Glenn D. Fogel - Booking Holdings Inc. David I. Goulden - Booking Holdings Inc. Daniel J. Finnegan - Booking Holdings Inc.

Eric J. Sheridan - UBS Securities LLC Lloyd Walmsley - Deutsche Bank Securities, Inc. Brian Nowak - Morgan Stanley & Co. LLC Mark A. May - Citigroup Global Markets, Inc. Dae K. Lee - JPMorgan Securities LLC Justin Post - Merrill Lynch, Pierce, Fenner & Smith, Inc. Paul Bieber - Credit Suisse Securities (USA) LLC Kevin Kopelman - Cowen & Co. LLC Heath Terry - Goldman Sachs & Co. LLC Deepak Mathivanan - Barclays Capital, Inc.

Welcome to Booking Holdings, formerly The Priceline Group, Fourth Quarter 2017 Conference Call. Booking Holdings 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 or expectations and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements. For a list of factors that could cause Booking Holdings' actual results to differ materially from those described in the forward-looking statements, please refer to the safe harbor statements at the end of Booking Holdings' earnings press release as well as Booking Holdings' most recent filings with the Securities and Exchange Commission. Unless required by law, Booking Holdings undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. A copy of Booking Holdings' earnings press release, together with an accompanying financial and statistical supplement, is available in the For Investors section of Booking Holdings' website, www.bookingholdings.com. And now I'd like to introduce Booking Holdings' speakers for this afternoon: Glenn Fogel, Daniel Finnegan and David Goulden. Go ahead, gentlemen. Glenn D. Fogel: Thank you, and welcome to Booking Holdings' Fourth Quarter Conference Call. I'm joined this afternoon by our CFO, Dan Finnegan, in what will be his final earnings call before retiring, and David Goulden, our soon-to-start CFO, who I am pleased to welcome today, though his start date is March 1. David has an impressive background in financial and operational management at EMC and more recently as part of the Dell-EMC combined team. I am looking forward to working with David and know he will play an important role in the continued success of our company. David, welcome. David I. Goulden: Thanks, Glenn. I'm very excited to join the Booking Holdings team and I look forward to working with you and Dan and the rest of the leadership team to first dig deep into the business to understand it as well as all of you do, and then to help drive its future success across all of its aspects. Also, I look forward to meeting many of you on the call over the coming weeks and months. Glenn D. Fogel: Thank you, David. I am pleased to report that Booking Holdings performed well in the fourth quarter, with worldwide accommodation reservations of 152 million room nights, which is up 17% year-over-year and exceeded the high end of our guidance range. Consolidated gross bookings were up 19% year-over-year in U.S. dollars or about 14% on a constant-currency basis. Gross profit was up 22% year-over-year in U.S. dollars or about 17% on a constant-currency basis, and adjusted EBITDA increased 23% year-over-year to $1.1 billion. I am particularly pleased with the results of our performance marketing optimization efforts during the quarter. We raised ROIs across our pay channels, improving performance advertising efficiency, whilst still delivering solid growth in bookings. We were also successful in driving growth through our direct channel, which is an important to the long-term health of our business. And I want to specifically send out a thank you to our talented marketing teams, who successfully navigated this difficult-to-predict marketplace, achieving better-than-expected results during the quarter. As we've said in the past, our efforts to drive greater efficiency in this complex and dynamic marketplace will produce strategic and financial benefits, but we still expect to face continuing long-term pressure in this area. Let me now briefly highlight a few points about our 2017 performance. It was a good year for the company. We grew our room nights by 21%, which represents over 116 million incremental room nights booked in the year. Performance in our key regions around the world was strong, and we believe we achieved market share gains in some of our major geographies, such as the United States. Moreover, we combined this top-line growth with EBITDA growth of approximately 18% and non-GAAP EPS growth of 17%, which was strong performance, considering we began to undertake some important investments in the second half of the year. We made good progress on many of our key initiatives for the year. We expanded our marketplace, adding new supply and continued to be one of the world's largest accommodation platforms. Booking.com added over 470,000 properties last year and ended the year with almost 1.6 million properties on its website and mobile app. This supply diversity brings unsurpassed choice and selection for our customers with what we believe to be the best desktop and mobile tools and customer support in the industry. We also made progress growing our alternative accommodation properties to approximately 1.2 million homes, apartments and other unique places to stay on Booking.com's platform, which represents a 53% year-over-year growth rate. Booking.com has changed its property classifications into two categories, the first representing more traditional accommodations, including hotels, motels and resorts; and the second, encompassing alternative accommodations, including homes, apartments and other unique places to stay. We believe this new classification is more consistent with those used by other industry participants and allows for a more direct comparison of our non-hotel supplies. We began to accelerate investments to build an effective payments platform at Booking.com. This initiative, in which we are in the very early stages and expect to continue to invest in throughout 2018, is important as we expand our merchant capabilities and give our property partners and customers more flexibility with respect to payment options. We made investments building a better customer experience across many of our brands. We believe these investments should improve the quality of our customer interaction as we look to support our customers across the entire journey. We plan to continue