Alan Pickerill - Dara Khosrowshahi - Chief Executive Officer, President, Director, Member of Preferred Stock Subcommittee and Member of Executive Committee Mark Okerstrom - Senior Vice President of Corporate Development

Tom White - Macquarie Research Naved Khan - Jefferies & Company, Inc., Research Division Unknown Analyst Bo Nam - JP Morgan Chase & Co, Research Division Michael Millman - Millman Research Associates Herman Leung - Susquehanna Financial Group, LLLP, Research Division Paul Bieber Ross Sandler - RBC Capital Markets, LLC, Research Division Brian Nowak - Nomura Securities Co. Ltd., Research Division Heath P. Terry - Goldman Sachs Group Inc., Research Division Stephen Ju - Crédit Suisse AG, Research Division Kevin Crissey - UBS Investment Bank, Research Division Tracy B. Young - Evercore Partners Inc., Research Division Michael J. Olson - Piper Jaffray Companies, Research Division

Gentlemen, thank you for standing by. Welcome to the Expedia, Inc. Fourth Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Thursday, February 9, 2012. I would now like to turn the conference over to Alan Pickerill. Please go ahead, sir.

Thank you, Joe. Good afternoon, and welcome to Expedia, Inc.'s financial results conference Call for the fourth quarter and year ended December 31, 2011. I'm pleased to be joined on the call today by Dara Khosrowshahi, Expedia's CEO and President; and Mike Okerstrom, our CFO. The following discussion, including responses to your questions, reflects management's views as of today, February 9, 2012, only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as we expect, we believe, we anticipate or similar statements. Please refer to today's press release and the company's filings with the SEC for information about factors, which could cause our actual results to differ materially from these forward-looking statements. You'll find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the company's IR website at expediainc.com/ir. I encourage you to periodically visit our Investor Relations site for important content, including today's earnings release. Finally, unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense and technology and content expense, excludes stock-based compensation. And all comparisons on this call will be against our results for the comparable period of 2010. With that, let me turn the call over to Dara.

Thanks, Alan. The fourth quarter wrapped up a solid year for Expedia. As promised, we completed the spinoff for TripAdvisor in the fourth quarter, unlocking significant value for our shareholders. There's a significant effort from a lot of folks in our organization, and we're happy to have successfully completed the transaction. We're now completely focused on our standalone travel transactions business and eager to prove that we can achieve healthy and meaningful top line and profit growth in the years to come. We're investing in key technology projects on modern platforms that will allow us to innovate much more quickly. Additionally, we're investing in international expansion in order to position the business well for long-term growth. As such, although we saw transaction growth of 11%, gross bookings growth of 12% and revenue growth of 14% for the full year, these investments led to cost deleverage with adjusted EBITDA growing just 1%. For the fourth quarter, gross bookings grew 10%, revenue growth -- grew 7% while adjusted EBITDA was down 4% year-on-year. Mark will have more to say about this after my remarks. Our key technology projects are on track and proceeding as expected. As we mentioned last quarter, the Expedia brand hotel product is on the new platform, and the team is testing and rolling out new innovation that are showing early signs of success. While the overall Expedia brand performance for the quarter was unsatisfactory, its standalone hotel room night growth, as measured on a book basis, improved for the quarter compared to what we saw in Q3, and a conversion is headed on the right direction. Air and packages continue to perform poorly, however, and are weighing on that business. We believe that air and packages are key to the Expedia brand value proposition, and we'll continue to invest appropriately. We successfully tested the new air product for Expedia brand site, and we'll roll it out through Q1, with the majority of traffic expected to be on the new platform, end-to-end air path by the end of the quarter. We also moved portions of the package product on to the new platform, but we still don't expect to have the end-to-end packages product finished until the back half of 2012. To be clear, we don't expect improvements from this platform or to have a meaningful impact on Expedia brand's financial returns until the back half of 2012. But it is one of our top priorities, and we're optimistic we will see things begin to turn. We continue to progress on our international expansion with Hotels.com in particular, seeing healthy room night growth across all regions. Our Expedia brand is 6 months into its joint venture with AirAsia, and we see excellent growth rate and progress in that new business. Although we don't consolidate the results for the JV, including it would have contributed roughly 200 basis points of total room night and revenue growth for the quarter. Importantly, the Expedia brand launched 11 new points-of-sale in 2011, representing a new record for that brand. And this week marks the full consumer launch of Expedia Mexico, which now features our full air product. Mark will spend more time on the quarterly results, but I did want to highlight our robust 19% room night growth, 21% if you include the AirAsia joint venture this quarter. With the exception of Expedia brand, all of our major brands delivered year-on-year room night growth this quarter as good or better than what we saw in Q3. Overall room night growth in APAC accelerated nicely, while room night growth for the EMEA and Americas region was largely similar to what we saw last quarter. Importantly, we continue to grow room night at a healthy pace in the U.S, despite its relative maturity, showing that there's still plenty of growth to be had here in what is our most mature market. We spent a total of $134 million on increased investments in eLong during 2011. We believe that China represents a unique and extremely sizable opportunity, and we're happy to be able to continue investing in that market. For Egencia, we're also pleased to have completed the acquisition of Traveldoo in the fourth quarter, a leading European provider of corporate online booking tools to enterprises and TMCs. The acquisition addresses a new segment of the managed travel market that we don't capture with Egencia's integrated solution. And although the business operates under Egencia, we'll run Traveldoo on a completely standalone basis. In many cases, Traveldoo will compete with Egencia in the same way that our leisure brands compete with one another today. We're excited about the corporate travel space, and this acquisition adds to our portfolio, leading companies as we continue to position the business for long-term growth. In closing, with 2011 behind us, we're squarely focused on executing our 2012 plan. All of our brands are doing quite well with the exception of Expedia brand. We know we have to turn that business around, and we have a good playbook, and the teams are executing. As we move into 2012, we'll face some really tough expense comps early in the year, but those will abate as the year progresses. By the end of the year, we'll have completed our key technology projects, setting us up for faster profit growth in what we think will be an excellent 2013. The business continues to generate significant annual free cash flow, and we'll be disciplined in our capital allocation and our stewardship of that cash. With that, let me turn it over to Mark.

