Q2 2022 Tripadvisor Inc Earnings Call

August 5, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Good day, and thank you for standing by and welcome to the Tripadvisor second quarter 2022 conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

To ask a question. During this session you will need to press star one one on your telephone.

Please be advised that today's conference is being recorded.

I'd now like to hand, the conference over to your Speaker today, Angela White, Vice President of Investor Relations. Please go ahead.

Thank you Michelle good.

Everyone and welcome to Tripadvisor second quarter 2020 financial results call. Joining me today are Matt Goldberg, President and CEO and Earth citizen, CFO , and Chief Executive Bioterror before and cruise critic.

Last night after market close we distributed and filed our earnings release and made available our shareholder letter on our IR website.

In the release, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP measures discussed on this call also on our IR website, you will find supplemental financial information, which also includes reconciliations of certain non-GAAP financial measures discussed on this call as well as other metrics.

Before we begin.

Like to remind you that this call may contain certain estimates and other forward looking statements that represent management's views as of today August five 2020 to Tripadvisor disclaims any obligation to update these statements reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially.

From these forward looking statements with that I'll turn the call over to Matt.

Thank you Angela good morning, everyone and thanks for joining us today I'm excited to be here I've been looking forward to my first earnings call with Tripadvisor. It's an exciting time to join this iconic company given the travel environment over the last few years the trajectory of recovery in the sector. The return of the leisure traveler and the potential to serve consumers in new and.

Unique ways as they look to satisfy their growing demand to get out and experience the world.

As you read in the shareholder letter, we had a strong quarter.

Our viator experiences focused offer stood out in its pace and level of recovery at 160% of 2019 levels.

<unk> achieved 103% relative to 2019 and the recovery in our core Tripadvisor hotels offering improved at 89% in the quarter up from 63% last quarter.

This is my first call as CEO I wanted to take a step back from the quarterly results and share some high level perspectives and reflections for my first 30 days, including why I wanted to return to the travel sector and the opportunities I saw at Tripadvisor.

I am personally passionate about travel and the meaning it brings to us all by opening us up to different cultures, and perspectives and a higher purpose that serves by reminding us how much we all have in common at our core.

The travel industry has always captured my professional attention as a category ripe for innovation and growth.

The size of the market is massive and the sector continues to go through constant change marked by an evolution in the democratization of travel information and distribution.

This creates a compelling opportunity to reimagine, the consumer experience by solving problems and what is often a fragmented and frustrating ecosystem.

When Tripadvisor launched back in 2000, it introduced a unique and disruptive offering to the market that pioneered a new way to enable travelers to decide where they want to go and discover trusted resources to make it happen.

The Tripadvisor I joined today is fortunate to have a strong and stable foundation and an enduring set of assets our trusted brand a large global audience, a scalable content model, a rich set of data and passionate teams committed to our future.

Fits squarely in the category of experiences over material consumption, a secular trend that we can expect to continue.

My mission simply stated is to make sure we continue to evolve the company. So that we can serve travelers diners and experience seekers for decades to come while I recognize that we operate in a competitive space with external pressures. There are a number of advantages that attracted me to the opportunity.

First tripadvisor as the companies that I have long admired both as a traveler and the travel industry executive I saw the opportunity to follow a visionary founder and identify new ways. We can be disrupted by a re imagining the future of travel at a time when consumers are looking for trusted guidance I.

Also looked at the company's portfolio, we have a collection of diverse assets in <unk> and the <unk> as well as core tripadvisor that allow us to participate across travel experiences and business models as the pace of change increases. This can play a meaningful role in how we serve consumers in unique and seamless ways.

Given my background in digital media something that jumped out to me is truly differentiated and valuable at Tripadvisor is the community of Likeminded people actively contributing content to help their fellow travelers make the most of every experience.

This has created the world's largest travel guidance platform built on a relationship of trust with over 1 billion reviews and hundreds of millions of visitors every month.

With this scale I was also energized by the potential of our data assets to create a better experience for consumers and enable all areas of the company.

Having spent a number of years, leading advertising content and commerce businesses enabled by data I am confident that our data can help us drive deeper consumer insights and higher levels of engagement create further operational agility as well as identify meaningful commercial opportunities.

Perhaps most importantly, one final attributes that attracted me to Tripadvisor was the culture and people Tripadvisor has a culture that attracts talent with a passion for purpose and a highly skilled knowledgeable and capable team over the past months I've enjoyed spending time with teams across the organization and <unk>.

Just wanted to say thanks for welcoming me with such enthusiasm.

At this early point in my tenure I can say that my excitement for the opportunity in front of US has only grown stronger and I'm looking forward to rolling up my sleeves, engaging with our talent and charting our course for the future.

One area of clear focus is driving stronger and more effective execution.

In the coming months, we will align our strategy operating model and teams to deliver against our goals in a structured and rigorous manner I expect to empower our leaders and their teams to execute.

Execute and enable every employee to do their best work.

I believe that building a foundation of trust with all our employees and stakeholders is critical as we set the framework for our future together.

I'm also looking forward to connecting and collaborating with our customers partners industry peers and shareholders to understand their perspectives and help us better serve consumers.

As we pursue our next phase of growth, we are well positioned to build on our foundation as we strengthen the essential role we play in the travel ecosystem.

We will aim to be clear about our plans communicate transparently as we go and identify milestones along the way.

In the meantime, I look forward to meeting many of you soon and sharing more in the coming months with that I will turn the call over to Ernst.

Thanks, Matt and welcome to your first earnings call with Us.

To Echo, Matt we had an impressive quarter and we are pleased with the continued demand recovery as well as the strong execution by our team.

The results speak for themselves. In addition to what Matt highlighted we reached 99% of our 2019 revenue in Q2, a strong step up from the 70% in Q1, and our adjusted EBITDA was $109 million or 26% of revenue.

Both revenue and EBITDA exceeding our expectations pre.

Free cash flow in the quarter was $282 million.

We had a little over $1 billion of cash on our balance sheet at the end of the quarter.

Despite the news flow on macro factors, such as inflation recession fears and consumer sentiment travel has been and continues to be strong.

While U S travel strength continued this quarter also saw Europe coming back very strongly.

We saw a progressive improvement of revenue as a percentage of of 2019 each month of Q2.

And at this time, we expect to be able to report further improvement in Q3.

This expectation includes a currency headwind versus 2019 that we expect in the back half of roughly 4%.

Impact on 2019 recovery.

And within that about 10% impact versus 2019 and recovery.

For the Fork, whose revenues as you all know is predominantly in euro.

We covered a lot of specifics about drivers of performance in our shareholder letter, which we posted last night, so rather than go through all the specifics I wanted to highlight a few salient points here.

Our new Tripadvisor core segment has continued on its path to 2019 recovery, reaching 84% of 2019 revenue in Q2 and on track to do better again in Q3.

This is with about a 3% drag from revenue lines that were discontinued or no longer consolidated.

Delight that our hotel auction was about 100% of 2019 in the U S and Europe , which is pleasing.

I also highlight that we are narrowing the gap with media and hotel <unk> two revenue streams that we have reported in the last quarter is slower to recover.

We expect these revenue streams super aggressively do better and ultimately intersect with their pre pandemic trajectory, although our hotel <unk> business may not get there this year.

While we're pleased with our performance in the recovery trends, we believe that the mix of our offers within Ta core.

Including our weighting to hotels, rather than alternative accommodations and the slower recovery in <unk> and media that I, just mentioned has been a relative headwind.

Core tripadvisor.

We are confident however that we have the levers to improve our performance going forward and believe that we have the assets within our portfolio to drive attractive and profitable growth proportion of advisor.

Notably our core Tripadvisor segment exceeded pre pandemic EBITDA margin levels in Q2.

Even with revenue is still trailing 2019, a testament to the fixed cost reductions we affected during the pandemic.

Our new <unk> segment is.

Youre showing remarkable growth.

60% growth versus 2019 in the quarter, 240% revenue growth year over year and in Q3, we expect to improve our performance again.

Despite a lot of growth investment our adjusted EBITDA margin in this business slightly improved versus 2019 this quarter.

And improved strongly versus last year.

Our new <unk> segment also exceeded 2019 levels in Q2 and is set to improve again in Q3.

Studies indicate that the European restaurant industry as a whole has not fully recovered yet with fewer restaurant openings in 2019 and staff shortages.

This makes it all the more promising that the fork with its ability to drive more volume per restaurant tours is exceeding 2019 levels already.

We have provided you with a series of documents, including a memo outlining the technicalities of our segment change and the historical presentation of segment numbers that will provide a lot of the specifics.

Let me just highlight the why of this change here.

First the segments are a good reflection of how we're currently thinking about managing our business.

These three segment P&L as Tripadvisor core <unk> reflect the true Standalone economics with market based commercial agreements between them and overhead allocations.

Segment reporting highlights that we managed <unk> and the <unk> for high growth and future rather than current margin.

It's also a reflection that we see great opportunity in managing brand Tripadvisor more holistically around a central user experience rather than in verticals.

Despite operating these segments as separate segments. We also derive significant benefit from the intersections viator in the Fort provide great and very strategic access to Bookable supply for Tripadvisor core and Tripadvisor core provides a significant volume of additional leads and demand to <unk> in the fourth.

