Tripadvisor, Inc. 10-Q Summary
Business Context and Reporting Period
Tripadvisor operates a global travel guidance and booking platform covering accommodations, experiences, restaurants, rentals, flights, cruises and cars. The filing reports unaudited results for the three months ended March 31, 2022, compared with the same period in 2021. Results continued to reflect recovery from COVID-19-related disruption, although travel demand remained below pre-pandemic levels in several markets.
Financial Performance and Key Metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $262 million | $123 million | 113% |
| Operating income (loss) | $(20) million | $(84) million | Improved by $64 million |
| Net income (loss) | $(34) million | $(80) million | Improved by $46 million |
| Net loss margin | (13.0%) | (65.0%) | Improved |
| Adjusted EBITDA | $27 million | $(26) million | Improved by $53 million |
| Operating cash flow | $86 million | $(19) million | Improved by $105 million |
| Capital expenditures | $14 million | $10 million | Increased by $4 million |
Revenue by segment was $160 million for Hotels, Media & Platform, $92 million for Experiences & Dining, and $10 million for Other. Segment revenue increased 82%, 229% and 43%, respectively. Adjusted EBITDA was $46 million for Hotels, Media & Platform, $(22) million for Experiences & Dining, and $3 million for Other.
Cost of revenue was $22 million, or 8.4% of revenue, versus 9.8% in the prior-year quarter. Selling and marketing expense increased to $141 million from $73 million, primarily because of approximately $62 million of additional search-engine marketing and other online traffic acquisition spending. Technology and content expense was $54 million, and general and administrative expense was $40 million.
Cash and cash equivalents were $781 million at March 31, 2022, compared with $723 million at December 31, 2021. The company also reported $497 million of available borrowing capacity under its revolving credit facility. Total liabilities were $1.605 billion and stockholders’ equity was $767 million.
Debt and Liquidity
Long-term debt had a carrying value of $834 million, consisting of $500 million principal amount of 7.0% 2025 Senior Notes and $345 million principal amount of 0.25% convertible 2026 Senior Notes. The company had no borrowings under its $500 million revolving credit facility and had $3 million of undrawn standby letters of credit. Management stated that available cash and expected operating cash flow should fund foreseeable working capital, capital expenditures, debt service, lease commitments and other obligations for at least the next twelve months.
Operating cash flow benefited from higher bookings and working capital, including an $86 million increase in deferred merchant payables and a $24 million increase in deferred revenue. The company cautioned that cash flow is seasonal and that working capital may reverse later in the year as experiences and rentals are completed.
Material Changes Versus the Prior Comparable Period
- Revenue more than doubled, reaching 70% of the comparable 2019 level versus 33% in Q1 2021.
- Average monthly unique users on Tripadvisor-branded websites reached approximately 71% of the comparable 2019 level, versus 55% in Q1 2021.
- Hotels, Media & Platform revenue reached approximately 63% of the comparable 2019 level, versus 35% in Q1 2021.
- Experiences & Dining revenue reached approximately 115% of the comparable 2019 level, driven by strong Experiences performance and restaurant reopenings.
- Net loss and operating loss narrowed despite substantially higher marketing investment to capture recovering demand.
- Stock-based compensation declined to $22 million from $29 million, while weighted-average diluted shares increased to approximately 139 million from 136 million.
- No shares were repurchased during the quarter; $75 million remained available under the repurchase authorization, although debt agreements restrict repurchases.
Guidance, Outlook, Commentary and Risks
Management did not provide specific quantitative full-year revenue or earnings guidance in the filing. Management expects the travel market to continue improving during 2022, supported by vaccination programs, easing restrictions and pent-up consumer demand, but described the recovery as uneven and uncertain.
Omicron negatively affected January 2022 demand, followed by stronger recovery in February and March. Management increased performance marketing investment as consumer demand and hotel auction economics improved. Experiences & Dining remains a strategic growth area, but its segment continued to report a negative Adjusted EBITDA of $22 million because of elevated marketing and growth investments.
- COVID-19 resurgences, new variants, travel restrictions, vaccine effectiveness and changing consumer behavior could materially affect demand, revenue, liquidity and cash flow.
- Seasonality typically makes the second and third quarters stronger than the first and fourth quarters; future patterns remain less predictable because of the pandemic recovery.
- The company depends substantially on major travel partners; Expedia and Booking Holdings together represented approximately 34% of 2021 consolidated revenue.
- The company faces proposed transfer-pricing adjustments of approximately $100 million to $110 million from the IRS and $45 million to $55 million from HMRC, excluding potentially significant interest and deferred-tax effects. Tripadvisor disputes the proposed adjustments.
- The company remains subject to tax audits and other legal, regulatory, privacy, competition, consumer-protection and intellectual-property matters.
- The company remained in the Credit Facility’s leverage-covenant holiday and stated that it does not currently expect a material risk of noncompliance over the next twelve months, although future compliance cannot be assured.
- Foreign exchange volatility, geopolitical tensions, cyberattacks and the Russia-Ukraine conflict may adversely affect results.
Important Facts for Investors to Verify
- Whether revenue recovery and user traffic continue toward or above 2019 levels after the first-quarter seasonal low point.
- Whether increased performance marketing spending produces sustainable revenue growth and acceptable returns.
- The timing and ultimate financial impact of the IRS and HMRC transfer-pricing disputes, including interest and deferred-tax consequences.
- Liquidity after seasonal working-capital reversals, interest payments and potential debt maturities or repurchases.
- The path to sustained positive GAAP earnings and profitability in Experiences & Dining.
- The effect of potential COVID-19 resurgences, travel restrictions, inflation, foreign exchange movements and geopolitical risks.
- Potential dilution from approximately 4.7 million shares underlying the convertible 2026 Senior Notes, partially mitigated by capped-call transactions subject to their cap price.