Tripadvisor Inc. (TRIP), a leading online travel platform, reported mixed financial results in its second-quarter earnings call. The company saw a slight 1% year-over-year increase in Q2 revenue, reaching $497 million, with adjusted EBITDA at $97 million, or 20% of revenue. Despite a decline in Brand Tripadvisor revenue by 10%, primarily due to weaker demand in hotel meta and experiences, Viator and TheFork showed revenue growth of 13% and 11% respectively. Tripadvisor ended the quarter with $1.2 billion in cash and cash equivalents, and they are optimistic about their initiatives for the second half of 2024.
Key Takeaways
- Tripadvisor's Q2 revenue increased by 1% YoY to $497 million, with adjusted EBITDA at $97 million.
- Brand Tripadvisor revenue declined by 10%, while Viator and TheFork saw growth of 13% and 11% respectively.
- The company closed a term loan B facility of $500 million, which was used to redeem high-yield notes.
- Tripadvisor repurchased 1.4 million shares at an average price of $18.28, spending about $25 million.
- The outlook for Q3 predicts flat to slightly down revenue growth, with a decrease in adjusted EBITDA margins.
- Full-year revenue is expected to grow in the low single digits, with declines in Brand Tripadvisor but improved profitability in Viator and TheFork.
- The company plans to focus on app-based and logged-in members, optimize marketing, and potentially roll out a rewards program.
- TheFork had its most profitable quarter ever, with an adjusted EBITDA of $3 million.
- Google (NASDAQ:GOOGL)'s search policy changes impacted free traffic and financials in the previous quarter, but most rankings have been recovered.
Company Outlook
- Flat to slightly down revenue growth expected for Q3.
- Low single-digit revenue growth projected for the full year.
- Adjusted EBITDA margins expected to decrease year-over-year.
- Strategic focus on direct member relationships and monetization through the app.
Bearish Highlights
- Brand Tripadvisor revenue declined by 10% due to weaker demand in hotel meta and experiences.
- Mixed signals observed in the macroeconomic environment.
Bullish Highlights
- Viator and TheFork reported improved profitability.
- Successful implementation of the Accelerate program, leading to increased GBV from suppliers.
- Low supplier churn and enhanced operator experience.
- Marketing efficiency and focus on repeat bookings driving revenue growth.
Misses
- Q2 revenue growth was marginal at 1% YoY.
- Adjusted EBITDA margins down year-over-year.
Q&A Highlights
- Tripadvisor discussed the use of rewards and incentives as a powerful tool for customer acquisition and engagement.
- The company recovered most of its hotel rankings after Google's search policy changes.
- TheFork's progress is expected to contribute to growth and profitability for the year.
- Optimism expressed for the second half of 2024, with a commitment to driving initiatives forward.
Tripadvisor's second-quarter results show a company navigating through a challenging market while leveraging its strengths in experiences and dining reservations. With strategic investments in marketing efficiency, customer engagement, and direct member relationships, Tripadvisor aims to maintain its position as a leading travel platform amidst fluctuating travel demand and macroeconomic uncertainties.
InvestingPro Insights
Tripadvisor Inc. (TRIP) has been making strategic moves that reflect a company adapting to market demands and leveraging its financial stability. The following insights from InvestingPro provide a deeper understanding of the company's financial health and market position:
- Market Capitalization: With an adjusted market cap of $2.27 billion, Tripadvisor remains a notable player in the online travel industry. This valuation reflects the market's current view of the company's worth.
- P/E and PEG Ratios: A P/E ratio of 94.22 might seem high, but when adjusted for the last twelve months as of Q2 2024, it drops to 56.43. This suggests that investors are expecting higher earnings in the future. Moreover, the PEG ratio, which stands at 0.41 during the same period, indicates that the stock may be undervalued when considering its expected earnings growth.
- Profit Margins: Tripadvisor's gross profit margin is particularly impressive at 91.18%, showcasing the company's ability to maintain profitability despite challenges in the market.
InvestingPro Tips for Tripadvisor highlight that the company's management has been confidently buying back shares, a sign that they believe the stock is undervalued. Additionally, Tripadvisor holds more cash than debt, providing financial flexibility and stability. Analysts predict that the company will be profitable this year, which aligns with the gross profit margins observed.