Thank you, Dara. From a financial perspective, Q4 came in largely as we expected. Strong room night growth was the gross bookings and revenue driver for the quarter. Room night growth was broadly strong across all regions with mid-teens growth in the Americas and EMEA region and much faster and accelerating growth in APAC. Revenue per room night, however, was down 5%. And the gap between 2% growth in ADRs and the decrease in revenue per room night was driven primarily by 4 key factors, each of which I would roughly equal weight. We had a year-on-year headwind from the foreign exchange book-to-stay impact. Note that although this depresses revenue per room night, it is largely offset from an economic perspective through our hedging program, and has relatively little impact on adjusted EBITDA. Mix also pushed down the revenue per room night. As we saw last quarter, we saw faster growth in our chain hotels versus independents. The cost of our loyalty programs also had an impact. For the Expedia brand, this is a relatively new program, which we did not have in place this time last year. And for Hotels.com, this is a program that we recently rolled out to all of our international markets. Note that we managed this item more like selling and marketing expense, but we do record it as contra revenue. And as we mentioned last quarter, we continue with certain competitive pricing actions designed to ensure that we are putting the best possible deals in front of our customers. As expected, our air business was down sharply in the quarter due to an 8% decline in ticket volume combined with an 11% decrease in revenue per ticket. The revenue per ticket pressure came from a combination of lacking the change to our merchant air accounting, which we described last year, and lower overall unit economics from recently negotiated contracts. These were partially offset by higher interline fees and consumer fees on certain international points-of-sale. Generally, we are expecting continued pressure on the air business in 2012. From a brand perspective, we once again saw strong revenue performance pretty much across the board, with the exception of our Expedia brand, which was down 9% year-on-year. Revenue growth for the total business, excluding the Expedia brand, was 21% for the quarter. Running through key expense categories, we saw a nice leverage in cost of revenue this quarter, which was aided by an easier comp for Q4, due to acceleration of some nonrefundable merchant fees and some onetime adjustments in Q4 2010. As expected, selling and marketing grew faster than revenue, driven largely by mix shift into our Expedia Affiliate Network and Hotels.com businesses. This impact was partially offset by a reduction in selling and marketing for Expedia. In addition, selling and marketing headcount grew across most of our brand, as well as within our supply organization. Technology and content grew 29% for the quarter as we continued to see year-on-year impact of the buildup of headcount needed to complete the key technology projects, which we have discussed previously. Growth in G&A expense was much higher than we certainly are striving for on an ongoing basis, due to number of factors, which are individually insignificant, but when combined with growth in people cost, drove deleverage. These included a tougher year-on-year bonus comp, consulting costs for the reorganization of our supply group and increased expenses related to our efforts to turn the Expedia business around. Also as we mentioned last quarter, we did have onetime expense of roughly $7 million in Q4 related to our London office move. This item is spread across multiple expense categories. Moving on to taxes, our GAAP effective fax rate was lower than expectations for the fourth quarter, and certainly lower than we can expect going forward. This was primarily due to a higher proportion of international earnings and favorable adjustments to our valuation allowances. Please note that our go-forward blended tax rate will be lower than it was when we owned TripAdvisor, since the travel transaction business has a higher relative proportion of earnings in the international regions with lower tax rates. Though precision can be difficult on this one, we would expect our effective rate to be in the range of 25% to 28% in 2012. We've had some favorable adjustments in the last couple of quarters, and the obvious caveat here is that these can sometimes go the other way. Free cash flow totaled $618 million for the full year and grew a robust 32%. We used a portion of that free cash flow to make acquisitions and investments totaling just under $200 million, including the Traveldoo acquisition and the eLong transactions mentioned earlier. During the year, we also repurchased 10.6 million shares on a presplit adjusted basis of Expedia for just over $280 million, and we paid out a total of just over $75 million in dividends. As we've said consistently over the years, we generate robust cash flow and as such, can invest appropriately in the business while making opportunistic acquisitions and returning cash to shareholders. As you may have seen in our earnings release, our quarterly dividend is now $0.09 per share effective for the March payout. In terms of our financial expectations for full year 2012, we are expecting adjusted EBITDA growth in the mid-single-digit range. As a reminder, our revenue is significantly more seasonal without TripAdvisor and our expense comps are quite tough in the first and second quarters, with easing expected as we move throughout the year. As such, we expect most of our adjusted EBITDA growth to build in the back half of 2012. Note that we are basing our guidance on the foreign currency rates that we can see now and we don't try to forecast any future FX fluctuations. Before I wrap up, a few quick housekeeping items. As we mentioned last quarter, you'll see from our recent disclosure that we've switched to adjusted EBITDA as our primary operating metric. It's effectively OIBA plus depreciation with one other primary difference, being the additional exclusion of reserves for occupancy tax litigation settlements. Occupancy tax settlement reserve items are now outside of our core non-GAAP operating measure and outside of G&A. Going forward, they reside in the legal reserves occupancy tax and other line item of our GAAP financials, and I would encourage investors interested in these matters to read the related disclosures in our SEC filings. You can see the complete definition of adjusted EBITDA in our earnings release along with the reconciliation to GAAP measures. Further, for Q3, we had estimated that our international gross bookings grew 6% on a currency-neutral basis. Since then, however, we have taken another look at this and now estimate that international gross bookings actually grew 14% in Q3 on a currency-neutral basis. Lastly, as part of the TripAdvisor spinoff, we retired our 8.5% notes. The expense associated with this is just under $40 million and will be recorded in the first quarter of 2012. The expense will be recorded in discontinued operations, and as such, will be excluded from adjusted EBITDA and adjusted net income. With that, let's turn to questions. Operator, would you please remind listeners how to ask a question.

