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

Tom White - Macquarie Research Rohit Kulkarni Bo Nam - JP Morgan Chase & Co, Research Division Herman Leung - Susquehanna Financial Group, LLLP, Research Division Ross Sandler - RBC Capital Markets, LLC, Research Division Michael Millman - Millman Research Associates Paul Bieber Michael J. Olson - Piper Jaffray Companies, Research Division Kevin Kopelman - Cowen and Company, LLC, Research Division Stephen Ju - Crédit Suisse AG, Research Division Nishant Verma - Morgan Stanley, Research Division Bill Lennan Tracy B. Young - Evercore Partners Inc., Research Division Michael Costantini - Nomura Securities Co. Ltd., Research Division

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Expedia, Inc.'s First Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, April 26, 2012. I would now like to turn the conference over to Alan Pickerill, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Erin. Good afternoon, and welcome to Expedia, Inc.'s financial results conference call for the first quarter ended March 31, 2012. I'm pleased to be joined on the call today by Dara Khosrowshahi, Expedia's CEO and President; and Mark Okerstrom, our CFO. The following discussion, including responses to your questions, reflects management's views as of today, April 26, 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 will 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 2011. With that, let me turn the call over to Dara.

Thanks, Alan. Expedia is off to a solid start this year, with $102 million of adjusted EBITDA generated in the first quarter, exceeding our own expectations. On the top line, gross bookings and revenue growth were again driven by strength in our hotel business, with global room nights growing 24%, a nice acceleration from the 19% we saw for Q4. Including the room nights from Expedia's joint venture with AirAsia, room nights would have grown by 27%. As we mentioned last quarter, all of our major brands other than Expedia, continues to perform well, with combined revenue growth of 27%. Results for the Expedia brand are still not where we want them to be, but they did show improvement. Standalone room night growth has improved over the last few quarters from a slight decline year-over-year in the third quarter last year prior to the launch of the new platform, to mid-single-digit growth in the first quarter. While it's clearly too soon to declare any type of victory, the Expedia brand team is starting to execute effectively, and we're beginning to see tangible evidence that our focused product-led game plan is working. It's also important to note that the technology projects on the Expedia brand remain on track. We're pushing a significant percentage of U.S. traffic through the new air platform and testing its performance. Optimizations are being implemented, and we'll continue the rollout of the new platform in the second quarter. The work on packages is ongoing, and we expect it to be substantially complete by year end. We continue to innovate on the new hotel platform, and those of you that visit the site regularly can undoubtedly see some of these improvements. Having the capability to test quickly and broadly deploy new features are keys to success, and we've already run more tests on our new platform so far in 2012 than we did all of last year. We expect the most pronounced overall benefits come when consumers can enjoy the best shopping experience in online travel seamlessly across all of our product lines. International revenue growth accelerated in the quarter versus the prior quarter, and we continue to aggressively scale our international businesses, most notably with our recent acquisition or recent announcement that we intend to acquire VIA Travel, a leading corporate travel company in the Nordic region of Europe. As of today, the deal hasn't closed, so our comments will be limited. But suffice it to say that this transaction is almost entirely complementary to our existing corporate travel business and gives us a strong position in that region. We're committed to driving scale for Egencia, and are pleased to be able to use our international cash for this purpose. Also in regard to international travel, we've recently partnered with Brand USA, promoting travel to America by matching advertising dollars for any travel brands that promote their destination or products to an international audience. We're also featuring participating brand partners on the Discover America landing page. Brand USA is a terrific public-private marketing organization that works with the travel industry to promote travel to the U.S., creating jobs in our domestic travel sector. Lastly, in terms of capital allocation, we've repurchased 8.8 million shares so far in 2012 for $291 million, exhausting our previous share repurchase authorization. Since our spin-off from IAC, we've allocated $2.7 billion towards the repurchase of our company's stock, returning approximately 36% of our share capital. And we've returned another 168 million to our shareholders through dividends since initiating that program a couple of years ago. We'll continue to look to add value for our shareholders through strong operational execution, as well as smart capital allocation. In summary, I'm encouraged with our