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

Michael Millman - Millman Research Associates Ingrid Chung - Goldman Sachs Group Inc. Aaron Kessler - ThinkEquity LLC Douglas Anmuth - JP Morgan Chase & Co Justin Post - BofA Merrill Lynch Unknown Analyst - Herman Leung - Susquehanna Financial Group, LLLP Jeetil Patel - Deutsche Bank AG Ross Sandler - RBC Capital Markets, LLC Mark Mahaney - Citigroup Inc

Welcome to the Priceline Group's Second Quarter 2011 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 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 speakers for this afternoon, Jeff Boyd and Dan Finnegan. Go ahead, gentlemen.

Thank you very much, and welcome to Priceline's Second Quarter Conference Call. I'm here with Priceline's CFO, Dan Finnegan. I will make some opening remarks, and Dan will give a detailed financial review. After the prepared portion, we will take questions. Priceline reported consolidated gross bookings for the second quarter of approximately $5.8 billion, up 70% year-over-year. Non-GAAP net income was $283 million or $5.49 per share, up 78% versus prior year. Second quarter results surpassed First Call consensus estimates of $4.91 per share and our guidance for the quarter. Worldwide hotel room night reservations were $36.1 million for the quarter, up 56% year-over-year. Growth rates for our international business held firm during the quarter with 79% gross bookings growth on a local currency basis. Growth rates benefited generally from increased ADRs, impressive growth in new markets for Booking.com and high excellent growth rates for Agoda and TravelJigsaw. International hotel gross bookings also benefited generally from growth in hotel supply, with hotels now in over 110 countries worldwide. Booking.com grew its supply platform of 155,000 hotels at the fastest pace in over 3 years. Booking.com continues to build inventory and sales around the world, delivering growth in reservations to new destinations and growing demand in those destinations for hotels around the world. Bookings has also continued to execute well into its high season, not only expanding geographically, but also in securing availability in high-demand destinations, helping achieve high international growth rates this quarter. Priceline's domestic gross bookings grew 13% in the second quarter, due primarily to growth in retail hotel room night gross bookings, aided by improved ADRs, and continued growth in airline ticket sales and higher airfares. Growth in opaque air tickets again helped the domestic top and bottom line as airlines used the opaque channel as a revenue management tool while they increased fares. Merchant gross bookings growth of 45% continues to reflect growth in the domestic merchant businesses. That was primarily driven by growth from Agoda and TravelJigsaw, which now represent a significant share of merchant bookings. Agoda reported higher year-over-year growth rates in gross bookings as it comp-ed last year's civil strife in Thailand, contributing to the overall international and merchant growth we are reporting. TravelJigsaw delivered better-than-anticipated growth in rental car unit sales in the quarter through solid execution in building toward the high season. In summary, the growth in the group's international hotel business exceeded our forecast in the second quarter, and we are pleased with the progress of our brand's expansion in new markets and their hard work in preparing for high-season travel. 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 in operating results and cash flows for the quarter, and then provide guidance for the third quarter of 2011. Q2 operating performance was exceptional, led by year-over-year gross bookings growth of 70%. Hotel room nights booked grew year-over-year by 56% in the second quarter, maintaining the same strong level of growth that was generated in the first quarter. Average daily rates, or ADRs, were up on a local currency basis by approximately 4% for our international hotel service and by almost 8% for our U.S. hotel service for Q2 2011, compared to the prior year second quarter. These increases were favorable to our assumptions for Q2 guidance. FX rates for the second quarter were unfavorable to the rates we assumed in our guidance. However, currency exchange rates provided a substantial tailwind when compared to the prior year second quarter FX rates. The average exchange rates for the second quarter of 2011 for the euro and the pound sterling were approximately 14% and 9% higher, respectively, than the average exchange rates for Q2 2010. Our international gross bookings grew by 98% and by 79% on a local currency basis for Q2 2011 compared to the prior year. Our Booking.com and Agoda businesses once again delivered outstanding results. It exceeded our expectations when we gave guidance for the quarter back on May 4. Our forecast was based upon the growth rates we saw through that date, and as we said on the call, an assumption that growth rates would further decelerate as we proceeded through the remainder of the quarter. Instead, we were pleasantly surprised to see acceleration in our unit growth rates over the more seasonally significant back half of the quarter. The outstanding unit growth, as well as some ADR favorability versus guidance, drove results that exceeded the top end of our guidance range. Performance across key markets was good. We saw continued strong growth rates in our core European market in Q2. Faster-growing markets for our international business, including Asia-Pacific, North America and South America, continued to grow at levels that exceeded our consolidated unit growth rate. These markets are increasing as a percentage of our business from a destination and point-of-sale perspective and are, therefore, having a more pronounced impact on our overall growth rate. TravelJigsaw, the U.K.