TripAdvisor Inc. (TRIP) reported adjusted fourth-quarter 2013 earnings of 15 cents per share, beating the Zacks Consensus Estimate by a penny. This is the fifth consecutive quarter with a positive earnings surprise by this company. The adjusted earnings per share exclude one-time items but include stock-based compensation expense.
Revenues
TripAdvisor reported revenues of $212.7 million in the fourth quarter, down 16.6% sequentially but up 25.5% from the year-ago period. However, the fourth-quarter revenues surpassed the Zacks Revenue Estimate of $205.0 million driven by continued strong hotel shopper growth, increased ad rates and strength across product suite.
Related-party revenues from Expedia Inc. (EXPE) totaled $46.4 million, down 17.3% sequentially but up 17.4% year over year. Total traffic in the fourth quarter grew 50% year over year.
Revenues by Product
Revenues from Click-based advertising were $144.4 million, up 17% from the year-ago quarter and represented 68% of total revenue. Revenues from Display-based advertising were $32.5 million, up 46% year over year, and accounted for 15% of total revenue. Subscription, transaction and other revenues totaled $35.7 million, up 53% year over year, and represented 17% of total revenue.
Revenues by Geography
Geographically, on a year-over-year basis, the Americas (North America and Latin America) revenues increased 22.0% to $117.0 million, representing 55.0% of total revenue. Revenues from the EMEA (Europe, Middle East and Africa) increased 30% to $63.7 million and contributed 30% of total revenue, while revenues from the Asia-Pacific region increased 40.0% to $32.0 million, representing 15.0% of total fourth-quarter revenue.
Operating Results
TripAdvisor reported operating expenses of $184.2 million, up 50.5% from $122.4 million incurred in the year-ago quarter. Selling & marketing expense and technology & content expenses were up as a percentage of sales from the year-ago quarter, while general & administrative expenses declined. The net result was a GAAP operating margin of 13.4% compared with 27.7% in the year-ago quarter.
Reported pre-tax income was $26.7 million, down from $43.3 million in the year-ago quarter. Pre-tax margin decreased significantly year over year to 12.6%.
On a GAAP basis, TripAdvisor recorded a net profit of $20.3 million or 14 cents per share compared with $33.6 million or 23 cents per share in the year-ago quarter.
TripAdvisor generated adjusted net profit of $21.3 million compared with $34.4 million in the year-ago quarter. Pro-forma earnings came in at 15 cents per share compared with 24 cents in the year-ago quarter.
Balance Sheet & Cash Flow
TripAdvisor exited the fourth quarter with cash, cash equivalents and short-term investments of approximately $482.4 million versus $432.4 million in the prior quarter. Accounts receivables were $97.0 million, down from $111.1 million in the prior quarter.
Cash flow from operations was $71.2 million versus $145.0 million in the year-ago quarter. Capex was $16.1 million versus $15.7 million in the year-ago quarter. Free cash flow was $55.1 million versus $129.3 million in the prior quarter.
During the quarter, TripAdvisor spent $7.6 million on share repurchases.
Our Take
TripAdvisor, Inc. is an online travel research company, which continues to witness robust top-line growth in every quarter. The company delivered a decent fourth quarter, with both earnings and revenues above the Zacks Consensus Estimate, helped by a stronger travel market all over the world.
We are encouraged by the company’s strong fundamentals, strong focus on improving its mobile products and improvement in traffic and hotel shoppers in the quarter. Moreover, the company recently launched new meta-display platform, which allows customers to compare hotel pricing and availability information from top advertisers on the TripAdvisors website itself, helped the company to increase their AD rates, expanding revenues.
However, lack of visibility, increasing competition from Priceline (PCLN), Expedia and Google (GOOG), which is expected to enter the online travel market very soon, may keep the share price range bound in the near term. Over the long term, TripAdvisor is well positioned for growth, given its expanding user base, improving margins and increasing monetization of social and mobile platforms.
Currently, TripAdvisor has a Zacks Rank #3 (Hold).
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