progress in brand Expedia and with the continuing results of our other brands. Our strategy is on track, and our efforts are beginning to show signs of payback. With that, I'll turn it over to Mark to talk about the financials. Mark D. Okerstrom: Thanks, Dara. From a financial perspective, the first quarter came in better than we had expected, driven by underlying strength in our global hotel business. Of course, we did have some tailwinds this quarter with the favorable comps on airline ticket volumes and extra day from leap year and FX improving slightly since the last conference call. As Dara mentioned, room night growth was robust at 24%, 27% including the results from the AirAsia joint venture, and accelerated from Q4 growth rates across all major geographies. Of particular note, total room nights in the United States were up 18%, accelerating versus Q4, solid evidence of our ability to grow our domestic volumes and share. Hotels.com, our largest hotel business as measured by room nights, led the charge with room night growth of 37% and sequential acceleration, again, across all major regions. Revenue per room night was down 6% on flat ADRs. The gap between the 2 metrics was driven by similar trends as last quarter. Also, keep in mind that growth in our APAC hotel business continues to outpace the other regions, and APAC represented a high teens percentage of global room nights in the first quarter. Since ADRs and revenue per room night are much lower in APAC, this will put downward pressure on per-room metrics for the foreseeable future. With that said, we believe APAC represents a great long-term growth opportunity for us, which we're targeting with our diversified set of key assets including eLong, the AirAsia-Expedia joint venture, Hotels.com, Egencia and our growing affiliate business. Revenue from our air business represented 11% of our total revenue for the quarter, and although we grew ticket volume 5%, revenue per ticket was down 20% due primarily to reduced ticket economics combined with lower volume-based incentives. We expect revenue per ticket to continue to be down year-over-year for the duration of 2012, with the impact easing as we move through the year. Other revenue grew 15% for the quarter on a combination of nice growth across car rental, ad and media, and corporate travel fees. Running through key expense categories, cost of revenue grew just a touch faster than revenue this quarter, as credit card fees grew along with the growth in our merchant gross bookings and as we added headcount to support our growth. This was partially offset by lower debit card fees and an increase in credit card rebates. Selling and marketing grew at a rate quite a bit slower than revenue growth, driven by decreased online spending for our Expedia brand. We have been systematically pulling out inefficient spend at Expedia and have been generally less aggressive on the marketing front for that brand given where we are in the technology migration projects. Excluding the Expedia brand, selling and marketing grew more in line with revenue. For Expedia, Inc., we do not expect to see the type of leverage that we saw in Q1 as we move forward in 2012. And we are forecasting full year selling and marketing to go broadly in line with revenue. Technology and content grew 26% for the quarter, and though a bit lighter than we had expected, we continue to see the year-on-year impact of the prior period build-up of headcount needed to complete our key technology projects. While we expect year-over-year growth of our cash spending on technology and content to decrease as we move through 2012, we expect that the recorded growth rate in future quarters will be broadly similar to what we saw in Q1 due to the relative levels of the capitalization of these costs and related depreciation. G&A grew 10% for the quarter, largely due to headcount costs to support the overall growth in the business. From a capital allocation perspective, as Dara mentioned, we've repurchased 8.8 million shares for $291 million so far this year, and the board has authorized an additional tranche of 20 million shares for repurchase. We also paid our $0.09 per share quarterly dividend. Lastly, we announced the VIA acquisition, which we expect to close imminently. And assuming it does, you'll see its impact on our Q2 cash flow statement. In terms of our financial expectations for full year 2012, we continue to expect adjusted EBITDA growth in the mid-single-digit range. Remember that Q1 represents our lowest adjusted EBITDA quarter for the year. So while we're happy with the out-performance in the first quarter, it does not have a large impact on full year adjusted EBITDA. Consistent with prior practice, we are not giving guidance for Q2, but we do want to note that top line comps get tougher and at current rates, foreign currency translation, is a bigger headwind. While we're quite pleased with Q1 performance and are incrementally confident about our ability to deliver these full year results, note that the majority of our annual adjusted EBITDA growth is expected to build in the back half of the year. And as such, the real story of our full year results is very much yet to be told. With that, let's turn to questions. Operator, would you please remind listeners how to ask a question?

