Airbnb : Earnings Transcript

Corrected Transcript

03-Aug-2023

Airbnb, Inc. (ABNB)

Q2 2023 Earnings Call

	Total Pages: 18
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Airbnb, Inc. (ABNB)	Corrected Transcript
Q2 2023 Earnings Call	03-Aug-2023

CORPORATE PARTICIPANTS

Ellie Mertz	David E. Stephenson
Vice President-Finance, Airbnb, Inc.	Chief Financial Officer & Head-Employee Experience, Airbnb, Inc.
Brian Chesky
Chairman, Chief Executive Officer & Co-Founder, Airbnb, Inc.

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OTHER PARTICIPANTS

Mario Lu	Brian Nowak
Analyst, Barclays Capital, Inc.	Analyst, Morgan Stanley & Co. LLC
Jed Kelly	James Lee
Analyst, Oppenheimer & Co., Inc.	Analyst, Mizuho Securities USA LLC
Stephen Ju	Kenneth James Gawrelski
Analyst, Credit Suisse Securities (USA) LLC	Analyst, Wells Fargo
Bernie McTernan	Thomas Champion
Analyst, Needham & Co. LLC	Analyst, Piper Sandler & Co.
Jacob Seed	Mark Mahaney
Analyst, Cowen & Co. LLC	Analyst, Evercore ISI

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MANAGEMENT DISCUSSION SECTION

Operator: Good afternoon, and thank you for joining Airbnb's Earnings Conference Call for the Second Quarter of 2023. 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 Ellie Mertz, VP of Finance. Please go ahead.

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Ellie Mertz

Vice President-Finance, Airbnb, Inc.

Good afternoon, and welcome to Airbnb's Second Quarter of 2023 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 2023. 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'd 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 our

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Airbnb, Inc. (ABNB)	Corrected Transcript
Q2 2023 Earnings Call	03-Aug-2023

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 the non-GAAP financial measures. We've 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.

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Brian Chesky

Chairman, Chief Executive Officer & Co-Founder, Airbnb, Inc.

All right. Thank you, Ellie, and good afternoon, everyone. Thanks for joining today. Excited to share our results with you. Q2 was another strong quarter for Airbnb. We had over 115 million Nights and Experiences Booked. Revenue of $2.5 billion grew 18% year-over-year. And when you exclude foreign exchange, our revenue increased 19% year-over-year. Net income was $650 million, representing a net income margin of 26%, our highest second quarter ever. And free cash flow for the quarter was $900 million, up 13% year-over-year. In fact, on a trailing 12-month basis, our free cash flow was $3.9 billion, and this represented a trailing 12-month free cash flow margin of 43%. And because of our strong cash flow and balance sheet, we [ph] may be able (02:48) to repurchase $2.5 billion of our stock in the last 12 months, which has more than offset the impact of share dilution.

Now, during the quarter, we saw a number of positive business trends. First, guest demand at Airbnb remained strong. Nights and Experiences Booked increased 11% in Q2 compared to a year ago. Active bookers grew in every region, and we had more first-time bookers compared to a year ago. In fact, we've now had more than 1.5 billion guest arrivals since starting Airbnb.

Second, guests are traveling farther. Cross-border nights booked increased 16% in Q2 compared to a year ago, and we're especially encouraged by the continued recovery of Asia Pacific, where inbound international travel increased 80% compared to this time last year. And we also saw cross-border nights booked to North America increase 20% year-over-year.

And finally, the third trend we're seeing is that guests are staying longer on Airbnb. Millions of people remain flexible about where they live and work, and we see this reflected in our bookings. In Q2, long-term stays remained 18% of total nights booked. And throughout the quarter, we saw an acceleration in year-over-year growth in bookings for monthly stays.

Now, while the ability to travel and work remotely has been an important part of long-term stay growth, people are also extending their typical weekend stays by an extra night or two. In fact, in the past six quarters, long stays, long weekend stays have been the fastest-growing trip type on Airbnb. And I think this is just evidence of the incremental flexibility people have post-pandemic.

Now, given that we're halfway through 2023, I just want to provide a very quick update on the progress we made across our three strategic priorities. First, we are focused on making hosting mainstream. With supply growth stagnated at the beginning of COVID, we developed a new strategy to recruit more Hosts. Since then, we've been focused on raising awareness around hosting, making it easier to get started, and improving our tools for Hosts. And our strategy is working. In Q2, supply grew 19% year-over-year, and this is actually up from 18% in Q1. In

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Airbnb, Inc. (ABNB)	Corrected Transcript
Q2 2023 Earnings Call	03-Aug-2023

fact, in every quarter since we've gone public, we've seen an acceleration in total active listings growth, and we're continuing to see strong supply growth across all regions, all market types and all price points. In fact, we added a record number of new listings in Q2, and we ended the quarter with more than 7 million total active listings.

