Airbnb, Inc. Q1 FY2025 Earnings Call

Good afternoon, and thank you for joining Airbnb's Earnings Conference Call for the First Quarter of 2025. 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 will now hand the call over to Angela Yang, Director of Investor Relations. Please go ahead.

Good afternoon, and welcome to Airbnb's first quarter of 2025 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, Ellie Mertz. Earlier today, we issued a shareholder letter with our financial results and commentary for our first quarter of 2025. These items were also 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've provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to the Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. With that, I'll pass the call to Brian.

Well, good afternoon, everyone, and thanks for joining. We had a strong start to 2025. In Q1, guests on Airbnb spent nearly $25 billion. These results show that no matter what's happening in the world, people continue to choose Airbnb, and that's because our model is inherently adaptable. It's something we've proven time and time again. We started Airbnb during the Great Recession of 2008. People turned to us for a more affordable way to travel, and they started hosting on Airbnb to earn extra income. Then, in 2020, when the pandemic hit, we provided a way for people to travel close to home. As a result, our business quickly rebounded, and by the end of that year, we went public. Today, things feel uncertain once again. But just as we've shown in the past, as the world changes, Airbnb will continue to adapt. That's because we have millions of hosts offering nearly every type of home at nearly every price point from budget to luxury in neighborhoods and cities all over the world. For hosts, Airbnb remains a great way to earn meaningful income. Now, before we get into Q1 results, I want to just talk for a moment about where we are as a company. We've been focused on driving long-term growth, as well as preparing for Airbnb's next chapter, when we'll offer more than just a place to stay. We've been laying the groundwork to make this transformation for years. There are two key things we've done to get ready. First, we want to ensure that people love our core service before we launch anything new. So, we spent the last few years rolling out hundreds of upgrades to make Airbnb better for guests and hosts. It's now easier to use, more affordable, and more reliable. One example of this is the launch of Guest Favorites, which is a way for people to easily find the best places to stay on Airbnb. Since launch, over 350 million nights booked have been booked at Guest Favorites listings. We've also worked hard to improve affordability and price transparency, which are especially top of mind for people today. When guests told us prices weren't transparent enough, we introduced a toggle that let them see the total price upfront. Over 17 million guests have used it over the past two years. Last month, we rolled out total price display globally. Now, the price you see upfront includes all fees. But perfecting our core service wasn't enough. To expand beyond homes, we needed an app that could support new offerings. Until now, our app has really done one thing, which is let you book a home. So, we rebuilt the app from the ground up on a new technology stack. Now, we can innovate faster and offer much more than homes. We're ready for Airbnb's next chapter. On Tuesday, May 13th, we'll unveil the 2025 Summer Release, and you can visit our website that day to watch the announcement and see all the details. So with that, I'm going to turn the call over to Ellie for a financial update.