[Operator Instructions] And our first question is from the line of Tom White with Macquarie. Tom White - Macquarie Research: Great. Just a follow up on the delta between the ADR growth and the revenue per room night. Again, a pretty big difference. I understand the commentary about Asia Pacific. Can you just kind of remind us about the other moving pieces and any chance that, that delta sort of might narrow over the next few quarters in any meaningful way? And then just a quick follow up, can you make some color or comments on the ADR environment in Europe, the U.S. and Asia Pac?

Sure. So again, the trends that we saw and the delta between ADR and revenue per room night were similar to what we've seen on prior quarters. Those were the impact of our loyalty programs, primarily of the Expedia brand. This time last year, Expedia did not have a loyalty program; they do this year. And so there's really a tough comp there. In addition, the Hotels.com loyalty program expanded internationally during the last quarter. And so again, we've got a tough comp on that front. The second impact that we mentioned on the last call, which was also happening this quarter as well, is competitive pricing actions. Primarily that is Hotwire, where Hotwire is having some pretty nice success, pushing volumes through, taking lower margins essentially. The third item was the impact of foreign exchange. That, again, was a factor this quarter. And then we also continued to see just mix shift in our hotel business, the chains, and otherwise less margin-accretive products. So those were by and large the big delta drivers between ADR and revenue per room night. If you look across those 4 things, on the loyalty front, you will start to hit clean comps as we move throughout this year. I think the Expedia program was launched through the end of Q1 and through Q2. So Q3, that gets to be a clean comp. Hotels.com, it's probably not going to be until Q1 of 2013 until you clean that comp. On the Hotwire actions, they've been doing that for a number of quarters now. So I suspect Q2, Q3, you might get a clean comp on that. And then -- it's always hard to say with FX. And the mix shift issue on Hotel is just something that's really hard to predict. I think your second was in terms of ADRs in various regions. We continue to see decent strength in ADRs. I think if you look at how our hotel partners, the ones that have reported the trends that they're seeing, broadly, ours were consistent with what they've reported. There is some pockets of ADR weakness in Europe that we have seen, and the rest of the world is by and large looking fairly healthy.

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

This is Rohit Kulkarni, sitting in for Mark Mahaney. Can you please remind us where you are in the technology upgrade process as in particular -- as far as hotels and air is concerned? Are you satisfied with what results you are seeing there? And then -- and can you share any metrics or anything along the lines as to what improvements did you see over the last 3 months from the technology upgrade project that you're doing?

Sure, Rohit. We're satisfied with the technology upgrade and our progress there. The Expedia Hotel path is -- has been on the new technology platform for the past couple of quarters. And while we won't share specific metrics, our room night volume -- standalone room night volume on Expedia accelerated nicely in the first quarter over Q4 of last year, which was faster than Q3 of last year. So on a sequential basis, our standalone room night volume is improving. We think that we're just getting started here. And the key here is just translating the new platform into actually new product to consumers that converts better and then marketing more aggressively against that product. So we are, I would say, early in that program, but we're already starting to see benefits of that program, and we expect to see further benefits in the back half of the year. Again, similar to what we saw in Hotels.com, although Expedia is somewhat disadvantaged because of its multi-product nature. We are also right in the middle of rolling over from our old air platform to our new air platform, and are actively testing single tickets, different types of transactions on the new platform versus the old platform. And we're actively right -- we're in the middle of that testing. We expect to see good results from that testing. We will then start rolling over all of our air ticketing on a worldwide basis to the new platform, which will then enable us to start really testing out new feature functionality and, hopefully, driving conversions. So the platform upgrade is happening as planned, and then hopefully, the feature functionality will follow suit just as you've seen in Hotels. And on package, that's going to happen really in the back half of the year. It's going to happen sometime in the fourth quarter. All of the work being done is on schedule, and you will see benefits of that, hopefully, next year.

Okay. If I may add one quick follow up about -- so that translates to your technology spend? You did see some nice leverage in Q1. And so would it -- so how should we think about your technology staffing spend going forward? I would assume you're already behind majority of what you were planning to be spending on, and is that the right assumption to have?

Yes, I think on the platform-type investments, we now have the kind of headcount that we need to drive through those platforms. The increases that you're seeing are increases -- year-over-year increases based on the kind of increased headcount that we brought on last year. So from a cash spend view, our technology spend comps should get better as the year progresses. But then some of the capitalized numbers there are going to start coming through on the depreciation side. So from a P&L standpoint, based on what Mark said, you're going to see pretty significant increases for the balance of the year.

