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, 2022
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
The Nasdaq Global Select Market
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was
$1,915,177,508 based on the closing price on The Nasdaq Global Select Market on such date.
Class
Common Stock, $0.001 par value per share
Class B common stock, $0.001 par value per share
Outstanding Shares at February 10, 2023
128,164,615 shares
12,799,999 shares
Documents Incorporated by Reference
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, 2022. Portions of such proxy statement are
incorporated by reference into Part III of this Annual Report on Form 10-K.
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
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
[Reserved]
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
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
PART IV
Item 15.
Exhibit and Financial Statement Schedules
Item 16.
Form 10-K Summary
SIGNATURES
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We refer to Tripadvisor, Inc. and our wholly-owned subsidiaries as “Tripadvisor,” “Tripadvisor group,” “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 (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.
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Item 1. Business
Overview
PART I
The Tripadvisor group operates as a family of brands with a purpose of connecting people to experiences worth sharing. Our vision is to be the
world’s most trusted source for travel and experiences. The Company operates across three reportable segments: Tripadvisor Core, Viator, and TheFork. We
leverage our brands, technology platforms, and capabilities to connect our large, global audience with partners by offering rich content, travel guidance
products and services, and two-sided marketplaces for experiences, accommodations, restaurants, and other travel categories.
Tripadvisor Core’s purpose is to empower everyone to be a better traveler by serving as the world’s most trusted and essential travel guidance
platform. Since Tripadvisor’s founding in 2000, the Tripadvisor brand has developed a relationship of trust and community with travelers and experience
seekers by providing an online global platform for travelers to discover, generate, and share authentic user-generated content (“UGC”) in the form of
ratings and reviews for destinations, points-of-interest (“POIs”), experiences, accommodations, restaurants, and cruises in over 40 countries and over 20
languages across the world. As of December 31, 2022, Tripadvisor offered more than 1 billion user-generated ratings and reviews on nearly 8 million
experiences, accommodations, restaurants, airlines, and cruises. Tripadvisor’s online platform attracts one of the world’s largest travel audiences, with
hundreds of millions of visitors in 2022.
Viator’s purpose is to bring more wonder into the world—to bring extraordinary, unexpected, and forever memorable experiences to more people,
more often, wherever they are traveling. In doing so, Viator elevates tens of thousands of businesses, large and small. Viator delivers on its purpose by
enabling travelers to discover and book iconic, unique and memorable experiences from experience operators around the globe. Our online marketplace is
comprehensive and easy-to-use, connecting millions of travelers to the world’s largest supply of bookable tours, activities and attractions—over 300,000
experiences from more than 50,000 operators as of December 31, 2022. Viator is a pure-play experiences online travel agency (“OTA”) singularly focused
on the needs of both travelers and operators with the largest supply of bookable experiences available to travelers.
TheFork’s purpose is to deliver happiness through amazing dining experiences. TheFork delivers on its purpose by providing an online marketplace
that enables diners to discover and book online reservations at more than 55,000 restaurants in 12 countries, as of December 31, 2022, across the UK,
western and central Europe, and Australia. TheFork has become an urban, gastronomic guide with a strong community that offers more than 20 million
restaurant reviews.
The COVID-19 pandemic had a significant negative impact on the travel and hospitality industries and, consequently, adversely and materially
affected our business, results of operations, liquidity and financial condition during the years ended December 31, 2021 and 2020. In 2022, we generally
experienced a travel demand recovery fueled by the continued easing of government restrictions globally and increasing consumer travel demand. We
believe that consumers will continue to seek connection with others, discover new places, and experience new things through travel. We believe this
sustained demand, combined with an ongoing need to make informed decisions, creates significant long-term growth opportunities for our business.
Our Industry and Market Opportunity
We are one of the world’s largest online travel companies; however, our consolidated annual revenue in 2022 of nearly $1.5 billion represents less
than one percent of total worldwide travel spending, which highlights the potential size of our global market opportunity. Phocuswright, an independent
travel, tourism and hospitality research firm, estimated global travel spending, exclusive of experiences and dining, at approximately $1.6 trillion in 2020
prior to the onset of COVID-19. In December 2022 Phocuswright estimated global travel spending will reach approximately $1.4 trillion by 2024, with an
expected increasing share booked through online channels each year.
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We believe that we are a compelling leader in the global experiences industry and well positioned to capture increased share in a large and growing
market that is estimated to reach more than $275 billion by 2025 according to Arival’s October 2022 report (the “Arival Report”), a leading research
provider on the in-destination experiences industry. Moreover, we believe we are poised to benefit from increased online adoption in the global experiences
industry. While online penetration in experiences remains nearly a third below other major travel categories, such as hotel accommodations, the anticipated
total size of the online experiences market will continue to expand, and is expected to surpass pre-pandemic levels by 2023, according to the Arival Report,
as travelers become increasingly more comfortable making last-minute bookings online, operators continue to shift online in order to more efficiently
adhere to evolving pandemic regulations, and international travel returns. In addition, OTAs are the fastest growing channel in the travel experiences
market and are expected to undergo significant growth going forward, with the OTA channel expected to experience a compounded annual growth rate
(“CAGR”) of 62% from 2020 to 2025 according to the Arival Report.
Based on information in Euromonitor's February 2022 report, a leading provider of global business intelligence, market research data and analysis,
we estimate the full-service European restaurants industry may reach approximately $250 billion by 2025. In addition, based on this same data, this
industry is exhibiting a similar trend as the experiences industry in terms of online adoption; the majority of restaurant reservation bookings still take place
offline, but an increasing share is booked through online channels each year. We believe that we are still early in the global shift in consumer adoption
towards booking experiences and restaurants online, which provides an exciting future market opportunity for our business.
Our Business Strategy
The Tripadvisor group operates in a unique position in the travel and experiences ecosystem:
•
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Large, global, and growing addressable markets including travel, experiences, and digital advertising;
A large, global, and engaged audience making meaningful contributions that reinforces a relationship of trust and community; and
A wealth of high-intent data that comes from serving our audience of travelers and experience seekers at different points along their
journey - whether they are engaging on our platforms for inspiration on their next experience, planning a trip, or making a purchasing
decision.
The Tripadvisor group is united in a shared purpose and vision, but operate different value creation strategies for each segment. We manage
priorities and levels of investment based upon factors that include the size and maturity of each segment, the size and maturity of the addressable market,
growth opportunities, and competitive positioning, among other factors.
In our Tripadvisor Core segment, we offer a compelling value proposition to both travelers and partners across a number of key categories that
include accommodations, experiences, and media, among other categories. This value proposition is delivered through a collection of durable assets that we
believe is difficult to replicate: a trusted brand, authentic UGC, a large community of contributors, and one of the largest global travel audiences. Our
strategy in this segment is to leverage these core assets as well as our technology capabilities to provide travelers with a compelling user experience that
helps travelers make the best decisions in each phase of their travel journey, including pre-trip planning, in-destination, and post-trip sharing. We intend to
drive new traveler acquisition and repeat audience engagement on our platform by offering meaningful travel guidance solutions and services that reduce
friction in the traveler journey and create a deeper, more persistent relationship with travelers. We evaluate investment opportunities across data, product,
marketing, and technology that we believe will improve the monetization of our audience through deeper engagement, which, in turn, we expect will drive
more value to our partners.
In our Viator and TheFork segments, we provide two-sided marketplaces that connect travelers and diners to operators of bookable experiences and
restaurants, respectively. Within our Viator segment, we are investing in growth, future scale, and market share gains to accelerate our market leadership
position, while improving booking unit economics that provide visibility to sustainable future profitability. This means driving awareness and higher
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quality audience engagement, which we believe will drive greater repeat behavior, more direct traffic, and translate into improved unit economics over
time. Our investments on both sides of our marketplace, as well as in our core offerings, are intended to deliver a differentiated value proposition that will
drive sustainable market leadership as our partners, operators, and travelers find themselves in an increasingly competitive marketplace environment.
Similarly, in TheFork segment, we are also investing in growth, future scale, and market share gains. Our investments are focused on continuing to grow
both our restaurant base and our diner base by offering innovative tools and features on our platform, and through continued awareness of our brand.
We expect to drive growth across the Tripadvisor group through organic investment in data, product, marketing and technology to further enhance
the value we deliver to travelers and partners across our brands, platforms, and reportable segments. In addition, we may accelerate growth inorganically by
opportunistically pursuing strategic acquisitions.
Our Business Models
We manage our Tripadvisor Core segment primarily through the following revenue sources and related business models:
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Tripadvisor-branded Hotels Revenue. The largest source of Tripadvisor Core segment revenue is generated from click-based
advertising on our hotel meta platform (formerly referred to as our hotel auction), which consists primarily of contextually-relevant
booking links to partner websites, which predominantly include OTAs and hotels. Click-based advertising is generally priced on a
cost-per-click (“CPC”) basis, with payments from partners determined by the number of clicks generated on a commerce link
multiplied by the CPC rate for each particular click. CPC rates are determined in a dynamic, competitive auction bidding process. We
also generate click-based advertising revenue on a cost-per-action (“CPA”) basis, with payments from partners determined by a
contractual commission rate based on a traveler click generated on our platform that ultimately results in a hotel booking and stay via
the partners’ websites.
We provide additional business-to-business (“B2B”) offerings to hotels and related accommodation partners that deliver other unique
opportunities to further promote, advertise, and operate their businesses as well as merchandise their inventory on our platform. These
include a subscription-based advertising solution, with payments determined by a contractual fee and time duration, or other CPC-
based advertising services through hotel sponsored placements on our platform.
Tripadvisor-branded Display and Platform Revenue. We offer endemic and non-endemic advertisers unique opportunities to
promote their brands primarily through display-based advertising placements across our brands on our platform. Our advertising
clients are predominantly direct suppliers of hotels, airlines and cruises, as well as destination marketing organizations (“DMOs”),
OTAs, and other travel related businesses. Display-based advertising placements are predominantly sold on a cost per thousand
impressions (“CPM”) basis.
Tripadvisor Experiences and Dining Revenue. We merchandise, on the Tripadvisor platform, bookable experiences available on
Viator and bookable dining reservations available on TheFork and earn affiliate marketing commission revenue on bookings that are
driven by our platform, which are fulfilled by Viator and TheFork, respectively. These transactions generate intercompany
(intersegment) revenue which is eliminated on a consolidated basis. The nature and economics of these transactions are consistent
with the Viator segment and TheFork segment, as described below.
We provide additional B2B offerings to restaurant partners that deliver other unique opportunities to further promote, advertise, and
operate their businesses as well as merchandise their businesses on our platform. These offerings can be subscription-based, with
payments determined by a contractual fee and time duration, or CPC-based advertising services through restaurant sponsored
placements on our platform.
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•
Other Revenue. We provide travelers additional offerings across various other travel categories, including alternative
accommodations (e.g., short-term vacation rentals), cruises, flights, and rental cars. We provide these offerings across a collection of
brands that complement and reinforce our segment strategy of providing differentiated guidance that helps travelers reduce friction
and make better decisions. Our alternative accommodation rentals platform (formerly referred to as vacation rentals) is a two-way
marketplace that connect travelers with owners and operators of short-term rental properties, generating commission revenue from
both the traveler and the property owner for each booking we facilitate across our branded platforms. Our cruise, flight, and rental
cars offerings generate revenue primarily through click-based and display-based advertising, as described above.
Our Viator segment offers travelers a comprehensive online marketplace that provides access to over 300,000 experiences and over 50,000
experience operators. These experiences are instantly bookable online in over 190 countries. Our business model relies on the success of travelers and
operators who join our marketplace and generate consistent bookings over time. As operators become more successful on our platform and as travelers
return over time, we benefit from the recurring activity on our marketplace. We generate revenue through commissions for each booking transaction we
facilitate directly and indirectly through our platform. Through Viator, we power traveler experience bookings on behalf of third-party distribution partner
websites, including the Tripadvisor platform as well as many of the world’s major OTAs, airlines, hotels, online and offline travel agencies, and other
prominent content and eCommerce brands. For the majority of experience bookings, we collect the full amount charged to the traveler at the time of
booking and remit the operator’s portion after the booked experience occurs, which contributes to positive working capital before the traveler completes the
experience.
TheFork segment offers travelers and diners a comprehensive online marketplace that provides access to more than 55,000 restaurants to discover
and book reservations in 12 countries across the UK, western and central Europe, and Australia. We primarily generate revenue for each booking
reservation we facilitate on our platform, calculated on a per seated diner fee basis and paid for by the restaurant partner. We also generate revenue on a
subscription basis from restaurant partners by providing, for a fee, access to premium online reservation booking software and related services offerings to
help them more effectively and efficiently manage their business.
Seasonality
Consumers' travel expenditures have historically followed a seasonal pattern. Correspondingly, travel partner advertising investments, and therefore
our revenue and operating profits, have also historically followed 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, including traveler accommodation stays, and travel experiences
taken, compared to the first and fourth quarters, which represent seasonal low points. In addition, during the first half of the year, experience bookings
typically exceed the amount of completed experiences, 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.
Certain factors may impact our typical seasonal fluctuations, which may include any significant shifts in our business mix or adverse economic
conditions that could result in future seasonal patterns that are different from historical trends. For example, the negative impact to our business from
COVID-19 materially affected our historical trends at varying levels during the years ended December 31, 2021 and 2020, while these trends significantly
improved during the year ended December 31, 2022, resulting in increased revenues, and working capital and operating cash flow more akin to typical
historical seasonality trends.
Marketing
We have established world-renowned, widely used, and recognized brands through the innovative and efficient implementation of marketing and
promotional campaigns. Particularly, we believe we have been successful with the strategic use of a number of cost effective online and offline marketing
channels to reach travelers and diners, including our own platform channels (i.e., websites and apps), online search engines (primarily Google), social
media, email, media via public relations, partnerships, and content distribution. Our omni-channel marketing
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programs are intended to showcase the value of our industry-leading travel brands; increase user traffic; efficiently drive transactions and engagement;
optimize ongoing traveler acquisition costs; and strategically position our brands in relation to one another as we continue to differentiate our offering
versus those of our competitors. Our sustained scale and profitability depend on our continued ability to cost effectively maintain and increase the overall
number of users engaged on our platforms and their subsequent transactions. We continue to focus on our ability to attract and engage new and repeat users
and encourage users to directly visit our websites and apps. We have the ability to manage our marketing investments across our portfolio of brands to
optimize results for the Company. Our relative flexibility enables us to make decisions on a brand-by-brand, market-by-market, travel segment and
customer basis that we think are appropriate based on the relative growth opportunity, the expected returns and the competitive environment.
Competition
We operate in a very competitive set of market environments that constantly evolve and change. Some of our current and potential competitors,
listed below, have significantly more customers, data, and financial and other resources than we do, and may be able to leverage those strengths to compete
more aggressively with us.
Across our three segments, we primarily compete, and in some cases partner, with the following businesses:
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General OTAs, such as Expedia, Booking Holdings, Airbnb, traveloka, Despegar, Trip.com, and their respective subsidiaries and operating
companies;
Experiences OTAs, such as GetYourGuide, Klook, and TUI Musement;
Hotel metasearch providers, such as trivago, Kayak and HotelsCombined;
Online search, social media, and marketplace platforms for advertising spend, such as Google, Facebook, Twitter, Pinterest, and Snap;
Global and regional travel, experiences, and restaurant brands seeking to promote direct bookings;
Emerging online advertising businesses, such as ad-supported retail and entertainment platforms like Amazon, Spotify, and Walmart;
Traditional offline travel agencies; and
Global and regional restaurant technology providers for reservation management and related services, such as OpenTable, Resy, and Tock.
Commercial 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. 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.
For the years ended December 31, 2022, 2021 and 2020, our two most significant travel partners were Expedia (and its subsidiaries) and Booking
(and its subsidiaries), each of which accounted for 10% or more of our consolidated revenue and together accounted for approximately 35%, 34% and 25%
of our consolidated revenue, respectively. Nearly all of this concentration of revenue is recorded in our Tripadvisor Core segment during these reporting
periods. Additionally, our business is dependent on relationships with third-party service operators that we rely on to fulfill service obligations to our
customers where we are the merchant of record, such as our experience providers and vacation rental owners. However, no single operator’s inventory
resulted in more than 10% of our revenue on a consolidated basis or at a reportable segment level in any period presented.
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
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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 in a "hybrid-cloud" configuration in which parts of it are housed at a colocation
facility and managed by our operations team, while the rest is hosted on Amazon Web Services. Our infrastructure installations have multiple
communication links as well as continuous monitoring and engineering support. The co-location facility is protected with both network-level and
application-level defenses, using well known commercial solutions specifically tailored for such purposes. We make use of Amazon Web Services
availability zones to provide redundancy for the cloud portions of our infrastructure. Substantially all of our software components, data, and content are
replicated in multiple data centers and development centers, as well as backed up at offsite locations. Our systems are monitored and protected through
multiple layers of security. Several of our individual subsidiaries and businesses have their own technology teams to support business growth while
leveraging common assets, tools and processes for scale across the group.
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.
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 platform by consumers.
However, differences between statutes, limitations on immunity, political and regulatory efforts to amend relevant statutes, 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 as well as some relating to the travel
industry, the provision of travel services and the vacation rental industry. As we continue to expand the reach of our brands into additional international
markets and expand our product offerings, we are increasingly subject to additional laws and regulations. This includes laws and regulations
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regarding privacy and data protection, libel and defamation, content, intellectual property, distribution, electronic contracts and other communications,
consumer protection, taxation, online payment services and competition, among others. 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 U.S. (as well as individual states), the E.U. (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 E.U., in May 2018, adopted the General Data Protection Regulation, or GDPR, which requires companies, including ours, to meet enhanced
requirements regarding the handling and storage of personal data. In January 2020, the State of California adopted the Consumer Privacy Protection Act
which also enhances privacy rights and consumer protection for residents of California. In addition, several U.S. states have adopted similar laws or are
currently evaluating their own laws and regulations. The enactment, interpretation and application of these laws is still in a state of flux.
Compliance with these laws, rules and regulations has not had, and is not expected to have, a material effect on our business, results of operations
and financial condition. However, there are, and will likely continue to be, an increasing number of laws and regulations pertaining to the internet and
online commerce and/or information retrieved from or transmitted over the internet, online editorial and user-generated content, user privacy, behavioral
targeting and online advertising, liability for third-party activities. 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. 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.
Corporate History, Equity Ownership and Voting Control
Tripadvisor was founded in February 2000. 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
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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, and as of December 31, 2022, LTRIP beneficially owned approximately 16.4 million shares of our common stock
and 12.8 million shares of our Class B common stock, which constitute nearly 13% 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 nearly 21% 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 approximately 56%
of our voting power.
Human Capital Management, Culture and Employees
Employees
As of December 31, 2022, the Company had approximately 3,100 employees. Approximately 55%, 35%, and 10% of the Company’s current
employees are based in Europe, the U.S., and the rest of world, respectively. Additionally, we use independent contractors to supplement our workforce. We
believe we have good relationships with our employees and contractors, including relationships with employees represented by international works councils
or other similar organizations.
Talent Acquisition and Development
We believe our employees are essential to our success and that the Company’s success depends on our ability to attract, develop and retain key
talent. The skills, experience and industry knowledge of key employees significantly benefit our operations and performance. Competition for qualified
personnel is intense, particularly for software engineers, computer scientists, and other technical staff, and constrained labor markets have increased
competition for personnel across other parts of our business. The Company's management and Board of Directors oversee various initiatives for talent
acquisition, retention and development.
Our talent philosophy is to both develop talent from within and to strategically recruit key external talent. This approach has yielded a deep
understanding, among our employee base, of our business, our products, and our customers, while adding new employees and ideas in support of our
continuous improvement mindset. Our overall talent acquisition and retention strategy is designed to attract and retain diverse and qualified candidates to
enable the success of the Company and achievement of our performance goals. We recruit the best people for the job without regard to gender, ethnicity or
other protected traits and it is our policy to comply fully with all domestic, foreign and local laws relating to discrimination in the workplace. Our talent
acquisition team uses internal and external resources to recruit highly skilled and talented workers, and we encourage employee referrals for open positions.
We support and develop our employees through global training and development programs that build and strengthen employees’ leadership and
professional skills. Leadership development includes programs for new leaders as well as programs designed to support more experienced leaders. We also
partner with external training organizations to help provide current and future workers with the knowledge and skills they need to succeed.
It is important that our employees represent a mix of experiences and backgrounds in order to make our company stronger, more innovative and
more inclusive. Inclusion is one of our core values, and we have programs in place to promote diversity and inclusion. Our diversity and inclusion
initiatives support our goal that everyone throughout the Company is engaged in creating an inclusive workplace. We support inclusion through training on
topics including Unconscious Bias and Inclusive Leadership. We also support a network of active Employee Resource Groups reflecting many dimensions
of diversity across the Company.
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Total Rewards
As part of our compensation philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees
in order to attract, motivate and retain superior talent. These programs not only include base wages and incentives in support of our pay for performance
culture, but also health, welfare, and retirement benefits.
We design our benefit programs to meet the needs of our employees’ health while managing program costs for escalation rates at or below industry
trend factors. Our programs include but are not limited to wellness, mental health services, telemedicine, and partnerships with service providers that
support diverse family-care need solutions. We continuously refine, develop and implement proactive health care strategies and solutions that allow us to
enhance employee health and well-being while curbing costs.
Health and Safety
The health and safety of our employees is of utmost importance to us. We conduct regular self-assessments and audits to ensure compliance with our
health and safety guidelines and regulatory requirements.
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, 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 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 and adversely affected.
Risks Related to Our Business and Industry
Weak economic conditions, including those that cause declines or disruptions in the travel industry or reduce consumer discretionary spending
have had a material adverse impact on the Company’s business and financial performance. Our business and financial performance are affected by the
health of the worldwide travel industry. Events beyond our control, such as pandemics, unusual or extreme weather or natural disasters (whether caused by
climate change or otherwise), travel-related health concerns, restrictions related to travel, trade or immigration policies, wars, sources of political
uncertainty, foreign policy changes, regional hostilities, imposition
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of taxes or surcharges by regulatory authorities, labor unrest or travel-related accidents, can disrupt travel globally or otherwise result in declines in travel
demand. For example, the COVID-19 pandemic caused significant disruption in the travel industry and resulted in a material adverse impact on our
business.
In addition, the uncertainty of macro-economic factors and their impact on consumer behavior makes it more difficult to forecast industry and
consumer trends, which in turn could adversely affect our ability to effectively manage our business. Our financial performance is also subject to global
economic conditions and their impact on levels of discretionary consumer spending. Sales of travel services tend to decline or grow more slowly during
economic downturns and times of inflation 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. Leisure travel, which accounts for a
substantial majority of our current business, is particularly dependent on discretionary consumer spending levels.
If we are unable to continue to attract a significant amount of visitors to our platform, to cost-effectively convert these visitors into revenue-
generating customers and to continue to engage consumers, our business and financial performance could be harmed. Our traffic and user engagement
could be adversely affected by a number of factors including, but not limited to, inability to provide quality content, inventory or supply to our consumers;
declines or inefficiencies in traffic acquisition and reduced awareness of our brands. 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 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 consumers, 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 platform 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 ours. If we are unable to drive traffic cost-effectively, traffic to our platform could decline and our business would be
negatively affected. The number of consumers we attract to our platform is due in large part to how and where information from, and links to, our platform
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. Search engines frequently 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 platform can be negatively affected. A search engine could alter its search algorithms or results
causing our websites to place lower in search query results. For example, Google, a significant source of traffic to our platform, frequently promotes its
own competing products in its search results, which has negatively impacted placement of references to our company and our platform on the SERP. 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 Search Engine Optimization (“SEO”) or Search Engine Marketing (“SEM”) in a negative manner,
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 platform, as well as increased costs to the extent we replace free
traffic with paid traffic.
We also rely on application marketplaces, or app stores such as Apple’s App Store and Google’s Play, to drive downloads of our apps. In the future,
Apple, Google or other marketplace operators may make changes that make access to our products more difficult or may limit our access to information
that would restrict our ability to provide the best user experience. 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 apps may receive unfavorable treatment
compared to the promotion and placement of competing apps, such as the order in which they appear within marketplaces. In addition, Apple has
announced new features that limit who has access to consumer data, including location information. Similarly, if problems arise in our relationships with
providers of application marketplaces, traffic to our platform 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 on our platform could
harm our business. Our ability to grow advertising revenue with our existing or new travel partners is dependent in large part on our ability to provide
value to them relative to other alternatives. Our ability to provide value to our travel partners depends on a number of factors, including, but not limited to,
the following:
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Our ability to increase or maintain user engagement;
Our ability to increase or maintain the quantity and quality of ads shown to consumers;
The development of technologies that can block the display of our ads or our ad measurement tools;
The effectiveness of our advertising and the extent to which it generates sales leads, customers, bookings or financial results on a cost-
effective basis;
The competitiveness of our products, traffic quality, perception of our platform, and availability and accuracy of analytics and measurement
solutions to demonstrate our value; and
Adverse government actions or legal developments relating to advertising, including limitations on our ability to deliver targeted advertising.
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, any of which would negatively affect our revenue and financial results.
Click-based advertising revenue accounts for the majority of our advertising revenue. Our 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 advertising revenue which would, in
turn, have an adverse effect on our business and financial results.
We rely on a relatively small number of significant travel partners and any reduction in spending by or loss of these partners could seriously
harm our business. For the year ended December 31, 2022, our two most significant travel partners, Expedia and Booking (and their subsidiaries),
accounted for a combined 35% of total revenue, with most of this revenue recorded within our Tripadvisor Core segment. If any of our significant travel
partners were to cease or significantly curtail advertising on our platform, 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 strong brands and any failure to maintain, protect or enhance our brands could hurt our ability to retain and expand
our base of consumers and partners, the frequency with which consumers utilize our products and services and our ability to attract partners. Our
ability to maintain and protect our brands depends, in part, on our ability to maintain consumer trust in our products and services and in the quality,
integrity, reliability and usefulness of the content and other information found on our platform. If consumers do not view the content on our platform 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 or at all. We
dedicate significant resources to protecting the quality of our content, primarily through our content guidelines, computer algorithms and human moderators
that are focused on identifying and removing inappropriate, unreliable or deceptive content.
Media, legal, or regulatory scrutiny of our user content, advertising practices, and other issues may adversely affect our reputation and brand.
Negative publicity about our company, including our content, technology and business practices, could diminish our reputation and confidence in our
brand, thereby negatively affecting the use of our products and our financial performance. For example, in the past, 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. 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. Regulatory inquiries or investigations require management time and
attention and could result in further negative publicity, regardless of their merits or ultimate outcomes.
In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection 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.
If we are unable to offer compelling products and services on mobile devices or continue to operate effectively on these platforms, our business
may be adversely affected. Widespread adoption of mobile devices has driven substantial online traffic and commerce to mobile platforms. Our platform,
when utilized on mobile phone devices, have historically monetized at a significantly lower rate than desktops and advertising opportunities are more
limited on these devices. Additionally, consumer purchasing patterns differ on these devices. For example, accommodation reservations made on a mobile
device are generally for shorter lengths of stay and are not made as far in advance. We expect that the ways in which consumers engage with our platform
will continue to change as consumers increasingly engage via alternative devices.
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It is 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 and we may need to devote significant resources to the creation, support and maintenance of competitive new products. If we are
unable to continue to rapidly innovate and create appealing, user-friendly and differentiated offerings and efficiently and effectively advertise on these
platforms, we could lose market share and our business, future growth and financial results could be adversely affected.
Our success will also depend on the interoperability of our products with a range of technologies, systems, networks and standards and our ability to
create, maintain and develop relationships with key participants in related industries, some of which may be our competitors. For example, Apple’s iPhone
and Google’s Android are the leading smartphones in the world and our products need to synergistically function on their operating systems in order to
create a positive user experience on those devices. Yet, Apple continues to announce and implement new privacy features that limit the amount of
information we can access about our users operating on the Apple iPhone operating system.
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 do not 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 financial results may be
harmed.
Any continued or future declines or disruptions in the economy and industries in which we operate could adversely affect our businesses,
financial performance and the market price of our common stock. Sales of travel and/or leisure products tend to decline or grow more slowly during
economic downturns 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 uncertainty of macro-economic factors and their impact
on consumer behavior 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. Economic downturn and adverse market conditions may also
negatively impact our partners, our partners’ access to capital, cost of capital and ability to meet liquidity needs. These challenges faced in a prolonged
economic downturn or deterioration in the travel industry could adversely impact our business, financial performance and share price. The extent and
duration of such impacts remain largely uncertain and dependent on future developments that cannot be accurately predicted at this time.
The global economy may be adversely impacted by events beyond our control including actual or threatened terrorism, regional hostilities or
instability, natural disasters, political instability and health concerns (including epidemics or pandemics), significant increases in energy costs, tightening of
credit markets and declines in consumer confidence. For example, the COVID-19 pandemic had a material impact on the travel industry, our company and
our financial performance. In addition, in response to the COVID-19 pandemic, much of our work force began working remotely and continue to work
remotely. Working remotely can give rise to cybersecurity issues, training and compliance issues, or create operational or other challenges as we adjust to a
fully-remote workforce, any of which could harm our business.
