TripAdvisor Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 6, 2024

Key Takeaways

  • At Brand TripAdvisor, engagement-led initiatives drove stabilized MAUs, accelerating membership growth, a 450 bp increase in direct channel share, and “Trips” users generating ARPU roughly 15x the platform average, signaling strong future monetization potential.
  • Viator achieved 13% revenue growth to $244 M and $12 M of additional EBITDA in Q2, with app-active bookers nearly doubling, improved repeat user economics, and rising gross booking value of $1.2 B.
  • The Fork generated its most profitable quarter ever with 11% revenue growth to $42 M and an EBITDA improvement of $7 M, driven by 75% of bookings through the app, enhanced marketing efficiency, and growing B2B subscription revenue.
  • TripAdvisor Group delivered Q2 revenue of $497 M (+1% y/y) and adjusted EBITDA of $97 M (+7% y/y, 20% margin), ended with $1.2 B in cash, repurchased $25 M of stock, and replaced a $500 M high‐yield note with a lower‐cost term loan.
  • For Q3, the company expects flat to slight revenue declines and a ~350 bp drop in EBITDA margin y/y, and now sees full-year revenue growth at the low end of low-single-digits alongside a 100–200 bp margin decline, reflecting Hotel Meta headwinds and higher strategic investments.
AI Generated. May Contain Errors.
Earnings Conference Call
TripAdvisor Q2 2024
00:00 / 00:00

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Operator

Good day, and thank you for standing by. Welcome to the Tripadvisor Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Angela White, Vice President of Investor Relations. Angela, please go ahead.

Angela White
Angela White
VP of Investor Relations at Tripadvisor

Thank you, Felicia. Good afternoon, and welcome to Tripadvisor's second quarter 2024 financial results call. Joining me today are Matt Goldberg, President and CEO, and Mike Noonan, CFO. Earlier this afternoon, after market close, we filed and made available our earnings release. In that release, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP measure discussed on this call. Before we begin, I'd like to remind you that this call may contain estimates and other forward-looking statements that represent management's views as of today, August 6, 2024. Tripadvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release, as well as our filings with the SEC, for information concerning factors that could cause actual results to differ materially from these forward-looking statements. With that, I'll turn the call over to Matt.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Thanks, Angela, and good afternoon, everyone. Our second quarter consolidated results were in line with our expectations, with revenue of $497 million, reflecting year-over-year growth of 1% and adjusted EBITDA growth of 7% to $97 million, or 20% of revenue. Our results reflect the diversification of our portfolio mix, its different growth profiles and strategies, and the increasing contribution to profit mix we're seeing from Viator and TheFork. Mike will cover details of financial performance in his section, but first, I'll cover our operational progress as we execute our segment strategies. As a reminder, at Brand Tripadvisor, our strategy focuses on driving engagement and delivering world-class guidance products to fuel diverse monetization paths. At Viator, we're reinforcing our leadership position in experiences by investing in our brand, product, and repeat bookings to drive LTV and improved unit economics.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Finally, at TheFork, we're focused on driving revenue growth with margin improvement by increasing the value we deliver to diners and restaurants as the leader in the European dining market. Let's start with Brand Tripadvisor. In Q2, we delivered revenue of $250 million, a decline of 10%, and Adjusted EBITDA of $84 million, or 34% of revenue. Our financial performance continues to reflect the transition from our historical reliance on legacy offerings, such as Hotel Meta, which has experienced ongoing pressure over time, to a more diverse and sustainable model. This challenge is well known, and the strategy we launched last year addresses it head-on. When we offer a more compelling product that better meets travelers' needs across their end-to-end journey, from the first moment of planning through the end of the trip itself, we drive deeper engagement.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

