Tripadvisor, Inc. Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2021. The filing presents unaudited consolidated GAAP results. Tripadvisor operates a global travel guidance, advertising, comparison, reservation and experiences platform across Hotels, Media & Platform; Experiences & Dining; and other travel businesses.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $235 million | $59 million | $358 million | $337 million |
| Operating income (loss) | $(35) million | $(164) million | $(119) million | $(191) million |
| Net income (loss) | $(40) million | $(153) million | $(120) million | $(169) million |
| Net loss margin | (17.0%) | (259.3%) | (33.5%) | (50.1%) |
| Adjusted EBITDA | $25 million | $(74) million | $(1) million | $(34) million |
| Operating cash flow | Not separately provided | Not separately provided | $106 million | $(148) million |
- Q2 revenue increased 298% year over year and was 56% of Q2 2019 revenue. Six-month revenue increased 6% year over year.
- Hotels, Media & Platform revenue was $156 million in Q2 and $245 million for six months, up 311% and 18%, respectively. Experiences & Dining revenue was $68 million in Q2, up 386%, but $95 million for six months, down 2%.
- Q2 Adjusted EBITDA margin was approximately 10.6%; six-month Adjusted EBITDA margin was approximately (0.3%). Adjusted EBITDA is a non-GAAP measure.
- Interest expense was $11 million in Q2 and $22 million for six months, compared with $7 million and $9 million, respectively, in the prior-year periods.
- Capital expenditures were $25 million for the first six months, compared with $36 million in 2020.
Liquidity, debt and balance sheet
- Cash and cash equivalents were $775 million at June 30, 2021, compared with $418 million at December 31, 2020.
- Total assets were $2.387 billion and stockholders’ equity was $779 million at June 30, 2021.
- Long-term debt was $832 million carrying value, consisting of $500 million principal of 7.0% senior notes due 2025 and $345 million principal of 0.25% convertible senior notes due 2026.
- The Company had no outstanding borrowings under its $500 million revolving credit facility and approximately $4 million of outstanding letters of credit. Nearly $500 million of borrowing capacity was available.
- The Company believes available liquidity will fund foreseeable working capital, capital expenditures, debt service, leases and other commitments for at least the next twelve months.
- Financing cash flow was $281 million for the first six months, primarily reflecting $340 million of net proceeds from the 2026 Senior Notes, partly offset by the $35 million cost of capped calls and $29 million of employee tax-withholding payments.
Material changes versus prior comparable periods
- Travel demand improved materially as vaccinations increased and government restrictions eased, particularly in the United States and Europe. Tripadvisor-branded monthly unique users were approximately 59%, 71% and 79% of comparable 2019 levels in April, May and June 2021, respectively.
- Q2 2021 operating loss narrowed by $129 million, and net loss narrowed by $113 million, primarily because of higher revenue and the absence of $33 million of Q2 2020 restructuring costs.
- Six-month operating loss narrowed by $72 million and net loss narrowed by $49 million. The improvement reflected higher revenue, lower personnel and overhead costs, and no 2020 restructuring charges in 2021.
- Selling and marketing expense increased to $123 million in Q2, from $54 million, as the Company increased performance marketing and traffic acquisition spending in response to improving demand.
- Cash from operations improved by $254 million year over year, largely due to favorable working capital, including higher deferred merchant payables and deferred revenue from increased bookings.
- The Company issued $345 million of 2026 convertible senior notes in March 2021 and entered into capped call transactions covering approximately 4.7 million underlying shares. The initial conversion price was approximately $73.81 per share and the initial capped-call cap price was $107.36.
- No shares were repurchased in Q2 or the first six months of 2021. The repurchase program had $75 million remaining authorization, subject to debt agreement restrictions.
Outlook, commentary, risks and unusual items
- Management remained optimistic that travel demand would improve during 2021, supported by vaccination programs and pent-up demand, but expected COVID-19 to have a material negative impact on Q3 2021 results, lessening as the year progressed.
- Management stated that the recovery remained uneven by geography and exposed to new variants, resurgent cases, renewed government restrictions, vaccine efficacy and changing consumer travel behavior.
- Significant tax contingencies remain. Proposed IRS transfer-pricing adjustments for 2009–2016 could increase worldwide income tax expense by approximately $95 million to $105 million, excluding significant interest and deferred tax effects. HMRC proposed adjustments for 2012–2016 could increase tax expense by approximately $45 million to $55 million, excluding interest. The Company disputes the proposed adjustments.
- The Company recognized $2 million of government grants and other assistance in Q2 and $5 million for the first six months, compared with $4 million in each 2020 comparable period.
- The 2026 Senior Notes may become convertible upon specified conditions, which could affect liquidity, working capital classification and dilution. Capped-call counterparties could default, potentially resulting in greater dilution or adverse tax consequences.
- Customer concentration is material: Expedia and Booking each represented at least 10% of 2020 consolidated revenue and together represented 25%.
- Other risks include foreign-exchange exposure, digital-services taxes, legal and regulatory matters, data privacy, competition, cancellations, credit losses and the uncertain post-pandemic seasonal pattern.
Investor verification checklist
- Verify whether travel recovery, traffic and hotel auction revenue continued after June 30, 2021, particularly outside the United States and Europe.
- Assess whether increased performance marketing spending is generating sustainable revenue and margin improvement.
- Review the maturity, covenants and refinancing or repayment strategy for the $500 million 2025 Senior Notes and $345 million 2026 Senior Notes.
- Monitor conversion triggers, potential dilution and counterparty exposure related to the 2026 Senior Notes and capped calls.
- Track operating cash flow excluding temporary working-capital benefits from deferred merchant payables and deferred revenue.
- Follow the IRS and HMRC transfer-pricing audits, including potential tax, interest and cash-payment exposure.
- Confirm the extent to which COVID-19 variants, travel restrictions, cancellations and changing consumer behavior affect future revenue, liquidity and seasonality.