TripAdvisor, Inc. - Quarter Report: 2023 June (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ 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

80-0743202

(State or other jurisdiction of

incorporation or organization)

(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	Trading Symbol	Name of each exchange on which registered
Common stock	TRIP	Nasdaq

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, a 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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒


Class		Outstanding Shares at July 28, 2023
Common Stock, $0.001 par value per share		125,187,927 shares
Class B common stock, $0.001 par value per share		12,799,999 shares

Tripadvisor, Inc.

Form 10-Q

For the Quarter Ended June 30, 2023

Table of Contents


		Page
Part I—Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022		3
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2023 and 2022		4
Unaudited Condensed Consolidated Balance Sheets at June 30, 2023 and December 31, 2022		5
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022		6
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022		8
Notes to Unaudited Condensed Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures about Market Risk		40
Item 4. Controls and Procedures		41
Part II—Other Information
Item 1. Legal Proceedings		41
Item 1A. Risk Factors		41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		42
Item 3. Defaults Upon Senior Securities		42
Item 4. Mine Safety Disclosures		42
Item 5. Other Information		42
Item 6. Exhibits		43
Signatures		44

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)


	Three Months Ended						Six months ended
	June 30,						June 30,
	2023			2022			2023			2022
Revenue (Note 3)	$	494		$	417		$	865		$	679

Costs and expenses:
Cost of revenue (1) (exclusive of depreciation and amortization as shown separately below)		41			31			70			53
Selling and marketing (1)		270			217			488			357
Technology and content (1)		71			53			139			107
General and administrative (1)		47			28			96			68
Depreciation and amortization		21			25			42			50
Total costs and expenses		450			354			835			635
Operating income (loss)		44			63			30			44
Other income (expense):
Interest expense		(11	)		(11	)		(22	)		(23	)
Interest income		12			2			22			2
Other income (expense), net		(1	)		(1	)		(1	)		(2	)
Total other income (expense), net		—			(10	)		(1	)		(23	)
Income (loss) before income taxes		44			53			29			21
(Provision) benefit for income taxes (Note 8)		(20	)		(22	)		(78	)		(24	)
Net income (loss)	$	24		$	31		$	(49	)	$	(3	)

Earnings (loss) per share attributable to common stockholders (Note 12):
Basic	$	0.17		$	0.22		$	(0.35	)	$	(0.02	)
Diluted	$	0.17		$	0.21		$	(0.35	)	$	(0.02	)
Weighted average common shares outstanding (Note 12):
Basic		140			140			141			139
Diluted		145			145			141			139

(1) Includes stock-based compensation expense as follows (Note 10):
Cost of revenue	$	—		$	—		$	1		$	1
Selling and marketing	$	4		$	3		$	8		$	6
Technology and content	$	10		$	9		$	20		$	18
General and administrative	$	11		$	9		$	19		$	18

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)


	Three Months Ended						Six months ended
	June 30,						June 30,
	2023			2022			2023			2022
Net income (loss)	$	24		$	31		$	(49	)	$	(3	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax (1)		(1	)		(24	)		3			(28	)
Total other comprehensive income (loss), net of tax		(1	)		(24	)		3			(28	)
Comprehensive income (loss)	$	23		$	7		$	(46	)	$	(31	)

(1) Deferred income tax liabilities related to these amounts are not material.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except number of shares and per share amounts)


	June 30,			December 31,
	2023			2022
ASSETS
Current assets:
Cash and cash equivalents (Note 4)	$	1,141		$	1,021
Accounts receivable and contract assets, net (allowance for credit losses of $21 and $28, respectively) (Note 4)		240			205
Income taxes receivable (Note 8)		51			—
Prepaid expenses and other current assets		46			44
Total current assets		1,478			1,270
Property and equipment, net of accumulated depreciation of $538 and $512, respectively		194			194
Operating lease right-of-use assets		22			27
Intangible assets, net of accumulated amortization of $202 and $198, respectively		47			51
Goodwill		824			822
Non-marketable investments (Note 4)		33			34
Deferred income taxes, net		87			78
Other long-term assets, net of allowance for credit losses of $10 and $10, respectively (Note 4, Note 8)		49			93
TOTAL ASSETS	$	2,734		$	2,569

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	47		$	39
Deferred merchant payables		435			203
Deferred revenue (Note 3)		87			44
Income taxes payable (Note 8)		26			16
Accrued expenses and other current liabilities (Note 5)		259			231
Total current liabilities		854			533
Long-term debt (Note 6)		838			836
Finance lease obligation, net of current portion		55			58
Operating lease liabilities, net of current portion		10			15
Deferred income taxes, net		1			1
Other long-term liabilities (Note 7)		195			265
Total Liabilities		1,953			1,708

Commitments and contingencies (Note 9)
Stockholders’ equity: (Note 11)
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: 148,642,645 and 146,891,538, respectively
Shares outstanding: 125,073,302 and 128,046,924, 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		1,445			1,404
Retained earnings		212			261
Accumulated other comprehensive income (loss)		(79	)		(82	)
Treasury stock-common stock, at cost, 23,569,343 and 18,844,614 shares, respectively		(797	)		(722	)
Total Stockholders’ Equity		781			861
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,734		$	2,569

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in millions, except number of shares)


	Three months ended June 30, 2023
														Accumulated
									Additional					other
					Class B				paid-in			Retained		comprehensive
	Common stock				common stock				capital			earnings		income (loss)			Treasury Stock
	Shares		Amount		Shares		Amount										Shares			Amount			Total
Balance as of March 31, 2023		148,090,833	$	—		12,799,999	$	—	$	1,420		$	188	$	(78	)		(18,844,614	)	$	(722	)	$	808
Net income (loss)													24											24
Other comprehensive income (loss), net of tax															(1	)								(1	)
Issuance of common stock related to exercises of options and vesting of RSUs		551,812		—						—														—
Repurchase of common stock (Note 11)																		(4,724,729	)		(75	)		(75	)
Withholding taxes on net share settlements of equity awards										(3	)													(3	)
Stock-based compensation										28														28
Balance as of June 30, 2023		148,642,645	$	—		12,799,999	$	—	$	1,445		$	212	$	(79	)		(23,569,343	)	$	(797	)	$	781


	Six months ended June 30, 2023
															Accumulated
									Additional						other
					Class B				paid-in			Retained			comprehensive
	Common stock				common stock				capital			earnings			income (loss)			Treasury Stock
	Shares		Amount		Shares		Amount											Shares			Amount			Total
Balance as of December 31, 2022		146,891,538	$	—		12,799,999	$	—	$	1,404		$	261		$	(82	)		(18,844,614	)	$	(722	)	$	861
Net income (loss)													(49	)											(49	)
Other comprehensive income (loss), net of tax																3									3
Issuance of common stock related to exercises of options and vesting of RSUs		1,751,107		—						—															—
Repurchase of common stock (Note 11)																			(4,724,729	)		(75	)		(75	)
Withholding taxes on net share settlements of equity awards										(12	)														(12	)
Stock-based compensation										53															53
Balance as of June 30, 2023		148,642,645	$	—		12,799,999	$	—	$	1,445		$	212		$	(79	)		(23,569,343	)	$	(797	)	$	781

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in millions, except number of shares)


	Three months ended June 30, 2022
														Accumulated
									Additional					other
					Class B				paid-in			Retained		comprehensive
	Common stock				common stock				capital			earnings		income (loss)			Treasury Stock
	Shares		Amount		Shares		Amount										Shares			Amount			Total
Balance as of March 31, 2022		145,636,700	$	—		12,799,999	$	—	$	1,342		$	207	$	(60	)		(18,844,614	)	$	(722	)	$	767
Net income (loss)													31											31
Other comprehensive income (loss), net of tax															(24	)								(24	)
Issuance of common stock related to exercises of options and vesting of RSUs		211,021		—						—														—
Withholding taxes on net share settlements of equity awards										(1	)													(1	)
Stock-based compensation										23														23
Balance as of June 30, 2022		145,847,721	$	—		12,799,999	$	—	$	1,364		$	238	$	(84	)		(18,844,614	)	$	(722	)	$	796


	Six months ended June 30, 2022
															Accumulated
									Additional						other
					Class B				paid-in			Retained			comprehensive
	Common stock				common stock				capital			earnings			income (loss)			Treasury Stock
	Shares		Amount		Shares		Amount											Shares			Amount			Total
Balance as of December 31, 2021		144,656,649	$	—		12,799,999	$	—	$	1,326		$	241		$	(56	)		(18,844,614	)	$	(722	)	$	789
Net income (loss)													(3	)											(3	)
Other comprehensive income (loss), net of tax																(28	)								(28	)
Issuance of common stock related to exercises of options and vesting of RSUs		1,191,072		—						—															—
Withholding taxes on net share settlements of equity awards										(9	)														(9	)
Stock-based compensation										47															47
Balance as of June 30, 2022		145,847,721	$	—		12,799,999	$	—	$	1,364		$	238		$	(84	)		(18,844,614	)	$	(722	)	$	796

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Six months ended June 30,
	2023			2022
Operating activities:
Net income (loss)	$	(49	)	$	(3	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		42			50
Stock-based compensation expense (Note 10)		48			43
Deferred income tax expense (benefit)		(9	)		14
Other, net		3			5
Changes in operating assets and liabilities, net:
Accounts receivable and contract assets, prepaid expenses and other assets		(40	)		(115	)
Accounts payable, accrued expenses and other liabilities		33			63
Deferred merchant payables		230			220
Income tax receivables/payables, net		(61	)		68
Deferred revenue		43			35
Net cash provided by (used in) operating activities		240			380

Investing activities:
Capital expenditures, including capitalized website development		(31	)		(27	)
Other investing activities, net		—			1
Net cash provided by (used in) investing activities		(31	)		(26	)

Financing activities:
Repurchase of common stock (Note 11)		(75	)		—
Payment of financing costs related to Credit Facility (Note 6)		(3	)		—
Payment of withholding taxes on net share settlements of equity awards		(12	)		(9	)
Payments of finance lease obligation and other financing activities, net		(3	)		(4	)
Net cash provided by (used in) financing activities		(93	)		(13	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		4			(19	)
Net increase (decrease) in cash, cash equivalents and restricted cash		120			322
Cash, cash equivalents and restricted cash at beginning of period		1,021			723
Cash, cash equivalents and restricted cash at end of period	$	1,141		$	1,045
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for income taxes, net of refunds	$	149		$	(58	)
Cash paid during the period for interest	$	20		$	20

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NOTE 1: BASIS OF PRESENTATION

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 unaudited condensed consolidated financial statements.

