Hedgeye - TRIP 4Q CONFERENCE CALL NOTES

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

CONF CALL

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

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

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

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;

Headwinds with international and mobile. Hope assisted bookings will help the mobile segment. Meta should be a tailwind.