TripAdvisor Q1 Sales, EPS Beat Forecasts; Shares Fall 1%

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TripAdvisor ( TRIP ) shares were down more than 1% in after-hours trading Tuesday after the provider of travel reviews and related content issued Q1 results that beat earnings and sales forecasts on a strong double-digit jump in click-based ads. Investors seemed miffed by revenue impact of the company's shift to a metasearch business model in the quarter, despite the sales surge.

The shares closed regular trading at 55.

For the first quarter, TripAdvisor said Q1 sales surged 25% from a year earlier to $229.9 million, beating analysts forecasts of $224.29 million. Sales were up 36% quarter-over-quarter.

The Newton, Mass.-based company said it earned 43 cents a share on a GAAP basis, up 23% from 35 cents in the year-earlier period and 4 cents above the 39 cents GAAP-based average estimate of 22 analysts polled by Thomson Reuters.

On a non-GAAP basis, TripAdvisor said it earned 50 cents a share, up 31.6% from a year earlier, and 4 cents above analyst views of 46 cents.

Unique Visitors

"Our underlying fundamentals are indeed very strong," TripAdvisor CEO Steve Kaufer said in a conference call with analysts after the results were issued. The company, citing tracker Google Analytics, said it averaged more than 200 million monthly unique visitors in Q1. TripAdvisor says this continues to make it the largest travel website in the world based on unique visitors.

Revenue from cost per click or CPC ads in Q1 surged 24% from a year earlier and made up 78% of total revenue. Display-based ad revenue jumped 14%, making up 11% of total revenue. Subscription and other revenue surged 51%, accounting for 11% of total revenue.

CPC is an online ad model used to direct traffic to websites. Advertisers pay website owners when an ad is clicked.

The company didn't issue a formal outlook for the current quarter. But CFO Julie Bradley reiterated company guidance for full-year 2013 revenue growth "in the low 20s" on the call.

North American revenue in Q1 totaled $121.5 million and represented 53% of total revenue; revenue from Europe, the Middle East and Africa totaled $71.3 million, representing 31% of Q1 revenue; revenue from Asia-Pacific totaled $26.9 million, representing 12% of total Q1 revenue; and Latin America revenue totaled $10.2 million in Q1, representing 4% of total revenue.

Related-party revenue from Expedia rose 17% to $60.5 million in Q1, representing an increase of $8.9 million. JPMorgan says this is the most Expedia has ever spent with TripAdvisor in a single quarter.

TripAdvisor was spun off from Web travel companyExpedia ( EXPE ) in an IPO in December 2011.

New Model

TripAdvisor is currently shifting to a metasearch business model or a price search tool that generates revenue by allowing users to book hotels and other travel products directly. This is expected to take the emphasis off CPC advertising from hotels and online travel agencies.

But some analysts have been worried that this could disrupt revenue flow since such comparison shopping will take place on TripAdvisor and fewer CPC leads will be sent to advertisers.

CFO Bradley said on the call that Q1 revenue was "negatively impacted by 3% to 5%" because of the shift to metasearch. "We expect this negative impact will be greater in Q2 and will improve in the back half of the year as we get to revenue neutrality" by the end of the year, she added.

JPMorgan analyst Doug Anmuth in a pre-earnings note on May 6 that the switch to metasearch is "positive" for TripAdvisor's user experience and will "lead to higher conversions and increased pricing over time." But Anmuth also says that with shares trading near all-time highs, investors may not react well to "near-term dislocations in revenue or costs due to the transition."

Piper Jaffray analyst Mike Olson said in an email interview before the results were issued that TripAdvisor's Q1 performance was buoyed by increased marketing outlays by Expedia andPriceline ( PCLN ) in the quarter.

"In fact, during Q1, Expedia's spending on TripAdvisor grew 20% year-on-year after 4% in 2012," Olson said.

Long term, Olson says TripAdvisor also is well-poised to benefit from global growth in online travel advertising. He notes that online travel represents 30% to 40% of worldwide travel bookings, but that only 16% of the $40 billion spent annually on travel ads is online.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: EXPE , PCLN , TRIP

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