We get more users coming to us through direct channels, like our app. We get them to sign up as members and come back more frequently, giving us valuable data and more opportunities to monetize, which we believe will result in a meaningfully higher average revenue per user over time. We are uniquely positioned to serve these traveler needs, given the durable trust in our brand, the quality of our content, the relevance of our data, and the scale of our audience. Last year, we set the foundation, building teams around product and data and putting core capabilities in place. This year, we're seeing tangible outcomes from our initiatives. The data is clear: Travelers are responding to the improvements we're making in our product, and we're excited about scaling them to drive financial impact.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Before I share highlights on key initiatives over the last quarter, let's cover some of the progress we see across a few of the metrics we outlined in our last call that give us confidence we're heading in the right direction. First, our overall audience has stabilized after an extended period of decline. Specifically, we've seen sustained and stable monthly active users so far this year. While this metric is not the most important indicator of the depth of engagement, it ensures we retain a broad global audience to drive membership and a deeper relationship over time. It also serves as the top of the funnel for our category marketplaces. It's worth noting that in the U.S., where we've launched and scaled many of our initiatives first, we're seeing meaningful year-over-year growth in MAUs. Second, we've seen solid growth in membership.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Our monthly active members, which were declining along with our overall MAUs, has returned to growth this year and accelerated from Q1 to Q2, and we expect this trend line to continue, driven by our ongoing product efforts. Third, we continue to see improvements over the last year in direct engagement, which includes our mobile app, which is one of the clearest signals that travelers are finding value in the changes we're making to the product. In Q2 of this year, direct channel share across all services grew by approximately 450 basis points over last year. While this is still a relatively small overall channel, we see meaningful headroom for growth driven by our strategy. Finally, we continue to see deeper engagement translate into better monetization. Historically, we've seen very low average revenue per user, given our reliance on low-value, flyby traffic.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

It's still early, but the product enhancements we're rolling out are driving meaningfully higher monetization among our highest engaged members and app users, whose ARPU is multiple times higher. For example, in Q2, we observed that travelers who use Trips, our trip planning offering, reached ARPU levels roughly 15x higher than our platform-wide average. This higher monetization has been consistent as we've begun to scale our efforts, driven primarily by experiences bookings today, but with real upside as we introduce more in-app booking across other categories in the future. The formula is simple, when we keep travelers engaged on our platform, we have more opportunities to monetize, not just through clicks, but through higher value transactions as well. Now, let's step back from the outcomes for a moment and focus on the work we're doing to drive impact and accelerate the pace of change. Here are a few highlights.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

In Q2, we continued to extend the use of AI to offer more relevant guidance to more travelers. We scaled AI-powered review summaries to restaurants and experiences, personalizing the planning experience so you can explore things to do, places to stay, and restaurants recommended specifically for you in the app. We expanded Trips internationally to 20 new languages across more than 30 locales. Looking ahead over the next few quarters, we'll continue to introduce new ways for travelers to discover, share, and consume guidance, and strengthen our free membership value proposition, highlighting all the benefits of joining our community by better recognizing our most engaged members. Last quarter, we also launched a large set of upgrades to our mobile app, such as a new home screen and improved navigation that make it easier to explore destinations, plan a trip, and book it immediately, starting with experiences.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

We also introduced hotel booking and rewards exclusively in our app, where we've seen strong early indicators of customer engagement, including better click-through conversion and repeat rates. We were also pleased to see that app users who book hotels spend more on experiences, leave more reviews, and create more trips. We're excited about the role hotel and experiences bookings can play in the traveler journey for our deeply engaged, logged-in members. Moving forward, we'll continue to differentiate the experience in our app with a focus on new features and UX improvements to drive higher conversion rates across our category marketplaces. Finally, over the last few months, we conducted a full funnel marketing pilot focused on driving consideration across channels like Connected TV and social.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

This represented a very small portion of our marketing spend in the quarter, the bulk of which continues to be focused on lower funnel channels to support our legacy offerings. But the pilot performed very well and gave us considerable learnings as we evolve our marketing mix over time to reorient our spend to drive lifetime value in support of our engagement-led strategy. We're excited by the progress we've made at Brand Tripadvisor and the opportunities ahead, but let me be very clear, our near-term financial performance is still heavily reliant on legacy offerings that face well-known challenges. Tripadvisor is, right now, a combination of two very different business models. One is defined by our legacy offerings that are large and profitable and will continue to be an important but less central part of our overall business mix. The other is emerging.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