For investors looking for more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/TRIP. These tips delve into other aspects of Tripadvisor's financials and market performance, offering a broader perspective for making informed investment decisions.
Full transcript - Tripadvisor Inc (TRIP) Q2 2024:
Operator: Good day and thank you for standing by. Welcome to the Tripadvisor Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker for today, Angela White, Vice President of Investor Relations. Angela, please go ahead.
Angela White: Thank you, Felicia. Good morning, and welcome to Tripadvisor’s second quarter 2024 financial results call. Joining me today are Matt Goldberg, President and CEO; and Mike Noonan, CFO. Earlier this afternoon after market opened, we filed and made available our earnings release. In that release, you’ll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measure discussed on this call. Before we begin, I’d like to remind you that this call may contain estimates and other forward-looking statements that represent management’s view as of today, August 06, 2024. 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 from these forward-looking statements. With that, I’ll turn the call over to Matt.
Matt Goldberg: Thanks, Angela, and good afternoon, everyone. Our second quarter consolidated results were in line with our expectations. With revenue of $497 million, reflecting year-over-year growth of 1%, and adjusted EBITDA growth of 7% to $97 million, or 20% of revenue. Our results reflect the diversification of our portfolio mix, its different growth profiles and strategies, and the increasing contribution to profit mix we're seeing from Viator and TheFork. Mike will cover details of financial performance in his section, but first I'll cover our operational progress as we execute our segment strategies. As a reminder, at Brand Tripadvisor, our strategy focuses on driving engagement and delivering world-class guidance products to fuel diverse monetization paths. At Viator, we're reinforcing our leadership position and experiences by investing in our brand, product, and repeat bookings to drive LTV and improved unit economics. Finally, at TheFork, we're focused on driving revenue growth with margin improvement by increasing the value we deliver to diners and restaurants as the leader in the European dining market. Let's start with Brand Tripadvisor. In Q2, we delivered revenue of $250 million, a decline of 10%, and adjusted EBITDA of $84 million or 34% of revenue. Our financial performance continues to reflect the transition from our historical reliance on legacy offerings, such as hotel meta, which has experienced ongoing pressure over time, to a more diverse and sustainable model. This challenge is well-known, and the strategy we launched last year addresses it head on. When we offer a more compelling product that better meets travelers' needs across their end-to-end journey, from the first moment of planning through the end of the trip itself, we drive deeper engagement. We get more users coming to us through direct channels, like our app. We get them to sign up as members and come back more frequently, giving us valuable data and more opportunities to monetize, which we believe will result in a meaningfully higher average revenue per user over time. We are uniquely positioned to serve these traveler needs, given the durable trust in our brand, the quality of our content, the relevance of our data, and the scale of our audience. Last year, we set the foundation, building teams around product and data and putting core capabilities in place. This year, we're seeing tangible outcomes from our initiatives. The data is clear. Travelers (NYSE:TRV) are responding to the improvements we're making in our product, and we're excited about scaling them to drive financial impact. Before I share highlights on key initiatives over the last quarter, let's cover some of the progress we see across a few of the metrics we outlined in our last call that give us confidence we're heading in the right direction. First, our overall audience has stabilized after an extended period of decline. Specifically, we've seen sustained and stable monthly active users so far this year. While this metric is not the most important indicator of the depth of engagement, it ensures we retain a broad global audience to drive membership and a deeper relationship over time. It also serves at the top of the funnel for our category marketplaces. It's worth noting that in the U.S., where we've launched and scaled many of our initiatives first, we're seeing meaningful year-over-year growth in MAUs. Second, we've seen solid growth in membership. Our monthly active members, which were declining along with our overall MAUs, has returned to growth this year and accelerated from Q1 to Q2. And we expect this trend line to continue, driven by our ongoing product efforts. Third, we continue to see improvements over the last year in direct engagement, which includes our mobile app, which is one of the clearest signals that travelers are finding value in the changes we're making to the product. In Q2 of this year, direct channel share across all services grew by approximately 450 basis points over last year. While this is still a relatively small overall channel, we see meaningful headroom for growth, driven by our strategy. Finally, we continue to