Tripadvisor, Inc. 2021 Form 10-K Summary
Business context and reporting period
Tripadvisor operates a global travel guidance and online travel platform, including Tripadvisor, Viator, TheFork and other travel brands. Its principal revenue sources are hotel-related advertising, display and platform advertising, bookable experiences, dining reservations and other travel offerings.
The filing covers the fiscal year ended December 31, 2021, with comparisons to 2020 and 2019. The filing is an annual report rather than a standalone fourth-quarter report.
The business remained materially affected by COVID-19, although travel demand and operating trends improved during 2021. Average monthly unique users on Tripadvisor-branded websites in the fourth quarter of 2021 were approximately 73% of the comparable 2019 period.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $902 million | $604 million | Up 49% |
| Operating income (loss) | $(131) million | $(329) million | Loss narrowed |
| Net income (loss) | $(148) million | $(289) million | Loss narrowed by $141 million |
| Net loss margin | (16.4%) | (47.8%) | Improved |
| Adjusted EBITDA | $100 million | $(51) million | Improved by $151 million |
| Cash flow from operations | $108 million | $(194) million | Improved by $302 million |
| Capital expenditures | $54 million | $55 million | Down slightly |
| Interest expense | $45 million | $35 million | Up $10 million |
Revenue remained below pre-pandemic levels at approximately 58% of 2019 revenue. Fourth-quarter 2021 revenue was approximately 72% of the comparable 2019 period, despite disruption from the Omicron variant.
| Revenue by segment | 2021 | 2020 | Change |
|---|---|---|---|
| Hotels, Media & Platform | $549 million | $361 million | Up 52% |
| Experiences & Dining | $307 million | $186 million | Up 65% |
| Other | $46 million | $57 million | Down 19% |
- Hotels, Media & Platform Adjusted EBITDA increased to $111 million from $13 million; margin increased to 20% from 4%.
- Experiences & Dining Adjusted EBITDA loss narrowed to $36 million from $79 million; margin improved to (12%) from (42%).
- Tripadvisor-branded hotels revenue increased 55% to $452 million; display and platform revenue increased 41% to $97 million.
- Experiences revenue grew more than 230% year over year and reached approximately 64% of 2019 levels.
- Dining revenue declined 5% for the full year but increased approximately 29% across the final three quarters compared with the comparable 2020 quarters.
- Selling and marketing expense increased 48% to $469 million, primarily because of increased search-engine marketing and paid traffic acquisition.
- Stock-based compensation was $120 million, compared with $109 million in 2020.
Liquidity, debt and balance sheet
- Cash and cash equivalents increased to $723 million at December 31, 2021, from $418 million at December 31, 2020.
- The Company had $497 million of available borrowing capacity under its $500 million revolving Credit Facility and no outstanding revolver borrowings.
- Long-term debt had a carrying value of $833 million and principal of $845 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 issued the 2026 Senior Notes for net proceeds of approximately $340 million and paid approximately $35 million for capped call transactions intended to reduce potential dilution.
- Deferred merchant payables increased to $113 million from $36 million, reflecting stronger experiences bookings and the timing of payments to suppliers.
- Total contractual cash requirements summarized by management were $1.163 billion, including debt principal, interest, leases, purchase obligations and Credit Facility commitment fees. This excludes $177 million of unrecognized tax benefits and $3 million of undrawn standby letters of credit.
- The Company did not repurchase shares or pay dividends in 2021. The existing repurchase authorization had $75 million remaining, but debt agreements restrict repurchases and dividends.
Material changes versus prior periods
- Travel recovery drove a substantial rebound in revenue, operating cash flow and Adjusted EBITDA from the depressed 2020 levels, but full-year revenue and profitability remained below 2019.
- Domestic travel, particularly in the United States, recovered more quickly than international and intercontinental travel.
- The Company increased performance marketing investment as travel demand improved, while retaining most cost reductions implemented in 2020.
- Technology and content expense decreased 4% to $212 million, general and administrative expense decreased 3% to $167 million, and depreciation and amortization decreased 11% to $111 million.
- No restructuring or goodwill impairment charges were recorded in 2021, compared with $41 million of restructuring costs and $3 million of goodwill impairment in 2020.
- Government grants and other assistance declined to $9 million from $12 million. The $23 million CARES Act income tax benefit recorded in 2020 did not recur.
- CEO Stephen Kaufer was expected to step down in 2022, and the Company had not named a successor as of the filing date.
Guidance, outlook, risks and unusual items
Management expected travel markets to continue improving in 2022, supported by vaccination programs, easing restrictions and pent-up demand. The filing does not provide formal numerical revenue or earnings guidance. Management stated that the timing and extent of recovery remain difficult to predict.
- COVID-19, including new or recurring variants, travel restrictions and changing consumer behavior, remained the principal operating risk.
- Revenue was concentrated among Expedia and Booking, which together represented approximately 34% of 2021 consolidated revenue.
- The Company depends substantially on search engines, particularly Google, and application marketplaces for traffic. Changes to search rankings, auctions, privacy rules or app-store policies could reduce traffic or increase acquisition costs.
- Competition includes Expedia, Booking, Airbnb, Google, hotel chains, metasearch providers, experience marketplaces and restaurant reservation platforms.
- Cybersecurity, data privacy, payment processing, foreign currency and international regulatory risks could affect operations and financial results.
- The Company remained subject to significant tax disputes. Proposed IRS adjustments for 2009 through 2016 could increase worldwide income tax expense by an estimated $95 million to $105 million, excluding significant interest and deferred tax effects. Proposed HMRC adjustments for 2012 through 2016 could increase tax expense by an estimated $45 million to $55 million, excluding interest.
- Unrecognized tax benefits, including interest, totaled approximately $177 million at year-end.
- Liberty TripAdvisor Holdings controlled nearly 57% of voting power through ownership of all Class B shares, creating controlled-company governance and change-of-control risks.
- KPMG issued unqualified opinions on the consolidated financial statements and internal control over financial reporting. Revenue recognition was identified as a critical audit matter because of the number of revenue streams and related information technology systems.
Most important facts for investors to verify
- Whether travel recovery reaches or exceeds pre-pandemic levels and how future COVID-19 variants or restrictions affect demand.
- Progress toward sustainable GAAP profitability, including the effect of increased marketing spending and $120 million of annual stock-based compensation.
- Liquidity relative to the $500 million of 2025 Senior Notes, $345 million of 2026 Senior Notes and related interest obligations.
- The status and ultimate cash impact of the IRS and HMRC transfer-pricing disputes.
- Revenue concentration and renewal or spending decisions by Expedia and Booking.
- CEO succession, employee retention and the effect of leadership transition on strategy.
- Conversion conditions and potential dilution from the 2026 Convertible Senior Notes, including the approximately 4.7 million shares initially underlying the notes.
- Whether Experiences becomes profitable and whether Dining and Other offerings recover to pre-pandemic revenue levels.