Good day, everyone, and welcome to the TripAdvisor First Quarter 2012 Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Will Lyons, Senior Director of Investor Relations. Please go ahead, sir.

Thanks, Karen. Good afternoon, everyone, and welcome to TripAdvisor's First Quarter 2012 Earnings Conference Call. We appreciate you joining us today. I'm Will Lyons, Senior Director, Investor Relations for TripAdvisor, and joining me on the call today are CEO, Steve Kaufer; and our CFO, Julie Bradley. Before we begin, I'd like to remind you that today's presentation contains estimates and other statements that are forward-looking under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements. Additional information concerning these factors is contained in TripAdvisor's filings with the SEC, including our annual report filed on Form 10-K, which is available at www.sec.gov. The forward-looking statements included in this call represents the company's view on May 1, 2012. TripAdvisor disclaims any obligation to update these statements to reflect future events or circumstances. During the call, we will refer to non-GAAP financial measures that are not prepared in accordance with Generally Accepted Accounting Principles including adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating expenses, non-GAAP net income, non-GAAP net income per diluted share and free cash flow. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure is available in the press release announcing our first quarter 2012 financial results. This press release, as well as other important content, is available in the Investor Relations section of our website, www.tripadvisor.com. And with that, I will now turn the call over to Steve.

Thank you, Will, and welcome, everyone to today's conference call. I will start by summarizing operating results for the first quarter, and then do a deeper dive on a few important developments since our last call. I'll then turn it over to Julie, who will provide a more detailed look at both our financial results and our outlook. We had a strong start to 2012. We generated record quarterly revenue of $184 million, further extended our market leadership position in content and traffic and continued our focus on providing the best user experience possible through partnerships and product innovation. Julie will provide more color on the Q1 results, but suffice it to say that our better-than-expected revenue and profit performance was driven primarily by stronger hotel shopper growth, which was up over 30% year-over-year, as well as slightly better CPC pricing. From this position of strength, we chose to reinvest some of the revenue upside to continue to pursue our long-term growth strategies. Driving traffic growth, both domestically and internationally, remains at the core of our strategic growth plan. With an average of over 50 million worldwide unique visitors in Q1, according to comScore data, TripAdvisor remains the largest travel site in the world. This comScore data reflects 39% year-over-year traffic growth to TripAdvisor sites. When we look at our internal logs, we see a similar growth rate, but off a consistently higher unique visitor count. More importantly, it is the hotel shopper traffic, our monthly unique visitors who view a specific hotel page or listings of a hotel in a city on any TripAdvisor point of sale, that interests us most, as it remains the key driver of our click-based revenue stream. We are a global brand, as evidenced by the fact that 1/3 of our hotel shoppers are…

Thanks, Steve, and good afternoon, everyone. Looking back on this past quarter, our first full quarter as a public company, we are very pleased with both our financial and operational results. Our employees have swiftly migrated off legacy Expedia systems and delivered financial results ahead of our expectations. For the first full quarter, revenue increased -- for the first quarter, revenue increased 23% to $184 million. Better-than-expected results were primarily driven by a fad click-based revenue. Click-based revenue was up 20% to $144.9 million, significantly ahead of our expectations, primarily due to growth in hotel shoppers, and to a much lesser extent, better pricing. Let me take a moment to tie some of these numbers together. Click-based revenue was up 20% year-over-year on slightly better pricing, while as Steve mentioned, hotel shopper growth was up more than 30% in the same period. Most of the delta in year-over-year growth rate is due to our site redesign completed last year, which reduced comments, or said another way, reduced the number of monetization opportunities on our hotel pages. Display-based advertising grew 17% in Q1 to $21.6 million, and in line with our 2012 expectations of mid to high teens. We saw CPM prices increase slightly as compared to Q1 of last year. As discussed, we've maintained a premium price in the CPM market and therefore, have more inventory than we need. Subscription, transaction and other revenue, which includes Business Listings, Vacation Rentals and our Transactions businesses, had a strong Q1, growing 67% to $17.2 million. We set very aggressive targets for these business lines. For example, Business Listings originally planned to complete the sales force build out in early Q1. We are making good progress, but the sales force build-out is running slightly behind plan. This leads to some expense savings, but…

[Operator Instructions] Our first question comes from the line of Ross Sandler from RBC Capital Markets.

