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TripAdvisor's Total Expenses Are Projected To Stand At $1.5 billion for 2020
Total Expenses
Breakdown of TripAdvisor's Total Expenses in 2020 :
Total $1.5 Bil
Cost of Revenues $0.1 Bil
Operating Expenses $1.3 Bil
Provision for income taxes $65 Mil
Non-operating (income)/expense -($7) Mil
Takeaways
TripAdvisor's total expenses have trended lower from $1.6 billion in 2017 to $1.4 billion in 2019.As a % of Revenues, Expenses have declined from 101.2% in 2017 to 91.9% over the same period. Operating expenses are the biggest driver of TripAdvisor's expenses, accounting for 87% of Revenue in 2017 and 82% of Revenues in 2019. We estimate that this decrease in Operating Expenses as % Revenue has impacted TripAdvisor's Operating Income by about $60 million. However, Operating Expenses are expected to increase in 2020, as the company plans to spend on more ads. Operating Expense as % of revenue is likely to grow to 85% in 2020, leading to reduced operating profits.Below, we take a look at the key drivers of TripAdvisor's Expenses and Net Margins.
Total Expenses Are Projected to Be $1.5 Billion in 2020, with Operating Expenses of $1.3 Billion
Total Expenses
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Change in Expenses
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We expect the expenses to remain relatively flat between 2018 and 2020 at $1.5 Bil levels.
Below, we take a look at how the company's key expense components have trended and the key reasons for the change.
1. Cost of Sales :
Cost of Sales have increased from $71 Mil in 2016 to $94 Mil in 2019, driven by increased direct costs associated with prepaid tour tickets, merchant credit card and other transaction payment processing fees as a result of revenue growth in the Non-Hotel segment. As Cost of Sales has grown at a faster rate than Revenues, the Gross Profit Margin has declined from 95.2% to 94.0% over the same period. We expect this figure to reach 93.4% in 2020.
Cost of Revenue
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Gross Profit Margin
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2. Operating Expenses :
TripAdvisor's Operating Expenses include 4 key components:
A. Selling & Marketing (S&M) Expenses
B. Technology and Content (T&C) Expenses
C. General & Administrative (G&A) Expenses
D. Depreciation and Amortisation (D&A) Expenses
Total Operating Expenses
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Breakdown of TripAdvisor's Operating Expenses in 2019 :
Total $1.4 Bil(100%)
S&M Expenses $0.7 Bil (52%)
T&C Expenses $0.3 Bil (23%)
G&A Expenses $0.2 Bil (15%)
D&A Expenses $0.1 Bil (10%)
(A) S&M Expenses decreased from $778 million in 2017 to about $672 million in 2019 due to decreased SEM and online traffic acquisition costs in the Hotel segment. However, the company plans to increase its spending in ads going forward to tackle increased competition from Google. As a % of Revenue, SG&A expenses declined from 54.6% in 2017 to 43.1% in 2019. This figure could grow slightly higher to 44% in 2020.
Selling and Marketing Expenses
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Selling and Marketing as % Revenue
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(B) T&C Expenses are expected to increase from $243 million in 2017 to about $310 million in 2020, due to higher personnel and overhead costs. As a % of Revenue, T&C expenses could grow from 15.6% in 2017 to 19.5% in 2020
Technology and Content Expenses
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Technology and Content as % Revenue
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(C) G&A Expenses are expected to increase from $157 million in 2017 to about $200 million in 2020. As a % of Revenue, G&A expenses could likely grow from 10.1% in 2017 to 12.6% in 2020
General and Administrative Expenses
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General and Administrative as % Revenue
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(D) D&A Expenses could increase from $111 million in 2017 to about $136 million in 2020. As a % of Revenue, D&A expenses could increase from 7.1% in 2017 to 8.6% in 2020
Deprecitaion & Amortization
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Depreciation and Amortization as % Revenue
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3. Non-Operating Income :
TripAdvisor's non-operating income has declined from $14 million in 2017 to -$7 million in 2019, driven by lower Interest and dividend income from its investments.
Non-Operating Income/ Expenses
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Interest Income As % Cash & Cash Equivalents
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4. Tax Expense:
TripAdvisor's effective tax rate declined from 93.5% in 2017 to 31.1% in 2018, due to Transition Tax and re-measurement of deferred tax assets and liabilities as a result of the Tax Act, as well as decrease in U.S. corporate Tax rate. We expect this rate to go to 36% by 2020
Provision for income taxes
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Effective Tax Rate
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Related Analysis
Our complete set of analyses on TripAdvisor
1. How to save your forecasts for TripAdvisor:
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2. How to monitor your scenario vs. actual results
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