Tripadvisor, Inc. (TRIP) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong performance in segments like TheFork, with 28% revenue growth and margin improvements. Despite challenges in Brand Tripadvisor, cost management exceeded expectations. Management's optimistic guidance for future growth, AI-driven efficiencies, and a positive outlook for Viator supports a positive sentiment. The Q&A confirmed growth reacceleration and strong positioning, though some questions were deflected. The significant market cap suggests a moderate reaction, leading to a positive prediction for the stock price movement.

Key Financial Performance

Consolidated Revenue $553 million, a 4% growth year-over-year. The growth was attributed to improved performance in the Viator segment and coordinated marketing efforts.

Adjusted EBITDA $123 million, representing 22% of revenue. This exceeded expectations due to efficient marketing channel mix and cost management.

Viator Revenue $294 million, a 9% growth year-over-year. Growth was driven by an 18% increase in the number of experiences booked and a 15% growth in Gross Booking Value (GBV).

Viator Adjusted EBITDA $50 million, or 17% of revenue, with a margin improvement of 550 basis points. This was driven by a more efficient marketing channel mix and growth in direct channels and repeat bookings.

Brand Tripadvisor Revenue $235 million, an 8% decline year-over-year. The decline was due to stronger-than-anticipated traffic headwinds affecting both free and paid channels.

Brand Tripadvisor Adjusted EBITDA $59 million, or 25% of revenue. Despite revenue decline, cost management and fixed cost prudence helped exceed margin expectations.

TheFork Revenue $63 million, a 28% growth year-over-year. Growth was driven by an 11% increase in B2C bookings and higher-priced premium plans in B2B subscriptions.

TheFork Adjusted EBITDA $14 million, or 22% of revenue, with a margin improvement of approximately 10 percentage points. This was driven by leverage in personnel costs.

Gross Cost Savings Program $85 million in annualized savings expected by 2027. This includes a 20% reduction in headcount and other operating expense efficiencies.

Free Cash Flow $261 million on a trailing twelve-month basis, a significant improvement from the prior year due to favorable working capital and reduced onetime cash tax settlement charges.

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Operating Highlights

AI-native MVP for planning phase: Tripadvisor plans to launch an AI-native MVP for the planning phase in Q4 2025, focusing on personalized recommendations and actionable insights for travelers.

AI integration with ChatGPT: Tripadvisor and TheFork are integrating into ChatGPT with first-of-their-kind apps, expected to go live in the coming weeks.

Expansion in experiences category: Tripadvisor is unifying Viator and Tripadvisor experiences operations to focus on the global experiences market, which is expected to reach $350 billion in GBV by 2028.

Geographic and category expansion: Plans to address new geographic markets and expand into new categories within the experiences segment.

Cost savings program: Tripadvisor is launching an $85 million annualized gross cost savings program, including a 20% reduction in headcount, to be fully realized by 2027.

Operational efficiency in experiences: Unified operations between Viator and Tripadvisor are expected to improve marketing efficiency, conversion rates, and supply optimization.

Shift to experiences-led and AI-enabled model: Tripadvisor is transitioning to an experiences-led and AI-enabled company, focusing on high-growth marketplaces and reducing reliance on legacy SEO-driven models.

Focus on profitability in legacy categories: Tripadvisor will optimize its mature legacy categories for profitability while shifting resources to marketplace growth opportunities.

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Risk or Challenges

Traffic headwinds: Accelerating traffic headwinds negatively affected both free and paid channels, impacting revenue in branded hotels, media and advertising, and experiences and dining segments.

SEO landscape shifts: Increasing pressure from the shifting SEO landscape has negatively impacted Tripadvisor's legacy offerings, leading to a focus on optimizing for profitability rather than growth.

Dependence on legacy models: Tripadvisor's legacy model built on SEO faces structural headwinds, making it less sustainable and requiring a shift to new growth areas.

Operational restructuring risks: The planned reduction in headcount by approximately 20% and other cost-saving measures may lead to operational disruptions and challenges in maintaining efficiency during the transition.

AI competition: AI-native products are increasingly preferred by customers over legacy products with AI features, raising the stakes for Tripadvisor to innovate and compete effectively in the AI ecosystem.

Geographic and category expansion challenges: Efforts to address new geographic markets and expand into new categories in the experiences segment may face execution risks and require significant investment.

Revenue growth pressure: Brand Tripadvisor's revenue declined by 8% in Q3, with stronger-than-anticipated traffic headwinds and challenges in monetizing new investments.

Marketing efficiency risks: Coordinated marketing efforts between Tripadvisor and Viator are still experimental, and their long-term effectiveness in improving revenue and profitability remains uncertain.

Economic uncertainties: Macroeconomic conditions and currency fluctuations could impact gross booking value (GBV) and revenue growth, particularly in international markets.

Supply chain and operational risks: Expanding supply coverage in new categories and emerging destinations may face logistical challenges and risks in maintaining quality and availability.

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Guidance & Outlook

Revenue Growth: Consolidated revenue growth is expected to accelerate, driven by strategic changes and a focus on high-growth marketplaces like Viator and TheFork. Full-year consolidated revenue growth is projected at 3% to 4% for 2025, with Q4 revenue expected to be flat year-over-year.

