After its third-quarter earnings report back in November left shareholders running for cover, TripAdvisor (NASDAQ:TRIP) had to respond with aggressive initiatives to reassure investors that it could turn its impressive revenue growth into bottom-line gains as well. Coming into Wednesday afternoon's fourth-quarter report, TripAdvisor shareholders specifically wanted to see faster gains in earnings than in sales, and the company didn't disappoint them. With the company now apparently firing on all cylinders, the big question some investors are asking is whether TripAdvisor will remain an independent company throughout 2015 or become a takeover target for one of the giants in the industry. Let's look more closely at TripAdvisor's latest financials and what they say about how 2015 will be for the company.
TripAdvisor's growth soars into the skies
From TripAdvisor's headline numbers, the company's progress was evident. Sales jumped 35% from the year-ago quarter to $288 million, which was about 1% higher than what investors had thought to see from TripAdvisor. Earnings per share actually fell slightly short of the more optimistic assessment among those following the stock, but even so, adjusted net income of $52 million led to earnings per share of $0.35, up 73% from the year-ago quarter.
TripAdvisor's fourth quarter capped a strong year for the company. For 2014, revenue climbed 32%, helping to send adjusted earnings up 16%. Cash flows picked up by 11% during the year, and TripAdvisor's websites saw traffic of more than 2.5 billion unique visitors.
Looking at the travel site's various segments shows how TripAdvisor used its three-prong approach to deliver growth. The fastest growth came from subscription- and transaction-based revenue, which nearly doubled from the previous year's quarter. Click-based advertising continued to play a key role, climbing 25% despite suffering about a five-percentage-point decline from the strong dollar. Display-based advertising was the slow-growth segment for TripAdvisor, but even it saw revenue pick up by 13%.
Geographically, TripAdvisor saw gains across the globe. The company's revenue is split about equally between its domestic and international business, and North American sales climbed 35% during the fourth quarter. Internationally, Latin America was the strongest performer, with sales gains of 89%, but Europe's 39% jump was also unexpectedly strong. The Asia-Pacific region held results back with an increase of just 13%, but overall, TripAdvisor has done well at building its presence throughout the world.
What TripAdvisor expects in 2015
Despite its growth, TripAdvisor sees 2014 largely as a stepping stone to bigger and better things. "2014 was a year in which we laid the foundation for TripAdvisor's future," said CEO Steve Kaufer, "[and] we have begun enabling more users to complete their booking in our three largest demand categories: hotels, attractions, and restaurants. This makes TripAdvisor the most comprehensive one-stop shop in travel." In the coming year, Kaufer sees TripAdvisor starting to emphasize its breadth more aggressively, showing the full value of its services compared to those of its competitors.
In particular, TripAdvisor has huge potential in going beyond its historically strong area of hotels. Over the past year, TripAdvisor more than tripled its revenue from sources other than hotel-related sales, but even so, it still represents just 13% of the company's total revenue.
Moreover, TripAdvisor has done a good job of penetrating the mobile-device arena, with substantial growth in engagement. As mobile becomes increasingly important in 2015 and beyond, TripAdvisor will have to keep working hard to attract new users and get them to use the site's mobile capabilities.
TripAdvisor shareholders were ecstatic with the results, sending shares up 8% in the first hour after the company's announcement and more than overcoming the 4% drop in the stock leading up to its earnings release. Despite that optimism, though, TripAdvisor will have to navigate an increasingly competitive environment in online travel during 2015, while also dealing with inevitable takeover rumors. Nevertheless, for investors who have struggled with the stock's decline recently, TripAdvisor's latest news points to a potential rebound that could help make their patience pay off.