Thanks, Brian, and good afternoon, everyone. I'll start with a review of our Q1 financial results, and then I'll walk through our outlook for Q2. As Brian mentioned, we had a strong first quarter. We had 143 million nights and experiences booked, up 8% year-over-year. Looking at the year-over-year growth by region, Latin America grew in the low-20%s, Asia Pacific grew in the mid-teens, Europe in the mid-single digits, and North America in the low-single digits. Revenue for the quarter was $2.3 billion, up 6% year-over-year. If you exclude the impact of FX and calendar factors, revenue would have grown 11%. As a reminder, those calendar factors include Easter falling in Q1 2024 and the extra day from Leap Day last year. We generated $417 million of adjusted EBITDA, which represents an 18% margin. Next, I'll turn to our balance sheet and cash flow. We continue to generate significant cash in Q1, delivering $1.8 billion of free cash flow. Over the past 12 months, we've generated $4.4 billion, representing a free cash flow margin of 39%. At the end of Q1, we had $11.5 billion of corporate cash and investments as well as $9.2 billion of funds held on behalf of guests. Our strong balance sheet allowed us to repurchase $807 million of our common stock during the quarter. At the end of Q1, we had $2.5 billion remaining on our repurchase authorization. Now, let's shift to our Q2 and full year 2025 outlook. Despite the recent volatility in the global economy, we believe we're positioned to deliver strong results in Q2. We expect to deliver revenue between $2.99 billion to $3.05 billion, representing 9% to 11% year-over-year growth. This includes a benefit of approximately 2 percentage points due to the timing of Easter. For nights and experiences booked, we expect year-over-year growth in Q2 to moderate relative to Q1. So far in Q2, we saw strong guest demand for Easter travel in Europe and continued momentum in Latin America, which remains our fastest growing region. In the US, we've seen relatively softer trends, which we believe is largely driven by broader economic uncertainty. On profitability, we expect adjusted EBITDA to increase year-over-year with adjusted EBITDA margins expected to be flat to slightly down compared to Q2 2024. Marketing expense will grow faster than revenue in Q2, mostly due to our upcoming summer release and investments in growth initiatives. For the full year, we continue to expect an adjusted EBITDA margin of at least 34.5%, in line with what we shared in February. That includes $200 million to $250 million of investment to launch and scale new businesses in 2025. These investments will have the biggest impact on our margins in the second half of the year, since our new offerings go live on May 13. Looking ahead, our priorities remain consistent with last quarter. As a reminder, we're continuing to drive long-term growth and deliver market share gains through three key growth levers. First, we are perfecting our core service. As Brian mentioned, we've made Airbnb significantly better for both guests and hosts. While we've been driving growth from product improvements, like enhanced search and better merchandising, we know there's still more work to do. Secondly, we are accelerating growth in global markets. We're taking a much more localized approach to product and marketing in underpenetrated markets around the world. This is a multi-year strategy, but we have already seen encouraging results. For the fifth quarter in a row, growth in these expansion markets significantly outperformed our core markets. In fact, the average growth rate in Q1 in expansion markets was more than double that of our core markets. Brazil continues to lead the way. In Q1, origin nights in Brazil grew 27% and first-time bookers grew over 30%, both accelerating from Q4. Third, we are launching and scaling new offerings, beginning May 13th. To wrap-up before we go to questions, we're staying close to geopolitical and macroeconomic uncertainty and monitoring any short-term impact they could have. As Brian mentioned in his remarks, we have an adaptable and diversified business that has been resilient during periods of uncertainty, most recently during COVID. Despite signs of near-term volatility, we remain focused on the long-term opportunity to both grow our core business and expand into new ones. We believe that our efficient operating model, financial strength, and significant liquidity give us the ability to pursue these multi-year initiatives in the current environment. And with that, I will open it up to Q&A.

Thank you. We will now begin the question-and-answer session. Your first question comes from Justin Post from Bank of America. Your line is open.

Great. Thank you. I wonder if you could expand a little bit on the letter on travel corridor changes. Are you seeing any differences in total volumes of bookings from quarter changes, like in Europe? And I know you already mentioned Canada. Is that driving any change for you? And then, do you think there's any market share impact in the US? Or do you think you're holding in your share, it's just the whole country is a little depressed? Thank you.

Great. Brian, why don't I take this? Let me first talk a little bit about travel corridors, and in particular, you mentioned Canada, which we called out in the letter. Let me share what we are seeing, in particular with regard to the inbound corridor to the US. We absolutely have seen a decline in popularity of foreign travelers coming to the US. What we have seen is two things. One is that segment has become less popular to come to the US from a year ago, also relative to the beginning of the year. What we see in that segment is that it is a very small portion of our overall business. As a reminder, US travel is predominantly domestic. And as a result, that corridor of foreign travelers coming to the US is approximately 2% to 3% of our overall business. So, it's frankly not quite material. At the same time, what we're seeing is that, within that corridor, guests who would have in a prior year come to the US are simply choosing different locations. I think Canada is the most obvious example where we see Canadians are traveling at a much lower rate to the US, but they're traveling more domestically, they are traveling to Mexico, they are going to Brazil, they're going to France, they're going to Japan. What that tells you about the distribution is that, at this moment, it's not necessarily that people don't want to travel; they are just using different destinations. Airbnb is a platform that, given our distributed supply, provides an adaptable way for them to find a new location. So that's the comment I would make on the corridors. In terms of market share in the US, I would say that we continue to have very strong market share. We are not seeing any losses in market share. Much to the contrary, we continue to gain market share in the US, but we see generally that as a market, North America has been the slowest growing across the industry.

