Welcome to the Priceline Group's Fourth Quarter 2014 Conference Call. The Priceline Group would like to remind everyone that this call may contain forward-looking statements which are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied or forecast in any such forward-looking statements. Expressions of future goals or expectations and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements. For a list of factors that could cause the Group's actual results to differ materially from those described in the forward-looking statements please refer to the Safe Harbor Statement at the end of the Group's earnings press release, as well as the Group's most recent filings with the Securities and Exchange Commission. Unless required by law, the Priceline Group undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A copy of the Group's earnings press release, together with an accompanying financial and statistical supplement is available in the For Investors section of the Priceline Group's website, www.priceline.com. And now I would like to introduce the Priceline Group's speakers for this afternoon, Darren Huston and Daniel Finnegan. Sir you may begin.

Okay, thank you very much. And welcome to The Priceline Group's fourth quarter conference call. Thank you for joining us before the markets open this morning in New York. I'm here with Priceline Group's CFO, Dan Finnegan. The Group reported consolidated gross bookings for the fourth quarter of approximately $10.7 billion, up 17% year-over-year or about 23% on a local currency basis. Non-GAAP earnings per share was $10.85 up 23% versus prior year surpassing FactSet consensus estimates of $10.10 per share and our guidance for the quarter. For the full year The Priceline Group reported gross bookings of just over a $50 billion, 346 million room nights, $3.5 billion in adjusted EBITDA and non-GAAP earnings per share of $53.31 all up about 28% year-over-year. Gross bookings benefited from growth in hotel supply of Booking.com which now has over 600,000 hotels and other accommodations in 212 countries and territories up 41% over last year. Booking.com continues to invest aggressively in its global supply platform building substantially differentiated hotel and accommodation supply, content and availability. Much of that growth in supply is driven by vacation rentals which more than doubled to 247,000 properties including villas, chalets, apartments, apart-hotels and other self-catered product all of which are instantly confirmable. It is important to note that because many of our vacation rental properties have multiple units our 247,000 properties actually represent over 1 million instantly bookable and confirmable units within these properties. We continue to believe in the large untapped potential of the global vacation rental opportunity which has historically been burdened by our high friction research and fulfillment process. In addition to aggressively growing our number of accommodation partners the group invested nearly $2.6 billion in marketing during the year. While the preponderance of that investment was in online channels Booking.com continued to…

Thanks, Darren. I'll discuss some of the highlights in operating results and cash flows for the quarter and then provide guidance for the first quarter of 2015. Q4 was a strong quarter from both the top and bottom-line perspective. Unit growth is an important metric to focus on for our business to understand core performance excluding the impact of currency. Room nights booked grew by 24% in the fourth quarter decelerating modestly compared to the 27% growth rate for Q3. Rental car days grew by 16% in Q4 reflecting accelerating retail growth offset by a decrease for Name Your Own Price rental car reservations. Strong momentum in room night and rental car day unit growth has carried over into Q1 as we will see in a moment when we review Q1 guidance. Average daily rates for accommodations or ADRs for Q4, 2014 were up on a local currency basis by about 1.5% for the consolidated group. Q4 gross bookings grew by about 23% on a local currency basis and by about 17% in U.S dollars compared to prior year. Our Q4 international gross bookings grew by about 27% on a local currency basis and by about 19% in U.S dollars. Gross bookings for our Priceline.com brand business in the U.S grew by 3%. The Priceline team is doing a great job improving the experience for customers on the website which is driving nice conversion improvements. The result has been accelerating retail room nights and rental car growth. However our Name Your Own Price services continue to be hamstrung by lack of discounted rates. Gross profit for the quarter was $1.7 billion and grew by about 33% on a constant currency basis and by 26% in U.S dollars compared to prior year. Our international operations generated gross profit of $1.4 billion…

Thank you. [Operator Instructions] Our first question comes from Heath Terry of Goldman Sachs. Your line is now open.

Just a couple of questions. If you could provide us a little bit more detail on, you mentioned ADR growth being less than 1% in the quarter. But if you look more specifically, particularly at the Eurozone, what you're seeing from a consumer demand perspective and just willingness to spend on travel, whether the day-to-day data points you're seeing are positive or negative from any trend perspective. And then you mentioned that as we go through or past Q1 that the operating margin pressure should diminish. As that happens are there incremental positive ROI growth channels from a customer acquisition or business acquisition perspective that you see out there that you can allocate those dollars to accelerate growth or do you simply expect to see that fall to the bottom-line?

