Tripadvisor, Inc. — Q1 2021 Form 10-Q Summary
Reporting period: Three months ended March 31, 2021; comparisons are principally with the three months ended March 31, 2020. Tripadvisor operates a global travel guidance, advertising, price-comparison, booking, experiences, dining and travel-media platform.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $123 million | $278 million | Down 56% |
| Operating loss | $84 million | $27 million | Loss increased $57 million |
| Net loss | $80 million | $16 million | Loss increased $64 million |
| Net loss margin | (65.0%) | (5.8%) | Down 59.2 percentage points |
| Adjusted EBITDA | $(26) million | $40 million | Declined $66 million |
| Adjusted EBITDA margin | (21.1%) | 14.4% | Down 35.5 percentage points |
| Operating cash flow | $(19) million | $(70) million | Improved $51 million |
| Capital expenditures | $10 million | $20 million | Down $10 million |
Revenue declined across all businesses, primarily because of COVID-19-related travel restrictions, reduced consumer demand and lower travel-partner advertising spend. Revenue by segment was $88 million for Hotels, Media & Platform, $28 million for Experiences & Dining, and $7 million for Other, representing year-over-year declines of 48%, 66% and 73%, respectively.
Costs and expenses decreased 32% to $207 million, reflecting workforce reductions, lower marketing and advertising expenditures, and other cost controls. These savings were insufficient to offset the revenue decline. Interest expense increased to $11 million from $2 million, principally because of the 7.0% 2025 Senior Notes issued in July 2020.
Cash, debt and liquidity
- Cash and cash equivalents were $674 million at March 31, 2021, compared with $418 million at December 31, 2020.
- Net cash used in operating activities was $19 million; investing cash use was $10 million; financing activities provided $287 million.
- Long-term debt was $831 million carrying value, consisting of $500 million principal amount of 7.0% Senior Notes due 2025 and $345 million principal amount of 0.25% Convertible Senior Notes due 2026.
- The March 2021 convertible-notes offering generated approximately $340 million of net proceeds. Tripadvisor spent approximately $35 million on capped-call transactions intended to reduce potential dilution.
- 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 remained available.
- During the credit-facility covenant holiday, the company must maintain minimum liquidity of $150 million, calculated under the facility’s specified terms. Management reported compliance with applicable covenants.
- Share repurchases were suspended by practical covenant restrictions; no shares were repurchased in Q1 2021, and $75 million remained available under the authorization.
Material changes versus the prior comparable period
- Revenue fell 56%, with the most severe declines in Experiences & Dining and Other.
- Hotels, Media & Platform Adjusted EBITDA declined to $(3) million from $53 million; Experiences & Dining Adjusted EBITDA declined to $(24) million from $(19) million.
- Operating and net losses widened despite substantial reductions in selling and marketing, technology and content, general and administrative, and restructuring costs.
- Operating cash outflow improved from $70 million to $19 million, primarily because working-capital outflows were substantially lower and deferred merchant payables provided an inflow.
- The company issued $345 million of convertible notes and increased long-term debt materially from the $491 million carrying value reported at December 31, 2020.
- Monthly unique users on Tripadvisor-branded websites were approximately 53%, 56% and 58% of the corresponding 2019 levels in January, February and March 2021. March U.S. users were nearly 80% of March 2019 levels, while users outside the U.S. were approximately 50%.
- Headcount was 2,579 at March 31, 2021, approximately 34% below the prior-year level; approximately 400 employees remained furloughed, primarily in European TheFork operations.
Outlook, risks and unusual items
Management stated that travel trends improved during the quarter, particularly in the United States, and expressed optimism that vaccination programs and pent-up leisure demand could support recovery as 2021 progresses. However, management expected COVID-19 to continue having a material negative effect on second-quarter 2021 results, with the impact expected to lessen as the year progresses. No precise full-year revenue or earnings guidance was provided.
- Key uncertainties include virus transmission and variants, vaccine effectiveness and distribution, renewed government restrictions, consumer travel behavior, cancellations and the pace of international recovery.
- Tax authorities have proposed transfer-pricing adjustments that could increase worldwide income tax expense by an estimated $95 million to $105 million if the IRS prevails, excluding potentially significant interest and deferred-tax effects. HMRC has separately proposed adjustments estimated at $45 million to $55 million, excluding interest.
- The company had an expected $48 million U.S. federal tax refund related to the 2020 NOL carryback.
- The 2026 Senior Notes may create future dilution or liquidity requirements if converted. Conversion-related accounting could also require reclassification from long-term to current liabilities if specified conditions are met.
- Capped-call counterparties could default, potentially resulting in greater dilution, adverse tax consequences or creditor exposure.
- Travel-partner concentration remains significant: Expedia and Booking each represented at least 10% of 2020 consolidated revenue and together represented 25%.
- The company early adopted new convertible-debt accounting guidance in Q1 2021; the filing states that the adoption had no prior-period impact.
- Foreign-currency exposure, tax audits, legal and regulatory matters, data-privacy and consumer-protection issues, and the company’s reliance on discretionary travel demand remain material risks.
Most important facts for investors to verify
- Whether the improving U.S. traffic and booking trends persist and offset continued weakness in Europe and other international markets.
- Second-quarter and full-year revenue recovery, Adjusted EBITDA performance and the timing of a return to positive operating cash flow.
- Cash burn, deferred merchant payables, cancellation activity and liquidity after required interest, lease and debt payments.
- Compliance with the revolving-credit facility’s liquidity and leverage covenants as the covenant holiday expires or borrowing levels change.
- Potential outcomes, timing and cash consequences of the IRS and HMRC transfer-pricing audits.
- Conversion terms, dilution exposure and current-versus-long-term classification risk for the 2026 Senior Notes.
- Whether cost reductions and furloughs are sustainable without impairing platform investment, traffic acquisition or long-term growth.