It's beginning to drive the outcomes I referenced earlier and will shift our mix over time. It's defined by a deeper and more direct relationship with travelers, grounded in membership and the mobile app. It gives us the opportunity to monetize not just through clicks, but also transactions, and not just once in a single session, but over and over again, with less reliance on having to reacquire the customer in paid channels. This gives us a lot of confidence to drive sustainable growth at Brand Tripadvisor as we continue to execute on our strategy. Turning now to Viator, where we delivered revenue of $244 million, growing 13% year-over-year, or 14% in constant currency. Gross booking value grew 8% year-over-year to approximately $1.2 billion.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Adjusted EBITDA was $10 million, or 4% of revenue, representing a $12 million year-on-year improvement. These results reflect our ability to deliver on our stated strategic priorities as we continue to invest across marketing and R&D and make progress driving repeat bookings and unit economics. We continue to deliver value to both sides of our marketplace and sustain our leadership position. On the traveler side, we're making improvements across every part of the product experience. A few of these include checkout flow refinements that drive lower cancellation rates and reductions in payment friction in our Reserve Now, Pay Later option, contributing to uplift in conversion. We're also making progress shifting travelers from web to app, nearly doubling the number of active bookers who log into the app, which is our fastest-growing, highest repeating, and best converting channel.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

We're also excited about redoubling our efforts to give travelers the best app to discover, book, and enjoy the highest quality experiences wherever they are. We continue to extend our reach, balancing performance marketing, affiliate partnerships, brand, and promotions to drive more efficient costs as we better target new and repeat customers over the long term. From a brand perspective, we're seeing improvements in consideration, in particular with high-value travelers, and we've seen almost double the growth in branded search over the last year versus markets where we haven't rolled out creative. On the supply side, we continue to see evidence of the value of our suppliers that our suppliers find in our platform. We offer unmatched access to demand across multiple points of sale, including Tripadvisor, where experience shoppers are the largest and fastest-growing segment of the audience.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

We continue to offer compelling tools and programs to help operators access this demand, grow their bookings, and drive their economics. This includes our Accelerate program, where we've seen GBV from participating suppliers increase from last year, at the same time, that supplier churn remains very low. We're also making improvements to key parts of the operator experience on our platform, including our new supplier onboarding program, which continues to smooth the self-service path and has led to reduction in customer service contact rates and higher customer service satisfaction. At TheFork, we continue to drive profitable growth and deliver value to diners and restaurants across Europe, benefiting from sustained operational efficiencies that continue to improve our unit economics. In Q2, revenue was $42 million, 11% growth year-on-year, or 12% in constant currency.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Importantly, Adjusted EBITDA was $3 million, or 7% of revenue, a $7 million improvement over Q2 last year, representing our most profitable quarter ever. We're driving marketing efficiency, focusing our investment mix to balance how we acquire new customers and drive repeat reservations at greater scale. We've been pleased with the performance in social channels, which are delivering incremental volumes with strong ROI and repeat rates. In TheFork's direct channels, repeat bookings represent a growing share of overall bookings. More than 75% of TheFork's booking volume comes through the app, and we continue to enhance the user experience in that valuable and growing channel. Homepage additions, such as local hotspots, top restaurants by city, and special offers, as well as an improved ranking algorithm, have driven year-over-year conversion improvements.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

We also continue to drive opportunities to enhance TheFork's recognized brand, including exploring new and innovative partnerships to tap into new audiences. We recently piloted a gift card program in one of our key markets, partnering with Vodafone to provide its millions of customers an incentive loyalty reward, as well as promoting TheFork in its media. We think there are more opportunities like this one to pursue in the future. On the restaurant side, our results reflect the value we're providing to over 50,000 restaurants in TheFork network. In the quarter, we drove growth in new restaurant acquisition and stability in active restaurants. Importantly, we achieved significant improvement in sales productivity for new restaurant acquisition. We also laid the foundation for sustained B2B revenue growth, which drove double-digit subscription revenue that gives us confidence in the runway ahead.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Before closing out, I want to reflect on all the progress we're making in each of our segments across Tripadvisor Group, as we continue to pursue our shared vision to be the most trusted source for travel and experiences. We're uniquely positioned, our strategies are aligned, and we're doing the hard work quarter by quarter to execute on our plans that will drive the trajectory of our performance. Of course, we're also watching closely what's happening externally. Recently, we've all observed mixed signals in the macroeconomic environment, as well as ongoing geopolitical tensions. We also see some signs and signals around narrowing international booking windows and moderated pricing. Overall, however, we continue to see healthy travel intent in both our search and survey data that suggests travel remains a priority, and experiences continue to be a mainstay at the heart of travel planning.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

