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TripAdvisor (TRIP) Beats on Q2 Earnings, Revenues Match

Zacks

TripAdvisor Inc. TRIP reported adjusted second-quarter 2017 earnings of 25 cents per share, exceeding the Zacks Consensus Estimate by 6 cents. Adjusted earnings exclude one-time items but include stock-based compensation expense.

However, earnings decreased 10.7% from the year-ago quarter and came in below the Wall Street expectations of 41 cents. Revenues of $424 million were in line with the Zacks Consensus Estimate and below $474 million expected by Wall Street.

Following the weaker-than-expected second quarter earnings release, share price Trip Advisor’s declined more than 8% in the after-hours trading. The company's shares have lost 19.9% year to date, underperforming the industry’s gain of 49.8%.


Revenues

TripAdvisor’s quarterly revenues reflect an increase of 14.0% sequentially and 8.4% year over year.

In 2016, the instant booking rollout had led to significant revenue headwinds, muting revenue growth, thereby impacting profitability. Lately, the company has been making efforts to get travelers to book hotels directly on its website instead of just using it as a review site. These efforts have led to an increase in the company’s clicked-based advertising and transaction revenues, expanding its top-line growth in the quarter.

Revenue Segments

TripAdvisor reports its revenue under two segments: Hotel and Other.

Revenues of $326 million from the Hotel segment increased 4% sequentially and 3% from the year-ago quarter but made up 77% of total revenue. This segment includes click, display, subscription and transaction-based revenues from hotels, air and cruise, including that from the company’s largest subsidiary, SmarterTravel, as well as from operations in China.

Revenues of $98 million from the Other segment increased 69% sequentially and 31% year over year and contributed the remaining 23% of the total revenue. This segment includes revenues from attractions, restaurants and vacation rentals businesses.

Revenues by Source

Revenues of $214 million from Click-based advertising increased 6% from the year-ago quarter and accounted for 50% of the total revenue. Revenues from Display-based advertising increased 3% year over year to $74.0 million and brought home 17% of total revenue. The other hotel revenue component was $38 million, reflecting a decrease of 12% year over year. However, it accounted for 9% of the total revenue. Non-Hotel revenue component contributed the remaining 24%, accounting for $98 million in revenues, up 31% year over year.

Operating Results

TripAdvisor’s adjusted operating expenses of $331 million increased 10.7% year over year. The adjusted operating margin of 10.8% was down 120 bps from the year ago-quarter.

On a GAAP basis, TripAdvisor’s net profit was $27 million or 19 cents per share, declining from the year-ago figure of $34 million or 23 cents.

Balance Sheet & Cash Flow

TripAdvisor exited the quarter with cash, cash equivalents and short-term investments of roughly $904 million, slightly up from $746 million in the prior quarter. Accounts receivables were $252 million, increasing from $232 million in the last quarter.

Long-term debt was $260 million in the second quarter compared with $210 million in the previous quarter.

Cash flow from operations was $221 million, up from $134 million in the previous quarter. Capex was $17 million, down from $18 million in the first quarter. Free cash flow was $204 million, up from $116 million in the previous quarter.

During the quarter, the company repurchased 2,549,080 shares for approximately $100 million.

TripAdvisor, Inc. Price, Consensus and EPS Surprise

TripAdvisor, Inc. Price, Consensus and EPS Surprise | TripAdvisor, Inc. Quote

Our Take

TripAdvisor is an online travel research company that features reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages and travel guides, to name a few.

The company’s growth initiatives to boost hotel bookings from its own website have helped it in expanding its top-line growth. Moreover, strong focus on developing its mobile products, expansion into the international restaurant reservation space and improvement in user growth and engagement, especially related to mobile devices, are positives.

Additionally, TripAdvisor’s acquisitions complement its travel product portfolio. These also improve efficiency and expand user base, on the one hand, while increasing traffic, hotel shoppers and profits, on the other. The company is well positioned to grow, given its expanding user base, improving margins and increasing monetization of social and mobile platforms in the long term.

However, mounting expenses due to new initiatives and investments are hurting the company’s profits. Also, lack of visibility and intensifying competition from Priceline PCLN, Expedia EXPE and Alphabet GOOGL remain future growth concerns.

Currently, TripAdvisor has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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