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, or UGC, in the form of ratings and reviews for destinations, points-of-interest, or POIs, experiences, alternative accommodation rentals, 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 operators around the globe. Viator's 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.

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.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements present our results of operations, financial position and cash flows on a consolidated basis. The unaudited condensed 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. 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.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operating results. We prepared the unaudited condensed consolidated financial statements following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, we condensed or omitted certain footnotes or other financial information that are normally required by GAAP for annual financial statements. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation, none of which were material to the presentation of the accompanying unaudited condensed consolidated financial statements. Our interim unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022, previously filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures including notes required by GAAP.

As of June 30, 2023, Liberty Tripadvisor Holdings, Inc. (“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 13% of the outstanding shares of common stock and 100% of the outstanding shares of Class B common stock. Assuming the conversion of all LTRIP’s shares of Class B common stock into common stock, LTRIP would beneficially own 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 57% of our voting power. We had no related party transactions with LTRIP during the three and six months ended June 30, 2023 and 2022, respectively.

Risks and Uncertainties

Our business was negatively impacted by the 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 COVID-19 or the emergence of any new pandemic or other health crisis 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 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.

Accounting Estimates

We use estimates and assumptions in the preparation of our unaudited condensed 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 unaudited condensed 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 unaudited condensed consolidated financial statements is accounting for income taxes.

Seasonality

Consumer 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. Other factors may also impact typical seasonal fluctuations, which factors include further significant shifts in our business mix, adverse economic conditions, or health-related events.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to our accounting policies since December 31, 2022, as described under “Note 2: Significant Accounting Policies”, in the notes to consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022.

NOTE 3: REVENUE RECOGNITION

There have been no material changes to our principal revenue streams, revenue recognition policies, performance obligations, description of and timing of services, or customer payment terms since December 31, 2022, as described under “Note 2: Significant Accounting Policies” and “Note 3: Revenue Recognition”, in the notes to consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022. There was no significant revenue recognized in the three and six months ended June 30, 2023 and 2022, related to performance obligations satisfied in prior periods. We have applied a practical expedient and do not disclose the value of unsatisfied performance obligations that have an original expected duration of less than one year. 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.

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 13: Segment Information,” our business consists of three reportable segments – (1) Tripadvisor Core; (2) Viator; and (3) TheFork. A reconciliation of disaggregated revenue to segment revenue is also included below:


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
Major products/revenue sources (1):	(in millions)
Tripadvisor Core
Tripadvisor-branded hotels	$	174		$	188		$	343		$	322
Tripadvisor-branded display and platform		42			37			72			63
Tripadvisor experiences and dining (2)		50			35			83			56
Other		13			14			25			24
Total Tripadvisor Core		279			274			523			465

Viator		216			136			331			192
TheFork		38			32			73			58
Intersegment eliminations (2)		(39	)		(25	)		(62	)		(36	)
Total Revenue	$	494		$	417		$	865		$	679

(1)

Our revenue is recognized primarily at a point in time for all reportable 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 13: Segment Information” for a discussion of intersegment revenue for all periods presented.

Deferred Revenue

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, including amounts that are refundable. As of January 1, 2023, we had $44 million recorded as deferred revenue on our unaudited condensed consolidated balance sheet, of which $8 million and $36 million was recognized as revenue during the three and six months ended June 30, 2023, respectively. During the three and six months ended June 30, 2023, refunds due to cancellations by travelers were $1 million and $3 million, respectively. As of January 1, 2022, we had $36 million recorded as deferred revenue on our unaudited condensed consolidated balance sheet, of which $8 million and $26 million was recognized as revenue during the three and six months ended June 30, 2022, respectively. During the three months ended June 30, 2022, refunds due to cancellations by travelers were not material, while $2 million was refunded due to cancellations by travelers during the six months ended June 30, 2022. 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.

NOTE 4: FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels:

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.

Cash, Cash Equivalents and Marketable Securities

As of June 30, 2023 and December 31, 2022, we had approximately $1.1 billion and $1.0 billion of cash and cash equivalents, respectively, which consisted of available on demand cash deposits and term deposits, as well as money market funds, 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 June 30, 2023 and December 31, 2022, and there were no purchases or sales of any marketable securities during and for the three and six months ended June 30, 2023 and 2022.

The following table shows our cash and cash equivalents that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy, as well as their classification on our unaudited condensed consolidated balance sheet as of June 30, 2023 and December 31, 2022:


	June 30, 2023						December 31, 2022
	Amortized Cost		Fair Value (1)		Cash and Cash Equivalents		Amortized Cost		Fair Value (1)		Cash and Cash Equivalents
	(in millions)
Cash	$	638	$	638	$	638	$	821	$	821	$	821
Level 1:
Money market funds		503		503		503		—		—		—
Level 2:
Term deposits		—		—		—		200		200		200
Total	$	1,141	$	1,141	$	1,141	$	1,021	$	1,021	$	1,021

(1)

Unrealized gains and losses related to our cash equivalents were not material.

We generally classify cash equivalents and marketable securities, if any, 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 use forward contracts to reduce the effects of foreign currency exchange rate fluctuations on our cash flows primarily for the Euro versus the U.S. Dollar. For the three and six months ended June 30, 2023 and 2022, our forward contracts have not been designated as hedges and generally had maturities of less than 90 days. Our outstanding or unsettled forward contracts are carried at fair value on our unaudited condensed consolidated balance sheet as of both June 30, 2023 or December 31, 2022. We measure the fair value of our outstanding or unsettled derivatives using Level 2 fair value inputs, as we use a pricing model that takes into account the contract terms as well as current foreign currency exchange rates in active markets. We recognize any gain or loss resulting from the change in fair value of our foreign currency forward contracts in other income (expense), net on our unaudited condensed consolidated statement of operations, which was not material during the three and six months ended June 30, 2023, while we recorded a net gain of $2 million for both the three and six months ended June 30, 2022.

The following table shows the net notional principal amounts of our outstanding derivative instruments as of the dates presented:

(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.

(2)

The fair value of our outstanding derivatives as of June 30, 2023 and December 31, 2022, 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 unaudited condensed consolidated balance sheet.

Counterparties to our outstanding forward contracts consist of major global 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 were not entered into any cash flow, fair value or net investment hedges as of June 30, 2023 or December 31, 2022.

Other Financial Assets and Liabilities

As of June 30, 2023 and December 31, 2022, financial instruments not measured at fair value on a recurring basis including accounts payable, accrued expenses and other current liabilities, and deferred merchant payables, were carried at cost on our unaudited condensed consolidated balance sheets, which approximates their fair values because of the short-term nature of these items. Accounts receivable and contract assets, as described below, as well as certain other financial assets, are measured at amortized cost and are carried at cost less an allowance for expected credit losses on our unaudited condensed consolidated balance sheets to present the net amount expected to be collected.

Accounts Receivable and Contract Assets, net

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:


	June 30, 2023		December 31, 2022
	(in millions)
Accounts receivable	$	211	$	173
Contract assets		29		32
Total	$	240	$	205

Accounts receivable are recognized when the right to consideration becomes unconditional, and are recorded net of an allowance for expected credit losses. We record accounts receivable at the invoiced amount. Our customer invoices are generally due from customers 30 days from the time of invoicing. During the six months ended June 30, 2023, we recorded $1 million of incremental allowance for expected uncollectible accounts, offset by $8 million of write-offs for accounts deemed to be uncollectible. 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. 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.

Fair Value of Long-Term Debt

The following table shows the aggregate principal and fair value amount of the outstanding 2025 Senior Notes and 2026 Senior Notes as of the dates presented, which are classified as long-term debt on our unaudited condensed consolidated balance sheets and considered Level 2 fair value measurements. Refer to “Note 6: Debt” for additional information on the 2025 Senior Notes and 2026 Senior Notes.


	June 30, 2023		December 31, 2022
	(in millions)
2025 Senior Notes
Aggregate principal amount	$	500	$	500
Carrying value amount (1)		496		495
Fair value amount (2)		502		498

2026 Senior Notes
Aggregate principal amount	$	345	$	345
Carrying value amount (3)		342		341
Fair value amount (2)		291		281

(1)

Net of $4 million and $5 million of unamortized debt issuance costs as of June 30, 2023 and December 31, 2022, respectively.

(2)

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.

(3)

Net of $3 million and $4 million of unamortized debt issuance costs as of June 30, 2023 and December 31, 2022, respectively.

The Company did not have any assets or liabilities measured at fair value on a recurring basis using Level 3 unobservable inputs as of June 30, 2023 and December 31, 2022.

Risks and Concentrations

Our business is subject to certain financial risks and concentrations, including concentration related to dependence on our relationships with our customers. For the year ended December 31, 2022, our two most significant travel partners, Expedia Group, Inc. (and its subsidiaries) and Booking Holdings, Inc. (and its subsidiaries), each accounted for 10% or more of our consolidated revenue and together accounted for approximately 35% of our consolidated revenue, with nearly all of this revenue concentrated in our Tripadvisor Core segment.

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 several major global financial institutions, as well as money market funds, 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 international financial institutions with high credit standings. Forward contracts, which, to date, have typically had

maturities of less than 90 days, also mitigates risk. Our overall credit risk related to accounts receivable is mitigated by the relatively short collection period.

Assets Measured at Fair Value on a Non-recurring Basis

Non-Marketable Investments

Equity Securities Accounted for under the Equity Method

The Company owns a 40% equity investment in Chelsea Investment Holding Company PTE Ltd, which is majority owned by Ctrip Investment Holding Ltd, a majority-owned subsidiary of Trip.com Group Limited. The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence, but not control, over the investee. The carrying value of this minority investment was $31 million and $32 million as of June 30, 2023 and December 31, 2022, respectively, and is included in non-marketable investments on our unaudited condensed consolidated balance sheets. During both the six months ended June 30, 2023 and 2022, we recognized $1 million, representing our share of the investee’s net loss in other income (expenses), net within the unaudited condensed 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. During the three and six months ended June 30, 2023 and 2022, we did not record any impairment loss on this equity investment.

The Company maintains various commercial agreements with Chelsea Investment Holding Company PTE Ltd. and/or its subsidiaries. Transactions under these agreements are considered related-party transactions, and were not material during the three and six months ended June 30, 2023 and 2022.

Other Long-Term Assets

The Company holds collateralized notes (the “Notes Receivable”) issued by a privately held company with a total principal amount of $20 million. 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 June 2025 and the remaining 50% due in June 2030. As of both June 30, 2023 and December 31, 2022, 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 unaudited condensed consolidated balance sheets 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.