[Operator Instructions] Our first question comes from the line of Tom White from Macquarie. Tom White - Macquarie Research: I had a quick follow up on the ADR growth versus revenue per night. On the couponing and loyalty piece, in particular, how should we sort of think about that over the course of 2012? Any change the way you guys are going to be doing that, I guess, maybe based on macro factors?

Sure. So I think there's 2 pieces to that question. One on couponing, the other on loyalty. If it's couponing, if you're talking about the competitive pricing actions, I think listen, going forward, when we see ADR and ATPs such as they have been, you could expect to see that happening. Now ADR growth has slowed down a little bit. So it's potentially in 2012 you can see that item easing. But it's tough to say, you'll have to see how things unfold. On loyalty, the thing that's really impacting that item in this quarter, last quarter is the fact that we didn't have the Expedia program last, last year at this time. So you've got to -- you basically got a really difficult comp. Now that program was rolled out in probably Q1, really part of Q2. And so as we roll through 2012, the comps on that front will get easier. We also saw an expanded rollout of the Hotels.com program, which, again, is to some extent a onetime item. That happened basically in Q4. So again, you'll see that with a little bit tougher comps throughout 2012. I will say with loyalty as one of those items that as these programs mature, they start to harden up. And until that happens, you can sometimes see fluctuations in the loyalty accruals, which certainly we did see last quarter.

