Jeffery Boyd - Chief Executive Officer, President, Director, Chief Executive Officer of Lowestfare.com and Director of Lowestfare.com Daniel Finnegan - Chief Financial Officer, Chief Accounting Officer and Senior Vice President

Sandeep Aggarwal - Caris & Company Michael Millman - Millman Research Associates Justin Patterson - Morgan Keegan & Company, Inc. Ingrid Chung - Goldman Sachs Group Inc. Bill Lennon - Inaudible Justin Post - BofA Merrill Lynch Michael Olson - Piper Jaffray Companies Herman Leung - Deutsche Bank AG Shelby Taffer Heath Terry - Canaccord Genuity Ross Sandler - RBC Capital Markets, LLC Mark Mahaney - Citigroup Inc

Welcome to the Priceline Group's Fourth Quarter and Full Year 2010 Conference Call. Priceline would like to remind everyone that this call may contain forward-looking statements, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements. For a list of factors that could cause Priceline's actual results to differ materially from those described in the forward-looking statements, please refer to the Safe Harbor statements at the end of Priceline's earnings press release as well as Priceline's most recent filings with the Securities and Exchange Commission. Unless required by law, Priceline undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A copy of Priceline's earnings press release, together with an accompanying financial and statistical supplement, is available in the Investor Relations section of Priceline's website located at www.priceline.com. And now I'd like to introduce the Priceline Group's speakers for this afternoon, Jeff Boyd and Dan Finnegan. Go ahead, gentlemen.

Thank you very much, and welcome to Priceline's fourth quarter conference call. I'm here with Priceline's CFO, Dan Finnegan. I will make some opening remarks, Dan will give a detailed financial review and then I will sum up. After the prepared portion, we will take questions. Priceline reported consolidated gross bookings for the fourth quarter of approximately $3.3 billion, up 44% year-over-year. Non-GAAP net income was $175 million or $3.40 per share, up 71% versus prior year. Fourth quarter results surpassed First Call consensus estimates of $3.09 per share and our guidance for the quarter. Worldwide hotel room night reservations were $22 million for the quarter, up 51% year-over-year. For the full year, Priceline reported gross bookings of $13.6 billion, up 47% from 2009 and non-GAAP net income per share of $13.49, a 58% increase over 2009. Growth rates for our International business decreased slightly during the quarter with 71% gross bookings growth on a local-currency basis. Growth rates benefited from increased ADRs. International gross bookings also benefited from growth in new markets, growth in hotel supply, strong growth from Agoda and inclusion of TravelJigsaw results. Booking.com continued to make impressive strides in building its business, and its worldwide hotel supply platform is now approximately 120,000 hotels in 99 countries. Booking.com's focus on new markets in Asia, South America and North America is paying off with rapidly growing reservations to those destinations and growing demand in those regions for hotels around the world. Booking is making substantial investment in people to promote and manage expansion of its hotel and geographic base, which is evident in the company's growing hotel count and geographic footprint. Priceline's domestic gross bookings grew 9% in the fourth quarter due primarily to growth in sales of opaque and retail hotel room night reservations and rental car reservations. Opaque and retail hotel room night booking growth benefited from higher ADRs, and our hotel partners continued to use promotional pricing to drive demand in retail channels and use our opaque services to bolster occupancy. Merchant gross bookings growth of 42% reflects growth in the domestic retail and opaque hotel business and growing contributions from Agoda and TravelJigsaw. Agoda continues to build its business in the Asian region and continues to report impressive year-over-year growth in gross bookings, contributing to the overall International and merchant growth we are reporting. TravelJigsaw delivered solid growth in rental car unit sales in the quarter and is making good progress with platform and website enhancements and other integration steps. The growth in the Group's International hotel business has exceeded our forecast for the last few quarters, and both Booking.com and Agoda are building staff to accommodate this growth. The expense associated with this investment, as well as the payoff in terms of top line growth, are visible in our reported results and forward guidance. In summary, the business performed well in the fourth quarter, and I commend my colleagues around the world for their focus and execution. I will now turn the call over to Dan for the detailed financial review.