This is Darren I'll take the ADR growth European economy issue and maybe Dan can comment on operating margins. No in general certainly everyone knows what's going on the euro but we're not sensing overall that there are big issues with consumer demand in Europe. Its kind a mixed bag certainly Russian outbound is down for obvious reasons, although Russian domestic travel is still quite strong. France specifically is still in a bit of malaise both as a destination and as bookers, but that's made up for the fact that the Brits as bookers are very strong the German as bookers are very strong and Southern Europe it looks like it's going to be very popular this spring and summer. So overall the U.S. is definitely one of the hottest markets in the world, but that Europe is holding up quite well at least the early signs in 2015.

And Heath on operating margins so yes we said that we expect the pressure to diminish as we go throughout the year as it relates to other non-advertising OpEx expenses. We already advertise aggressively in all variable channels and we'll spend an unlimited amount of money there regardless of what's going on with OpEx as long as we can get a fair return on our investment, so the impact of less margin pressure from OpEx should benefit bottom-line and the how advertising plays out is just completely separate story.

Thank you. Our next question comes from Justin Post of Bank of America Merrill Lynch. Your line is now opened.

Just talking a little bit on a high level on the space, obviously Expedia has had a lot of acquisition news lately. Does that really change anything for Priceline? And they do have their room nights up at a faster rate, so how does that affect the overall environment, if you can provide any help on that? And then, secondly on mobile, it looks like mobile is growing as a piece of your business. Are the upfront costs to acquire customers more there? And do you expect a longer pay pack? Are they coming back more frequently direct on mobile? Maybe a little bit about the mobile channel versus PC. Thank you.

This is Darren. I guess I'll take both questions. First of all as it relates to what if Travelocity the pending deal with Orbitz, it's hard I'm not Expedia, so I can't exactly -- don't know exactly what they're doing but it sounds like a consolidation strategy. Our focus as a group is quite different than that. We're very focused primarily on organic growth and acquisition. And from an acquisition standpoint, we're focused on buying premium winning brands that either add new geographies or business verticals or competencies new channels that we can add to our existing brands so if you look at our history as a group whether it was buying booking.com to compete in Europe, Agoda Asia Rentalcars in rental cars, KAYAK in meta, OpenTable in restaurants and then recently Buuteeq to help build our booking suite business it's all been adjacent growth versus doubling or tripling down on similar brands. My own view is I don't see the deal that Expedia if it passes as being a negative for our group I think of anything it consolidates and clarifies competition and there's still plenty of room to grow. If you think travel market it was 1 trillion market recently someone said it was 1.3 trillion market so if you add both all of our business and Expedia's business together still less than 10% of the total opportunity space. And if you look at the U.S. specifically for us it's all upside and we plan to work very hard to continue to increase our share in the U.S. market, so to me it just shows that there's a tremendous potential ahead and we're just staying very focused on what we do well and I'm sure Expedia will do the same so I don't see it overall as a…

Thank you. Our next question comes from Doug Anmuth of JPMorgan. Your line is now open.

Great, thanks for taking the question. Can you guys talk a little bit more about the investment in 1Q in OpenTable and Booking Suite and just talk about the key initiatives there? And then, also, you mentioned that you're starting to harvest the fruit from the Ctrip relationship. Can you provide some more color on some of the benefits that you're seeing there, as well? Thanks.

Okay, I'll take Doug. This is Darren again, I'll take those. So first of all let me talk first about OpenTable, since we bought it we made a massive investment replatforming the OpenTable B2B software as now going to be all cloud based. The whole frontend has been replatformed so we can run AB experimentation on it. There's been a lot of best practice sharing, you're going to see the OpenTable product now improve at a very dramatic pace because we put it on to this new modern and cloud based platform. We've also now posted our position that our beginning hiring for a number of international cities,. I'll let you do your own research there in terms of which cities we're expanding into So, I would say it's time to date has been a lot of best practice sharing. Betting some of the plumbing done in 2015 for us is a big investment year for OpenTable. And, as we've always said, we're going here to create something that is going to be truly a global platform and a modern eCommerce platform and where we remain very bullish on the opportunity with that asset and certainly today we've been performing above the level of hat we had expected it too, but really the best is yet to come. And then as it relates to Booking Suite, we bought Buuteeq and a smaller company called Hotel Ninjas. That team now has been completely brought into booking.com. We've rebranded it Booking Suite. We're now in the market with a number of products, mostly Web site products. The demand for those products is very strong. And we're just now in a rhythm of really trying to scale the old Buuteeq business now that is fully integrated with Booking and the receptivity from the…

Thank you. Our next question comes from Ross Sandler of Deutsche Bank. Your line is now open.

