Notice of 2020 Annual Meeting and
Proxy Statement
and
2019 Annual Report
Notice of 2020 Annual Meeting
and Proxy Statement
April 28, 2020
Dear Fellow Stockholder:
Our 2019 financial results demonstrate our success navigating challenges with a disciplined approach to growth,
investment, profitability and capital allocation. Consolidated revenue declined 3% year-over-year, 2019 GAAP net
income grew 12% to $126 million, and adjusted EBITDA grew 4% to $438 million while Cash flow from operating
activities grew 5% to $424 million.
We have operated a very cash generative business over many years and we took action in three important focus
areas to ensure that would continue for years to come. Specifically, we:
Continued to focus on driving revenue growth outside of the hotel auction;
•
• Adjusted our cost structure to support continued strong adjusted EBITDA and operating cash flow; and
•
Returned a total of $548 million of capital to stockholders through a special dividend and share buyback.
We ended 2019 with $319 million of cash and cash equivalents, and no outstanding debt.
Thus far in 2020, increased impacts of the COVID-19 outbreak have created significant uncertainty related to
global travel trends. On March 18, 2020 we announced the withdrawal of our 2020 outlook and associated
commentary, given our inability to reliably quantify the COVID-19 outbreak’s impact on our future financial results.
I note that while the COVID-19 outbreak’s full impacts are still to be determined, the travel and tourism industry has
recovered from past disruptions. At Tripadvisor, we have successfully navigated these disruptions, and we will
continue to operate prudently through this challenging period. We are confident that travel will rebound. Also, we are
confident in our long-term business prospects and strategy. We are closely monitoring this developing situation, and
will continue to actively support Tripadvisor’s consumers, partners and employees worldwide.
You are cordially invited to attend the Annual Meeting of Stockholders of Tripadvisor, Inc. to be held on
Tuesday, June 9, 2020, at 11:00 a.m. Eastern Time. Due to concerns about COVID-19, this year the annual meeting
will be a completely virtual meeting of stockholders. You may attend the meeting, submit questions and vote your
shares electronically during the meeting via the Internet by visiting www.virtualstockholdermeeting.com/TRIP2020.
To enter the annual meeting electronically, you will need the control number that is printed in the box marked by the
arrow on your proxy card. We recommend logging in at least fifteen minutes before the meeting to ensure that you
are logged in when the meeting starts. Online check-in will start shortly before the meeting on June 9, 2020.
At the Annual Meeting, stockholders will be asked to vote on the matters described in the accompanying notice
of annual meeting and proxy statement, as well as such other business that may properly come before the meeting and
any adjournments or postponements thereof. Your vote is very important to us. Please review the instructions for
each voting option described in the Notice and in this Proxy Statement. Your prompt cooperation will be greatly
appreciated.
Sincerely,
STEPHEN KAUFER
President and Chief Executive Officer
400 1st Avenue
Needham, Massachusetts 02494
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 9, 2020
The Annual Meeting of Stockholders of Tripadvisor, Inc., a Delaware corporation, will be held on Tuesday, June 9, 2020, at
11:00 a.m. Eastern Time. Due to concerns about the COVID-19 pandemic, this year the Annual Meeting will be held via the
internet and will be a completely virtual meeting. You may attend the Annual Meeting, submit questions and vote your shares
electronically during the meeting via the Internet by visiting www.virtualstockholdermeeting.com/TRIP2020. To enter the
Annual Meeting, you will need the 16-digit control number that is printed in the box marked by the arrow on your proxy card.
We recommend logging in at least fifteen minutes before the meeting to ensure that you are correctly logged in when the Annual
Meeting begins. The online check-in will start shortly before the Annual Meeting on June 9, 2020. At the Annual Meeting,
stockholders will be asked to consider the following:
1.
To elect the nine directors named in this Proxy Statement, each to serve for a one-year term from the date of
his election and until such director’s successor is elected or until such director’s earlier resignation or removal;
2.
To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal
year ending December 31, 2020; and
3.
To consider and act upon any other business that may properly come before the Annual Meeting and any
adjournments or postponements thereof.
Only holders of record of outstanding shares of Tripadvisor capital stock at the close of business on April 17, 2020 are entitled
to notice of and to vote at the Annual Meeting and at any adjournments or postponements thereof. We will furnish the Notice of
Annual Meeting of Stockholders, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31,
2019 over the Internet. We will send to our stockholders a Notice of Internet Availability of Proxy Materials on or about April
28, 2020, and provide access to our proxy materials over the Internet to our holders of record and beneficial owners of our capital
stock as of the close of business on the record date. You may request paper copies by following the instructions on the Notice
of Internet Availability of Proxy Materials.
By Order of the Board of Directors,
SETH J. KALVERT
Senior Vice President, General Counsel
and Secretary
April 28, 2020
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to Be Held on June 9, 2020
This Proxy Statement and the 2019 Annual Report are available at:
http://ir.Tripadvisor.com/annual-proxy.cfm
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
Procedural Matters..........................................................................................................................................
Proposal 1: Election of Directors....................................................................................................................
Corporate Governance ....................................................................................................................................
Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm...............
Audit Committee Report.................................................................................................................................
Compensation Discussion and Analysis .........................................................................................................
CEO Pay Ratio .................................................................................................................................................
Executive Compensation .................................................................................................................................
Director Compensation ...................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management........................................................
Certain Relationships and Related Person Transactions.............................................................................
Where You Can Find More Information and Incorporation By Reference ..............................................
Annual Reports ................................................................................................................................................
Proposals by Stockholders for Presentation at the 2021 Annual Meeting .................................................
Delivery of Documents to Stockholders Sharing an Address ......................................................................
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1
PROCEDURAL MATTERS
This Proxy Statement is being furnished to holders of common stock and Class B common stock of Tripadvisor,
Inc., a Delaware corporation, in connection with the solicitation of proxies by Tripadvisor’s Board of Directors (the
“Board”) for use at its 2020 Annual Meeting of Stockholders or any adjournment or postponement thereof (the
“Annual Meeting”). All references to “Tripadvisor,” the “Company,” “we,” “our” or “us” in this Proxy Statement are
to Tripadvisor, Inc. and its subsidiaries. An Annual Report to Stockholders, containing financial statements for the
year ended December 31, 2019, and this Proxy Statement are being made available to all stockholders entitled to vote
at the Annual Meeting.
Tripadvisor’s principal executive offices are located at 400 1st Avenue, Needham, Massachusetts 02494. This
Proxy Statement is being made available to Tripadvisor stockholders on or about April 28, 2020.
Date, Time and Place of Meeting
The Annual Meeting will be held on Tuesday, June 9, 2020, at 11:00 a.m. local time. Due to concerns about the
COVID-19 pandemic, this year the Annual Meeting will be held via the Internet and will be a completely virtual
meeting. You may attend the meeting, submit questions and vote your shares electronically during the meeting via the
Internet by visiting www.virtualstockholdermeeting.com/TRIP2020. To enter the annual meeting, you will need the
16-digit control number that is printed in the box marked by the arrow on your proxy card. We recommend logging
in at least fifteen minutes before the meeting to ensure that you are logged in when the meeting starts.
If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call
the technical support number that will be posted on the virtual meeting web portal.
Record Date and Voting Rights
The Board established the close of business on April 17, 2020, as the record date for determining the holders of
Tripadvisor common stock entitled to notice of and to vote at the Annual Meeting. On the record date, 121,326,497
shares of common stock and 12,799,999 shares of Class B common stock were outstanding and entitled to vote at the
Annual Meeting. Tripadvisor stockholders are entitled to one vote for each share of common stock and ten votes for
each share of Class B common stock held as of the record date, voting together as a single voting group, on (i) the
election of six of the nine director nominees, and (ii) the ratification of the appointment of KPMG LLP as
Tripadvisor’s independent registered public accounting firm for the year ending December 31, 2020. Tripadvisor
stockholders are entitled to one vote for each share of common stock held as of the record date in the election of the
three director nominees that the holders of Tripadvisor common stock are entitled to elect as a separate class pursuant
to Tripadvisor’s restated certificate of incorporation. Stockholders have no right to cumulative voting as to any matter,
including the election of directors.
On August 27, 2014, the entire beneficial ownership of our common stock and Class B common stock
previously held by Liberty Interactive Corporation, which is currently known as Qurate Retail, Inc. (“Liberty”) was
transferred to Liberty Tripadvisor Holdings, Inc. (“LTRIP”). Simultaneously, Liberty, LTRIP’s former parent
company, distributed, by means of a dividend, to the holders of its Liberty Ventures common stock, Liberty’s entire
equity interest in LTRIP. We refer to this transaction as the Liberty Spin-Off. As a result of the Liberty Spin-Off,
effective August 27, 2014, LTRIP became a separate, publicly traded company and 100% of Liberty’s interest in
Tripadvisor was held by LTRIP. Liberty also assigned to LTRIP its rights and obligations under the Governance
Agreement between Tripadvisor and Liberty, dated December 20, 2011 (the “Governance Agreement”).
As a result of these transactions, as of the record date, LTRIP beneficially owned 18,159,753 shares of our
common stock and 12,799,999 shares of our Class B common stock, which shares constitute 15.0% of the outstanding
shares of common stock and 100% of the outstanding shares of Class B Common Stock. Assuming the conversion of
all of the LTRIP’s shares of Class B common stock into common stock, as of the record date LTRIP would beneficially
own 23.1% of the outstanding common stock. Because each share of Class B common stock generally is entitled to
ten votes per share and each share of common stock is entitled to one vote per share, as of the record date LTRIP may
be deemed to beneficially own equity securities representing 58.6% of our voting power. As a result, regardless of the
vote of any other Tripadvisor stockholder, LTRIP has control over the vote relating to (i) the election of six of the
nine director nominees; and (ii) the ratification of the appointment of KPMG LLP as Tripadvisor’s independent
registered public accounting firm for the fiscal year ending December 31, 2020.
2
Quorum; Abstentions; Broker Non-Votes
Transaction of business at the Annual Meeting may occur if a quorum is present. If a quorum is not present, it
is expected that the Annual Meeting will be adjourned or postponed in order to permit additional time for soliciting
and obtaining additional proxies or votes, and, at any subsequent reconvening of the Annual Meeting, all proxies will
be voted in the same manner as such proxies would have been voted at the original convening of the Annual Meeting,
except for any proxies that have been effectively revoked or withdrawn.
With respect to (i) the election of six of the nine director nominees; and (ii) the ratification of the appointment
of KPMG LLP as Tripadvisor’s independent registered public accounting firm for the fiscal year ending December
31, 2020, the presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the total votes
entitled to be cast constitutes a quorum. Virtual attendance at the Annual Meeting also constitutes presence in person
for purposes of quorum at the Annual Meeting. For the election of the three directors whom the holders of Tripadvisor
common stock are entitled to elect as a separate class, the presence at the Annual Meeting, in person or by proxy, of
the holders of a majority of shares of common stock constitutes a quorum.
If a share is represented for any purpose at the meeting, it is deemed to be present for quorum purposes and for
all other matters as well. Shares of Tripadvisor capital stock represented by a properly executed proxy will be treated
as present at the Annual Meeting for purposes of determining a quorum, without regard to whether the proxy is marked
as casting a vote or abstaining.
Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a
quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote the shares on
a proposal because the nominee does not have discretionary voting power for a particular item and has not received
instructions from the beneficial owner regarding voting. Brokers who hold shares for the accounts of their clients have
discretionary authority to vote shares if specific instructions are not given with respect to the ratification of the
appointment of our independent registered public accounting firm. Brokers do not have discretionary authority to vote
on the election of our directors, so we encourage you to provide instructions to your broker regarding the voting of
your shares.
Solicitation of Proxies
Tripadvisor will bear the cost of the solicitation of proxies from its stockholders. In addition to solicitation by
mail, the directors, officers and employees of Tripadvisor, without additional compensation, may solicit proxies from
stockholders by telephone, by letter, by facsimile, in person or otherwise. Following the original mailing of the proxies
and other soliciting materials, Tripadvisor will ask brokers, trusts, banks or other nominees to forward copies of the
proxy and other soliciting materials to persons for whom they hold shares of Tripadvisor capital stock and to request
authority for the exercise of proxies. In such cases, Tripadvisor, upon the request of the brokers, trusts, banks and
other stockholder nominees, will reimburse such holders for their reasonable expenses.
Voting of Proxies
The manner in which your shares may be voted depends on whether you are a:
•
•
Registered stockholder: Your shares are represented by certificates or book entries in your name on the
records of Tripadvisor’s stock transfer agent and you have the right to vote those shares directly; or
Beneficial stockholder: You hold your shares in “street name” through a broker, trust, bank or other
nominee and you have the right to direct your broker, trust, bank or other nominee on how to vote the shares
in your account; however, you must request and receive a valid proxy from your broker, trust, bank or other
nominee.
3
Whether you hold shares directly as a registered stockholder or beneficially as a beneficial stockholder, you
may direct how your shares are voted without attending the Annual Meeting. For directions on how to vote, please
refer to the instructions below and those on the Notice of Internet Availability of Proxy Materials, proxy card or voting
instruction form provided. To vote using the Internet or by telephone, you will be required to enter the control number
included on your Notice of Internet Availability of Proxy Materials or other voting instruction form provided by your
broker, trust, bank or other nominee.
• Using the Internet. Registered stockholders may vote using the Internet by going to www.proxyvote.com
and following the instructions. Beneficial stockholders may vote by accessing the website specified on the
voting instruction forms provided by their brokers, trusts, banks or other nominees.
•
•
By Telephone. Registered stockholders may vote, from within the United States, using any touch-tone
telephone by calling 1-800-690-6903 and following the recorded instructions. Beneficial owners may vote,
from within the United States, using any touch-tone telephone by calling the number specified on the voting
instruction forms provided by their brokers, trusts, banks or other nominees.
By Mail. Registered stockholders may submit proxies by mail by requesting printed proxy cards and
marking, signing and dating the printed proxy cards and mailing them in the accompanying pre-addressed
envelopes. Beneficial owners may vote by marking, signing and dating the voting instruction forms
provided by their brokers, trusts, banks or other nominees and mailing them in the accompanying pre-
addressed envelopes.
All proxies properly submitted and not revoked will be voted at the Annual Meeting in accordance with the
instructions indicated thereon. If no instructions are provided, such proxies will be voted FOR proposals (1) and (2).
Tripadvisor is incorporated under Delaware law, which specifically permits electronically transmitted proxies,
provided that each such proxy contains, or is submitted with, information from which the inspector of elections can
determine that such proxy was authorized by the stockholder. The electronic voting procedures provided for the
Annual Meeting are designed to authenticate each stockholder by use of a control number, to allow stockholders to
vote their shares and to confirm that their instructions have been properly recorded.
Voting in Person at the Annual Meeting
Virtual attendance at the Annual Meeting constitutes presence in person for purposes of each required vote.
Votes in person will replace any previous votes you have made by mail or telephone or via the Internet. Attendance
at the Annual Meeting without voting or revoking a previous proxy in accordance with the voting procedures will not
in and of itself revoke a proxy.
Holders of record may vote their shares electronically during the meeting via the Internet by visiting
www.virtualstockholdermeeting.com/TRIP2020. To enter the annual meeting, holders will need the 16-digit control
number that is printed in the box marked by the arrow on their proxy card. We recommend logging in at least fifteen
minutes before the meeting to ensure that they are logged in when the meeting starts. Online check-in will start shortly
before the meeting.
Your vote is very important. Whether or not you plan to attend the Annual Meeting, please take the time to
vote via the Internet, by telephone or by returning your marked, signed and dated proxy card so that your
shares will be represented at the Annual Meeting.
Revocation of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person giving it any time before the taking
of the vote at the Annual Meeting.
4
If you are a beneficial stockholder, you may revoke your proxy or change your vote only by following the
separate instructions provided by your broker, trust, bank or other nominee.
If you are a registered stockholder, you may revoke your proxy at any time before it is exercised at the Annual
Meeting by (i) delivering written notice, bearing a date later than the proxy, stating that the proxy is revoked, or
(ii) submitting a later-dated proxy relating to the same shares by mail or telephone or via the Internet prior to the vote
at the Annual Meeting. Registered holders may send any written notice or request for a new proxy card to Tripadvisor,
Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717, or follow the instructions provided on the
Notice of Internet Availability of Proxy Materials and proxy card to submit a new proxy by telephone or via the
Internet. Registered holders may also request a new proxy card by calling 1-800-579-1639. Your attendance at the
annual meeting will not, by itself, revoke a prior vote or proxy from you.
Other Business
The Board does not presently intend to bring any business before the Annual Meeting other than the proposals
discussed in this Proxy Statement and specified in the Notice of Annual Meeting of Stockholders. The Board has no
knowledge of any other matters to be presented at the Annual Meeting other than those described in this Proxy
Statement. If any other matters should properly come before the Annual Meeting, the persons designated in the proxy
will vote on them according to their best judgment.
5
PROPOSAL 1:
ELECTION OF DIRECTORS
Overview
Our Board currently consists of nine members. Pursuant to the terms of Tripadvisor’s bylaws, each director
serves for a one-year term from the date of his or her election and until such director’s successor is elected or until
such director’s earlier resignation or removal. The Board recommends that each of the nine nominees listed below be
elected to serve a one-year term and until such director’s successor shall have been duly elected and qualified or until
such director’s earlier resignation or removal:
Gregory B. Maffei
Stephen Kaufer
Jay C. Hoag
Betsy L. Morgan
M. Greg O’Hara
Jeremy Philips
Albert E. Rosenthaler
Trynka Shineman Blake
Robert S. Wiesenthal
Tripadvisor’s restated certificate of incorporation provides that the holders of Tripadvisor common stock, acting
as a single class, are entitled to elect a number of directors equal to 25% of the total number of directors, rounded up
to the next whole number, which will be three directors as of the date of the Annual Meeting. The Board has designated
Ms. Shineman and Messrs. Philips and Wiesenthal as nominees for the positions on the Board to be elected by the
holders of Tripadvisor common stock voting as a separate class.
Pursuant to the Governance Agreement, LTRIP has the right to nominate up to a number of directors equal to
20% of the total number of the directors on the Board (rounded up to the next whole number if the number of directors
on the Board is not an even multiple of five) for election to the Board and has certain other rights regarding committee
participation, so long as certain stock ownership requirements applicable to LTRIP are satisfied. LTRIP has
designated Messrs. Maffei and O’Hara as its nominees to the Board.
Although management does not anticipate that any of the nominees named above will be unable or unwilling to
stand for election, in the event of such an occurrence, proxies may be voted for a substitute nominee designated by
the Board.
Information Regarding Director Nominees
The information provided below about each nominee is as of the date of this Proxy Statement. The information
presented includes the names of each of the nominees, along with his or her age, any positions held with the Company,
term of office as a director, principal occupations or employment for the past five years or more, involvement in
certain legal proceedings, if applicable, and the names of all other publicly-held companies for which he or she
currently serves as a director or has served as a director during the past five years. The information also includes a
description of the specific experience, qualifications, attributes and skills of each nominee that led our Board to
conclude that he or she should serve as a director of the company for the ensuing term.
The nine nominees to the Board possess the experience and qualifications that we believe will allow them to
make substantial contributions to the Board. In selecting nominees to the Board, we seek to ensure that the Board
collectively has a balance of diversity, experience and expertise, including chief executive officer experience, chief
financial officer experience, international expertise, corporate governance experience and experience in other
functional areas that are relevant to our business. Following, please find a more detailed discussion of the business
experience and qualifications of each of the nominees to the Board.
6
Gregory B. Maffei
Age: 59
Director Since: 2013
Committee Memberships:
Compensation
Executive
Mr. Maffei has served as a director as well as the President and Chief Executive
Officer of Liberty Media Corporation (“LMC”) (including its predecessor) since
May 2007, LTRIP since July 2013, Liberty Broadband Corporation (“LBC”) since
June 2014 and GCI Liberty, Inc. since March 2018. He has served as Chairman
of the board of directors of Qurate Retail, Inc. (“Qurate”) since March 2018 and
as a director of Qurate (including its predecessor) since November 2005. He
previously served as President and Chief Executive Officer of Qurate from
February 2006 to March 2018 and CEO-Elect from November 2005 through
February 2006. Prior to joining Qurate, Mr. Maffei served as President and Chief
Financial Officer of Oracle Corporation, Chairman, President and Chief Executive
Officer of 360networks Corporation and Chief Financial Officer of Microsoft
Corporation. Mr. Maffei currently serves on the board of directors of the
following public
Inc., Live Nation
Entertainment, Inc., Charter Communications, Inc., Zillow Group, Inc. and
Pandora Media, Inc. Mr. Maffei is a member of the Council on Foreign Relations
and the Board of Trustees of Dartmouth College. Mr. Maffei previously served
on the board of directors of Starz, Electronic Arts, Inc., Barnes & Noble, Inc.,
Citrix Systems,
Inc., DirecTV, Starbucks Corp., and Dorling Kindersley
Limited. Mr. Maffei holds an M.B.A. from Harvard Business School, where he
was a Baker Scholar, and an A.B. from Dartmouth College.
Sirius XM Holdings
companies:
Board Membership Qualifications
Mr. Maffei brings to our Board significant financial and operational experience
based on his senior policy-making positions at LMC, Qurate, LBC and LTRIP,
his previous executive positions at Oracle, 360networks and Microsoft and his
other public company board experience. He provides our board with an executive
and leadership perspective on the operation and management of large public
companies and risk management principles.
7
Stephen Kaufer
Age: 57
Director Since: 2011
Committee Memberships:
Executive
Mr. Kaufer co-founded Tripadvisor in February 2000 and has been the President
and Chief Executive Officer of Tripadvisor since that date. Mr. Kaufer has been
a director of Tripadvisor since the completion of the spin-off of Tripadvisor from
Expedia, Inc. (“Expedia”) in December 2011 (the “Spin-Off”). Mr. Kaufer serves
on the board of directors of CarGurus, Inc., a company traded on The Nasdaq
Stock Market, LLC. Mr. Kaufer also serves as President and Chairman of the
board of directors of The Tripadvisor Foundation, a private charitable foundation,
and on the board of Neuroendocrine Tumor Research Foundation, a charity. Prior
to co-founding Tripadvisor, Mr. Kaufer served as President of CDS, Inc., an
independent software vendor specializing in programming and testing tools, and
co-founded CenterLine Software and served as its Vice President of Engineering.
Mr. Kaufer holds an A.B. in Computer Science from Harvard University.
Board Membership Qualifications
As co-founder of Tripadvisor and through his service as its Chief Executive
Officer, Mr. Kaufer has extensive knowledge of our business and operations, and
significant experience in the online advertising sector of the global travel industry.
Mr. Kaufer also possesses strategic and governance skills gained through his
executive and director roles with several other companies.
Jay C. Hoag
Age: 61
Director Since: 2018
Committee Memberships:
Compensation - Chair
Section 16 - Chair
Mr. Hoag co-founded Technology Crossover Ventures, a private equity and
venture capital firm, in 1995 and continues to serve as a founding General Partner.
Mr. Hoag serves on the Boards of Directors of the following public companies:
Electronic Arts Inc.; Netflix, Inc.; Peloton Interactive, Inc.; and Zillow Group, Inc.
Mr. Hoag also serves on the board of directors of several private companies.
Previously, Mr. Hoag has served on the board of directors of numerous other
public and private companies. Mr. Hoag also serves on the Board of Trustees of
Northwestern University and Vanderbilt University and the Investment Advisory
Board of the University of Michigan. Mr. Hoag holds an M.B.A. from the
University of Michigan and a B.A. from Northwestern University.
Board Membership Qualifications
As a venture capital investor, Mr. Hoag brings strategic insights and extensive
financial experience to our Board. He has evaluated, invested in and served as a
board and committee member of numerous companies, both public and private,
and is familiar with a full range of corporate and board functions. His many years
of experience helping companies shape and implement strategy provide our
Board with unique perspectives on matters such as risk management, corporate
governance, talent selection and leadership development.
8
Betsy L. Morgan
Age: 51
Director Since: 2019
Committee Memberships:
None
M. Greg O’Hara
Age: 54
Director Since: 2020
Committee Memberships:
None
Ms. Morgan is currently the co-founder of Magnet Companies, a private equity-
backed company focused on media and commerce, and an associate professor at
Columbia Business School and Columbia College. From February 2016 to July
2018, Ms. Morgan served as an Executive in Residence of LionTree, an advisory
and merchant bank firm specializing in technology and media. From January 2011
to July 2015, Ms. Morgan was the CEO of TheBlaze, an early multi-platform and
direct-to-consumer news and entertainment company. Prior to TheBlaze, Ms.
Morgan was the CEO of The Huffington Post. Ms. Morgan currently serves on
the board of directors of the following privately-held companies: Trusted Media
Brands, Chartbeat and TheSkimm. Ms. Morgan has an M.B.A from Harvard
Business School and a B.A. in Political Science and Economics from Colby
College, where she served as a member of the Board of Trustees for eight years.
She is also a contributor to Riptide, an oral history of journalism and digital
innovation created by Harvard’s Shorenstein Center on Media, Politics and Public
Policy.
Board Membership Qualifications
Ms. Morgan has extensive experience leading digital media, subscription and
original content businesses. This experience will benefit Tripadvisor and its
stockholders as we continue to execute on our strategy. Her financial
background, investment knowledge and Board experience also make her an
excellent addition to the Board, able to provide valuable insight and advice.
Mr. O’Hara founded Certares Management LLC in 2012 and serves as its Senior
Managing Director, as the Head of its Investment Committee and as a member of
its Management Committee. Mr. O’Hara serves as the Executive Chairman of
American Express Global Business Travel, as the Vice Chairman of the Liberty
TripAdvisor Holdings board of directors and as a director of Travel Leaders
Group, The Innocence Project, Mystic Invest, World Travel & Tourism Council
and Certares Holdings LLC. Prior to forming Certares Management LLC,
Mr. O’Hara served as Chief Investment Officer of JPMorgan Chase’s Special
Investments Group and as a Managing Director of One Equity Partners, the private
equity arm of JPMorgan. Mr. O’Hara also served as Executive Vice President and
a director of Worldspan. Mr. O’Hara received his Master of Business
Administration degree from Vanderbilt University.
Board Membership Qualifications
Mr. O’Hara’s extensive background in investment analysis and management and
his particular expertise in the travel industry contribute to our Board’s evaluation
of investment and financial opportunities and strategies and strengthen our
board’s collective qualifications, skills and attributes.
9
Jeremy Philips
Age: 47
Director Since: 2011
Committee Memberships:
Audit
Mr. Philips has been a general partner of Spark Capital since May 2014. From
January 2012 until May 2014, Mr. Philips invested in private technology
companies. From June 2010 to January 2012, Mr. Philips served as the Chief
Executive Officer of Photon Group Limited, a holding company listed on the
Australian Securities Exchange. From July 2004 to March 2010, Mr. Philips held
various roles of increasing responsibility with News Corporation, most recently
as an Executive Vice President in the Office of the Chairman. Prior to joining
News Corporation, he served in several roles, including co-founder and Vice-
Chairman of ecorp, a publicly traded Internet holding company, and as an analyst
at McKinsey & Company. Mr. Philips is on the board of directors of several
private Internet companies. He is an adjunct professor at Columbia Business
School and holds a B.A. and LL.B. from the University of New South Wales and
an MPA from the Harvard Kennedy School of Government.
Board Membership Qualifications
Mr. Philips has significant strategic and operational experience acquired through
his service as Chief Executive Officer and other executive-level positions. He also
possesses a high level of financial literacy and expertise regarding mergers,
acquisitions, investments and other strategic transactions as well as an extensive
background in the Internet industry.
Albert E. Rosenthaler
Age: 60
Director Since: 2016
Committee Memberships:
None
Mr. Rosenthaler has served as Chief Corporate Development Officer of LMC,
Qurate, LTRIP and LBC since October 2016, and GCI Liberty, Inc. since March
2018. He previously served as Chief Corporate Development Officer of Liberty
Expedia Holdings, Inc. from October 2016 to July 2019 and Chief Tax Officer of
LMC, Qurate, LTRIP and LBC from January 2016 to September 2016, and
Liberty Expedia Holdings, Inc. from March 2016 to September 2016. Prior to
that, Mr. Rosenthaler served as a Senior Vice President of LMC (including its
from May 2007 to December 2015, Qurate (including its
predecessor)
predecessors) from April 2002 to December 2015, LTRIP from July 2013 to
December 2015 and LBC from June 2014 to December 2015. Mr. Rosenthaler
has also served on the board of directors of LTRIP since August 2014. He is a
graduate of Olivet College (B.A.) and University of Illinois (M.A.S.).
Board Membership Qualifications
Mr. Rosenthaler has significant executive and financial experience gained
through his service as an executive officer of Qurate and LMC for many years
and as a partner of a major national accounting firm for more than five years prior
to joining QurateLiberty. Mr. Rosenthaler brings a unique perspective to our
Board, focused in particular on the areas of tax management, mergers and
acquisitions and financial structuring. Mr. Rosenthaler’s perspective and
expertise assist the Board in developing strategies that take into consideration the
application of tax laws and capital allocation.
10
Trynka Shineman Blake
Age: 46
Director Since: 2019
Committee Memberships:
None
Ms. Shineman currently serves on the board of directors of Ally Financial, Inc., a
leading digital financial services company currently traded on the New York Stock
Exchange, and serves as a member of the Audit and Digital Transformation
Committees. She is also a member of the Board of Trustees of the Mass Technology
Leadership Council. From March 2004 through February 2019, Ms. Shineman held
positions of increasing responsibility with Cimpress N.V., and most recently was
the Chief Executive Officer of its Vistaprint business. Ms. Shineman has an M.B.A
from Columbia Business School and a B.A. in Psychology from Cornell University.
Robert S. Wiesenthal
Age: 53
Director Since: 2011
Committee Memberships:
Audit – Chair
Board Membership Qualifications
Ms. Shineman has many years of experience with customer-focused businesses and
with digital transformations. She has extensive experience helping companies
develop a deep understanding of customer needs and shaping the organization
around those needs. She will be able to provide the Board and management with
important insight and counsel as Tripadvisor improves its platform to provide its
users a better and more inspired travel planning experience.
Since July 2015, Mr. Wiesenthal has served as founder and Chief Executive
Officer of Blade Urban Air Mobility, Inc., a technology enabled short-distance
aviation company and the largest arranger of helicopter flights in and out of city
centers in the U.S. From January 2013 to July 2015, Mr. Wiesenthal served as
Chief Operating Officer of Warner Music Group Corp., a leading global music
conglomerate. From 2000 to 2012, Mr. Wiesenthal served in various senior
executive capacities with Sony Corporation, most recently as Executive Vice
President and Chief Financial Officer of Sony Corporation of America. Prior to
joining Sony, from 1988 to 2000, Mr. Wiesenthal served in various capacities
with Credit Suisse First Boston, most recently as Managing Director, Head of
Digital Media and Entertainment. Mr. Wiesenthal previously served on the
board of directors of Starz. Mr. Wiesenthal has a B.A. from the University of
Rochester.
Board Membership Qualifications
Mr. Wiesenthal possesses extensive strategic, operational and financial
experience, gained through his wide range of service in executive-level positions
with a strong focus on networked consumer electronics, entertainment, and
digital media. He also has a high degree of financial literacy and expertise
regarding mergers, acquisitions, investments and other strategic transactions.
11
All of our nominees also have extensive management experience in complex organizations. In addition to the
information presented regarding each nominee’s specific experience, qualifications, attributes and skills that led the
Board to the conclusion that he should be nominated as a director, each nominee has proven business acumen and an
ability to exercise sound judgment, as well as a commitment to Tripadvisor and its Board as demonstrated by each
nominee’s past service. The Board considered the Nasdaq requirement that Tripadvisor’s Audit Committee be
composed of at least three independent directors, as well as specific Nasdaq and U.S. Securities and Exchange
Commission (“SEC”) requirements regarding financial literacy and expertise.
Required Vote
Election of Ms. Morgan and Messrs. Maffei, Hoag, Kaufer, O’Hara and Rosenthaler as directors requires the
affirmative vote of a plurality of the total number of votes cast by the holders of shares of Tripadvisor common stock
and Class B common stock, present in person or represented by proxy, voting together as a single class. Election of
Ms. Shineman and Messrs. Philips and Wiesenthal as directors requires the affirmative vote of a plurality of the total
number of votes cast by the holders of shares of Tripadvisor common stock, present in person or represented by proxy,
voting together as a separate class.
We ask our stockholders to vote in favor of each of the director nominees. Valid proxies received pursuant to
this solicitation will be voted in the manner specified. With respect to the election of directors, you may vote “FOR”
or “WITHHOLD”. Where no specification is made, it is intended that the proxies received from stockholders will be
voted FOR the election of the director nominees identified. Votes withheld and broker non-votes will have no effect
because approval by a certain percentage of voting stock present or outstanding is not required.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF
THE NOMINEES FOR DIRECTOR NAMED ABOVE.
12
Executive Officers
CORPORATE GOVERNANCE
Set forth below is certain background information, as of April 28, 2020, regarding Tripadvisor’s executive
officers. There are no family relationships among directors or executive officers of Tripadvisor.
Name
Stephen Kaufer
Ernst Teunissen
Seth J. Kalvert
Lindsay Nelson
Kanika Soni
Age
57
53
50
35
41
Position
Director, President and Chief Executive Officer
Senior Vice President, Chief Financial Officer and
Treasurer
Senior Vice President, General Counsel and Secretary
Chief Experience and Brand Officer
Chief Commercial Officer
Refer to “Proposal 1: Election of Directors” above for information about our President and Chief Executive
Officer Stephen Kaufer.
Ernst Teunissen has served as Senior Vice President, Chief Financial Officer and Treasurer of Tripadvisor
since November 2015. From October 2009 to October 2015, Mr. Teunissen served in various capacities with Cimpress,
N.V. (formerly known as Vistaprint, N.V.), most recently as Executive Vice President and Chief Financial Officer.
Before joining Cimpress, Mr. Teunissen was a founder and director of two corporate finance and management
consulting firms: Manifold Partners from May 2007 through September 2009 and ThreeStone Ventures Limited from
June 2003 through September 2009. Mr. Teunissen began his career in investment banking, holding executive
positions in the investment banking divisions of Morgan Stanley and Deutsche Bank. Mr. Teunissen holds an M.B.A.
from the University of Oregon and a B.B.A. from Nijenrode University, The Netherlands School of Business.
recently as Vice President and Associate General Counsel. Prior
Seth J. Kalvert has served as Senior Vice President, General Counsel and Secretary of Tripadvisor since August
2011. Mr. Kalvert also serves as Secretary and a director of The Tripadvisor Foundation, a private charitable
foundation. Prior to joining Tripadvisor, from March 2005 to August 2011, Mr. Kalvert held positions at Expedia,
most
to that, Mr. Kalvert worked at
IAC/InterActiveCorp. Mr. Kalvert began his career as an associate at Debevoise & Plimpton, LLP, a New York law
firm. Mr. Kalvert also serves on the board of directors of Citizen Schools and as Secretary and a director of the
Internet Association, an industry trade group. Mr. Kalvert holds a J.D. from Columbia Law School and an A.B. from
Brown University.
Lindsay Nelson has served as Chief Experience & Brand Officer of Tripadvisor LLC since January 2020 having
previously served as President of Core Experiences of Tripadvisor LLC from November 2018 through January
2020. From December 2014 through November 2018, Ms. Nelson served in roles of increasing responsibility for Vox
Media, Inc., most recently as Chief Commercial Officer and, prior to that, Chief Marketing Officer. Ms. Nelson also
serves on the board of directors of Bonnier Corporation, one of the largest special-interest publishing groups in
America. Ms. Nelson holds a B.A. from the University of California, Los Angeles.
Kanika Soni has served as Chief Commercial Officer of Tripadvisor LLC since January 2020 having previously
served as President of Hotels from April 2019 through December 2019. From October 2016 through March 2019,
Ms. Soni served as Senior Vice President and General Manager for Global eCommerce for The Walt Disney
Company. Prior to Disney, Ms. Soni held leadership positions at Tesla Motors, Gilt Groupe and McKinsey &
Company. Ms. Soni holds an M.B.A. from the University of Chicago Booth School of Business and B.A. from Delhi
University.
13
Board of Directors
Director Qualifications and Diversity
Our Board is comprised of a group of individuals whose previous experience, financial and business acumen,
personal ethics and dedication and commitment to our company allow the Board to complete its key task of oversight.
The specific experience and qualifications of each of our Board members are set forth above. The Board is committed
to a policy of inclusiveness and diversity. The Board believes members should be comprised of persons with diverse
skills, expertise, backgrounds and experiences including, without limitation, the following areas:
• management or board experience in a wide variety of enterprises and organizations;
•
•
•
•
•
•
banking, capital markets and finance;
accounting, audit and financial reporting;
compliance, legal and regulatory;
travel, technology, and commerce;
sales and marketing and operations; and
corporate governance.
In case of a Board vacancy or if the Board elects to increase its size, determinations regarding the eligibility of
director candidates are made by the entire Board, which considers the candidate’s qualifications as to skills and
experience in the context of the needs of the Board and our stockholders. The Board is committed to a policy of
diversity and inclusion. When seeking new Board candidates, the Board is committed to including diverse candidates
(including women and minority candidates) in the pool of candidates from which the Board nominees are chosen.
Director Independence
Under the Nasdaq Stock Market Listing Rules (the “Nasdaq Rules”), the Board has a responsibility to make an
affirmative determination that those members of the Board who serve as independent directors do not have any
relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a
director. In connection with these independence determinations, the Board reviews information regarding transactions,
relationships and arrangements relevant to independence, including those required by the Nasdaq Rules. This
information is obtained from director responses to questionnaires circulated by management, as well as our records
and publicly available information. Following this determination, management monitors those transactions,
relationships and arrangements that were relevant to such determination, as well as solicits updated information
potentially relevant to independence from internal personnel and directors, to determine whether there have been any
developments that could potentially have an adverse impact on the Board’s prior independence determination.
Based on the information provided by each director concerning his background, employment and affiliations
and upon review of this information, our Board previously determined that each of Mmes. Shineman and Morgan and
Messrs. Hoag, Nishar, Philips, and Wiesenthal do not have a relationship that should interfere with the exercise of
independent judgment in carrying out the responsibilities of a director and that each of these directors is an
“independent director” as defined under the applicable rules and regulations of the SEC and Nasdaq. In making its
independence determinations, the Board considered the applicable legal standards and any relevant transactions,
relationships or arrangements. In addition to the satisfaction of the director independence requirements set forth in the
NASDAQ Rules, members of the Audit Committee and Compensation Committees also satisfied separate
independence requirements under the current standards imposed by the SEC and the Nasdaq Rules for audit committee
members and by the SEC, Nasdaq Rules and the Internal Revenue Service for compensation committee members. At
the first meeting of the Board following the Annual Meeting, the Board intends to conduct a review of director
independence and to designate the members of the Board to serve on each of the committees and the Chair of each of
the committees for the directors’ term.
14
Controlled Company Status
As of the record date, LTRIP beneficially owned 18,159,753 shares of our common stock and 12,799,999 shares
of our Class B common stock, which shares constitute 15.0% of the outstanding shares of common stock and 100%
of the outstanding shares of Class B common stock, respectively. Assuming the conversion of all of LTRIP’s shares
of Class B common stock into common stock, LTRIP would beneficially own 23.1% of the outstanding common
stock. Because each share of Class B common stock generally is entitled to ten votes per share and each share of
common stock is entitled to one vote per share, LTRIP may be deemed to beneficially own equity securities
representing approximately 58.6% of our voting power. LTRIP has filed a Statement of Beneficial Ownership on
Schedule 13D with respect to its Tripadvisor holdings and related voting arrangements with the SEC.
The Nasdaq Rules exempt “controlled companies,” or companies of which more than 50% of the voting power
is held by an individual, a group or another company, such as Tripadvisor, from certain governance requirements
under the Nasdaq Rules. On this basis, Tripadvisor is relying on the exemption for controlled companies from certain
requirements under the Nasdaq Rules, including, among others, the requirement that the Compensation Committees
be composed solely of independent directors and certain requirements relating to the nomination of directors. We may,
in the future, rely on other exemptions available to a controlled company, including, among others, the requirement
that a majority of the Board be composed of independent directors.
Board Leadership Structure
Mr. Maffei serves as the Chairman of the Board, and Mr. Kaufer serves as President and Chief Executive Officer
of Tripadvisor. The roles of Chief Executive Officer and Chairman of the Board are currently separated in recognition
of the differences between the two roles. This leadership structure provides us with the benefit of Mr. Maffei’s
oversight of Tripadvisor’s strategic goals and vision, coupled with the benefit of a full-time Chief Executive Officer
dedicated to focusing on the day-to-day management and continued growth of Tripadvisor and its operating businesses.
We believe that it is in the best interests of our stockholders for the Board to make a determination regarding the
separation or combination of these roles each time it elects a new Chairman or Chief Executive Officer based on the
relevant facts and circumstances applicable at such time.
Independent members of the Board chair our Audit Committee, Compensation Committee and Section 16
Committee.
Meeting Attendance
The Board met six times in 2019. During such period, each member of the Board attended at least 75% of the
meetings of the Board and the Board committees on which they served. The independent directors meet in regularly
scheduled sessions, typically before or after each Board meeting, without the presence of management. We do not
have a lead independent director or any other formally appointed leader for these sessions. Directors are encouraged
but not required to attend annual meetings of Tripadvisor stockholders. All of the incumbent directors who were
directors at the time have historically attended the annual meetings of stockholders.
Committees of the Board of Directors
The Board has the following standing committees: the Audit Committee, the Compensation Committee, the
Section 16 Committee and the Executive Committee. The Audit, Compensation and Section 16 Committees operate
under written charters adopted by the Board. These charters are available in the “Corporate Governance” section of
the Investor Relations page of Tripadvisor’s corporate website at ir.Tripadvisor.com. At each regularly scheduled
Board meeting, the Chairperson of each committee provides the full Board with an update of all significant matters
discussed, reviewed, considered and/or approved by the relevant committee since the last regularly scheduled Board
meeting. The membership of our Audit, Compensation and Section 16 Committees ensures that directors with no
direct ties to Company management are charged with oversight for all financial reporting and executive compensation
related decisions made by Company management.
15
The following table sets forth the current members of the Board and the members of each committee of the
Board. At the first meeting of the Board following the Annual Meeting, the Board intends to conduct a review of
director independence and to designate the members of the Board to serve on each of the committees and the Chair of
each of the committees for the directors’ term.
Name
Greg Maffei
Trynka Shineman Blake
Jay C. Hoag
Stephen Kaufer
Betsy L. Morgan
Jeremy Philips
M. Greg O'Hara
Spencer M. Rascoff
Albert Rosenthaler
Robert S. Wiesenthal
Audit Committee
Audit
Committee
Compensation
Committee
Section 16
Committee
Executive
Committee
—
—
—
—
—
X
—
X
—
Chair
X
—
—
—
Chair
Chair
—
X
—
—
—
—
—
—
X
—
—
—
—
—
X
—
—
X
—
—
—
—
—
—
The Audit Committee of the Board currently consists of three directors:
Messrs. Philips, Rascoff and Wiesenthal. Mr. Wiesenthal is the Chairman of the
Audit Committee. Each Audit Committee member satisfies the independence
requirements under the current standards imposed by the rules of the SEC and
Nasdaq. The Board has determined that each of Messrs. Philips, Rascoff and
Wiesenthal is an “audit committee financial expert,” as such term is defined in
the regulations promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).
The Audit Committee is appointed by the Board to assist the Board with a variety
of matters discussed in detail
including
monitoring:
in the Audit Committee charter,
-
-
-
-
the integrity of our accounting, financial reporting and public disclosures
process,
our relationship with our independent registered public accounting firm,
including qualifications, performance and independence,
the performance of our internal audit department, and
our compliance with legal and regulatory requirements.
The formal report of the Audit Committee with respect to the year ended
December 31, 2019, is set forth in the section below titled “Audit Committee
Report.” The Audit Committee met eight times in 2019.
16
Compensation Committee
Section 16 Committee
of three
consists
currently
the Compensation Committee. Each member of
The Compensation Committee
directors:
Messrs. Hoag and Maffei and Ms. Morgan, with Mr. Hoag serving as the
Chairperson of
the
Compensation Committee is an “outside director” for purposes of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the “Code”). With the
exception of Mr. Maffei, each member is an “independent director” as defined
by the Nasdaq Rules. No member of the Compensation Committee is an
employee of Tripadvisor.
The Compensation Committee is responsible for:
-
-
-
designing and overseeing compensation with respect
to our executive
officers, including salary matters, bonus plans and stock compensation
plans;
administrating our stock plans, including approving grants of equity awards
but excluding matters governed by Rule 16b-3 under the Exchange Act
(which are handled by the Section 16 Committee described below); and
periodically reviewing and approving compensation of the members of our
Board.
A description of our policies and practices for
the consideration and
determination of executive compensation is included in the section below titled
“Compensation Discussion and Analysis.” The Compensation Committee met
eight times in 2019 and acted by written consent three times.
The Section 16 Committee currently consists of two directors: Mr. Hoag and
Ms. Morgan. Mr. Hoag is the Chairperson of the Section 16 Committee. Each
member is an “independent director” as defined by the Nasdaq Rules and satisfies
the definition of “non-employee director” for purposes of Section 16 of the
Exchange Act.
The Section 16 Committee is authorized to exercise all powers of the Board with
respect to matters governed by Rule 16b-3 under the Exchange Act, including
approving grants of equity awards to Tripadvisor’s executive officers. The
Section 16 Committee met eight times in 2019 and acted by written consent three
times.
In this Proxy Statement, we refer to the Compensation Committee and Section
16 Committee collectively as the “Compensation Committees.”
17
Executive Committee
The Executive Committee currently consists of two directors: Messrs. Kaufer
and Maffei. The Executive Committee has the powers and authority of the Board,
except for those matters that are specifically reserved to the Board under
Delaware law or our organizational documents. The Executive Committee
primarily serves as a means to address issues that may arise and require Board
approval between regularly scheduled Board meetings. The following are some
examples of matters that could be handled by the Executive Committee:
-
-
-
oversight and implementation of matters approved by the Board (including
any share repurchase program);
administrative matters with respect to benefit plans, transfer agent matters,
banking authority, formation of subsidiaries and other administrative items
involving subsidiaries and determinations or findings under Tripadvisor’s
financing arrangements; and
in the case of a natural disaster or other emergency as a result of which a
quorum of the Board cannot readily be convened for action, directing the
management of the business and affairs of Tripadvisor during such
emergency or natural disaster.
The Executive Committee met informally throughout 2019.
Risk Oversight
through direct decision-making authority with respect
Assessing and managing the day-to-day risk of our business is the responsibility of Tripadvisor’s management.
Our Board as a whole is responsible for oversight of our risk management efforts. Our Board is involved in risk
oversight
to significant matters and the oversight of
management by the Board and its committees. The President and Chief Executive Officer; the Senior Vice President,
Chief Financial Officer and Treasurer; and the Senior Vice President, General Counsel and Secretary attend Board
meetings and discuss operational risks with the Board, including risks associated with the geographies in which we
operate or are considering operating. Management also provides reports and presentations on strategic risks to the
Board. Among other areas, the Board is involved, directly or through its committees, in overseeing risks related to our
overall corporate strategy, business continuity, cybersecurity and other technology risks, crisis preparedness and
competitive and reputational risks.
The Board has delegated primary responsibility for oversight over certain risks to the Audit Committee and the
Compensation Committees. The committees of the Board execute their oversight responsibility for risk management
as follows:
•
•
The Audit Committee has primary responsibility for discussing with management Tripadvisor’s major
financial risks and the steps management has taken to monitor and control such risks. In fulfilling its
responsibilities, the Audit Committee receives regular reports from, among others, the Chief Financial
Officer, the General Counsel, the Vice President of Tax and the Chief Accounting Officer as well as from
representatives of information security, internal audit, the company’s compliance committee and the
Company’s auditors. The Audit Committee makes regular reports to the Board. In addition, Tripadvisor
has, under the supervision of the Audit Committee, established procedures available to all employees for
the anonymous and confidential submission of complaints relating to any matter to encourage employees
to report questionable activities directly to our senior management and the Audit Committee.
The Compensation Committees consider and evaluate risks related to our cash and equity-based
compensation programs, policies and practices and evaluate whether our compensation programs encourage
participants to take excessive risks that are reasonably likely to have a material adverse effect on Tripadvisor
18
or our business. Consistent with SEC disclosure requirements, the Compensation Committees, working
with management, have assessed the compensation policies and practices for our employees, including our
executive officers, and have concluded that such policies and practices do not create risks that are
reasonably likely to have a material adverse effect on Tripadvisor.
Ultimately, management is responsible for the day-to-day risk management process, including identification of
key risks and implementation of policies and procedures to manage, mitigate and monitor risks. In fulfilling these
duties, management conducts annually an enterprise and internal audit risk assessment and uses the results of these
assessments in its risk management efforts. In addition, management has formed a Compliance Committee in
connection with the implementation, management and oversight of a corporate compliance program to promote
operational excellence throughout the entire organization in adherence with all legal and regulatory requirements and
with the highest ethical standards.
Director Nominations
Given the ownership structure of Tripadvisor and our status as a “controlled company,” the Board does not have
a nominating committee or other committee performing similar functions or any formal policy on director nominations.
The Board does not have specific requirements for eligibility to serve as a director of Tripadvisor; however, the Board
does consider, among other things, diversity when considering nominees to serve on our Board. We broadly construe
diversity to mean diversity of opinions, perspectives, and personal and professional experiences and backgrounds,
such as gender, race and ethnicity, as well as other differentiating characteristics. In evaluating candidates, regardless
of how recommended, the Board considers a number of factors, including whether the professional and personal ethics
and values of the candidate are consistent with those of Tripadvisor; whether the candidate’s experience and expertise
would be beneficial to the Board in rendering service to Tripadvisor, including in providing a mix of Board members
that represent diversity of backgrounds, perspectives and opinions; whether the candidate is willing and able to devote
the necessary time and energy to the work of the Board; and whether the candidate is prepared and qualified to
represent the best interests of Tripadvisor’s stockholders.
19
Pursuant to the Governance Agreement, LTRIP has the right to nominate a number of directors equal to 20% of
the total number of the directors on the Board (rounded up to the next whole number if the number of directors on the
Board is not an even multiple of five) for election to the Board so long as certain stock ownership requirements are
satisfied. LTRIP has nominated Messrs. Maffei and Rosenthaler as nominees for 2020. The other nominees to the
Board were recommended by the Chairman and then were considered and recommended by the entire Board.
The Board does not have a formal policy regarding the consideration of director candidates recommended by
stockholders, as historically Tripadvisor has not received such recommendations. However, the Board would consider
such recommendations if made in the future. Stockholders who wish to make such a recommendation should send
the recommendation to Tripadvisor, Inc., 400 1st Avenue, Needham, Massachusetts 02494, Attention: Secretary. The
envelope must contain a clear notation that the enclosed letter is a “Director Nominee Recommendation.” The letter
must identify the author as a stockholder, provide a brief summary of the candidate’s qualifications and history and
be accompanied by evidence of the sender’s stock ownership, as well as consent by the candidate to serve as a director
if elected. Any director candidate recommendations will be reviewed by the Secretary and, if deemed appropriate,
forwarded to the Chairman for further review. If the Chairman believes that the candidate fits the profile of a director
nominee as described above, the recommendation will be shared with the entire Board.
Communications with the Board
Stockholders who wish to communicate with the Board or a particular director may send such communication
to Tripadvisor, Inc., 400 1st Avenue, Needham, Massachusetts 02494, Attention: Secretary. The mailing envelope
must contain a clear notation indicating that the enclosed letter is a “Stockholder-Board Communication” or
“Stockholder-Director Communication.” All such letters must identify the author as a stockholder, provide evidence
of the sender’s stock ownership and clearly state whether the intended recipients are all members of the Board or
certain specified directors. The Secretary will then review such correspondence and forward it to the Board, or to the
specified director(s), if deemed appropriate. Communications that are primarily commercial in nature, that are not
relevant to stockholders or other interested constituents or that relate to improper or irrelevant topics will generally
not be forwarded to the Board or to the specified director(s).
20
PROPOSAL 2:
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Overview
The Audit Committee of the Board is directly responsible for the appointment, compensation, retention and
oversight of the external accounting firm retained to audit the Company’s financial statements. The Audit Committee
has retained KPMG LLP (“KPMG”) as Tripadvisor’s independent registered public accounting firm for the fiscal year
ending December 31, 2020.
KPMG has served as Tripadvisor’s independent registered public accounting firm continuously since the audit
of the Company’s financial statements for the fiscal year ended December 31, 2014. In order to assure continuing
auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the
independent external audit firm. The members of the Audit Committee and the Board believe that the continued
retention of KPMG to serve as the Company’s independent external auditor is in the best interest of the Company and
its investors. A representative of KPMG is expected to be present at the Annual Meeting, and will be given an
opportunity to make a statement if he or she so chooses and will be available to respond to appropriate questions.
If the stockholders fail to vote to ratify the appointment of KPMG, the Audit Committee will reconsider whether
to retain KPMG and may retain that firm or another firm without resubmitting the matter to our stockholders. Even if
stockholders vote on an advisory basis in favor of the appointment, the Audit Committee may, in its discretion, direct
the appointment of a different independent registered public accounting firm at any time during the year if it
determines that such a change would be in the best interests of Tripadvisor and our stockholders.
Required Vote
We ask our stockholders to ratify the appointment of KPMG as our independent registered public accounting
firm for the fiscal year ending December 31, 2020. This proposal requires the affirmative vote of a majority of the
voting power of our shares, present in person or represented by proxy, and entitled to vote thereon, voting together as
a single class. With respect to the ratification of KPMG, you may vote “FOR”, “AGAINST” or “ABSTAIN”.
Abstentions will be counted toward the tabulations of voting power present and entitled to vote on the ratification of
the independent registered public accounting firm proposal and will have the same effect as votes against the proposal.
Brokers have discretion to vote on the proposal for ratification of the independent registered public accounting firm.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS TRIPADVISOR’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.
Fees Paid to Our Independent Registered Public Accounting Firm
KPMG was Tripadvisor’s independent registered public accounting firm for the fiscal years ended December
31, 2019 and 2018. The following table sets forth aggregate fees for professional services rendered by KPMG for the
years ended December 31, 2019 and 2018.
Audit Fees(1)
Audit-Related Fees(2)
Tax Fees (3)
Other Fees (4)
Total Fees
2019
2018
$
$
2,235,397
4,315
157,275
2,730
2,399,717
$
$
2,400,336
1,000
—
2,730
2,404,066
(1) Audit Fees include fees and expenses associated with the annual audit of our consolidated financial
statements, statutory audits, review of our periodic reports, accounting consultations, review of SEC
registration statements, report on the effectiveness of internal control and consents and other services
related to SEC matters.
21
(2) Audit-Related Fees include fees and expenses for statutory reporting XBRL tagging services.
(3)
Tax Fees include fees and expenses for tax compliance, tax planning, and tax advice.
(4) Other Fees include accounting research software.
Audit and Non-Audit Services Pre-Approval Policy
The Audit Committee has responsibility for appointing, setting compensation of, retaining and overseeing the
work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee
has adopted a policy governing the pre-approval of all audit and permitted non-audit services performed by
Tripadvisor’s independent registered public accounting firm to ensure that the provision of such services does not
impair the independent registered public accounting firm’s independence from Tripadvisor and our management.
Unless a type of service to be provided by our independent registered public accounting firm has received general pre-
approval from the Audit Committee, it requires specific pre-approval by the Audit Committee. The payment for any
proposed services in excess of pre-approved cost levels requires specific pre-approval by the Audit Committee.
Pursuant to its pre-approval policy, the Audit Committee may delegate its authority to pre-approve services to
one or more of its members, and it has currently delegated this authority to its Chairman, subject to a limit of
$250,000 per approval. The decisions of the Chairman (or any other member(s) to whom such authority may be
delegated) to grant pre-approvals must be presented to the full Audit Committee at its next scheduled meeting. The
Audit Committee may not delegate its responsibilities to pre-approve services to Company management.
All of the audit-related and all other services provided to us by KPMG in 2019 and 2018 were approved by the
Audit Committee by means of specific pre-approvals or pursuant to the procedures contained in the Company’s pre-
approval policy.
The Audit Committee has considered the non-audit services provided by KPMG in 2019 and 2018, as described
above, and believes that they are compatible with maintaining KPMG’s independence in the conduct of their auditing
functions.
22
AUDIT COMMITTEE REPORT
Management has primary responsibility for our financial statements, reporting process and system of internal
control over financial reporting. Tripadvisor’s independent registered public accounting firm is engaged to audit and
express opinions on the conformity of our financial statements to generally accepted accounting principles, and the
effectiveness of Tripadvisor’s internal control over financial reporting.
The Audit Committee serves as a representative of the Board and assists the Board in monitoring (i) the integrity
of our accounting, financial reporting and public disclosures process, (ii) our relationship with our independent
registered public accounting firm, including qualifications, performance and independence, (iii) the performance of
our internal audit department, and (iv) our compliance with legal and regulatory requirements. In this context, the
Audit Committee met eight times in 2019 and, among other things, took the following actions:
•
•
•
•
•
•
appointed KPMG as our auditors and discussed with the auditors the overall scope and plans for the
independent audit and pre-approved all audit and non-audit services to be performed by KPMG;
reviewed and discussed with management and the auditors the audited consolidated financial statements
for the year ended December 31, 2019, as well as our quarterly financial statements and interim financial
information contained in each quarterly earnings announcement prior to public release;
discussed with the auditors the matters required to be discussed by the Public Company Accounting
Oversight Board (“PCAOB”), and received all written disclosures and letters required by the applicable
requirements of the PCAOB;
discussed with the auditors its independence from Tripadvisor and Tripadvisor’s management as well as
considered whether the non-audit services provided by the auditors could impair its independence and
concluded that such services would not;
reviewed and discussed with management and the auditors our compliance with the requirements of the
Sarbanes-Oxley Act of 2002 with respect to internal control over financial reporting, together with
management’s assessment of the effectiveness of our internal control over financial reporting and the
auditors’ audit of internal control over financial reporting; and
regularly met with KPMG, with and without management present,
to discuss the results of their
examinations, including the integrity, adequacy and effectiveness of the accounting and financial reporting
processes and controls.
Relying on the reviews and discussions referred to above, the Audit Committee recommended to the Board that
the audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2019, and the Board approved such inclusion.
No portion of this Audit Committee Report shall be deemed to be incorporated by reference into any filing under
the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, through any general statement
incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that
Tripadvisor specifically incorporates this report or a portion of it by reference. In addition, this report shall not be
deemed to be “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
Members of the Audit Committee:
Robert S. Wiesenthal (Chairman)
Jeremy Philips
Spencer Rascoff
23
COMPENSATION DISCUSSION AND ANALYSIS
Overview
This Compensation Discussion and Analysis describes Tripadvisor’s executive compensation program as it
relates to the following named executive officers, or NEOs, for the year ended December 31, 2019.
Name
Stephen Kaufer
Ernst Teunissen
Seth J. Kalvert
Dermot M. Halpin
Position
President and Chief Executive Officer
Senior Vice President, Chief Financial Officer and
Treasurer
Senior Vice President, General Counsel and Secretary
President, Experiences and Rentals
The Board has a Compensation Committee and a Section 16 Committee that
together have primary
responsibility for establishing the compensation of our named executive officers.
Executive Summary and 2019 Business Highlights
We have a pay for performance philosophy that guides all aspects of our compensation decisions. For example:
•
•
•
•
•
annual incentive compensation is structured so that payouts are tied to the achievement of financial targets
and require year-over-year improvement in revenue or share price;
certain long-term incentive compensation is structured so that target equity award values are linked to
individual and business performance, while realized values are tied to our share price;
other long-term incentive compensation is designed to reward increasing stockholder value over the long-
term;
the interests of our NEOs are aligned with those of our stockholders through the granting of a substantial
portion of compensation in equity awards with key performance metrics linked to relative total stockholder
return and with multi-year vesting requirements; and
by combining a three- to four-year vesting period for equity awards with policies prohibiting hedging or
pledging of such securities, a substantial portion of our executive’s compensation package is tied to changes
in our stock price, and therefore, is at risk for a significant period of time.
Tripadvisor is an online travel guidance company that helps people around the world plan, book and take the
perfect trip. In 2019, we faced challenging hotel auction trends. As a result, we grew revenue outside of our hotel
auction and initiated cost-saving measures, that we believe will enable us to preserve strong profitability moving
forward. We also returned over $540 million of capital to stockholders through a special dividend and share buyback.
More specifically, the Company was able to achieve the following:
•
•
Full year consolidated Net Income grew by 12% to $126 million and full year consolidated total adjusted
EBITDA* grew 4% to $438 million, with full year consolidated adjusted EBITDA margin improved to
28%, a two percentage point increase year-over-year;
Full year Experiences & Dining segment revenue grew 23% to $456 million, while full year Experiences
and Dining segment adjusted EBITDA reflected ongoing long-term growth investments;
24
• We ended 2019 with $319 million in cash and cash equivalents and no outstanding debt despite returning
over $540 million in cash to stockholders through a special dividend and share repurchase program.
•
Completed the announced strategic partnership with Trip.com Group Limited as well as two acquisitions
that further bolster our fast-growing Restaurants offering.
* Consolidated adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Please
refer to the Company’s Annual Report on Form 10-K for a reconciliation of consolidated adjusted EBITDA to its most
directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting
principles. We define consolidated adjusted EBITDA margin as consolidated adjusted EBITDA divided by
consolidated revenue.
In addition to improving our rich travel content which differentiates our brand and attracts nearly half-a-billion
monthly unique visitors, we reinvigorated Hotels, Media & Platform segment profitability and reinforced leading
positions in Experiences and Restaurants which laid important groundwork for future growth. We believe these efforts,
combined with the attractive $1.7 trillion global travel market opportunity, continue to position the Company for long-
term growth.
Compensation Program Objectives
Our compensation program is designed to reward both short-term and long-term performance and to link the
In addition, our
financial interests of our named executive officers with the long-term stockholder returns.
compensation program is designed to attract, motivate and retain highly skilled employees with the business
experience and acumen and diversity that management and the Compensation Committees believe are necessary for
achievement of our long-term business objectives. We also strive to ensure that the compensation provided to these
employees remains competitive with the compensation paid to similarly situated employees at comparable companies.
The compensation program is also designed so that it does not encourage our named executive officers to take
unreasonable risks relating to our business.
Management and the Compensation Committees evaluate both performance and compensation levels to ensure
that we maintain our ability to attract and retain outstanding employees. To that end, management and the
Compensation Committees believe the executive compensation packages provided by Tripadvisor to our named
executive officers should include both cash and equity-based compensation.