NOTE 5: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following as of the dates presented:


	June 30, 2023		December 31, 2022
	(in millions)
Accrued employee salary, bonus, and related benefits	$	52	$	65
Accrued marketing costs		106		68
Interest payable (1)		16		17
Finance lease liability - current portion		6		6
Operating leases liability - current portion		13		14
Other		66		61
Total	$	259	$	231

(1)

Amount relates primarily to unpaid interest accrued on the 2025 Senior Notes. Refer to “Note 6: Debt” for further information.

NOTE 6: DEBT

The Company’s outstanding debt consisted of the following as of the dates presented:


June 30, 2023	Outstanding Principal Amount		Unamortized Debt Issuance Costs			Carrying Value
(in millions)
Long-Term Debt:
2025 Senior Notes	$	500	$	(4	)	$	496
2026 Senior Notes		345		(3	)		342
Total Long-Term Debt	$	845	$	(7	)	$	838

December 31, 2022	Outstanding Principal Amount		Unamortized Debt Issuance Costs			Carrying Value
(in millions)
Long-Term Debt:
2025 Senior Notes	$	500	$	(5	)	$	495
2026 Senior Notes		345		(4	)		341
Total Long-Term Debt	$	845	$	(9	)	$	836

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”). On May 8, 2023, the Company declared a "Covenant Changeover Date" (as defined in its existing credit agreement), thereby declaring the Company out of the financial covenant holiday and no longer subject to certain of the restrictive covenants contained in the agreement. Following that, on June 29, 2023, we amended and restated the Credit Agreement (the "Restated Credit Agreement") to, among other things, (i) extend the maturity date of the Credit Facility from May 12, 2024 to June 29, 2028 (unless, on any date that is 91 days prior to the final scheduled maturity date in respect of any indebtedness outstanding under certain “specified debt", the aggregate outstanding principal amount of such specified debt is $200 million or more then the maturity date will be such business day); (ii) maintain the aggregate amount of revolving commitments available at $500 million; (iii) increases the total net leverage ratio from 3.5 to 1.0 to 4.5 to 1.0; and (iv) replace the LIBOR interest rate benchmark with a secured overnight financing rate ("SOFR") interest rate benchmark.

The Company may borrow from the Credit Facility in U.S dollars, Euros and Sterling. Borrowings under the Credit Facility generally bear interest, at the Company’s option, at a rate per annum equal to either (i) the Term Benchmark Borrowing rate, or the EURIBO rate for the interest period in effect for such borrowings in Euro; plus an applicable margin ranging from 1.75% to 2.50% (“Term Benchmark/RFP Spread”), based on the Company’s total net leverage ratio; (ii) the RFP Borrowing rate, or the Daily Simple Sterling Overnight Interbank Average rate for the interest period in effect for such borrowings in Sterling; plus the Term Benchmark/RFP Spread, based on the Company’s total net leverage ratio; or (iii) the Alternate Base Rate (“ABR”) Borrowing, which is the greatest of (a) the Prime Rate in effect on such day, (b) the New York Fed Bank Rate in effect on such day plus 1/2 of 1.00% per annum; and (c) the Term Benchmark Borrowing rate, or Adjusted Term SOFR for an interest period of one month as published two US Government Securities Business Days prior to such day (or if such day is not a US Government Securities Business Day, the immediately preceding US Government Securities Business Day) plus 1.00% per annum; in addition to an applicable margin ranging from 0.75% to 1.50%, based on the Company’s total net leverage ratio. In addition, we are required to pay a quarterly commitment fee, at an applicable rate ranging from 0.25% to 0.40%, on the daily unused portion of the Credit Facility for each fiscal quarter and in connection with the issuance of letters of credit. As of June 30, 2023, our unused revolver capacity was subject to a commitment fee of 0.25%, given the Company’s total net leverage ratio. 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 June 30, 2023 and December 31, 2022, the Company had no outstanding borrowings under the Credit Facility and had issued $4 million of undrawn standby letters of credit under the Credit Facility. For the three and six months ended June 30, 2023 and 2022, total interest expense and commitment fees on our Credit Facility was not material. In connection with the Restated Credit Agreement, we incurred lender fees and other debt financing costs of approximately $3 million. These costs were capitalized as deferred financing costs in other long-term assets on our unaudited consolidated balance sheet as of June 30, 2023, while deferred financing costs incurred in previous amendments, which were immediately recognized to interest expense on our unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2023, were not material. As of June 30, 2023, the Company had $4 million 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 unaudited condensed 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 Term Benchmark and RFP interest rate-based 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 intend to classify any future 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. 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 requires us to maintain a maximum total net leverage ratio and contains certain customary affirmative and negative 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 June 30, 2023 and December 31, 2022, the Company was in compliance with its existing covenants.

2025 Senior Notes

In 2020, the Company issued $500 million of outstanding aggregate principal amount of 7.0% Senior Notes due 2025 (the “2025 Senior Notes”). The 2025 Senior Notes are governed by 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, and continues until their maturity date of July 15, 2025. The 2025 Senior Notes are senior unsecured obligations of the Company, although unconditionally guaranteed on a joint and several basis, 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 the redemption prices set forth in the 2025 Indenture, plus accrued and unpaid interest, if any.

As of both June 30, 2023 and December 31, 2022, unpaid interest on the 2025 Senior Notes totaled approximately $16 million, and was included in accrued expenses and other current liabilities on our unaudited condensed consolidated balance sheets. During both the three and six months ended June 30, 2023 and 2022, we recorded interest expense of $9 million and $18 million, respectively, on our unaudited condensed consolidated statements of operations.

The 2025 Indenture contains covenants that, among other things and subject to certain exceptions and qualifications, restrict the ability of the Company and 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

In 2021, the Company issued $345 million in outstanding aggregate principal amount of 0.25% Convertible Senior Notes due 2026 (the “2026 Senior Notes”). The Company also 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 unconditionally guaranteed on a joint and several basis, by certain of the Company’s domestic subsidiaries, with interest payable semiannually in arrears on April 1 and October 1 of each year. During both the three and six months ended June 30, 2023 and 2022, our effective interest rate, including debt issuance costs, was approximately 0.50% and interest expense incurred was not material in any period. As of June 30, 2023 and December 31, 2022, unpaid interest on the 2026 Senior Notes was also not material.

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 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.

Refer to “Note 9: Debt” in the notes to consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022, for additional information pertaining to redemption, conversion, and repurchase features or terms regarding the 2025 Senior Notes and 2026 Senior Notes.

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 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, 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 the unaudited condensed consolidated balance sheets as of both June 30, 2023 and December 31, 2022. The Capped Calls are not accounted for as derivatives and their fair value is not remeasured each reporting period.

NOTE 7: OTHER LONG-TERM LIABILITIES

Other long-term liabilities consisted of the following as of the dates presented:


	June 30, 2023		December 31, 2022
	(in millions)
Unrecognized tax benefits (1)	$	151	$	204
Deferred gain on equity method investment (2)		27		28
Long-term income taxes payable (3)		15		27
Other		2		6
Total	$	195	$	265

(1)

Refer to “Note 8: 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. 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.

NOTE 8: INCOME TAXES

Each interim period is considered an integral part of the annual period; accordingly, we measure our income tax expense using an estimated annual effective tax rate. An enterprise is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

Our income tax provision was $20 million and $78 million for the three and six months ended June 30, 2023, respectively, and our income tax provision was $22 million and $24 million for the three and six months ended June 30, 2022, respectively. The change in our income tax provision during the six months ended June 30, 2023, when compared to the same period in 2022, was primarily the result of an Internal Revenue Service ("IRS") audit settlement and related adjustment to our existing transfer pricing income tax reserves for subsequent tax years recorded during the three months ended March 31, 2023. Our effective tax rate for the three and six months ended June 30, 2023 differs from the U.S. federal statutory rate of 21%, primarily due to the reasons noted above.

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:


	Six months ended June 30,
	2023			2022
	(in millions)
Income tax expense (benefit) at the federal statutory rate	$	6		$	5
State income taxes, net of effect of federal tax benefit		3			2
Unrecognized tax benefits and related interest		4			7
Stock-based compensation		6			9
Research tax credit		(1	)		(2	)
Change in valuation allowance		5			4
IRS audit settlement		31			—
Transfer pricing reserves adjustment		24			—
Other, net		—			(1	)
Provision (benefit) for income taxes	$	78		$	24

Our accounting policy is to recognize accrued interest and penalties related to unrecognized tax benefits and income tax liabilities as part of our income tax expense. As of June 30, 2023, we had an accrued interest liability of $43 million and no penalties have been accrued.

We are currently 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 questions regarding or review of 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 2014. As of June 30, 2023, 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.

As disclosed in previous filings, including in our Annual Report on Form 10-K for the year ended December 31, 2022, we received Notices of Proposed Adjustments ("NOPA") from the IRS with respect to income tax returns filed by Expedia when Tripadvisor was part of Expedia Group’s consolidated income tax return for the 2009, 2010, and 2011 tax years. The assessment is related to certain transfer pricing arrangements with foreign subsidiaries, which we had requested competent authority assistance under the Mutual Agreement Procedure (“MAP”) for the 2009 through 2011 tax years. In January 2023, we received a final notice from the IRS regarding a MAP settlement for the 2009 through 2011 tax years, which the Company accepted in February 2023. In the first quarter of 2023, we recorded additional income tax expense as a discrete item, inclusive of interest, of $31 million specifically related to this settlement. During the first quarter of 2023, we reviewed the impact of the acceptance of this settlement position against our existing transfer pricing income tax reserves for the subsequent tax years, which resulted in incremental income tax expense, inclusive of estimated interest, of $24 million. The total impact of these adjustments resulted in an incremental income tax expense of $55 million, which was recognized during the three months ended March 31, 2023. During the three months ended June 30, 2023, we made a U.S. federal tax payment of $113 million, inclusive of interest, to Expedia related to this IRS audit settlement, pursuant to the Tax Sharing Agreement with Expedia. This amount was previously accrued in income taxes payable on our unaudited condensed consolidated balance sheet. We anticipate a competent authority refund and federal tax benefits, net of state tax payments due, associated with this IRS audit settlement will be substantially settled in the next twelve months, resulting in an estimated net cash inflow of $45 million to $55 million, inclusive of related interest expense, and is reflected in income taxes receivable on our unaudited condensed consolidated balance sheet as of June 30, 2023.