We operate in a competitive global environment and our failure to compete effectively could reduce our market share and harm our financial
performance. We compete with different types of companies in the various markets and geographies where we operate, including large and small
companies in the travel and leisure space as well as broader service providers. We face competition for content, consumers, advertisers, online travel search
and price comparison services 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. Current and new competitors can launch new services at a relatively low cost. More
specifically:
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General OTAs, such as Expedia, Booking Holdings, Airbnb, traveloka, Despegar, Trip.com, and their respective subsidiaries and operating
companies;
Experiences OTAs, such as GetYourGuide, Klook, and TUI Musement;
Hotel metasearch providers, such as trivago, Kayak and HotelsCombined;
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Online search, social media, and marketplace platforms for advertising spend, such as Google, Facebook, Twitter, Pinterest, and Snap;
Global and regional travel, experiences, and restaurant brands seeking to promote direct bookings;
Emerging online advertising businesses, such as ad-supported retail and entertainment platforms like Amazon, Spotify, and Walmart;
Traditional offline travel agencies; and
Global and regional restaurant technology providers for reservation management and related services, such as OpenTable, Resy, and Tock.
There has been a proliferation of new channels through which service 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 offer a variety of online services and, in some cases, 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 have significantly greater
financial, technical, marketing and other resources and have more expertise in developing online commerce and facilitating internet traffic as well as larger
client bases. They also have the ability to leverage other aspects of their business to enable them to compete more effectively.
In addition, Google and other large, established companies with substantial resources and expertise have launched travel or travel-related search,
metasearch and/or reservation booking services and may create additional inroads into online travel. Many of our competitors continue to expand their
voice and artificial intelligence capabilities, which may provide them with a competitive advantage in travel.
We compete with certain companies that we also do business with, including certain of our travel partners and related parties. The consolidation of
our competitors and travel partners 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 platform and reduced
advertising by travel companies on our platform.
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. 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. Our future success will also depend on our ability to adapt to emerging
technologies such as tokenization; new authentication technologies, such as biometrics, distributed ledger and blockchain technologies; new and emerging
payment methods, such as Alipay, Paytm and WeChat Pay; artificial intelligence; virtual and augmented reality; and cloud technologies. The emergence of
alternative or new devices 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.
If we are unable to adapt to the evolving demands of our customers, we may not remain competitive, and our business and financial
performance could suffer. Our competitors are continually developing innovations in services and features. As a result, we are continually working to
improve the user experience on our platform in order to engage our consumers and drive user traffic and conversion rates for our partners and provide our
business partners with the tools they need to succeed. 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.
If we are unable to continue offering innovative products and services and quality features that customers want to use, existing customers may become
dissatisfied and use competitors’ offerings and we may be unable to attract additional customers, which could adversely affect our business and financial
performance.
Our dedication to making the consumer experience our highest priority may cause us to prioritize rapid innovation and consumer experience
over short-term financial results. We strive to create the best experience for our consumers. We believe that in doing so we will increase our traffic
conversion (i.e., visitors converting into
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clicks and/or bookings), revenue and financial performance. We have taken actions in the past, and may continue to take actions in the future, that have the
effect of reducing our short-term financial results if we believe the actions benefit the overall consumer experience. These decisions may not produce the
long-term benefits we expect, new or enhanced products may fail to engage consumers and/or we may be unsuccessful in our efforts to monetize these
initiatives, in which case our relationships with consumers and partners, and our business and financial performance could be harmed.
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 and adverse impact on the value of our platform 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 and identify low quality clicks such as non-human processes, including robots, spiders, 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 will be delivered to such online advertisers. Such 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. 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. 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; 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 our platform. As such, the calculations of our
unique users may not accurately reflect the number of people actually visiting our platform. 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. We continue to improve upon our tools and
methodologies to capture data; 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. Finally, we may, in the future, identify new or other metrics
that enable us to more accurately evaluate our business. Accordingly, investors should not place undue reliance on these metrics.
Our future success depends on the performance of our key employees and our ability to attract and retain senior management and highly skilled
personnel. In particular, we are highly dependent on the services of our leadership team for the development of and our execution on our vision and
strategy. In 2022, we made several changes to our senior management team, including those serving as our Chief Executive Officer and President and our
Chief Financial Officer and adding several senior leaders. Our future performance will depend, in part, on the successful integration of these new senior
level executives into their roles. If we do not successfully manage these additions, it could be viewed negatively by our investors, employees, and partners,
and could have an adverse impact on our business and results of operations. We also heavily rely on the continued service and performance of our senior
management team, which provides leadership, contributes to the core areas of our business and helps us to efficiently execute on mission, vision and
strategic initiatives. If we are unable to retain members of our senior management team, including our executive leadership, we may not be able to manage
our business effectively and, as a result, our business and operating results could be harmed. If the senior management team fails to work together
effectively and to execute our plans and strategies on a timely basis, then our business and future growth prospects could be harmed.
The success of our operations and the quality of our services are also highly dependent on our ability to attract and retain skilled personnel. For
employees, we compete with companies that have far greater financial resources than we do as well as companies that promise short-term growth
opportunities and/or other benefits. 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 present new challenges and risks and
disrupt our ongoing business. We have acquired, invested in and/or entered into significant commercial arrangements with a number of businesses in the
past and our future growth may
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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:
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Costs incurred to identify, pursue and fund these endeavors that may or may not be successful and may limit other potential uses of cash;
Diversion of management’s attention or other resources from our existing business;
Difficulties and expenses in integrating the operations, products, technology or personnel;
Difficulties in implementing and retaining uniform standards, controls, procedures, policies and information systems;
Assumption of debt and liabilities, including costs associated with litigation, cybersecurity risks, and other claims;
Failure of any such strategy or target to achieve anticipated objectives, revenues or earnings;
Limited management or operational control and heightened reputational risk with respect to minority investments;
Entrance into markets in which we have no prior experience;
Amortization expenses related to acquired intangible assets and other adverse accounting consequences; and
Adverse market reaction to the transaction.
We have in the past invested, and may in the future invest, in privately-held companies. Such investments are inherently risky and our ability to
liquidate any such investments is typically difficult. Valuations of such privately-held companies are inherently complex and uncertain due to the lack of
liquid market for the companies’ securities. We cannot assure you that these investments will be successful or that such endeavors will result in the
realization of the synergies, cost savings and innovation that may be possible within a reasonable period of time, if at all. We could lose the full amount of
our investments; any impairment of our investments could have a material adverse effect on our financial results.
Risks Related to Legal and Regulatory Matters
We are a global company that operates in many different jurisdictions inside and outside the U.S. and these operations expose us to additional
risks. Many regions have different economic conditions, languages, currencies, legislation, regulatory environments, levels of political stability, levels of
consumer expectations, and use of the internet for commerce. We are subject to risks typical of global businesses, including, but not limited to, the
following:
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Compliance with additional laws and regulations, including but not limited to, laws and regulations regarding data privacy, labor and
employment, advertising, anti-competition and tax;
Difficulties in managing staff and operations due to distance, time zones, language and cultural differences;
Restrictions on repatriation of cash and on investments in operations;
Uncertainty regarding liability for services, content and intellectual property rights;
Increased risk and limits on enforceability of intellectual property rights;
Diminished ability to legally enforce contractual rights;
Economic or political instability or laws involving economic or trade prohibitions or sanctions; and
Threatened or actual acts of terrorism.
Our strategy includes continued expansion in existing markets and potentially new markets. In addition to the risks mentioned above, 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 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 existing and potentially new markets and effectively managing that
expansion, our business and financial results could be adversely affected.
We are regularly subject to claims, lawsuits, government investigations, and other proceedings which may result in adverse outcomes and,
regardless of the outcome, result in legal costs, diversion of management
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resources, injunctions or damage awards, and other negative results. 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, financial results or financial position. These proceedings could also result in
reputational harm, criminal sanctions or 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. Any of these consequences could adversely affect our business and
financial results.
A failure to comply with existing or new laws, rules and regulations or changes to such laws, rules and regulations and other legal uncertainties
may adversely affect our business or financial results. Our business and financial results 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,
but not limited to, those relating to internet and online commerce, internet advertising, consumer protection, intermediary liability and data security and
privacy. 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 and liability for information retrieved from or transmitted over the internet, online editorial and user-generated content, user
privacy, behavioral targeting and online advertising and liability for third-party activities. Likewise, the SEC, DOJ and 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. Operating in this dynamic regulatory environment requires significant management attention and financial resources. 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. 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 and financial results.
The promulgation of new laws, rules and regulations, or new interpretations of existing laws, rules and regulations, could require us to change
certain aspects of our business, operations and relationships to ensure compliance, which could decrease demand for services, reduce revenues, increase
costs and/or subject the Company to additional liabilities. For example, many jurisdictions have adopted, and many jurisdictions are considering adopting,
privacy rights and consumer protections for their residents, which 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 limit marketing methods and capabilities, decrease demand
for products and services, impede development of new products, require significant management time, increase costs and/or subject us to additional
liabilities. Violations of these laws and regulations could result in penalties, criminal sanctions and/or negative publicity against us, our officers or our
employees and/or restrictions on the conduct of our business.
We face risks related to our intellectual property. We rely on content, brands and technology, much of which is proprietary. We protect our content,
brands and technology by, among other things, a combination of maintenance and enforcement of registered and unregistered intellectual property rights
(e.g. trademarks, copyrights and trade secrets), technological solutions and contractual protections. Even with these precautions, it may be possible for
another party to copy or otherwise obtain and use our intellectual property, without authorization or to independently develop similar content, brands or
technology. Any misappropriation or violation of our rights could have a material adverse effect on our business.
Effective intellectual property protection may not be available in every jurisdiction in which our platform or 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 adequately protect our
intellectual property against unauthorized third-party copying or use. 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 in order to enforce our rights or scope of the
proprietary rights of others. These proceedings might result in substantial costs and diversion of resources and management attention, and we cannot
accurately predict the likelihood of success in such proceedings. Our failure to protect our intellectual property in an effective manner could have a material
adverse effect on our business.
We currently license some of the intellectual property displayed on our platform from third parties. As we continue to introduce new services that
incorporate new intellectual property, we may be required or elect to license additional intellectual property. We cannot be sure that such licenses will be
available on commercially reasonable terms, if at all.
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From time to time, in the ordinary course of our business, we have been subject to, and are currently subject to, legal proceedings and claims relating
to third-party intellectual property rights, and we expect that third parties will continue to assert intellectual property claims against us, particularly as we
expand the complexity and scope of our platform and services. Successful intellectual property claims against us could result in significant monetary
liability or prevent us from operating our business, or portions of our business, or require us to change business practices or develop non-infringing
intellectual property, which could require significant effort and expense. In addition, resolution of claims may require us to obtain releases or licenses to use
intellectual property rights belonging to third-parties, which may be expensive to procure, or possibly to cease using those rights altogether. Any of these
events could have a material adverse effect on our business, results of operations and financial condition.
Increased focus on our environmental, social, and governance ("ESG") responsibilities have and will likely continue to result in additional costs
and risks, and may adversely impact our reputation, employee retention, and willingness of customers and partners to do business with us. Institutional,
individual, and other investors, proxy advisory services, regulatory authorities, consumers and other stakeholders are increasingly focused on ESG practices
of companies. The standards for tracking and reporting on ESG matters and disclosure frameworks are relatively new, have not been harmonized, and
continue to evolve. Ensuring there are systems and processes in place to comply with the various ESG tracking and reporting obligations may require
management time and expense. As we look to respond to evolving standards for identifying, measuring, and reporting ESG metrics, our efforts may result
in a significant increase in costs and may nonetheless not meet investor or other stakeholder expectations and evolving standards or regulatory
requirements, which may negatively impact our financial results, our reputation, our ability to attract or retain employees, our attractiveness as a service
provider, investment, or business partner, or expose us to government enforcement actions, private litigation, and actions by stockholders or stakeholders.
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. Failure to comply with
those laws and regulations could give rise to liabilities. The security of data when engaging in electronic commerce is essential to maintaining consumer
and service provider confidence in our services. We are subject to a variety of laws in the U.S. 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. The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so
for the foreseeable future. In addition, 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.
Implementing and complying with these laws and regulations may be more costly or take longer than we anticipate, or could otherwise affect our
operations. Any failure or perceived failure by us to comply with our privacy and information security policies, privacy-related obligations to consumers or
other third parties, or privacy-related legal obligations, may result in litigation or governmental enforcement actions that could harm our reputation and
cause our consumers and partners to lose trust in us, any of which could have an adverse effect on our business, brand, market share and financial results.
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/or additional costs and could have a negative impact on our business. We accept payments from consumers and our business partners
using a variety of methods, including credit, debit and invoicing. We are susceptible to fraudulent activity and cybercrime generally and with respect to this
payment facilitation activity. We rely on third parties to provide certain payment methods and payment processing services and our business could be
disrupted if these companies become unwilling or unable to provide these services to us. We are subject to laws, regulations and compliance requirements
relating to payments, international money transfers, privacy and information security and money laundering, including obligations to implement enhanced
authentication processes. 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. These laws, regulations
and/or requirements result in significant costs. If we fail to comply or if our data security systems are breached or compromised, we may be liable for card
issuing banks’ costs, subject to fines, penalties and higher transaction fees, and/or lose our ability to accept credit and debit card payments, process
electronic funds transfers, or facilitate other
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types of online payments. In addition, 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.
Additionally, our marketplace activities in the U.K. and Europe require us to obtain or operate under a payment institution license under the Payment
Services Directive Two (“PSD2”). PSD2 requires a license to perform certain defined “payment services” in a European Economic Area (“EEA”) member
state. Conditions for obtaining and complying with the license include minimum capital requirements, establishment of procedures for safeguarding funds,
and certain governance and reporting requirements. Certain obligations relating to internal controls and the conduct of business, in particular, consumer
disclosure requirements and certain rules regarding the timing and settlement of payments, must be met. We have obtained a payment institution license in
the U.K. As a result of Brexit, we are no longer able to passport our U.K. license to the EEA. Although work on our EU application is underway and we
anticipate submitting our application in the first half of 2023, we may not receive the EU license on a timely basis if at all.
It is possible that we could become subject to regulatory enforcement or other proceedings in those states or other jurisdictions with money
transmission, or other similar statutes or regulatory requirements, including an EEA member state, related to the handling or moving of money, which could
in turn have a significant impact on our business, even if we were to ultimately prevail in such proceedings. If we are ultimately deemed to be in violation
of one or more money transmitter or other similar statutes or regulatory requirements related to the handling or moving of money in the U.S., the EEA or
other jurisdictions, we may be subject to the imposition of fines or restrictions on our business, our ability to offer some or all of our services in the relevant
jurisdiction may be suspended, and we may be subject to civil or criminal liability and our business, results of operations and financial position could be
materially adversely affected.
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 share price. Our reputation
and ability to attract, retain and service our consumers and partners is dependent upon the reliable performance and security of our computer systems 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 partners, could expose us, our consumers and 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 could result in government enforcement actions and
litigation and potential liability for us. 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.
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 vulnerabilities in our systems, 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. 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.
Much of our business is conducted with third-party partners and vendors. 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 reputational damage, expose us to risk of loss or litigation and subject us to
regulatory penalties and sanctions. In addition, such incidents may also result in a decline in our user base and client base or engagement levels.
Media coverage of data breaches and public exposure of consumer data rights has increased, in part because of the rise of enforcement actions,
investigations and lawsuits. Similarly, the increase in privacy activist groups is likely to give rise to further scrutiny, investigative actions and publicity.
Security breaches could result in negative
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publicity, damage to reputation, exposure to risk of loss 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 consumers to lose confidence in our data security, which would have a negative effect on the value of our brand.
Evolving regulations, guidance and practices on the use of "cookies" and similar tracking technologies could negatively impact the way we do
business. Cookies and similar technologies are common tools used by websites and apps, including ours, to store or gather information, improve site
security, improve and personalize the customer experience, market to consumers and increase conversion. Companies such as Apple and Google have
introduced new policies governing developers’ use of cookies and similar tracking technologies, including enhanced disclosure and opt in requirements.
Similarly, many states and countries have adopted data protection laws and regulations governing the use of cookies and other similar tracking technologies
by websites and app developers. Such regulations could limit our ability to serve certain customers in the manner we currently do, including with respect to
retargeting or personalized advertising, impair our ability to improve and optimize performance on our platform, negatively affect a consumer's experience
using our platform, which, in turn, could negatively impact our business.
Equally, privacy has been the impetus behind a move towards a cookie-less online ecosystem which poses a potential risk to our online behavioral
advertising strategy.
Risks Related to Financial Matters
Our financial results are difficult to forecast; they have fluctuated in the past and will likely fluctuate in the future. 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:
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Our ability to maintain and grow our consumer base and to increase user engagement;
Increases in marketing, sales and other expenses that we will incur to grow and expand our operations and to remain competitive;
Fluctuations in the marketing spend of our travel partners due to seasonality, global or regional events or other factors;
User behavior or product changes that may reduce traffic to features or products that we successfully monetize;
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;
Adverse litigation judgments, settlement or other litigation related costs;
Changes in the legislative or regulatory environment or engagement by regulators;
Changes in tax laws, which may significantly affect our tax rates and taxes due;
Tax obligations that may arise from resolutions of tax examinations 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 GAAP; and
Changes in global business and macroeconomic conditions.
As a result, you should not rely upon our quarterly financial results as indicators of future performance.
If we are unable to successfully maintain effective internal control over financial reporting, investors may lose confidence in our reported
financial information and our business and our share price 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. If we are not successful in maintaining effective internal control over financial reporting, there could be inaccuracies or omissions in the
financial information we file with the SEC. Additionally, even if there are no inaccuracies or omissions, we could be required to publicly disclose our
management’s conclusion that our internal control over financial reporting or disclosure controls and procedures are not effective. These events could
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cause investors to lose confidence in our reported financial information, 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, adversely impact our stock price,
or cause our stock to be delisted from The Nasdaq or any other securities exchange on which we are then listed.
We have indebtedness which could adversely affect our business and financial condition. With respect to the 2025 Senior Notes and 2026 Senior
Notes, we are subject to risks relating to our existing or potential indebtedness that include:
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Requirement to dedicate a portion of our cash flow to principal and interest payments, thereby reducing the availability of cash to fund
working capital, capital expenditures, acquisitions and investments and other general corporate purposes;
Difficulties to optimally capitalize and manage the cash flow for our businesses;
Possible competitive disadvantage compared to our competitors that have less debt;
Limitations on our ability to borrow additional funds on acceptable terms or at all; and
Exposure to increased interest rates to the extent our outstanding debt is subject to variable rates of interest.
Failure to comply with the various covenants contained in our Credit Agreement and the 2025 Indenture could have a material adverse effect on
our business. The various covenants contained in the Credit Agreement and 2025 Indenture include those that limit our ability to, among other things:
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Incur indebtedness;
Pay dividends on, redeem or repurchase our capital stock;
Effect share repurchases;
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. Any failure to comply with the restrictions of our Credit Facility or our
2025 Senior Notes and 2026 Senior Notes may result in an event of default under the agreements governing such debt instruments and such default may
allow the creditors to accelerate the debt incurred thereunder. In addition, lenders under the Credit Facility may be able to terminate any commitments they
had made to supply us with further funds.
We are subject to risks relating to our 2026 Senior Notes. If any of the conditions to the conversion of the 2026 Senior Notes is satisfied, then we
may be required under applicable accounting standards to reclassify the liability carrying value of the 2026 Senior Notes as a current, rather than a long-
term, liability, thereby materially reducing our reported working capital. This reclassification could be required even if no noteholders exchange their 2026
Senior Notes. Holders of our 2026 Senior Notes may convert the 2026 Senior Notes after the occurrence of certain dates or events. Settlement of the 2026
Senior Notes could adversely affect our liquidity.
We are subject to risks relating to the Capped Calls. In connection with the issuance of the 2026 Senior Notes, we entered into privately negotiated
capped call transactions (the “Capped Calls”) to reduce potential dilution to our common stock and/or offset cash payments we must make in excess of the
principal amount, in each case, upon any conversion of the 2026 Senior Notes, with such offset subject to a cap. We are subject to the risk that one or more
of the hedge counterparties may default under the Capped Calls. If any of the hedge counterparties become subject to insolvency proceedings, we will
become an unsecured creditor with a claim equal to our exposure at that time under our transactions with such counterparties. Our exposure will depend on
many factors but, generally, the increase in our exposure will be correlated to the increase in the market price and in the volatility of our common stock. In
addition, upon a default by a hedge counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to
our common stock.
We may have future capital needs and may not be able to obtain additional financing on acceptable terms. Pursuant to the Credit Facility, we
agreed to pledge substantially all of our assets, including the equity interests of our subsidiaries. This agreement also includes restrictive covenants that may
limit our ability to secure additional financing in the future on favorable terms, if at all. Our ability to secure additional financing will also depend upon our
future operating performance, which is subject to then prevailing general economic and credit market conditions, and financial, business and other factors,
many of which are beyond our control.
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Risks Related to Tax Matters
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 U.S. and other foreign jurisdictions. In the
event we incur taxable 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 could affect 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. Our future income tax rates could be affected by a number of matters outside of our control, including but not limited to changes in the mix of
earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets or accounting for share-based compensation. If our
effective income tax rates were to increase, our financial results and cash flows would be adversely affected.
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 U.S. and various other international jurisdictions. Tax laws are subject to change as new laws are passed and new interpretations of the laws are
issued or applied. Due to economic and political conditions, tax rates and tax regimes 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 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. Any changes to international tax
laws or any additional reporting requirements may increase the complexity and costs associated with tax compliance and adversely affect our cash flows
and results of operations.
Over the last several years, the Organization for Economic Cooperation and Development (“OECD”) has been working on a Base Erosion and Profit
Shifting Project to address the tax challenges arising from digitalization. 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. In
October 2021, more than 130 countries tentatively signed on to a framework, which calls for a minimum tax rate on corporations of 15% and a reallocation
of profits from the largest and most profitable businesses to countries where they make sales. The proposed framework, once enacted, envisages new
international tax rules and the removal of all digital services taxes. As this framework is subject to further negotiation and implementation by each member
country, the timing and ultimate impact of any such changes on our tax obligations is uncertain. As the OECD/G20 continues to drive toward a consensus
framework, several countries which have previously enacted unilateral digital services tax initiatives, such as France, Italy, Spain, and the U.K., will
continue to impose these revenue-based taxes until implementation of the consensus framework. During the years ended December 31, 2022, 2021 and
2020, we recorded $9 million, $1 million and $2 million, respectively, of digital service tax to general and administrative expense on our consolidated
statements of operations.
We are routinely under audit by federal, state and foreign taxing authorities. The ultimate outcome of these examinations (including the Internal
Revenue Service (“IRS") audit described below) cannot be predicted with certainty but could be materially different from our income tax provisions and
accruals and could have a material effect on our results of operations or cash flows in the period or periods for which that determination is made. Should the
IRS or other taxing authorities assess additional taxes as a result of examinations, we may be required to record charges to our results of 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 platform and our financial
results. Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-
commerce and it is possible that various jurisdictions may attempt to levy additional or new sales, income or other taxes relating to our activities. 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
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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, certain U.S. states and
countries in which we do business have enacted or proposed digital services tax initiatives. 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; however, 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 results and financial condition.
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. In the event of an adverse outcome, we could face assessments, 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). 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 short-period
2011 tax years and, in connection with that audit, have received Notices of Proposed Adjustment from the IRS which would result in an increase in our
worldwide income tax expense. We have requested competent authority assistance under the Mutual Agreement Procedure (“MAP”) for tax years 2009
through 2011. The outcome of these matters or any other audits could subject us to significant tax liabilities. In January 2023, we received a final notice
regarding a MAP settlement for the 2009 through 2011 tax years which we accepted in February 2023. In the first quarter of 2023, we will record additional
tax expense as a discrete item, inclusive of interest, in an estimated range of $25 million to $35 million specifically related to this settlement.
We face risks associated with fluctuations in foreign currency exchange rates. As a result, we face exposure to movements in foreign currency
exchange rates including, but 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, 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 revenue growth in future 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 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
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carry risks of counter-party failure. There can be no assurance that our forward exchange contracts will have their intended effects.
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). Our Chairman, Gregory Maffei, and
Director Albert Rosenthaler, also serve as officers and directors of LTRIP. LTRIP may have interests that differ from those of our other stockholders and
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 related to our business. LTRIP’s control of us, as well as the 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 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:
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Quarterly variations in our or our competitors’ results of operations;
Changes in earnings estimates or recommendations by securities analysts;
Failure to meet market expectations;
The announcement of new products or product enhancements by us or our competitors;
Repurchases of our common stock;
Developments in our industry, including changes in governmental regulations; and
General market conditions and other factors.
In the past, the stock market has 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. We currently rely on the controlled company exemption for certain of the above requirements,
including the requirement that 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. 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.
We do not pay regular quarterly or annual cash dividends on our stock. Any determination to pay dividends is 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.
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 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
24
we may file for ourselves or other stockholders. 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.
These provisions include:
•
•
•
•
Authorization and issuance of Class B common stock that entitles holders to ten votes per share;
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;
Prohibition of our stockholders to fill board vacancies or call special stockholder meetings; and
Limitations on who may call special meetings of stockholders.
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.
Item 2. Properties
As of December 31, 2022, we do not own any real estate. We lease approximately 280,000 square feet of office space for our corporate headquarters
in Needham, Massachusetts (the “Headquarters Lease”). The Headquarters Lease, has 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 400,000 square feet of office space at approximately
30 locations across North America, Europe, Asia Pacific and South America, in cities such as New York, London, Sydney, Barcelona, Buenos Aires and
Paris, primarily used as sales offices, subsidiary headquarters, and for international operations, 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.
Item 3. Legal Proceedings
Refer to “Note 12: Commitments and Contingencies” in the notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on
Form 10-K, for further information on our legal proceedings. For an additional discussion of certain risks associated with legal proceedings, see “Risk
Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
Item 4. Mine Safety Disclosures
Not applicable.
25
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 The Nasdaq Global Select Market 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 10, 2023, all of our Class B common stock was held by LTRIP.
Performance Comparison Graph
The following graph provides a comparison of the total stockholder return from December 31, 2017 to December 31, 2022, of an investment of $100
in cash on December 31, 2017 for Tripadvisor, Inc. common stock and an investment of $100 in cash on December 31, 2017 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.
26
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 10, 2023, there were 128,164,615 outstanding shares of our common stock held by 1,803 stockholders of record, and 12,799,999
outstanding shares of our Class B common stock held by one stockholder of record: LTRIP.
Dividends
We did not declare or pay any dividends during the years ended December 31, 2022, 2021, or 2020. 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. In addition, our ability to pay dividends was also limited by
the terms of our Credit Agreement and our 2025 Indenture. 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 2023 Proxy Statement, which proxy statement will be filed with
the SEC not later than 120 days after the close of our fiscal year ended December 31, 2022.
Unregistered Sales of Equity Securities
During the quarter ended December 31, 2022, 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
During the quarter ended December 31, 2022, we did not repurchase any shares of our common stock under our existing share repurchase program.
As of December 31, 2022, we had $75 million remaining available to repurchase shares of our common stock under our previously authorized share
repurchase program.
While the Board of Directors has not suspended or terminated the share repurchase program, the terms of our Credit Agreement limit the Company
from engaging in share repurchases and the terms of our 2025 Indenture related to our 2025 Senior Notes impose certain limitations and restrictions on
share repurchases. In addition, the Inflation Reduction Act of 2022 imposes a 1% excise tax on certain corporate stock buybacks. Refer to “Note 9: Debt” in
the notes to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information about our Credit Agreement and
our 2025 Indenture.
Item 6. [Reserved]
27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be
read in conjunction with our accompanying consolidated financial statements and the notes in Item 8 of this Annual Report on Form 10-K.
Overview
The Tripadvisor group operates as a family of brands with a purpose of connecting people to experiences worth sharing. Our vision is to be the
world’s most trusted source for travel and experiences. The Company operates across three reportable segments: Tripadvisor Core, Viator, and TheFork. We
leverage our brands, technology platforms, and capabilities to connect our large, global audience with partners by offering rich content, travel guidance
products and services, and two-sided marketplaces for experiences, accommodations, restaurants, and other travel categories.
Tripadvisor Core’s purpose is to empower everyone to be a better traveler by serving as the world’s most trusted and essential travel guidance
platform. Since Tripadvisor’s founding in 2000, the Tripadvisor brand has developed a relationship of trust and community with travelers and experience
seekers by providing an online global platform for travelers to discover, generate, and share authentic UGC in the form of ratings and reviews for
destinations, POIs, experiences, accommodations, restaurants, and cruises in over 40 countries and over 20 languages across the world. As of December 31,
2022, Tripadvisor offered more than 1 billion user-generated ratings and reviews on nearly 8 million experiences, accommodations, restaurants, airlines,
and cruises. Tripadvisor’s online platform attracts one of the world’s largest travel audiences, with hundreds of millions of visitors in 2022.
