Good morning, everyone. Welcome to day two of the Morgan Stanley 2026 TMT Conference. We're thrilled today to have Scott Schenkel with us, the CFO of Expedia. Good to see you, Scott.

Good to see you.

You've had a very illustrious career at a lot of different companies. You've been at Expedia, eBay, GE.

We've been knowing each other a while, so it's good to catch up. Good to be here.

Before we get started, let me handle the important disclosures, including the personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at www.morganstanley.com for its last research disclosures. They are also available at the registration desk. Some of the statements made today by Expedia Group may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today. And Expedia Group undertakes no obligation to update them. Please refer to Expedia Group's Form 10-K for discussion of the risk factors

that may impact actual results.

There's a lot going on with Expedia, with the macro travel dynamics, with questions about Agentex. So I think this is a good time to sort of cover a lot of different types of topics. Let me just sort of level set a little bit. You know, you've been in this role now for about a year. You've had a lot of different investor discussions over the course of that year. Maybe as a baseline, Talk to us about one or two of the aspects of the business that have surprised you most. And what do you think is most misunderstood about Expedia when you've been having all these investor discussions?

Yeah, so I arrived at December of 24, I guess. I'd say I came with the intent that we would connect, kind of refine the strategy, connect the strategy to the operational side and then the financial plan, develop a three-year plan with a three-year financial architecture and operating metrics that associate with that plan. And I was surprised at just how quickly the team was able to do it. Like you kind of go in, go, this might be a multi-year journey. I think the business on the surprise side did a great job of just kind of adapting to that kind of mentality. And at the same time, we were doing things like Ariane Terms, brilliant at the basics. So the ability to kind of come in and say, okay, what do we need to improve now that we've put in a lot of work into the underlying platform of the company, what can we improve? So site speed, uptime, conversion rates, multiples of other metrics. And so, like, some teams don't necessarily react to scorecarding and being held accountable and things like that. And I think Arian did a wonderful job of doing that, and I think that's really changed the game. I think on the other side, things like a three-year cost plan and saying, okay, we're going to get to a better marginal return rate or incremental return rate on our marketing spend for the B2C business. The team did an amazing job of kind of pivoting from how they were running things to a different set of metrics, more critical assessment of what return levels are expected, fast-paced daily innovation on where we're daily refocusing of where we're going to spend the money with then micro measurements and ability to kind of determine how things are going. I'm sure there'll be other questions about that, but that's sort of how I kind of walked in and I was very pleasantly surprised with how quickly you can, that the team was able to make a change. And I think we changed, radically changed the direction of the company over the course of the last six to nine months. In terms of surprise, I think the thing that maybe links to the agentic discussion or AI discussion that we'll have, no doubt, the kind of underlying how an OTA works and how products get online and the kind of selective memory of what you remember. Like, if you remember this same conversation, Rob, you were probably in the rooms asking the question at the time. But Google was going to do this, too. And now it's one of the AI engines that's going to do it. That's great. But the underlying complexity of an OTA and the value that you bring is maybe... I certainly walked in and didn't fully understand it. There are a lot of analogs with the marketplace like eBay. But the dynamic of, first, supply. supply, the ability to leverage supply between B2B and the B2C businesses. And so we put up a 10% number that we talked about at Q4 earnings, 10% expansion in the number of properties that we're listing on our sites, the ability to do that, and the need to do that. Because not necessarily is every hotel going to reach out, especially when you get down to individual or small group chains. that need is out there for the industry. It just doesn't happen automatically. And we can believe it will, but you've been able to list if you're one of those properties on Google for 10 years, more than that probably. Second, how you then display those properties on your site, the kind of ability, the rich ability to take information about those customers and deploy that onto your apps and your site, with roughly two-thirds of our traffic coming direct, that opportunity still exists, and we can leverage AI to do that. Third, loyalty, spend, and pricing. The use of, call it our overall take rate, to drive better conversion with loyalty and better conversion with pricing actions, It's both paid for by our partners or by us. So that kind of capability. And then you go to things like service. Mid-trip, have a problem, happens all the time, sadly. Probably many of us flying in here have dynamics about that. The ability to call, get someone on the phone, or increasingly the ability to use AI to find out what can be fixed in the product or in your trip. which can't necessarily be taken all of the time and fixed by an agent or by a virtual agent. So the ability to reach and have the trust of doing that across our properties. So the dynamic, I'm just surprised at the depth of that and then a little bit at the kind of reaction to, oh, an agent's going to solve everything. I think it will help some things, but also help us in a big way, and we'll talk more about that, no doubt.