Our next question is from the line of Naved Khan with Jefferies. Naved Khan - Jefferies & Company, Inc., Research Division: It's Naved Khan from Jefferies. So if you sort of look at Europe, and would you comment about the environment you saw in the Q4 and you're seeing today in terms of leisure bookings? Can you sort of give us more color as to what's going on in the different markets there especially between the Northern Europe and Southern Europe?

Naved, we haven't seen too much change. Last time we talked to you, we said we saw some spotty weakness in Southern Europe as far as the economies and the effect on travel spend, and we haven't seen much change there. I think the significant change in Europe between Q3 and Q4 are foreign exchange rates that really started going against us fairly significantly in Q4 with all the news coming out of Europe. But operationally, European room nights, et cetera, generally were stable. I'd say Expedia in Q4 had a bit of a weaker quarter in Europe than what you saw in Q3, but I think that was more of an Expedia issue versus a macro issue. Naved Khan - Jefferies & Company, Inc., Research Division: Okay, good. And then about the sort of the revenue per room night sort of coming down, I think one thing you mentioned was the mix. And when we sort of -- when we have to think about the mix, what's driving the shift towards, I want to say, the larger hotels versus the independents.

Sure. So there's a couple of things driving that. One is we have seen particularly with Hotels.com exceptionally strong growth in the U.S. And the U.S. is a market that is much more chain-heavy than Europe. So that's one driver. That said, we've also seen pretty strong performance by the chains in Europe. But I think it was -- if we could pin it on something, it would probably be growth in the U.S. And just, listen, those good partners of ours utilizing our channel effectively.

Naved, I'd also add that when we get in early into markets, for example, the Asia Pacific markets, because we have global deals with chains, we have instant chain inventory and very high-quality chain inventory in those markets. And then typically we go into the market and we fill out, not only the chain inventory with independents, et cetera. So when we talk about the Asia Pacific markets, for example, and we're seeing lots of acceleration there, we're adding inventory there, the chains do get a good bit of market share in those marketplaces. Then we'll look to fill up the independent hotels as well. But right now, we've got very good relationships with the chains. They are -- they merchandise quite effectively in our marketplace. And we find that the supply partners who have the closest relationships with our market managers on the ground tend to merchandise pretty effectively and they get an unfair share of our demand, and the chains are doing a really good job of that. Naved Khan - Jefferies & Company, Inc., Research Division: Okay, great. And the last question is about the Groupon partnership and how that might have contributed to sort of the pressure on the room rates -- on the room night, sorry.

Yes. The Groupon partnership at this point is too small a contributor to the full business. We're very happy with our partnership with Groupon. I think they announced pretty amazing results maybe yesterday. And so -- but at this point, it's just too small to move the needle overall. I would say eLong, for example, in China, as it gets to be a larger percentage of our overall volume, could move the average ADRs. And in general, we are also working on other kind of flash sale-type products. Expedia has a great product called ASAP, which is a fun, amazing price. Travel-Ticker is a nice business as well. Those businesses, I think, are already at a larger scale and over time, could affect the balance of ADRs going forward. So Groupon isn't significant yet, hopefully it will be.

Our next question comes from the line of Mark Mahaney with Citi.

So this is Eric [ph] one of Mark's associates calling from his line. We were interested in knowing if the competitive pricing actions happened in the U.S. or internationally.

Eric [ph], sure. It is a mix. Generally, the biggest driver there is Hotwire, with their opaque rates. Again, they've got a very price-sensitive customer. And in environments like this, they do drive significant volume through discount. And so that would be the primary driver. There is a few other things, call it, scattered around the world, but mostly the U.S.

We're also, in general, we're testing customer sensitivity to package pricing. And in general, we're working on our revenue management with packages pretty aggressively. But that's a worldwide endeavor. It's in the U.S., it's in Europe and it's in the Asia Pacific regions as well.

Our next question comes from the line of Doug Anmuth with JPMorgan. Bo Nam - JP Morgan Chase & Co, Research Division: This is Bo on behalf of Doug. Just had 2 quick questions. One is can you give a little bit more detail about Hotels.com's performance in APAC and Latin America? And then secondly, if you can provide any color on your plans for buybacks going forward in 2012?

Mark is going to answer that question on behalf of me.