Viator’s purpose is to bring more wonder into the world—to bring extraordinary, unexpected, and forever memorable experiences to more people,
more often, wherever they are traveling. In doing so, Viator elevates tens of thousands of businesses, large and small. Viator delivers on its purpose by
enabling travelers to discover and book iconic, unique and memorable experiences from experience operators around the globe. Our online marketplace is
comprehensive and easy-to-use, connecting millions of travelers to the world’s largest supply of bookable tours, activities and attractions—over 300,000
experiences from more than 50,000 operators as of December 31, 2022. Viator is a pure-play experiences OTA singularly focused on the needs of both
travelers and operators with the largest supply of bookable experiences available to travelers.
TheFork’s purpose is to deliver happiness through amazing dining experiences. TheFork delivers on its purpose by providing an online marketplace
that enables diners to discover and book online reservations at more than 55,000 restaurants in 12 countries, as of December 31, 2022, across the UK,
western and central Europe, and Australia. TheFork has become an urban, gastronomic guide with a strong community that offers more than 20 million
restaurant reviews.
Trends
The online travel industry in which we operate is large, highly dynamic and competitive. We describe below the impact on our business from
COVID-19, other current trends affecting our business and reportable segments, including key drivers of our financial results, and uncertainties that may
impact our ability to execute on our objectives and strategies.
COVID-19
The COVID-19 pandemic had a significant negative impact on the global economy and the travel, leisure, hospitality and restaurant industries in
particular beginning in 2020. Since the beginning of the pandemic, the pervasiveness and severity of travel restrictions and stay-at-home directives have
varied by country and state; however, as of December 31, 2022, most of the countries in which we operate had eased or completely lifted such restrictions.
While the COVID-19 pandemic negatively and materially affected our results for the years ended
28
December 31, 2020 and 2021, in 2022, although some areas of our business recovered faster than others, as discussed below, we generally experienced a
recovery in travel demand and our financial performance during 2022. Although all periods included in our consolidated financial statements presented in
this Annual Report on Form 10-K were impacted at varying degrees by the COVID-19 pandemic, none of these periods are considered comparable, and no
periods affected by the pandemic are expected to be comparable to future periods. As a result, for additional context, below we provide information
regarding our performance for the year ended December 31, 2022 as compared to the year ended December 31, 2019, before the impacts of the COVID-19
pandemic.
Our consolidated revenue for the year ended December 31, 2022 was approximately $1.5 billion, an increase of 65%, when compared to the same
period in 2021. In comparison to a pre-COVID-19 timeframe, consolidated revenue for the year ended December 31, 2022 was approximately 96% of
2019’s comparable period, an increase from approximately 58% of 2019’s comparable period during the year ended December 31, 2021, primarily
attributable to what we believe to be increased consumer travel demand for travel industry related services, combined with the easing of government travel
restrictions. Revenue trends also improved as 2022 progressed, as consolidated revenue for the third and fourth quarter of 2022 exceeded parity with 2019's
comparable periods, in comparison to approximately 70% and 99% of 2019’s comparable periods during the first and second quarters of 2022, respectively.
Tripadvisor Core revenue increased by 45% during the year ended December 31, 2022, when compared to the same period in 2021, despite the
significant impact from the Omicron variant in the month of January 2022, as travel demand and revenue rebounded significantly during 2022. In
comparison to a pre-COVID-19 timeframe, during the year ended December 31, 2022, Tripadvisor Core revenue reached approximately 79% of 2019’s
comparable period, an increase from approximately 54% of 2019’s comparable period during 2021.
Tripadvisor-branded hotels revenue increased 44% during the year ended December 31, 2022, when compared to 2021, primarily driven by growth
in hotel meta (formerly referred to as hotel auction). During 2022, Tripadvisor-branded hotels revenue reached approximately 83% of 2019’s comparable
period, an increase from approximately 58% of 2019’s comparable period during 2021. The Company saw continued strength of recovery in our U.S. hotel
meta revenue throughout 2022 on strong consumer travel demand, reaching parity with 2019’s comparable period during the year ended December 31,
2022. Revenue recovery in Europe and the rest of the world has been slower relative to the U.S. due to relative brand strength and recognition, but also due
to uneven macroeconomic environments.
While slower to recover than Tripadvisor-branded hotels revenue, our Tripadvisor-branded display and platform revenue increased 33% during the
year ended December 31, 2022, when compared to 2021. In comparison to a pre-COVID-19 timeframe, Tripadvisor-branded display and platform revenue
for the year ended December 31, 2022 was approximately 81% of 2019’s comparable period, an increase from approximately 61% of 2019’s comparable
period in 2021. This improvement in 2022 was primarily driven by an increase in marketing spend from our advertisers in correlation with increasing
consumer travel demand, as discussed above.
Our Tripadvisor experiences and dining revenue increased by 91% as a result of the travel demand recovery, combined with the easing of
government restrictions, as well as the continued execution by our business, primarily driven by performance in our experiences offering as we continue to
make investments in this offering to gain market share. In comparison to a pre-COVID-19 timeframe, Tripadvisor experiences and dining revenue for the
year ended December 31, 2022 was approximately 115% of 2019’s comparable period, an increase from approximately 60% of 2019’s comparable period
in 2021.
Financial results in Other revenue also improved during the year ended December 31, 2022, when compared to 2021, primarily driven by similar
trends of increased consumer travel demand as part of the global travel demand recovery. The offerings within Other revenue complement our Tripadvisor
Core segment’s long-term strategy of delivering comprehensive guidance across the traveler journey. However, Other revenue during the year ended
December 31, 2022 has been slower to recover when compared against 2019's comparable period as we continue to balance capital deployment across our
portfolio that align with our strategic priorities across the segment. We have also divested certain offerings within Other revenue since 2019.
29
We began to see improvement in our Viator segment’s financial results during the third quarter of 2021, and this trend has continued throughout
2022, as revenue increased by 168% during the year ended December 31, 2022, when compared to 2021, primarily driven by the consumer demand
recovery across all geographies, in conjunction with the lifting of various government restrictions on experience activities and the travel industry recovery,
as well as continued execution by our business. In comparison to a pre-COVID-19 timeframe, our Viator segment revenue for 2022 was approximately
171% of 2019’s comparable period, an increase from approximately 64% of 2019’s comparable period in 2021.
During the first quarter of 2021, restaurants in most of the European countries in which TheFork operates were ordered to remain closed. In TheFork
segment, we saw a notable recovery beginning in mid-May 2021, as restaurants in most European countries in which TheFork operates began reopening for
in-restaurant dining. However, late in the fourth quarter of 2021 and early into the first quarter of 2022, Omicron-related restrictions and related impact to
consumer demand within Europe again negatively impacted TheFork. These Omicron-related restrictions were again lifted late in the first quarter of 2022,
bringing a recovery of consumer demand and revenue, although European consumer demand and restaurant openings remained below pre-pandemic levels
through 2022. TheFork segment revenue during 2022 increased by approximately 48%, primarily driven by improving consumer demand, when compared
to 2021. In comparison to a pre-COVID-19 timeframe, TheFork revenue for 2022 was approximately 99% of 2019’s comparable period, an increase from
approximately 67% of 2019’s comparable period in 2021.
Other Current Trends
In response to increased consumer travel demand, we increased our performance marketing investments in 2022 across the Tripadvisor group. In
Tripadvisor Core, we observed strong performance in hotel meta primarily driven by increased CPC pricing during 2022. This environment allowed us to
increase performance marketing at a profitable ROAS (return on advertising spend), while our direct traffic, including SEO, has been slower to recover.
Historically, we have generated a significant amount of direct traffic from search engines, such as Google, through strong SEO performance. We believe
our SEO traffic acquisition performance has been negatively impacted in the past, and may be impacted in the future by search engines (primarily Google)
increasing the prominence of their own products in search results. Over the long-term, we are focused on driving a greater percentage of our traffic from
direct sources and channels that are more profitable than performance marketing channels.
The global experiences market is large, growing, and highly fragmented, with the vast majority of bookings still occurring through traditional offline
sources. We are observing a secular shift, however, as this market continues to grow and moves online faster. We are observing similar trends in terms of
online adoption by both consumers and partners in the global restaurants category, particularly in Europe. Given the competitive positioning of our
businesses relative to the attractive growth prospects in these categories, we expect to continue to invest in these categories across the Tripadvisor group,
and in particular, within Viator and TheFork, to continue accelerating revenue growth, operating scale, and market share gains for the long-term.
For information regarding our business strategy and business models, see the discussion set forth in Part I, Item 1. “Business,” of this Form 10-K
under the captions “Our Business Strategy”, and “Our Business Models.”
Consolidated Results of Operations
In the second quarter of 2022, as part of our continuous review of the business and in consultation with our CEO, who also serves as our CODM, we
evaluated our operations and realigned the reportable segment information which our CODM regularly assesses to evaluate performance for operating
decision-making purposes, including allocation of resources. The revised segment reporting structure includes the following reportable segments: (1)
Tripadvisor Core; (2) Viator; and (3) TheFork. For further information, including the change in segments and principal revenue streams within these
segments, refer to “Note 3: Revenue Recognition” and “Note 19: Segment and Geographic Information” in the notes to our consolidated financial
statements in Item 8 of 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.
30
During the fourth quarter of 2022, the Company was the subject of a targeted fraud scheme, resulting in the payment of refunds to an external party
for products which were fraudulently subscribed within Tripadvisor Core. As a result, the Company incurred a loss of approximately $8 million, which was
recorded to general and administrative expense on the consolidated statement of operations for the year ended December 31, 2022. These fraudulent
transactions had no impact on revenue, as the fraudulent subscriptions were cancelled in a timely manner by the Company. Operating process changes were
put into place to provide further safeguards against this type of activity happening in the future. Although we continue to vigorously pursue recovery of our
losses and related expenses arising from this incident, there can be no assurance of recovery or of the timing of any such recovery.
A discussion regarding our financial condition and results of operations for fiscal year 2022 compared to fiscal year 2021 is presented below. A
discussion regarding our financial condition and results of operations for fiscal year 2021 compared to fiscal year 2020 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, 2021, filed with the SEC on February 18, 2022.
As noted above, during the second quarter of 2022, we revised our segment reporting structure. We did not include a discussion regarding our
financial condition and results of operations for fiscal year 2021 compared to fiscal year 2020, as we believe the changes in our reportable segments is not a
material change to understand the financial condition, changes in financial conditions, and results of operations of our revised reportable segments due to
the impact of COVID-19 during those years, which is discussed above.
Results of Operations
Selected Financial Data
(in millions, except percentages)
Year ended December 31,
2021
2022
2020
2022 vs. 2021
2021 vs. 2020
% Change
$
1,492 $
902 $
604
65 %
49 %
116
784
222
172
97
—
—
1,391
101
(44 )
15
(5 )
(34 )
67
(47 )
20 $
74
469
212
167
111
—
—
1,033
(131 )
(45 )
1
(10 )
(54 )
(185 )
37
(148 ) $
55
316
220
173
125
3
41
933
(329 )
(35 )
3
(8 )
(40 )
(369 )
80
(289 )
57 %
67 %
5 %
3 %
(13 )%
n.m.
n.m.
35 %
n.m.
(2 )%
1400 %
(50 )%
(37 )%
n.m.
n.m.
n.m.
35 %
48 %
(4 )%
(3 )%
(11 )%
n.m.
n.m.
11 %
(60 )%
29 %
(67 )%
25 %
35 %
(50 )%
(54 )%
(49 )%
295 $
100 $
(51 )
195 %
n.m.
$
$
Revenue
Costs and expenses:
Cost of revenue
Selling and marketing
Technology and content
General and administrative
Depreciation and amortization
Impairment of goodwill
Restructuring and other related reorganization costs
Total costs and expenses:
Operating income (loss)
Other income (expense):
Interest expense
Interest income
Other income (expense), net
Total other income (expense), net
Income (loss) before income taxes
(Provision) benefit for income taxes
Net income (loss)
Other financial data:
Adjusted EBITDA (1)
n.m. = not meaningful
(1) Adjusted EBITDA is considered a non-GAAP measure as defined by the SEC. Please refer to “Adjusted EBITDA” below for more information, including tabular reconciliations to the
most directly comparable GAAP financial measure.
31
Revenue and Segment Information
Revenue by Segment:
Tripadvisor Core (1)
Viator
TheFork
Intersegment Eliminations (1)
Total revenue
Adjusted EBITDA by Segment:
Tripadvisor Core
Viator
TheFork
Total Adjusted EBITDA
Adjusted EBITDA Margin by Segment (2):
Tripadvisor Core
Viator
TheFork
n.m. = not meaningful
2022
Year ended December 31,
2021
(in millions)
2020
2022 vs. 2021
2021 vs. 2020
% Change
$
$
$
$
966 $
493
126
(93 )
1,492 $
345 $
(11 )
(39 )
295 $
36 %
(2 %)
(31 )%
665 $
184
85
(32 )
902 $
177 $
(31 )
(46 )
100 $
27 %
(17 %)
(54 )%
483
55
86
(20 )
604
64
(72 )
(43 )
(51 )
13 %
(131 %)
(50 )%
45 %
168 %
48 %
191 %
65 %
95 %
(65 )%
(15 )%
195 %
38 %
235 %
(1 )%
60 %
49 %
177 %
(57 )%
7 %
n.m.
(1)
(2)
Tripadvisor Core segment revenue figures are shown gross of intersegment (intercompany) revenue, which is eliminated on a consolidated basis. Refer to “Note 19: Segment and
Geographic Information” in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for a discussion of intersegment revenue for all periods
presented.
“Adjusted EBITDA Margin by Segment” is defined as Adjusted EBITDA by segment divided by revenue by segment.
Tripadvisor Core Segment
Tripadvisor Core segment revenue increased by $301 million during the year ended December 31, 2022 when compared to the same period in 2021,
primarily due to increased hotel meta revenue, and, to a lesser extent, an increase in Tripadvisor experiences and dining and Tripadvisor-branded display
and platform revenue, all of which was due to the impact of increased consumer travel demand, the easing of travel restrictions and travel industry recovery
on our business. In addition, we estimate this segment's revenue growth was negatively impacted by foreign currency fluctuations of approximately 6%
during the year ended December 31, 2022 when compared to the same period in 2021.
Adjusted EBITDA in our Tripadvisor Core segment increased $168 million during the year ended December 31, 2022 when compared to the same
period in 2021. This was primarily due to an increase in revenue as noted above, partially offset by an increase in direct selling and marketing expenses
related to SEM and other online paid traffic acquisition costs in response to increased consumer travel demand as travel restrictions eased and the travel
industry recovered, and to a lesser extent, increased personnel and overhead costs to support business growth during the travel demand recovery.
32
The following is a detailed discussion of the revenue sources within our Tripadvisor Core segment:
Tripadvisor Core:
Tripadvisor-branded hotels
Tripadvisor-branded display and platform
Tripadvisor experiences and dining (1)
Other
Total Tripadvisor Core Revenue
2022
Year ended December 31,
2021
(in millions)
2020
2022 vs. 2021
2021 vs. 2020
% Change
$
$
650 $
130
134
52
966 $
451 $
98
70
46
665 $
292
69
65
57
483
44 %
33 %
91 %
13 %
45 %
54 %
42 %
8 %
(19 %)
38 %
(1)
Tripadvisor experiences and dining revenue within the Tripadvisor Core segment is shown gross of intersegment (intercompany) revenue, which is eliminated on a consolidated basis.
Refer to “Note 19: Segment and Geographic Information” in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for a discussion of
intersegment revenue for all periods presented.
Tripadvisor-branded Hotels Revenue
For the years ended December 31, 2022, 2021, and 2020, 67%, 68%, and 60%, respectively, of our Tripadvisor Core segment revenue was derived
from Tripadvisor-branded hotels revenue. Tripadvisor-branded hotels revenue increased $199 million during the year ended December 31, 2022 when
compared to the same period in 2021. This increase was primarily driven by our hotel meta revenue across all geographic markets, and, to a lesser extent,
hotel B2B revenue, which has been slower to recover than hotel meta, due to the impact of increased consumer travel demand, the easing of travel
restrictions and travel industry recovery on our business. As consumer travel demand increased during 2022, the Company saw continued improvement in
hotel meta monetization, as CPC rates during 2022 were consistently near or exceeded parity with 2019's comparable period, which enabled increased
efficient marketing investment on performance channels, enhancing our 2022 hotel meta revenue growth.
Tripadvisor-branded Display and Platform Revenue
For the years ended December 31, 2022, 2021, and 2020, 13%, 15%, and 14%, respectively, of our Tripadvisor Core segment revenue was derived
from Tripadvisor-branded display and platform revenue, which consists of revenue from display-based advertising across our platform. Tripadvisor-branded
display and platform revenue increased $32 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily driven
by an increase in marketing spend from our advertisers, particularly DMOs, in correlation with increased consumer travel demand.
Tripadvisor Experiences and Dining Revenue
For the years ended December 31, 2022, 2021, and 2020, 14%, 11%, and 13%, respectively, of our Tripadvisor Core segment revenue was derived
from our Tripadvisor experiences and dining revenue, which includes intercompany (intersegment) revenue consisting of affiliate marketing commissions
earned primarily from experience bookings, and to a lesser extent, restaurant reservation bookings on Tripadvisor-branded websites and mobile apps,
fulfilled by Viator and TheFork, respectively, which are eliminated on a consolidated basis, in addition to revenue earned from Tripadvisor's restaurant
service offerings. Tripadvisor experiences and dining revenue increased by $64 million during the year ended December 31, 2022 when compared to the
same period in 2021, primarily driven by increased consumer travel demand for experiences across all geographies, in conjunction with the lifting of
various government restrictions on experience activities and the travel industry recovery.
Other Revenue
For the years ended December 31, 2022, 2021, and 2020, 5%, 7%, and 12%, respectively, of our Tripadvisor Core segment revenue was derived
from Other revenue, which includes alternative accommodation rentals revenue, in addition to primarily click-based advertising and display-based
advertising revenue from our cruise, flights, and rental cars offerings on Tripadvisor websites and mobile apps. Other revenue increased by $6 million
during the
33
year ended December 31, 2022 when compared to the same period in 2021, primarily due to the impact of increased consumer travel demand and travel
industry recovery on our business.
Viator Segment
Viator segment revenue increased by $309 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily
driven by the consumer demand recovery for experiences across all geographies, in conjunction with the lifting of various government restrictions on
experience activities and the travel industry recovery during the same period. Viator is also benefitting from a larger macro trend, or secular shift, as the
large global market in which it operates continues to grow, and, in addition, migrate online from traditional offline sources. In addition, we estimate this
segment's revenue growth was negatively impacted by foreign currency fluctuations of approximately 16% during the year ended December 31, 2022,
when compared to the same period in 2021.
Adjusted EBITDA loss in our Viator segment decreased by $20 million during the year ended December 31, 2022 when compared to the same
period in 2021, primarily due to an increase in revenue as noted above. This was largely offset by an increase in selling and marketing expenses related to
SEM, other online paid traffic acquisition costs, and other marketing costs in response to increased consumer demand for experiences as part of the
consumer travel demand recovery and to grow market share, and, to a lesser extent, an increase in direct costs from credit card payments and other revenue-
related transaction costs in direct correlation with the increase in revenue, as well as increased personnel and overhead costs to support business growth
during the travel demand recovery.
TheFork Segment
TheFork segment revenue increased by $41 million during the year ended December 31, 2022 when compared to the same period in 2021, driven by
consumer travel demand recovery and various government restrictions on restaurants being lifted in Europe, combined with the travel industry recovery
during the same time period, despite the impact of foreign currency fluctuations, which we estimate negatively impacted this segment's revenue growth
during the year ended December 31, 2022 in the amount of approximately 19%, when compared to the same period in 2021.
Adjusted EBITDA loss in TheFork segment decreased by $7 million during the year ended December 31, 2022 when compared to the same period
in 2021, primarily due to an increase in revenue as noted above, and to a lesser extent, incremental non-income tax related government assistance benefits
related to COVID-19 relief of $8 million. This was largely offset by an increase in selling and marketing expenses related to online paid traffic acquisition
costs and television advertising costs, in response to consumer travel demand recovery as government restrictions on restaurants were lifted and the travel
industry recovered and, to a lesser extent, an increase in personnel and overhead costs to support business growth during the travel demand recovery.
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.
Direct costs
Personnel and overhead
Total cost of revenue
% of revenue
2022
Year ended December 31,
2021
(in millions)
2020
2022 vs. 2021
2021 vs. 2020
% Change
$
$
89 $
27
116 $
7.8 %
50 $
24
74 $
8.2 %
34
21
55
9.1 %
78 %
13 %
57 %
47 %
14 %
35 %
34
Cost of revenue increased $42 million during the year ended December 31, 2022 when compared to the same period in 2021, the majority of which
is due to increased direct costs from credit card payment processing fees and other revenue-related transaction costs in our Viator segment in direct
correlation with the increase in revenue, as Viator serves as the merchant of record for the majority of its experience booking transactions.
Selling and Marketing
Selling and marketing expenses consist of direct costs, including traffic generation costs from SEM and other online traffic acquisition costs,
syndication costs and affiliate marketing commissions, social media costs, brand advertising (including television and other offline advertising), promotions
and public relations. In addition, our selling 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
2022
Year ended December 31,
2021
(in millions)
2020
2022 vs. 2021
2021 vs. 2020
% Change
$
$
589 $
195
784 $
52.5 %
294 $
175
469 $
52.0 %
128
188
316
52.3 %
100 %
11 %
67 %
130 %
(7 %)
48 %
Direct selling and marketing costs increased $295 million during the year ended December 31, 2022 when compared to the same period in 2021. In
addition, direct selling and marketing costs as a percentage of total consolidated revenue was 39% during the year ended December 31, 2022, an increase
from 33% when compared to the same period in 2021. These increases were primarily due to an increase of approximately $277 million in SEM, other paid
online traffic acquisition spend, and other marketing costs, the substantial majority of which was incurred within our Tripadvisor Core and Viator segments,
in order to capture increased consumer travel demand primarily in hotel meta and for experiences, as travel activity restrictions eased and the travel industry
recovered, while direct traffic in Tripadvisor Core, including SEO traffic, has been slower to recover, as well as, and to a lesser extent, increased television
advertising costs of $12 million in TheFork segment in order to regain brand awareness levels as pandemic related restaurant restrictions subsided in
Europe and the industry recovered.
Personnel and overhead costs increased $20 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily
due to an increase in headcount and contingent staff to support business growth during the travel demand recovery.
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
platform. Other costs include licensing, maintenance expense, computer supplies, telecom costs, content translation and localization costs, and consulting
costs.
Personnel and overhead
Other
Total technology and content
% of revenue
2022
Year ended December 31,
2021
(in millions)
2020
2022 vs. 2021
2021 vs. 2020
% Change
$
$
193 $
29
222 $
14.9 %
188 $
24
212 $
23.5 %
194
26
220
36.4 %
3 %
21 %
5 %
(3 %)
(8 %)
(4 %)
35
Technology and content costs increased $10 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily
due to increased personnel and overhead costs resulting from additional headcount and contingent staff to support business growth during the travel demand
recovery, partially offset by a decrease in stock-based compensation expense of $10 million.
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 operating costs including bad debt expense, non-income taxes,
such as sales, use, digital services, and other non-income related taxes.
Personnel and overhead
Professional service fees and other
Total general and administrative
% of revenue
2022
Year ended December 31,
2021
(in millions)
2020
2022 vs. 2021
2021 vs. 2020
% Change
$
$
128 $
44
172 $
11.5 %
132 $
35
167 $
18.5 %
119
54
173
28.6 %
(3 %)
26 %
3 %
11 %
(35 %)
(3 %)
General and administrative costs increased $5 million during the year ended December 31, 2022 when compared to the same period in 2021.
Personnel and overhead costs decreased $4 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to
a decrease in stock-based compensation expense of $18 million, partially offset by additional headcount to support business growth during the travel
demand recovery. Professional service fees and other costs increased $9 million during the year ended December 31, 2022 when compared to the same
period in 2021, primarily due to an increase in digital service taxes in Europe of $8 million and an approximate $8 million loss incurred during the fourth
quarter of 2022 as the result of a fraud scheme resulting in payments to an external party, as discussed above, partially offset by an increase in non-income
tax related government assistance benefits related to COVID-19 relief of $9 million during the year ended December 31, 2022.
Depreciation and amortization
Depreciation expense consists of depreciation on computer equipment, leasehold improvements, furniture, office equipment and other assets, and
amortization of capitalized website development costs and right-of-use (“ROU”) assets related to our finance lease. Amortization consists of the
amortization of definite-lived intangibles purchased in business acquisitions.
Depreciation
Amortization of intangible assets
Total depreciation and amortization
% of revenue
2022
Year ended December 31,
2021
(in millions)
2020
$
$
84 $
13
97 $
6.5 %
91 $
20
111 $
12.3 %
99
26
125
20.7 %
Depreciation and amortization decreased $14 million during the year ended December 31, 2022 when compared to the same period in 2021,
primarily due to the completion of amortization related to certain intangible assets from business acquisitions and capitalized website development costs in
previous years.
36
Interest Expense
Interest expense primarily consists of interest incurred, commitment fees, and debt issuance cost amortization related to the Credit Facility, 2025
Senior Notes, 2026 Senior Notes, as well as interest on finance leases.
Interest expense
2022
Year ended December 31,
2021
(in millions)
2020
$
(44 ) $
(45 ) $
(35 )
Interest expense did not change materially during the year ended December 31, 2022 when compared to the same period in 2021. The majority of
interest expense reported during the years ended December 31, 2022 and 2021 were as a result of the 2025 Senior Notes. Refer to “Note 9: Debt” in the
notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information.
Interest Income
Interest income primarily consists of interest earned from bank deposits available on demand, term deposits, money market funds, and marketable
securities, including amortization of discounts and premiums on our marketable securities.
Interest income
2022
Year ended December 31,
2021
(in millions)
2020
$
15 $
1 $
3
Interest income increased $14 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to an
increase in the average amount of cash invested and increased interest rates received on bank deposits during 2022.
Other Income (Expense), Net
Other income (expense), net generally consists of net foreign exchange gains and losses, forward contract gains and losses, earnings/(losses) from
equity method investments, gain/(loss) and impairments on non-marketable investments, gain/(loss) on sale/disposal of businesses, and other non-operating
income (expenses).
Other income (expense), net
$
(5 ) $
(10 ) $
(8 )
2022
Year ended December 31,
2021
(in millions)
2020
Other expense, net decreased $5 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to a $5
million allowance for credit losses recorded on our long-term note receivable during 2021, which did not reoccur in 2022. Refer to “Note 17: Other Income
(Expense), Net” in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information.
(Provision) Benefit for Income Taxes
(Provision) benefit for income taxes
Effective tax rate
2022
$
Year ended December 31,
2021
(in millions)
2020
(47 ) $
70.1 %
37 $
20.0 %
80
21.7 %
37
We recorded a total income tax provision of $47 million for the year ended December 31, 2022. The change in our income taxes and our effective
tax rate during the year ended December 31, 2022, when compared to the same period in 2021, was primarily due to an increase in pretax income
recognized during the year ended December 31, 2022. Refer to “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 of
this Annual Report on Form 10-K for further information.
Net income (loss)
Net income (loss)
Net income (loss) margin
2022
$
Year ended December 31,
2021
(in millions)
2020
20 $
1.3 %
(148 ) $
(16.4 %)
(289 )
(47.8 %)
Net income (loss) improved $168 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to an
increase in revenue, as described in more detail above under “Revenue and Segment Information”, largely offset by an increase in selling and marketing
expenses in response to increasing consumer travel demand as travel activity restrictions eased and the travel industry recovered, and to a lesser extent, an
increase in personnel and overhead costs to support business growth during the consumer travel demand recovery and increased direct costs from credit
card payment fees and other revenue-related transaction costs in direct correlation with the increase in revenue during the year ended December 31, 2022,
all of which is described in more detail above under “Consolidated Expenses.”
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 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) benefit for income taxes; (2) other income
(expense), net; (3) depreciation and amortization; (4) stock-based compensation and other stock-settled obligations; (5) goodwill, long-lived asset, and
intangible asset impairments; (6) legal reserves and settlements; (7) restructuring and other related reorganization costs; and (8) other non-recurring
expenses and income.
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 (loss) and our other GAAP results.