Yeah, maybe, you know, I have a lot of questions about the core, but since you gave a great answer on agentic, maybe we just let's tackle the agentic questions right now since it's sort of top of mind. You know, there is this discussion about what can Expedia and the OTAs do to drive more direct traffic or improve the user experience on their own application with generative AI? Do you have some examples of how do you think about continuing to grow that direct traffic mix, grow that direct traffic overall as you have more of these potential horizontal agents out there?

I start with the opportunity. The opportunity is immense. When you look at diversifying from where your traffic comes from is a key component of this. So I don't start like it's going to be a risk. It's a new channel. You've got to always be wary. But you need to explore. You need to experiment with it. But we look at it as it's an opportunity to bring in more customers or existing customers differently into our rich environment. That's first. So there's a good side of this, which is diversification of where you're getting your customers from. And no doubt we'll double-click on that. But let me stick on your question. Second, the kind of opportunity to leverage AI to make your product better. And whether that's the ability to have a chatbot or have a written, here's what I'm looking for, that's richer and we have a little experiment with hotels today, but more and more of that capability built into the product will be a huge opportunity for us. Third, how do you develop that product and then service it better? So we've got over 50% self-service rates. How do we continue to do that and take the productivity? And then how do you onboard suppliers and make those suppliers easier to onboard and be able to bring the value that I just talked about to them more clearly? And then there's the whole dynamic of leveraging internally around pricing and algorithmic determination of pricing that you're going to show, as well as personalization and loyalty. So there's an enormous kind of value chain, if you will, of opportunities that we can enable with AI that are super exciting, and we're ahead on some, and we're pacing right on track with where we want on others.

I think that that 10% comment you made about growing supply is really important because I think there is this perception or this risk that the chains could go direct easier in an agentic world. So maybe just talk to us about your efforts to continue to grow that supply and how do we think about, you know, the investments and when we can sort of see more of the non-chain supply come on over the course of 26.

Yeah, so we were up 10% on properties in Q4. And as we look towards 2026 and beyond, how do you bring on more chains? How do you bring on more independence? How do you bring on more VR? there's a lot of opportunities to expand our supply and in doing so also enable those suppliers to show and help us show value, so pricing dynamics, bring in loyalty dynamics, bring in better marketing and advertising for them products. So there's a lot of things that we can do as we bring these suppliers on to kind of bring the richness of an OTA, like Expedia into the fold for them and serve them better. And so it's not just about getting a listing out there or just getting their property online. It's about managing their supply. Is a person apt to upgrade to a higher room and we can show them a higher room rate or a bigger room or a suite? Is it that you're looking for a family dynamic? Some of that's just not going to be available on a day-to-day feed with an agent per se, especially when you connect it to the rest of the value chain that Expedia brings.

I think that room-level detail is a very important point that is missed. You know, you have room-level detail of what's the review of the room or the amenities, does it overlook the dumpster or Lake Como, and you have that data, and agents are not. In a lot of cases, they're going to get it wrong, and people aren't going to like that.

Exactly, and then if something does go wrong when you get to the site, you can call us, and we'll help fix it because of our relationship with the supplier. So I think there's a richness to the back end of an ecosystem around like Expedia Manages, and I think we bring an enormous amount of capabilities to that. And I think as we bring more people on, it just serves more people better. And then we just have to make sure that the front end of our product continues to evolve and get better based on some of the AI tools that are available.

I know you've partnered with some of these early horizontal agents, like you have in the past with other emerging channels. Anything you can share with us about sort of conceptualizing how large the volume is, the growth is, any difference in cancellation rates, conversions? What are you sort of seeing with these early partnerships with these horizontal agents?

Yeah, I mean, let me preface it by saying it's super early days. It's sort of like, you know, we're getting into inning one and there's an out, right? There's a lot of things that need to go to be able to say how great is conversion. Conversion goes up and down on any given day when we look at it. And as we monitor it daily, conversion rates are up or down. Cancellations have generally been lower. I suspect that's self-fulfilling prophecy, and that will normalize over time. So early days, it's really hard to extrapolate. For those of you that are extrapolating for 10 years, good luck. It's super hard. it's an enormous challenge to extrapolate from less than round numbers of 1% of traffic and the dynamic is a lot of change in moving parts day to day and the LMs are also changing what they're doing like you saw last week with advertising going to the top or going to the product people are trying to extrapolate what the CPM is or the CPA or whatever it's going to be there's a lot to do on that And I, again, think we come at it from a perspective of like each of these is an opportunity and keep an eye that it could be a threat, but how do you work with the LLMs and those providers to provide the best possible chance to capture customers, travelers coming in the door, and add to our 65% directory and bring those into the fold and capture them with all of our tools that we just talked about.