Thanks, Jeff. I'll discuss some of the highlights and operating results and cash flows for the quarter and then provide guidance for the first quarter of 2011. Q4 top line performance was strong, reflecting only modest deceleration in unit growth rates. Hotel room nights booked grew year-over-year by 51% in the fourth quarter as compared to the unit growth rate of 54% we posted in the third quarter. Average daily rates or ADRs dropped by about 3% for our international hotel service and by over 5% for our domestic hotel service for Q4 2010 compared to the prior year fourth quarter. FX rates for the fourth quarter were unfavorable to both our guidance and prior year rates and therefore, adversely impacted our gross bookings growth expressed in U.S. dollars. The average exchange rates for the euro and the pound versus the dollar were down by 8% and 3%, respectively, in the fourth quarter of 2010 versus the fourth quarter of 2009. The strong performance in unit growth drove total gross booking dollars to grow by 44% for Q4 compared to the prior year. Our International gross bookings grew by 65% and by 71% on a local-currency basis for Q4 2010 compared to the prior year Q4. These growth rates exceeded the top end of our guidance range as our International Hotel business continues to deliver outstanding results and did not decelerate to the extent assumed in our guidance. TravelJigsaw, the U.K.-based merchant rental car reservation service we acquired in May 2010 contributed $55 million in gross bookings in Q4. Rental car days booked were up by 65% versus fourth quarter of 2009 including the impact of TravelJigsaw. Domestic hotel room nights posted strong double-digit growth, driven primarily by price disclosed reservations. Airline tickets booked were down by 2% in the quarter, resulting mainly from decrease in retail airline tickets, which adversely impacts gross bookings but has a negligible impact on gross profit. Domestic gross bookings growth of 9% was near the top end of our range of guidance. The strong performance in gross bookings and some favorability on operating expenses helped to drive bottom line performance that exceeded the top end of our range of guidance and First Call consensus. Gross profit was $478 million and grew 53% as compared to prior year. Our International operations generated gross profit of $374 million and grew by 68% as compared to the prior year. Gross profit for our Domestic business amounted to $104 million, which represented 15% growth versus prior year. Total operating expenses came in lower than our guidance, driven primarily by lower than forecasted online advertising and personnel expenses. Online advertising expense as a percentage of gross profit was favorable to the fourth quarter of 2009 and came in favorable to our guidance, driven by improved advertising efficiency. Personnel expense was lower than forecast for the quarter. In Q4, we actually hired at a faster pace than originally forecast due to the recent and projected growth of the business. As a result, salary expenses came in higher than forecast. However, this unfavorable variance was more than offset by lower than forecasted bonus expense. Non-GAAP other expense recorded below operating income in the quarter amounted to $3.2 million, which is lower than the $6.5 million of expense we assumed in our guidance. The variance relates mainly to less FX hedging losses than assumed for guidance. In summary, non-GAAP EBITDA for Q4 amounted to $223 million, which exceeded our guidance range of $200 million to $210 million and represents 67% growth versus prior year. EBITDA leverage or EBITDA expressed as a percentage of gross profit expanded by 390 basis points in the quarter versus prior year Q4. In terms of cash flow, we generated approximately $180 million of cash from operations during fourth quarter 2010, which represents a 23% increase versus prior year. Operating cash flow for the quarter was impacted by the timing of income tax payments, which were significantly higher than prior year fourth quarter. We spent about $8 million on CapEx in the quarter. We received $43 million of cash in the fourth quarter upon early termination of the convergence spread hedges related to our 2011 bonds. For full year 2010, the Group generated $777 million of cash from operations, representing a 53% increase compared to 2009. We expect to pay approximately $60 million in early 2011, representing the earnout amount due based upon the performance of our Agoda business since we acquired it in 2007. The Agoda team has done an exceptional job of building a profitable business focused principally on the fast-growing Asia-Pacific market from a destination and point of demand perspective. As of year end, our cash and investments of $1.7 billion exceed our outstanding debt balance by about $1.1 billion. We also have our $175 million revolving credit facility that is undrawn and doesn't expire until September 2012. Now for first quarter 2011 guidance. Our forecast reflect exceptional top line performance driven primarily by the continued strength of our worldwide hotel room reservation business as well as the inclusion of TravelJigsaw. Our forecast also assumes that exchange rates remain at the same $1.36 per euro and $1.61 per British pound as yesterday's closing rates. That assumption yields average exchange rates for the first quarter of 2011 that would be weaker by 2% for the euro and stronger by 3% for the British pound as compared to the prior year. We have hedged contracts in place to substantially shield our first quarter EBITDA and net earnings from any further deterioration in the euro or the pound between now and the end of the quarter, but these hedges do not offset the impact of translation on our gross bookings, revenue and gross profit. We are forecasting total gross bookings to grow by 45% to 50%, with domestic gross bookings growing by approximately 7% to 12%. We expect International gross bookings expressed in U.S. dollars to grow by 64% to 69% as compared to last year, and to grow on a local-currency basis by approximately 66% to 71%. Our first quarter guidance assumes that the rate of year-over-year increase for international and domestic hotel ADRs will be similar to the increases we experienced in Q4. We expect Q1 revenue to grow year-over-year by approximately 29% to 34% and gross profit dollars to grow by approximately 47% to 52%. For Q1 operating expenses, we are targeting consolidated advertising expenses of approximately $185 million to $190 million, with about $12 million of that amount being spent for offline