Separately, during August 2020, we received a NOPA from the IRS for the 2014, 2015, and 2016 tax years. These proposed adjustments pertain to certain transfer pricing arrangements with our foreign subsidiaries and would result in additional income tax expense above our existing tax reserves as of June 30, 2023, in an estimated range of $55 million to $65 million at the close of the audit if the IRS prevails. This estimated range takes into consideration competent authority relief, existing income tax reserves, and transition tax regulations and is exclusive of deferred tax consequences and interest expense, which would also be significant. We disagree with the proposed adjustments, and we intend to defend our position through applicable administrative and, if necessary, judicial remedies. 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 years discussed above, if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, we may be subject to significant additional tax liabilities. We have previously requested competent authority assistance under MAP for the tax years 2014 through 2016. We reviewed our transfer pricing reserves as of June 30, 2023 and, based on the facts and circumstances that existed as of the reporting date, consider them to be the Company’s best estimate as of June 30, 2023.

As of December 31, 2022, we had recorded $204 million of unrecognized tax benefits, inclusive of interest, classified as other long-term liabilities on our unaudited condensed consolidated balance sheet. As a result of the Company's acceptance of MAP with the IRS for the tax years 2009 through 2011, and its impact on other ongoing IRS audits, as described above, during the first quarter of 2023, we reduced this unrecognized tax benefits liability by $59 million, reclassifying this balance to income taxes payable. We also increased our income taxes receivable balance by $46 million, representing short-term competent authority relief, or payment due from a foreign jurisdiction, while reducing our long-term income taxes receivable by $45 million, representing our previous estimate of competent authority relief, previously recorded to other long-term assets on our unaudited condensed consolidated balance sheet as of December 31, 2022.

In January 2021, we received an issue closure notice from HMRC relating to adjustments for the 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 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 the Company has taken with regard to transfer pricing with our foreign subsidiaries is sustainable.

NOTE 9: COMMITMENTS AND CONTINGENCIES

As of June 30, 2023, there have been no material changes to our commitments and contingencies since December 31, 2022. Refer to “Note 12: Commitments and Contingencies,” in the notes to our consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended 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 8: Income Taxes” for further information on potential contingencies surrounding income taxes.

NOTE 10: STOCK BASED AWARDS AND OTHER EQUITY INSTRUMENTS

On June 6, 2023, our stockholders approved the TripAdvisor, Inc. 2023 Stock and Annual Incentive Plan (the “2023 Plan”) primarily for the purpose of providing sufficient reserves of shares of our common stock to ensure our ability to continue to provide new hires, employees, and other participants with equity incentives. The 2023 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. As of June 30, 2023, the total number of shares reserved for future stock-based awards under the 2023 Plan was approximately 18 million shares, calculated as follows: 12 million shares plus the number of shares available for issuance (and not subject to outstanding awards) under the TripAdvisor, Inc. 2018 Stock and Annual Incentive Plan (the “2018 Plan”). All shares of common stock issued to date in respect of the exercise of options, restricted stock units (“RSUs”), or other equity awards have been issued from authorized, but unissued common stock.

Stock-Based Compensation Expense

The following table presents the amount of stock-based compensation expense and the related income tax benefit included in our unaudited condensed consolidated statements of operations during the periods presented:


	Three months ended						Six months ended
	June 30,						June 30,
	2023			2022			2023			2022
	(in millions)						(in millions)
Total stock-based compensation expense	$	25		$	21		$	48		$	43
Income tax benefit from stock-based compensation		(5	)		(5	)		(10	)		(9	)
Total stock-based compensation expense, net of tax	$	20		$	16		$	38		$	34

We capitalized $3 million and $5 million of stock-based compensation expense as website development costs during the three and six months ended June 30, 2023, respectively, and $2 million and $5 million during the three and six months ended June 30, 2022, respectively.

Stock-Based Award Activity and Valuation

2023 Stock Option Activity

A summary of our stock option activity, consisting of service-based non-qualified stock options, is presented below:


				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Options			Price Per		Contractual		Intrinsic
	Outstanding			Share		Life		Value
	(in thousands)					(in years)		(in millions)
Options outstanding at December 31, 2022		5,462		$	43.48
Granted		138			20.85
Cancelled or expired		(466	)		41.95
Options outstanding at June 30, 2023		5,134		$	43.01		4.5	$	—
Exercisable as of June 30, 2023		3,816		$	49.19		3.0	$	—
Vested and expected to vest after June 30, 2023 (1)		4,988		$	43.47		4.4	$	—

(1)

The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and therefore does not include a forfeiture rate in its vested and expected to vest calculation unless necessary for a performance condition award.

The weighted-average grant date fair value of stock options issued during the six months ended June 30, 2023 and 2022, using a Black-Scholes Merton option-pricing model, was $10.46 and $12.13, respectively. The total fair value of stock options vested was $4 million and $7 million for the six months ended June 30, 2023 and 2022, respectively. 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 June 30, 2023 was $16.49.

2023 RSU Activity

A summary of our RSU activity, consisting of service-based vesting terms, is presented below:


				Weighted
				Average
				Grant-		Aggregate
	RSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested RSUs outstanding as of December 31, 2022		8,572		$	28.41
Granted		6,488			21.75
Vested and released (1)		(2,337	)		30.55
Cancelled		(621	)		27.28
Unvested RSUs outstanding as of June 30, 2023 (2)		12,102		$	24.48	$	200

(1)

Inclusive of approximately 540,000 RSUs 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 2023 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 unaudited condensed consolidated statements of cash flows.

(2)

RSUs are measured at fair value based on the quoted price of our common stock at the date of grant. We amortize the grant-date 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. The total fair value of RSUs vested was $71 million and $63 million for the six months ended June 30, 2023 and 2022, respectively.

A summary of our performance-based RSUs ("PSUs") and market-based RSUs (“MSUs”) activity is presented below:

PSUs (1)

MSUs (2)

Weighted

Average

Grant-

Aggregate

Grant-

Aggregate

Date Fair

Intrinsic

Date Fair

Intrinsic

Outstanding

Value Per Share

Value

Outstanding

Value Per Share

Value

(in thousands)

(in millions)

(in thousands)

(in millions)

Unvested and outstanding as of December 31, 2022

—

$—

592

$10.00

Granted

546

18.45

14.80

Cancelled

(2)

18.45

(54)

9.26

Unvested and outstanding as of June 30, 2023

544

$18.45

572

$10.35

(1)

Represents PSUs awarded in February 2023. The PSU awards provide for vesting in two equal annual installments on each of February 15, 2024 and February 15, 2025, based on the extent to which the Company achieves certain financial metrics relative to targets established by the Company’s Compensation Committee of its Board of Directors. The estimated grant-date fair value per PSU was measured based on the quoted price of our common stock at the date of grant, calculated upon the establishment of performance targets, and will be amortized on a straight-line basis over the requisite service period. Based upon actual attainment relative to the target financial metrics, employees have the ability to receive up to 200% of the target number originally granted, or to be issued none at all. Probable outcome for performance-based awards is updated based upon changes in actual and forecasted operating results or expected achievement of performance goals, as applicable, and the impact of modifications, if any.

(2)

MSUs shall vest three years from grant date, generally with 25% vesting if the weighted-average stock price over a 30 day trading period during the vesting period is equal to or greater than $35.00 but less than $45.00, 50% vesting if equal to or greater than $45.00 but less than $55.00; and 100% vesting if equal to or greater than $55.00, subject to continuous employment with, or performance of services for, the Company. 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 and is not adjusted based on the actual number of awards that ultimately vest.

Income tax benefits associated with the exercise or settlement of all Tripadvisor stock-based awards held by our employees was $3 million and $6 million during the three and six months ended June 30, 2023, respectively, and $1 million and $3 million during the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, total unrecognized compensation cost related to stock-based awards, substantially RSUs, was $288 million, which the Company expects to recognize over a weighted-average period of 3.0 years.

NOTE 11: STOCKHOLDERS’ EQUITY

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. Our Board of Directors authorized and directed management, working with the Executive Committee of our Board of Directors, to affect the share repurchase program in compliance with applicable legal requirements. As of December 31, 2022, the Company had $75 million remaining under this existing share repurchase program to repurchase shares of its common stock.

During the three months ended June 30, 2023, we repurchased 4,724,729 shares of our outstanding common stock at an average price of $15.85 per share, exclusive of fees and commissions, or $75 million in the aggregate, which completed this share repurchase

program. As of June 30, 2023, the Company held 23,569,343 shares of its common stock in treasury with an aggregate cost of $797 million.

On August 16, 2022, the Inflation Reduction Act was signed into law, and imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. For the three months ended June 30, 2023, the excise tax on share repurchases was not material.

NOTE 12: EARNINGS PER SHARE

We compute basic earnings per share ("Basic EPS") by dividing net income (loss) by the weighted average number of common shares outstanding during the period. We compute diluted earnings per share ("Diluted EPS") by dividing net income (loss) by the sum of the weighted average number of common shares outstanding including the dilutive effect of stock-based awards as determined under the treasury stock method and of our 2026 Senior Notes using the if-converted method, as share settlement is presumed, under GAAP. In periods when we recognize a net loss, we exclude the impact of outstanding stock-based awards and the potential share settlement impact related to our 2026 Senior Notes from the Diluted EPS calculation as their inclusion would have an antidilutive effect. Accordingly, for periods in which we report a net loss, such as for the six months ended June 30, 2023 and 2022, respectively, Diluted EPS is the same as Basic EPS.

Additionally, in periods when the 2026 Senior Notes are dilutive, interest expense, net of tax, is added back to net income (loss) (the “numerator”) to calculate Diluted EPS. 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 June 30, 2023 and 2022, the market price of a share of our common stock did not exceed the $107.36 cap price.

Below is a reconciliation of the weighted average number of common shares outstanding used to calculate Diluted EPS for the periods presented:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023			2022
	(shares in thousands and dollars in millions, except per share amounts)
Numerator:
Net income (loss) (1)	$	24	$	31	$	(49	)	$	(3	)
Denominator:
Weighted average shares used to compute Basic EPS		139,881		139,692		140,666			139,392
Weighted average effect of dilutive securities:
Stock-based awards (Note 10)		560		1,130		—			—
2026 Senior Notes (Note 6)		4,674		4,674		—			—
Weighted average shares used to compute Diluted EPS		145,115		145,496		140,666			139,392
Basic EPS	$	0.17	$	0.22	$	(0.35	)	$	(0.02	)
Diluted EPS	$	0.17	$	0.21	$	(0.35	)	$	(0.02	)

(1)

Interest expense, net of taxes, related to the 2026 Senior Notes which was included in the Diluted EPS calculation for both the three months ended June 30, 2023 and 2022 was not material.