Listen, I don't want to get into specific, call it by brand, by region performance. What I will say, though, is that Hotels.com has got a pretty effective formula that works around the world. I think they are -- they're going significantly in the U.S., a pretty mature market. They're seeing very healthy growth rates in Europe. They're seeing really nice growth rates in Asia Pacific and have had a lot of success in Brazil and other parts of Latin America. So I would say that the Hotels.com business, although certainly growing faster in Asia Pacific and faster in Latin America than the other regions, has really got a formula that's working globally. And I think if you look -- just to give you a few numbers, in Asia Pacific, that growth is triple digit. So it's pretty significant, and they have seen acceleration quarter-to-quarter. So there's still plenty of opportunity there, lots of headroom, big markets, they've got a formula that just seems to be working.

And as far as the buyback question, I think -- listen, look at what we've done in the past. I think our capital philosophy as a company hasn't changed, which is we create very significant cash flow. We will allocate that cash to the best use of cash. And over the past couple of years, because of the health of our cash flow that there's been a mix of M&A and buybacks. We very much believe in reducing our share count over the long term, and that should not change on a go-forward basis. We'll be opportunistic. But over the long term, I think you should expect to see buyback activity from us.

Our next question comes from the line of Michael Millman with Millman Research Associates. Michael Millman - Millman Research Associates: It seems that the chain hotels are working very diligently to disintermediate, to take themselves from OTAs and others. It looks like on the other hand that's a large part of your business, biggest growth you had within merchant. I wonder how much risk you see in, I don't know, putting all your eggs in one basket is appropriate, but something like that. And secondly, given that it looks like enplanements have been soft in the last couple of months. Airlines, reducing capacity. Same thing, looks like it's happening in car rentals. Can you talk about what you see happening going forward in pricing and availability in both airlines and car rental?

Sure. As far as the chain hotels, listen, they're working on their own initiatives. But our relationships with the chain hotels on the ground remain very, very strong. And obviously, our volume remains quite strong. I think that the chain hotels view their business very similarly to how we view our business, which is you want to make sure that you have a balance of direct business and you want to make sure that you are getting as much share as you can from the large marketing channels out there. So would I rather have a direct booker than a booker from Google? I'd rather have a direct booker, but I'm doing everything that I can to build a relationship with Google, make sure we're great at search engine marketing, make sure we're great at SEO, et cetera. And I think the chains are doing the same thing with us, which is we're seeing very good work with them. We have great merchandising partnerships with them and we run terrific promotions with them and we don't see that changing. And I think they're doing exactly what they should be doing, which is making sure that they've got a good balance with direct business as well. This is a very, very large industry. It is a global business, and I think during this recovery, you're seeing businesses like ours grow and you're seeing the chains grow. And the point is that in this kind of economic recovery, travel is a great place to allocate capital, and travel companies are going to grow. So I don't see a significant risk there as long as we do what we're doing, which is provide a great product for our consumers everywhere and being great partners for our suppliers. Michael Millman - Millman Research Associates: Do you see significant risk in profitability from that business?

I'm not, as long as we grow volume, as long as we build great service for consumers. I think we've demonstrated to you that we've been able to growth room nights at healthy rates. And as long as we grow room nights at healthy rates, I think the revenue will follow. As far as the second question, as far as enplanements being soft in airlines. In general, we are seeing some pricing softness from our car partners. The good news is that we're seeing very, very strong opaque inventory on the Hotwire side, and that business is really doing quite well. We're also seeing a lot of competition from what I would call tier 2 and tier 3 vendors as far as pricing against the top brands out there, which is hitting pricing to some extent. The car companies, I think, the fleets are at appropriate size, but I think the car companies have to be a bit more aggressive on pricing in order to get kind of the utilization of the fleets to where they need to be. So that -- those are the trends that we're seeing on the car business. We don't expect those trends to change going forward.

Our next question comes from the line of Herman Leung with Susquehanna. Herman Leung - Susquehanna Financial Group, LLLP, Research Division: Two quick questions for you guys. First is you talked about some contra, the cost of the loyalty program that you just launched in Expedia and Hotels.com. Just wanted to be clear. Is that -- so that's a contra revenue item. So I was wondering how much revenue was understated because of some of these new loyalty programs. And then second was wondering if you're also, given the FX decline from third quarter into the fourth quarter, if you're seeing a little bit higher demand from U.S. travelers over to the European side.

So on the -- the impact of loyalty contra revenue, I don't want to give specific numbers. But if you thought about that for the quarter as going high-single digits, low-double digits, you'd be in the right ballpark. So not a massive number yet. But in low periods like this -- is the programs we're building that can have a pretty significant impact. In terms of FX declines impacting U.S. volume, we haven't seen a lot of that yet. And I think it's tough to tell. The FX rates were just so, so volatile that it's difficult to see where things will settle out and what will happen. But we haven't really seen that impact.