advertising. Online advertising expense as a percentage of gross profit is assumed to increase compared with prior year Q1. The increase is driven principally by brand mix rather than a change in the fundamental efficiency of our online advertising by brand. Our International brands are growing substantially in Q1 and spend the higher percentage of gross profit on online advertising than our Domestic business. We expect sales and marketing expense of between $32 million and $36 million. We expect personnel costs, excluding stock-based compensation, to come in between $65 million and $69 million. We expect G&A expenses of approximately $23 million to $26 million. We expect information technology costs of about $7 million, and depreciation and amortization expense, excluding acquisition amortization, of about $5 million. We expect total non-GAAP other income expense recorded below operating income to amount to expense of approximately $5.5 million for Q1 2011 compared to income of $1 million in Q1 2010. The other income expense is comprised primarily of foreign exchange loss, net interest expense and the charge for non-GAAP net income allocated to noncontrolling interests. We assume that losses will be incurred on our hedge contracts in Q1 2011, since the FX rates assumed for guidance reflect a stronger euro than the rates that prevailed earlier in the quarter when we entered into our FX hedge contracts. We had FX hedging gains in first quarter 2010 as the euro weakened in the latter half of the quarter. Non-GAAP EBITDA is expected to range between $147 million and $157 million, which at the midpoint represents 36% growth versus prior year. Our guidance assumes that we will experience deleverage closed by online advertising expense and personnel expense growing at a faster rate than gross profit, as well as the variance in other income and expense that I just discussed. The EBITDA deleverage is principally caused by the timing difference between the recognition of revenue and certain expenses. Q1 is typically a quarter where online advertising expense and operating expense is in total expressed as a percentage of gross profit by the seasonal high point, and so the impact of these timing differences can be magnified. A significant amount of bookings typically occur in Q1 as customers make travel reservations for spring and Easter holidays in Q2 and summer holidays in Q3. However, Q1 is typically a relatively less significant quarter of the year from a revenue and gross profit perspective as less travel occurs compared to other quarters of the year. We have grown our headcount significantly since Q1 of 2010 to accommodate the substantial rate of growth that we experienced throughout 2010, and we are continuing to grow our headcount in our worldwide business in order to accommodate the current and future growth. Although the headcount and related expenses are on board in Q1, a substantial amount of our profits will be reported in Q2 and to an even larger degree, in Q3 when the travel takes place. There is also a mixed impact on consolidated margins from the inclusion of TravelJigsaw and the level of growth achieved by Agoda, which exceeds the growth rates of our other brands. Both of these businesses are less mature than our core Booking.com and Priceline brands and consequently, have lower operating margins. TravelJigsaw, which will be included in our Q1 results for the first time, in particular has seasonally lower margins in Q1 than our core business. We are targeting non-GAAP fully diluted EPS of approximately $2.34 to $2.44 per share, which at the midpoint represents 41% growth over prior year. Our non-GAAP EPS forecast includes an estimated cash income tax of approximately $26 million comprised of International income taxes and alternative minimum tax and state income taxes in the U.S. where we have a sizable NOL to reduce our cash tax liability. Our non-GAAP tax rate has generally been increasing as compared to prior year periods to the more significant growth in International earnings as compared to Domestic earnings. We recently received a formal ruling from the Dutch tax authorities that a portion of our pretax earnings in the Netherlands are generated from innovative activities and therefore, qualify for Innovation Box tax treatment. Earnings that qualify for the Innovation Box tax are taxed at the rate of 5% rather than the current Dutch statutory rate of 25%. The ruling covers the years 2010 through 2013 and specifies that the benefit be phased in over a multiyear period. We expect that the impact of the Innovation Box tax will reduce our consolidated cash income tax rate for Q1 and the full year of 2011 by one to two percentage points, and the guidance that I just gave for Q1 reflects this assumption. The impact of the Innovation Box benefit is likely to grow in subsequent years as we proceed through the phasing period. By 2013, all things being equal, we estimate that the Innovation Box benefit could reduce our consolidated cash income tax rate by up to approximately five percentage points depending upon the level of earnings. Our non-GAAP EPS guidance assumes a fully diluted share count of 51.5 million shares based upon Tuesday's closing stock price of $433.78. We expect to report GAAP EPS of $1.66 to $1.76 per share for Q1. The difference between our GAAP and non-GAAP results is driven by non-GAAP adjustments to exclude stock-based compensation, acquisition-related amortization, noncash interest expense for amortization of debt discount, noncash gains or losses related to early debt conversions, certain noncash income tax expenses and to include the impact on net income attributable to noncontrolling interests of certain of the aforementioned non-GAAP adjustments to arrive at non-GAAP earnings. We also intend to address non-GAAP results to exclude charges or benefits, if any, related to hotel margin tax, judgments, rulings or settlements. We are very pleased with top line performance of the business delivered in Q4 and inherent in the guidance for Q1. However, as we have emphasized in previous earnings releases, we believe it is highly likely that we will experience sequential deceleration in quarterly year-on-year unit growth rates in the future due to the sheer size of the business and progressively more difficult comps as economic conditions continued to gradually improve. Our guidance assumes that macro economic conditions in general and conditions in the consumer travel market in particular remain relatively unchanged. I'll now turn the call back over to Jeff for some closing comments.

