TripAdvisor Inc (NASDAQ:TRIP) reported a disappointing third quarter results as revenue picked up just 1% to $421 million, much is less than 5% expected growth. The adjusted net income of $78 million was flat from its corresponding period. The diluted EPS was at $0.53 per share. Revenue took a hit of 2 percentage points from the strong US dollar.
TripAdvisor click based advertising and transaction based revenue fell 10% from year ago levels, which offset the gains in display based advertising and subscription revenue as well as hotel related sales. But the group’s referral and transaction revenue performance disappointed investors which lost 9.6% in the third quarter. This weak referral revenue was mainly affected after the company rolled out the instant booking feature, which allows booking of hotel rooms directly through the company’s website. TripAdvisor is focusing to promote the feature by partnering with hotel chains like Marriott International Inc and travel website operators such as Priceline Inc’s Booking.com. While this feature could favor the group’s partners and enhance their customer’s experience, referral revenue could continue be under pressure. TripAdvisor said on Tuesday that it had made instant booking more prominent on the mobile app by favoring user engagement over generating revenue in the near term. A 35% jump in non-hotel revenue sources was able to restrict the fall in topline.
Given this top line pressure, the group’s Adjusted EBITDA was $114 million, falling by 12% on a year over year basis. Cash flow used in operations was $87 million while free cash flow was negative $108 million. Cash and cash equivalents were at $756 million.
North America contributed 56% of revenues and recorded 3 percentage point growth over the corresponding period. The rest of the world however noted a single point drop in business.
On the positive side, the company’s assets continued to expand and customers keep seeing the vale of its information. Average monthly unique visitors rose 11% to 390 million during the quarter. TripAdvisor now has more than 435 million reviews and opinions with about 1.05 million hotels, 4.2 million restaurants, 830,000 vacation rentals and 730000 attractions and other experiences carrying information from the company. The click based and transaction revenues per hotel shopper growth improved throughout the quarter and was better towards the end of the quarter.
Going forward, the challenge that TripAdvisor faces is monetizing its travel information. The stock plummeted 13% in after hours trading following the announcement while made a gap down opening on November 9th, of more than 14% today (as of 9:38AM EST).