Potential common shares, consisting of outstanding stock options, RSUs, and those issuable under the 2026 Senior Notes, totaling approximately 16.1 million shares and 22.4 million shares for the three and six months ended June 30, 2023, respectively, and approximately 11.5 million shares and 15.2 million shares for the three and six months ended June 30, 2022, respectively, have been excluded from the Diluted EPS calculation because their effect would have been antidilutive. In addition, potential common shares from certain performance-based awards of approximately 1.1 million shares for both the three and six months ended June 30, 2023, respectively, and approximately 0.1 million shares for both the three and six months ended June 30, 2022, respectively, for which all targets required to trigger vesting had not been achieved, were also excluded from the calculation of weighted average shares used to compute Diluted EPS.

The earnings per share amounts are the same for our common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation. In addition, our non-vested RSUs are entitled to dividend equivalents, which 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 13: SEGMENT INFORMATION

We have three 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 also 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 (also referred to as "media advertising"); (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, 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 2: Significant Accounting Policies” and “Note 3: Revenue Recognition”, in the notes to consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022.

Our operating segments are determined based on how our chief executive officer, who also serves as our chief operating decision maker (“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 assets 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 individual segment performance, which is consistent with the financial information used 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 three and six months ended June 30, 2023 and 2022 and include 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 & 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 the “Corporate & Eliminations” column in the tables below.


	Three months ended June 30, 2023
	Tripadvisor Core (1)		Viator (2)			TheFork (3)			Corporate & Eliminations			Total
	(in millions)
External revenue	$	240	$	216		$	38		$	—		$	494
Intersegment revenue		39		—			—			(39	)		—
Total Revenue	$	279	$	216		$	38		$	(39	)	$	494
Adjusted EBITDA		96		(2	)		(4	)		—			90
Depreciation and amortization										(21	)		(21	)
Stock-based compensation										(25	)		(25	)
Operating income (loss)													44
Other income (expense), net													—
Income (loss) before income taxes													44
(Provision) benefit for income taxes													(20	)
Net income (loss)													24


	Three months ended June 30, 2022
	Tripadvisor Core (1)		Viator (2)		TheFork (3)			Corporate & Eliminations			Total
	(in millions)
External revenue	$	249	$	136	$	32		$	—		$	417
Intersegment revenue		25		—		—			(25	)		—
Total Revenue	$	274	$	136	$	32		$	(25	)	$	417
Adjusted EBITDA		116		—		(7	)		—			109
Depreciation and amortization									(25	)		(25	)
Stock-based compensation									(21	)		(21	)
Operating income (loss)												63
Other income (expense), net												(10	)
Income (loss) before income taxes												53
(Provision) benefit for income taxes												(22	)
Net income (loss)												31


	Six months ended June 30, 2023
	Tripadvisor Core (1)		Viator (2)			TheFork (3)			Corporate & Eliminations			Total
	(in millions)
External revenue	$	461	$	331		$	73		$	—		$	865
Intersegment revenue		62		—			—			(62	)		—
Total Revenue	$	523	$	331		$	73		$	(62	)	$	865
Adjusted EBITDA		168		(31	)		(14	)		—			123
Depreciation and amortization										(42	)		(42	)
Stock-based compensation										(48	)		(48	)
Non-recurring income (expense) (4)										(3	)		(3	)
Operating income (loss)													30
Other income (expense), net													(1	)
Income (loss) before income taxes													29
(Provision) benefit for income taxes													(78	)
Net income (loss)													(49	)


	Six months ended June 30, 2022
	Tripadvisor Core (1)		Viator (2)			TheFork (3)			Corporate & Eliminations			Total
	(in millions)
External revenue	$	429	$	192		$	58		$	—		$	679
Intersegment revenue		36		—			—			(36	)		—
Total Revenue	$	465	$	192		$	58		$	(36	)	$	679
Adjusted EBITDA		172		(20	)		(15	)		—			137
Depreciation and amortization										(50	)		(50	)
Stock-based compensation										(43	)		(43	)
Operating income (loss)													44
Other income (expense), net													(23	)
Income (loss) before income taxes													21
(Provision) benefit for income taxes													(24	)
Net income (loss)													(3	)

(1)

Corporate general and administrative personnel costs of $2 million and $3 million for the three and six months ended June 30, 2023, respectively, and $2 million for both the three and six months ended June 30, 2022, were allocated to the Viator and TheFork segments.

(2)

Includes allocated corporate general and administrative personnel costs from our Tripadvisor Core segment of $1 million for the three and six months ended June 30, 2023 and 2022.

(3)

Includes allocated corporate general and administrative personnel costs from our Tripadvisor Core segment of $1 million and $2 million for the three and six months ended June 30, 2023, respectively, and $1 million for each of the three and six months ended June 30, 2022.

(4)

The Company expensed $3 million of previously capitalized transaction costs during the first quarter of 2023 to general and administrative expenses on our unaudited condensed consolidated statement of operations. The Company considers such costs to be non-recurring in nature.

Customer Concentrations

Refer to “Note 4: Financial Instruments and Fair Value Measurements” under the section entitled “Risks and Concentrations” for information regarding our major customer concentrations.

Product Information

Revenue sources within our Tripadvisor Core segment, consisting of Tripadvisor-branded hotels revenue, Tripadvisor-branded display and platform revenue, Tripadvisor experiences and dining revenue, and other revenue, along with our Viator and TheFork segment revenue sources, comprise our products. Refer to “Note 3: Revenue Recognition” for our revenue by product.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q, and the consolidated financial statements and accompanying notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, but not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2022, Part I, Item 1A, “Risk Factors,” as well as those discussed elsewhere in this report. Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition and results of operations. Accordingly, readers should not place undue reliance on these forward-looking statements. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. We are not under any obligation to, and do not intend to, publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Please carefully review and consider the various disclosures made in this report and in our other reports filed with the SEC that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

Overview

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, or UGC, in the form of ratings and reviews for destinations, points-of-interest, or POIs, experiences, alternative accommodation rentals, 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 annually.

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 operators around the globe. Viator's 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 an 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.

Our Business Strategy

The Tripadvisor group operates in a unique position in the travel and experiences ecosystem:

•

Large, global, and growing addressable markets including travel, experiences, dining, 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 operates 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.

In our Tripadvisor Core segment, we offer a compelling value proposition to both travelers and partners across a number of key offerings that include accommodations, experiences, dining, and media. 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 and diversify the monetization of our audience through deeper engagement, which, in turn, we expect will drive more value to our partners. As an example, during June 2023, we introduced a beta version of our core trip planning tool, including a new AI-powered travel itinerary generator. This new feature creates personalized travel itineraries utilizing generative AI technology.

The Tripadvisor Core segment plays an important role in our portfolio. For over two decades, we believe we have built difficult to replicate assets such as a trusted brand, authentic content, a large community of contributors, and one of the largest global travel audiences available. Our long-term strategy for the Tripadvisor Core segment builds on our heritage and the reasons hundreds of millions of travelers come to Tripadvisor each year. Fundamental to this strategy will be: (1) innovating world-class travel guidance and planning products to help travelers make confident decisions in a world where it is hard to find advice you can trust; (2) prioritizing deeper engagement with travelers by leveraging our rich data and technology assets to provide more relevant, curated, and contextual content throughout the traveler journey; and (3) driving a step change in the value we can deliver to our partners by accelerating and diversifying the monetization of our valuable audience across key categories, including hotel meta, media advertising, and experiences.

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 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, products, marketing and technology to further enhance the value we deliver to travelers and partners across our brands, platforms, and segments. In addition, we may accelerate growth inorganically by opportunistically pursuing strategic acquisitions.

Trends

The online travel industry in which we operate is large, highly dynamic and competitive. We describe below current trends affecting our overall business and reportable segments, including uncertainties that may impact our ability to execute on our objectives and strategies. Health-related events, such as a pandemic, 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.

During the first quarter of 2022, we experienced a significant negative impact from the Omicron variant across all segments which helped contribute to the year-over-year revenue growth rate during the first half of 2023. Asia-Pacific, which represents a small portion of our overall business, has been slower to recover due to longer and sustained travel restrictions as a result of the COVID-19 pandemic. However, in the first quarter of 2023, travel restrictions across Asia began to ease relative to 2022 and continued in the second quarter of 2023, contributing to increased year-over-year revenue growth within this region.

Prior to Google introducing changes to its SERP (search engine results page), we generated a significant amount of direct traffic from search engines, such as Google, through strong SEO performance across all segments. 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 across our business, most notably within our hotel meta offering within our Tripadvisor Core segment.

In response to strong consumer demand for our experiences offerings across our Viator and Tripadvisor Core segments, we continued to increase investment in performance marketing and brand spend during the first half of 2023 to grow market share in this large underpenetrated market. Over the long-term, we are focused on driving a greater percentage of our traffic from direct sources and channels which 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 accelerate the pace of online adoption. Likewise, the global restaurants category is also benefiting from increased online adoption by both consumers and partners, 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 the Viator and TheFork segments, to continue accelerating revenue growth, operating scale, and market share gains for the long-term.

On July 31, 2023, the Company approved global cost reduction measures to provide additional flexibility in prioritizing our strategic investment. At this time, we expect an estimated $35 million in annualized cost savings across several areas of the Company, related to targeted global workforce reduction measures, largely in the Tripadvisor Core segment, including corporate general and administrative. Cost reduction measures may also include, but not be limited to, discretionary spend and real estate. We expect these cost reduction measures to be largely completed by the Company over the remainder of 2023.

Employees

As of June 30, 2023, the Company had approximately 3,112 employees. Approximately 57%, 34%, and 9% 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.

Seasonality

typical seasonal fluctuations, which factors include further significant shifts in our business mix, adverse economic conditions, or health-related events.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that we believe are important in the preparation of our consolidated financial statements because they require that management use judgment and estimates in applying those policies. 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 significant judgment 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.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Significant Accounting Policies and New Accounting Pronouncements

There have been no material changes to our significant accounting policies since December 31, 2022, as compared to those described under “Note 2: Significant Accounting Policies”, in the notes to consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022.

Statements of Operations

Selected Financial Data

(in millions, except percentages)


	Three months ended June 30,						% Change			Six months ended June 30,						% Change
	2023			2022			2023 vs. 2022			2023			2022			2023 vs. 2022
Revenue	$	494		$	417			18	%	$	865		$	679			27	%

Costs and expenses:
Cost of revenue		41			31			32	%		70			53			32	%
Selling and marketing		270			217			24	%		488			357			37	%
Technology and content		71			53			34	%		139			107			30	%
General and administrative		47			28			68	%		96			68			41	%
Depreciation and amortization		21			25			(16	)%		42			50			(16	)%
Total costs and expenses:		450			354			27	%		835			635			31	%
Operating income (loss)		44			63			(30	)%		30			44			(32	)%
Other income (expense):
Interest expense		(11	)		(11	)		0	%		(22	)		(23	)		(4	)%
Interest income		12			2			500	%		22			2			1000	%
Other income (expense), net		(1	)		(1	)		0	%		(1	)		(2	)		(50	)%
Total other income (expense), net		—			(10	)	n.m.				(1	)		(23	)		(96	)%
Income (loss) before income taxes		44			53			(17	%)		29			21			38	%
(Provision) benefit for income taxes		(20	)		(22	)		(9	%)		(78	)		(24	)		225	%
Net income (loss)	$	24		$	31			(23	%)	$	(49	)	$	(3	)		1533	%

Other Financial Data:
Adjusted EBITDA (1)	$	90		$	109			(17	)%	$	123		$	137			(10	)%

n.m. = not meaningful

(1)

Consolidated 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.

