What happened
Shares of TripAdvisor Inc. (TRIP -0.53%) were moving higher today as the travel recommendation specialist posted better-than-expected results in its third-quarter earnings report as profits rose sharply as the company better controlled operating expenses. As a result, the stock was up 15.6% as of 11:34 a.m. EST.
So what
TripAdvisor continued to struggle on the top line as revenue grew just 4% to $458 million, which was well short of estimates at $469.1 million. Revenue from hotels, the company's biggest segment, declined again, slipping 2% in the quarter to $305 million. However, the non-hotel segment, which consists of restaurants and experiences, saw another quarter of strong growth with revenue up 20% to $153 million.
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The company significantly slashed, or optimized, its marketing expenses as they fell 17% to $206 million, or from 56.2% to 45% as a percentage of revenue. That drove outstanding bottom-line growth as adjusted earnings per share doubled from $0.36 to $0.72, crushing expectations at $0.48.
CEO Steve Kaufer summed up the performance, saying, "We delivered a strong third quarter, delivering increased operating efficiency while investing for long-term profitable growth. Product enhancements, platform expansion and progressive marketing optimizations continue to hit the mark and contributed to improved financial results."
Now what
Management said performance was improving ahead of expectations, and issued strong guidance, calling for a mid-20% increase in adjusted EBITDA for the full year, and for improving revenue growth in the fourth quarter. The company also expects further monetization improvements in 2019 as well as increased return on advertising spend. Considering that marketing is by far its biggest expense, controlling that line item will be key to delivering solid profits in the future. With the latest report, it appears that TripAdvisor's turnaround is finally gaining significant traction.