to develop and use technology, such as AI, to drive efficiencies in this area. While we are still in the early stages, we feel good about the integration of KAYAK and Momondo. The teams are working well together and we are seeing early evidence of the benefits of the combination. We're excited to see what they can achieve in 2018 and beyond. Turning to 2018. I will spend a few minutes commenting on our key strategic priorities for the year, many of which I mentioned on our Q3 earnings call. We expect to continue to aggressively expand our supply of homes, apartments and other unique places to stay. To do this, we are investing in tools to help our supply partners more efficiently onboard their properties and more effectively manage their participation in our marketplace. We know that our customers benefit by seeing the largest breadth of all types of accommodations. And although we believe we are a global leader in the area of homes, apartments and other unique places to stay, we recognize that in some geographies, our abilities in this area are not as well-known as in other geographies, and we are determined to make sure that customers in all geographies are aware of our excellent offers in this area. Providing holistic frictionless travel for our customers remains a long-term goal and we are making investments this year to help us achieve this vision. Providing an integrated ground transportation offering is a part of this holistic travel concept. Rentalcars.com and Booking.com have recently started working together more closely to provide bookings customers with an airport ground transportation offering. We believe this is a first step to bring ground transportation offerings to Booking.com and leverage our scale across our brands to bring great services to our customers. We were experimenting with providing in-destination experiences and currently have tests running in multiple markets. Whether you want to visit a museum or book a tour, Booking.com wants its mobile app to eventually become the center of your entire travel experience. It is extremely early days for us, but we are excited about the long-term potential in this area. Finally, we will look to continue our optimization efforts in our pay channels with the goal of properly balancing ROI discipline and top-line growth. We continuously evaluate each channel and support those that deliver appropriate ROIs, treat our conversion-friendly product displays fairly and offer a superior consumer experience, with the overall goal of building our direct traffic over time. If successful, these optimization efforts should produce benefits over the long run. Also, brand marketing remains an important investment as we seek to not only increase our share of direct traffic, but also enhance our effectiveness in the pay channels. We plan to continue to experiment with the right mix of marketing spend and geographic focus to achieve our long-term goals. In terms of capital return, I am proud of our track record here. We have returned about $6 billion of capital over the last three years, including over $1.8 billion in 2017. We believe this demonstrates our commitment to returning excess capital to our shareholders. Dan will discuss this in more detail, but the recent U.S. tax law change will enable us to access our international cash more efficiently. Our Board of Directors recently approved an incremental $8 billion share repurchase authorization. So we now have a total of $10 billion authorized for share repurchases. We expect to execute repurchases by using a programmic (sic) [programmatic] and opportunistic approach that reflects our increased access to our international cash and future cash flows. Now I want to provide a few quick comments on our recent name change and the rationale for doing so. The Priceline Group has evolved significantly since it was founded in 1997 as priceline.com, with a unique, Name Your Own Price airline ticket service to become today a company with multiple travel brands. Under The Priceline Group name, we became one of the world's leading providers of online travel and related services. Today, our Amsterdam-based Booking.com brand has grown into a business of significant global scale, averaging over 1 million room nights booked per day. Booking.com drives a significant majority of our company's total operating results. We believe this name change better reflects the truly global operation that we have become today, more closely aligns our parent company name with our largest business and connects our collective brands, Booking.com, priceline.com, KAYAK, Agoda, Rentalcars.com and OpenTable under a unified name. Booking Holdings reflects our brand's sheer purpose to book services which further our mission to help people experience the world. Today was the first day that our stock traded under the new ticker symbol, BKNG. Finally, I want to say thank you to our outgoing CFO, Dan Finnegan. It is hard to overstate the role Dan has played in his almost 14-year career here at the company. Since he started with us in 2004, Dan's leadership and guidance had been an important part of the success we have witnessed during his time here. I and everyone associated with Booking Holdings wish him well in his retirement. With that, I will turn it over to you, Dan. Daniel J. Finnegan: Thanks, Glenn. Let me start by welcoming David onboard. I'm happy we have found such a talented person to step into the role and I look forward to us working together to achieve a smooth transition. Now to the quarter. I'll discuss operating results and cash flows for the quarter and then provide guidance for the first quarter of 2018. All growth rates referenced in my comments are relative to the prior year comparable period, unless otherwise indicated. Our non-GAAP financial results and forecasts include stock-based compensation and are reconciled to our GAAP results in our earnings release. In early November when we gave guidance for Q4, we talked about a recent change we've made to optimize ROIs in our performance advertising channels. The Booking.com team did a superb job of executing this strategy, delivering performance advertising efficiency and gross bookings growth that exceeded our forecast. The strong gross bookings performance also benefited gross profit for the quarter. The result was