Revenue and Segment Information


	Three months ended June 30,						% Change			Six months ended June 30,						% Change
	2023			2022			2023 vs. 2022			2023			2022			2023 vs. 2022
Revenue by Segment:	(in millions)
Tripadvisor Core (1)	$	279		$	274			2	%	$	523		$	465			12	%
Viator		216			136			59	%		331			192			72	%
TheFork		38			32			19	%		73			58			26	%
Intersegment eliminations (1)		(39	)		(25	)		56	%		(62	)		(36	)		72	%
Total revenue	$	494		$	417			18	%	$	865		$	679			27	%
Adjusted EBITDA by Segment:
Tripadvisor Core	$	96		$	116			(17	)%	$	168		$	172			(2	)%
Viator		(2	)		—		n.m.				(31	)		(20	)		55	%
TheFork		(4	)		(7	)		(43	)%		(14	)		(15	)		(7	)%
Total Adjusted EBITDA	$	90		$	109			(17	)%	$	123		$	137			(10	)%
Adjusted EBITDA Margin by Segment (2):
Tripadvisor Core		34	%		42	%					32	%		37	%
Viator		(1	)%		0	%					(9	)%		(10	)%
TheFork		(11	)%		(22	)%					(19	)%		(26	)%

n.m. = not meaningful

(1)

Tripadvisor Core segment revenue figures are shown gross of intersegment (intercompany) revenue, which is eliminated on a consolidated basis. Refer to “Note 13: Segment Information” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for a discussion of intersegment revenue for all periods presented.

(2)

"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 $5 million during the three months ended June 30, 2023, when compared to the same period in 2022, primarily due to an increase in Tripadvisor experiences revenue, and, to a lesser extent, an increase in Tripadvisor-branded display and platform and hotel B2B revenue, largely offset by a decrease in our European hotel meta revenue.

Tripadvisor Core segment revenue increased by $58 million during the six months ended June 30, 2023, when compared to the same period in 2022, primarily due to an increase in Tripadvisor experiences and hotel B2B revenue, and, to a lesser extent, an increase in Tripadvisor-branded display and platform revenue, all of which was primarily driven by strong consumer demand, in addition to the negative impact on this segment’s revenue from the Omicron variant in the first quarter of 2022, partially offset by a decrease in our European hotel meta revenue during the second quarter of 2023.

Adjusted EBITDA in our Tripadvisor Core segment decreased by $20 million and $4 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, while adjusted EBITDA margin decreased by 8 percentage points and 5 percentage points during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022. This was primarily due to an increase in personnel and overhead costs to support business growth, particularly during the second half of 2022 related to the travel demand recovery, an increase in direct selling and marketing expenses related to search engine marketing, or SEM, and other online paid traffic acquisition costs, as well as a decrease in our European hotel meta revenue during the second quarter of 2023, partially offset by an increase in other Tripadvisor Core segment revenue streams, as noted above.

The following is a detailed discussion of the revenue sources within our Tripadvisor Core segment:


	Three months ended June 30,				% Change			Six months ended June 30,				% Change
	2023		2022		2023 vs. 2022			2023		2022		2023 vs. 2022
	(in millions)							(in millions)
Tripadvisor Core:
Tripadvisor-branded hotels	$	174	$	188		(7	%)	$	343	$	322		7	%
Tripadvisor-branded display and platform		42		37		14	%		72		63		14	%
Tripadvisor experiences and dining (1)		50		35		43	%		83		56		48	%
Other		13		14		(7	%)		25		24		4	%
Total Tripadvisor Core Revenue	$	279	$	274		2	%	$	523	$	465		12	%

(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 13: Segment Information” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for a discussion of intersegment revenue for all periods presented.

Tripadvisor-branded Hotels Revenue

For the three and six months ended June 30, 2023, 62% and 66%, respectively, and for both the three and six months ended June 30, 2022, 69% of our total Tripadvisor Core segment revenue was derived from Tripadvisor-branded hotels revenue.

Tripadvisor-branded hotels revenue decreased by $14 million during the three months ended June 30, 2023 when compared to the same period in 2022, primarily driven by a decrease in our European hotel meta revenue related to lower seasonal demand and increased competitive environment in paid channels, leading to a decrease in paid volume clicks. This decrease was partially offset by improved hotel B2B revenue when compared to the second quarter of 2022.

Tripadvisor-branded hotels revenue increased by $21 million during the six months ended June 30, 2023 when compared to the same period in 2022, primarily driven by improved hotel B2B revenue, as well as to a lesser extent, improved hotel meta revenue in the U.S. and rest of world geographic markets, primarily driven by strong consumer travel demand compared to the first half of 2022, which was negatively impacted by the Omicron variant during the first quarter of 2022. In addition, the Company saw continued strength in hotel meta monetization in the U.S., as CPC rates remained robust when compared to the same quarter of 2022, as consumer demand remained strong. These improvements were partially offset by a decrease in our European hotel meta revenue during the second quarter of 2023, as described above.

Tripadvisor-branded Display and Platform Revenue

For the three and six months ended June 30, 2023, 15% and 14%, respectively, and for both the three and six months ended June 30, 2022, 14% of Tripadvisor Core segment revenue was derived from our Tripadvisor-branded display and platform revenue, which consists of revenue from Tripadvisor-branded display-based advertising (or “media advertising”) across our platform.

Tripadvisor-branded display and platform revenue increased by $5 million and $9 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily driven by an increase in marketing spend from advertisers, in correlation with strong consumer travel demand.

Tripadvisor Experiences and Dining Revenue

For the three and six months ended June 30, 2023, 18% and 16%, respectively, and for the three and six months ended June 30, 2022, 13% and 12%, 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 experiences 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 restaurants service offerings.

Tripadvisor experiences and dining revenue increased by $15 million and $27 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily driven by strong consumer demand for experiences, conversion rate improvements and enhancements to our online user experience.

Other Revenue

For both the three and six months ended June 30, 2023 and 2022, 5% of Tripadvisor Core segment revenue was derived from Other revenue, which includes rentals revenue, in addition to primarily click-based advertising and display-based advertising revenue from our cruises, flights, and cars offerings on Tripadvisor websites and mobile app.

Viator Segment

Viator segment revenue increased by $80 million and $139 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily driven by strong consumer demand for experiences across all geographies. 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 migrate online from traditional offline sources.

Adjusted EBITDA loss in our Viator segment increased by $2 million and $11 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022. These increases were primarily due to an increase in selling and marketing expenses related to SEM, other online paid traffic acquisition costs, and other marketing costs, including brand spend, in response to strong consumer demand for experiences and increased investment to grow market share and drive brand awareness, 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. In addition, increases in personnel and overhead costs, particularly during the second half of 2022, to support business growth related to strong consumer demand and travel demand recovery contributed to adjusted EBITDA losses in this segment. This was all largely offset by an increase in revenue as noted above.

TheFork Segment

TheFork segment revenue increased by $6 million and $15 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022. This improvement was driven by increased consumer demand for dining, including increased bookings, during 2023 compared to the first half of 2022, as well as a decrease in the negative impact of the Omicron variant which occurred during the first quarter of 2022.

Adjusted EBITDA loss in TheFork segment decreased by $3 million and $1 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, while adjusted EBITDA margin improved by 11 percentage points and 7 percentage points during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily due to an increase in revenue as noted above, a decrease in selling and marketing expenses related to SEM, other online paid traffic acquisition costs, and television advertising costs during the second quarter of 2023, which were largely offset by non-income tax related government assistance benefits related to COVID-19 relief received during the second quarter of 2022 of $11 million recorded as a benefit to general and administrative expenses, which did not reoccur in 2023, and, to a lesser extent, an increase in personnel and overhead costs to support business growth related to the travel demand recovery that began during 2022.

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.


	Three months ended June 30,						% Change			Six months ended June 30,						% Change
	2023			2022			2023 vs. 2022			2023			2022			2023 vs. 2022
	(in millions)									(in millions)
Direct costs	$	33		$	24			38	%	$	56		$	39			44	%
Personnel and overhead		8			7			14	%		14			14			0	%
Total cost of revenue	$	41		$	31			32	%	$	70		$	53			32	%
% of revenue		8.3	%		7.4	%					8.1	%		7.8	%

Cost of revenue increased by $10 million and $17 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022. The increase in cost of revenue was primarily 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 significant 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.


	Three months ended June 30,						% Change			Six months ended June 30,						% Change
	2023			2022			2023 vs. 2022			2023			2022			2023 vs. 2022
	(in millions)									(in millions)
Direct costs	$	212		$	171			24	%	$	376		$	264			42	%
Personnel and overhead		58			46			26	%		112			93			20	%
Total selling and marketing	$	270		$	217			24	%	$	488		$	357			37	%
% of revenue		54.7	%		52.0	%					56.4	%		52.6	%

Direct selling and marketing costs increased by $41 million and $112 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, while direct selling and marketing costs as a percentage of consolidated revenue was 43% during both the three and six months ended June 30, 2023, an increase from 41% and 39%, respectively, when compared to the same periods in 2022, primarily due to increased marketing investments related to strong consumer demand and growth opportunities in our experiences category.

The increase in direct selling and marketing costs during the three and six months ended June 30, 2023, when compared to the same periods in 2022, was primarily due to an increase of $47 million and $110 million, respectively, in paid online traffic acquisition costs, including SEM and other paid online traffic acquisition spend, and also other marketing costs, including brand spend, the substantial majority of which was incurred within our Viator segment and, to a lesser extent, our Tripadvisor Core segment, in order to capture consumer demand, including increased investment in the marketing of our experiences offerings within these segments for growth opportunities, partially offset by a decrease in television advertising costs of $6 million in TheFork segment during the three months ended June 30, 2023.

Personnel and overhead costs increased by $12 million and $19 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily due to an increase in headcount and contingent staff to support business growth related to the travel demand recovery that began during 2022.