Roles and Responsibilities
Role of the Compensation and Section 16 Committees
The Compensation Committee is appointed by the Board and consists entirely of directors who are “outside
directors” for purposes of Section 162(m) of the Code. The Compensation Committee currently consists of
Messrs. Maffei and Hoag and Ms. Morgan, with Mr. Hoag acting as Chairperson of the Compensation Committee.
The Compensation Committee is responsible for (i) designing and overseeing our compensation with respect to our
executive officers, including salary matters, bonus plans and stock compensation plans; and (ii) approving all grants
of equity awards, but excluding matters governed by Rule 16b-3 under the Exchange Act (for which the Section 16
Committee has responsibility as described below). Notwithstanding the foregoing, the Compensation Committee has
delegated to the Chief Executive Officer of the Company authority to grant certain types of equity awards, subject to
certain limitations, to employees other than executive officers.
The Section 16 Committee is also appointed by the Board and consists entirely of directors who are “non-
employee directors” for purposes of Rule 16b-3 under the Exchange Act. The Section 16 Committee currently consists
of Mr. Hoag and Ms. Morgan. The Section 16 Committee is responsible for administering and overseeing matters
governed by Rule 16b-3 under the Exchange Act, including approving grants of equity awards to our named executive
officers. Mr. Hoag is also the Chairman of the Section 16 Committee.
25
Role of Executive Officers
Management participates in reviewing and refining our executive compensation program. Mr. Kaufer, our
President and Chief Executive Officer, annually reviews the performance of Tripadvisor and each named executive
officer other than himself with the Compensation Committees and makes recommendations with respect to the
appropriate base salary, annual bonus and grants of equity awards for each named executive officer, other than in
connection with compensation for himself. Based in part on these recommendations and the other factors discussed
below, the Compensation Committees review and approve the annual compensation package of each named executive
officer.
Role of Compensation Consultant
Pursuant to the Compensation Committee and Section 16 Committee Charter, the Compensation Committees
may retain compensation consultants for the purpose of assisting the Compensation Committees in their evaluation of
the compensation for our named executive officers. In 2013, the Compensation Committees first retained Compensia,
Inc. (“Compensia”), a management consulting firm providing executive compensation advisory services to
compensation committees and senior management. Since then, Compensia has provided the following services to the
Compensation Committees:
• Assist in developing and annually evaluating a peer group of publicly-traded companies to help assess
executive compensation;
•
•
•
Compile and analyze competitive compensation market data and review all elements of Tripadvisor’s
executive compensation to assist the Company in developing a competitive compensation framework for
our named executive officers;
Review the value of equity compensation previously granted to our executives and advise on matters related
to our equity compensation programs and to our long-term incentive compensation structure generally; and
Provide advice on matters related to director compensation.
While the Compensation Committees meet regularly with Compensia, the Compensation Committees consider
input from their compensation consultant as one factor in making decisions with respect to compensation matters,
along with information and analysis they receive from management and their own judgment and experience.
Based on consideration of the factors set forth in the rules of the SEC and Nasdaq, the Compensation
Committees have determined that their relationship with Compensia and the work performed by Compensia on behalf
of the Compensation Committees have not raised any conflict of interest. In addition, in compliance with the
Compensation Committee and Section 16 Committee Charter, the Compensation Committees approved the fees paid
to Compensia for work performed in 2019, which fees amounted to less than $120,000.
Role of Stockholders
Tripadvisor provides its stockholders with the opportunity to cast an advisory vote to approve the compensation
of our named executive officers every three years. In evaluating our 2018 executive compensation program, the
Compensation Committees considered the result of the stockholder advisory vote on our executive compensation (the
“say-on-pay vote”) held at our Annual Meeting of Stockholders on June 21, 2018, which was approved by
approximately 72% of the votes cast.
Although stockholders expressed strong support for our executive compensation program in the last say-on-pay
vote, since then, our Board has made modifications to our executive compensation program specifically to address
concerns raised by some of our stockholders as well as based on the recommendations of major proxy advisory firms,
the practices of companies in our peer group and the views of our compensation consultant. Specifically, in 2018, the
26
Company revised its annual bonus practices such that annual bonus amounts are subject primarily to the achievement
of performance goals relating to a combination of revenue and adjusted EBITDA as well as individual performance.
In addition, the Compensation Committee re-allocated the equity compensation of our senior leaders from stock
options and time-based restricted stock units to stock options, time-based restricted stock units and market-based
restricted stock units subject to market-based performance metrics. These changes were designed to further align the
interests of our senior leaders with those of our stockholders.
The Compensation Committees will continue to consider the outcome of the say-on-pay vote when making
future compensation decisions for our named executive officers.
We have historically held a say-on-pay vote every three years. At our 2018 Annual Meeting, stockholders
considered and voted upon the frequency of future say-on-pay votes and voted in favor of a say-on-pay vote every
three years. Although such vote is advisory and non-binding on Tripadvisor and our Board, the Board will take into
account the outcome of this vote in making a determination on the frequency of future say-on-pay votes.
Compensation Program Elements
General
The primary elements of our executive compensation program are base salary, an annual cash bonus and long-
term incentive compensation in the form of equity awards. Generally, the Compensation Committees review these
elements in the first quarter of each year in light of business and individual performance, recommendations from
management and other relevant information, including prior compensation history and outstanding long-term
incentive compensation arrangements. Management and the Compensation Committees believe that there are multiple,
dynamic factors that contribute to success at an individual and business level. Management and the Compensation
Committees have, therefore, refrained from adopting strict formulas and have relied primarily on a discretionary
approach that allows the Compensation Committees to set executive compensation levels on a case-by-case basis,
taking into account all relevant factors.
The following chart illustrates the composition of the target total direct compensation for the Chief Executive
Officer and for the other current named executive officers between base salary, short term and long-term compensation.
All elements of compensation are considered to be performance-based, or “at-risk”, with the exception of base salary.
(1)
(2)
CEO Total Compensation consists of 2019 annualized base salary, 2019 annual bonus target, the grant date fair-value of his 2017 equity
grants, which grants are prorated for the portion of service period attributed to 2019.
Other NEO Total Compensation is defined as 2019 annualized base salary, 2019 annual bonus target, and the 2019 aggregate grant date fair
value of annual equity awards as disclosed in the Summary Compensation Table. The Other NEO Total Compensation Mix chart reflects
the average Total Compensation of Messrs. Teunissen, Kalvert and Halpin.
27
One of the primary objectives of our compensation philosophy is to design pay opportunities that align with our
performance and result in strong long-term value creation for our stockholders. The significant weighting of long-
term incentive compensation ensures that our named executive officers’ primary focus is sustained long-term
performance, while our short-term incentive compensation motivates consistent annual achievement. The following
chart illustrates the percentage of compensation which is fixed versus variable and the allocation between short and
long-term compensation.
(1)
(2)
For our CEO and Other NEOs, Fixed Compensation consists solely of 2019 annualized base salary. For our CEO, Variable Compensation
consists of 2019 annual bonus target and the grant date fair-value of the CEO’s 2017 equity grants, which grants are prorated for the portion
of service period attributed to 2019. For Other NEOs, Variable Compensation consists of the 2019 annual bonus target and the 2019
aggregate grant date value of annual equity awards as disclosed in the Summary Compensation Table. Compensation for the Other NEOs
also reflects the compensation averages for Messrs. Teunissen, Kalvert, and Halpin.
For our CEO and Other NEOs, short-term incentive compensation consists of 2019 annual bonus. For our CEO, long-term incentive
compensation consists of the grant date fair-value of the CEO’s 2017 equity grants, which grants are prorated for the portion of service
period attributed to 2019. For Other NEOs, long-term incentive compensation is defined as the grant date fair value of annual equity awards
as disclosed in the Summary Compensation Table. Compensation for the Other NEOs reflects the compensation averages for Messrs.
Teunissen, Kalvert, and Halpin.
Following recommendations from management or based on other considerations,
the Compensation
Committees may also adjust compensation for specific individuals at other times during the year when there are
significant changes in responsibilities or under other circumstances that the Compensation Committees consider
appropriate.
Base Salary
Base salary represents the fixed portion of a named executive officer’s compensation and is intended to provide
compensation for expected day-to-day performance. A named executive officer’s base salary is initially determined
upon hire or promotion based on a number of factors including, but not limited to, his or her responsibilities, prior
experience, and salary levels of other executives within Tripadvisor. Providing a competitive salary to our executives
is essential to achieving our objectives of attracting and retaining talent. Base salary is typically reviewed annually, at
which time management makes recommendations to the Compensation Committees based on consideration of a
variety of factors including, but not limited to, the following:
•
•
•
the named executive officer’s total compensation relative to other executives in similarly situated positions;
his or her responsibilities, prior experience, and individual compensation history, including any non-
standard compensation;
his or her individual performance relative to performance goals established between our President and Chief
Executive Officer and the named executive officer;
28
•
•
•
competitive compensation market data, when available;
general economic conditions; and
the recommendations of the President and Chief Executive Officer (other than in connection with his own
compensation).
After careful consideration of the factors discussed above with respect to each of the named executive officers,
the Compensation Committees approved 2019 salary changes for our named executive officers. The table below
describes, for each NEO, the 2018 base salary, the base salary increase and the 2019 base salary.
Name
Stephen Kaufer
Ernst Teunissen
Seth Kalvert
Dermot M. Halpin
2018 (1)
800,000
470,000
450,000
460,000
$
$
$
$
Annual Salary
(Increase /
Decrease)
$
$
$
$
25,000 $
20,000 $
15,000 $
20,000 $
2019 (2)
825,000
490,000
465,000
480,000
(1)
(2)
Reflects base salary of the NEOs as of December 31, 2018
Reflects base salary of the NEOs as of December 31, 2019.
Adjustments were made to the annual base salaries of the named executive officers, primarily in response to the
scope of responsibilities and the analysis provided by Compensia on competitive compensation market data for
executive officers within our peer group in comparable positions.
Notwithstanding the foregoing determinations regarding Mr. Kaufer’s base salary, in light of the impacts of the
COVID-19 pandemic and the uncertainty around the pandemic’s full impact on the Company and its financial
performance, in March 2020, Mr. Kaufer announced that he elected to forego his base salary for the remainder of the
2020 calendar year.
Annual Bonuses
Annual bonuses are awarded to recognize and reward each named executive officer based on achievement of
our annual operating plan as well as achievement of any strategic goals or business goals set for such officer and such
officer’s contributions to the Company’s performance. The amount payable each year is based on (i) with respect to
50%, the extent to which certain pre-established financial performance goals are achieved during the year, and (ii)
with respect to the remaining 50%, the extent to which individual performance goals established for each named
executive officer are achieved during the year. The annual bonus is “variable compensation” because the Company
must achieve certain performance goals for the executive officers to receive an annual incentive bonus, with the
amount of bonus based on the extent to which the goals are achieved. The annual bonus is designed to motivate our
executive officers to improve Company performance. The annual bonus program aligns a portion of executive
compensation with key business and financial targets and, as a result, provides a valuable link between compensation
and creation of stockholder value.
Unless otherwise provided by the provisions of his or her employment agreement, the target annual bonus
opportunities for our named executive officers are generally established by the Compensation Committees, based on
competitive market data and recommendations by the President and Chief Executive Officer (other than in connection
with his own compensation). After consideration of the views of our stockholders, the practices of other companies in
our peer group and the recommendation of our compensation consultant, the Compensation Committees determined
that annual incentive bonuses awarded to our named executive officers based on the achievement of pre-established
performance goals would be subject primarily to the achievement of performance goals relating to a combination of
revenue and adjusted EBITDA (as such terms are used and such amounts are reported in the Company’s financial
statements) for the entire company. The Compensation Committee determined these performance metrics were
appropriate since most executives have influence over revenue and adjusted EBITDA, which allows a balanced focus
on both revenue growth and profitability.
29
In 2019, the Compensation Committee set the threshold for payment at 85% of the revenue target and 80% of
the adjusted EBITDA target and the payout at a threshold of 50% of each individual's annual bonus target. For
example, no annual bonus related to the pre-determined financial goals would occur unless the Company achieved at
least 85% of the revenue target and 80% of the adjusted EBITDA target, and, assuming these thresholds were met, it
would result in a payout of 50% of the target annual bonus related to the pre-determined financial goals. The maximum
payout of 200% of the target bonus requires achievement of 120% of the revenue target and 130% of the adjusted
EBITDA target. The annual bonus was designed with such threshold, target and maximum payout goals in order to
create more financial incentive for management to achieve a performance range of target or higher.
In February 2020, management recommended payouts for bonuses with respect to the 2019 calendar year for
each of our named executive officers after taking into account a variety of factors including, but not limited to, the
following:
•
•
•
•
•
Tripadvisor’s actual revenue and adjusted EBITDA results for the year relative to Tripadvisor’s plan;
Tripadvisor’s performance against strategic initiatives;
the named executive officer’s target bonus opportunity, if any;
the named executive officer’s individual performance; and
the recommendations of the President and Chief Executive Officer (other than in connection with his own
compensation).
The table below describes, for each named executive officer, the target bonus for 2019, the actual bonus paid
and percentage of bonus paid relative to target.
Name
Stephen Kaufer
Ernst Teunissen
Seth Kalvert
Dermot M. Halpin
Equity Awards
Target Bonus as %
of Base Salary
100%
80%
80%
90%
$
$
$
$
Target Bonus
Bonus Award
825,000
392,000
372,000
432,000
$
$
$
$
424,545
335,003
317,911
384,307
Percentage of
Award to Target
51%
85%
85%
89%
The Compensation Committees use equity awards to align executive compensation with our long-term
performance. Equity awards link compensation to financial performance because their value depends on Tripadvisor’s
share price and/or stockholder return. Equity awards are also an important retention tool because they generally vest
over a multi-year period, subject to continued service by the award recipient. Equity awards are typically granted to
our named executive officers upon hire or promotion and annually thereafter. Management generally recommends
annual equity awards in the first quarter of each year when the Compensation Committees meet
to make
determinations regarding annual bonuses for the last completed fiscal year and to set compensation levels for the
current fiscal year. The practice of the Compensation Committees is to generally grant equity awards to our named
executive officers only in open trading windows.
Under the Company’s stock plans, the Compensation Committees may grant a variety of long-term incentive
vehicles. The following is a general description of the vehicles we used in 2019.
Stock Options. Stock options have an exercise price equal to the market price of Tripadvisor common stock on
the date of grant, and, therefore, provide value to our named executive officers only if our stock price increases. Stock
options generally vest over a period of four years. We believe stock options incentivize our named executive officers
to sustain increases in stockholder value over extended periods of time.
30
Service-Based Restricted Stock Units, or RSUs. RSUs are a promise to issue shares of our common stock in the
future provided that the named executive officer remains employed with us through the award’s vesting period. RSUs
generally vest over a period of four years. RSUs provide the opportunity for capital accumulation and long-term
incentive value and are intended to assist in satisfying our retention objectives.
Market-Based RSUs, or MSUs. Since 2018, the Company has granted executive officers restricted stock units
that are subject to market-based performance metrics. The MSU is a long-term incentive that is designed to further
align our executives’ interests with those of our stockholders.
It is settled in common stock after certification of
performance based upon the achievement of a market-based performance metric over a specified performance period.
Payout of these MSUs is tied to the Company’s total stockholder return, or TSR, over a three-year period relative to
the TSR of companies listed in the Nasdaq Composite Total Return Index. These awards have a payout opportunity
ranging from 0% to 200% of target shares of common stock, with 100% of the target number of shares earned when
Tripadvisor’s TSR is equal to that of the index. Payout is increased (or decreased) by 2% of the target shares for every
1% that Tripadvisor’s TSR exceeds (or trails) the index.
The Compensation Committees review various factors considered by management when they establish
Tripadvisor’s equity award grant pool including, but not limited to, the following:
•
•
•
•
•
Tripadvisor’s business and financial performance, including year-over-year performance;
dilution rates, taking into account projected headcount growth and employee turnover;
equity compensation utilization by peer companies;
general economic conditions; and
competitive compensation market data regarding award values.
For specific awards to our NEOs, management makes recommendations to the Section 16 Committee based on
a variety of factors including, but not limited to, the following:
•
•
•
•
•
•
•
Tripadvisor’s business and financial performance, including year-over-year performance;
individual performance and future potential of the executive;
the overall size of the equity award pool;
award value relative to other Tripadvisor employees;
the value of previous awards and amount of outstanding unvested equity awards;
competitive compensation market data, to the degree that the available data is comparable; and
the recommendations of the President and Chief Executive Officer (other than in connection with his own
compensation).
After review and consideration of the recommendations of management and the President and Chief Executive
Officer (other than with respect to awards for himself), the Section 16 Committee decides whether to grant equity
awards to our NEOs. After consideration of the factors discussed above, in February 2019 the Section 16 Committee
granted the equity awards described below to our NEOs other than Mr. Kaufer in connection with our annual equity
awards program.
Name
Ernst Teunissen
Seth Kalvert
Dermot M. Halpin
Grant Date Fair
Value(1)
$
$
$
2,774,953
2,108,964
2,220,000
Number of
Stock Options
28,001
21,281
22,401
Number of
RSUs
25,922
19,701
20,738
Number of
MSUs
12,961
9,850
10,369
(1)
The Grant Date Fair Value includes the incremental value, including dividend equivalents, in light of the special cash dividend
subsequently granted to the Company’s stockholders in 2019, as described in more detail below.
31
The RSUs and stock options described above vest in four equal annual installments, with the first vesting date
occurring on February 15, 2020. The stock options were granted with an exercise price equal to the closing price of
our common stock on the date of grant, which exercise price was subsequently adjusted due to the special cash
dividends subsequently granted to Tripadvisor’s stockholders, as described in more detail below. The MSUs vest
following completion of the performance period commencing January 1, 2019 through December 31, 2021, upon
certification by the Compensation Committee and based on the achievement of the applicable performance goals.
While we typically make annual equity grants for long-term incentive to our named executive officers in
February of each year, Mr. Kaufer has not historically received annual equity grants and, instead, received a significant
equity grant for long-term incentive compensation in November 2017. The Summary Compensation Table reflects
the equity grant made to Mr. Kaufer in November 2017 and reflects that no such equity grants were made to Mr.
Kaufer in 2019 and 2018. The Section 16 Committee has indicated that it does not currently contemplate that Mr.
Kaufer would be eligible for another equity grant for long-term incentive Compensation until 2022.
In addition, in 2019, after consultation with our compensation consultant and evaluation of the equity holdings
of executive officers of other companies in our peer group, the Section 16 Committee determined that both the current
and historic volatility of Tripadvisor’s common stock had substantially decreased the retentive value of Tripadvisor’s
long-term incentives and that Tripadvisor was at risk of losing key employees. As a result, the Section 16 Committee
determined it was appropriate to authorize a strategic grant to a limited number of senior leaders in order to ensure
their continued retention. In December 2019, the Section 16 Committee granted the equity awards described below to
Messrs. Teunissen and Kalvert, not in connection with our long-term incentive program, but as special grants.
Name
Ernst Teunissen
Seth Kalvert
Grant Date Fair
Value
$
$
2,549,990
2,049,972
Number of
RSUs
84,830
68,196
The grants were in the form of RSUs and vest in two equal annual installments, with the first vesting date
occurring on December 20, 2020.
In November 2019, the Company declared a special cash dividend on its shares of common stock. The terms
of the RSU award agreements provide that if the Company declares and pays dividends on its common stock, the
award holder will be credited with additional amounts for each RSU equal to the dividend that would have been paid
with respect to such RSU if it had been an actual share of common stock, which amount shall vest concurrently with
the vesting of the RSUs upon which such dividend equivalent amounts were paid. As a result, Tripadvisor issued
additional RSUs, MSUs and performance-based RSUs, or PSUs, to the holders of each such award as of the November
20, 2019 record date for the dividend, which additional securities vest concurrently with the corresponding award.
Tripadvisor’s 2018 Plan provides that in the event of a stock dividend, stock split, reverse stock split, stock rights
offering, reorganization, extraordinary dividends of cash or other property, the Compensation Committee or the Board
shall make such substitutions or adjustments as it deems appropriate and equitable to the exercise price of outstanding
options. Therefore, as a result of the Company’s aforementioned 2019 special cash dividend, the Compensation
Committee made adjustments to the exercise price of all issued and outstanding stock options, whether vested or
unvested, by reducing the exercise price in an amount equal to the cash dividend, or $3.50 per share. The number of
RSUs, MSUs and PSUs and the exercise price of the stock options set forth in the Proxy Statement reflect the adjusted
amounts (and exercise prices) after the Company took the foregoing actions.
Employee Benefits
In addition to the primary elements of compensation described above, our named executive officers also
participate in employee benefits programs available to our employees generally, including the Tripadvisor Retirement
Savings Plan, a tax-qualified 401(k) plan. Under this plan, Tripadvisor matches 50% of each dollar contributed by a
participant, up to the first 6% of eligible compensation, subject to tax limits. Prior to his relocation from the United
Kingdom to the United States, Mr. Halpin participated in our UK pension scheme, pursuant to which we match 100%
of participant contributions, up to the first 5% of eligible compensation. Following his relocation to the United States
in 2016, Mr. Halpin began participating in the Tripadvisor Retirement Savings Plan.
32
In addition, we provide other benefits to our named executive officers on the same basis as all of our domestic
employees generally. These benefits include group health (medical, dental, and vision) insurance, group disability
insurance, and group life insurance. Tripadvisor also sponsors a Global Personal Travel Reimbursement program
generally available to all employees, including our named executive officers, that provides for reimbursement of up
In addition, Tripadvisor sponsors a “wellness benefit” generally
to $750 per year for qualifying leisure travel.
available to all employees, including our named executive officers, that provides for reimbursement of up to $600 per
year for qualifying health-related expenses.
In situations where a named executive officer is required to relocate, Tripadvisor provides relocation benefits,
including reimbursement of moving expenses, temporary housing and other relocation expenses as well as a tax gross-
up payment on the relocation benefits.
In 2015, Mr. Halpin relocated from the United Kingdom to our corporate
headquarters in Needham, Massachusetts and received certain relocation support. In connection with Mr. Halpin’s
relocation to the United States, the Company and Mr. Halpin entered into a new employment arrangement providing
for, among other things, reimbursement of Mr. Halpin for fees and expenses associated with the preparation of his tax
returns and a personal travel allowance of $20,000 per year as well as a tax gross-up payment on his personal travel
benefits. The Company previously disclosed these benefits in the Summary Compensation Table and Mr. Halpin no
longer receives such relocation benefits.
Compensation-Related Policies
Executive Compensation Recovery, or “Clawback”, Provisions
Tripadvisor has an executive compensation recovery, or clawback, provision in our form of award agreements
providing for recoupment of equity compensation. Each of Tripadvisor’s equity award documents provide that, under
certain circumstances, the employee agrees that certain equity securities issued to such employee (whether or not
vested) may be forfeited and cancelled in their entirety upon such termination of employment. In such event,
Tripadvisor may cause the employee to either (i) return the equity securities or shares of common stock issued upon
exercise or vesting of such securities, or (ii) pay to Tripadvisor an amount equal to the aggregate amount, if any, that
the employee had previously realized in respect of any and all shares of common stock acquired upon exercise or
vesting of such equity awards.
We intend to adopt a general clawback policy covering our annual and long-term incentive award plans and
arrangements or amend our existing documents once the SEC adopts final rules implementing the requirement of
Section 954 of the Dodd-Frank Act.
Insider Trading and Hedging Policy
Tripadvisor has adopted an Insider Trading Policy covering our directors, officers, employees and consultants
that is designed to ensure compliance with relevant SEC regulations, including insider trading rules. Tripadvisor’s
Insider Trading Policy also prohibits directors, officers, employees and consultants from engaging in various types of
transactions in which they may profit from short-term speculative swings in the value of Tripadvisor securities. These
transactions include “short sales” (or selling borrowed securities which the sellers hopes can be purchased at a lower
price in the future), “put” and “call” options (or publicly available rights to sell or buy securities within a certain period
of time at a specified price or the like) and hedging transactions, such as zero-cost collars and forward sale contracts.
The policy also prohibits the pledge or use of company securities as collateral in a margin account or collateral for a
loan.
Stock Ownership Guidelines
In October 2015, the Board adopted guidelines which require that our named executive officers and members
of our Board own shares of our common stock to further align their interests with those of our stockholders. These
guidelines were reviewed in January 2019, after which revised guidelines were approved. These guidelines require
that our named executive officers and directors must directly hold securities having market or intrinsic value which is
equal to or greater than a specified multiple of his or her base salary or cash retainer, as set forth below:
•
For our President and Chief Executive Officer, six times his annual base salary;
33
•
•
For all other named executive officers, three times his or her annual base salary; and
For each non-employee director, three times his or her annual cash retainer.
For purpose of these calculations, 100% of shares of common stock and 50% of vested “in-the-money” stock
options are counted. Individuals subject to these guidelines are required to achieve the relevant ownership threshold
on or before the later of January 30, 2024, or five years after commencing service as a named executive officer or
director.
These stock ownership guidelines were established after consideration of the Compensation Committees’ review
of market practices of other companies in the Company’s peer group with respect to stock ownership guidelines and
in an effort to enhance risk mitigation and to more closely align the interests of the Company’s executive officers and
Board members with those of the Company’s stockholders.
Code of Business Conduct and Ethics
In April 2018, our Board adopted an amended and restated Code of Business Conduct and Ethics applicable to
all of our directors, officers, employees, consultants and independent contractors. A copy of the Code of Business
Conduct and Ethics is posted on our website at http://ir.Tripadvisor.com/corporate-governance.
Role of Competitive Compensation Market Data
Management considers multiple data sources when reviewing compensation information to ensure that the data
reflects compensation practices of relevant companies in terms of size, industry and geographic location. Among other
factors, management considers the following information in connection with its recommendations to the
Compensation Committees regarding compensation for our named executive officers:
• Data from salary and equity compensation surveys that include companies of a similar size, based on market
capitalization, revenues and other factors; and
• Data regarding compensation for certain executive officer positions from recent proxy statements and other
SEC filings of peer companies, which include: (i) direct industry competitors, and (ii) non-industry
companies with which Tripadvisor commonly competes for talent (including both regional and national
competitors).
The Compensation Committees retained Compensia to periodically review the compensation peer group and to
recommend possible changes. Our business model is specialized in that we use our innovative technology systems
and software to attract users and then facilitate transactions between our business partners and those users.
Accordingly, Compensia identified comparable companies focusing on publicly-traded companies in the business to
consumer (“B2C”) and software industries.
In October 2018, based on input from Compensia, the Compensation Committees approved the peer group for
purposes of reviewing and considering our executive officers’ 2019 base salaries, 2019 annual bonus targets, and 2019
annual equity awards.
In October 2019, based on input from Compensia, the Compensation Committees approved the peer group for
purposes of reviewing and considering our executive officers’ 2020 base salaries, 2020 annual bonus targets, and 2020
equity awards. The newly-approved peer group differed from the prior peer group in that we eliminated four
companies (Shutterfly, Inc., Wayfair, Inc., Splunk, Inc. and VeriSign, Inc.) and added six companies (ANGI
Homeservices, Inc., Booking Holdings, Inc., CarGurus, Inc., Cimpress N.V., Etsy, Inc. and Stitch Fix, Inc.) in order
to more closely position Tripadvisor near the 50th percentile of its peer group in terms of revenues and market
capitalization.
34
The following is a list of the companies currently constituting our peer group:
Software Companies
Akamai Technologies, Inc.
ANSYS, Inc.
Citrix Systems, Inc.
B2C Internet Companies
ANGI Homeservices, Inc.
Booking Holdings, Inc.
CarGurus, Inc.
Cimpress plc
Etsy Inc.
Expedia, Inc.
Groupon, Inc.
GrubHub Inc.
IAC/InterActiveCorp.
Match Group
Stitch Fix, Inc.
Twitter, Inc.
Yelp, Inc.
Zillow Group
Zynga Inc.
When available, management and the Compensation Committees consider competitive market compensation
paid by peer group companies but do not attempt to maintain a certain target percentile within the compensation peer
group or otherwise rely solely on such data when making recommendations to the Compensation Committees
regarding compensation for our named executive officers. Management and the Compensation Committees strive to
incorporate flexibility into our executive compensation program and the assessment process to respond to and adjust
for the evolving business environment and the value delivered by our named executive officers.
Post-Employment Compensation
The Company has entered into employment agreements with each of Messrs. Kaufer, Kalvert and Teunissen
and an offer letter with Mr. Halpin. Pursuant to these agreements, each of our named executive officers is eligible to
receive certain severance payments and benefits in the event of a qualifying termination of employment. The material
terms of these employment agreements are described below under the heading “Potential Payments Upon Termination
or Change in Control.”
We believe that a strong, experienced management team is essential and in the best interests of our company
and our stockholders. In addition, we recognize that the possibility of a change in control could arise and that such an
event could result in the departure of our senior leaders to the detriment of the company and our stockholders. As a
result, in 2017 we adopted a severance plan applicable to certain senior leaders (the “Severance Plan”). The Severance
Plan formalizes and standardizes our severance practices for certain of our senior leaders. Adoption of the Severance
Plan was approved by the Compensation Committees. The Severance Plan applies to all named executive officers,
including Mr. Kaufer, as well as certain other senior leaders. While the benefits are generally consistent with the
severance benefits provided for in individual employment agreements, there are some differences. The Severance
Plan includes a provision that in the event of any conflict or inconsistency between the terms of any employment
agreement and the Severance Plan, the terms more beneficial to the executive shall prevail. For a description and
quantification of change in control payments and benefits for our named executive officers, please see the section
below entitled “Potential Payments Upon Termination or Change in Control.”
Our Amended and Restated 2011 Stock and Annual Incentive Plan (the “2011 Plan”) provided that equity
awards granted to certain named executive officers would be entitled to accelerated vesting of certain of their
outstanding and unvested equity awards in the event of a Change in Control of Tripadvisor (i.e. a “single trigger”
acceleration provision). In August 2013, after further evaluation of the “single trigger” acceleration provisions, the
Compensation Committees determined that future equity awards made under the 2011 Plan would not be entitled to
“single trigger” acceleration and, instead, the award agreements with respect to such equity awards would generally
provide that any acceleration of vesting of the equity awards would be subject to “double trigger” rather than “single
trigger” acceleration. This means that accelerated vesting of outstanding and unvested equity awards granted on or
after August 28, 2013, would generally only occur upon both a qualified termination of employment following a
Change in Control (and not solely upon a Change in Control).
35
The 2018 Stock and Annual Incentive Plan (the “2018 Plan”) provides only for “double trigger” acceleration
(i.e., acceleration upon termination by the Company other than for Cause or disability or resignation for Good Reason,
in each case within three months prior to and 12 months following a change in control). The 2018 Plan also provides
for acceleration of all equity awards upon the death of a participant.
Tax Considerations
Section 162(m) of the Code generally precludes a tax deduction by any publicly-held company for compensation
paid to any “covered employee” to the extent the compensation paid to such covered employee exceeds $1 million
during any taxable year of the company. The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) included changes
to Section 162(m) effective for years after 2017. Prior to 2018, “covered employees” included the Chief Executive
Officer of the company and the three other highest paid officers of the company (other than the Chief Financial Officer).
For 2018 and later years, “covered employees” will include the Chief Executive Officer of the company, the Chief
Financial Officer of the company, the three highest paid officers of the company (other than the Chief Executive
Officer and the Chief Financial Officer) and any employee who qualified as a “covered employee” either in 2017
(applying the pre-2018 definition) or for any tax year beginning in or after 2018 (applying the definition in the 2017
Tax Act). For years beginning prior to January 1, 2018, the $1 million deduction limit did not apply to “qualified
performance-based compensation” that was based on the attainment of pre-established, objective performance goals
established under a stockholder-approved plan. Effective for the years beginning on or after January 1, 2018, there is
no exception for “qualified performance-based compensation”; but a transition rule provides that the “qualified
performance-based compensation” exemption will continue to apply to grandfathered arrangements made pursuant to
a binding contract in effect on or before November 2, 2017 that is not materially modified thereafter. We believe that
it is important to preserve flexibility in administering compensation programs to promote various corporate goals.
Accordingly, we have not adopted a policy that all compensation must qualify as deductible under Section 162(m)
(although we have identified the compensation that is grandfathered under the transition rule, so as to protect against
material modifications where possible). Amounts paid under our compensation programs may not be deductible as
the result of Section 162(m). While our policy is generally been to preserve corporate tax deductions by qualifying
compensation over $1 million paid to executive officers as performance-based, the Compensation Committees have,
from time to time, concluded that compensation arrangements are in our best interests and the best interests of our
stockholders despite the fact that such arrangements might not, in whole or part, qualify for tax deductibility. Going
forward, we intend to continue to design our executive compensation arrangements to be consistent with our best
interests and those of our stockholders; accordingly, the Compensation Committees, while considering the tax
deductibility as a factor in determining executive compensation, may not limit such compensation to those levels that
will be deductible, particularly in light of the elimination of the expansion of the covered employee group and the
elimination of the exception for performance-based compensation.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Maffei and Hoag and Ms. Morgan and the Section 16
Committee consists of Mr. Hoag and Ms. Morgan. None of Messrs. Maffei and Hoag or Ms. Morgan was an officer
or employee of Tripadvisor, formerly an officer of Tripadvisor, or an executive officer of an entity for which an
executive officer of Tripadvisor served as a member of the compensation committee or as a director during the one-
year period ended December 31, 2019.
During the last fiscal year, none of our executive officers served as: (1) a member of the compensation
committee (or other committee of the board of directors performing equivalent functions or, in the absence of any
such committee, the entire board of directors) of another entity, one of whose executive officers served on our
Compensation Committee; (2) a director of another entity, one of whose executive officers served on our
Compensation Committee; or (3) a member of the compensation committee (or other committee of the board of
directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of
another entity, one of whose executive officers served on our Board.
36
Compensation Committees Report
This report is provided by the Compensation Committee and the Section 16 Committee, or the Compensation
Committees, of the Board. The Compensation Committees have reviewed the Compensation Discussion and Analysis
and discussed that analysis with management. Based on this review and discussions with management, the
Compensation Committees recommended to the Board that the Compensation Discussion and Analysis be included
in Tripadvisor’s 2020 Proxy Statement.
No portion of this Compensation Committees Report shall be deemed to be incorporated by reference into any
filing under the Securities Act or the Exchange Act, through any general statement incorporating by reference in its
entirety the Proxy Statement in which this report appears, except to the extent that Tripadvisor specifically incorporates
this report or a portion of it by reference. In addition, this report shall not be deemed to be “soliciting material” or
“filed” under either the Securities Act or the Exchange Act.
Members of the Compensation Committee:
Members of the Section 16 Committee:
Jay C. Hoag (Chairperson)
Gregory B. Maffei
Betsy L. Morgan
Jay C. Hoag (Chairperson)
Betsy L. Morgan
37
Overview
CEO PAY RATIO
The SEC adopted rules requiring annual disclosure of the ratio of the annual total compensation of a company’s
principal executive officer to such company’s median employee’s total annual compensation, excluding the principal
executive officer for purposes of this calculation. The purpose of this disclosure is to provide a measure of the
equitability of pay within the organization.
The 2019 annual total compensation of our median employee, excluding Mr. Kaufer, our President and CEO,
was $93,750. The 2019 annual total compensation of our President and CEO, as reported in our Summary
Compensation Table, was $1,260,637. The ratio of the annual total compensation of our President and CEO to that of
our median employee was 13 to 1. We believe this pay ratio is a reasonable estimate calculated in a manner consistent
with SEC rules.
Please note the following information to provide important context related to our employee population and to
describe the methodology and the material assumptions, adjustments, and estimates that we used to calculate this ratio.
•
Tripadvisor is a global company, with complex operations worldwide and many of our employees are
located outside of the United States. As of December 31, 2019, our workforce consisted of 3,889 full-time
and part-time employees, including hourly employees but not including an additional 305 employees of
companies which we had acquired in late 2019 and subject to transition services agreements. A little less
than half of these employees are located in the United States, with the remaining employees located in
Europe and throughout the rest of the world.
• We selected December 31, 2019, as the date upon which we would identify the “median employee,” because
it enabled us to make such identification in a reasonably efficient and economical manner.
• We included all of our full-time, part-time, and temporary employees globally, but excluded our President
and CEO. We annualized the compensation of approximately 1,131 full-time and part-time employees who
were hired in 2019 but did not work for us for the entire fiscal year. Earnings of our employees outside the
U.S. were converted to U.S. dollars using the currency exchange rates used for organizational planning
purposes, which consider historic and forecasted rates as well as other factors. We did not make any cost
of living adjustments.
•
The consistently applied compensation of measure used to identify our median employee was annualized
base salary, short-term bonus at target and annual long-term equity incentive at target.
• We identified employees within $400 of the median 2019 annual total compensation and removed those
employees who had anomalous compensation characteristics.
Because the SEC rules for identifying the median employee and calculating the pay ratio based on that
employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain
exclusions, and to make reasonable estimates and assumptions that reflect
their employee populations and
compensation practices, the pay ratio reported by other companies may not be comparable to our pay ratio, as other
companies have offices in different countries, have different employee populations and compensation practices and
may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios.
38
Summary Compensation
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the compensation earned by each of our named
executive officers for services rendered in 2019, 2018 and 2017.
Name and Principal Position
Stephen Kaufer
President and Chief Executive Officer
Bonus
($) (1)
Stock
Awards
($)(2)
Option
Awards
($)(2)(3)
—
—
—
—
—
28,578,210
—
—
18,292,152
Non-Equity
Incentive Plan
Compensation
($)(4)
424,545
1,163,360
350,000
All Other
Compensation
($)(5)
1,210,941
13,250
13,100
Total
($)
2,455,678
1,972,764
47,933,462
Year Salary ($)
820,192
2019
796,154
2018
700,000
2017
Ernst Teunissen
Senior Vice President, Chief Financial Officer,
and Treasurer
2019
2018
2017
486,154
464,207
437,014
—
—
—
4,699,961
2,141,356
4,499,973
624,982
624,994
2,498,960
Seth J. Kalvert
Senior Vice President, General Counsel
and Secretary
2019
2018
2017
462,116
448,053
437,014
—
—
—
3,683,944
1,627,393
2,124,960
474,992
474,994
2,124,150
335,003
546,779
286,670
317,911
460,512
254,619
175,592
8,850
8,100
6,321,692
3,786,186
7,730,717
207,186
14,600
13,100
5,146,149
3,025,552
4,953,843
Dermot M. Halpin
President, Experiences and Rentals
2019
2018
2017
476,154
454,231
421,092
—
—
—
1,720,010
1,713,013
6,299,893
499,990
499,988
1,699,359
384,307
502,844
600,000
98,078
68,174
59,321
3,178,539
3,238,250
9,079,665
(1)
(2)
(3)
(4)
(5)
The amounts for annual bonus awards paid to the NEOs pursuant to the Company’s incentive plan are reflected in the “Non-Equity Incentive
Plan Compensation Column.”
The amounts reported represent the aggregate grant date fair value of awards granted in the year indicated, calculated in accordance with
FASB ASC Topic 718. We have disclosed the assumptions made in the valuation of the awards in “Note 6 - Stock Based Awards and Other
Equity Instruments” in the notes to our consolidated financial statements in our 2019 Annual Report. For MSUs granted, the value reported
reflects the estimated grant-date fair value of the awards based upon a Monte-Carlo simulation model, which simulated the present value of
the potential outcomes of future stock prices and TSR of the Company as measured against the Nasdaq Composite Total Return Index over
the performance period. The value of Mr. Teunissen’s 2019 and 2018 MSUs at the grant date, assuming the highest level of the performance
conditions was achieved, is $1,493,626 and $1,782,713, respectively. The value of Mr. Kalvert’s 2019 and 2018 MSUs at the grant date,
assuming the highest level of the performance conditions was achieved, is $1,135,114 and $1,354,795, respectively. The value of Mr.
Halpin’s 2019 and 2018 MSUs at the grant date, assuming the highest level of the performance conditions was achieved, is $1,194,924 and
$1,426,075, respectively. The value of Mr. Kaufer’s 2017 MSUs at the grant date, assuming the highest level of the performance conditions
was achieved, is $17,239,688. For Mr. Kaufer, the 2017 amounts represent the value of the awards granted in November 2017 and include
the modification expense described below. The 2017 awards granted were a combination of service-based restricted stock units, service-
based stock options and performance-based restricted stock units. For Messrs. Teunissen, Kalvert and Halpin, the 2017 amounts for stock
awards and option awards include the value of engagement grants granted to the NEOs in February 2017 and a promotion grant to Mr.
Halpin in May 2017.
On June 5, 2017, the Section 16 Committee approved a modification to the option award granted on August 28, 2013 to Mr. Kaufer. The
modification provides that the option will expire on the tenth anniversary, instead of the seventh anniversary, of the grant date. As a result
of the modification, incremental fair value of $4,772,880 was recognized to stock-based compensation expense over the remaining vesting
term, or through August 2018, for GAAP purposes and is reflected in stock awards for 2017.
For a description of the annual cash bonus program, please see “Annual Bonuses” in Compensation, Discussion and Analysis.
Refer to the “2019 All Other Compensation” table below for information regarding the 2019 amounts reported.
39
2019 All Other Compensation
Name
Stephen Kaufer
Ernst Teunissen
Seth J. Kalvert
Dermot M. Halpin
Dividend
Equivalents
($)(a)
1,195,041
165,842
193,186
84,678
Matching
Charitable
Donation
($)(b)
7,500
500
5,000
5,000
Employer
Retirement
Contributions
($)(c)
8,400
8,400
8,400
8,400
Other ($)
—
850
600
—
Total ($)
1,210,941
175,592
207,186
98,078
(a)
(b)
(c)
Represents the incremental value to stock options held by the NEOs resulting from adjustments to the exercise price of such stock options
due to the special cash dividend declared in November 2019.
In lieu of an anti-dilution provision within the Company’s stock option
agreements, the Compensation Committee made an adjustment to the exercise price of all issued and outstanding stock options, whether
vested or unvested, by reducing the exercise price in an amount equal to the cash dividend, or $3.50 per share. These incremental amounts
were not factored into the grant date fair value of the options granted to the NEOs.
Represents matching charitable contributions made by the Company on behalf of the named executive officers.
Represents matching contributions under the Tripadvisor Retirement Savings Plan as in effect through December 31, 2019, pursuant to
which Tripadvisor matches $0.50 for each dollar a participant contributes, up to the first 6% of eligible compensation, subject to certain
limits.
40
Grants of Plan-Based Awards
While we typically make annual equity grants for long-term incentive compensation to our executive officers
in February of each year, Mr. Kaufer has not historically received annual equity grants and, instead, received a
significant equity grant for long-term incentive compensation in November 2017. In light of this grant, the Section
16 Committee did not grant to Mr. Kaufer any plan-based awards in 2018 and has indicated that it does not currently
contemplate that Mr. Kaufer would be eligible for another equity grant for long-term incentive compensation until
2022.
The table below provides information regarding the plan-based awards granted in 2019 to our NEOs under our
2018 Plan.
Name
Stephen Kaufer
Grant
Date
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards($)
Threshold
Target Maximum
All Other
Stock
Awards:
Number
of
Shares of
Stock or
Units(1)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
Exercise
Price or
Base Price
of Option
Awards
($/Share)(1)
Grant Date
Fair Value of
Stock and
Option
Awards
($)(2)
Annual Bonus
2/27/2019
412,500
825,000
1,650,000
—
—
—
—
Ernst Teunissen
Stock Options (3)
RSUs (3)
MSUs (3)(4)
Annual Bonus
RSUs (3)
Seth J. Kalvert
Stock Options (3)
RSUs (3)
MSUs (3)(4)
Annual Bonus
RSUs (3)
Dermot M. Halpin
Stock Options (3)
RSUs (3)
MSUs (3)(4)
Annual Bonus
2/27/2019
2/27/2019
2/27/2019
2/27/2019
12/20/2019
2/27/2019
2/27/2019
2/27/2019
2/27/2019
12/20/2019
2/27/2019
2/27/2019
2/27/2019
2/27/2019
—
—
—
196,000
—
—
—
—
186,000
—
—
—
—
392,000
—
—
—
—
372,000
—
—
—
—
216,000
—
—
—
432,000
—
—
—
784,000
—
—
—
—
744,000
—
—
—
—
864,000
—
25,922
12,961
—
84,830
—
19,701
9,850
—
68,196
—
20,738
10,369
—
28,001
—
—
—
—
21,281
—
—
—
—
22,401
—
—
—
50.63
—
—
—
—
50.63
—
—
—
—
50.63
—
—
—
624,982
1,403,158
746,813
—
2,549,990
474,992
1,066,415
567,557
—
2,049,972
499,990
1,122,548
597,462
—
(1)
(2)
(3)
(4)
The number of stock awards and exercise price of options reported have been adjusted to reflect a reduction to the exercise price of all
issued and outstanding stock options, whether vested or unvested, due to the special cash dividend declared in November 2019, as described
in more detail above.
The amounts reported represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 and may not
correspond to the actual value that will be realized by the executive. See footnote (2) in the Summary Compensation Table above for more
information regarding the determination of the grant date fair value of these awards, including the value of MSUs assuming achievement at
target performance.
For a description of the vesting terms of these awards, please see “Outstanding Equity Awards at Fiscal Year-End” below.
The number of shares of stock or units reported represents the target number of units to be issued. Depending on the Company’s performance,
executives may receive no awards or up to 200% of the target amount reflected.
41
Outstanding Equity Awards at Fiscal Year-End
The following table provides information regarding the holdings of stock options and RSUs by our named
executive officers as of December 31, 2019. The market value of the RSUs is based on the closing price of Tripadvisor
common stock on Nasdaq on December 31, 2019, the last trading day of the year, which was $30.38 per share.
Option Awards
Stock Awards
Name
Stephen Kaufer
Ernst Teunissen
Seth J. Kalvert
Dermot M. Halpin
Grant
Date
5/4/2012
8/28/2013
2/22/2016 (1)
2/27/2017
11/28/2017 (2)
11/28/2017 (2)
11/28/2017 (3)
11/28/2017 (4)
12/1/2015
2/22/2016 (1)
2/27/2017 (1)
2/27/2017 (5)
2/27/2017 (5)
2/22/2018 (1)
2/22/2018 (1)
2/22/2018 (6)
2/27/2019 (1)
2/27/2019 (1)
2/27/2019 (7)
12/20/2019 (8)
5/4/2012
2/28/2013
2/21/2014
2/26/2015
2/22/2016 (1)
2/22/2016 (1)
2/27/2017 (1)
2/27/2017 (1)
2/27/2017 (5)
2/27/2017 (5)
2/22/2018 (1)
2/22/2018 (1)
2/22/2018 (6)
2/27/2019 (1)
2/27/2019 (1)
2/27/2019 (7)
12/20/2019 (8)
2/21/2014
2/26/2015
2/22/2016 (1)
2/22/2016 (1)
2/27/2017 (1)
2/27/2017 (1)
2/27/2017 (5)
2/27/2017 (5)
2/22/2018 (1)
2/22/2018 (1)
2/22/2018 (6)
2/27/2019 (1)
2/27/2019 (1)
2/27/2019 (7)
Number of
Securities
Underlying
Unexercised
Options
Exercisable
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
Option
Exercise
Price
($)(9)
250,000
1,100,000
4,317
13,759
—
—
—
—
141,424
—
—
72,114
—
8,852
—
—
—
—
—
—
34,347
50,473
24,526
22,601
26,213
—
21,888
—
39,662
—
6,728
—
—
—
—
—
—
7,973
10,594
38,549
—
—
—
6,490
—
—
—
—
—
—
—
—
—
1,439
—
780,000
—
—
—
—
—
—
72,113
—
26,556
—
—
28,001
—
—
—
—
—
—
—
8,737
—
21,888
—
39,662
—
20,182
—
—
21,281
—
—
—
—
—
12,849
—
36,480
—
12,980
—
21,244
—
—
22,401
—
—
36.70
69.02
59.61
39.31
31.21
—
—
—
79.43
—
—
39.31
—
38.15
—
—
50.63
—
—
—
36.70
42.04
93.42
86.36
59.61
—
39.31
—
39.31
—
38.15
—
—
50.63
—
—
—
93.42
86.36
59.61
—
39.31
—
39.31
—
38.15
—
—
50.63
—
—
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have
Not Vested(9)
Equity
Incentive Plan
Awards:
Market or
Payout
Value of
Unearned
Shares, Units or
Other Rights
That Have
Not Vested
($)(10)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
—
—
—
—
—
—
—
—
—
—
—
—
—
239,112
179,334
—
135,069
796,594
—
995,765
—
767,642
—
—
787,510
—
2,577,135
—
—
—
—
—
114,806
—
298,696
—
547,630
—
583,387
—
—
598,516
—
2,071,794
—
—
—
168,822
—
497,837
—
418,181
—
614,071
—
—
630,020
—
—
—
—
—
—
—
—
16,845
—
—
12,961
—
—
—
—
—
—
—
—
—
—
—
—
—
12,802
—
—
9,850
—
—
—
—
—
—
—
—
—
—
—
13,475
—
—
10,369
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
511,751
—
—
393,755
—
—
—
—
—
—
—
—
—
—
—
—
—
388,925
—
—
299,243
—
—
—
—
—
—
—
—
—
—
—
409,371
—
—
315,010
Number of
Shares or
Units of
Stock That
Have Not
Vested(9)
—
—
—
—
—
478,224
—
—
—
4,446
26,221
—
32,777
—
25,268
—
—
25,922
—
84,830
—
—
—
—
—
3,779
—
9,832
—
18,026
—
19,203
—
—
19,701
—
68,196
—
—
—
5,557
—
16,387
—
13,765
—
20,213
—
—
20,738
—
Option
Expiration
Date
5/4/2022
8/28/2023
2/22/2026
2/27/2027
11/28/2027
—
—
—
12/1/2025
—
—
2/27/2027
—
2/22/2028
—
—
2/27/2029
—
—
—
5/4/2022
2/28/2023
2/21/2024
2/26/2025
2/22/2026
—
2/27/2027
—
2/27/2027
—
2/22/2028
—
—
2/27/2029
—
—
—
2/21/2024
2/26/2025
2/22/2026
—
2/27/2027
—
2/27/2027
—
2/22/2028
—
—
2/27/2029
—
—
(1)
Vests in four equal annual installments commencing on February 15th of the first year following the date of grant.
42
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Vests in two equal installments on each of August 1, 2021 and August 1, 2022.
Represents the target number of shares to be issued assuming that, for the period from January 1, 2018 through December 31, 2020, the
Company’s total stockholder return, or TSR, is 110% of the TSR of the Nasdaq Composite Total Return. Award vests December 31, 2020
and will settle shortly following certification of achievement of the performance criteria. Depending on the Company’s performance, the
executive may receive no awards, the target amount reflected above or up to 200% of the target amount reflected.
Represents the target number of shares to be issued assuming target achievement of financial and strategic performance metrics for 2018,
2019, 2020 and 2021. One quarter of the award to vest on December 31st of the relevant year of performance and settle shortly following
certification of achievement of the performance criteria for the year.
Vests in four equal installments on June 15th in each of the four years following the date of grant.
Represents the target number of shares to be issued assuming that, for the period from January 1, 2018 through December 31, 2020, the
Company’s total stockholder return, or TSR, is 100% of the TSR of the Nasdaq Composite Total Return. Award vests December 31, 2020
and will settle shortly following certification of achievement of the performance criteria. Depending on the Company’s performance, the
executive may receive no awards, the target amount reflected above or up to 200% of the target amount reflected.
Represents the target number of shares to be issued assuming that, for the period from January 1, 2019 through December 31, 2021, the
Company’s total stockholder return, or TSR, is 100% of the TSR of the Nasdaq Composite Total Return. Award vests December 31, 2020
and will settle shortly following certification of achievement of the performance criteria. Depending on the Company’s performance, the
executive may receive no awards, the target amount reflected above or up to 200% of the target amount reflected.
Vests in two equal installments on each of December 20, 2020 and December 20, 2021.
The stock option exercise price and number of stock awards reported have been adjusted to reflect dividend equivalents awarded to the
executives due to the special cash dividend the Company declared in November 2019, as described in more detail above.
(10)
The amounts reported in this column represent the market value of shares or units of stock that have not vested calculated by multiplying
the number of stock awards that have not vested by $30.38, the closing price of the Company’s common stock on The Nasdaq Stock Market
as of December 31, 2019, the last trading day in 2019.
Option Exercises and Stock Vested
The following table sets forth all stock option awards exercised and the taxable income realized upon exercise
and all other stock awards vested and the taxable income realized upon vesting by the named executive officers during
2019.
Name
Stephen Kaufer
Ernst Teunissen
Seth Kalvert
Dermot Halpin
Option Awards
Stock Awards
Exercise or
Vest Date
Number of
Shares
Acquired on
Exercise (1)
Value
Realized
on
Exercise
($)(2)
Number of Shares
Acquired on Vesting
(3)
Value Realized
on Vesting
($)(4)
2/05/2019
2/15/2019
2/15/2019
2/15/2019
6/14/2019
2/15/2019
2/15/2019
2/15/2019
2/15/2019
6/14/2019
2/15/2019
2/15/2019
2/15/2019
2/15/2019
2/22/2019
2/22/2019
6/14/2019
12/31/2019
—
—
—
—
—
—
—
—
—
—
—
—
—
—
18,240
7,082
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
226,541
96,032
—
—
60,582
3,961
11,680
7,503
14,599
2,225
3,367
4,380
5,703
8,030
6,003
1,043
4,951
7,300
—
—
6,132
31,907
3,631,891
228,787
674,637
433,373
675,642
128,516
194,478
252,989
329,405
371,628
346,733
60,244
285,970
421,648
—
—
283,789
957,848
(1)
The amounts reported in this column represent the gross number of shares acquired upon exercise of vested options without taking into
account any shares that may have been withheld to cover option exercise price or applicable tax obligations.
43
(2)
(3)
(4)
The amounts reported in this column represent the taxable income recognized upon exercise of vested stock options calculated by
multiplying (i) the number of shares of Tripadvisor’s common stock acquired upon exercise by (ii) the difference between the market price
of Tripadvisor’s common stock at exercise and the exercise price of the options.
The amounts reported in this column represent the gross number of shares acquired upon the vesting of RSUs without taking into account
any shares that may have been withheld to satisfy applicable tax obligations.
The amounts reported in this column represent the taxable income recognized upon the vesting of RSUs calculated by multiplying the gross
number of RSUs vested by the closing price of Tripadvisor common stock on The Nasdaq Stock Market on the vesting date or, if the vesting
occurred on a day on which The Nasdaq Stock Market was closed for trading, the next trading day.
Non-Qualified Deferred Compensation
We do not currently have any other defined contribution or other plan that provides for deferred compensation
on a basis that is not tax-qualified for our employees.
Potential Payments Upon Termination or Change in Control
We have entered into employment agreements with each of Messrs. Kaufer, Kalvert and Teunissen and an offer
letter with Mr. Halpin. Pursuant to these agreements, each of our named executive officers is eligible to receive certain
severance payments and benefits in the event of a qualifying termination of employment. The material terms of these
employment agreements are described below.
We believe that a strong, experienced management team is essential and in the best interests of our company
and our stockholders. In addition, we recognize that the possibility of a change in control could arise and that such an
event could result in the departure of our senior leaders to the detriment of the company and our stockholders. As a
result, we adopted the Severance Plan applicable to certain senior leaders. The plan formalizes and standardizes our
severance practices for our most senior leaders. Adoption of the Severance Plan was approved by the Compensation
Committees. The Severance Plan applies to all named executive officers, including Mr. Kaufer. While the benefits
are generally consistent with the severance benefits provided for in individual employment agreements, there are some
differences. In addition, the Severance Plan includes a provision that in the event of any conflict or inconsistency
between the terms of any employment agreement and the Severance Plan, the terms more beneficial to the officer shall
prevail.
Change of Control Provisions
Both the 2018 Plan and 2011 Plan provide that, unless otherwise specified in the applicable award agreement,
upon a participant’s termination of employment by the Company during the two-year period following a Change in
Control other than for “Cause” or “Disability,” or by the participant for “Good Reason,” as each term is defined in the
plans, during such period, stock options and stock appreciation rights held by such participant will automatically
become fully exercisable and will remain exercisable until the later of (i) the last day on which such option or stock
appreciation right is exercisable as specified in the applicable award agreement or (ii) the earlier of the first anniversary
of the change in control and the expiration of the term of the option or stock appreciation right, and the restrictions
and conditions on all other awards will automatically be deemed waived.
Stephen Kaufer Employment Agreement
In March 2014, Tripadvisor, LLC entered into an employment agreement with Mr. Kaufer, with an original term
of five years. This agreement was amended effective November 28, 2017 to, among other things, extend the term to
March 31, 2023.
Pursuant to the employment agreement, in the event that Mr. Kaufer’s employment terminates by reason of his
death or disability, then:
•
Tripadvisor will pay Mr. Kaufer (or his estate) his base salary through the end of the month in which the
termination occurs;
44
• Any outstanding unvested equity awards that vest less frequently than annually shall be treated as though
such awards vested annually; and
• Any unvested stock options held by Mr. Kaufer at the time of termination shall remain exercisable through
the earlier of 18 months following termination or the scheduled expiration of such options.
Pursuant to the employment agreement, in the event that Mr. Kaufer terminates his employment for Good
Reason or is terminated by Tripadvisor without Cause and such termination occurs during the period commencing
three months immediately prior to a Change in Control and ending 24 months immediately following the Change in
Control (in each case as such terms are defined in the employment agreement and below), then:
•
•
•
Tripadvisor will pay Mr. Kaufer cash severance in a lump sum equal to 24 months of his base salary;
Tripadvisor will pay Mr. Kaufer in a monthly cash amount equal to the premiums charged by Tripadvisor
to maintain COBRA health insurance coverage for him and his eligible dependents for each month between
the date of termination and 18 months thereafter;
Tripadvisor will pay to Mr. Kaufer a lump sum in cash equal to his annual target bonus, without pro-ration
or adjustment;
• All equity awards held by Mr. Kaufer that are outstanding and unvested shall immediately vest in full; and
• Mr. Kaufer will have 18 months following such date of termination of employment to exercise any vested
stock options (including stock options accelerated pursuant to the terms of his employment agreement) or,
if earlier, through the scheduled expiration date of the options.
Pursuant to the employment agreement, in the event that Mr. Kaufer terminates his employment for Good
Reason or is terminated by Tripadvisor without Cause and such termination is not in connection with a Change in
Control, then:
•
•
•
Tripadvisor will continue to pay Mr. Kaufer’s base salary through 12 months following the date of
termination;
Tripadvisor will consider in good faith the payment of an annual bonus on a pro rata basis based on actual
performance during the year of termination;
Tripadvisor will pay COBRA health insurance coverage for Mr. Kaufer and his eligible dependents for 12
months following termination;
• All equity awards held by Mr. Kaufer that otherwise would have vested during the 12-month period
following termination of employment, will accelerate and become fully vested and exercisable (provided
that awards that vest less frequently than annually will be treated as though such awards vested annually);
• Any equity awards that do not vest in connection with a termination of employment shall remain
outstanding for three months following termination, provided that there will be no additional vesting with
respect to such awards unless a Change in Control occurs within such three-month period; and
• Mr. Kaufer will have 18 months following such date of termination to exercise any vested stock options
(including stock options accelerated pursuant to the terms of his employment agreement) or, if earlier,
through the scheduled expiration date of the options.
The agreement also provides that a non-renewal of the employment agreement or expiration of the term will be
treated as a termination of employment without Cause or resignation for Good Reason not in connection with a Change
in Control, entitling Mr. Kaufer to benefits under his employment agreement. In addition, receipt of the severance
45
payments and benefits set forth above is contingent upon Mr. Kaufer executing and not revoking a separation and
release in favor of Tripadvisor. Each of the payments set forth above shall be offset by the amount of any cash
compensation earned by Mr. Kaufer from another employer during the 12 months following his termination of
employment.
With respect to Mr. Kaufer’s equity awards granted in August 2013 and thereafter, either Mr. Kaufer agreed to
waive the single trigger acceleration right upon a Change in Control or the award was issued pursuant to the 2018 Plan
which did not include this benefit. As a result, Mr. Kaufer’s awards will only accelerate upon a “double trigger.”
Mr. Kaufer has also agreed to be restricted from competing with Tripadvisor or any of its subsidiaries or
affiliates or soliciting their employees, consultants, independent contractors, customers, suppliers or business partners,
among others, during the term of his employment and through the period ending 18 months after the termination of
employment.
Ernst Teunissen Employment Agreement
On October 6, 2015, the Company entered into an agreement with Mr. Teunissen, effective November 9, 2015.
Such employment agreement commenced on November 9, 2015 and was to expire on March 31, 2018, unless sooner
terminated in accordance with its terms. This agreement was amended effective November 28, 2017 to, among other
things, extend the term to March 31, 2021.
Pursuant to the employment agreement, as amended, with Mr. Teunissen, in the event that his employment
terminates by reason of his death or disability, he will be entitled to continued payment of base salary through the end
of the month in which the termination occurs. In the event that he terminates his employment for Good Reason or is
terminated by Tripadvisor without Cause (in each case, as such terms are defined in the employment agreement and
below), then:
•
•
•
Tripadvisor will continue to pay his base salary through the longer of (i) 12 months following the
termination date, and (ii) the remaining term of the employment agreement up to a maximum of 18 months,
in each case provided that such payments will be offset by any amount earned from another employer during
such time period;
Tripadvisor will consider in good faith the payment of bonuses on a pro rata basis based on actual
performance for the year in which termination of employment occurs;
Tripadvisor will pay COBRA health insurance coverage for Mr. Teunissen and his eligible dependents
through the longer of the end of the term of his employment agreement and 12 months following termination;
• All equity awards held by Mr. Teunissen that otherwise would have vested during the 12-month period
following termination of employment, will accelerate and become fully vested and exercisable (provided
that equity awards that vest less frequently than annually shall be treated as though such awards vested
annually); and
• Mr. Teunissen will have 18 months following such date of termination or employment to exercise any
vested stock options (including stock options accelerated pursuant to the terms of his employment
agreement) or, if earlier, through the scheduled expiration date of the options.
The agreement also provides that a non-renewal of the employment agreement or expiration of the term will be
treated as a termination of employment without Cause or resignation for Good Reason not in connection with a Change
of Control, entitling Mr. Teunissen to benefits under his employment agreement.
46
Receipt of the severance payments and benefits set forth above is contingent upon Mr. Teunissen executing and
not revoking a separation and release in favor of Tripadvisor. In addition, Mr. Teunissen agreed to be restricted from
competing with Tripadvisor or any of its subsidiaries or affiliates or soliciting their employees, consultants,
independent contractors, customers, suppliers or business partners, among others, through the longer of (i) the
completion of the term of the employment agreement and (ii) 12 months after the termination of employment.