see deeper engagement translate into better monetization. Historically, we've seen very low average revenue per user given our reliance on low value flyby traffic. It's still early, but the product enhancements we're rolling out are driving meaningfully higher monetization among our highest engaged members and app users, whose ARPU is multiple times higher. For example, in Q2, we observed that travelers who use Trips, our trip planning offering, reached ARPU levels roughly 15 times higher than our platform wide average. This higher monetization has been consistent as we've begun to scale our efforts, driven primarily by experiences bookings today, but with real upside as we introduce more in-app booking across other categories in the future. The formula is simple. When we keep travelers engaged on our platform, we have more opportunities to monetize, not just through clicks, but through higher-value transactions as well. Now let's step back from the outcomes for a moment and focus on the work we're doing to drive impact and accelerate the pace of change. Here are a few highlights. In Q2, we continue to extend the use of AI to offer more relevant guidance to more travelers. We scaled AI-powered review summaries to restaurants and experiences, personalizing the planning experience so you can explore things to do, places to stay, and restaurants recommended specifically for you in the app. And we expanded TRIP internationally to 20 new languages across more than 30 locales. Looking ahead over the next few quarters, we'll continue to introduce new ways for travelers to discover, share, and consume guidance and strengthen our free membership value proposition, highlighting all the benefits of joining our community by better recognizing our most engaged members. Last quarter, we also launched a large set of upgrades to our mobile app, such as a new home screen and improved navigation that make it easier to explore destinations, plan a trip, and book it immediately, starting with experiences. We also introduced hotel booking and rewards exclusively in our app, where we've seen strong early indicators of customer engagement, including better click-through, conversion, and repeat rates. We were also pleased to see the app users who book hotels spend more on experiences, leave more reviews, and create more trips. We're excited about the role hotel and experiences bookings can play in the traveler journey for our deeply engaged, logged-in members. Moving forward, we'll continue to differentiate the experience in our app with a focus on new features and UX improvements to drive higher conversion rates across our category marketplaces. Finally, over the last few months, we conducted a full funnel marketing pilot focused on driving consideration across channels like Connected TV and Social. This represented a very small portion of our marketing spend in the quarter, the bulk of which continues to be focused on lower funnel channels to support our legacy offerings. But the pilot performed very well and gave us considerable learnings as we evolve our marketing mix over time to reorient our spend to drive lifetime value in support of our engagement-led strategy. We're excited by the progress we've made at Brand Tripadvisor and the opportunities ahead. But let me be very clear. Our near-term financial performance is still heavily reliant on legacy offerings that face well-known challenges. Tripadvisor is, right now, a combination of two very different business models. One is defined by our legacy offerings that are large and profitable and will continue to be an important but less central part of our overall business mix. The other is emerging. It's beginning to drive the outcomes I referenced earlier and will shift our mix over time. It's defined by a deeper and more direct relationship with travelers grounded in membership and the mobile app. It gives us the opportunity to monetize not just through clicks, but also transactions, and not just once in a single session, but over and over again with less reliance on having to reacquire the customer and paid channels. This gives us a lot of confidence to drive sustainable growth at Brand Tripadvisor as we continue to execute on our strategy. Turning now to Viator, where we delivered revenue of $244 million, growing 13% year-on-year, or 14% in constant currency. Gross booking value grew 8% year-over-year to approximately $1.2 billion. Adjusted EBITDA was $10 million, or 4% of revenue, representing a $12 million year-on-year improvement. These results reflect our ability to deliver on our stated strategic priorities as we continue to invest across marketing and R&D and make progress driving repeat bookings and unit economics. We continue to deliver value to both sides of our marketplace and sustain our leadership position. On the traveler side, we're making improvements across every part of the world. of the product experience. A few of these include checkout flow refinements that drive lower cancellation rates and reductions in payment friction in our Reserve Now Pay Later option contributing to uplift in conversion. We're also making progress shifting travelers from web to app, nearly doubling the number of active bookers who log into the app, which is our fastest growing, highest repeating, and best converting channel. We're also excited about redoubling our efforts to give travelers