We remain confident about the long-term growth opportunity ahead for travel and are focused on the work to fortify our position and create more value for all stakeholders. With that, I'll turn the call over to Mike.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Thanks, Matt, and good afternoon, everyone. I'll start by reviewing the quarter and then provide our outlook for the third quarter and the remainder of the year. All growth rates are relative to the comparable period in 2023, unless noted otherwise. Second quarter revenue was $497 million, reflecting growth of 1%, which was in line with the expectations for the quarter. Adjusted EBITDA was $97 million, or 20% of revenue, and 200 basis points higher than last year. Adjusted EBITDA was higher than expectations across each of the segments. Turning to segment performance for the second quarter. Brand Tripadvisor delivered revenue of $250 million, which was a decline of 10%. Brand Tripadvisor revenue was slightly lower than expectations, primarily due to the performance of Hotel Meta and experiences in the quarter.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Branded Hotels revenue was $150 million, or a decline of 14%. Hotel Meta performance reflects the weaker demand trends we observed in April, which did not improve in May or June. Lower paid click volume was driven by weaker demand, as well as increased competition in these channels. We continue to manage our paid channels for appropriate returns, as reflected by slightly higher year-over-year contribution margins. Lower free click volume was due, in part, to the impact of the algorithm update referenced on our last call. Pricing continued to be up year-over-year, but at a lower rate than prior quarters. From a geographic perspective, Hotel Meta revenue in the U.S. stepped back meaningfully from Q1 levels, while EMEA and APAC were more in line with Q1 levels.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Finally, we experienced modest declines in our hotel B2B offering, a trend we expected as we continued to transition our go-to-market model to self-service. Media and Advertising revenue declined 2% to $41 million. Growth in off-platform and programmatic revenue was offset by direct revenue and certain campaign timing, which, as noted on the last call, was positive to the first quarter, but negatively impacted the second quarter due to the pull forward of some campaigns into Q1. Experiences and Dining revenue was $48 million, or a decline of 4%, primarily due to a more than 20% decline in our restaurants B2B offering. These results were in line with our expectations as we continue the transition to a self-service model.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Experiences revenue growth was below expectations, particularly in the paid channels, where we witnessed more normalized category demand, combined with the effects of our marketing strategy, which emphasizes profitability at Brand Tripadvisor point of sale. Lastly, other revenue declined 15% to $11 million as we continue to de-emphasize our flights, car rental, and vacation rental offerings in favor of prioritizing investment in other areas more core to our stated strategy. Adjusted EBITDA for Brand Tripadvisor was $84 million, or 34% of revenue, reflecting approximately flat margins year-over-year. Lower paid marketing expense as a percent of revenue was partially offset by increases in new LTV-based marketing campaigns, such as app-focused marketing and social media brand campaigns, to accelerate our engagement-led strategy. It's early, but we like the results that show improved awareness, higher trips creation, and increased direct traffic and app downloads.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Finally, we also saw modest leverage coming from headcount increases across engineering, product, and data functions that underpin the strategic transformation work we've discussed in prior quarters at Brand Tripadvisor. Turning to Viator. Q2 revenue was $244 million, reflecting growth of 13% and 14% in constant currency. The pull forward of the Easter holiday into the first quarter was a headwind to Q2 revenue of approximately 100 basis points of growth. Gross booking value, or GBV, grew 8% to approximately $1.2 billion in Q2. GBV at the Viator point of sale grew at rates higher than total GBV, while Brand Tripadvisor point of sale grew below the total GBV rate. Our Q2 GBV sequential growth declines reflect broader demand trends across Viator's channels, as well as the deceleration in the Brand Tripadvisor point of sale, as referenced earlier.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