-based merchant rental car reservation service we acquired in late 2010, contributed $154 million in gross bookings in Q2 as compared to $44 million included in Q2 2010 from the point we acquired the business on May 18, 2010. Rental car days booked for the group were up by 55% versus second quarter 2010, including the impact of TravelJigsaw. Since we have now lapped the May 2010 acquisition, we will not separately report gross bookings for TravelJigsaw in future quarters. Gross bookings growth for our U.S. business of 13% is at the top end of our guidance range. Strong growth in retail hotel room nights booked and higher ADRs were key drivers. Name Your Own Price hotel room night growth decelerated, likely as a result of competitors' initiatives in the opaque hotel arena. Airline tickets booked were up by 7% in the quarter, resulting mainly from strong growth in Name Your Own Price airline tickets. A 4% increase in average retail ticket prices also contributed to gross bookings growth. Opaque rental car performed well due to improved access to discounted rates compared to the first quarter. The strong performance in gross bookings helped drive bottom-line performance that exceeded the top end of our range of guidance and First Call consensus. Gross profit was $749 million and grew 68% as compared to prior year. Our international operations generated gross profit of $612 million, an increase of 90% as compared to the prior year or 71% on a local currency basis. Gross profit for our U.S. business amounted to $137 million, which represented 11% growth versus prior year. Total operating expenses came in above the midpoint of our guidance, driven primarily by higher-than-forecasted online advertising expense, which was consistent with our gross booking's over-performance. Online advertising expense as a percentage of gross profit was slightly favorable to our guidance as a result of better-than-assumed ad efficiency, but came in higher than the second quarter of 2010. The variance versus prior year was caused by the significant level of growth for our international business, which relies more on online advertising spend than our U.S. business. Consequently, online ad spend increased as a percentage of gross profit in Q2, even though we were pleased with the underlying advertising efficiency for our brands. We will discuss operating leverage this quarter and in the future based upon non-GAAP operating income rather than adjusted EBITDA as a percentage of gross profit. We believe this is a more accurate leverage metric, because FX gains and losses from our short-term earnings hedges shield adjusted EBITDA but not gross profit. And therefore, changes in exchange rates create anomalous leverage comparisons from period to period. Our GAAP to non-GAAP reconciliation in our earnings release provides detail on the calculation of non-GAAP operating income. Non-GAAP operating income expressed as a percentage of gross profit amounted to 46.2% for Q2 2011, which represents an increase in leverage of 210 basis points versus prior year Q2. Although we had some de-leverage in online advertising as I just discussed, our other operating expenses grew at a slower pace than gross profit, resulting in improved operating leverage. Non-GAAP other expense recorded below operating income in the quarter amounted to $3 million, which is lower than the $9 million of expense we assumed in our guidance. The variance relates mainly to less FX hedging and transaction losses than assumed for guidance, as the euro weakened after we gave guidance. Our cash income tax rate was favorable to prior year and our guidance forecast. During second quarter, we increased our estimate of the impact of the Innovation Box Tax benefit on our annual effective tax rate. We now expect the Innovation Box benefit to reduce our 2011 income tax rate by 2 to 4 percentage points. The additional benefit is reflected in our second quarter tax expense, as well as a benefit of about $2 million reflecting the cumulative catch-up impact of the change on our first quarter tax provision. Adjusted EBITDA for Q2 amounted to $349 million, which exceeded our guidance range of $310 million to $320 million and represents 71% growth versus prior year. In terms of cash flow, we generated approximately $223 million of cash from operations during second quarter 2011, which represents a 19% increase versus prior year. During our last earnings call, I highlighted that operating cash flow was impacted by the timing of approximately $124 million of withholding tax payments, which were accrued in the first quarter and paid in the second quarter. This timing difference had a favorable impact on operating cash flow for the first quarter and an offsetting unfavorable impact for the second quarter. Operating cash flow for the 6 months ended June 30, 2011, is 71% higher than the prior year comparable period. We spent about $10 million on CapEx in the quarter and paid about $13 million in the quarter to purchase a portion of the noncontrolling interest in TravelJigsaw. At quarter close, our cash and investments of $1.9 billion exceed our outstanding debt balance by about $1.4 billion. We also have a $175-million revolving credit facility that is undrawn and expires in September 2012. Now for the third quarter 2011 guidance. Our forecast reflects exceptional top line performance, driven primarily by our worldwide hotel reservation business. Our forecast also assumes that exchange rates remain at the same $1.43 per euro and $1.64 per British pound of yesterday's closing rates. At or near these exchange rates, our euro and pound denominated results will be substantially higher expressed in U.S. dollars than they would've been at the prior year average exchange rates. Specifically, average exchange rates for the third quarter of 2011 would be stronger by about 11% for the euro and by about 5% for the British pound as compared to the prior year. However, as we have emphasized in the past and want to remind you again, volatility in the euro/dollar exchange rate, which seems to be the rule rather than the exception in the recent past, can materially impact our U.S.