It's also our belief that by presenting these three segments. This way we have made it possible for investors to truly do a sum of the parts valuation of Tripadvisor.

That was not a straightforward to do with the old segments.

We continue to look at other ways to highlight the value of these businesses. In addition to segment reporting as we had called out in previous quarters.

And although currently not yet demonstrating their profit potential as we invest in growth we believe longer term both viator in the fork can reach EBITDA margins of 25% to 30% given their strong gross margin profiles potential for scale given their large terms and attractive unit economics.

With that I'll hand, it over to the operator for questions.

Thank you very much to ask a question you will need to press star one on your telephone please.

Standby, while we compile the Q&A roster.

Okay.

The first question comes from.

<unk> Khan with <unk>. Your line is now open.

Okay. Thank you.

Couple of questions.

For me.

On the on <unk> maybe.

You can provide us some color on the on the repeat booking behavior that you see.

The cohorts that you have acquired in the past.

One to three years and.

And maybe just on the on the branded AD campaign that you're planning in the back half.

How sizeable is that going to be in.

Are there any markets or geographies that you're looking to target.

And then I had a follow up on the on the cohort.

Corporate debt.

Alright, good morning.

<unk>, yes.

Very very pleasing performance there.

Indeed.

We've seen.

Tremendous growth in the business.

Continuing.

And we're very very pleased with that.

The.

The growth in the.

The demand push we're making the branded demand pushed which is second part of your question.

As.

That we are diversifying away from.

From purely relying on SCM online channels too.

Towards.

We're also doing some brand it's not very TV based although there might be a little bit of TV based.

Questions investment, but theres going to be a lot of other online more branded oriented investment.

I say that within the context of the guidance that we've given so we are reinvesting some of the overage that we've seen in the business. We've given some guidance for the third quarter of where we see profit come in.

And those trends will be continuing into into the fourth into the fourth quarter.

So within that envelope youll see those investments happening.

On the repeat economics.

With <unk>, we have been able to measure quite precisely and quite consistently over its history, how our cohort how are.

Workhorse behave and that behavior has been ticking up consistently.

Every year.

And we feel great confidence in the in the data that we're getting what we're seeing is that increasingly we are able to trigger within the first 30 days repeat behavior, which is often just around the same trip, which is fantastic news because that is really the power of in destination offerings. So we have.

<unk> already sold something in either before the trip or during the trip we sell a repeat.

Transaction, but then in the first 12 months.

We are successful in selling onward.

Transactions as well and then there is a.

Our lifetime value there is year two year three year four repeats or.

Our investments that we're making in marketing.

<unk>.

Investing beyond that first transaction for that reason, we have stretched that too.

12 months before 18 months.

In the in the past periods.

So still attractive ROI.

From a beyond 18 months perspective, but loss, making immediately but the.

Unit economics support that very clearly so what you see in the in 2021 and 2022.

That these marketing investments have a negative impact on.

EBITDA in the year itself, but have a very important tailwind and we've seen that tailwind really come through.

This year in our.

Our in our repeat revenue and in our free revenue.

Very clearly.

We still.

Attractively.

Across all channels, so if I take the pay channels and the free channels. If we look at new consumers coming in across all those channels. We are immediately profitable. So although our pay channels may not be profitable immediately we have a lot of new customers that we acquire also through through our app.

Our site directly through Seo.

And so on a blended basis, we were actually profitable.

Immediately with new customers. So these are powerful economics theyre very attractive.

We keep improving them and the team has been successful in improving them.

And.

It's a main focus for us in some of these brand investments are going to help with that.

It's Matt I thought I might just add one thing.

As you know the <unk> team has done a fabulous job reinforcing their market position and driving growth coming out of the pandemic.

And one of the things that I am really excited about is the way that they have shifted fixed cost into into variable costs.

And I'm, a big believer in the power and value of brands and have made many brand investments in a number of my past roles.

I get excited about brands that have a loyal and passionate following that can pioneer their industry and really stand the test of time in fact, it's one of the reasons I was excited to join Tripadvisor.

And I would just say that.

<unk> brand has a real opportunity to drive market leadership and continued to scale, so being smart about how we make some of those investment and really thinking about the ROI of that investment is something that I am excited that theyre doing.

Okay.

The follow up I had is on the on the core hotel side.

<unk>.

And for you Matt so.

Things like.

Tripadvisor plus rich.

Maybe like a year ago look pretty exciting.

And then obviously you guys have been kind of iterate and improve that offering any thoughts on.

How you see the potential for these kind of offerings.

Just.

What do you see.

That can be done better and maybe give us give us your take as you kind of look at it Chris.

Set of eyes.

Thanks, David I appreciate that and as I think many of you know I'm a consumer first exec.

Executive I really want to make sure that everything we do puts the traveler and the experienced seeker at the very center of everything we do and in that context of direct to consumer offering that offers clear traveler needs with tangible benefits that consumers value is a compelling opportunity, particularly when you have.

In audience.

Size and as I learned about all the various aspects of the business.

I understand that this was launched as an experimental model and it's still being tested.

<unk>.

Discounts in the offer are substantial and frequently cover the cost of the annual subscription of course, there have been some challenges to scale and I recognize that the offering has not necessarily reached milestones that might have been expected, but of course I come from a subscription background.

In my time with Dow Jones in the Wall Street Journal and so this is an area I plan to dive into.

And I don't want to get ahead of myself on a timeline, but what I will say is that it will be a priority area of focus as we dive into strategy.

Thank you Matt Thank you.

Please standby for our next question.

The next question comes from Richard Clark with Bernstein. Your line is now.

Good morning, Matt Nice to nice to meet you welcome welcome to the team.

A couple of questions. If I may maybe I can just start with some slightly high level thoughts about.

I know you've only been there for a month, but do you think tripadvisor dramatic changes does it need a change in strategy does it need new verticals to sell so it isn't.

As many customers or is this about execution do you, but do you believe the strategy is the right one.

But it just needs to be executed on.

And then maybe secondly, altra months in the business what is your thought on the potential Tripadvisor should we be would you be looking at this as this is a business that's going to be a high growth business going forward I guess it wasn't in the company is pre COVID-19, but can it be longer term.

Or would you see this more as a business that can be more cash generative, but what do you think the focus.

The performance is going to be enough of a small follow up if I may after that as well.

Thank you Richard I appreciate the question and obviously, it's one that I've given a lot of thought to when I think about.

Entering the company. The first thing is I feel really fortunate because I'm joining a company that has built a really strong foundation and it really offers many diverse assets to think about growth path and of course, there are opportunities as there are in every company to think transformative Lee and in some ways.

Segment reporting that Ernst shared with you today is where I'm going to focus my time and energy because we have strong P&L leadership set up <unk> in the fourth both growing strengthening their market position and the Tripadvisor core business. We've seen the auction come back strong media is doing.

Well, we have some opportunities in <unk> and what I think about over the coming months is really sharpening the strategy and aligning everyone in the company around it putting an operating model in place, making choices about where we will prioritize I do think execution is fundamental.

We have a chance to execute more effectively than we have in the past.

And we've we've looked at where we can make some adjustments we have high performing teams. We've got a great culture, and I think getting the right cadence and processes that get us collaborating cross functionally and empowering teams to focus on where they have.

Market insight and knowledge in their respective products and market will do a great job.

I know that everybody would like to see me set our strategy today, it's a little early to do that but I think I can share a couple of areas of near term focus.

I mentioned, putting the consumer at the center of all of our decisions and I think as we do that we will reinforce the role that we play in the ecosystem and really clearly define the problems that were in a position to uniquely solve I think we can re imagine how we guide travelers before they go on.

A trip when they are ready to make it happen and when they're in destination. If we get this right.

<unk> will drive more direct traffic app downloads, and we'll see higher levels of engagement and monetization.

I am excited that we have a good number of diverse assets in the portfolio and the question. There is how do we.

Think about how they fit together to deliver the most value and we can get all of the areas of the business serving the consumer in a seamless manner and I think that will be noticeable and valuable.

I am excited about data as I mentioned in my opening remarks, we have a data asset that can be an enabling platform for all areas of the enterprise and really a strategic lever to drive.

Insight engagement there are market opportunities.

That we can be thinking about it will serve our existing business lines and has the potential to drive new ones and I think it's also a currency where we can work even more effectively with partners in the ecosystem to drive our unique solutions and value that we can be differentiated because it's.

An asset that we have uniquely.

We talked already about direct to consumer clearly a compelling opportunity and when I look at it altogether. It really comes down to a chance to re imagine our position reinforce it and do it from a position of strength.

Thanks, very much Matt.

Maybe something a little bit more per se, but just on the margin progression. Maybe maybe this is one for you on this but it looks like your guidance is that margins will step back a little bit Q2 into Q3, and then step up again into Q4, that's not the normal progression of margins what I would normally expect at Tripadvisor. They tend to come down in Q4. So just wondering whether you can sort of help.

With with why they go down and then back up again, what are the sort of drivers of that margin shift quarter to quarter.

So from Q3 to Q4, we we said in our in our shareholder letter that you should expect.

The seasonal step down that is typical for Q4, so youre absolutely right. Typically Q4 is a smaller quarter for us than you would typically see.

<unk> down in EBITDA margin as a result.

Because.

While fixed fixed cost so that is the commentary there.

