TripAdvisor's(NASDAQ:TRIP) business is barely growing, but Wall Street couldn't be happier. The online travel booking specialist's stock jumped over 20% immediately following its first-quarter earnings report that showed a 2% sales uptick while earnings fell 62% to $5 million.

As usual, there was much more to TripAdvisor's report than just those top and bottom line numbers. Below, we'll highlight a few important points that management made about the latest operating trends in their conference call with Wall Street analysts.

An engaged user base

Scale and global reach give TripAdvisor a differentiated competitive position and present us with unique, attractive growth opportunities within the $1.6 trillion travel ecosystem.

TripAdvisor remains a vibrant community of travel fans. In fact, the number of user reviews and opinions spiked 26% to 630 million as the monthly user base rose 12% to 433 million. Engagement was particularly strong on mobile devices, which just passed 50% of the user base.

A slide from management's investor presentation summarizing engagement metrics.

M = million. Image source: TripAdvisor investor presentation.

The company has a few big initiatives aimed at protecting its leadership position in the industry and keeping those engagement metrics humming. These are focused on improving the user experience and directing more cash toward brand marketing.

Smarter investments in marketing

Our 2018 focus remains on changing the profit trajectory of our hotel business, and Q1 results showed nice progress. Longer-term, our focus is to get our hotel segment back to sustainable, profitable revenue growth.

Consistent with their recent strategic shift, management pulled back on marketing spending in the core hotel business. The cost-saving measure led to lower revenue as shopper traffic slowed to a crawl.

However, the initiative didn't slow results by as much as executives had feared. At the same time, it boosted segment profitability to its highest point since 2016 as adjusted earnings held steady even though revenue slipped by 5%.

Getting users to try new things

We are capitalizing on our platform's distinct supply and demand advantages to enhance the [non-hotel] user experience, to drive value for partners and to drive diversified revenue growth.

The non-hotel business, which includes bookable experiences like tours and restaurant reservations, shot up to a 36% growth pace from 20% last quarter. CEO Steve Kaufer and his team believe they're just scratching the surface of this huge potential market, though, and that's why their focus now is on boosting the supply of bookable products. The portfolio passed 100,000 experiences this quarter, up 86% year over year. The non-hotel segment lost money this quarter, but earnings trends improved significantly.

A cash-rich business model

Cash provided by operating activities was $174 million, or 46% of revenue, up from $134 million in Q1 2017. Capital expenditures were $15 million, or 4% of revenue, and have remained relatively flat.

Management highlighted the fact that they haven't had to boost capital investments since late 2015, and this discipline helped cash flow improve sharply. It's a testament to TripAdvisor's capital light operating model, they said, that free cash flow jumped 37% to $159 million this quarter. 

Brighter outlook

Our solid start to the year makes us more positive [about adjusted earnings targets], and we now expect to deliver year-over-year consolidated adjusted [earnings] growth in 2018. We are also incrementally positive about our revenue prospects.

TripAdvisor's outlook edged up on both the top and bottom lines thanks to the success they've seen at building profitability back into the hotel booking business. They now predict slight adjusted profit gains as opposed to the flat result they forecast back in February.

Those aren't particularly impressive forecasts given that industry peers like Booking Holdings and its Priceline service are growing at over 20%. But the numbers suggest that TripAdvisor might finally be turning the corner toward steady sales gains and sustainable, and expanding, profitability.

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