-denominated earnings. We have hedge contracts in place to substantially shield our third quarter EBITDA and net earnings from any fluctuation in the euro or pound versus the dollar 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 and do not hedge our earnings beyond the third quarter. We are forecasting total gross bookings to grow by 47% to 52%, with U.S. gross bookings growing by approximately 8% to 13%. We expect international gross bookings expressed in U.S. dollars to grow by 62% to 67% as compared to last year, and to grow on a local currency basis by approximately 49% to 54%. The midpoint of this range represents a significant sequential decrease from Q2 results. We believe the primary drivers of this decrease are a softer Q2 comp a year ago and a tougher Q3 2010 comp. Our local currency international gross bookings growth accelerated by almost 1,100 basis points sequentially. Also, for the first time, the prior year Q3 includes TravelJigsaw for the full period. Finally, our guidance assumes that the rate of year-over-year increase in ADRs for Q3 will be less than that experienced in Q2 for both our international and U.S. hotel services. We expect Q3 revenue to grow year-over-year by approximately 37% to 42% and gross profit dollars to grow by approximately 54% to 59%. I'll now give guidance for Q3 operating expenses on a line-by-line basis. Starting next quarter, we will continue to provide top line and bottom line guidance, but we plan to cease our practice of providing line-by-line guidance for each operating expense line item. We are targeting Q3 consolidated advertising expenses of approximately $273 million to $283 million, with about $8 million of that amount being spent for offline advertising. We expect sales and marketing expense of between $40 million and $45 million. We expect personnel costs, excluding stock-based compensation, to come in between $78 million and $83 million. We expect G&A expenses of approximately $27 million to $32 million. We expect information technology costs of about $10 million and depreciation and amortization expense, excluding acquisition amortization, of about $6 million. We expect total non-GAAP other income expense recorded below operating income to amount to expense of approximately $6 million for Q3 2011 compared to expense of about $12 million in Q3 2010. Other expense is higher for Q3 2010 because it includes about $6 million related to FX hedging losses, as the euro strengthened during the quarter after we entered our hedge contracts. Other income and expense is comprised primarily of foreign exchange losses and transaction costs, net interest expense and the charge for net income allocated to noncontrolling interests. Non-GAAP other income expense excludes non-cash interest expense and gains or losses on early debt extinguishment, if any, related to cash settled to convertible debt and includes the additional impact of other non-GAAP adjustments on net income attributable to noncontrolling interests. Non-GAAP EBITDA is expected to range between $595 million and $615 million, which at the midpoint represents 67% growth versus prior year. Our guidance assumes that we will expand operating leverage by approximately 270 basis points as our gross profit grows at a faster pace than our operating expenses. We are targeting non-GAAP fully diluted EPS of approximately $9.10 to $9.30 per share, which at the midpoint represents 73% growth over prior year. Our non-GAAP EPS forecast includes an estimated cash income tax rate of approximately 20%, comprised of international income taxes and alternative minimum tax and state income taxes in the U.S. Our cash income tax rate has generally been increasing as compared to prior year periods due to more significant growth in international earnings as compared to U.S. earnings, where we have a sizable NOL to reduce our cash tax liability. This cash tax rate reflects an assumed 2 to 4 percentage point benefit from the Innovation Box Tax in the Netherlands. The impact of the Innovation Box benefit is likely to grow in 2012 as we complete the phase-in period. In 2012, we estimate that the Innovation Box benefit could reduce our consolidated cash income tax rate by approximately 4 to 6 percentage points. Our non-GAAP EPS guidance assumes a fully diluted share count of 51.5 million shares based upon yesterday's closing stock price of $521.97. We expect to report GAAP EPS of $8.37 to $8.57 per share for Q3. The difference between our GAAP and non-GAAP results is driven by non-GAAP adjustments to exclude stock-based compensation, acquisition-related amortization, non-cash interest expense for amortization of debt discount, non-cash gains or losses related to early debt conversions, certain non-cash income tax expenses, the beneficial impact in Q2 of reversing the 2010 reserve for unrecognized tax benefits, 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 adjust non-GAAP results to exclude charges or benefits, if any, related to hotel margin tax, judgments, rulings or settlements. We are pleased with the top line performance of the business in Q2 and inherent in the guidance for Q3. As we have emphasized in prior 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 we report against prior year periods, which had improving economic conditions, hotel occupancy rates and ADRs. Thus far, quarter-to-date, we assume deceleration in year-over-year unit growth rates compared to the second quarter of 2011. Our guidance reflects this actual deceleration and assumes that the deceleration will continue through the remainder of the quarter. Our guidance also assumes that macroeconomic conditions in general, and conditions in the consumer travel market in particular, remain relatively unchanged. We will now take your questions.