Seth J. Kalvert Employment Agreement
Effective May 19, 2016, the Company entered into an employment agreement with Mr. Kalvert, for a two-year
term, although this agreement was amended effective February 19, 2018 to, among other things, extend the term to
March 31, 2021.
Pursuant to the employment agreement with Mr. Kalvert, as amended, in the event that his employment
terminates by reason of his death or disability, he will be entitled to continued payment of base salary through the end
of the month in which the termination occurs. In the event that he terminates his employment for Good Reason or is
terminated by Tripadvisor without Cause (in each case as such terms are defined in the employment agreement and
below), then:
•
•
•
Tripadvisor will continue to pay his base salary through the longer of (i) 12 months following the
termination date, and (ii) the remaining term of the employment agreement up to a maximum of 18 months,
in each case provided that such payments will be offset by any amount earned from another employer during
such time period;
Tripadvisor will consider in good faith the payment of bonuses on a pro rata basis based on actual
performance for the year in which termination of employment occurs;
Tripadvisor will pay COBRA health insurance coverage for Mr. Kalvert and his eligible dependents through
the longer of the end of the term of his employment agreement and 12 months following termination;
• All equity awards held by Mr. Kalvert that otherwise would have vested during the 12-month period
following termination of employment, will accelerate and become fully vested and exercisable (provided
that equity awards that vest less frequently than annually shall be treated as though such awards vested
annually); and
• Mr. Kalvert will have 18 months following such date of termination or employment to exercise any vested
stock options (including stock options accelerated pursuant to the terms of his employment agreement) or,
if earlier, through the scheduled expiration date of the options.
The agreement also provides that a non-renewal of the employment agreement or expiration of the term will be
treated as a termination of employment without Cause or resignation for Good Reason not in connection with a Change
of Control, entitling Mr. Teunissen to benefits under his employment agreement.
Receipt of the severance payments and benefits set forth above is contingent upon Mr. Kalvert executing and
not revoking a separation and release in favor of Tripadvisor. In addition, Mr. Kalvert agreed to be restricted from
competing with Tripadvisor or any of its subsidiaries or affiliates or soliciting their employees, consultants,
independent contractors, customers, suppliers or business partners, among others, through the longer of (i) the
completion of the term of the employment agreement and (ii) 12 months after the termination of employment.
47
Dermot M. Halpin Offer Letter
On May 9, 2017, the Company entered into a new offer letter with Dermot Halpin. Pursuant to the offer letter,
in the event that the offer letter is terminated whether by Mr. Halpin for Good Reason, by Tripadvisor without Cause,
or as a result of death or Disability (in each case, as such terms are defined in the offer letter and below) then:
•
•
•
Tripadvisor will continue to pay Mr. Halpin his base salary for a period of 12 months following termination;
Tripadvisor will pay COBRA health insurance coverage for Mr. Halpin and his eligible dependents until
the earlier of 12 months following termination and the date Mr. Halpin becomes re-employed;
Tripadvisor will consider, in good faith, the payment of an annual bonus on a pro rata basis for the year in
which the termination of employment occurs;
• All equity awards held by Mr. Halpin that otherwise would have vested during the 12-month period
following termination of employment will accelerate and become fully vested and exercisable (provided
that equity awards that vest less frequently than annually shall be treated as though such awards vested
annually); and
• Mr. Halpin will have 18 months following such date of termination of employment to exercise any vested
stock options (including stock options accelerated pursuant to the terms of his employment agreement) or,
if earlier, through the scheduled expiration date of the options.
Simultaneously with entering into the new offer letter, Mr. Halpin entered into a Non-Disclosure, Developments
and Non-Competition Agreement, pursuant to which Mr. Halpin agreed to be restricted from competing with
Tripadvisor or any of its subsidiaries or affiliates or soliciting their employees, consultants, independent contractors,
customers, suppliers or business partners, among others, through the longer of (i) the completion of the term of the
employment agreement and (ii) one year after the termination of employment.
On January 17, 2020, Mr. Halpin announced his resignation, effective January 20, 2020, from his position as
President - Experiences and Rentals. From January 20, 2020 through March 31, 2020, Mr. Halpin continued to serve
as an employee of the Company and an Advisor to Mr. Kaufer. The severance benefits received by Mr. Halpin were
equivalent to those provided upon a termination of employment without Cause or resignation for Good Reason, as
more specifically described above.
Definitions
Under the employment agreements and offer letter, Cause means: (i) the plea of guilty or nolo contendere to, or
conviction for, a felony offense by the executive; provided, however, that after indictment, Tripadvisor may suspend
the executive from rendition of services but without limiting or modifying in any other way Tripadvisor’s obligations
under the applicable employment agreement, (ii) a material breach by the executive of a fiduciary duty owed to
Tripadvisor or its subsidiaries, (iii) material breach by the executive of certain covenants of the applicable employment
agreement, (iv) the willful or gross neglect by the executive of the material duties required by the applicable
employment agreement or (v) a knowing and material violation by the executive of any Tripadvisor policy pertaining
to ethics, legal compliance, wrongdoing or conflicts of interest that, in the cases of the conduct described in clauses
(iv) and (v) above, if curable, is not cured by the executive within 30 days after the executive is provided with written
notice thereof.
Under the employment agreements and offer letter as well as under the 2018 Plan, Change in Control means
any of the following events:
(i) The acquisition by any individual entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), other than Liberty Tripadvisor Holdings, Inc. and its affiliates (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of equity securities of
the Company representing more than 50% of the voting power of the then outstanding equity securities of the
Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);
48
provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a
Change in Control: (A) any acquisition by the Company, (B) any acquisition directly from the Company,
(C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (D) any acquisition pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (iii); or
(ii) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board; provided, however, that any individual becoming a director
subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders,
was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially
all of the assets of the Company or the purchase of assets or stock of another entity (a “Business Combination”),
in each case, unless immediately following such Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination will beneficially own, directly or indirectly, more than 50%
of the then outstanding combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors (or equivalent governing body, if applicable) of the entity resulting from
such Business Combination (including, without limitation, an entity which as a result of such transaction owns
the Company or all or substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, (B) no Person (excluding Liberty Tripadvisor
Holdings, Inc. and its respective affiliates, any employee benefit plan (or related trust) of the Company or such
entity resulting from such Business Combination) will beneficially own, directly or indirectly, more than a
majority of the combined voting power of the then outstanding voting securities of such entity except to the
extent that such ownership of the Company existed prior to the Business Combination and (C) at least a
majority of the members of the board of directors (or equivalent governing body, if applicable) of the entity
resulting from such Business Combination will have been members of the Incumbent Board at the time of the
initial agreement, or action of the Board, providing for such Business Combination; or
(iv) Approval by our stockholders of a complete liquidation or dissolution of the Company.
Under the employment agreements and offer letter, Good Reason means the occurrence of any of the following
without the executive’s prior written consent: (A) Tripadvisor’s material breach of any material provision of the
applicable employment agreement, (B) the material reduction in the executive’s title, duties, reporting responsibilities or
level of responsibilities in such executive’s position at Tripadvisor, (C) the material reduction in the executive’s base
salary or the executive’s total annual compensation opportunity, or (D) the relocation of the executive’s principal place
of employment more than 20 miles outside of their location of employment; provided that in no event shall the executive’s
resignation be for Good Reason unless (x) an event or circumstance set forth in clauses (A) through (D) shall have
occurred and the executive provides Tripadvisor with written notice thereof within 30 days after the executive has
knowledge of the occurrence or existence of such event or circumstance, which notice specifically identifies the event or
circumstance that the executive believes constitutes Good Reason, (y) Tripadvisor fails to correct the event or
circumstance so identified within 30 days after receipt of such notice, and (z) the executive resigns within 90 days after
the date of delivery of the notice referred to in clause (x) above.
Notwithstanding the terms of the NEO employment agreements and offer letter described above, the Severance
Plan includes a provision that in the event of any conflict or inconsistency between the terms of any employment
agreement and the Severance Plan, the terms more beneficial to the employee shall prevail. For a description and
quantification of the estimated potential payments in the event of a termination without Cause, resignation for Good
Reason, Change in Control and termination without Cause or resignation for Good Reason in connection with a
Change in Control, please see the section below entitled “Potential Payments Upon Termination or Change in Control.”
The amounts reflected in this table reflect the “better of” the terms between the employment arrangements, the 2018
Plan and the Severance Plan.
49
Severance Plan
Effective August 7, 2017, the Company adopted the Severance Plan applicable to certain senior leaders of the
Company. The Severance Plan formalizes and standardizes the Company’s severance practices for certain designated
employees. Employees covered by the Severance Plan generally will be eligible to receive severance benefits in the
event of a termination by the Company without Cause or, under certain circumstances, resignation by the employee
for Good Reason. If a termination of employment occurs in connection with a Change in Control, the participants
would generally be eligible to receive enhanced severance benefits. The severance benefits provided pursuant to the
Severance Plan are determined based on the job classification of the employees and, in certain cases, his or her years
of service with the Company.
Under the Severance Plan, in the event of a termination by the Company without Cause more than three months
prior to a Change in Control or more than 12 months following a Change in Control, the severance benefits for the
employee generally shall consist of the following:
•
•
continued payment of base salary for a period ranging from six to 18 months following the date of such
employee’s termination of employment (in such case, based on the employee’s classification within the
organization and years of service); and
continuation of coverage under the Company’s health insurance plan through the Company’s payment of
COBRA premiums for a period ranging from six to 18 months following the date of such employee’s
termination of employment (in such case, based on the employee’s classification within the organization
and years of service).
Under the Severance Plan, in the event of a termination by the Company without Cause or by the employee for
Good Reason, in each case within three months prior to or 12 months following a Change in Control, the severance
benefits for the participant shall consist of the following:
•
•
payment of a lump sum amount equal to (i) a minimum of 12 and up to 24 months of the participant’s base
salary, plus (ii) the participant’s target bonus multiplied by 1, 1.5 or 2 (in each case, based on employee’s
classification within the organization and years of service); and
payment of a lump sum amount equal to the premiums required to continue the participant’s medical
coverage under the Company’s health insurance plan for a period ranging from 12 to 24 months (in such
case, based on employee’s classification within the organization and years of service).
The foregoing summary is qualified in its entirety by reference to the Severance Plan incorporated herein by
reference to Exhibit 10.22 to the Company’s 2017 Annual Report.
Estimated Potential Incremental Payments
The table below reflects the estimated amount of incremental compensation payable to each of our named executive
officers upon termination of his or her employment in the following circumstances: (i) termination of employment as a
result of death of the NEO; (ii) a termination of employment by Tripadvisor without Cause not in connection with a
Change in Control, (iii) resignation by him or her for Good Reason not in connection with a Change in Control, (iv) a
Change in Control or (v) a termination of employment by Tripadvisor without Cause or by him or her for Good Reason
in connection with a Change in Control. No benefits are payable upon a resignation by the NEO without Good Reason,
termination of employment by Tripadvisor for Cause. Upon a termination of employment for Disability or retirement,
no benefits are provided, other than an extension of time for the exercise of any outstanding options.
50
The amounts shown in the table (i) assume that the triggering event was effective as of December 31, 2019, the
last business day of 2019; (ii) are based on the terms of the employment agreements in effect as of December 31, 2019
and do not reflect any subsequent amendments to the employment agreement; and (iii) are based on the “better of”
such employment agreements or the terms of the Severance Plan, as specifically provided for in the Severance Plan.
The price of Tripadvisor common stock on which certain of the calculations are based was $30.38 per share, the
closing price of Tripadvisor’s common stock on The Nasdaq Stock Market on December 31, 2019. These amounts are
estimates of the incremental amounts that would be paid out to each named executive officer upon such triggering
event. The actual amounts to be paid out can only be determined at the time of the triggering event, if any.
Name and Benefit
Stephen Kaufer
Salary
Bonus (2)
Equity Awards (vesting accelerated)
Health & Benefits (3)
Total estimated value
Ernst Teunissen
Salary
Bonus (2)
Equity Awards (vesting accelerated)
Health & Benefits (3)
Total estimated value
Seth J. Kalvert
Salary
Bonus (2)
Equity Awards (vesting accelerated)
Health & Benefits (3)
Total estimated value
Death ($)(1)
—
—
25,424,809
—
25,424,809
—
—
6,965,223
—
6,965,223
—
—
4,902,998
—
4,902,998
Termination
Without
Cause ($)
Resignation
for Good
Reason ($)
Change in
Control ($)
Termination
w/o Cause
or for Good
Reason in
connection
with
Change in
Control ($)
1,237,500
424,545
12,857,674
41,941
14,561,660
1,237,500
424,545
12,857,674
41,941
14,561,660
—
—
7,361,079 (4)
—
7,361,079
1,650,000
1,650,000
19,395,505
55,922
22,751,427
735,000
335,003
2,859,507
42,525
3,972,035
697,500
317,911
1,984,037
41,941
3,041,389
735,000
335,003
2,859,507
42,525
3,972,035
697,500
317,911
1,984,037
41,941
3,041,389
—
—
57,998 (4)
—
57,998
—
—
44,078 (4)
—
44,078
735,000
588,000
6,146,714
42,525
7,512,239
697,500
558,000
4,280,947
41,941
5,578,389
(1)
(2)
(3)
(4)
Pursuant to the Company’s 2018 Stock and Annual Incentive Plan, upon a participant’s termination of employment by reason of death, any
award that was unvested at the time of death shall automatically vest, including performance awards which shall vest at target.
Represents actual bonus amount for 2019, the payment of which the Company must consider in good faith, in both cases pursuant to the
terms of the employment agreement.
Assumes extension of benefits or payment of the cost of benefits for a period of time following termination, pursuant to the terms of the
employment agreement or the Severance Plan.
In the event of a Change in Control, the stock options, RSUs and MSUs granted in connection with the 2017 CEO Award and the MSUs
granted to Messrs. Teunissen, Kalvert, and Halpin in February 2019 and 2018 will be treated as though they vested daily over the vesting
period and the vesting will accelerate with respect to those awards that would have vested as of the effective date of the Change in Control
under this scenario. The remaining unvested awards will vest pro-rata on each anniversary of August 1, 2017 for the CEO and December
31, 2018 for Messrs. Teunissen, Kalvert, and Halpin.
51
Equity Compensation Plan Information
The following table provides information as of December 31, 2019 regarding shares of common stock that may
be issued under Tripadvisor’s equity compensation plans consisting of the 2018 Plan, the Viator, Inc. 2010 Stock
Incentive Plan and the Deferred Compensation Plan for Non-Employee Directors.
Equity Compensation Plan Information
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
Weighted Average
exercise price of
outstanding
options, warrants
and rights
(b)
Number of securities
remaining available
for future issuance
under equity
compensation plan
(excluding securities
reflected in column
(a))
(c)
14,881,424 (1) $
50.27 (2)
N/A
14,881,424
N/A
—
10,050,703
N/A
10,050,703
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
(1)
Includes (i) 6,016,706 shares of common stock issuable upon the exercise of outstanding options, of which 13,659 shares were granted
pursuant to options under the Viator, Inc. 2010 Stock Incentive Plan, (ii) 8,469,429 shares of common stock issuable upon the vesting of
RSUs, (iii) 389,022 shares of common stock issuable upon the vesting of MSUs (assuming target performance is achieved), and (iv) 6,267
shares of common stock reserved for issuance upon exercise of options granted pursuant to the Deferred Compensation Plan for Non-
Employee Directors.
(2)
Since RSUs and MSUs do not have an exercise price, such units are not included in the weighted average exercise price calculation.
52
Overview
DIRECTOR COMPENSATION
The Board sets non-employee director compensation which is designed to provide competitive compensation
necessary to attract and retain high quality non-employee directors and to encourage ownership of Tripadvisor
common stock to further align their interests with those of our stockholders. Each non-employee director of
Tripadvisor is eligible to receive the following compensation:
• An annual cash retainer of $50,000, paid in equal quarterly installments;
• An RSU award with a value of $250,000 (based on the closing price of Tripadvisor’s common stock on the
Nasdaq Stock Market on the date of grant), upon such director’s election to office, subject to vesting in full
on the first anniversary of the grant date and, in the event of a Change in Control (as defined in the 2018
Plan and above), full acceleration of vesting;
• An annual cash retainer of $20,000 for each member of the Audit Committee (including the Chairman) and
$15,000 for each member of the Compensation Committees (including the Chairman); and
• An additional annual cash retainer of $10,000 for each of the Chairman of the Audit Committee and the
Chairman of the Compensation Committees.
We also pay reasonable travel and accommodation expenses of the non-employee directors in connection with
their participation in meetings of the Board.
Tripadvisor employees do not receive compensation for serving as directors. Accordingly, Mr. Kaufer does not
receive any compensation for his service as a director.
In light of the impacts of the COVID-19 outbreak and the uncertainty around the outbreak’s full impact on the
Company and its financial performance, on April 14, 2020, the Board determined that the compensation to be paid to
the non-employee directors, commencing with the election of directors at the June 9, 2020 annual meeting of
stockholders, would be reduced as follows: (i) the directors would forego the annual cash retainer, and (ii) the value
of the annual RSU award would be reduced from $250,000 to $187,500.
Non-Employee Director Deferred Compensation Plan
Under Tripadvisor’s Non-Employee Director Deferred Compensation Plan, the non-employee directors may
defer all or a portion of their directors’ fees. Eligible directors who defer their directors’ fees may elect to have such
deferred fees (i) applied to the purchase of share units representing the number of shares of Tripadvisor common stock
that could have been purchased on the date such fees would otherwise be payable or (ii) credited to a cash fund. If any
dividends are paid on Tripadvisor common stock, dividend equivalents will be credited on the share units. The cash
fund will be credited with deemed interest at an annual rate equal to the average “bank prime loan” rate for such year
identified in the U.S. Federal Reserve Statistical Release. Upon termination of service as a director of Tripadvisor, a
director will receive (i) with respect to share units, such number of shares of Tripadvisor common stock as the share
units represent and (ii) with respect to the cash fund, a cash payment. Payments upon termination will be made in
either one lump sum or up to five installments, as elected by the eligible director at the time of the deferral election.
53
2019 Non-Employee Director Compensation Table
The following table shows the compensation information for the non-employee directors of Tripadvisor for the
year ended December 31, 2019:
Name
Gregory B. Maffei
Jay C. Hoag
Betsy L. Morgan
Dipchand (Deep) Nishar (4)
Jeremy Philips
Spencer M. Rascoff
Albert Rosenthaler
Trynka Shineman Blake
Robert S. Wiesenthal
Fees Earned or
Paid in Cash
($)(1)
65,000
77,100
30,973
46,325
70,000
70,000
50,000
27,875
80,000
Stock Awards
($)(2)(3)
280,586
280,586
351,307
—
280,586
280,586
280,586
351,307
280,586
Total
($)
345,586
357,686
382,280
46,325
350,586
350,586
330,586
379,182
360,586
(1)
(2)
(3)
(4)
The amounts reported in this column represent the annual cash retainer amounts for services in 2019, including fees with respect to which
directors elected to defer and credit towards the purchase of share units representing shares of the Company common stock pursuant to the
Company’s Non-Employee Director Deferred Compensation Plan.
The amounts reported in this column represent the aggregate grant date fair value of RSU awards computed in accordance with FASB ASC
Topic 718. These amounts reflect an estimate of the grant date fair value and may not correspond to the actual value that will be recognized
by the non-employee directors from their awards.
As of December 31, 2019, Messrs. Hoag, Maffei, Philips, Rascoff, Rosenthaler, and Wiesenthal each held 6,125 RSUs. Ms. Shineman and
Ms. Morgan each held 7,490 RSUs
Mr. Nishar did not run for re-election in 2019 and is no longer a director. The amounts above represent the amount paid to Mr. Nishar for
service from January 1, 2019 through June 11, 2019.
54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Ownership Table
The following table presents information as of April 17, 2020, relating to the beneficial ownership of
Tripadvisor’s capital stock by (i) each person or entity known to Tripadvisor to own beneficially more than 5% of the
outstanding shares of Tripadvisor’s common stock or Class B common stock, (ii) each director and director nominee
of Tripadvisor, (iii) the named executive officers and (iv) our executive officers and directors, as a group. In each case,
except as otherwise indicated in the footnotes to the table, the shares are owned directly by the named owners, with
sole voting and dispositive power. Unless otherwise indicated, beneficial owners listed in the table may be contacted
at Tripadvisor’s corporate headquarters at 400 1st Avenue, Needham, Massachusetts 02494.
Shares of Tripadvisor Class B common stock may, at the option of the holder, be converted on a one-for-one
basis into shares of Tripadvisor common stock; therefore, the common stock column below includes shares of Class
B common stock held by each such listed person, entity or group, and the beneficial ownership percentage of each
such listed person assumes the conversion of all Class B common stock into common stock. For each listed person,
entity or group, the number of shares of Tripadvisor common stock and Class B common stock and the percentage of
each such class listed also include shares of common stock and Class B common stock that may be acquired by such
person, entity or group on the conversion or exercise of equity securities, such as stock options, which can be converted
or exercised, and RSUs that have or will have vested, within 60 days of April 17, 2020, but do not assume the
conversion or exercise of any equity securities (other than the conversion of the Class B common stock) owned by
any other person, entity or group.
The percentage of votes for all classes of Tripadvisor’s capital stock is based on one vote for each share of
common stock and ten votes for each share of Class B common stock. There were 121,326,497 shares of common
stock and 12,799,999 shares of Class B common stock outstanding on April 17, 2020.
Beneficial Owner
5% Beneficial Owners
Liberty TripAdvisor Holdings, Inc.
12300 Liberty Boulevard Englewood,
CO 80112
BlackRock, Inc.
55 East 52nd Street, New York, NY 10022
The Vanguard Group
100 Vanguard Blvd, Malvern, PA 19355
Eagle Capital Management, LLC
499 Park Avenue, 17th Floor, New York, NY 10022
Named Executive Officers and Directors
Gregory B. Maffei
Stephen Kaufer
Trynka Shineman Blake
Jay C. Hoag
Betsy Morgan
Greg O'Hara
Jeremy Philips
Spencer M. Rascoff
Albert Rosenthaler
Robert S. Wiesenthal
Ernst Teunissen
Seth J. Kalvert
Lindsay Nelson
Kanika Soni
All executive officers, directors and director
nominees as a group (14 persons)
Common Stock
Class B Common Stock
Shares
%
Shares
%
Percent (%)
of Votes
(All Classes)
30,959,752 (1)
23.1% 12,799,999 (1)
100
58.6%
12,902,837 (2)
10,502,596 (3)
8,461,064
(4)
9.6%
7.8%
6.3%
30,526 (5)
1,969,067 (6)
7,490 (7)
2,294,293 (8)
7,490 (7)
—
34,231 (9)
27,219 (9)
23,680 (9)
34,231 (9)
313,525 (10)
305,517 (11)
33,236 (12)
35,342 (13)
*
1.5%
*
1.7%
*
0
*
*
*
*
*
*
*
*
5,115,847 (14)
3.8%
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5.2%
4.2%
3.4%
*
*
*
*
*
0
*
*
*
*
*
*
*
*
2.0%
*
The percentage of shares beneficially owned does not exceed 1% of the class.
55
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Based on information contained in a Schedule 13D/A filed with the SEC on March 16, 2020, by LTRIP. Consists of 18,159,753 shares of
common stock and 12,799,999 shares of Class B Common Stock owned by LTRIP. Excludes shares beneficially owned by the executive
officers and directors of LTRIP, as to which LTRIP disclaims beneficial ownership.
Based solely on information contained in a Schedule 13G/A filed with the SEC on February 10, 2020, by BlackRock, Inc. According to the
Schedule 13G/A, BlackRock beneficially owns and has sole dispositive power with respect to 12,902,837 shares of common stock and has
sole voting power with respect to 11,833,718 shares.
Based solely on information contained in a Schedule 13G/A filed with the SEC on February 12, 2020, by The Vanguard Group (“Vanguard”).
According to the Schedule 13G/A, Vanguard beneficially owns 10,502,596 shares of common stock, has sole dispositive power with respect
to 10,398,268 shares of common stock and has sole voting power with respect to 27,275 shares.
Based solely on information contained in a Schedule 13G filed with the SEC on February 14, 2020, by Eagle Capital Management, LLC
(“Eagle”). According to the Schedule 13G, Eagle beneficially owns and has sole dispositive power with respect to 8,461,064 shares of
common stock and has sole voting power with respect to 7,031,602 shares.
Includes 1,938 shares of common stock that are held by the Maffei Foundation. Mr. Maffei and his wife, as the two directors of the Maffei
Foundation, have shared voting and investment power with respect to any shares held by the Maffei Foundation. Also includes 6,125 RSUs
that will vest and settle within 60 days of April 17, 2020.
Includes options to purchase 1,368,076 shares of common stock that are currently exercisable.
Includes 6,125 RSUs that will vest and settle within 60 days of April 17, 2020.
Includes 6,125 RSUs that will vest and settle within 60 days of April 17, 2020. Mr. Hoag holds directly these RSUs and 2,785 shares
resulting from RSUs that previously vested and has sole voting and dispositive power over these securities; however, TCV IX Management,
L.L.C. has a right to 100% of the pecuniary interest in such securities. Mr. Hoag is a Member of TCV IX Management, L.L.C. and disclaims
beneficial ownership of such RSUs and the shares underlying such RSUs except to the extent of his pecuniary interest therein. The
remainder of the shares are held directly by TCV IX Tumi, L.P., TCV IX Tumi (A), L.P., TCV IX Tumi (B), L.P., and TCV IX Tumi (MF),
L.P. (the “TCV Funds”). Jay C. Hoag is a Class A Member of Technology Crossover Management IX, Ltd. ("Management IX") and a
limited partner of Technology Crossover Management IX, L.P. ("TCM IX"). Management IX is the sole general partner of TCM IX, which
in turn is the sole general partner of TCV IX, L.P., which in turn is the sole member of TCV IX TUMI GP, LLC, which in turn is the sole
general partner each of the TCV Funds. Mr. Hoag may be deemed to beneficially own the shares held by the TCV Funds, but disclaims
beneficial ownership of such shares except to the extent of his pecuniary interest therein.
(9)
Includes 6,125 RSUs that will vest and settle within 60 days of April 17, 2020.
(10)
(11)
Includes options to purchase 238,243 shares of common stock that are currently exercisable, options to purchase 36,057 shares of common
stock that will be exercisable within 60 days of April 17, 2020 and 16,388 RSUs that will vest and settle within 60 days of April 17, 2020.
Includes options to purchase 277,999 shares of common stock that are currently exercisable and 9,013 RSUs that will vest and settle within
60 days of April 17, 2020.
(12)
Includes options to purchase 29,669 shares of common stock that are currently exercisable.
(13)
Includes options to purchase 23,995 shares of common stock that are currently exercisable.
(14)
Includes options to purchase 1,974,039 shares of common stock that are currently exercisable or will be exercisable within 60 days of April
17, 2020 and 74,401 RSUs that will vest and settle within 60 days of April 17, 2020.
Changes in Control
We know of no arrangements, including any pledge by any person of our securities, the operation of which may
at a subsequent date result in a change in control of our company.
56
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review and Approval or Ratification of Related Person Transactions
Pursuant to the Company’s Related Party Transactions Policy, we will enter into or ratify a “related person
transaction” only when it has been approved by the Audit Committee of the Board, in accordance with its written
charter. Related persons include our executive officers, directors, 5% or more beneficial owners of our common stock
or immediate family members of these persons and entities in which one of these persons has a direct or indirect
material interest. Related person transactions are transactions that meet the minimum threshold for disclosure in the
proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which
a related person or entity has a direct or indirect material interest). When a potential related person transaction is
identified, management presents it to the Audit Committee to determine whether to approve or ratify. When
determining whether to approve, ratify, disapprove or reject any related person transaction, the Audit Committee
considers all relevant factors, including the extent of the related person’s interest in the transaction, whether the terms
are commercially reasonable and whether the related person transaction is consistent with the best interests of
Tripadvisor and our stockholders.
The legal and accounting departments work with business units throughout Tripadvisor to identify potential
related person transactions prior to execution. In addition, we take the following steps with regard to related person
transactions:
• On an annual basis, each director, director nominee and executive officer of Tripadvisor completes a
Director and Officer Questionnaire that requires disclosure of any transaction, arrangement or relationship
with us during the last fiscal year in which the director or executive officer, or any member of his or her
immediate family, had a direct or indirect material interest.
•
•
Each director, director nominee and executive officer is expected to promptly notify our legal department
of any direct or indirect interest that such person or an immediate family member of such person had, has
or may have in a transaction in which we participate.
Tripadvisor monitors its accounts payable, accounts receivable and other databases to identify any other
potential related person transactions that may require disclosure.
• Any reported transaction that our legal department determines may qualify as a related person transaction
is referred to the Audit Committee.
If any related person transaction is not approved, the Audit Committee may take such action as it may deem
necessary or desirable in the best interests of Tripadvisor and our stockholders.
Related Person Transactions
On August 27, 2014, the entire beneficial ownership of our common stock and Class B common stock held by
Liberty was transferred to LTRIP. Simultaneously, Liberty, LTRIP’s former parent company, distributed, by means
of a dividend, to the holders of its Liberty Ventures common stock, Liberty’s entire equity interest in LTRIP. We
refer to this transaction as the “Liberty Spin-Off”. As a result of the Liberty Spin-Off, effective August 27, 2014,
LTRIP became a separate, publicly traded company holding 100% of Liberty’s interest in Tripadvisor.
As a result of these transactions, as of the record date, LTRIP beneficially owned 18,159,753 shares of our
common stock and 12,799,999 shares of our Class B common stock, which shares constitute 15.0% of the outstanding
shares of common stock and 100% of the outstanding shares of Class B common stock. Assuming the conversion of
all of LTRIP’s shares of Class B common stock into common stock, LTRIP would beneficially own 23.1% of the
outstanding common stock (calculated in accordance with Rule 13d-3). Because each share of Class B common stock
is generally entitled to ten votes per share and each share of common stock is entitled to one vote per share, LTRIP
may be deemed to beneficially own equity securities representing approximately 58.6% of our voting power. As a
result, LTRIP is effectively able to control the outcome of all matters submitted to a vote or for the consent of
Tripadvisor’s stockholders (other than with respect to the election by the holders of Tripadvisor common stock of 25%
of the members of Tripadvisor’s Board and matters as to which Delaware law requires a separate class vote).
57
WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION BY REFERENCE
Tripadvisor files annual, quarterly and current reports, proxy statements and other information with the SEC.
Tripadvisor’s filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov.
Tripadvisor’s SEC filings are also available to the public from commercial retrieval services.
The SEC allows Tripadvisor to “incorporate by reference” the information that Tripadvisor’s files with the SEC,
which means that Tripadvisor can disclose important information to you by referring you to those documents. The
information incorporated by reference is an important part of this proxy statement.
ANNUAL REPORTS
Tripadvisor’s Annual Report to Stockholders for 2020, which includes our 2019 Annual Report (not including
exhibits), is available at http://ir.Tripadvisor.com/annual-proxy.cfm. Upon written request to Tripadvisor, Inc., 400
1st Avenue, Needham, Massachusetts 02494, Attention: Secretary, Tripadvisor will provide, without charge, an
additional copy of Tripadvisor’s 2019 Annual Report on Form 10-K. Tripadvisor will furnish any exhibit contained
in the 2019 Annual Report upon payment of a reasonable fee. Stockholders may also review a copy of the 2019 Annual
Report (including exhibits) by accessing Tripadvisor’s corporate website at www.Tripadvisor.com or the SEC’s
website at www.sec.gov.
PROPOSALS BY STOCKHOLDERS FOR PRESENTATION AT THE
2021 ANNUAL MEETING
Stockholders who wish to have a proposal considered for inclusion in Tripadvisor’s proxy materials for
presentation at the 2021 Annual Meeting of Stockholders must ensure that their proposal is received by Tripadvisor
no later than December 25, 2020, at its principal executive offices at 400 1st Avenue, Needham, Massachusetts 02494,
Attention: Secretary. The proposal must be made in accordance with the provisions of Rule 14a-8 of the Exchange
Act. Stockholders who intend to present a proposal at the 2021 Annual Meeting of Stockholders without inclusion of
the proposal in Tripadvisor’s proxy materials are required to provide notice of such proposal to Tripadvisor at its
principal executive offices no later than March 11, 2021. Tripadvisor reserves the right to reject, rule out of order or
take other appropriate action with respect to any proposal that does not comply with these and other applicable
requirements.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
If you share an address with any of our other stockholders, your household might receive only one copy of the
Proxy Statement, 2019 Annual Report and Notice, as applicable. To request individual copies of any of these materials
for each stockholder in your household, please contact Tripadvisor, Inc., 400 1st Avenue, Needham, Massachusetts
02494, Attention: Secretary, or call us at (781) 800-5000. We will deliver copies of the Proxy Statement, 2019 Annual
Report and/or Notice promptly following your request. To ask that only one copy of any of these materials be mailed
to your household, please contact your broker.
Needham, Massachusetts
April 28, 2020
58
2019 Annual Report on Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-35362
TRIPADVISOR, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
80-0743202
(I.R.S. Employer
Identification No.)
400 1st Avenue
Needham, MA 02494
(Address of principal executive office) (Zip Code)
Registrant’s telephone number, including area code:
(781) 800-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock
Trading Symbol
TRIP
Name of each exchange on which registered
NASDAQ
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
☒
☐
☐
Accelerated filer
Smaller reporting company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant as of the last business day of the
registrant’s most recently completed second fiscal quarter was $4,872,586,695 based on the closing price on The NASDAQ Global Select Market
on such date. For the purpose of the foregoing calculation only, all directors and executive officers of the registrant are assumed to be affiliates of
the registrant.
Class
Common Stock, $0.001 par value per share
Class B common stock, $0.001 par value per share
Outstanding Shares at February 12, 2020
123,286,835 shares
12,799,999 shares
The registrant intends to file a proxy statement pursuant to Regulation 14A not later than 120 days after the close of the fiscal year ended
December 31, 2019. Portions of such proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.
Documents Incorporated by Reference
Table of Contents
PART I.....................................................................................................................................................................
Item 1.
Business .........................................................................................................................................
Item 1A. Risk Factors ...................................................................................................................................
Item 1B. Unresolved Staff Comments ..........................................................................................................
Item 2.
Properties .......................................................................................................................................
Item 3.
Legal Proceedings..........................................................................................................................
Item 4.
Mine Safety Disclosures ................................................................................................................
Page
2
2
9
31
32
32
32
PART II...................................................................................................................................................................... 32
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.............................................................................................................................
Item 6.
Selected Financial Data..................................................................................................................
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations........
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......................................................
Item 8.
Financial Statements and Supplementary Data..............................................................................
32
35
36
57
60
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 116
Item 9A. Controls and Procedures ................................................................................................................ 116
Item 9B. Other Information .......................................................................................................................... 120
PART III .................................................................................................................................................................... 120
Item 10. Directors, Executive Officers and Corporate Governance ............................................................ 120
Item 11. Executive Compensation ............................................................................................................... 120
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters ...................................................................................................................................... 120
Item 13. Certain Relationships and Related Transactions, and Director Independence .............................. 120
Item 14. Principal Accounting Fees and Services........................................................................................ 120
PART IV .................................................................................................................................................................... 120
Item 15. Exhibits; Financial Statement Schedules ....................................................................................... 120
Item 16. Form 10-K Summary ..................................................................................................................... 123
SIGNATURES ........................................................................................................................................................ 124
ii
We refer to Tripadvisor, Inc. and our wholly-owned subsidiaries as “Tripadvisor,” “the Company,” “us,”
“we” and “our” in this Annual Report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” that involve risks and uncertainties,
as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially
from those expressed or implied by such forward-looking statements. The statements contained in this Annual
Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934,
as amended, or the Exchange Act. The following words, when used, are intended to identify forward-looking
statements: “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,”
“target,” “result,” “should,” “will,” and similar expressions which do not relate solely to historical matters. We
caution investors that any forward-looking statements in this report, or which management may make orally or in
writing from time to time, are based on management’s beliefs and on assumptions made by, and information
currently available to, management. Such statements are subject to risks, uncertainties and assumptions and are not
guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and
factors that are beyond our control. Some of the risks and uncertainties that may cause our actual results,
performance or achievements to differ materially from those expressed or implied by forward-looking statements are
more fully described in Part I. Item 1A. "Risk Factors." Moreover, we operate in a rapidly changing environment.
New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor
can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in any forward-looking statements. We
caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not
guarantees of future performance and are impacted by actual events when they occur after we make such statements.
We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new
information, future events or otherwise.
Investors should also refer to our quarterly reports on Form 10-Q for future periods and current reports on
Form 8-K as we file them with the U.S. Securities and Exchange Commission, or the SEC, and to other materials we
may furnish to the public from time to time through Current Reports on Form 8-K or otherwise.
1
Item 1.
Business
Overview
PART I
Tripadvisor, Inc. (“Tripadvisor”, “the Company”, “we”, or “us”) is a leading online travel company and our
mission is to help people around the world plan, book and experience the perfect trip. We operate a global travel
platform that connects the world’s largest audience of prospective travelers with travel partners through rich content,
price comparison tools, and online reservation and related services for destinations, accommodations, travel
activities and experiences, and restaurants.
Under our flagship brand, Tripadvisor, we launched www.Tripadvisor.com in the United States in 2000. Since
then, we have launched localized versions of the Tripadvisor website in 48 markets and 28 languages worldwide.
Tripadvisor features 859 million reviews and opinions on 8.6 million places to stay, places to eat and things to do –
including 1.4 million hotels, inns, B&Bs and specialty lodging, 842,000 rental properties, 5.2 million restaurants and
1.2 million travel activities and experiences worldwide. Tripadvisor’s rich content and engaged community attract
the world’s largest travel audience, based on monthly unique visitors, including 463 million average monthly unique
visitors in the third quarter of 2019 during the peak summer travel season.
In addition to the flagship Tripadvisor brand, we own and operate a portfolio of travel media brands and
businesses, operating under various websites, including the following: www.airfarewatchdog.com, www.bokun.io,
www.bookingbuddy.com, www.cruisecritic.com, www.familyvacationcritic.com, www.flipkey.com,
www.thefork.com (including www.lafourchette.com, www.eltenedor.com, www.restorando.com, and
www.bookatable.co.uk), www.holidaylettings.co.uk, www.holidaywatchdog.com, www.housetrip.com,
www.jetsetter.com, www.niumba.com, www.onetime.com, www.oyster.com, www.seatguru.com,
www.singleplatform.com, www.smartertravel.com, www.vacationhomerentals.com, and www.viator.com.
Our Industry and Market Opportunity
We operate in the global travel industry, focusing exclusively on online travel and travel-related activity, and
the online advertising market.
According to Phocuswright, an independent travel, tourism and hospitality research firm, the annual global
travel market represents $1.7 trillion in sales and is increasingly shifting online. As consumer online travel media
consumption and online travel commerce activity increases, we believe travel and travel-related businesses will
continue to allocate greater percentages of their marketing budgets to online channels in order to grow their
businesses. We believe this creates a significant long-term growth opportunity for our business.
Our Business Model
Our businesses match demand, or consumers that seek to discover, research, price compare and book the best
travel experiences online, with supply from travel partners around the world that provide travel accommodations and
experiences.
Consumer Offerings
Tripadvisor enables consumers to plan, book and experience the perfect trip by providing content, supply,
price, and convenience. Content and supply has enabled Tripadvisor to become a well-known global brand, one that
has attracted the world’s largest travel audience, based on average monthly unique visitors, and influences a
significant amount of travel commerce. We are focused on creating the best online experience in travel planning and
booking, making it easier for consumers to research destinations and experiences, read and contribute user-generated
content, compare destinations and businesses based on quality, price and availability, and complete bookings
powered by our travel partners.
2
Travel Partners
Our portfolio of travel-related websites enables our travel partners to be discovered, to advertise and to sell
their services to a global travel audience. Travel partners may include hotel chains, independent hoteliers, online
travel agencies, or OTAs, destination marketing organizations, and other travel-related and non-travel related
product and service providers—that seek to market and sell their products and services to a global audience. We
enable media advertising opportunities – and in some cases, facilitate transactions between consumers and travel
partners in a number of ways, including by sending referrals to our travel partners’ websites, facilitating bookings on
behalf of our travel partners, or by serving as the merchant of record – particularly in our Experiences and Rentals
offerings – and by offering advertising placements on our websites and mobile apps.
Segments and Products
We manage our business based on the following reportable segments: (1) Hotels, Media & Platform and (2)
Experiences & Dining.
The Hotels, Media & Platform segment includes revenue generated from the following sources:
(cid:129)
(cid:129)
Tripadvisor-branded Hotels Revenue. Our largest source of Hotels, Media & Platform segment revenue
is generated from click-based advertising on Tripadvisor-branded websites, which is primarily
comprised of contextually-relevant booking links to our travel partners’ websites. Our click-based travel
partners are predominantly OTAs and direct suppliers in the hotel category. Click-based advertising is
generally priced on a cost-per-click, or “CPC”, basis, with payments from travel partners determined by
the number of travelers who click on a link multiplied by the CPC rate for each specific click. CPC rates
are determined in a dynamic, competitive auction process, also known as our hotel metasearch auction,
where our travel partner CPC bids for rates and availability to be listed on our site are submitted. We
also offer subscription-based advertising to hotel partners, owners of B&Bs and other specialty lodging
properties, enabling subscribers to advertise their businesses on our websites, as well as manage and
promote their website URL, email address, phone number, special offers and other information related
to their business. Subscription-based advertising services are predominantly sold for a flat fee for a
contracted period of time of one year or less. We also offer travel partners the opportunity to advertise
and promote their business through hotel sponsored placements on our websites. This service is
generally priced on a CPC basis, with payments from travel partners determined by the number of
travelers who click on the sponsored link multiplied by the CPC rate for each specific click. CPC rates
for hotel sponsored placements that our travel partners pay are based on a pre-determined contractual
rate. In addition, transaction revenue is generated from our hotel instant booking feature, which enables
hotel shoppers to book directly with a travel partner, with the latter serving as the merchant of record for
the transaction, without leaving our website. We earn a commission from our travel partners for each
traveler that completes a hotel reservation on our website based on a pre-determined contractual
commission rate.
Tripadvisor-branded Display and Platform Revenue. We offer travel partners the ability to promote
their brands in a contextually-relevant manner through a variety of display-based advertising placements
on our websites. Our display-based advertising clients are predominantly direct suppliers of hotels, air
travel and cruises, as well as destination marketing organizations. Other display advertising partners
include OTAs and other travel-related businesses, as well as advertisers from non-travel categories.
Display-based advertising is sold predominantly on a cost per thousand impressions, or CPM, basis.
The Experiences & Dining segment includes revenue generated from the following sources:
(cid:129)
Experiences. We provide information and services that allow consumers to research and book activities
and attractions in popular travel destinations both through Viator, our dedicated Experiences offering,
and on our Tripadvisor website and mobile apps. We also power travel activities and experiences
booking capabilities to consumers on affiliate partner websites, including some of the world’s top
airlines, hotel chains, and online and offline travel agencies. We work with local tour or travel
3
activities/experiences operators (“the supplier”) to provide consumers the ability to book tours, activities
and experiences (“the activity”) in popular destinations worldwide. We generate commissions for each
booking transaction we facilitate through our online reservation system. To a lesser extent, we earn
commissions from affiliate partners, or third-party merchant partners who display and promote on their
websites the supplier activities available on our platform to generate bookings.
(cid:129) Dining. We provide information and services for consumers to research and book restaurants in popular
travel destinations through our dedicated restaurant reservations offering, TheFork, and on our
Tripadvisor-branded websites and mobile apps. TheFork is an online restaurant booking platform
operating on a number of websites (including www.thefork.com, www.lafourchette.com,
www.eltenedor.com, www.restorando.com and www.bookatable.co.uk), with a network of restaurant
partners located primarily across the United Kingdom (the “U.K.”), Europe, Australia, and South
America. We primarily generate transaction fees (or per seated diner fees) that are paid by restaurants
for diners seated primarily from bookings through TheFork’s online reservation system. To a lesser
extent, we also generate subscription fees for subscription-based advertising to restaurants, access to
certain online reservation management services, marketing analytic tools, and menu syndication services
provided by TheFork and Tripadvisor. In addition, we also offer restaurant partners the opportunity to
advertise and promote their business through restaurant media advertising placements on our website.
This service is generally priced on a CPC basis, with payments from restaurant partners determined by
the number of users who click on the sponsored link multiplied by the CPC rate for each specific click.
CPC rates for media advertising placements that our restaurant partners pay are based on a pre-
determined contractual rate.
Other is a combination of our Rentals, Flights/Cruises/Car, SmarterTravel, and Tripadvisor China business
units and is not considered a reportable segment. Other includes revenue generated from the following sources:
(cid:129) Our Rentals offering provides information and services that allow travelers to research and book
vacation and short-term rental properties, including full homes, condominiums, villas, beach properties,
cabins and cottages. Rentals generates revenue primarily by offering individual property owners and
managers the ability to list their properties on our websites and mobile apps thereby connecting with
travelers through a free-to-list, commission-based option or, to a lesser extent, by an annual
subscription-based fee structure. These properties are listed on www.flipkey.com,
www.holidaylettings.co.uk, www.housetrip.com, www.niumba.com, www.vacationhomerentals.com,
and on our Tripadvisor-branded websites and mobile apps. In addition, Other also includes revenue
generated from flights, cruise, and car offerings on Tripadvisor, as well as revenue from non-
Tripadvisor-branded websites not otherwise described above, such as www.bookingbuddy.com,
www.cruisecritic.com, www.onetime.com and www.smartertravel.com, and Tripadvisor China, which
primarily includes click-based advertising and display-based advertising revenue.
For further information regarding our segments, including a change in reportable segments during 2019,
financial information, and the principal revenue streams within these segments, refer to “Note 1: Organization and
Business Description” and “Note 18: Segment and Geographic Information” in the notes to our consolidated
financial statements in Item 8 on this Annual Report on Form 10-K.
Seasonality
Consumers’ travel expenditures follow a seasonal pattern. Correspondingly, travel partners’ advertising
investments and, therefore, our revenue and profits, also follow a seasonal pattern. Our financial performance tends
to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in
consumer demand, traveler hotel and rental stays, and travel activities and experiences taken, compared to the first
and fourth quarters, which represent seasonal low points. Significant shifts in our business mix or adverse economic
conditions could result in future seasonal patterns that are different from historical trends.
Our Growth Strategy
Phocuswright, an independent travel, tourism and hospitality research firm, estimates the annual global travel
market (not including dining) at $1.7 trillion of bookings and we believe that Tripadvisor’s influence in the travel
4
ecosystem remains significant. Our growth strategy aims to increase revenue by deepening customer engagement on
our platform by pursuing the following key strategies, including:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
continue building products that reduce friction throughout the travel planning and trip-taking journey and
delight travelers;
deepen consumer engagement with our platform (including, but not limited to, membership growth,
mobile app engagement and overall repeat usage);
invest in technology to further improve our customer and supplier experiences;
deepen travel partner engagement with our platform by expanding the number of products and services
we offer;
invest in and grow certain categories where we lead the broader travel market today and/or can leverage
unique assets, such as hotel business to business (“B2B”) services, media advertising, experiences and
restaurants;
leverage our technological and operational efficiencies; and
opportunistically pursue strategic acquisitions.
Marketing and Competition
We compete with other companies in attractive, rapidly evolving categories of the travel industry. In these
areas, we compete for content, traffic, advertising dollars and, more generally, to attract and retain our users’
attention, both in terms of reach and engagement. Since our products and those of our competitors are typically free,
we compete based on our brand, the quality and nature of our product offerings and our online travel search and
price comparison services (or metasearch), rather than on price. As such, we invest heavily in constantly improving
our user experience and expanding content, listings and bookable inventory.
We also invest to amplify our global brand and raise consumer awareness of, and engagement with, our end-
to-end product offerings. We leverage a number of online and offline marketing channels, including online search
engines (primarily Google), social media, email and brand advertising (primarily television advertising). The
relative success of our marketing strategy is more measurable on some of these channels than others, and can be
influenced by changes that we, our travel partners, or our competitors make to our respective products and
marketing strategies. During 2019, our total advertising expense was approximately $423 million, primarily driven
by investments in online search engines, and to a lesser extent, investments in offline marketing channels, which
was primarily television advertising. We intend to continue to promote brand awareness through both online and
offline advertising efforts. We compete globally with both online and offline, established and emerging, providers of
travel, lodging, experiences and restaurant reservation and related services. The markets for the services we offer are
intensely competitive, and current and new competitors can launch new services at a relatively low cost.
We also compete with different types of companies in the various markets and geographies where we operate,
including large and small companies in the travel space as well as broader service providers. More specifically:
(cid:129)
In our Hotels, Media & Platform segment, we compete, and in some cases partner, with the following
businesses:
o OTAs (including Expedia Group, Inc., or “Expedia”, Booking Holdings, Inc., or “Booking”,
Trip.com Group Limited (formerly known as Ctrip.com International, Ltd) and their
respective subsidiaries and operating companies);
o
o
o
hotel metasearch providers (including Google, trivago (a subsidiary of Expedia), Kayak and
HotelsCombined (subsidiaries of Booking));
large online search, social media, and marketplace platforms and companies (including
Google, Facebook, Microsoft’s Bing, Yahoo, Baidu, Alibaba, and Amazon);
traditional offline travel agencies; and
5
o
global hotel chains seeking to promote direct bookings.
(cid:129) We also compete with offerings in our Experiences & Dining segment. Experiences competes with
online travel agencies, such as Airbnb, Booking, GetYourGuide and Klook; traditional travel agencies;
online travel service providers; and wholesalers, among others. Dining competes with other online
restaurant reservation services, such as SeatMe (owned by Yelp) and OpenTable (a subsidiary of
Booking).
Commercial Relationships
We have a number of commercial relationships that are important to the success of our business. Although
these relationships are memorialized in agreements, many of these agreements are for limited terms or are
terminable at will or on short notice. As a result, we seek to ensure the mutual success of these relationships.
We have commercial relationships with a majority of the world’s leading OTAs, as well as thousands of other
travel partners, pursuant to which these companies primarily purchase traveler leads from us, generally on a click-
based advertising basis. For the years ended December 31, 2019, 2018 and 2017 our two most significant travel
partners were Expedia Group, Inc. and Booking Holdings, Inc., which each accounted for more than 10% of our
consolidated revenue and together accounted for approximately 33%, 37% and 43% of our consolidated revenue,
respectively. Nearly all of this concentration of revenue is recorded in the Tripadvisor-branded Hotels revenue line
within our Hotels, Media & Platform segment for these reporting periods.
Operations and Technology
We have assembled a team of highly skilled software engineers, computer scientists, data scientists, network
engineers and systems engineers whose expertise spans a broad range of technical areas, including a wide variety of
open source operating systems, databases, languages, analytics, networking, scalable web architecture, operations
and warehousing technologies. We make significant investments in product and feature development, data
management, personalization technologies, scalable infrastructures, networking, data warehousing, and search
engine technologies.
Our systems infrastructure for Tripadvisor-branded websites is housed at two geographically separate facilities
and hosted by Amazon Web Services. Our infrastructure installations have multiple communication links as well as
continuous monitoring and engineering support. Each facility is fully self-sufficient and operational with its own
hardware, networking, software and content, and is structured in an active/passive, fully redundant configuration.
Substantially all of our software components, data, and content are replicated in multiple datacenters and
development centers, as well as backed up at offsite locations. Our systems are monitored and protected though
multiple layers of security. Several of our individual subsidiaries and businesses have their own data infrastructure
and technology teams.
Intellectual Property
Our intellectual property, including patents, trademarks, copyrights, domain names, trade dress, proprietary
technology and trade secrets, is an important component of our business. We rely on our intellectual property rights
in our content, proprietary technology, software code, ratings indexes, databases of reviews and forum content. We
have acquired some of our intellectual property rights through licenses and content agreements with third parties and
these arrangements may place restrictions on the use of our intellectual property.
We protect our intellectual property by relying on our terms of use, confidentiality agreements and contractual
provisions, as well as on international, national, federal, state and common law rights. We protect our brands by
pursuing the trademark registration of our core brands, as appropriate, maintaining our trademark portfolio, securing
contractual trademark rights protection when appropriate, and relying on common law trademark rights when
appropriate. We also register copyrights and domain names as deemed appropriate. Additionally, we protect our
trademarks, domain names and copyrights with the use of intellectual property licenses and an enforcement
program.
6
We have considered, and will continue to consider, the appropriateness of filing for patents to protect future
inventions, as circumstances may warrant. However, many patents protect only specific inventions and there can be
no assurance that others may not create new products or methods that achieve similar results without infringing upon
patents owned by us.
In connection with our copyrightable content, we post and institute procedures under the U.S. Digital
Millennium Copyright Act and similar “host privilege” statutes worldwide to gain immunity from copyright liability
for photographs, text and other content loaded on our sites by users. However, differences between statutes,
limitations on immunity, and moderation efforts in the many jurisdictions in which we operate may affect our ability
to claim immunity.
From time to time, we may be subject to legal proceedings and claims in the ordinary course of our business,
including claims of alleged infringement by us of the trademarks, copyrights, patents, and other intellectual property
rights of third parties. In addition, litigation may be necessary in the future to enforce our intellectual property
rights, protect our trade secrets or determine the validity and scope of proprietary rights claimed by others. Any
such litigation, regardless of outcome or merit, could result in substantial costs and diversion of management and
technical resources, any of which could materially harm our business.
Regulation
We are subject to a number of laws and regulations that affect companies conducting business on the internet
and relating to the travel industry, the vacation rental industry and the provision of travel services. As we continue
to expand the reach of our brands into additional international markets, we are increasingly subject to additional
laws and regulations. This includes laws and regulations regarding, among other matters, consumer privacy, libel,
rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other
communications, consumer protection, taxation, online payment services, competition and protection of minors.
These laws and regulations are constantly evolving and can be subject to significant change. Many of these laws and
regulations are being tested in courts, and could be interpreted by regulators and courts in ways that could harm our
business. In addition, the application and interpretation of these laws and regulations is often uncertain, particularly
in the new and rapidly-evolving industry in which we operate.
In addition, we provide advertising data and information and conduct marketing activities that are subject to
consumer protection laws that regulate unfair and deceptive practices, domestically and internationally, including, in
some countries, pricing display requirements, licensing and registration requirements and industry specific value-
added tax regimes. The United States (as well as individual states), the European Union (as well as member states)
and other countries have adopted legislation that regulates certain aspects of the internet, including online editorial
and user-generated content, data privacy, behavioral targeting and online advertising, taxation, and liability for third-
party activities. It is difficult to accurately predict how such legislation will be interpreted and applied or whether
new taxes or regulations will be imposed on our services, and whether or how we might be affected. Increased
regulation of the internet could increase the cost of doing business or otherwise materially adversely affect our
business, financial condition or operating results.
We are subject to laws that require protection of user privacy and user data. As our business has evolved, we
have begun to receive and store a greater volume of personally identifiable data. This data is increasingly subject to
laws and regulations in numerous jurisdictions around the world. For example, the European Union, in May 2018,
adopted the General Data Protection Regulation, or GDPR, which requires companies, including ours, to meet
enhanced requirements regarding the handling of personal data. In addition, the State of California adopted the
Consumer Privacy Protection Act which became effective January 1, 2020 and also enhances privacy rights and
consumer protection for residents of California. In addition, similar laws have been adopted or are currently under
discussion in other jurisdictions. The enactment, interpretation and application of these laws is still in a state of flux.
7
Also, on June 23, 2016, the U.K. passed a referendum to exit the European Union, known as Brexit, and the
U.K. ceased to be a member of the EU on January 31, 2020. The EU and U.K. will continue to work on the terms of
the departure through a transition period ending December 31, 2020. Since the final terms of the U.K.’s exit from
the European Union remain uncertain, we are unable to predict the effect Brexit will have on our business and
results of operations; however, we will likely face new regulatory costs and challenges if the U.K. regulations
diverge from those of the European Union.
Corporate History, Equity Ownership and Voting Control
Tripadvisor was co-founded in February 2000 by Stephen Kaufer, our current Chief Executive Officer and
President. In April 2004, Tripadvisor was acquired by IAC/InterActiveCorp, or IAC. In August 2005, IAC spun-off
its portfolio of travel brands, including Tripadvisor, into Expedia, at the time a separate newly-formed Delaware
corporation. On December 20, 2011 Expedia completed a spin-off of Tripadvisor into a separate publicly-traded
Delaware corporation. We refer to this second spin-off transaction as the “Spin-Off.” Following the Spin-Off, on
December 21, 2011, Tripadvisor began trading on The NASDAQ Global Select Market, or NASDAQ, as an
independent public company under the trading symbol “TRIP.”
On December 11, 2012, Liberty Interactive Corporation, or Liberty, purchased an aggregate of approximately
4.8 million shares of common stock of Tripadvisor from Barry Diller, our former Chairman of the Board of
Directors and Senior Executive, and certain of his affiliates. As a result, Liberty beneficially owned approximately
18.2 million shares of our common stock and 12.8 million shares of our Class B common stock.
On August 27, 2014, the entire beneficial ownership of our common stock and Class B common stock held by
Liberty was acquired by Liberty Tripadvisor Holdings, Inc., or LTRIP. Simultaneously, Liberty, LTRIP’s former
parent company, distributed, by means of a dividend, to the holders of its Liberty Ventures common stock, Liberty’s
entire equity interest in LTRIP. We refer to this transaction as the “Liberty Spin-Off”. As a result of the Liberty
Spin-Off, effective August 27, 2014, LTRIP became a separate, publicly traded company holding 100% of Liberty’s
interest in Tripadvisor.
As a result of these transactions, as of December 31, 2019, LTRIP beneficially owned approximately 18.2
million shares of our common stock and 12.8 million shares of our Class B common stock, which constitute 14.6%
of the outstanding shares of common stock and 100% of the outstanding shares of Class B common stock. Assuming
the conversion of all of LTRIP’s shares of Class B common stock into common stock, LTRIP would beneficially
own 22.5% of the outstanding common stock. Because each share of Class B common stock is entitled to ten votes
per share and each share of common stock is entitled to one vote per share, LTRIP may be deemed to beneficially
own equity securities representing 57.9% of our voting power.
Employees
As of December 31, 2019, we had 4,194 employees. Of these employees, 45% were based in the United States.
We believe we have good relationships with our employees, including relationships with employees represented by
international works councils or other similar organizations.
Additional Information
We maintain a corporate website at ir.tripadvisor.com. Except as explicitly noted, the information on our
website, as well as the websites of our various brands and businesses, is not incorporated by reference in this Annual
Report on Form 10-K, or in any other filings with, or in any information furnished or submitted to, the SEC.
On our Investor Relations website (http://ir.tripadvisor.com/investor-relations), we provide our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to
these reports free of charge. These reports are available on our website as soon as reasonably practicable after we
electronically file or furnish these reports to the SEC or publish through press releases, public conference calls and
certain webcasts. All documents filed electronically with the SEC (including reports, proxy and information
statements and other information) are also available at www.sec.gov. Investors and others should be aware that we
8
use our investor relations website (http://ir.tripadvisor.com/investor-relations) to announce material financial
information to our investors as well as communicate with the public about our company, our results of operations
and other information.
We post our code of business conduct and ethics, which applies to all employees, including all executive
officers, senior financial officers and directors, on our corporate website at www.tripadvisor.com. We intend to
disclose any waivers of the code of ethics for our executive officers, senior financial officers or directors, on our
corporate website.
Item 1A. Risk Factors
You should consider carefully the risks described below together with all of the other information included in
this Annual Report as they may impact our business, results of operations and/or financial condition. The risks and
uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known
to us or that we currently believe are immaterial may also impair our business, results of operations or financial
condition. If any of the following risks occur, our business, financial condition, operating results and cash flows
could be materially adversely affected.
Risks Related to Our Business and Industry
If we are unable to continue to attract a significant amount of visitors to our websites and mobile apps, to cost-
effectively convert these visitors into revenue-generating users and to continue to engage our users, our revenue,
financial results and business could be harmed.
Our long-term success depends on our continued ability to attract a significant number of visitors to our
platforms in a cost-effective manner, to convert those visitors into consumers and then to continue to engage those
consumers throughout the travel planning, booking and trip-taking phases. Our traffic and user engagement could be
adversely affected by a number of factors, including but not limited to, increased competition; inability to provide
quality content, inventory or supply to our consumers; declines or inefficiencies in traffic acquisition; reduced
awareness of our brands; and macroeconomic conditions. Certain of our competitors have advertising campaigns
expressly designed to drive traffic directly to their websites, and these campaigns may negatively impact traffic to
our site. Our traffic growth could decline over time and our success could become increasingly dependent on our
ability to increase levels of user engagement on our platform. There can be no assurances that we will continue to
provide content and products in a manner that meets rapidly changing demand. Any failure to obtain and manage
content and products in a cost-effective manner that will engage users, or any failure to provide content and products
that are perceived as useful, reliable and trustworthy, could adversely affect user experiences and their repeat
behavior, reduce traffic to our websites and negatively impact our business and financial performance.
We rely on internet search engines and application marketplaces to drive traffic to our platform, certain
providers of which offer products and services that compete directly with our products. If links to our websites
and apps are not displayed prominently, traffic to our platform could decline and our business would be
negatively affected.
We rely heavily on internet search engines to generate a significant amount of traffic to our websites,
principally through SEM (i.e., the purchase of travel-related keywords) as well as through SEO (i.e., free, or organic,
search). The number of consumers we attract from search engines to our platform is due in large part to how and
where information from, and links to, our websites are displayed on search engine results pages, or SERPs. The
display, including rankings, of search results can be affected by a number of factors, many of which are not in our
control and may change frequently. Search engines frequently update and change the logic that determines the
placement and display of the results of a user’s search, such that the purchased or algorithmic placement of links to
our websites can be negatively affected. In addition, a search engine could, for competitive or other purposes, alter
its search algorithms or results causing our websites to place lower in search query results. If a major search engine
changes its algorithms in a manner that negatively affects the search engine ranking of our websites or those of our
travel partners, or if competitive dynamics impact the cost or effectiveness of SEO or SEM in a negative manner,
9
our business and financial performance would be adversely affected. Furthermore, our failure to successfully
manage our SEO and SEM strategies and/or other traffic acquisition strategies could result in a substantial decrease
in traffic to our websites, as well as increased costs to the extent we replace free traffic with paid traffic.
In some instances, search and metasearch companies and application marketplaces may change their displays
or rankings in order to promote their own competing products or services or the products or services of one or more
of our competitors. For example, Google, a significant source of traffic to our website accounting for a substantial
portion of the visits to our websites, frequently promotes its own competing products in its web search results, which
has negatively impacted placement of references to our company and our website on the SERP. Google’s promotion
of its own competing products, or similar actions by Google in the future that have the effect of reducing our
prominence or ranking on its search results, could have a substantial negative effect on our business and results of
operations.