Second, we're perfecting our core service. We want people to love our service, and that means obsessing over every detail. Millions of people have given us feedback on how to improve Airbnb. We've listened. On May 3, we introduced over 50 new features and upgrades as part of our 2023 summer release. Now, many of these new features and upgrades were aimed at addressing affordability, starting with new pricing tools for Hosts. Hosts told us that our pricing tools were difficult to use, so we redesigned our tools and we made it easier for Hosts to add discounts and promotions. They also told us that they had trouble setting competitive prices. So we added a new feature called Similar Listings to help them see listings in their area so they know what to charge.

Now, we received very positive feedback from Hosts, and the changes are already having an impact. Hosts have started lowering their prices, and some of them are offering weekly and monthly - and with more of them offering weekly and monthly discounts. And as more Hosts adopt these tools, we believe we'll be able to drive greater affordability and value for guests.

We also rolled out more affordable monthly stays. Guests are staying longer at Airbnb so we took steps to make longer stays more affordable. We significantly reduced fees for stays longer than three months. We started offering US guests the option to save money by paying with their bank account, and we made it easier for Hosts to offer monthly discounts. And as a result, the percentage of our new active listings that offered monthly discount jumped from 22% to 50%.

Now, we took another step to address affordability with the launch of Airbnb Rooms. Airbnb Rooms takes us back to our founding ethos of sharing. It's one of the most affordable ways to travel. Airbnb Rooms have an average price of only $67 per night, significantly lower than the average hotel room. Given the increased price sensitivity for many guests, especially the next generation travelers, this is going to remain an important category for Airbnb.

And finally, our third strategic priority is expand beyond the core. We spent the past few years perfecting our core service. We've rolled out hundreds of new features and upgrades. And today, our core is stronger and more profitable than ever. But we're not stopping there because we have some big ideas for where to take Airbnb next, and we're building the foundational capabilities for these new products and services that we plan to launch in the years to come.

Now, before I turn to Q&A, I want to tell you about a recent campaign that highlights what makes Airbnb unique. Airbnb is known for one-of-a-kind listings. As I'm sure you know, the Barbie movie just came out in theaters. And in celebration of the premiere, we partnered with Warner Bros. and Mattel to transform a home into a Barbie Malibu DreamHouse and we launched it as part of our Only On Airbnb campaign. Only On Airbnb taps into global pop culture moments, inspiring guests with some of the most iconic homes in the world. The Barbie Malibu DreamHouse has been a sensation, and it is now Airbnb's most popular listing ever. We saw 13,000 press hits and more than 250 million social media impressions since it was announced. And to give you a sense of how much that is, that is more than twice as many press hits as were generated from our IPO. Only On Airbnb campaigns are an effective way to introduce Airbnb and our unique inventory to new guests, and they'll be an important part of our playbook going forward.

So those are the results that we have to share for Q2. And with that, Dave and I look forward to answering your questions.

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Airbnb, Inc. (ABNB)	Corrected Transcript
Q2 2023 Earnings Call	03-Aug-2023

QUESTION AND ANSWER SECTION

Operator: Thank you. We'll go to our first question from Mario Lu at Barclays.

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Mario Lu

Analyst, Barclays Capital, Inc.

Q

Great. Thanks for taking the question. So the first one is on the third quarter ADR guide. [indiscernible] (10:14) upward pressure in the quarter. Can you help explain what you mean by the listing type mix shift that's kind of lifting up ADR's?

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David E. Stephenson

Chief Financial Officer & Head-Employee Experience, Airbnb, Inc.

A

Yeah. The listing type mix shift is just simply the mix of types of listings that are geographic, size of home, location, that's driving the mix. And so ADRs are coming up due to that, and it's also coming up in the third quarter driven by foreign exchange.

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Mario Lu

Analyst, Barclays Capital, Inc.

Q

Okay. Got it. And then in terms of your section on the operational take rate, you guys mentioned that you're offering a lower take rate especially for stays after the third month. Does that mean over time should we expect this number to come down or are there kind of offsets that you're going to provide to keep the operational take rates flat? Thanks.

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Brian Chesky

Chairman, Chief Executive Officer & Co-Founder, Airbnb, Inc.

A

Yeah. Hey, Mario. I can answer that. We always want to make sure that we're providing the very best value for our guest, and we identified this as a huge opportunity where we could drive incremental conversion by taking take rates down after the third month, and we saw some really great results. That being said, I do not expect our take rate to change materially. There may be some segments or trip types or geographies where we would want to the take it down, but that could be offset by other areas that could come up. And so generally, I would expect it to be pretty stable. And the way that we're going to see margin expansion is by launching incremental services for guests and hosts over the coming years.

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Mario Lu

Analyst, Barclays Capital, Inc.

Great. Thank you.

Q

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Operator: We'll move next to Jed Kelly at Oppenheimer.

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Jed Kelly

Analyst, Oppenheimer & Co., Inc.

Q

Hey. Great. Thanks for taking my question. Just following up on the listing type, are you still adding more of that like vacation rental single unit inventory versus some of like, call it, the smaller units in urban areas? And then can you just give us an update on how we should think about your marketing into the back half? Thank you.

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