Our next question comes from the line of Doug Anmuth with JPMorgan. Bo Nam - JP Morgan Chase & Co, Research Division: This is Bo Nam on behalf of Doug Anmuth. I just had 2 quick questions. First of all, are you expecting any positive impact from the London Olympics this summer? And then secondly, can you kind of go over some of your mobile strategy and how it differs from some of your competitors?

Sure, Bo. As far as the London Olympics go, we certainly do expect to see positive impact for London and the U.K. in general as a destination. I can't say that we've really worked it into our numbers or forecast. The demand profile and the supply profile of the business are so global now that particular Olympics and a particular price isn't going to really move the needle too much. But the market management team is prepared, and we've got good inventory in London during those times. As far as our mobile strategy goes, it is really moving along all fronts with Hotels.com really leading the charge there on the mobile side. One of the feature sets that we have are exclusive kind of same day-only-type booking functionality for Hotels.com on a worldwide basis. And then we're also tying in the WelcomeRewards loyalty program into our mobile products as well, which is a very popular program for Hotels.com on a worldwide basis. On Expedia, we have rolled out the Expedia Hotels App, which has been built by a combination of our teams and the Mobiata teams. And later in this year, we are going to launch an air product that we're very excited about. And then Hotwire, of course, we've relaunched on a mobile basis as well. So I think mobile right now is at the stage of kind of consistent execution across all of the brands. It is starting to become a channel that we're quite focused on, and it's clearly one of our fastest-growing channels. And we're very hopeful that the volumes are going to increase and the kind of volumes that we're seeing are incremental to our base business.

Our next question comes from the line of Herman Leung of Susquehanna. Herman Leung - Susquehanna Financial Group, LLLP, Research Division: Two quick questions for you. First, I would say on the hotel conversions that you've seen, I think you noted on the fourth quarter that conversions, you started to see some improvement, and you saw a -- probably a little bit more in that testing. Can you kind of give us an update on how that has progressed in terms of better conversion rates and potential for increased marketing on just that hotel platform specifically? And then second is on some of your chain hotels. I know that some of the contract negotiations sort of gave a little bit of margins. But a little bit more brands are now -- the Expedia brands are now working with some of the chain hotels. Wondering if you saw an increased volume as part of that change? And I have a very quick follow up.

Sure. As far as hotel improvement, we are seeing continuing strong conversion on the hotel side. I think that we will see more, and we are -- when I talk about the acceleration of kind of the A/B testing that we're seeing in Expedia, has significantly accelerated in the first quarter versus where we were in the fourth quarter or third quarter last year. So while some of the improvement that we're seeing in the Expedia hotel volume is because of stronger conversion, along with better strength on the variable marketing side, I'm certainly expecting more. The more tests you do, usually, the more tests succeed, and then you pick the successful ones and you roll them out worldwide. And we're kind of right in the middle of that process. I know you can obviously see from the strength of the Hotels.com brand is that -- that's a -- that's kind of a flywheel that you can continue with for some period of time. So Hotels.com conversion, in particular, now that it's rolled over kind of the one year anniversary of the platform continues to get better as we roll out more and more products and as we optimize the sites better, get rid of bugs, et cetera. So we're hoping to see that conversion clock continue, and I think Expedia's early in the path, and the Hotels.com team and the EAN teams, et cetera, are kind of well down the path and I think are -- proven that, hopefully, this is something that we can keep going for some period, of time. As far as the chain negotiations go, we are seeing very healthy volumes with the chains. Our relationships continue to be quite good, and we have and will have some pretty significant negotiations coming up this year. We're confident that we'll continue to work with our major chain partners. But other than that, we're not going to get into the specific details of the relationships one way or the other. Herman Leung - Susquehanna Financial Group, LLLP, Research Division: Got it. And then just a quick follow up. I know TripAdvisor launched a very -- an early competitive product on the hotel side called Tingo. And I know they are using Expedia as affiliate inventory to build that business. I mean, because you guys spent a lot on TripAdvisor, I was wondering how you feel about TripAdvisor launching their own sort of similar OTA-like business, or do you kind of just see it as an affiliate business?