Some of these limitations are:
•
•
Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
38
•
•
•
•
•
•
•
Adjusted EBITDA does not reflect the interest expense, or cash requirements necessary to service interest or principal payments on our debt;
Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation or other stock-settled obligations;
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;
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;
Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
Adjusted EBITDA is unaudited and does not conform to SEC Regulation S-X, and as a result such information may be presented differently
in our future filings with the SEC; and
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 (Loss), the most directly comparable financial measure calculated
and presented in accordance with GAAP, for the periods presented:
Net income (loss)
Add: Provision (benefit) for income taxes
Add: Other expense (income), net
Add: Restructuring and other related reorganization costs
Add: Impairment of goodwill
Add: Legal reserves and settlements
Add: Non-recurring expenses (income) (1)
Add: Stock-based compensation
Add: Depreciation and amortization
Adjusted EBITDA
2022
Year ended December 31,
2021
(in millions)
2020
20 $
47
34
—
—
1
8
88
97
295 $
(148 ) $
(37 )
54
—
—
—
—
120
111
100 $
(289 )
(80 )
40
41
3
—
—
109
125
(51 )
$
$
(1)
The Company incurred a loss of approximately $8 million during the fourth quarter of 2022, as the result of a targeted payment fraud scheme by an external party, as discussed
above. The Company considers such costs to be non-recurring in nature. To the extent the Company recovers any losses in future periods related to this incident, the Company
plans to reduce Adjusted EBITDA by the recovery amount in that same period.
Liquidity and Capital Resources
For a discussion of our liquidity and capital resources as of and our cash flow activities for the fiscal year ended December 31, 2021, see 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, 2021, filed with the SEC on February 18, 2022.
Our principal source of liquidity is cash flow generated from operations and our existing cash and cash equivalents balance. Our liquidity needs can
also be met through drawdowns under the Credit Facility. As of December 31, 2022 and 2021, we had $1.0 billion and $723 million, respectively, of cash
and cash equivalents, and $496 million of available borrowing capacity under our Credit Facility as of December 31, 2022. As of December 31, 2022,
approximately $157 million of our cash and cash equivalents were held by our international subsidiaries outside of the U.S., of which approximately 40%
was held in the U.K. As of December 31, 2022, the significant majority of our cash was denominated in U.S. dollars.
39
As of December 31, 2022, we had $445 million of cumulative undistributed earnings in foreign subsidiaries which were no longer considered to be
indefinitely reinvested. As of December 31, 2022, we maintained a deferred income tax liability on our consolidated balance sheet, which was not material,
for the U.S. federal and state income tax and foreign withholding tax liabilities on the cumulative undistributed foreign earnings that we no longer consider
indefinitely reinvested. Refer to “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-
K for further information.
As of December 31, 2022, we are party to the Credit Facility, which, among other things, provides for a $500 million revolving credit facility with a
maturity date of May 12, 2024. The Company may borrow from the Credit Facility in U.S. dollars and Euros. The Credit Facility requires us to maintain a
maximum leverage ratio and contains certain customary affirmative covenants and events of default, including a change of control.
We amended the Credit Facility in May 2020 and December 2020 to, among other things, suspend the leverage ratio covenant for quarterly testing of
compliance beginning in the second quarter of 2020, replacing it with a minimum liquidity covenant through June 30, 2021 (requiring the Company to
maintain $150 million of unrestricted cash, cash equivalent and short-term investments less deferred merchant payables plus available revolver capacity),
until the earlier of (a) the first day after June 30, 2021 through maturity on which borrowings and other revolving credit utilizations under the revolving
commitments exceed $200 million, and (b) the election of the Company, at which time the leverage ratio covenant (the “Leverage Covenant Holiday”) will
be reinstated.
The Company remained in the Leverage Covenant Holiday as of December 31, 2022. Based on the Company’s existing leverage ratio, any
outstanding or future borrowings under the 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% with a London Inter-Bank Offered Rate (“LIBO rate”) floor of 1.00% per annum; or (ii) the Alternate Base Rate 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%. In addition, based on the Company’s existing leverage ratio, we are required to pay a quarterly commitment fee, at an applicable rate
ranging from 0.15% to 0.30% as of December 31, 2022, on the daily unused portion of the Credit Facility for each fiscal quarter during the Leverage
Covenant Holiday and in connection with the issuance of letters of credit. The Credit Facility includes restrictions on the Company’s ability to make
certain payments and distributions, including share repurchases and dividends.
As of December 31, 2022 and 2021, we had no outstanding borrowings and were in compliance with our covenant requirements in effect under the
Credit Facility. While there can be no assurance that we will be able to meet the leverage ratio covenant after the Leverage Covenant Holiday ceases, based
on our current projections, we do not believe there is a material risk we will not remain in compliance throughout the next twelve months.
As of December 31, 2022, the Company had $845 million in long-term debt, as a result of the issuance of our 2025 Senior Notes in July 2020 and
2026 Senior Notes in March 2021, as discussed below.
In July 2020, the Company completed the sale of $500 million of our 2025 Senior Notes. The 2025 Senior Notes provide, among other things, that
interest, at an interest rate of 7.0% per annum, is payable on January 15 and July 15 of each year, which began on January 15, 2021, until their maturity on
July 15, 2025. The 2025 Senior Notes are senior unsecured obligations of the Company and are guaranteed by certain of the Company’s domestic
subsidiaries.
In March 2021, the Company completed the sale of $345 million of our 2026 Senior Notes. The 2026 Senior Notes provide, among other things, that
interest, at an interest rate of 0.25% per annum, is payable on April 1 and October 1 of each year, which began on October 1, 2021, until their maturity on
April 1, 2026. Concurrently, the Company used a portion of the proceeds from the 2026 Senior Notes to enter into privately negotiated capped call
transactions with certain of the initial purchasers of the 2026 Senior Notes and/or their respective affiliates and/or other financial institutions at a cost of
approximately $35 million. The Company intends to use the remainder of the proceeds from this offering for general corporate purposes, which may
include repayment of debt, including the
40
partial redemption and/or purchase of the 2025 Senior Notes prior to maturity. The 2026 Senior Notes are senior unsecured obligations of the Company and
are guaranteed by certain of the Company’s domestic subsidiaries.
The 2025 Senior Notes and 2026 Senior Notes are not registered securities and there are currently no plans to register these notes as securities in the
future. We may from time to time repurchase our outstanding 2025 Senior Notes or 2026 Senior Notes through tender offers, open market purchases,
privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual
restrictions and other factors.
For further information on the Credit Facility, 2025 Senior Notes, and 2026 Senior Notes, refer to “Note 9: Debt” in the notes to our consolidated
financial statements in Item 8 of this Annual Report on Form 10-K.
Significant uses of capital and other liquidity matters
During the year ended December 31, 2020, we repurchased 4,707,450 shares of the Company’s outstanding common stock at an aggregate cost of
$115 million, under our share repurchase program. The Company did not repurchase any shares of outstanding common stock under the share repurchase
program during 2022 or 2021 and had $75 million remaining available to repurchase shares of our common stock as of December 31, 2022. The terms of
our Credit Agreement were amended to limit the Company from share repurchases during the Leverage Covenant Holiday and the terms of the 2025
Indenture related to the 2025 Senior Notes also impose certain limitations and restrictions on share repurchases.
Our business typically experiences seasonal fluctuations that affect the timing of our annual cash flows during the year related to working capital.
From our experience bookings, we receive cash from travelers at the time of booking or prior to the occurrence of an experience, and we record these
amounts, net of commissions, on our consolidated balance sheet as deferred merchant payables. We pay the operator, or the experience supplier, after the
travelers’ use. Therefore, we generally receive cash from the traveler prior to paying the operator and this operating cycle represents a source or use of cash
to us. During the first half of the year, experiences bookings typically exceed the amount of completed experiences, 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.
Certain factors may impact our typical seasonal fluctuations, which may include any significant shifts in our business mix or adverse economic
conditions that could result in future seasonal patterns that are different from historical trends. For example, the negative impact to our business from
COVID-19 materially affected our historical trends at varying levels during the years ended December 31, 2021 and 2020, while these trends significantly
improved during the year ended December 31, 2022, resulting in increased revenues, and working capital and operating cash flow more akin to typical
historical trends. In addition, new or different payment options offered to our customers could impact the timing of cash flows. For example, our “Reserve
Now, Pay Later” payment option available in our Viator segment, which allows travelers the option to reserve certain experiences and defer payment until a
date no later than two days before the experience date, which although not used in a majority of bookings to date, may continue to increase, and affect the
timing of our future cash flows and working capital.
As discussed in “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K, we
have received Notices of Proposed Adjustments issued by the IRS for tax years 2009 through 2011, and 2014 through 2016, as of December 31, 2022. The
statute of limitation of assessment for all years subject to the Notices of Proposed Adjustment remain open. 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, for the open tax
years, in an estimated range of $85 million to $95 million, exclusive of interest expense, at the close of the audit if the IRS prevails. In January 2023, we
received a final notice regarding a MAP settlement for the 2009 through 2011 tax years, which we accepted in February 2023. Accepting this MAP
settlement will result in an estimated net cash outflow of $70 million to $80 million, inclusive of related interest expense, expected during 2023. In the first
quarter of 2023, we will record additional tax expense as a discrete item, inclusive of interest, in an estimated range of $25 million to $35 million
specifically related to this settlement. This MAP settlement supersedes the Notices of Proposed Adjustment for 2009 through 2011 from the IRS, described
above. We will review the impact of the acceptance of this settlement position to our transfer pricing income tax
41
reserves for the subsequent tax years during the first quarter of 2023. Based on this new information received subsequent to year end, adjustments may
occur, which could be material.
In addition, we received from HMRC in the U.K. an issue closure notice relating to adjustments for 2012 through 2016 tax years, as of December
31, 2022. 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 $25 million to $35 million, exclusive of interest expense and potential U.S. transition tax
adjustments, at the close of the audit if HMRC prevails. We disagree with the proposed adjustments and we intend to defend our positions through
applicable administrative and, if necessary, judicial remedies.
Although the ultimate timing for resolution of certain of these income tax matters is uncertain, any future payments would negatively and materially
impact our operating cash flows.
The CARES Act, enacted in March 2020, made tax law changes to provide financial relief to companies as a result of the impact to businesses
related to COVID-19. Key income tax provisions of the CARES Act include changes in NOL carryback and carryforward rules, increase of the net interest
expense deduction limit, and immediate write-off of qualified improvement property. The CARES Act allowed the Company to carry back U.S. federal
NOLs incurred in 2020, generating an expected U.S. federal tax benefit of $76 million, of which $64 million was refunded during the year ended December
31, 2022. The remaining refund of $12 million is included in current income taxes payable within accrued expenses and other current liabilities on our
consolidated balance sheet as of December 31, 2022 and is expected to be received during the year ended December 31, 2023. In addition, $25 million of
this refund received during the year ended December 31, 2022, was recorded to long-term taxes payable within other long-term liabilities on our
consolidated balance sheet as of December 31, 2022, which reflects future transition tax payments expected to be made by the Company related to the Tax
Cuts and Jobs Act of 2017 (the “2017 Tax Act”).
We believe that our available cash and cash equivalents will be sufficient to fund our foreseeable working capital requirements, capital expenditures,
existing business growth initiatives, debt and interest 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 and/or other expenditures in support of our business strategy, which
may potentially reduce our cash balance and/or require us to borrow under the Credit Facility or to seek other financing alternatives.
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
2022
Year ended December 31,
2021
(in millions)
2020
$
400 $
(52 )
(27 )
108 $
(54 )
263
(194 )
(56 )
341
During the year ended December 31, 2022, our primary source of cash was from operations, while our primary use of cash was from financing
activities (including payment of withholding taxes on net share settlements of equity awards of $20 million) and investing activities (including capital
expenditures of $56 million). This use of cash was funded with cash and cash equivalents, and operating cash flows.
Net cash provided by operating activities for the year ended December 31, 2022, increased by $292 million when compared to the same period in
2021, primarily due to a decrease in net losses of $168 million and an increase in working capital of $154 million. The increase in working capital was
driven primarily by a $64 million U.S. federal tax refund related to the CARES Act, an increase of $42 million related to the timing of vendor payments
due to increased selling and marketing costs, and to a lesser extent, an increase of $18 million in deferred merchant payables reflecting the timing of when
cash was received from travelers, principally due to an increase in experiences bookings, net of cancellations, which exceeded our payments to experience
operators. These increases
42
were partially offset by the increase in accounts receivable related to increased billings, reflective of the increasing consumer demand for travel activities
during the year, as well as, and to a lesser extent, a decrease in non-cash items of $30 million which was primarily due to a decrease in stock-based
compensation expense and depreciation and amortization, partially offset by a decrease in deferred income tax benefits.
Net cash used in investing activities for the year ended December 31, 2022 decreased by $2 million when compared to the same period in 2021, as
capital expenditures by the Company were materially consistent in both fiscal years.
Net cash provided by financing activities for the year ended December 31, 2022 decreased by $290 million when compared to the same period in
2021, primarily due to proceeds received from the issuance of our 2026 Senior Notes of $340 million, net of financing costs, partially offset by payments of
$35 million for the Capped Calls in connection with our 2026 Senior Notes during the first quarter of 2021, both of which did not reoccur during the year
ended December 31, 2022, and to a lesser extent, cash received for stock option exercises of $8 million during the year ended December 31, 2021, partially
offset by a decrease in payment of withholding taxes on net share settlements of equity awards of $24 million during the year ended December 31, 2022
when compared to the same period in 2021.
The following table summarizes our current and long-term material cash requirements, both accrued and off-balance sheet, as of December 31,
2022:
Total
Less than
1 year
1 to 3 years
(in millions)
3 to 5 years
More than
5 years
By Period
2025 Senior Notes (1)
Expected interest payments on 2025 Senior Notes (2)
2026 Senior Notes (3)
Expected interest payments on 2026 Senior Notes (4)
Finance lease obligations (5)
Operating lease obligations (6)
Expected commitment fee payments on Credit Facility (7)
Purchase obligations and other (8)
Total (9)(10)
$
$
500 $
90
345
3
76
30
3
39
1,086 $
— $
35
—
1
9
15
2
21
83 $
500 $
55
—
2
19
12
1
16
605 $
— $
—
345
—
20
3
—
1
369 $
—
—
—
—
28
—
—
1
29
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Represents outstanding principal on our 2025 Senior Notes due July 2025 and assumes that our existing debt is repaid at maturity.
Expected interest payments on our 2025 Senior Notes are based on a fixed interest rate of 7.0%, as of December 31, 2022 and assumes that our existing debt is repaid at maturity.
Represents outstanding principal on our 2026 Senior Notes due April 2026 and assumes that our existing debt is repaid at maturity.
Expected interest payments on our 2026 Senior Notes are based on a fixed interest rate of 0.25%, as of December 31, 2022 and assumes that our existing debt is repaid at
maturity.
Estimated future lease payments for our Headquarters Lease in Needham, Massachusetts. These amounts exclude expected rental income under non-cancelable subleases.
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.
Expected commitment fee payments are based on the daily unused portion of the Credit Facility, issued letters of credit, and the effective commitment fee rate as of December
31, 2022; however, these variables could change significantly in the future.
Estimated purchase obligations that are fixed and determinable, primarily related to telecommunication and licensing contracts, with various expiration dates through
approximately June 2029. These contracts have non-cancelable terms or are cancelable only upon payment of significant penalty. 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.
Excluded from the table was $204 million of unrecognized tax benefits, including interest, which is included in other long-term liabilities on our consolidated balance sheet as of
December 31, 2022, for which we cannot make a reasonably reliable estimate of the amount and period of payment.
Excluded from the table was $4 million of undrawn standby letters of credit, primarily as security deposits for certain property leases as of December 31, 2022.
43
As of December 31, 2022, other than the items discussed above, we did not have any off-balance sheet arrangements, 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
As of December 31, 2022, we leased approximately 280,000 square feet of office space for our corporate headquarters in Needham, Massachusetts.
Our Headquarters Lease, has an expiration date of December 2030, with an option to extend the lease term for two consecutive terms of five years each. We
account for our Headquarters Lease as a finance lease as of December 31, 2022.
In addition to our Headquarters Lease, we have contractual obligations in the form of operating leases for office space, in which we lease an
aggregate of approximately 400,000 square feet, at approximately 30 other locations across North America, Europe, Asia Pacific and South America, in
cities such as New York, London, Sydney, Barcelona, Buenos Aires, and Paris, primarily used for sales offices, subsidiary headquarters, and international
management teams, pursuant to leases with various expiration dates, with the latest expiring in July 2027.
Contingencies
In the ordinary course of business, we are party to legal, regulatory and administrative matters, including threats thereof, arising out of or in
connection with our operations. These matters may involve claims involving patent and other intellectual property rights (including privacy, 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 reputational 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 and is material, 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 and non-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 2014 through 2016, and 2018 tax years, and have various ongoing audits for foreign
and state income tax returns. These audits include questioning the timing and 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, 2022, no material assessments have resulted, except as noted below regarding our 2009, 2010, and
2011 IRS audit with Expedia, our 2014 through 2016 standalone IRS audit, and our 2012 through 2016 HM Revenue & Customs (“HMRC”) audit.
44
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 August 2020, we received Notices of Proposed Adjustment from the IRS for the 2014, 2015, and 2016 tax years. The
statute of limitation of assessment for all years subject to the Notices of Proposed Adjustment outlined above remain open. 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, for the
open tax years, in an estimated range of $85 million to $95 million at the close of the audit if the IRS prevails, which includes $20 million to $30 million
related to the 2009 through 2011 pre Spin-Off tax years. The estimated ranges take into consideration competent authority relief and transition tax
regulations and is exclusive of deferred tax consequences and interest expense, which would be significant. 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 the open years outlined above, 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. We
have previously requested competent authority assistance under the MAP for open tax years 2009 through 2011 and 2014 through 2016. In January 2023,
we received a final notice regarding a MAP settlement for the 2009 through 2011 tax years, which we accepted in February 2023. In the first quarter of
2023, we will record additional tax expense as a discrete item, inclusive of interest, in an estimated range of $25 million to $35 million specifically related
to this settlement. This MAP settlement supersedes the Notices of Proposed Adjustment for 2009 through 2011 from the IRS, described above. We will
review the impact of the acceptance of this settlement position to our transfer pricing income tax reserves for the subsequent tax years during the first
quarter of 2023. Based on this new information received subsequent to year end, adjustments may occur, which could be material.
In January 2021, we received an issue closure notice relating to adjustments for 2012 through 2016 tax years from HMRC. 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 $25 million to $35 million, exclusive of interest expense and potential U.S. transition tax adjustments, at the close of the
audit if HMRC prevails. 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.
Over the last several years, the OECD has been working on a Base Erosion and Profit Shifting Project to address the tax challenges arising from
digitalization. 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. In October 2021, more than 130 countries tentatively signed on to
a framework, which calls for a minimum tax rate on corporations of 15% and a reallocation of profits from the largest and most profitable businesses to
countries where they make sales. The proposed framework, once enacted, envisages new international tax rules and the removal of all digital services taxes.
As this framework is subject to further negotiation and implementation by each member country, the timing and ultimate impact of any such changes on our
tax obligations is uncertain. As the OECD/G20 continues to drive toward a consensus framework, several countries which have previously enacted
unilateral digital services tax initiatives, such as France, Italy, Spain, and the U.K., will continue to impose these revenue-based taxes until implementation
of the consensus framework. During the years ended December 31, 2022, 2021 and 2020, we recorded $9 million, $1 million and $2 million, respectively,
of digital service tax to general and administrative expense on our consolidated statement of operations.
Due to the one-time transition tax on the deemed repatriation of undistributed foreign subsidiary earnings and profits in 2017, as a result of the 2017
Tax Act, the majority of previously unremitted earnings have been subjected to U.S. federal income tax. To the extent future distributions from these
subsidiaries will be taxable, a deferred tax liability has been accrued which was not material as of December 31, 2022. As of December 31, 2022, $445
million of our cumulative undistributed foreign earnings were no longer considered to be indefinitely reinvested.
45
Refer to “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further
information on potential tax contingencies, including 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 18: Related Party Transactions” in the notes to our consolidated financial
statements in Item 8 of this Annual Report on Form 10-K.
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 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:
•
•
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 of this Annual Report on Form 10-
K for an overview of our significant accounting policies and any 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:
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. As of December 31, 2022, we had a valuation allowance of approximately $114 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. 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
46
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.
Refer to “Note 11: Income Taxes” in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K and
“Contingencies” above for further information, including certain uncertainties, estimates, and potential contingencies related to ongoing audits regarding
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, our ongoing investment and financial activities, as well as changes in economic conditions in
all significant markets in which we operate. The risk of loss can be assessed from the perspective of adverse changes in our future earnings, cash flows, fair
values of our assets, and financial condition. Our exposure to market risk, at any point in time, may include risks related to any borrowings under the Credit
Facility, or outstanding debt related to the 2025 Senior Notes and 2026 Senior Notes, derivative instruments, capped calls, cash and cash equivalents, short-
term and long-term marketable securities, if any, accounts receivable, intercompany receivables/payables, accounts payable, deferred merchant payables
and other balances and 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.
For a discussion of market conditions and impacts on our financials resulting from the COVID-19 pandemic, refer to Part I, Item 1A, "Risk
Factors”, Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations,” and “Note 1: Organization and
Business Description” in the notes to our consolidated financial statements in Item 8, in this Annual Report on Form 10-K.
Interest Rates
Our primary exposure to changes in interest rates relates primarily to our cash, cash equivalents, investment portfolio at any point in time, 2025 and
2026 Senior Notes, and borrowings, if any, under our existing Credit Facility.
Changes in interest rates affect the amount of interest earned on our cash, cash equivalents, and marketable securities, if any, 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 bank
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.
As of December 31, 2022 and 2021, respectively, we had no outstanding marketable securities in our investment portfolio, and no outstanding
borrowings under our Credit Facility. In July 2020, we issued 2025 Senior Notes with a principal balance of $500 million at a fixed rate of 7.0% and in
March 2021, we issued 2026 Senior Notes with a principal balance of $345 million at a fixed rate of 0.25%. As of December 31, 2022, the fair value of our
2025 Senior Notes and 2026 Senior Notes were approximately $498 million and $281 million, respectively, based on recently reported market transactions
and prices for identical or similar financial instruments obtained from a third-party pricing source. Since our 2025 Senior Notes and 2026 Senior Notes bear
interest at a fixed rate, we are more sensitive to the capital market conditions of our shares than changes in interest rates. The fair value of the 2025 Senior
Notes and 2026 Senior Notes will likely change based on the capital market conditions.
47
Refer to “Note 4: Financial Instruments and Fair Value Measurements” and “Note 9: Debt” in the notes to our consolidated financial statements in
Item 8 of this Annual Report on Form 10-K for further information on our cash and cash equivalents, investments and other financial instruments, 2026
Senior Notes, 2025 Senior Notes and our Credit Facility.
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, 2022, 2021 or 2020.
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 estimated unrealized loss of approximately $29 million related to a decrease in our net assets as of
December 31, 2022, 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 and British pound currency transactions) in our
consolidated statement of operations and have recorded net foreign currency exchange losses of $9 million and $6 million for the years ended December
31, 2022 and 2021, respectively, and a net foreign currency exchange gain of $4 million for the year ended December 31, 2020, 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 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 (“forward 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.
48
The forward contracts which we have entered into to date, have principally addressed foreign currency exchange fluctuation risk between the Euro
and the U.S. dollar. We account for these forward contacts, which have not been designated as hedges under GAAP to date, as either assets or liabilities and
carry them at fair value. We had outstanding forward contracts as of December 31, 2022 and 2021, with a total net notional value of $18 million and $9
million, respectively. These forward contracts were not designated as hedges and had maturities of less than 90 days. We recognize gains and losses from
forward contracts in our consolidated statement of operations upon settlement or a change in fair value, as a result, we recorded net gains of $4 million, $2
million, and $1 million for the years ended December 31, 2022, 2021 and 2020, respectively, in other income (expense), net on our consolidated statements
of operations. Refer to “Note 4: Financial Instruments and Fair Value Measurements” in the notes to the consolidated financial statements in Item 8 of this
Annual Report on Form 10-K for further detail on our derivative instruments.
We expect that we will continue to increase our operations internationally. Our exposure to potentially volatile movements in foreign currency
exchange rates will increase as we increase our operations in these international markets. 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. We continue to monitor the current
economic environment, including the impact of a potential U.S. recession and increased inflation globally, which has been heightened by the conflict
between Russia and Ukraine. These changes, if material, could cause us to adjust our foreign currency risk strategies. Continued uncertainty regarding our
international operations and U.K. and E.U. relations may result in future currency exchange rate volatility which may impact our business and results of
operations. In addition, the geopolitical tensions resulting from Russia’s invasion of Ukraine, including increased cyberattacks, military conflicts and
sanctions, may result in additional financial volatility that may adversely affect our results of operations.
49
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements and Supplementary Data:
Report of Independent Registered Public Accounting Firm (KPMG LLP, Boston, Massachusetts, Auditor Firm ID: 185)
Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
51
53
54
55
56
57
58
50
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, 2022 and 2021, the
related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the
three-year period ended December 31, 2022, 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, 2022 and 2021, and the results of its
operations and its cash flows for each of the years in the three-year period ended December 31, 2022, 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, 2022, 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 17, 2023 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.
Sufficiency of Audit Evidence over Revenue
As discussed in Notes 2 and 3 to the consolidated financial statements, and disclosed in the consolidated statements of operations, the Company had
$1,492 million in revenue, net of intersegment revenue of $93 million, for the year ended December 31, 2022, of which $966 million was Tripadvisor
Core related, $493 million was Viator related and $126 million was TheFork related. Each of these categories of revenue has
51
multiple 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 following are the primary procedures we performed to address this critical audit matter. We 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 evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included
controls related to accurate recording of amounts.
●
●
For certain revenue streams, we 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, we 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 processes.
Testing the transfer of relevant revenue data between certain systems used in the revenue recognition processes.
We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed.
/s/ KPMG LLP
We have served as the Company’s auditor since 2014.
Boston, Massachusetts
February 17, 2023
52
TRIPADVISOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Revenue (Note 3)
Costs and expenses:
Cost of revenue (1) (exclusive of depreciation and amortization as shown
separately below)
Selling and marketing (1)
Technology and content (1)
General and administrative (1)
Depreciation and amortization
Impairment of goodwill (Note 7)
Restructuring and other related reorganization costs (Note 1)
Total costs and expenses
Operating income (loss)
Other income (expense):
Interest expense
Interest income
Other income (expense), net (Note 17)
Total other income (expense), net
Income (loss) before income taxes
(Provision) benefit for income taxes (Note 11)
Net income (loss)
Earnings (loss) per share attributable to common stockholders (Note 16):
Basic
Diluted
Numerator used to compute net income (loss) per share attributable to common
stockholders (Note 16):
Basic
Diluted
Weighted average common shares outstanding (Note 16):
Basic
Diluted
(1) Includes stock-based compensation expense as follows (Note 14):
Cost of revenue
Selling and marketing
Technology and content
General and administrative
2022
Year ended December 31,
2021
2020
$
1,492
$
902
$
604
116
784
222
172
97
—
—
1,391
101
(44 )
15
(5 )
(34 )
67
(47 )
20 $
74
469
212
167
111
—
—
1,033
(131 )
(45 )
1
(10 )
(54 )
(185 )
37
(148 ) $
55
316
220
173
125
3
41
933
(329 )
(35 )
3
(8 )
(40 )
(369 )
80
(289 )
0.14
0.14
$
$
(1.08 ) $
(1.08 ) $
(2.14 )
(2.14 )
20
21
$
$
(148 ) $
(148 ) $
140
146
1 $
12 $
36 $
39 $
137
137
1 $
16 $
46 $
57 $
(289 )
(289 )
135
135
1
16
44
48
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
53
TRIPADVISOR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
Net income (loss)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax (1)
Reclassification adjustments included in net income (loss), net of tax
Total other comprehensive income (loss), net of tax
Comprehensive income (loss)
2022
Year ended December 31,
2021
2020
$
20 $
(148 ) $
(27 )
1
(26 )
(6 ) $
(24 )
2
(22 )
(170 ) $
$
(289 )
28
1
29
(260 )
(1)
Deferred income tax liabilities related to these amounts are not material. Refer to “Note 11: Income Taxes” for further information.
The accompanying notes are an integral part of these consolidated financial statements.
