TRIP

TripAdvisor, Inc. (TRIP)

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TripAdvisor (TRIP)

Q3 2012 Earnings Call

November 01, 2012 5:00 pm ET

Executives

Will Lyons

Stephen Kaufer - Co-Founder, Chief Executive Officer, President, Director and Member of Executive Committee

Julie M. B. Bradley - Chief Financial Officer, Chief Accounting Officer, Senior Vice President and Treasurer

Analysts

Michael J. Olson - Piper Jaffray Companies, Research Division

Laura A. Martin - Needham & Company, LLC, Research Division

Kaizad Gotla - JP Morgan Chase & Co, Research Division

Nathaniel H. Schindler - BofA Merrill Lynch, Research Division

Lloyd Walmsley - Deutsche Bank AG, Research Division

Anthony J. DiClemente - Barclays Capital, Research Division

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Deepak Mathivanan - Susquehanna Financial Group, LLLP, Research Division

Brian Nowak - Nomura Securities Co. Ltd., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the TripAdvisor Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Senior Director of Investor Relations, Will Lyons. You may begin.

Will Lyons

Thanks, Ashley. Good afternoon, everyone, and welcome to TripAdvisor's Third Quarter 2012 Earnings Conference Call. We appreciate your joining us today. I'm Will Lyons, Senior Director of Investor Relations for TripAdvisor. And joining me on the call today are our CEO, Steve Kaufer; and our CFO, Julie Bradley.

Before we begin, with many of our analysts and investors located in the areas impacted by the recent storm, we thought it best to delay our earnings call until today. Our thoughts are with those affected, and we appreciate everyone's patience.

I'd like to remind you that the estimates and other forward-looking statements included in this call represent the company's view as of today, November 1, 2012. TripAdvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our -- today's earnings release and TripAdvisor's filing with the SEC for information concerning factors that could cause actual results to differ materially from those expressed or implied by such statements. You'll also find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call in our Q3 earnings release, which is available on our IR site, ir.tripadvisor.com. Finally, unless otherwise stated, all references to selling and marketing expense, general and administrative expense and technology and content expense excludes stock-based compensation, and all comparisons on this call will be against our results for the comparable period of 2011.

With that, I will now turn the call over to Steve.

Stephen Kaufer

Thank you, Will, and welcome, everyone, to today's conference call. Before starting, on behalf of the entire TripAdvisor Media Group family, our thoughts are with everyone that has been impacted by Hurricane Sandy. Special thanks goes out to those of you in the Northeast region who are joining us today.

I'm happy to report that TripAdvisor had a strong third quarter. We generated record quarterly revenue of $212.7 million and adjusted EBITDA of $107.1 million. Across the globe, traffic to our site continues to be strong, as total traffic to TripAdvisor sites grew in the mid-30s and, even more importantly, our hotel shoppers have continued to grow at approximately 30% based on our log files.

I'm also pleased that we made great progress this quarter rapidly innovating the TripAdvisor experience for both our users and our advertising partners alike.

Our core click-based revenue accelerated, growing 15% year-over-year based on continued strong hotel shopper growth. This revenue growth can also be attributed to improvements in our on-site conversion and personalization efforts, offset by a still weak, yet stabilizing, Southern European market. Unique to the third quarter, we estimate that the Summer Olympics had a 2% negative impact on hotel shopper traffic in click-based revenue.

We were also pleased to see a 5% to 6% uplift in click-based revenue very late in the quarter, when we lapped last year's site redesign. We expect this uplift to continue in the coming quarters.

One of the most exciting things to see is the continued strong growth and deep engagement of our growing traveler community. Our marketable members grew over 70% year-over-year to more than 36 million, fueling our robust and growing email campaigns. Our members love sharing their travel experiences with other travelers and friends, and they continue to share content in 21 different languages at a remarkable rate of more than 60 contributions per minute, which equates to over 30 million contributions in a single year.

During the third quarter, we were thrilled to announce content syndication agreements with Best Western and with Wyndham Hotels Group. The Wyndham partnership, which has been expanded to 15 of their hotel brands, also includes a review collection agreement, where Wyndham will encourage their guests to share their experiences through a post-stay email and survey powered by TripAdvisor. Including these latest wins, we now syndicate our traveler reviews to more than 500 major travel partners, including more than 50 hotel chains, reinforcing and enhancing the visibility of the TripAdvisor brand as the de facto standard for travel research.

We also appreciate that tens of thousands of individual business owners around the world proudly display their "Reviewed on TripAdvisor" stickers, their certificates of excellence and their Travelers' Choice plaques on-site at their hotels, restaurants and attractions. The brand flywheel is humming, but with TripAdvisor sites accounting for only 10% of online travel uniques, we have a lot of runway left for continued growth and adoption.

At TripAdvisor, we are always innovating our products and extensively testing and discovering new ways to improve site usability and experience for our users. We strive to create the very best experience for every user, on every device, in every geography. You can see this in our social and personalization initiatives, great vehicles through which we learn about our users, their friends and their preferences, all of which enable us to deliver more satisfying, inspiring and customized travel planning experience for everyone.

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