Listen, our philosophy on the affiliate business is we're opening up our systems for anyone to innovate on top of. We've got internal brands that are incredibly strong, are very innovative. But we welcome other brands and other ideas using our inventory because it benefits both of us. It pushes hotel volume down to our hotel partners. We have, obviously, economic share in that transaction as well. And we think innovation in the travel business is a good thing. So we're working very closely with TripAdvisor on Tingo. We think it's a cool, new product, and you're right. In some ways, it's a competitor, but in a bigger way, we think that it's a partner. And that kind of open philosophy of having a completely open marketplace is something that's pretty fundamental to what we believe, and it's not something we're going to change.

Our next question comes from the line of Ross Sandler with RBC Capital Markets. Ross Sandler - RBC Capital Markets, LLC, Research Division: Guys, I just want to reconcile the comment about the full year guidance. So you said mid-single digits. The majority of the EBITDA growth coming in the second half, which given the 24% that you just put up, would imply a pretty material decline in either 2Q or 3Q. So can you just give us a little more color about that, or is that just some conservatism baked into the guidance? And then the second question is, the 18% domestic room night growth accelerating, can you just parse that a little bit between Expedia.com and Hotels.com? Where is the acceleration coming from? And is any of it from the platform? Mark D. Okerstrom: Got it. So in terms of full year guidance, all I'll say is it's just way too early to tell. Q1 is just such a small quarter for us. We do have some much harder comps going into Q2. So we're just really not at a point in the year where we can start taking up guidance. I don't want to get into much more in terms of sort of how we think the year is going to unfold. But again, I think it's just too early. With respect to domestic room night growth, we've had help really across all of our major businesses. So I wouldn't even be able to isolate for you a particular laggard or winner. It's really been strength across. And I think, as Dara mentioned, some of the benefits from having the new hotel path out and seeing some of the conversion uplift are starting to show through on the Expedia numbers, and that's really happening globally, and it's happened in the U.S. as well.

Our next question comes from the line of Michael Millman with Millman Research. Michael Millman - Millman Research Associates: Two questions. One, to follow-up a previous question, particularly regarding mobile, which seems to be moving the industry into one day or almost same day. The question is, what is the long-term effects likely to be on the OTAs and on the hotels, and on the rental cars regarding their pricing and, in fact, how will they market? And my second question, what signs are you seeing that, in fact, the rental car, U.S. rental car fleets have tightened? And maybe you can talk about any particular geographies that stand out one way or another.

As far as the question on same day bookings, et cetera, I think -- listen, the effect on the hotels and suppliers is going to be that they need to be much more careful on the revenue management front. And they also need to be able to balance those short-term bookings with the book of business, kind of a long-term book of business, which, for example, on the Expedia side, it's really the packages business that we offer to those hotels. So the more they can balance that short and long term, the better off they are. But they do have to, I would say, revenue manage more aggressively and also take advantage of different consumer channels kind of more appropriately. The parity pricing everywhere, I think is going to be tough to pull off when you've got mobile channels, you've got maybe Facebook channels, when you can market specifically to consumers, let's say, in Japan and Germany, differently from consumers in other countries. So I think that, that there is going to be a real change in how hoteliers and our partners revenue manage. And, hopefully, we will help them with a balanced book of business, leisure, corporate, package, standalone, desktop and mobile and also deliver to them lots of intelligence on where the demand is coming from or where the demand is weak on a relative basis. As far as the rental fleets go, the volumes that we saw in the first quarter were healthy, but pricing was somewhat less healthy. Pricing was a little weak. But we have seen the fleets get tighter, and we are expecting pricing to tighten up a bit, although I can't give you specifics on kind of the result in pricing. I think we'll see those results coming in Q2 more than we saw in Q1.

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

This is Paul Bieber for Justin. Given the strong performance of Hotels.com, by how much do you think the room nights growth can improve on Expedia.com when we look out 1 to 2 years of new tech platform? And then secondly, just on the competitive landscape, in the U.S., are you seeing any impact from Booking.com's efforts in the U.S. or Google's Hotel Finder product that they're experimenting a lot with?