Thanks, Dan. We are pleased with the performance of our global business in 2010, and in particular, with the progress of our International Hotel business in Asia Pacific and the Americas. Expansion of supply, efficient customer acquisition and brand building and innovation strengthened our International platform and, we believe, have allowed us to achieve high growth rates on a very large business. We will now take your questions.

[Operator Instructions] Our first question comes from Mark Mahaney of Citigroup. Mark Mahaney - Citigroup Inc: One, do you want to call out any adverse weather-related impact on your Q4 results or on your Q1 guide? And secondly, a broader question on the U.S. hotel market. Do you think that we could see over the next couple of years a move away from the merchant model more towards an agency model? I asked that given the context of the merchant model was established at that time when the online travel agencies may have had undue leverage in the industry that maybe less the case now. So do you think that's possible, is something you could see? And is that something you're actually trying to push with the Booking.com in North America?

I don't think that I expect in the near term to see any broad move away from the merchant model here in the United States. It's very well understood and accepted by consumers. I think hotels see a real benefit from lower levels of cancellation, and it provides a very effective vehicle for promotions and discounting. So I think the merchant model will continue to be relevant and vibrant here in the United States for some time to come. The agency model is another approach that, I think, also has been used in the United States with traditional travel agents for a long time and is attractive to consumers here, especially consumers who value the flexibility and the ease of cancellation it affords. So I think that there's room for that model as well. But I think the merchant model is going to continue to do well also.

And Mark, related to the weather in Q4 for Europe and Q1 in the U.S., where we had a lot of snow-related events, it did drive some increase in cancel rates, but it wasn't overly significant to either quarter. And I think that's apparent in the results that we were able to deliver for Q4 and are included in our guidance for Q1.

Our next question comes from Bridget Weishaar of JPMorgan.

This is Shelby Taffer calling in for Bridget. Are you seeing any impact from the civil unrest in the Middle East? And secondly, can we expect easier comps in Asia and Agoda over the next few months due to the disruptions in Thailand last year?

I mean, with respect to the Middle East, there's no question that we're seeing a significant drop in reservations from the countries that are experiencing the civil unrest. Those markets tend to be pretty small markets for our International business, and we've also seen at the same time, some pickup in some other warm-weather destinations. With respect to the civil unrest in Thailand, I think that there will be some easier comps for the business in Thailand. But again, our International Hotel business is very diverse and at any given point in time in the year, there will be things that are either hurting travel like volcanoes and civil unrest or helping travel like the Shanghai Expo or the Olympics, that sort of thing, that on balance, the large size and the global scope of it would tend to mitigate the impact of those sort of regional disruptions.

Our next question comes from Ingrid Chung of Goldman Sachs. Ingrid Chung - Goldman Sachs Group Inc.: First, your domestic bookings grew 8.5% in 4Q and your guidance 7% to 12%. For once, you're implying the potential for reacceleration. And it sounds like you're looking for ADRs to be relatively flat sequentially, so I was wondering what could be driving that reacceleration? And then secondly, I was wondering if you could talk about the direct connect agreement you have with American. Do you see doing more deals like this or could you see forging an airline partnership similar to one that Expedia recently signed with US Airways where the inventory still funnels through the GDS, but now you see ancillary revenue streams going through the OTA?

I think that the market going forward for airline connectivity will be a mixed market where there'll be some direct connects like the one that we announced with American Airlines but also a very significant flow of ticketing through the GDSs. Even though I don't have a real inside track on product development plans of the GDSs, because they represent such a large and important distribution channel and because they have economies of scale, over time, if there are other products, ancillaries and functionality being made available on direct connect basis, I believe the GDSs have the technology and the will to provide that functionality to their agency customers as well. So I think we'll see a mixed model going forward where some airlines may choose to connect with a large agency through a direct connect. But many other airlines will operate through the GDS, and big travel agents like us will operate with both.

And Ingrid, for the Domestic business, the hotel business performed very well in Q4, and it's forecasted to perform very well in our Q1 guidance. In terms of airline tickets, we saw it down 2% in Q4, and prices were relatively weak year-on-year as well. There's been an uptick in pricing in Q1 and that can drive some additional gross bookings dollars but doesn't have a significant impact on gross profit or other profit bonds.

