Airbnb, Inc. Q2 FY2022 Earnings Call

Good afternoon, and thank you for joining Airbnb's earnings conference call for the second quarter of 2022. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Airbnb's website following this call. I'll now hand the call over to Ellie Mertz, VP of Finance. Please go ahead.

Good afternoon, and welcome to Airbnb's Second Quarter of 2022 Earnings Call. Thank you for joining us today. On the call today, we have Airbnb's Co-Founder and CEO, Brian Chesky; and our Chief Financial Officer, Dave Stephenson. Earlier today, we issued a shareholder letter with our financial results and commentary for our second quarter of 2022. These items were posted on the Investor Relations section of Airbnb's website. During the call, we'll make brief opening remarks and then spend the remainder of time on Q&A. Before I turn it over to Brian, I would like to remind everyone that we will be making forward-looking statements on this call that involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also, during this call, we will discuss some non-GAAP financial measures. We provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. And with that, I will pass the call to Brian.

All right. Thank you, Ellie, and good afternoon, everyone. Thanks for joining. Our Q2 results demonstrate that Airbnb has achieved growth and profitability at scale. From a growth perspective, we exceeded 103 million Nights and Experiences Booked. Now this was our largest quarterly number ever. Revenue was $2.1 billion, up 58% from last year or 64%, excluding foreign exchange. Gross booking value was $17 billion, up 27% from last year or 34% if you exclude foreign exchange. Now both revenue and GBV were 73% higher than Q2 2019, significantly outperforming the travel industry. Now from a profitability perspective, we had our most profitable Q2 ever. Net income of $379 million was a nearly $700 million improvement from Q2 2019. Adjusted EBITDA was $711 million. Now this represents a 34% adjusted EBITDA margin, which is significantly up from the 16% margin in Q2 2021, a negative 4% in Q2 2019. Finally, we generated $795 million of free cash flow. Now this is a $1.1 billion improvement from the nearly $300 million cash burn two years ago at the depth of the pandemic. Over the last 12 months, Airbnb generated almost $3 billion in free cash flow and ended the quarter with nearly $10 billion in cash. So what explains this transformation in our business? Well, first, our business model is adaptable. We have nearly every type of space in nearly every location so however travel changes, we can adapt. And regardless of the economic environment, our guests come to Airbnb because they can find great value and our hosts can earn extra income. Second, we've relentlessly innovated while also staying focused and disciplined. When the pandemic began in 2020, we made some incredibly difficult decisions. We significantly reduced spending, making us a leaner and more focused company. And we've kept this discipline ever since, allowing us to keep the hiring and investment plans made in the beginning of the year. And Airbnb is well positioned for whatever lies ahead. In fact, we're so confident in our long-term growth and profitability that today, we're announcing a $2 billion share repurchase program. And this is coming only 1.5 years after our IPO. Now returning to our Q2 results. Our strong financial performance was driven by a number of positive business trends. First, guest demand in Airbnb is as high as ever. In Q2, we surpassed 103 million Nights and Experiences Booked, marking our highest quarterly number ever. Now despite broader macroeconomic concerns, we still saw a 25% increase in Nights and Experiences Booked compared to the second quarter of 2021. Now early in Q2, strong guest demand exceeded our expectations. This is because guests in Europe and North America booked earlier than they have historically. Now given this earlier booking, growth rates compared to last year decelerated in May and June. And since the end of Q2, what we've seen is growth in nights booked reaccelerate from June to July as we enter peak travel season. Second, guests continue to return to cities and cross borders. In previous quarters, we've talked about how we saw significant growth driven by surges in domestic travel as well as travel to rural destinations. Now these trends continue. But we're also seeing guests returning to cities and crossing borders above pre-pandemic levels. Third, guests continue to stay longer in Airbnb. They're not just traveling Airbnb, they're now living on Airbnb. We saw long-term stays of 28 days or more remain our fastest-growing category by trip nights compared to 2019. The long-term stays have increased nearly 25% from a year ago. And actually, long-term stays have increased almost 90% since Q2 2019. Fourth, guest demand is driving growth in our host community. We continue to see the strongest supply increases in areas of greatest demand, with nonurban active listings up 50% compared to Q2 2019. But as demand is returning to cities, we're also seeing an increase in total urban supply. And we believe the upgrades we introduced last year, including our new host onboarding flow and AirCover, are supporting this growth, but we're not stopping there. So you're going to see some exciting new product features to recruit the next generation of hosts later this year. Finally, I'd like to share a few highlights from the 2022 summer release. In May, we introduced Airbnb Categories. Since launch, listings in the Airbnb Categories have been viewed more than 180 million times. Through Categories, we are distributing guest discovery across more destinations and dates. Now we also introduced AirCover for guests. Since launch, the Net Promoter Score for guests that had an issue with their stay has already improved. And in the rare instance where our host cancels, AirCover has led to 10% more rebookings. So to recap, we achieved significant milestones this quarter with our results. Nights and Experiences Booked were our highest ever. Revenue and adjusted EBITDA were records for Q2, and free cash flow was $795 million. In the last 12 months, we generated nearly $3 billion in free cash flow. Now before I go to questions, I want to talk about an update on my co-founder, Joe Gebbia. Last month, Joe announced that he'll be stepping back from his full-time operating role. Joe will continue to serve on the Board of Directors of both Airbnb and Airbnb.org. Airbnb is a founder-led company. So he's going to continue to take a role at Airbnb, and this will be as an adviser to me on future concepts and creative culture. Since the beginning, Joe has always been focused on big ideas to help others. These are uncompromising True North. So it will be fun to be able to spend more time with him on dreaming up new ideas, just like the early days. And as I reflect on the last 14 years together, I just can't believe how lucky Joe, Nate, and I have been. If anything, I just happened to go a few degrees in a different direction, I wouldn't be doing this call with you right now. That’s how fragile ideas are, and it's what gives me gratitude to know Joe and Nate. And what I'm most thankful for is that we're still together, still meeting every Sunday 14 years after we started. We built a dream together, and now, after all these years, we still continue to dream. So thank you, Joe. And with that, Dave and I look forward to answering your questions.

