TRIP 4Q CONFERENCE CALL NOTES

Hotel shopper growth a little disappointing in Q4 but meta hit neutrality in December

CONF CALL

  • 25% growth in hotel shoppers in Q4; 36% for the year - strength in UK and USA
    • 50% total traffic growth
    • 4 new point-of-sales in 2013; plan 8 more in 2014
  • In 2014, mgmt wants to integrate photos from Oyster acquisition into TRIP, while working on a more engaging member experience on mobile, and have plans to make TRIP membership further come to life for users. 
  • New TV spot due out Spring 2014
  • Meta: bidding landscape matured in Q4. CPC uptick in Q4, consequently resulting in resident per hotel shopper growth
  • Tablet:  made further improvements on new native app
  • TripConnect:  remains in early stage of adoption curve
  • Display:  sold impressions up 34% YoY (larger global sales force)
  • Business listings:  69k subscriptions, up 38% YoY;  better client-facing tools 
  • 2014 - free to list platform - expect more improvements
  • Daodao:  strong demand for international demand for repeat users; remain in investment mode
  • No margin target
  • May take a short-term hit for the benefit of long-term goals
  • Click-based:  Stronger pricing from meta leads, offset by smartphone growth and international traffic growth; smartphone impact intensifying given strong hotel shopper traffic on that device
  • Meta transition achieved revenue neutrality in December
    • Saw more bidders per property on average
    • More properties with at least one bidder
    • Increasing CPCs
  • Model is highly sensitive to CPC pricing.  Positive trend will continue into 2014
  • Display:  Better sell-through rates in APAC and EMEA; also easy Q4 comps
  • Subscription:  Sales productivity, pricing improvements in business listings and increased brand awareness in vacation rentals
  • International revenue (other than dot com): increased slightly as a % of total growth based on hotel shopper growth globally and strong performance of display/business listings products overseas
  • Q4 expenses increased sequentially to 75% of revenues due to timing of TV ad campaign
  • Effective tax rate of 28% is a good run rate
  • Diluted share count will increase 1-2% by the end of 2014
  • 4Q capex was 8% of revenues; 
  • 2014 capex as a % of revenue will remain in-line with 2013 exit rate
  • Paid $35MM to acquire 6 companies
  • Repurchased $145MM in 2013; $100MM repurchase plan remaining 
  • Click-based revenue expected to accelerate throughout the year; low twenties growth expectations in 2014
  • Mid-to-high teens display rev growth in 2014; up against very strong 2013 comps; does not expect very strong 4Q growth rate to recur
  • Low 50s growth from subscription, transaction, and other business lines
  • 2014 revenue growth guidance:  mid 20s
  • 2014 EBITDA growth guidance in line with revenue growth - mid 20s
  • Try to give conservative forecast

Q & A

  • Hotel shopper comp in 1H 2014 will be tough
  • No comment on assisted bookings product timeframe; fully committed to building it in 2014. May launch on other platforms but right now wait and see
    • Assisted bookings disruptions will be less than the meta disruptions
  • Onsite conversions:  nice progress with travelers moving down the funnel 
  • Leads have been more valuable for clients compared with 6 months ago;  more likely for clients to finish the transaction
  • TV ad campaign:  raised awareness in all 4 markets. Pleased with effort but only the beginning.  Looking for harder-hitting campaign.
  • Display advertising seasonality:  couple of larger orders dropped into the quarter that normally does not happen.  Q4 is seasonally very volatile.  This big uptick is not in the Q4 forecast for 2014.
  • TV ad spend correlation with hotel shopper growth:  expect meaningful growth via TV spend but too early to tell
  • Non-hotel shopper traffic growing worldwide:  nothing but upside  
  • Meta revenue neutrality:  by November, they saw some price increases but pricing picked up in December and continued into January.  Not concerned about breakage. 
  • Monetization on smartphone have not been where it should be
  • Hotel shoppers:  includes tripadvisor mobile website, does not include daodao, does not include native shoppers on Android/iPhone
    • Q1 2014 will have full quarter of native shoppers
  • Marketing/selling expense Q4 ex TV spend impact:  EBITDA margins would have been closer to previous quarters
  • Outside of Summer Olympics, other events are too small to impact results
  • Business subscriptions: 775k hotels on platform; of those, >300k registered owners (69k subscribers)
  • Traffic:  50% hotel shoppers, 50% non-hotel shoppers
  • 4Q headwinds/tailwinds:
    • International/mobile continue to drag on traffic in 5-10% range; mobile headwind has strengthened; favorable FX by a point and a half.  Meta (revenue/per hotel shopper): neutral in December; 
  • 2014 headwinds/tailwinds:
    • Headwinds with international and mobile.  Hope assisted bookings will help the mobile segment.  Meta should be a tailwind.