Tripadvisor, Inc. annual report, FY2022

Tripadvisor, Inc. — FY2022 Form 10-K Summary

Business Context and Reporting Period

Tripadvisor operates three reportable segments: Tripadvisor Core, Viator, and TheFork. The company provides travel guidance, user-generated content, advertising, experiences bookings, and restaurant reservations. This Form 10-K covers the fiscal year ended December 31, 2022; it is an annual filing rather than a standalone fourth-quarter filing.

Travel demand generally recovered during 2022 as governments eased COVID-19 restrictions. Consolidated revenue reached approximately 96% of the comparable 2019 level, compared with approximately 58% in 2021. Third- and fourth-quarter 2022 revenue exceeded the comparable 2019 periods.

Financial Performance and Key Metrics

Metric	2022	2021	Change
Revenue	$1,492 million	$902 million	+65%
Operating income (loss)	$101 million	($131 million)	Improved $232 million
Income (loss) before taxes	$67 million	($185 million)	Improved $252 million
Net income (loss)	$20 million	($148 million)	Improved $168 million
Net margin	1.3%	(16.4%)	Improved
Adjusted EBITDA	$295 million	$100 million	+195%
Operating cash flow	$400 million	$108 million	+$292 million
Capital expenditures	$56 million	$54 million	+$2 million

Revenue by segment was $966 million for Tripadvisor Core, $493 million for Viator, and $126 million for TheFork, before $93 million of intersegment eliminations. Segment Adjusted EBITDA was $345 million, $(11) million, and $(39) million, respectively.

• Tripadvisor Core revenue increased 45%, led by hotel metasearch revenue. Hotel revenue increased 44%, display and platform revenue increased 33%, and experiences and dining revenue increased 91%.
• Viator revenue increased 168% to $493 million, reflecting the recovery in experiences demand and continued online adoption. Viator remained Adjusted EBITDA negative, but its loss narrowed to $11 million from $31 million.
• TheFork revenue increased approximately 48% to $126 million. Its Adjusted EBITDA loss narrowed to $39 million from $46 million.
• Consolidated selling and marketing expense increased 67% to $784 million, including approximately $572 million of advertising expense. Paid search and other online traffic acquisition spending increased substantially to capture recovering demand.
• Interest expense was $44 million, interest income was $15 million, and the effective income tax rate was 70.1% on pretax income of $67 million.

Liquidity, Debt, and Capital Resources

• Cash and cash equivalents were $1.021 billion at December 31, 2022, up from $723 million at December 31, 2021. Approximately $157 million was held by international subsidiaries.
• The company had $845 million of principal debt, consisting of $500 million of 7.0% Senior Notes due July 2025 and $345 million of 0.25% Convertible Senior Notes due April 2026. Carrying value of long-term debt was $836 million.
• The $500 million secured revolving Credit Facility matures in May 2024. There were no borrowings outstanding at year-end, and available borrowing capacity was $496 million.
• The company reported compliance with applicable debt covenants and expects available liquidity to fund foreseeable operating needs, capital expenditures, debt service, leases, and other commitments for at least the next twelve months.
• Contractual obligations totaled approximately $1.086 billion, including principal debt, interest, lease obligations, commitment fees, and purchase obligations. This excludes $204 million of unrecognized tax benefits for which payment timing could not be reliably estimated.
• No dividends were declared or paid in 2022. No shares were repurchased during 2022, and $75 million remained available under the repurchase authorization, although debt agreements restrict repurchases.

Material Changes Versus the Prior Comparable Period

• Revenue returned strongly toward pre-pandemic levels, with Viator showing the fastest growth and Tripadvisor Core generating the majority of consolidated profitability.
• The company shifted from a consolidated net loss of $148 million in 2021 to net income of $20 million in 2022 and from negative operating income to $101 million of operating income.
• Operating cash flow increased to $400 million, aided by improved earnings, a $64 million federal tax refund, timing of vendor payments, and a $99 million increase in deferred merchant payables.
• Foreign currency movements adversely affected reported growth: management estimated impacts of approximately 6% for Tripadvisor Core, 16% for Viator, and 19% for TheFork.
• The company revised its segment reporting structure in the second quarter of 2022 to Tripadvisor Core, Viator, and TheFork. Prior-period segment information was reclassified, with no effect on consolidated financial statements.
• Management made several senior leadership changes during 2022, including changes involving the chief executive officer and chief financial officer.

Guidance, Outlook, Risks, and Unusual Items

The filing does not provide specific quantitative revenue or earnings guidance for 2023. Management expects to continue investing in Viator and TheFork to expand supply, demand, operating scale, and market share, while investing in data, products, marketing, and technology across the company.

• The principal outlook driver is continued recovery in travel, experiences, and restaurant demand, but performance remains exposed to economic downturns, inflation, reduced discretionary spending, travel disruptions, pandemics, extreme weather, geopolitical conflict, and changing government restrictions.
• Tripadvisor depends materially on advertising and a limited number of travel partners. Expedia and Booking together represented approximately 35% of consolidated revenue in 2022.
• Search-engine changes, particularly Google’s promotion of competing travel products, could reduce unpaid traffic or increase traffic acquisition costs.
• Competition from OTAs, search engines, social platforms, experiences marketplaces, restaurant reservation providers, and direct supplier channels could pressure traffic, pricing, margins, and market share.
• Privacy, data protection, cybersecurity, payment processing, online advertising, content liability, competition, tax, and payment-license requirements create regulatory and operating risks. The company was working toward an EU payment institution license after Brexit and stated that timing was uncertain.
• A targeted payment fraud scheme in the fourth quarter resulted in an approximately $8 million loss recorded in general and administrative expense. The company implemented additional safeguards and is pursuing recovery, but recovery and timing are uncertain.
• The company expects to record $25 million to $35 million of additional tax expense in the first quarter of 2023 related to an accepted transfer-pricing settlement for 2009–2011, with an estimated net cash outflow of $70 million to $80 million during 2023.
• Other unresolved tax matters include proposed IRS adjustments estimated at $85 million to $95 million, exclusive of interest and deferred tax effects, and HMRC adjustments estimated at $25 million to $35 million, exclusive of interest and potential additional effects. The 2009–2011 IRS matter was superseded by the 2023 settlement.
• LTRIP beneficially controlled approximately 56% of voting power through ownership of all Class B shares, giving it effective control over most stockholder matters.
• KPMG issued unqualified opinions on the consolidated financial statements and the effectiveness of internal control over financial reporting. Revenue evidence and related information technology systems were identified as a critical audit matter.

Important Facts for Investors to Verify

• Whether travel and experiences demand remains strong enough to sustain 2022 recovery rates, particularly if macroeconomic conditions weaken.
• Whether Viator and TheFork can convert strong revenue growth into sustainable positive Adjusted EBITDA and GAAP profitability.
• The sustainability of elevated paid marketing spending, its return on advertising spend, and the recovery of direct and search-driven traffic.
• The timing and cash impact of the $70 million to $80 million tax settlement payment and the ultimate resolution of remaining IRS, HMRC, and other tax audits.
• The company’s ability to refinance or repay the $500 million 2025 Senior Notes and $345 million 2026 Convertible Senior Notes without impairing liquidity or increasing dilution.
• Exposure to Expedia and Booking, which together contributed approximately 35% of 2022 revenue, and the terms and renewability of those relationships.
• Progress on the EU payment institution license, cybersecurity and fraud controls, and compliance with evolving privacy and digital-services-tax requirements.
• Whether LTRIP’s voting control and debt-covenant restrictions continue to limit corporate actions, dividends, share repurchases, or change-of-control flexibility.