TripAdvisor (TRIP -1.00%) has had to deal with a long period of ups and downs, as the online travel service worked hard to expand its scope to go beyond travel reviews and offer direct booking services to customers. For a while, TripAdvisor had a lot of trouble producing consistent strong profit growth, which stood out among competitors that in many cases had experienced impressive bottom-line performance for years.

Coming into Wednesday's third-quarter financial report, TripAdvisor investors wanted the company to get over its challenges and post solid growth. The travel website's bottom-line performance was amazing, and those who've waited impatiently for signs that a long-term turnaround might be taking shape finally got some long-awaited reassurance that the future could look brighter.

Building with TripAdvisor logo and with several people walking in, with owl logo superimposed.

Image source: TripAdvisor.

The sky's the limit for TripAdvisor

TripAdvisor's third-quarter results were generally strong. Revenue growth of 4% to $458 million was somewhat troubling, given investor expectations for 7% top-line gains. But TripAdvisor managed to make the most of its sales, as adjusted net income doubled to $101 million and sent adjusted earnings to $0.72 per share, far exceeding the consensus forecast among those following the stock for just $0.48 per share on the bottom line.

Hotels continued to weigh on TripAdvisor's overall sales results, with a 2% drop in segment revenue holding back the entire business. It took a 20% jump in non-hotel revenue to keep top-line figures moving higher. Yet from a profit standpoint, the situation was reversed, with adjusted pre-tax operating earnings rising 94% for the hotel segment but picking up just 7% on the non-hotel side of the business.

Looking more closely at the hotel segment, display-based ad and subscription revenue was the sole bright spot, enjoying a 7% rise in revenue. A 1% drop in transaction and click-based ad sales was discouraging, but it was still six percentage points more favorable than TripAdvisor managed in the second quarter. Other revenue, including money from branded websites and other miscellaneous sources, once again posted big declines of more than 25%, costing TripAdvisor the chance to see its overall hotel business achieve sales growth at the segment level.

Fundamentally, TripAdvisor had mixed success. Average monthly unique visitors were up 8% to 490 million, although hotel shopper counts were down 5% to 160 million in the same period. Revenue per hotel shopper inched higher by 5% to $0.41, ending a long streak of zero or negative moves for the metric. TripAdvisor now offers more than 700 million reviews and opinions, with 2.1 million accommodations, 1 million travel activities, and 4.9 million restaurant listings sending total listings above the 8 million mark.

What's next for TripAdvisor?

CEO Steve Kaufer summed up the quarter well. "Product enhancements, platform expansion, and progressive marketing optimizations continue to hit the mark," Kaufer said, "and contributed to improved financial results." CFO Ernst Teunissen added comments about growth in the non-hotel area as well as revenue-per-hotel-shopper metrics. In his words, "We are on track to deliver strong profit growth in 2018, and we are well-positioned heading into 2019."

TripAdvisor's outlook for the remainder of 2018 was generally favorable, including expectations for adjusted pre-tax operating earnings to grow by percentages in the mid-20s. Improvements in overall revenue should come in the fourth quarter, with contributions on both the hotel and non-hotel sides of the business. Although hotel shopper counts will likely decline, revenue per shopper should climb enough to offset that negative impact, and growth in experiences and restaurants should also contribute. Non-hotel revenue growth for the full 2018 year should have a percentage rise in the mid-20s as well. Further out, TripAdvisor sees strong growth in adjusted pre-tax operating earnings for 2019.

TripAdvisor shareholders reacted favorably to the news, and the stock was higher by 8% in after-hours trading following the announcement. With the online travel specialist finally getting some traction in accelerating bottom-line growth, investors are hopeful that TripAdvisor has turned the corner and will keep growing.