Our next question comes from Ross Sandler of RBC Capital Markets. Ross Sandler - RBC Capital Markets, LLC: So you mentioned better efficiency in your online marketing, can you just talk about what's driving that efficiency? Is it more organic traffic coming to your International sites, better ROI on search spend or both? Just a little more color there. And then, can you give us a little bit of help on -- if you look at Booking.com from the user perspective, what's the distribution of the user base? Is it very fragmented kind of like your supply or is it consolidated to some of the bigger Western European countries? Can you just give us a little color about where the customers are coming from in terms of percent of exposure by country, region, et cetera?

Ross, in terms of the advertising efficiency, we don't get into a lot of the details behind that. It is driven by the factors you mentioned. So it's how successful we are in getting traffic to come back to our website directly without a click cost. But we've said in the past, we're pleased with the levels of repeat business that we've been able to deliver. With our International business, which is growing at such a rapid pace, you still have a fairly large percentage of new customers coming and mostly through online channels. We do disclose what's going on with ADRs, and ADRs increasing is generally helpful for the unit economics for advertising efficiency, and so that's a positive. We don't talk about click costs just because we're such a big player in a lot of the markets that to indicate whether we'd see click costs going up or down, it can be indicative of what we're doing and that's competitively sensitive.

With respect to, Ross, where the customers are coming from, I think we've pointed out over the past couple of quarters that for Booking.com in particular, their core markets of Western Europe continue to have very strong demand trends. But as the business has expanded into new markets, we've seen not only business move into those markets as destinations, but also we're getting demand in those markets as the team of Booking.com is successful in building local presence, local distribution and some growing brand loyalty. So I think one of the reasons that we've seen a sustaining of these high growth rates is that the new market strategy is working both from a destination perspective but also as a source of demand with these new market as a point of sale.

Our next question comes from Heath Terry of Canaccord Genuity. Heath Terry - Canaccord Genuity: Dan, you called out the plans to spend significantly more online in the domestic market this year. Can you give us a better idea of what's motivating that specifically online? Are you seeing a change in the ROI there versus your offline spending? Or is it a reaction to competitors spending more in the channel? And then finally, with regard to Jigsaw and the growth that you saw in rental cars, how much of a driver of that level of growth came from any cross-promotion with bookings?

Heath, just to clarify, for online spending in Q1, what I said was there's an increase in online advertising as a percentage of gross profit as compared to the prior year, and that's driven by mix of business amongst our brands. So we didn't see any fundamental change in advertising efficiency in each individual brand. But because our International brands are growing at a faster rate and spend a higher percentage of online advertising, as a percentage of gross profit, than our domestic business does, the overall consolidated rate went up. But I didn't say anything about domestic spending more this year. Each brand maintained their efficiency, and we just have the mixed impact there.

And with respect to cross-sales to TravelJigsaw, there definitely is some cross-selling going on among customers of other brands in TravelJigsaw, and it's helping their results. I'm not going to break out the number. It's not huge, but it's definitely helpful and it's something that we hope we're able to build on in the future. We're certainly not optimized in terms of the amount of traffic that all of our brands could potentially send to their rental car platform. So it represents an incremental opportunity as well going forward.

Our next question comes from Sandeep Aggarwal of Caris & Company. Sandeep Aggarwal - Caris & Company: One is, Jeff, can you tell us what is your current view on the Google's acquisition of ITA? And what efforts OTA industry is doing to raise your voice regulators? And then another question is about International revenue and market share. If you can help us to understand how much of your revenue by continents, Europe, Asia-Pac and Latin America, basically, what is the revenue breakdown? And what is your market share?

So with respect to Google's acquisition of ITA, the federal anti-trust review of that acquisition is ongoing. The government has received the input from the industry, and I think it's fair to say if you look at that review and the review by the European community of Google's moving to vertical search in Europe, a lot of the same concerns have been voiced. And I think the regulators had a clear view of what some of the issues are for Google's advertisers, and those issues become serious simply because of the very significant market share that Google has and its ability should it choose to do so to move business away from the product of advertising customers and towards the products that are proprietary to Google. With respect to ITA, there's also a continued concern about whether ITA's pricing platform would be available to other industry participants who could be viewed as competitors of Google in the future. I think that, that review has been very, very fulsome, and I think the industry has done a very good job of raising the questions around it. With respect to International revenue and market share by region, that's just not information that we would share. We give information based on International and domestic, but we have not broken it down by regions. And we haven't broken down market share by regions either, and that's simply for competitive reasons.