the best app to discover, book, and enjoy the highest quality experiences wherever they are. We continue to extend our reach, balancing performance marketing, affiliate partnerships, brand and promotions to drive more efficient costs as we better target new and repeat customers over the long term. From a brand perspective, we're seeing improvements in consideration, in particular with high value travelers, and we've seen almost double the growth in branded search over the last year versus markets where we haven't rolled out creative. On the supply side, we continue to see evidence of the value that our suppliers find in our platform. We offer unmatched access to demand across multiple points of sale, including Tripadvisor, where experiences shoppers are the largest and fastest growing segment of the audience. And we continue to offer compelling tools and programs to help operators access this demand, grow their bookings, and drive their economics. This includes our Accelerate program, where we've seen GBV from participating suppliers increase from last year, at the same time that supplier churn remains very low. We're also making improvements to key parts of the operator experience on our platform, including our new supplier onboarding program, which continues to smooth the self-service path and has led to reduction in customer service contact rates and higher customer service satisfaction. At TheFork, we continue to drive profitable growth and deliver value to diners and restaurants across Europe, benefiting from sustained operational efficiencies that continue to improve our unit economics. In Q2, revenue was $42 million, 11% growth year-on-year, or 12% in constant currency. Importantly, adjusted EBITDA was $3 million, or 7% of revenue, a $7 million improvement over Q2 last year, representing our most profitable quarter ever. We're driving marketing efficiency, focusing our investment mix to balance how we acquire new customers and drive repeat reservations at greater scale. We've been pleased with the performance in social channels, which are delivering incremental volumes with strong ROI and repeat rates. In TheFork's direct channels, repeat bookings represent a growing share of overall bookings. More than 75% of TheFork's booking volume comes through the app and we continue to enhance the user experience in that valuable and growing channel. Home page additions such as local hotspots, top restaurants by city, and special offers, as well as an improved ranking algorithm have driven year-over-year conversion improvements. We also continue to drive opportunities to enhance TheFork’s recognize brand, including exploring new and innovative partnerships to tap into new audiences. We recently piloted a gift card program in one of our key markets, partnering with Vodafone (NASDAQ:VOD) to provide its millions of customers an incentive loyalty reward, as well as promoting TheFork in its media. We think there are more opportunities like this one to pursue in the future. On the restaurant side, our results reflect the value we're providing to over 50,000 restaurants in TheFork network. In the quarter, we drove growth in new restaurant acquisition and stability in active restaurants. Importantly, we achieved significant improvement in sales productivity for new restaurant acquisition. We also laid the foundation for sustained B2B revenue growth which drove double-digit subscription revenue that gives us confidence in the runway ahead. Before closing out, I want to reflect on all the progress we're making in each of our segments across Tripadvisor Group as we continue to pursue our shared vision to be the most trusted source for travel and experiences. We're uniquely positioned, our strategies are aligned, and we're doing the hard work quarter by quarter to execute on our plans that will drive the trajectory of our performance. Of course, we're also watching closely what's happening externally. Recently, we've all observed mixed signals in the macroeconomic environment as well as ongoing geopolitical tensions. We also see some signs and signals around narrowing international booking windows and moderated pricing. Overall, however, we continue to see healthy travel intent in both our search and survey data that suggests travel remains a priority and experiences continue to be a mainstay at the heart of travel planning. We remain confident about the long-term growth opportunity ahead for travel and are focused on the work to fortify our position and create more value for all stakeholders. With that, I'll turn the call over to Mike.