top- and bottom-line performance that substantially exceeded our guidance and FactSet analyst expectations. Room nights booked in Q4 grew by 17%, decelerating modestly on a sequential basis, despite a very difficult prior year comp and our ROI optimization strategy. Rental car day reservations grew by 5%, consistent with the Q3 growth rate. Average daily rates for accommodations, or ADRs, were down about 1% for Q4 versus prior year on a constant-currency basis for the consolidated group, which was consistent with our forecast. Foreign exchange rates favorably impacted growth rates expressed in U.S. dollars for our Q4 results as compared to prior year. Q4 gross bookings grew by 19%, expressed in U.S. dollars and grew by about 14% on a constant currency basis. Consolidated gross profit for the fourth quarter was $2.8 billion and grew by 22% in U.S. dollars and by about 17% on a constant currency basis. Gross profit includes $37 million from our acquisition of the Momondo Group, which we closed on July 24, 2017. Our international-based operations generated gross profit of approximately $2.4 billion, which grew by 23% in U.S. dollars and by about 17% on a constant currency basis. Gross profit for our U.S.-based operations amounted to $337 million, which grew about 15% compared to the prior year, including the benefit of a $12 million accrual reversal based upon a favorable hotel occupancy tax litigation ruling. Advertising and other revenue, which is mainly comprised of non-intercompany revenues for KAYAK and OpenTable, grew by 29% in Q4 compared to the prior year, including revenue from Momondo. GAAP operating income grew by 25%, and GAAP operating margins increased by 89 bps compared to Q4 last year. Operating margin performance was substantially better than our forecast due mainly to gross profit growth and performance marketing efficiency that exceeded forecast. Non-advertising OpEx expenses pressured year-over-year margins, but were favorable to forecast due to the phasing of expenses. We increased our investment in brand advertising by 108% or $44 million in Q4 to build brand awareness and drive traffic directly to our websites. Adjusted EBITDA for Q4 amounted to about $1.1 billion, which exceeded the top end of our guidance range of $910 million and grew by 23% versus prior year. GAAP net loss amounted to $555 million or $11.41 per share, including $1.3 billion of provisional net income tax expense related to the Tax Cuts and Jobs Act, comprised of a $1.6 billion deemed repatriation tax on our accumulated international earnings, including state and local taxes and international withholding taxes, partly offset by a $217 million income tax benefit from revaluing our net deferred tax liabilities from 35% to the new statutory rate of 21%. Non-GAAP fully diluted net income per share, which excludes the onetime tax expense impact from the U.S. Tax Act, was $16.86, up 19% versus the prior year, exceeding our guidance for the quarter and FactSet consensus of $14.12. In terms of cash flow, full year 2017 operating cash flow amounted to $4.7 billion and grew by 17%. We returned about $700 million during the fourth quarter and about $1.8 billion for the full year 2017 to our shareholders through share buybacks. Since December 31 through yesterday, we have spent an additional $380 million to purchase about 200,000 shares. We also intend to spend about $700 million in Q1 based upon yesterday's closing stock price to settle the conversion premium on our 1% convertible bonds that mature in March using cash, which beneficially impacts our fully diluted share count going forward. 2017 full year free cash flow amounted to almost $4.4 billion, growing by 18%. About 35% of our full year gross profit converted to free cash flow, which is a function of attractive operating margins and capital efficiency for our business. Our cash and investments amounted to $17.8 billion at year-end. The Tax Act allows us to use this balance and future international cash flows in the U.S. with no additional U.S. federal tax expense due on repatriation beyond the onetime deemed repatriation tax that I just mentioned. This deemed repatriation tax liability that we recorded in Q4, amounting to $1.3 billion, net of about $200 million of U.S. NOLs that we expect to utilize to reduce the tax due, is payable over eight years and does not impact 2017 net cash flow from operations. Before I get to guidance for Q1, I want to discuss a couple of new accounting pronouncements that will impact our financial statements for the first time in Q1 2018. First, pursuant to the new revenue recognition standard, which took effect on January 1, we will now recognize substantially all our revenue at check-in rather than at checkout, as we had in the past. We estimate that the net impact of the change in accounting standard for the full year will be immaterial. However, the impacts on our quarterly revenue are expected to be more significant. A meaningful amount of travel checks in during December and checks out in January, which means that under the New Accounting Standard, this revenue will be recognized each year in Q4 rather than Q1, as it was under the Previous Accounting Standard. We have provided additional information in our earnings release to help you model the quarterly allocation of our 2018 revenue under the new revenue accounting. Also, to help with the transition, our financial statement footnotes in each quarter of 2018 will show what the revenue in 2018 would have been if it were recognized at checkout, as it was in 2017. Gross bookings and other unit metrics, like room night reservations, are not impacted by the new revenue accounting. Another impact of the New Revenue Accounting Standard is that we will no longer report our Name Your Own Price revenue on a gross basis with a corresponding cost of revenue for the amount paid to the travel providers. These amounts will be reported on a net basis in revenue, which is consistent with how we record our other travel revenue. Another accounting change taking effect in Q1 requires that unrealized gains and losses on publicly traded equity investments, like our investment in Ctrip shares, will be recorded in the income statement rather than equity, starting in Q1 2018. We expect to exclude these unrealized gains and losses from our non-GAAP