Your next question comes from the line of Richard Clarke from Bernstein. Your line is open.

Hi, thanks for taking my question. Just wanted to delve a little bit into what behavior you're actually seeing from the US guests to slow down? Is it delayed booking windows? Is it higher cancellation rates, shorter trips, trading down, some nature of what you're actually seeing? I guess we've heard from maybe a few travel companies that things got a little bit better towards the end of April. Are you seeing that? Is there any sort of light at the end of the tunnel with regard to bookings picking up in the last few days or weeks?

Yeah. Thanks for the question, Richard. Let me double-click on this. I just talked about the quarter that is inbound to the US. Let me talk now about what we're seeing regarding US domestic travel, which again is the lion's share of overall US destinations. A couple of things to comment on. One is, we are seeing the higher-income traveler somewhat unimpacted by the current macro conditions. We see, in particular, the higher ADRs of our bookings; the growth is very stable and healthy for the US traveler. In terms of lead times, we're experiencing something else. We're seeing that the short lead times, meaning bookings that are just around the quarter—could be in two days or a week or two weeks—are seeing relatively strong growth. However, in the longer lead times, particularly those bookings that are for more than a month out, those are where we're seeing relative softness. So, the takeaway in terms of the lead times is that some US consumers are waiting to book their summer travel. The one aspect that gives us comfort in the weakness at the longer lead times is that we've seen movement in lead times shift many times in the past. An example is last summer when we saw a truncation of lead times, similar to what we're seeing today. What we saw then is that people waited for a while, but they ended up booking that trip; it was just closer to the check-in day. Therefore, we're obviously monitoring this closely, both globally, and particularly in the US, as we believe the country is the most impacted by a lot of the headline noise currently. I'll add that we haven't particularly seen consumers trading down in choosing lower ADR bookings or shorter trips; that has not been behavior we've observed.

Your next question comes from the line of Mark Mahaney from Evercore ISI. Your line is open.

I wanted to ask about what you think are the best chances for reaccelerating your units, your nights and experiences. If we just leave aside experiences for now, in terms of the core accommodations unit growth, I think you're investing to get back to double-digit unit growth. Of the different things you're rolling out—co-hosting, leaning into the expansion markets—what do you think will be most impactful in getting that recovery back to double-digit nights growth? Thank you very much.

Hey, Mark. I will take this. We think we're just scratching the surface of how much bigger our core business could be. There's no reason to think it couldn't be double the size that it is today. The first thing we want to do is continue to perfect the core service. To do that, we really have to do three things: make Airbnb easy to use, more affordable, and more reliable. For example, for every person who books an Airbnb, we estimate about nine people are booking hotels. If we could just get one of those nine people to book an Airbnb, that would essentially double the size of our business. The number one reason people say they don't use Airbnb is that they don't find it as reliable as a hotel. That's why we're trying to elevate the best homes on Airbnb and remove the worst. We now have Guest Favorites, supported by bookings of over 350 million nights. Additionally, we've removed 450,000 listings to create higher customer satisfaction and reduce customer service tickets. We're going to do much more to enhance the reliability of Airbnb. On affordability, we know this is a primary driver of growth. When Airbnb first started, it was an alternative to hotels. We lost a bit of ground during the pandemic, but we believe hotel prices have increased more than Airbnb's in recent years. Last month, we rolled out total price display globally, so users now see the total price before additional fees. We can also work on usability. The majority of people coming to Airbnb do not find a booking. Last year, over 1.5 billion devices accessed Airbnb. We're focused on ensuring we have the right homes for users and the right tools to find them. Perfecting the core service is a driver for growth and is essential for our core markets, which include the US, Australia, Canada, the UK, and France. Expansion markets like Spain, Italy, Germany, Mexico, Brazil, China, India, Korea, and Japan are growing twice as fast as core markets. We will focus on international growth as a major opportunity to get back to double-digit growth.