Youll see that.

The way, we've guided for the third quarter as reasonably close to what we had.

Q2, we had.

An unusual benefit in Q2, which we called out in France, We got paid by the French government.

For a subsidy for four of the pandemic period of $11 million that wasn't unusual one off benefit that occurred in Q2. So if you would normalize for that Youll see that the margin development between Q2 and Q3 the way we guided is actually quite quite.

Quite consistent.

Okay. Okay. That's very helpful. Thanks, so much.

Please standby for the next question.

Our next question comes from Lloyd Wamsley with UBS. Your line is now open.

Yeah.

Thanks.

One for Matt and one for Ernst So Matt.

Thanks for sharing some of them some of your used already on what brought you to tripadvisor and kind of what you like about the asset.

No. It's still early to ask you to kind of lay out your plan, but maybe instead you could just share maybe some anecdotes about things you've done in the past you had kind of a broad range of experiences in media and tech. So are there things from your past.

Analog Samir career that may serve as a playbook for what you might apply here.

Tripadvisor or anything you could you could share that would give us kind of a sensitive.

You're taking over here.

Even though obviously, it's a little early to ask you to kind of lay out the future.

Would be helpful and then and then Ernst.

Can you give us just like.

Broad sense of kind of help them in the meta search auctions clearly the numbers were strong this quarter that the cadence looked better than more consistent than what we're hearing from other travel channels, but there are big players talking about leaning away from performance marketing I am curious just like to get your view.

Use on yes, just broadly the health of the auction.

And what you're seeing there thanks.

Alright, thanks for the question.

Sure.

You all have had a chance to see what I've spent time doing.

In my career and having had a chance to be early in my career in the travel industry really going deep on digital media and the transformation of a number of different.

Iconic assets Commerce data had been active <unk>.

Thinking about how to take our consumer spec perspective to drive product led innovation of course I've worked in sales marketing business development M&A operations. If I were to go to a couple of anecdotes.

Thank.

Start most recently with my time at the trade desk, which was just a great experience to operate with a platform at scale across a number of categories in a data driven advertising environment.

It really gave me a much deeper perspective in a pre categories in a data driven advertising environment.

It really gave me a much deeper perspective, an appreciation on the power of data and importantly, really starting with an ROIC focus for partners and advertisers to show real value to their business.

This can be helpful in our media and <unk> businesses, our auction really thinking about our solution orientation, because if you're if you start with client objectives and deliver solutions that meet their needs you can build a business of scale and of course at the trade desk really working across all the most.

Temporary platforms, where consumers are engaging which helps connect it all back to the consumer and that traveler and experienced seeker and putting their needs at the heart of everything we do.

It would be remiss for me not to share some thoughts about.

Back at Lonely planet.

Because it was one of the best experiences in my career.

I've had the pleasure of doing.

As a relatively young global CEO in the travel sector at a time of incredible change also coming out of the 2008 period.

Which was very dynamic it was another iconic company looking for an inflection point from a publisher to a diversified travel information provider and paid content digital media marketplaces.

I was really proud of that team as well achieving growth and transformation through.

Dynamic environment, and we really leaned into digital and understanding our audience global and cross border some.

Some interesting product led innovation adjust as the iPhone was emerging in the iPad, where we were in rooms that were blacked out and secure so that we could develop the very first travel apps that would leverage all of the newest technology in those devices and that adaptation to.

A rapidly changing landscape and the learnings that I took from it about the needs of the travel consumer and where companies could go to serve them. Most effectively I certainly will bring with me in this experience to come.

Yes Lloyd on your question about the auction the auction has been healthy we've experienced healthy dynamics.

Good bidding levels in participations from Otas hotels.

Our <unk> have been strong.

Commented early than that in.

Got it.

In the quarter for U S and Europe , we were actually quite close to 2019 revenue.

<unk>.

<unk> parts.

We saw in the auction in the first half of July we saw a bit of weakness a bit of a step back and you may have heard others comment on that as well with everything that was going on in travel multiple factors, probably but we've seen that sort of go back up again at the second half of July and the early days of August are off to a very.

Good start and so.

Everything is back to sort of normal and we expect to continued continued improvement in that APAC.

APAC is is still underperforming I talked about U S and Europe , which in 2019 was say three quarters of our revenue. So it's an important chunk of it that is that is back on but also have an important chunk of of geographic revenue that is not still performing well and we're looking forward to.

Two the recovery to happen in those areas, maybe not in the back half of this year, but hopefully into into next year. So strong performance overall.

And if I broadened my comments about July out to the rest of the business and the rest of the business. We we saw no such first half weakness in July we have seen quite consistent strong performance and.

Overall for us as a percentage of 2019.

July was a little bit better than than than June so.

We look at the health of the auction and we look at the rest of our business and we see strong trends in in a very.

With anticipation looking looking forward to the rest of the year.

If I can ask actually ask a follow up Ernst that's great helpful color and I appreciate I appreciate that perspective, Matt.

Just digging into the hotel auction I know youre not disclosing like hotel shoppers anymore, but can you kind of help us think through how much of the recovery has happened on the kind of hotel shopper side and the monetization side.

Get back to where you are.

Yes, we've seen.

More progress on the on the monetization side Cpc's revenue per shopper.

Then on the volume side, so volume is still under 2019 and price realization as strong obviously driven by strong ADR is.

In the hotel business.

But also driven by.

Obviously.

Healthy auction environment so.

Strong price volume is still not complete.

Completely back.

And I would just add Ernst a broad perspective on the auction.

We were of course pleased to see the strong comeback following the pandemic.

So for me. This is a sign of continued relevance for the product and that.

The auction and really has a place in the ecosystem.

We can think differently about.

Data and of course, we always work with partners to help them achieve their objectives and I think as we get that solution orientation.

We will be able to leverage that product to be really helpful and continue to reinforce its place in the ecosystem.

Alright, thanks, guys nice quarter.

Thank you.

Please standby for the next question.

The next question comes from Mario Lu with Barclays. Your line is now open.

Okay, great. Thanks for taking my question and welcome back.

The first question.

Or does that margin.

Charles.

Needed pre pandemic levels for the first time.

So can you help us break down the 200 beds.

And then turning to.

2019 is the most based on the fixed cost side or anything you're seeing in terms of marketing efficiency here.

Yes.

It is.

From fixed cost.

Is where all the improvement is and this is the fixed cost.

Cost reduction that we have executed that we executed during the pandemic our variable cost is still elevated from 2019.

And this is because some of our very profitable.

<unk> and media businesses are not quite back to those levels, yet sort of provide some some deleverage in the auction.

We have seen a closing of the gap between free and paid revenue independencia.

In the first half of the year, we've seen a higher skew to pay more revenue, but that gap is closing in and so those two so those two combined saw some deleverage on the variable side.

But some strong leverage on the fixed side, which results in this and this outperformance even with.

Revenue levels lower than 2019 in the second quarter, so that our margin at lower at lower revenue.

Still so that bodes really well for as we continue the recovery on the revenue side.

Great. Thank you and then one on <unk>.

Hey, Tyler.

<unk> mentioned previously that the operation I'll take rate, but it's in that.

20 percentage range.

In the second quarter.

Part of the take rate was around 17%.

So is that just a function of timing with most.

Experiences I expect it to be realized in the third quarter.

Okay.

So has the operational and take rate changed at all versus 2019.

Our take rate is in the mid twenties.

And we have actually been executing on a number of strategies that allowed us to to increase that over time.

Bye bye, providing suppliers with ways of marketing themselves more effectively.

On Tripadvisor it at higher at higher take rate. So that's been a very positive trend.

Moving trend we have some great programs in place at the moment that help both suppliers and help our take rate accelerate is the name of the program.

So it's been going really well if you compare.

We're sharing.

Gross booking value.

The trends and we share revenue trends, there's a couple of in between as you were alluding to first of all revenue gets recognized on the moment of consumption of the of the experience.

<unk> is a measure of when the booking takes takes place. So there's a timing difference there.

Especially as you ramp into the year.

Bookings lead.

Lead revenue recognition of course, so that's one difference.

The other.

And then there is take rate then there is a difference and then there is cancellations.

Cancellations.

In line with what we've seen last year, there is still a little bit elevated from 2019.

But cancellations as another factor as you as you compare between gross booking value in <unk> and that revenue because the gross booking value that we present is as pre cancellations as gross of gasoline.

Great. Thank you.

Please standby for the next question.

The next question comes from James Lee with Mizuho. Your line is now open.

Great. Thanks for taking my questions, Matt Congratulations on your first quarter as CEO and given your experience in digital marketing maybe.

Maybe can you give us an early view on the hotel meta search business, obviously investors have concerns that otas are getting more direct traffic and Google is encroaching in the space now, giving that want the trip advisor strength is released from consumers.

Potential angle to unlock revenue opportunities or maybe moving up to mid to upper funnel marketing.

It makes more sense.

Your.

Color on that thanks.

Yes, thanks for that question James.

I think you identified that there is a number of different ways that we can play in this ecosystem and of course I recognize that.

We're in a competitive space and there are really strong players at the top of the funnel.

And that there are players totally optimized at the bottom of the funnel and I think if we.

Really lean into where we are strong in providing that context, and bringing that audience that.

