TripAdvisor (TRIP) reports after the close and investors will be watching to see if the company can grow amid increasing competition and currency headwinds.
Shares of TRIP are up 23% year to date, but most of the move came from the announcement that Marriott International (MAR) would join TripAdvisor's instant hotel-booking platform later this summer.
TripAdvisor reported first-quarter revenue of $363 million, up 29%, which missed the Street consensus estimate of $365 million. Management said the strong dollar took 200 basis points out of the results. Adjusted EBITDA increased a disappointing 4% to $127 million.
Average monthly users rose 31% to 340 million, as the company has been able to attract a larger global user base. Vacation rental listings were up 18% to 700,000, and the company added more than 20 hotel clients to its instant book platform.
Click-based advertising revenue increased 20% to $249 million and represented 69% of total revenue. Subscriptions and other revenue climbed 88% to $79 million and were 21% of total revenue. Display advertising made up the rest and rose 9% to $35 million.
The hotel segment increased 20% to $320 million and represents 88% of total revenue. But the rest of the "other" revenue was mostly driven by acquisitions. The "other" segment increased 187% to $43 million. The company added Portugal-based Best Tables, a restaurant booking company, to its stable of tuck-in acquisitions. Since 2014, the company has acquired nine companies.
I think TRIP's growth rate is slowing in the face of increased competition and foreign currency. In 2014, the company grew 32%, but revenue estimates for 2015 call for top-line growth of 27% and just 23% the year after. At the same time that revenue growth is slowing, the company is spending more on advertising. Adjusted EBITDA is getting squeezed. I don't think the company can exceed last year's 37.6% adjusted EBITDA margin.
Given that scenario, I can't see TripAdvisor getting any multiple expansion. Unless the company gets some operating leverage from all those recent acquisitions, I'd say TripAdvisor's shares are on vacation for a while.