We continue to see healthy growth in our paid marketing channels, while our direct channels are growing faster. As Matt referenced, we are pleased with the progress we're making in growing our app channel, as it is the fastest growing channel, and we believe we still have a lot of optimization opportunities ahead of us. We are still seeing strong growth in repeat users, and this growth has been consistent quarter-over-quarter. Importantly, our repeat users come with lower marketing costs. Viator Adjusted EBITDA was $10 million, or 4% of revenue in the quarter. The year-over-year margin leverage of approximately 500 basis points was driven primarily by lower sales and marketing as a percent of revenue as a result of a more favorable free versus paid channel mix.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

People costs as a percent of revenue were approximately flat year-over-year, despite continued investment in our product experience, especially in the app, and growing supply in our marketplace. At TheFork, revenue grew 11% as reported and 12% in constant currency terms to $42 million. Top-line results were driven by balanced growth in both pricing and booking volume. The pull forward of Easter holiday into Q1 of this year resulted in a headwind up to Q2 revenue of approximately 200 basis points of growth. Adjusted EBITDA at TheFork was $3 million, or 7% of revenue, an improvement of 18 percentage points from Q2 of last year. Lower people cost as a percent of revenue was the primary driver of the year-over-year, year-over-year leverage. Now, turning to consolidated expenses for the quarter.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Cost of revenue was 9% of revenue, an increase of 100 basis points, due primarily to higher cloud costs across Brand Tripadvisor and Viator, higher transaction fees at Viator, and higher media production costs at Brand Tripadvisor. Sales and marketing was 53% of revenue and was lower by approximately 200 basis points due to lower people and performance marketing costs at Brand Tripadvisor. Technology and content costs were 15% of revenue, approximately 100 basis points higher, primarily due to higher people costs at Brand Tripadvisor and Viator. G&A expense as a percent of revenue increased by nearly 200 basis points, which was due to several items.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

We incurred a one-time expense in the quarter of approximately $4 million related to the recently enacted Canadian Digital Services Tax, which required retrospective application to the past periods, an expense of approximately $3 million related to a previously granted one-time share-based compensation award to a former senior executive, and approximately $2 million in costs related to the Special Committee process. G&A as a percent of revenue for the quarter would have been approximately flat year-over-year without these expenses. Now to cash and liquidity. Operating cash flow was $53 million, and free cash flow was $37 million.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

A key driver of the year-over-year decline was $141 million in cash outflows related to the previously disclosed 2014 to 2016 IRS transfer pricing settlement, versus last year's outflow of approximately $113 million related to the 2009 to 2011 IRS transfer pricing settlement. As part of this year's settlement, we expect to receive a refund of approximately $25 million-$35 million in Q3 or Q4, which would bring the total expected settlement to approximately $110 million. Other drivers of the year-over-year decline were changes in other working capital, including lower deferred merchant payables.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

We ended the quarter with nearly $1.2 billion of cash and cash equivalents, an increase of $109 million from December 31, 2023. During the quarter, we repurchased approximately 1.4 million shares at an average price of $18.28 per share, spending approximately $25 million. We have approximately $200 million remaining in our current authorization. Finally, subsequent to the quarter end, on July 8, we closed on a Term Loan B facility in the amount of $500 million at SOFR + 275. Proceeds were used to redeem the $500 million High Yield Notes that were due on July 15, 2025. Turning to our outlook for the third quarter, which incorporates trends we saw in the business through July.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

In Hotel Meta, we continue to see demand headwinds in July, and our outlook assumes that we see a continuation of these trends for the remainder of the quarter. Also, given what we're seeing in the normalization of pricing trends across the hotel category, we are assuming a softening of pricing relative to the last few quarters. For experiences across the group, our outlook assumes continued normalization of demand, reflecting the overall travel market, although still benefiting from higher growth relative to other travel categories, given the secular opportunities. Incorporating this outlook for the third quarter, we expect consolidated revenue growth to be approximately flat to a few points down year-over-year. At Brand Tripadvisor, we expect increasing year-over-year declines from Q2 levels, driven by the more volatile macro demand picture in Hotel Meta.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