[Operator Instructions] Our first question comes from Justin Post of Bank of America. Justin Post - BofA Merrill Lynch: Jeff, one big picture question and maybe a quick follow-up. On the saturation levels, are you seeing any slowdown in growth in any of your larger markets where you've been in operation a long time? And are you seeing, overall, any reason for thinking that your overall hotel add growth might slow down? And then second one, can you remind us of what you learned out of kind of the '08 kind of slowdown in the economic growth? And are there ways that you can kind of offset that in your numbers as you look out, if that were to happen?

Okay. Justin, in terms of saturation levels, we consistently said that it's our expectation that the growth rates in our core markets, which tend to be more mature and more competitive, will slow down. And our strategy has been to build the business in new markets to a size where the higher growth rates in those new markets can have a meaningful impact on the total business. And that, in fact, is what's happening. The new markets are growing faster than the well-established core markets, and our assumption in guiding to decelerating growth rates is that, that trend would be reflected in the future. In terms of addition of hotels, I mentioned in my prepared remarks that we had significant growth in hotel counts. Again, with 155,000 hotels, I think you should expect for those growth rates over the long-term to slow down rather than to accelerate, although there's still a lot of hotels, particularly in the new markets, that we need to sign up for the international businesses. With respect to what we learned in the '08 slowdown, I think what we learned principally is there's really not much we can do about changes in currency exchange rates and changes in ADRs, which is what hurt our dollar-denominated reported results the most during the financial crisis. The other lesson that we learned, though, is that I think we did the right thing in continuing to invest aggressively in building out the international hotel platform and to invest aggressively in marketing. And I think those investments are still paying dividends for us today.

Our next question comes from Mark Mahaney of Citigroup. Mark Mahaney - Citigroup Inc: Your guidance does imply that leverage in EBITDA over gross profit, which is the first time in maybe a couple of quarters where you signaled that. Before you were talking about expanding sales force. Is there something that would depress margins? Is there -- do you really feel like you've reached a tipping point where margins can't expand again? Is there something that's causing you to scale back your initial plans for rolling out more sales people, more procurement people in the international markets?

I think there's a couple of things going on here, Mark. The first is that I want to emphasize that there has been no scaling back of our plans to build out the international hotel platform. And in fact, our brands are investing aggressively in hotel supply personnel and in building out the geographic footprint. So we haven't changed our approach to that, nor have we changed our approach to advertising. A couple of things that are happening as we go into the third quarter is that seasonally speaking, it's our strongest quarter from a margin perspective. And I think, second of all, because we had such significant acceleration of growth in the prior quarter, which implies significant marketing expenditure with revenue and stays to come in a later quarter, and a slowing down of growth accordingly in the third quarter, that could tend to build your operating leverage a little bit as well.