Great, thanks guys. Congrats on the quarter. I just had two questions. First one, Airbnb called out that they had 550,000 travelers that used them for New Year's Eve this past year in 20,000 cities or something. So, this isn't exactly apples to apples to your 800,000 to 900,000 room nights per night average in the fourth quarter, but just big picture how do you view Airbnb competitively in the hotel space longer term? And then a quick follow-up to the earlier question on mobile unit economics. I'll ask this a different way. As you guys move away from paid searches and marketing channel. Do you see the online marketing as a percent of gross profit staying in this kind of 31% range or could that get better one day? That's all, thanks.

This is Darren I will take first one and a fair shot at the second if Dan can have anything to add. Yes with respect to Airbnb we have a lot of respect for what they are doing. It is still as good as their website is as it's still a relatively high friction process of booking on Airbnb but the whole sharing economy peer to peer is a real force. I will remind people that on average every day we have more than a 1 million guests if we do the math and if you look at the total number of units that are actually bookable on Booking.com it far exceeds what's available on Airbnb. The interesting dynamic is really happening in the vacation rental space. We're coming into the market with an instantly bookable, immediately confirmable product -- they are coming from the bottom up with a sharing economy and there is a lot of interest among our consumers in self-catered product and whether that product ultimately ends up being somebody's sofa or being in a aparthotel room in Paris nobody knows but one of the things that Airbnb is really helping us with is the rules in this space have traditionally been very foggy and gray and city by city around the world the rules are now getting written and that helps us a lot because we're always going to play on the right side of the rules but they have always been a little bit foggy and we will see where that all goes at the end of day. We're seeing some -- we don't see a big impact on hotel demand based on this new advent of what I would call self-catered demand I mean that's all up Airbnb, us, other players but maybe one…

I agree we're not moving away from paid search we're moving closer to we're looking for every opportunity to spend money with our partners to drive business profitably and we're seeing nice growth in our direct business which we hope will continue over time but -- and that may cause what you would perceive to be moving away but we're actually diving in with both feet partnering with our HR partners to drive more opportunities for both of us.

Thank you our next question comes from Mark Mahaney of RBC Capital Markets. Your line is now open

Thank you. Two questions please. I think two quarters ago you'd quantified vacation rentals as a percentage of your total bookings. Could you give us an update there? Has it exceeded 10% perhaps on a trailing 12-month basis? And then, secondly, Darren you talked about having used acquisitions to expand into newer areas, and you mentioned a couple of them. I want to ask your thoughts about expanding into things like local attractions and air, especially internationally. How do you think about those as incremental or adjacent market opportunities? How high on the priority list or low on the priority list are those two things, particularly attractions and international air?

Okay. Thanks, Mark. So we don't have any new numbers on vacation rentals, we gave a trailing 12-months but I will say is the vacation rental business is outgrowing our business. And so the next time we say a number maybe we do it a year from the first time we said the number and you can think about it in that way. So it's becoming a greater proportion of our business. I always also flag you have to be careful with property count. That's why we added the vacation rental sub number because those properties do come in with less units than our traditional hotels. And that's why you will see our property count continue to expand at a rate faster than our overall business because we're bringing on less units per property. And I think that will continue to be the case going forward. I'd say and I don't we're not by any means done with acquisitions as a lot more to do and then next move in vacation rental is to really address the home owner versus property managed vacation rental product and we're well in our way to doing that. And in terms of acquisitions or opportunity space, number one, I would say we have a lot to digest right now, and we're in what I consider to be the most attractive spaces. And the addition of restaurants is just an amazing opportunity for the group. Areas are very low margin business and its right with customer service concerns and our plan right now is a little piece of Priceline but also growth KAYAK which plays about OTA and direct air. And even though air is not a very attractive business from an EBITDA perspective, it is an important part of travel and we want to…

Our next question comes from Mike Olson of Piper Jaffray. Your line is now open.

Thanks, good morning. You mentioned vacation rentals again as a focus and, I think you just said, you'll be looking at addressing the homeowner property category. Does that present more challenges than what you've done so far in this space with the property manager inventory? So, should the pace of BR inventory addition slow in the coming quarters because of that? And then, secondly and totally separately, does the $3 billion buyback have any specific time frame on it? Like, is it authorization for one or two years or is it just an open-ended authorization? Thanks.

