Tripadvisor, Inc. — Q1 2023 Form 10-Q Summary
Business context and reporting period
Tripadvisor operates three reportable segments: Tripadvisor Core, Viator, and TheFork. Its platforms provide travel guidance, user-generated content, advertising, and marketplaces for experiences, accommodations, and restaurant reservations. The filing covers the three months ended March 31, 2023, compared with the same period in 2022. Results are seasonal, with the second and third quarters generally stronger than the first and fourth quarters.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $371 million | $262 million | 42% increase |
| Operating loss | $14 million | $20 million | 30% improvement |
| Net loss | $73 million | $34 million | $39 million higher loss |
| Net loss margin | (19.7%) | (13.0%) | Down 6.7 percentage points |
| Adjusted EBITDA | $33 million | $27 million | 22% increase |
| Operating cash flow | $135 million | $86 million | $49 million increase |
| Capital expenditures | $16 million | $14 million | $2 million increase |
| Cash and cash equivalents | $1.132 billion | $1.021 billion at Dec. 31, 2022 | $111 million increase |
Revenue growth reflected strong consumer travel demand and comparisons against the Omicron-affected first quarter of 2022. Tripadvisor Core revenue increased 28% to $244 million, Viator revenue increased 105% to $115 million, and TheFork revenue increased 35% to $35 million. Segment Adjusted EBITDA was $72 million for Tripadvisor Core, $(30) million for Viator, and $(9) million for TheFork.
Total costs and expenses increased 37% to $385 million. Selling and marketing expense increased 55% to $219 million, including approximately $63 million of additional paid online traffic acquisition costs. Technology and content expense increased 26% to $68 million, while general and administrative expense increased 20% to $48 million. Depreciation and amortization declined 16% to $21 million.
Interest expense was $11 million, offset in part by $11 million of interest income, compared with $1 million of interest income in the prior-year quarter. Basic and diluted loss per share was $0.52, compared with $0.24 in Q1 2022. Stock-based compensation was $23 million.
Operating cash flow benefited from higher deferred merchant payables and deferred revenue associated with experience bookings, seasonal working capital, and income-tax-related balances. The filing cautions that experience-booking working capital can reverse in the second half of the year.
Long-term debt had a carrying value of $837 million, consisting of $500 million of 7.0% senior notes due July 2025 and $345 million of 0.25% convertible senior notes due April 2026. The company had no borrowings under its $500 million revolving credit facility, $4 million of standby letters of credit, and approximately $496 million of available borrowing capacity. The company reported compliance with applicable covenants.
Material changes versus the prior comparable period
- Revenue increased 42%, led by Viator’s 105% growth and continued recovery in travel demand across the business.
- Tripadvisor Core hotel revenue increased 24% to $168 million, primarily from stronger hotel meta revenue and higher cost-per-click pricing.
- Tripadvisor experiences and dining revenue increased 65% to $33 million; display and platform revenue increased 15% to $30 million.
- Adjusted EBITDA increased to $33 million, but Viator and TheFork remained loss-making as management increased marketing and personnel investment to gain scale and market share.
- Net loss increased substantially because of higher marketing investment and a $55 million discrete income-tax expense related to an IRS transfer-pricing settlement and related reserve adjustment.
- General and administrative expense included a $3 million non-recurring charge for previously capitalized transaction costs.
- Cash increased to $1.132 billion, while deferred merchant payables increased to $311 million from $203 million at year-end 2022.
Guidance, outlook, commentary, and risks
Management reported strong travel demand in North America and Europe and improving conditions in Asia-Pacific as travel restrictions eased. The company plans to continue investing in Tripadvisor Core, Viator, and TheFork, particularly in performance marketing, technology, product development, and marketplace growth. The filing does not provide formal consolidated revenue or earnings guidance.
Management expects available cash and cash equivalents to fund working capital, capital expenditures, growth initiatives, debt and interest obligations, leases, and other commitments for at least the next twelve months. The company expects a net cash outflow of approximately $60 million to $70 million, including interest, related to the accepted IRS settlement, substantially payable within the next twelve months.
Material risks include weaker travel demand, a recession, inflation, foreign-exchange volatility, geopolitical conflict, terrorism, renewed pandemics or travel restrictions, and changes in consumer discretionary spending. Search-engine changes, particularly greater prominence for Google products, may continue to pressure Tripadvisor’s organic search traffic. The company also faces competitive pressure and remains dependent on major travel partners; Expedia and Booking Holdings together represented approximately 35% of 2022 consolidated revenue.
Additional tax contingencies remain. If the IRS prevails on proposed adjustments for 2014–2016, additional tax expense could be approximately $55 million to $65 million, excluding potentially significant interest and deferred-tax effects. HMRC proposed adjustments for 2012–2016 could result in additional tax expense of approximately $25 million to $35 million, excluding interest. The company disputes these proposed adjustments.
Liberty Tripadvisor Holdings beneficially controlled approximately 56% of the company’s voting power as of March 31, 2023. The company reported no material changes to its risk factors, commitments, contingencies, market-risk profile, or internal controls during the quarter.
Important facts for investors to verify
- Whether Viator and TheFork can convert rapid revenue growth into sustainable positive Adjusted EBITDA as marketing investment moderates.
- The durability of hotel meta cost-per-click pricing and the recovery of direct and organic traffic.
- The timing and cash impact of the IRS settlement and the ultimate resolution of the remaining IRS and HMRC transfer-pricing matters.
- The company’s ability to refinance or repay the $500 million of 2025 Senior Notes and manage the $345 million convertible notes due in 2026.
- Whether seasonal working-capital benefits from deferred merchant payables reverse as expected later in 2023.
- Exposure to Expedia and Booking Holdings, foreign-exchange movements, search-platform changes, and renewed travel-industry disruptions.
- The implications of Liberty Tripadvisor Holdings’ voting control and the continuing restrictions on share repurchases under the credit agreement and senior-notes indenture.