Our next question comes from Ingrid Chung of Goldman Sachs. Ingrid Chung - Goldman Sachs Group Inc.: So I think Dan mentioned on the call that you have roughly $1.5 billion of net cash at this point. And you've only bought a modest amount of stock so far this year. I was wondering if you could just give us an update on your thoughts regarding capital allocation? And then secondly, we saw that you launched a local deals offer. I was just wondering, is this an experiment? Or do you see this as a real opportunity for you?

In terms of stock buyback, we bought back a fairly sizable amount in the first quarter. We were less aggressive with buyback in the second quarter. It's something we look at from time to time, and we'll continue to be opportunistic with buybacks. So we don't necessarily have a plan to buy a steady amount each quarter or to not buy. We look to be opportunistic, and we look in relation to other possible uses of cash such as acquisitions or debt repayment, which, right now, we don't have anything coming up in the foreseeable future. So I would expect that we will continue to access stock buyback as we had in the past.

And Ingrid, with respect to the local deals, emails that you might have seen, that's a test that we're doing in a particular market to see if the customer base is responsive to local deals coming from our brand here in the United States. And as I look at some of the deals, I think some of them are pretty attractive. As everybody knows, there is a lot of clutter in that space now, and a lot of emails and offers are vying for the attention of consumers now. But it's a fairly easy test for us to perform, and so we're just going to keep working on it. And you may see it in another city or 2 as we try to figure out how accepting consumers are with those kinds of offers from the Priceline.com brand.

Our next question comes from Ross Sandler of RBC Capital Markets. Ross Sandler - RBC Capital Markets, LLC: Just 2 questions on international. Can you give us a little bit of color on the 78% international x FX growth rate just in terms of maybe kind of bracketing Europe versus APAC? And then a follow-up on that one, you guys have always talked about your hotel business, should be thought of in terms of your percentage of hotel room nights relative to total hotel room nights there being booked, either online or offline. But if we just look at the online market specifically, where do you think Agoda and Booking.com are in terms of market share in Asia-Pacific?

Dan, why don't you do the first one with respect to the growth rate? And I'll do the second.

Okay. For the 78% growth rate on a local currency basis, Ross, as Jeff said, Europe is growing at a slow rate in that overall growth rate, but still at a very high rate, and it still is such a big part of our business that we couldn't post that kind of a growth rate without a significant contribution from our European market. Asia-Pacific is growing at a faster rate, and it is starting to become a larger percentage of our total room nights, together with North America for our Booking.com business and South America. And so they're starting to have a more pronounced impact on our overall growth rate. But Asia-Pacific, growing faster together with North America and South America, and Europe's still growing at a very fast rate.

And I think if you look at the Agoda and Booking.com businesses in Asia as a share of all online, the first thing I can say is there really is no reliable data to basically sum all of the online business in Asia. I don't think anybody really has complete information about what percentage of hotel bookings are coming directly to Hotel.com (sic) [Hotels.com] websites. You can look at the businesses of Ctrip and Wotif and some of the other leading folks in the region. And I think we still have a long way to go in that region to approach the size of some of those folks. So I look at our share in the Asia-Pacific region as -- especially if you go market-by-market in a lot of places, pretty small. And therefore, there's a lot of room for us to grow. But I would continue to emphasize, as you mentioned, that it's much more important to look at the total marketplace to really try to understand the opportunity for further growth. Online penetration is much lower in a lot of these markets than it is in the United States, and I just think there's a lot of running room for us and for other players in this space to build their business.

Our next question comes from Jeetil Patel of Deutsche Bank Securities. Jeetil Patel - Deutsche Bank AG: A couple of questions. First of all, can you talk about just the overall number of hotels that you've added in the quarter? In general, about 155,000 is what the quarter end number was. I guess, can you discuss how many came out of the Asia-Pac region and out of Europe in terms of where most of the incremental adds on hotel is coming today? And then second, maybe qualitatively, if you could just discuss maybe the traveler demand within Europe? Are there markets or countries that are showing exemplary growth relative to others? Maybe a bit of a qualitative view there, that'd be great.

Well, I think in terms of hotel additions there, Booking.com continues to add a lot of hotels in Asia-Pacific. They also continue to add a significant number of hotels in North America, which is a new market for the international business, and in South America as well. With respect to travel demand, I don't have any significant regional commentary for you other than to say something I said in the last quarter, is that we've seen a little bit of shifting of demand away from destinations in North Africa that have been subject of civil unrest, perhaps to destinations in Southern Europe and elsewhere. But I don't have a lot of other sort of regional color for you.