Our first question is from Lloyd Walmsley with UBS.

Two questions, if I can. First, it looks like room Nights and Experiences Booked grew a little bit sequentially less in Q2 this year than it did in '19. And similarly, the guidance looks like it's calling for a little bit slower sequential growth. Just wondering if there's anything you'd call out that's behind that? And then secondly, can you give us an update on what you're seeing around just how people are using the platform post some of the new search and discovery innovations this summer? Are you seeing demand move into a wider dispersion of areas or any changes in conversion rates? What are early learnings from some of those innovations this past summer?

Thank you very much. Dave, why don't you take the first question about Q2, Q3 growth, and I can talk a little bit about how the launch of Airbnb Categories has affected how people use Airbnb?

Our Q2 gross nights before cancellations exceeded our internal expectations. However, we did experience an increase in cancellations towards the end of the quarter, which we think were primarily due to global flight cancellations, mainly in North America. Overall, we are seeing strong growth in nights booked, with a 25% year-over-year increase in nights and experiences, and we are confident about maintaining similar results in Q3. Demand for guest travel worldwide remains robust.

And just to answer the second question, just to give a little bit of background, for decades, travel search has worked the same way. There's a search box, and you are asked to enter a location. And the problem with that is that Airbnb is in 100,000 locations all over the world. And so people can't think to type in 100,000 destinations into a search box. So people miss millions of unique Airbnbs they would have never known to search for. And the reason this is important, as you asked is because we think that Airbnb Categories can allow us to point demand to where we have supply. This, I think, is one of the really big opportunities. So as I said, since release, listings in every category have been viewed over 180 million times. We've also seen that guests are now showing more flexibility with their dates and their destinations than before. For example, a typical search, properties are 30 miles further apart than they would have been before. So we are seeing search radii increase. And additionally, we are seeing more people continue to use the flexible date feature. So we believe our theory is working. Airbnb Categories allows us to highlight what makes us unique. It allows us to point demand where we have supply. I also think it helps us be in the inspiration business where people start to travel on Airbnb.

Our next question is from Mario Lu with Barclays.

So the first one is on new initiatives. So we look at the third quarter guidance, it seems like bookings is expected to contract by more than 10 points in 3Q versus 2019 versus the second quarter. So does that change the timing or focus on these other new initiatives such as Experiences? Or are more resources now being focused back on the core business?

No. I mean we have a very consistent strategy. And our strategy is, number one, we want to unlock the next generation of hosts. We have 4 million hosts on Airbnb, and I think that millions more can turn to hosting, especially during these economic times. So that, I think, is really priority #1. As we add more hosts, we continue to grow. We want Airbnb to be the ultimate host to our guests and hosts. That's why we offered AirCover, where we continue to provide better service all over the world and continue to up level. Guests aren't just traveling Airbnb, they're now living on Airbnb. And so we want to continue to offer more opportunities for them to travel and live on Airbnb. So we are still focused on our core business. That is the priority for us. We are also continuing to invest in long-term stays and other initiatives, and most importantly, providing an incredible service that people love. I would also just say, again, we're feeling really, really solid and good about Q3. Dave, anything you want to add?