May or may not be looking to book right away and thinking about before they travel and really driving further engagement I think theres a number of ways that we can do that and understanding the signals that they bring and their needs. We can use all of that to do a great job engaging on the site and then understand that.

At which they're ready to make it happen or they are actually in destination.

And be thoughtful about what's the right offer an experienced at that moment, we have a lot of assets to leverage to do that now.

Now.

Spent my career competing cooperating a differentiating from some of the big technology platforms and of course, we can do the same at Tripadvisor. The key is going to be able to focus on how we're differentiated and again as we re imagine the.

That we are the definitive guide for consumers as they make those choices I think that will help a lot. So we can play up and up and down the funnel.

I think you mentioned, the Otas and I think.

Obviously, they are an important part of the ecosystem. They have what they do best I think.

Everybody wants to see direct traffic and and of course, we will focus on the benefit that we can deliver to them as part of their funnel consideration.

And again I mentioned that we have assets that I think we can take even better advantage of like like data data in the way, we think about a full range of solutions and it's that power of context that I think.

It can really be helpful. So I'm excited when I think about having spent a couple of decades in digital media.

I feel as though the assets and the diversity.

And what we represent as a brand is a very very strong place to start.

Great. If I can ask a follow up question is the more separately related to consumer behavior and clearly investors are concerned about macro uncertainty are you guys seeing any changes in consumer behavior may be trading down to lower price hotels, maybe shorter stays and just curious what are you what are you seeing there.

Yes, so I'll kick it off and if <unk> wants to add any detail. He can do that I've only been in the role for about a month.

From everything I see our consumers are actively returning to travel and experiences. So while we're always looking for signs of slowdown we don't see anything today that causes any near term concern.

And of course, we've put the business in a good position post pandemic and rebalanced more towards variable cost the team did a great job there.

I will say, we cant predict whats to come but having operated in a variety of context through a number of cycles.

Confident that as we watch the macro we will see if there are early signs and be able to adjust or do you want to add anything.

Yes, I'll just echo that as obviously, we're focused on that we're looking at at the data and seeing are we seeing some some any signs of potential weakening of the consumer in travel and we're not seeing it.

Demand is very strong.

If you look at forward behavior like searches that are being done in a forward level.

Bookings that will get done a forward, they're all strong versus 2019, and so we're not seeing signs of course as Matt says.

We also cannot predict the impact of the economy on travel going forward, but as we look at now and the summer and into the rest of the year.

We see the traveler.

Wanting to return to travel.

And we talked about pent up demand a lot of people are talking about pent up demand and we're just seeing it we're seeing very enthusiastic.

Travel behavior from from our audience.

And see no signs that a slowdown in our in our business to date.

Okay.

Great. Thanks, so much.

Please standby for the next question.

The next question comes from Deepak Monster, Dan <unk> with Wolfe Research. Your line is now open.

Great. Thanks for taking the questions. So first Matt I know, it's still early for you, but how do you think about the org structure currently attract triple has done a few iterations to the past, but where do you see sort of like the talent gaps that need to be addressed at the high level and then just wanted to ask you you have about $1 billion in cash any thoughts on.

And a path for shareholder capital returns or how do you think about it.

Thank you.

Thanks, Deepak I appreciate the question.

And as I noted earlier I think there is a strong team in place.

And of course, we're always going to seek to be a vibrant home for world class talent and highly effective teams and.

As in any organization there are always opportunities to stretch a little more regardless of the function.

I think that we will be building on the capabilities. We already have here and eventually we'll look at where we think we might have gaps I think that has more to do with the next stage of opportunities will approach through our strategy work and less to do with me in particular, joining the company.

Team is really great. There is a lot of talent I'm excited to join this team and be a part of it.

As we think about organization I mentioned opportunities for execution I am excited to think about the way that our strategy and operating model will link but of course any organizations always.

Function of what you choose to do how you prioritize and setting your teams up for success and Thats the order in which we will do it.

And Deepak to your question of cash we have indeed and consider a considerable cash balance.

And we are evaluating OLED.

All the different ways of how we can go about that cash either keep it in reserve for awhile ear market for acquisitions.

Obviously attractive businesses that might be complemented with acquisitions and then.

We have options around.

Delevering.

<unk>.

Or equity repurchases and so we continuously evaluate that.

With Matt coming onboard.

We will look at that together in the months and quarters to come along with our board of course, yes.

Yes.

I'd just say it.

Didn't mention it upfront.

As I was evaluating things.

Things I really like what I saw from a financial perspective that strong balance sheet.

And enduring and cash generative core business to strong growing segment.

And I think we have a good array of assets to deliver growth and they'll benefit from sharper focus better alignment.

But I am excited about organic opportunities there of course are.

Other opportunities to consider I think the main thing is that we will seek always to be great stewards of capital.

Think about what is the best mix to get the best return on capital.

<unk>.

We will we will certainly be talking about that over time with you all.

Great. Thank you so much.

Please standby for the next question.

The next question comes from Ron Josey with Citi. Your line is now open.

Thanks for taking the question I'll Echo everyone else, Matt Welcome I wanted to ask you, Matt a little bit more about the data aspect of Tripadvisor. You just mentioned a few times the size and value of trips data.

Unlocking that asset even more so than today. So just talk just a little bit more about I know, it's been one month, but just how you might envision using this data to call it creative better or.

The more engaging consumer experience.

And drive better partner Oi, and then maybe.

A question about via tour and revenue retention and new users you talk to just about consistent revenue retention rates and investments in acquiring new users. So maybe talk just about these investments on the consumer side and building up the brand. Thank you guys.

Yes. Thanks for the question Ron and so of course, it's still early but what I can say is <unk>.

Having spent a good number of years thinking about the way that data is transforming really every industry and all the companies that I've been a part of.

I do have conviction.

That we can leverage our data asset.

In ways that we haven't before to enable the business.

I think it's going to deliver agility more insight.

It'll be really useful as we think about the way that we bring our strategy together to get all the pieces really reinforcing.

Data is one of those currencies that can play across the entire organization.

And really help understand that consumer in a more granular way.

Of course with all our privacy considered.

And think about what's the next best opportunity to serve that consumer need.

And so I think it does open up a number of different opportunities.

Yes, it would be early for me to project, but.

Absolutely data in the way that it plays in media ecosystems in the way that we can serve.

Our partners and think about value exchange in different ways.

The opportunity.

To think about.

Yield on the platform.

Data is something that can be aggregated and anonymised in really get trend signal and theirs.

A lot of different things, we could be doing with that.

Of course, there are ways to think about the data ecosystem and the way that one might target.

Segments at scale. So I think there are a lot of hypotheses that we could develop and we'll be very thoughtful about.

Testing and learning and then sharing at that moment of conviction, but I think at the starting point.

Excited about that platform and we have already been rolling up our sleeves and getting to it.

And Ron on the Viator.

Ah repeat rates and investments, we're making there.

Very important focal point for the team there has been strides and more we can do around.

What experiences do we presented to people who are coming to our site at what moment.

What do we show people next when they have already booked and experience.

<unk>.

What else they could do and how do we present that.

Investment in the App, who has been a major focus for us over the last 12 months.

Our app usage number of bookings through the App has grown.

Impressively over the last 12 months and Thats important because.

Not surprisingly bookings.

Bookings from the App have higher repeat rates higher ltvs.

And then coming in other ways and so we've been pleased with that progress also allows us to have more effective communication with in market with.

With folks.

It improves the repeat rate.

Been focus focusing on.

Localization of content.

We have historically skewed to the English speaking point of sale not so much to destination actually Europe as a destination is larger.

Historically for us than the U S as a destination.

But skew to use speaking audiences that book and we see a huge opportunity to broaden that to European audiences and later later on in the cycle Asian audiences as well so we're investing in that.

And then there are other channels that we can explore that.

Are more conducive to experiences to repeat rates.

Downloads is.

As an attractive investment area that we've been looking at.

And so there's there are a lot of activities going on and all with that very important kpis of how can I, how can we improve repeat behavior of our customers because thats ultimately.

The going to be the driver of the LTV per customer, which allows us to.

Invest more but more importantly show very attractive margins overtime.

Sure.

Thank you Matt Thank you.

Please standby for the next question.

The next question comes from John calling Twangy with Jefferies. Your line is now open.

Hey, Thanks for taking my questions I wanted to start by.

By asking about strength in the U S dollar versus the euro and the pound.

Based on your data that you're collecting on cross border travel behavior I'm curious whether you saw this U S. Dollar strengths help catapult more customer engagement to Tripadvisor as U S travelers took advantage of their currency.

Going a little bit further across some of the key destination markets across Europe , given that it's an important driver of traffic for Tripadvisor and I've got a follow up.

Yes, it's difficult to say that definitively, but it does make common sense and it has been in the past we have seen that as an important driver.

It is there is a multiple factors going on including.

The price of flights et cetera. So you have to look at the total <unk>.

Total trip.

For our traveler from the USA to Europe , but.

But we have seen in the past that of course, if the euro is cheap.

Then.

Then it is more attractive to travel overseas and traveled to Europe . So nothing really I can give you is a strong data point at this point.

But we have seen the growth of Intercontinental travel come back progressively over the.

During the quarter, we have seen the U S. U S travelers booking hotels in Europe come back we've seen very strong growth in.