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, computer supplies, telecom, content translation and localization, and consulting.


	Three months ended June 30,						% Change			Six months ended June 30,						% Change
	2023			2022			2023 vs. 2022			2023			2022			2023 vs. 2022
	(in millions)									(in millions)
Personnel and overhead	$	61		$	46			33	%	$	121		$	94			29	%
Other		10			7			43	%		18			13			38	%
Total technology and content	$	71		$	53			34	%	$	139		$	107			30	%
% of revenue		14.4	%		12.7	%					16.1	%		15.8	%

Personnel and overhead costs increased by $15 million and $27 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily due to increased personnel and overhead costs resulting from additional headcount and contingent staff to support business growth related to the travel demand recovery that began during 2022.

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.


	Three months ended June 30,						% Change			Six months ended June 30,						% Change
	2023			2022			2023 vs. 2022			2023			2022			2023 vs. 2022
	(in millions)									(in millions)
Personnel and overhead	$	33		$	28			18	%	$	67		$	59			14	%
Professional service fees and other		14			—		n.m.				29			9			222	%
Total general and administrative	$	47		$	28			68	%	$	96		$	68			41	%
% of revenue		9.5	%		6.7	%					11.1	%		10.0	%

n.m. = not meaningful

Personnel and overhead costs increased by $5 million and $8 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily driven by additional headcount to help support business growth related to the travel demand recovery that began during 2022.

Professional service fees and other costs increased by $14 million and $20 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily due to non-income tax related government assistance benefits related to COVID-19 relief of $11 million received by the Company during the second quarter of 2022, which did not reoccur in 2023, as well as, and to a lesser extent, a non-recurring cost of $3 million related to previously capitalized transaction costs during the first quarter of 2023, and incremental digital service tax costs of $3 million and $4 million for the three and six months periods, respectively.

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.


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
	(in millions)						(in millions)
Depreciation	$	19		$	22		$	38		$	44
Amortization of intangible assets		2			3			4			6
Total depreciation and amortization	$	21		$	25		$	42		$	50
% of revenue		4.3	%		6.0	%		4.9	%		7.4	%

Depreciation and amortization decreased by $4 million and $8 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily due to the completion of amortization related to certain intangible assets from business acquisitions and capitalized website development costs in previous years.

Interest Expense

Interest expense primarily consists of interest incurred, commitment fees, and debt issuance cost amortization related to the Credit Facility, the 2025 Senior Notes, the 2026 Senior Notes, as well as interest on finance leases.


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
	(in millions)						(in millions)
Interest expense	$	(11	)	$	(11	)	$	(22	)	$	(23	)

The significant majority of interest expense incurred during the three and six months ended June 30, 2023 and 2022, was related to the 2025 Senior Notes. Refer to “Note 6: Debt” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information on the 2025 Senior Notes.

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.


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(in millions)				(in millions)
Interest income	$	12	$	2	$	22	$	2

Interest income increased by $10 million and $20 million during the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022, primarily due to an increase in the average amount of cash invested and increased interest rates received on bank and term deposits, and an increase in the interest earned on money market funds during 2023.

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).


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
	(in millions)						(in millions)
Other income (expense), net	$	(1	)	$	(1	)	$	(1	)	$	(2	)

Other expense, net primarily consists of net foreign exchange gains and losses as a result of foreign currency movements.

(Provision) Benefit for Income Taxes


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
	(in millions)						(in millions)
(Provision) benefit for income taxes	$	(20	)	$	(22	)	$	(78	)	$	(24	)
Effective tax rate		45.5	%		41.5	%		269.0	%		114.3	%

Our effective tax rate differed from the U.S. federal statutory rate of 21% during the three months ended June 30, 2023, primarily due to state taxes, stock compensation expense shortfalls, and unbenefited foreign losses. Our effective tax rate differed from the U.S. federal statutory rate of 21% during the six months ended June 30, 2023, primarily as a result of a discrete item recorded during the first quarter of 2023, as described below.

We recorded an income tax provision of $20 million and $78 million for the three and six months ended June 30, 2023, respectively. The change in our income tax provision and our effective tax rate during the six months ended June 30, 2023, when compared to the same period in 2022, was primarily the result of an IRS audit settlement and a related adjustment to our existing transfer pricing income tax reserves for subsequent tax years, totaling $55 million, which was recognized during the three months ended March 31, 2023. Refer to “Note 8: Income Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information.

Net income (loss)


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
	(in millions)						(in millions)
Net income (loss)	$	24		$	31		$	(49	)	$	(3	)
Net income (loss) margin		4.9	%		7.4	%		(5.7	%)		(0.4	%)

Net income decreased by $7 million during the three months ended June 30, 2023 when compared to the same period in 2022. The decrease in net income was largely driven by increased direct selling and marketing costs incurred in response to strong consumer travel demand and investment to grow market share in our experiences offerings, increased personnel and overhead costs to help support business growth and consumer demand, as well as to a lesser extent, increased direct costs from credit card payment and other revenue-related transaction costs in direct correlation with the increase in experiences revenue during the three months ended June 30, 2023, and non-income tax related government assistance benefits related to COVID-19 relief of $11 million received during the

second quarter of 2022 and did not reoccur in 2023, all of which are described in more detail above under “Consolidated Expenses.” These changes were largely offset by an increase in revenue, as described in more detail above under “Revenue and Segment Information.”

Net loss increased by $46 million during the six months ended June 30, 2023 when compared to the same period in 2022. The increase in net loss was largely driven by increased direct selling and marketing costs in response to strong consumer travel demand and investment to grow market share in our experiences offerings, as well as incremental income tax expense of $55 million recognized during the first quarter of 2023 as a result of an IRS audit settlement and related adjustment to our existing transfer pricing income tax reserves for subsequent tax years and, to a lesser extent, increased personnel and overhead costs to help support business growth and consumer demand, increased direct costs from credit card payment and other revenue-related transaction costs in direct correlation with the increase in experiences revenue during the six months ended June 30, 2023, and non-income tax related government assistance benefits related to COVID-19 relief of $11 million received during the second quarter of 2022, which did not reoccur in 2023, all of which is described in more detail above under “Consolidated Expenses,” largely offset by an increase in revenue, as described in more detail above under “Revenue and Segment Information.”

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 assets 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;

•

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:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023			2022
	(in millions)
Net income (loss)	$	24	$	31	$	(49	)	$	(3	)
Add: Provision (benefit) for income taxes		20		22		78			24
Add: Other expense (income), net		—		10		1			23
Add: Non-recurring expense (income) (1)		—		—		3			—
Add: Stock-based compensation		25		21		48			43
Add: Depreciation and amortization		21		25		42			50
Adjusted EBITDA	$	90	$	109	$	123		$	137

(1)

Related Party Transactions

For information on our relationship with LTRIP, which may be deemed to beneficially own equity securities representing approximately 57% of our voting power as of June 30, 2023, refer to “Note 1: Basis of Presentation” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report. We had no related party transactions with LTRIP during both of the three and six months ended June 30, 2023 and 2022.

Stock-Based Compensation

Refer to “Note 10: Stock Based Awards and Other Equity Instruments” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information on current year equity award activity, including the issuance of nearly 6.5 million service-based RSUs with a weighted average grant-date fair value of $21.75 during the six months ended June 30, 2023.

Liquidity and Capital Resources

Our principal source of liquidity is cash flow generated from operations and existing cash and cash equivalents. Liquidity needs can also be met through drawdowns under the Credit Facility. As of June 30, 2023 and December 31, 2022, we had approximately $1.1 billion and $1.0 billion, respectively, of cash and cash equivalents, and $496 million of available borrowing capacity under the Credit Facility. As of June 30, 2023, $221 million of our cash and cash equivalents were held by our international subsidiaries outside of the U.S., of which nearly 45% was held in the U.K. As of June 30, 2023, the significant majority of our cash was denominated in U.S. dollars.

As of June 30, 2023, we had $478 million of cumulative undistributed earnings in foreign subsidiaries that are no longer considered to be indefinitely reinvested. As of June 30, 2023, we maintained a deferred income tax liability on our unaudited condensed 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.

As of June 30, 2023, we are party a credit agreement, which, among other things, provides for a $500 million revolving credit facility with a maturity date of June 29, 2028. The Company may borrow from the Credit Facility in U.S dollars, Euros and Sterling. Borrowings under the Credit Facility generally bear interest, at the Company’s option, at a rate per annum equal to either (i) the Term Benchmark Borrowing rate, or the EURIBO rate for the interest period in effect for such borrowings in Euro; plus an applicable margin ranging from 1.75% to 2.50% (“Term Benchmark/RFP Spread”), based on the Company’s total net leverage ratio; (ii) the RFP Borrowing rate, or the Daily Simple Sterling Overnight Interbank Average rate for the interest period in effect for such borrowings in Sterling; plus the Term Benchmark/RFP Spread, based on the Company’s total net leverage ratio; or (iii) the Alternate Base Rate (“ABR”) Borrowing, which is the greatest of (a) the Prime Rate in effect on such day, (b) the New York Fed Bank Rate in effect on such day plus 1/2 of 1.00% per annum; and (c) the Term Benchmark Borrowing rate, or Adjusted Term SOFR for an interest period of one month as published two US Government Securities Business Days prior to such day (or if such day is not a US Government Securities Business Day, the immediately preceding US Government Securities Business Day) plus 1.00% per annum; in addition to an applicable margin ranging from 0.75% to 1.50%, based on the Company’s total net leverage ratio. In addition, we are required to pay a quarterly commitment fee, at an applicable rate ranging from 0.25% to 0.40%, on the daily unused portion of the Credit Facility

for each fiscal quarter and in connection with the issuance of letters of credit. As of June 30, 2023, our unused revolver capacity was subject to a commitment fee of 0.25%, given the Company’s total net leverage ratio. The Credit Facility requires us to maintain a maximum total net leverage ratio and contains certain customary affirmative and negative covenants and events of default, including for a change of control.

As of June 30, 2023 and December 31, 2022, 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 total net leverage ratio covenant, based on our current projections, we do not believe there is a material risk that we will not remain in compliance throughout the next twelve months.

As of June 30, 2023, the Company had an aggregate outstanding principal amount of $845 million in long-term debt, as a result of the 2025 Senior Notes and 2026 Senior Notes, as discussed below.

In July 2020, the Company completed the sale of $500 million in 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, until their maturity on July 15, 2025. The 2025 Senior Notes are senior unsecured obligations of the Company, although unconditionally guaranteed on a joint and several basis, by certain of the Company’s domestic subsidiaries. In March 2021, the Company completed the sale of $345 million of the 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, until their maturity on April 1, 2026. The 2026 Senior Notes are senior unsecured obligations of the Company, although unconditionally guaranteed on a joint and several basis, 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 the 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, liquidity requirements, contractual restrictions and other factors.