Adjusted EBITDA Margin: The company expects an adjusted EBITDA margin improvement of approximately 100 basis points in fiscal 2026 due to cost-saving initiatives. For Q4 2025, consolidated adjusted EBITDA margin is projected to be 11% to 13%.

Cost Savings Program: An $85 million annualized gross cost savings program will be implemented, primarily through a 20% reduction in headcount and other operational efficiencies. Approximately $10 million of these savings will be realized in Q4 2025, with full realization by 2027.

Viator Segment Growth: Viator bookings are expected to grow 16% to 18% in Q4 2025, with revenue growth in line or slightly accelerating compared to Q3. Adjusted EBITDA margin for Viator is expected to improve by approximately 200 basis points, excluding a nonrecurring tax credit.

Brand Tripadvisor Revenue: Revenue for Brand Tripadvisor is expected to decline in the low teens in Q4 2025 due to traffic headwinds. Adjusted EBITDA margin is projected to decline by approximately 900 basis points.

TheFork Segment Growth: TheFork revenue is expected to grow in the mid-teens in Q4 2025, with adjusted EBITDA remaining flat year-over-year. The segment will continue to execute a financially disciplined growth strategy.

AI and Experiences Strategy: The company plans to launch an AI-native MVP for the planning phase in Q4 2025 and integrate Tripadvisor and TheFork into ChatGPT. These initiatives aim to position Tripadvisor as a leader in the AI-enabled travel ecosystem.

Segment Reporting Changes: Starting in fiscal 2026, the company will update its reportable segments to Experiences, Hotels and Other, and TheFork to better align with its strategic focus and resource allocation.

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Shareholder Return Plan

Share Repurchase Program: During the third quarter, we did not repurchase shares given the operating model changes and cost savings programs we were contemplating. However, we expect to restart our open market repurchases this quarter aligned with our previously communicated programmatic approach, subject to a stable macro environment. Today, we have approximately $160 million remaining in our authorization.

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Key Q&A

Q:What are the revenue growth assumptions going forward, and how will the new organizational structure impact the Experiences segment?

A:The Experiences segment is expected to reaccelerate next year, focusing on geo TAM expansion and category expansion. The hotels and other category will face revenue headwinds due to traffic challenges and reduced investment in paid channels. TheFork is expected to grow with improved margins. Overall, consolidated revenue and EBITDA are expected to grow next year, with a 1-point margin improvement due to cost savings.

Q:Can the Viator business or Experiences business grow closer to its closest competitor's 30% growth rate while maintaining margin expansion?

A:Management believes they can reaccelerate growth while expanding margins. Viator is positioned as the largest, most trusted, and most profitable platform in the category, with unmatched supply and reach. The last 12 months showed $4.6 billion GBV and 17% items growth. Viator has been profitable since 2023, with margins improving from mid-single digits to approaching double digits.

Q:What are the new user trends at Viator, and how is the company approaching supply growth in newer markets?

A:In North America, repeat revenue growth from existing customers is strong, reducing reliance on paid channels. New user acquisition is disciplined, focusing on attractive ROIs. Geo expansion, particularly in Europe, leverages Tripadvisor's brand awareness and traffic volumes to grow the new user base.

Q:How is AI driving cost efficiencies and revenue opportunities across the business?

A:AI is deployed across the organization for customer service, content moderation, fraud detection, localization, and marketing. It has improved productivity and efficiency. AI is also used for product innovation, such as trips, planning, and itineraries. The company plans to launch an AI-native MVP soon and sees potential in scaling partnerships and licensing deals.

Q:Will the consumer experience on Tripadvisor change with the reset to an experience-led strategy?

A:Yes, the user experience will change to focus on the Experiences category. Resources and KPIs will prioritize experiences, optimizing the funnel and reducing friction. Both Tripadvisor and Viator brands will work together to provide a seamless experience for consumers.

Q:What is driving the acceleration in volume growth at Viator, and what will drive Q4 acceleration despite tough comps?

A:Volume growth is driven by the 3P business, which is growing fast. Viator and Tripadvisor channels have shown acceleration, with Tripadvisor turning to positive growth. Q4 acceleration will be supported by modest growth in both channels and improvements in marketing, products, and supply.

Q:Will the go-to-market strategy for Experiences focus more on the Viator or Tripadvisor brand, and how will the company expand into other regions?

A:The go-to-market strategy will depend on the market and category. Both brands can coexist, with Viator focusing on booking experiences and Tripadvisor on planning and recommendations. Geo expansion, particularly in Europe, will leverage Tripadvisor's brand awareness and traffic volumes.

Q:How is the company thinking about the legacy Metasearch business and TheFork?

A:The Metasearch business will not receive incremental investments but will maintain quality for travelers and partners. TheFork is performing well, with sustainable growth and improving profitability. Management is open to exploring options to unlock value, including a potential sale. Revenue growth for TheFork is expected to step down next year due to tough comps but remain healthy.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the question about whether Viator can grow closer to its competitor's 30% growth rate. They emphasized their leadership position and profitability but did not provide a clear comparison or specific growth targets relative to competitors.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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