What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-02-16 compared with 2023-02-17 · 24 added, 2385 removed, 19 unchanged (99% of the section changed)

Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is quoted on The Nasdaq Global Select Market under the ticker symbol “TRIP.”

Our Class B common stock is not listed and there is no established public trading market for that security.

Our common stock is quoted on The Nasdaq Global Select Market under the ticker symbol “TRIP.” Our Class B common stock is not listed and there is no established public trading market for that security.

As of February 9, 2024, all of our Class B common stock was held by LTRIP.

1 unchanged sentence

The following graph provides a comparison of the total stockholder return from December 31, 2018 to December 31, 2023, of an investment of $100 in cash on December 31, 2018 for Tripadvisor, Inc.

common stock and an investment of $100 in cash on December 31, 2017 for (i) the Standard and Poor’s 500 Index (the “S&P 500 Index”), (ii) The Nasdaq Composite Index, and (iii) the Research Data Group (“RDG”) Internet Composite Index.

common stock and an investment of $100 in cash on December 31, 2018 for (i) the Standard and Poor’s 500 Index (the “S&P 500 Index”), (ii) The Nasdaq Composite Index;

and (iii) the Research Data Group (“RDG”) Internet Composite Index.

The RDG Internet Composite Index is an index of stocks representing the internet industry, including internet software and service companies, and e-commerce companies.

1 unchanged sentence

Data for the S&P 500 Index, The Nasdaq Composite Index, and the RDG Internet Composite Index assume reinvestment of dividends.

This performance comparison graph is not “soliciting material,”

is not deemed filed with the SEC and is not deemed to be incorporated by reference into any filing of Tripadvisor, Inc.

This performance comparison graph is not “soliciting material,” is not deemed filed with the SEC and is not deemed to be incorporated by reference into any filing of Tripadvisor, Inc.

under the Securities Act or any filing under the Exchange Act.

3 unchanged sentences

Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend on our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions and other factors deemed relevant by our Board of Directors.

In addition, our ability to pay dividends was also limited by the terms of our Credit Agreement and our 2025 Indenture.

In addition, our ability to pay dividends is limited by the terms of our Credit Agreement and our 2025 Indenture.

Refer to “Note 8:

Debt ” in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information regarding our debt agreements.

Therefore, investors should not rely on regular quarterly or annual dividend income from shares of our common stock and investors should not rely on special dividends with any regularity, or at all.

5 unchanged sentences

Issuer Purchases of Equity Securities

During the quarter ended December 31, 2022, we did not repurchase any shares of our common stock under our existing share repurchase program.

As of December 31, 2022, we had $75 million remaining available to repurchase shares of our common stock under our previously authorized share repurchase program.

While the Board of Directors has not suspended or terminated the share repurchase program, the terms of our Credit Agreement limit the Company from engaging in share repurchases and the terms of our 2025 Indenture related to our 2025 Senior Notes impose certain limitations and restrictions on share repurchases.

In addition, the Inflation Reduction Act of 2022 imposes a 1% excise tax on certain corporate stock buybacks.

Refer to “Note 9:

Debt ”

in the notes to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information about our Credit Agreement and our 2025 Indenture.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information concerning our results of operations and financial condition.

This discussion should be read in conjunction with our accompanying consolidated financial statements and the notes in Item 8 of this Annual Report on Form 10-K.

The Tripadvisor group operates as a family of brands with a purpose of connecting people to experiences worth sharing.

Our vision is to be the world’s most trusted source for travel and experiences.

The Company operates across three reportable segments:

Tripadvisor Core, Viator, and TheFork.

We leverage our brands, technology platforms, and capabilities to connect our large, global audience with partners by offering rich content, travel guidance products and services, and two-sided marketplaces for experiences, accommodations, restaurants, and other travel categories.

Tripadvisor Core’s purpose is to empower everyone to be a better traveler by serving as the world’s most trusted and essential travel guidance platform.

Since Tripadvisor’s founding in 2000, the Tripadvisor brand has developed a relationship of trust and community with travelers and experience seekers by providing an online global platform for travelers to discover, generate, and share authentic UGC in the form of ratings and reviews for destinations, POIs, experiences, accommodations, restaurants, and cruises in over 40 countries and over 20 languages across the world.