Sure. So I'll take -- actually take the second question first. I think if you look at our domestic room night growth this quarter at 18%, accelerated from prior quarters, I think, it's decent evidence of the fact that we can continue to grow even our domestic market. We are the largest in the U.S. We sell about 1 out of every 20 room nights that's sold on any channel in the U.S. And we're the biggest. So there's lots of headroom in the U.S. market. I think we've said it in the past, the -- that the global travel market is a very big opportunity. I think there's room for both ourselves and our competitor, our primary global competitor to grow on into the future before we really start bumping into each other. So with respect to the growth expectations for Expedia relative to what we've seen with Hotels.com, it's really hard to predict. I would just say that we were pleasantly surprised with what we saw with Hotels.com, and we are encouraged with what we've seen with Expedia. And I guess it is possible that we could see Expedia hit those growth rates. I do remind you, though, that Expedia is just a little bit more of a complicated business with it being multiproduct. And so there's a little bit more complexity to it. And it's a little bit larger in some markets like the U.S. But theoretically, if we get this right, again, it's a huge market with lots of opportunity, and there's lots of room for growth for Hotels.com and Expedia. And if we get the technology right, I think there's lots of opportunity ahead. Mark D. Okerstrom: I think the structural disadvantage, at least near-term, for Expedia is that the package business for Expedia accounts for a fairly significant portion of Expedia's room night volume, and a higher portion of Expedia's profitability. And with higher average ticket prices, capacity in general on the air side being down on a year-on-year basis, and our package platform being on the old platform versus the new platform this year, our packaged volumes are going to be somewhat more muted than our air -- than our standalone hotel volumes. And when -- then when you look at Expedia on an overall basis, that's a relative disadvantage versus Hotels.com. A fair amount of Expedia's hotel volume also comes from up-sells from the air path, et cetera. And again, with air being weaker than stronger this year, that's a bit of a headwind. Now when we move over fully to the new technology platform on air packages, et cetera, we hope to get those businesses growing again. But the economics, the unit economics of those businesses are certainly going to be a headwind for us. So listen, we've seen a nice progress on Expedia. We expect more progress going forward. We're certainly not counting on Hotels.com-like results. Although we'd be pleased as punch if we got them.

Our next question comes from the line of Mike Olson with Piper Jaffray. Michael J. Olson - Piper Jaffray Companies, Research Division: Just one quick one. Can you just talk about the top 1 or 2 international markets that you're feeling you're gaining most traction in for the last couple of quarters and kind of into the next couple of quarters? So just -- which markets, narrowing it down to a couple, would you say you're most excited about?

Yes, there are a number of attractive markets for us. Again, it's a global business, and we are working to build a platform that crisscrosses people from anywhere to anywhere. From a, call it, point-of-origin perspective, China continues to be very exciting for us. As you know, we own a significant portion of eLong. And judging by the performance in prior quarters continues -- we continue to feel good about eLong. Latin America continues to be exciting. It's still fairly small. Brazil is an interesting market. And we are seeing traction there. And then with our Expedia-AirAsia joint venture, Southeast Asia, India, Japan are all places where we're getting very nice traction, particularly in that business but it has a distinct competitive advantage given the exclusivity it has with the leading low-cost carrier in that market. So I would say there are a bunch of opportunities and a bunch of pockets of growth that we're seeing in the business. We like China. We like Latin America and the rest of Asia is interesting. And we still think there's room and lots of room for us in Europe as well.

Our next question comes from the line of Kevin Kopelman with Cowen and Company. Kevin Kopelman - Cowen and Company, LLC, Research Division: You touched on it a bit, but could you just give us a little bit more color on the results you're seeing from the Google Hotel Finder platform? If you're seeing any impact on advertising expense or conversion rates? And has it changed the way you think about the paid search channel at all?

Kevin, looking at -- at this point, it's a pretty small channel for us, but growing nicely. The -- it's a nicely efficient channel. But the volumes, compared to the overall search volumes or the volumes in other parts of the business, are pretty small. So I think in short, it's really too soon to tell. It's not having any real effect on spend conversion rates one way or the other. Kevin Kopelman - Cowen and Company, LLC, Research Division: Okay, got it. And then just one more question. Just switching to air for a moment. Obviously, a smaller part of the business, but just given the difficult trend, can you help us think about how that -- how or if that impacts free cash flow as the year goes on?