54
TRIPADVISOR, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except number of shares and per share amounts)
December 31,
2022
December 31,
2021
$
1,021 $
ASSETS
Current assets:
Cash and cash equivalents (Note 4)
Accounts receivable and contract assets, net of allowance for credit losses
of $28 and $28, respectively (Note 2, Note 3)
Income taxes receivable (Note 11)
Prepaid expenses and other current assets
Total current assets
Property and equipment, net (Note 5, Note 6)
Operating lease right-of-use assets (Note 6)
Intangible assets, net (Note 7)
Goodwill (Note 7)
Non-marketable investments (Note 4)
Deferred income taxes, net (Note 11)
Other long-term assets, net of allowance for credit losses of $10 and $10, respectively
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Deferred merchant payables (Note 2)
Deferred revenue (Note 3)
Accrued expenses and other current liabilities (Note 8)
Total current liabilities
Long-term debt (Note 9)
Finance lease obligation, net of current portion (Note 6)
Operating lease liabilities, net of current portion (Note 6)
Deferred income taxes, net (Note 11)
Other long-term liabilities (Note 10)
Total Liabilities
Commitments and contingencies (Note 12)
Stockholders’ equity: (Note 15)
Preferred stock, $0.001 par value
Authorized shares: 100,000,000
Shares issued and outstanding: 0 and 0, respectively
Common stock, $0.001 par value
Authorized shares: 1,600,000,000
Shares issued: 146,891,538 and 144,656,649, respectively
Shares outstanding: 128,046,924 and 125,812,035, 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)
$
$
205
—
44
1,270
194
27
51
822
34
78
93
2,569 $
39 $
203
44
247
533
836
58
15
1
265
1,708
—
—
—
1,404
261
(82 )
(722 )
861
2,569 $
723
142
49
26
940
215
42
65
843
36
54
94
2,289
27
113
36
181
357
833
65
29
1
215
1,500
—
—
—
1,326
241
(56 )
(722 )
789
2,289
Treasury stock-common stock, at cost, 18,844,614 and 18,844,614 shares, respectively
Total Stockholders’ Equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
The accompanying notes are an integral part of these consolidated financial statements.
55
TRIPADVISOR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions, except number of shares and per share amounts)
Balance as of December 31, 2019
Net income (loss)
Cumulative effect adjustment from adoption of
new accounting guidance
Other comprehensive income (loss), net of tax
Issuance of common stock related to exercise of
options and vesting of RSUs
Repurchase of common stock (Note 15)
Withholding taxes on net share settlements of
equity awards
Stock-based compensation (Note 14)
Other
Balance as of December 31, 2020
Net income (loss)
Other comprehensive income (loss), net of tax
Issuance of common stock related to exercise of
options and vesting of RSUs
Purchase of capped calls, net of tax of $9 million
(Note 9)
Withholding taxes on net share settlements of
equity awards
Stock-based compensation (Note 14)
Balance as of December 31, 2021
Net income (loss)
Other comprehensive income (loss), net of tax
Issuance of common stock related to exercise of
options and vesting of RSUs
Withholding taxes on net share settlements of
equity awards
Stock-based compensation (Note 14)
Common stock
Shares
138,698,30
7
Amoun
t
$ —
2,076,914
—
Class B
common stock
Additional
Accumulated
other
paid-in
Retained
comprehensive
Treasury stock
Shares
12,799,99
9
Amount
capital
earnings
income (loss)
Shares
(14,116,5
Amount
Total
$ —
$
1,150
$
$
681
(289 )
(3 )
—
(21 )
124
(63 )
34 ) $ (607 ) $ 1,161
(289 )
29
(3 )
29
—
(4,707,45
0 )
(115 )
(115 )
140,775,22
1
$ —
12,799,99
9
$ —
$
1,253
$
389
$
(148 )
(20,630 ) —
(18,844,6
(34 )
14 ) $ (722 ) $
(22 )
3,881,428
—
8
(26 )
(44 )
135
144,656,64
9
$ —
12,799,99
9
$ —
$
1,326
$
$
241
20
(18,844,6
(56 )
14 ) $ (722 ) $
(26 )
2,234,889
—
—
(20 )
98
(21 )
124
—
886
(148 )
(22 )
8
(26 )
(44 )
135
789
20
(26 )
—
(20 )
98
Balance as of December 31, 2022
146,891,53
8
$ —
12,799,99
9
$ —
$
1,404
$
261
$
(82 )
14 ) $ (722 ) $
861
(18,844,6
The accompanying notes are an integral part of these consolidated financial statements.
56
TRIPADVISOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Year ended December 31,
2021
2022
2020
$
20
$
(148 ) $
(289 )
Depreciation and amortization
Stock-based compensation expense (Note 14)
Deferred income tax expense (benefit) (Note 11)
Provision for expected credit losses (Note 2)
Impairment of goodwill (Note 7)
Loss on sale/disposal of business (Note 17)
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 (used in) operating activities
Investing activities:
Capital expenditures, including capitalized website development
Acquisitions and other investments, net of cash acquired
Other investing activities, net
Net cash provided by (used in) investing activities
Financing activities:
Repurchase of common stock (Note 15)
Proceeds from issuance of 2026 Senior Notes, net of financing costs (Note 9)
Purchase of capped calls in connection with 2026 Senior Notes (Note 9)
Proceeds from issuance of 2025 Senior Notes (Note 9)
Payment of financing costs for the issuance of 2025 Senior Notes (Note 9)
Proceeds from Credit Facility (Note 9)
Payment of financing costs related to Credit Facility (Note 9)
Payments to Credit Facility (Note 9)
Proceeds from exercise of stock options (Note 14)
Payment of withholding taxes on net share settlements of equity awards
Payments of finance lease obligation and other financing activities, net (Note 6)
Net cash provided by (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 (received) 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 website
development costs (Note 14)
97
88
(19 )
6
—
—
7
(87 )
72
99
107
10
400
(56 )
—
4
(52 )
—
—
—
—
—
—
—
—
—
(20 )
(7 )
(27 )
(23 )
298
723
1,021
$
(40 ) $
$
40
111
120
(44 )
3
—
—
19
(73 )
30
81
1
8
108
(54 )
—
—
(54 )
—
340
(35 )
—
—
—
—
—
8
(44 )
(6 )
263
(12 )
305
418
723 $
5 $
43 $
10
$
13 $
125
109
(1 )
17
3
6
11
92
(28 )
(124 )
(81 )
(34 )
(194 )
(55 )
(4 )
3
(56 )
(115 )
—
—
500
(10 )
700
(7 )
(700 )
—
(21 )
(6 )
341
8
99
319
418
3
13
15
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
57
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,” “Tripadvisor group,” “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, and as of December 31, 2022, LTRIP beneficially owned approximately 16.4 million shares of our common stock
and 12.8 million shares of our Class B common stock, which constitute nearly 13% 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 nearly 21% 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 approximately 56%
of our voting power.
Description of Business
The Tripadvisor group operates as a family of brands with a purpose of connecting people to experiences worth sharing. Our vision is to be the
world’s most trusted source for travel and experiences. The Company operates across three reportable segments: Tripadvisor Core, Viator, and TheFork. We
leverage our brands, technology platforms, and capabilities to connect our large, global audience with partners by offering rich content, travel guidance
products and services, and two-sided marketplaces for experiences, accommodations, restaurants, and other travel categories.
Tripadvisor Core’s purpose is to empower everyone to be a better traveler by serving as the world’s most trusted and essential travel guidance
platform. The Tripadvisor brand offers travelers and experience seekers an online global platform for travelers to discover, generate, and share authentic
user-generated content (“UGC”) in the form of ratings and reviews for destinations, points-of-interest (“POIs”), experiences, accommodations, restaurants,
and cruises in over 40 countries and over 20 languages across the world. As of December 31, 2022, Tripadvisor offered more than 1 billion user-generated
ratings and reviews on nearly 8 million experiences, accommodations, restaurants, airlines, and cruises.
Viator enables travelers to discover and book iconic, unique and memorable experiences from experience operators around the globe. Our online
marketplace is comprehensive, connecting travelers to bookable tours, activities and attractions—consisting of over 300,000 experiences from more than
50,000 operators as of December 31, 2022.
58
TheFork provides an online marketplace that enables diners to discover and book online reservations at more than 55,000 restaurants in 12 countries,
as of December 31, 2022, across the UK, western and central Europe, and Australia.
Risks and Uncertainties
In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China, and on March 11, 2020 was declared a global
pandemic. COVID-19 caused material and adverse declines in consumer demand within the travel, hospitality, restaurant, and leisure industry. The
pandemic’s proliferation, concurrent with travel bans, varying levels of governmental restrictions and mandates globally to limit the spread of the virus,
dampened consumer demand for our products and services, and impacted consumer sentiment and discretionary spending patterns. Consequently, the
COVID-19 pandemic adversely and materially affected our business, results of operations, liquidity and financial condition during the years ended
December 31, 2021 and 2020. In 2022, we generally experienced a travel demand recovery fueled by the continued easing of government restrictions
globally and increased consumer travel demand.
During the year ended December 31, 2020, in response to the COVID-19 pandemic, we took several steps to further strengthen our financial
position and balance sheet including but not limited to, restructuring activities, primarily by significantly reducing our ongoing operating expenses and
headcount. During the year ended December 31, 2020, the Company incurred total restructuring and other related reorganization costs of $41 million which
consisted of employee severance and related benefits. In addition, in order to maintain financial liquidity and flexibility during this time period, the
Company (i) borrowed $700 million from our Credit Facility in the first quarter of 2020 (subsequently repaid during the third quarter of 2020); (ii)
amended our Credit Agreement, which included short-term financial covenant relief and the extension of the maturity date from May 12, 2022 to May 12,
2024; and (iii) raised additional financing through the issuance of $500 million in Senior Notes by the Company in July 2020, all which are described in
more detail in “Note 9: Debt”.
We may continue to be subject to risks and uncertainties related to the COVID-19 pandemic. We believe the travel, leisure, hospitality, and
restaurant industries, and our financial results, would be adversely and materially affected upon a resurgence of existing COVID-19 variants (e.g., Delta,
Omicron, and BA.5) or if new variants emerge, which result in reinstated travel bans and/or other government restrictions and mandates, all of which would
likely negatively impact consumer demand, sentiment and discretionary spending patterns.
Additionally, other distinct health-related events, political instability, geopolitical conflicts, acts of terrorism, fluctuations in currency values,
changes in global economic conditions, including the impact of a potential U.S. recession, and increased inflation, are examples of other events that could
have a negative impact on the travel industry, and as a result, our financial results in the future.
Seasonality
Consumers' travel expenditures have historically followed a seasonal pattern. Correspondingly, travel partner advertising investments, and therefore
our revenue and operating profits, have also historically followed 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, including traveler accommodation stays, and travel experiences
taken, compared to the first and fourth quarters, which represent seasonal low points. In addition, during the first half of the year, experience bookings
typically exceed the amount of completed experiences, 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.
Certain factors may impact our typical seasonal fluctuations, which may include any significant shifts in our business mix or adverse economic
conditions that could result in future seasonal patterns that are different from historical trends. For example, the negative impact to our business from
COVID-19 materially affected our historical trends at varying levels during the years ended December 31, 2021 and 2020, while these trends significantly
improved during the year ended December 31, 2022, resulting in increased revenues, and working capital and operating cash flow more akin to typical
historical seasonality trends.
59
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 may have been reclassified for comparability with the current period presentation,
none of which were material. 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, or 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’ financial 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 estimate underlying our consolidated financial statements is accounting for income taxes.
Refer to our accounting policy for income taxes disclosed below and "Note 11: Income Taxes" for information regarding our significant income tax
estimates.
Revenue Recognition
Refer to “Note 3: 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 consist of direct costs, including traffic generation costs from SEM and other online traffic acquisition costs,
syndication costs and affiliate marketing commissions, social media costs, brand advertising (including television and other offline advertising), promotions
and public relations. In addition, our selling 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.
Advertising costs
We incur advertising costs, consisting of online advertising expense, primarily SEM and other online traffic costs, and offline advertising costs,
including television, 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
60
production costs associated with advertisements in the period in which the advertisement first takes place. For the years ended December 31, 2022, 2021
and 2020, we recorded advertising expense of $572 million, $282 million, and $118 million, respectively, in selling and marketing expense on our
consolidated statements of operations. We include prepaid advertising expenses in prepaid expenses and other current assets on our consolidated balance
sheet, which was not material as of December 31, 2022 and 2021.
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
platform. 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 operating costs including bad debt expense, non-income taxes,
such as sales, use, digital services, and other non-income related taxes.
Stock-Based Compensation
Stock Options. Our employee stock options generally consist of service based awards. The exercise price is equal to the market price of the
underlying shares of our common stock at the date of grant. In this regard, when granting 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 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 yields 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. When measuring
implied volatility for a specific employee stock option grant, we generally rely on traded contracts with six month maturities or more and exercise prices
approximately equal to the exercise price of the specific 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. 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.
61
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 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 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 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 estimating 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 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, Cash Equivalents, Restricted Cash and Marketable Securities
Our cash consists of bank deposits held in global financial institutions. Our cash equivalents generally consist of highly liquid investments, generally
including money market funds, available on demand cash deposits, term deposits, and marketable securities, with maturities of 90 days or less at the date of
purchase.
62
For all periods presented, our restricted cash, which primarily consists of escrowed security deposits, was not material and is included in prepaid
expenses and other current assets on our consolidated balance sheet.
We classify marketable 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 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 securities with maturities greater than 12
months from the balance sheet date will generally be classified as long-term. We classify 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 securities are classified and accounted for as available-for-sale, and therefore are carried at fair value, with 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 any available-for-sale securities to determine whether their fair value is below their carrying value. If the fair value of an
available-for-sale security is below their carrying value, and either we intend to sell the security or we will be required to sell before recovery, then the
difference between fair value and carrying value is recognized as a loss in other income (expense), net on our consolidated statements of operations. If we
do not intend to sell and we will not be required to sell before recovery, then we analyze whether a portion of the unrealized loss is the result of a credit
loss. When a portion of the unrealized loss is the result of a credit loss, we recognize an allowance for credit losses on our consolidated balance sheet and a
corresponding loss in other income (expense), net on our consolidated statements of operations. Any portion of the unrealized loss on the available-for-sale
securities that is not attributable to a credit loss would be recognized as an unrealized loss in accumulated other comprehensive income (loss) within our
consolidated statements of changes in stockholders’ equity.
The Company's investment portfolio at any point in time may contain various investments, including, in U.S. treasury and U.S. government agency
securities, taxable and tax-exempt municipal notes, corporate notes and bonds, commercial paper, non-U.S. government agency securities, overnight
demand deposits, and money market funds. The Company segments its portfolio based on the underlying risk profiles of the securities and has a zero loss
expectation for U.S. treasury and U.S. government agency securities. The Company regularly reviews the securities in an unrealized loss position and
evaluates the expected credit loss risk by considering factors such as historical experience, market data, issuer-specific factors, and current economic
conditions. As of December 31, 2022 and 2021, the Company had no available-for-sale securities.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recognized when the right to consideration becomes unconditional and are recorded net of an allowance for credit losses.
We record accounts receivable at the invoiced amount. Our customer invoices are generally due 30 days from the time of invoicing. The Company uses the
“expected credit loss” methodology, allowed under GAAP, in estimating its allowance for credit losses. We apply the “expected credit loss” methodology
by first assessing our historical losses based on credit sales and then adding in an assessment of expected changes in the foreseeable future, whether
positive or negative, to the Company’s ability to collect its outstanding accounts receivables, or the expectation for future losses. The Company develops its
expectation for future losses by assessing the profiles of its customers using their historical payment patterns, any known changes to those customers’
ability to fulfill their payment obligations, and assessing broader economic conditions that may
63
impact our customers’ ability to pay their obligations. Where appropriate, the Company performs this analysis using a portfolio approach. Portfolios
comprise customers with similar characteristics and payment history, and we have concluded that the aggregation of these customers into various portfolios
does not produce a result that is materially different from considering the affected customers individually. Customers are assigned internal credit ratings, as
determined by the Company, based on our collection profiles. Customers whose outstanding obligations are less likely to experience a credit loss are
assigned a higher internal credit rating, and those customers whose outstanding obligations are more likely to experience a credit loss are assigned a lower
credit rating. We recognize a greater credit loss allowance on the accounts receivable due from those customers in the lower credit tranche, as determined
by the Company. When the Company becomes aware of facts and circumstances affecting an individual customer, it also takes that specific customer
information into account as part of its calculation of expected credit losses.
The Company's exposure to credit losses may increase if our customers are adversely affected by changes in macroeconomic pressures or
uncertainty associated with local or global economic recessions, or other customer-specific factors.
The following table presents the changes in our allowance for credit losses for the periods presented:
Allowance for credit losses:
Balance, beginning of period
Provision charged to expense
Write-offs, net of recoveries and other
adjustments
Balance, end of period
2022
December 31,
2021
(in millions)
2020
$
$
28 $
6
(6 )
28 $
33 $
3
(8 )
28 $
25
17
(9 )
33
Property and Equipment
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 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 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 and is accounted for as a finance lease under GAAP. The 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 “Note 6:
Leases” for a discussion of our lease accounting policy and other required financial disclosures.
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
64
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.
Non-marketable equity investments that are not accounted for under the equity method and that do not have a readily determinable fair value are
accounted for under the measurement alternative, allowed under GAAP. 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, if any, 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 investments at fair value.
Valuations of such privately-held companies are inherently complex and uncertain due to the lack of liquid market for such 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.
Business Combinations
We account for acquired businesses using the acquisition method of accounting which requires that 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 in which such goodwill was generated 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
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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 or 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 (i.e. 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 valuation 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
substantially 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 second quarter of 2022, subsequent to our annual impairment test in the fourth quarter of 2021, the composition of our reportable
segments was changed, as discussed in “Note 19: Segment and Geographic Information.” Following the change in reportable segments, our new reporting
units for the purposes of goodwill impairment testing are as follows: (1) Tripadvisor Core, (2) Viator (formerly Experiences), and (3) TheFork. The
Tripadvisor Core reporting unit includes the operations of the following legacy reporting units (including the carrying value of their related goodwill):
Hotels, Media & Platform, Rentals, Flights & Car, Cruises, and Tripadvisor Restaurants. As a result of this reporting unit change, we performed a
qualitative assessment on our legacy reporting units prior to operationalizing the new segment reporting structure and determined that it was more likely
than not that the fair value of all legacy reporting units was greater than the carrying value, which is consistent with our conclusion reached in the fourth
quarter of 2021. We then performed a goodwill impairment test for each of the three new reporting units (Tripadvisor Core, Viator, and TheFork) 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, and therefore, no indications of impairment were identified as a result of these changes in the second quarter of 2022.
During the Company's annual goodwill impairment test in the fourth quarter of 2022, a qualitative assessment was performed for all our reporting
units. We determined that it was not more likely than not that the fair value of
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any reporting unit was less than its carrying value, and, accordingly, no impairment charges were recorded during the year ended December 31, 2022. As
part of the qualitative assessment for our annual 2022 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, (h) changes in estimates, valuation inputs, and/or assumptions since the last quantitative analysis of
the reporting units during the second quarter of 2022, (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.
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 our definite-
lived intangible assets. If we reduce the estimated useful life assumption, the remaining unamortized balance is amortized over the revised estimated useful
life.
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's carrying value 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 significantly 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.
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, net
and operating lease right-of-use assets, 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. The Company’s impairment evaluation is performed at the asset group level or the lowest level for which identified cash
flows are largely independent, which the Company has defined as the reporting unit level. 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
67
fair value and would be included in operating income (loss) 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 sheets at
December 31, 2022 or 2021.
Deferred Merchant Payables
In our experiences and rentals free-to-list offerings, we receive payment from travelers at the time of booking or prior to the experience date, and we
record these amounts, net of our commissions, on our consolidated balance sheet as deferred merchant payables. We pay the operators, generally the third-
party experience providers and vacation rental owners, after the travelers’ use. Therefore, we receive payment from the traveler prior to paying the operator
and this operating cycle represents a working capital source or use of cash to us. Our deferred merchant payables balance was $203 million and $113
million at December 31, 2022 and 2021, respectively, on our consolidated balance sheets. The increase in our deferred merchant payables during the year
ended December 31, 2022 was primarily due to increased consumer demand for travel industry related services, combined with the easing of government
travel restrictions put in place due to COVID-19.
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 U.S. use the 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 reporting
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.
In addition, our subsidiaries also engage in transactions in currencies other than its functional currency. Transactions denominated in currencies
other than the functional currency are recorded based on foreign currency exchange rates at the time such transactions arise. Subsequent changes in foreign
currency 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 $5 million and $4 million for the years ended December 31, 2022 and 2021, respectively, and a net foreign currency exchange gain of $5 million for the
year ended December 31, 2020, in other income (expense), net on our consolidated statements of operations. These amounts also include transaction gains
and losses, both realized and unrealized from forward contracts.
Derivative Financial Instruments
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 foreign currency exchange rates reported in other income (expense), net on our consolidated statements of operations. In certain
circumstances, we enter into 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. 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 did not enter into any cash flow, fair value or net investment hedges during the years ended December 31, 2022, 2021 or 2020.
Refer to “Note 4: Financial Instruments and Fair Value Measurements” for additional information on derivatives.
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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.
Debt Issuance Costs
We defer costs we incur to issue debt, which are presented in the balance sheet as a direct deduction from the carrying amount of the related debt
liability, and amortize these costs using the effective interest rate method to interest expense over the term of the debt. We also defer costs we incur to enter
into a credit facility or to amend our existing revolving credit facility, which are presented in the balance sheet as a long-term asset, and amortize these
costs using the effective interest rate method to interest expense over the term of the credit facility.
Certain Risks and Concentrations
Our business is subject to certain risks and concentrations, including a concentration related to dependence on our relationships with our customers.
For the years ended December 31, 2022, 2021 and 2020 our two most significant travel partners, Expedia (and its subsidiaries) and Booking (and its
subsidiaries), each accounted for 10% or more of our consolidated revenue and together accounted for approximately 35%, 34% and 25%, respectively, of
our consolidated revenue, with nearly all of this revenue concentrated in our Tripadvisor Core segment. Additionally, our business is dependent on
relationships with third-party service operators that we rely on to fulfill service obligations to our customers where the Company is the merchant of record,
such as our experience providers and vacation rental owners. However, no one operator’s inventory resulted in more than 10% of our revenue on a
consolidated basis or at a reportable segment level in any period presented. Refer to “Note 3: Revenue Recognition” and “Note 19: Segment and
Geographic Information” for information regarding concentrations related to geographic and product revenues, respectively. As of December 31, 2022 and
2021, Expedia accounted for approximately 19% and 10%, respectively, of our total accounts receivable and contract assets. Our overall credit risk related
to accounts receivable is mitigated by the relatively short collection period.
Financial instruments, which potentially subject us to concentration of credit risk, generally consist, at any point in time, of cash and cash
equivalents, corporate debt securities, forward contracts, capped calls, and accounts receivable. We maintain cash balances with financial institutions that
are in excess of Federal Deposit Insurance Corporation insurance limits in the U.S. and similar programs outside the U.S. Our cash is generally composed
of available on demand bank deposits or term deposits with major global financial institutions primarily denominated in U.S. dollars, and to a lesser extent
Euros, British pounds, and Australian dollars. We may 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 and capped calls are transacted with major
69
international financial institutions with high credit standings. Forward contracts, which, to date, have typically had maturities of less than 90 days, also
mitigates risk.
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 statement 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 on 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 16: Earnings Per Share” for a discussion as to how we compute Basic EPS and Diluted EPS.
Recently Adopted Accounting Pronouncements
As of December 31, 2022, there are no recently issued accounting standards which are expected to have a material impact on the Company’s
financial statements or disclosures.
NOTE 3: REVENUE RECOGNITION
We generate all 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:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
(1)
(2)
(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, 2022, 2021 and 2020 related to performance obligations satisfied in prior periods, respectively. We have applied a practical expedient and do not
disclose the
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value of unsatisfied performance obligations that have an original expected duration of less than one year. The Company expects to complete its
performance obligations within one year from the initial transaction date. 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. As of both December 31, 2022 and 2021, there
were $4 million of unamortized contract costs in other long-term assets on our consolidated balance sheet. 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
expense on our consolidated statements of operations during each of the years ended December 31, 2022, 2021 and 2020, was $1 million. We assess such
asset for impairment when events or circumstances indicate that the carrying amount may not be recoverable. No impairments were recognized during the
years ended December 31, 2022, 2021 and 2020.
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 and current trends. 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.
The application of our revenue recognition policies and a description of our principal activities, organized by reportable segment, from which we
generate our revenue, are presented below.
Tripadvisor Core Segment
Tripadvisor-branded Hotels Revenue. Our largest source of Tripadvisor Core segment revenue is generated from click-based advertising on
Tripadvisor-branded websites, which we refer to as our hotel meta (formerly referred to as hotel auction) revenue, which is primarily comprised of
contextually-relevant booking links to our travel partners’ websites. Our click-based travel partners are predominantly online travel agencies, or OTAs, and
hotels. 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, where
the travel partner bids for rates and availability to be listed on our platform. When a CPC bid is submitted, the travel partner agrees to pay us the bid
amount each time a traveler clicks on the link to that travel 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.
We also generate revenue from our cost-per-action, or “CPA” model, which consists of contextually-relevant booking links to our travel partners’ websites
which are advertised on our platform. We earn a commission from our travel partners, based on a pre-determined contractual commission rate, for each
traveler who clicks to and books a hotel reservation on the travel partners’ website, which results in a traveler stay. CPA revenue is billable only upon the
completion of each traveler’s stay resulting from a hotel reservation. The travel partners provide the service to the travelers and we act as an agent under
GAAP. Our performance obligation is complete at the time of the hotel reservation booking, and the commission earned is recognized upon booking, as we
have no post-booking service
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obligations. We recognize this revenue net of an estimate of the impact of cancellations, using historical cancellation rates and current trends. Contract
assets are recognized at the time of booking for commissions that are billable upon the completion of a traveler's stay. CPA revenue is generally billed to
our travel partners monthly for traveler stays completed in that month.
In addition, we offer business-to-business (“B2B”) solutions to hotels, including subscription-based advertising to hotels, owners of B&Bs, and
other specialty lodging properties. Our performance obligation is generally to enable subscribers to advertise their businesses on our platform, as well as to
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 initially on our consolidated balance sheet
for the amount of prepayment in excess of revenue recognized, until the performance obligation is satisfied. To a lesser extent, we offer travel partners the
opportunity to advertise and promote their business through hotel sponsored placements on our platform. 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 generally based on bids submitted as part of an auction by our travel
partners. When a CPC bid is submitted, the travel partner agrees to pay us the bid amount each time a traveler clicks on a link to our travel partner’s
websites. Bids may be submitted periodically – as often as daily – on a property-by-property basis. 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 monthly, consistent with the timing of the service.
Tripadvisor-branded Display and Platform Revenue. We offer travel partners the ability to promote their brands through display-based
advertising placements across our platform. 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 platform 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 corresponds with the value to the customer of our performance to date, which is measured based on
impressions delivered.
Tripadvisor Experiences and Dining Revenue. We generate revenue from our experiences and restaurant service offerings on Tripadvisor-branded
websites and mobile apps. Tripadvisor receives intercompany (intersegment) revenue consisting of affiliate marketing commissions earned primarily from
experience bookings and, to a lesser extent, restaurant reservation bookings, on Tripadvisor-branded websites and mobile apps, fulfilled by Viator and
TheFork, respectively, which are eliminated on a consolidated basis. The performance obligations, timing of customer payments for our experiences and
dining transactions, and methods of revenue recognition are consistent with the Viator and TheFork segments, as described below. In addition, Tripadvisor
restaurant service offerings, or B2B restaurants offering, generate subscription fees for subscription-based advertising to our restaurant partners that allow
restaurants to manage and promote their website URL, email address, phone number, special offers and other information related to their business, as well
as access to certain online reservation management services, marketing analytic tools, and menu syndication services. 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-based advertising services are generally billed at
the inception of the service. When prepayments are received, we recognize deferred revenue initially on our consolidated balance sheet for the amount of
prepayment in excess of revenue recognized, until the performance obligation is satisfied. In addition, we offer restaurant partners the opportunity to
advertise and promote their business through restaurant media advertising placements on our platform. This service is generally priced on a CPC basis, with
payments from restaurant partners determined by the number of clicks by consumers on the sponsored link multiplied by the CPC rate for each specific
click. CPC rates for media advertising placements agreed to by our restaurant partners are based on a pre-determined
72
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 monthly, consistent with the timing of the service.
Other Revenue. We also offer travelers alternative accommodations rentals (formerly referred to as vacation rentals), cruises, flights, and rental cars
solutions on our platforms which complement our end-to-end travel experience. Our alternative accommodation 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. Our alternative accommodation rentals offering primarily generates revenue by offering individual property owners and managers the
ability to list their properties on our platform thereby connecting with travelers through a free-to-list, commission-based option. These properties are listed
on our Tripadvisor-branded websites and mobile apps, and Tripadvisor's portfolio of travel media brands, including, www.flipkey.com,
www.holidaylettings.co.uk, www.niumba.com, and www.vacationhomerentals.com. 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 in the transactions, under GAAP, 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 payment from the traveler at the time of booking,
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 on our consolidated balance sheet until revenue is recognized, and that portion of the payment representing the amount due to
the property owner is recorded as a deferred merchant payable on our consolidated balance sheet until payment is made to the property owner after the
completion of the rental.
In addition, Other Revenue includes revenue generated from cruises, flights, and rental cars offerings on Tripadvisor-branded websites and mobile
apps and Tripadvisor’s portfolio of brands, which primarily includes click-based advertising and display-based advertising revenue. The performance
obligations, timing of customer payments for these offerings, and methods of revenue recognition are generally consistent with click-based advertising and
display-based advertising revenue, as described above.