Our next question comes from the line of Justin Post with Bank of America Merrill Lynch.

This is Paul Bieber for Justin Post. I was hoping you could provide some color on the ADR growth in Europe, North America and Asia? And then secondly, how would you characterize the overall CPC environments? And then I have a quick follow-up question afterward.

Sure. I think in general, ADR growth has been fairly healthy in both the U.S. and Europe. I would say, kind of low single-digits growth. And it's been fairly consistent. European ADRs did take a negative kind of -- the growth rate in European ADRs slowed down because of FX, foreign exchange. The same went for APAC. So I would say on a same currency basis, things didn't change. But on a U.S. currency basis, the international ADRs that were quite strong at the beginning of the year became less strong in Q4. But again, that's not a fundamental issue. That is purely a foreign exchange issue. As far as CPCs go, we see CPCs, in general, we haven't seen very significant movement on CPCs in most of our different marketing segments. In general, we've seen CPCs move up and down with ADRs and we're not seeing significant change in that area.

And then I just want to make sure, did you say that the European room nights were stable quarter-over-quarter, the growth?

Yes.

Our next question comes from the line of Ross Sandler with RBC Capital Markets. Ross Sandler - RBC Capital Markets, LLC, Research Division: Dara, a couple of questions. Where do you think hotel room night growth can go once the Expedia.com upgrade kicks in? I think you start to comp the acceleration at Hotels.com mostly in the first quarter, if I recall correctly. So can you maintain this current level or potentially accelerate into the back half? And then Mark, the merchant revenue margin declined a little bit more than expected, totaling 40 bps year-on-year. Is that from the same factors that impacted revenue per room? Was there anything onetime that impacted that margin, including some of the renegotiations with partners or that mix? A little color there.

Ross, on the room night growth. Listen, all other things being equal, when E3 is complete, I would expect to see room night growth accelerate for Expedia, not only standalone room nights but especially packaged room nights that have been a negative factor. And I would hope to see that in the second half of the year. Again, we haven't done it. But that's why we're investing the way that we are on the technology side. We're not going to make predictions on where Hotels.com, the room night growth and our private label room night growth are going to go, which other than saying that they have been healthy. Hotels.com has already lapped the big increase in acceleration in room nights that it experienced. So the lapping has already happened. And Hotels.com has continued to maintain high revenue -- sorry, room night growth. And hopefully, with execution, we'd expect to see that continue on a go-forward basis. But again, we know that we have to prove that out to you. I think the Q4 room night number was really healthy, and I think it was really healthy without Expedia hitting on all cylinders. So if we can hit on all cylinders, we could see things get better. But those are a lot of ifs at this point. And Mark, do you want to talk on...

Yes, sure. So, Ross, on the margin revenue margin decline of 240 bps, on a year-on-year basis, there's a few things going on there. One is you've got essentially the same impact from the revenue per room night decline. So the same drivers that I mentioned on that front. You've also got a tough comp on the air side because in that number is also the Q4 2010 essentially pull in of revenue that you're comping over. So those things basically hit it. So there are certainly some one-timers in that decline, nothing significant to report on actual like-for-like margin declines in terms of renegotiations with partners, particularly on the hotel side, there is obviously some headwind. On the air side, although, generally, that's been less palpable in the merchant air side of the thing. Ross Sandler - RBC Capital Markets, LLC, Research Division: Okay. If I could just follow up on it. So I think you guys are -- you're comping the American Airlines quarter next quarter. So taking that in context with the comment on the EBITDA growth for the first half versus second half, is there any additional investment that you're making? Or is it just that the seasonality is a little bit more accentuated now that Trip is not in the mix.

Yes, the big thing is the seasonality combined with the fact that in 2011 we brought on a significant number of technology heads through the quarter. So you've got the confluence of 2 things conspiring against us in Q4, which is our lowest seasonal revenue combined with really tough expense comps. So that's the biggest, really impact in Q1.

Our next question comes from the line of Brian Nowak with Nomura. Brian Nowak - Nomura Securities Co. Ltd., Research Division: I have 2 quick questions. First one, are you seeing any changes in market share in any of the larger U.S. metropolitan areas where it seems Booking.com has been getting access to more inventory? Just curious about any competitive updates. And then the second one is also semi-related to the U.S., any updates on the Marriott negotiation they mentioned a few months ago? Then any other key contracts coming up for renewal?

