A new CFO boards TripAdvisor for a journey into the public domain

CFO Interview: Julie Bradley, chief financial officer of TripAdvisor

By Michelle Perry | CFO UK | Published 15:57, 27 June 12

TripAdvisorLast year Julie Bradley’s summer didn’t last quite as long as she had intended but then great opportunities rarely fit in with one’s life plans.

The Boston-based finance chief had promised her family she would take some time off work. She had spent the previous year working intensively as chief financial officer of Art Technology Group when Oracle acquired the company. She oversaw the acquisition and then left. And she wanted a break.

But a headhunter had other plans for her, contacting Bradley to tell her about a new opening that was coming up that perfectly fitted her prerequisites for her next role.

“I wanted something in the Boston area. That was internet or technology related so that I could use my background in the tech space. Something of size – either public or going public, because I really love that aspect of the job, working with investors and telling the story. I really wanted the opportunity to work with the founder again,” Bradley explains.

The irony is that the job turned out to be chief financial officer of the world’s largest online travel site, TripAdvisor. She had found her match. After meeting TripAdvisor’s founder and chief executive Stephen Kaufer she decided it was indeed a role she couldn’t turn down. Bradley accepted heartily but with the proviso that she could spend the summer with her family. Kaufer duly agreed, and Bradley ventured on the journey with the newly public company in October 2011; thoroughly refreshed.

With topped-up energy levels Bradley could begin to work on building the financial structure of a public company because Expedia, the former parent company, had handled all the legal and regulatory activities. TripAdvisor, which offers users peer reviews of hotels and restaurants, was spun off from Expedia in mid-2011 “to unlock shareholder value”, because the two companies’ business models were becoming increasingly divergent, she explains.

“Expedia is TripAdvisor’s number one customer, which was probably great in the early days but as it started to get more traction with online travel agencies and hoteliers it was perceived as competition.”

She says a perception was growing that advertisers wouldn’t want to spend too much on TripAdvisor “even though you were getting great value because it would ultimately benefit their number one competitor”. Investors also prefer a simpler story, the CFO adds.

Sailing into headwinds

In its first quarter trading statement for 2012 published on 1 May, TripAdvisor reported pre-tax income of $48.2 million, a slight rise on the same period the previous year ($47.4 million). Revenue for the first three months increased to $183.7 million, up 33 percent on the previous quarter, and up 23 percent on the same period in 2011.

“We have said that we expect profits to be relatively low or flat in 2012 because we have two revenue headwinds,” Bradley says.

The first of those two headwinds relates to the spin out from Expedia, which lowered the prices its pays to TripAdvisor for leads by between 10 and 15 percent, because Expedia had been paying a premium. The benefits of this had cut both ways. Whenever Expedia wanted to trial a particular location or run a marketing campaign the online travel agent would do it on TripAdvisor.

“They could guarantee they’d always be in the top placements. But now we’re not part of the family they are treating us like any other vendor.”

There is a commercial agreement in place between Expedia and TripAdvisor for a 12 month period but then prices will drop, which Bradley calculates will be “about a 5 percent hit on our revenue side”.
The second headwind Bradley refers to that impacted revenues was a major site redesign. And like it or loath it, with more than 50 million unique monthly visitors across 30 countries, it’s likely you or someone in your immediate family will have visited the site at least once in the past few years.

The board found that catering to two very different customers – users and the travel agents who pay for the leads – have competing and often clashing wishes. Previously when users searched for a flight, holiday or hotel eight windows would pop open “which was great because we’d get paid eight times”. But Bradley concedes the company couldn’t really find one user who enjoyed the experience.

So “knowing that there would be a sizeable revenue hit”, TripAdvisor has reduced the number of windows that pop open when you search to a maximum of three to improve the user experience. “Our community is everything to us,” Bradley says, and to prove this the company has taken the revenue hit.

“We estimated at the time it would be a 2 to 3 percent hit but in the fourth quarter we are seeing it at higher levels. So if you just take our constant expense base we’re down around 8 percent year-on-year on revenue growth. That explains part of the flat-ish net income,” she explains.

A further hit to profit came in the form of public company costs, which were estimated to reach as much as $17 million. Expedia used to take care of those costs when TripAdvisor was part of its group.

On the road to growth

The reason Bradley is comfortable with layering on so many costs during the first year as a public company is because the strategy is for long-term growth.

“We’re putting some good bets on – internationalisation, social, traffic diversification, vacation rentals, business listings etc – so we’re building out a global sales force to go after that,” she says.

“We don’t expect to see any leverage in that for the short-term because we’re really investing for the long-term.”
Bradley says that even as the “world’s largest travel website” traffic, which she reckons is at 10 percent of total unique travel users, has a lot of room to grow. While the Nasdaq-listed company is focused primarily on hotels and travel today, there are other adjacent markets where she says the site’s “user-generated content can benefit and strengthen the community”.

“Hotels are definitely TripAdvisor’s bread and butter,” she says, explaining that 80 percent of its revenue is derived from passing on leads to customers, such as online travel agencies. But she says “our largest asset is the community that we’ve built and that sense of sharing. We get a lot of traffic because of that. It’s a destination point”. And it’s here that the company wants to really focus in.

In terms of how the board plans to grow the company, Bradley says they have ruled out nothing – large scale acquisitions, bolt-ons or a combination of both as well of course as organic growth.

“The tuck-ins are great. They’re easier and safer but it probably doesn’t get you as far. We have a history of growing organically and through acquisition,” Bradley refers to two small recent acquisitions made – one in the UK and on in the US – as example of this strategy.

Crucially, the company is “fairly well funded” with over $400 million in cash and a $200 million credit revolver “so we can do some pretty good M&A activities with what we have on the balance sheet”.

However Bradley says the business isn’t averse to asking the markets for money to make “the right acquisition”, whether that’s a series of smaller acquisitions or “something more in the game-changing field”.

Bradley’s rise to become CFO of the most well-known travel site in the world is an unlikely journey, she admits. Having trained as an accountant with Deloitte she subconsciously mapped out a career as a partner with the firm for life. But she soon realised that she wanted a piece of the action.

“What I realised over time working with CFOs and management is that they really got to operationalise the projects. And at the end of the projects I’d always feel like the outsider and wanted to be more operational,” she says.
Since she secured her first senior finance role in business she hasn’t looked back. As for being a woman in a highly competitive industry she wasn’t afraid to define her boundaries and work differently (at home at night), so that she could have children and spend time with them as well as achieve her career goals.

She praises Deloitte for having cottoned on to the realisation that by implementing flexible working and other work/life balance arrangements they helped stemmed the outflow of women from the finance industry. Nonetheless she’s still surprised that there aren’t more female CFOs.

“It’s important to set those boundaries of how and when you’re going to get your work done instead of being tied to your office. I think that’s evolving though. So hopefully there’ll be more dresses at the party soon.”
Bradley will need to muster all her experience, listening skills and business nous to help corner the highly competitive travel market for TripAdvisor in what is a world of greater austerity, tighter budgets and even tighter margins. But with a keen eye on the non-traditional markets as well as Europe and the US, she assures there still much room for growth for the fledgling public company.

CV – Julie Bradley

Oct 2011 – Present CFO, TripAdvisor

July 2005 – May 2011 CFO, ATG (bought by Oracle)

2000 – 2005 VP Finance, Akamai Technologies

1993 – 2000 Manager, Deloitte

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