The air business in general is a relatively small part of our overall profitability and I think of our overall free cash flow. Obviously, we're fighting the headwinds that we talked about, the ATP's and the capacity, especially domestically. And what we're hopeful is that the new products that we're going to be offering under the new platform will offset that through conversion, a better user experience, et cetera. But clearly, there are macro headwinds that we're fighting our way through.

And our next question comes from the line of Stephen Ju with Crédit Suisse. Stephen Ju - Crédit Suisse AG, Research Division: Your bookable hotel properties are about flat quarter-on-quarter. So I'm wondering if you're waiting for your technology improvements to be fully in place and thereby, generate more demand before more aggressively trying to add properties and I guess the supply side of the equation, or is there something else that's holding back the growth there? And secondarily, is there any way you can shed some light on what the ADR and the revenue margin change would've been if you strip out the downward pressure on both from eLong? And Mark, just to confirm, you said eLong was a high teens percentage of the room nights total?

Great. So let me just start with the bookable hotel properties. We did add some properties in the quarter -- over the course of the quarter. And what I'd say on that is, this is a game of balancing supply and demand. We are constantly looking at the balance between the bookings that we can deliver to a hotel and the number of hotels that we have. And you'll see us go in -- to some extent, sometimes fits and starts in terms of our property additions just depending on our -- the demand side of our business is doing, and whether we're feeling like we're particularly supply-constraint given the demand we've had. We did have a period over the course of the last few years where we've been pretty aggressive in building up our inventory position, helped in part by the agency product that we brought on with Venere. And so we've had some time to really have demand catch-up. And I think we'll see what happens throughout 2012, but our focus is going to be primarily on really sort of optimizing what we've got and adding tactically as opposed to a massive acquisition effort. Just with respect to the specific question you had on eLong, that was actually a reference to all of our Asia Pacific business, which includes the AirAsia joint venture, Hotels.com, our EAN private label business that powers J-Lon [ph], for example, which is the leading OTA in Japan. So it's not just eLong. And then you had another question with respect to ADRs and revenue margin trends. I would say that we have seen fairly consistent patterns, what we've seen in the last few quarters, we've seen some strength in the U.S. and some pockets of ADR weakness in parts of Europe, where they've had particular economic troubles. But no real sort of broader trends than I would -- that are worth commenting on. Stephen Ju - Crédit Suisse AG, Research Division: So on a like-for-like basis, everything is fairly stable. It's just a mix issue with eLong starting to account for a greater percentage of the total. Is that a fair characterization? Kevin Kopelman - Cowen and Company, LLC, Research Division: Well, again, I don't want to go into specifics around the impact of eLong. I would just say that there are a number of factors, as I said, impacting the delta between ADR in revenue per room night, of which eLong or APAC are not specific to one cause in terms of that delta, but rather that the overall impact on ADRs and revenue per room night from our APAC region is something that we're going to continue to see. Some of that is eLong probably, and some of that is a bunch of the rest of our businesses essentially. Stephen Ju - Crédit Suisse AG, Research Division: Lastly, does the hotel chain inventory convert at generally higher rates versus some of the, I guess, the unbranded inventory?

Chain inventory tends to be higher ADR than independent inventory.

And our next question comes from the line of Scott Devitt with Morgan Stanley. Nishant Verma - Morgan Stanley, Research Division: This is Nishant Verma for Scott Devitt. I just had a quick question on marketing expenses. Expedia had about 200 basis points of leverage this quarter. It looks like about 100 basis points was due to the reduced spend in Trip. I'm just wondering for the rest of the year, how do you expect -- and do you continue to expect leverage in sales and marketing?

So what you saw this quarter was primarily the impact of our Expedia brand broadly being much more efficient with its online marketing spend across all channels. That was -- it's really something they've been focused on. I would consider that, to some extent, an anomaly for the quarter. Part of that again is just the systematic process they've been going through. Part of it is they've been working on the technology platform, and so they've been a little bit less aggressive. But I think the way I would think about it going forward is that on a full year basis, for Expedia, Inc., we expect sales and marketing to be growing broadly in line with revenue for the full year.

Our next question comes from the line of Bill Lennan with Monness, Crespi, Hardt.