Since we started primarily focusing on hotels even moving into bed and breakfasts and hostels and even treehouses and igloos and everything we've added to the site as presenting new challenges. And what we do is we bring in we experiment with it we adjust our business system. Recently we rolled out a simple extranet and we've got a lot of other things in the pipeline to specifically address the needs all the way down to the single unit, single property single owner model. I mean that ultimately as a company it's our destination we're here to be the world's largest inventory and selection of accommodation at the best price of the simplest experience and it's very much fits that. I honestly don't believe the challenges are insurmountable but it takes a lot of work in an industry that's traditionally operated in a very different fashion than modern eCommerce which is the ability device things that a price and we'll actually booked them without ever having to talk to the seller of the product and that's what we're working towards And, frankly I'm quite optimistic -- not that we have the answer to everything at this moment but we've got really smart teams working on this right now and over to Dan on the $3 billion.

On the stock buyback authorization Mike similar to all of the authorizations we've had in the past that's open ended there is no specific time frame by which we need to execute that. If you'll look at our tract record we've been active in the market and Q4 we bought back over 500 million over the last couple of years we bought back $1.6 billion for worth of stock. That said this is the biggest buyback authorization we've ever gotten from our board. We got it because we want to use it will be active in the market. But we're not going constrain ourselves by stating the pace at which we will execute it.

Our next question comes from Naved Khan - Cantor Fitzgerald. Your line is now open

Yes hi, thanks. Just two questions. One on the TV ad spend -- last year it grew faster than your online spend as well as the growth in gross profits. And I know you're not guiding 2015 but can you just talk about what to expect for the year in terms of TV ad spend? And then on a different topic, have you tested the traffic cross-sell synergies between the core travel and OpenTable? And what have you seen so far?

Yes, I'm going to let Dan take the first one, I'll take the second one.

Hi Naved. On the TV ad spend, we're not giving any guidance for the year, we didn't mention it as it relates to Q1 being a factor positively or negatively related to guidance so you can assume it's fairly neutral. As we added more and more markets over the last couple of years and then you continue to spend on those markets at the same amount or some relative increase that's not growing as fast as our business the pressure on operating margin subsides to an extent that said we still like the results we've seen in all the markets where we've launched our advertising and we'll likely to launch an additional market for this year particularly for Booking.com and so when we do that you can't see from quarter-to-quarter some operating pressure when we add those new markets.

And Naved on the second question, the way I like to think about the cross sell is a very narrow way to think about it, that would be I made a hotel booking and immediately I'm going to make a restaurant booking and I think of the much bigger opportunity as cross-promotion meaning A, I live in Italy and I love using Booking.com -- oh and you can also do that with restaurants and that's the part that we've seen the biggest interest. If we look at our insider guides and our pre-trip e-mails the biggest thing people are interested in who book accommodations is restaurants. The restaurants nearby or they booked and the ability on that first night if they arriving late, where can I eat, any of our hotels have restaurants and as a competitive thing within the space the persons sitting in there and that we're absolutely confident that there is significant interest in that but we need to then get of course is great relevant content get the OpenTable reviews, the photos, et cetera and really lace those two things together but we're quite optimistic, I'd say all of that in OpenTable's proposition is not going to grow as a primary just because of Booking.com. OpenTable will need to stand on its own as a business which it has in the United States and I'm confident will internationally. Booking.com will be a nice new group of tens of millions of customers we can introduce the concept to and that's really the way I think about it versus get a hotel booking, get a restaurant booking. Although by the way we've tested that it works but it's not like the biggest idea in terms of the synergy between the brands.

Thank you.

Thank you, our next question comes from Tom White of Macquarie, your line is now open.

Thanks for taking my question. I think in your prepared remarks you talked about Booking and Agoda, you guys believe now are the leaders in intra-Asia travel. Could you maybe just talk a bit about what metrics that's based on and why you believe the playbook there is working? And then, just quickly, you talked about less pressure on online ad ROIs in quarter than expected. Maybe talk a bit about what's driving that. I'm curious if any of it relates to your emerging markets. Are you seeing any of the recent investments you've made there starting to pay off in terms of repeat visits? Thanks.