Your next question comes from the line of Jed Kelly from Oppenheimer. Your line is open.

Hey, great. Thanks for taking my questions. Just two, circling back on the US, I think I've asked this before, but just in some of these urban markets, do you think about leaning more into hotels? And then just on the full-year guidance, you reiterated your margin guidance. But is there any reason, given the macro uncertainty, for not widening the margin range? Thanks.

I can take hotels, and I'll let Ellie take the second part, Jed. Yes, we think hotels are a massive opportunity for Airbnb. In 2019, we acquired HotelTonight, with the philosophy that while people came to Airbnb looking for a unique place to stay, the majority of people visiting Airbnb do not end up booking. One of the reasons is they're window shopping and are not ready to book. In popular urban markets, sometimes when many are traveling, Airbnb homes are booked, leading to high occupancy. Hotels can fill in these network gaps when we need additional lodging options. During the pandemic, we paused some efforts to focus on the basics, but now that we've made significant progress on our core business, we are ready to expand beyond our core. One initiative, HotelTonight, offers a promotional percentage credit towards an Airbnb booking, increasing conversion rates on HotelTonight while introducing hotel travelers to Airbnb. Over the coming years, we plan to expand more hotels onto Airbnb, viewing it as a valuable distribution channel for hoteliers.

Regarding the margin guidance, we reiterated the plan shared back in February. We believe that this remains a good range, allowing us to strengthen the core business while investing in growth initiatives. There has been no material change in our investment profile for the year.

Your next question comes from the line of John Colantuoni from Jefferies. Your line is open.

Hey. Thanks for the question. I wanted to start with the momentum in the business. Given that growth in 2024 peaked in December, I'm curious how growth has trended throughout the quarter and into April. Is growth at a low-point right now for the year, or did it dip a little earlier in the quarter and improve from there? My second question is about expansion markets. Could you characterize how growth has progressed in those markets specifically this quarter compared to last quarter, when you called it out as a key contributor to the strength that you saw? Thanks.

Thanks, John. Let me start with the first question on how growth has trended year-to-date. It's interesting to see the path that both we and the industry went through in Q1. January was very strong, followed by a dip in February where there was a drop in consumer sentiment. That said, when we look at our full-quarter results, the softness we saw in February rebounded and recovered in March, making the full-quarter results in line with expectations. When we look at today, with ongoing volatility, we have to remember that fluctuations in booking behavior have occurred since the year's start. However, people may be pausing on bookings, they are returning to it. I wouldn't say April is below expectations; there's been week-to-week and month-to-month volatility. As for expansion markets, we see good momentum in those areas, particularly in Latin America, where growth in Q1 outperformed Q1 last year. This indicates that with proper product and marketing localization, we can achieve and maintain momentum over time.

Your next question comes from the line of Lee Horowitz from Deutsche Bank. Your line is open.

Thanks for taking the question. I have two. Last quarter, you discussed leveraging marketing expense in core markets to invest in growth markets. As things possibly slow, how do you view leaning into that slowness to capture shares relative to competitors who are becoming more aggressive? Can you leverage marketing in your core markets under those assumptions?

Absolutely. We start the year with a full-year marketing plan, but each month, we're evaluating efficiencies by channel and market, adjusting accordingly. So broadly, we retain flexibility to increase investments in working channels and markets, while cutting back in areas showing less desirable results. We've been doing that regularly this year as in prior years.

Your next question comes from the line of Ron Josey from Citi. Your line is open.

Hi, thanks for taking the question. I have two, please. I want to ask about the new product launch on May 13th, whether in experiences or something else. Could you share more about the plans for integration across the site and whether you expect any contribution from these new products in guidance? Additionally, regarding affordability and the volatility we've discussed, how do you think Airbnb's affordability initiatives could drive greater bookings? We noticed summer travel data suggests US guests are prioritizing staycations and driving. I'd like to hear your thoughts on that.