We also rely on application marketplaces, or app stores such as Apple’s App Store and Google’s Play, to drive
downloads of our applications. In the future, Apple, Google or other marketplace operators may make changes to
their marketplaces that make access to our products more difficult. For example, Google has entered various aspects
of the online travel market, including by establishing a flight metasearch product and hotel metasearch product as
well as reservation functionality. Our applications may receive unfavorable treatment compared to the promotion
and placement of competing applications, such as the order in which they appear within marketplaces. Similarly, if
problems arise in our relationships with providers of application marketplaces, traffic to our site and our user growth
could be harmed.
We derive a substantial portion of our revenue from advertising and any significant reduction in spending by
advertisers or redirections of advertising spend could harm our business.
We derive a substantial portion of our revenue from the sale of advertising, primarily through click-based
advertising and, to a lesser extent, display-based and subscription-based advertising. We enter into advertising
contracts with our advertising partners; however, the agreement terms are generally limited to legal matters, with
campaign details and economics governed by insertion orders, and most of these contracts can be terminated by our
partners at will or on short notice. Our ability to grow advertising revenue with our existing or new advertising
partners is dependent in large part on our ability to generate revenue for them relative to other alternatives.
Advertisers will not continue to do business with us if their investment in such advertising does not generate sales
leads, customers, bookings, or revenue and profit on a cost-effective basis. Our ability to provide value to our
advertising partners depends on a number of factors, including effectiveness of online advertising, competitiveness
of our products, traffic quality, perception of our platform, availability and accuracy of analytics and measurement
solutions to demonstrate our value, and macroeconomic conditions, whether in the advertising industry generally,
among specific types of marketers or within particular geographies. We cannot guarantee that our current advertisers
will fulfill their obligations under existing contracts, continue to advertise beyond the terms of existing contracts or
enter into any additional contracts with us.
In addition, advertising revenue could be impacted by a number of other factors, including, but not limited to,
the following:
(cid:129) Our inability to increase or maintain user engagement;
(cid:129) Our inability to increase or maintain the quantity and quality of ads shown to consumers, including as a
result of technical infrastructure constraints;
(cid:129)
(cid:129)
The development of technologies that can block the display of our ads or block our ad measurement
tools, particularly for advertising displayed on tablets and/or on mobile platforms;
The effectiveness of our ad targeting or degree to which consumers opt out of certain types of ad
targeting;
(cid:129) Adverse government actions or legal developments relating to advertising, including legislative and
regulatory developments and developments in litigation that limit our ability to deliver or target
advertising; and
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(cid:129)
The impact of macroeconomic conditions, whether in the advertising industry in general or among
special types of marketers or within particular geographies.
The occurrence of any of these or other factors could result in a reduction in demand for our ads, which may
reduce the prices we receive for our ads, or cause marketers to stop advertising with us altogether, either of which
would negatively affect our revenue and financial results.
Click-based advertising revenue accounts for the majority of our advertising revenue. Our CPC pricing for
click-based advertising depends, in part, on competition between advertisers. If our large advertisers become less
competitive with each other, merge with each other or with our competitors, focus more on per-click profit than on
traffic volume, or are able to reduce CPCs, this could have an adverse impact on our click-based advertising revenue
which would, in turn, have an adverse effect on our business, financial condition and results of operations.
We rely on a relatively small number of significant advertising partners and any reduction in spending by or loss
of these partners could seriously harm our business.
We derive a substantial portion of our revenue from a relatively small number of advertising partners and rely
significantly on our relationships. For example, for the year ended December 31, 2019, our two most significant
advertising partners, Expedia and Booking (and their subsidiaries), accounted for a combined 33% of total revenue.
While we enter into master advertising contracts with our partners, as discussed above, most of these contracts can
be terminated by our partners at will or on short notice. If any of our significant advertisers were to cease or
significantly curtail advertising on our websites, we could experience a rapid decline in our revenue over a relatively
short period of time which would have a material impact on our business.
Our business depends on a strong brand and any failure to maintain, protect and enhance our brand could hurt
our ability to retain and expand our base of consumers and partners, as well as increase the frequency with
which consumers utilize our products and services.
We believe that the strength of our brands (particularly the Tripadvisor brand) has contributed significantly to
our success. We also believe that maintaining, protecting and enhancing our brands is critical to expanding our base
of consumers, increasing the frequency with which consumers utilize our solutions and attracting advertisers and
business partners. Our ability to maintain and protect our brand depends, in part, on our ability to maintain consumer
trust in our products and in the quality, integrity, reliability of usefulness of the content and other information found
on our platform. For example, if consumers do not view our reviews to be useful and reliable, they may seek other
sources to obtain the information they are looking for and may not return to our platform as often in the future, or at
all. This would negatively impact our ability to attract and retain consumers and partners and the frequency with
which they use our platform. We dedicate significant resources to these goals, primarily through our computer
algorithms and teams of moderators that are focused on identifying inappropriate, unreliable or deceptive content.
We remove those types of content from our website and, in certain cases, take legal action against individuals or
businesses that we believe have engaged in deceptive practices.
Media, legislative, or regulatory scrutiny of our decisions regarding user privacy, content, advertising, and
other issues may adversely affect our reputation and brands. Negative publicity about our company, including our
content, technology, business practices or strategic plans, could diminish our reputation and confidence in our brand,
thereby negatively affecting the use of our products and potentially even our share price. For example, certain media
outlets have alleged that we have improperly filtered or screened reviews, that we have not properly verified reviews,
or that we manipulate reviews, ranking and ratings in favor of our advertisers against non-advertisers. We expend
significant resources to ensure the integrity of our reviews and to ensure that the most relevant reviews are available
to our consumers; we do not establish rankings and ratings in favor of our advertisers. Nevertheless, our reputation
and brand, the traffic to our platform, our business and potentially even our share price may suffer from negative
publicity about our company or if consumers otherwise perceive that our content is manipulated or biased. In
addition, regulatory inquiries or investigations require management time and attention and could result in further
negative publicity, regardless of their merits or ultimate outcomes.
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In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection,
product changes, competitive pressures, litigation or regulatory activity could adversely affect our reputation with
our consumers and our partners. Such negative publicity also could have an adverse effect on the size, engagement,
and loyalty of our user base and result in decreased revenue.
We continue to invest significant time and effort towards educating users about our brand and our product
offerings and there can be no assurances that these efforts will continue to be successful.
In an effort to enhance our brand we invest significantly in brand marketing including, but not limited to,
television advertising. We expect these investments to continue, and potentially even increase, as a result of a
variety of factors, including relatively high levels of advertising spending by competitors, the increasing costs of
supporting multiple brands, expansion into new geographies, product positioning where our brands are less well
known, and the continued emergence and relative traffic share growth of search engines as destination sites for
travelers. We expect to continue our television advertising campaign and to adjust our marketing efforts and spend
among the different marketing channels, in each case as we think appropriate based on the relative growth
opportunity, the expected returns and the competitive environment in the different segments and businesses in which
we operate.
Such efforts may not maintain or enhance consumer awareness of our brands and, even if we are successful in
our branding efforts, such efforts may not be cost-effective or as efficient as they have been historically. If we are
unable to maintain or enhance consumer awareness of our brands or to generate demand in a cost-effective manner,
it would have a material adverse effect on our business and financial performance. In addition, there are no
assurances that these actions will have a positive impact on our marketing efficiencies or operating margins or when
the financial benefit expected to result from these efforts will exceed the costs of such efforts. Furthermore, some of
our current and potential competitors have access to significantly greater and more diverse resources than we do,
and they may also be able to leverage other aspects of their businesses to enable them to compete more effectively
with us.
Consumer adoption and use of mobile devices creates new challenges. If we are unable to operate effectively on
these platforms or our products for such devices are not compelling, our business may be adversely affected.
Widespread adoption of mobile devices, such as the iPhone, Android-enabled smartphones and tablets such as
the iPad, coupled with web browsing functionality and development of thousands of useful apps available on these
devices, is driving substantial online traffic and commerce to mobile platforms. We have experienced a significant
shift of business to mobile platforms and our advertising partners are also experiencing a rapid shift of traffic to
mobile platforms. We anticipate that the rate of use of these devices will continue to grow. The functionality and
user experience associated with these alternative devices, such as a smaller screen size or lack of a screen, may make
the use of our platform through such devices more difficult. Our websites and apps, when utilized on mobile phone
devices, monetize at a significantly lower rate than desktops and advertising opportunities are more limited on these
mobile devices. Additionally, consumer purchasing patterns differ on alternative devices. For example,
accommodation reservations made on a mobile device typically are for shorter lengths of stay and are not made as
far in advance. Mobile consumers may also be unwilling to download multiple apps from multiple companies
providing similar services or contribute high quality content through such devices. As a result, the consumer
experience with mobile apps and brand recognition are likely to become increasingly important. We expect that the
ways in which consumers engage with our platform will continue to change over time as consumers increasingly
engage via alternative devices.
It is increasingly important for us to develop and maintain effective platforms to drive adoption and user
engagement by providing consumers with an appealing, easy-to-use experience. As new devices and platforms are
continually being released, it is difficult to predict the problems we may encounter in adapting our products and
services to them – and developing competitive new products and services - and we may need to devote significant
resources to the creation, support and maintenance of such products. If we are unable to continue to rapidly innovate
and create new, user-friendly and differentiated offerings and efficiently and effectively advertise and distribute on
these platforms, or if our offerings are not used by consumers, we could lose market share and our business, future
growth and results of operations could be adversely affected.
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Our success will also depend on the interoperability of our products with a range of technologies, systems,
networks and standards or in creating, maintaining and developing relationships with key participants in related
industries, some of which may be our competitors. For example, Google’s Android and Apple’s iPhone are the
leading smartphones in the world; therefore, our products need to synergistically function on their respective
operating systems in order to create a positive user experience on a mobile device. However, Google could leverage
its Android operating system to give its travel services a competitive advantage, either technically or with
prominence on its Google Play app store or within its mobile search results. Similarly, Apple obtained a patent for
“iTravel,” a mobile app that would allow a traveler to check in for a travel reservation. In addition, Apple’s iPhone
operating system includes “Wallet,” a virtual wallet app that holds tickets, boarding passes, coupons and gift cards,
and, along with iTravel, may be indicative of Apple’s intent to enter the travel reservations business in some
capacity. Apple has substantial market share in the smartphone category and controls integration of offerings,
including travel services, into its mobile operating system. Apple also has more experience producing and
developing mobile apps and has access to greater resources than we do. Apple may use or expand iTravel, Wallet,
Siri (Apple’s voice recognition “concierge” service), Apple Pay (Apple’s mobile payment system) or another mobile
app or functionality as a means of entering the travel reservations marketplace. To the extent Google or Apple use
their mobile operating systems, app distribution channels or, in the case of Google, search services, to favor their
own travel service offerings, there may be an adverse effect on our ability to compete in the mobile space.
We may not be successful in developing products that operate effectively with these technologies, systems,
networks and standards or in creating, maintaining and developing relationships with key participants in related
industries. If we experience difficulties or increased costs in integrating our products into alternative devices, or if
manufacturers elect not to include our products in their devices, make changes that degrade the functionality of our
products, give preferential treatment to competitive products or prevent us from delivering advertising, our user
growth and results of operations may be harmed. This risk may be exacerbated by the frequency with which
consumers change or upgrade their devices. In the event consumers choose devices that do not already include or
support our platform or do not install our products when they change or upgrade their devices, our traffic and user
engagement may be harmed.
In addition, the market for advertising products on mobile and other devices is rapidly evolving. As new
devices and platforms are released, consumers may begin consuming content in a manner that is more difficult to
monetize. Similarly, as advertising products for mobile and other platforms develop, demand may increase for
products that we do not offer or that may alienate our user base, which we must balance against our commitment to
prioritizing the quality of user experience over short-term monetization. If we are not able to balance these
competing considerations successfully to develop compelling advertising products, advertisers may stop or reduce
their advertising with us and we may not be able to generate meaningful revenue from alternative devices despite the
expected growth in their usage.
Declines or disruptions in the economy in general and travel industry, in particular, could adversely affect our
businesses and financial performance.
Our businesses and financial performance are affected by the health of the global economy generally as well
as the travel industry and leisure travel in particular. Sales of travel services tend to decline or grow more slowly
during economic downturns and recessions when consumers engage in less discretionary spending, are concerned
about unemployment or economic weakness, have reduced access to credit or experience other concerns that reduce
their ability or willingness to travel. The global economy may be adversely impacted by unforeseen events beyond
our control including incidents of actual or threatened terrorism, regional hostilities or instability, unusual weather
patterns, natural disasters, political instability and health concerns (including epidemics or pandemics), defaults on
government debt, significant increases in fuel and energy costs, tax increases and other matters that could reduce
discretionary spending, tightening of credit markets and declines in consumer confidence. Decreased travel spending
could reduce the demand for our services and have a negative impact on our business and financial performance. In
addition, the uncertainty of macro-economic factors and their impact on consumer behavior, which may differ across
regions, makes it more difficult to forecast industry and consumer trends and the timing and degree of their impact
on our markets and business, which in turn could adversely affect our ability to effectively manage our business and
our results of operations.
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For example, since the U.K. initiated the process to exit the European Union, known as Brexit, global markets
and foreign exchange rates have experienced increased volatility, including a decline in the value of the British
pound as compared to the U.S. Dollar. We have significant operations in both the U.K. and the European Union. Our
operations and those of our merchants are highly integrated across the U.K. and the European Union and are highly
dependent on the free flow of labor and goods in those regions. Although the U.K. ceased to be a member of the E.U.
on January 31, 2020, the U.K. and E.U. will continue to work on the terms of the departure through a transition
period ending December 31, 2020. As a result, there remains significant uncertainty about the future relationship
between the U.K. and the E.U. The ongoing uncertainty and potential outcomes could negatively impact our
merchant and customer relationships and financial performance. In addition, uncertainty could continue to adversely
affect consumer confidence and spending in the U.K. We could face new regulatory costs and challenges when the
final terms of the governing relationships and final U.K. regulations are determined. Since the final terms of that
exit and the U.K. regulatory environment are uncertain, we are unable to predict the effect Brexit will have on our
business and results of operations.
As another example, our financial results may be negatively impacted by the 2019 Novel Coronavirus
outbreak. The extent and duration of such impacts remain largely uncertain and dependent on future developments
that cannot be accurately predicted at this time, such as the severity and transmission rate of the coronavirus, the
extent and effectiveness of containment actions taken and the impact of these and other factors on travel behavior.
We operate in an increasingly competitive global environment and our failure to compete effectively could reduce
our market share and harm our financial performance.
We compete in a rapidly evolving and competitive industry. We face competition for content, consumers,
advertisers, online travel search and price comparison services, or what is known in the industry as metasearch, and
online reservations. We compete globally with both online and offline, established and emerging, providers of travel,
lodging, experiences and restaurant reservation and related services. The markets for the services we offer are
intensely competitive, and current and new competitors can launch new services at a relatively low cost.
We also compete with different types of companies in the various markets and geographies where we operate,
including large and small companies in the travel space as well as broader service providers. More specifically:
(cid:129)
In our Hotels, Media & Platform segment, we face competition from, and in some cases partner with,
the following businesses: OTAs (including Expedia and Booking and many of their respective
subsidiaries and operating companies); hotel metasearch providers (including trivago, Kayak and
HotelsCombined, subsidiaries of Booking, and Trip.com Group Limited, formerly known as Ctrip.com
International, Ltd); large online search, social media, and marketplace platforms and companies
(including Google, Facebook, Microsoft’s Bing, Yahoo, Baidu, Alibaba, and Amazon); and traditional
offline travel agencies; and global hotel chains seeking to promote direct bookings.
(cid:129) We also face competition from different companies in each of the offerings in our Experiences &
Dining segment. Experiences competes with online travel agencies, such as Airbnb, Booking,
GetYourGuide and Klook; traditional travel agencies; online travel service providers; and wholesalers,
among others. Dining competes with other online restaurant reservation services, such as SeatMe
(owned by Yelp) and OpenTable (a subsidiary of Booking).
There has been a proliferation of new channels through which providers can offer accommodations,
experiences and restaurant reservations. Metasearch services may lower the cost for new companies to enter the
market by providing a distribution channel without the cost of promoting the new entrant’s brand to drive consumers
directly to its website. Some of our competitors and potential competitors offer a variety of online services, many of
which are used by competitors more frequently than online travel services. In addition, in some cases, our
competitors are willing to make little or no profit on a transaction, or offer travel services at a loss, in order to gain
market share. Many of our competitors (such as Google, Booking and Trip.com Group Limited) have significantly
greater financial, technical, marketing and other resources than us and have more expertise in developing online
commerce and facilitating internet traffic as well as large client bases. They also have the ability to leverage other
aspects of their business to enable them to compete more effectively against us. For example, Google has entered
various aspects of the online travel market, including by establishing a flight metasearch product ("Google Flights")
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and a hotel metasearch product ("Google Hotel Ads") that are growing rapidly, as well as its "Book on Google"
reservation functionality and its Google Trips app.
In addition, Google and other large, established companies with substantial resources and expertise in
developing online commerce and facilitating internet traffic have launched travel or travel-related search,
metasearch and/or reservation booking services and may create additional inroads into online travel. Google's travel
metasearch services, Google Hotel Ads and Google Flights, are growing rapidly and have achieved significant
market share in a relatively short time. In addition, many of our competitors, including online search companies,
continue to expand their voice and artificial intelligence capabilities, which may provide them with a competitive
advantage in travel. We cannot assure you that we will be able to compete successfully against our current,
emerging and future competitors or on platforms that may emerge, or provide differentiated products and services to
our traveler base.
We compete with certain companies that we also do business with, including some of our click-based
advertising travel partners. The consolidation of our competitors and travel partners, including Expedia (through its
acquisitions of Orbitz, Travelocity, and HomeAway) and Booking (through its acquisitions of KAYAK and
OpenTable), may affect our relative competitiveness and our travel partner relationships. Competition and
consolidation could result in higher traffic acquisition costs, reduced margins on our advertising services, loss of
market share, reduced customer traffic to our websites and reduced advertising by travel companies on our websites.
As the industry shifts towards online travel services and the technology supporting it continues to evolve,
including platforms such as mobile phone and tablet computing devices, competition is likely to intensify.
Competition in our industry may result in pricing pressure, loss of market share or decreased user engagement, any
of which could adversely affect our business and financial performance.
We rely on information technology to operate our business and remain competitive, and any failure to adapt to
technological developments or industry trends could harm our businesses.
We depend on the use of sophisticated information technologies and systems for website and mobile apps,
supplier connectivity, communications, reservations, payment processing, procurement, customer service and fraud
prevention. Our future success depends on our ability to continuously improve and upgrade our systems and
infrastructure to meet rapidly evolving consumer trends and demands while at the same time maintaining the
reliability and integrity of our systems and infrastructure. We may not be able to maintain or replace our existing
systems or introduce new technologies and systems as quickly as we would like or in a cost-effective manner. We
may not be successful, or as successful as our competitors, in developing technologies and systems that operate
effectively across multiple devices and platforms in a way that is appealing to our consumers.
In addition, the emergence of alternative devices, such as mobile phones and tablets, and the emergence of
niche competitors who may be able to optimize products, services or strategies for such platforms, will require
additional investment in technology. New developments in other areas could also make it easier for competitors to
enter our markets due to lower up-front technology costs. Technology changes, including new devices, services and
home assistants, such as Amazon’s Alexa Voice and Google Home, and developing technologies, such as machine
learning and artificial intelligence, could negatively impact our business.
If we do not continue to innovate and provide products, services and features that are useful to users, we may not
remain competitive, and our business and financial performance could suffer.
Our success depends in part on continued innovation to provide products, features and services that make our
platform compelling to users and engage our consumers. Our competitors are continually developing innovations in
online travel-related services and features. As a result, we are continually working to improve our business model
and consumer experience in order to engage our consumers and drive user traffic and conversion rates. We have
invested, and expect to continue to invest, significant resources in developing and marketing these innovations. We
can give no assurances that the changes we make will yield the benefits we expect and will not have unintended or
adverse impacts that we did not anticipate. If we are unable to continue offering innovative products and services
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and quality features that users want to use, existing consumers may become dissatisfied and use competitors’
offerings and we may be unable to attract additional consumers, which could adversely affect our business and
financial performance.
Our dedication to making the user experience our highest priority may cause us to prioritize rapid innovation and
user experience over short-term financial results.
We strive to create the best experience for our users, providing them with the information, products and tools
to enable them to plan, book, and experience the perfect trip. We believe that in doing so we will increase our rates
of conversion, our revenue and, ultimately, our financial performance over the long-term. We have taken actions in
the past and may continue to make decisions in the future that have the effect of reducing our short-term revenue or
profitability if we believe that the decisions benefit the overall user experience. For example, we may introduce new
products or changes to existing products or the user experience that decrease rates of conversion but increases
revenue. In addition, our approach of putting users first may negatively impact our relationship with existing or
prospective partners. These actions and practices could result in a loss of partners, which in turn could harm our
results of operations. The short-term reductions in revenue or profitability could be more severe than we anticipate
or these decisions may not produce the long-term benefits that we expect, in which case our user growth and
engagement, our relationships with consumers and travel partners, and our business and results of operations could
be harmed. In addition, if new or enhanced products fail to engage users or if we are unsuccessful in our effort to
monetize these initiatives, we may fail to generate sufficient revenue, profit margin or other value to justify our
investments, in which case our business and results of operations would be adversely affected.
We are dependent upon the quality of traffic in our network to provide value to our partners, and any failure in
our ability to deliver quality traffic and/or the metrics to demonstrate the value of the traffic could have a
material adverse effect on the value of our websites to our partners and adversely affect our revenue.
We use technology and processes to monitor the quality of the internet traffic that we deliver to our partners
and have identified metrics to demonstrate the quality of that traffic. These metrics are used to not only identify the
value of advertising on our website but also to identify low quality clicks such as non-human processes, including
robots, spiders or other software; the mechanical automation of clicking; and other types of invalid clicks or click
fraud. Even with such monitoring in place, there is a risk that a certain amount of low-quality traffic, or traffic that
online advertisers deem to be invalid, will be delivered to such online advertisers. As a result, we may be required to
credit amounts owed to us by our partners. Furthermore, low-quality or invalid traffic may be detrimental to our
relationships with partners, and could adversely affect our advertising pricing and revenue.
We rely on assumptions and estimates and data to calculate certain of our key metrics, and real or perceived
inaccuracies in such metrics may harm our reputation and negatively affect our business.
We believe that certain metrics are key to our business. As both the industry in which we operate and our
businesses continue to evolve, so too might the metrics by which we evaluate our businesses and the company. In
addition, while the calculation of the metrics we use is based on what we believe to be reasonable estimates, our
internal tools are not independently verified by a third party and have a number of limitations and, furthermore, our
methodologies for tracking these metrics may change over time. For example, a single person may have multiple
accounts or browse the internet on multiple browsers or devices, some consumers may restrict our ability to
accurately identify them across visits, some mobile apps automatically contact our servers for regular updates with
no user action, and we are not always able to capture user information on all of our platforms. As such, the
calculations of our unique visitors may not accurately reflect the number of people actually visiting our
platforms. We continue to improve upon our tools and methodologies to capture data and believe that our current
metrics are accurate; however, the improvement of our tools and methodologies could cause inconsistency between
current data and previously reported data, which could confuse investors or lead to questions about the integrity of
our data. Also if the internal tools we use to track these metrics under-count or over-count performance or contain
algorithm or other technical errors, the data we report may not be accurate. Finally, we may, in the future, identify
new or other metrics that enable us to more accurately evaluate our business. Accordingly, readers should not place
undue reliance on these metrics.
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We rely on the performance of highly skilled personnel and, if we are unable to retain or motivate key personnel
or hire, retain and motivate qualified personnel, our business would be harmed.
Our future success is largely dependent on the talents and efforts of highly skilled individuals. In particular,
the contributions of Stephen Kaufer, our co-founder, Chief Executive Officer and President, the contributions of key
senior management and the contributions of software engineers and other technology professionals, are critical to
our overall management and the success of our business. We cannot ensure that we will be able to retain the
services of our existing key personnel and the loss of one or more of our key personnel could seriously harm our
business. We do not maintain any key person life insurance policies.
In addition, competition remains intense for well-qualified employees in certain aspects of our business,
including software engineers, developers, product management and development personnel, and other technology
professionals. Our continued ability to compete effectively depends on our ability to attract new employees and to
retain and motivate existing employees. As a global company, we aim to attract quality employees from all over the
world, so any restrictions on travel for professional or personal purposes may cause significant disruption to our
businesses or negatively affect our ability to attract and retain employees on a global basis. If we do not succeed in
attracting well-qualified employees or retaining or motivating existing employees, our business would be adversely
affected.
Acquisitions, investments, significant commercial arrangements and/or new business strategies could disrupt our
ongoing business and present new challenges and risks.
Our success will depend, in part, on our ability to expand our product offerings in order to grow our business
in response to changing technologies, user and travel partner demands and competitive pressures. As a result, we
have acquired, invested in and/or entered into significant commercial arrangements with a number of new
businesses in the past and our future growth may depend, in part, on future acquisitions, investments, commercial
arrangements and/or changes in business strategies. Such endeavors may involve significant risks and uncertainties,
including, but not limited to, the following:
(cid:129)
Expected and unexpected costs incurred in identifying and pursuing these endeavors, and performing
due diligence on potential targets that may or may not be successful;
(cid:129) Use of cash resources and incurrence of debt and contingent liabilities in funding these endeavors that
may limit other potential uses of our cash, including product development, stock repurchases, and/or
dividend payments;
(cid:129) Amortization expenses related to acquired intangible assets and other adverse accounting consequences;
(cid:129) Diversion of management’s attention or other resources from our existing business;
(cid:129) Difficulties and expenses in integrating the operations, products, technology, privacy protection systems,
information systems or personnel of the company, including the assimilation of corporate cultures;
(cid:129) Difficulties in implementing and retaining uniform standards, controls, procedures, policies and
information systems;
(cid:129)
(cid:129)
(cid:129)
The assumption of known and unknown debt and liabilities of the acquired company, including costs
associated with litigation, cybersecurity risks, and other claims relating to the acquired company;
Failure of any company which we have acquired, in which we have invested, or with which we have a
commercial arrangement, to achieve anticipated revenues, earnings or cash flows or to retain key
management or employees;
Failure to generate adequate returns on acquisitions and investments;
(cid:129) With respect to minority investments, limited management or operational control and reputational risk,
which risk is heightened if the controlling person in such case has business interests, strategies or goals
that are inconsistent with ours;
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(cid:129)
(cid:129)
Entrance into markets in which we have no direct prior experience and increased complexity in our
business;
Impairment of goodwill or other intangible assets such as trademarks or other intellectual property
arising from acquisitions; and
(cid:129) Adverse market reaction to acquisitions.
We have invested, and may in the future invest, in privately-held companies and these investments are
currently accounted for using the measurement alternative for equity investments without a readily determinable fair
value, which measure these investments at cost while subtracting any impairments, if any, plus or minus changes
resulting from observable price changes in orderly transactions for the identical or a similar investment of the same
issuer. Such investments are inherently risky in that such companies are typically at an early stage of development,
may have no or limited revenues, may not be or may never become profitable, may not be able to secure additional
funding or their technologies, services or products may not be successfully developed or introduced into the market.
Further, our ability to liquidate any such investments is typically dependent upon some liquidity event, such as a
public offering or acquisition, since no public market exists for such securities. Valuations of such privately-held
companies are inherently complex and uncertain due to the lack of liquid market for the company’s securities.
Moreover, we could lose the full amount of any of our investments and any impairment of our investments could
have a material adverse effect on our financial condition and results of operations.
We cannot assure you that these investments will be successful or that such endeavors will result in the
realization of the full benefits of synergies, cost savings, innovation and operational efficiencies that may be
possible or that we will achieve these benefits within a reasonable period of time.
If we fail to manage our growth effectively, our brand, results of operations and business could be harmed.
Over the years, we have experienced rapid growth in some areas of our business, including through
acquisitions of other businesses and in new international markets. We continue to make substantial investments in
our technology, product and sales, and marketing organizations. This growth places substantial demands on
management and our operational infrastructure. In addition, as our business matures, we make periodic changes and
adjustments to our organization in response to various internal and external considerations, including market
opportunities, the competitive landscape, new and enhanced products and acquisitions. These changes may result in
a temporary lack of focus or productivity or otherwise impact our business.
To manage our growth, we may need to improve our operational, financial and management systems and
processes which may require significant capital expenditures and allocation of valuable management and employee
resources. As we continue to grow, we must effectively integrate, develop and motivate a large number of new
employees, including employees in international markets, while maintaining the beneficial aspects of our company
culture. If we do not manage the growth of our business and operations effectively, the quality of our platform and
efficiency of our operations could suffer, which could harm our brand, results of operations and business.
Risks Related to Legal and Regulatory Matters
We are a global company that operates in many different jurisdictions and these operations expose us to
additional risks, which risks increase as our business continues to expand.
We operate in a number of jurisdictions both inside and outside of the United States and continue to expand
our operations both domestically and internationally. Many regions have different economic conditions, languages,
currencies, consumer expectations, legislation, regulatory environments (including labor laws and customs), tax
laws, levels of consumer acceptance and use of the internet for commerce and levels of political stability. We are
subject to associated risks typical of global businesses, including, but not limited to, the following:
(cid:129) Compliance with additional laws and regulations (including the Foreign Corrupt Practices Act, the U.K.
Bribery Act, the EU General Data Protection Regulation (or GDPR) and the California Consumer
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Privacy Act (or CCPA)), data privacy requirements, labor and employment law, laws regarding
advertisements and promotions and anti-competition regulations;
(cid:129) Diminished ability to legally enforce contractual rights;
(cid:129) Increased risk and limits on enforceability of intellectual property rights;
(cid:129) Restrictions on repatriation of cash as well as restrictions on investments in operations in certain
countries;
(cid:129) Financial risk arising from transactions in multiple currencies as well as foreign currency exchange
restrictions;
(cid:129) Difficulties in managing staff and operations due to distance, time zones, language and cultural
differences;
(cid:129) Uncertainty regarding liability for services, content and intellectual property rights, including
uncertainty as a result of local laws and lack of precedent;
(cid:129) Economic or political instability or laws and regulations involving economic or trade prohibitions or
sanctions; and
(cid:129) Threatened or actual acts of terrorism.
Our strategy includes continued expansion in existing international and new international markets. Many of
these markets have different economic conditions, customers, languages, currencies, consumer expectations, levels
of consumer acceptance and use of the internet for commerce, legislation, regulatory environments, tax laws and
levels of political stability, and we are subject to associated risks typical of international businesses. International
markets have strong local competitors with established brands and travel service providers or relationships that may
make expansion in certain markets difficult and costly and take more time than anticipated. In addition, compliance
with legal, regulatory or tax requirements in multiple jurisdictions places demands on our time and resources, and
we may nonetheless experience unforeseen and potentially adverse legal, regulatory or tax consequences. In some
markets, legal and other regulatory requirements may prohibit or limit participation by foreign businesses, such as
by making foreign ownership or management of internet or travel-related businesses illegal or difficult or may make
direct participation in those markets uneconomic, which could make our entry or expansion in those markets
difficult or impossible, require that we work with a local partner or result in higher operating costs. If we are
unsuccessful in expanding in new and existing markets and effectively managing that expansion, our business and
results of operations could be adversely affected. A number of countries are actively pursuing changes to their tax
laws applicable to corporate multinationals, such as the recently enacted U.S. tax legislation, Tax Cuts and Jobs Act
of 2017 (the “2017 Tax Act”). Foreign governments may enact tax laws that could result in further changes to global
taxation and materially affect our financial position and results of operations.
The 2017 Tax Act resulted in significant changes to the U.S. corporate income tax system. The 2017 Tax Act
requires complex computations to be performed that were not previously required in U.S. tax law, significant
judgments to be made in interpretation of the provisions of the 2017 Tax Act and significant estimates in
calculations, and the preparation and analysis of information not previously relevant or regularly produced. The U.S.
Treasury Department, the IRS and other standard-setting bodies could interpret or issue guidance on how provisions
of the 2017 Tax Act will be applied or otherwise administered that is different from our interpretation.
We are regularly subject to claims, lawsuits, government investigations, and other proceedings that may result in
adverse outcomes.
We are regularly subject to claims, lawsuits, government investigations and other proceedings involving,
among other matters, patent and intellectual property rights (including alleged infringement of third-party
intellectual property rights), tax matters (including value-added, excise, transient, occupancy and accommodation
taxes), regulatory compliance (including competition and consumer protection matters), defamation and free speech
(including intermediary liability and platform immunity challenges), labor and employment matters and commercial
disputes.
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Such claims, lawsuits, government investigations and proceedings are inherently uncertain and their results
cannot be predicted with certainty. Regardless of the outcome, any of these types of legal proceedings could have an
adverse impact on us because of legal costs, diversion of management resources, injunctions or damage awards and
other factors. Determining reserves for our pending litigation or other legal proceedings is a complex, fact-intensive
process that requires significant judgment. It is possible that a resolution of one or more such proceedings could
result in substantial damages, fines or penalties that could adversely affect our business, consolidated financial
position, results of operations, or cash flows in a particular period. These proceedings could also result in
reputational harm, criminal sanctions, consent decrees, the release of confidential information or orders preventing
us from offering certain features, functionalities, products, or services, requiring a change in our business practices
or other field action, or requiring development of non-infringing or otherwise altered products or technologies. Any
of these consequences could adversely affect our business and results of operations.
A failure to comply with current laws, rules and regulations or changes to such laws, rules and regulations and
other legal uncertainties may adversely affect our business or financial performance.
Our business and financial performance could be adversely affected by unfavorable changes in or
interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations
applicable to us and our business, including those relating to internet and online commerce, internet advertising,
consumer protection, intermediary liability, data security and privacy, travel and rental licensing and listing
requirements and tax. In some cases, these laws continue to evolve.
For example, there is, and will likely continue to be, an increasing number of laws and regulations pertaining
to internet and online commerce that may relate to liability for information retrieved from or transmitted over the
internet, online editorial and user-generated content, user privacy, data security, behavioral targeting and online
advertising, taxation, liability for third-party activities and the quality of products and services. In addition, the
growth and development of online commerce may prompt calls for more stringent consumer protection laws and
more aggressive enforcement efforts, which may impose additional burdens on online businesses generally. Also,
evolving case law and new legislation involving worker classification, including a new law in California, increase
the potential for litigation and government audits in this area and may have ramifications as to how we operate
certain segments of our business and our engagement with independent contractors.
Further, our Rentals business has been and continues to be subject to regulatory developments globally that
affect the rental industry and the ability of companies like us to list those rentals online. For example, some states
and local jurisdictions, both domestically and internationally, have adopted, or are considering adopting, statutes or
ordinances that prohibit property owners and managers from renting certain properties on a short-term basis or
otherwise limit their ability to do so, and other states and local jurisdictions may introduce similar regulations.
Some states and local jurisdictions also have fair housing or other laws governing whether and how properties may
be rented, which they assert apply to vacation rentals. In addition, many homeowners, condominium and
neighborhood associations have adopted or are considering adopting rules that prohibit or restrict property owners
and managers from short-term rentals. Operating in this dynamic regulatory environment requires significant
management attention and financial resources. We cannot assure that our efforts will be successful, and the
investment and additional resources required to manage growth will produce the desired levels of revenue or
profitability.
We also have been subject, and we will likely be subject in the future, to inquiries from time to time from
regulatory bodies concerning compliance with consumer protection, competition, tax, data privacy and travel
industry-specific laws and regulations. The failure of our businesses to comply with these laws and regulations could
result in fines and/or proceedings against us by governmental agencies, regulatory authorities, courts and/or
consumers, which if material, could adversely affect our business, financial condition and results of operations.
Further, if such laws and regulations are not enforced equally against other competitors in a particular market, our
compliance with such laws may put us at a competitive disadvantage vis-à-vis competitors who do not comply with
such requirements.
The promulgation of new laws, rules and regulations, or the new interpretation of existing laws, rules and
regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we provide
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services could require us to change certain aspects of our business, operations and commercial relationships to
ensure compliance, which could decrease demand for services, reduce revenues, increase costs and/or subject the
company to additional liabilities. For example, in 2018, the European Union adopted GDPR implementing enhanced
data protection requirements and, in 2019, the State of California adopted the California Consumer Privacy Act
(“CCPA”) implementing privacy rights and consumer protections for California residents. Other jurisdictions have
adopted or are contemplating similar legislation. This legislation will continue to change the landscape for the use
and protection of data and could increase the cost and complexity of delivering our services. Unfavorable changes
could decrease demand for products and services, limit marketing methods and capabilities, impede development of
new products, result in negative publicity, require significant management time, increase costs and/or subject us to
additional liabilities. Violations of these laws and regulations could result in penalties and/or criminal sanctions
against us, our officers or our employees and/or restrictions on the conduct of parts of our business in certain
jurisdictions.
Likewise, the SEC, Department of Justice (“DOJ”) and Office of Foreign Assets Controls (“OFAC”), as well
as foreign regulatory authorities, have continued to increase the enforcement of economic sanctions and trade
regulations, anti-money laundering, and anti-corruption laws, across industries. U.S. economic sanctions relate to
transactions with designated foreign countries, including Cuba, Iran, North Korea, Syria and nationals and others of
those countries, Ukraine/Russia related sanctions, as well as certain specifically targeted individuals and entities. We
believe that our activities comply with OFAC, European Union, U.K. and other regulatory authorities’ economic
sanction and trade regulations, as well as anti-money laundering and anti-corruption regulations, including the
Foreign Corrupt Practices Act (“FCPA”), the UK Bribery Act and the U.K. Criminal Finances Act. As regulations
continue to evolve and regulatory oversight continues to increase, we cannot guarantee that our programs and
policies will be deemed compliant by all applicable regulatory authorities. In the event our controls should fail or are
found to be out of compliance for other reasons, we could be subject to monetary damages, civil and criminal
monetary penalties, litigation and damage to our reputation and the value of our brands.
We cannot be sure that our intellectual property is protected from copying or use by others, including potential
competitors.
Our websites rely on content, brands and technology, much of which is proprietary. We protect our proprietary
content, brands and technology by relying on a combination of trademarks, copyrights, trade secrets, patents and
confidentiality agreements. Any misappropriation or violation of our rights could have a material adverse effect on
our business. Even with these precautions, it may be possible for another party to copy or otherwise obtain and use
our proprietary technology, content or brands without authorization or to develop similar technology, content or
brands independently.
Effective intellectual property protection is expensive to develop and maintain, both in terms of initial and
ongoing registration requirements and expenses and the costs of defending our rights. In addition, effective
intellectual property protection may not be available in every jurisdiction in which our services are made available,
and policing unauthorized use of our intellectual property is difficult and expensive. Therefore, in certain
jurisdictions, we may be unable to protect our intellectual property adequately against unauthorized third-party
copying or use, which could adversely affect our business or ability to compete. We cannot be sure that the steps we
have taken will prevent misappropriation or infringement of our intellectual property. Furthermore, we may need to
go to court or other tribunals or administrative bodies in order to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary rights of others. These proceedings might
result in substantial costs and diversion of resources and management attention. Our failure to protect our
intellectual property in a cost-effective or effective manner could have a material adverse effect on our business and
ability to protect our technology, content and brands.
We currently license from third parties and incorporate the technologies and content into our websites. As we
continue to introduce new services that incorporate new technologies and content, we may be required to license
additional technology, or content. We cannot be sure that such technology or content will be available on
commercially reasonable terms, if at all.
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Risks Related to Data Security and Privacy
Our processing, storage and use of personal information and other data subjects us to additional laws and
regulations and failure to comply with those laws and regulations could give rise to liabilities.
We collect, process, store and transmit data, including personal information, for our consumers and our
workforce. As a result, we are subject to a variety of laws in the United States and abroad regarding privacy and the
storing, sharing, use, processing, disclosure and protection of personal information, the scope of which are changing,
subject to differing interpretations, and may be inconsistent between countries or conflict with other existing laws.
In addition, the security of data when engaging in electronic commerce is essential to maintaining consumer and
travel service provider confidence in our services. The regulatory framework for privacy issues worldwide is
currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage,
transmission and security of personal information by companies operating over the internet have recently come
under increased public scrutiny. The U.S. Congress and federal agencies, including the Federal Trade Commission
and the Department of Commerce, are reviewing the need for greater regulation for the collection and use of
information concerning consumer behavior on the internet in the United States. Various U.S. courts are also
considering the applicability of existing federal and state statutes, including computer trespass and wiretapping laws,
to the collection and exchange of information online.
In addition, we are subject to legislation intended to enhance the privacy and security of personal data,
including credit card information (such as GDPR, the CCPA and other country specific data protection laws). There
are a number of proposals for data privacy laws pending or proposed in other jurisdictions, including at both the
state and federal levels of the United States as well as internationally. Implementing and complying with these laws
and regulations may be more costly or take longer than we anticipate, or could otherwise affect our business
operations. We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct
relating to privacy and data protection. Any failure or perceived failure by us to comply with our privacy policies,
privacy-related obligations to consumers or other third parties, or privacy-related legal obligations, may result in
governmental enforcement actions, including, for example, fines and/or penalties, compliance orders, litigation or
public statements that could harm our reputation and cause our users and travel partners to lose trust in us, any of
which could have an adverse effect on our business, brand, market share and results of operations.
We are subject to risks associated with processing credit card and other payment transactions and failure to
manage those risks may subject us to fines, penalties and additional costs and could have a negative impact on
our business.
We accept payments from consumers and travel partners using a variety of methods, including credit card,
debit card, direct debit from a customer’s bank account, and invoicing. For existing and future payment options we
offer to our customers, we may become subject to additional regulations and compliance requirements (including
obligations to implement enhanced authentication processes). These regulations and/or requirements could result in
significant costs and reduce the ease of use of our payment products and yet may still be susceptible to fraudulent
activity. In addition, we may be held liable for accepting fraudulent credit cards on our websites as well as other
payment disputes with our customers. For certain payment methods, including credit and debit cards, we pay
interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We
rely on third parties to provide certain payment methods and payment processing services, including the processing
of credit cards and debit cards. In each case, our business could be disrupted if these companies become unwilling or
unable to provide these services to us. We are also subject to payment card association operating rules, including
data security rules, certification requirements, and rules governing electronic funds transfers, which could change or
be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or
requirements or if our data security systems are breached or compromised, we may be liable for card issuing banks’
costs, subject to fines and higher transaction fees, and/or lose our ability to accept credit and debit card payments,
process electronic funds transfers, or facilitate other types of online payments. We are also subject to a number of
other laws and regulations relating to payments, money laundering, international money transfers, privacy and
information security, and electronic fund transfers. If we were found to be in violation of applicable laws or
regulations, we could be subject to additional requirements and civil and criminal penalties, or forced to cease
providing certain services.
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System security issues, data protection breaches, cyberattacks and system outage issues could disrupt our
operations or services provided to our consumers, and any such disruption could damage our reputation and
adversely affect our business, financial results and stock price.
Our reputation and ability to attract, retain and service our consumers and travel partners is dependent upon
the reliable performance and security of our computer systems, workforce and those of third parties we utilize in our
operations. Significant security issues, data breaches, cyberattacks and outages, interruptions or delays, in our
systems or third party systems upon which we rely, could impair our ability to display content or process
transactions and significantly harm our business. Breaches of our security measures or the accidental loss,
inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about
us, our consumers or our travel partners, could expose us, our consumers and travel partners to a risk of loss or
misuse of this information, damage our brand and reputation or otherwise harm our business and financial
performance and result in government enforcement actions and litigation and potential liability for us.
Computer programmers and hackers also may be able to develop and deploy viruses, worms, ransomware and
other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our
products, or attempt to fraudulently induce our employees, consumers, or others to disclose passwords or other
sensitive information or unwittingly provide access to our systems or data. In addition, sophisticated hardware and
operating system software and applications that we produce or procure from third parties may contain defects in
design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of
the system. We may need to expend significant resources to protect against security breaches or to investigate and
address problems caused by cyber or other security problems.
We may be unable to proactively address these techniques or to implement adequate preventive measures and
our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of
service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other
critical functions. Failure to adequately protect against attacks or intrusions, whether for our own systems or systems
of vendors, could expose us to security breaches that could have an adverse impact on our financial performance.
The costs of enhancing infrastructure to attain improved stability and redundancy may be time consuming and
expensive and may require resources and expertise that are difficult to obtain. In addition, to the extent that we do
experience a data breach, remediation may be costly and we may not have adequate insurance to cover such costs.
Much of our business is conducted with third party partners and vendors, including, for example, marketing
agencies and SaaS providers. A security breach at such third party could be perceived by consumers as a security
breach of our systems and could result in negative publicity or damage our reputation, expose us to risk of loss or
litigation and possible liability and subject us to regulatory penalties and sanctions. In addition, such incidents may
also result in a decline in our active user base or engagement levels. Finally, failure of such third parties to comply
with applicable disclosure requirements could expose us to liability.
We have acquired a number of companies over the years and may continue to do so in the future. As a result
of these acquisitions, we may increase the volume of personal data that we collect, store, process and transmit.
While we make significant efforts to address any information security issues and personal data protection issues
with respect to our acquisitions, we may still inherit such risks when we integrate the acquired businesses.
Media coverage of data breaches and consumer rights has escalated, in part because of the increased number
of enforcement actions, investigations and lawsuits. Security breaches could result in negative publicity, damage to
reputation, exposure to risk of loss or litigation and possible liability due to regulatory penalties and sanctions. As
this focus and attention on privacy and data protection increases, we also risk exposure to potential liabilities and
costs resulting from the compliance with, or any failure to comply with, applicable legal requirements, conflicts
among these legal requirements or differences in approaches to privacy and security. Security breaches could also
cause travelers and potential consumers to lose confidence in our data security, which would have a negative effect
on the value of our brand.
Evolving guidance on use of "cookies" and similar technology could negatively impact the way we do business.
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A "cookie" is a text file that is stored on a user's web browser by a website. Cookies are common tools used by
thousands of websites, including ours, to, among other things, store or gather information (e.g., remember log-on
details so a user does not have to re-enter them when revisiting a website), market to consumers, improve site
security and enhance the user experience on a website. Cookies and similar tracking technologies are valuable tools
for websites and apps like ours to improve the customer experience and increase conversion on their websites. Many
countries have adopted data protection laws that introduce regulations governing the use of "cookies and other
similar tracking technologies" by websites and app developers servicing consumers. To the extent any such
regulations require "opt-in" or “affirmative” consent before certain cookies or trackers can be placed on a user's
device or the ability of users to “opt-out” or control their preferences, our ability to serve certain customers in the
manner we currently do, including with respect to retargeting or personalized advertising, might be adversely
affected and our ability to continue to improve and optimize performance on our websites might be impaired, either
of which could negatively affect a consumer's experience using our services and our business, market share and
results of operations.
Risks Related to the Financial and Tax Matters
We may have future capital needs and may not be able to obtain additional financing on acceptable terms.
We are currently party to a credit agreement with respect to a $1.2 billion revolving credit facility maturing in
May 2022 (the “2015 Credit Facility”). This agreement includes restrictive covenants that may impact the way we
manage our business and may limit our ability to secure significant additional financing in the future on favorable
terms. Our ability to secure additional financing and satisfy our financial obligations outstanding from time to time
will depend upon our future operating performance, which is subject to then prevailing general economic and credit
market conditions, including interest rate levels and the availability of credit generally, and financial, business and
other factors, many of which are beyond our control. There can be no assurance that sufficient financing will be
available or desirable, or even any, terms to fund investments, acquisitions, stock repurchases, dividends, debt
refinancing or extraordinary actions or that counterparties in any such financings would honor their contractual
commitments.
We have indebtedness which could adversely affect our business and financial condition.
As of December 31, 2019, we had no outstanding long-term debt; however, we continue to have existing
credit facilities from which we can borrow significant amounts. As such, we are still subject to risks relating to our
potential indebtedness that include:
(cid:129)
(cid:129)
Increasing our vulnerability to general adverse economic and industry conditions;
Requiring us to dedicate a portion of our cash flow from operations to principal and interest payments
on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital
expenditures, acquisitions and investments and other general corporate purposes;
(cid:129) Making it more difficult for us to optimally capitalize and manage the cash flow for our businesses;
(cid:129)
Limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in
which we operate;
(cid:129)
(cid:129)
(cid:129)
Possibly placing us at a competitive disadvantage compared to our competitors that have less debt;
Limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find
acceptable; and
Exposing us to the risk of increased interest rates because our outstanding debt is expected to be subject
to variable rates of interest.
In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course
of business. The terms of our 2015 Credit Facility allow us to incur additional debt subject to certain limitations;
24
however, there is no assurance that additional financing will be available to us on terms favorable to us, if at all. In
addition, if new debt is added to the then existing debt levels, the risks described above could intensify.
Our 2015 Credit Facility provides for various provisions that limit our discretion in the operation of our business
and require us to meet financial maintenance tests and other covenants and the failure to comply with these
covenants could have a material adverse effect on us.
We are party to a credit agreement providing for our 2015 Credit Facility. The agreements that govern the
2015 Credit Facility contain various covenants, including those that limit our ability to, among other things:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Incur indebtedness;
Pay dividends on, redeem or repurchase our capital stock;
Enter into certain asset sale transactions, including partial or full spin-off transactions;
Enter into secured financing arrangements;
Enter into sale and leaseback transactions; and
Enter into unrelated businesses.
These covenants may limit our ability to optimally operate our business. In addition, our 2015 Credit Facility
requires that we meet certain financial tests, including a leverage ratio test. Any failure to comply with the
restrictions of our credit facility may result in an event of default under the agreements governing such facility. Such
default may allow the creditors to accelerate the debt incurred thereunder. In addition, lenders may be able to
terminate any commitments they had made to supply us with further funds (including periodic rollovers of existing
borrowings).
Our financial results will fluctuate from quarter to quarter and are difficult to predict.
Our quarterly financial results have fluctuated in the past and will likely fluctuate in the future. Additionally,
we have limited operating history with the current scale of our business, which means it is difficult to forecast our
financial results. As a result, you should not rely upon our quarterly financial results as indicators of future
performance. Our financial results in any given quarter can be influenced by numerous factors, many of which we
are unable to predict or are outside of our control, including:
(cid:129) Our ability to maintain and grow our user base and to increase user engagement;
(cid:129)
Increase in marketing, sales and other operation expenses that we will incur to grow and expand our
operations and to remain competitive;
(cid:129)
(cid:129)
Fluctuations in the marketing spend of our travel partners due to seasonality, episodic global or regional
events or other factors;
The pricing of our ads and other products;
(cid:129) User behavior or product changes that may reduce traffic to features or products that we successfully
monetize;
(cid:129)
(cid:129)
(cid:129)
System failure or outages, which would prevent us from serving ads for any period of time;
Breaches of security or privacy and the costs associated with any such breaches and remediation;
Fees paid to third parties for content or promotion of our products and services;
(cid:129) Adverse litigation judgments, settlement or other litigation related costs;
(cid:129)
Changes in the legislative or regulatory environment, including with respect to privacy and data
protection, or engagement by government regulators, including final orders or consent decrees;
25
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
The impact of changes in tax laws, which are recorded in the period enacted and may significantly affect
our effective income tax rates and non-income taxes;
Tax obligations that may arise from resolutions of tax examinations, including the examinations we are
currently under that may materially differ from the amounts we have anticipated;
Fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses
denominated in foreign currencies;
Changes in U.S. generally accepted accounting principles; and
Changes in global business and macroeconomic conditions.
If we are unable to successfully maintain effective internal control over financial reporting, investors may lose
confidence in our reported financial information and our stock price and business may be adversely impacted.
As a public company, we are required to maintain internal control over financial reporting and our
management is required to evaluate the effectiveness of our internal control over financial reporting as of the end of
each fiscal year. Additionally, we are required to disclose in our Annual Reports on Form 10-K our management’s
assessment of the effectiveness of our internal control over financial reporting and a registered public accounting
firm’s attestation report on this assessment. If we are not successful in maintaining effective internal control over
financial reporting, there could be inaccuracies or omissions in the consolidated financial information we are
required to file with the SEC. Additionally, even if there are no inaccuracies or omissions, we could be required to
publicly disclose the conclusion of our management that our internal control over financial reporting or disclosure
controls and procedures are not effective. These events could cause investors to lose confidence in our reported
financial information, adversely impact our stock price, result in increased costs to remediate any deficiencies,
attract regulatory scrutiny or lawsuits that could be costly to resolve and distract management’s attention, limit our
ability to access the capital markets or cause our stock to be delisted from NASDAQ or any other securities
exchange on which we are then listed.
Our effective income tax rate is impacted by a number of factors that could have a material impact on our
financial results and could increase the volatility of those results.
Due to the global nature of our business, we are subject to income taxes in the United States and other foreign
jurisdictions. In the event we incur net income in certain jurisdictions but incur losses in other jurisdictions, we
generally cannot offset the income from one jurisdiction with the loss from another. This lack of flexibility increases
our effective income tax rate. Furthermore, significant judgment is required to calculate our worldwide provision for
income taxes and depends on our ability to operate our business in a manner consistent with our corporate structure
and intercompany arrangements. In the ordinary course of our business, there are many transactions and calculations
where the ultimate tax determination is uncertain.
We believe our tax estimates are reasonable. However, we are routinely under audit by federal, state and
foreign taxing authorities. The taxing authorities of jurisdictions in which we operate may challenge our
methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing, or
determine that the manner in which we operate our business does not achieve the intended tax consequences, which
would increase our effective income tax rate and harm our financial position and results of operations. As we
operate in numerous taxing jurisdictions, the application of tax laws can also be subject to diverging and sometimes
conflicting interpretations by taxing authorities of these jurisdictions. It is not uncommon for taxing authorities of
different countries to have conflicting views, for instance, with respect to, among other things, the manner in which
the arm’s length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual
property. For example, the OECD has recently recommended changes to numerous long-standing international tax
principles. If countries amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax
uncertainty and may adversely impact our tax liabilities. Any of these changes could affect our financial
performance.
26
The final determination of audits could be materially different from our income tax provisions and accruals
and could have a material effect on our financial position, results of operations, or cash flows in the period or
periods for which that determination is made. Also, our future effective income tax rates could be affected by
changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax
assets or changes in tax laws or their interpretation. If our effective income tax rates were to increase, our results of
operations and cash flows would be adversely affected.
The income tax effects of the accounting for share-based compensation may significantly impact our effective
income tax rate. In periods in which our stock price is higher than the grant-date price of the share-based
compensation awards vesting in that period, we will recognize excess tax benefits that will decrease our effective
income tax rate. In periods in which our stock price is lower than the grant-date price of the share-based
compensation awards vesting in that period, our effective income tax rate will increase.
Application of U.S. state and local or international tax laws, changes in tax laws or tax rulings, or the
examination of our tax positions, could materially affect our financial position and results of operations.
As an international business, we are subject to income taxes and non-income-based taxes in the United States
and various other international jurisdictions. Tax laws are dynamic and subject to change as new laws are passed
and new interpretations of the law are issued or applied. Our existing corporate structure and intercompany
arrangements have been implemented in a manner we believe is in compliance with current prevailing tax laws.
However, due to economic and political conditions, tax rates and tax regimes in various jurisdictions may be subject
to significant change and the tax benefits that we intend to eventually derive could be undermined due to changing
tax laws. Governments are increasingly focused on ways to increase tax revenues, which has contributed to an
increase in audit activity, more aggressive positions taken by tax authorities and an increase in tax legislation. Any
such additional taxes or other assessments may be in excess of our current tax provisions or may require us to
modify our business practices in order to reduce our exposure to additional taxes going forward, any of which could
have a material adverse effect on our business, results of operations and financial condition.
The 2017 Tax Act has resulted in significant changes to the U.S. corporate income tax system. The tax law
changes by the 2017 Tax Act are broad and complex and there are still uncertainties about how the 2017 Tax Act
will be interpreted at both the U.S. federal and state levels. The U.S. Treasury Department, the IRS and other
standard-setting bodies could interpret or issue guidance on how provisions of the 2017 Tax Act will be applied or
otherwise administered that is different from our interpretation. This could materially change the taxes that we
recorded since 2017, and the expected future impact of the 2017 Tax Act on our business.
The OECD has been working on a Base Erosion and Profit Shifting Project, and issued the Action 1 report in
2015 to address the tax challenges arising from digitalization. Since then, the OECD/G20 Inclusive Framework has
issued various guidelines, policy notes, and proposals that if adopted could result in an overhaul of the international
taxation system under which our current tax obligations are determined. As the OECD/G20 Inclusive Framework
drives toward a consensus long-term solution, several countries have introduced unilateral digital service tax
initiatives which impose new types of non-income taxes, including taxes based on a percentage of revenue. In July
2019, France signed into law a 3% digital services tax to be applied retroactively as of January 1, 2019. We
recorded an estimate of $3 million for digital service tax to general and administrative expense on our consolidated
statement of operations during the year ended December 31, 2019; however, we continue to assess the financial
impact of this new law. The Company is also monitoring other U.S. states and countries in which we do business,
such as Italy, Spain, and the U.K., which have enacted or proposed similar taxes that will be applicable or are likely
to be applicable during 2020. The Company will continue to monitor developments and determine the financial
impact worldwide of these initiatives.
Any changes to international tax laws, including new definitions of permanent establishment, could affect the
tax treatment of our foreign earnings and adversely impact our effective income tax rate. Further, changes to tax
laws and additional reporting requirements could increase the complexity, burden and cost of compliance. Due to
the large and expanding scale of our international business activities, any changes in U.S. or international taxation of
our activities or the combined effect of tax laws in multiple jurisdictions may increase our worldwide effective
income tax rate, increase the complexity and costs associated with tax compliance (especially if changes are
27
implemented or interpreted inconsistently across tax jurisdictions) and adversely affect our cash flows and results of
operations.
In addition, the taxing authorities in the United States and other jurisdictions where we do business regularly
examine our income and other tax returns as well as the tax returns of Expedia, our former parent. The ultimate
outcome of these examinations (including the IRS audit described below) cannot be predicted with certainty. Should
the IRS or other taxing authorities assess additional taxes as a result of examinations, we may be required to record
charges to our operations, which could harm our operating results and financial condition.
Changes in the tax treatment of companies engaged in e-commerce may adversely affect the commercial use of
our sites and our financial results.
Due to the global nature of the internet, it is possible that various states or foreign countries might attempt to
levy additional or new sales, income or other taxes relating to our activities. Tax authorities at the international,
federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-
commerce. For example, Congress is considering various approaches to legislation that would require companies
engaged in e-commerce to collect sales tax on internet revenue and a growing number of U.S. states and certain
foreign jurisdictions have adopted or are considering proposals to impose obligations on remote sellers and online
marketplaces to collect taxes on their behalf. Additionally, the U.S. Supreme Court’s ruling in South Dakota v.
Wayfair Inc., in which a Court reversed longstanding precedent that remote sellers are not required to collect state
and local sales taxes, may have an adverse impact on our business. Also, as described in more detail above, the
European Commission released two draft directives on the Taxation of the Digital Economy and, on July 24, 2019,
President Macron signed into law the French Digital Services Tax. New or revised international, federal, state or
local tax regulations or court decisions may subject us or our customers to additional sales, occupancy, income and
other taxes. We cannot predict the effect of these and other attempts to impose sales, income or other taxes on e-
commerce. New or revised taxes and, in particular, sales taxes, occupancy taxes, value added taxes (“VAT”) and
similar taxes would likely increase the cost of doing business online and decrease the attractiveness of selling
products and services over the Internet. New taxes could also create significant increases in internal costs necessary
to capture data and collect and remit taxes. Any of these events could have a material adverse effect on our business,
financial condition and operating results.
Taxing authorities may successfully assert that we should have collected or in the future should collect sales and
use, occupancy, VAT or similar taxes, and we could be subject to liability with respect to past or future sales,
which could adversely affect our operating results.
We do not collect and remit sales and use, occupancy, VAT or similar taxes in all jurisdictions in which we
have sales, based on our belief that such taxes are not applicable or legally required. Several states and other taxing
jurisdictions have presented or threatened us with assessments, alleging that we are required to collect and remit
certain taxes there. While we do not believe that we are subject to such taxes and intend to vigorously defend our
position in these cases, we cannot be sure of the outcome of our discussions and/or appeals with these states or cases
that are pending in the courts. In the event of an adverse outcome, we could face assessments for additional time
periods since the last assessments we received, plus any additional interest and penalties. We also expect additional
jurisdictions may make similar assessments or pass similar new laws in the future, and any of the jurisdictions where
we have sales may apply more rigorous enforcement efforts or take more aggressive positions in the future that
could result in greater tax liability allegations. Such tax assessments, penalties and interest or future requirements
may materially adversely affect our business, financial condition and operating results.
We continue to be subject to significant potential tax liabilities in connection with the Spin-Off.
Under the Tax Sharing Agreement between us and Expedia entered into in connection with the Spin-Off, we
are generally required to indemnify Expedia for any taxes resulting from the Spin-Off (and any related interest,
penalties, legal and professional fees, and all costs and damages associated with related stockholder litigation or
controversies) to the extent such amounts resulted from (i) any act or failure to act by us described in the covenants
in the tax sharing agreement, (ii) any acquisition of our equity securities or assets or those of a member of our group,
or (iii) any failure of the representations with respect to us or any member of our group to be true or any breach by
28
us or any member of our group of any covenant, in each case, which is contained in the separation documents or in
the documents relating to the IRS private letter ruling and/or the opinion of counsel.
We continue to be responsible for potential tax liabilities in connection with consolidated income tax returns
filed with Expedia prior to or in connection with the Spin-Off. By virtue of previously filed consolidated tax returns
with Expedia, we are currently under IRS audit for the 2009, 2010, and 2011 tax years. In connection with that audit,
we received, in January 2017 and April 2019, Notices of Proposed Adjustment from the IRS for the 2009, 2010, and
2011 tax years, which would result in an increase in our worldwide income tax expense. The proposed adjustments
would result in a reimbursement to Expedia in an estimated range totaling $15 million to $20 million for those
specific years related to the pre spin-off years after consideration of competent authority relief, exclusive of interest
and penalties. The outcome of these matters or any other audits could subject us to significant tax liabilities.
We are subject to fluctuation in foreign currency exchange risk.
We conduct a significant and growing portion of our business outside the United States but report our results
in U.S. dollars. As a result, we face exposure to movements in foreign currency exchange rates, particularly those
related to the Euro, British pound, and Australian dollar. These exposures include, but are not limited to, re-
measurement of gains and losses from changes in the value of foreign denominated assets and liabilities; translation
gains and losses on foreign subsidiary financial results that are translated into U.S. dollars upon consolidation; and
planning risk related to changes in exchange rates between the time we prepare our annual and quarterly forecasts
and when actual results occur. For example, Brexit caused significant volatility in currency exchange rates,
especially between the U.S. dollar and the British pound. Continued uncertainty regarding the final terms of Brexit
may result in future exchange rate volatility. In addition, in the event that one or more European countries were to
replace the Euro with another currency, our sales into such countries, or into Europe generally, would likely be
adversely affected until stable exchange rates are established. Accordingly, fluctuations in foreign currency
exchange rates, such as the strengthening of the U.S. dollar against the Euro or the British pound, could adversely
affect our net revenue growth in future periods.