Thanks Tom. It's really we say intra-Asian travel because it really has been the strength of the group, if you look at the Agoda brand in Southeast Asia really is the leading people way book accommodations in Southeast Asia, and then with the addition of booking.com which brings travelers from all over the world in Asia and Asians amongst Asia, it really plays to our strong suite of brands. There are very large domestic OTAs in the market, the Ctrips, the Gilands, the Rackatins, who do actually very high volume business but their business is largely domestic and we have a pretty good sense from our hotel partners that we're the leading players from market share standpoint in terms of how Asians move within Asia, meaning from country to country.

And for the second part Tom, regarding Q4 we said the favorability for operating margins was mainly driven by better than forecasted online ad ROIs. So not so much of a mix issue direct growing faster and that's also in there but that was in our forecast. We don't get into the specifics of much driving those better ROIs but you know all the elements that go into it, it's got CTCs conversion which we got are great teams, had all of our brands working hard every day to approve cancellation rates, unit economics. So the way that all blended our in Q4 was favorable to what we had assumed in our forecast.

Thank you. Our next question comes from Brian Fitzgerald of Jefferies. Your line is now open.

Thanks. A quick question on your thoughts around loyalty programs and their impacts on consumer travel behavior. Is that something that's important to you guys? Are you going to be investing around that? Do you feel like you're at a bit of a disadvantage relative to some of the other OTAs that have been investing around loyalty programs? Thanks, guys.

Thanks Brian. Agoda has a loyalty program that was very points driven. It's as much my philosophy as some of the brand CEOs. I grew up at Starbucks and other places. My own view, and what we've seen in the data, is that customers are most loyal when you give them a great experience. And that's what we've been focused on. And it's driven if you look at repeat behavior if you look at a number of bookings share of wallet in a year we've seen in our biggest brands it won't have a formal and post loyalty program significant increases in those kind of metrics every single year that we've been in a business. So, that's what we focus on. The other question though is for high volume travel what you do and most of our business is built off of leader travelers they don't actually book that often But for high volume travel it seems like loyalty is an aspect. By the way, it is a very deep aspect more in the United States than it is in many other parts of the world where people take a lot more leisure travel versus pure business travel. So, we've always been interested in what is the role of points and loyalty programs, what role should The Group play in that. By the way, some of these programs, you think they drive people to be more loyal but they can actually make them more dissatisfied with you because people will give you points and then make it harder and harder for you to use your points that's what marketers do and CFOs do at times looking at Dan so there's also cautions with these things, but we're obviously very interested it hasn't been a big issue for us in the past or when you do look at specific pockets of high volume traveler that's where probably we have the greatest going forward interest in this topic.

Thank you. And our final question comes from Ron Josey of JMP Securities. Your line is now opened.

I'll be brief. I was just following up on an earlier question I believe that Darren, you'd answered, specifically on segmentation and one of that perhaps and finding non-Google participants. I wanted to get your thoughts on marching to Millennials. I think you've said in the past Millennials have a pension for non-hotel activity. You launched Booking. Now recently, the new TV ad campaign I think maybe focused on them, as well. So, as you think about sort of the new segments not resting on your existing customers, curious on those on your approach there. Thank you.

We're are cognizant of Millennials I think another thing I would add to your list, its MHAs it's things like Booking Now they basically like not to go to Paris or London or New York, they like to just wander off into the countryside many of them don't have computers they only have phones. So thinking of all of those things and as well as having product on the site, we're one of the world leaders in hostels. If you go to our any hostel in Europe a lot of people using booking.com to book hostel so making sure that we're relevant to this next generation of travelers is also helping us to make sure relevant with the emerging lifestyles of consumers. So we do a lot of work not I wouldn't say traditional marketing work like we're now buying ads on just programs that Millennials watch that's never been something we do but we target them more from the data perspective and also making sure that the product that we have is relevant to their lifestyles and at least the data that we see shows that we have a very large group of young people who use booking.com on a regular basis even backpacking through Europe we're thing. We're not just a rich person product and that obviously keeps the brand healthy and we hope that the hostel stayers become hotel bookers et cetera through their life cycle. But it's a great question and certainly watching my own children the world is changing very-very fast and we want to make sure relevant the way that they use their screens versus the way that Dan and I would use our stream which was quite different.

Thank you. And at this time I'd like to turn the call back to management for closing remarks.

Okay well thank you very much and thank you all for joining the call and we look forward to getting back into the weeds on execution there I think Dan mentioned the currency is the translation challenge for us but as the team we continue to be very focused in organically executing through the way that we've always done and we're very optimistic in where the business will be going in the coming quarters years et cetera. So thank you.