The other question I get asked sometimes on the agentic piece is the risk around air. Is there a higher risk around air just sort of given the consolidation of the industry, or how do you think about sort of maintaining that spot on the air funnel?

I think, again, Google has a product, and it's really hard. I think the dynamic is we have to continue to be a great partner to airlines. We have to be able to supplement their pricing schemes and their seat schemes and their route schemes and their time schemes and be able to deal with all of that and bring the value of our loyalty programs where people kind of double dip and there's other things we can do. So I think that dynamic is super interesting. Again, an opportunity. Depends how you look at it.

All right. All right, so 15 minutes on Gentic. Let's talk about the core. There's a lot of goodness going on at the core. I want to start with the B2B business. This is a business that I'm pretty bad at modeling. I get it wrong most quarters. So maybe can you help me help us sort of understand how you think about the drivers of the B2B business, the types of partners, the geographies? What has sort of driven this strong B2B growth you've seen over the past, call it 12 months?

Well, look, I think you should start with the supply dynamic is just a big component to this. Second is the product component. So I won't dwell on that because we've kind of talked about it. But the second is the product component. We've got multiples. It's called round numbers, four big products that serve different types of customer bases, which make it difficult to model, particularly from the outside, right? So you've got individual agencies all the way up to financial and banking partners or airline partners. all of which spend at different levels at different times. And so in some quarters, you see a little bit of a spike when one of the larger partners or a series of larger partners spend in the market and leverage our product. And on the other hand, it's like when you get down to TAP or template, it tends to be smaller, large numbers of smaller groups, so they tend to move in mass. It's a little bit easier to predict if you're internal. But two or three of those, I think across all four products in Q4, we are growing nicely over 20%. We've been double-digit for 19 quarters now. So the mix right now is working well. Combination of sourcing or product. Then there's the mix of partners that we continue to evolve, sign up, get on board and you always win or lose some in there but the dynamic is continue to bring more better partners in and it's just a great flywheel right now and at the same time the lines of business that we're adding to that product so we just bought tickets so we're going to pump more activities through that channel first and then bring it to B2C once it's structured we're going to we've added lines of business so last year we expanded to cars then we're going to expand into we've already expanded into airlines we'll continue to expand that

so expanding what's possible

and then improving the attach rates is another growth vector so product, marketing sourcing there's a number of things in the flywheel right now that are working really well we feel great about the company

Have you shared?

And it mixes higher international as well. So it gives us a little bit more presence internationally than we have on our B2C site.

I know we call it B2B, but is there anything we can think about how much of that business is actually more consumers booking, whether we're redeeming points or it's actually a consumer-based demand?

Well, ultimately, for sure, right? I mean, but ultimately, but our customer is the partner. So then they're marketing to their supplier base or to their customer base, the consumer base. So definitely, ultimately, you get back to that. But I think that dynamic is because we're serving the consumer, or sorry, the suppliers, our partners, it's super important to just understand that we don't really get too involved in that. We're providing a great product, a plug-in API, capability to have access to our hotels, as well as the other products or lines of business that we're offering. And it gives us the capability to then take advantage of a different way that, you know, people go to market.

On the B2C, the official brands, I want to sort of ask you about first Expedia.com and Hotels.com, and then we can get to Vrbo after. Again, like the growth has really improved nicely. I'd be just curious to hear about some of the strategies that have really driven the faster growth in the core two brands, and how to think about the keys to sort of maintaining or maybe further accelerating growth from here?

Yeah, I think it's important if you just take those through the three consumer brands, largely speaking, and talk about what's happened. Over the last few years, we were working on the platform, and Expedia was working on making those platforms better and more agile, easier to program, fast, getting, you know, buy ourselves some room to be able to do things with speed. And I think over the last couple of years, as that's come to fruition, what you've seen is a much more dynamic, hopefully you've seen a much more dynamic B2C business. And so that's on things like, and I ticked them off earlier, but just to kind of revisit, that's around things like site speed. Like we had to imagine we hadn't worked for a couple of years on site speed. We were trying to get it onto a platform that was agile and able to do that. So site speed pays off, in my experience, in the Internet. I think it's done nicely. Conversion. How do we bring people into better landing pages from a diverse set of products and experiences, whether that's SEO or direct search or whether that's into our own direct channels? So there's a series of things that we've done in B2C that I think are in terms brilliant at the basics that are really good. Second, probably most materially around marketing, we essentially said, hey, look, we're going to raise the bar on the marketing spend that we're working on, that we've been working with, and say we expect this level of return, and the incremental level has to be at this level, and we're going to measure it this way, and we're going to kind of adapt day-to-day and week-to-week and redeploy where we see the best opportunities for growth versus running it out for a quarter. So we've done a series of things based on the use of the platform that give us the ability to spend better, and then we've held a bar higher. I kind of mentioned that in the opening response. The team that's been working on this has done an amazing job. Just like the technology team has done on site speed and uptime and conversion rates, the marketing team has done a great job of kind of adapting to a higher set of bars. and, quite frankly, while cutting costs, have added to the net traffic growth and the net GBV growth of the company. So quite great results.