Just one quick question. So your revenue from Expedia came in at only down 4% year-on-year, much better than, I think, what we had talked about last quarter. So I just wanted to get a little color there. Are all the CPC initiatives and de-cluttering fully baked in that number? Or is it just a new kind of established run rate at kind of down 4% year-on-year? And then a question on the non-Expedia customers of yours. That spend was up about almost 40% year-on-year. Do you think that could see some acceleration as some of your non-Expedia advertisers get more aggressive throughout 2012 or versus the right run rate?

So on the Expedia pricing, we feel like as the bidding marketplace has evolved, we've seen the changes that we would expect to see. The site redesign is all done, Expedia's had plenty of time to adjust their bids to the new world order, if you will. So Expedia lowered their pricing on the hotel clicks, but we're also sending them fewer of the photo or map clicks, which were much lower priced. So net-net, the Expedia rev was down a bit, but again, it's highly variable depending on the type of the clicks that we sent them with respect to the actual pricing. When we look at the non-Expedia revenue, obviously with Expedia staying where it is, the other clients are happily taking up the slack, the slack being additional volume. So as a bidding environment, when we move forward, the degree to which we can grow our hotel shopper traffic, we have a high degree of confidence that there are plenty of customers very interested in those leads in all of our points of sale. We like it when there's a bidding war that we can get going in certain markets or at certain regions, but we haven't baked in anything like that into our planning going forward.

And our next question comes from the line of Heath Terry from Goldman Sachs.

I was wondering if you could give us a sense of the type of traffic that you're seeing from a mix perspective, just that you see the restaurant activity, hotel mix shifting one way or the other. And to what extent you see opportunities and monetizing that non-hotel traffic as it continues to grow.

Sure. Again, good question. The traffic mix, we're talking about hotel shoppers, and we're now disclosing to you that, that's up 30%. comScore up, I think, they said it was 39%, and we said our internal log showed something similar. So we're giving you the notion that, well yes, we have a lot of our traffic on the site is hotel shoppers, the growth rate on the other stuff is clearly higher because it's averaging out according to comScore at 39%. We've been clear. We don't make much money, and we certainly sell CPM ads against all of it and some sponsorships against all of it, but the click-based revenue comes primarily from the hotel shoppers. What I alluded to at the end of my prepared remarks was that the Business Listing organization, as it has been growing, we've clearly focused it on the opportunity for hoteliers because their return on the purchase of the Business Listing is so straightforward, it's so amazing and it's relatively easy for us to reach those 500,000 hoteliers, relatively easy, compared to the 1 million restaurants and attractions, some of whom are frankly, barely online. When we look out a couple of years, we see -- we project a continued growth in overall traffic, probably a higher growth in the restaurant attraction-type traffic, as we have more and more tourists on our site for all sorts of things. So where we have eyeballs, we feel optimistic that we would be able to monetize them for attractions and restaurants and tour guides and other things to do once in destination. I don't believe it will be as significant as what we can do for the hotelier, but we do think both on desktop and mobile, that those will become valuable eyeballs to us in the outlying -- in the future years, not so much 2012.

And our next question comes from the line of Doug Anmuth from JPMorgan.

I wanted to ask you a couple of things. First, just in terms of the 30% hotel shopper growth, can you just talk about some of the drivers here? Do you think this is more sort of overall market? Or is it clear signs that some of the efforts you've made in terms of de-cluttering and other improvements are starting to pay off? And then can you also give us an update in terms of how you're thinking about some of the format changes that Google has done and also some of their travel products as well?

Sure. Boy, I wish had better answers or more complete answers to those questions. So we're still very proud of the site redesign that we've done. We think the user experience is much better. We've added a lot of photos to the site. That always sorts of enhances usability and customer feedback. It's darn hard for me to tie that to the growth in hotel shoppers. We see growth across all of our significant channels, be it free search, paid search, e-mail, domain direct, pretty much anything that amounts to a meaningful channel that we source, is growing and is growing in just about every corner of the world, so international growing faster than our U.S. point of sale as we've otherwise shared with you. So again, across the board, probably mildly affected by -- I say probably, it's really just a guess on my part -- affected by the ongoing challenges in Southern Europe. But I can't really point to the de-cluttering being the reason why our traffic has grown. With regard to Google's activity, the second part of your question, we certainly see them in the search results with their hotel finder occupying the very top position for frequent -- for major city hotel searches. We can't, at the moment, see a meaningful loss of traffic to us because of that. Again, that's not to say it couldn't happen in the future, and it's possible that we just can't measure it well enough to note it yet, and of course, they're just starting to roll that out. So we would expect more coming in that direction. Of course, we've used the product ourselves as well, and when you look at what it does versus the rich community that we provide, we don't --how do I say this? We're not particularly concerned if the customer were to give both products a try.