As of December 31, 2022, Tripadvisor offered more than 1 billion user-generated ratings and reviews on nearly 8 million experiences, accommodations, restaurants, airlines, and cruises.

Tripadvisor’s online platform attracts one of the world’s largest travel audiences, with hundreds of millions of visitors in 2022.

Viator’s purpose is to bring more wonder into the world—to bring extraordinary, unexpected, and forever memorable experiences to more people, more often, wherever they are traveling.

In doing so, Viator elevates tens of thousands of businesses, large and small.

Viator delivers on its purpose by enabling travelers to discover and book iconic, unique and memorable experiences from experience operators around the globe.

Our online marketplace is comprehensive and easy-to-use, connecting millions of travelers to the world’s largest supply of bookable tours, activities and attractions—over 300,000 experiences from more than 50,000 operators as of December 31, 2022.

Viator is a pure-play experiences OTA singularly focused on the needs of both travelers and operators with the largest supply of bookable experiences available to travelers.

TheFork’s purpose is to deliver happiness through amazing dining experiences.

TheFork delivers on its purpose by providing an online marketplace that enables diners to discover and book online reservations at more than 55,000 restaurants in 12 countries, as of December 31, 2022, across the UK, western and central Europe, and Australia.

TheFork has become an urban, gastronomic guide with a strong community that offers more than 20 million restaurant reviews.

The online travel industry in which we operate is large, highly dynamic and competitive.

We describe below the impact on our business from COVID-19, other current trends affecting our business and reportable segments, including key drivers of our financial results, and uncertainties that may impact our ability to execute on our objectives and strategies.

The COVID-19 pandemic had a significant negative impact on the global economy and the travel, leisure, hospitality and restaurant industries in particular beginning in 2020.

Since the beginning of the pandemic, the pervasiveness and severity of travel restrictions and stay-at-home directives have varied by country and state;

however, as of December 31, 2022, most of the countries in which we operate had eased or completely lifted such restrictions.

While the COVID-19 pandemic negatively and materially affected our results for the years ended

December 31, 2020 and 2021, in 2022, although some areas of our business recovered faster than others, as discussed below, we generally experienced a recovery in travel demand and our financial performance during 2022.

Although all periods included in our consolidated financial statements presented in this Annual Report on Form 10-K were impacted at varying degrees by the COVID-19 pandemic, none of these periods are considered comparable, and no periods affected by the pandemic are expected to be comparable to future periods.

As a result, for additional context, below we provide information regarding our performance for the year ended December 31, 2022 as compared to the year ended December 31, 2019, before the impacts of the COVID-19 pandemic.

Our consolidated revenue for the year ended December 31, 2022 was approximately $1.5 billion, an increase of 65%, when compared to the same period in 2021.

In comparison to a pre-COVID-19 timeframe, consolidated revenue for the year ended December 31, 2022 was approximately 96% of 2019’s comparable period, an increase from approximately 58% of 2019’s comparable period during the year ended December 31, 2021, primarily attributable to what we believe to be increased consumer travel demand for travel industry related services, combined with the easing of government travel restrictions.

Revenue trends also improved as 2022 progressed, as consolidated revenue for the third and fourth quarter of 2022 exceeded parity with 2019's comparable periods, in comparison to approximately 70% and 99% of 2019’s comparable periods during the first and second quarters of 2022, respectively.

Tripadvisor Core revenue increased by 45% during the year ended December 31, 2022, when compared to the same period in 2021, despite the significant impact from the Omicron variant in the month of January 2022, as travel demand and revenue rebounded significantly during 2022.

In comparison to a pre-COVID-19 timeframe, during the year ended December 31, 2022, Tripadvisor Core revenue reached approximately 79% of 2019’s comparable period, an increase from approximately 54% of 2019’s comparable period during 2021.

Tripadvisor-branded hotels revenue increased 44% during the year ended December 31, 2022, when compared to 2021, primarily driven by growth in hotel meta (formerly referred to as hotel auction).

During 2022, Tripadvisor-branded hotels revenue reached approximately 83% of 2019’s comparable period, an increase from approximately 58% of 2019’s comparable period during 2021.

The Company saw continued strength of recovery in our U.S.

hotel meta revenue throughout 2022 on strong consumer travel demand, reaching parity with 2019’s comparable period during the year ended December 31, 2022.