Depending on the size of the exposures and the relative movements of exchange rates, if we were to choose
not to hedge or were to fail to hedge effectively our exposure, we could experience a material adverse effect on our
financial statements and financial condition. As seen in some recent periods, in the event of severe volatility in
exchange rates the impact of these exposures can increase, and the impact on results of operations can be more
pronounced. In addition, the current environment and the increasingly global nature of our business have made
hedging these exposures both more complex. We hedge certain short-term foreign currency exposures with the
purchase of forward exchange contracts. These forward exchange contracts only help mitigate the impact of changes
in foreign currency rates that occur during the term of the related contract period and carry risks of counter-party
failure. There can be no assurance that our forward exchange contracts will have their intended effects.
Significant fluctuations in foreign currency exchange rates can affect consumer travel behavior. Volatility in
foreign currency exchange rates and its impact on consumer behavior, which may differ across regions, makes it
more difficult to forecast industry and consumer trends and the timing and degree of their impact on our markets and
business, which in turn could adversely affect our ability to effectively manage our business and adversely affect our
results of operations.
Risks Related to Ownership of our Common Stock
Liberty Tripadvisor Holdings, Inc. currently is a controlling stockholder.
Liberty Tripadvisor Holdings, Inc., or LTRIP, effectively controls the outcome of all matters submitted to a
vote or for the consent of our stockholders (other than with respect to the election by the holders of our common
stock of 25% of the members of our Board of Directors and matters as to which Delaware law requires separate
class votes), including but not limited to, corporate transactions such as mergers, business combinations or
dispositions of assets, the authorization or issuance of new equity or debt securities and determinations with respect
to our business direction and policies. Our Chairman, Gregory Maffei, and one of our Directors, Albert Rosenthaler,
29
also serve as officers and directors of LTRIP. LTRIP may have interests that differ from those of our other
stockholders and they may vote in a way with which our other stockholders may not agree or that may be adverse to
other stockholders’ interests. LTRIP is not restricted from investing in other businesses involving or related to our
business. LTRIP’s control of us, as well as the existing provisions of our organizational documents and Delaware
law, may discourage or prevent a change of control that might otherwise be beneficial, which may reduce the market
price of our common stock.
The market price and trading volume of our common stock may be volatile and may face negative pressure.
Our stock price has experienced, and could continue to experience in the future, substantial volatility. The
market price of our common stock is affected by a number of factors, including the risk factors described in this
section and other factors beyond our control. Factors affecting the trading price of our common stock could include:
(cid:129) Quarterly variations in our or our competitors’ results of operations;
(cid:129)
Changes in earnings estimates or recommendations by securities analysts;
(cid:129)
(cid:129)
(cid:129)
Failure to meet market expectations;
The announcement of new products or product enhancements by us or our competitors;
Repurchases of our common stock pursuant to our share repurchase program which could also cause our
stock price to be higher than it would be in the absence of such a program and could potentially reduce
the market liquidity for our stock;
(cid:129) Developments in our industry, including changes in governmental regulations; and
(cid:129) General market conditions and other factors, including factors related to our operating performance or
the operating performance of our competitors.
Furthermore, the stock markets have experienced price and volume fluctuations that have affected and
continue to affect the market prices of equity securities of many companies. These fluctuations often have been
unrelated or disproportionate to the operating performance of those companies. These broad market and industry
fluctuations and general economic, political and market conditions, such as recessions, interest rate changes or
foreign currency exchange fluctuations, may negatively impact the market price of our common stock regardless of
our actual operating performance.
We are currently relying on the “controlled company” exemption under NASDAQ Stock Market Listing Rules,
pursuant to which “controlled companies” are exempt from certain corporate governance requirements
otherwise applicable under NASDAQ listing rules.
The NASDAQ Stock Market Listing Rules exempt “controlled companies,” or companies of which more than
50% of the voting power is held by an individual, a group or another company, from certain corporate governance
requirements, including those requirements that:
(cid:129) A majority of the Board of Directors consist of independent directors;
(cid:129)
Compensation of officers be determined or recommended to the Board of Directors by a majority of its
independent directors or by a compensation committee comprised solely of independent directors; and
(cid:129) Director nominees be selected or recommended to the Board of Directors by a majority of its
independent directors or by a nominating committee that is composed entirely of independent directors.
We currently rely on the controlled company exemption for certain of the above requirements. Accordingly,
our stockholders will not be afforded the same protections generally as stockholders of other NASDAQ-listed
companies with respect to corporate governance for so long as we rely on these exemptions from the corporate
governance requirements.
30
We do not pay regular quarterly or annual cash dividends on our stock.
Although the Company's Board of Directors declared, on November 1, 2019, a special cash dividend of $3.50
per share, or approximately $488 million in the aggregate, we do not pay regular quarterly or annual cash
dividends. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and
will depend on our results of operations, earnings, capital requirements, financial condition, future prospects,
contractual restrictions and other factors deemed relevant by our Board of Directors. Therefore, investors should not
rely on regular quarterly or annual dividend income from shares of our common stock and investors should not rely
on special dividends with any regularity or at all. Investors should rely on sales of their common stock after price
appreciation, which may never occur, as the only way to realize future gains on their investments.
Future sales of shares of our common stock in the public market, or the perception that such sales may occur,
may depress our stock price.
Sales of substantial amounts of our common stock in the public market, particularly sales by our directors,
officers, employees and significant stockholders, or the perception that these sales might occur, could depress the
market price of our common stock and could impact our ability to raise capital through the sale of additional equity
securities. In addition, certain stockholders have rights, subject to some conditions, to require us to file registration
statements covering their shares or to include their shares in registration statements that we may file for ourselves or
other stockholders. If LTRIP or some other stockholder sells substantial amounts of our common stock in the public
market, or if there is a perception in the public market that LTRIP might sell shares of our common stock, the
market price of our common stock could decrease significantly. A decline in the price of shares of our common
stock might impede our ability to raise capital through the issuance of additional shares of our common stock or
other equity securities.
Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change
of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price
adversely and prevent attempts by our stockholders to replace or remove our current management.
Our certificate of incorporation and bylaws contain provisions that could delay or prevent a change of control
of our company or changes in our Board of Directors that our stockholders might consider favorable. These
provisions include:
(cid:129) Authorization and issuance of Class B common stock that entitles holders to ten votes per share;
(cid:129) Authorization of the issuance of preferred stock which can be created and issued by the Board of
Directors without prior stockholder approval, with rights senior to those of our common stock;
(cid:129)
(cid:129)
Prohibiting our stockholders from filling board vacancies or calling special stockholder meetings; and
Limiting who may call special meetings of stockholders.
We are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may
prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock.
These and other provisions in our certificate of incorporation, bylaws and Delaware law could make it more difficult
for stockholders or potential acquirers to obtain control of our Board of Directors or initiate actions that are opposed
by our then-current Board of Directors, including a merger, tender offer or proxy contest involving our company.
Any delay or prevention of a change of control transaction or changes in our Board of Directors could cause the
market price of our common stock to decline.
Item 1B. Unresolved Staff Comments
None.
31
Item 2.
Properties
We currently lease approximately 280,000 square feet for our corporate headquarters in Needham,
Massachusetts, or Headquarters Lease, pursuant to a lease with an expiration date of December 2030, with an option
to extend the lease term for two consecutive terms of five years each. We also lease an aggregate of approximately
505,000 square feet of office space in approximately 50 other locations across North America, Europe, Asia Pacific
and South America, in cities such as New York, Boston, London, Sydney, Barcelona, Buenos Aires and Paris,
primarily for our sales offices, subsidiary headquarters, and international management teams, pursuant to leases with
various expiration dates. We believe that our current facilities are adequate for our current operations and that
additional leased space can be obtained on reasonable terms if needed. We do not legally own any real estate as of
December 31, 2019.
Item 3.
Legal Proceedings
In the ordinary course of business, we are parties to legal proceedings and claims involving alleged
infringement of third-party intellectual property rights, defamation, taxes, regulatory compliance and other claims.
Rules and regulations promulgated by the SEC require the description of material pending legal proceedings, other
than ordinary, routine litigation incident to the registrant’s business, and advise that proceedings ordinarily need not
be described if they primarily involve damages claims for amounts (exclusive of interest and costs) not individually
exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of
management, none of the pending litigation matters that we are defending involves or is likely to involve amounts of
that magnitude. There may be claims or actions pending or threatened against us of which we are currently not
aware and the ultimate disposition of which could have a material adverse effect on us.
Item 4.
Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market Information
Our common stock is quoted on NASDAQ under the ticker symbol “TRIP.” Our Class B common stock is not
listed and there is no established public trading market for that security. As of February 12, 2020, all of our Class B
common stock was held by LTRIP.
32
Performance Comparison Graph
The following graph provides a comparison of the total stockholder return from December 31, 2014 to
December 31, 2019, of an investment of $100 in cash on December 31, 2014 for Tripadvisor, Inc. common stock
and an investment of $100 in cash on December 31, 2013 for (i) the Standard and Poor’s 500 Index (the “S&P 500
Index”), (ii) the NASDAQ Composite Index, and (iii) the Research Data Group (“RDG”) Internet Composite Index.
The RDG Internet Composite Index is an index of stocks representing the internet industry, including internet
software and service companies and e-commerce companies. The stock price performance shown on the graph
below is not necessarily indicative of future price performance. Data for the S&P 500 Index, the NASDAQ
Composite Index, and the RDG Internet Composite Index assume reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among TripAdvisor, Inc., the S&P 500 Index,
the NASDAQ Composite Index and the RDG Internet Composite Index
$300
$250
$200
$150
$100
$50
$0
12/14
12/15
12/16
12/17
12/18
12/19
TripAdvisor, Inc.
S&P 500
NASDAQ Composite
RDG Internet Composite
*$100 invested on 12/31/14 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2020 Standard & Poor's, a division of S&P Global. All rights reserved.
This performance comparison graph is not “soliciting material,” is not deemed filed with the SEC and is not
deemed to be incorporated by reference into any filing of Tripadvisor, Inc. under the Securities Act or any filing
under the Exchange Act.
Holders of Record
As of February 12, 2020, there were 123,286,835 outstanding shares of our common stock held by 2,135
stockholders of record, and 12,799,999 outstanding shares of our Class B common stock held by one stockholder of
record: LTRIP.
33
Dividends
On November 1, 2019, the Company's Board of Directors declared a special cash dividend of $3.50 per share,
or approximately $488 million in the aggregate. The dividend was payable on December 4, 2019 to stockholders of
record on November 20, 2019. Any determination to pay dividends in the future will be at the discretion of our
Board of Directors and will depend on our results of operations, earnings, capital requirements, financial condition,
future prospects, contractual restrictions and other factors deemed relevant by our Board of Directors. Therefore,
investors should not rely on regular quarterly or annual dividend income from shares of our common stock and
investors should not rely on special dividends with any regularity, or at all. Investors should rely on sales of their
common stock after price appreciation, which may never occur, as the only way to realize future gains on their
investments.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required under this item is incorporated herein by reference to our 2020 Proxy Statement,
which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the
close of our fiscal year ended December 31, 2019.
Unregistered Sales of Equity Securities
During the year ended December 31, 2019, we did not issue or sell any shares of our common stock, Class B
common stock or other equity securities pursuant to unregistered transactions in reliance upon an exemption from
the registration requirements of the Securities Act.
Issuer Purchases of Equity Securities
On January 31, 2018, Tripadvisor’s Board of Directors authorized up to $250 million of share repurchases.
Our Board of Directors authorized and directed management, working with the Executive Committee of our Board
of Directors, to affect the share repurchase program in compliance with applicable legal requirements. As of
December 31, 2018, we had $150 million remaining available to repurchase shares of our common stock under this
share repurchase program. On November 1, 2019, our Board of Directors authorized the repurchase of an additional
$100 million in shares of our common stock under our existing share repurchase program, which increased the
amount available to the Company under this share repurchase program to $250 million. As of December 31, 2019,
we had approximately $190 million available to repurchase shares of our common stock under this share repurchase
program. This repurchase program has no expiration date but may be suspended or terminated by the Board of
Directors at any time.
34
A summary of information regarding our common stock repurchases during the fourth quarter of 2019 is set
forth in the table below:
Maximum
Number (or
approximate
U.S. dollar
value) of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
$ 150,000,033
$ 250,000,033
$ 189,601,661
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
—
—
2,059,846
2,059,846
Total
Number
of Shares
Purchased
—
—
2,059,846
2,059,846
$
$
$
Average Price
Paid per Share
(1)
—
—
29.32
Period
October 1 to October 31
November 1 to November 30
December 1 to December 31
Total
(1) Exclusive of fees and commission
Item 6.
Selected Financial Data
We have derived the following selected financial data presented below from our consolidated financial
statements and related notes. The information set forth below is not necessarily indicative of future results and
should be read in conjunction with the consolidated financial statements and related notes appearing in Item 8
“Financial Statements and Supplementary Data,” and Item 7 “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of this Annual Report on Form 10-K. Historical results are not necessarily
indicative of the results to be expected in any future period.
2019
Year Ended December 31,
2018
2016
2017
(in millions, except per share data)
2015
$ 1,560
1,373
187
194
126
$ 1,615
1,432
183
173
113
$ 1,556
1,432
124
110
(19)
$ 1,480
1,314
166
151
120
$ 1,492
1,260
232
239
198
$
$
0.91
0.89
$
0.82
0.81
(0.14) $
(0.14)
$
0.83
0.82
1.38
1.36
139
141
3.50
138
140
—
140
140
—
145
147
—
144
146
—
Consolidated Statements of Operations Data:
Revenue
Total costs and expenses
Operating income
Income before income taxes
Net income (loss) (1)
Earnings (loss) per share attributable to common
stockholders:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
Cash dividends declared per common share (2)
$
35
Consolidated Balance Sheet Data:
Cash and cash equivalents, short and long-term
marketable securities (2)
Working capital (2)
Total assets
Long-term debt
Other long-term obligations under long-term lease
liabilities (3)
Total liabilities (3)
Total stockholders’ equity (2)
2019
2018
December 31,
2017
(in millions)
2016
2015
$
$
$
$
319
98
1,984
—
142
823
1,161
670
522
2,167
—
83
696
1,471
$
735
621
2,272
230
84
909
1,363
746
527
2,238
91
84
736
1,502
698
553
2,128
200
84
716
1,412
(1)
(2)
The year ended December 31, 2017 reflects $67 million of tax expense recorded for the mandatory deemed
repatriation of accumulative foreign earnings (the “Transition Tax”) and $6 million of tax expense recorded
for the remeasurement of deferred taxes related to the 2017 Tax Act enacted on December 22, 2017. Refer to
“Note 11: Income Taxes” in the notes to the consolidated financial statements in Item 8 on this Annual Report
on Form10-K for further information on the financial statement impact of the 2017 Tax Act.
The Company declared a special cash dividend on November 1, 2019 to stockholders of record on November
20, 2019. An amount of $488 million in the aggregate was paid to common stockholders on December 4, 2019
from cash on hand.
(3) Amount includes certain operating leases as of January 1, 2019. Refer to “Note 2: Significant Accounting
Policies” in the notes to the consolidated financial statements in Item 8 on this Annual Report on Form 10-K
for further information on our leases, including transition accounting and updated accounting policies upon
adoption of ASC 842, Leases (“ASC 842”) on January 1, 2019.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Tripadvisor is a leading online travel company and our mission is to help people around the world plan, book
and experience the perfect trip. We operate a global travel platform that connects the world’s largest audience of
prospective travelers with travel partners through rich content, price comparison tools, and online reservation and
related services for destinations, accommodations, travel activities and experiences, and restaurants.
Under our flagship brand, Tripadvisor, we launched www.Tripadvisor.com in the United States in 2000. Since
then, we have launched localized versions of the Tripadvisor website in 48 markets and 28 languages worldwide.
Tripadvisor features 859 million reviews and opinions on 8.6 million places to stay, places to eat and things to do –
including 1.4 million hotels, inns, B&Bs and specialty lodging, 842,000 rental properties, 5.2 million restaurants and
1.2 million travel activities and experiences worldwide. Tripadvisor’s rich content and engaged community attract
the world’s largest travel audience, based on monthly unique visitors, including 463 million average monthly unique
visitors in the third quarter of 2019 during the peak summer travel season.
In addition to the flagship Tripadvisor brand, we own and operate a portfolio of websites and businesses,
connected by the common goal of providing consumers the most comprehensive travel-planning and trip-taking
resources in the travel industry. For additional information about our portfolio of brands and our business model, see
the disclosure set forth in Part I, Item 1. “Business”, under the caption “Overview.”
During the first quarter of 2019, as part of our continuous review of the business, we evaluated our operations
and realigned the reportable segment information which our chief operating decision maker, or CODM, regularly
assesses to evaluate performance for operating decision-making purposes, including evaluation and allocation of
resources. The CODM for the Company is our Chief Executive Officer. The revised segment reporting structure
includes the following reportable segments: (1) Hotels, Media & Platform; and (2) Experiences & Dining. For
36
further information on our segments, including the change in segments, and principal revenue streams within these
segments refer to “Note 1: Organization and Business Description” and “Note 18: Segment and Geographic
Information” in the notes to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K.
All prior period segment disclosure information has been reclassified to conform to the current reporting structure in
this Form 10-K. These reclassifications had no effect on our consolidated financial statements in any period.
Executive Financial Summary and Business Trends
Tripadvisor is the world’s largest online travel site, as measured by average unique monthly visitors. As a
result, Tripadvisor represents an attractive platform for travel partners – including hotel chains, independent
hoteliers, OTAs, destination marketing organizations, and other travel-related and non-travel related product and
service providers – who seek to market and sell their products and services to a global audience. Tripadvisor’s
platform and product offerings enable consumers to discover, research and price shop a variety of travel products,
including hotels, flights, cruises, cars, vacation rental properties, tours, travel activities and experiences, and
restaurants; and book a number of these travel experiences either directly on our websites or mobile apps, or on our
travel partners’ websites or mobile apps. Key drivers of our financial results are described below, including current
trends affecting our business, and our segment reporting information.
Business Trends
The online travel industry in which we operate is large and growing and also remains highly dynamic and
competitive. Our overall strategy is to deliver more value to consumers and travel partners in order to generate more
monetization on our platform. While we operate with a long-term growth focus, our specific growth objectives and
resource allocation strategies can differ in both duration and magnitude within our reportable segments. We describe
these dynamics, as well as other trends in our business, below.
Hotels, Media & Platform Segment
We operate the Hotels, Media & Platform segment for profit while also driving increased customer and client
engagement with – and high-margin media advertising revenue from – the Tripadvisor platform. We seek to achieve
this by delivering consumers a holistic product experience and by offering travel partners a diversified number of
advertising opportunities.
For consumers, we seek to implement product enhancements that deliver a more engaging and comprehensive
hotel shopping experience. This includes providing rich, immersive content – reviews, photos, videos and ratings,
among other contributions – as well as increasing the number of travel partners and properties as well as the
available hotel supply on our platform. We believe providing consumers tools to discover, research, price shop and
book a comprehensive selection of accommodations, helps increase brand awareness and brand loyalty and, over
time, can result in deeper consumer engagement, more qualified leads delivered to travel partners and greater
monetization on our platform.
We seek to monetize our influence and achieve revenue growth through hotel-related product improvements,
supply and marketing efforts and customer advertising opportunities. We rely heavily on search engines, such as
Google, to generate a significant amount of hotel shoppers to our websites, principally through SEM as well as
through SEO. We define hotel shoppers as visitors who view either a listing of hotels in a city or on a specific hotel
page. Given our ongoing focus on Hotels, Media & Platform profitability, a key ongoing objective is to attract or
acquire hotel shoppers at or above our desired marketing return on investment targets. To that end, starting in mid-
2017, we began to reduce inefficient direct selling and marketing investments on paid online channels, primarily
SEM, to improve profitability. This reduced the number of hotel shoppers to our platform and reduced Tripadvisor-
branded hotels revenue specifically in our hotel metasearch auction into 2019, while generating meaningful overall
Hotels, Media & Platform segment profit growth and margin expansion, including year-over-year profit growth
during both the years ended December 31, 2019 and 2018, respectively. Following moderate revenue growth
resulting from SEO during 2018, we experienced revenue headwinds in this marketing channel in 2019 and expect
this trend to continue, which we believe is impacted by search engines (primarily Google) increasing the prominence
of their own hotel products in search results. We believe executing our long-term growth strategy can enable us to
deepen customer engagement on our platform, monetize our influence and stabilize – and eventually grow – Hotels,
37
Media & Platform segment revenue. For example, in Tripadvisor-branded display and platform revenue, we enable
travel partners to amplify their brand, generate brand impressions, and potentially drive qualified leads and bookings
for their businesses. Historically, we have limited both the type and number of display-based advertising
opportunities we make available to travel partners, particularly on mobile phone, which, in turn, has limited display-
based advertising revenue growth. However, we are working on initiatives to better leverage our audience, content,
data, travel influence and platform breadth to open up new media advertising opportunities through a more modern,
high-powered advertising suite spanning native, video and programmatic solutions. We also intend to deliver this
broadened solution to a larger set of advertising travel endemic and non-travel endemic advertising partners,
including industries such as airlines, finance and beauty.
In addition, we are focused on initiatives to increase our traffic quality and deepen customer engagement on
our platform, including membership growth, personalization, and mobile app initiatives we believe can lead to
increased monetization over time in this segment. For example, there remains not only an opportunity to continue to
grow our member base, but also to deepen member engagement by making membership more valued, through
building communities and leveraging our content to further personalize trip-planning features.
Experiences & Dining Segment
During 2019, our Experiences & Dining segment growth strategy prioritized near-term investments for
platform expansion and bookings and revenue growth. We increased investments in product, supply and marketing
to enhance our long-term growth prospects. We have done this by, for example, growing bookable supply in newer
experience categories in lower-priced options, such as events, tickets, and other experiences, and also non-English
markets and mobile offerings. These categories have grown rapidly, and has added to our total bookable experience
products which reached approximately 345,000 as of December 31, 2019. We believe offering consumers more
selection can contribute to our goals to build deeper, more durable consumer relationships with our platform.
We also continue to seek selective acquisition opportunities in this segment. For example, in December 2019,
we acquired U.K.-based Bookatable, which offers an online restaurant reservation and booking platform. This
further strengthens our position in certain of our existing European markets as well as expands us into new countries,
such as the U.K., Germany, Austria, Finland and Norway. Once fully integrated, Bookatable should add
approximately 14,000 more restaurants to TheFork’s online restaurant booking platform, which, including
Bookatable, had approximately 84,000 total bookable restaurants, as of December 31, 2019.
Over the long-term, our Experiences and Dining offerings enable us to deliver consumers a more
comprehensive experience, which we believe will increase awareness of, loyalty to, and engagement with our
products, drive more bookings to Experiences and Dining partners and generate greater revenue and increased
profitability on our platform. Given the significant market opportunities in these large and growing categories, as
well as competition aiming to provide consumers a similar multimodal experience, we expect to continue to invest
to drive bookings and revenue growth.
Other
Other is a combination of our Rentals, Flights/Cruises/Car, SmarterTravel, and Tripadvisor China business
units and is not considered a reportable segment. Profits have been relatively stable to positive and revenues have
declined in recent periods primarily due to strategic re-alignments and resource re-allocation to other areas of our
business. We operate these offerings opportunistically as they complement our overall strategic objectives to deliver
more value to consumers and travel partners.
Consolidated Results of Operations
A discussion regarding our financial condition and results of operations for fiscal year 2019 compared to fiscal
year 2018 is presented below. A discussion regarding our financial condition and results of operations for fiscal year
2018 compared to fiscal year 2017 can be found in Part II, Item 7. "Management’s Discussion and Analysis of
Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December
31, 2018, filed with the SEC on February 22, 2019 (our “2018 Annual Report”). As previously noted, we revised our
38
reportable segments during 2019. Although not required, in order to complement our revenue discussion of fiscal
year 2018 compared to fiscal year 2017 in our 2018 Annual Report for investors, we presented below summary
commentary describing the key drivers of revenue performance related to our principal revenue sources during that
time frame conformed to our revised reportable segment structure.
Results of Operations
Selected Financial Data
(in millions, except per share amounts and percentages)
Year ended December 31,
2018
2017
2019
% Change
2019 vs. 2018
2018 vs. 2017
Revenue
$
1,560 $
1,615 $
1,556
(3)%
4%
Costs and expenses:
Cost of revenue
Selling and marketing
Technology and content
General and administrative
Depreciation
Amortization of intangible assets
Total costs and expenses
Operating income
Other income (expense):
Interest expense
Interest income
Other income (expense), net
Total other income (expense), net
Income before income taxes
Provision for income taxes
Net income (loss)
Earnings (loss) per share attributable to common
stockholders:
Basic
Diluted
Other financial data:
Adjusted EBITDA (1)
$
$
$
$
94
672
294
187
93
33
1,373
187
(7)
17
(3)
7
194
(68)
126 $
86
778
275
177
82
34
1,432
183
(12)
7
(5)
(10)
173
(60)
113 $
72
849
243
157
79
32
1,432
124
(15)
1
—
(14)
110
(129)
(19)
9%
(14)%
7%
6%
13%
(3)%
(4)%
2%
(42)%
143%
(40)%
n.m.
12%
13%
12%
19%
(8)%
13%
13%
4%
6%
0%
48%
(20)%
600%
n.m.
(29)%
57%
(53)%
n.m.
0.91 $
0.89 $
0.82 $
0.81 $
(0.14)
(0.14)
11%
10%
n.m.
n.m.
438 $
422 $
331
4%
27%
n.m. = not meaningful
(1) See “Adjusted EBITDA” discussion below for more information.
39
Revenue and Segment Information
Year ended December 31,
2019
2018
2017
Revenue by Segment:
Hotels, Media & Platform
Experiences & Dining
Other (1)
Total revenue
Adjusted EBITDA by Segment:
Hotels, Media & Platform
Experiences & Dining
Other (1)
Total Adjusted EBITDA
$ 939
456
165
$ 1,560
(in millions)
$ 1,001
372
242
$ 1,615
$ 1,022
264
270
$ 1,556
$ 378
5
55
$ 438
$ 329
48
45
$ 422
$ 267
23
41
$ 331
% Change
2019 vs. 2018
2018 vs. 2017
(6)%
23%
(32)%
(3)%
15%
(90)%
22%
4%
(2)%
41%
(10)%
4%
23%
109%
10%
27%
Adjusted EBITDA Margin by Segment (2):
Hotels, Media & Platform
Experiences & Dining
Other (1)
40%
1%
33%
33%
13%
19%
26%
9%
15%
n.m. = not meaningful
(1) Other consists of our Rentals, Flights/Cruises/Car, SmarterTravel, and Tripadvisor China business units and does not
constitute a reportable segment.
(2) We define “Adjusted EBITDA Margin by Segment”, as Adjusted EBITDA by segment divided by revenue by segment.
Hotels, Media & Platform Segment
Hotels, Media & Platform segment revenue decreased by $62 million during the year ended December 31,
2019, when compared to the same period in 2018, primarily due to a decrease in our hotel metasearch auction
revenue. We estimate that adverse changes in foreign currency negatively impacted revenue by 2% during this
period. This decrease was partially offset to a lesser extent by an increase in our hotel sponsored placements
advertising revenue. Hotels, Media & Platform segment revenue decreased by $21 million during the year ended
December 31, 2018, when compared to the same period in 2017, primarily due to a decrease in our hotel metasearch
auction revenue, partially offset to a lesser extent by an increase in our hotel sponsored placements advertising.
Adjusted EBITDA and Adjusted EBITDA margin in our Hotels, Media & Platform segment increased $49
million or to 40%, respectively, during the year ended December 31, 2019 when compared to the same period in
2018, primarily due to reduced direct selling and marketing expenses related to SEM and other online paid traffic
acquisition channels, and television advertising, which more than offset the decrease in revenue. Adjusted EBITDA
and Adjusted EBITDA margin in our Hotels, Media & Platform segment increased $62 million or to 33%,
respectively, during the year ended December 31, 2018 when compared to the same period in 2017, primarily due to
a decrease in our direct selling and marketing expenses related to SEM and other online paid traffic acquisition costs
as we continued to optimize and improve our market efficiency from our online marketing campaigns, which more
than offset the decrease in revenue.
Our Hotels, Media & Platform segment has two revenue sources, as described below: (1) Tripadvisor-branded
hotels, which includes our Hotel auction and B2B revenue; and (2) Tripadvisor-branded display and platform (also
referred to as media advertising in our discussion). The following is a detailed discussion of the revenue sources
within our Hotels, Media & Platform segment:
40
Hotels, Media & Platform:
Tripadvisor-branded hotels
Tripadvisor-branded display and platform
Total Hotels, Media & Platform revenue
Tripadvisor-branded Hotels Revenue
Year ended December 31,
% Change
2019
2018
2017
(in millions)
779 $
160
939 $
848 $
153
1,001 $
866
156
1,022
$
$
2019 vs
2018
2018 vs
2017
(8%)
5%
(6%)
(2%)
(2%)
(2%)
Tripadvisor-branded hotels revenue primarily includes hotel metasearch auction revenue, and to a lesser extent
hotel B2B revenue, which includes click-based revenue generated from hotel sponsored placements advertising that
enable hotels to enhance their visibility on Tripadvisor hotel pages, and subscription-based advertising services that
we offer to travel partners. For the years ended December 31, 2019, 2018, and 2017, 83%, 85%, and 85%,
respectively, of our total Hotels, Media & Platform segment revenue was derived from Tripadvisor-branded hotels
revenue.
2019 vs. 2018
Tripadvisor-branded hotels revenue decreased $69 million or 8% during the year ended December 31, 2019
when compared to the same period in 2018. This decrease was due to factors impacting our hotel metasearch auction
revenue, primarily reduced revenue generated through our SEO marketing channel, which we believe is impacted by
search engines (primarily Google) increasing the prominence of their own hotel products in search results.
Tripadvisor-branded hotels revenue was also impacted by our progressive optimizations in SEM and other online
paid traffic acquisition spend, and to a lesser extent, the general trend of an increasing percentage of hotel shoppers
visiting via mobile phones which monetize at a significantly lower rate than hotel shoppers visiting via desktop or
tablet. Declines in Tripadvisor-branded hotels was partially offset to a lesser extent by growth in our hotel sponsored
placements advertising revenue. Refer to “Note 4: Revenue Recognition” in the notes to our consolidated financial
statements in Item 8 on this Annual Report on Form 10-K for a discussion of how our hotel metasearch auction
works.
2018 vs. 2017
Tripadvisor-branded hotels revenue decreased $18 million or 2% during the year ended December 31, 2018
when compared to the same period in 2017. This decrease was primarily due to factors impacting our hotel
metasearch auction revenue including travel partners bidding lower CPCs in our hotel metasearch auction during the
second half of 2017, which created difficult year-over-year comparisons during the first half of 2018. The decrease
in revenue can also be attributed to a significant reduction of our direct marketing spend on our least-profitable paid
online marketing campaigns as part of our progressive optimizations in SEM and other online paid traffic
acquisition spend, as well as a greater percentage of hotel shoppers visiting Tripadvisor-branded websites and apps
on mobile phones. The decline in Tripadvisor-branded hotels revenue was partially offset to a lesser extent by
growth in our hotel sponsored placements advertising revenue and product enhancements focused on increasing
traffic quality.
Tripadvisor-branded Display and Platform Revenue
For the years ended December 31, 2019, 2018, and 2017, 17%, 15%, and 15%, respectively, of our total
Hotels, Media & Platform segment revenue was derived from Tripadvisor-branded display and platform revenue.
Tripadvisor-branded display and platform revenue increased $7 million or 5% during the year ended December 31,
2019, when compared to the same period in 2018, primarily due to an increase in pricing and to a lesser extent, new
initiatives launched in the later part of 2019. Tripadvisor-branded display and platform revenue decreased $3 million
or 2% during the year ended December 31, 2018, when compared to the same period in 2017, primarily due to a
general trend of an increasing percentage of our traffic visiting our websites on mobile phones, which yielded
smaller impression opportunities due to the smaller screen size.
41
Experiences & Dining Segment
For the years ended December 31, 2019, 2018 and 2017, our Experiences & Dining segment revenue
accounted for 29%, 23% and 17%, respectively, of our total consolidated revenue. Experiences & Dining segment
revenue increased by $84 million or 23% during the year ended December 31, 2019, when compared to the same
period in 2018, primarily driven by growth in both Experiences and Dining bookings, including increased bookings
and revenue from Tripadvisor websites, partially offset by adverse changes in foreign currency which we estimate
negatively impacted Experiences and Dining revenue by 4%. Experiences & Dining segment revenue increased by
$108 million or 41% during the year ended December 31, 2018, when compared to the same period in 2017,
primarily driven by growth in both Experiences and Restaurants bookings, including increased bookings and
revenue from Tripadvisor websites.
Experiences revenue growth during the years ended December 31, 2019 and 2018, when compared to the
same periods in 2018 and 2017, respectively, was primarily driven by growth in consumer demand, mobile
reservations, and bookable supply on our platform contributing to overall bookings growth as consumers are offered
a greater selection of travel experiences, which we believe was supported by platform improvements for both
consumers and suppliers and expansion. Dining revenue growth during the years ended December 31, 2019 and
2018, when compared to the same periods in 2018 and 2017, respectively, was primarily driven by growth in the
following: seated diners, bookable supply of restaurant listings, mobile reservations, dining sponsored placement
revenue, and subscription service revenue, as well as, to a lesser extent, incremental revenue related to our 2019
acquisitions.
Experiences & Dining segment Adjusted EBITDA decreased by $43 million or 90%, during the year ended
December 31, 2019 when compared to the same period in 2018, primarily due to increased people costs to drive
product and supply investments, as well as increased marketing investments to fund long-term growth initiatives,
partially offset by an increase in revenue, as noted above. Experiences & Dining segment Adjusted EBITDA
increased by $25 million or 109%, during the year ended December 31, 2018 when compared to the same period in
2017, primarily due to an increase in revenue, as noted above, partially offset by increased people costs to drive
product and supply investments and increased marketing investments to fund long-term growth initiatives.
Other
Other revenue, which primarily includes click-based advertising and display-based advertising revenue from
our Rentals, and Flights, Cruises and Car offerings on Tripadvisor, and non-Tripadvisor branded websites, such as
www.smartertravel.com, www.bookingbuddy.com, www.cruisecritic.com and www.onetime.com, decreased by $77
million or 32% and $28 million or 10%, during the years ended December 31, 2019 and 2018, respectively, when
compared to the same periods in 2018 and 2017, respectively. This was primarily driven by the elimination of some
marginal and unprofitable revenue within these offerings near the end of 2018, as well as strategic resource re-
allocation of investment across other areas of our business and continued competition in our Rentals offering.
Adjusted EBITDA in Other increased $10 million or 22% during the year ended December 31, 2019, when
compared to the same period in 2018, and increased $4 million or 10% during the year ended December 31, 2018,
when compared to the same period in 2017. These increases were primarily due to reduced costs related to
marketing and operational re-alignments, primarily offset by a decrease in revenue, as described above.
Consolidated Expenses
Cost of Revenue
Cost of revenue consists of expenses that are directly related or closely correlated to revenue generation,
including direct costs, such as credit card and other booking transaction payment fees, data center costs, costs
associated with prepaid tour tickets, ad serving fees, flight search fees, and other transaction costs. In addition, cost
of revenue includes personnel and overhead expenses, including salaries, benefits, stock-based compensation and
bonuses for certain customer support personnel who are directly involved in revenue generation.
42
Direct costs
Personnel and overhead
Total cost of revenue
% of revenue
$
$
Year ended December 31,
2019
$
2018
(in millions)
67
$
19
86
$
5.3%
71
23
94
$
6.0%
% Change
2019 vs
2018
2018 vs
2017
2017
53
19
72
4.6%
6%
21%
9%
26%
0%
19%
Cost of revenue increased $8 million during the year ended December 31, 2019 when compared to the same
period in 2018, primarily due to increased direct costs from credit card payment and other transaction costs in our
Experiences & Dining segment as a result of revenue growth and increased personnel and overhead costs related to
additional headcount in our Experiences & Dining segment to support business growth, partially offset by decreased
credit card transaction fees in Other.
Selling and Marketing
Selling and marketing expenses primarily consist of direct costs, including traffic generation costs from SEM
and other online traffic acquisition costs, syndication costs and affiliate program commissions, social media costs,
brand advertising (including television and other offline advertising), promotions and public relations. In addition,
our sales and marketing expenses consist of indirect costs such as personnel and overhead expenses, including
salaries, commissions, benefits, stock-based compensation, and bonuses for sales, sales support, customer support
and marketing employees.
Direct costs
Personnel and overhead
Total selling and marketing
% of revenue
$
$
Year ended December 31,
2019
$
2018
(in millions)
553
$
225
$
778
48.2%
433
239
672
$
43.1%
% Change
2019 vs
2018
2018 vs
2017
2017
639
210
849
54.6%
(22%)
6%
(14%)
(13%)
7%
(8%)
Direct selling and marketing costs decreased $120 million during the year ended December 31, 2019 when
compared to the same period in 2018, primarily due to an overall decrease in SEM and other online traffic
acquisition costs, as well as lower television advertising costs, driven by our Hotels, Media & Platform segment and
Other, partially offset by an increase in similar marketing expenditures in our Experiences & Dining segment.
Personnel and overhead costs increased $14 million during the year ended December 31, 2019 when
compared to the same period in 2018, primarily due to an increase in personnel and overhead costs related to
additional headcount in our Experiences & Dining segment to support business growth, partially offset by decreased
personnel and overhead costs in Other as a result of strategic personnel re-allocation across the business.
Technology and Content
Technology and content expenses consist primarily of personnel and overhead expenses, including salaries
and benefits, stock-based compensation expense, and bonuses for salaried employees and contractors engaged in the
design, development, testing, content support, and maintenance of our websites and mobile apps. Other costs include
licensing, maintenance expense, computer supplies, telecom costs, content translation and localization costs, and
consulting costs.
43
Personnel and overhead
Other
Total technology and content
% of revenue
$
$
Year ended December 31,
2019
$
2018
(in millions)
246
$
29
275
$
17.0%
261
33
294
$
18.8%
% Change
2019 vs
2018
2018 vs
2017
2017
219
24
243
15.6%
6%
14%
7%
12%
21%
13%
Technology and content costs increased $19 million during the year ended December 31, 2019 when
compared to the same period in 2018. Personnel and overhead costs increased by $15 million during the year ended
December 31, 2019 when compared to the same period in 2018, primarily due to additional headcount in our
Experiences & Dining segment to support business growth, partially offset by a decrease of personnel and overhead
costs in Other as a result of strategic personnel re-allocation across the business.
General and Administrative
General and administrative expenses consist primarily of personnel and related overhead costs, including
personnel engaged in leadership, finance, legal, and human resources, as well as stock-based compensation expense
for those same personnel. General and administrative costs also include professional service fees and other fees
including audit, legal, tax and accounting, and other costs including bad debt expense, non-income taxes, such as
sales, use and other non-income related taxes.
Personnel and overhead
Professional service fees and other
Total general and administrative
% of revenue
$
$
Year ended December 31,
2019
$
2018
(in millions)
129
$
48
177
$
11.0%
135
52
187
$
12.0%
% Change
2019 vs
2018
2018 vs
2017
2017
116
41
157
10.1%
5%
8%
6%
11%
17%
13%
General and administrative costs increased $10 million during the year ended December 31, 2019 when
compared to the same period in 2018. Personnel and overhead costs increased $6 million during the year ended
December 31, 2019 when compared to the same period in 2018, primarily related to additional headcount in our
Experiences & Dining segment to support business growth and, to a lesser extent, our Hotels, Media & Platform
segment, partially offset by a decrease in personnel and overhead costs in Other as a result of strategic personnel re-
allocation across the business. Professional service fees and other increased $4 million during the year ended
December 31, 2019 when compared to the same period in 2018, primarily related to $3 million of French digital
service tax recorded during 2019, in addition to increased professional service fees and acquisition-related costs of
$5 million, partially offset by a decrease of $5 million in legal reserves and settlements during 2019.
44
Depreciation
Depreciation expense consists of depreciation on computer equipment, leasehold improvements, furniture,
office equipment and other assets, and amortization of capitalized software and website development costs and
right-of-use (“ROU”) assets related to our finance lease.
Depreciation
% of revenue
2019
Year ended December 31,
2018
(in millions)
82
93
$
$
5.1%
6.0%
$
2017
79
5.1%
Depreciation expense increased $11 million during the year ended December 31, 2019 when compared to the
same period in 2018, primarily due to incremental amortization of $6 million for the ROU asset related to our
Headquarters Lease recorded upon adoption of ASC 842 and to a lesser extent increased amortization related to
capitalized software and website development costs. Refer to “Note 2: Significant Accounting Policies” in the notes
to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for additional information on
our adoption of ASC 842.
Interest Expense
Interest expense primarily consists of interest incurred, commitment fees and debt issuance cost amortization
related to our 2015 Credit Facility, Chinese Credit Facilities, as well as interest on finance leases.
Interest expense
2019
Year ended December 31,
2018
(in millions)
2017
$
(7) $
(12) $
(15)
Interest expense decreased $5 million during the year ended December 31, 2019 when compared to the same
period in 2018, primarily due to lower finance costs related to our Headquarters Lease under ASC 842 and no
outstanding borrowings on our 2015 Credit Facility during 2019. Refer to “Note 2: Significant Accounting Policies”
in the notes to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for additional
information regarding our adoption of ASC 842.
Interest Income
Interest income primarily consists of interest earned from our money market funds and marketable securities,
including amortization of discounts and premiums on our marketable securities.
Interest income
2019
Year ended December 31,
2018
(in millions)
2017
$
17 $
7 $
1
Interest income increased $10 million during the year ended December 31, 2019 when compared to the same
period in 2018 primarily due to an increase in interest income earned from our money market funds and other
investments related to increased average interest rates and increased average invested funds during 2019.
Other Income (Expense), Net
Other income (expense), net primarily consists of net foreign exchange gains and losses, gains (losses) and
impairments from non-marketable investments, and other non-operating income (expenses).
45
Other income (expense), net
$
(3) $
(5) $
-
2019
Year ended December 31,
2018
(in millions)
2017
Other income (expense), net decreased $2 million during the year ended December 31, 2019 when compared
to the same period in 2018 primarily due to lower foreign currency transaction losses as a result of the fluctuation of
foreign exchange rates during 2019, partially offset by net increases in other non-operating expenses. Refer to “Note
19: Other Income (Expense), Net” in the notes to our consolidated financial statements in Item 8 on this Annual
Report on Form 10-K for additional information.
Provision for Income Taxes
Provision for income taxes
Effective tax rate
2019
Year ended December 31,
2018
(in millions)
2017
$
$
68
35.1%
$
60
34.7%
129
117.3%
The 2017 Tax Act was signed into law on December 22, 2017, and resulted in significant changes to the U.S.
corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the
elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest
expense and executive compensation. The 2017 Tax Act also transitions international taxation from a worldwide
system to a modified territorial system and includes base erosion prevention measures on non-U.S. earnings, which
has the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low-
taxed income (“GILTI”). These changes were effective beginning January 1, 2018. Refer to “Note 11: Income Taxes”
in the notes to our consolidated financial statements in Item 8 for further information on the financial statement
impact of the 2017 Tax Act.
Our effective income tax rate is higher than the federal statutory rate in the United States primarily due to
foreign valuation allowances, unrecognized tax benefits, and non-deductible stock based compensation. This was
partially offset by international provisions from the 2017 Tax Act and research tax credits.
Our effective income tax rate increased to 35.1% during the year ended December 31, 2019 from 34.7% in the
same period in 2018. The change in the effective tax rate for the year ended December 31, 2019 when compared to
the same period in 2018, was primarily due to an income tax expense related to the reversal of a $15 million
cumulative benefit taken for excluding stock-based compensation from our inter-company cost-sharing
arrangements, partially offset by a release of valuation allowances on certain foreign deferred tax assets. Refer to
“Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 on this Annual Report on
Form 10-K for further information regarding this $15 million adjustment and of the Altera Corporation (“Altera”)
litigation with the Internal Revenue Service (“IRS”).
Adjusted EBITDA
To provide investors with additional information regarding our financial results, we also disclose consolidated
Adjusted EBITDA, which is a non-GAAP financial measure. A “non-GAAP financial measure” refers to a
numerical measure of a company’s historical or future financial performance, financial position, or cash flows that
excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure
calculated and presented in accordance with GAAP in such company’s financial statements.
Adjusted EBITDA is also our segment profit measure and a key measure used by our management and board
of directors to understand and evaluate the financial performance of our business and on which internal budgets and
forecasts are based and approved. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA
can provide a useful measure for period-to-period comparisons and better enables management and investors to
compare financial results between periods as these costs may vary independent of ongoing core business
46
performance. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in
understanding and evaluating our operating results in the same manner as our management and board of directors.
We define Adjusted EBITDA as net income (loss) plus: (1) provision for income taxes; (2) other income (expense),
net; (3) depreciation of property and equipment, including amortization of internal use software and website
development; (4) amortization of intangible assets; (5) stock-based compensation and other stock-settled obligations;
(6) goodwill, long-lived asset and intangible asset impairments; (7) legal reserves and settlements; (8) restructuring
and other related reorganization costs; and (9) other non-recurring expenses and income. The items above are
excluded from our Adjusted EBITDA measure because these items are noncash in nature, or because the amount is
not driven by ongoing core operating results and renders comparisons with prior periods less meaningful.
During the fourth quarter of 2019, we revised our Adjusted EBITDA definition to exclude restructuring and
other related reorganization costs, as we believe these costs are not directly tied to the ongoing core operations of
our business. We believe that excluding these amounts better enables management and investors to compare
financial results between periods as these costs may vary independent of business performance. This revision to our
definition did not have a material impact to Adjusted EBITDA for any period prior to the year ended December 31,
2019; therefore, no reclassifications have been made to conform the prior periods to the current period presentation.
This revision had no effect on consolidated GAAP results in any period.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation
or as a substitute for analysis of our results reported in accordance with GAAP. Because of these limitations, you
should consider Adjusted EBITDA alongside other financial performance measures, including net income and our
other GAAP results.
Some of these limitations are:
(cid:129) Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures
or contractual commitments;
(cid:129) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
(cid:129) Adjusted EBITDA does not reflect the interest expense, or cash requirements necessary to service
interest or principal payments on our debt, if any;
(cid:129) Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation or
other stock-settled obligations;
(cid:129) Although depreciation and amortization are non-cash charges, the assets being depreciated and
amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital
expenditure requirements for such replacements or for new capital expenditure requirements;
(cid:129) Adjusted EBITDA does not reflect certain income and expenses not directly tied to the ongoing core
operations of our business, such as legal reserves and settlements, restructuring and other related
reorganization costs;
(cid:129) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
and
(cid:129) Other companies, including companies in our own industry, may calculate Adjusted EBITDA
differently than we do, limiting its usefulness as a comparative measure.
The following table presents a reconciliation of Adjusted EBITDA to Net Income, the most directly
comparable financial measure calculated and presented in accordance with GAAP, for the periods presented:
47
2019
Year ended December 31,
2018
(in millions)
2017
Net income (loss)
Add: Provision for income taxes
Add: Other expense (income), net
Add: Restructuring and other related reorganization costs
Add: Legal reserves and settlements
Add: Stock-based compensation
Add: Amortization of intangible assets
Add: Depreciation
Adjusted EBITDA
$
$
126 $
68
(7)
1
—
124
33
93
438 $
113 $
60
10
—
5
118
34
82
422 $
(19)
129
14
—
—
96
32
79
331
Liquidity and Capital Resources
Our principal source of liquidity is cash flows generated from operations, although liquidity needs can also be
met through drawdowns under our credit facilities. As of December 31, 2019 and 2018, we had $319 million and
$670 million, respectively, of cash, cash equivalents and short-term available-for-sale marketable debt securities. As
of December 31, 2019, approximately $151 million of our cash and cash equivalents were held by our international
subsidiaries outside of the United States of which approximately 50% were located in the U.K., with the majority of
our international cash denominated in U.S. dollars, Euros, and, to a lesser extent, British pounds, Australian dollars
and other currencies. As of December 31, 2019, we had $619 million of cumulative undistributed earnings in foreign
subsidiaries. As a result of the 2017 Tax Act, foreign earnings may now generally be repatriated back to the U.S.
without incurring U.S. federal income tax. Historically, we have asserted our intention to indefinitely reinvest the
cumulative undistributed earnings of our foreign subsidiaries. In response to increased cash requirements in the U.S.
related to our declaration of a special cash dividend and other strategic initiatives during the fourth quarter of 2019,
we determined that we no longer consider $501 million of these foreign earnings to be indefinitely reinvested.
During the year ended December 31, 2019, we recorded a deferred tax liability of $1 million for the U.S. state
income tax and foreign withholding tax liabilities on the cumulative undistributed foreign earnings that are not
indefinitely reinvested. We intend to indefinitely reinvest $118 million of our foreign earnings in our non-US
subsidiaries. Determination of the amount of unrecognized deferred income tax liability related to these earnings is
not practicable. Refer to “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 on
this Annual Report on Form 10-K for further information.
As of December 31, 2019, we had no outstanding borrowings and approximately $1.2 billion of borrowing
capacity available under our 2015 Credit Facility (as defined below) and $30 million of borrowing capacity
available under our Chinese Credit Facility—BOA (as defined below). For further discussion on our credit facilities,
refer to “Note 10: Debt” in the notes to our consolidated financial statements in Item 8 on this Annual Report on
Form 10-K.
2015 Credit Facility
In June 2015, we entered into a five-year credit agreement with a group of lenders which, among other things,
provided for a $1 billion unsecured revolving credit facility (the “2015 Credit Facility”) and immediately borrowed
$290 million. In May 2017, the 2015 Credit Facility was amended to, among other things, (i) increase the aggregate
amount of revolving loan commitments available from $1.0 billion to $1.2 billion; and (ii) extend the maturity date
of the 2015 Credit Facility from June 26, 2020 to May 12, 2022 (the “First Amendment”). Borrowings under the
2015 Credit Facility generally bear interest, at the Company’s option, at a rate per annum equal to either (i) the
Eurocurrency Borrowing rate, or the adjusted LIBO rate for the interest period in effect for such borrowing; plus an
applicable margin ranging from 1.25% to 2.00% (“Eurocurrency Spread”), based on the Company’s leverage ratio;
or (ii) the Alternate Base Rate (“ABR”) Borrowing, which is the greatest of (a) the Prime Rate in effect on such day,
(b) the New York Fed Bank Rate in effect on such day plus 1/2 of 1.00% per annum and (c) the Adjusted LIBO Rate
(or LIBO rate multiplied by the Statutory Reserve Rate) for an interest period of one month plus 1.00%; in addition
48
to an applicable margin ranging from 0.25% to 1.00% (“ABR Spread”), based on the Company’s leverage ratio. The
Company may borrow from the 2015 Credit Facility in U.S dollars, Euros and British pound.
As of December 31, 2019, we had no outstanding borrowings and approximately $1.2 billion of borrowing
capacity available under our 2015 Credit Facility. We are required to pay a quarterly commitment fee, at an
applicable rate ranging from 0.15% to 0.30%, on the daily unused portion of the revolving credit facility for each
fiscal quarter and additional fees in connection with the issuance of letters of credit. As of December 31, 2019, our
unused revolver capacity was subject to a commitment fee of 0.15%, given the Company’s leverage ratio. The 2015
Credit Facility includes $15 million of borrowing capacity available for letters of credit and $40 million for
Swingline borrowings on same-day notice.
During the year ended December 31, 2018, we repaid all of our outstanding borrowings, or approximately
$230 million, under the 2015 Credit Facility. This repayment was primarily made from a one-time cash repatriation
of $325 million of foreign earnings to the United States during the year ended December 31, 2018. We recorded
total interest expense and commitment fees on our 2015 Credit Facility of $2 million, $3 million and $6 million for
the years ended December 31, 2019, 2018 and 2017, respectively, to interest expense on our consolidated statements
of operations.
The 2015 Credit Facility contains a number of covenants that, among other things, restrict our ability to: incur
additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations,
sell or transfer assets, pay dividends and distributions, make investments, loans or advances, prepay certain
subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material
agreements governing certain subordinated indebtedness, and change our fiscal year. The 2015 Credit Facility also
requires us to maintain a maximum leverage ratio and contains certain customary affirmative covenants and events
of default, including a change of control. If an event of default occurs, the lenders under the 2015 Credit Facility will
be entitled to take various actions, including the acceleration of all amounts due under the 2015 Credit Facility. As
of December 31, 2019 and 2018, we were in compliance with all of our debt covenants.
Chinese Credit Facilities
We are party to a $30 million, one-year revolving credit facility with the Bank of America (the “Chinese
Credit Facility—BOA”) that is currently subject to review on a periodic basis with no specific expiration period.
This credit facility generally bears interest at a rate based on the People’s Bank of China benchmark, including
certain adjustments, which may be made in accordance with market conditions at the time of borrowing. As of both
December 31, 2019 and 2018, there were no outstanding borrowings under this credit facility.
Significant uses of capital
On January 25, 2017, our Board of Directors authorized the repurchase of $250 million of our shares of
common stock under a share repurchase program. During the year ended December 31, 2017, we repurchased a total
of 6,079,003 shares of the Company’s outstanding common stock at an aggregate cost of $250 million, and
completed this share repurchase program.
On January 31, 2018, our Board of Directors authorized an additional repurchase of up to $250 million of our
shares of common stock under a share repurchase program. This share repurchase program has no expiration date
but may be suspended or terminated by the Board of Directors at any time. During the year ended December 31,
2018, we repurchased 2,582,198 shares of the Company’s outstanding common stock at an aggregate cost of $100
million. As of December 31, 2018, we had $150 million remaining available to repurchase shares of our common
stock under this share repurchase program.
On November 1, 2019, our Board of Directors authorized the repurchase of an additional $100 million in
shares of our common stock under our existing share repurchase program, which increased the amount available to
the Company under this share repurchase program to $250 million. This share repurchase program has no expiration
date but may be suspended or terminated by the Board of Directors at any time. During the year ended December 31,
2019, we repurchased 2,059,846 shares of the Company’s outstanding common stock at an aggregate cost of $60
49
million. As of December 31, 2019, we had $190 million remaining available to repurchase shares of our common
stock under this share repurchase program.
On November 1, 2019, our Board of Directors declared a special cash dividend of $3.50 per share, or
approximately $488 million in the aggregate. The dividend was payable on December 4, 2019 to stockholders of
record on November 20, 2019. We funded this special cash dividend with available cash primarily from the U.S.
and to a lesser extent from a foreign subsidiary, with any related income tax impact not material.
During 2019, we paid $110 million, net of cash acquired, in connection with the following Dining segment
acquisitions: (1) SinglePlatform, a leading online content management and syndication platform company based in
the U.S., (2) BookaTable, an online restaurant reservation and booking platform company based in the U.K.; and (3)
Restorando, an online restaurant reservation and booking platform company based in Argentina.
Our business experiences seasonal fluctuations that affect the timing of our annual cash flows related to
working capital. In our Experiences business and our Rentals free-to-list model, we generally receive cash from
travelers at the time of booking and we record these amounts, net of commissions, on our consolidated balance
sheets as deferred merchant payables. We pay the suppliers, or the property rental owners and experience providers,
after the travelers’ use. Therefore, we receive cash from the traveler prior to paying the supplier and this operating
cycle represents a source or use of cash to us. During the first half of the year Rentals and Experiences bookings
typically exceed the amount of completed stays and tour-taking, resulting in higher cash flow related to working
capital, while during the second half of the year, particularly in the third quarter, this pattern reverses and cash flows
from these transactions are typically negative. While we expect the impact of seasonal fluctuations to continue,
further significant shifts in our business mix or adverse economic conditions could result in future seasonal patterns
that are different from historical trends. In addition, new or different payment options offered to our customers could
impact the timing of cash flows. For example, in September 2019 we introduced a new payment feature which
allows our Experiences customers the option to reserve certain experience activities and defer payment until a date
no later than two days before the experience date; as a result, this new payment option may affect the timing of our
future cash flows.
We believe that our available cash and cash equivalents, combined with expected cash flows generated by
operating activities and available borrowings from our credit facilities, will be sufficient to fund our foreseeable
working capital requirements, capital expenditures, existing business growth initiatives, debt obligations, lease
commitments, and other financial commitments through at least the next twelve months. Our future capital
requirements may also include capital needs for acquisitions, share repurchases, cash dividends, and/or other
expenditures in support of our business strategy, and may potentially reduce our cash balance and/or increase our
debt.
Our cash flows from operating, investing and financing activities, as reflected in our consolidated statements
of cash flows, are summarized in the following table:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
2019
Year ended December 31,
2018
(in millions)
2017
$
424 $
(176)
(580)
405 $
(49)
(358)
238
6
(200)
During the year ended December 31, 2019, our primary use of cash was for operations, financing activities,
(including payment of a special cash dividend to common stockholders of $488 million, repurchases of our
outstanding common stock at an aggregate cost of $60 million under our existing share repurchase program, and
withholding taxes on net share settlements of our equity awards of $29 million), and investing activities (including
business acquisitions and other investments of $110 million, capital expenditures of $83 million and cash used of
$133 million in purchases of marketable securities). This use of cash was funded with available cash and cash
50
equivalents, cash provided by operations, and also investing activities, which consisted of $150 million generated
from sales and maturities of marketable securities.
For the year ended December 31, 2019, net cash provided by operating activities increased by $19 million or 5%
when compared to the same period in 2018. This increase in cash provided by operating activities was due to an
increase in incremental non-cash items affecting cash flow of $18 million, which was primarily due to an increase in
the following items: depreciation and stock-based compensation, an increase in net income of $13 million, all of
which was partially offset by a decrease in working capital movements of $12 million, primarily due to the timing of
customer receipts and vendor and merchant payments.
For the year ended December 31, 2019, net cash used in investing activities increased by $127 million when
compared to the same period in 2018, due to an increase in net cash paid for business acquisitions and other
investments of $86 million, increase in net cash used from the purchases, sales and maturities of marketable
securities of $31 million, and an increase in capital expenditures of $22 million, partially offset by a decrease in
other investing activities of $12 million during the year ended December 31, 2018, which did not reoccur in 2019.
For the year ended December 31, 2019, net cash used in financing activities increased by $222 million when
compared to the same period in 2018, primarily due to a payment of a special cash dividend to common
stockholders of $488 million in 2019, partially offset by a net repayment on our 2015 Credit Facility of $230 million
during 2018, which did not reoccur in 2019, and a decrease in net cash used to purchase shares of our common stock
under our existing share repurchase program of $40 million, as compared to the year ended December 31, 2018.
The following table summarizes our material contractual obligations and commercial commitments as of
December 31, 2019:
By Period
Total
Less than
1 year
1 to 3 years 3 to 5 years
(in millions)
More than
5 years
Finance lease obligations (1)
Operating lease obligations (2)
2017 Tax Act - Transition tax liability
Expected commitment fee payments on 2015
Credit Facility (3)
Purchase obligations and other (4)
Total (5)(6)
$
$
106 $
92
31
4
10
243 $
9 $
23
—
2
3
37 $
20 $
42
—
2
4
68 $
20 $
21
16
—
3
60 $
57
6
15
—
—
78
(1)
(2)
(3)
(4)
(5)
(6)
Estimated future lease payments for our Headquarters Lease in Needham, Massachusetts. Refer to “Note 2: Significant
Accounting Policies” in the notes to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K
for further information.
Estimated future lease payments for our operating leases, primarily for office space, with non-cancelable lease terms.
These amounts exclude expected rental income under non-cancelable subleases. Refer to “Note 2: Significant Accounting
Policies” in the notes to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for further
information.
Expected commitment fee payments are based on the daily unused portion of the 2015 Credit Facility, issued letters of
credit, and the effective commitment fee rate as of December 31, 2019; however, these variables could change
significantly in the future.
Estimated purchase obligations that are fixed and determinable primarily related to telecommunication contracts, with
various expiration dates through approximately December 2024. These contracts have non-cancelable terms or are
cancelable only upon payment of significant penalty.
Excluded from the table was $167 million of unrecognized tax benefits, including interest, which is included in other long-
term liabilities on our consolidated balance sheet as of December 31, 2019, for which we cannot make a reasonably
reliable estimate of the amount and period of payment. We anticipate that the liability for unrecognized tax benefits could
decrease by up to $12 million within the next twelve months due to the settlement of examinations of issues with tax
authorities. Refer to “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 on this
Annual Report on Form 10-K for further discussion.
Excluded from the table was $3 million of undrawn standby letters of credit, primarily related to our property leases.
51
As of December 31, 2019, other than the items discussed above, we did not have any off-balance sheet
arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC, that have, or are
reasonably likely to have, a current or future effect on our financial condition, results of operations, liquidity, capital
expenditures or capital resources.
Office Lease Commitments
In June 2013, we entered into a lease for a new corporate headquarters building. Pursuant to the Headquarters
Lease, the landlord built an approximately 280,000 square foot rental building in Needham, Massachusetts, and
leased the Premises to us as our corporate headquarters for an initial term of 15 years and 7 months or through
December 2030. We also have an option to extend the term of our Headquarters Lease for two consecutive terms of
five years each. We account for our Headquarters Lease as a finance lease as of December 31, 2019.
In addition to our Headquarters Lease, we also have contractual obligations in the form of operating leases for
our office space, in which we lease an aggregate of approximately 505,000 square feet of office space at
approximately 50 other locations across North America, Europe, Asia Pacific and South America, in cities such as
New York, Boston, London, Sydney, Barcelona, Buenos Aires, and Paris, primarily for our sales offices, subsidiary
headquarters, and international management teams, pursuant to leases with various expiration dates, with the latest
expiring in June 2027.
Refer to “Note 2: Significant Accounting Policies,” under the Recently Adopted Accounting Pronouncements,
for detailed discussion on the accounting impact of ASC 842, Leases on our property leases which the Company
adopted on January 1, 2019.