Our next question comes from Justin Post of Bank of America. Justin Post - BofA Merrill Lynch: First, the guidance in the first quarter suggests that the rate of deceleration in International market is only going to be about two points at the midpoint to 69%. Anything helping the growth rate in the first quarter that we should think about or slowing the deceleration? It looks like it really is slowing. The second question, as you spent a lot of time on the call, Dan, about deleverage in the first quarter. Does that kind of imply that we might see leverage again in the following three quarters? Just trying to help people with their models. And lastly, Jeff, I ask you this pretty much every first quarter call. But you're spending less than $30 million on your tech platform. You're doing some direct connect stuff. You're growing really rapidly. Is your tech platform holding up? And is there any reason why you're able to spend less than some of your larger competitors?

Okay. So with respect to the first question, we're seeing modest deceleration in our business implied in the guidance, and I think some of the factors that we've been pointing out for the last six months or so continue to be at play here. The new market growth both as a destination and a point-of-sale for Booking.com in Asia, in particular South America. The Americas in general is at a higher growth rate than in the core markets. And as those markets become a bigger part of the whole business, it just has the effect of holding up your growth rates. Agoda continues to perform very well in the Asian market and growing at a high growth rate. That's been helpful in holding up growth rates. So I think those are -- it's really the platform, the International Hotel platform that's continuing to grow. You see the hotel count that we published for Booking.com, 120,000 hotels. I think that's up 55% year-over-year. So really, great job by the team at Booking.com in building what was already a very large and widely dispersed hotel network by a very significant amount over 12 months. And so I think it's those kinds of efforts that are helping hold up the growth as well as the great innovation that our marketing and front-end teams do around the world. And then I'll hit the capital expenditure question and Dan can talk about earnings leverage. With respect to capital expenditures, the $30 million represents an increase. It's been a modest trend up in our CapEx. And as I've said before, we have a simpler job to do than our competition because our platforms run independently. We don't have to make the investment to try to build one platform that suits everybody's different business. The International platform support one line of business only, support hotels in the case of Booking.com and Agoda, and rental cars in the case of the guys at TravelJigsaw. I think the network team that supports all of those businesses does a good job of getting economies of scale where appropriate. And I also think we have a very good technologist who have been brought up in an entrepreneurial environment and in companies where we're just very, very careful about what we spend. So I think those are all the factors. I don't think we're under-invested. And as you can see by the growth that the business has produced over the last three or four years, we've been able to manage that growth without very significantly ramping our IT spend.

Justin, and on the deleverage point in Q1, we gave what are the key drivers there. So on online advertising, it's really driven by mix. We saw a similar phenomena last year in the first quarter. Some of the other expenses, it's really just Q1 can be a strange quarter, and that we have a lot of online advertising coming through. We're trying to get staffed up for a prior year. We've got staff on board that we need to hire to get through peak season from last year. But the revenue is going to come later when the stays occur. So that's something we have seen in the past. Every now and then, it can throw some strange relationships into Q1. We're not going to give guidance beyond Q1, but we will say it's an important goal for our business to maintain operating leverage, and we will strive to try and do that.

Our next question comes from Herman Leung of Deutsche Bank. Herman Leung - Deutsche Bank AG: First, I guess on your emerging markets business, I think, can you talk about the gap between the monetization of your more developed countries such as Europe relative to Asia? When can we expect that to track closer to the same monetization rates there? And then second, just curious on your trends of organic traffic in the fourth quarter as well as the first quarter, and how much Google drove traffic to your sites, whether it's domestic or internationally? And then the last question is, just if you can comment a little bit about the linearity of Q1 bookings between January and February, whether or you're seeing trends accelerate or give us some color there it would be helpful.

With respect to emerging markets businesses, Dan mentioned in his prepared remarks, the relatively less mature businesses that we have operate at lower operating margins than the more mature businesses. It's a balance between making sure that we are investing enough in these businesses at their stage of development to make sure that they can capitalize most effectively on the market opportunities that they're facing on the one hand, and making sure that they are, over time, building operating leverage so that they can, within a reasonable time period, approach the kind of margins our more mature businesses are able to achieve. We don't have a forecast or a time frame for you, but we obviously are comfortable with the balance that we struck between investment in these relatively younger businesses and the prospect for them to improve their margins over time. And particularly, in the Asian market where there's so much economic growth, so much growth in the travel economy in general and so much happening in terms of penetration of Internet commerce, I think it's the right decision to make sure that we are weighing in on the side of investing adequately in expanding that business at such a crucial time. We're not going to make any comments on how much business we get from Google organically. That's just not something that we discuss, although I completely understand why you asked the question. And Dan, you want to hit the question about January, February?

Yes. Also, Herman, in respect to our Q1 guidance, we're not going to break it down month by month or say what we project for the remainder of the quarter. But suffice to say that there is minimal deceleration as compared to Q4 inherent in that forecast. Herman Leung - Deutsche Bank AG: And then I guess I know you guys won't talk about the traffic that's being generated by Google, but can you talk about organic traffic level of repeat users that are coming back onto your International sites? Maybe just a little bit of color on that would be very helpful.