Mike Noonan: Thanks, Matt, and good afternoon, everyone. I'll start by reviewing the quarter and then provide our outlook for the third quarter and the remainder of the year. All growth rates are relative to the comparable period in 2023, unless noted otherwise. Second quarter revenue was $497 million, reflecting growth of 1%, which was in line with the expectations for the quarter. Adjusted EBITDA was $97 million, or 20% of revenue, and 200 basis points higher than last year. Adjusted EBITDA was higher than expectations across each of the segments. Turning to segment performance for the second quarter, Brand Tripadvisor delivered revenue of $250 million, which was a decline of 10%. Brand Tripadvisor revenue was slightly lower than expectations, primarily due to the performance of hotel meta and experiences in the quarter. Brand hotel revenue was $150 million or declined of 14%. Hotel meta performance reflects the weaker demand trends we observed in April, which did not improve in May or June. Lower paid click volume was driven by weaker demand as well as increased competition in these channels. We continue to manage our paid channels for appropriate returns as reflected by slightly higher year-over-year contribution margins. Lower free click volume was due in part to the impact of the algorithm update referenced on our last call. Pricing continued to be up year-over-year, but at a lower rate than prior quarters. From a geographic perspective, hotel meta revenue in the US stepped back meaningfully from Q1 levels while EMEA and APAC were more in line with Q1 levels. Finally, we experienced modest declines in in our hotel B2B offering, a trend we expected as we continue to transition our go-to-market model to self-service. Media and advertising revenue declined 2% to $41 million. Growth in off platform and programmatic revenue was offset by direct revenue and certain campaign timing, which, as noted on the last call, was positive to the first quarter, but negatively impacted the second quarter due to the pull-forward of some campaigns into Q1. Experiences in dining revenue was $48 million, or a decline of 4%, primarily due to a more than 20% decline in our restaurant's B2B offering. These results were in line with our expectations as we continue the transition to a self-service model. Experiences revenue growth was below expectations, particularly in the paid channels, where we witnessed more normalized category demand, combined with the effects of our marketing strategy, which emphasizes profitability at Brand TripAdvisor (NASDAQ:TRIP) point of sale. Lastly, other revenue declined 15% to $11 million, as we continue to de-emphasize our flights, car rental, and vacation rental offerings in favor of prioritizing investment in other areas more core to our stated strategy. Adjusted EBITDA in Brand TripAdvisor was $84 million, or 34% of revenue, reflecting approximately flat margins year-over-year. Lower paid marketing expense as a percent of revenue was partially offset by increases in new LTV-based marketing campaigns, such as app-focused marketing and social media brand campaigns, to accelerate our engagement-led strategy. It's early, but we like the results that show improved awareness, higher trips creation, and increased direct traffic and app downloads. Finally, we also saw a modest deleverage coming from headcount increases across engineering, product, and data functions that underpin the strategic transformation work we've discussed in prior quarters at Brand Tripadvisor. Turning to Viator, Q2 revenue was $244 million, reflecting growth of 13% and 14% in constant currency. The pull forward of the Easter holiday into the first quarter was a headwind to Q2 revenue of approximately 100 basis points of growth. Gross booking value, or GBV, grew 8% to approximately $1.2 billion in Q2. GBV, at the Viator point of sale, grew at rates higher than total GBV, while brand supervisor point of sale grew below the total GBV rate. Our Q2 GBV sequential growth declines reflect broader demand trends across Viator's channels, as well as the deceleration in the brand supervisor point of sale, as referenced earlier. We continue to see healthy growth in our paid marketing channels, while our direct channels are growing faster. As Matt referenced, we are pleased with the progress we are making in growing our app channel, as it is the fastest growing channel and we believe we still have a lot of optimization opportunities ahead of us. We are still seeing strong growth in repeat users, and this growth has been consistent quarter-over-quarter. Importantly, our repeat users come with lower marketing costs. Viator adjusted EBITDA was %10 million or 4% of revenue in the quarter. The year-over-year margin leverage of approximately 500 basis points was driven primarily by lower sales and marketing as a percent of revenue as a result of a more favorable free versus paid channel mix. People cost as a percent of revenue were approximately flat year-over-year despite continued investment in our product experience, especially in the app and growing supply in our marketplace. At TheFork, revenue grew 11% as reported and 12% in constant currency terms to $42 million. Top line results were driven by balanced growth in both pricing and booking volume. The pull forward of Easter holiday into Q1 of this year resulted in a headwind up to Q2 revenue of approximately 200 basis points of growth. Adjusted EBITDA at TheFork was $3 million or 7% of revenue, an improvement of 18% as points from Q2 of last year. Lower people cost as a percent of revenue was the primary driver of the year-over-year leverage. Now turning to consolidated expenses for the quarter. Cost of revenue was 9% of revenue, an increase of 100 basis points due primarily to higher cloud costs across Brand Tripadvisor and Viator, higher transaction fees at Viator, and higher media production costs at Brand Tripadvisor. Sales and marketing were 53% of revenue and was lowered by approximately 200 basis points due to lower people and performance margin costs at Brand Tripadvisor. Technology and content costs were 15% of revenue, approximately 100 basis points higher, primarily