Contingencies
In the ordinary course of business, we are party to regulatory and legal matters, including threats thereof,
arising out of our operations. These matters may involve claims involving patent and intellectual property rights
(including alleged infringement of third-party intellectual property rights), tax matters (including value-added,
excise, transient occupancy and accommodation taxes), regulatory compliance (including competition, consumer
matters and data privacy), defamation and other claims. Periodically, we review the status of all significant
outstanding matters to assess any potential financial exposure. When (i) it is probable that an asset has been
impaired or a liability has been incurred; and (ii) the amount of the loss can be reasonably estimated, we record the
estimated loss in our consolidated statements of operations. We provide disclosures in the notes to the consolidated
financial statements for loss contingencies that do not meet both of these conditions if there is a reasonable
possibility that a loss may have been incurred that would be material to the consolidated financial statements. We
base accruals on the best information available at the time which can be highly subjective. Although occasional
adverse decisions or settlements may occur, we do not believe that the final disposition of any of these matters will
have a material adverse effect on our business. However, the final outcome of these matters could vary significantly
from our estimates. Finally, there may be claims or actions pending or threatened against us of which we are
currently not aware and the ultimate disposition of which could have a material adverse effect on us.
We are also under audit by the IRS and various other domestic and foreign tax authorities with regards to
income tax matters. We have reserved for potential adjustments to our provision for income taxes that may result
from examinations by, or any negotiated agreements with, these tax authorities. Although we believe our tax
estimates are reasonable, the final determination of audits could be materially different from our historical income
tax provisions and accruals. The results of an audit could have a material effect on our financial position, results of
operations, or cash flows in the period for which that determination is made.
By virtue of consolidated income tax returns previously filed with Expedia, we are currently under an IRS
audit for the 2009, 2010 and short-period 2011 tax years. We are separately under examination by the IRS for the
short-period 2011 and 2012-2016 tax years, under an employment tax audit by the IRS for the 2013 and 2014 tax
years, and have various ongoing audits for state income tax returns. These audits include questioning of the timing
and the amount of income and deductions and the allocation of income among various tax jurisdictions. These
52
examinations may lead to proposed or ordinary course adjustments to our taxes. We are no longer subject to tax
examinations by tax authorities for years prior to 2009. As of December 31, 2019, no material assessments have
resulted, except as noted below regarding our 2009, 2010, and 2011 IRS audit with Expedia and our 2012 and 2013
standalone IRS audit.
In January 2017 and April 2019, as part of the IRS audit of Expedia, we received Notices of Proposed
Adjustment from the IRS for the 2009, 2010, and 2011 tax years. Subsequently, in September 2019, as part of
Tripadvisor’s standalone audit, we received Notices of Proposed Adjustment from the IRS for the 2012 and 2013 tax
years. These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries,
and would result in an increase to our worldwide income tax expense in an estimated range of $35 million to $40
million at the close of the audit if the IRS prevails, after consideration of competent authority relief and Transition
Tax, exclusive of interest and penalties. We disagree with the proposed adjustments and we intend to defend our
position through applicable administrative and, if necessary, judicial remedies. Our policy is to review and update
tax reserves as facts and circumstances change. Based on our interpretation of the regulations and available case law,
we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable. In
addition to the risk of additional tax for 2009 through 2013 transactions, if the IRS were to seek transfer pricing
adjustments of a similar nature for transactions in subsequent years, we would be subject to significant additional tax
liabilities.
The Organization for Economic Cooperation and Development (“OECD”) has been working on a Base
Erosion and Profit Shifting Project, and issued the Action 1 report in 2015 to address the tax challenges arising from
digitalization. Since then, the OECD/G20 Inclusive Framework have issued various guidelines, policy notes, and
proposals that if adopted could result in an overhaul of the international taxation system under which our current tax
obligations are determined. As the OECD/G20 Inclusive Framework drives toward a consensus long-term solution,
several countries have introduced unilateral digital service tax initiatives which impose new types of non-income
taxes, including taxes based on a percentage of revenue. In July 2019, France signed into law a 3% digital services
tax to be applied retroactively as of January 1, 2019. We recorded an estimate of $3 million for digital service tax in
general and administrative expense on our consolidated statement of operations during the year ended December 31,
2019; however, we continue to assess the financial impact of this new law. We are also monitoring other U.S. states
and countries in which we do business, such as Italy, Spain, and the U.K., who have enacted or proposed similar
taxes which will be applicable or are likely to be applicable at some point during 2020. We will continue to monitor
developments and determine the financial impact worldwide of these initiatives.
As a result of the 2017 Tax Act, foreign earnings may now generally be repatriated back to the U.S. without
incurring U.S. federal income tax. Historically, we have asserted our intention to indefinitely reinvest the cumulative
undistributed earnings of our foreign subsidiaries. In response to increased cash requirements in the U.S. related to
our declaration of a special cash dividend and other strategic initiatives during the fourth quarter of 2019, we
determined that we no longer consider $501 million of these foreign earnings to be indefinitely reinvested. During
the year ended December 31, 2019, we recorded a deferred tax liability of $1 million for the U.S. state income tax
and foreign withholding tax liabilities on the cumulative undistributed foreign earnings that are not indefinitely
reinvested. We intend to indefinitely reinvest $118 million of our foreign earnings in our non-US subsidiaries.
Determination of the amount of unrecognized deferred income tax liability related to these earnings is not
practicable.
Refer to “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 on this
Annual Report on Form 10-K for further information on the impact of the 2017 Tax Act, potential contingencies
surrounding current audits by the IRS and various other domestic and foreign tax authorities, and other income tax
and non-income tax matters.
Certain Relationships and Related Party Transactions
For information on our related party transactions, refer to “Note 17: Related Party Transactions” in the notes
to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K.
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Critical Accounting Policies and Estimates
We prepare our consolidated financial statements and accompanying notes in accordance with GAAP.
Preparation of the consolidated financial statements and accompanying notes requires that management make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities as of the date of the consolidated financial statements as well as revenue and expenses during
the periods reported. Management bases its estimates on historical experience, when applicable and other
assumptions that it believes are reasonable under the circumstances. Actual results may differ from estimates under
different assumptions or conditions.
There are certain critical policies and estimates that we believe require that management use significant
judgment and estimates in applying those policies in the preparation of our consolidated financial statements. We
consider an accounting estimate to be critical if:
(cid:129)
(cid:129)
It requires us to make an assumption because information was not available at the time or it included
matters that were highly uncertain at the time we were making the estimate; and/or
Changes in the estimate or different estimates that we could have selected may have had a material impact
on our financial condition or results of operations.
Refer to “Note 2: Significant Accounting Policies” in the notes to our consolidated financial statements in Item
8 on this Annual Report on Form 10-K for an overview of our significant accounting policies and new accounting
pronouncements that we have adopted or that we plan to adopt that have had or may have an impact on our financial
statements.
A discussion of information about the nature and rationale for our critical accounting estimates is below:
Recognition and Recoverability of Goodwill, Definite-Lived Intangibles, and Other Long-Term Assets
We account for acquired businesses using the acquisition method of accounting which requires that the
tangible assets and identifiable intangible assets acquired and assumed liabilities be recorded at the date of
acquisition at their respective fair values. Any excess purchase price over the estimated fair value of the net tangible
and intangible assets acquired is allocated to goodwill. When determining the fair values of assets acquired and
liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible
assets. Significant estimates in valuing certain intangible assets include but are not limited to future expected cash
flows from customer and supplier relationships, acquired technology and trade names from a market participant
perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may
differ from estimates. Valuations are performed by management or third party valuation specialists under
management's supervision, where appropriate.
We subsequently assess goodwill, which is not amortized, for impairment annually during the fourth quarter,
or more frequently, if events and circumstances indicate impairment may have occurred. We test goodwill for
impairment at the reporting unit level. Goodwill is assigned to reporting units that are expected to benefit from the
synergies of the business combination as of the acquisition date. We evaluate our reporting units when changes in
our operating structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach.
Once goodwill has been allocated to the reporting units, it no longer retains its identification with a particular
acquisition and becomes identified with the reporting unit in its entirety. Accordingly, the fair value of the reporting
unit as a whole is available to support the recoverability of its goodwill.
The Company has the option to qualitatively assess whether it is more likely than not that the fair value of a
reporting unit is less than its carrying value. In the evaluation of goodwill for impairment, we generally first perform
a qualitative assessment to determine whether it is more likely than not (i.e., a likelihood of more than 50%) that the
estimated fair value of the reporting unit is less than the carrying amount. Periodically, we may choose to forgo the
initial qualitative assessment and proceed directly to a quantitative analysis to assist in our annual evaluation. When
assessing goodwill for impairment, our decision to perform a qualitative impairment assessment for an individual
reporting unit in a given year is influenced by a number of factors, including, but not limited to, the size of the
reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying
54
value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments
from the date of acquisition to establish an updated baseline quantitative analysis, and other performance and market
indicators. During a qualitative assessment, if we determine that it is not more likely than not that the implied fair
value of the goodwill is less than its carrying amount, no further testing is necessary. If, however, we determine that
it is more likely than not that the implied fair value of the goodwill is less than its carrying amount, we then perform
a quantitative assessment and compare the estimated fair value of the reporting unit to the carrying value. If the
carrying value of a reporting unit exceeds its estimated fair value, the goodwill impairment is measured using the
difference between the carrying value and the fair value of the reporting unit; however, any loss recognized cannot
exceed the total amount of goodwill allocated to that reporting unit.
In determining the estimated fair values of reporting units in a quantitative goodwill impairment test, we
generally use a blend of the following recognized valuation methods: the income approach (discounted cash flows
model) and the market valuation approach, which we believe compensates for the inherent risks of using either
model on a stand-alone basis. The discounted cash flows model indicates the fair value of the reporting units based
on the present value of the cash flows that we expect the reporting units to generate in the future. Our significant
estimates in the discounted cash flows model include: weighted average cost of capital; long-term rate of growth and
profitability of the reporting unit; income tax rates and working capital effects. The market valuation approach
indicates the fair value of the business based on a comparison to comparable publicly traded firms in similar lines of
business and other precedent transactions. Our significant estimates in the market approach model include
identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on
investment and assessing comparable revenue and/or income multiples in estimating the fair value of the reporting
units. Valuations are performed by management or third party valuation specialists under management's supervision,
where appropriate. We believe that the estimated fair values assigned to our reporting units in impairment tests are
based on reasonable assumptions that marketplace participants would use. However, such assumptions are
inherently uncertain and actual results could differ from those estimates. The use of different assumptions, estimates
or judgments could trigger the need for an impairment charge, or materially increase or decrease the amount of any
such impairment charge.
During the first quarter of 2019, the composition of our reportable segments was revised, as discussed in
“Note 1: Organization and Business Description.” Prior to implementing the revised segment reporting structure,
our previously disclosed Hotel segment was considered a single reporting unit. Following the change in reportable
segments, our legacy Hotel reporting unit was split into four distinct reporting units – (1) Hotels, Media & Platform,
(2) SmarterTravel, (3) Flights, Cruises and Car; and (4) Tripadvisor China for the purposes of goodwill impairment
testing. As a result, we first performed a qualitative assessment on our previous Hotel reporting unit prior to
implementing the revised segment reporting structure and determined that it was more likely than not that the fair
value of this reporting unit was greater than the carrying value, which was consistent with our conclusion in the
fourth quarter of 2018. We then performed a goodwill impairment test for each of the new reporting units upon the
change in reportable segments using a quantitative assessment. We concluded the estimated fair values were
significantly in excess of the carrying values for these reporting units. We also performed sensitivity analyses, such
as calculating estimated fair values using different rates for the weighted-average cost of capital and long-term rates
of growth in the income approach and different revenue/income multiples in our market approach, and the estimated
fair values remained in excess of the carrying values. Therefore, no indications of impairment were identified as a
result of these changes in the first quarter of 2019.
During the Company's annual goodwill impairment test during the fourth quarter of 2019, a qualitative
assessment was performed for the following reporting units: (1) Hotels, Media & Platform, (2) SmarterTravel, (3)
Flights, Cruises and Car, (4) Dining; and (5) Experiences, while a quantitative assessment of the Rentals and
Tripadvisor China reporting units goodwill was performed. For fiscal 2019, we determined the fair value of all our
reporting units were in excess of their carrying values. Accordingly, we did not recognize any impairment charges
during the year ending December 31, 2019. As part of our qualitative assessment for our 2019 goodwill impairment
analysis of our reporting units, the factors that we considered included, but were not limited to: (a) changes in
macroeconomic conditions in the overall economy and the specific markets in which we operate, (b) our ability to
access capital, (c) changes in the online travel industry, (d) changes in the level of competition, (e) evaluation of
current and future forecasted financial results of the reporting units, (f) comparison of our current financial
performance to historical and budgeted results of the reporting units, (g) change in excess of the Company’s market
capitalization over its book value including the decrease in the Company’s market price during 2019, (h) changes in
estimates, valuation inputs, and/or assumptions since the last quantitative analysis of the reporting units, (i) changes
55
in the regulatory environment; (j) changes in strategic outlook or organizational structure and leadership of the
reporting units; and (k) other relevant factors, and how these factors might impact specific performance in future
periods.
We also periodically review the carrying amount of our definite-lived intangible assets and other long-term
assets, including property and equipment and website and internal use software, to determine whether current events
or circumstances indicate that such carrying amounts may not be recoverable. Factors that would necessitate an
impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a
significant adverse change in legal factors or the business climate that could affect the value of the asset, or a
significant decline in the observable market value of an asset, among others. If such facts indicate a potential
impairment, we assess the recoverability of the asset group by determining if the carrying value of the asset group
exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of
the assets over the remaining economic life of the primary asset of the group. If the recoverability test indicates that
the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using
appropriate valuation methodologies which would typically include an estimate of discounted cash flows, using an
appropriate discount rate. Any impairment would be measured by the amount that the carrying values, of such asset
groups, exceed their fair value and would be included in operating income on the consolidated statement of
operations. Considerable management judgment is necessary to estimate the fair value of asset groups. Accordingly,
actual results could vary significantly from such estimates. We have not identified any circumstances that would
warrant an impairment charge for any recorded definite-lived intangibles or other long term assets on our
consolidated balance sheet at December 31, 2019.
In addition, we hold investments in non-marketable equity securities of privately-held companies, which do
not have a readily determinable fair value. Our policy is to measure these investments at cost less impairment, if any,
plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar
investment of the same issuer such observable price changes may include instances where the investee issues equity
securities to new investors, thus creating a new indicator of fair value, as an example. On a quarterly basis, we
perform a qualitative assessment considering impairment indicators to evaluate whether these investments are
impaired and also monitor for any observable price changes. When indicators of impairment exist, we prepare a
quantitative assessment of the fair value of our equity investments, which may include using both the market and
income approaches which require judgment and the use of estimates, including discount rates, investee revenues and
costs, and available comparable market data of private and public companies, among others. Valuations of such
privately-held companies are inherently complex and uncertain due to the lack of liquid market for the company’s
securities. In addition, such investments are inherently risky in that such companies are typically at an early stage of
development, may have no or limited revenues, may not be or may never become profitable, may not be able to
secure additional funding or their technologies, services or products may not be successfully developed or
introduced into the market.
Income Taxes
We record income taxes under the asset and liability method. Deferred tax assets and liabilities reflect our
estimation of the future tax consequences of temporary differences between the carrying amounts of assets and
liabilities for book and tax purposes. We determine deferred income taxes based on the differences in accounting
methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred
tax asset or liability for each temporary difference based on the enacted income tax rates expected to be in effect
when we realize the underlying items of income and expense. We consider all relevant factors when assessing the
likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction,
expectations of future taxable income and the carryforward periods available to us for tax reporting purposes, as
well as assessing available tax planning strategies. We may establish a valuation allowance to reduce deferred tax
assets to the amount we believe is more likely than not to be realized. We classify deferred tax assets and liabilities
as noncurrent on our consolidated balance sheet. Due to inherent complexities arising from the nature of our
businesses, future changes in income tax law, tax sharing agreements or variances between our actual and
anticipated operating results, we make certain judgments and estimates. Therefore, actual income taxes could
materially vary from these estimates.
We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that we
expect to take in a future tax return. The determination for required liabilities is based upon an analysis of each
56
individual tax position, taking into consideration whether it is more likely than not that our tax position, based on
technical merits, will be sustained upon examination. For those positions for which we conclude it is more likely
than not it will be sustained, we recognize the largest amount of tax benefit that is greater than 50% likely of being
realized upon ultimate settlement with the taxing authority. The difference between the amount recognized and the
total tax position is recorded as a liability. The ultimate resolution of these tax positions may be greater or less than
the liabilities recorded.
On December 22, 2017, the 2017 Tax Act was signed into United States tax law. The legislation significantly
changed U.S. tax law by, among other provisions, lowering corporate income tax rates, and imposing Transition
Tax. The 2017 Tax Act permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a flat
21% rate, effective January 1, 2018. The 2017 Tax Act also provided for prospective changes that began in 2018.
Under GAAP, the effects of changes in income tax rates and laws are recognized in the period in which the new
legislation is enacted.
We are subject to additional requirements of the 2017 Tax Act which began during the year ended
December 31, 2018. Those provisions include a deduction for foreign derived intangible income (“FDII”), GILTI, a
limitation of certain executive compensation, and other provisions which are not material. We have elected to
account for GILTI as a period cost, and therefore included GILTI expense in the effective income tax rate
calculation. Our 2019 effective income tax rate includes our estimates of these new provisions, with a net tax benefit
of $3 million recorded during the year ended December 31, 2019 to our consolidated statement of operations. Our
estimates may be revised in future periods as we obtain additional data, and as the IRS issues new guidance
implementing the law changes.
Refer to “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 on this
Annual Report on Form 10-K for further information on income taxes.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Management
Market risk refers to the risk of loss arising from adverse changes in stock prices, interest rates and foreign
currency exchange rates. We are exposed to market risks primarily due to our international operations, and our
ongoing investment and financial activities. The risk of loss can be assessed from the perspective of adverse changes
in our future earnings, cash flows, fair values, and financial condition. Our exposure to market risk generally
includes our credit facilities, derivative instruments, cash, cash equivalents, marketable securities, accounts
receivable, intercompany receivables/payables, accounts payable, deferred merchant payables and other transactions
denominated in foreign currencies. We have established policies, procedures and internal processes governing our
management of market risks and the use of financial instruments to manage and attempt to mitigate our exposure to
such risks.
Interest Rates
Our primary exposure to changes in interest rates relates primarily to our investment portfolio and borrowings,
if any, under our existing credit facilities.
Changes in interest rates affect the amount of interest earned on our cash, cash equivalents, and marketable
securities, and the fair value of those securities. Our interest income and expense is most sensitive to fluctuations in
U.S. interest rates. We generally invest our excess cash in cash deposits at major global banks, money market funds,
and marketable securities. Our investment policy and strategy are focused on preservation of capital and supporting
our liquidity requirements. We invest in highly-rated securities, and our investment policy limits the amount of
credit exposure to any one issuer. Our investment policy requires our investments to be investment grade, with the
primary objective of minimizing the potential risk of principal loss.
In order to provide a meaningful assessment of the interest rate risk associated with our investment portfolio,
we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of our
current investment portfolio assuming a 100 basis point parallel shift in the yield curve. Based on our investment
positions as of December 31, 2018, a hypothetical 100 basis point increase in interest rates across all maturities
57
would not have resulted in a material decline in the fair value of the portfolio. In addition, such losses would only be
realized if we sold the investments prior to maturity. As of December 31, 2019, we had no outstanding cash
equivalents or marketable securities in our investment portfolio, and no outstanding borrowings under our existing
credit facilities. Refer to “Note 7: Financial Instruments and Fair Value Measurements” and “Note 10: Debt” in the
notes to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for further information
on our investment portfolio, other financial instruments and our existing credit facilities.
We currently do not hedge our interest rate risk; however, we are continually evaluating the interest rate
market, and if we become increasingly exposed to potentially volatile movements in interest rates, and if these
movements are material, this could cause us to adjust our financing strategy. We did not experience material
changes in interest rate exposures or any material financial impact from adverse changes in interest rates for the
years ended December 31, 2019, 2018 or 2017.
Foreign Currency Exchange Rates
We conduct business in certain international markets, largely in the Europe, including the U.K., and also in
countries such as Singapore and Australia. Because we operate in international markets, we have exposure to
different economic climates, political arenas, tax systems and regulations that could affect foreign currency
exchange rates.
Some of our subsidiaries maintain their accounting records in their respective local currencies other than the
U.S. dollar. Consequently, changes in foreign currency exchange rates may impact the translation of those
subsidiary’s financial statements into U.S. dollars. As a result, we face exposure to adverse movements in foreign
currency exchange rates as the financial results of our non-U.S. dollar operations are translated from local currency,
or functional currency, into U.S. dollars upon consolidation. If the U.S. dollar weakens against the functional
currency, the translation of these foreign-currency-denominated balances will result in increased net assets, revenue,
operating expenses, operating income and net income upon consolidation. Similarly, our net assets, revenue,
operating expenses, operating income and net income will decrease upon consolidation if the U.S. dollar strengthens
against the functional currency. The effect of foreign currency exchange on our business historically has varied from
quarter to quarter and may continue to do so, potentially materially. In order to provide a meaningful assessment of
the foreign currency exchange rate risk associated with our consolidated financial statements, we performed a
sensitivity analysis. A hypothetical 10% decrease of the foreign currency exchange rates relative to the U.S. dollar,
or strengthening of the U.S. dollar, would generate an unrealized loss of approximately $38 million related to a
decrease in our net assets as of December 31, 2019, which would initially be recorded to accumulated other
comprehensive income (loss) on our consolidated balance sheet.
In addition, foreign currency exchange rate fluctuations on transactions denominated in currencies other than
the functional currency result in transactional gains and losses. We recognize these transactional gains and losses
(primarily Euro currency transactions) in our consolidated statements of operations and have recorded foreign
currency exchange losses of $3 million and $6 million for the years ended December 31, 2019 and 2018,
respectively, and a gain of $1 million for the year ended December 31, 2017, in “Other income (expense), net” on
our consolidated statements of operations. Future transactional gains and losses are inherently difficult to predict as
they are reliant on how the multiple currencies in which we transact fluctuate in relation to the U.S. dollar and other
functional currencies, and the relative composition and denomination of monetary assets and liabilities each period.
We currently manage our exposure to foreign currency risk through internally established policies and
procedures. To the extent practicable, we minimize our foreign currency exposures by maintaining natural hedges
between our current assets and current liabilities in similarly denominated foreign currencies, as well as, using
derivative financial instruments. We use foreign currency forward exchange contracts to manage certain short-term
foreign currency risk to try and reduce the effects of fluctuating foreign currency exchange rates on our cash flows
denominated in foreign currencies. We do not use financial instruments for trading purposes and are not a party to
any leveraged derivatives. Our objective is to hedge only those foreign currency exposures that can be confidently
identified and quantified and that may result in significant impacts to our cash or the consolidated statement of
operations. Our policy does not allow speculation in derivative instruments for profit or execution of derivative
instrument contracts for which there are no underlying exposures.
58
Our foreign currency forward exchange contracts, to date, have principally addressed foreign currency
exchange fluctuation risk between the Euro and the U.S. dollar. We have accounted for our derivative instruments to
date, which have not been designated as hedges under GAAP, as either assets or liabilities and carry them at fair
value. We had one outstanding forward currency contract as of December 31, 2019 with a total notional value of $10
million. We had two outstanding forward currency contracts as of December 31, 2018 with a total notional value of
$13 million. These outstanding forward currency contracts were not designated as hedges and had maturities of less
than 90 days. We recognize gains and losses from our derivative contracts in our consolidated statement of
operations and have recorded a net gain of $1 million for the year ended December 31, 2019, a net loss of $3 million
for the year ended December 31, 2018, and was not material for the year ended December 31, 2017, respectively, in
“Other income (expense), net” on our consolidated statements of operations. Refer to “Note 7: Financial
Instruments and Fair Value Measurements” in the notes to the consolidated financial statements in Item 8 on this
Annual Report on Form 10-K for further detail on our derivative instruments.
As we increase our operations in international markets, our exposure to potentially volatile movements in
foreign currency exchange rates increases. The economic impact to us of foreign currency exchange rate movements
is linked to variability in real growth, inflation, interest rates, governmental actions, and other factors. These
changes, if material, could cause us to adjust our foreign currency risk strategies. For example, Brexit has caused
significant volatility in currency exchange rates, especially between the U.S. dollar and the British pound. Although
the U.K. ceased to be a member of the E.U. on January 31, 2020, the U.K. and E.U. will continue to work on the
terms of the departure through a transition period ending December 31, 2020. Continued uncertainty regarding
Brexit may result in future exchange rate volatility. Since the final terms of the U.K.’s exit from the E. U. remain
uncertain, we are unable to predict the effect Brexit will have on our business and results of operations.
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Item 8.
Financial Statements and Supplementary Data
Index to Financial Statements and Supplementary Data:
Report of Independent Registered Public Accounting Firm ....................................................................................... 61
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017.................... 63
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and
2017 ............................................................................................................................................................... 64
Consolidated Balance Sheets as of December 31, 2019 and 2018..................................................................... 65
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2019,
2018 and 2017 ............................................................................................................................................... 66
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 .................. 67
Notes to Consolidated Financial Statements...................................................................................................... 68
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Tripadvisor, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Tripadvisor, Inc. and subsidiaries (the Company)
as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income,
changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31,
2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period
ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission”, and our report dated February 19, 2020 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Evaluation of the sufficiency of audit evidence over revenue
As discussed in Notes 2 and 4 to the consolidated financial statements, and disclosed in the consolidated
statements of operations, the Company had $1.560 billion in revenue for the year ended December 31, 2019, of
which $779 million was hotels related, $160 million was display and platform related, $456 million related to
experiences and dining and $165 million of other revenue. Each of these categories of revenue has multiple
61
revenue streams and the Company’s processes and information technology (IT) systems differ between each
revenue stream.
We identified the evaluation of sufficiency of audit evidence over revenue as a critical audit matter. This matter
required especially subjective auditor judgment due to the number of revenue streams and the related IT
applications utilized throughout the revenue recognition processes. Subjective auditor judgment was required to
evaluate that relevant revenue data was captured and aggregated throughout these various IT applications. This
matter also included determining the revenue streams over which procedures would be performed and
evaluating the nature and extent of evidence obtained over each revenue stream, both of which included the
involvement of IT professionals with specialized skills and knowledge.
The primary procedures performed to address this critical audit matter included the following. We performed
risk assessment procedures and applied auditor judgment to determine the nature and extent of procedures to be
performed over revenue. For each revenue stream where procedures were performed, we:
- Tested certain internal controls over the Company’s revenue processes, including the Company’s controls over
the accurate recording of amounts.
- For certain revenue streams, assessed the recorded revenue by selecting a sample of transactions and
compared the amounts recognized for consistency with underlying documentation, including evidence of
contracts with customers.
- For certain revenue streams, assessed the recorded revenue by comparing the total cash received during the
year to the revenue recognized, including evaluating the relevance and reliability of the inputs to the
assessment.
We involved IT professionals with specialized skills and knowledge, who assisted in:
- Testing certain IT applications used by the Company in its revenue recognition process.
- Testing the transfer of relevant revenue data between certain systems used in the revenue recognition process.
In addition, we evaluated the overall sufficiency of audit evidence obtained over revenue.
We have served as the Company’s auditor since 2014.
Boston, Massachusetts
February 19, 2020
/s/ KPMG LLP
62
TRIPADVISOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
2019
Year ended December 31,
2018
2017
$
1,560
$
1,615 $
1,556
Revenue (Note 4)
Costs and expenses:
Cost of revenue (1)(2)
Selling and marketing (2)
Technology and content (2)
General and administrative (2)
Depreciation
Amortization of intangible assets
Total costs and expenses
Operating income
Other income (expense):
Interest expense
Interest income
Other income (expense), net (Note 19)
Total other income (expense), net
Income before income taxes
Provision for income taxes (Note 11)
Net income (loss)
Earnings (loss) per share attributable to common stockholders
(Note 5):
Basic
Diluted
$
$
$
Weighted average common shares outstanding (Note 5):
Basic
Diluted
(1) Excludes amortization expense as follows:
Amortization of acquired technology included in
amortization of intangible assets
Amortization of website development costs included in
depreciation
(2) Includes stock-based compensation expense as follows
(Note 6):
Cost of revenue
Selling and marketing
Technology and content
General and administrative
$
$
$
$
$
$
94
672
294
187
93
33
1,373
187
(7)
17
(3)
7
194
(68)
126 $
0.91
0.89
$
$
139
141
10 $
63
73 $
1 $
23 $
55 $
45 $
86
778
275
177
82
34
1,432
183
(12)
7
(5)
(10)
173
(60)
113 $
0.82 $
0.81 $
138
140
8 $
59
67 $
1 $
21 $
51 $
45 $
72
849
243
157
79
32
1,432
124
(15)
1
—
(14)
110
(129)
(19)
(0.14)
(0.14)
140
140
8
54
62
—
21
40
35
The accompanying notes are an integral part of these consolidated financial statements.
63
TRIPADVISOR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net income (loss)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax (1)
Reclassification adjustment for net losses included in net
income
Total other comprehensive income (loss), net of tax
Comprehensive income
$
2019
Year ended December 31,
2018
2017
$
126 $
113 $
(19)
1
(20)
(2)
(1)
125 $
—
(20)
93 $
35
—
35
16
(1)
Through the year ended December 31, 2018, foreign currency translation adjustments excluded a provision for U.S.
federal and state income taxes as a result of the Company's intention to indefinitely reinvest the earnings of its
international subsidiaries outside of the United States. In response to increased cash requirements in the U.S. related to the
Company’s declaration of a special cash dividend and other strategic initiatives during the fourth quarter of 2019, we
determined that we no longer consider certain foreign earnings to be indefinitely reinvested. The deferred income tax
liability related to foreign currency translation adjustments is not material. Refer to “Note 11: Income Taxes” for further
information.
The accompanying notes are an integral part of these consolidated financial statements.
64
TRIPADVISOR, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except number of shares and per share amounts)
December 31,
2019
December 31,
2018
ASSETS
Current assets:
Cash and cash equivalents (Note 7)
Short-term marketable securities (Note 7)
Accounts receivable and contract assets, net of allowance for doubtful accounts of
$25 and $21, respectively (Note 2, Note 4)
Prepaid expenses and other current assets
$
Total current assets
Property and equipment, net (Note 8)
Operating lease right-of-use assets (Note 2)
Intangible assets, net (Note 9)
Goodwill (Note 9)
Deferred income taxes, net (Note 11)
Non-marketable investments (Note 7)
Other long-term assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Deferred merchant payables (Note 2)
Deferred revenue (Note 4)
Accrued expenses and other current liabilities (Note 12)
Total current liabilities
Deferred income taxes, net (Note 11)
Other long-term liabilities (Note 13)
Total Liabilities
Commitments and contingencies (Note 14)
Stockholders’ equity: (Note 16)
Preferred stock, $0.001 par value
Authorized shares: 100,000,000
Shares issued and outstanding: 0 and 0
Common stock, $0.001 par value
$
$
Authorized shares: 1,600,000,000
Shares issued: 138,698,307 and 137,158,010, respectively
Shares outstanding: 124,581,773 and 125,101,322, respectively
Class B common stock, $0.001 par value
Authorized shares: 400,000,000
Shares issued and outstanding: 12,799,999 and 12,799,999, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock-common stock, at cost, 14,116,534 and 12,056,688 shares,
respectively
Total Stockholders’ Equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
319 $
—
183
31
533
270
74
110
840
7
55
95
1,984 $
11 $
159
62
203
435
8
380
823
—
—
—
1,150
681
(63)
(607)
1,161
1,984 $
655
15
212
33
915
253
—
118
756
27
12
86
2,167
15
164
63
151
393
21
282
696
—
—
—
1,037
1,043
(62)
(547)
1,471
2,167
The accompanying notes are an integral part of these consolidated financial statements.
65
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T
TRIPADVISOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Year ended December 31,
2018
2017
2019
Operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of property and equipment, including amortization of internal-use
software and website development
Amortization of intangible assets
Stock-based compensation expense (Note 6)
Deferred income tax expense (benefit) and other, net
Changes in operating assets and liabilities, net of effects from acquisitions and other
investments:
Accounts receivable and contract assets, prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Deferred merchant payables
Income tax receivables/payables, net
Deferred revenue
Net cash provided by operating activities
Investing activities:
Capital expenditures, including internal-use software and website development
Acquisitions and other investments, net of cash acquired (Note 3)
Purchases of marketable securities
Sales of marketable securities
Maturities of marketable securities
Other investing activities, net
Net cash provided by (used in) investing activities
Financing activities:
Repurchase of common stock (Note 16)
Payment of common stock cash dividends to stockholders (Note 16)
Proceeds from 2015 credit facility, net of financing costs (Note 10)
Payments to 2015 credit facility (Note 10)
Proceeds from Chinese credit facilities (Note 10)
Payments to Chinese credit facilities (Note 10)
Payments to 2016 credit facility (Note 10)
Payments of finance lease obligation (Note 2)
Proceeds from exercise of stock options
Payment of withholding taxes on net share settlements of equity awards
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes, net of refunds
Cash paid during the period for interest
Supplemental disclosure of non-cash investing and financing activities:
Stock-based compensation capitalized with internal-use software and website
development costs
Equity method investment acquired for non-cash consideration
$
126 $
113 $
(19)
93
33
124
14
23
(1)
(3)
17
(2)
424
(83)
(110)
(133)
80
70
—
(176)
(60)
(488)
—
—
—
—
—
(5)
2
(29)
(580)
(4)
(336)
655
319 $
82
34
118
12
(8)
22
14
13
5
405
(61)
(24)
(16)
59
5
(12)
(49)
(100)
—
5
(235)
2
(10)
—
—
6
(26)
(358)
(16)
(18)
673
655 $
47 $
6 $
53 $
8 $
19 $
41 $
13 $
— $
79
32
96
39
(36)
—
14
38
(5)
238
(64)
—
(63)
105
28
—
6
(250)
—
433
(296)
—
—
(73)
—
3
(17)
(200)
17
61
612
673
62
13
13
—
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
67
TRIPADVISOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND BUSINESS DESCRIPTION
We refer to Tripadvisor, Inc. and our wholly-owned subsidiaries as “Tripadvisor,” “the Company,” “us,” “we”
and “our” in these notes to the consolidated financial statements.
On December 20, 2011, Expedia Group, Inc. (“Expedia”) completed a spin-off of Tripadvisor into a separate
publicly traded Delaware corporation. We refer to this transaction as the “Spin-Off.” Tripadvisor’s common stock
began trading on the NASDAQ as an independent public company on December 21, 2011, under the trading symbol
“TRIP.”
On December 11, 2012, Liberty Interactive Corporation, or Liberty, purchased an aggregate of approximately
4.8 million shares of common stock of Tripadvisor from Barry Diller, our former Chairman of the Board of
Directors and Senior Executive, and certain of his affiliates. As a result, Liberty beneficially owned approximately
18.2 million shares of our common stock and 12.8 million shares of our Class B common stock.
On August 27, 2014, the entire beneficial ownership of our common stock and Class B common stock held by
Liberty was acquired by Liberty Tripadvisor Holdings, Inc., or LTRIP. Simultaneously, Liberty, LTRIP’s former
parent company, distributed, by means of a dividend, to the holders of its Liberty Ventures common stock, Liberty’s
entire equity interest in LTRIP. We refer to this transaction as the “Liberty Spin-Off”. As a result of the Liberty
Spin-Off, effective August 27, 2014, LTRIP became a separate, publicly traded company holding 100% of Liberty’s
interest in Tripadvisor.
As a result of these transactions, as of December 31, 2019, LTRIP beneficially owned approximately 18.2
million shares of our common stock and 12.8 million shares of our Class B common stock, which constitute 14.6%
of the outstanding shares of common stock and 100% of the outstanding shares of Class B common stock. Assuming
the conversion of all of LTRIP’s shares of Class B common stock into common stock, LTRIP would beneficially
own 22.5% of the outstanding common stock. Because each share of Class B common stock is entitled to ten votes
per share and each share of common stock is entitled to one vote per share, LTRIP may be deemed to beneficially
own equity securities representing 57.9% of our voting power.
Description of Business
Tripadvisor is a leading online travel company and our mission is to help people around the world plan, book
and experience the perfect trip. We operate a global travel platform that connects the world’s largest audience of
prospective travelers with travel partners through rich content, price comparison tools, and online reservation and
related services for destinations, accommodations, travel activities and experiences, and restaurants.
Under our flagship brand, Tripadvisor, we launched www.Tripadvisor.com in the United States in 2000. Since
then, we have launched localized versions of the Tripadvisor website in 48 markets and 28 languages worldwide.
Tripadvisor features 859 million reviews and opinions on 8.6 million places to stay, places to eat and things to do –
including 1.4 million hotels, inns, B&Bs and specialty lodging, 842,000 rental properties, 5.2 million restaurants and
1.2 million travel activities and experiences worldwide. Tripadvisor’s rich content and engaged community attract
the world’s largest travel audience, based on monthly unique visitors, including 463 million average monthly unique
visitors in the third quarter of 2019 during the peak summer travel season. In addition to the flagship Tripadvisor
brand, we own and operate a portfolio of travel media brands and businesses, operating under various websites
including the following: www.airfarewatchdog.com, www.bokun.io, www.bookingbuddy.com,
www.cruisecritic.com, www.familyvacationcritic.com, www.flipkey.com, www.thefork.com (including
www.lafourchette.com, www.eltenedor.com, www.restorando.com, and www.bookatable.co.uk),
www.holidaylettings.co.uk, www.holidaywatchdog.com, www.housetrip.com, www.jetsetter.com,
www.niumba.com, www.onetime.com, www.oyster.com, www.seatguru.com, www.singleplatform.com,
www.smartertravel.com, www.vacationhomerentals.com, and www.viator.com.
68
During the first quarter of 2019, as part of our continuous review of the business, we evaluated our operations
and realigned the reportable segment information which our chief operating decision maker, or CODM, regularly
assesses to evaluate performance for operating decision-making purposes, including evaluation and allocation of
resources. The CODM for the Company is our Chief Executive Officer. The revised segment reporting structure
includes the following reportable segments: (1) Hotels, Media & Platform; and (2) Experiences & Dining. For
further information on our segments and principal revenue streams within these segments refer to “Note 4: Revenue
Recognition” and “Note 18: Segment and Geographic Information” in the notes to our consolidated financial
statements. All prior period segment disclosure information has been reclassified to conform to the current reporting
structure in this Form 10-K. These reclassifications had no effect on our consolidated financial statements in any
period.
Seasonality
Consumers’ travel expenditures follow a seasonal pattern. Correspondingly, travel partners’ advertising
investments and, therefore, our revenue and profits, also follow a seasonal pattern. Our financial performance tends
to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in
consumer demand, traveler hotel and rental stays, and travel activities and experiences taken, compared to the first
and fourth quarters, which represent seasonal low points. Significant shifts in our business mix or adverse economic
conditions could result in future seasonal patterns that are different from historical trends.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying consolidated financial statements include Tripadvisor, our wholly-owned subsidiaries, and
entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits
or losses. All inter-company accounts and transactions have been eliminated in consolidation. Additionally, certain
prior period amounts have been reclassified for comparability with the current period presentation. The
accompanying consolidated financial statements have been prepared in accordance with generally accepted
accounting principles in the United States (“GAAP”). We believe that the assumptions underlying our consolidated
financial statements are reasonable. However, these consolidated financial statements do not present our future
financial position, the results of our future operations and cash flows.
One of our subsidiaries that operates in China has variable interests in affiliated entities in China in order to
comply with Chinese laws and regulations, which restrict foreign investment in Internet content provision
businesses. Although we do not own the capital stock of these Chinese affiliates, we consolidate their results as we
are the primary beneficiary of the cash losses or profits of these variable interest affiliates and have the power to
direct the activity of these affiliates. Our variable interest entities’ financials results were not material for all periods
presented. Investments in entities in which we do not have a controlling financial interest are accounted for under
the equity method, the fair value option, as available-for-sale securities or at cost adjusted for observable price
changes and impairments, as appropriate.
Accounting Estimates
We use estimates and assumptions in the preparation of our consolidated financial statements in accordance
with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of our consolidated financial statements. These estimates and
assumptions also affect the reported amount of net income or loss during any period. Our actual financial results
could differ significantly from these estimates. The significant estimates underlying our consolidated financial
statements include: (i) recognition and recoverability of goodwill, definite-lived intangibles and other long-lived
assets; and (ii) accounting for income taxes. Refer to “Note 11: Income Taxes” for further discussion of our
significant income tax amounts included in our consolidated financial statements.
69
Revenue Recognition
Refer to “Note 4: Revenue Recognition” for a discussion about our revenue recognition policies and other
financial disclosures.
Cost of Revenue
Cost of revenue consists of expenses that are directly related or closely correlated to revenue generation,
including direct costs, such as credit card and other booking transaction payment fees, data center costs, costs
associated with prepaid tour tickets, ad serving fees, flight search fees, and other transaction costs. In addition, cost
of revenue includes personnel and overhead expenses, including salaries, benefits, stock-based compensation and
bonuses for certain customer support personnel who are directly involved in revenue generation.
Selling and Marketing
Selling and marketing expenses primarily consist of direct costs, including traffic generation costs from SEM
and other online traffic acquisition costs, syndication costs and affiliate program commissions, social media costs,
brand advertising (including television and other offline advertising), promotions and public relations. In addition,
our sales and marketing expenses consist of indirect costs such as personnel and overhead expenses, including
salaries, commissions, benefits, stock-based compensation, and bonuses for sales, sales support, customer support
and marketing employees.
We incur advertising expense, which includes traffic generation costs from SEM and other online traffic costs,
affiliate program commissions, display advertising, social media, and other online, and offline (primarily television)
advertising expense, promotions and public relations to promote our brands. We expense the costs associated with
communicating the advertisements in the period in which the advertisement takes place. We expense the production
costs associated with advertisements in the period in which the advertisement first takes place. For the years ended
December 31, 2019, 2018 and 2017, we recorded advertising expense of $423 million, $544 million, and $629
million, respectively, in selling and marketing expense on our consolidated statements of operations. As of both
December 31, 2019 and 2018, we had $2 million of prepaid advertising expenses included in prepaid expenses and
other current assets on our consolidated balance sheets. We expect to fully expense our prepaid advertising asset of
$2 million as of December 31, 2019 to the consolidated statement of operations during 2020.
Technology and Content
Technology and content expenses consist primarily of personnel and overhead expenses, including salaries
and benefits, stock-based compensation expense, and bonuses for salaried employees and contractors engaged in the
design, development, testing, content support, and maintenance of our websites and mobile apps. Other costs include
licensing, maintenance expense, computer supplies, telecom costs, content translation and localization costs, and
consulting costs.
General and Administrative
General and administrative expenses consist primarily of personnel and related overhead costs, including
personnel engaged in leadership, finance, legal, and human resources, as well as stock-based compensation expense
for those same personnel. General and administrative costs also include professional service fees and other fees
including audit, legal, tax and accounting, and other costs including bad debt expense, non-income taxes, such as
sales, use and other non-income related taxes.
Stock-Based Compensation
Stock Options. The exercise price for all stock options granted by us has been equal to the market price of the
underlying shares of common stock at the date of grant. In this regard, when making stock option awards, our
practice is to determine the applicable grant date and to specify that the exercise price shall be the closing price of
our common stock on the date of grant. Our stock options generally have a term of ten years from the date of grant
and typically vest equally over a four-year requisite service period. We amortize the grant-date fair value of our
stock option grants as stock-based compensation expense over the vesting term on a straight-line basis, with the
70
amount of compensation expense recognized at any date at least equaling the portion of the grant-date fair value of
the award that is vested at that date.
The estimated grant-date fair value of stock options is calculated using a Black-Scholes Merton option-
pricing model (“Black-Scholes model”). The Black-Scholes model incorporates assumptions to fair value stock-
based awards, which includes the risk-free rate of return, expected volatility, expected term and expected dividend
yield. Our risk-free interest rate is based on the rates currently available on zero-coupon U.S. Treasury issues, in
effect at the time of the grant, whose remaining maturity period most closely approximates the stock option’s
expected term assumption. Our expected volatility is calculated by equally weighting the historical volatility and
implied volatility on our own common stock. Historical volatility is determined using actual daily price observations
of our common stock price over a period equivalent to or approximate to the expected term of our stock option
grants to date. Implied volatility represents the volatility calculated from the observed prices of our actively traded
options on our common stock, with remaining maturities in excess of six months and market prices approximate to
the exercise prices of the stock option grant. We estimate our expected term using historical exercise behavior and
expected post-vest termination data. Our expected dividend yield is zero as we have not historically paid regular
cash dividends on our common stock and do not expect to pay regular cash dividends for the foreseeable future.
Restricted Stock Units. RSUs are stock awards that are granted to employees entitling the holder to shares of
our common stock as the award vests. RSUs are measured at fair value based on the quoted price of our common
stock at the date of grant. We amortize the fair value of RSUs as stock-based compensation expense over the vesting
term, which is typically over a four-year requisite service period on a straight-line basis, with the amount of
compensation expense recognized at any date at least equaling the portion of the grant-date fair value of the award
that is vested at that date.
Performance-Based Awards. Performance-based stock options and RSUs vest upon achievement of certain
company-based performance conditions and a requisite service period. On the date of grant, the fair value of a
performance-based award is calculated using the same method as our service based stock options and RSUs
described above. We then assess whether it is probable that the individual performance targets would be achieved. If
assessed as probable, compensation expense will be recorded for these awards over the estimated performance
period. At each reporting period, we will reassess the probability of achieving the performance targets and the
performance period required to meet those targets. The estimation of whether the performance targets will be
achieved and of the performance period required to achieve the targets requires judgment, and to the extent actual
results or updated estimates differ from our current estimates, the cumulative effect on current and prior periods of
those changes will be recorded in the period estimates are revised, or the change in estimate will be applied
prospectively depending on whether the change affects the estimate of total compensation cost to be recognized or
merely affects the period over which compensation cost is to be recognized. The ultimate number of shares issued
and the related compensation expense recognized will be based on a comparison of the final performance metrics to
the specified targets.
Market-Based Awards. We issue market-based performance RSUs, or market-based RSUs (“MSUs”), which
vest upon achievement of specified levels of market conditions. The fair value of our MSUs is estimated at the date
of grant using a Monte-Carlo simulation model. The probabilities of the actual number of market-based performance
units expected to vest and resultant actual number of shares of common stock expected to be awarded are reflected
in the grant date fair values; therefore, the compensation expense for these awards will be recognized assuming the
requisite service period is rendered and are not adjusted based on the actual number of awards that ultimately vest.
Estimates of fair value are not intended to predict actual future events or the value ultimately realized by
employees who receive these awards, and subsequent events are not indicative of the reasonableness of our original
estimates of fair value. The Company accounts for forfeitures in the period in which they occur, rather than estimate
expected forfeitures.
Income Taxes
We record income taxes under the asset and liability method. Deferred tax assets and liabilities reflect our
estimation of the future tax consequences of temporary differences between the carrying amounts of assets and
liabilities for book and tax purposes. We determine deferred income taxes based on the differences in accounting
71
methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred
tax asset or liability for each temporary difference based on the enacted income tax rates expected to be in effect
when we realize the underlying items of income and expense. We consider all relevant factors when assessing the
likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction,
expectations of future taxable income, and the carryforward periods available to us for tax reporting purposes, as
well as assessing available tax planning strategies. We may establish a valuation allowance to reduce deferred tax
assets to the amount we believe is more likely than not to be realized. Due to inherent complexities arising from the
nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual
and anticipated operating results, we make certain judgments and estimates. Therefore, actual income taxes could
materially vary from these estimates. We classify deferred tax assets and liabilities as noncurrent on our
consolidated balance sheet.
We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that we
expect to take in a future tax return. The determination for required liabilities is based upon an analysis of each
individual tax position, taking into consideration whether it is more likely than not that our tax position, based on
technical merits, will be sustained upon examination.
Cash and Cash Equivalents
Our cash consists of cash deposits held in global financial institutions. Our cash equivalents consist of highly
liquid investments, including money market funds and marketable debt securities, with maturities of 90 days or less
at the date of purchase.
For all periods presented, our restricted cash, which primarily consists of escrowed security deposits, was not
material and is included in other long-term assets on our consolidated balance sheet.
Marketable Securities
We classify our marketable debt securities as either short-term or long-term based on each instrument’s
underlying contractual maturity date and as to whether and when we intend to sell a particular security prior to its
maturity date. Marketable debt securities with maturities greater than 90 days at the date of purchase and 12 months
or less remaining at the balance sheet date will be classified as short-term and marketable debt securities with
maturities greater than 12 months from the balance sheet date will generally be classified as long-term. We classify
our marketable equity securities, limited by policy to money market funds and mutual funds, as either a cash
equivalent, short-term or long-term based on the nature of each security and its availability for use in current
operations.
Our marketable debt securities are classified and accounted for as available-for-sale, and therefore are carried
at fair value, with the unrealized gains and losses, net of taxes, reported in accumulated other comprehensive income
(loss) as a component of stockholders’ equity. Fair values are determined for each individual security in the
investment portfolio. We determine the appropriate classification of our marketable securities at the time of
purchase and reevaluate the designations at each balance sheet date. We invest in highly-rated securities, and our
investment policy limits the amount of credit exposure to any one issuer, industry group and currency. The policy
requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal
loss and providing liquidity of investments sufficient to meet our operating and capital spending requirements and
debt repayments. Realized gains and losses on the sale of marketable securities are determined by specific
identification of each security’s cost basis. We may sell certain of our marketable securities prior to their stated
maturities for strategic reasons including, but not limited to, anticipation of credit deterioration, liquidity, and
duration management. The weighted average maturity of our total invested cash shall not exceed 18 months, and no
security shall have a final maturity date greater than three years, according to our investment policy.
We continually review our available for sale securities to determine whether a decline in fair value below the
carrying value is other than temporary. When evaluating an investment for other-than-temporary impairment, we
review factors such as the length of time and extent to which fair value has been below its cost basis, the financial
72
condition of the issuer and any changes thereto, and our intent to sell, or whether it is more likely than not it will be
required to sell the investment before recovery of the investment’s cost basis. Once a decline in fair value is
determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is
established. If we do not intend to sell the security, but it is probable that we will not collect all amounts due, then
only the impairment due to the credit risk would be recognized in earnings and the remaining amount of the
impairment would be recognized in accumulated other comprehensive loss within stockholders’ equity.
Non-Marketable Equity Investments
We account for non-marketable equity investments through which we exercise significant influence but do not
have control over the investee under the equity method. Under this method, the investment, originally recorded at
cost, is adjusted to recognize the Company’s share of net earnings or losses of the investment as they occur rather
than as dividends or other distributions are received. Losses are limited to the extent of the Company’s investment in,
advances to and commitments for the investee. In the event we are unable to obtain accurate financial information
from the investee in a timely manner, we record our share of earnings or losses of such equity investment on a lag.
Our non-marketable equity securities not accounted for under the equity method and that do not have a readily
determinable fair value are accounted for under the measurement alternative. Under the measurement alternative, the
carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price
changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined
primarily based on a market approach as of the transaction date. We classify our non-marketable equity investments
as long-term assets on our consolidated balance sheet as those investments do not have stated contractual maturity
dates.
On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate
whether these investments are impaired. Qualitative factors considered include industry and market conditions,
financial performance, business prospects, and other relevant events and factors. When indicators of impairment
exist, we prepare a quantitative assessment of the fair value of our equity investments, which may include using both
the market and income approaches which require judgment and the use of estimates, including discount rates,
investee revenues and costs, and available comparable market data of private and public companies, among others.
When our assessment indicates that an impairment exists, we measure our non-marketable equity securities at fair
value.
Valuations of such privately-held companies are inherently complex and uncertain due to the lack of liquid
market for the company’s securities. In addition, such investments are inherently risky in that such companies are
typically at an early stage of development, may have no or limited revenues, may not be or may never become
profitable, may not be able to secure additional funding or their technologies, services or products may not be
successfully developed or introduced into the market.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recognized when the right to consideration becomes unconditional and are recorded
net of an allowance for doubtful accounts. We record accounts receivable at the invoiced amount. Our customer
invoices are generally due 30 days from the time of invoicing. Collateral is not required for accounts receivable. For
all accounts, we may determine an allowance by considering a number of factors, including the length of time trade
accounts receivable are past due, previous loss history, a specific customer’s ability to pay its obligations to us, and
the condition of the general economy and industry as a whole.
73
The following table presents the changes in our allowance for doubtful accounts for the periods presented:
Allowance for doubtful accounts:
Balance, beginning of period
Charges to earnings
Write-offs, net of recoveries and other
adjustments
Balance, end of period
Derivative Financial Instruments
2019
December 31,
2018
(in millions)
2017
$
$
21 $
11
(7)
25 $
16 $
11
(6)
21 $
9
8
(1)
16
In certain circumstances, we enter into foreign currency forward exchange contracts (“forward contracts”) to
reduce, to the extent practical, our potential exposure to the effects of fluctuating foreign currency exchange rates on
our cash flows denominated in foreign currencies. We account for derivative instruments that do not qualify for
hedge accounting as either assets or liabilities and carry them at fair value, with any subsequent adjustments to fair
value recorded in other income (expense), net on our consolidated statements of operations. Monetary assets and
liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot
rates in effect on the balance sheet date with the effects of changes in spot rates reported in other income (expense),
net on our consolidated statements of operations. Accordingly, fair value changes in the forward contracts help
mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency
exchange rates, except to the extent of the spot-forward differences. These differences are not expected to be
significant due to the short-term nature of the contracts, which to date, have typically had maturities at inception of
90 days or less. The net cash received or paid related to our derivative instruments are classified in other investing
activities in our consolidated statements of cash flows. Counterparties to forward contracts consist of major
international financial institutions. We monitor our positions and the credit ratings of the counterparties involved
and, by policy limits, the amount of credit exposure to any one party. We do not use derivatives for trading or
speculative purposes. We had not entered into any cash flow, fair value or net investment hedges as of December 31,
2019. Refer to “Note 7: Financial Instruments and Fair Value Measurements” for further disclosure on our
derivatives.
Property and Equipment, Including Website and Software Development Costs
We record property and equipment at cost, net of accumulated depreciation. We capitalize certain costs
incurred during the application development stage related to the development of websites and internal use software
when it is probable the project will be completed and the software will be used as intended. Capitalized costs include
internal and external costs, if direct and incremental, and deemed by management to be significant. We expense
costs related to the planning and post-implementation phases of software and website development as these costs are
incurred. Maintenance and enhancement costs (including those costs in the post-implementation stages) are typically
expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software
resulting in added functionality, in which case the costs are capitalized.
We compute depreciation using the straight-line method over the estimated useful lives of the assets, which is
three to five years for computer equipment, capitalized software and website development, office furniture and other
equipment. We depreciate leasehold improvements using the straight-line method, over the shorter of the estimated
useful life of the improvement or the remaining term of the lease.
Leases
We lease office space in a number of countries around the world, generally under non-cancelable operating
lease agreements. Our Headquarters Lease is our most significant office space lease, accounted for as a finance lease
under the new lease accounting guidance, or ASC 842, Leases, which the Company adopted on January 1, 2019. The
74
Company has also entered into data center and certain equipment leases, such as network equipment and other
leases, which are not material to our consolidated financial statements.
Refer to the Recently Adopted Accounting Pronouncements section below, for a detailed accounting
discussion on the impact of this new guidance to our existing leases and accounting policy.
Business Combinations
We account for acquired businesses using the acquisition method of accounting which requires that the
tangible assets and identifiable intangible assets acquired and assumed liabilities be recorded at the date of
acquisition at their respective fair values. Any excess purchase price over the estimated fair value of the net tangible
and intangible assets acquired is allocated to goodwill. When determining the fair values of assets acquired and
liabilities assumed, management makes estimates and assumptions, especially with respect to intangible assets.
Significant estimates in valuing certain intangible assets may include but are not limited to future expected cash
flows from customer and supplier relationships, acquired technology and trade names from a market participant
perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may
differ from estimates. Valuations are performed by management or third party valuation specialists under
management's supervision, where appropriate. Any changes to provisional amounts identified during the
measurement period, calculated as if the accounting had been completed as of the acquisition date, are recognized in
the consolidated financial statements in the reporting period in which the adjustment amounts are determined.
Goodwill and Intangible Assets
Goodwill
We assess goodwill, which is not amortized, for impairment annually during the fourth quarter, or more
frequently, if events and circumstances indicate impairment may have occurred. We test goodwill for impairment at
the reporting unit level. Goodwill is assigned to reporting units that are expected to benefit from the synergies of the
business combination as of the acquisition date. We evaluate our reporting units when changes in our operating
structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach. Once goodwill
has been allocated to the reporting units, it no longer retains its identification with a particular acquisition and
becomes identified with the reporting unit in its entirety. Accordingly, the fair value of the reporting unit as a whole
is available to support the recoverability of its goodwill.
The Company has the option to qualitatively assess whether it is more likely than not that the fair value of a
reporting unit is less than its carrying value. In the evaluation of goodwill for impairment, we generally first perform
a qualitative assessment to determine whether it is more likely than not (i.e., a likelihood of more than 50%) that the
estimated fair value of the reporting unit is less than the carrying amount. Periodically, we may choose to forgo the
initial qualitative assessment and proceed directly to a quantitative analysis to assist in our annual evaluation. When
assessing goodwill for impairment, our decision to perform a qualitative impairment assessment for an individual
reporting unit in a given year is influenced by a number of factors, including, but not limited to the size of the
reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying
value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments
from the date of acquisition to establish an updated baseline quantitative analysis, and other performance and market
indicators. During a qualitative assessment, if we determine that it is not more likely than not that the implied fair
value of the goodwill is less than its carrying amount, no further testing is necessary. If, however, we determine that
it is more likely than not that the implied fair value of the goodwill is less than its carrying amount, we then perform
a quantitative assessment and compare the estimated fair value of the reporting unit to the carrying value. If the
carrying value of a reporting unit exceeds its estimated fair value, the goodwill impairment is measured using the
difference between the carrying value and the fair value of the reporting unit; however, any loss recognized cannot
exceed the total amount of goodwill allocated to that reporting unit.
In determining the estimated fair values of reporting units in a quantitative goodwill impairment test, we
generally use a blend, of the following recognized valuation methods: the income approach (discounted cash flows
model) and the market valuation approach, which we believe compensates for the inherent risks of using either
model on a stand-alone basis. The discounted cash flows model indicates the fair value of the reporting units based
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on the present value of the cash flows that we expect the reporting units to generate in the future. Our significant
estimates in the discounted cash flows model include: weighted average cost of capital; long-term rate of growth and
profitability of the reporting unit; income tax rates and working capital effects. The market valuation approach
indicates the fair value of the business based on a comparison to comparable publicly traded firms in similar lines of
business and other precedent transactions. Our significant estimates in the market approach model include
identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on
investment and assessing comparable revenue and/or income multiples in estimating the fair value of the reporting
units. Valuations are performed by management or third party valuation specialists under management's supervision,
where appropriate. We believe that the estimated fair values assigned to our reporting units in impairment tests are
based on reasonable assumptions that marketplace participants would use. However, such assumptions are
inherently uncertain and actual results could differ from those estimates. The use of different assumptions, estimates
or judgments could trigger the need for an impairment charge, or materially increase or decrease the amount of any
such impairment charge.
During the first quarter of 2019, the composition of our reportable segments was revised, as discussed in
“Note 1: Organization and Business Description.” Prior to implementing the revised segment reporting structure,
our previously disclosed Hotel segment was considered a single reporting unit. Following the change in reportable
segments, our legacy Hotel reporting unit was split into four distinct reporting units – (1) Hotels, Media & Platform,
(2) SmarterTravel, (3) Flights, Cruises and Car, and (4) Tripadvisor China for the purposes of goodwill impairment
testing. As a result, we first performed a qualitative assessment on our previous Hotel reporting unit prior to
implementing the revised segment reporting structure and determined that it was more likely than not that the fair
value of this reporting unit was greater than the carrying value; which was consistent with our conclusion in the
fourth quarter of 2018. We then performed a goodwill impairment test for each of the new reporting units upon the
change in reportable segments using a quantitative assessment. We concluded the estimated fair values were
significantly in excess of the carrying values for these reporting units. We also performed sensitivity analyses, such
as calculating estimated fair values using different rates for the weighted-average cost of capital and long-term rates
of growth in the income approach and different revenue/income multiples in our market approach and the estimated
fair values remained in excess of the carrying values. Therefore, no indications of impairment were identified as a
result of these changes in the first quarter of 2019.
During the Company's annual goodwill impairment test during the fourth quarter of 2019, a qualitative
assessment was performed for the following reporting units: (1) Hotels, Media & Platform, (2) SmarterTravel, (3)
Flights, Cruises and Car, (4) Dining, and (5) Experiences, while a quantitative assessment of the Rentals and
Tripadvisor China reporting units goodwill was performed. For fiscal 2019, we determined the fair value of all our
reporting units were in excess of their carrying values. Accordingly, we did not recognize any impairment charges
during the year ending December 31, 2019. As part of our qualitative assessment for our 2019 goodwill impairment
analysis of our reporting units, the factors that we considered included, but were not limited to: (a) changes in
macroeconomic conditions in the overall economy and the specific markets in which we operate, (b) our ability to
access capital, (c) changes in the online travel industry, (d) changes in the level of competition, (e) evaluation of
current and future forecasted financial results of the reporting units, (f) comparison of our current financial
performance to historical and budgeted results of the reporting units, (g) change in excess of the Company’s market
capitalization over its book value including the decrease in the Company’s market price during 2019, (h) changes in
estimates, valuation inputs, and/or assumptions since the last quantitative analysis of the reporting units, (i) changes
in the regulatory environment; (j) changes in strategic outlook or organizational structure and leadership of the
reporting units; and (k) other relevant factors, and how these factors might impact specific performance in future
periods. However, as we periodically reassess estimated future cash flows and asset fair values, changes in our
estimates and assumptions may cause us to realize material impairment charges in the future.
Intangible Assets
Intangible assets with estimable useful lives, or definite-lived intangibles, are carried at cost and are amortized
on a straight-line basis over their estimated useful lives and reviewed for impairment upon certain triggering events.
We routinely review the remaining estimated useful lives of definite-lived intangible assets. If we reduce the
estimated useful life assumption, the remaining unamortized balance is amortized over the revised estimated useful
life.
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Intangible assets that have indefinite lives are not amortized and are tested for impairment annually during the
fourth quarter, or whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. Similar to the qualitative assessment for goodwill, we may assess qualitative factors to determine if it is
more likely than not that the implied fair value of the indefinite-lived intangible asset is less than its carrying
amount. If we determine that it is not more likely than not that the implied fair value of the indefinite-lived
intangible asset is less than its carrying amount, no further testing is necessary. If, however, we determine that it is
more likely than not that the implied fair value of the indefinite-lived intangible asset is less than its carrying
amount, we compare the implied fair value of the indefinite-lived asset with its carrying amount. If the carrying
amount of an individual indefinite-lived intangible asset exceeds its implied fair value, the individual asset is written
down by an amount equal to such excess. The assessment of qualitative factors is optional and at our discretion. We
may bypass the qualitative assessment for any indefinite-lived intangible asset in any period and resume performing
the qualitative assessment in any subsequent period. We base our quantitative measurement of fair value of
indefinite-lived intangible assets, using the relief-from-royalty method. This method assumes that the trade name
and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits
received from them. This method requires us to estimate future revenues, the appropriate royalty rate and the
weighted average cost of capital, however, such assumptions are inherently uncertain and actual results could differ
from those estimates. The use of different assumptions, estimates or judgments could trigger the need for an
impairment charge, or materially increase or decrease the amount of any such impairment charge.