Yes. As far as market share in the U.S., it's tough to tell. What we can say is that our U.S. room night volume remains quite healthy. And we haven't seen any change in the growth there. So to the extent that Booking.com is taking share, they're either taking share from supplier direct or offline or some of the other players. We're certainly not feeling it. We take them very, very seriously. They're a major, major competitor of ours, not only here in the U.S. but worldwide. But as we've said before, there's plenty of room for -- in this marketplace, especially as long as we've got the tailwind of Internet penetration behind us. And I will add that, again, when you step back and you look at the U.S. market, our share of the U.S. lodging market has gone -- has grown from low single digits to 5% over the past few years, and it continues to grow. And to us, that's the most important factor as far as market share goes. As far as update on Marriott renegotiations, we don't comment on individual renegotiations with any of our large partners at any point in time. We are probably in discussions with a significant partner. We do have some key renewals this year. And once we're done with those renewals, we'll certainly report back to you on that.

Our next question comes from the line of Heath Terry with Goldman Sachs. Heath P. Terry - Goldman Sachs Group Inc., Research Division: TripAdvisor spoke last night about declining CPCs. I was wondering if you could -- if you're seeing any benefit to your marketing return on investment from that shift? And just more generally, where are you seeing the highest value or impact from your marketing spend online?

It's too soon to tell as far as TripAdvisor goes. We have taken some of our CPCs down from where we were when we were combined companies certainly. I'd say especially on the Expedia side. As Mark said, Expedia's marketing spend has come down year-on-year. But we are in kind of in the middle of measuring the relative volume effect relative to the increases or decreases in CPCs there, and we're right in the middle of it. So I think it's too soon to tell. I think our CPCs will settle out with TripAdvisor as the year moves on. They're an incredibly valuable partner to us. They continue to grow the channel. And with the amount of content that they have and their worldwide expansion, they are going to be a bigger part of ours 5 years from now than they are today. As far as our marketing ROI, the best ROI that we get on our marketing spend is bringing consumers directly to the site. It's the brand investments. Its investments that we're making in e-mail, et cetera. The difficulty in those investments is you don't see the direct ROI on those investments. So the strategy that we have is to keep investing in the variable channels, keep increasing our efficiency, hopefully, in those variable channels as we operationalize conversion improvements, and just how good we are in those variable channels. And then try to convert more and more of those consumers to our loyalty programs into direct consumers. It's a lot to do, but we think it's a sound strategy, and we're executing on itas we speak.

Our next question comes from the line of Stephen Ju with Crédit Suisse. Stephen Ju - Crédit Suisse AG, Research Division: I wanted to dig a little bit more into the revenue per room night compression and as it relates to eLong. I think their room night growth is around 40%, and it's my understanding that their commission rates are lower versus Expedia overall. I think their ADRs are lower as well. So is it conceivable that you may continue to see revenue per room night growth lag that of the volume growth? Or is that impact too small to really discern?

Sure. So I don't want to get into eLong numbers, of course they haven't announced yet. Of course they were healthy through Q3, and they continue to be a pretty significant part of our overall room nights. I think -- listen, generally, that when we grow into APAC and Lat-Am regions, that movement into those markets could generally blend down our revenue per room night. And again, we're fine with that. We view those markets as very attractive. Generally, the marketing economics go with the revenue economics. So on a contribution basis, we're completely fine with that impact happening and we're driving to the global opportunity, and those markets are a big piece of that.

And we think it's almost like charging up a battery because over time, as those consumers move into more mid-market and higher-market hotels, we will get the benefit of those revenue per room night increasing over a long, long period of time. While short term, it's pressure. Long term, we think it creates almost stored-up earnings over along period of time.

Our next question comes from the line of Kevin Crissey with UBS. Kevin Crissey - UBS Investment Bank, Research Division: Can you use your hotel partnership relationships with the airlines to encourage them to get Google to direct business to Expedia?

Explain that to me again, Kevin, because it's an idea. I'm trying to understand what you're asking. Kevin Crissey - UBS Investment Bank, Research Division: Well what I'm trying to ask is I mean you're providing the hotel inventory for 2 of the largest U.S. airlines or 2 of the largest airlines in the world or actually the 2 largest, right? And at the same time, they're not directing your air traffic through Google Flight Search. Couldn't you provide economics that make that attractive to do?