We've said in the past that it's a very important goal of all of our business, and the International business in particular, because it relies on online advertising to build strong brands and to build strong repeat trends, and that's something that our team in Amsterdam has been very, very effective at. We're very pleased with the repeat trends that we see, and you can rest assured that it's a primary focus of the business. There are a lot of different ways that repeat customers can find our brands, and so we have to be attentive to those channels. But I think we have continued to basically build a very strong base of very loyal customers coming back to our websites. And Dan has mentioned in the past, it's one of the reasons that our overall advertising efficiencies have held up so well is because we're getting a lot of customers coming back to the website: loyal, repeat customers. And typically, the cost to get those customers back to the website is a lot less than the cost of bringing in a new customer.

Our next question comes from Mike Olson of Piper Jaffray. Michael Olson - Piper Jaffray Companies: Do you guys anticipate any changes in competitive landscape in Asia just based on some of your competitors' indications of increasing their spending and gaining share in Asia-Pac? I guess, are you seeing any more aggressive tactics from competitors in Asia right now?

I think there are a lot of businesses that are spending money investing in Asia and doing well there. It's a massive market: 900 million people, not including China or India. There is, in many cases, high single-digit, double-digit economic growth going on there. The market for travel to Asia, I think, is growing very dramatically if you look at where the hotels are building their hotels. And because of the Internet and because of the increasing International airlift to the region, it's just a very, very robust travel market. So companies have been investing very significantly there for many years, and a lot of those businesses are showing excellent results. Ctrip is doing extremely well in particular for travel, Chinese travelers inside China. I think that our major multinational competitors are spending money there with varying results based on what the public reports are. But my belief is that, that market is so robust and attractive that there'll be room for a lot of businesses to do well there.

Our next question comes from Justin Patterson of Morgan Keegan. Justin Patterson - Morgan Keegan & Company, Inc.: First, just looking geographically, are there any markets that are tracking ahead of your expectations just both for Q4 and embedded in Q1 guidance? And secondly, you've been very aggressive on the mobile platforms. I'm curious if that's just introducing a new consumer base for you, particularly in Asia-Pac where advanced smartphones seem to have a very high penetration?

With respect to mobile, the business, while still a small percentage of our total business, has grown very rapidly. And we're very excited about the products that we have out in the mobile markets, and we're very excited to continue to innovate and bring more functionality into the mobile application world and to equally importantly, improve the browsing experience for people that just come to our mobile website. I think a couple of the things that have happened in the marketplace that will probably be interesting, the first is that if you look at the fourth quarter results for the device manufacturers, it's clear that there is a very, very significant increase in sales in mobile devices in the quarter. A lot of that is holiday gifts and so forth. But there just continues to be a very significant increase in the number of devices that are out and activated. And I think that, that's going to be impacted positively by the availability of the iPhone on the Verizon platform, which will create a whole another category of demand. And you're also having non-Apple manufacturers building tablet devices that are getting good reviews, and the Android device has basically, in a very short period of time, grown to be of roughly equal size. So just the significant growth in the number of devices online represents an opportunity for folks like us and for guys that can get good functionality out into the marketplace to participate. With respect to emerging markets, I think that our view is that the mobile platforms will be very, very important, and that it may take a little bit longer for the mobile platforms in those markets to become significant vehicles for commerce. But that over the intermediate time frame, they have the potential to become more important as a share of total e-commerce just because a higher percentage of consumers in emerging markets are likely to have their primary interaction with the Internet over a mobile device versus a fixed desktop computer at their home or in the office. So I think that the potential there, it may take longer to realize, but it actually could potentially be higher than the domestic market share potential.

And in terms of geographically, which markets are tracking ahead of our expectations, I'd say for our worldwide hotel business, it's basically every market. We've been pleasantly surprised with the performance that we posted for Q4 and with the guidance we're able to give for Q1, and that's really coming through in the new markets like Jeff mentioned. So Asia-Pacific, the Americas, South America are growing very fast. But the core markets still being such a big part of the business that without those markets also posting very strong growth, we wouldn't be able to post the results in the forecast that we did. So I'd say we've been pleasantly surprised across the board.

Our next question comes from Michael Millman of Millman Research. Michael Millman - Millman Research Associates: In the U.S., in rental car, we're seeing a big growth in the spartan brands. I was wondering what impact that's having on your ability to get merchandise for opaque? What impact -- is it the impact that you're seeing on your total U.S. business and rental cars? And Jigsaw, can you talk about what's driving their big increases in growth? And then maybe you can say something about Expedia's talking about putting Hotwire opaque into Europe and what you see from that?