results, because they are unpredictable and are not indicative of the core operating results of our business. The guidance that I am about to provide is based on the new revenue recognition accounting that I just mentioned, which is also the basis upon which our results for Q1 will be reported. This basis is different than the previous revenue accounting basis which we used for 2017 and upon which analyst forecasts were prepared. Year-over-year growth rates are based upon comparison to our Q1 2017 results as reported last year under the Previous Accounting Standard. Revenue growth and margin performance is based upon comparison to prior year's Q1 gross profit due to the change from gross basis to net basis revenue reported in – reporting in 2018 that I just mentioned. Our guidance reflects our quarter-to-date actual results and assumes that our growth rates will decelerate over the remainder of the quarter, mainly due to the size of our business and consistent with long-term trends. Our guidance also reflects a difficult prior year comp and the impact of our performance marketing optimization efforts. We also expect that Easter falling on April 1 this year will negatively impact Q1 gross bookings and room night growth slightly as we received cancellations leading up to Easter and people start traveling towards the end of March. We estimate that Easter taking place earlier this year will benefit Q1 revenue, operating profit, EBITDA, net income and profit margins and will negatively impact those metrics in Q2, in both cases compared to the prior year. We estimate that earlier Easter will shift about $90 million of revenue on a check-in basis from Q2 into Q1 this year. Under the Previous Revenue Accounting Standard, we estimate that earlier Easter would shift about $30 million of revenue on a checkout basis from Q2 into Q1 this year. Our Q1 forecast is based upon recent foreign exchange rates, which provide a nice tailwind to our growth rates expressed in U.S. dollars. We're forecasting booked room nights to grow by 8% to 12% and total gross bookings to grow by 14.5% to 18.5% in U.S. dollars and by 6% to 10% on a constant-currency basis. Our Q1 forecast assumes that constant-currency accommodation ADRs for the consolidated group will be down by about 1% compared to the prior year period. We forecast Q1 revenue to grow by 17.5% to 21.5% in U.S. dollars and by 9% to 13% on a constant-currency basis compared to gross profit in 2017. GAAP operating income is expected to grow by 6% to 10% and GAAP operating margin is expected to be about 230 bps lower than prior year Q1. Q1 adjusted EBITDA is expected to range between $680 million and $705 million, which, at the midpoint, is up about 9% versus prior year. We forecast that adjusted EBITDA margin will be about 235 bps lower than prior year Q1. Our Q1 forecast assumes that our ROI optimization efforts will yield year-over-year performance marketing efficiency. The deleverage assumed in our forecast reflects the investments in brand advertising and non-advertising operating expenses that Glenn just spoke about. These investments have a more significant margin impact in Q1 and Q2, which are quarters in which we typically earn a smaller share of our annual profits due to the normal seasonality of our business. Although we are not giving detailed guidance beyond Q1, we do expect deleverage in non-advertising OpEx and brand advertising throughout 2018, but diminishing in the second half as we lap investments made last year. We assume that operating margins will benefit from increased performance marketing efficiency until we anniversary the optimization efforts that started in Q3 last year. We forecast GAAP EPS between $9.05 to $9.45 per share for Q1, which at the midpoint is up about 2% versus prior year. Our EPS guidance assumes a fully diluted share count of about 49.2 million shares, reflects the beneficial impact of the common stock repurchases we have made to date and settlement of our maturing convertible bonds in cash on March 15. Our GAAP EPS guidance for Q1 assumes a tax rate of 20% compared to the prior year tax rate of 14%, which included nonrecurring discrete items that lowered the rate by about 2 percentage points. The increase in the 2018 forecasted tax rate reflects our best estimate of our tax expense under the U.S. Tax Act, estimated state and local taxes on our international earnings and an increase in the Innovation Box Tax rate in the Netherlands from 5% to 7%. Due to the relatively short amount of time since enactment of the U.S. Tax Act and the complexity involved in evaluating and applying its provisions, our estimates may change as we proceed through the quarter and the year and additional guidance is issued by the Treasury Department, the IRS, state tax authorities and other authorities. We are forecasting Q1 non-GAAP fully diluted net income per share of approximately $10 to $10.40 per share, which at the midpoint is up about 3% versus prior year. Our non-GAAP EPS forecast includes an estimated income tax rate of approximately 20%, which is higher than the prior year rate for the same reasons I've just discussed for the GAAP tax rate. Our earnings release also includes detailed non-GAAP guidance for Q1 2018 under the Previous Revenue Accounting Standard, which is how our 2017 results were reported and analyst estimates have been prepared. We estimate that revenue and adjusted EBITDA amounts in the guidance I just gave would be about $65 million to $70 million higher if revenue were recognized at checkout as it was prior to adoption of the New Revenue Accounting Standard. In summary, Q1 guidance under the Previous Revenue Accounting Standard for adjusted EBITDA would be $745 million to $770 million and non-GAAP EPS would be $11 to $11.40 per share, which compares to FactSet consensus of $10.35. We have hedge contracts in place to substantially shield our first quarter EBITDA and net earnings from any further fluctuation in currencies versus the dollar between now and the end of the quarter, but the hedges do not protect our gross bookings, revenue or operating profit from the impact of foreign currency fluctuations. Our forecast does not assume any significant change in macroeconomic conditions in general or in the travel market in particular. We will now take your questions.