We theoretically could. But those are 2 separate economic relationships, and we're pretty pure about separating those businesses. Our private label business, the business that powers Delta and Continental United now, is essentially a standalone business of ours. It reports directly to me. It has its own technology team. It has its own profit and loss statement. It goes out and captures any and all business that it can, including business that could be competitive with the brands here versus the competition, which are often kind of the ugly siblings of the brand. This is an independent team that got their own technology. They're building amazing technology out there. They're growing room nights really fast, accelerating through 2011. And we think that this strategy could be a unique differentiator for us in the long term. So what I don't want to get in -- do is get in the way of that team that's executing incredibly well and mix up their issues with other issues that we may be having with Google or airlines, et cetera. Frankly, I want to stay the heck out of the way of those guys because they're doing great. So I don't want to mix the 2, and we have lots of different relationships with the airlines and Google, and hopefully we can resolve those relationships kind of on their own. Kevin Crissey - UBS Investment Bank, Research Division: And as a follow-up -- okay, though, a separate question here. I struggle a bit on understanding where we are in the cycle overall the economics/travel cycle. Because if I look at corporate travel, it looks relatively normal over the last 3 years. You had a sharp V-shape recovery in 2009 and in 2010, which has continued for the next couple of years, and it's showing up in your Egencia numbers, I imagine, as well. But then at the same time, the economy has been relatively weak. And it's just starting to recover from high unemployment. So when I think of the travel cycle, I think of a 5, 6-year horizon, after which there's another downturn. Are we 3 years in or are we 1 year in?

Boy, that's a great question. We've got a great -- lots of great questions. Listen, it's tough to say. I think what I would say is that generally, we do very well in, call it, the slack economic periods, which is when it really hits the bottom, we get a lot of volume, but we get lower revenue per transaction, so we do okay. And at the top, when the travel market generally is at high capacities and ADRs and ATPs are at their peak, again, we're not at our best. But in between those periods, we generally do pretty darn well. If I had to peg where we were right now, it's not the bottom, it's not the top, but it's certainly somewhere in between, and I think that's where we like to be.

Our next question comes from the line of Tracy Young with Evercore. Tracy B. Young - Evercore Partners Inc., Research Division: Yes. I just have an expense question as far as the stock comp. Can you give us some more clarification is whether that -- end of year? Or is that something that's ongoing?

You're talking about the growth in stock comp that we saw in Q4? Tracy B. Young - Evercore Partners Inc., Research Division: Yes.

The big, call it, abnormal chunk of that related to option adjustments in connection with the spinoff of TripAdvisor.

So otherwise, trends would have been normal.

Yes, otherwise trends would have been normal. Again, people that had unvested options essentially got doubled down in Expedia options when TripAdvisor spun off.

Our last question comes from the line of Mike Olson with Piper Jaffray. Michael J. Olson - Piper Jaffray Companies, Research Division: I apologize if this question was already asked, I got on late. But I just want to get kind of the latest update on how you guys are thinking about metasearch as a friend or foe. And is it basically is it a valuable lead generation tool? Or does it ultimately end up becoming a path to competitive bookings on direct sites?

It's a good question. I think we view metasearch as a complementary product to our product, and ultimately friend. Our metasearch partners have been big partners for us for many, many years, including Kayak in the U.S., a number of metasearch players in Europe. They serve a different customer than our core customer who likes what we do and come back to us day after day after day. And they open us up to a set of customers that we can convert into kind of repeat customers for Expedia. Now again, it's similar to what I said about Google. Would I rather have a customer come to us directly? Yes, I would. But that doesn't mean I'm going to close myself off to millions of customers who come to metasearch sites on a daily basis. We want to be -- have our unfair share in every single channel out there, and metasearch is a really important channel, and we think will continue to be a growing channel for us.

Now I'd like to hand the conference over to Alan Pickerill with any closing remarks.

Hey, yes. Thanks everybody for joining us on the call today, for all of your questions. We'll have a replay of on the IR website shortly after we finish the call here. Dara, did you have any closing comments?

Just special thanks to Expedia employees. We had a tough year in 2011, a lot of people worked very hard especially on the TripAdvisor spin. So thank you to everyone, and looking forward to how we do in 2012.

Thank you. Ladies and gentlemen, this concludes the Expedia, Inc. Fourth Quarter Earnings Conference Call. You may now disconnect. Thank you for using AT&T Conferencing.