Okay. So with respect to the rental car spartan brands, as you call them, there's no question that consolidation in the industry has happened in a real way and that part of the strategy of the major rental car companies is to have a low cost brand associated with a premium brand. I think that over time, that can have an impact on how the large rental car companies allocate inventory to opaque. But I think the more important driver of whether opaque channels have strong inventory is overall fleet capacity, and that's been volatile. And that volatility has been evident in our results, and we expect that volatility to continue. With respect to TravelJigsaw, the growth rates that we're reporting for rental car are driven more by the fact that TravelJigsaw is being included in these quarters for the first time, and there's no year-over-year comp. We're very pleased with the growth we've seen in that business, but we haven't broken it out specifically. And it is not our intention to break it out in the future, but rather to discuss the rental car product broadly speaking internationally and domestically, and that's what you'll see us doing going forward. With respect to Hotwire in Europe, the European market is challenging for opaque hotels because in the United States and especially in large cities, well more than half of the inventory is national brands where star ratings and what you'd expect to see in a hotel are very, very well understood. And in Europe, it's a little bit harder because the hotels are all very different, and it's hard for the consumer to really know what they're getting without actually knowing more details about the hotel. I think that's going to be a challenge for Hotwire, and it's certainly a challenge for us as we try to sell opaque hotels to U.S. customers traveling to Europe. It's something we'll keep our eye on. It probably would have been a stronger supplier proposition two years ago than it is today.

Our next question comes from Bill Lennon of MCH. Bill Lennon - Inaudible: With respect to hotel room nights, it looks like you still gained nice share from Expedia, but slightly less than in the last couple of quarters and enough to catch my eye. So question one is, do you see Expedia doing anything different with respect to their competitive positioning? Or do you believe that their efforts to make their platform more efficient and more effective and conversions as bearing fruit? The second question is two parts. With the stock price up so much, some people have their compensation go up materially over the last two years or so. And then with the organization getting so much larger, I fear that there maybe some creeping bureaucracy because that's just a natural thing that happens to organizations. So the second question is, how do you retain senior management when their lives have changed, have gotten a lot more wealthy perhaps? And then, how do you avoid getting bureaucratic and less nimble than you have been in the last five years?

So with respect to the room night growth versus Expedia's room night growth, I don't recall off the top of my head what their year-over-year growth in room nights was for the fourth quarter. But I certainly don't have the perception that there was any material change in the amount of share that we took in the market versus prior quarters. So I just can't comment specifically on what they might or might have done to change that relationship. With respect to compensation, we've worked very hard to create an environment around the world where the entrepreneurs who founded the businesses that we joined up with have the independence and the scope to continue building their business and have the financial incentive that they'll benefit significantly if the business does well. And that, in fact, has happened. And we're very pleased to see those incentives working to drive value for our shareholders, and it's one of the things that we worked hardest at, and senior management is making sure that, that independence in ownership is enjoyed by the local management teams, but that also everybody understands how all the businesses fit together and see the benefits of working together as a group, which we're down to the benefit of our shareholders over the last four or five years. With respect to bureaucracy, that's just not part of our DNA. We have very little by way of layers of management, and if someone were to criticize the organizational structure of our company, it would be to say that we don't have enough middle management and staff running around the place. So I don't view that as a current risk, although over time, it's a risk for any large organization.

Gentlemen, our final question comes from Ross Sandler of RBC Capital Markets. Ross Sandler - RBC Capital Markets, LLC: So on the Google issue, Google has been adding hotel partnerships with Trust International and a few others recently. Can you talk about how much of your Booking.com 120,000 supply could be matched by these types of partnerships and maybe how challenging or not challenging it is to kind of build the direct business on a supply side that you've built at booking over the years?

I think that what Google is doing is very different from what we do. They are building advertising relationships, and we're helping consumers make reservations. They're getting all of their content from third parties. The content that we have is ours and proprietary to us. So I view them as essentially different things. I think that the barriers to entry in terms of building hotel content are lower for somebody who runs an advertising model because there are a lot of third parties who are willing to allow businesses like metasearch that have advertising platforms access to the content that they've built up over the years. So with respect to businesses that have a lot of customers and can drive well-priced leads to online travel agents and people who make reservations, they'll have content as long as they are able to supply reasonably priced leads to the folks who are giving them the content. With respect to somebody who wants to go out to a hotel and build a booking business where the merchant or agency for a commission, I think the hill is a lot higher to climb because essentially, they are, by definition, showing up without any customers and saying, do the work to connect with me and I promise someday I'll bring you a lot of customers. And that's just a little bit of a harder thing to do.

And gentlemen, at this time, I'd like to turn it back to you for any closing remarks.

Thank you, all, very much for participating in the call.

And this does concludes your program. Thank you for your participation, and have a wonderful day. You may disconnect at this time.