The carrying value of indefinite-lived intangible assets that is subject to annual assessment for impairment is
$30 million at December 31, 2019 and consists of trademarks and tradenames. During the Company's annual
indefinite-lived intangible impairment test during the fourth quarter of 2019, a qualitative assessment was
performed. As part of our qualitative assessment we considered, amongst other factors, the amount of excess fair
value of our trade names and trademarks to the carrying value of those same assets, changes in estimates, and
valuation input assumptions, since our previous quantitative analysis. After considering these factors and the impact
that changes in such factors would have on the inputs used in our previous quantitative assessment, we determined
that it was more likely than not that our indefinite-lived intangible assets were not impaired as of December 31,
2019.
Impairment of Long-Lived Assets
We periodically review the carrying amount of our definite-lived intangible assets and other long-term assets,
including property and equipment and website and internal use software, to determine whether current events or
circumstances indicate that such carrying amounts may not be recoverable. Factors that would necessitate an
impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a
significant adverse change in legal factors or the business climate that could affect the value of the asset, or a
significant decline in the observable market value of an asset, among others. If such facts indicate a potential
impairment, we assess the recoverability of the asset group by determining if the carrying value of the asset group
exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of
the assets over the remaining economic life of the primary asset of the group. If the recoverability test indicates that
the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using
appropriate valuation methodologies which would typically include an estimate of discounted cash flows, using an
appropriate discount rate. Any impairment would be measured by the amount that the carrying values, of such asset
groups, exceed their fair value and would be included in operating income on the consolidated statement of
operations. Considerable management judgment is necessary to estimate the fair value of asset groups. Accordingly,
actual results could vary significantly from such estimates. We have not identified any circumstances that would
warrant an impairment charge for any recorded definite-lived intangibles or other long term assets on our
consolidated balance sheet at December 31, 2019.
Deferred Merchant Payables
In our Experiences and Rentals free-to-list offerings, we generally receive cash from travelers at the time of
booking and we record these amounts, net of commissions, on our consolidated balance sheets as deferred merchant
payables. We pay the suppliers, or the vacation rental owners and third-party experience providers, respectively,
after the travelers’ use. Therefore, we receive cash from the traveler prior to paying the supplier and this operating
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cycle represents a working capital source or use of cash to us. Our deferred merchant payables balance was $159
million and $164 million at December 31, 2019 and 2018, respectively, on our consolidated balance sheets.
Foreign Currency Translation and Transaction Gains and Losses
Our consolidated financial statements are reported in U.S. dollars. Certain of our subsidiaries outside of the
United States use the related local currency as their functional currency and not the U.S. dollar. Therefore assets and
liabilities of our foreign subsidiaries are translated at the spot rate in effect at the applicable reporting date, and the
consolidated statements of operations are translated at the average exchange rates in effect during the applicable
period. The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other
comprehensive income (loss) in stockholders’ equity on our consolidated balance sheet.
We also have subsidiaries that have transactions in foreign currencies other than their functional currency.
Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at
the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses which
are reflected in our consolidated statements of operations as unrealized (based on the applicable period-end
exchange rate) or realized upon settlement of the transactions. Accordingly, we have recorded net foreign currency
exchange losses of $2 million and $9 million for the years ended December 31, 2019 and 2018, respectively, and a
net gain of $1 million for the year ended December 31, 2017, in other income (expense), net on our consolidated
statement of operations. These amounts also include transaction gains and losses, both realized and unrealized from
forward contracts.
Fair Value Measurements and Disclosures
We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities
that are recognized or disclosed at fair value in the financial statements on a recurring basis. We measure assets and
liabilities at fair value based on the expected exit price, which is the amount that would be received on the sale of an
asset or amount paid to transfer a liability, as the case may be, in an orderly transaction between market participants
in the principal or most advantageous market in which we would transact. As such, fair value may be based on
assumptions that market participants would use in pricing an asset or liability at the measurement date. The
authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on
either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical
level. GAAP provides the following hierarchical levels of inputs used to measure fair value:
Level 1—Valuations are based on quoted market prices for identical assets and liabilities in active
markets.
Level 2—Valuations are based on observable inputs other than quoted market prices included in Level
1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active, or other inputs that are observable or can be
corroborated by observable market data.
Level 3—Valuations are based on unobservable inputs reflecting our own assumptions, consistent with
reasonably available assumptions made by other market participants. These valuations require significant
judgment.
Certain Risks and Concentrations
Our business is subject to certain risks and concentrations, including concentration related to dependence on
our relationships with our customers. For the years ended December 31, 2019, 2018 and 2017 our two most
significant travel partners, Expedia (and its subsidiaries) and Booking (and its subsidiaries), each accounted for more
than 10% of our consolidated revenue and combined accounted for 33%, 37% and 43%, respectively, of our
consolidated revenue, with nearly all of this revenue concentrated in our Hotels, Media & Platform segment. Refer
to “Note 4: Revenue Recognition” and “Note 18: Segment and Geographic Information” for information regarding
concentrations related to geographic revenue and our products.
Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of cash
and cash equivalents, corporate debt securities, forward contracts, and accounts receivable. We maintain some cash
78
and cash equivalents balances with financial institutions that are in excess of Federal Deposit Insurance Corporation
insurance limits. Our cash and cash equivalents are primarily composed of bank account balances with financial
institutions primarily denominated in U.S. dollars, Euros, British pounds, and Australian dollars, as well as, money
market funds. We invest in highly-rated corporate debt securities, and our investment policy limits the amount of
credit exposure to any one issuer, industry group and currency. Our credit risk related to corporate debt securities is
also mitigated by the relatively short maturity period required by our investment policy. Forward contracts are
transacted with various international financial institutions with high credit standings, which to date, have typically
had maturities of less than 90 days. Our overall credit risk related to accounts receivable is mitigated by the
relatively short collection period.
Contingent Liabilities
Periodically, we review the status of all significant outstanding matters to assess any potential financial
exposure. When (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the amount
of the loss can be reasonably estimated, we record the estimated loss in our consolidated statements of operations.
We provide disclosure in the notes to the consolidated financial statements for loss contingencies that do not meet
both these conditions if there is a reasonable possibility that a loss may have been incurred that would be material to
the consolidated financial statements. Significant judgment may be required to determine the probability that a
liability has been incurred and whether such liability is reasonably estimable. We base accruals made on the best
information available at the time which can be highly subjective. The final outcome of these matters could vary
significantly from the amounts included in the accompanying consolidated financial statements.
Treasury Stock
Shares of our common stock repurchased are recorded at cost as treasury stock and result in the reduction of
stockholders' equity in our consolidated balance sheet. We may reissue these treasury shares. When treasury shares
are reissued, we use the average cost method for determining the cost of reissued shares. If the issuance price is
higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in-capital. If the
issuance price is lower than the cost, the difference is first charged against any credit balance in additional paid-in-
capital from the previous issuances of treasury stock and any remaining balance is charged to retained earnings.
Earnings Per Share (“EPS”)
Refer to “Note 5: Earnings Per Share” for a discussion about how we compute Basic EPS and Diluted EPS.
New Accounting Pronouncements Not Yet Adopted
In August 2018, the FASB issued new accounting guidance which require a customer in a cloud computing
arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance to
determine which implementation costs to capitalize as assets or expense as incurred. The accounting for the cost of
the hosting component of the arrangement (i.e., service costs the customer pays for the cloud computing service) is
not affected by this new guidance. The Company uses both internally-developed software and third-party software
to operate its business. This guidance is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019, with early adoption permitted, including adoption in any interim period. Entities
have the option to apply the guidance retrospectively or prospectively to all implementation costs incurred after the
date of adoption. We will adopt this new guidance as of January 1, 2020 on a prospective basis without adjusting the
comparative periods presented. We do not expect the adoption of this new guidance will have a material impact on
our consolidated financial statements.
In June 2016, the FASB issued new accounting guidance which replaces the existing incurred loss impairment
model with an expected loss methodology on the measurement of credit losses for financial assets measured at
amortized cost, which includes accounts receivable and available-for-sale debt securities. For financial assets
measured at amortized cost, this new guidance requires an entity to: (1) estimate its lifetime expected credit losses
upon recognition of the financial assets and establish an allowance to present the net amount expected to be
collected; (2) recognize this allowance and changes in the allowance during subsequent periods through net income;
79
and (3) consider relevant information about past events, current conditions and reasonable and supportable forecasts
in assessing the lifetime expected credit losses. For available-for-sale debt securities, this new guidance made
several targeted amendments to the existing other-than-temporary impairment model, including: (1) requiring
disclosure of the allowance for credit losses; (2) allowing reversals of the previously recognized credit losses until
the entity has the intent to sell, is more-likely-than-not required to sell the securities or the maturity of the securities;
(3) limiting impairment to the difference between the amortized cost basis and fair value; and (4) not allowing
entities to consider the length of time that fair value has been less than amortized cost as a factor in evaluating
whether a credit loss exists. This guidance is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019, with early adoption permitted, including interim periods within those fiscal
years beginning after December 15, 2018. Entities are required to adopt this new guidance on a modified
retrospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the period of
adoption without adjusting the comparative periods presented. We will adopt this new guidance as of January 1,
2020. We do not expect the adoption of this new guidance will have a material impact on our consolidated financial
statements.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued new guidance which revises the accounting for leases (“ASC 842”). ASC
842 requires entities that lease assets to recognize right-of-use (ROU) assets representing its right to use the
underlying asset for the lease term and lease liabilities related to the rights and obligations created by those leases on
the balance sheet regardless of whether they are classified as finance or operating leases, with classification affecting
the pattern and presentation of expenses and cash flows on our consolidated financial statements. In addition, new
disclosures are required to meet the objective of enabling users of the financial statements to better understand the
amount, timing, and uncertainty of cash flows arising from leases. We adopted ASC 842 on January 1, 2019 and
elected the modified retrospective transition method that allowed for a cumulative-effect adjustment in the period of
adoption. Financial results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while
prior period amounts were not adjusted and continue to be reported under the accounting standards in effect for
those periods. The Company has also updated its accounting policies to reflect the new guidance and has
implemented lease accounting software to support its accounting process, financial reporting, and new financial
disclosure requirements.
We elected the following practical expedients available in transition upon adoption of ASC 842 and
accounting policy updates: 1) the “practical expedients package of three”, which allows us to not reassess the
following as of the adoption date: a) whether any expired or existing contracts are or contain a lease; b) the lease
classification for any expired or existing leases; and c) the accounting treatment for initial direct costs for existing
leases; 2) the “short-term lease recognition exemption”, which allows entities to forego recognition of ROU assets
and lease liabilities for leases with a lease term of twelve months or less and which also do not include an option to
renew the lease term that the entity is reasonably certain to exercise; 3) elect by asset class as an accounting policy,
to combine lease and non-lease components as a single component and subsequently account for the combined
single component as the lease component; and 4) apply the portfolio approach to similar types of leases where the
Company does not reasonably expect the outcome to differ materially from applying the new guidance to individual
leases.
The adoption of ASC 842 did not have a material impact to both our consolidated statement of operations and
consolidated statement of cash flows during the year ended December 31, 2019. The effect on our consolidated
balance sheet as of January 1, 2019 from the adoption of ASC 842 is as follows:
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Balance at
December 31,
2018
Adjustments
due to ASC
842
Balance at
January 1,
2019
(in millions)
Assets:
Prepaid expenses and other current assets
Property and equipment, net (1)
Operating lease right-of-use assets (1)
Deferred income taxes, net
Other long-term assets
$
Liabilities:
Accrued expenses and other current liabilities (2)
Other long-term liabilities (1)
Retained earnings (3)
$
33 $
253
—
27
86
151
282
1,043 $
(3) $
8
75
(1)
(2)
21
53
3 $
30
261
75
26
84
172
335
1,046
(1) Refer to the below discussion regarding the transition accounting for operating and finance leases upon
adoption of ASC 842.
(2) This adjustment primarily represents the short-term portion of operating and finance lease obligations
recorded upon adoption of ASC 842, discussed below.
(3) Represents a cumulative-effect adjustment of $3 million, net of tax to our beginning balance of retained
earnings recorded upon adoption of ASC 842.
We determine whether a contract is or contains a lease at inception of a contract. We define a lease as a
contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an
identified asset) for a period of time in exchange for consideration. Control over the use of the identified asset means
that we have both the right to obtain substantially all of the economic benefits from the use of the asset and the right
to direct the use of the asset.
Our lease contracts contain both lease and non-lease components. We account separately for the lease and
non-lease components of office space leases and certain other leases, such as data center leases. We allocate the
consideration in the contract to the lease and non-lease components based on each component’s relative standalone
price. We determine standalone prices for the lease components based on the prices for which other lessors lease
similar assets on a standalone basis. We determine standalone prices for the non-lease component based on the
prices that other suppliers charge for services for similar assets on a standalone basis. If observable standalone prices
are not readily available, we estimate the standalone prices based on other available observable information.
However, for certain categories of equipment leases, such as network equipment and others, we account for the lease
and non-lease components as a single lease component. Additionally, for certain equipment leases that have similar
characteristics, we apply a portfolio approach to effectively account for operating lease ROU assets and operating
lease liabilities, hence we do not expect the outcome to differ materially from applying the new guidance to
individual leases.
The Company uses its estimated incremental borrowing rate as the discount rate in measuring the present
value of our lease payments given the rate implicit in our leases is not typically readily determinable. Given we do
not currently borrow on a collateralized basis, our incremental borrowing rate is estimated to approximate the
interest rate in which the Company would expect to pay on a collateralized basis over a similar term and payments,
and in economic environments where the leased asset is located. We use the portfolio approach to determine the
discount rate for leases with similar characteristics or when the Company is reasonably certain that doing so would
not materially affect the accounting for those leases to which a single discount rate is applied.
We establish assets and liabilities for the estimated construction costs incurred under lease arrangements
where we are considered the owner for accounting purposes only, or build-to-suit leases, to the extent we are
involved in the construction of structural improvements or take construction risk prior to commencement of a lease.
Upon occupancy of facilities under build-to-suit leases, we assess whether these arrangements qualify for sales
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recognition under the sale-leaseback accounting guidance under GAAP. If we continue to be the deemed owner, for
accounting purposes, the facilities are accounted for as financing obligations.
We also establish assets and liabilities for the present value of estimated future costs to return certain of our
leased facilities to their original condition for asset retirement obligations. Such assets are depreciated over the lease
period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration
costs and are included in other long-term liabilities on our consolidated balance sheet. Our asset retirement
obligations were not material as of December 31, 2019 and December 31, 2018, respectively.
Operating Leases
Our office space leases, exclusive of our Headquarters Lease, are operating leases, which we lease an
aggregate of approximately 505,000 square feet of office space at approximately 50 other locations across
North America, Europe, Asia Pacific and South America, in cities such as New York, Boston, London, Sydney,
Barcelona, Buenos Aires and Paris, primarily for our sales offices, subsidiary headquarters, and international
management teams, pursuant to leases with various expiration dates, with the latest expiring in June 2027.
Based on the present value of remaining lease payments on the Company's existing leases, we recognized $88
million of both operating ROU assets and operating lease liabilities, respectively, on our consolidated balance sheet
upon adoption of ASC 842, as of January 1, 2019. These operating ROU assets were then reduced by a net deferred
rent balance of $13 million as of January 1, 2019, which primarily consisted of existing deferred and prepaid rent
balances.
Operating lease ROU assets and liabilities commencing after January 1, 2019 are recognized at lease
commencement date, or the date the lessor makes the leased asset available for use, based on the present value of
lease payments over the lease term using the Company’s estimated incremental borrowing rate. ROU assets related
to operating leases comprise the initial lease liability, and are then adjusted for any prepaid or deferred rent
payments, unamortized initial direct costs, and lease incentives received. Amortization expense for operating lease
ROU assets and interest accretion on operating lease liabilities are recognized as a single operating lease cost in our
consolidated statement of operations, which results effectively in recognition of rent expense on a straight-line basis
over the lease period. The carrying amount of operating lease liabilities are (1) accreted to reflect interest using the
incremental borrowing rate if the rate implicit in the lease is not readily determinable; and (2) reduced to reflect
lease payments made during the period. We present the combination of both the amortization of operating lease
ROU assets and the change in the operating lease liabilities in the same line item in the adjustments to reconcile net
income to net cash provided by operating activities in our consolidated statement of cash flows. Lease incentives are
recognized as reductions of rental expense on a straight-line basis over the term of the lease. Certain of our operating
leases include options to extend the lease terms for up to 6 years and/or terminate the leases within 1 year, which we
include in our lease term if we are reasonably certain to exercise these options. Payments under our operating leases
are primarily fixed, however, certain of our operating lease agreements include rental payments which are adjusted
periodically for inflation. We recognize these costs as variable lease costs on our consolidated statement of
operations, which were not material during the year ended December 31, 2019 and 2018. In addition, our short-term
lease costs were not material in any period. As of December 31, 2019, we had operating lease ROU assets of $74
million on our consolidated balance sheet.
Finance Lease
In June 2013, we entered into our Headquarters Lease. Pursuant to the Headquarters Lease, the landlord built
an approximately 280,000 square foot rental building in Needham, Massachusetts (the “Premises”), and leased the
Premises to the Company as our new corporate headquarters for an initial term of 15 years and 7 months or through
December 2030. The Company also has an option to extend the term of the Headquarters Lease for two consecutive
terms of five years each. The Company was deemed to be the owner of the Premises for accounting purposes only
during the construction period under legacy GAAP lease accounting rules, or ASC 840. Accordingly, the Company
recorded project construction costs during the construction period incurred by the landlord as a construction-in-
progress asset and a related construction financing obligation on our consolidated balance sheet. The amounts that
the Company incurred for normal tenant improvements and structural improvements had also been recorded to the
construction-in-progress asset. Upon completion of construction at the end of the second quarter of 2015, we
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evaluated the construction-in-progress asset and construction financing obligation for de-recognition under the
criteria for “sale-leaseback” treatment under ASC 840. We concluded that it did not meet the provisions for sale-
leaseback accounting. Therefore, the Headquarters Lease was accounted for as a financing obligation through
December 31, 2018, in which we depreciated the building asset over its estimated useful life and incurred interest
expense related to the financing obligation, imputed using the effective interest rate method.
Upon the adoption of ASC 842 on January 1, 2019, we derecognized the previous asset and liability recorded
for the Headquarters Lease described above, with the exception of a net asset of $26 million, primarily related to
structural improvements paid by the Company, net of tenant incentives and accumulated amortization, which is
classified as prepaid rent under the new guidance. The Company then assessed the lease classification of our
Headquarters Lease and concluded it should be classified and accounted for as a finance lease upon adoption on
January 1, 2019. Accordingly, on January 1, 2019, we recognized a finance lease ROU asset and a finance lease
liability of $114 million and $88 million, respectively, on our consolidated balance sheet. The difference between
the finance lease ROU asset and finance lease liability represents the aforementioned $26 million of net prepaid rent,
and is being amortized straight-line over the remaining lease term. As of December 31, 2019, the ROU asset related
to our Headquarters Lease was $105 million, net of accumulated amortization of $9 million, and is included in the
property and equipment, net on our consolidated balance sheet.
Finance lease ROU assets and finance lease liabilities commencing after January 1, 2019 are recognized
similar to an operating lease, at the lease commencement date or the date the lessor makes the leased asset available
for use. Finance lease ROU assets are generally amortized on a straight-line basis over the lease term, and the
carrying amount of the finance lease liabilities are (1) accreted to reflect interest using the incremental borrowing
rate if the rate implicit in the lease is not readily determinable, and (2) reduced to reflect lease payments made
during the period. Amortization expense for finance lease ROU assets and interest accretion on finance lease
liabilities are recorded to depreciation and interest expense, respectively, in our consolidated statement of operations.
We did not update any financial information or provide any disclosures required under the new guidance for
both the years ended December 31, 2018 and 2017, or as of December 31, 2018. The disclosures provided below for
the years ended December 31, 2018 and 2017, or as of December 31, 2018 are based on the disclosure requirements
under ASC 840.
The components of lease expense were as follows for the periods presented:
Operating lease cost (1)
Finance lease cost
Amortization of right-of-use assets (2)
Interest on lease liabilities (3)
Total finance lease cost
Sublease income (1)
Total lease cost, net
Year ended
December 31,
2019
(in millions)
$
$
$
$
24
9
4
13
(3)
34
(1) Operating lease costs, net of sublease income, are included within operating expenses in our consolidated statement of
operations. During both the years ended December 31, 2018 and 2017, we recorded operating lease expense of $21 million and
sublease income of $3 million, in our consolidated statement of operations in accordance with ASC 840.
(2) Amount is included in depreciation expense in our consolidated statement of operations. During both the years ended December
31, 2018 and 2017, we recorded depreciation expense of $3 million related to our Headquarters Lease in our consolidated
statement of operations in accordance with ASC 840.
(3) Amount is included in interest expense in our consolidated statement of operations. During both the years ended December 31,
2018 and 2017, we recorded interest expense of $7 million related to our Headquarters Lease in our consolidated statement of
operations in accordance with ASC 840.
83
Additional information related to our leases is as follows for the periods presented:
Supplemental Cash Flows Information:
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash outflows from operating leases
Operating cash outflows from finance lease
Financing cash outflows from finance lease
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases (1)
Finance lease (2)
Year ended
December 31, 2019
(in millions)
$
$
26
4
5
106
88
(1) Amount includes operating leases existing on January 1, 2019 of $88 million and those that commenced during the year ended
December 31, 2019 of $18 million.
(2) Amount represents the finance lease liability arising from obtaining the ROU asset related to our Headquarters Lease, which was
recognized upon the adoption of ASC 842 on January 1, 2019.
Weighted-average remaining lease term:
Operating leases
Finance lease
Weighted-average discount rate:
Operating leases
Finance lease
As of December
31, 2019
4.4 years
11.0 years
4.11%
4.49%
Future lease payments under non-cancelable leases as of December 31, 2019 were as follows:
Year Ending December 31,
2020
2021
2022
2023
2024
Thereafter
Total future lease payments
Less imputed interest
Total lease liabilities
Operating
Leases
Finance
Lease
(in millions)
23 $
23
19
13
8
6
92
(8)
84 $
9
10
10
10
10
57
106
(23)
83
$
$
Reported on consolidated balance sheet as of
December 31, 2019
Operating
Leases
Finance
Lease
Accrued expenses and other current liabilities
Other long-term liabilities
Total lease liabilities
(in millions)
20 $
64
84 $
5
78
83
$
$
84
As of December 31, 2018, future minimum lease commitments under our Headquarters Lease and other non-
cancelable operating leases for office space with terms of more than one year and contractual sublease income were
as follows:
Headquarters
Lease (1)
Other
Operating
Leases
Sublease
Income
Total Lease
Commitments
(Net of
Sublease
Income)
9 $
9
10
10
10
67
115 $
$
(in millions)
19 $
18
16
16
9
9
87 $
(3) $
(2)
(2)
(2)
—
—
(9) $
25
25
24
24
19
76
193
Year
2019
2020
2021
2022
2023
Thereafter
Total
(1) Amount includes an $83 million financing obligation in other long-term liabilities on our consolidated
balance sheet at December 31, 2018, related to the Headquarters Lease.
As of December 31, 2019, we did not have any additional operating or finance leases that have not yet
commenced but that create significant rights and obligations for us.
NOTE 3: ACQUISITIONS AND OTHER INVESTMENTS
During the years ended December 31, 2019 and 2018, we acquired businesses which were accounted for as
purchases of businesses under the acquisition method, or GAAP. We had no business acquisitions during the year
ended December 31, 2017. The fair value of purchase consideration has been allocated to tangible and identifiable
intangible assets acquired and liabilities assumed, based on their respective fair values on the acquisition date, with
the remaining amount recorded to goodwill. Acquired goodwill represents the premium we paid over the fair value
of the net tangible and intangible assets acquired. We paid a premium in each of these transactions for a number of
reasons, including expected operational synergies, the assembled workforces, and the future development initiatives
of the assembled workforces. The results of each of these acquired businesses have been included in the
consolidated financial statements beginning on the respective acquisition dates. Pro-forma results of operations for
these acquisitions have not been presented as the financial impact to our consolidated financial statements, both
individually and in aggregate, would not be materially different from historical results. For the years ended
December 31, 2019 and 2018, acquisition-related costs which were expensed as incurred, were $2 million and not
material, respectively, and are included in general and administrative expenses on our consolidated statements of
operations.
2019 Acquisition of Businesses and Other Investments
During the year ended December 31, 2019, we completed three acquisitions of businesses under GAAP with a
total purchase price consideration of $110 million for 100% ownership of the following: (1) SinglePlatform, a
leading online content management and syndication platform company based in the U.S. acquired in December 2019,
(2) BookaTable, an online restaurant reservation and booking platform company based in the U.K. acquired in
December 2019; and (3) Restorando, an online restaurant reservation and booking platform company based in
Argentina acquired in February 2019. We paid cash consideration of $108 million, net of $2 million of cash
acquired. The cash consideration was paid from our U.S. and European cash.
The aggregate purchase price consideration was allocated to the fair value of assets acquired and liabilities
assumed. The purchase price allocation of our 2019 acquisitions is preliminary and subject to revision as more
information becomes available, primarily related to the estimated values of BookaTable intangible assets, but in any
case will not be revised beyond twelve months after the acquisition date. Any change to the fair value of assets
85
acquired or liabilities assumed will lead to a corresponding change to the purchase price allocable to goodwill in the
period the adjustment is determined.
The following summarizes the preliminary allocation, in millions:
Goodwill (1)
Intangible assets (2)
Net tangible assets (liabilities) (3)
Total purchase price consideration (4)
$
$
Total
85
26
(1)
110
(1) Goodwill of $50 million is not deductible for tax purposes.
(2)
Preliminary identifiable definite-lived intangible assets acquired during 2019 were comprised of trade names
of $2 million with a weighted average life of 2 years, customer lists and supplier relationships of $10 million
with a weighted average life of 8 years, subscriber relationships of $6 million with a weighted average life of
approximately 3 years, and technology and other of $8 million with a weighted average life of approximately
6 years. The overall weighted-average life of the identifiable definite-lived intangible assets acquired in the
purchase of these businesses during 2019 was 6 years, and will be amortized on a straight-line basis over
their estimated useful lives from acquisition date.
Primarily includes cash acquired of $2 million, accounts receivable of $3 million, prepaid expenses and
other current assets of $2 million and liabilities assumed of $8 million, including accounts payable, accrued
expenses and other current liabilities, and deferred revenue, which reflect their respective fair values at
acquisition.
Subject to adjustment based on (i) final working capital adjustment calculations; and (ii) indemnification
obligations for general representations and warranties of certain acquired company stockholders.
(3)
(4)
During the year ended December 31, 2019, we also invested $2 million in the equity securities of a privately-
held company. Refer to “Note 7: Financial Instruments and Fair Value Measurements” for further disclosure on our
non-marketable investments.
2018 Acquisition of Business
During the year ended December 31, 2018, we acquired one business for a purchase price and net cash
consideration of $23 million. The cash consideration was paid from our U.S. cash.
The purchase price consideration of $23 million was allocated to the fair value of assets acquired and
liabilities assumed. The following summarizes the final purchase price allocation, in millions:
Goodwill (1)
Intangible assets (2)
Deferred tax liabilities, net
Total purchase price consideration (3)
$
$
Total
11
14
(2)
23
(1) Goodwill is not deductible for tax purposes.
(2)
Identifiable definite-lived intangible assets acquired during 2018 were comprised of supplier relationships of
$6 million with a weighted average life of 10 years and technology and other of $8 million with a weighted
average life of approximately 6 years. The overall weighted-average life of the identifiable definite-lived
intangible assets acquired in the purchase of this business during 2018 was 8 years, and will be amortized on
a straight-line basis over the estimated useful lives from acquisition date.
Subject to adjustment based on indemnification obligations for general representations and warranties of
certain acquired company stockholders.
(3)
86
NOTE 4: REVENUE RECOGNITION
We generate all of our revenue from contracts with customers. We recognize revenue when we satisfy a
performance obligation by transferring control of the promised services to a customer in an amount that reflects the
consideration that we expect to receive in exchange for those services. When we act as an agent in the transaction,
we recognize revenue for only our commission on the arrangement. We determine revenue recognition through the
following steps:
(1) Identification of the contract, or contracts, with a customer
(2) Identification of the performance obligations in the contract
(3) Determination of the transaction price
(4) Allocation of the transaction price to the performance obligations in the contract
(5) Recognition of revenue when, or as, we satisfy a performance obligation.
At contract inception, we assess the services promised in our contracts with customers and identify a
performance obligation for each promise to transfer to the customer a service (or bundle of services) that is distinct.
To identify the performance obligations, we consider all of the services promised in the contract regardless of
whether they are explicitly stated or are implied by customary business practices. We have provided qualitative
information about our performance obligations for our principal revenue streams discussed below. There was no
significant revenue recognized in the years ended December 31, 2019 and 2018 related to performance obligations
satisfied in prior periods, respectively. We have applied a practical expedient and do not disclose the value of
unsatisfied performance obligations that have an original expected duration of less than one year, and we do not
have any material unsatisfied performance obligations over one year. The value related to our remaining or partially
satisfied performance obligations relates to subscription services that are satisfied over time or services that are
recognized at a point in time, but not yet achieved. Our timing of services, invoicing and payments are discussed in
more detail below and do not include a significant financing component. Our customer invoices are generally due 30
days from the time of invoicing.
We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the
benefit of those costs to be longer than one year. Although the substantial majority of our contract costs have an
amortization period of less than one year, we have determined contract costs arising from certain sales incentives
have an amortization period in excess of one year given the high likelihood of contract renewal. Sales incentives are
not paid upon renewal of these contracts and therefore are not commensurate with the initial sales incentive costs.
Total capitalized costs to obtain a contract were approximately $4 million and $2 million as of December 31, 2019
and 2018, respectively. We amortize these contract costs on a straight-line basis over the estimated customer life,
which is based on historical customer retention rates. Amortization expense recorded to selling and marketing
during the years ended December 31, 2019 and 2018, respectively, were $1 million and not material. We assess such
assets for impairment when events or circumstances indicate that the carrying amount may not be recoverable.
The recognition of revenue may require the application of judgment related to the determination of the
performance obligations, the timing of when the performance obligations are satisfied and other areas. The
determination of our performance obligations does not require significant judgment given that we generally do not
provide multiple services to a customer in a transaction, and the point in which control is transferred to the customer
is readily determinable. In instances where we recognize revenue over time, we generally have either a subscription
service that is recognized over time on a straight-line basis using the time-elapsed output method, or based on other
output measures that provide a faithful depiction of the transfer of our services. When an estimate for cancellations
is included in the transaction price, we base our estimate on historical cancellation rates. There have been no
significant adjustments to our cancellation estimates and the cancellation estimates are not material. Taxes assessed
by a government authority that are both imposed on and concurrent with a specific revenue–producing transaction,
that are collected by us from a customer, are reported on a net basis, or in other words excluded from revenue on our
consolidated financial statements, which is consistent with prior periods. The application of our revenue recognition
policies and a description of our principal activities, organized by segment, from which we generate our revenue, are
presented below.
87
Hotels, Media & Platform Segment
Tripadvisor-branded Hotels Revenue. Our largest source of Hotels, Media & Platform segment revenue is
generated from click-based advertising on Tripadvisor-branded websites, which is primarily comprised of
contextually-relevant booking links to our travel partners’ websites. Our click-based travel partners are
predominantly OTAs and direct suppliers in the hotel category. Click-based advertising is generally priced on a cost-
per-click, or “CPC”, basis, with payments from travel partners determined by the number of travelers who click on a
link multiplied by the CPC rate for each specific click. CPC rates are determined in a dynamic, competitive auction
process, also known as our hotel metasearch auction, where our travel partner CPC bids for rates and availability to
be listed on our site are submitted. When a CPC bid is submitted, the partner agrees to pay us the bid amount each
time a traveler clicks on the link to that partner’s websites. Bids can be submitted periodically – as often as daily– on
a property-by-property basis. We record click-based advertising revenue as the click occurs and traveler leads are
sent to the travel partner websites as our performance obligation is fulfilled at that time. Click-based revenue is
generally billed to our travel partners on a monthly basis consistent with the timing of the service.
In addition, we offer subscription-based advertising to hotel partners, owners of B&Bs and other specialty
lodging properties. Our performance obligation is generally to enable subscribers to advertise their businesses on our
website, as well as manage and promote their website URL, email address, phone number, special offers and other
information related to their business. Subscription-based advertising services are predominantly sold for a flat fee
for a contracted period of time of one year or less and revenue is recognized on a straight-line basis over the period
of the subscription service as efforts are expended evenly throughout the contract period. Subscription-based
advertising services are generally billed at the inception of the service. When prepayments are received, we
recognize deferred revenue for the amount of prepayment in excess of revenue recognized until the performance
obligation is satisfied.
We also offer travel partners the opportunity to advertise and promote their business through hotel sponsored
placements on our websites. This service is generally priced on a CPC basis, with payments from travel partners
determined by the number of travelers who click on the sponsored link multiplied by the CPC rate for each specific
click. CPC rates for hotel sponsored placements that our travel partners pay are based on a pre-determined
contractual rate. We record this click-based advertising revenue as the click occurs and traveler leads are sent to the
travel partner as our performance obligation is fulfilled at that time. Hotel sponsored placements revenue is
generally billed to our travel partners on a monthly basis consistent with the timing of the service.
To a lesser extent, we generate transaction revenue from our hotel instant booking feature, which enables hotel
shoppers to book directly with a travel partner, with the latter serving as the merchant of record for the transaction,
without leaving our website. We earn a commission from our travel partners for each traveler that completes a hotel
reservation on our website based on a pre-determined contractual commission rate. Our hotel instant booking
revenue includes (i) arrangements where commissions are billable on all instant booking hotel reservations; and (ii)
arrangements where the commissions are billable only upon the completion of each traveler’s stay resulting from the
reservation. The travel partners provide the service to the travelers and we act as an agent under ASC 606. Our
performance obligation in both arrangements is complete at the time of the booking and the commission earned is
recognized upon booking, as we have no post-booking service obligations. The amount of revenue recognized for
commissions that are billable contingent upon a traveler stay requires an estimate of the impact of cancellations
using historical cancellation rates. Contract assets are recognized at the time of booking for commissions that are
billable at the time of stay.
Tripadvisor-branded Display and Platform Revenue. We offer travel partners the ability to promote their
brands through display-based advertising placements on our websites across all of our segments and business units.
Our display-based advertising clients are predominantly direct suppliers of hotels, airlines and cruises, as well as
destination marketing organizations. We also sell display-based advertising to OTAs and other travel related
businesses, as well as advertisers from non-travel categories. Display-based advertising is sold predominantly on a
cost per thousand impressions, or CPM, basis. The performance obligation in our display-based advertising
arrangements is to display a number of advertising impressions on our websites and we recognize revenue for
impressions as they are delivered. Services are generally billed monthly. We have applied the practical expedient to
measure progress toward completion, as we have the right to invoice the customer in an amount that directly
88
corresponds with the value to the customer of our performance to date, which is measured based on impressions
delivered.
Experiences & Dining Segment
We provide information and services that allow consumers to research and book activities and attractions in
popular travel destinations both through Viator, our dedicated Experiences offering, and on our Tripadvisor website
and mobile apps. We also power travel activities and experiences booking capabilities to consumers on affiliate
partner websites, including some of the world’s top airlines, hotel chains, and online and offline travel agencies. We
work with local tour or travel activities/experiences operators (“the supplier”) to provide consumers the ability to
book tours, activities and experiences (“the activity”) in popular destinations worldwide. We generate commissions
for each booking transaction we facilitate through our online reservation system. We provide post-booking service
to the customer until the time of the activity, which is the completion of the performance obligation. Revenue is
recognized at the time that the activity occurs. We generally do not control the activity before the supplier provides
it to our customer and therefore act as agent for nearly all of these transactions under ASC 606. We generally collect
payment from the customer at the time of booking that includes both our commission revenue and the amount due to
the supplier. Our commission revenue is recorded as deferred revenue until the activity occurs and revenue is
recognized, and the amount due to the supplier is recorded as deferred merchant payables on our consolidated
balance sheet until completion of the activity and payment is made to the supplier. To a lesser extent, we earn
commissions from affiliate partners, or third-party merchant partners who display and promote on their websites the
supplier activities available on our platform to generate bookings. In these transactions, where we are not the
merchant of record, we generally invoice and receive commissions directly from the third-party merchant partners.
Our performance obligation is to allow the third-party merchant partners to display and promote on their website
suppliers who utilize our platform and we earn a commission when consumers book and complete an activity. We
do not control the service and act as an agent for these transactions under ASC 606. Our performance obligation is
complete and revenue is recognized at the time of the booking, as we have no post-booking obligations. We
recognize this revenue net of an estimate of the impact of cancellations using historical cancellation rates. Contract
assets are recognized for commissions that are billable contingent upon completion of the activity.
We also provide information and services for consumers to research and book restaurants in popular travel
destinations through our dedicated restaurant reservations offering, TheFork, and on our Tripadvisor-branded
websites and mobile apps. TheFork is an online restaurant booking platform operating on a number of websites
(including www.thefork.com, www.lafourchette.com, www.eltenedor.com, www.restorando.com and
www.bookatable.co.uk), with a network of restaurant partners located primarily across the U.K., Europe, Australia,
and South America. We primarily generate transaction fees (or per seated diner fees) that are paid by restaurants for
diners seated primarily from bookings through TheFork’s online reservation system. The transaction fee is
recognized as revenue after the reservation is fulfilled, or as diners are seated by our restaurant customers. We
invoice restaurants monthly for transaction fees. To a lesser extent, we also generate subscription fees for
subscription-based advertising to restaurants, access to certain online reservation management services, marketing
analytic tools, and menu syndication services provided by TheFork and Tripadvisor. As the performance obligation
is to provide restaurants with access to these services over the subscription period, subscription fee revenue is
recognized over the period of the subscription service on a straight-line basis as efforts are expended evenly
throughout the contract period. Subscription fees are generally billable in advance of service. When prepayments are
received, we recognize deferred revenue for the amount of prepayment in excess of revenue recognized until the
performance obligation is satisfied. In addition, we also offer restaurant partners the opportunity to advertise and
promote their business through restaurant media advertising placements on our website. This service is generally
priced on a CPC basis, with payments from restaurant partners determined by the number of users who click on the
sponsored link multiplied by the CPC rate for each specific click. CPC rates for media advertising placements that
our restaurant partners pay are based on a pre-determined contractual rate. We record this click-based advertising
revenue as the click occurs and diner leads are sent to the restaurant partner as our performance obligation is
fulfilled at that time. Click-based revenue is generally billed to our restaurant partners on a monthly basis consistent
with the timing of the service.
89
Other
We provide information and services that allow travelers to research and book vacation and short-term rental
properties, including full homes, condominiums, villas, beach properties, cabins and cottages. Our Rentals offering
generates revenue primarily by offering individual property owners and managers the ability to list their properties
on our websites and mobile apps thereby connecting with travelers through a free-to-list, commission-based option
or, to a lesser extent, by an annual subscription-based fee structure. These properties are listed on www.flipkey.com,
www.holidaylettings.co.uk, www.housetrip.com, www.niumba.com, and www.vacationhomerentals.com, and on
our Tripadvisor-branded websites and mobile apps. We earn commissions associated with rental transactions
through our free-to-list model from both the traveler, and the property owner or manager. We provide post-booking
service to the travelers, property owners and managers until the time the rental commences, which is the time the
performance obligation is completed. Revenue from transaction fees is recognized at the time that the rental
commences. We act as an agent, under ASC 606, in the transactions as we do not control any properties before the
property owner provides the accommodation to the traveler and do not have inventory risk. We generally collect
from the traveler at the time of booking payment representing the amount due to the property owner or manager, as
well as our commission. That portion of the payment representing our commission is recorded as deferred revenue
until revenue is recognized, and that portion of the payment representing the amount due to the property owner is
recorded as deferred merchant payables until payment is made to the property owner after the completion of the
rental. Payments for term-based subscription fees related to online advertising services for the listing of rental
properties are generally due in advance. As the performance obligation is the listing service provided to the property
owner or manager over the subscription period, revenue is recognized over the period of the subscription service on
a straight-line basis as efforts are expended evenly throughout the contract period. We recognize deferred revenue
for the amount of prepayment in excess of revenue recognized until the performance obligation is satisfied.
In addition, Other also includes revenue generated from flights, cruises, and car offerings on Tripadvisor, as
well as revenue from non-Tripadvisor-branded websites not otherwise described above, such as
www.bookingbuddy.com, www.cruisecritic.com, www.onetime.com and www.smartertravel.com, and Tripadvisor
China, which primarily includes click-based advertising and display-based advertising revenue. The performance
obligations, timing of customer payments for these brands, and methods of revenue recognition are generally
consistent with click-based advertising and display-based advertising revenue, as described above.
Practical Expedients and Exemptions
We expense costs to obtain a contract as incurred, such as sales incentives, when the amortization period
would have been one year or less.
We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected
length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right
to invoice for services performed.
Disaggregation of Revenue
We disaggregate revenue from contracts with customers into major products/revenue sources. We have
determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the
nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. As noted in
“Note 18: Segment and Geographic Information”, our business consists of two reportable segments – (1) Hotels,
Media & Platform; and (2) Experiences & Dining. A reconciliation of disaggregated revenue to segment revenue is
also included below.
90
Major products/revenue sources (1):
Hotels, Media & Platform
Tripadvisor-branded hotels
Tripadvisor-branded display and platform
Total Hotels, Media & Platform
Experiences & Dining
Other (2)
Total Revenue
Year ended December 31,
2018
2019
(in millions)
$
$
779 $
160
939
456
165
1,560 $
848
153
1,001
372
242
1,615
(1) Our revenue is recognized primarily at a point in time for all reported segments.
(2) Other consists of the combination of our Rentals, Flights/Cruises/Car, SmarterTravel and Tripadvisor China
business units and does not constitute a reportable segment
Contract Balances
The following table provides information about the opening and closing balances of accounts receivables and
contract assets from contracts with customers (in millions):
Accounts receivable
Contract assets
Total
December 31, 2019 December 31, 2018
205
$
7
212
176 $
7
183 $
$
Accounts receivable are recognized when the right to consideration becomes unconditional. Contract assets
are rights to consideration in exchange for services that we have transferred to a customer when that right is
conditional on something other than the passage of time, such as commission payments that are contingent upon the
completion of the service by the principal in the transaction. Contract liabilities generally include payments received
in advance of performance under the contract, and are realized as revenue as the performance obligation to the
customer is satisfied, which we present as deferred revenue on our consolidated balance sheets. As of January 1,
2019 and 2018, we had $63 million and $59 million, respectively, recorded as deferred revenue on our consolidated
balance sheet, of which $61 million and $57 million, respectively, was recognized in revenue and $2 million was
refunded due to cancellations by travelers during both years ended December 31, 2019 and 2018. The difference
between the opening and closing balances of our deferred revenue primarily results from the timing differences
between when we receive customer payments and the time in which we satisfy our performance obligations. The
difference between the opening and closing balances of our contract assets primarily results from the timing
difference between when we satisfy our performance obligations and the time when the principal completes the
service in the transaction. There were no significant changes in contract assets or deferred revenue during the years
ended December 31, 2019 and 2018 related to business combinations, impairments, cumulative catch-ups or other
material adjustments.
NOTE 5: EARNINGS PER SHARE
Basic Earnings Per Share Attributable to Common Stockholders
We compute basic earnings per share, or Basic EPS, by dividing net income by the weighted average number
of common shares outstanding during the period. We compute the weighted average number of common shares
outstanding during the reporting period using the total of common stock and Class B common stock outstanding as
of the last day of the previous year end reporting period plus the weighted average of any additional shares issued
and outstanding less the weighted average of any common shares repurchased during the reporting period.
91
Diluted Earnings Per Share Attributable to Common Stockholders
Diluted earnings per share, or Diluted EPS, includes the potential dilution of common equivalent shares
outstanding that could occur from stock-based awards and other stock-based commitments using the treasury stock
method. We compute Diluted EPS by dividing net income (loss) by the sum of the weighted average number of
common and common equivalent shares outstanding during the period. We computed the weighted average number
of common and common equivalent shares outstanding during the period using the sum of (i) the number of shares
of common stock and Class B common stock used in the Basic EPS calculation as indicated above, and (ii) if
dilutive, the incremental weighted average common stock that we would issue upon the assumed exercise of
outstanding common equivalent shares, primarily related to stock options and the vesting of restricted stock units
using the treasury stock method, and (iii) if dilutive, performance-based and market-based awards based on the
number of shares that would be issuable as of the end of the reporting period assuming the end of the reporting
period was also the end of the contingency period.
Under the treasury stock method, the assumed proceeds calculation includes the actual proceeds to be received
from the employee upon exercise of outstanding equity awards and the average unrecognized compensation cost
during the period. The treasury stock method assumes that a company uses the proceeds from the exercise of an
equity award to repurchase common stock at the average market price for the reporting period.
In periods of a net loss, common equivalent shares are excluded from the calculation of Diluted EPS as their
inclusion would have an antidilutive effect. Accordingly, for periods in which we report a net loss, Diluted EPS is
the same as Basic EPS, since dilutive common equivalent shares are not assumed to have been issued if their effect
is anti-dilutive.
Below is a reconciliation of the weighted average number of shares of common stock outstanding in
calculating Diluted EPS (shares in thousands and dollars in millions, except per share amounts) for the periods
presented:
Numerator:
Net income (loss)
Denominator:
Weighted average shares used to compute
Basic EPS
Weighted average effect of dilutive
securities:
Stock options
RSUs/MSUs
Weighted average shares used to compute
Diluted EPS
Basic EPS
Diluted EPS
2019
Year ended December 31,
2018
2017
$
126 $
113 $
(19)
138,975
138,116
140,445
155
1,528
351
1,908
—
—
140,658
0.91 $
0.89 $
140,375
0.82 $
0.81 $
140,445
(0.14)
(0.14)
$
$
Potential common shares, consisting of outstanding stock options, service and performance-based restricted
stock units (“RSUs”) and market-based restricted stock units (“MSUs”), totaling approximately 6.7 million, 6.2
million, and 12.5 million, for the years ended December 31, 2019, 2018 and 2017, respectively, have been excluded
from the calculations of Diluted EPS because their effect would have been antidilutive. In addition, potential
common shares of certain performance-based awards of approximately 0.7 million, 0.5 million, and 0.6 million, for
the years ended December 31, 2019, 2018 and 2017, respectively, for which all targets required to trigger vesting
had not been achieved, were excluded from the calculation of weighted average shares used to compute Diluted EPS
for those reporting periods.
The earnings per share amounts are the same for common stock and Class B common stock because the
holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.
In addition, our non-vested RSUs are entitled to dividend equivalents, which will be payable to the holder subject to,
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and upon vesting of, the underlying awards and are therefore forfeitable. Given such dividend equivalents are
forfeitable, we do not consider them to be participating securities and, consequently, they are not subject to the
two-class method of determining earnings per share.
NOTE 6: STOCK BASED AWARDS AND OTHER EQUITY INSTRUMENTS
Stock-based Compensation Expense
The following table presents the amount of stock-based compensation expense related to stock-based awards,
primarily stock options and RSUs, on our consolidated statements of operations during the periods presented:
Cost of revenue
Selling and marketing
Technology and content
General and administrative
Total stock-based compensation expense
Income tax benefit from stock-based compensation
expense
Total stock-based compensation expense, net of
tax effect
2019
Year ended December 31,
2018
(in millions)
2017
$
1 $
23
55
45
124
1 $
21
51
45
118
(28)
(27)
$
96
$
91 $
—
21
40
35
96
(28)
68
We capitalized $19 million, $13 million and $13 million of stock-based compensation expense as internal-use
software and website development costs during the years ended December 31, 2019, 2018 and 2017, respectively.
Stock and Incentive Plans
On December 20, 2011, our 2011 Stock and Annual Incentive Plan (the “2011 Plan”) became effective and we
filed a to Registration Statement registering a total of 17,500,000 shares of our common stock, of which 17,400,000
shares were issuable in connection with grants of equity-based awards under our 2011 Plan and 100,000 shares were
issuable under our Deferred Compensation Plan for Non-Employee Directors (refer to “Note 15: Employee Benefit
Plans” for information on our Deferred Compensation Plan for Non-Employee Directors). At our annual meeting of
stockholders held on June 28, 2013, our stockholders approved an amendment to our 2011 Plan to, among other
things, increase the aggregate number of shares of common stock authorized for issuance thereunder by 15,000,000
shares.
On June 21, 2018, our stockholders approved the 2018 Stock and Annual Incentive Plan (the “2018 Plan”) and
we filed a Registration Statement registering 6,000,000 shares plus the number of shares available for issuance (and
not subject to outstanding awards) under the 2011 Plan. As of the effective date of the 2018 Plan, no additional
awards will be granted under the 2011 Plan. The 2018 Plan provides for the grant of stock options, stock
appreciation rights, restricted stock, restricted stock units, and other stock-based awards to our directors, officers,
employees and consultants. The summary of the material terms of the 2018 Plan is qualified in its entirety by the full
text of the 2018 Plan previously filed.
As of December 31, 2019, the total number of shares reserved for future stock-based awards under the 2018
Plan is approximately 10.1 million shares. All shares of common stock issued in respect of the exercise of options,
RSUs, or other equity awards have been issued from authorized, but unissued common stock.
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Stock Based Award Activity and Valuation
Stock Option Activity
A summary of our stock option activity, consisting primarily of service-based non-qualified stock options, is
presented below:
Weighted Weighted
Options outstanding as of December 31, 2016
Granted (1)
Exercised (2)
Cancelled or expired
Options outstanding as of December 31, 2017
Granted
Exercised (2)
Cancelled or expired
Options outstanding as of December 31, 2018
Granted
Exercised (2)
Cancelled or expired
Options outstanding as of December 31, 2019
Exercisable as of December 31, 2019
Vested and expected to vest after December 31, 2019 (3)
Options
Outstanding
(in thousands)
5,818 $
2,333
(496)
(802)
6,853
762
(1,162)
(412)
6,041
752
(195)
(581)
6,017 $
3,425 $
6,017 $
Average
Exercise
Price Per
Share
Average
Remaining Aggregate
Intrinsic
Contractual
Value
Life
(in millions)
(in years)
57.60
40.03
29.37
65.13
52.78
43.53
37.26
61.46
54.00
48.30
42.17
56.97
50.27
57.27
50.27
5.9 $
4.2 $
5.9 $
—
—
—
(1)
(2)
Inclusive of 780,000 stock options awarded to our Chief Executive Officer and President, or CEO, during
November 2017. The estimated grant-date fair value per option, using a Black-Scholes option pricing model
was $17.33. These stock options shall vest in equal installments on each of August 1, 2021 and August 1,
2022, subject to the CEO’s continuous employment with, or performance of services for, the Company. The
estimated grant-date fair value of this award will be amortized on a straight-line basis over the requisite
service period through August 1, 2022.
Inclusive of 120,112, 814,635, and 294,410 stock options as of December 31, 2019, 2018 and 2017,
respectively, which were not converted into shares due to net share settlement in order to cover the aggregate
exercise price and the required amount of employee withholding taxes. Potential shares which had been
convertible under stock options that were withheld under net share settlement remain in the authorized but
unissued pool under the 2018 Plan and can be reissued by the Company. Total payments for the employees’
tax obligations to the taxing authorities due to net share settlements are reflected as a financing activity within
the consolidated statements of cash flows.
(3) The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed
under GAAP and therefore do not include a forfeiture rate in our vested and expected to vest calculation
unless necessary for a performance condition award.
Aggregate intrinsic value represents the difference between the closing stock price of our common stock and
the exercise price of outstanding, in-the-money options. Our closing stock price as reported on NASDAQ as of
December 31, 2019 was $30.38. The total intrinsic value of stock options exercised for the years ended
December 31, 2019, 2018 and 2017 were $2 million, $20 million, and $8 million, respectively.
94
The fair value of stock option grants has been estimated at the date of grant using the Black–Scholes option
pricing model with the following weighted average assumptions for the periods presented:
Risk free interest rate
Expected term (in years)
Expected volatility
Expected dividend yield
Weighted-average grant date fair value
2019
December 31,
2018
1.79%
5.19
42.09%
2.70%
5.45
41.86%
2017
2.02%
6.13
42.14%
— %
$ 21.25
— %
$ 18.11
— %
$ 16.50
The total fair value of stock options vested for the years ended December 31, 2019, 2018 and 2017 were $15
million, $38 million, and $40 million, respectively. Cash received from stock option exercises for the years ended
December 31, 2019, 2018 and 2017 were $2 million, $6 million, and $3 million, respectively.
On June 5, 2017, the Section 16 Committee of our Board of Directors approved an amendment to the
nonqualified stock option award (the “Option”) granted on August 28, 2013 to Stephen Kaufer, the Company’s
CEO. The amendment provided that the Option will expire on the tenth anniversary, instead of the seventh
anniversary, of the grant date. Vesting conditions under the Option were not affected by this amendment. As a result
of the modification, incremental fair value of $5 million was recognized to stock-based compensation expense on a
straight-line basis over the remaining vesting term, or through August 2018, in general and administrative expense
on the consolidated statement of operations.
RSU Activity
A summary of our RSU activity is presented below:
Unvested RSUs outstanding as of December 31, 2016
Granted (1)(2)
Vested and released (3)
Cancelled
Unvested RSUs outstanding as of December 31, 2017
Granted
Vested and released (3)
Cancelled
Unvested RSUs outstanding as of December 31, 2018
Granted (4)
Vested and released (3)
Cancelled
Unvested RSUs outstanding as of December 31, 2019 (5)
Weighted
Average
Grant-
Date Fair
RSUs
Outstanding Value Per Share
(in thousands)
Aggregate
Intrinsic
Value
(in millions)
2,856 $
4,829
(1,030)
(853)
5,802
3,302
(1,617)
(847)
6,640
4,688
(2,002)
(857)
8,469 $
69.35
41.58
67.25
52.64
48.81
43.04
54.22
46.43
44.93
47.35
48.11
47.19
45.42 $
258
(1)
Inclusive of 426,000 service-based RSUs awarded to our CEO during November 2017. The service-based
RSU award provides for vesting in two equal annual installments on each of August 1, 2021 and August 1,
2022, subject to the CEO’s continuous employment with, or performance of services for, the Company. The
estimated grant-date fair value per RSU, based on the quoted price of our common stock on the date of grant,
was $34.71. The estimated grant-date fair value of this award will be amortized on a straight-line basis over
the requisite service period through August 1, 2022.
(2) Excludes from the 2017 RSU grants, a performance-based RSU grant for 213,000 shares awarded to our CEO
during November 2017. This award provides for vesting based on the extent to which the Company achieves
95
certain financial and/or the CEO achieves certain strategic performance metrics relative to the targets to be
established by the Company’s Compensation Committee. One quarter of these RSUs may vest and settle
annually based on actual performance relative to the targets established annually for each of the four fiscal
years ending December 31, 2018, December 31, 2019, December 31, 2020, and December 31, 2021, of which
60,582 RSUs vested and settled during the year ending December 31, 2019 related to the achievement of 2018
annual performance targets. The estimated grant-date fair value per RSU will be calculated upon the
establishment of annual performance targets and each tranche will be amortized on a straight-line basis over
its requisite service period. At any point in time during the vesting period, the award’s expense to date will at
least equal the portion of the grant-date fair value that is expected to vest at that date. Based upon actual
attainment relative to the target performance metrics, the CEO has the ability to receive up to 125% of the
target number originally granted, or to be issued none at all.
Inclusive of 532,164, 424,848, and 301,932 RSUs as of December 31, 2019, 2018 and 2017, respectively,
withheld due to net share settlement to satisfy required employee tax withholding requirements. Potential
shares which had been convertible under RSUs that were withheld under net share settlement remain in the
authorized but unissued pool under the 2018 Plan and can be reissued by the Company. Total payments for the
employees’ tax obligations to the taxing authorities due to net share settlements are reflected as a financing
activity within the consolidated statements of cash flows.
Inclusive of 843,426 dividend equivalents issued to employees holding non-vested RSU grant awards in
conjunction with our special cash dividend declared on November 1, 2019, which will be payable to the
holder subject to, and upon vesting of, the underlying awards.
(3)
(4)
(5) The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed
under GAAP and therefore do not include a forfeiture rate in our vested and expected to vest calculation
unless necessary for a performance condition award.
A summary of our RSU activity for MSUs is presented below:
Unvested MSUs outstanding as of December 31, 2017 (1)
Granted (2)
Vested and released
Cancelled
Unvested MSUs outstanding as of December 31, 2018
Granted (3)(4)
Vested and released
Cancelled
Unvested MSUs outstanding as of December 31, 2019
(in thousands)
213 $
71
—
—
284
121
—
(16)
389 $
Weighted
Average
Grant-
Date Fair
MSUs
Outstanding Value Per Share
Aggregate
Intrinsic
Value
(in millions)
30.04
59.40
37.41
51.76
—
58.63
40.99 $
12
(1) Represents 213,000 market-based RSU or MSUs awarded to the Company’s CEO in November 2017. The
MSU award provides for vesting based upon the Company’s total shareholder return, or TSR, performance
over the period commencing January 1, 2018 through December 31, 2020 relative to the TSR performance of
the Nasdaq Composite Total Return Index. Based upon actual attainment relative to the target performance
metric, the CEO has the ability to receive up to 125% of the target number of MSUs originally granted, or to
be issued none at all.
(2) MSUs provide for vesting based upon the Company’s total shareholder return, or TSR, performance over the
period commencing January 1, 2018 through December 31, 2020 relative to the TSR performance of the
Nasdaq Composite Total Return Index. Based upon actual attainment relative to the target performance metric,
the grantee has the ability to receive up to 200% of the target number of MSUs originally granted, or to be
issued none at all. These MSUs were granted under the 2011 Plan.
Inclusive of 78,050 MSUs which provide for vesting based upon the Company’s total shareholder return, or
TSR, performance over the period commencing January 1, 2019 through December 31, 2021 relative to the
TSR performance of the Nasdaq Composite Total Return Index. Based upon actual attainment relative to the
(3)
96
(4)
target performance metric, the grantee has the ability to receive up to 200% of the target number of MSUs
originally granted, or to be issued none at all. These MSUs were granted under the 2018 Plan.
Inclusive of 42,477 dividend equivalents issued to employees holding non-vested MSU grant awards in
conjunction with our special cash dividend declared on November 1, 2019, which will be payable to the holder
subject to, and upon vesting of, the underlying awards.
A Monte-Carlo simulation model, which simulated the present value of the potential outcomes of future stock
prices and TSR of the Company and the Nasdaq Composite Total Return Index over the performance period, was
used to calculate the grant-date fair value of our MSU awards. The estimated grant-date fair value of these awards is
being amortized on a straight-line basis over the requisite service period.
Unrecognized Stock-Based Compensation
A summary of our remaining unrecognized compensation expense and the weighted average remaining
amortization period at December 31, 2019 related to our non-vested equity awards is presented below (in millions,
except in years information):
Stock
Unrecognized compensation expense
Weighted average period remaining (in years)
Options
$
RSUs/MSUs
248
2.5
32 $
2.6
NOTE 7: FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable Securities
The following table shows our marketable securities, by consolidated balance sheet classification and major
security type, that are measured at fair value on a recurring basis and were categorized using the fair value hierarchy,
as well as their classification on our consolidated balance sheet, as of the periods presented (in millions):
Level 1:
Money market funds
Level 2:
Commercial paper
Total
December 31, 2018
Total
Amortized
Cost
Total Fair
Value (1)
Cash and Cash
Equivalents
Short-Term
Marketable
Securities
$
$
128 $
128 $
128
20
148 $
20
148 $
5
133 $
—
15
15
(1) As of December 31, 2018, any unrealized gains or losses related to our marketable securities were not material.
We had no outstanding marketable securities as of December 31, 2019.
Our cash equivalents consist of money market funds and other marketable securities, with maturities of 90
days or less at the date of purchase. Our short-term marketable securities include maturities that were greater than 90
days at the date purchased and had 12 months or less remaining at December 31, 2018.
We classify our marketable securities within Level 1 and Level 2 as we value these financial instruments using
quoted market prices (Level 1) or alternative pricing sources (Level 2). The valuation technique we used to measure
the fair value of money market funds was derived from quoted prices in active markets for identical assets or
liabilities. Fair values for Level 2 marketable securities are considered “Level 2” valuations because they are
obtained from independent pricing sources for identical or comparable instruments, rather than direct observations
of quoted prices in active markets. Our procedures include controls to ensure that appropriate fair values are
97
recorded, including comparing the fair values obtained from our independent pricing services against fair values
obtained from another independent source.
There were no material realized gains or losses related to sales of our marketable securities for the years ended
December 31, 2019, 2018 and 2017.
Non-Marketable Investments
Equity Securities Accounted for under the Equity Method
In November 2019, the Company and Ctrip Investment Holding Ltd, a majority-owned subsidiary of Trip.com
Group Limited, entered into an agreement to combine certain assets in China through the creation of a new entity,
Chelsea Investment Holding Company PTE, Ltd. Tripadvisor contributed a portion of its business in China, to
Chelsea Investment Holding Company PTE, Ltd, including a long-term exclusive brand and content license and
other assets, in return for a 40% equity ownership interest in Chelsea Investment Holding Company PTE, Ltd. This
investment resulted in the Company recording an initial equity method investment of $41 million, included in non-
marketable investments on our consolidated balance sheet as of December 31, 2019, and a $39 million deferred
income liability attributable to the brand and content license, included in accrued expenses and other current
liabilities and other long-term liabilities on our consolidated balance sheet of $3 million and $36 million,
respectively as of December 31, 2019. The Company expects to earn the deferred income ratably over a 15-year
period, congruent with the initial term of the brand and content license, presented in other income (expense), net on
the consolidated statement of operations. The investment is being accounted for as an equity method investment as
the Company determined it has the ability to exercise significant influence over the investee.
Investments in Privately-Held Companies
We hold investments in equity securities of privately-held companies, which are typically at an early stage of
development and do not have a readily determinable fair value. As of December 31, 2019 and 2018, the total
carrying value of these investments was $14 million and $12 million, respectively, and included in non-marketable
investments on our consolidated balance sheet. Our policy is to measure these investments at cost less impairment, if
any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a
similar investment of the same issuer such observable price changes may include instances where the investee issues
equity securities to new investors, thus creating a new indicator of fair value, as an example. On a quarterly basis,
we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are
impaired and also monitor for any observable price changes. The Company determined that no changes were
required to the carrying value of these equity investments at December 31, 2019 and 2018 and recognized a loss of
$2 million related to an equity investment during the year ended December 31, 2017 in other income (expense), net
on our consolidated statements of operations.