U S travelers buying experiences in Europe , which is.

A strong indication of of more people traveling to Europe . So how much of that is pent up demand and borders opening.

Versus versus the euro impact is a little bit difficult to draw a straight line too, but yes, we have seen very very robust U S to Europe travel behavior.

Great and.

<unk>, obviously, it's been delivering very impressive revenue growth, but when you when you look at customer trends sort.

Sort of what portion in recent periods would you say are new device tour versus repeat customers and how does this customer composition between new and repeat comparative pre COVID-19 and how does that kind of help inform your outlook for customer lifetime value and the ROI on your.

Ramping marketing spend in that business. Thanks.

So new customer growth has been very important for us and you've seen us lean in on marketing in 2021 and in 2022 and so.

Unfortunately that means we are getting a lot of new customers in the door.

But also Fortunately, we see the expected growth in a repeat customer.

Customer revenue as well and.

And we see that as we as we anticipated come so you'll see both lines up going both lines going up into the right.

New customer revenue as well as repeat revenue, which is which is of course very pleasing and new revenue is an indication of.

Repeat revenue in the following year. So that's been strong the other thing I would call out is.

That pre pandemic.

Our profile was predominantly.

Americans and Brits traveling to Europe that was that was the big source of our revenue.

Europe as a destination was the big revenue source of course, the pandemic shifted a lot of demand to North America domestic people going to and so what we've seen.

Now in this year is that the North America to North America.

Volume and growth has been like it was last year. So our customers continue to do that plus now.

U S and U K to Europe revenue has come back in full force.

So, we're adding that plus Europe to Europe revenue has come back so we're getting the the double.

Benefit of.

Now two big markets, where we only had one before we have U S to Europe before and now we have U S to Europe as well as North America and in North America.

<unk> is very very strong market. So that's an important driver as well we've not only created a lot of new users. We've also created a new use case for our users which is <unk> greater use when you say in the U S as well.

Thank you.

With that the call will come to a conclusion I would now like to turn the conference back to Matt Goldberg for closing remarks.

Thank you all for joining us this summer time Friday morning, we have a lot of opportunities ahead of us and a lot of exciting work to do I am looking forward to this next phase in keeping an open and trends. Thank you for participating with all of you have a great weekend everyone.

This concludes today's conference call. Thank you for participating you may now disconnect.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

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Okay.

Good day and thank you for standing by welcome to the Tripadvisor second quarter 2022 conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during this session.

And you will need to press star one on your telephone.

Be advised that today's conference is being recorded.

I'd now like to hand, the conference over to your Speaker today, Angela White, Vice President of Investor Relations. Please go ahead.

Thank you Michele good morning, everyone and welcome to Tripadvisor second quarter 2020 financial results call. Joining me today are Matt Goldberg, President and CEO , and Earth's citizen CFO and Chief Executive <unk> before increase correct last night after market close we distributed and filed our earnings release and made available our shareholder letter on our IR.

Website.

And the release, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP measures discussed on this call also on our IR website, you will find supplemental financial information, which also includes reconciliations of certain non-GAAP financial measures discussed on this call as well as other metrics.

Before we begin.

Like to remind you that this call may contain certain estimates and other forward looking statements that represent management's views as of today August five 2020, Tam Tripadvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially.

<unk> from these forward looking statements with that I will turn the call over to Matt.

Unique ways as they look to satisfy their growing demand to get out and experience. The world as you read in the shareholder letter, we had a strong quarter.

Our viator experiences focused offer stood out in its pace and level of recovery at 160% of 2019 levels.

<unk> achieved 103% relative to 2019 and the recovery in our core Tripadvisor hotels offering improved at 89% in the quarter up from 63% last quarter.

The travel industry has always captured my professional attention as a category ripe for innovation and growth.

Size of the market is massive and the sector continues to go through constant change marked by an evolution in the democratization of travel information and distribution.

This creates a compelling opportunity to reimagine, the consumer experience by solving problems and what is often a fragmented and frustrating ecosystem.

Fits squarely in the category of experiences over material consumption, a secular trend that we can expect to continue.

My mission simply stated is to make sure we continue to evolve the company. So that we can serve travelers diners and experience seekers for decades to come.

While I recognize that we operate in a competitive space with external pressures. There are a number of advantages that attracted me to the opportunity.

First tripadvisor as the companies that I have long admired both as a traveler and the travel industry executive.

I saw the opportunity to follow a visionary founder and identify new ways, we can be disrupted by a re imagining the future of travel at a time when consumers are looking for trusted guidance.

I also looked at the Companys portfolio, we have a collection of diverse assets in <unk> and the <unk> as well as core tripadvisor that allow us to participate across travel experiences and business models as the pace of change increases. This can play a meaningful role in how we serve consumers in unique and seamless ways.

Given my background in digital media something that jumped out to me is truly differentiated and valuable and Tripadvisor is the community of Likeminded people actively contributing content to help their fellow travelers make the most of every experience. This has created the world's largest travel guidance platform built on a relationship of <unk>.

Trust with over 1 billion reviews, and hundreds of millions of visitors every month.

With this scale I was also energized by the potential of our data assets to create a better experience for consumers and enable all areas of the company having.

Over the past month I have enjoyed spending time with teams across the organization and just wanted to say thanks for welcoming me with such enthusiasm.

One area of clear focus is driving stronger and more effective execution.

In the coming months, we will align our strategy operating model and teams to deliver against our goals in a structured and rigorous manner I expect to empower our leaders and their teams to execute.

Execute and enable every employee to do their best work.

I believe that building a foundation of trust with all our employees and stakeholders is critical as we set the framework for our future together I'm also looking forward to connecting and collaborating with our customers partners industry peers and shareholders to understand their perspectives and help us better serve consumers.

As we pursue our next phase of growth, we are well positioned to build on our foundation as we strengthen the essential role we play in the travel ecosystem.

I will aim to be clear about our plans communicate transparently as we go and identify milestones along the way.

In the meantime, I look forward to meeting many of you soon and sharing more in the coming months.

With that I'll turn the call over to Ernst.

Thanks, Matt and welcome to your first earnings call with Us.

To Echo, Matt we had an impressive quarter and we are pleased with the continued demand recovery as well as the strong execution by our team.

I think the results speak for themselves. In addition to what Matt highlighted we reached 99% of our 2019 revenue in Q2, a strong step up from the 70% in Q1, and our adjusted EBITDA was $109 million or 26% of revenue.

Both revenue and EBITDA exceeding our expectations pre.

Free cash flow in the quarter was $282 million.

And we had a little over $1 billion of cash on our balance sheet at the end of the quarter.

Despite the news flow on macro factors, such as inflation and recession fears and consumer sentiment travel has been and continues to be strong.

While U S travel strength continued this quarter also saw Europe coming back very strongly.

We saw a progressive improvement of revenue as a percentage of of 2019 each month of Q2.

And at this time, we expect to be able to report further improvement in Q3.

This expectation includes a currency headwind versus 2019 that we expect in the back half of roughly 4%.

Impact on 2019 recovery.

And within that about 10% impact versus 2019 and recovery.

For the <unk>, whose revenues as you all know is predominantly in euro.

Our new Tripadvisor core segment has continued on its path to 2019 recovery, reaching 84% of 2019 revenue in Q2 and on track to do better again in Q3.

This is with about a 3% drag from revenue lines that were discontinued or no longer consolidated.

Light that our hotel auction was about 100% of 2019 in the U S and Europe , which is pleasing.

I also highlight that we are narrowing the gap with media and hotel <unk> two revenue streams that we have reported in the last quarter is slower to recover we expect these revenue streams to progressively do better and ultimately intersect with their pre pandemic trajectory, although our hotel <unk> business may not get there this year.

While we're pleased with our performance in the recovery trends, we believe that the mix of our offers within Ta core <unk>.

Including our weighting to hotels, rather than alternative accommodations and the slower recovery in <unk> and media that I, just mentioned has been a relative headwind.

Core tripadvisor.

Notably our core Tripadvisor segment exceeded pre pandemic EBITDA margin levels in Q2.

Even with revenue is still trailing 2019, a testament to the fixed cost reductions we affected during the pandemic.

Our new <unk> segment.

Showing remarkable growth, 60% growth versus 2019 in the quarter, 240% revenue growth year over year and in Q3, we expect to improve our performance again.

Despite a lot of growth investment our adjusted EBITDA margin in this business slightly improved versus 2019 this quarter.

And improved strongly versus last year.

Our new <unk> segment also exceeded 2019 levels in Q2 and is set to improve again in Q3.

Studies indicate that the European restaurant industry as a whole has not fully recovered yet with fewer restaurant openings in 2019 and staff shortages.

This makes it all the more promising that the fork with its ability to drive more volume per restaurant tours is exceeding 2019 levels already.

Let me just highlight the why of this change here.

First the segments are a good reflection of how we're currently thinking about managing our business.

These three segment P&L as Tripadvisor core <unk> in the fork reflect the true Standalone economics with market based commercial agreements between them and overhead allocations.

The segment reporting highlights that we managed <unk> and the <unk> for high growth and future rather than current margin.

It's also a reflection that we see great opportunity in managing brand Tripadvisor more holistically around a central user experience rather than verticals.