Yes, I want to emphasize Brian's point. We are optimistic about stable bookings in Q3, particularly given the long lead times we are observing. We are experiencing some early bookings for summer travel in Q2, alongside the overall economic environment. Our gross booking value growth compared to 2019 was 73% in Q1 and 73% in Q2. We are seeing robust growth in gross booking value relative to 2019. To achieve further quarter-over-quarter acceleration, we need to see continued recovery in Europe and APAC, which are still significantly lagging.

Great. And just a follow-up, speaking of APAC. You guys mentioned that the domestic business is trending down in China, which I believe you guys said was around 1% of your business. Is there any other color you can provide in terms of the P&L impact from shutting that down? And any color on how large the outbound bookings for China is?

Dave?

Yes. I mean the China business has been a small part of the business overall. I mean, it's had less than a 1% impact on our revenue. One of the things that has been important for us in getting out of the domestic business in China is maintaining a focus on what we think is the most valuable and important part of China, which is the outbound business. So really, what we've done is we've shifted all of the resources that we're applying and splitting between both domestic and outbound travel. We focused all that on outbound, which we think is the greater prize and the most important part for the long term. So until China has their COVID policy kind of in place and allowing people to kind of travel outbound from China, it will kind of remain to be depressed. But as that evolves and Chinese travelers travel again, we think that will be a nice unlock for our Asia Pacific business. It's not going to have a material impact on our P&L.

Our next question is from Bernie McTernan with Needham & Company.

Great. ADRs are hanging in there better than feared, I believe, still expecting them to be up year-over-year. Can you just talk to some of the puts and takes, demand-driven pricing versus mix shift?

Dave?

Yes. If you kind of rewind to what we've seen with ADRs back at the beginning of the pandemic, all of the increase was driven by mix, right? This initial resurgence of the travel for North America, whole home, nonurban. And then over time, we've seen mix become less and less a part of the increase in the ADR. Here in both Q1 and Q2, what we've seen is that ADRs were up 40% year over year, back to 2019. And about 2/3 of that increase has been price appreciation, and about 1/3 due to mix. So we do anticipate that over time, as more people return to travel to urban, cross-border, ADRs may moderate. But yes, as you see, 2/3 of that increase has actually been price appreciation. So it's been stickier than we anticipated, maybe 6 months ago.

Got it. And then the dip in May and June from the earlier booking windows and then reacceleration in July, is that reacceleration for near-term bookings in terms of late summer? Or is that kind of early bookings for the fall and winter period?

Well, it's a bit of both. I mean, really, we have on the books for Q4 of this year, we have more nights on the books in Q4 than relative to the same kind of period a year ago. It's very strong. We're seeing really strong demand in the back half of the year. So we're seeing a bit of both.

Our next question is from Justin Patterson with KeyBanc Capital Markets.

Great. Two, if I can. Brian, when you look at host right now and just the friction to onboarding, what are you looking to really solve with this upcoming release? And then secondly, perhaps for both you and Dave, you've clearly shown a lot of margin progress, free cash flow progress over the next few years. How should we think about just the puts and takes between overall growth and showing more margin, more free cash flow generation ahead?

And just to confirm, you're talking about with this upcoming release, right, this winter?

Yes. Well, I mean it can be a little broader in there. Just where the friction point on onboarding is.

Yes, that's a great question. I'll address the first part, and then Dave can discuss margin improvement, and I may add to that as well. We currently have 4 million hosts on Airbnb, but we believe there are millions more potential hosts. Hosting is a straightforward way to earn money using an existing asset. Most individuals don't have significant start-up costs, and many receive bookings within their first week. This fall and winter, we are planning several initiatives, with a key focus on making hosting easier. One highlight from last year is our Ask a Super Host program, which connects our top super hosts with those interested in becoming hosts. This initiative is beneficial because it enables our community to train new hosts. We're committed to enhancing this program and exploring additional ways to reduce obstacles. Expect to see innovative products aimed at facilitating the hosting experience. Additionally, we are considering further protections for hosts and methods to encourage everyday people to occasionally host on Airbnb, particularly those with primary homes. Many may not be aware that the leading professions of Airbnb hosts in the U.S. include school teachers, healthcare workers, and students. We see significant potential in attracting more regular individuals as hosts. Last quarter, 36% of new hosts were prior guests, indicating a substantial opportunity for growth. Airbnb was founded during the 2008 recession when many sought additional income from hosting. We believe that once again, hosting may appeal to many looking to supplement their income. Now, Dave, would you like to discuss margin improvement?