I could go on, but that's sort of at the macro. And then what about Vrbo? I'm curious to hear about just the evolution of the strategy both on supply acquisition by geography as well as just the customer acquisition strategy.

So Vrbo is a big chunk of our supply and the supply expansion that we've talked about. I think that has been great because we have the supply team working and it's been a combination of expanding from where we're strong into where we could do better, largely speaking cities. So smaller properties versus larger properties at the beach or at golf courses, but city properties and expanding that in our core market of the U.S. And then international on select countries and locations to expand our property count and business that's there. That dynamic is really important. For the channel, for the marketing stuff, same thing. It's not just Expedia or it's not just hotels. It's also Vrbo. It gets the opportunity to participate in that efficiency and the effectiveness. I think the team has done a really nice job of working on both of those But it's also the product. You've seen the product get better and implement things faster. So we knew we were behind on letting property owners market or offer lower prices at certain times. And we launched that last year, and that's gone gangbusters. And so the ability to kind of pivot the product, get sharper on what we're doing, be better at marketing, and with more plans to come on that. And then the supply side has been terrific.

I always ask yourself and your two alternative accommodation peers in this space, how much does take rate come up when you're sort of in the supply acquisition mode, trying to get more into Europe or get more into the cities? How much does sort of take rate, a potential lever to pull to bring on more supply for you guys?

Look, it's always a dynamic, I mean, for any marketplace, right? It's how do you bring in great supply at great prices? So it's always a dynamic. And, you know, I think we're competitive, and I think where we need to spend our time is right now is the ability to build a product that's even better for not only the buyers, so we're bringing a rich set of supply to the property owners, and then for the property owners, give them the opportunity to easily manage their property. And I think that's a huge component of this as well.

Excellent. I'll ask a couple of questions about the cost structure. The leverage that you've been delivering and guiding to has been pretty impressive of late. Maybe just let me start a big picture of where have you found the earliest sources of OPEX efficiency or cost reduction as of today? And as you look into 26, where does that go?

Yeah, so I'd kind of have a few points on this. First off, I think we've been doing a great job on cost of sales. So if you look at that combination of getting sharper around how we use cloud services, how we negotiate with vendors, and how we deploy our data and utilize our data, I think Raman and the team have done an excellent job at controlling cloud costs. That showed up in leverage and cost of sales, mostly cost of sales. Very similar around customer service. The team has done an excellent job of leveraging AI tools, as well as other tools, to improve self-service percentage rates while keeping call times shorter and answer times faster. And I think that's done an excellent job at driving cost of service levels down as well. That would be one point I'd make. Second, over the course of the last – and then the second point I'd say is marketing, just materially. Marketing and the whole dynamic around how do you hold the team and the traffic and the conversion and the business that you're driving to a higher bar of returns? And how do you maximize those returns across channel, across sites, across geographies? I think the team's done an excellent job there. And that showed up in the bottom line. And then third, I'd call out, so over the course of the last year, it's called really since April of last year, We've been doing a series of workforce rationalizations to reduce costs. Some of that has been in product. Some of that's been in technology. Some of that we did last year. A bunch of it we did at the end of January. Second, functional costs. We've announced a series of functional cost reductions last year in April and then this year as well in early February. And I think as we do that and we continue to kind of be critical about our cost structure and force fewer people doing fewer things better, faster, with more impact, that's how we think about it. And, look, along the way we're using AI tools, and we'll continue to do that, and I think we'll see further productivity in the future. But right now I'd highlight that the key areas of engineering and customer service are doing an excellent job of leveraging those tools in its early days.

What is your philosophy in sort of letting those efficiencies flow through as opposed to reinvesting? There's a counter-argument to say, well, maybe you should be pressing more on GPU-nailed machine learning to make the product better, and that could pressure some margins. How do you think about that balance?

Yeah, absolutely. The way we think about it is we'll drive more cost out and leave ourselves room to reinvest both in things like that and on the AI side as well as within the quarter if we see an opportunity to drive more growth

that's at a reasonable return.