At Viator, we expect revenue growth to moderately step back from Q2 levels, driven by macro demand trends and continued point of sale mix pressure, as we just discussed. At TheFork, we expect growth in line with Q2 growth. For Q3, we expect consolidated adjusted EBITDA margins to be down year-over-year by approximately 350-450 basis points. Year-over-year, margin improvement at Viator and TheFork will be offset by year-over-year deleverage at Brand Tripadvisor of approximately 8-10 percentage points. The deleverage at Brand Tripadvisor is due to a combination of the lower revenue expectation and planned spend in the areas of headcount and LTV-based marketing experimentation in support of our future growth initiatives.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Given our outlook for Q3, we now expect full-year consolidated revenue growth of low single digits, which is at the low end of our previous range. We also expect consolidated adjusted EBITDA margins deleverage of approximately 100-200 basis points. For the full year, we expect revenue declines in Brand Tripadvisor of mid- to high-single digits and margins down year-over-year by approximately 400 basis points, which is down slightly from our last update. This outlook assumes that we see revenue declines in our Hotel Meta offering moderating in the fourth quarter. For Viator, we assume modest acceleration of growth versus Q3 in the fourth quarter as we lap an easier comp due to the start of the Mideast conflict. Our expectation for improved profitability versus last year remains unchanged, and we continue to realize increased operating efficiencies in the business.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

This easier comp will also benefit experiences revenue growth at Brand Tripadvisor. At TheFork, our revenue expectations remain unchanged, and we still expect a significant year-over-year improvement in Adjusted EBITDA for the year. With that, I'd like to turn the call back over to the operator to begin Q&A.

Operator

Thank you. One moment while we compile the Q&A roster. The first question comes from the line of Ben Miller of Goldman Sachs. Ben, please go ahead.

Ben Miller
Ben Miller
Vice President of Global Investment Research at Goldman Sachs

Thanks for taking the question. I guess, just given the importance of driving more app-based and logged in members, I wanted to touch on just your own marketing efforts and any color you can share on how you're optimizing your marketing efforts around targeting those users that have a high likelihood of converting to, to being a logged in member, as opposed to, casting a wide kind of top of funnel net there. Thanks.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Yeah. Hey, Ben, it's Mike. I'll start and Matt can chime in. So, it's a great question. It's central to really the work we're doing around at Brand Tripadvisor. As you said, so much of this has been product-led transformation, and we're really excited about what's developing in the app both with the hotels category, but obviously with experiences in combination with our trip planning tool, which we've been investing heavily behind. You know, I think there's a lot of marketing strategies which we do employ. You know, a lot of it is around, you know, when we have a massive top of the funnel with our at Brand Tripadvisor.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

When we see users that are activating across the surfaces, there are a lot of different things we can do to stimulate or inspire or incentivize certain behaviors to download the app and get them to start interacting in the app. And so that, that's one strategy we certainly will be employing. And then there's a lot of just you think about just different marketing campaigns around you know how you're targeting users, whether it be in app downloads, whether you are incentivizing certain people to a behavior with, again, with an incentive that we will be looking at exploring and have been doing for some time.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Yeah, Ben, I just want to add, it's Matt. Our marketing at Tripadvisor has traditionally been same session. It's been about, basically bringing people in and taking advantage of the fly-by traffic. We can shift from same session to LTV-based bidding. We've got data now that we can use to target. We've been very lower funnel, and as we move mid to upper funnel, we can get a lot of the learnings that we've had in what we've done at Viator and TheFork, frankly, about how we can leverage that data to drive people into membership and the app where they engage, and we can let the product do the work. And I think that the early movement in the metrics that we shared gives us a lot of confidence that we've got a good, a good plan ahead for that.

Operator

One moment for your next question. The next question comes from the line of Naved Khan of B. Riley Securities. Naved, please go ahead.