due to higher people costs at Brand Tripadvisor and Viator. G&A expense as a percent of revenue increased by nearly 200 basis points, which was due to several items. We incurred a one-time expense in the quarter of approximately $4 million related to the recently enacted Canadian Digital Service Tax, which required retrospective application to the past periods, an expense of approximately $3 million related to a previously granted one-time share -based compensation award to a former senior executive, and approximately $2 million in costs related to the special committee process. G&A as a percent of revenue for the quarter would have been approximately flat year-over-year without these expenses. Now to cash and liquidity. Operating cash flow was $53 million and free cash flow was $37 million. A key driver of the year-over-year decline was $141 million in cash outflows related to the previously disclosed 2014 to 2016 IRS transfer pricing settlement versus last year's outflow of approximately $113 million related to the 2009 to 2011 IRS transfer pricing settlement. As part of this year's settlement, we expect to receive a refund of approximately $25 million to $35 million in Q3 or Q4, which would bring the total expected settlement to approximately $110 million. Other drivers of the year-over-year decline were changes in other working capital, including lower deferred merchant payables. We ended the quarter with nearly $1.2 billion of cash and cash equivalents, an increase of $109 million from December 31, 2023. During the quarter, we repurchased approximately 1.4 million shares at an average price of $18.28 per share, spending approximately $25 million. We have approximately $200 million remaining in our current authorization. Finally, subsequent to the quarter end, on July 8, we closed on a term loan B facility an amount of $500 million at SOFR plus 2.75%. Proceeds were used to redeem the $500 million high-yield notes that were due on July 15, 2025. Turning to our outlook for the third quarter, which incorporates trends we saw in the business through July. In hotel meta, we continue to see demand headwinds in July, and our outlook assumes that we see a continuation of these trends for the remainder of the quarter. Also, given what we're seeing in the normalization of pricing trends across the hotel category, we are assuming a softening of pricing relative to the last few quarters. For experiences across the group, our outlook assumes continued normalization of demand, reflecting the overall travel market, although still benefiting from higher growth relative to other travel categories given the secular opportunities. Incorporating this outlook for the third quarter, we expect consolidated revenue growth to be approximately flat to a few points down year-over-year. At Brand Tripadvisor, we expect increasing year-over-year declines from Q2 levels driven by the more volatile macro demand picture in hotel meta. At Vitor, we expect revenue growth to moderately step back from Q2 levels driven by macro demand trends and continued point of sale mix pressure as we just discussed. At TheFork, we expect growth in line with Q2 growth. For Q3, we expect consolidated adjusted EBITDA margins to be down year-over-year by approximately 350 to 450 basis points. Year-over-year margin improvement at Vitor and TheFork will be offset by year-over-year deleverage at Brand Tripadvisor of approximately 8 to 10 percentage points. The leverage at Brand Tripadvisor is due to a combination of the lower revenue expectation and planned spend in the areas of headcount and LTV based marketing experimentation in support of our future growth initiatives. Given our outlook for Q3, we now expect full year consolidated revenue growth of low single digits which is at the low end of our previous range. We also expect consolidated adjusted EBITDA margins deleverage of approximately 100 to 200 basis points. For the full year, we expect revenue declines in Brand Tripadvisor of mid to high single digits and margins down year-over-year by approximately 400 basis points, which is down slightly from our last update. This outlook assumes that we see revenue declines in our hotel meta offering moderating in the fourth quarter. For Viator, we assume modest acceleration of growth versus Q3 in the fourth quarter as we lap an easier comp due to the start of the Mideast conflict. Our expectation for improved profitability versus last year remains unchanged, and we continue to realize increased operating deficiencies in the business. This easier comp will also benefit experienced revenue growth at Brand Tripadvisor. At TheFork, our revenue expectations remain unchanged, and we still expect a significant year-over-year improvement in adjusted EBITDA for the year. With that, I'd like to turn the call back over to the operator to begin Q&A.
Operator: [Operator Instructions] The first question comes from the line of Ben Miller of Goldman Sachs (NYSE:GS).
Ben Miller: Thanks for taking the question. I guess just given the importance of driving more app-based and logged in members, I wanted to touch on just your own marketing efforts and any color you can share on how you're optimizing your marketing efforts around targeting those users that have a high likelihood of converting to being a logged in member as opposed to casting a wide kind of top-of-funnel net there. Thanks.