And so we always strive for more out, be able to redeploy, and then continue. I talked about the three-year cost structure, and part of that was a visioning session about where we needed to invest for the future. And in our announcements for product and technology, what you'd see is we talked about we'll be cutting. we've done some cutting there and we'll be reinvesting some of that back into machine learning and AI capabilities so we don't necessarily try and talk about it that way, but that's practically speaking the way we're managing it

On the B2C marketing point, you talked a lot about some of the changes you've been making the improvements you've been making about how quickly you're analyzing data and adjusting and things like that just sort of again, philosophically do you see B2C marketing, we evaluate it externally as a percentage of gross bookings, is that a potential further source of leverage? Or are you more sort of in an investment mode to reinvest those efficiencies in marketing spend?

I think for 26, the way we're talking about it is we're going to continue to get some, we'll cut the cost, we'll test the efficient frontier, we'll reinvest where we see capabilities to grow, and then we'll take to the bottom line or reinvest in other areas as we see the opportunity. how long you can do that. At some point, I'd like to just get to an agreement around what type of spend level is at what ROI and just let it run. And you've seen other companies do that. And I think that's a good way to operate and then just the ability to kind of tap the brakes or accelerate as you see fit or you see the need or you see the opportunity in the market.

You bring a fresh set of eyes to this business in the last, call it 12 months. You have a new head of IR. I think a lot of people in the room know. When you look at your individual sites, so Expedia.com, Hotels.com, and compare them to booking, are there any structural reasons why some of those properties or both those properties couldn't get to the booking margin levels eventually to sort of think about all those deficiencies? Yeah, I don't.

I mean, that's the perspective I come from. Let's benchmark our peers, and it's not just them, it's others. and it's other companies at this scale. And you say, why can't you? And continue to push around, why can't we get to this? Or can we do better? And so I think the whole mindset of Arianna and I going into these types of discussions is how can we get to those type of comparison markers and why can't we continue to expand margins? Why can't we continue? So it's a mindset. And I think we've got the mindset. It's going well. And we committed to one to one and a quarter points for the year. for the quarter for Q1, we'll do three to four. Now, some of that's year-on-year comparisons that I laid out in earnings, so don't get too excited. But I think the dynamic is, how do you chip away? I think it'd be very dangerous to flash marketing and brand spend without testing your way through it and being judicious about leaning in and spending where you can, but cutting where you can also do that and take to the bottom line. So I think it's a balance. And so how do you do that in a way that's rational, that delivers great returns for our shareholders and on the other side does right by our shareholders in terms of driving the growth that we can.

There's a lot of focus in this market around Gen AI, ROIC, and what are companies doing to improve their overall cash flow generation from this. If you think about one year ago where you thought you'd be on some of these Gen AI applications versus where you are now, do you have examples of investments that have actually gone better led to more efficiencies, actually scaled faster than you think on the Gen AI side, where you say, wow, this is actually leading to even bigger savings than we thought one year ago.

Yeah, it's a little early, but what I would say is we're super optimistic about some of the product innovation we're going to be able to do. And we're testing today, and then we'll continue to roll out over the course of 26. So I think we're all very excited about those opportunities. I've been surprised at how quickly we can get productivity and customer service. I think the team's done a very nice job there. and making the customer experience better and making the – so as part of that NPS scores go up. I've just been super impressed by what the team can do there. I think the use of AI in personalization as part of the product but also as part of marketing is a huge dynamic that I think we've done well on, and I've seen some speed there that's better. And then the opportunity is huge. And then functionally, look, I think it's super early days for a lot of functions. but I think functionally there's an enormous amount of capability to be better, be more efficient and more effective leveraging some of these tools, and there's a lot to sort out.

Yep. Maybe that's close on capital allocation and sort of just remind everybody of the company's philosophy about returning capital when it comes to both buybacks and reducing share count on top of dividends.

Yeah, so post, a few years after the COVID, we re-implemented a dividend. We upped that dividend 20% this year, so $0.48 a share for the year. And we've been in the market for the last three to four years buying back shares pretty dramatically. So I think for the last three years, we've reduced share count by 22%, net a dilution. So quite good performance in terms of how it's driven. Not only for those of you that want dividends, I think we have a nice offering. And then on the other side, our EPS expansion has been really strong when you do that calculation. And what we've said for 26 is expect more of the same. So 20% increase in the dividend and share buybacks opportunistically, but roughly at the same rates as prior years. Got it.

Scott, thank you for taking the time. I'm anxious to see how the year goes, and we will be chatting in a year. Can't wait.