And if I could just follow up with one thing, and I may have missed this on CPC, so I apologize. But did you talk about what your outlook is for the year relative to the flattish that you previously indicated?

So I mean, I guess Julie had mentioned it's hard for us to forecast this because, as you know, we don't set the prices. Our clients come to us on occasion and say, they want to bid more for certain parts of the traffic that we can supply. So as we look forward, we're saying Q1, it was slightly better, and I emphasize slightly, which is great news, that it wasn't down a lot, and we weren't forecasting it to be up a lot. And so it hasn't really changed when we look forward. It hasn't really changed our forecast or that part of our model has not changed going forward.

And our next question comes from the line of Tom White from Macquarie.

I guess on your selling and marketing line, any color you can give, I guess, between the direct and the indirect breakout? And I guess specifically looking to see if I can get any comments from you about just sort of the U.S. versus foreign market spending. I guess where are you in terms of those markets where you guys might be more aggressively seeding kind of a local content from the local population?

Sure. So this past quarter, the breakout between direct and indirect, that was 70-30, which is consistent with what we saw last quarter and for all of last year. The international spend we don't break out specifically. International expansion is definitely one of our key long-term growth strategies. And so as you can imagine, a good part of that spend is directed towards international growth.

And our next question comes from the line of Nathaniel Schindler from Bank of America.

I want to ask you a little bit more on the traffic detail. Have you noticed any correlation between increased content in the site and acceleration in unique user growth? Also, on your domestic versus international growth, your domestic growth at 12% in the U.S. roughly and 17% for last year, while international is growing roughly 3x faster than that with roughly what, twice the traffic? Is this just a catch-up in the monetization of the international traffic, in which case you would expect it to go look more like the U.S. once that monetization has occurred, or is there something else? And can you characterize a little bit more about traffic growth you saw on 30% hotel shoppers? How did that growth look in the U.S.? Sorry if I ask a lot of questions.

Good questions. I tried to take note as we went along. So in order, certainly we do see content growth related to overall traffic growth. The more visitors we have, this has always been true. The more visitors, the more review contributions we have and that's part of our challenge when we start in brand new markets, where we have not a lot of traffic, we don't get a lot of reviews and we need to jumpstart that process. We've since, especially over the past -- essentially over the past 12 months or so, done a fair amount of focus on helping to reward our members with badges and such to help get them more engaged in our community, to write more reviews and we certainly have seen that pay off with higher reviews per user contribution rate. So we've proven to ourselves, at least, that if we spend a little bit more time engaging with our members, we can get more content out of it. To your second question, the relative U.S. growth, so it is a little more complicated. But when we looked at this and asked the same question ourselves, it is a little more complicated than on the face value. One of the things that's going on is when we look at U.S. visitors, people -- sorry, I'll be even clearer. When we look at people who live in the U.S. and they're coming to tripadvisor.com usually, and the growth rate there is actually higher than that sort of 12% might imply. But the traffic on -- but then you asked why is the traffic on tripadvisor.com isn't growing as much. And the answer is, or partial answer is we have a fair amount of traffic over the past year that was coming from other English-speaking…

And our next question comes from the line of Peter Stabler from Wells Fargo Securities.

Wondering if you could provide a little bit more color on DaoDao and Kuxun, and the level of your investment in China and whether you can give us any sort of magnitude of loss on your investment there and maybe what kind of ramp you are looking at toward profitability in that market.