Our next question comes from Aaron Kessler with ThinkEquity. Aaron Kessler - ThinkEquity LLC: A couple of questions. First, can you just give us -- on the tax rate for 2012, if you can just repeat that on the approximate rate you would expect or at least an improvement versus the 2011 rate. And additionally, for the air ticket improvement, I think you said 7% growth roughly, are you thinking it's a change the consumer behavior in the U.S. markets in terms of looking for more value-priced tickets? Or are you just getting better inventory availability?

On the first one, Aaron, for the tax rate, what I said was that we expect the Innovation Box to benefit our cash tax rate next year by 4 to 6 percentage points. There are other factors that could work into play there that could have an impact, such as work proportion of our pretax income Booking.com represents in relation to our other subsidiaries. But based upon current quarters since the -- in the breakdown of our pretax income by business, that's what we're projecting. Aaron Kessler - ThinkEquity LLC: Okay, so that's not relative to 2011. That's just the total impact.

That's correct.

And with respect to the airline ticket business, I don't think there's been a fundamental change in shopping behavior. But as you guys know, airfares have gone up fairly substantially over the past couple of years. And that's especially true when you consider the impact of additional fees for baggage and things like that. And so American consumers have always been very active shoppers for airline tickets. They typically are going to a lot of different sites. And so I think, because we're one of the main brands, we benefit from that shopping activity to a degree in traffic, although sometimes it hurts our conversion. The other thing that I would mention, though, is I think our air team at Priceline.com has done a very nice job of continuing to build the position and relevance of the opaque product, so that when airfares are going up like they have, the airlines, I think, are using the product as a tool to revenue-manage and keep their loads up as prices are going up. And that's worked well, I think, for the airlines, but it's also worked well for our opaque business. Aaron Kessler - ThinkEquity LLC: Okay. And finally, any commentary on Booking.com's success within the U.S. market? It seems like you see a lot of bidding pretty aggressively for the top keywords and for Booking.com?

Well, I think Booking.com is doing well in the United States. Booking still has a long way to go to fill out a truly national inventory here in the United States, but I think the team has done a very good job of adding a lot of hotels over a short period of time, and that's helping Booking.com's results. And I also think it's helping that the Booking.com inventory is also getting some demand from Priceline.com, which is able to help them build a higher degree of relevance with the hotels, being able to represent demand from both sources. So we're pleased with the progress they've made. We have a long way to go to really get national comprehensive inventory. But I think we're making very good progress towards that goal.

Our next question comes from Herman Leung of Susquehanna. Herman Leung - Susquehanna Financial Group, LLLP: Jeff, Dan, 2 quick questions for you. I guess the first one is you mentioned a lot of acceleration a couple of times, with Agoda and Booking.com growth rates sort of accelerated into the back half with growth in that business. I was wondering if you're seeing incremental demand. Or is that just sort of early stages of growth in this business? And then second, I was curious on how important you think owning inventory in the Asia market is, or partnering up, with how Expedia partnered with AirAsia to secure a kind of air inventory, or Ctrip taking ownership in a hotel to get access to hotel inventory, and MakeMyTrip kind of trying to also go into that Asia space as well. So just kind of curious on how you look at the competitive landscape and whether or not inventory -- how important it is to kind of partner up for inventory.

Maybe I'll answer the second question first. We have not traditionally taken a principal position with inventory. That's something that consolidators did in the past, and that basically took away the hotel's control over their pricing, usually involved much higher margins than we charge. And we believe our business model is much more both hotel-friendly and even more important, consumer-friendly. And so, our efforts are really focused more on making sure that we've got availability, real time, through our extranet rather than trying to sell up inventory. The AirAsia transaction is really a very different situation. We don't sell airline tickets in Asia. We only sell hotel reservations and a little bit of rental car. And I don't think you need to engage in that kind of partnership and trade off some of your equity in your business in order to get hotel inventory. The distribution model is attractive enough to hotels that they're happy to participate in it without that kind of an arrangement being a prerequisite. With respect to Ctrip and the hotel business in China, I think that's a unique market, where it was very important for the whole market to increase the inventory of moderately priced hotels in China in order to help the entire travel industry grow for travelers inside of China. Right now, that's a smaller part of our business. We're focused much more on international travel to and from China and therefore, that has not been an important part, at least our strategy in that market.