I have 2. The first one is about Google, particularly in Europe. Could you tell us how much you think the European Commission inquiry -- or the fact that they're looking at the Google, inhibits Google's behavior. And to put it another way, if the European Commission laid-off Google tomorrow, how much -- how differently would they behave in Europe? That's the first one. The second one is, if you look at Expedia and Priceline as the market, I know that's not realistic, but the numbers we get on hotels room nights only come from Expedia and Priceline. If you look at -- if you add those 2 together, the hotel room nights you've sold, Q1 last year was an outstanding quarter. It was very -- it was such a very difficult comp that accelerated over Q4 and Q3. Going into this quarter, I was a little nervous, and you put up a great number. And assuming a normal share shift, the number that Priceline and Expedia put up together will be another acceleration on an extremely difficult comp. So my question is, what do you think is behind that? Is this just Asia starting to matter in the numbers, or have we hit an inflection point? Have we got -- have we reached a steeper point on the S-curve where offline travel agents are really dying and people are really starting to embrace online travel booking?

Thanks, Bill. Those are some tough questions, good questions. I say as far as Google and the EU, it's just impossible to speculate on what their behavior would be based on different circumstances. Obviously, we are worried about Google's power, which we consider monopolistic and which we think potentially could result in difficult circumstances for businesses working with Google as well as consumers. And we've made that -- those concerns apparent to the EU to -- and it's something that we're working on actively. But it's very difficult to say how would Google behave one way or the other. The fact is, we've got a good working relationship with them on a day-to-day basis. We're very big clients of theirs, and we'll see how that relationship progresses on a go-forward basis. As far as Expedia and Priceline and the markets, listen, I go back to what Mark said before. This is -- travel is an enormous market. We are the biggest online player in the U.S., and we're only 5% of the room night share. I think that Priceline has been executing for many, many years, and they've been executing quite effectively. And we are starting to execute more effectively as a team and across our brands and across our geographies. I really can't make a statement as to whether this is a -- signifies a change in the industry one way or the other, or offline to online share, I will say though that the increasing share of Asia Pacific as a percentage of our overall volumes is something that we're quite excited about. And hopefully, something that we can build going forward.

And our next question comes from the line of Tracy Young with Evercore Partners. Tracy B. Young - Evercore Partners Inc., Research Division: Two questions for you. Obviously, you're growing a nice cash balance. I'm just wondering where it is domestic versus international? If you can give -- I know you have the closing of VIA still to come, but if you can give some guidance on that. And then also, how should we be thinking about guidance relative to FX? You have a big headwind for you in second quarter. So is there anything in there that I might have missed in terms of guidance for FX? Mark D. Okerstrom: Sure. So I'll start with the second question first. With respect to FX, our -- one of our largest exposures is with respect to the euro. If you remember what happened this time last year, the euro started to bubble up into the north of 140 territory, and that's certainly not where we are right now. So if rates hold where they are, we could see some decent headwinds in Q2 and spreading potentially into Q3. With respect to our cash balance, we did have about 100 -- we did about $150 million offshore. The rest is domestic. We have been pretty successful in our ability to deploy our international cash against international acquisitions or incremental purchases in eLong and would expect to continue to be able to do that.

And our next question comes from the line of Brian Nowak with Nomura Securities. Michael Costantini - Nomura Securities Co. Ltd., Research Division: This is Michael Costantini for Brian Nowak. I'm just wondering if you can give us some more detain on your room night growth, if you'd give the breakdown between domestic or international, that would be helpful.

Yes, I mean, I think the number that we've already given is that our domestic, specifically our U.S. room night growth, is growing 18% year-on-year and the overall number is 24% globally, 27% if you include the AirAsia joint venture joint venture.

Thank you. Ladies and gentlemen, this does conclude today's question-and-answer session. I would now like to turn the call back to Alan Pickerill for closing comments. Please go ahead, sir.

Okay. Thanks, everyone, for joining us on the call today. A replay of the call will be available on the IR site shortly after the call is over. We appreciate everybody's interest in the company. Dara, do you have any closing comments?

Sure. Just thank you, everyone, for joining us, and a special thanks to the Expedia Inc. employees for a solid quarter. And hopefully, more to come. Thank you.

Thank you. Ladies and gentlemen, this concludes the Expedia, Inc.'s First Quarter Earnings Conference Call. You may now disconnect.