Certainly, Peter. It's a very good question. We've sort of discussed it internally. Unfortunately, we're not sort of ready to disclose that, the loss and the path to profitability numbers yet. We're continuing to work on a couple of meaningful initiatives in that part of the world and identifying additional ways where we can bring the work we're putting into both sites into a more common framework, if you will. We do continue to lose money there. We continue to invest because we see the prize there being quite meaningful, and the model, we certainly believe will work in China. At this point, Kuxun is doing quite well on the flight side. Certainly, a strength in that part of the business as they've hooked up with a lot of individual agents, as well as several of the OTAs to really help the clients find the better price than what they can do on other sites. And on DaoDao, again, the focus remains on helping the user find the best hotel and overall the best travel experience. We're starting to leverage some of our additional worldwide sales activities because there's a lot of other western hotel companies looking to break into the China market, and we're a company that they're used to dealing with. And of course, the domestic traveler on the outbound trip, as everyone would tell you, is more valuable than the domestic traveler, even though much smaller number, but a more valuable commodity. And we have, far and away, the most reviews of anyone when you look at the entire set of places that the Chinese outbound traveler would go to. So we remain optimistic, but not a lot of detail I can report in terms of progress.

Our next question comes from the line of Herman Leung from Susquehanna.

Two quick questions. I guess, first, on your hotel shopper trends, you talked about a much stronger-than-expected growth of 30%. I was wondering if you can kind of give us a context of how that growth has progressed, I guess, compared to last year's seasonality and how that's progressing in the first quarter and early view into the second. And then second is on volume and pricing growth, you talked about a little bit of a pricing growth that you're seeing today, so -- and I know that it's predicated on a lot of the competitive bidding, but wondering what your guidance today implies from a pricing and volume standpoint.

Sure. So I don't have off hand kind of the monthly image of the hotel shopper growth last year. I do recall our February call, where it was looking a lot darker at that time, when we were looking at our January hotel shopper growth. So January was a tougher start when we looked at the overall numbers as best we could tell. And then the quarter looked like -- the quarter did get better. We also did make some monetization improvements over the course of the quarter. So the hotel shoppers was a challenge, the monetization of the hotel shoppers, as we were still pulling out of the site redesign. And we're pleased to report that we were able to make some monetization progress, i.e. the 30% of the hotel shoppers that were visiting earlier in the quarter were converting less, and by the end of the quarter, they were stronger, so we were able to recover some of that loss. The CPC growth, I really wouldn't counsel, or I can say, we are not modeling a growth in CPC over the course of the rest of the year. And again, it's the bidding model, as I've said, but we'd be quite uncomfortable assuming a price increase as we look forward.

And our next question comes from the line of Chad Bartley from Pacific Crest.

Slightly different questions on the Expedia and the redesign topics, and I guess headwinds, I think. Earlier in the year, you talked about Expedia and the CPCs there being a headwind to growth of about 5 points, the site redesign being a headwind to growth of about 2 to 3 points. It seems like perhaps that's a little conservative. And I'm curious if your -- what your new results and what your new guidance -- excuse me, implies as far as the headwind from those 2 topics?

Sure, Chad. The -- as I say, it would seem that the CPC headwind from Expedia was balanced by the site redesigns and in fewer lower value clicks, combined with the pricing moves of our clients. So net-net, we're back to a flat number. So when we look forward, it's kind of all of that site redesign, all of the Expedia transition is behind us, and we're just looking forward saying, "Okay, CPCs, we're modeling flattish going forward and now it's all about the traffic growth and international expansion and the other interesting initiatives that we have." So I guess I'd suggest we leave some of those things behind us and kind of model on Q1 going forward as obviously adjusted for the seasonality of our business.

And our next question comes from the line of Mike Olson from Piper Jaffray.

This is Andrew Connor in for Mike. The question is we've seen very impressive RevPAR growth in Latin America during the last several quarters. And we've also seen a very strong correlation between RevPAR and TripAdvisor revenue. So first of all, just curious, how do you explain that strong correlation between RevPAR and your guys' revenue? And then second, if you could just talk about the growth rates you're seeing in Latin America and what is really driving that 50%-plus rest of world growth?

Sure. I mean, it's a fair question, Andrew. The RevPAR, when the hotelier or when the OTA is making more money because of a lead we send because RevPARs have gone up, they can literally afford to spend more of that. So if, for example, an OTA is willing to share 60% of the revenue that they make with us, just as an example, some pay more, some pay less, as that RevPAR goes up, we would see that increase. So if RevPAR is up 5%, it's fair to think of TripAdvisor deserving a 5% increase as our percentage. Do we always get that? No. That's a part of a negotiation with our sales rep and the client and it's part competition for that click, if in any particular country, hoteliers battling against an OTA for the lead, the hotelier has lots more margin they can offer and RevPAR going up, they can offer even more. They have a bigger piece of the pie than what the OTA has so they might be able to outbid. So again, relatively straightforward correlation with RevPAR, relatively straightforward correlation with booking rates in whatever particular country. If it's a highly engaged online country that has a high online conversion rate, that's great for us as well versus a country where there's a lot of lookers but most of the actual transaction happens offline, ergo we wouldn't get a lot of credit for those transactions, therefore client wouldn't be able to pay us a lot on a per-lead basis. To the other of your part of your question, the continued growth in our rest of world is really a function of a lot of our initiatives, and focus is around driving traffic throughout the globe, really not just in the U.S., but the fact that our U.S. and U.K. points of sale are really the most mature, they're the most well-known. So there's just a lot more room to attract new visitors in other markets. And I would expect that overall trend to certainly continue going forward.