Viator Segment
We provide an online marketplace that allows travelers to research and book tours, activities and attractions in popular travel destinations across the
globe through our stand-alone Viator-branded platform, which includes website, mobile web, and mobile app. Through Viator, we also power traveler
bookings of tours, activities and attractions on behalf of third-party distribution partner websites, including the Tripadvisor platform as well as many of the
world’s major OTA, airlines, hotels, online and offline travel agencies, and other prominent content and eCommerce brands.
We work with local tour, activities, and experience operators (“operators”) to provide travelers (“customers”) the ability to book tours, activities and
attractions (the “experience”) in destinations worldwide. We generate commissions for each booking transaction we facilitate through our online reservation
system, in exchange for certain activities, including the use of the Company’s booking platform, post-booking customer support (24/7) until the time of the
experience and payment processing activities as the merchant of record, which is the completion of the performance obligation. These activities are not
distinct from each other and are not separate performance obligations. As a result, the Company’s single performance obligation is to facilitate an
experience, which is complete upon the time the experience occurs, and when revenue is recognized. We do not control the experience or have inventory
risk before the operator provides the experience to our customer and therefore act as agent for substantially all of these transactions under GAAP.
We collect payment from the customer prior to the experience occurring, which includes both our commission and the amount due to the operator.
We record our commissions as deferred revenue on our consolidated balance sheet when payment is received, including amounts which are refundable
subject to cancellation, until the experience occurs when revenue is recognized. The amount due to the operator is recorded as a deferred merchant
73
payable on our consolidated balance sheet until completion of the experience, after which payment is made to the operator.
To a much lesser extent, we earn commissions from third-party distribution partners, in this case the customers, who display and promote on their
websites the operator experiences available on our platform to generate bookings. In these transactions, we are not the merchant of record, and we generally
invoice and receive commissions directly from the third-party distribution partners. Our performance obligation is to allow the third-party distribution
partners to display and promote on their website experiences, offered by operators who utilize our platform, and we earn a commission when travelers book
and complete an experience on the third-party distribution partner website. We do not control the service or have inventory risk, and therefore act as an
agent for these transactions under GAAP. We receive payment prior to the experience date in the majority of these transactions and make payments to the
operators after the experience is complete. Our performance obligation is complete, and revenue is recognized at the time of the booking, as we have no
post-booking obligations to the customer. We recognize this revenue net of an estimate of the impact of cancellations, which is not material, using historical
cancellation rates and current trends. Contract assets are recognized for commissions that are contractually billable contingent upon completion of the
experience.
TheFork Segment
We provide information and services for consumers to research and book restaurants through our dedicated online restaurant reservations platform,
TheFork. We primarily generate transaction fees (or per seated diner fees) that are paid by our restaurant customers 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 providing access
to certain online reservation management services, marketing analytic tools, and menu syndication services. Our performance obligation is to provide
restaurants with access to these services over the subscription period, which generally is one-month, and we recognize revenue once our performance
obligation is met and invoice restaurants monthly for these subscription services.
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 under GAAP, which is to depict how the nature, amount, timing, and uncertainty of revenue and cash
flows are affected by economic factors. As noted in “Note 19: Segment and Geographic Information” our business consists of three reportable segments –
(1) Tripadvisor Core; (2) Viator; and (3) TheFork. A reconciliation of disaggregated revenue to reportable segment revenue is included below.
74
Major products/revenue sources (1):
Tripadvisor Core
Tripadvisor-branded hotels
Tripadvisor-branded display and platform
Tripadvisor experiences and dining (2)
Other
Total Tripadvisor Core
Viator
TheFork
Intersegment eliminations (2)
Total Revenue
2022
Year ended December 31,
2021
2020
(in millions)
$
$
650 $
130
134
52
966
493
126
(93 )
1,492 $
451 $
98
70
46
665
184
85
(32 )
902 $
292
69
65
57
483
55
86
(20 )
604
(1) Our revenue is recognized primarily at a point in time for all reported segments.
(2)
Tripadvisor experiences and dining revenue within the Tripadvisor Core segment are shown gross of intersegment (intercompany) revenue, which is eliminated on a
consolidated basis. See “Note 19: Segment and Geographic Information” for a discussion of intersegment revenue for all periods presented.
Contract Balances
The following table provides information about the opening and closing balances of accounts receivable and contract assets, net of allowance for
credit losses, from contracts with customers (in millions):
Accounts receivable
Contract assets
Total
December 31, 2022 December 31, 2021
105
173 $
$
37
32
142
205 $
$
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. 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.
During the year ended December 31, 2021, bad debt expense recorded to our allowance for expected credit losses on accounts receivable and
contract assets decreased by $14 million, when compared to the same period in 2020, primarily due to improved collection trends with our customers
driven by the ongoing travel industry recovery from COVID-19 during that year.
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 sheet. As of January 1, 2022 and
2021, we had $36 million and $28 million, respectively, recorded as deferred revenue on our consolidated balance sheets, of which $34 million and $23
million, respectively, was recognized in revenue and $2 million and $4 million was refunded due to cancellations by travelers during the years ended
December 31, 2022 and 2021, respectively. 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. There were no significant
changes in contract assets or deferred revenue during the years ended December 31, 2022 and 2021 related to business combinations, impairments,
cumulative catch-ups or other material adjustments.
75
NOTE 4: FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Cash, Cash Equivalents and Marketable Securities
As of December 31, 2022 and 2021, we had $1.0 billion and $723 million of cash and cash equivalents, respectively, which consisted of available on
demand cash deposits and term deposits with maturities of 90 days or less at the date of purchase, in each case, with major global financial institutions. We
had no outstanding investments classified as either short-term or long-term marketable securities as of December 31, 2022 and 2021, respectively, and there
were no purchases or sales of any marketable securities during the years ended December 31, 2022, 2021 and 2020.
The following table shows our cash equivalents, which are measured at fair value on a recurring basis and categorized using the fair value hierarchy,
as well as their classification on our consolidated balance sheet as of December 31, 2022 (in millions):
Level 2:
Term deposits
Total
Amortized Cost
Fair Value (1)
Cash Equivalents
$
$
200 $
200 $
200 $
200 $
200
200
(1)
We did not have any unrealized gains and losses related to our cash equivalents.
We had no material financial assets or liabilities measured at fair value on a recurring basis as of December 31, 2021.
We generally classify any existing cash equivalents and 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 use to measure the fair value of money market
funds is derived from quoted prices in active markets for identical assets or liabilities. Fair values for Level 2 investments 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 recorded, including comparing the fair values obtained
from our independent pricing services against fair values obtained from another independent source.
Derivative Financial Instruments
We generally use forward contracts to reduce the effects of foreign currency exchange rate fluctuations on our cash flows for the Euro versus the
U.S. Dollar. For the periods ended December 31, 2022, 2021 and 2020, 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 were carried at fair value on our consolidated balance sheets at
December 31, 2022 and 2021. 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 forward contracts in other income (expense), net on our consolidated statement of operations. We recorded a
net gain of $4 million, $2 million, and $1 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to our forward contracts.
The following table shows the net notional principal amounts of our outstanding derivative instruments for the periods presented:
Foreign currency exchange-forward contracts (1)(2)
December 31, 2022
December 31, 2021
$
(in millions)
18 $
9
(1)
Derivative contracts address foreign currency exchange fluctuations for the Euro versus the U.S. dollar. These outstanding derivatives are not designated as hedging
instruments and have an original maturity period of 90 days or less.
76
(2)
The fair value of our outstanding derivatives as of December 31, 2022 and 2021, respectively, was not material. The notional amount of a forward contract is the contracted
amount of foreign currency to be exchanged and is not recorded on the consolidated balance sheet.
Other Financial Assets and Liabilities
As of December 31, 2022 and 2021, financial instruments not measured at fair value on a recurring basis including accounts payable, accrued
expenses and other current liabilities, and deferred merchant bookings, were carried at cost on our consolidated balance sheets, which approximates their
fair values because of the short-term nature of these items. Accounts receivable and contract assets, on our consolidated balance sheets, as well as certain
other financial assets, were measured at amortized cost and are carried at cost less an allowance for expected credit losses to present the net amount
expected to be collected.
The following table shows the aggregate principal and fair value amount of our outstanding 2025 Senior Notes and 2026 Senior Notes as of the
periods presented, which are classified as long-term debt on our consolidated balance sheets, and considered Level 2 fair value measurements. Refer to
“Note 9: Debt” for additional information related to our 2025 Senior Notes and 2026 Senior Notes.
2025 Senior Notes
Aggregate principal amount
Carrying value amount (1)
Fair value amount (2)
2026 Senior Notes
Aggregate principal amount
Carrying value amount (3)
Fair value amount (2)
December 31, 2022
December 31, 2021
(in millions)
$
$
500 $
495
498
345 $
341
281
500
493
531
345
340
305
(1)
(2)
(3)
Net of $5 million and $7 million of unamortized debt issuance costs as of December 31, 2022 and 2021, respectively.
We estimate the fair value of our outstanding 2025 Senior Notes and 2026 Senior Notes based on recently reported market transactions and/or prices for identical or similar
financial instruments obtained from a third-party pricing source.
Net of $4 million and $5 million of unamortized debt issuance costs as of December 31, 2022 and 2021, respectively.
The Company did not have any assets or liabilities measured at fair value on a recurring basis using Level 3 unobservable inputs at both December
31, 2022 and 2021.
Assets Measured at Fair Value on a Non-recurring Basis
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, including a long-term exclusive brand and content license and other assets, in return for a 40% equity investment in
Chelsea Investment Holding Company PTE Ltd. This investment resulted in the Company recording an initial equity method investment of $41 million and
a $39 million deferred income liability attributable to the brand and content license in the fourth quarter of 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, and recorded in other income (expense), net on the
consolidated statement of operations.
77
The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence over, but not
control, the investee. The carrying value of this minority investment was $32 million and $34 million as of December 31, 2022 and 2021, respectively, and
is included in non-marketable investments on our consolidated balance sheets. During the years ended December 31, 2022, 2021 and 2020, we recognized
$2 million, $3 million and $3 million, respectively, representing our share of the investee’s net loss in other income (expenses), net within the consolidated
statements of operations. The Company evaluates this investment for impairment when factors indicate that a decline in the value of its investment has
occurred and the carrying amount of its investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the
estimated fair value of the investment based on Level 3 inputs, is recognized in earnings when an impairment is deemed to be other than temporary. Due to
ongoing operating losses, primarily due to the ongoing negative impact of COVID-19 in China, we performed a qualitative assessment to evaluate whether
this equity investment is impaired as of December 31, 2022. During the years ended December 31, 2022, 2021 and 2020, respectively, we did not record
any impairment loss on this equity investment. The remaining deferred income liability of $31 million is presented in accrued expenses and other current
liabilities and other long-term liabilities on our consolidated balance sheet of $3 million and $28 million, respectively, as of December 31, 2022.
During the year ended December 31, 2020, the Company entered into various commercial agreements with Chelsea Investment Holding Company
PTE Ltd. and/or its subsidiaries. Transactions under these agreements with the equity method investee are considered related-party transactions, and were
not material for the years ended December 31, 2022, 2021 and 2020, respectively.
Other Equity Investments
We also hold a minority investment in equity securities of a privately-held company, which is at an early stage of development and does not have a
readily determinable fair value. As of both December 31, 2022 and 2021, the total carrying value of this investment was $2 million, and included in non-
marketable investments on our consolidated balance sheets.
Our policy is to measure this equity investment 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, if any, to evaluate whether this investment is impaired and monitor for any observable price changes. During
the years ended December 31, 2022, 2021 and 2020, we did not record any impairment loss on this equity investment or note any observable price change
indicators.
Other Long-Term Assets
In June 2020, the Company was issued collateralized notes (the “Notes Receivable”) with a total principal amount of $20 million from a privately-
held company, in exchange for an existing equity investment held in the investee by the Company, and other-long term receivables, net, which the
Company held due from the same investee. The Company has classified the Notes Receivable as held-to-maturity, as the Company has concluded it has the
positive intent and ability to hold the Notes Receivable until maturity, with 50% due in five years and remaining 50% due in 10 years from issuance date.
The Company recorded a $5 million and $3 million allowance for credit losses under GAAP during the years ended December 31, 2021 and 2020,
respectively, in other income (expense), net on the consolidated statement of operations, related to the Notes Receivable. As of both December 31, 2022
and 2021, the carrying value of the Notes Receivable was $9 million, net of accumulated allowance for credit losses, and is classified in other long-term
assets, net on our consolidated balance sheet at amortized cost. On a quarterly basis, we perform a qualitative assessment considering impairment indicators
to evaluate whether the Notes Receivable are impaired and monitor for changes to our allowance for credit losses.
Other non-financial assets, such as property and equipment, goodwill, intangible assets, and operating lease right-of-use assets are adjusted to fair
value when an impairment charge is recognized or the underlying investment is sold. Such fair value measurements, if necessary, are based predominately
on Level 3 inputs. Refer to “Note 5: Property and Equipment, Net”, “Note 6: Leases” and “Note 7: Goodwill and Intangibles Assets, Net” for additional
information regarding those assets.
78
NOTE 5: PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following for the periods presented:
December 31, 2022
December 31, 2021
Capitalized website development
Finance lease right-of-use asset (Note 6)
Leasehold improvements
Computer equipment and purchased software
Furniture, office equipment and other
Less: accumulated depreciation
Total
$
$
$
(in millions)
445
114
46
82
19
706
(512 )
194
$
416
114
48
77
20
675
(460 )
215
As of December 31, 2022 and 2021, the carrying value of our capitalized website development costs, net of accumulated amortization, was $91
million and $97 million, respectively. For the years ended December 31, 2022, 2021 and 2020, we capitalized $56 million, $55 million and $63 million,
respectively, related to website development costs. For the years ended December 31, 2022, 2021 and 2020, we recorded amortization of capitalized
website development costs of $61 million, $64 million and $67 million, respectively, which is included in depreciation expense on our consolidated
statements of operations for those years. During the year ended December 31, 2022, we retired and subsequently disposed of certain capitalized website
development projects, which were no longer in use and fully depreciated, with a total cost of $22 million.
NOTE 6: LEASES
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 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 which we combine as a single component under our accounting policy by asset
class, except for office space leases and certain other leases, such as colocation data center leases, which we account separately for the lease and non-lease
components. For leases which the consideration in the contract is allocated to lease and non-lease components, we base it 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 third-party 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 right-of-use ROU assets and operating lease liabilities.
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
79
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 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 finance obligations.
Finance Leases
Finance lease ROU assets and finance lease liabilities are recognized 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 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 lease approximately 280,000 square feet of office space for our corporate headquarters in Needham, Massachusetts (the “Headquarters Lease”).
The Headquarters Lease has an expiration date of December 2030, with an option to extend the lease term for two consecutive terms of five years each. Our
Headquarters Lease is accounted for as a finance lease.
Operating Leases
Our office space leases, exclusive of our Headquarters Lease, are operating leases, which we lease an aggregate of approximately 400,000 square
feet at approximately 30 locations across North America, Europe, Asia Pacific and South America, in cities such as New York, London, Sydney, Barcelona,
Buenos Aires and Paris, primarily used as sales offices, subsidiary headquarters, and for international operations, pursuant to leases with various expiration
dates, with the latest expiring in July 2027.
Operating lease ROU assets and liabilities 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 associated
with 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 within the adjustments to reconcile net
income (loss) 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 years ended
December 31, 2022, 2021 and 2020. In addition, our short-term lease costs were not material in any period presented.
We also establish assets and liabilities at the present value of estimated future costs to return certain of our leased facilities to their original condition
to satisfy any 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 both December 31, 2022 and 2021.
80
Operating and finance lease assets and liabilities are included on our consolidated balance sheet as follows for the periods presented:
Presentation on Consolidated Balance Sheet
December 31,
December 31,
2022
2021
(in millions)
Noncurrent Lease Assets:
Finance lease
Operating lease
Current Lease Liabilities:
Finance lease
Operating lease
Noncurrent Lease Liabilities:
Finance lease
Operating lease
Property and equipment, net
Operating lease right-of-use-assets
Total lease assets
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities
Total current lease liabilities
Finance lease liability, net of current portion
Operating lease liabilities, net of current portion
Total noncurrent lease liabilities
Total lease liabilities
$
$
$
$
76 $
27
103 $
6 $
14
20
58
15
73
93 $
86
42
128
6
20
26
65
29
94
120
As of December 31, 2022, we did not have any additional operating or finance leases that have not yet commenced but that create significant rights
and obligations for us.
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
$
$
$
$
2022
Year ended December 31,
2021
(in millions)
2020
19 $
10 $
3
13 $
(9 )
23 $
21 $
10 $
4
14 $
(5 )
30 $
28
10
4
14
(3 )
39
(1) Operating lease costs, net of sublease income, are included within operating expenses in our consolidated statements of operations.
(2) Amount is included in depreciation expense in our consolidated statements of operations.
(3) Amount is included in interest expense in our consolidated statements of operations.
81
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
$
Weighted-average remaining lease term:
Operating leases
Finance lease
Weighted-average discount rate:
Operating leases
Finance lease
2022
Year ended December 31,
2021
(in millions)
2020
22 $
3
6
25 $
3
6
2 $
6 $
26
4
6
4
Year ended December 31,
2022
2021
2.5 years
8.0 years
3.0 years
9.0 years
3.7 %
4.5 %
3.7 %
4.5 %
Future lease payments under non-cancelable leases as of December 31, 2022 were as follows:
Year Ending December 31,
Operating Leases
Finance Lease
2023
2024
2025
2026
2027
Thereafter
Total future lease payments
Less imputed interest
Total lease liabilities
$
$
(in millions)
15 $
9
3
2
1
—
30
(1 )
29 $
9
9
10
10
10
28
76
(12 )
64
82
NOTE 7: GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
The following table summarizes our goodwill activity by reportable segment for the periods presented:
Hotels,
Media &
Platform
Experiences &
Dining
Other (2)
Tripadvisor Core
Viator
TheFork
Total
Balance as of December 31, 2020
Foreign currency translation
adjustments
Balance as of December 31, 2021
Foreign currency translation
adjustments
Allocation to new segments (1)
Balance as of December 31, 2022
$
407 $
(in millions)
362 $
—
407 $
—
(407 )
— $
$
$
(18 )
344 $
(18 )
(326 )
— $
93 $
(1 )
92 $
(5 )
(87 )
— $
— $
— $
— $
862
—
— $
—
599
599 $
—
— $
(1 )
120
119 $
—
— $
3
101
104 $
(19 )
843
(21 )
—
822
(1)
(2)
Refer to “Note 19: Segment and Geographic Information” for information regarding our reportable segment changes in the second quarter of 2022.
Other consists of the combination of Rentals, Flights & Car, and Cruises, and did not previously constitute a reportable segment.
There were no goodwill impairment charges recognized on our consolidated statements of operations during the years ended December 31, 2022 and
2021, respectively. Refer to “Note 2: Significant Accounting Policies” for discussion regarding the Company’s 2022 interim and annual goodwill
impairment assessments. During 2020, the Company recognized a goodwill impairment charge of $3 million, which represented all goodwill previously
allocated to our former Tripadvisor China reporting unit. This impairment was driven by strategic operating decisions made by the Company. As of both
December 31, 2022 and 2021, accumulated goodwill impairment losses totaled $3 million, which was associated with the Tripadvisor Core segment as of
December 31, 2022 and Other as of December 31, 2021.
Intangibles
Intangible assets, acquired in business combinations and recorded at fair value on the date of purchase, consisted 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,
2022
2021
(in millions)
219 $
(198 )
21
30
51 $
237
(202 )
35
30
65
$
$
Amortization expense for definite-lived intangible assets was $13 million, $20 million, and $26 million, for the years ended December 31, 2022,
2021 and 2020, respectively.
Our indefinite-lived intangible assets relate to trade names and trademarks for the Tripadvisor brand. During the Company's annual indefinite-lived
intangible impairment test during the fourth quarter of 2022, a qualitative
83
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, 2022.
There were no impairment charges recognized to our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020
related to our intangible assets.
The following table presents the components of our intangible assets with definite lives for the periods presented:
Weighted
Average
Remaining Life
(in years)
Gross
Carrying
Amount
December 31, 2022
December 31, 2021
Accumulated
Amortization
(in millions)
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
(in millions)
Net
Carrying
Amount
Trade names and trademarks
Customer lists and supplier relationships
Subscriber relationships
Technology and other
Total
1.7
4.7
3.3
2.5
3.2
$
$
47
95
34
43
$
219
$
(40 ) $
(87 )
(33 )
(38 )
(198 ) $
7 $
8
1
5
21 $
55 $
99
40
43
237 $
(43 ) $
(87 )
(36 )
(36 )
(202 ) $
12
12
4
7
35
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):
2023
2024
2025
2026
2027
2028 and thereafter
Total
$
$
9
6
3
2
1
—
21
NOTE 8: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following for the periods presented:
Accrued salary, bonus, and other employee-related benefits
Accrued marketing costs
Interest payable (1)
Current income taxes payable (2)
Finance lease liability - current portion (3)
Operating lease liabilities - current portion (3)
Other
Total
84
December 31, 2022
December 31, 2021
$
$
(in millions)
65 $
68
17
16
6
14
61
247 $
58
27
16
3
6
20
51
181
(1) Amount relates primarily to unpaid interest accrued on our 2025 Senior Notes. Refer to “Note 9: Debt” for further information.
(2)
(3)
Refer to “Note 11: Income Taxes” for further information regarding our income tax liabilities.
Refer to “Note 6: Leases” for further information regarding our lease obligations.
NOTE 9: DEBT
The Company’s outstanding debt consisted of the following for the periods presented:
December 31, 2022
Long-Term Debt:
2025 Senior Notes
2026 Senior Notes
Total Long-Term Debt
December 31, 2021
Long-Term Debt:
2025 Senior Notes
2026 Senior Notes
Total Long-Term Debt
Outstanding
Principal Amount
(in millions)
Unamortized Debt
Issuance Costs
Carrying Value
$
$
500
345
845
$
$
(5 ) $
(4 )
(9 ) $
495
341
836
Outstanding
Principal Amount
(in millions)
Unamortized Debt
Issuance Costs
Carrying Value
$
$
500
345
845
$
$
(7 ) $
(5 )
(12 ) $
493
340
833
Credit Facility
We are party to a credit agreement with a group of lenders initially entered into in June 2015 (as amended, the “Credit Agreement”), which, among
other things, provides for a $500 million secured revolving credit facility (the “Credit Facility”) with a maturity date of May 12, 2024. The Company may
borrow from the Credit Facility in U.S. dollars and Euros. In addition, the Credit Facility includes $15 million of borrowing capacity available for letters of
credit and $40 million for Swing Line borrowings on same-day notice. As of December 31, 2022 and 2021, we had issued $4 million and $3 million,
respectively, of undrawn standby letters of credit under the Credit Facility. The Credit Facility, among other things, requires us to maintain a maximum
leverage ratio and contains certain customary affirmative covenants and events of default, including a change of control.
We amended the Credit Facility during 2020 to, among other things: suspend the leverage ratio covenant for quarterly testing of compliance
beginning in the second quarter of 2020, replacing it with a minimum liquidity covenant through June 30, 2021 (requiring the Company to maintain $150
million of unrestricted cash, cash equivalents and short-term investments less deferred merchant payables plus available revolver capacity), until the earlier
of (a) the first day after June 30, 2021 through maturity on which borrowings and other revolving credit utilizations under the revolving commitments
exceed $200 million, and (b) the election of the Company, at which time the leverage ratio covenant will be reinstated (the “Leverage Covenant Holiday”).
The Company remained in the Leverage Covenant Holiday as of December 31, 2022. Based on the Company’s existing leverage ratio, any
outstanding or future borrowings under the 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% with a London Inter-Bank Offered Rate (“LIBO rate”) floor of 1.00% per annum; or (ii) the Alternate Base Rate 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%. In addition, based on the Company’s existing leverage ratio
85
, we are required to pay a quarterly commitment fee, at an applicable rate ranging from 0.15% to 0.30% as of December 31, 2022, on the daily unused
portion of the Credit Facility for each fiscal quarter during the Leverage Covenant Holiday and in connection with the issuance of letters of credit.
As of December 31, 2022 and 2021, the Company had no outstanding borrowings under the Credit Facility. During the first quarter of 2020, the
Company borrowed $700 million under the Credit Facility. These funds were drawn down as a precautionary measure to reinforce the Company’s liquidity
position and preserve financial flexibility in light of uncertainty in the global markets resulting from COVID-19. The Company repaid these borrowings in
full during July 2020.
For the years ended December 31, 2022, 2021 and 2020, we recorded total interest expense and commitment fees on the Credit Facility of $1
million, $3 million and $10 million, respectively, to interest expense on our consolidated statements of operations. In connection with the amendments to
our Credit Facility in 2020, we incurred additional lender fees and debt financing costs totaling $7 million, which were capitalized as deferred financing
costs and recorded to other long-term assets on the consolidated balance sheet, while $2 million of previously deferred financing costs related to the Credit
Facility were immediately recognized to interest expense on our consolidated statement of operations for the year ended December 31, 2020. As of
December 31, 2022 and 2021, the Company had $2 million and $4 million, respectively, remaining in deferred financing costs in connection with the Credit
Facility. These costs will be amortized over the remaining term of the Credit Facility, using the effective interest rate method, and recorded to interest
expense on our consolidated statement of operations.
There is no specific repayment date prior to the maturity date for any borrowings under the Credit Agreement. We may voluntarily repay any
outstanding borrowing under the 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 Credit
Agreement 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 Credit Agreement also limits the Company from repurchasing shares of its common
stock and paying dividends, among other restrictions, during the Leverage Covenant Holiday. In addition, to secure the obligations under the Credit
Agreement, the Company and certain subsidiaries have granted security interests and liens in and on substantially all of their assets as well as pledged
shares of certain of the Company’s subsidiaries. The Credit Agreement also contains certain customary affirmative covenants and events of default,
including a change of control. If an event of default occurs, the lenders under the Credit Agreement will be entitled to take various actions, including the
acceleration of all amounts due under the Credit Facility. As of December 31, 2022 and 2021, we were in compliance with our covenants.
2025 Senior Notes
On July 9, 2020, the Company completed the sale of $500 million aggregate principal amount of 7.0% Senior Notes due 2025 (the “2025 Senior
Notes”), pursuant to a purchase agreement, dated July 7, 2020, among the Company, the guarantors party thereto and the initial purchasers party thereto in a
private offering to qualified institutional buyers. The 2025 Senior Notes were issued pursuant to an indenture, dated July 9, 2020 (the “2025 Indenture”),
among the Company, the guarantors and the trustee. The 2025 Indenture provides, among other things, that interest is payable on the 2025 Senior Notes
semiannually on January 15 and July 15 of each year, which began on January 15, 2021, and continue until their maturity date of July 15, 2025. The 2025
Senior Notes are senior unsecured obligations of the Company and are guaranteed by certain of the Company’s domestic subsidiaries.
The Company has the option to redeem all or a portion of the 2025 Senior Notes at any time on or after July 15, 2022 at the redemption prices set
forth in the 2025 Indenture, plus accrued and unpaid interest, if any. Subject to certain limitations, in the event of a Change of Control Triggering Event (as
defined in the 2025 Indenture), the Company will be required to make an offer to purchase the 2025 Senior Notes at a price equal to 101% of the aggregate
86
principal amount of the 2025 Senior Notes repurchased, plus accrued and unpaid interest, if any, to the date of repurchase. These features have been
evaluated as embedded derivatives under GAAP; however, the Company has concluded they do not meet the requirements to be accounted for separately.
As of both December 31, 2022 and 2021, unpaid interest on our 2025 Senior Notes totaled approximately $16 million and was included in accrued
expenses and other current liabilities on our consolidated balance sheets, and $35 million, $35 million and $17 million was recorded as interest expense on
our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020, respectively. In the third quarter of 2020, the Company
used all proceeds from the 2025 Senior Notes to repay a portion of our Credit Facility outstanding borrowings.
The 2025 Indenture contains covenants that, among other things and subject to certain exceptions and qualifications, restrict the ability of the
Company and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness or issue disqualified stock or certain preferred stock; pay
dividends and make other distributions or repurchase stock; make certain investments; create or incur liens; sell assets; create restrictions affecting the
ability of restricted subsidiaries to make distributions, loans or advances or transfer assets to the Company or the restricted subsidiaries; enter into certain
transactions with the Company’s affiliates; designate restricted subsidiaries as unrestricted subsidiaries; and merge, consolidate or transfer or sell all or
substantially all of the Company’s assets.