Despite operating these segments are separate segments. We also derive significant benefit from the intersections via during the fourth provide great and very strategic access to Bookable supply for Tripadvisor core and Tripadvisor core provides a significant volume of additional leads and demand to <unk> in the fourth.

It's also our belief that by presenting these three segments. This way we have made it possible for investors to truly do a sum of the parts evaluation of Tripadvisor something that was not a straightforward to do with the old segments.

We continue to look at other ways to highlight the value of these businesses. In addition to segment reporting as we've called out in previous quarters.

And although currently not yet demonstrating their profit potential as we invest in growth we believe longer term both viator in the fork can reach EBITDA margins of 25% to 30% given their strong gross margin profiles potential for scale and given their large terms and attractive unit economics.

With that I'll hand, it over to the operator for questions.

As I think you remark to ask a question you will need to press star one on your telephone.

Please standby, while we compile the Q&A roster.

Okay.

Hi.

The first question comes from.

Now the con with <unk>. Your line is now open.

Okay. Thank you.

Couple of questions.

For me.

On the <unk>.

On <unk> maybe.

You can provide us some color on the on the repeat booking behavior out of that you'll see the cohorts that you have acquired in the past.

One to two years.

Maybe just on the on the branded AD campaign that you're planning in the back half.

How sizeable is that going to be and what are the markets.

Or geographies that you're looking to target.

And then I had a follow up on the on the cohort.

Okay.

Alright, good morning.

<unk>, yes.

Very very pleasing performance there.

Indeed.

We've seen.

<unk> growth in the business.

<unk>.

And we're very very pleased with that.

The.

The growth in the demand push we're making the branded demand pushed which is second part of your question.

As.

That we are diversifying away from.

From purely relying on SCM online channels.

Towards.

Also doing some branded enough.

TV base lower there might be a little bit of TV based.

Questions investment, but theres going to be a lot of other online more branded oriented investment.

And those trends will be continuing into into the fourth into the fourth quarter.

So within that envelope youll see those investments happening.

On the repeat economics.

With <unk>, we have been able to measure quite precisely and quite consistently over its history, how our cohort how our cohorts behave and that behavior has been ticking up consistently.

Every year.

We have already sold something in either before the trip or during the trip we sell a repeat.

Transaction within the first 12 months.

We are successful in selling onward.

Transactions as well and then there is a <unk>.

Our lifetime value there is year two year three year four repeats or.

Our investments that we're making in marketing.

<unk>.

Investing beyond that first transaction for that reason, we have stretch that too.

12 months before 18 months.

In the in the past periods.

So still attractive ROI.

From a beyond 18 months perspective, but loss, making immediately but the.

Unit economics support that very clearly so what you see in the in 2021 and 2022.

That these marketing investments have a negative impact on.

EBITDA in the year itself would have a very important tailwind and we've seen that tailwind really come through.

This year in our in our repeat revenue and in our free revenue very very clearly.

We still.

Attractively.

Our site directly through Seo.

So on a blended basis, we were actually profitable.

Immediately with with new customers. So these are powerful economics theyre very attractive.

We keep improving them and the team has been successful in improving them.

And.

It's a main focus for us in some of these brand investments are going to help with that.

It's Matt I thought I might just add one thing.

As you know the <unk> team has done a fabulous job reinforcing their market position and driving growth coming out of the pandemic.

And one of the things that I am really excited about is the way that they have shifted fixed cost into into variable costs.

And I'm, a big believer in the power and value of brands and have made many brand investments in a number of my past roles.

I get excited about brands that have a loyal and passionate following that can pioneer their industry and really stand the test of time in fact, that's one of the reasons I was excited to join Tripadvisor and I would just say that.

<unk> brand has a real opportunity to drive market leadership and continued to scale, so being smart about how we make some of those investments and really thinking about the ROI of that investment is something that I am excited that theyre doing.

Great.

The follow up I had is on the on the core hotel side.

<unk>.

And for you Matt so.

On things like.

Tripadvisor plus rich.

Maybe like a year ago look pretty exciting.

And then obviously you guys have been kind of iterate and improve that offering any thoughts on.

How you see the potential for this kind of offering.

Just.

What do you see.

That can be done better and maybe give us give us your take as you kind of look at it Chris.

Set of eyes.

Thanks, David I appreciate that and as I think many of you know I'm a consumer first.

Executive I really want to make sure that everything we do puts the traveler and the experienced seeker at the very center of everything we do and in that context of direct to consumer offerings that offers clear traveler needs with tangible benefits that consumers value is a compelling opportunity, particularly when you have.

And audience.

The size and as I learned about all the various aspects of the business.

I understand that this was launched as an experimental model and it's still being tested.

<unk>.

Discounts.

The offer are substantial and frequently cover the cost of the annual subscription of course, there have been some challenges to scale and I recognize that the offering has not necessarily reached the milestone that might have been expected, but of course I come from a subscription background.

In my time with Dow Jones in the Wall Street Journal and so this is an area I plan to dive into.

And I don't want to get ahead of myself on a timeline, but what I will say is that it will be a priority area of focus as we dive into strategy.

Thank you Matt Thank you.

Please standby for our next question.

The next question comes from Richard Clark with Bernstein. Your line is now open.

Good morning, Matt.

Nice to meet you welcome welcome to the <unk>.

A couple of questions. If I may maybe I can just start with some slightly high level thoughts of yours about.

I know you've only been there for a month.

Do you think Tripadvisor dramatic changes does it need a change in strategy does it need new vehicles to sell so it's.

Many customers or is this about execution do you, but do you believe the strategy is the right one.

But it just needs to be executed on.

And then maybe secondly, after months of that business. What is your thought on the potential of Tripadvisor should we be would you be looking at this as this is a business that's going to be a high growth business going forward I guess it wasn't in the company is pre COVID-19, but can it be longer term.

Would you see this more as a business it can be more cash generative, but what do you think the focus.

The performance is going to be enough quite a small follow up if I may ask that as well.

Thank you Richard I appreciate the question and obviously, it's one that I've given a lot of thought to.

I think about <unk>.

Segment reporting that Ernst shared with you today is where I'm going to focus my time and energy because we have strong P&L leadership setup viator in the fourth both growing strengthening their market position and the Tripadvisor core business. We've seen the auction come back strong media is doing well.

We have a chance to execute more effectively than we have in the past.

And we.

Looked at where we can make some adjustments we have high performing teams. We've got a great culture, and I think getting the right cadence and processes that get us collaborating cross functionally and empowering teams to focus on where they have.

Market insight and knowledge in their respective products and market will do a great job.

I know that everybody would like to see me set our strategy today, it's a little early to do that but I think I can share a couple of areas of near term focus I mentioned, putting the consumer at the center of all of our decisions and I think as we do that we will reinforce the role that we play in the ecosystem.

Really clearly defined the problems that we're in a position to uniquely solve I think we can re imagine how we guide travelers before they go on a trip when they are ready to make it happen and when they're in destination. If we get this right I'm confident will drive more direct traffic.

Downloads, and we will see higher levels of engagement and monetization.

I am excited that we have a good number of diverse assets in the portfolio and the question. There is how do we.

Think about how they fit together to deliver the most value and we can get all the areas of the business serving the consumer in a seamless manner and I think that will be noticeable and valuable.

I am excited about data as I mentioned in my opening remarks, we have a data asset that can be an enabling platform for all areas of the enterprise and really a strategic lever to drive.

Insight engagement there are market opportunities.

And that we can be thinking about it will serve our existing business lines and has the potential to drive new ones and I think it's also a currency where we can work even more effectively with partners in the ecosystem to drive our unique solutions and value that we can be differentiated because it's.

An asset that we have uniquely.

We talked already about direct to consumer clearly a compelling opportunity and when I look at it altogether.

It really comes down to it.

<unk> to re imagine our position reinforce it and do it from a position of strength.

Thanks, very much Matt.

Maybe something a little bit more per se, but just on the margin progression. Maybe maybe this is one for you on this but it looks like your guidance is that margins will step back a little bit Q2 into Q3, and then step up again into Q4, that's not the normal progression of margins that I would normally expect at Tripadvisor. They tend to come down in Q4. So just wondering whether you can sort of help.

With with why they go down and then back up again, what are the sort of drivers of that margin shift quarter to quarter.

So from Q3 to Q4, we we said in our in our shareholder letter that you should expect.

The seasonal step down that is typical for Q4. So you are absolutely right. Typically Q4 is a smaller quarter for us than you would typically see.

<unk> down in EBITDA margin as a result.

Because.

While fixed fixed cost so that is the commentary there.

Youll see that.

The way, we've guided for the third quarter as reasonably close to what we had.

Q2, we had.

An unusual benefit in Q2, which we called out we in France, We got paid by the French government.

For a subsidy for for the pandemic period of $11 million that wasn't unusual one off benefit that occurred in Q2. So if you would normalize for that you will see that the margin development between Q2 and Q3 the way we guided is actually quite quite.

Quite consistent.

Okay. Okay. That's very helpful. Thanks, so much.

Please standby for the next question.

Our next question comes from Lloyd Wamsley with UBS. Your line is now open.

Yeah.

Thanks.

Two one for Matt and one for Ernst So Matt.

Thanks for sharing some of the some of your used already on what brought you to tripadvisor and kind of what you like about the asset.