For further information on the Credit Facility, 2025 Senior Notes, and 2026 Senior Notes, refer to “Note 6: Debt” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report.

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 three months ended June 30, 2023, we repurchased 4,724,729 shares of our outstanding common stock at an average price of $15.85 per share, exclusive of fees and commissions, or $75 million in the aggregate, which completed this share repurchase program.

Our business typically experiences seasonal fluctuations that affect the timing of our annual cash flows during the year related to working capital. As a result of 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 unaudited condensed consolidated balance sheet as deferred merchant payables. We pay the experience operator, or the experience supplier, after the travelers’ use. Therefore, we generally receive cash from the traveler prior to paying the experience 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. Other factors, such as a resurgence of COVID-19, may also impact typical seasonal fluctuations, which include further significant shifts in our business mix or adverse economic conditions that could result in future seasonal patterns that are different from historical trends. In addition, new or different payment options offered to our customers could impact the timing of cash flows. For example, our “Reserve Now, Pay Later” payment option, which allows our travelers the option to reserve certain experiences and defer payment until a date no later than two days before the experience date, may continue to increase though it is still not used in a majority of bookings to date, and affect the timing of our future cash flows and working capital.

As discussed in “Note 8: Income Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report, we received a final notice regarding a MAP settlement for the 2009 through 2011 tax years in January 2023, which the Company subsequently accepted in February 2023. During the three months ended June 30, 2023, we made a U.S. federal tax payment of $113 million, inclusive of interest, to Expedia related to this IRS audit settlement, pursuant to the Tax Sharing Agreement with Expedia. This amount was previously accrued in income taxes payable on our unaudited condensed consolidated balance sheet. We anticipate a competent authority refund and federal tax benefits, net of state tax payments, associated with this IRS audit settlement will be substantially settled in the next twelve months, and will result in an estimated net operating cash inflow of $45 million to $55 million, inclusive of related interest expense.

Additionally, during August 2020 we separately received a NOPA issued by the IRS for the 2014, 2015, and 2016 tax years. These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries and would result in additional income tax expense above our existing tax reserves in an estimated range of $55 million to $65 million, exclusive of interest expense, at the close of the audit if the IRS prevails. In addition, we received an issue closure notice from HMRC relating to adjustments for the 2012 through 2016 tax years in January 2021. These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries and would result in an increase to 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. Although the ultimate timing for resolution of these matters is uncertain, any future payments required would negatively impact our operating cash flows.

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 for the six months ended June 30, 2023 and 2022, as reflected in our unaudited condensed consolidated statements of cash flows, are summarized in the following table:


	Six months ended June 30,
	2023			2022
	(in millions)
Net cash provided by (used in):
Operating activities	$	240		$	380
Investing activities		(31	)		(26	)
Financing activities		(93	)		(13	)

During the six months ended June 30, 2023, our primary use of cash was in operations, and from financing activities (including repurchases of our outstanding common stock at an aggregate cost of $75 million under our existing share repurchase program and payment of withholding taxes on net share settlements of our equity awards of $12 million) and investing activities (including capital expenditures of $31 million incurred during the six months ended June 30, 2023). This use of cash was funded with cash and cash equivalents and operating cash flows during the period.

During the six months ended June 30, 2022, our primary use of cash was in operations, and from financing activities (including payment of withholding taxes on net share settlements of our equity awards of $9 million) and investing activities (including capital expenditures of $27 million). This use of cash was funded with cash and cash equivalents, and operating cash flows during the period.

Net cash provided by operating activities for the six months ended June 30, 2023, decreased by $140 million when compared to the same period in 2022, primarily due to a decrease in working capital of $66 million and an increase in net losses of $46 million, as well as, and to a lesser extent, a decrease in non-cash items of $28 million, primarily due to a decrease in deferred income tax expense. The decrease in working capital was largely driven by a U.S. federal tax payment of $113 million during the second quarter of 2023, inclusive of interest, related to the IRS audit settlement, discussed above, a $64 million U.S. federal tax refund related to the CARES Act received in 2022, which did not reoccur in 2023, and increased cash outflows from accounts payable due to timing of vendor payments. These changes were partially offset by an increase in deferred revenue and deferred merchant payables resulting from cash received in advance for experiences bookings, net of cancellations, reflecting experiences bookings growth, and the timing of when cash is received from travelers and then remitted to experience operators, in addition to the timing of and improvement in collection from customers, resulting in increased operating cash flows from accounts receivable during the period, and an increase of $55 million in our income tax provision as a result of an IRS audit settlement and a related adjustment to our existing transfer pricing income tax reserves for subsequent tax years, discussed above.

Net cash used in investing activities for the six months ended June 30, 2023 increased by $5 million when compared to the same period in 2022, due to an increase in capital expenditures across the business.

Net cash used in financing activities for the six months ended June 30, 2023 increased by $80 million when compared to the same period in 2022, primarily due to the repurchase of shares of our common stock under the existing share repurchase program of $75 million and $3 million of financing costs incurred related to our Credit Facility, both occurring during the three months ended June 30, 2023.

Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements

There have been no material changes outside the normal course of business to our contractual obligations and commercial commitments since December 31, 2022. As of June 30, 2023, other than our contractual obligations and commercial commitments, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC. Refer to “Liquidity and Capital Resources” 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, 2022 for a discussion of our contractual obligations and commercial commitments.

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.

We are currently 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 of the timing and the amount of income and deductions and the allocation of income among various tax jurisdictions. These examinations may lead to proposed or ordinary course adjustments to our taxes. We are no longer subject to tax examinations by tax authorities for years prior to 2014. As of June 30, 2023, 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 HMRC audit.

As disclosed in previous filings, including in our Annual Report on Form 10-K for the year ended December 31, 2022, we received a NOPA from the IRS by virtue of income tax returns filed with Expedia for the 2009, 2010, and 2011 tax years relating to certain transfer pricing arrangements with our foreign subsidiaries. In response, we requested competent authority assistance under the MAP for the 2009 through 2011 tax years. In January 2023, we received a final notice from the IRS regarding a MAP settlement for the 2009 through 2011 tax years, which the Company accepted in February 2023. In the first quarter of 2023, we recorded additional income tax expense as a discrete item, inclusive of interest, of $31 million specifically related to this settlement. We reviewed the impact of the acceptance of this settlement position against our existing transfer pricing income tax reserves for the subsequent tax years during the first quarter of 2023, which resulted in incremental income tax expense, inclusive of estimated interest, of $24 million. The total impact of these adjustments resulted in an incremental income tax expense of $55 million, which was recognized during the three months ended March 31, 2023.

In addition, and separately, during August 2020, we received a NOPA from the IRS for the 2014, 2015, and 2016 tax years. These proposed adjustments pertain to certain transfer pricing arrangements with our foreign subsidiaries and would result in additional income tax expense above our existing tax reserves in an estimated range of $55 million to $65 million at the close of the audit if the IRS prevails. This estimated range takes into consideration competent authority relief, existing income tax reserves, and transition tax regulations and is exclusive of deferred tax consequences and interest expense, which would also be significant. We disagree with the proposed adjustments, and we intend to defend our position through applicable administrative and, if necessary, judicial remedies. 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 years discussed above, if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, we may be subject

to significant additional tax liabilities. We have previously requested competent authority assistance under MAP for the tax years of 2014 through 2016. We have reviewed our transfer pricing reserves as of June 30, 2023, 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 June 30, 2023.

In January 2021, we received an issue closure notice from HMRC relating to adjustments for the 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 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 the Company has taken with regard to transfer pricing with our foreign subsidiaries is sustainable.

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. In July 2023, more than 138 countries and jurisdictions agreed to refrain from imposing newly enacted digital service tax initiatives or relevant similar measures on any company before December 31, 2024, or the entry into force of the multilateral convention developed by the OECD/G20 Inclusive Framework if earlier, provided the multilateral convention has made sufficient progress by the end of 2023. Furthermore, certain U.S. states, such as Maryland, have deployed comparable digital services tax initiatives, and we continue to monitor these developments to determine the financial impact to the Company. During the three and six months ended June 30, 2023, we recorded $5 million and $7 million, respectively, of digital service tax, while during the three and six months ended June 30, 2022, we recorded $2 million and $3 million, respectively, of digital service tax to general and administrative expense on our unaudited condensed 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 income tax liability has been accrued on our unaudited condensed consolidated balance sheet, which was not material as of June 30, 2023. As of June 30, 2023, $478 million of our cumulative undistributed foreign earnings were no longer considered to be indefinitely reinvested.

Refer to “Note 8: Income Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in our market risk profile during the six months ended June 30, 2023 since December 31, 2022. For additional information about our market risk profile, refer to “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A. in Part II of our Annual Report on Form 10-K for the year ended December 31, 2022.

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.

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, increasing interest rates, 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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of June 30, 2023, our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2023, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s, or the SEC’s, rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and 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 June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a description of the risks and uncertainties which could materially and adversely affect our business, financial condition, cash flows and results of operations, and the trading price of our common stock. The risks and uncertainties described 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. During the quarter ended June 30, 2023, there were no material changes in our risk factors from those disclosed in Part 1, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

During the quarter ended June 30, 2023, 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 of 1933, as amended.

Share Repurchases

A summary of information regarding our common stock repurchases during the second quarter of 2023 is set forth in the table below:


Period	Total Number of Shares Purchased		Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 to April 30		—		—		—	$	75,042,077
May 1 to May 31		4,724,729	$	15.85		4,724,729	$	—
June 1 to June 30		—		—		—	$	—
Total		4,724,729				4,724,729

(1) Exclusive of fees and commissions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the second quarter of 2023, none of the Company’s directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report.

Exhibit

Filed

Incorporated by Reference

No.

Exhibit Description

Herewith

Form

SEC File No.

Exhibit

Filing Date

10.1

Amendment and Restatement Agreement, dated as of June 29, 2023, to the Credit Agreement dated as of June 26, 2015 (as amended as of May 12, 2017, May 5, 2020 and December 17, 2020, among Tripadvisor, Inc., Tripadvisor Holdings, LLC, Tripadvisor, LLC, the other Borrowers party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

8-K

001-35362

10.1

7/6/23

31.1

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Tripadvisor, Inc.
By		/s/ Michael Noonan
		Michael Noonan
		Chief Financial Officer

By		/s/ Geoffrey Gouvalaris
		Geoffrey Gouvalaris
		Chief Accounting Officer

August 2, 2023