Our next question comes from the line of Brennan Diaz from Viking Global.

Just first off, I think people have asked in a couple of different ways, but would love to hear your commentary around linearity of growth throughout the quarter. I guess, really how growth, especially in CPC revenue both in January versus March, and whether it was kind of fair to assume that, that Expedia revenue number got better as we got throughout the quarter. And then the second question, really just around the business listings product, and I would just love to step back and Steve, get your thoughts in terms of where that business can go in terms of percent of penetration of the overall market and just thoughts around how you think about potentially sizing that business over time.

Sure, Brennan. Again, excellent questions. I don't really recall how Expedia's CPCs may have changed Jan, Feb, March. The fact that I don't remember them being on a big upswing or downswing might lead you to fairly believe it wasn't something I was carefully watching for any particular reason. So they manage their bids carefully. Again, I can't say one thing for sure or not, but it wasn't something I was focused on, certainly. Overall, again, it's a bidding environment, so all the other partners are moving their things up and down. And we do see a fair amount of fluctuation kind of on a weekly basis, where some are moving up and some were moving down. Our averages tend not to change all that much. To the question on the Business Listings, so we do some simple math on the -- I think it's 570,000 accommodations on the site, and we have I think over 1/2 of them as registered owners now. And most of the registered owners are properties that have reviews. And so we qualify by properties that are popular enough to have a bunch of reviews. So the owner has probably heard of TripAdvisor because people have shown up, saying, "Hey, I read about you on TripAdvisor." So there's some knowledge built in. And then from memory, the different ways we tried to qualify out of that 570,000, it was well over 1/2 that we thought were perfectly reasonable folks who would be interested in the Business Listing subscription. It might have been something closer to 3/4 who have potential and then we take out the properties that really don't have a good reputation on the assumption that most of them probably wouldn't want to pay us for something. And we come up with again, well…

And our final question comes from the line of Brian Nowak from Nomura.

I have 2 quick ones. So first, I want to go back to Herman's question on kind of the hotel shopper growth compares. Yes, because I know that last year, Google made a lot of changes throughout the year. So I was just curious if there's anything that happened with the hotel shopper growth trend throughout last year. And how we should think about the cost per click growth because the compares do get easier throughout this year if you're advertising. So is there any reason we should not expect an acceleration in the cost per click growth revenue? And then the second one is on, in the quarter, just curious, is there any impact at all from kind of the Easter shift, the Easter shift being earlier in April this year than last year? And then what was the benefit of leap year?

Well I think I can really only answer the very last question. Leap year probably added 3% to our February revenue. It added one extra day, that's nice. So the hotel shopper growth last year -- I'm really -- I look around, I'm really not sure I can add much color to the notion of it getting easier just because I don't recall a particular fall-off of hotel shoppers. And yes, Google made changes throughout the year but we expect Google to make changes throughout this year as well. So I don't -- aside from lapping the site redesign in Q4, I don't see any other nonseasonal effect looking over the course of this year that would be material to our numbers.

Okay. And then the Easter impact, is there any impact of that at all in the quarter?

I think it just shifts kind of April traffic to April traffic. So certainly nothing that we've modeled into any of our numbers. And yes -- no, I don't think there's any effect.

And we have no further questions at this time. I would like to turn the conference back over to CEO, Steve Kaufer for any closing remarks.

Excellent. Well again, I want to thank you -- thank everyone for joining us on our first quarter call. Before I close, I also want to thank all of our employees around the globe whose dedication, hard work are really greatly appreciated. I also want to thank all the users of the TripAdvisor community for their contributions as these are the folks that play an integral role in making TripAdvisor the largest travel site in the world. So again, thanks very much to everyone. We look forward to talking to you next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.