Thank you. Our first question comes from Eric Sheridan with UBS. You may begin. Eric J. Sheridan: Glenn D. Fogel: Eric J. Sheridan:

Thank you. Our next question comes from Lloyd Walmsley with Deutsche Bank. You may begin.

Glenn D. Fogel:

Daniel J. Finnegan:

Thank you. Our next question comes from Brian Nowak with Morgan Stanley. You may begin.

Glenn D. Fogel: Daniel J. Finnegan: Glenn D. Fogel:

Glenn D. Fogel:

Thank you. Our next question comes from Douglas Anmuth with JPMorgan. You may begin. Douglas, your line is open. Please check your mute button. Our next question comes from Mark May with Citi. You may begin. Mark A. May: Glenn D. Fogel:

Thank you. Our next question comes from Douglas Anmuth with JPMorgan. You may begin. Dae K. Lee: Glenn D. Fogel: Daniel J. Finnegan: Dae K. Lee: Daniel J. Finnegan:

Thank you. Our next question comes from Mark Mahaney with RBC. You may begin.

Glenn D. Fogel:

Glenn D. Fogel:

Thank you. Our next question comes from Justin Post with Bank of America Merrill Lynch. You may begin.

Daniel J. Finnegan:

Glenn D. Fogel:

Thank you. Our next question comes from Paul Bieber with Credit Suisse. You may begin.

Daniel J. Finnegan:

Glenn D. Fogel:

Thank you. Our next question comes from Kevin Kopelman with Cowen. You may begin.

Glenn D. Fogel:

Glenn D. Fogel:

Thank you. Our next question comes from Heath Terry with Goldman Sachs. You may begin.

Glenn D. Fogel: Daniel J. Finnegan: Glenn D. Fogel:

Our last question is from Deepak Mathivanan with Barclays Capital. You may begin.

Daniel J. Finnegan:

Thank you. I would now like to turn the call back over to management for closing remarks. Glenn D. Fogel: Thank you. I'm going to give the final word to Dan. Dan, your final word. Daniel J. Finnegan: Thanks, Glenn. As we close my last earnings call as CFO, I'd like to thank analyst and investors for your insightful questions and interest in our company. I also want to thank my colleagues all around the world for their hard work and skill to deliver another fantastic year in a string of many amazing years of growth and profitability. It has been a wonderful experience being part of your team. I wish you all you the best. And I look forward to following your continued future success. Glenn D. Fogel: Thank you, Dan, and we all wish you the best. And thank you, everybody, for participating in our call.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day