Yes. Thanks. We're really proud of the progress we made to reduce our fixed costs and make improvements in our variable costs. We've really exercised discipline on our spending here in 2022, and we're going to continue to do so. But while we're thrilled with this margin expansion, we're heavily in growth mode. We are not in profit maximization mode. We really want to balance profitability with growth. One of the things we're very proud of in Q2 is that we are showing both growth and profitability at scale. But we'll continue to invest in growth. We're going to prioritize things. We'll grow the business over the long haul.

Our next question is from Doug Anmuth with JPMorgan.

Just hoping you can talk a little bit about just kind of macro environment, just what you're seeing in terms of consumer activity or types of trips being booked. And also just to get your view on long-term stays. I think you talked about 25% growth year-over-year, but just the trends there going forward.

Dave?

Sure. Starting with the macro environment, we are very pleased with our results despite the prevailing economic conditions. We're observing strong demand in Q3, with Q2 nights and experiences up 25% year-over-year, and we're seeing similar growth for Q3. Demand for Q4 reservations is also robust. North America and Europe have been our strongholds, and we're noticing an increase in cross-border and urban travel, which have historically been key areas for us, and they're beginning to rebound. Overall, when you step back, the resilience of our business is evident because we offer various types of accommodations globally, catering to anyone looking to travel. There is significant pent-up demand for travel, as people are eager to spend money on travel experiences rather than material goods. We're continuing to see strong performance in our business. Long-term stays remain the fastest-growing segment. Nights of 28 days or longer are growing faster since 2019 than any other stay segment. Almost 50% of our nights are for 7 days or longer. Airbnb provides the best experience for those longer stays, and the trend for long-term stays is solid, outpacing other parts of our business.

The next question is from Nick Jones with JMP Securities.

Two. I guess, first, can you just kind of give us an update on the 'I'm Flexible' option and how that's kind of playing out and what kind of experiences you're able to provide in those markets that maybe are less dense? And then a follow-up.

Yes, yes. So Nick, 'I'm Flexible' essentially is a product that we launched last year, and it really has two components. There's flexible dates that allows people to say, 'I'm flexible when to travel,' and we can say, 'I'm really interested in traveling anywhere for a week or a month anytime in the next year.' We also have 'I'm Flexible' destinations. We rebuilt 'I'm Flexible' destination from the ground up, and that became Airbnb Categories. So that's the product that has been used, and people have seen listings that have been featured in the Airbnb categories over 180 million times since May 11. This has definitely been a huge boon for us. What we're seeing is that people are discovering homes they would have never otherwise found in their books. We're seeing the search radius widen by, I think, as I said before, 30 miles. The other thing we're seeing is that people are continuing to be more flexible about their dates. More and more people are using the 'I'm Flexible' dates feature as well. We're really excited about this. I think this is a really big shift in how people will travel. Not everyone is going to be flexible about how they travel. But for anyone who's not traveling for business or not visiting family, almost by definition, they're probably going to have some flexibility. As fewer and fewer people are going to be required to go into the office five days a week, I think this option is going to be more and more important. Our business model works uniquely for this because we have a lot of unique inventory. So it has been used quite a lot, and hopefully, that answers your question.

Yes. And then, I guess, a follow-up is in some of the areas that are outside of urban areas, less dense, less, I guess, arguably activities, how are you thinking about adding more optionality to make these types of experiences more engaging for the guests?

Oh, I see. Yes. Well, it's a great question. So number one, Airbnb Categories and the new products we're doing are great ways to highlight really interesting homes and communities you never knew existed, right? We have incredible barns and farm stays and capsules and treehouses, many of which are in towns you've probably never even heard of. But there's another good question: If you go to Paris, you have the Eiffel Tower. But if you go to a rural area in upstate New York or in California or some other place, what do you do when you're there? We think Airbnb Experiences are great, obviously, for places that are not iconic tourism destinations. That's why we're continuing to invest in that product, and people really love Airbnb Experiences. They actually have a higher 5-star rating even than homes. I think this is a great opportunity for rural destinations, and we have a lot of really popular experiences. For example, if you go on a farm, you can do a farm stay, and then you can have interesting experiences on that farm. That's just one example. We have really popular experiences, for example, in Tuscany. You can make pasta with a nearly 90-year-old grandmother who's been making pasta the same way for more than half a century. These are experiences you would have never been able to find, and we're really excited about that.

The next question is from James Lee with Mizuho.

And maybe as we look into FY '23, obviously, we have a lot of economic uncertainties here. If the economy indeed slows down and consumers start to trade down, how do you think that impacts Airbnb's business? And also on the other hand, if you look at expenses, the demand slowdown, is there anything in your cost structure you could optimize to offset any potential headwinds?