Naved Khan
Naved Khan
Managing Director of Technology Research at B. Riley Securities

Yeah, hi. Thanks a lot. Two questions from me. Maybe just on the increase in the app users, that's great to see. But in terms of the P&L effect, and when can, you know, this be more meaningful in terms of, maybe, you know, stabilizing the core business or maybe even returning it to growth? How should we be thinking about that transition? Is it like a 12-month window, 12 months away, or something that's further out? That's one. And then on the share buyback, you still have, like, authorization of $200 million remaining. Given where the stock is, how should we be thinking about the propensity to spend on buyback versus maybe other opportunities? Thanks.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Hey, Naved, thanks for the questions. Yeah, I'll start with the buyback. Yeah, so we still have a good amount left in that. You know, we have said consistently, you know, our approach has been very programmatic in that. You know, I would say this quarter, we are very much focused on, you know, setting our capital structure as well and understanding true liquidity with the refinance of the high yield. So I think, you know, we will always evaluate this and find the best opportunities, whether, you know, whether it be programmatic or more opportunistic. And certainly, we will engage in those discussions, you know, going forward as we think about, you know, where the stock may or may be and versus our liquidity, our liquidity profile.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Yeah, and the way to think about what we're seeing in the app, I've said in the past, our strategy is very much about moving away from the big number at the very top of the funnel, which includes a lot of flyby in-and-out traffic, frankly, a very low percentage of which clicks through, and we monetize. And to think about that sort of, the traffic that is actually coming in and wants to use our tools is showing us that they're willing to plan with us, leverage our content, getting the data that comes along with that, moving that into membership, really enhancing the value of the membership and getting more people to use the app. And we're super excited that, the early returns on that look very good.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Now, that direct traffic, that engaged traffic, membership, and app, it's a subset of our business today, and we see it as an opportunity to scale it. And we think that, what we've seen is that we're responding to what travelers really want from us, and the engagement metrics are translating through to the monetization that we described, the many multiples more that we can do. So, while it's small, it's something we can scale, and when we get marketing and product working together, I think that you will see it become a more meaningful, percentage of our overall, financial performance.

Naved Khan
Naved Khan
Managing Director of Technology Research at B. Riley Securities

Okay, maybe a quick clarification, if I may. If I would think about Viator margin for this year, are we still aiming to have some improvement year-on-year, or how should we think about that?

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Oh, yeah. Yeah, Naved, Mike, definitely, if I wasn't clear about that, yeah, we are expecting a meaningful margin improvement in Viator, for sure.

Naved Khan
Naved Khan
Managing Director of Technology Research at B. Riley Securities

Thank you.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Yeah.

Operator

One moment for your next question. The next question comes from the line of Steven Ju of UBS. Steven, please go ahead.

Analyst at UBS

Hey, good afternoon, guys. This is Jeremy on for Steven. So you called out improvements in Viator cancellation rates from optimization. How much more room do you think there is across Viator in the business for optimization? And can you maybe walk through some of the areas you're excited about? And then my second question is on hotel booking and rewards, are you expecting any sort of P&L impact? And would you potentially roll this out to experiences as well? Thank you.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Yeah, thanks, Jeremy. Look, on Viator, you know, there's a lot of changes that happen every quarter to optimize the funnel at Viator. We have changes that will, you know, bring down cancellation rates because we've done a better job of serving the consumer with what they expect and gotten them to the right product, and given them a great experience, and then they come back, and we see improvements. There's a lot that we're doing with personalization, to personalize the product sort. We're obviously always thinking about optimizing the app. One of the things we're excited about is how we're thinking about post-booking, logistics and, really leveraging consumer data to deliver a more personalized and effortless booking experience. Obviously, we're leaning into loyalty, and a rewards program that'll really drive repeat, behavior.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

We're focused on our suppliers and making sure that they have the best experience, so we have the best supply, and I'm pleased to say that supply continues to grow, and we feel really good about the quality work we're doing there as well. And then, of course, you know, we're leveraging AI to think about the sort, to think about how we augment our customer service and other parts. So we're always looking at opportunities to improve the metrics on that funnel, and I think you see it in the way that that it delivers. The second part of the question, I think-

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Yeah, on the rewards. Yeah, I'll take that, Jeremy. Yeah, so listen, I think rewards and incentives are a powerful tool for us and really you've seen that across the travel ecosystem. We have built our products with that in mind, and you could say that at both Brand Tripadvisor, what we're doing in the app, you could say that certainly at Viator and even TheFork. So we think about this across all of our brands. You know, your question directly of, you know, impact on the P&L, I would say... You know, we've been very disciplined on our performance marketing spend, and ROAS and ROIs. I view this really as another way of, you know, thinking about customer acquisition and acquiring stickiness in the customer.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