Derivative Financial Instruments
We generally use forward contracts to reduce the effects of foreign currency exchange rate fluctuations on our
cash flows primarily for the Euro versus the U.S. Dollar. For the periods ended December 31, 2019, 2018 and 2017,
respectively, our forward contracts have not been designated as hedges and generally had maturities of less than 90
days. Our outstanding or unsettled forward contracts are carried at fair value on our consolidated balance sheets at
December 31, 2019 and 2018. We measure the fair value of our outstanding or unsettled derivatives using Level 2
fair value inputs, as we use a pricing model that takes into account the contract terms as well as current foreign
currency exchange rates in active markets. We recognize any gain or loss resulting from the change in fair value of
our foreign currency forward contracts in other income (expense), net on our consolidated statement of operations.
We recorded a net gain of $1 million for the year ended December 31, 2019, a net loss of $3 million for the year
ended December 31, 2018, and was not material for the year ended December 31, 2017, respectively, related to our
forward contracts.
98
The following table shows the notional principal amounts of our outstanding derivative instruments for the
periods presented:
Foreign currency exchange-forward contracts (1)(2)
$
(in millions)
10 $
13
December 31,
2019
December 31,
2018
(1) Derivative contracts address foreign currency exchange fluctuations for the Euro versus the U.S. dollar. The
Company had one and two outstanding derivative contracts as of December 31, 2019 and 2018, respectively.
These outstanding derivatives are not designated as hedging instruments.
The fair value of our outstanding derivatives as of December 31, 2019 and 2018, respectively, was not
material and was reported as a liability in accrued expenses and other current liabilities on our consolidated
balance sheets.
(2)
Other Financial Instruments
Other financial instruments not measured at fair value on a recurring basis include accounts receivable and
contract assets, accounts payable, deferred merchant payables, short-term debt, accrued expenses and other current
liabilities. The carrying amount of these financial instruments approximate their fair value because of the short
maturity of these instruments as reported on our consolidated balance sheets as of December 31, 2019 and
December 31, 2018, respectively.
The Company did not have any material assets or liabilities measured at fair value on a recurring basis using
Level 3 unobservable inputs at both December 31, 2019 and December 31, 2018.
NOTE 8: PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following for the periods presented:
December 31, 2019
December 31, 2018
Capitalized software and website development
Building (1)
Finance lease right-of-use asset (1)
Leasehold improvements
Computer equipment and purchased software
Furniture, office equipment and other
Less: accumulated depreciation
Total
$
$
$
(in millions)
335
—
114
49
70
21
589
(319)
270
$
259
123
—
41
52
18
493
(240)
253
(1) Refer to “Note 2: Significant Accounting Policies,” regarding the transition accounting related to our adoption
of ASC 842 and the subsequent accounting for our Headquarter Lease.
As of December 31, 2019 and December 31, 2018, the carrying value of our capitalized software and website
development costs, net of accumulated amortization, was $115 million and $99 million, respectively. For the years
ended December 31, 2019, 2018 and 2017, we capitalized $79 million, $63 million and $65 million, respectively,
related to software and website development costs. For the years ended December 31, 2019, 2018 and 2017, we
recorded amortization of capitalized software and website development costs of $63 million, $59 million and $54
million, respectively, which is included in depreciation expense on our consolidated statements of operations for
those years.
99
NOTE 9: GOODWILL AND INTANGIBLE ASSETS, NET
The following table summarizes our goodwill activity by reportable segment for the periods presented:
Balance as of December 31, 2017
Acquisitions (1)
Other adjustments (2)
Balance as of December 31, 2018
Allocation to new segments (3)
Acquisitions (1)
Other adjustments (2)
Balance as of December 31, 2019
Hotel
Non-Hotel
Hotels,
Media &
Platform
Experiences
& Dining Other (4) Total
(in millions)
451 $
—
—
451 $
(451)
—
—
— $
307
11
(13)
305
(305)
—
—
—
$
$
$
$
$
$
— $
—
—
— $
405
— $
—
405 $
(in millions)
— $
—
—
— $
250
85 $
(2)
333 $
— $
—
—
— $
101
—
1
102 $
758
11
(13)
756
—
85
(1)
840
(1)
The additions to goodwill relate to our business acquisitions. Refer to “Note 3: Acquisitions and Other
Investments,” for further information.
Primarily related to impact of changes in foreign currency exchange rates to goodwill.
(2)
(3) Refer to “Note 1: Organization and Business Description” for information on our reporting segment
changes in the first quarter of 2019.
(4) Other consists of the combination of our Rentals, Flights/Cruises/Car, SmarterTravel, and Tripadvisor
China business units and does not constitute a reportable segment.
Intangible assets, which were acquired in business combinations and recorded at fair value on the date of
purchase, consist of the following for the periods presented:
Intangible assets with definite lives
Less: accumulated amortization
Intangible assets with definite lives, net
Intangible assets with indefinite lives
Total
December 31,
2019
2018
(in millions)
253 $
(173)
80
30
110 $
228
(140)
88
30
118
$
$
Amortization expense for definite-lived intangible assets was $33 million, $34 million, and $32 million, for
the years ended December 31, 2019, 2018 and 2017, respectively. Our indefinite-lived intangible assets relate to
trade names and trademarks.
There were no impairment charges recognized to our consolidated statement of operations during the years
ended December 31, 2019, 2018 and 2017 related to our goodwill or intangible assets.
100
The following table presents the components of our intangible assets with definite lives for the periods
presented:
December 31, 2019
December 31, 2018
Weighted
Average
Gross
Net
Remaining Life Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount Amount Amortization Amount
(in years)
Gross
Net
Trade names and trademarks
Customer lists and supplier relationships
Subscriber relationships
Technology and other
Total
(in millions)
(in millions)
4.5 $
4.4
3.3
5.1
4.4 $
59 $
98
40
56
253 $
(35) $
(65)
(29)
(44)
(173) $
24 $
33
11
12
80 $
57 $
88
34
49
228 $
(28) $
(53)
(25)
(34)
(140) $
29
35
9
15
88
Refer to “Note 3: Acquisitions and Other Investments” above for a discussion of definite lived intangible
assets acquired in business combinations during the years ended December 31, 2019 and 2018.
Our definite-lived intangible assets are being amortized on a straight-line basis. The straight-line method of
amortization is currently our best estimate, or approximates to date, the distribution of the economic use of these
intangible assets.
The estimated amortization expense for intangible assets with definite lives for each of the next five years, and
the expense thereafter, assuming no subsequent impairment of the underlying assets or change in estimate of
remaining lives, is expected to be as follows (in millions):
2020
2021
2022
2023
2024
2025 and thereafter
Total
$
$
26
19
13
9
6
7
80
NOTE 10: DEBT
2015 Credit Facility
In June 2015, we entered into a five-year credit agreement with a group of lenders which, among other things,
provided for a $1 billion unsecured revolving credit facility (the “2015 Credit Facility”) and immediately borrowed
$290 million. In May 2017, the 2015 Credit Facility was amended to, among other things, (i) increase the aggregate
amount of revolving loan commitments available from $1.0 billion to $1.2 billion; and (ii) extend the maturity date
of the 2015 Credit Facility from June 26, 2020 to May 12, 2022 (the “First Amendment”). Borrowings under the
2015 Credit Facility generally bear interest, at the Company’s option, at a rate per annum equal to either (i) the
Eurocurrency Borrowing rate, or the adjusted LIBO rate for the interest period in effect for such borrowing; plus an
applicable margin ranging from 1.25% to 2.00% (“Eurocurrency Spread”), based on the Company’s leverage ratio;
or (ii) the Alternate Base Rate (“ABR”) Borrowing, which is the greatest of (a) the Prime Rate in effect on such day,
(b) the New York Fed Bank Rate in effect on such day plus 1/2 of 1.00% per annum and (c) the Adjusted LIBO Rate
(or LIBO rate multiplied by the Statutory Reserve Rate) for an interest period of one month plus 1.00%; in addition
to an applicable margin ranging from 0.25% to 1.00% (“ABR Spread”), based on the Company’s leverage ratio. The
Company may borrow from the 2015 Credit Facility in U.S dollars, Euros and British pound.
During the year ended December 31, 2018, we repaid all of our outstanding borrowings, or approximately
$230 million, under the 2015 Credit Facility. This repayment was primarily made from a one-time cash repatriation
of $325 million of foreign earnings to the United States during the year ended December 31, 2018. During the year
101
ended December 31, 2017, we borrowed $435 million and repaid $296 million of our outstanding borrowings under
the 2015 Credit Facility. These net borrowings during the year were primarily used to repurchase shares of our
outstanding common stock under a share repurchase program, which is described in “Note 16: Stockholders Equity”.
As of December 31, 2019 and 2018, we had no outstanding borrowings and approximately $1.2 billion of
borrowing capacity available under our 2015 Credit Facility. We are required to pay a quarterly commitment fee, at
an applicable rate ranging from 0.15% to 0.30%, on the daily unused portion of the revolving credit facility for each
fiscal quarter and additional fees in connection with the issuance of letters of credit. As of December 31, 2019 and
2018, our unused revolver capacity was subject to a commitment fee of 0.15%, given the Company’s leverage ratio.
The 2015 Credit Facility includes $15 million of borrowing capacity available for letters of credit and $40 million
for Swingline borrowings on same-day notice. As of December 31, 2019 and 2018, we had issued $3 million of
outstanding letters of credit under the 2015 Credit Facility. We recorded total interest expense and commitment fees
on our 2015 Credit Facility of $2 million, $3 million and $6 million for the years ended December 31, 2019, 2018
and 2017, respectively, to interest expense on our consolidated statements of operations. All unpaid interest and
commitment fee amounts as of December 31, 2019 and December 31, 2018, respectively, were not material. We
also incurred lender fees and debt financing costs in connection with entering into the 2015 Credit Facility and in
connection with the First Amendment totaling $5 million, which were capitalized as deferred financing costs and
recorded to other long-term assets on the consolidated balance sheet. As of December 31, 2019, the Company has $2
million remaining in deferred financing costs in connection with the 2015 Credit Facility. These costs are being
amortized over the remaining term on a straight line basis and recorded to interest expense on our consolidated
statements of operations.
There is no specific repayment date prior to the maturity date for any borrowings under this credit agreement.
We may voluntarily repay any outstanding borrowing under the 2015 Credit Facility at any time without premium or
penalty, other than customary breakage costs with respect to Eurocurrency loans. Additionally, the Company
believes that the likelihood of the lender exercising any subjective acceleration rights, which would permit the
lenders to accelerate repayment of any outstanding borrowings, is remote. As such, we classify any borrowings
under this facility as long-term debt. The 2015 Credit Facility contains a number of covenants that, among other
things, restrict our ability to: incur additional indebtedness, create liens, enter into sale and leaseback transactions,
engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions, make investments, loans
or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions
with affiliates, amend material agreements governing certain subordinated indebtedness, and change our fiscal year.
The 2015 Credit Facility also requires us to maintain a maximum leverage ratio and contains certain customary
affirmative covenants and events of default, including a change of control. If an event of default occurs, the lenders
under the 2015 Credit Facility will be entitled to take various actions, including the acceleration of all amounts due
under the 2015 Credit Facility. As of December 31, 2019 and 2018, we were in compliance with all of our debt
covenants.
2016 Credit Facility
We were party to an uncommitted facility agreement which provided for a $73 million unsecured revolving
credit facility (the “2016 Credit Facility”) with no specific expiration date. We initially borrowed $73 million from
this uncommitted credit facility during the year ended December 31, 2016, which was used for general working
capital needs of the Company primarily for partial repayment of our 2015 Credit Facility, and we subsequently
repaid the full amount during the year ended December 31, 2017. The Company terminated the 2016 Credit Facility
in June 2018. We had no outstanding borrowings under the 2016 Credit Facility at the time of termination.
Chinese Credit Facilities
We are party to a $30 million, one-year revolving credit facility with Bank of America (the “Chinese Credit
Facility—BOA”) that is currently subject to review on a periodic basis with no specific expiration period. This
credit facility generally bears interest at a rate based on the People’s Bank of China benchmark, including certain
adjustments, which may be made in accordance with market conditions at the time of borrowing. As of both
December 31, 2019 and 2018, there were no outstanding borrowings under this credit facility.
102
We were also party to a RMB 70,000,000 (approximately $10 million) one-year revolving credit facility with
J.P. Morgan Chase Bank (“Chinese Credit Facility-JPM”) through September 2019, when the Company did not
renew this credit facility. We had no outstanding borrowings under this credit facility at the time of termination or
at December 31, 2018.
NOTE 11: INCOME TAXES
The following table presents a summary of our domestic and foreign income before income taxes:
Domestic
Foreign
Total
2019
Year Ended December 31,
2018
(in millions)
2017
$
$
92 $
102
194 $
104 $
69
173 $
81
29
110
The following table presents a summary of the components of our provision for income taxes:
Current income tax expense:
Federal
State
Foreign
Current income tax expense
Deferred income tax expense (benefit):
Federal
State
Foreign
Deferred income tax expense (benefit):
Provision for income taxes
2019
Year Ended December 31,
2018
(in millions)
2017
$
$
31 $
5
26
62
25
7
(26)
6
68 $
37 $
12
17
66
(10)
(1)
5
(6)
60 $
93
1
6
100
25
2
2
29
129
The Company reduced its current income tax payable by $24 million, $15 million and $27 million for the
years ended December 31, 2019, 2018 and 2017, respectively, for tax deductions attributable to the exercise or
settlement of the Company’s stock-based awards.
103
The significant components of our deferred tax assets and deferred tax liabilities as of December 31, 2019 and
2018 are as follows:
Deferred tax assets:
Stock-based compensation
Net operating loss carryforwards
Provision for accrued expenses
Deferred rent
Lease financing obligation
Foreign advertising spend
Deferred expense related to cost-sharing arrangement
Interest carryforward
Other
Total deferred tax assets
Less: valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Intangible assets
Property and equipment
Prepaid expenses
Building - corporate headquarters
Deferred income related to cost-sharing arrangement
Other
Total deferred tax liabilities
Net deferred tax asset (liability)
December 31,
2019
2018
(in millions)
47 $
49
6
—
24
15
-
20
14
175 $
(72)
103 $
(51) $
(27)
(2)
(22)
—
(2)
(104) $
(1) $
44
38
6
3
22
15
31
14
10
183
(57)
126
(57)
(22)
(2)
(23)
(16)
—
(120)
6
$
$
$
$
$
$
At December 31, 2019, we had federal, state and foreign net operating loss carryforwards (“NOLs”) of
approximately $4 million, $32 million and $201 million, respectively. If not utilized, the federal and state NOLs will
expire at various times between 2020 and 2037 and the foreign NOLs will expire at various times between 2020 and
2028.
As of December 31, 2019, we had a valuation allowance of approximately of $72 million related to certain
NOL carryforwards and other foreign deferred tax assets for which it is more likely than not, the tax benefit will not
be realized. This amount represented an increase of $15 million, as compared to balance as of December 31, 2018.
The increase is primarily related to additional foreign net operating losses. Except for certain foreign deferred tax
assets, we expect to realize all of our deferred tax assets based on a strong history of earnings in the U.S. and other
jurisdictions, as well as future reversals of taxable temporary differences.
104
A reconciliation of the provision for income taxes to the amounts computed by applying the statutory federal
income tax rate to income before income taxes is as follows:
Income tax expense at the federal statutory rate
Foreign rate differential
State income taxes, net of effect of federal tax benefit
Unrecognized tax benefits and related interest
Change in cost-sharing treatment of stock-based compensation
FDII, GILTI and other provisions
Impacts related to the 2017 Tax Act
Research tax credit
Stock-based compensation
Change in valuation allowance
Local income tax on intercompany transaction (1)
Executive compensation
Other, net
Provision for income taxes
2019
Year Ended December 31,
2018
(in millions)
2017
$
$
40 $
(16)
9
11
15
(3)
—
(11)
4
6
7
3
3
68 $
36 $
(17)
9
15
(3)
(5)
—
(9)
8
9
10
2
5
60 $
38
(25)
5
12
(5)
—
73
(8)
13
25
—
1
—
129
(1)
During 2018, we completed an intra-entity transfer from Australia to the U.S. of certain intangible property (“IP”)
rights associated with a subsidiary’s technology platform. This transfer resulted in an income tax expense for
Australian tax purposes of approximately $10 million. As a result of the IP transfer, we utilized NOLs and
consequently released the valuation allowance on our Australian entity. During 2019, we completed an intra-entity
transfer from China to Singapore of certain IP. As a result of the transfer, we utilized NOLs and consequently
released the valuation allowance on certain deferred tax assets on our China entity.
During 2011, the Singapore Economic Development Board accepted our application to receive a tax incentive
under the International Headquarters Award. This incentive provides for a reduced tax rate on qualifying income of
5% as compared to Singapore’s statutory tax rate of 17% and is conditional upon our meeting certain employment
and investment thresholds. This agreement has been extended until June 30, 2021 as we have met certain
employment and investment thresholds. This benefit resulted in a decrease to our 2019 provision for income tax
expense of $2 million.
The 2017 Tax Act was signed into United States tax law on December 22, 2017. The 2017 Tax Act
significantly changed the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax
rate from 35% to 21% effective January 1, 2018. The 2017 Tax Act also provided for a mandatory one-time tax on
the deemed repatriation of accumulative foreign earnings of foreign subsidiaries (the “Transition Tax”), as well as
prospective changes beginning in 2018, including additional limitations on executive compensation. Under GAAP,
the effects of changes in income tax rates and laws are recognized in the period in which the new legislation is
enacted. We recorded an estimate of $67 million of Transition Tax, and $6 million due to a remeasurement of our
net deferred tax assets, during the year ended December 31, 2017, which reflected provisional amounts for those
specific income tax effects of the 2017 Tax Act. Subsequent adjustments in 2018 were not significant.
We are subject to additional requirements of the 2017 Tax Act during the year ended December 31, 2019.
Those provisions include a deduction for foreign derived intangible income (“FDII”), a tax on global intangible low-
taxed income (“GILTI”), a limitation of certain executive compensation, and other immaterial provisions. We have
elected to account for GILTI as a period cost, and therefore included GILTI expense in the effective income tax rate
calculation. Our 2019 effective income tax rate includes our estimates of these new provisions, with a net tax benefit
of $3 million recorded during the year ended December 31, 2019. Our estimates may be revised in future periods as
we obtain additional data, and as the IRS issues new guidance implementing the law changes.
As a result of the 2017 Tax Act, foreign earnings may now generally be repatriated back to the U.S. without
incurring U.S. federal income tax. Historically, we have asserted our intention to indefinitely reinvest the cumulative
undistributed earnings of our foreign subsidiaries. In response to increased cash requirements in the U.S. related to
105
the Company’s declaration of a special cash dividend and other strategic initiatives during the fourth quarter of
2019, we determined that we no longer consider $501 million of these foreign earnings to be indefinitely reinvested.
During the year ended December 31, 2019, we recorded a deferred tax liability of $1 million for the U.S. state
income tax and foreign withholding tax liabilities on the cumulative undistributed foreign earnings that are not
indefinitely reinvested. We intend to indefinitely reinvest $118 million of our foreign earnings in our non-US
subsidiaries. Determination of the amount of unrecognized deferred income tax liability related to these earnings is
not practicable.
For purposes of governing certain of the ongoing relationships between us and Expedia at and after the Spin-
Off, and to provide for an orderly transition, we and Expedia entered into various agreements at the time of the Spin-
Off, which Tripadvisor has satisfied its obligations. However, Tripadvisor continues to be subject to certain post
Spin-Off obligations under the Tax Sharing Agreement. Under the Tax Sharing Agreement between us and Expedia,
we are generally required to indemnify Expedia for any taxes resulting from the Spin-Off (and any related interest,
penalties, legal and professional fees, and all costs and damages associated with related stockholder litigation or
controversies) to the extent such amounts resulted from (i) any act or failure to act by us described in the covenants
in the tax sharing agreement, (ii) any acquisition of our equity securities or assets or those of a member of our group,
or (iii) any failure of the representations with respect to us or any member of our group to be true or any breach by
us or any member of our group of any covenant, in each case, which is contained in the separation documents or in
the documents relating to the IRS private letter ruling and/or the opinion of counsel. The full text of the Tax Sharing
Agreement is incorporated by reference in this Annual Report on Form 10-K as Exhibit 10.2.
By virtue of consolidated income tax returns previously filed with Expedia, we are currently under an IRS
audit for the 2009, 2010 and short-period 2011 tax years. We are separately under examination by the IRS for the
short-period 2011 and 2012-2016 tax years, under an employment tax audit by the IRS for the 2013-2016 tax years,
and have various ongoing audits for state income tax returns. These audits include questioning of the timing and the
amount of income and deductions and the allocation of income among various tax jurisdictions. These examinations
may lead to proposed or ordinary course adjustments to our taxes. We are no longer subject to tax examinations by
tax authorities for years prior to 2009. As of December 31, 2019, no material assessments have resulted, except as
noted below regarding our 2009, 2010, and 2011 IRS audit with Expedia and our 2012 and 2013 standalone IRS
audit.
In January 2017 and April 2019, as part of the IRS audit of Expedia, we received Notices of Proposed
Adjustment from the IRS for the 2009, 2010, and 2011 tax years. Subsequently, in September 2019, as part of
Tripadvisor’s standalone audit, we received Notices of Proposed Adjustment from the IRS for the 2012 and 2013 tax
years. These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries,
and would result in an increase to our worldwide income tax expense in an estimated range of $35 million to $40
million at the close of the audit if the IRS prevails, after consideration of competent authority relief and Transition
Tax, exclusive of interest and penalties. We disagree with the proposed adjustments and we intend to defend our
position through applicable administrative and, if necessary, judicial remedies. Our policy is to review and update
tax reserves as facts and circumstances change. Based on our interpretation of the regulations and available case law,
we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable. In
addition to the risk of additional tax for 2009 through 2013 transactions, if the IRS were to seek transfer pricing
adjustments of a similar nature for transactions in subsequent years, we would be subject to significant additional tax
liabilities.
In July 2015, the United States Tax Court (the “Court”) issued an opinion favorable to Altera with respect to
Altera’s litigation with the IRS. This opinion was submitted as a final decision under Tax Court Rule 155 during
December 2015. The litigation relates to the treatment of stock-based compensation expense in an inter-company
cost-sharing arrangement with Altera’s foreign subsidiary. In its opinion, the Court accepted Altera’s position of
excluding stock-based compensation from its inter-company cost-sharing arrangement. The IRS appealed the Court
decision on February 19, 2016. On June 7, 2019, a three-judge panel from the Ninth Circuit Court of Appeals
reversed the Court’s decision and upheld the validity of the Treasury regulation (Reg. sec. 1.482-7A(d)(2)) requiring
stock-based compensation costs to be included in the costs shared in a cost-sharing arrangement. Based on this
Ninth Circuit Court of Appeals decision, we recorded a cumulative income tax expense of $15 million during the
year ended December 31, 2019, which was a reversal of income tax benefits taken by the Company since the Court’s
2015 opinion. If the June 7, 2019 Ninth Circuit Court of Appeals decision is reversed, we would anticipate recording
106
an income tax benefit at that time. In November 2019, the Ninth Circuit denied Altera’s request for a rehearing en
banc. On February 10th, 2020, Altera filed a certiorari petition with the Supreme Court, asking it to hear an appeal
of the Ninth Circuit’s decision. If the Supreme Court does not hear the appeal, the Ninth Circuit’s decision will be
final. The Company will continue to monitor this matter and related potential impacts to its consolidated financial
statements.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (excluding interest
and penalties) is as follows:
Balance, beginning of year
Increases to tax positions related to the current year
Increases to tax positions related to the prior year
Reductions due to lapsed statute of limitations
Decreases to tax positions related to the prior year
Settlements during current year
Balance, end of year
2019
December 31,
2018
(in millions)
2017
$
$
136 $
11
1
—
(8)
—
140 $
123 $
11
2
—
—
—
136 $
105
17
1
—
—
—
123
As of December 31, 2019, we had $140 million of unrecognized tax benefits, net of interest, which is
classified as long-term and included in other long-term liabilities and deferred income taxes, net on our consolidated
balance sheet. The amount of unrecognized tax benefits, if recognized, would reduce income tax expense by $82
million, due to correlative adjustments in other tax jurisdictions. We recognize interest and penalties related to
unrecognized tax benefits in income tax expense on our consolidated statement of operations. As of December 31,
2019 and 2018, total gross interest accrued was $29 million and $20 million, respectively. We anticipate that the
liability for unrecognized tax benefits could decrease by up to $12 million within the next twelve months due to the
settlement of examinations of issues with tax authorities.
NOTE 12: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following for the periods presented:
December 31,
2019
December 31,
2018
Accrued employee salary, bonus, and related benefits $
Accrued marketing costs
Current income taxes payable (1)
Finance lease liability - current portion (2)
Operating lease liabilities - current portion (2)
Other
Total
$
(in millions)
74 $
27
14
5
20
63
203 $
67
31
7
—
—
46
151
(1) Refer to “Note 11: Income Taxes” for additional information.
(2) Refer to “Note 2: Significant Accounting Policies” for further information regarding our leases, including the
transition accounting and updated accounting policies upon adoption of ASC 842 in 2019.
107
NOTE 13: OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following for the periods presented:
Unrecognized tax benefits (1)
Long-term income taxes payable (2)
Financing obligation, net of current portion (3)
Finance lease liability, net of current portion (3)
Operating lease liabilities, net of current portion (3)
Deferred income liability (4)
Other
Total
December 31,
2019
December 31,
2018
$
$
(in millions)
167 $
31
—
78
64
36
4
380 $
148
31
83
—
—
—
20
282
(1) Refer to “Note 11: Income Taxes” for additional information on our unrecognized tax benefits. Amount includes
accrued interest related to this liability.
(2) Amount relates to the long-term portion of Transition Tax related to 2017 Tax Act. Refer to “Note 11: Income
Taxes,” for additional information.
(3) Refer to “Note 2: Significant Accounting Policies” for further information regarding our leases, including the
transition accounting and updated accounting policies upon adoption of ASC 842 in 2019.
(4) Amount relates to long-term portion of a deferred income liability recorded as a result of an equity method
investment in the fourth quarter of 2019. Refer to “Note 7: Financial Instruments and Fair Value Measurements”
for additional information.
NOTE 14: COMMITMENTS AND CONTINGENCIES
As of December 31, 2019, we have contractual obligations and commercial commitments that include
expected commitment fees on our 2015 Credit Facility and purchase obligations, as summarized in the table below.
The expected timing of the payment of the obligations discussed below is estimated based on information available
to us as of December 31, 2019. Timing of payments and actual amounts paid may be different depending on the time
of receipt of goods or services or changes to agreed-upon amounts for some obligations.
By Period
Total
Less than
1 year
1 to 3 years 3 to 5 years
(in millions)
More than
5 years
Purchase obligations and other (1)
Expected commitment fee payments on 2015
Credit Facility (2)
Total (3)(4)
$
10 $
4
14 $
$
3 $
2
5 $
4 $
2
6 $
3 $
—
3 $
—
—
—
(1)
(2)
(3)
(4)
Estimated purchase obligations that are fixed and determinable, primarily related to telecommunication contracts,
with various expiration dates through approximately December 2024. These contracts have non-cancelable terms or
are cancelable only upon payment of significant penalty.
Expected commitment fee payments are based on the daily unused portion of our 2015 Credit Facility, issued letters
of credit, and the effective commitment fee rate as of December 31, 2019; however, these variables could change
significantly in the future. Refer to “Note 10: Debt” for a discussion of the 2015 Credit Facility with additional
information on our available borrowing capacity and effective commitment fee as of December 31, 2019.
Excluded from the table was $3 million of undrawn standby letters of credit, primarily as security deposits for certain
property leases as of December 31, 2019.
Refer to “Note 2: Significant Accounting Policies” for expected future lease payments under existing non-cancelable
leases as of December 31, 2019, which are excluded from this table.
Legal Proceedings
In the ordinary course of business, we are parties to regulatory and legal matters, including threats thereof,
arising out of our operations. These matters may involve claims involving patent and intellectual property rights
108
(including alleged infringement of third-party intellectual property rights), tax matters (including value-added,
excise, transient occupancy and accommodation taxes), regulatory compliance (including competition and consumer
matters), defamation and other claims. Periodically, we review the status of all significant outstanding matters to
assess any potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has been
incurred; and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our
consolidated statements of operations. We provide disclosures in the notes to the consolidated financial statements
for loss contingencies that do not meet both of these conditions if there is a reasonable possibility that a loss may
have been incurred that would be material to the consolidated financial statements. We base accruals on the best
information available at the time which can be highly subjective. Although occasional adverse decisions or
settlements may occur, we do not believe that the final disposition of any of these matters will have a material
adverse effect on our business. However, the final outcome of these matters could vary significantly from our
estimates. Finally, there may be claims or actions pending or threatened against us of which we are currently not
aware and the ultimate disposition of which could have a material adverse effect on us. All legal fees incurred by the
Company related to any regulatory and legal matters are expensed in the period incurred.
Income and Non-Income Taxes
We are under audit by the IRS and various other domestic and foreign tax authorities with regards to income
tax and non-income tax matters. We have reserved for potential adjustments that may result from examinations by,
or any negotiated agreements with, these tax authorities. Although we believe our tax estimates are reasonable, the
final determination of audits could be materially different from our historical tax provisions and accruals. The results
of an audit could have a material effect on our financial position, results of operations, or cash flows in the period
for which that determination is made.
Refer to “Note 11: Income Taxes” for further information on potential contingencies surrounding income
taxes.
NOTE 15: EMPLOYEE BENEFIT PLANS
Retirement Savings Plan
The Tripadvisor Retirement Savings Plan (the “401(k) Plan”), qualifies under Section 401(k) of the Internal
Revenue Code. The 401(k) Plan allows participating employees, most of our U.S. employees, to make contributions
of a specified percentage of their eligible compensation. Participating employees may contribute up to 50% of their
eligible salary on a pre-tax basis, but not more than statutory limits. Employee-participants age 50 and over may also
contribute an additional amount of their salary on a pre-tax tax basis up to the IRS Catch-Up Provision Limit (or
“catch-up contributions”). Employees may also contribute into the 401(k) Plan on an after-tax basis up (or “Roth
401(k) contributions”) to an annual maximum of 10%. The 401(k) Plan has an automatic enrollment feature at 6%
pre-tax. We match 50% of the first 6% of employee contributions to the plan for a maximum employer contribution
of 3% of a participant’s eligible earnings. The catch-up contributions are not eligible for employer matching
contributions. The matching contributions portion of an employee’s account, vests after two years of service.
Additionally, at the end of the 401(k) Plan year, we make a discretionary matching contribution to eligible
participants. This additional discretionary matching employer contribution (or “true up”) is limited to match only
contributions up to 3% of eligible compensation.
We also have various defined contribution plans for our international employees. Our contribution to the
401(k) Plan and our international defined contribution plans which are recorded in our consolidated statement of
operations for the years ended December 31, 2019, 2018 and 2017 were $14 million, $13 million, and $9 million,
respectively.
Tripadvisor, Inc. Deferred Compensation Plan for Non-Employee Directors
The Company also has a Deferred Compensation Plan for Non-Employee Directors (the “Plan”). Under the
Plan, eligible directors who defer their directors’ fees may elect to have such deferred fees (i) applied to the
purchase of share units, representing the number of shares of our common stock that could have been purchased on
the date such fees would otherwise be payable, or (ii) credited to a cash fund. The cash fund will be credited with
interest at an annual rate equal to the weighted average prime or base lending rate of a financial institution selected
109
in accordance with the terms of the Plan and applicable law. Upon termination of service as a director of
Tripadvisor, a director will receive (i) with respect to share units, such number of shares of our common stock as the
share units represent, and (ii) with respect to the cash fund, a cash payment. Payments upon termination will be
made in either one lump sum or up to five annual installments, as elected by the eligible director at the time of the
deferral election.
Under the 2011 Plan, 100,000 shares of Tripadvisor common stock are available for issuance to non-employee
directors. From the inception of the Plan through December 31, 2019, a total of 6,267 shares have been reserved for
such purpose.
Tripadvisor, Inc. Executive Severance Plan and Summary Plan Description
Effective August 7, 2017, the Company adopted an Executive Severance Plan and Summary Plan Description
(the “Severance Plan”) applicable to certain employees of the Company and its subsidiaries. The Severance Plan
formalizes and standardizes the Company’s severance practices for certain designated employees (each, a
“Participant” and, collectively, the “Participants”). Participants covered by the Severance Plan generally will be
eligible to receive severance benefits in the event of a termination by the Company without Cause or, under certain
circumstances, by the Participant for Good Reason. The severance benefits differ if there is a termination of
employment in connection with a Change in Control. The severance benefits provided pursuant to the Severance
Plan are determined based on the job classification of the Participants (as reflected in internal job profile
designations) and, in certain cases, their years of service with the Company.
Under the Severance Plan, in the event of a termination by the Company without Cause more than three
months prior to a Change in Control or more than twelve months following a Change in Control, the severance
benefits for the Participant generally shall consist of the following:
•
•
continued payment of base salary for a period of six to eighteen months following the date of such
Participant’s termination of employment; and
continuation of coverage under the Company’s health insurance plan through the Company’s payment of
COBRA premiums for a period of six to eighteen months following the date of such Participant’s
termination of employment.
Under the Severance Plan, in the event of a termination by the Company without Cause or by the Participant
for Good Reason, in each case within three months prior to or twelve months following a Change in Control, the
severance benefits for the Participant shall consist of the following:
•
•
payment of a lump sum amount equal to (i) twelve to twenty-four months of the Participant’s Base Salary,
plus (ii) the Participant’s Target Bonus multiplied by 1, 1.5 or 2; and
payment of a lump sum amount equal to the premiums required to continue the Participant’s medical
coverage under the Company’s health insurance plan for a period of twelve to twenty-four months.
The foregoing summary is qualified in its entirety by reference to the Executive Severance Plan and Summary
Plan Description incorporated herein by reference as Exhibit 10.23 to this Annual Report on Form 10-K. Severance
expense recorded under this plan was not significant during each of the years end December 31, 2019, 2018 and
2017.
NOTE 16: STOCKHOLDERS’ EQUITY
Preferred Stock
In addition to common stock, we are authorized to issue up to 100 million preferred shares, with $ 0.001 par
value per share, with terms determined by our Board of Directors, without further action by our stockholders. As of
December 31, 2019, no preferred shares had been issued.
110
Common Stock and Class B Common Stock
Our authorized common stock consists of 1.6 billion shares of common stock with par value of $0.001 per
share, and 400 million shares of Class B common stock with par value of $0.001 per share. Both classes of common
stock qualify for and share equally in dividends, if declared by our Board of Directors. Common stock is entitled to
one vote per share and Class B common stock is entitled to 10 votes per share. Holders of Tripadvisor common
stock, acting as a single class, are entitled to elect a number of directors equal to 25% percent of the total number of
directors, rounded up to the next whole number, which was three directors as of December 31, 2019. Class B
common stockholders may, at any time, convert their shares into common stock, on a one for one share basis. Upon
conversion, the Class B common stock is retired and is not available for reissue. In the event of liquidation,
dissolution, distribution of assets or winding-up of Tripadvisor the holders of both classes of common stock have
equal rights to receive all the assets of Tripadvisor after the rights of the holders of the preferred stock have been
satisfied. There were 138,698,307 and 124,581,773 shares of common stock issued and outstanding, respectively,
and 12,799,999 shares of Class B common stock issued and outstanding at December 31, 2019.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive loss is primarily comprised of accumulated foreign currency translation
adjustments, as follows for the periods presented:
Cumulative foreign currency translation
Adjustments, net of tax (1)
Total accumulated other comprehensive loss (2)
December 31,
2019
December 31,
2018
(in millions)
$
$
(63) $
(63) $
(62)
(62)
(1) Through the year ended December 31, 2018, foreign currency translation adjustments excluded a provision for
U.S. federal and state income taxes as a result of the Company's intention to indefinitely reinvest the earnings of
its international subsidiaries outside of the United States. In response to increased cash requirements in the U.S.
related to the Company’s declaration of a special cash dividend and other strategic initiatives during the fourth
quarter of 2019, we determined that we no longer consider certain foreign earnings to be indefinitely reinvested.
The deferred income tax liability related to foreign currency translation adjustments is not material.
(2) Our accumulated net unrealized gain (loss) on available for sale debt securities was not material as of December
31, 2018.
Treasury Stock
On January 25, 2017, our Board of Directors authorized the repurchase of $250 million of our shares of
common stock under a share repurchase program. During the year ended December 31, 2017, we repurchased a total
of 6,079,003 shares of the Company’s outstanding common stock under this share repurchase program at an average
share price of $41.13, exclusive of fees and commissions, or $250 million in the aggregate, and completed this share
repurchase program. As of December 31, 2017, there were 9,474,490 shares of the Company’s common stock held
in treasury with an aggregate cost of $447 million.
On January 31, 2018, our Board of Directors authorized an additional repurchase of up to $250 million of our
shares of common stock under a share repurchase program. This share repurchase program has no expiration date
but may be suspended or terminated by the Board of Directors at any time. During the year ended December 31,
2018, we repurchased 2,582,198 shares of our outstanding common stock at an average share price of $38.73 per
share, exclusive of fees and commissions, or $100 million in the aggregate. As of December 31, 2018, we had a
remaining $150 million available to repurchase shares of our common stock under this share repurchase program.
As of December 31, 2018, there were 12,056,688 shares of the Company’s common stock held in treasury with an
aggregate cost of $547 million.
On November 1, 2019, our Board of Directors authorized the repurchase of an additional $100 million in
shares of our common stock under our existing share repurchase program, which increased the amount available to
111
the Company under this share repurchase program to $250 million. During the year ended December 31, 2019, we
repurchased 2,059,846 shares of our outstanding common stock at an average share price of $29.32 per share,
exclusive of fees and commissions, or $60 million in the aggregate. As of December 31, 2019, we had $190 million
remaining available to repurchase shares of our common stock under this share repurchase program. As of
December 31, 2019, there were 14,116,534 shares of the Company’s common stock held in treasury with an
aggregate cost of $607 million.
Our Board of Directors authorized and directed management, working with the Executive Committee of our
Board of Directors, to affect the share repurchase programs discussed above in compliance with applicable legal
requirements.
Dividends
On November 1, 2019, the Company's Board of Directors declared a special cash dividend of $3.50 per share,
or approximately $488 million in the aggregate. The dividend was payable on December 4, 2019 to stockholders of
record on November 20, 2019. During the years ended December 31, 2018 and 2017, our Board of Directors did not
declare any dividends on our outstanding common stock.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will
depend on our results of operations, earnings, capital requirements, financial condition, future prospects, contractual
restrictions and other factors deemed relevant by our Board of Directors. Our ability to pay dividends is also limited
by the terms of our 2015 Credit Facility. Refer to “Note 10: Debt” in the notes to the consolidated financial
statements in Item 8 in this Annual Report on Form 10-K for additional information regarding this revolving credit
facility. In connection with the declaration of such dividends, our non-vested RSUs are entitled to dividend
equivalents, which will be payable to the holder subject to, and upon vesting of, the underlying awards. Our
outstanding stock options are not entitled to dividend or dividend equivalents.
NOTE 17: RELATED PARTY TRANSACTIONS
Relationship between Liberty Tripadvisor Holdings, Inc. and Tripadvisor
We consider Liberty Tripadvisor Holdings, Inc. (“LTRIP”) a related party. As of December 31, 2019, LTRIP
beneficially owned approximately 18.2 million shares of our common stock and 12.8 million shares of our Class B
common stock, which constitute 14.6% of the outstanding shares of common stock and 100% of the outstanding
shares of Class B common stock. Assuming the conversion of all of LTRIP’s shares of Class B common stock into
common stock, LTRIP would beneficially own 22.5% of the outstanding common stock. Because each share of
Class B common stock is entitled to ten votes per share and each share of common stock is entitled to one vote per
share, LTRIP may be deemed to beneficially own equity securities representing 57.9% of our voting power. Refer
to “Note 1: Organization and Business Description” above, which describes the evolution of our relationship with
LTRIP. We had no related party transactions with LTRIP during the years ended December 31, 2019, 2018 or 2017.
NOTE 18: SEGMENT AND GEOGRAPHIC INFORMATION
Beginning in the first quarter of 2019 we have two reportable segments: (1) Hotels, Media & Platform; and (2)
Experiences & Dining. Our Hotels, Media & Platform reportable segment includes the following revenue sources: (1)
Tripadvisor-branded hotels revenue – primarily consisting of Tripadvisor-branded hotel metasearch auction revenue,
and to a lesser extent transaction revenue from our hotel instant booking feature, subscription-based advertising and
hotel sponsored placements advertising revenue; and (2) Tripadvisor-branded display and platform revenue –
consisting of Tripadvisor-branded display-based revenue. All remaining business units have been combined into and
reported as “Other”, which includes Rentals, Flights/Cruises/Car, SmarterTravel, and Tripadvisor China, as none of
these businesses meet the quantitative thresholds and other criteria to qualify as reportable segments, and therefore
are combined and disclosed as Other. The nature of the services provided and revenue recognition policies are
summarized by reported segment in “Note 4: Revenue Recognition.”
112
All direct general and administrative costs are included in the applicable segments and business units;
however, all corporate general and administrative costs are included in the Hotels, Media & Platform reportable
segment. In addition, the Hotels, Media & Platform reportable segment includes all Tripadvisor-related brand
advertising expenses (primarily television advertising), and technical infrastructure and other costs supporting the
Tripadvisor platform.
Adjusted EBITDA is our segment profit measure and a key measure used by our management and Board of
Directors to understand and evaluate the operating performance of our business and on which internal budgets and
forecasts are based and approved. We define Adjusted EBITDA as net income (loss) plus: (1) provision for income
taxes; (2) other income (expense), net; (3) depreciation of property and equipment, including amortization of
internal use software and website development; (4) amortization of intangible assets; (5) stock-based compensation
and other stock-settled obligations; (6) goodwill, long-lived asset and intangible asset impairments; (7) legal
reserves and settlements; (8) restructuring and other related reorganization costs; and (9) non-recurring expenses and
income. During the fourth quarter of 2019, the Company revised its Adjusted EBITDA definition to exclude
restructuring and other related reorganization costs, as the Company believes these costs are not directly tied to the
ongoing core operations of our business. The Company believes that excluding these amounts better enables
management and investors to compare financial results between periods as these costs may vary independent of
business performance. This revision to our definition did not have a material impact to Adjusted EBITDA for any
period prior to the year ended December 31, 2019; therefore, no reclassifications have been made to conform the
prior periods to the current period presentation. This revision had no effect on consolidated GAAP results in any
period.
The following tables present our segment information for the years ended December 31, 2019, 2018 and 2017
and includes a reconciliation of Adjusted EBITDA to Net Income. We record depreciation of property and
equipment, including amortization of internal-use software and website development, amortization of intangible
assets, stock-based compensation and other stock-settled obligations, legal reserves and settlements, restructuring
and other related reorganization costs, other income (expense), net, other non-recurring expenses and income, net,
and income taxes, which are excluded from segment operating performance, in corporate and unallocated. In
addition, we do not report our assets, capital expenditures and related depreciation expense by segment as our
CODM does not use this information to evaluate operating segments. Accordingly, we do not regularly provide such
information by segment to our CODM. Intersegment revenue is not material and is included in Other.
Year ended December 31, 2019
Hotels, Media
& Platform
(1)
Experiences
& Dining
Other (2)
Corporate
and
Unallocated
Total
Revenue
Adjusted EBITDA
Depreciation
Amortization of intangible assets
Stock-based compensation
Restructuring and other related
reorganization costs
Operating income
Other income, net
Income before income taxes
Provision for income taxes
Net income
$
939 $
378
(in millions)
$
456
5
165 $
55
$
—
—
(93)
(33)
(124)
(1)
$
1,560
438
(93)
(33)
(124)
(1)
187
7
194
(68)
126
113
Revenue
Adjusted EBITDA
Depreciation
Amortization of intangible assets
Stock-based compensation
Legal reserves and settlements
Operating income
Other expense, net
Income before income taxes
Provision for income taxes
Net income
Revenue
Adjusted EBITDA
Depreciation
Amortization of intangible assets
Stock-based compensation
Operating income
Other expense, net
Income before income taxes
Provision for income taxes (3)
Net loss
Year ended December 31, 2018
Hotels, Media
& Platform
(1)
Experiences
& Dining
Other (2)
Corporate
and
Unallocated
Total
$
1,001 $
329
(in millions)
$
372
48
242 $
45
— $
—
(82)
(34)
(118)
(5)
$
1,615
422
(82)
(34)
(118)
(5)
183
(10)
173
(60)
113
Year ended December 31, 2017
Hotels, Media
& Platform
(1)
Experiences
& Dining
Other (2)
Corporate
and
Unallocated
Total
$
1,022 $
267
(in millions)
$
264
23
270 $
41
— $
—
(79)
(32)
(96)
$
1,556
331
(79)
(32)
(96)
124
(14)
110
(129)
(19)
(1)
(2)
(3)
Includes allocated corporate general and administrative costs of $69 million, $77 million and $76 million and Tripadvisor-branded
advertising expenses (primarily television advertising) of $77 million, $122 million and $82 million for the years ended December 31,
2019, 2018 and 2017, respectively.
Other consists of the combination of our Rentals, Flights/Cruises/Car, SmarterTravel and Tripadvisor China business units and
does not constitute a reportable segment.
The year ended December 31, 2017 reflects $67 million of Transition Tax and $6 million of tax expense recorded due to the
remeasurement of net deferred tax assets related to the 2017 Tax Act enacted on December 22, 2017. Refer to “Note 11: Income Taxes”
for further information.
Revenue and Geographic Information
Our revenue sources within our Hotels, Media & Platform segment, which are Tripadvisor-branded hotels
revenue and Tripadvisor-branded display and platform revenue; which along with our Experience & Dining and
Other revenue source, comprise our products. Refer to “Note 4: Revenue Recognition” for our revenue by source.
114
The Company measures its geographic revenue information to the physical location of the Tripadvisor
subsidiary which generates the revenue, which is consistent with our measurement of long-lived physical assets, or
property and equipment, net. The geographic classification is independent of where the consumer resides, where the
consumer is physically located while using the Company's services, or the location of the travel service provider,
experience operator or restaurant. For example, a reservation made through Tripadvisor.com at a hotel in the U.S. by
a consumer in the U.S. could be part of the Company's non-U.S. revenue.
Revenue
United States
United Kingdom
All other countries
Total revenue
2019
Year ended December 31,
2018
(in millions)
2017
$
$
821 $
466
273
1,560 $
835 $
508
272
1,615 $
802
530
224
1,556
The Company’s property and equipment, net for the United States and all other countries based on the
geographic location of the assets consists of the following for the periods presented:
Property and equipment, net
United States
All other countries
Total
December 31,
2019
2018
(in millions)
$
$
227 $
43
270 $
214
39
253
NOTE 19: OTHER INCOME (EXPENSE), NET
Other income (expense), net, consists of the following for the periods presented:
Year Ended December 31,
2019
2018
(in millions)
2017
Foreign currency exchange rates gains (losses), net (1)
Gain (loss) and impairments on equity investments in
privately-held companies, net
Gain (loss) from equity method investment, net
Other income (expense), net
Total
$
$
(2) $
—
(1)
—
(3) $
(9) $
1
—
3
(5) $
1
(2)
—
1
—
(1) Our foreign currency exchange gains (losses), net, are generally related to foreign exchange transaction gains and losses from the
conversion of the transaction currency to the functional currency, partially offset by the foreign currency forward contract gains and
losses.
115
NOTE 20: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents selected unaudited financial information for the eight quarters in the period ended
December 31, 2019. The results for any quarter are not necessarily indicative of future quarterly results and,
accordingly, period to period comparisons should not be relied upon as an indication of future performance.
Year ended December 31, 2019
Revenue
Operating income
Net income
Basic earnings per share (1)
Diluted earnings per share (1)
Year ended December 31, 2018
Revenue
Operating income
Net income
Basic earnings per share (1)
Diluted earnings per share (1)
Three Months Ended
March 31
June 30 September 30 December 31
(in millions, except per share data)
$
$
$
$
$
$
376 $
31
26
0.19 $
0.18 $
378 $
23
5
0.04 $
0.04 $
422 $
66
34
0.24 $
0.24 $
433 $
49
32
0.23 $
0.23 $
428 $
68
50
0.36 $
0.36 $
458 $
89
69
0.50 $
0.49 $
335
23
15
0.11
0.11
346
23
7
0.05
0.05
(1) Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of the
quarterly earnings per share may not equal the total computed for the year.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of December 31, 2019, our management, with the participation of our Chief Executive Officer and
President and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures
pursuant to Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, or
the Exchange Act. Based upon that evaluation, our Chief Executive Officer and President and our Chief Financial
Officer concluded that, as of December 31, 2019, our disclosure controls and procedures were effective in ensuring
that material information required to be disclosed in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’s, or the SEC’s, rules and forms, including ensuring that such material information is accumulated and
communicated to our management, including our Chief Executive Officer and President and our Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the quarter ended
December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is a process to
provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance
116
with accounting principles generally accepted in the United States of America. Under the supervision and with the
participation of the Company’s management, including the Chief Executive Officer and President and the Chief
Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the criteria for effective internal control over financial reporting described in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company’s management evaluated the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2019. Pursuant to Exchange Act Rule 13a-15(d) or 15d-15(d), management has
concluded that, as of December 31, 2019, our internal control over financial reporting was effective. Management
has reviewed its assessment with the Audit Committee. KPMG LLP, an independent registered public accounting
firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2019, as stated
in their report which is included below.
Limitations on Effectiveness of Controls and Procedures
Management does not expect that our disclosure controls and procedures or our internal control over financial
reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated,
is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be
met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will
not occur or that all control issues and instances of fraud, if any, within our company have been detected.
117
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Tripadvisor, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Tripadvisor, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related
consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for
each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the
consolidated financial statements), and our report dated February 19, 2020 expressed an unqualified opinion on
those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
118
Boston, Massachusetts
February 19, 2020
/s/ KPMG LLP
119
Item 9B. Other Information
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required under this item is incorporated herein by reference to our 2020 Proxy Statement,
which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the
close of our fiscal year ended December 31, 2019.
Item 11.
Executive Compensation
The information required under this item is incorporated herein by reference to our 2020 Proxy Statement,
which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the
close of our fiscal year ended December 31, 2019.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required under this item is incorporated herein by reference to our 2020 Proxy Statement,
which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the
close of our fiscal year ended December 31, 2019.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required under this item is incorporated herein by reference to our 2020 Proxy Statement,
which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the
close of our fiscal year ended December 31, 2019.
Item 14.
Principal Accounting Fees and Services
The information required under this item is incorporated herein by reference to our 2020 Proxy Statement,
which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the
close of our fiscal year ended December 31, 2019.
Item 15.
Exhibits, Financial Statement Schedules
(a) The following is filed as part of this Annual Report on Form 10-K:
PART IV
1.
Consolidated Financial Statements: The consolidated financial statements and report of
independent registered public accounting firms required by this item are included in Part II,
Item 8.
All other schedules are omitted because they are not applicable or not required, or because the required
information is shown either in the consolidated financial statements or in the notes thereto.
120
(b) Exhibits:
Exhibit
No.
3.1
3.2
3.3
4.1
4.2
10.1
10.2
10.3+
10.4+
10.5+
10.6
10.7
10.8+
10.9+
Exhibit Description
Restated Certificate of Incorporation of
Tripadvisor, Inc.
Amended and Restated Bylaws of
Tripadvisor, Inc.
Amendment No. 1 to Amended and Restated
Bylaws of Tripadvisor, Inc.
Specimen Tripadvisor, Inc. Common Stock
Certificate
Description of the Registrant’s Securities
Registered Pursuant to Section 12 of the
Securities Exchange Act of 1934
Governance Agreement, by and among
Tripadvisor, Inc., Liberty Interactive Corporation
and Barry Diller, dated as of December 20, 2011
Tax Sharing Agreement by and between
Tripadvisor, Inc. and Expedia, Inc., dated as of
December 20, 2011
Amended and Restated Tripadvisor, Inc. 2011
Stock and Annual Incentive Plan
Tripadvisor, Inc. 2018 Stock and Annual
Incentive Plan
Tripadvisor, Inc. Deferred Compensation Plan
for Non-Employee Directors
Corporate Headquarters Lease with Normandy
Gap-V Needham Building 3, LLC, as landlord,
dated as of June 20, 2013
Guaranty dated June 20, 2013 by Tripadvisor,
Inc. for the benefit of Normandy Gap-V
Needham Building 3, LLC, as landlord
Employment Agreement between Tripadvisor
LLC and Seth Kalvert, effective as of May 19,
2016
Amendment to Employment Agreement between
Tripadvisor LLC and Seth Kalvert, dated as of
February 19, 2018
Filed
Herewith
Incorporated by Reference
Form
8-K
8-K
8-K
S-
4/A
SEC File No.
001-35362
001-35362
001-35362
333-175828-
01
Exhibit
No.
3.1
3.2
3.1
4.6
Filing
Date
12/27/11
12/27/11
2/12/13
10/24/11
X
8-K
001-35362
10.1
12/27/11
8-K
001-35362
10.2
12/27/11
10-Q
001-35362
10-Q
001-35362
10.1
10.1
11/8/16
8/1/18
S-8
333-178637
4.6
12/20/11
10-Q
001-35362
10.1
7/24/13
10-Q
001-35362
10.2
7/24/13
8-K
001-35362
10.1
5/23/16
10-K
001-35362
10.8
2/21/18
10.10+ Employment Agreement between Tripadvisor
10-Q
001-35362
10.3
5/6/14
LLC and Stephen Kaufer, effective as of March
31, 2014
10.11+ Amendment to Employment Agreement between
10-K
001-35362
10.10
2/21/18
Tripadvisor LLC and Stephen Kaufer, effective
as of November 28, 2017
10.12+ Amended and Restated Option Agreement dated
8-K
001-35362
10.1
6/8/17
June 5, 2017 between Stephen Kaufer and
Tripadvisor, Inc.
10.13+ Stock Option Agreement (time-based) between
10-K
001-35362
10.12
2/21/18
Stephen Kaufer and Tripadvisor, Inc. dated
November 28, 2017
10.14+ RSU Agreement (time-based) between Stephen
10-K
001-35362
10.13
2/21/18
Kaufer and Tripadvisor, Inc. dated November
28, 2017
121
Exhibit
No.
Exhibit Description
10.15+ RSU Agreement (performance based (market))
between Stephen Kaufer and Tripadvisor, Inc.
dated November 28, 2017
10.16+ RSU Agreement (performance based (financial
and strategic)) between Stephen Kaufer and
Tripadvisor, Inc. dated November 28, 2017
10.17+ Viator, Inc. 2010 Stock Incentive Plan
10.18+ Offer Letter dated May 9, 2017, between
10.19
10.20
Tripadvisor Limited and Dermot Halpin
Credit Agreement dated as of June 26, 2015 by
and among Tripadvisor, Inc., Tripadvisor
Holdings, LLC, Tripadvisor LLC, JPMorgan
Chase Bank, N.A., as Administrative Agent; J.P.
Morgan Europe Limited, as London Agent;
Morgan Stanley Bank, N.A.; Bank of America,
N.A.; BNP Paribas; SunTrust Bank; Wells Fargo
Bank, National Association; Royal Bank of
Canada; Barclays Bank PLC; U.S. Bank
National Association; Citibank, N.A.; The Bank
of Tokyo-Mitsubishi UFJ, Ltd.; Goldman Sachs
Bank USA; and Deutsche Bank AG New York
Branch
First Amendment, dated as of May 12, 2017, by
and among Tripadvisor, Inc., Tripadvisor
Holdings, LLC, Tripadvisor LLC and other
Subsidiary Loan Parties party thereto, the
Lenders party thereto, JPMorgan Chase Bank,
N.A., as administrative agent, and J.P.Morgan
Europe Limited, as London Agent
Incorporated by Reference
Filed
Herewith
Form
10-K
SEC File No.
001-35362
Exhibit
No.
10.14
Filing
Date
2/21/18
10-K
001-35362
10.15
2/21/18
S-8
10-Q
333-198726
001-35362
8-K
001-35362
99.1
10.1
10.1
9/12/14
5/9/17
6/30/15
8-K
001-35362
10.1
5/15/17
10.21+ Employment Agreement, dated as of October 6,
8-K
001-35362
10.1
10/8/15
2015, between Tripadvisor, LLC and Ernst
Teunissen
10.22+ Amendment to Employment Agreement, dated
as of November 28, 2017, between Tripadvisor,
LLC and Ernst Teunissen
10.23+ Executive Severance Plan and Summary Plan
10.24
Description
Form of Tripadvisor Media Group Master
Advertising Insertion Order
10.25+ Form of Option Agreement (Domestic)
10.26+ Form of Option Agreement (International)
10.27+ Form of Restricted Stock Unit Agreement
(Domestic)
10.28+ Form of Restricted Stock Unit Agreement
10-Q
001-35362
(International)
10.29+ Form of Restricted Stock Unit Agreement
10-Q
001-35362
(French)
10.30+ Form of Restricted Stock Unit Agreement
(Performance Based Domestic)
10.31+ Form of Restricted Stock Unit Agreement
(Performance Based French)
10-Q
001-35362
10-Q
001-35362
10.32+ Form of Restricted Stock Unit Agreement (Non-
10-Q
001-35362
Employee Directors)
122
10-K
001-35362
10.21
2/21/18
10-Q
001-35362
10.4
8/8/17
10-K
001-35362
10.23
2/21/18
10-Q
10-Q
10-Q
001-35362
001-35362
001-35362
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.2
5/8/18
5/8/18
5/8/18
5/8/18
5/8/18
5/8/18
5/8/18
8/1/18
Exhibit
No.
Exhibit Description
10.33+ Governance Agreement dated as of November 6,
Incorporated by Reference
Filed
Herewith
Form
8-K
SEC File No.
001-35362
Exhibit
No.
10.1
Filing
Date
11/6/19
21.1
23.1
24.1
31.1
31.2
32.1
32.2
2019 between Tripadvisor, Inc and Trip.com
Group Limited
Subsidiaries of the Registrant
Consent of KPMG, LLP, Independent Registered
Public Accounting Firm
Power of Attorney (included in signature page)
Certification of the Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification of the Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification of the Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Certification of the Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
101.INS Inline XBRL Instance Document - the instance
document does not appear in the Interactive Data
File because its XBRL tags are embedded within
the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema
Document.
101.CAL Inline XBRL Taxonomy Extension Calculation
Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition
Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label
Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation
Linkbase Document.
104
Cover Page Interactive Data File (embedded
within the Inline XBRL document).
X
X
X
X
X
X
X
X
X
X
X
X
X
X
+ Indicates a management contract or a compensatory plan, contract or arrangement.
Item 16.
Form 10-K Summary
Not applicable.
123
Pursuant to the requirements of the Section 13 or 15(d) of Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Signatures
February 19, 2020
TRIPADVISOR, INC.
By:
/s/ STEPHEN KAUFER
Stephen Kaufer
Chief Executive Officer and
President
POWER OF ATTORNEY
We, the undersigned officers and directors of Tripadvisor, Inc., hereby severally constitute and appoint
Stephen Kaufer and Ernst Teunissen, and each of them singly, our true and lawful attorneys, with full power to them
and each of them singly, to sign for us in our names in the capacities indicated below, all amendments to this report,
and generally to do all things in our names and on our behalf in such capacities to enable Tripadvisor, Inc. to comply
with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated as of February 19, 2020.
Signature
Title
/s/ STEPHEN KAUFER
Stephen Kaufer
/s/ ERNST TEUNISSEN
Ernst Teunissen
/s/ GEOFFREY GOUVALARIS
Geoffrey Gouvalaris
/s/ GREGORY B. MAFFEI
Gregory B. Maffei
/s/ TRYNKA SHINEMAN BLAKE
Trynka Shineman Blake
/s/ JAY C. HOAG
Jay C. Hoag
/s/ BETSY MORGAN
Betsy Morgan
/s/ JEREMY PHILIPS
Jeremy Philips
/s/ SPENCER M. RASCOFF
Spencer M. Rascoff
/s/ ALBERT E. ROSENTHALER
Albert E. Rosenthaler
Chief Executive Officer, President and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Chairman of the Board
Director
Director
Director
Director
Director
Director
124
Signature
/s/ ROBERT S. WIESENTHAL
Robert S. Wiesenthal
Title
Director
125
TripAdvisor, Inc.
Board of Directors
Gregory B. Maffei
Chairman
Stephen Kaufer
Director, President and Chief
Executive Officer
Jay C. Hoag
Director
Betsy L. Morgan
Director
M. Greg O’Hara
Director
Jeremy Philips
Director
Spencer M. Rascoff
Director
Albert Rosenthaler
Director
Trynka Shineman Blake
Director
Robert S. Wiesenthal
Director
Executive Officers
Stephen Kaufer
President and
Chief Executive Officer
Ernst Teunissen
Senior Vice President,
Chief Financial Officer and
Treasurer
Seth Kalvert
Senior Vice President,
General Counsel and
Secretary
Lindsay Nelson
Chief Experience and Brand
Officer
Kanika Soni
Chief Commercial Officer
Corporate and Stockholder Information
Headquarters
TripAdvisor, Inc.
400 1st Ave.
Needham, Massachusetts 02494
Exchange Listing and Ticker Symbol
NASDAQ Global Select Market, “TRIP”
Annual Meeting
June 9, 2020
11:00 a.m. Eastern Time
www.virtualshareholdermeeting.com/TRIP2020
Publications and Reports
A variety of stockholder publications and reports, including TripAdvisor’s
Annual Report on Form 10-K, proxy statement, financial news releases and a
variety of legal filings are available at http://ir.tripadvisor.com. Stockholders can
also request a copy of the Annual Report and proxy statement by contacting
the Secretary of TripAdvisor, Inc., 400 1st Avenue, Needham, Massachusetts
02494.
Independent Registered Public Accounting Firm
KPMG LLP
Two Financial Center
60 South Street
Boston, Massachusetts 02110
Transfer Agent and Registrar
Computershare
P.O. Box 358015
Pittsburgh, PA 15252
Electronic Delivery
Most stockholders can elect to receive e-mails in the future with links to the
Annual Report, proxy statement and voting web site. Registered
stockholders can sign up for electronic delivery at
www.bnymellon.com/shareowner/equityaccess. Street name stockholders
should contact their bank or broker to inquire about electronic delivery.