And in terms of the acceleration in growth rate, Herman, it's hard to identify sometimes the reasons why the growth rate slows down a little bit or accelerates. We saw a deceleration in April, which we expected to be the easiest comp because of the volcano. And then, the growth rate accelerated in the back part of the quarter. So to point to a specific reason why that happened, it's very difficult. But the acceleration was pretty much across the board. It was for our core markets as well as our newer, faster-growing markets. And we've seen some deceleration now so far in Q3, and that's reflected in our forecast. Herman Leung - Susquehanna Financial Group, LLLP: Got it. And then TravelJigsaw, $154 million was a lot better than what we expected. Is this just partly seasonality? Or should we expect a continuous sequential increase in this?

We're not giving out guidance as to growth rates by brand or for TravelJigsaw. But the international rental car business is highly seasonal. And the second and third quarters are by far the most important from a gross bookings perspective.

Our next question comes from Doug Anmuth of JPMorgan. Douglas Anmuth - JP Morgan Chase & Co: Just 2 things. Is there anything specific you can point to in terms of the improved marketing efficiency during the quarter? And then secondly, as you think about the business a little bit longer term and obviously as you go even more international, would you still expect to get margin expansion going forward?

In terms of the improved marketing efficiency, Doug, it improved versus our forecast. It's actually worse versus the prior year. What we said was that we're happy with our ad efficiency on a brand-by-brand basis. So it's really more of a mix driver that's causing the year-on-year relationship. In terms of versus our guidance, just the ROIs came in a little bit stronger than what we had assumed when we put the guidance together. In terms of leverage for the long run, we're only giving guidance right now for Q3, but we've been pretty successful at maintaining our non-variable expenses, if you will. So other than like an online advertising or sales and marketing expense growing at slower rates than our gross profit. And we would strive to continue to do that in the future. While we're growing at these types of rates, it's on the margin easier to deliver leverage. But our Q3 guidance shows some nice leverage, and that's an important goal for the business to continue to focus on that.

Our next question comes from Michael Millman of Millman Associates. Michael Millman - Millman Research Associates: Some companies are indicating that they've seen a slowdown in the vacation exchange market in the U.K. And I was wondering if indeed your hotel market is totally different from that, or why you would think that market was slowing. And maybe the European market may be slowing a little. I think you've indicated it wasn't. And regarding the U.S. rental car business, I think you said the second quarter was strong. I was wondering what you're seeing in the summer, particularly because one of the major companies said it was pretty -- prices were pretty soft going into looking at August and so -- and another company said prices were pretty stable. So hopefully, you'd be the tiebreaker.

With respect to the U.K. business, I know some of the tour operators announced results that were viewed as disappointing. I don't have any particular comment to make about whether that has an impact on what we're seeing in the U.K. I think that part of that is driven by share shift to low cost carriers and that sort of thing. So it's hard to correlate that to exactly what's happening in the online marketplace. And if you look at our competition, Expedia, I think, posted attractive growth numbers. U.K. is a big market for them, so I don't think that you can draw any firm conclusions by what's going on in those other businesses. With respect to U.S. rental car business, our commentary on that is really more driven by the extent to which rental car companies are operating with very constrained fleets or with relatively unconstrained fleets. And in some summer periods, the fleets are very constrained, and there are a lot of -- you know better than I do, a lot of reasons why that happens. And I think this year, our experience has been so far that there was decent fleet availability to allow participation in some of the promotional channels and revenue management-type channels like our opaque. And as a result, we were pretty pleased with the numbers we were seeing there. The pricing in the rental car market seems to go sometimes in a very different direction from pricing in the other travel verticals. So in a time when hotel ADRs and airfares were coming down a couple of years ago, rental car prices were going up. Now, prices for airline tickets and hotels have been very firm really for a number of quarters, and rental car price is a little bit softer. I really don't have much beyond that. Michael Millman - Millman Research Associates: Is fleet still pretty loose going into the summer?

I wouldn't say that fleet is loose. I think the rental car companies do a terrific job of managing fleet size. But it's not like it's been in some prior periods where there were literally no cars in Orlando or no cars in Las Vegas. There are typically cars available.