Analog some of your career that may serve as a playbook for what you might apply here at Tripadvisor or anything you could you could share that would give us kind of a sense of.

Youre taking over here.

Even though obviously, it's a little early to ask you to kind of lay out the future.

Would be helpful and then and then Ernst.

Can you give us just like.

Broad sense of kind of help them in the meta search auctions clearing the the numbers were strong this quarter that the cadence looked better than more consistent than what we're hearing from other travel channels, but there are big players talking about leaning away from performance marketing I am curious just like to get your view.

Yes, just broadly the health of the auction.

And what you're seeing there thanks.

Alright, thanks for the question.

Sure.

You all have had a chance to see what I've spent time doing it.

In my career and having had a chance to be early in my career in the travel industry really going deep on digital media and the transformation of a number of different.

Iconic assets Commerce data had been active thinking about how to take a consumer respect perspective to drive product led innovation of course I've worked in sales marketing business development M&A operations.

Where to go to a couple of anecdotes I think.

Most recently with my time at the trade desk, which was just a great experience to operate with a platform at scale across a number of categories in a data driven advertising environment.

It really gave me a much deeper perspective in a pre categories in a data driven advertising environment. It really gave me a much deeper perspective, an appreciation on the power of <unk>.

And importantly, really starting with an ROIC focus.

For partners and advertisers to show real value to their business.

And of course at the trade desk really working across all the most.

Contemporary platforms, where consumers are engaging which helps connect it all back to the consumer and that traveler and experienced seeker and putting their needs at the heart of everything we do.

Would be remiss for me not to share some thoughts about.

Back at Lonely planet.

Because it was one of the best experiences in my career.

Had the pleasure of doing.

As a relatively young global CEO in the travel sector at a time of incredible change also coming out of the 2008 period.

Was very dynamic it was another iconic company looking for an inflection point from a publisher to a diversified travel information provider and paid content digital media marketplaces.

I was really proud of that team as well achieving growth and transformation through <unk>.

Dynamic environment, and we really leaned into digital and understanding our audience global and cross border.

Some interesting product led innovation adjust as the iPhone was emerging in the iPad, where we were.

In rooms that were blacked out and secure so that we could develop the very first travel apps that would leverage all of the newest technology in those devices and that adaptation to a rapidly.

Changing landscape and the learnings that I took from it about the needs of the travel consumer.

And where companies could go to serve them most effectively I certainly will bring with me in this experience to come.

Alright.

Yes Lloyd on your question about the auction the auction has been healthy we've experienced healthy dynamics.

Bidding levels in participations from Otas hotels are cpc's have been strong I commented early than that in.

In the quarter for U S and Europe , we were actually quite close to 2019 revenue.

Exceeding eight different parts.

We saw in the auction.

In the first half of July we saw a bit of weakness a bit of a step back and you may have heard others comment on that as well.

With everything that was going on in travel multiple factors, probably but we've seen that sort of go back up again at the second half of July and the early days of August are off to a very good start and so.

Everything is back to sort of normal and we expect to continued continued improvement in that APAC.

APAC is is still underperforming I talked about U S and Europe , which in 2019 was say three quarters of our revenue.

<unk> chunk of it that that is back on but also have an important chunk of of geographic revenue that is not still performing well and we're looking forward to.

Two the recovery to happen in.

Those areas, maybe not in the back half of this year, but hopefully into into next year. So strong performance overall.

And if I broadened my comments about July out to the rest of the business and the rest of the business we.

We saw no such first half weakness in July we have seen quite consistent strong performance in.

Overall for us as a percentage of 2019.

July was a little bit better than than than June so.

We look at the health of the auction and we look at the rest of our business and we see strong trends in in a very.

With anticipation looking looking forward to the rest of the year.

If I can ask actually ask a follow up Ernst that's great helpful color and I appreciate.

Nate that perspective, Matt just digging into the hotel auctions I know youre not disclosing like hotel shoppers anymore, but can you kind of help us think through how much of the recovery has happened on that kind of hotel shopper side and the monetization side to kind of get back to where you are.

Yes, we've seen.

More progress on the on the monetization side Cpc's revenue per shopper.

Then on the volume.

So volume is still under 2019 and price realization as strong obviously driven by strong ADR is.

In the hotel business, but.

But also driven by.

Obviously.

Healthy auction environment so.

Strong price volume is still not complete.

Completely back.

And I would just add on a broad perspective on the auction.

We were of course pleased to see the strong comeback following the pandemic.

For me. This is a sign of continued relevance for the product and that.

The auction and really has a place in the ecosystem.

We can think differently about.

Data and of course, we always work with partners to help them achieve their objectives and I think as we get that solution orientation.

We will be able to leverage that product to be really helpful and continue to reinforce its place in the ecosystem.

Alright, thanks, guys nice quarter.

Thank you.

Please standby for the next question.

The next question comes from Mario Lu with Barclays. Your line is now open.

Great. Thanks for taking my questions and welcome back.

The first question is on core.

Martin you mentioned it exceeded pre pandemic levels for the first time.

So can you help us break down the 200 beds.

<unk>.

19.

Based on the fixed cost side or anything you're seeing in terms of marketing efficiency.

Yes.

Is.

From fixed cost.

Is where all the improvement is and this is the fixed cost.

Cost reduction that we have executed that we executed during the pandemic our variable cost is still elevated from 2019.

And this is because some of our very profitable.

<unk> and media businesses are not quite back to those levels, yet sort of provide some some deleverage and in the auction.

We have seen a closing of the gap between free and paid revenue Independencia make.

In the first half of the year, we've seen a higher skew to paid more revenue, but that gap is closing in and so those two so those two combined so some deleverage on the variable side, but.

But some strong leverage on the fixed side, which results in this and this outperformance even with.

Revenue levels lower than 2019 in the second quarter, so better margin at lower at lower revenue.

Still so that bodes really well for as we continue the recovery on the revenue side.

Great. Thank you and then one on.

Hey, Tyler.

Mentioned previously that the operation I'll take rate, but it's in that.

20 percentage range.

In the second quarter.

Part of the take rate was around 17%.

So is that just a function of timing.

<unk> is expected to be realized in the third quarter.

Okay.

So has the operational take rate changed at all versus 2019.

Articulated is in mid twenties.

And we have actually been executing on a number of strategies that allowed us to to increase that over time.

<unk>.

Bye bye, providing suppliers with ways of marketing themselves more effectively.

On Tripadvisor it at higher at higher take rate. So that's been a very positive trend and.

The improving trend we have some great programs in place at the moment that help both suppliers and help our take rate accelerate is the name of the program.

So it's been going really well if you compare.

We are sharing.

The gross booking value.

The trends and we share revenue trends, there's a couple of in between as you were alluding to first of all revenue gets recognized on the moment of consumption of the of the experience.

<unk> is a measure of when the booking takes takes place. So there's a timing difference there.

Especially as you ramp into the year.

Bookings lead.

Lead revenue recognition of course, so that's one difference.

The other.

And then there is take rate then there is a difference and then there is cancellations.

Cancellations.

In line with what we've seen last year, there is still a little bit elevated from 2019.

But cancellations as another factor as you compare between gross booking value.

And in that revenue because the gross booking value that we present is as pre cancellations as gross of gasoline.

Great. Thank you.

Please standby for the next question.

The next question comes from James Lee with Mizuho. Your line is now open.

Thanks for taking my questions, Matt Congratulations on your first quarter as the CEO .

And given your experience in digital marketing.

Can you give us an early view on the hotel meta search business, obviously investors have concerns that otas are getting more direct traffic and Google is encroaching in the space now, giving that want the trip advisor strength is released from consumers is that it.

Potential angle to unlock revenue opportunities or maybe moving up to mid to upper funnel marketing.

It makes more sense.

Would love your.

Color on that thanks.

Yes, thanks for that question James.

I think you identified that there is a number of different ways that we can play in this ecosystem and of course I recognize that.

We're in a competitive space and there are really strong players at the top of the funnel.

And that there are players totally optimized at the bottom of the funnel and I think if we.

Really lean into where we are strong in providing that context, and bringing that audience that.

At which they're ready to make it happen or they are actually in destination.

And be thoughtful about what's the right offer an experienced at that moment, we have a lot of assets to leverage to do that now.

Now.

That we are the definitive guide for consumers as they make those choices I think that will help a lot. So we can play up and up and down the funnel.

I think you mentioned, the Otas and I think.

Obviously, they are an important part of the ecosystem. They have what they do best I think.

Everybody wants to see direct traffic and and of course, we will focus on the benefit that we can deliver to them as part of their funnel consideration.

It can really be helpful. So I'm excited when I think about having spent a couple of decades in digital media.

I feel as though the assets and the diversity.

And what we represent as a brand is a very very strong place to start.

I'm curious what you're seeing there.

Yes, so I'll kick it off and if <unk> wants to add any detail. He can do that I've only been in the role for about a month, but from everything I see our consumers are actively returning to travel and experiences. So while we're always looking for signs of slowdown we don't see anything today that causes any near term concern.

And of course, we've put the business in a good position post pandemic and rebalanced more towards variable cost the team did a great job there.

I will say, we cant predict whats to come but having operated in a variety of context through a number of cycles.

Confident that as we watch the macro we will see if there are early signs and be able to adjust or do you want to add anything.