Dave, do you want to take that?

Sure. I think we've highlighted this a bit on the call that you don't know what the economy is going to bring, but we do know that Airbnb is resilient to almost any economic shock. As Brian mentioned, we were founded in a recession, and we've obviously thrived in the era of COVID despite COVID. What we're just finding is that people can come to Airbnb because we have any kind of property, whether it's a small shared room or a private room to luxury stays, we have something for anyone depending on their travel needs. We likely saw on COVID, if they can't cross borders, they're going to stay domestically. They get in the car and they go down the road. If domestic air travel gets too expensive, they can stay domestically and can find the perfect place for them within their budget because we have such a diversity of types of offerings for them. So I think that is one of the things that gives us great resilience. In terms of expenses, if the business slows down, I mean, again, we've already made the hard choices. In 2020, we substantially reduced our fixed costs. We eliminated a number of positions. We moved from being divisional to functional. So we are a leaner, tighter machine, and we will remain that way. We're going to continue to grow our headcount, maybe at high single-digit percentage rates, but that is going to be able to support us for the long term, and we're going to remain very focused and disciplined in our investments. So I feel really good about the position that we're in with our investment model.

Our next question is from Brian Fitzgerald with Wells Fargo.

We wanted to ask about the recovery of supply that you continue to see, maybe particularly in urban areas. Are you seeing hosts who had come off the platform now coming back, wondering how you're making these hosts aware of the increased urban demand and helping to reactivate them? And any color there on that, maybe latent supply capacity, if you could, that'd be awesome.

Dave, do you want to take this?

Yes. We are experiencing strong growth in supply. Since 2019, our Nights and Experiences Booked have risen by 24%, and our active listings have grown by 23%. We now have over 6 million active listings, including domestic listings in China. Regarding urban areas, as demand returns, we are noticing a recovery in total urban supply. Property owners are reactivating their listings on Airbnb, ready to host again. Most of our hosts are individuals, and their listings typically comprise their primary or secondary homes. They tend to hold onto these even during economic downturns, unlike professional hosts who may focus solely on investment returns. When demand increases, these individual hosts come back to Airbnb, making their listings available again, which is exactly what we are witnessing as demand rises, leading to an immediate availability of supply.

Our next question is from Mark Mahaney with Evercore ISI.

I have two questions. First, can you discuss the China outbound market and how you have engaged with it? How significant has it been for you so far? Secondly, regarding Experiences, I understand that's part of a broader list of product innovations you’re working on. While it seems to have been less of a focus, is there any indication that it's becoming a higher priority for you, and do you plan to pursue it more actively in 2023?

Yes. Dave, why don't you take China, I can expand on the answer and I'll take Experiences.

Yes, we're very optimistic about China in the long term. The market has certainly been affected by COVID, particularly with outbound travel declining. That was actually how we began, by capitalizing on significant outbound travel from China worldwide. This remains a key area for us to focus on. Currently, the APAC region is still quite sluggish. Overall, our nights growth is up 25% compared to Q2 of 2019, but when excluding APAC, it's actually up 35%. This highlights the negative impact APAC has on our numbers. The future growth of our business will greatly benefit from the return of outbound travel, which will help revitalize our APAC operations.

Yes. I want to emphasize that we have observed pent-up demand in every region globally. There was pent-up demand in North America, in Europe, and we anticipate a significant amount of pent-up demand for outbound travel from China and more broadly in the Asia-Pacific region. In terms of preparation, our main focus for the China outbound market is to ensure we have a strong supply in the destinations that travelers from China are heading to, including Japan, Korea, Southeast Asia, and more. Additionally, we need to ensure that our product remains updated and that our marketing campaigns are ready once travel resumes. Our strategy is straightforward and requires minimal changes. We believe our existing product will perform well once outbound travel from China rebounds, and all indicators suggest this will happen, similar to other markets. We are excited about the potential for this to become a crucial aspect of our Asia-Pacific business in the coming years. Regarding Experiences, in 2018 and 2019, things were progressing well, and we anticipated 2020 would be a breakout year for this sector. However, the pandemic struck, forcing us to pause operations as people were hesitant to gather, especially with strangers. During this challenging period, we refocused on our core business and returned to fundamental practices, which contributed significantly to our business transformation and allowed us to generate nearly $3 billion in free cash flow. That said, we are highly optimistic about the long-term prospects for experiences. The average 5-star rating for Experiences is even higher than that of homes. We believe more people need to discover this product, and it requires ongoing integration into our search flow and sustained marketing efforts. Therefore, Experiences will be a renewed priority, and we are making several investments to promote it. I believe it will play a significant role in our narrative for 2023 and beyond over the next five years, and I am genuinely excited about it.

