Image: TripAdvisor.
Online travel has become a cutthroat business, but TripAdvisor (TRIP +1.61%) has performed well in 2015 by standing up to its competitors with ambitious plans to stake its claim to the rapidly growing industry. Coming into Wednesday afternoon's first-quarter financial report, TripAdvisor shareholders had already seen substantial gains so far this year, but they wanted assurances that the travel site would be able to keep producing growth in sales that would eventually work its way down to the bottom line. Although TripAdvisor didn't give investors higher earnings, the company nevertheless kept its revenue moving higher and appears poised to keep growing well into the future. Let's take a closer look at TripAdvisor and what its latest numbers have to say about the company's prospects.
TripAdvisor keeps making sales
TripAdvisor had mixed news to give investors in its first-quarter numbers, even if many of those following the stock didn't seem fazed by the results. Revenue rose 29% from the year-ago quarter to $363 million, and those numbers even include a seven percentage point hit from the strong U.S. dollar. On a GAAP basis, net income fell about 7%, but adjusted earnings were flat at $0.47 per share compared to the first quarter of 2014. That was a big letdown from the better than 70% year-over-year growth in earnings that TripAdvisor reported last quarter.
A closer look at the various ways that TripAdvisor makes money shows the shifting nature of the business. As we saw last quarter, TripAdvisor had the most success with its subscription- and transaction-based revenue, which posted gains of 88% from a year ago to $79 million. Click-based advertising is still an essential element of TripAdvisor's business model, with gains of 20% to $249 million even though the strong dollar again cost the company seven percentage points of gains. Meanwhile, display-based advertising continues to be the lagging segment of TripAdvisor's three divisions, but it managed to boost its revenue by 9%.
TripAdvisor enjoyed better results internationally than it did in its domestic business, despite solid performance around the world. North American revenue jumped 25% and saw its representative share of TripAdvisor's total sales fall again during the quarter. Latin America sales climbed 90%, and 33% gains in Europe, the Middle East, and Africa also outpaced the U.S. segment. Even in the Asia-Pacific region, TripAdvisor had 20% higher sales, and overall, foreign revenue made up more than half of TripAdvisor's overall business.
Image: TripAdvisor.
Can TripAdvisor keep climbing from here?
TripAdvisor has even more ambitious plans for the future. As CEO Steve Kaufer said, "Content and community continues to grow, we are amplifying our 'Plan, Compare, and Book' message, and we are driving bookings across hotels, attractions, restaurants, and vacation rentals." Combining all of those offerings should allow TripAdvisor to gain all the benefits from maximizing its cross-selling potential and give customers the one-stop shopping experience the company hopes they really want, especially in light of the integration of its attraction and restaurant platforms.
Still, TripAdvisor has a lot of progress to make before it can truly call itself a balanced company. Hotel-related sales still make up 88% of TripAdvisor's revenue, and hotels bring in all of the company's operating profit. Yet operationally, TripAdvisor has moved forward with initiatives to bolster its growth, including 190 million mobile-app downloads, 340 million monthly unique visitors to its website, and consistently rising numbers of reviews.
Despite missing short-term earnings expectations, TripAdvisor shareholders seemed pleased with the report, as the shares jumped nearly 5% in the first hour and a half in after-market trading following the announcement. The stock has plenty of ground to make up from its highs last summer, but investors are giving credit to TripAdvisor for the progress it's making -- even if it hasn't come at quite the pace that they might prefer to see. If the company can take the next step and start bolstering its profitability, then that's when the best share-price gains could finally start kicking in.