Yes, I'll just echo that as obviously, we're focused on that we're looking at at the data and see are we seeing some some any signs of potential weakening of the consumer in travel and we're not seeing it.

The demand is very strong.

If you look at forward behavior like searches that are being done in a forward level.

Bookings that will get done a forward, they're all strong versus 2019, and so we're not seeing signs of course.

<unk> says.

We also cannot predict the impact of the economy on travel going forward, but as we look at now and the summer and into the rest of the year.

We see the traveler.

Wanting to return to travel and we talked about pent up demand a lot of people are talking about pent up demand and we're just seeing it we're seeing very enthusiastic.

Travel behavior from from our audience.

And see no signs that a slowdown in our in our business to date.

Yes.

Great. Thanks, so much.

Please standby for the next question.

The next question comes from Deepak Monster, Dan <unk> with Wolfe Research. Your line is now open.

Great. Thanks for taking the questions. So first Matt I know, it's still early for you, but how do you think about the org structure currently attract triple has done a few iterations in the past, but where do you see sort of like the talent gaps that need to be addressed at the high level and then just wanted to ask you you have about $1 billion in cash any thoughts on.

And a path for shareholder capital returns or how do you think about it.

Thank you.

Thanks, Deepak I appreciate the question.

And as I noted earlier I think there is a strong team in place.

And of course, we're always going to seek to be a vibrant home for world class talent and highly effective teams and.

As in any organization there are always opportunities to stretch a little more regardless of the function.

Team is really great. There is a lot of talent I am excited to join this team and be a part of it.

As we think about organization I mentioned opportunities for execution I am excited to think about the way that our strategy and operating model will link but of course any organizations always.

Function of what you choose to do how you prioritize and setting your teams up for success and Thats the order in which we will do it.

And Deepak to your question of cash we have indeed and consider a considerable cash balance.

And we are evaluating OLED.

All the different ways of how we can go about that cash either keep it in reserve for awhile ear market for acquisitions.

Obviously attractive businesses that might be complemented with acquisitions.

And then we have options around <unk>.

Delevering.

Or equity repurchases and so we continuously evaluate that.

With Matt coming onboard.

We'll look at that together in the months and quarters to come along with our board of course.

Yes, I would just say and I didn't mention it upfront.

As I was evaluating things.

Things I really like what I saw from a financial perspective that strong balance sheet.

And enduring and cash generative core business to strong growing segment.

And I think we have a good array of assets to deliver growth and they'll benefit from sharper focus better alignment.

But I am excited about organic opportunities there of course are.

Other opportunities to consider I think the main thing is that we will seek always to be great stewards of capital.

Think about what is the best mix to get the best return on capital.

<unk>.

We will we will certainly be talking about that over time with you all.

Great. Thank you so much.

Please standby for the next question.

The next question comes from Ron Josey with Citi. Your line is now open.

Great. Thanks for taking the question I'll Echo everyone else, Matt Welcome I wanted to ask you, Matt a little bit more about the data aspect of Tripadvisor, you've just mentioned a few times the size and value of trips data.

Unlocking that asset even more so than today. So just talk just a little bit more about I know, it's kind of one month, but just how you might envision using this data to call it creative better or.

The more engaging consumer experience.

And drive better partner Oi and maybe.

A question about viator and revenue retention and new users you talk to just about consistent revenue retention rates and investments in acquiring new users. So maybe talk to us about these investments on the consumer side and building up the brand. Thank you guys.

Yes, thanks for the question Ron.

Of course, it's still early but what I can say is <unk>.

Having spent a good number of years thinking about the way that data is transforming really every industry and all the companies that I've been a part of.

I do have conviction.

That we can leverage our data asset.

In ways that we haven't before to enable the business.

I think it's going to deliver agility more insight.

It'll be really useful as we think about the way that we bring our strategy together to get all the pieces really reinforcing.

Data is one of those currencies that can play across the entire organization.

And really help understand that consumer in a more granular way.

Of course with all our privacy considered.

And think about what's the next best opportunity to serve that consumer need.

And so I think it does open up a number of different opportunities.

Yes, it would be early for me to project, but.

Absolutely data in the way that it plays in media ecosystems in the way that we can serve.

Our partners and think about value exchange in different ways.

The opportunity.

To think about.

Yield on the platform.

Data is something that can be aggregated and anonymised in really get trend signal and theirs.

A lot of different things, we could be doing with that.

Of course, there are ways to think about the data ecosystem and the way that one might target.

Segments at scale. So I think there are a lot of hypotheses that we could develop and we'll be very thoughtful about.

Testing and learning and then sharing at that moment of conviction, but I think as a starting point I am excited about that platform and we have already been rolling up our sleeves and getting getting to it.

And Ron on the the.

The viator.

Ah repeat rates and investments, we're making there.

Very important focal point for the team there has been strides and more we can do around well.

What experiences do we present to people who are coming to our site at what moment.

What do we show people next when they have already booked and experience.

<unk>.

What else they could do and how do we present that.

Investment in the App, who has been a major focus for us over the last 12 months.

Our app usage and number of bookings through the App has grown.

Impressively over the last 12 months and Thats important because.

Not surprisingly bookings.

Bookings from the App have higher repeat rates higher ltvs than coming in other ways and so we've been pleased with that progress also allows us to have more effective communication with in market with them.

With folks.

It improves the repeat rate.

Been focus focusing on.

Localization of content.

We have historically skewed to the English speaking point of sale not so much to destination actually Europe as a destination is larger.

Historically for us than the U S as a destination.

But skew to use speaking audiences that book and we see a huge opportunity to broaden that to European audiences and later later on in the cycle Asian audiences as well so we're investing in that.

And then there are other channels that we can explore that.

Are more conducive to experiences to repeat rates.

Downloads is.

As an attractive investment area that we've been looking at.

And so there's there are a lot of activities going on and all with that very important kpis of how can I, how can we improve repeat behavior of our customers because that's ultimately.

The going to be the driver of the LTV per customer, which allows us to.

Invest more but.

And importantly show very attractive margins over time.

Thank you Matt Thank you.

Please standby for the next question.

The next question comes from John calling Twangy with Jefferies. Your line is now open.

Hey, Thanks for taking my questions I wanted to start <unk>.

By asking about strength in the U S dollar versus the euro and the pound.

Going a little bit further across some of the key destination markets across Europe , given that as an important driver of traffic for Tripadvisor and I've got a follow up.

Yes, it's difficult to say that definitively, but it does make common sense and it has been in the past we have seen that as an important driver.

It is there is a multiple factors going on including.

The price of flights et cetera. So you have to look at the total <unk>.

Total trip.

Sure for a traveler from the USA to Europe , but.

But we have seen in the past that of course, if the euro is cheap.

Then.

And then it is more attractive to travel overseas and traveled to Europe . So nothing really I can give you is a strong data point at this point.

But we have seen the growth of Intercontinental travel come back it progressively over the.

During the quarter, we have seen the U S U S travelers booking hotels.

Europe come back we've seen very strong growth in <unk>.

U S travelers buying experiences in Europe , which is.

Is a strong indication of of more people traveling to Europe . So how much of that is pent up demand and borders opening.

Versus versus the euro impact it is a little bit difficult to draw a straight line too, but yes, we have seen very very robust.

The us to Europe travel behavior.

Great.

<unk>, obviously, it's been delivering very impressive revenue growth, but when you when you look at customer trends.

What portion in recent periods would you say are new device tour versus repeat customers and how does this customer composition between new and repeat comparative pre COVID-19.

And how does that kind of help inform your outlook for customer lifetime value and the ROI on your ramping marketing spend in that business. Thanks.

So new customer growth has been very important for us and you've seen us lean in on marketing in 2021 and 2022.

So.

Unfortunately that means we are getting a lot of new customers in the door.

But also Fortunately, we see the expected growth in a repeat customer.

Customer revenue as well and.

And we see that as we as we anticipated come so you see both lines up going both lines going up into the right.

New customer revenue as well as repeat revenue, which is which is of course very pleasing and new revenue is an indication of.

Repeat revenue in the following year. So that's been strong the other thing I would call out is.

That pre pandemic.

Our profile was predominantly.

Americans and Brits traveling to Europe that was that was the big source of our revenue.

Europe as a destination was the big revenue source of course, the pandemic shifted a lot of demand to North America domestic people going to and so what we've seen.

Now in this year is that the North America to North America.

Volume and growth has been like it was last year. So our customers continue to do that plus now.

U S and UK to Europe revenue has come back in full force.

So, we're adding that plus Europe to Europe revenue has come back. So we're getting the double benefit of of now two big markets, where we only had one before we have U S to Europe before and now we have U S to Europe as well as North America North America.

Very very strong market. So that's an important driver as well.

Not only created a lot of new users. We've also created a new use case for our users which is via towards great to use when you say in the U S as well.

Yes.

Thank you.

With that the call will come to a conclusion.

Now like to turn the conference back to Matt Goldberg for closing remarks.

Thank you all for joining us this summer time Friday morning, we have a lot of opportunities ahead of us and a lot of exciting work to do I am looking forward to this next phase in keeping an open and thank you for participate with all of you have a great weekend everyone.

This concludes today's conference call. Thank you for participating you may now disconnect.

Q2 2022 Tripadvisor Inc Earnings Call

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