Our next question is from John Colantuoni with Jefferies.

In the last quarter, you indicated that you expected marketing as a percentage of revenue to stay relatively unchanged compared to 2021. Can you update us on whether that is still your expectation, especially since marketing in the first half came in a few hundred basis points lower than last year? I also have a follow-up question.

Dave?

Yes. The short answer is we anticipate marketing as a percentage of revenue in 2022 will be consistent with 2021. So, a very modest increase in the back half of the year.

Okay. Great. And second question on take rate. It looks like outlook for the third quarter implies a take rate that's better than what we were expecting and up a decent chunk versus the same quarter in 2019. Any chance you can give us some detail about the puts and takes driving that take rate?

Yes. The underlying shift in take rate remains unchanged. Any variation in take rate is merely a timing difference between recognized revenue and booking timings.

Our next question is from Stephen Ju with Credit Suisse.

So Brian, I think you yourself signed up to be a digital nomad and joined your employees who could now, I guess, work from anywhere. So is there anything you can share in terms of what you're seeing from the organization overall regarding pickups or declines in productivity or your ability to innovate? And Dave, at the time of the IPO, I think you guys had disclosed that the different cohorts of guests were displaying pretty similar revenue retention as they age. But as we enter the pandemic, you probably had a pretty good influx of new users who signed up to experience Airbnb for the first time ever. So is there anything you can share in terms of the behavior of the 2020 and the 2021 cohorts relative to what you have seen for the folks who are arguably the earlier adopters?

Yes. So why don't I take the first question on really remote work. So in April, we announced that Airbnb employees can live and work anywhere. Why do we do this? There are a couple of reasons. Number one, we had the most productive two years in our company history. Those two years were the years when we rebuilt the company from the ground up, fixed our cost base, accelerated growth, and all of this was done on Zoom. It’s clear to me that the most productive we ever have been is on Zoom. There was no question that we can maintain that productivity. Additionally, I think a really good way to predict the future is to look at what young companies do. Twenty years ago, young companies had open floor plans and a lot of perks on-site, which became the dominant way that people worked in offices around the world. If you look at a lot of young companies today, they have a lot of flexibility. They're embracing remote work. So I think this is a really good leading indicator of what the office space will look like in the next 10 years. Now that being said, we do think in-person interaction is really important, but I don't think that requires you to have to come to an office three days a week. The guideline we've given is we'd like to gather employees at least one week a quarter. Rather than coming in every week, we want more meaningful, less frequent interactions and gatherings. Otherwise, we think Zoom is really efficient for productivity. I know a lot of CEOs are nervous about productivity if their employees aren't in an office. But we have a pretty unique way of running the company. We do these two releases every year, and it's a great mechanism for accountability. You can see the productivity of everyone in the organization because all the work comes together twice a year to make big leaps in the organization. It's kind of easier to track productivity when everything is online. So that's something we're really embracing.

Great. Regarding guest cohorts, we believe that we have some of the highest retention rates in travel. We mentioned this during our IPO, and we still stand by it. Our booking frequency remains strong and is approaching 2019 levels. When we look at the new guest cohorts from 2020 and 2021, they have shown high retention rates, possibly even more than in the past, likely due to self-selection. New guests who joined during the pandemic are eager to travel now and are probably more inclined to do so than others. For rebooking rates among past guests, we've noticed positive improvements in 2022 compared to 2021, although they may still be slightly below 2019 levels, again due to the self-selection of those willing to travel at this time.

Our next question is from Kevin Kopelman with Cowen.

Can you give us a sense of what listings growth looks like excluding the China shutdown? And then qualitatively, if you could talk about the key drivers and trends you're seeing there and listings.

Dave, do you want to take that?

Yes. In terms of growth, what we've stated is that we're still well above 6 million active listings, even excluding the takedown of the China domestic listings. As we mentioned in our results, we're seeing strong listings growth, specifically in the areas where we have the strongest bookings.

Did you give the number of China listings?

We have not specifically mentioned the China listings, no.

Okay. And then just a quick follow-up on the Q2 guide. You talked about a slowdown later in the quarter, but you were still pretty much on track with your guidance for nights. Is it safe to assume that for the third quarter, you are also expecting some slowdown in the remainder of that quarter?