Mike Noonan: Yes. Hey, Ben. It's Mike. I'll start, and Matt can chime in. So it's a great question. It's essential to really the work we're doing around at Brand Tripadvisor. As we said, so much of this has been product-led transformation, and we're really excited about what's developing in the app, both of the hotels category, but obviously with experiences in combination with our trip planning tool, which we've been investing heavily behind. I think there's a lot of marketing strategies which we do employ. A lot of it is around when we have a massive upper, we have a massive top of the funnel with our, at Brand Tripadvisor, when we see users that are activating across the surfaces, there are a lot of different things we can do to stimulate or inspire or incentivize certain behaviors to download the app and get them to start interacting in the app. So that's one strategy we certainly will be employing. And then there's a lot of just, you think about just different marketing campaigns around, how you're targeting users, whether it be an app downloads, whether you are incentivizing certain people to a behavior, again, with an incentive that we will be looking at and exploring and have been doing for some time.
Matt Goldberg: Yes, Ben, I just want to add, it's Matt. Our marketing at Tripadvisor has traditionally been same session, it's been about basically bringing people in and taking advantage of the flyby traffic. We can shift from same session to LTV-based bidding. We've got data now that we can use to target. We've been very lower funnel, and as we move mid to upper funnel, we can get a lot of the learnings that we've had in what we've done at Viator and TheFork frankly, about how we can leverage that data to drive people into membership and the app where they engage, and we can let the product do the work. And I think that the early movement in the metrics that we shared gives us a lot of confidence that we've got a good plan ahead for that.
Operator: The next question comes from the line of Naved Khan of B. Riley Securities.
Naved Khan: Yes, hi. Thanks a lot. Two questions from me. Maybe just on the increase in the app users, that's great to see, but in terms of the P&L effect, and when can this be more meaningful in terms of maybe stabilizing the core business or maybe even returning it to growth? How should we be thinking about that transition? Is it like a 12-month window, 12 months away, or something that's further out? That's one, and then on the share buyback, you still have like authorization of $200 million remaining. Given where the stock is, how should we would be thinking about the propensity to spend on buybacks versus the other opportunities. Thanks.
Mike Noonan: Hey, Naved, thanks for the questions. Yes, I'll start with the buyback. Yes, so we still have a good amount left in that. We have said consistently, our approach has been very programmatic in that. I would say this quarter, we are very much focused on setting our capital structure as well and understanding true liquidity with the refinance of the high yield. So I think we will always evaluate this and find the best opportunities, whether it be programmatic or more opportunistic. And certainly we will engage in those discussions going forward as we think about where the stock may or may be and versus our liquidity profile.
Matt Goldberg: Yes, and the way to think about what we're seeing in the app, I've said in the past, we are strategy is very much about moving away from the big number at the very top of the funnel which includes a lot of flyby, in and out traffic, frankly a very low percentage of which clicks through and we monetize. And to think about that sort of the traffic that is actually coming in and wants to use our tools is showing us that they're willing to plan with us, leverage our content, getting the data that comes along with that, moving that into membership, really enhancing the value of the membership and getting more people to use the app. And we're super excited that the early returns on that look very good. Now that direct traffic, that engaged traffic, membership and app, it's a subset of our business today. And we see it as an opportunity to scale it and we think that what we've seen is that we're responding to what travelers really want from us and the engagement metrics are translating through the monetization that we described, the many multiples more that we can do. So while it's small, it's something we can scale and when we get marketing and product working together, I think that you will see it become a more meaningful percentage of our overall financial performance.
Naved Khan: Okay, maybe a quick clarification, if I may, if I would think about Viator margin for this year, are you still aiming to have some improvement year-over-year, how should we think about that?
Mike Noonan: Oh, yes, Naved, it’s Mike, definitely. If I wasn't clear about that, yes, we are expecting meaningful margin improvement in Viator for sure.
Operator: The next question comes from the line of Stephen Ju of UBS.
Unidentified Analyst: Hey, good afternoon, guys. This is Jeremy on for Stephen. So you called out improvements in Viator cancellation rates from optimization. How much more room do you think there is across Viator and the business for optimization, and can you maybe walk through some of the areas you're excited about? And then my second question is, on hotel booking and rewards, are you expecting any sort of P&L impact, and would you potentially roll this out to experiences as well? Thank you.