2026 Senior Notes
On March 25, 2021, we entered into a purchase agreement for the sale of $300 million aggregate principal amount of 0.25% Convertible 2026
Senior Notes due 2026 (the “2026 Senior Notes”) in a private offering to qualified institutional buyers. The 2026 Senior Notes included an over-allotment
option that provided the initial purchasers of the 2026 Senior Notes with the option to purchase an additional $45 million aggregate principal amount of the
2026 Senior Notes; such over-allotment option was fully exercised. In connection with the issuance of the 2026 Senior Notes, the Company entered into an
Indenture, dated March 25, 2021 (the “2026 Indenture”), among the Company, the guarantors party thereto and the trustee. The terms of the 2026 Senior
Notes are governed by the 2026 Indenture. The 2026 Senior Notes mature on April 1, 2026, unless earlier converted, redeemed or repurchased. The 2026
Senior Notes are senior unsecured obligations of the Company, although guaranteed by certain of the Company’s domestic subsidiaries, with interest
payable semiannually in arrears on April 1 and October 1 of each year, which began on October 1, 2021. As of December 31, 2022 and 2021, unpaid
interest on our 2026 Senior Notes was not material.
The 2026 Senior Notes will be redeemable, in whole or in part, at our option at any time, and from time to time, on or after April 1, 2024 and on or
before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2026 Senior
Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of our common stock exceeds 130% of the
conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the
trading day immediately before the date we send the related redemption notice; and (2) the trading day immediately before the date we send such notice. In
addition, calling any such note for redemption will constitute a make-whole fundamental change with respect to that note, in which case the conversion rate
applicable to the conversion of that note will be increased in certain circumstances if it is converted after it is called for redemption.
The 2026 Senior Notes are unconditionally guaranteed, on a joint and several basis, by the guarantors on a senior, unsecured basis. The 2026 Senior
Notes are our general senior unsecured obligations and rank equally in right of payment with all of our existing and future senior indebtedness, and senior
in right of payment to all of our future subordinated indebtedness. The 2026 Senior Notes will be effectively subordinated to any of our existing and future
secured indebtedness, including borrowings under the Credit Facility, to the extent of the value of the assets securing such indebtedness.
Holders may convert their 2026 Senior Notes at any time prior to the close of business on the business day immediately preceding January 1, 2026,
in multiples of $1,000 principal amount, only under the following conditions and circumstances:
87
•
•
•
during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the
last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive
trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion
price on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per
$1,000 principal amount of 2026 Senior Notes for each trading day of the measurement period was less than 98% of the product of the last
reported sale price of our common stock and the conversion rate on each such trading day; or
upon the occurrence of specified corporate events as described in the 2026 Indenture.
In addition, holders may convert their 2026 Senior Notes, in multiples of $1,000 principal amount, at their option at any time beginning on or after
January 1, 2026, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the 2026 Senior
Notes, without regard to the foregoing circumstances.
The initial conversion rate for the 2026 Senior Notes is 13.5483 shares of common stock per $1,000 principal amount of 2026 Senior Notes, which
is equivalent to an initial conversion price of approximately $73.81 per share of common stock, or approximately 4.7 million shares of common stock,
subject to adjustment upon the occurrence of certain specified events as set forth in the 2026 Indenture. Upon conversion, the Company may choose to pay
or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock.
The Company accounts for the 2026 Senior Notes as a liability measured at its amortized cost, and no other features of the 2026 Senior Notes are
bifurcated and recognized as a derivative. The proceeds from the issuance of the 2026 Senior Notes were approximately $340 million, net of debt issuance
costs of $5 million comprised primarily of the initial purchasers’ discount, and the Company used a portion of the proceeds from the 2026 Senior Notes to
enter into capped call transactions, as discussed below. The Company intends to use the remainder of the proceeds from this offering for general corporate
purposes, which may include repayment of debt, including the partial redemption and/or purchase of our 2025 Senior Notes prior to maturity. The debt
issuance costs will be amortized over the remaining term of the 2026 Senior Notes, using the effective interest rate method, and recorded to interest expense
on our consolidated statement of operations. During the years ended December 31, 2022 and 2021, our effective interest rate on our 2026 Senior Notes,
including debt issuance costs, was approximately 0.47% and 0.53%, respectively, and $1 million was recorded as interest expense on our consolidated
statements of operations for both the years ended December 31, 2022 and 2021.
The 2026 Senior Notes are unsecured and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other
indebtedness, or restrictions on the issuance or repurchase of securities by the Company.
Capped Call Transactions
In connection with the issuance of the 2026 Senior Notes, the Company entered into privately negotiated capped call transactions (the “Capped
Calls”) with certain of the initial purchasers of the 2026 Senior Notes and/or their respective affiliates and/or other financial institutions (the “Option
Counterparties”) at a cost of approximately $35 million. The Capped Calls are separate transactions entered into by the Company with each of the Option
Counterparties, and are not part of the terms of the 2026 Senior Notes and therefore will not affect any noteholder’s rights under the 2026 Senior Notes.
Noteholders will not have any rights with respect to the Capped Calls.
The Capped Calls cover, subject to anti-dilution adjustments, substantially similar to those applicable to the conversion rate of the 2026 Senior
Notes, the number of shares of common stock initially underlying the 2026 Senior Notes, or up to approximately 4.7 million shares of our common stock.
The Capped Calls are expected generally to reduce potential dilution to the common stock upon any conversion of 2026 Senior Notes and/or offset any
potential cash payments the Company is required to make in excess of the principal amount of such converted 2026 Senior Notes, as the case may be, with
such reduction and/or offset subject to a cap. The strike price of the
88
Capped Calls is $73.81, while the cap price of the Capped Calls will initially be $107.36 per share of our common stock, which represents a premium of
100% over the close price of our common stock of $53.68 per share on March 22, 2021 and is subject to certain customary adjustments under the terms of
the Capped Calls.
The Capped Calls are considered indexed to our own stock and are considered equity classified under GAAP, and included as a reduction to
additional paid-in-capital within stockholders’ equity on our consolidated balance sheets as of both December 31, 2022 and 2021. The Capped Calls are not
accounted for as derivatives and their fair value is not remeasured each reporting period. In addition, upon entering into the Capped Calls we recorded an
associated deferred tax asset of $9 million, as we made an income tax election allowable under the IRS regulations in order to recover the cost of the
Capped Calls as interest expense for income tax purposes only over the term of the 2026 Senior Notes.
NOTE 10: OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following for the periods presented:
Unrecognized tax benefits (1)
Deferred gain on equity method investment (2)
Long-term income taxes payable (3)
Other
Total
December 31, 2022
December 31, 2021
$
$
(in millions)
204 $
28
27
6
265 $
177
31
2
5
215
(1) Refer to “Note 11: Income Taxes” for information regarding our unrecognized tax benefits. Amounts include accrued interest related to this liability.
(2) Amount relates to long-term portion of a deferred income liability recorded as a result of an equity method investment made in the fourth quarter of 2019.
Refer to “Note 4: Financial Instruments and Fair Value Measurements” for additional information.
(3) Amount relates to the long-term portion of transition tax payable related to the 2017 Tax Act. Refer to “Note 11: Income Taxes,” for additional information.
NOTE 11: INCOME TAXES
The following table presents a summary of our domestic and foreign income (loss) before income taxes for the periods presented:
Domestic
Foreign
Income (loss) before income taxes
2022
Year Ended December 31,
2021
(in millions)
2020
$
$
37 $
30
67 $
(127 ) $
(58 )
(185 ) $
(262 )
(107 )
(369 )
89
The components of our provision (benefit) for income taxes consisted of the following for the periods presented:
Current income tax expense (benefit):
Federal
State
Foreign
Current income tax expense (benefit)
Deferred income tax expense (benefit):
Federal
State
Foreign
Deferred income tax expense (benefit)
Provision (benefit) for income taxes
2022
Year Ended December 31,
2021
(in millions)
2020
$
$
37 $
3
26
66
(19 )
1
(1 )
(19 )
47 $
6 $
(1 )
2
7
(21 )
(5 )
(18 )
(44 )
(37 ) $
(73 )
(3 )
(3 )
(79 )
13
(10 )
(4 )
(1 )
(80 )
The significant components of our deferred tax assets and deferred tax liabilities consisted of the following for the periods presented:
Deferred tax assets:
Stock-based compensation
Net operating loss carryforwards
Provision for accrued expenses
Lease financing obligation
Foreign advertising spend
Tax credit carryforward
Capitalized research expenses (1)
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
Other
Total deferred tax liabilities
Net deferred tax asset (liability)
2022
December 31,
(in millions)
2021
28 $
83
6
17
14
7
39
53
19
266 $
(114 )
152 $
(48 ) $
(6 )
(4 )
(16 )
(1 )
(75 ) $
77 $
31
102
4
20
15
12
—
71
15
270
(123 )
147
(51 )
(22 )
(3 )
(17 )
(1 )
(94 )
53
$
$
$
$
$
$
(1)
As required by the 2017 tax Cuts and Jobs Act, effective January 1, 2022, our research and development expenditures were capitalized and amortized, which resulted in a
deferred tax asset.
At December 31, 2022, we had federal, state, and foreign net operating loss carryforwards (“NOLs”) of approximately $2 million, $97 million, and
$306 million, respectively. U.S. federal NOLs of $2 million expire at various times starting from 2029. State NOLs of $13 million may be carried forward
indefinitely, while the remaining state NOLs of $84 million expire at various times starting from 2024. Foreign NOLs of $302 million may be carried
forward indefinitely, while the remaining foreign NOLs of $4 million expire at various times starting from 2023.
90
As of December 31, 2022, we had a valuation allowance of approximately $114 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 a decrease of $9 million, as compared
to the balance as of December 31, 2021. The decrease was primarily related to a change in a deferred tax asset in our U.K. subsidiaries.
Except for such foreign deferred tax assets, discussed above, we expect to realize all of our deferred tax assets. Due to the negative impact from
COVID-19 in recent years and the continued risks and uncertainties that remain, in addition to economic uncertainty of a potential U.S. recession and
global inflationary pressures, we will continue to monitor our financial performance to determine if the valuation allowance against our deferred tax assets
may be necessary in the future.
A reconciliation of the provision (benefit) for income taxes to the amounts computed by applying the statutory federal income tax rate to income
(loss) before income taxes is as follows for the periods presented:
Income tax expense at the federal statutory rate
Foreign rate differential (1)
State income taxes, net of effect of federal tax benefit
Unrecognized tax benefits and related interest
Rate differential on US NOL carryback (2)
Research tax credit
Stock-based compensation
Change in valuation allowance
Local income tax on intercompany transaction
Executive compensation
Other, net
Provision (benefit) for income taxes
2022
Year Ended December 31,
2021
(in millions)
2020
14 $
—
5
17
—
(2 )
11
5
—
1
(4 )
47 $
(39 ) $
(14 )
(2 )
4
—
(7 )
(1 )
8
—
6
8
(37 ) $
(77 )
(9 )
(11 )
4
(23 )
(9 )
14
25
1
6
(1 )
(80 )
$
$
(1)
(2)
During 2021, we extinguished intercompany debt which resulted in a reduction of our overall foreign rate differential.
As a result of the CARES Act, an income tax benefit of $23 million was recorded during the year ended December 31, 2020 related to the income tax rate differential in tax
years applicable to U.S. loss carryforwards that became eligible for carryback.
The CARES Act allowed the Company to carryback our U.S. federal NOLs incurred in 2020, generating an expected U.S. federal tax benefit of $76
million, of which $64 million was refunded during the year ended December 31, 2022. The remaining refund of $12 million is included in income taxes
payable on our consolidated balance sheet as of December 31, 2022 and is expected to be received during the year ending December 31, 2023. In addition,
$25 million of this refund received was recorded to long-term taxes payable on our consolidated balance sheet as of December 31, 2022, which reflects
future transition tax payments to be made by the Company related to the 2017 Tax Act.
In addition, certain governments have passed legislation to assist businesses during the COVID-19 pandemic through loans, wage subsidies, wage
tax relief or other financial aid. We participated in several of these programs, including the CARES Act in the U.S., the United Kingdom's job retention
scheme, as well as similar programs in other global jurisdictions. In addition, in certain countries, such as within the European Union, Singapore, Australia,
and other global jurisdictions, we also participated in programs where government assistance was in the form of wage subsidies and reductions in wage-
related employer taxes paid by us. We recognize these government assistance benefits when there is a reasonable assurance of compliance with the
conditions associated with the assistance and the amount is received. During the years ended December 31, 2022, 2021 and 2020, we recognized
government grants and other assistance benefits of $12 million, $9 million and $12 million, respectively. These amounts are not income tax related and
were recorded as a reduction of personnel and overhead costs within operating costs in the consolidated statements of operations. The Company does not
expect any additional future benefits of this nature.
Due to the one-time transition tax on the deemed repatriation of undistributed foreign subsidiary earnings and profits in 2017, the majority of
previously unremitted earnings have been subjected to U.S. federal income tax. To
91
the extent future distributions from these subsidiaries will be taxable, a deferred tax liability has been accrued which was not material as of December 31,
2022. As of December 31, 2022, $445 million of our cumulative undistributed foreign earnings were no longer considered to be indefinitely reinvested.
For purposes of governing certain of the ongoing relationships between Tripadvisor and Expedia at and after the Spin-Off, and to provide for an
orderly transition, Tripadvisor 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 Tripadvisor and Expedia, Tripadvisor is 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 Tripadvisor described in the covenants in the tax sharing agreement, (ii) any acquisition of Tripadvisor
equity securities or assets or those of a member of the Tripadvisor group, or (iii) any failure of the representations with respect to Tripadvisor or any
member of our group to be true or any breach by Tripadvisor or any member of the Tripadvisor 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 2014 through 2016, and 2018 tax years, and have various ongoing audits for foreign
and state income tax returns. These audits include questioning the timing and 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, 2022, no material assessments have resulted, except as noted below regarding our 2009, 2010, and
2011 IRS audit with Expedia, our 2014 through 2016 standalone IRS audit, and our 2012 through 2016 HM Revenue & Customs (“HMRC”) 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 August 2020, we received Notices of Proposed Adjustment from the IRS for the 2014, 2015, and 2016 tax years. The
statute of limitation of assessment for all years subject to the Notices of Proposed Adjustment outlined above remain open. 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, for the
open tax years, in an estimated range of $85 million to $95 million at the close of the audit if the IRS prevails, which includes $20 million to $30 million
related to the 2009 through 2011 pre Spin-Off tax years. The estimated ranges take into consideration competent authority relief and transition tax
regulations and is exclusive of deferred tax consequences and interest expense, which would be significant. 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 the open years outlined above, 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. We
have previously requested competent authority assistance under the Mutual Agreement Procedure (“MAP”) for open tax years 2009 through 2011 and 2014
through 2016. We evaluated our transfer pricing reserves as of December 31, 2022, based on the facts and circumstances that existed as of the reporting
date and consider them to be the Company’s best estimate as of December 31, 2022. In January 2023, we received a final notice regarding a MAP
settlement for the 2009 through 2011 tax years, which we accepted in February 2023. In the first quarter of 2023, we will record additional income tax
expense as a discrete item, inclusive of interest, in an estimated range of $25 million to $35 million specifically related to this settlement. This MAP
settlement supersedes the Notices of Proposed Adjustment for 2009 through 2011 from the IRS, described above. We will review the impact of the
acceptance of this settlement position to our transfer pricing income tax reserves for the subsequent tax years during the first quarter of 2023. Based on this
new information received subsequent to year end, adjustments may occur, which could be material.
92
In January 2021, we received from HMRC an issue closure notice relating to adjustments for 2012 through 2016 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 $25 million to $35 million, exclusive of interest expense, at the close of the audit if HMRC prevails. 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.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (excluding interest and penalties) is as follows during the
periods presented:
Balance, beginning of year
Increases to tax positions related to the current year
Increases to tax positions related to the prior year
Decreases due to lapsed statute of limitations
Decreases due to tax positions related to the prior year
Settlements during current year
Balance, end of year
2022
December 31,
2021
(in millions)
2020
144 $
5
29
(20 )
(1 )
—
157 $
144 $
5
1
—
—
(6 )
144 $
140
3
1
—
—
—
144
$
$
As of December 31, 2022, we had $204 million of unrecognized tax benefits, inclusive of interest, which is classified as long-term and primarily
included in other long-term liabilities on our consolidated balance sheet. The amount of unrecognized tax benefits, if recognized, would reduce income tax
expense by $74 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, 2022 and 2021, total gross interest accrued was $47 million and $39
million, respectively, and was recorded in unrecognized tax benefits in other long-term liabilities on the consolidated balance sheets. As a result of the
impact of the IRS audit described above, we anticipate a material adjustment to these reserves in 2023.
NOTE 12: COMMITMENTS AND CONTINGENCIES
As of December 31, 2022, we have contractual obligations and commercial commitments that include expected interest payments on our 2026
Senior Notes and 2025 Senior Notes, expected commitment fees on our Credit Facility, and non-cancellable long-term purchase obligations, as summarized
in the table below. The expected amounts and timing of payments discussed below were estimated based on information available to us as of December 31,
2022.
Total
Less than
1 year
By Period
1 to 3 years
(in millions)
3 to 5 years
More than
5 years
$
$
90 $
3
3
39
135 $
35 $
1
2
21
59 $
55 $
2
1
16
74 $
— $
—
—
1
1 $
—
—
—
1
1
Expected interest payments on 2025 Senior Notes (1)
Expected interest payments on 2026 Senior Notes (2)
Expected commitment fee payments on Credit Facility (3)
Purchase obligations and other (4)
Total (5)
(1)
(2)
(3)
Expected interest payments on our 2025 Senior Notes are based on a fixed interest rate of 7.0%, as of December 31, 2022 and assumes that our existing debt is repaid at maturity.
Refer to “Note 9: Debt” for additional information on our 2025 Senior Notes.
Expected interest payments on our 2026 Senior Notes are based on a fixed interest rate of 0.25%, as of December 31, 2022 and assumes that our existing debt is repaid at maturity.
Refer to “Note 9: Debt” for additional information on our 2026 Senior Notes.
Expected commitment fee payments are based on the daily unused portion of our Credit Facility, issued letters of credit, and the effective commitment fee rate as of December 31,
2022; however, these variables could change significantly in the future. Refer to “Note 9: Debt” for additional information on our Credit Facility.
93
(4)
(5)
Estimated purchase obligations that are fixed and determinable, primarily related to telecommunication and licensing contracts, with various expiration dates through
approximately June 2029. These contracts have non-cancelable terms or are cancelable only upon payment of significant penalty. 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.
Excluded from the table was $4 million of undrawn standby letters of credit, primarily as security deposits for certain property leases as of December 31, 2022.
Legal Proceedings
In the ordinary course of business, we are party to legal, regulatory and administrative matters, including threats thereof, arising out of, or in
connection with our operations. These matters may involve claims involving intellectual property rights (including privacy, 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 reputational claims, personal injury claims, labor and employment matters and
commercial disputes. Periodically, we review the status of all significant outstanding matters to assess any potential financial exposure. We record the
estimated loss in our consolidated statements of operations 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 and is material. 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 13: 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, which includes 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 non-U.S. employees. Our contribution to the 401(k) Plan and our non-U.S. defined
contribution plans which are recorded in our consolidated statements of operations
94
for the years ended December 31, 2022, 2021 and 2020 were $11 million, $10 million, and $11 million, respectively.
Deferred Compensation Plan for Non-Employee Directors
The Company has a Deferred Compensation Plan for Non-Employee Directors (the “Deferred Compensation Plan”). Under the Deferred
Compensation 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 in accordance with the terms of the Deferred Compensation 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 Deferred Compensation Plan, 100,000 shares of Tripadvisor common stock are available for issuance to non-employee directors. From
the inception of the Deferred Compensation Plan through December 31, 2022, a total of 557 shares have been issued for such purpose.
Executive Severance Plan and Summary Plan Description
The Company also maintains its Executive Severance Plan and Summary Plan Description (the “Severance Plan”) which is 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. During the years ended December 31, 2022, 2021 and 2020, respectively, we recognized $1 million, $1 million and $5
million of expense under the Severance Plan on our consolidated statements of operations.
NOTE 14: 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
2022
Year ended December 31,
2021
(in millions)
2020
1 $
12
36
39
88
(18 )
70 $
1 $
16
46
57
120
(23 )
97 $
1
16
44
48
109
(23 )
86
$
$
We capitalized $10 million, $13 million and $15 million of stock-based compensation expense as website development costs during the years ended
December 31, 2022, 2021 and 2020, respectively.
95
Stock and Incentive Plans
On December 20, 2011, our 2011 Stock and Annual Incentive Plan (the “2011 Plan”) became effective and we filed a 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 13: 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, the Company ceased granting awards 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.
On June 8, 2021, our stockholders approved an amendment to the Company’s 2018 Plan to, among other things, increase the aggregate number of
shares reserved and available for issuance under the 2018 Plan by 10,000,000 shares. The purpose of this amendment was to provide sufficient reserves of
shares of our common stock to ensure our ability to continue to provide new hires, employees and management with equity incentives.
The foregoing summary of the material terms of the 2018 Plan is qualified in its entirety by reference to the 2018 Stock and Annual Incentive Plan
and Amendment No. 1 incorporated herein by reference as Exhibit 10.4 and Exhibit 10.37, respectively, to this Annual Report on Form 10-K.
As of December 31, 2022, the total number of shares reserved for future stock-based awards under the 2018 Plan was approximately 11 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.
Stock Based Award Activity and Valuation
2022 Stock Option Activity
A summary of our stock option activity, consisting of service-based non-qualified stock options, is presented below:
Options outstanding as of December 31, 2021
Granted (1)
Exercised (2)
Cancelled or expired
Options outstanding as of December 31, 2022
Exercisable as of December 31, 2022
Vested and expected to vest after December 31, 2022 (3)
Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Life
(in years)
Aggregate
Intrinsic
Value
(in millions)
Options
Outstanding
(in thousands)
5,671 $
841
(13 )
(1,037 )
5,462 $
3,931 $
5,316 $
47.03
20.00
24.94
44.06
43.48
49.19
43.93
5.1 $
3.6 $
5.0 $
—
—
—
(1)
Inclusive of approximately 516,000 stock options awarded to Matt Goldberg, our CEO, during July 2022. The estimated grant-date fair value per option, using a Black-Scholes option
pricing model was $9.23. These stock options shall vest over four years, with 25% vesting on July 1, 2023 and 6.25% of the remaining award vesting in equal quarterly installments
commencing thereafter, subject to the CEO’s continuous employment with 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 July 1, 2026.
96
(2)
(3)
Inclusive of approximately 10,000 stock options for the year ended December 31, 2022, 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.
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, 2022 was $17.98. The total intrinsic value of stock options exercised
for the year ended December 31, 2021 was $9 million, and for the years ended December 31, 2022 and 2020, was not material.
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
2022
December 31,
2021
2020
3.07 %
5.42
51.63 %
— %
9.93 $
0.83 %
5.45
49.61 %
— %
18.40 $
1.15 %
5.30
43.39 %
— %
10.08
$
The total fair value of stock options vested for the years ended December 31, 2022, 2021 and 2020 were $16 million, $31 million, and $14 million,
respectively. Cash received from stock option exercises for the year ended December 31, 2021 was $8 million, and for the years ended December 31, 2022
and 2020, was not material.
2022 RSU Activity
A summary of our restricted stock units (“RSUs”) activity, consisting primarily of service-based vesting terms, is presented below:
Unvested RSUs outstanding as of December 31, 2021
Granted (1)
Vested and released (2)
Cancelled
Unvested RSUs outstanding as of December 31, 2022 (3)
Weighted
Average
Grant-
Date Fair
Value Per Share
RSUs
Outstanding
(in thousands)
Aggregate
Intrinsic
Value
(in millions)
5,786 $
7,059
(3,086 )
(1,187 )
8,572 $
36.82
25.42
35.60
32.96
28.41 $
154
(1)
(2)
(3)
Inclusive of approximately 258,000 RSUs awarded to our CEO during July 2022. The estimated grant-date fair value per RSU, based on the quoted price of our common stock on the
date of grant, was $18.47. This service-based RSU award shall vest over four years, with 25% vesting on July 1, 2023 and 6.25% of the remaining award vesting in equal quarterly
installments commencing thereafter, subject to the CEO’s continuous employment with 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 July 1, 2026.
Inclusive of approximately 820,000 RSUs for the year ended December 31, 2022, 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.
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.
On May 27, 2020 and July 15, 2020, the Compensation Committee of the Board of Directors, approved modifications to the Company’s annual RSU
and stock option grants, respectively, issued to its employees in the first quart
97
er of 2020. Such modifications reduced the original grant-date vesting period from four years to two years. We estimate these modifications resulted in the
acceleration and recognition of an additional $17 million of stock-based compensation expense during the year ended December 31, 2020, given the
modified vesting term. There was no change to the original fair value of the impacted RSUs or stock options as a result of this modification.
On December 31, 2021, the Section 16 Committee of our Board of Directors approved and granted to Stephen Kaufer, the Company’s CEO at the
time, the following: (i) stock option to purchase 115,200 shares of common stock, 25% of which vested and became exercisable on August 1, 2022, while
the balance vests in quarterly installments over the following three years; with an estimated grant-date fair value per option of $12.59, using a Black-
Scholes option pricing model; (ii) stock option to purchase 110,026 shares of common stock, which will vest and become exercisable in full on August 1,
2024; with an estimated grant-date fair value per option of $13.18, using a Black-Scholes option pricing model; and (iii) 106,382 RSUs, 25% of which
vested and settled on August 1, 2022, while the balance vests in quarterly installments over the following three years, with an estimated grant-date fair
value of $27.26 per RSU, based on the quoted price of our common stock on the date of grant. The estimated fair value of these awards totaled $6 million
and was fully recognized as stock-based compensation expense to the consolidated statement of operations for the year ended December 31, 2021, given
the Company concluded there was no substantive future requisite service condition for these awards that existed at grant date for GAAP purposes. During
the year ended December 31, 2022, the Company reversed $3 million of this previously recorded stock-based compensation expense related to these awards
as the Company concluded that certain awards scheduled to vest were no longer achievable as a result of new terms executed in Mr. Kaufer's Consulting
Service Agreement entered into on May 3, 2022. The full text of this Consulting Service Agreement is incorporated by reference in this Annual Report on
Form 10-K as Exhibit 10.45.
A summary of our market-based RSUs (“MSUs”) activity is presented below:
Unvested MSUs outstanding as of December 31, 2021
Granted (1)
Cancelled (2)
Unvested MSUs outstanding as of December 31, 2022
Weighted
Average
Grant-
Date Fair
Value Per Share
MSUs
Outstanding
(in thousands)
Aggregate
Intrinsic
Value
(in millions)
120 $
592
(120 )
592 $
28.15
10.00
28.15
10.00 $
12
(1)
(2)
Inclusive of approximately 378,000 MSUs awarded to our CEO during July 2022. A Monte-Carlo simulation model, which simulated the present value of the potential outcomes of
future stock prices was used to calculate the grant-date fair value of our MSU awards. These MSUs shall vest on July 1, 2025, with 25% vesting if our stock price is equal to or greater
than $35.00 but less than $45.00, 50% if our stock price is equal to or greater than $45.00 but less than $55.00 and 100% if our stock price is equal to or greater than $55.00, 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 July 1, 2026. All other MSU grants during the year, to various employees, contained similar vesting and performance conditions.
MSU cancellations primarily reflect performance targets not being attained by the end of the performance period.
A Monte-Carlo simulation model, which simulated the present value of the potential outcomes of future stock prices was used to calculate the grant-
date fair value of our MSU awards. The estimated grant-date fair value of these awards is 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, 2022
related to our non-vested equity awards is presented below (in millions, except in years information):
Unrecognized compensation expense
Weighted average period remaining (in years)
Stock
Options
$
RSUs/MSUs
14 $
2.8
197
2.8
98
NOTE 15: 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, 2022, no preferred shares had been issued.
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% of the total number of directors, rounded up to the next whole
number, which was three directors as of December 31, 2022. 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 146,891,538 and 128,046,924 shares of common stock issued and
outstanding, respectively, and 12,799,999 shares of Class B common stock issued and outstanding at December 31, 2022.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is comprised of accumulated foreign currency translation adjustments, as follows for the periods
presented:
Cumulative foreign currency translation
adjustments, net of tax (1)
Accumulated other comprehensive income (loss)
(1) Deferred income tax liabilities related to these amounts are not material.
Treasury Stock
December 31, 2022 December 31, 2021
(in millions)
$
$
(82 ) $
(82 ) $
(56 )
(56 )
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.
During the year ended December 31, 2020, we repurchased 4,707,450 shares of our outstanding common stock at an average share price of $24.32
per share, exclusive of fees and commissions, or $115 million in the aggregate. During the years ended December 31, 2022 and 2021, the Company did not
repurchase any shares of outstanding common stock under the share repurchase program.
As of December 31, 2022, we had $75 million remaining available to repurchase shares of our common stock under this share repurchase program,
with 18,844,614 shares of the Company’s common stock held in treasury with an aggregate cost of $722 million.