Well, if anything, what we're seeing is an acceleration of the business here in July and actually kind of a very stable overall nights booked growth for the quarter on Nights and Experiences Booked. Obviously, then for our revenue, it has a modest deceleration on a year-over-year basis, but it will be up from a year-over-three years.

Our next question is from Brian Nowak with Morgan Stanley.

I have two. The first one, just any update on the number of 'I'm Flexible' queries or sort of how big that's gotten? I know it's a number that you all were disclosing for a couple of quarters. And then secondly, there remains to be an ongoing debate about how much of the shift towards Airbnb long-term accommodations was due to COVID, and now you're going to have a mean reversion back to hotels. What are 2 or 3 of the KPIs that you look at that give you confidence that your addressable market of users, hosts, and everything has really expanded? What are you seeing in the internal KPIs that you watch now in July and August that give you confidence that you're still going to have outsized market share growth into '23?

Dave, you want to take this?

Yes. We're continuing to see just really strong growth in our new guests. Obviously, looking at our new guest retention, which is one of the questions we just had, which remains quite strong, with people coming back on. We're also continuing to see overall utilization of Airbnb versus hotels. We didn't ever dip as much as hotels did, and we introduced Airbnb to millions of new customers. We see the new use cases. We've highlighted things like our long-term stays and the use cases where people aren't going to want to be at a hotel for more than seven days. Nearly 50% of our nights are seven days or longer. When you start to stay in any place for seven days or more, an Airbnb is the best way to experience that stay. Long-term stay trends continue to be very solid, growing faster than any other part of the business. We don't just tap out. If we were only, say, a vacation rental destination-type company, you can tap out in supply and even demand in those areas. We have such a diversity of supply around the world that we're able to continue to grow quite well.

Yes. Maybe I'll add a little context. It's good to remember that before the pandemic, our bread and butter was cross-border and urban travel. That was our bread and butter. It was cross-border travel and urban travel. When the pandemic occurred, that got primarily shut off, and yet our business recovered because people were using Airbnb differently. The key important thing is that our model is incredibly adaptable. We are in nearly every community in the world. We have nearly every type of space at nearly every price point. The reason that people will continue to use Airbnb will endure. People are looking for value. They want to feel like they are living locally. As more and more people have flexibility in trip length, this continues to rise. Nearly half of our business is for a week or longer. It is probably prohibitive to stay in hotels, so there are a lot of new use cases that we think are here to stay. The older use cases, cross-border and urban, are coming back.

Our next question is from Naved Khan with Truist Securities.

I'm really surprised by the continued strength in North America and in the U.S. I think you talked about a 37% growth in Nights and Experiences versus EMEA, maybe up 25%. Is it just that EMEA continues to lag? Or just from everything that we've been hearing, it seems like EMEA saw a burst of demand in the second quarter. So just trying to reconcile that.

Dave?

Yes. EMEA is still lagging behind the acceleration that we've seen in North America, and we think that is actually one of the opportunities for future acceleration of the business. Clearly, things like the impact of the war in Ukraine have certainly had an impact. There’s the economic impact of foreign exchange rates, lower euro and British pound relative to the U.S. dollar. There are some reasons why Europe has been lagging. It is still a strong business for us. It's still doing well, but it could do even better.

And then maybe just as a follow-up. So if I have to think about the back half and the advertising channels, do you see an opportunity to increase the branded ad spend? Or do you think you're pretty much maxed out and might just stay on these levels?

Again, I think we have a very modest increase in our overall marketing spend in the back half of the year. We're very happy with our approach to our brand spend. One of the big strengths of Airbnb is our ability to market to both guests and hosts at the same time. We're able to bring guests with 90% of our traffic remaining direct or unpaid. This brand strategy is more of a product marketing strategy that we have to market the features and capabilities that we have in Airbnb, what makes us different, has been a huge strength for us. We're really happy with that investment. We think we're investing fully at the moment there. We will look over time to maybe expand the countries that we're doing more of that investment. You could see us expanding into more countries because we're seeing such good success with our investment right now.

Our next question is from Jed Kelly with Oppenheimer.

Great. Two, if I may. Just one on the nonurban listings, it continues to grow well, and you're adding a lot of supply. Can you sort of touch on where the share gains are coming from, like where those listings are coming from? Is it coming from people not using their second home as much and going back to more urban destinations? Or are you taking more share with property managers? Or are you opening up with new destinations? Then my second question just relates to overall seasonality this year. It seems like the room nights are following a consistent seasonal trend as 2019. Should we expect a similar 4Q seasonality as 2019?