Matt Goldberg: Yes, thanks, Jeremy. Look, on Viator, there's a lot of changes that happen every quarter to optimize the funnel at Viator. We have changes that will bring down cancellation rates because we've done a better job of serving the consumer with what they expect and gotten them to the right product and given them a great experience, and then they come back and we see improvements. There's a lot that we're doing with personalization to personalize the product sort. We're obviously always thinking about optimizing the app. One of the things we're excited about is how we're thinking about post-booking logistics and really leveraging consumer data to deliver a more personalized and effortless booking experience. Obviously, we're leaning into loyalty and a rewards program that will really drive repeat behavior. We're focused on our suppliers and making sure that they have the best experience so we have the best supply and I'm pleased to say that supply continues to grow and we feel really good about the quality work we're doing there as well. And then of course we are leveraging AI to think about the sort, to think about how we augment our customer service and other parts. So we're always looking at opportunities to improve the metrics on that funnel and I think you see it in the way that it delivers. The second part of the question.
Mike Noonan: Yes, on the rewards. Yes, I'll take that Jeremy. Listen, I think rewards and incentives are a powerful tool for us and really, you've seen that across the travel ecosystem. We have built our products with that in mind and you can say that at both Brand Tripadvisor, what we're doing in the app, you can say that certainly at Viator and even TheFork. So we think about this across all of our brands. Your question directly of impact on the P&L, I would say we've been very disciplined on our performance marketing spend and ROAS and ROIs. I view this really as another way of thinking about customer acquisition and acquiring stickiness in the customer and so we have to balance that with other investments around acquisition and you would expect us to do that. So it's an area that we are excited about. It's a tool that really can drive engagement but we'll think about that holistically as we think about overall marketing and investments.
Matt Goldberg: And Jeremy, just to be clear, you asked if we would roll it out on experiences. It already is rolled out on experiences. You can book experiences on our app. We're adding hotels and there's other category opportunities in the future. So we think this ability to come in and integrate trip planning with booking in the app for logged in members is a real meaningful opportunity for us. We're excited to go after it.
Operator: The next question comes from the line of Wei Fang of Mizuho Securities.
Wei Fang: Thank you for taking my question. Can you just give us a quick update on the Google kind of search policy changes impact? I remember last quarter you guys caught out on the meta business, you already kind of retrieved most of the impact, right. And then overcome that, and I'm not sure, but the experiment was just curious if there was anything you can cut out for the experience side. In a second point, on TheFork, do you have currently a target, like a restaurant count, right, coverage for your end? Thank you.
Mike Noonan: Yes, I'll take the first part. Yes, on the Google algo, what we caught out last quarter, we did say there was an algorithm change, it was very far-reaching and took a long time, right. So it was rather disruptive in April into May, and partly it was an impact on our free traffic, impacting our financials for the quarter. That algo update, our teams do a really good job of reacting to that, and as we said, in the hotel category, had clawed back most of those rankings as we came through the quarter, which is true, right. So I think it still had an impact in the quarter. I think much of the other financial impact of the quarter wasn't directly related to that. That was more reflective of that in combination with some of the demand trends we saw in both free and paid channels. So our financial performance in hotel meta was not all related to that algo change, to be very clear.
Matt Goldberg: And I would just remind you, this is exactly why we put the strategy in place that we put in, and then we're focused on these direct relationships with members in our app and translating that engagement to monetization. And I think the combination of our teams responding really well and our strategy is going to serve us well. The second part of your question, we didn't hear. So if you had the second part, can you repeat it?
Wei Fang: I was just curious, are you targeting additional restaurants consign now for the year end and what would then be versus the current number year?
Matt Goldberg: Yes, so we're really pleased with the progress we're making at TheFork. Thank you for asking about it. And we believe the business is on track to deliver growth and profitability this year, as we said we would aim to do in our strategy. And we're benefiting from a lot of different things that are driving unit economics and leverage. And part of that includes our enhanced sales productivity with restaurants, as you describe. So we've seen both stability and active restaurants and we're growing to count. But more importantly, we're seeing better restaurant ARPU at lower CAC. And so you combine that with the marketing efficiency on the B2C side and the product improvements we're making in the app to drive conversion rates and improve B2B revenue. And of course, the partnerships that I mentioned, you've got a recipe there where we're seeing profitability improving with a healthy growth rate and we're going to deliver that margin for the full year as we described.
Operator: This concludes the question and answer session. I would now like to hand the call back over to Matt Goldberg. Matt, please go ahead.
Matt Goldberg: Thanks again everyone for joining us today. We're looking forward to executing in the second half of 2024 and continuing to drive our initiatives forward. We'll look forward to speaking with you all soon. Have a good one.
Operator: This does conclude today's conference call. You may now disconnect.
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