Our Board of Directors authorized and directed management, working with the Executive Committee of our Board of Directors, to affect the share
repurchase program discussed above in compliance with applicable legal requirements. While the Board of Directors has not suspended or terminated the
share repurchase program, the terms of the Credit Agreement currently limit the Company from engaging in share repurchases during the Leverage
99
Covenant Holiday and the terms of our 2025 Indenture also imposes certain limitations and restrictions on share repurchases. Refer to “Note 9: Debt” for
further information about our Credit Agreement and our 2025 Indenture.
Dividends
During the years ended December 31, 2022, 2021 and 2020, 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 Credit Agreement during the Leverage Covenant Holiday and our 2025 Indenture.
NOTE 16: EARNINGS PER SHARE
Basic Earnings Per Share Attributable to Common Stockholders
We compute basic earnings per share, or Basic EPS, by dividing net income (loss) 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.
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 compute 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, (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 net income, shares of our common stock subject to the potential conversion of the 2026 Senior Notes outstanding during the period is
also included in our weighted average number of shares outstanding used to calculate Diluted EPS using the if-converted method under GAAP, as share
settlement is presumed. When the convertible notes are dilutive, interest expense, net of tax, is added back to net income attributable to common
stockholders to calculate diluted net income per share. The Capped Calls are excluded from the calculation of Diluted EPS, as they would be antidilutive.
However, upon conversion of the 2026 Senior Notes, unless the market price of our common stock exceeds the cap price, an exercise of the Capped Calls
would generally offset any dilution from the 2026 Senior Notes from the conversion price up to the cap price. As of December 31, 2022 and 2021, the
market price of a share of our common stock did not exceed the $107.36 cap price.
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, such as for the years ended December 31, 2021 and 2020, Diluted EPS is the same as Basic
EPS, since dilutive common equivalent shares are not assumed to have been issued if their effect is antidilutive.
100
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) used to compute Basic EPS
Interest expense on 2026 Senior Notes, net of tax
Net income (loss) used to compute Diluted EPS
Denominator:
Weighted average shares used to compute Basic EPS
Weighted average effect of dilutive securities:
Stock options
RSUs/MSUs
2026 Senior Notes (Note 9)
Weighted average shares used to compute Diluted EPS
Basic EPS
Diluted EPS
2022
Year ended December 31,
2021
2020
$
$
20 $
1
21 $
(148 ) $
—
(148 ) $
(289 )
—
(289 )
139,923
137,234
134,858
4
1,069
4,674
145,670
$
$
0.14 $
0.14 $
—
—
—
137,234
(1.08 ) $
(1.08 ) $
—
—
—
134,858
(2.14 )
(2.14 )
Potential common shares, consisting of outstanding stock options, RSUs, MSUs, and those issuable under the 2026 Senior Notes, totaling
approximately 11.4 million, 16.1 million, and 13.7 million, for the years ended December 31, 2022, 2021 and 2020, 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 0.3 million, 0.1 million, and 0.2 million, for the years ended December 31, 2022, 2021 and 2020, 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 and MSUs are entitled to dividend equivalents,
which are payable to the holder subject to, and only 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 17: OTHER INCOME (EXPENSE), NET
Other income (expense), net, consists of the following for the periods presented:
Foreign currency exchange gains (losses), net (1)
Earnings (losses) from equity investment, net
Loss on sale/disposal of business (2)
Other, net
Total
2022
Year Ended December 31,
2021
(in millions)
2020
(5 ) $
(2 )
—
2
(5 ) $
(4 ) $
(3 )
—
(3 )
(10 ) $
5
(3 )
(6 )
(4 )
(8 )
$
$
101
(1)
(2)
Foreign currency exchange gains (losses), net, are generally related to foreign exchange transaction gains and losses due to required conversion from transaction currency to
functional currency, partially offset by foreign currency forward contract gains and losses.
Related to loss on disposal on the sale of our SmarterTravel business during June 2020.
NOTE 18: RELATED PARTY TRANSACTIONS
Relationship between Liberty TripAdvisor Holdings, Inc. and Tripadvisor
LTRIP is a controlling stockholder of Tripadvisor. We consider LTRIP a related party. Refer to “Note 1: Organization and Business Description”,
which describes the evolution of our relationship with LTRIP, including LTRIP’s stock ownership of Tripadvisor and deemed voting power as of December
31, 2022. We had no related party transactions with LTRIP during the years ended December 31, 2022, 2021 and 2020.
Relationship between Chelsea Investment Holding Company PTE Ltd. and Tripadvisor
Refer to the discussion regarding our equity method investment in Chelsea Investment Holding Company PTD Ltd. in the section titled “Non-
Marketable Investments” within “Note 4: Financial Instruments and Fair Value Measurements” for a description of our relationship and existing
commercial arrangements with Chelsea Investment Holding Company PTE Ltd and/or its subsidiaries. We had no material related party transactions with
Chelsea Investment Holding Company PTE Ltd or its subsidiaries during the years ended December 31, 2022, 2021 and 2020.
NOTE 19: SEGMENT AND GEOGRAPHIC INFORMATION
In the second quarter of 2022, we revised our segment reporting structure. We now measure our business within three operating segments, which are
also our reportable segments: (1) Tripadvisor Core; (2) Viator; and (3) TheFork. Our Tripadvisor Core segment includes the following revenue sources: (1)
Tripadvisor-branded hotels – consisting of hotel meta revenue, primarily click-based advertising revenue, and hotel B2B revenue, which includes primarily
subscription-based advertising and hotel sponsored placements revenue; (2) Tripadvisor-branded display and platform revenue – consisting primarily of
display-based advertising revenue; (3) Tripadvisor experiences and dining revenue – consisting of intercompany (intersegment) revenue related to affiliate
marketing commissions earned primarily from experience bookings, and to a lesser extent, restaurant reservation bookings on Tripadvisor-branded websites
and mobile apps, fulfilled by Viator and TheFork segments, respectively, which are eliminated on a consolidated basis, in addition to external revenue
generated from Tripadvisor restaurant service offerings; and (4) Other revenue – consisting of cruises, alternative accommodation rentals, flights, and rental
cars revenue. The nature of the services provided and related revenue recognition policies are summarized by reportable segment in “Note 3: Revenue
Recognition.” 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. Our segment profit measure (Adjusted EBITDA), including its
definition, and other information provided to our CODM remain consistent with prior periods, except for certain segment expense allocations, which are
described below.
Our operating segments are determined based on how our CODM manages our business, regularly accesses information, and evaluates performance
for operating decision-making purposes, including allocation of resources. Adjusted EBITDA is our segment profit measure and a key measure used by our
CODM 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) benefit for income taxes; (2) other income (expense), net; (3)
depreciation and amortization; (4) stock-based compensation and other stock-settled obligations; (5) goodwill, long-lived asset, and intangible asset
impairments; (6) legal reserves and settlements; (7) restructuring and other related reorganization costs; and (8) non-recurring expenses and income.
Direct costs are included in the applicable operating segments, including certain corporate general and administrative personnel costs, which have
been allocated to each segment. We base these allocations on time-spent analyses, headcount, and other allocation methods we believe are reasonable. We
do not allocate certain shared expenses to our reportable segments, such as certain information system costs, technical infrastructure costs, and other costs
supporting the Tripadvisor platform and operations, that we do not believe are a material driver of
102
individual segment performance, which is consistent with the financial information viewed by our CODM. We include these expenses in our Tripadvisor
Core segment. Our allocation methodology is periodically evaluated and may change.
The following tables present our reportable segment information for the years ended December 31, 2022, 2021 and 2020 and includes a
reconciliation of Adjusted EBITDA to Net income (loss). We record depreciation and amortization, stock-based compensation and other stock-settled
obligations, goodwill, long-lived asset and intangible asset impairments, legal reserves and settlements, restructuring and other related reorganization costs,
and other non-recurring expenses and income, net, which are excluded from segment operating performance, in Corporate and Eliminations. In addition, we
do not report total assets, capital expenditures and related depreciation expense by segment as our CODM does not use this information to evaluate
operating segment performance. Accordingly, we do not regularly provide such information by segment to our CODM.
Our segment disclosure includes intersegment revenues, which consist of affiliate marketing fees for services provided by our Tripadvisor Core
segment to both our Viator and TheFork segments. These intersegment transactions are recorded by each segment at amounts that we believe approximate
fair value as if the transactions were between third parties and, therefore, impact segment performance. However, the revenue and corresponding expense
are eliminated in consolidation. The elimination of such intersegment transactions is included within Corporate and Eliminations in the table below.
Tripadvisor Core
(1)
Viator (2)
Year ended December 31, 2022
TheFork (3)
(in millions)
Corporate &
Eliminations
Total
External revenue
Intersegment revenue
Total Revenue
Adjusted EBITDA
Depreciation and amortization
Stock-based compensation
Legal reserves and settlements
Non-recurring expenses (income) (4)
Operating income (loss)
Other income (expense), net
Income (loss) before income taxes
(Provision) benefit for income taxes
Net income (loss)
External revenue
Intersegment revenue
Total Revenue
Adjusted EBITDA
Depreciation and amortization
Stock-based compensation
Operating income (loss)
Other income (expense), net
Income (loss) before income taxes
(Provision) benefit for income taxes
Net income (loss)
$
$
$
$
873
93
966
345
$
$
493
—
493
(11 )
$
126
—
126
$
(39 )
$
—
(93 )
(93 ) $
—
(97 )
(88 )
(1 )
(8 )
Tripadvisor Core
(1)
Viator (2)
Year ended December 31, 2021
TheFork (3)
(in millions)
Corporate &
Eliminations
Total
$
85
—
85
$
(46 )
—
$
(32 )
(32 ) $
—
(111 )
(120 )
$
$
$
$
633
32
665
177
$
$
184
—
184
(31 )
103
1,492
—
1,492
295
(97 )
(88 )
(1 )
(8 )
101
(34 )
67
(47 )
20
902
—
902
100
(111 )
(120 )
(131 )
(54 )
(185 )
37
(148 )
Tripadvisor Core
(1)
Viator (2)
Year ended December 31, 2020
TheFork (3)
(in millions)
Corporate &
Eliminations
Total
$
$
$
$
463
20
483
64
$
$
55
—
55
(72 )
External revenue
Intersegment revenue
Total Revenue
Adjusted EBITDA
Depreciation and amortization
Stock-based compensation
Restructuring and other related reorganization costs
Impairment of goodwill
Operating income (loss)
Other income (expense), net
Income (loss) before income taxes
(Provision) benefit for income taxes
Net income (loss)
$
86
—
86
$
(43 )
—
$
(20 )
(20 ) $
—
(125 )
(109 )
(41 )
(3 )
604
—
604
(51 )
(125 )
(109 )
(41 )
(3 )
(329 )
(40 )
(369 )
80
(289 )
(1)
(2)
(3)
(4)
Corporate general and administrative personnel costs of $5 million, $6 million and $4 million for the years ended December 31, 2022, 2021 and 2020, respectively, were
allocated to the Viator and TheFork segments.
Includes allocated corporate general and administrative personnel costs from our Tripadvisor Core segment of $2 million, $3 million and $2 million for the years ended
December 31, 2022, 2021 and 2020, respectively.
Includes allocated corporate general and administrative personnel costs from our Tripadvisor Core segment of $3 million, $3 million and $2 million for the years ended
December 31, 2022, 2021 and 2020, respectively.
The Company incurred a loss of approximately $8 million during the fourth quarter of 2022, as the result of external fraud. This loss was recorded to general and administrative
expenses on the consolidated statement of operations for December 31, 2022. The Company considers such costs to be non-recurring in nature. To the extent the Company
recovers any losses in future periods related to this incident, the Company plans to reduce Adjusted EBITDA by the recovery amount in that same period.
Product and Geographic Information
Our revenue sources within our Tripadvisor Core segment, including Tripadvisor-branded hotels revenue, Tripadvisor-branded display and platform
revenue, Tripadvisor experiences and dining revenue, and Other revenue; which along with the Viator and TheFork revenue sources, comprise our products.
Refer to “Note 3: Revenue Recognition” for our revenue by product.
The Company measures its geographic revenue information based on 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. As such, this geographic classification
does not necessarily align with 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.
The Company’s revenue based on geographic location consists of the following for the periods presented:
Revenue
United States
United Kingdom
All other countries
Total revenue
2022
Year ended December 31,
2021
(in millions)
2020
$
$
905 $
402
185
1,492 $
526 $
259
117
902 $
302
169
133
604
104
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
Customer Concentrations
December 31,
2022
2021
(in millions)
$
$
156 $
38
194 $
178
37
215
Refer to “Note 2: Significant Accounting Policies” under the section entitled “Certain Risks and Concentrations” for information regarding our
major customer concentrations.
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, 2022, 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 Exchange Act.
Based upon that evaluation, our Chief Executive Officer and President and our Chief Financial Officer concluded that, as of December 31, 2022, 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 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, 2022 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 with GAAP. 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, 2022.
Pursuant to Exchange Act Rule 13a-15(d) or 15d-15(d), management has concluded that, as of December 31, 2022, our internal control over financial
reporting was effective. Management has reviewed its assessment with the Audit Committee. KPMG LLP, an independent registered public accounting
105
firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2022, 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.
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, 2022, 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, 2022, 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, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss),
changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively,
the consolidated financial statements), and our report dated February 17, 2023 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
106
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.
/s/ KPMG LLP
Boston, Massachusetts
February 17, 2023
Item 9B. Other Information
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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 2023 Proxy Statement, which proxy statement will be filed with
the SEC not later than 120 days after the close of our fiscal year ended December 31, 2022.
Item 11. Executive Compensation
The information required under this item is incorporated herein by reference to our 2023 Proxy Statement, which proxy statement will be filed with
the SEC not later than 120 days after the close of our fiscal year ended December 31, 2022.
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 2023 Proxy Statement, which proxy statement will be filed with
the SEC not later than 120 days after the close of our fiscal year ended December 31, 2022.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required under this item is incorporated herein by reference to our 2023 Proxy Statement, which proxy statement will be filed with
the SEC not later than 120 days after the close of our fiscal year ended December 31, 2022.
Item 14. Principal Accounting Fees and Services
The information required under this item is incorporated herein by reference to our 2023 Proxy Statement, which proxy statement will be filed with
the SEC not later than 120 days after the close of our fiscal year ended December 31, 2022.
107
Item 15. Exhibit and 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.
(b) Exhibits:
Exhibit
No.
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2
10.3+
10.4+
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
Indenture, dated July 9, 2020, among Tripadvisor,
Inc., the guarantors party thereto and U.S. Bank
National Association, as trustee (as successor
trustee to Wilmington Trust, National Association)
Form of Senior Note (included in Exhibit 4.1)
Indenture, dated as of March 25, 2021, by and
among Tripadvisor, Inc., the guarantors party
thereto and U.S. Bank National Association, as
trustee
Form of 0.25% Convertible Senior Notes due 2026
(included as Exhibit A to Exhibit 4.1)
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
Filed
Herewith
Incorporated by Reference
Form
8-K
8-K
8-K
SEC File No.
001-35362
001-35362
001-35362
S-4/A
333-175828-01
10-K
001-35362
8-K
001-35362
Exhibit
No.
3.1
3.2
3.1
4.6
4.2
4.1
4.2
4.1
Filing
Date
12/27/11
12/27/11
2/12/13
10/24/11
2/19/20
7/9/20
7/9/20
3/25/21
8-K
8-K
8-K
8-K
8-K
001-35362
001-35362
001-35362
4.2
3/25/21
001-35362
10.1
12/27/11
001-35362
10.2
12/27/11
10-Q
001-35362
10.1
11/8/16
10-Q
001-35362
10.1
8/1/18
108
10.5+
10.6
10.7
10.8+
10.9+
10.10+
10.11+
10.12+
10.13+
10.14+
10.15+
10.16+
10.17+
10.19
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
Employment Agreement between Tripadvisor LLC
and Stephen Kaufer, effective as of March 31,
2014
Amendment to Employment Agreement between
Tripadvisor LLC and Stephen Kaufer, effective as
of November 28, 2017
Amended and Restated Option Agreement dated
June 5, 2017 between Stephen Kaufer and
Tripadvisor, Inc.
Stock Option Agreement (time-based) between
Stephen Kaufer and Tripadvisor, Inc. dated
November 28, 2017
RSU Agreement (time-based) between Stephen
Kaufer and Tripadvisor, Inc. dated November 28,
2017
RSU Agreement (performance based (market))
between Stephen Kaufer and Tripadvisor, Inc.
dated November 28, 2017
RSU Agreement (performance based (financial
and strategic)) between Stephen Kaufer and
Tripadvisor, Inc. dated November 28, 2017
Viator, Inc. 2010 Stock Incentive Plan
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
109
S-8
333-178637
10-Q
001-35362
4.6
10.1
12/20/11
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-Q
001-35362
10.3
5/6/14
10-K
001-35362
10.10
2/21/18
8-K
001-35362
10.1
6/8/17
10-K
001-35362
10.12
2/21/18
10-K
001-35362
10.13
2/21/18
10-K
001-35362
10.14
2/21/18
10-K
001-35362
10.15
2/21/18
S-8
8-K
333-198726
001-35362
99.1
10.1
9/12/14
6/30/15
8-K
001-35362
10.1
5/15/17
8-K
001-35362
10.1
5/7/20
8-K
001-35362
10.1
12/22/20
10.20
10.21
10.22
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
Second Amendment, dated as of May 5, 2020, by
and among Tripadvisor, Inc., Tripadvisor
Holdings, LLC, Tripadvisor LLC, the other
Borrowers party thereto, the Lenders party thereto,
JPMorgan Chase Bank, N.A., as Administrative
Agent and London Agent, BofA Securities, Inc.,
BMO Capital Markets Corp., BNP Paribas
Securities Corp., SunTrust Robinson Humphrey,
Inc., and U.S. Bank National Association, as Joint
Lead Arrangers and Joint Bookrunners; Bank of
America, N.A., BMO Capital Markets Corp., BNP
Paribas Securities Corp., SunTrust Robinson
Humphrey, Inc. and U.S. Bank National
Association, as Co-Syndication Agents; and
Barclays Bank PLC, Morgan Stanley Senior
Funding, Inc. and Wells Fargo Bank, National
Association, as Co-Documentation Agents.
Third Amendment, dated as of December 17,
2020, by and among Tripadvisor, Inc., Tripadvisor
Holdings, LLC, Tripadvisor LLC, the other
Borrowers party thereto, the Lenders party thereto,
JPMorgan Chase Bank, N.A., as Administrative
Agent and London Agent, BofA Securities, Inc.,
BMO Capital markets Corp., BNP Paribas
Securities Corp., Truist Securities, Inc., and U.S.
Bank National Association, as Joint Lead
Arrangers and Joint Bookrunners; Bank of
America, N.A., BMO Capital Markets Corp., BNP
Paribas Securities Corp., Truist Securities, Inc. and
U.S. Bank National Association, as Co-
Syndication
110
Agents; and Barclays Bank PLC, Morgan Stanley
Senior Funding, Inc. and Wells Fargo Bank,
National Association, as Co-Documentation
Agents.
Employment Agreement, dated as of October 6,
2015, between Tripadvisor, LLC and Ernst
Teunissen
Amendment to Employment Agreement, dated as
of November 28, 2017, between Tripadvisor, LLC
and Ernst Teunissen
Second Amendment to Employment Agreement,
dated as of May 8, 2020, between Tripadvisor,
LLC and Ernst Teunissen
Executive Severance Plan and Summary Plan
Description
Form of Tripadvisor Media Group Master
Advertising Insertion Order
Form of Option Agreement (Domestic)
Form of Option Agreement (International)
Form of Restricted Stock Unit Agreement
(Domestic)
Form of Restricted Stock Unit Agreement
(International)
Form of Restricted Stock Unit Agreement
(French)
Form of Restricted Stock Unit Agreement (Non-
Employee Directors)
Governance Agreement dated as of November 6,
2019 between Tripadvisor, Inc. and Trip.com
Group Limited
Amendment No. 1 to 2018 Stock and Annual
Incentive Plan
Employment Agreement, dated as of March 29,
2021 between Tripadvisor, LLC and Seth Kalvert
Offer Letter, dated as of September 14, 2018,
between Tripadvisor, LLC and Lindsay Nelson
Offer Letter, dated as of February 13, 2019,
between Tripadvisor, LLC and Kanika Soni
Form of Capped Call Confirmation
RSU Agreement (Time-Based) between Stephen
Kaufer and Tripadvisor, Inc. dated as of December
31, 2021
Option Agreement (Domestic) between Stephen
Kaufer and
10.23+
10.24+
10.25+
10.26+
10.27
10.28+
10.29+
10.30+
10.31+
10.32+
10.35+
10.36
10.37+
10.38+
10.39+
10.40+
10.41
10.42+
10.43+
8-K
001-35362
10.1
10/8/15
10-K
001-35362
10.21
2/21/18
10-Q
001-35362
10.9
5/8/20
001-35362
10.4
8/8/17
001-35362
10.23
2/21/18
10-Q
10-K
10-Q
10-Q
10-Q
001-35362
001-35362
001-35362
10-Q
001-35362
10-Q
001-35362
10-Q
8-K
8-K
10-Q
10-Q
10-K
8-K
10-Q
001-35362
001-35362
001-35362
001-35362
001-35362
001-35362
001-35362
001-35362
10.2
10.3
10.4
10.5
10.6
10.2
10.1
10.1
10.7
10.8
10.9
10.1
10.1
5/6/21
5/6/21
5/6/21
5/6/21
5/6/21
8/1/18
11/6/19
8/5/21
5/6/21
5/6/21
5/6/21
3/25/21
5/4/22
10-Q
001-35362
10.2
5/4/22
111
8-K
8-K
8-K
8-K
001-35362
001-35362
001-35362
10.1
10.2
10.1
5/4/22
5/4/22
10/11/22
001-35362
10.2
10/11/22
10.44+
10.45+
10.46+
10.47+
21.1
23.1
24.1
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Tripadvisor, Inc. dated as of December 31, 2021
Employment Letter Agreement dated May 2, 2022
between Tripadvisor LLC and Matt Goldberg
Consulting Services Agreement dated May 3, 2022
between Tripadvisor LLC and Stephen Kaufer.
Employment Letter Agreement dated October 10,
2022 between Tripadvisor LLC and Michael
Noonan
Transition Services Agreement dated October 10,
2022 between Tripadvisor LLC and Ernst
Teunissen
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
Inline XBRL Instance Document - the instance
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Inline XBRL Taxonomy Extension Schema
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Inline XBRL Taxonomy Extension Calculation
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Inline XBRL Taxonomy Extension Definition
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Inline XBRL Taxonomy Extension Label Linkbase
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Inline XBRL Taxonomy Extension Presentation
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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
112
+ Indicates a management contract or a compensatory plan, contract or arrangement.
Item 16. Form 10-K Summary
Not applicable.
113
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 17, 2023
TRIPADVISOR, INC.
By:
/s/ MATT GOLDBERG
Matt Goldberg
Chief Executive Officer and President
POWER OF ATTORNEY
We, the undersigned officers and directors of Tripadvisor, Inc., hereby severally constitute and appoint Matt Goldberg and Michael Noonan, 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 17, 2023.
Signature
/s/ MATT GOLDBERG
Matt Goldberg
/s/ MICHAEL NOONAN
Michael Noonan
/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/ GREG O’HARA
Greg O’Hara
/s/ JEREMY PHILIPS
Jeremy Philips
/s/ ALBERT E. ROSENTHALER
Albert E. Rosenthaler
Title
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
114
/s/ JANE JIE SUN
Jane Jie Sun
/s/ ROBERT S. WIESENTHAL
Robert S. Wiesenthal
Director
Director
115
Subsidiaries of the Registrant
DOMESTIC
Entity
TripAdvisor Holdings, LLC
TripAdvisor LLC
FlipKey, LLC
TAMG Ventures Co.
Viator, Inc.
The Independent Traveler, Inc.
TripAdvisor APAC Holdings Corp.
TripAdvisor GP1 LLC
TripAdvisor GP2 LLC
TripAdvisor Finance LLC
TripAdvisor LP2 LLC
Restorando, Inc.
TripAdvisor Securities Corporation
SinglePlatform, LLC
Owl Analytics, Inc.
Bokun LLC
INTERNATIONAL
Entity
TripAdvisor UK1 LP
TripAdvisor UK2 LP
Bokun ehf
Viator Systems Pty Limited
Viator Limited
TripAdvisor Canada Corp.
TripAdvisor Travel India Private Limited
TripAdvisor (Barbados) Srl
TripAdvisor Cayman Holdings II Limited
TripAdvisor UK Holdco Limited
LF Holdings (France) SAS
Owl Payments Limited
TripAdvisor Limited
Holiday Lettings (Holdings) Ltd.
Holiday Lettings Ltd.
HouseTrip SA
TripAdvisor Australia Pty. Ltd.
TripAdvisor GmbH
TripAdvisor France SAS
TripAdvisor Italy Srl
TripAdvisor Spain S.L.
Guia de Apartamentos Niumba, S.L.
TA Innovation Services Romania S.R.L.
TripAdvisor Portugal, Unipessoal Lda
TripAdvisor Ireland Ltd
Owl Payments Europe Limited
TripAdvisor FZ-LLC
TA Innovations Croatia d.o.o.
TA LF Australia Pty Limited
Exhibit 21.1
Jurisdiction of
Formation
MA
DE
DE
DE
DE
NJ
DE
DE
DE
DE
DE
DE
MA
DE
NV
DE
Jurisdiction of
Formation
United Kingdom
United Kingdom
Iceland
Australia
United Kingdom
Canada
India
Barbados
Cayman
United Kingdom
France
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Switzerland
Australia
Germany
France
Italy
Spain
Spain
Romania
Portugal
Ireland
Ireland
Dubai
Croatia
Australia
Dimmi Pty Ltd
BestTables Brasil Internet Servicos de Informacao e Technologia Ltda.
BestTables II Portugal, Unipessoal Lda.
La Fourchette SAS
La Fourchette Espana S.L.
LaFourchette Swiss SA
La Fourchette (Belgium) SA
La Fourchette Netherlands B.V.
IENS Independent Index B.V.
LaFourchette (Italy) SRL
Livebookings Holdings Limited
Bookatable AB
2Book AB
Livebookings AG
Bookatable GmbH & Co KG
Bookatable Verwaltungs GmbH
Bookatable Limited
Bookatable ApS
Loghos Limited
Easy Pre-Orders Limited
LaFourchette Sweden AB
Lerumar SA
Restorando SA
Restorando SPA
Restorando Peru SAC
Restorando Reservas SACV
Singaba SA
La Fourchette (UK) Ltd.
TripAdvisor K.K.
TripAdvisor Singapore Private Limited
TripAdvisor Korea Co., Ltd.
TripAdvisor Hong Kong Limited
TripAdvisor China Cayman Holdings Limited
TripAdvisor Consulting Service (Beijing) Co. Ltd
Tuqu Net Information Technology (Beijing) Co., Ltd. (beneficial ownership)
Beijing Tuqu Business Consulting Co., Ltd. (beneficial ownership)
Australia
Brazil
Portugal
France
Spain
Switzerland
Belgium
The Netherlands
The Netherlands
Italy
United Kingdom
Sweden
Sweden
Switzerland
Germany
Germany
United Kingdom
Denmark
United Kingdom
United Kingdom
Sweden
Uruguay
Argentina
Chile
Peru
Mexico
Uruguay
United Kingdom
Japan
Singapore
Korea
Hong Kong
Cayman
China
China
China
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors
Tripadvisor, Inc.:
We consent to the incorporation by reference in the registration statements (No. 333-260877, 333‑178637, 333-190384, 333-198726, 333-226749) on Form
S-8 of Tripadvisor, Inc. of our reports dated February 17, 2023, with respect to the consolidated financial statements of Tripadvisor, Inc. and the
effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Boston, Massachusetts
February 17, 2023
Exhibit 31.1
I, Matt Goldberg, Chief Executive Officer and President of Tripadvisor, Inc., certify that:
1.
I have reviewed this Annual Report on Form 10-K of Tripadvisor, Inc.;
Certification
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, 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;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: February 17, 2023
/s/ MATT GOLDBERG
Matt Goldberg
Chief Executive Officer
Exhibit 31.2
I, Michael Noonan, Chief Financial Officer of Tripadvisor, Inc. certify that:
1.
I have reviewed this Annual Report on Form 10-K of Tripadvisor, Inc.;
Certification
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, 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;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: February 17, 2023
/s/ MICHAEL NOONAN
Michael Noonan
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Tripadvisor, Inc. (the “Company”) for the year ended December 31, 2022, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Matt Goldberg, Chief Executive Officer and President of the Company, certify,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1.
the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 17, 2023
/s/ MATT GOLDBERG
Matt Goldberg
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of Tripadvisor, Inc. (the “Company”) for the year ended December 31, 2022, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Noonan, Chief Financial Officer of the Company, certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1.
the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 17, 2023
/s/ MICHAEL NOONAN
Michael Noonan
Chief Financial Officer