And so we have to balance that with other investments around acquisition. You would expect us to do that. So it's an area that we are excited about. It's a tool that really can drive engagement, but we'll think about that holistically as we think about overall marketing and investments.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Jeremy, just to be clear, you asked if we would roll it out on experiences. It already is rolled out on experiences. You can book experiences on our app, we're adding hotels, and there's other category opportunities in the future. So we think this ability to come in and integrate trip planning with booking in the app for logged in members is a real meaningful opportunity for us. We're excited to go after it.

Analyst at UBS

Great, thank you.

Operator

As a reminder, to ask a question, please press star one one on your telephone. I am not sure. Oh, here we go. We have one more. One moment for your next question. The next question comes from the line of Wei Fang of Mizuho Securities. Wei, please go ahead.

Wei Fang
Wei Fang
Director at Mizuho Securities

Thank you for taking my question. Can you just give us a quick update on the Google kind of search policy changes, impact? I remember last quarter you guys called out on the Meta business, you already kind of retrieved most of the impact, right? And then overcome that, and I'm not sure about the experience. I was just curious if there was anything you can call out for, for the experience side. And then secondly, on TheFork, do you have currently a target, like a restaurant count, like, coverage for year-end? Thank you.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

Yeah, I'll take the first part. Yeah, on the Google algo, we called, what we called out last quarter, we did say there was an algorithm change. It was very far reaching and took a long time, right? So it was rather disruptive in April into May, and partly, it was an impact on our free traffic, impacting our financials for the quarter. You know, that algo update, you know, our teams do a really good job of reacting to that. And as we said, you know, in the hotel category, had clawed back most of those rankings as we came through the quarter, which is true, right? So, you know, I think it still had an impact on the quarter.

Mike Noonan
Mike Noonan
CFO at Tripadvisor

I think much of the other financial impact of the quarter wasn't directly related to that. You know, that, that was more reflective of that in combination with some of the demand trends we saw in both free and paid channels. So I wouldn't. Our financial performance in Hotel Meta was not all related to that, to the algo change, to be very clear.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

I would, I would just remind you, this is exactly why we put the strategy in place that we put in, and that we're focused on these direct relationships with members in our app and translating that engagement to monetization. You know, I think the combination of our teams responding really well, and our strategy is gonna serve us well. The second part of your question we didn't hear, so if you had a second part, can you repeat it?

Wei Fang
Wei Fang
Director at Mizuho Securities

I was just curious, are you targeting additional restaurants that can sign now for the year-end? And what would them will be versus the what current number you have?

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

Yeah. So we're really pleased with the progress we're making at TheFork. Thank you for asking about it. And we believe, you know, the business is on track to deliver growth and profitability this year, as we said we would aim to do in our strategy. And we're benefiting from a lot of different things that are driving unit economics and leverage, and part of that includes our enhanced sales productivity with restaurants, as you described. So we've seen both stability and active restaurants, and we're growing the count. But more importantly, we're seeing better restaurant ARPU at lower CAC.

Matt Goldberg
Matt Goldberg
President and CEO at Tripadvisor

And so you combine that with the marketing efficiency on the B2C side, and, you know, the product improvements we're making in the app to drive conversion rates and improve B2B revenue, and you've got and of course, the partnerships that I mentioned. You've got a recipe there where, you know, we're seeing profitability improving with a healthy growth rate, and we're gonna deliver that, you know, margin for the full year as we described.

Wei Fang
Wei Fang
Director at Mizuho Securities

Awesome. Thank you very much.

Analysts
    • Angela White
      VP of Investor Relations at Tripadvisor
    • Ben Miller
      Vice President of Global Investment Research at Goldman Sachs
    • Matt Goldberg
      President and CEO at Tripadvisor
    • Mike Noonan
      CFO at Tripadvisor
    • Naved Khan
      Managing Director of Technology Research at B. Riley Securities
    • Wei Fang
      Director at Mizuho Securities
    • Analyst at UBS
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