On the first question, regarding the upcoming business launches on May 13th, we're excited about what's to come. However, its top-line impact in the current quarter will be relatively modest, with meaningful contributions expected as we scale over time. We are building those expenses and investments associated with the launch now, and you'll see meaningful hits to EBITDA in terms of compression in the back half of the year as we scale investments. As for affordability, I believe you're correct. From our experience throughout the pandemic, when certain travel segments were inaccessible, people found other activities on our platform. Our diverse business model allows us to adapt as consumer behavior changes. For US guests, there's an opportunity to merchandise lower-cost listings or more proximal listings, where guests don't need to fly for summer trips but can drive instead.

Your next question comes from the line of Justin Patterson from KeyBanc. Your line is open.

Great. Thank you. Could you detail the behavior of guests who primarily book through the app versus those who arrive via the web? Are you observing greater frequency rates, repeat rates, and so on?

The demo is slightly different in terms of app users compared to web users. Generally, the takeaway is that booking share moving to the app represents a better consumer experience. This is evident in conversion rates—people using our apps experience a smoother process than on the web. We’ve observed a significant increase in booking share over the past couple of years.

Your next question comes from the line of Doug Anmuth from JPMorgan. Your line is open.

Great. Thanks for taking my questions. I have two: Brian, you've been vocal about user experience in travel. How do you anticipate changes on Airbnb as you move beyond places to stay? Will new choices introduce new frictions? And secondly, what is your perspective on the long-term sustainability of your margins as you seek to expand beyond the core scale?

Hey, Doug. I believe one of the powers of Airbnb is our design team and our ability to create an easy-to-use interface. When we started Airbnb, vacation rentals existed, but they were difficult to book. We aimed to develop a system of trust to make travel easier. Many new businesses we'll explore face comparable challenges as our core business once did. Therefore, we want to ensure those offerings are instant, easy to book, and align with Airbnb's design philosophy. However, designing an entire travel experience is complex. Many travel planning apps have failed due to this complexity. We're focused on creating a superior user experience, and AI will play a significant role. We've recently launched an AI customer service agent that has shown promising results, reducing the need for live assistance. We're committed to making scheduling and bookings easier through enhanced design and AI capabilities.

Let me talk about long-term margins. Our core business possesses strong EBITDA margins and cash flow generation capabilities. We continue to focus on improving efficiency in our core business, which enables investments in growth initiatives. Year to year, we may choose to invest more of those efficiencies in growth. As you've seen this year, we are keen on investing upfront to optimize margins over time. Overall, we expect compelling margins as the business evolves.

Your next question comes from the line of Nick Jones from Citizens. Your line is open.

Thank you very much. I appreciate the question. Brian, regarding ADRs and room pricing, in the past, you've discussed making Airbnb's more affordable. In the current climate, do you expect hosts to have more flexibility in ADRs and see more affordability driving better volume and greater market share, particularly in urban North America?

Yes, and I'll explain why. Hotels have a cost base and need to ensure profit margins. The majority of Airbnb host listings are exclusive to Airbnb; they exist for homeowners, with most listings being either primary or second homes. Thus, most income for hosts is supplementary. Flexibility for hosts is generally higher than hotels, meaning they can adjust prices without facing the same pressures. We provide tools to help hosts manage prices more effectively, such as comparing listings and offering discounts for week-long or monthly stays. Our hosts are increasingly responsive to these tools. Affordable pricing aligns with our interests and is a long-term strategy.

I would add that when we test price elasticity, we often find reducing prices results in increased volume. When considering our pricing tools, we aim to help hosts achieve competitive pricing to drive more bookings.

Your next question comes from the line of Kevin Kopelman from TD Cowen. Your line is open.