Certainly. I can provide a response to the first question regarding non-urban listings at a broad level. One key observation is that our global network shows that markets experiencing the highest growth in supply often align with those seeing the most demand. This trend is not unexpected, as the primary source of hosts tends to be previous guests. For non-urban listings, the composition remains fairly consistent with previous years; it is still predominantly individual hosts, although property managers are also increasingly joining the platform. We are observing that more hosts are opening additional nights on their calendars as demand rises, which often leads to them sharing their experiences with friends. This is a great advantage of having individual hosts make up the majority of our supply. We continue to witness strong growth in non-urban listings, and as urban areas recover, we expect to see substantial supply growth there as well. Dave, please feel free to provide further details and address the second question.

Yes, I think you covered the first really well. I'll just say on the Nights and Experiences Booked kind of seasonality. Now that we enter Q3 and Q4, it's probably just better to look at the year-over-year growth rates as being more normalized. That's the better way to look at the overall seasonal growth.

Our next question is from Tom White with D.A. Davidson.

Brian, during the early days of the pandemic, you talked about narrowing your focus on Airbnb's most perishable opportunities. You guys have now achieved profitability at scale. Your cash balance has grown significantly. Can you update us on your latest thinking about those nonperishable opportunities? Are any of them particularly attractive to you? Or should we infer from the buyback announcement that maybe you're not super close to really exploring those opportunities again?

Tom, yes. So again, during the 2020 pandemic curve, just to recap, we got really focused. We got back to basics. Over the last two years, I think we've really benefited by perfecting our core product. That being said, we are now looking and we are thinking very expansively. You should look at our stock buyback as our confidence in our long-term growth and profitability. That's all you should believe that stock buyback's about. We are going to continue to invest aggressively over the coming years. We're not pulling on the brake; we are now stepping on the gas. Remember, the biggest innovations I had aren't going to be in my 20s and 30s. We have some pretty big opportunities coming up. I'm excited about some of the things we're going to be releasing later this year. We have another release coming next spring in time for the summer release and the following winter. We're going to continue to focus on unlocking the next generation of hosts. We have some really exciting new products built to attract the next generation of hosts, especially individuals that want to host occasionally. We are going to continue to think of radical innovations around Airbnb becoming the ultimate host to our guests and hosts. We're going to continue to innovate on our search technology. We have a lot of opportunities around helping people travel and live on Airbnb. There are going to be some pretty exciting opportunities coming forward, and I'm pretty bullish about it. I don't know if, Dave, if there's anything you want to add to that?

Yes. I'll just reemphasize, our priority is investing in growth. $10 billion in cash is more than we need; $8 billion is more than sufficient to aggressively invest in growth in the business. That is our #1 priority. At the same time, we're able to both invest and grow just given the profitability profile of our business overall. I'm proud that we can do both, but the priority for us is investment growth.

Great. Maybe just one quick follow-up on FX. Over the years, I remember some of the traditional OTAs talking about how maybe it's less about the absolute level of one currency relative to another, but it's more like the volatility of foreign exchange rates that kind of dictates customer booking behavior. Curious whether you'd say that was a similar dynamic in your business? Or just generally how do changes in FX rates impact customer behavior?

I think the biggest impact you see with FX is in the cross-border travel. A strengthening dollar gives you the ability for Americans to travel abroad, specifically right now, probably Europe and to the U.K., and a weakening euro and pound makes it more difficult for them to travel back. If you look at Airbnb, the fact is that people adjust their travel to meet their overall budgets. As we saw in COVID, people are more willing to stay domestically if their budget doesn't allow the cross-border travel. Maybe they stay domestically if they don't feel like they can afford the cost of airline travel. The FX impact from a consumer standpoint is usually tied to cross-border impact. To our overall business, we're just seeing that as we generate nights stayed in euros and pounds and then we bring them back to the U.S., we're just seeing the headwind of foreign exchange, which was material in Q1, it was 600 basis points of revenue growth driven by the FX move. I'd anticipate Q3 probably be something less than that to our overall P&L.

That will conclude our question-and-answer session for today. I'll hand it over to Brian Chesky for any closing remarks.

All right. Well, thank you, everyone, for joining us today. I just want to say I'm incredibly proud of what we've delivered this quarter. Record Nights and Experiences Booked, we had our most profitable Q2, and we generated $795 million of free cash flow, bringing our total free cash flow over the last 12 months to nearly $3 billion. This transformation of our business was only possible because of our adaptable model and relentless innovation. Regardless of economic environment, we believe guests will continue to come to Airbnb because they can find great value, and hosts can earn extra income. Airbnb is ready for whatever lies ahead, and we're so confident in our long-term growth and profitability that today, we're announcing a $2 billion share repurchase program. Thank you all for joining us today, and I'll see you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.