Our next question comes from Bill Lennan [ph] of Monness, Crespi [ph]. Unknown Analyst -: Time for my quarterly question about Expedia and competition. You took share again from Expedia in hotel room nights, but the rate at which you did so seemed to slow down. It didn't seem to -- actually, it did slow down. Any thoughts on why, is number one. Number two, on the OpEx guidance detail, you'll be scaling that back and not giving the line-by-line. Could you give us a reason why? Is that -- does that compromise your competitive effectiveness in any way? Or giving the detail, that is, compromise?

Right. Sure. So with respect to the room nights, we're focused more on how our business is rolling out geographically and how we're doing in markets relative to our own expectations. And you've heard us say before that this is a very big market. There's room for more than one company to do well. And Expedia has, over the past 5 years, had a lot of quarters where they're reporting 40% growth in international gross bookings. And I think they had a good quarter last quarter. But I'm very satisfied with the momentum of our business in these markets, especially when you consider the size of our business compared to Expedia's now. And the absolute difference between the growth rate that we're reporting and the growth rates that they're reporting, I think, is still very impressive performance by the Priceline Group and by our international hotel business in particular.

In terms of line item detail, Bill, mostly, line items just aren't all that material to our total income statement. And so to the extent that there is a driver in there, it will be -- we'll still be giving top line. We'll be giving bottom line. And if there's an unusual relationship in one of the line items, we'll call that out as we're giving our guidance.

Our next question is a follow-up from Mark Mahaney of Citigroup. Mark Mahaney - Citigroup Inc: Two quick questions. Any comments on the China market specifically? And any traction you think you're seeing there? And then the extent to which you have integrated TravelJigsaw and care hire -- rental car offerings across the different Priceline, Agoda, Booking.com properties, how much have you done there? Are you -- is it inning 2 of a 9-inning process? How much more integration could there be? How much cross-selling opportunity do you think there is there?

Okay. so with respect to the China market, as we've said previously, the largest part of our APAC business is outside of China. And the business that we have inside of China is relatively small. We're focusing on international travel, primarily inbound from the international traveler into China and Chinese residents traveling outbound to international destinations. And I think that the outlook for those businesses continues to be excellent. Given the growth in that economy and just the changing demographic that they're experiencing, there's just going to be a lot more international travel for Chinese travelers, and hopefully we'll be able to play a part of that. With respect to TravelJigsaw, we -- I think we've done a good job at trying to share knowledge and best practices. And I think that sharing is starting to be evident in TravelJigsaw's results. We are directing some demand from some of our brands to TravelJigsaw, although I don't want to oversell that because the crossover from hotel, which is our biggest business, to rental car is not that huge, quite frankly. But we still think there's a lot of opportunity for TravelJigsaw to, with our help, continue its geographic expansion. And I think that's one of the most exciting parts of the opportunity. And much of that is yet to come.

And, gentlemen, our final question comes from Jeetil Patel of Deutsche Bank Securities. Jeetil Patel - Deutsche Bank AG: Jeff, on this question, I'm curious as to your thoughts as to where you think the area-windows [ph], the Airbnb concepts fit in terms of the industry positioning from a consumer standpoint? Do you think they're a replacement for hotels? Do they kind of compliment or sit on top of hotels in terms of competition? Just curious as to your thoughts and your interest in that category as a whole.

Well, I think we look at vacation rentals and Airbnb as really an extension of that concept, although it could turn out over time that a lot their business is, in fact, a traditional vacation rental. It's a very interesting category. It's very well-suited to the Internet because of the fragmentation of supply and because of the critical need the consumer has to learn about the place they're going to stay. The Internet is just an excellent vehicle for delivering that information, and the development of social applications is a key ingredient there. And I think because consumers are so interested in participating in those applications, it's really got an ability to boost a business like Airbnb, and perhaps drive what I think they believe is really incremental business. It's not people that otherwise would have stayed in a hotel. The story that they tell about the starting of the business was a time when there were no hotel rooms available in San Francisco. And they were able to essentially rent out their air mattresses because there was no place for people to stay. And I think they're attracted to a category of traveler who might stay in the hotel but who, in fact, also might not. So in summary, we think it's a very interesting business. It's timely. I think it represents a potential nice addition to the vacation rental market for those homeowners who want to use their transaction processing capability. And I think that's something that's exciting for Airbnb. And we wish them the best. Well, I think, according to the operator, that was our last question. So we thank everybody for participating in the call.

Thank you, gentlemen, and thank you, everyone, for your participation. That does conclude your call. You may disconnect at this time. Have a great day.