Thanks. Regarding ADRs, the guide indicates softer ADRs for Q2 due to FX. How much of this is due to geographic mix versus softening in key regions, and what are you assuming for FX benefits in Q2?

In the Q2 guidance, we are seeing multiple factors at play. There is some real price appreciation supporting pricing increases, but we are also facing FX headwinds. The FX impact compared to Q1 has lessened in Q2. A third component influencing this is the shift of our business mix away from North America, which is a headwind since US prices typically exceed ADRs globally. It's worth noting that our FX exposure is limited compared to other platforms.

Your next question comes from the line of Tom White from D.A. Davidson. Your line is open.

Great. Thanks for taking my questions. One on international expansion markets: how are they tracking toward profitability in comparison to core markets, and what investments are helping to drive the growth you've mentioned?

Regarding expansion markets, we can generate attractive contribution profit across various ADRs. When entering a new market, we face fixed upfront costs for branding, which may impact margins. Over time, we can scale marketing costs and optimize variable costs. Our investments comprise localized product enhancements and comprehensive marketing strategies tailored to each new market, helping improve growth and profitability.

Your next question comes from the line of Stephen Ju from UBS. Your line is open.

Brian and Ellie, the analyst community may be overly focused on the advertising and monetization aspect of product development. Can you talk about your primary priorities? Should we be thinking more about transaction growth instead of capturing a higher portion of unit economics? What do you see as the primary drivers of gross bookings and revenue?

I agree; you've got the right model. We prioritize activities that yield perishable opportunities requested by guests and hosts. Most improvements stem from their feedback. Our past 500 improvements responded to user suggestions. The next big opportunity focuses on international expansion—growing in diverse markets characterized by a younger demographics and better social media engagement relative to hotels. This is vital for increasing our network effect. We're primarily focused on growing this network to support our market share.

Your next question comes from the line of Deepak Mathivanan from Cantor Fitzgerald. Your line is open.

Thanks, guys. This is Jack on for Deepak. Are you seeing hosts adjust pricing due to early demand softness in the US? Do you expect the marketplace to be relatively price sticky, or will it be more dynamic if the macro conditions worsen?

We haven't observed a notable downward shift in terms of hosts resetting their pricing. However, there's considerable opportunity for us to encourage hosts to lower prices to capture more demand, but this is more of an opportunity than current behavior.

Your next question comes from the line of Conor Cunningham from Melius Research. Your line is open.

Hi, everyone. Thank you. Airlines and hotels often discuss the resilience of loyalty programs during downturns. While I know you don't want to replicate those, can you give us an update on your thoughts regarding a subscription model or loyalty program that might be more feasible post-expansion into experiences?

I believe this is something we should absolutely consider. We have been actively discussing it. I was intentional in not wanting a point-subsidy program, which stems from a lack of loyalty. We have a high level of loyalty at Airbnb, and most users have verified identities on our platform. I see potential for a membership program or paid subscription offering differentiated benefits, increasing usage and share of wallet. We're looking at various models, inspired by Amazon Prime's success in encouraging frequent usage.

Your next question comes from the line of Alex Brignall from Redburn Atlantic. Your line is open.

Good evening. Thank you for taking the question. In Q4 results, your comments indicated FX was a headwind due to transaction exposure. With FX now being a positive influence, why hasn't there been a corresponding improvement in the margin target for the full year?

Yes, between now and February we've observed changes in FX rates. Originally, we anticipated FX would present a meaningful headwind, while now the adverse impact has lessened. A few points to consider are that the positive changes in Europe’s FX environment are not uniformly applicable to our entire portfolio. While some FX challenges remain, particularly in Latin America, we have revenue hedging in place that mitigates the benefits from positive changes as well. Additionally, we are aware of the various factors impacting overall volumes and ADR that play a role in our guidance.

And that concludes our question-and-answer session. I will now turn the call back over to Brian for closing remarks.

All right, everyone. Thanks for joining us today. We're incredibly proud of our results, and I'm really excited to share what we've been working on at Airbnb. Make sure to watch our 2025 Summer Release to see what's next. Until then, thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.