Tripadvisor, Inc. Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2022. The filing is unaudited and was filed August 4, 2022. Tripadvisor operates a global travel guidance and booking platform spanning accommodations, experiences, restaurants, and related travel services. In the second quarter, the Company realigned reporting into Tripadvisor Core, Viator, and TheFork.
Financial Performance and Position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $417 million, up 77% | $679 million, up 90% |
| Operating income (loss) | $63 million, versus $(35) million | $44 million, versus $(119) million |
| Net income (loss) | $31 million, versus $(40) million | $(3) million, versus $(120) million |
| Net margin | 7.4%, versus (17.0)% | (0.4)%, versus (33.5)% |
| Adjusted EBITDA | $109 million, versus $25 million | $137 million, versus $(1) million |
| Operating cash flow | Not separately provided | $380 million, versus $106 million |
Second-quarter revenue was nearly at parity with the comparable 2019 period. Average monthly unique users on Tripadvisor-branded websites were approximately 83% of the comparable 2019 level, compared with approximately 70% in the second quarter of 2021.
- Segment revenue: Tripadvisor Core $274 million, up 49%; Viator $136 million, up 240%; and TheFork $32 million, up 78% for the quarter.
- Segment Adjusted EBITDA: Tripadvisor Core $116 million; Viator breakeven; and TheFork $(7) million.
- Expenses: Selling and marketing rose 76% to $217 million in the quarter, primarily from increased search-engine marketing and online traffic acquisition. Technology and content declined 2% to $53 million, while general and administrative expense declined 39% to $28 million.
- Cash and liquidity: Cash and cash equivalents were $1.045 billion at June 30, 2022, compared with $723 million at December 31, 2021. The Company reported $497 million of available borrowing capacity under its revolving credit facility and no outstanding borrowings under that facility.
- Debt: Long-term debt had a carrying value of $835 million, consisting of $500 million of 7.0% senior notes due 2025 and $345 million of 0.25% convertible senior notes due 2026. The Company also had $61 million of finance lease obligations.
- Capital expenditures: $27 million in the first six months, compared with $25 million in the prior-year period.
- Working capital: Deferred merchant payables increased to $323 million from $113 million at year-end, reflecting customer funds received before payments to travel suppliers. Accounts receivable and contract assets increased to $246 million from $142 million.
Material Changes Versus the Prior Comparable Period
- Travel demand improved substantially as restrictions eased and pent-up demand returned, producing broad-based revenue recovery.
- Viator revenue grew particularly rapidly, but the segment remained at a six-month Adjusted EBITDA loss of $20 million as the Company increased marketing and operating investments.
- Tripadvisor Core Adjusted EBITDA increased to $116 million for the quarter from $49 million, despite higher performance marketing spending.
- Operating cash flow increased by $274 million in the first six months, driven by reduced losses, favorable working-capital movements, and a $64 million U.S. federal tax refund.
- The Company recognized $11 million of non-income-tax government assistance benefits in the second quarter, primarily reducing general and administrative expense.
- Stock-based compensation declined to $21 million in the quarter and $43 million for the first six months, compared with $32 million and $61 million, respectively.
- The Company changed its reportable segments and reassigned goodwill among Tripadvisor Core, Viator, and TheFork. No goodwill impairment was identified.
Outlook, Risks, Contingencies, and Unusual Items
- Management expects available cash and cash equivalents to fund foreseeable working capital, capital expenditures, growth initiatives, debt service, leases, and other commitments for at least the next twelve months.
- No specific revenue or earnings guidance was provided in the filing.
- COVID-19 remains a material uncertainty. New variants, renewed travel restrictions, reduced consumer demand, and cancellations could adversely affect revenue, liquidity, working capital, and financial condition.
- Seasonality is significant: the second and third quarters are typically strongest, while experience and rental working-capital cash flows may reverse in the second half of the year.
- The IRS has proposed transfer-pricing adjustments for 2009–2016 that could increase worldwide income tax expense by an estimated $115 million to $125 million, excluding significant interest and deferred-tax effects. HMRC has proposed adjustments for 2012–2016 estimated at $40 million to $50 million, excluding interest. Tripadvisor disputes both matters.
- The Company had $41 million of accrued interest related to unrecognized tax benefits as of June 30, 2022. A $12 million remaining CARES Act tax refund was expected in the second half of 2022.
- Foreign exchange exposure, inflation, a potential U.S. recession, the Russia-Ukraine conflict, cyberattacks, regulatory matters, customer concentration, and competitive conditions could affect results.
- Expedia and Booking Holdings each represented at least 10% of 2021 consolidated revenue and together represented approximately 34% of 2021 revenue.
- No material changes to previously disclosed risk factors, commitments, contingencies, or off-balance-sheet arrangements were reported. Management stated that disclosure controls were effective.
Important Facts for Investors to Verify
- Whether post-pandemic travel demand remains durable and supports continued recovery toward or above 2019 revenue levels.
- Viator’s ability to convert substantial revenue growth and marketing investment into sustained positive Adjusted EBITDA and cash flow.
- The timing and potential financial impact of the IRS and HMRC transfer-pricing disputes, including interest and related tax effects.
- Cash-flow seasonality, the increase in deferred merchant payables, and the potential reversal of working-capital benefits later in 2022.
- Debt maturities, refinancing or repurchase plans, convertible-note dilution, and compliance with credit-facility covenants after the leverage-covenant holiday.
- The effect of COVID-19 resurgences, macroeconomic weakness, foreign exchange movements, inflation, and geopolitical risks on travel demand and advertising spending.