Revenue recovery in Europe and the rest of the world has been slower relative to the U.S.

due to relative brand strength and recognition, but also due to uneven macroeconomic environments.

While slower to recover than Tripadvisor-branded hotels revenue, our Tripadvisor-branded display and platform revenue increased 33% during the year ended December 31, 2022, when compared to 2021.

In comparison to a pre-COVID-19 timeframe, Tripadvisor-branded display and platform revenue for the year ended December 31, 2022 was approximately 81% of 2019’s comparable period, an increase from approximately 61% of 2019’s comparable period in 2021.

This improvement in 2022 was primarily driven by an increase in marketing spend from our advertisers in correlation with increasing consumer travel demand, as discussed above.

Our Tripadvisor experiences and dining revenue increased by 91% as a result of the travel demand recovery, combined with the easing of government restrictions, as well as the continued execution by our business, primarily driven by performance in our experiences offering as we continue to make investments in this offering to gain market share.

In comparison to a pre-COVID-19 timeframe, Tripadvisor experiences and dining revenue for the year ended December 31, 2022 was approximately 115% of 2019’s comparable period, an increase from approximately 60% of 2019’s comparable period in 2021.

Financial results in Other revenue also improved during the year ended December 31, 2022, when compared to 2021, primarily driven by similar trends of increased consumer travel demand as part of the global travel demand recovery.

The offerings within Other revenue complement our Tripadvisor Core segment’s long-term strategy of delivering comprehensive guidance across the traveler journey.

However, Other revenue during the year ended December 31, 2022 has been slower to recover when compared against 2019's comparable period as we continue to balance capital deployment across our portfolio that align with our strategic priorities across the segment.

We have also divested certain offerings within Other revenue since 2019.

We began to see improvement in our Viator segment’s financial results during the third quarter of 2021, and this trend has continued throughout 2022, as revenue increased by 168% during the year ended December 31, 2022, when compared to 2021, primarily driven by the consumer demand recovery across all geographies, in conjunction with the lifting of various government restrictions on experience activities and the travel industry recovery, as well as continued execution by our business.

In comparison to a pre-COVID-19 timeframe, our Viator segment revenue for 2022 was approximately 171% of 2019’s comparable period, an increase from approximately 64% of 2019’s comparable period in 2021.

During the first quarter of 2021, restaurants in most of the European countries in which TheFork operates were ordered to remain closed.

In TheFork segment, we saw a notable recovery beginning in mid-May 2021, as restaurants in most European countries in which TheFork operates began reopening for in-restaurant dining.

However, late in the fourth quarter of 2021 and early into the first quarter of 2022, Omicron-related restrictions and related impact to consumer demand within Europe again negatively impacted TheFork.

These Omicron-related restrictions were again lifted late in the first quarter of 2022, bringing a recovery of consumer demand and revenue, although European consumer demand and restaurant openings remained below pre-pandemic levels through 2022.

TheFork segment revenue during 2022 increased by approximately 48%, primarily driven by improving consumer demand, when compared to 2021.

In comparison to a pre-COVID-19 timeframe, TheFork revenue for 2022 was approximately 99% of 2019’s comparable period, an increase from approximately 67% of 2019’s comparable period in 2021.

Other Current Trends

In response to increased consumer travel demand, we increased our performance marketing investments in 2022 across the Tripadvisor group.

In Tripadvisor Core, we observed strong performance in hotel meta primarily driven by increased CPC pricing during 2022.

This environment allowed us to increase performance marketing at a profitable ROAS (return on advertising spend), while our direct traffic, including SEO, has been slower to recover.

Historically, we have generated a significant amount of direct traffic from search engines, such as Google, through strong SEO performance.

We believe our SEO traffic acquisition performance has been negatively impacted in the past, and may be impacted in the future by search engines (primarily Google) increasing the prominence of their own products in search results.

Over the long-term, we are focused on driving a greater percentage of our traffic from direct sources and channels that are more profitable than performance marketing channels.

The global experiences market is large, growing, and highly fragmented, with the vast majority of bookings still occurring through traditional offline sources.

We are observing a secular shift, however, as this market continues to grow and moves online faster.

We are observing similar trends in terms of online adoption by both consumers and partners in the global restaurants category, particularly in Europe.

Given the competitive positioning of our businesses relative to the attractive growth prospects in these categories, we expect to continue to invest in these categories across the Tripadvisor group, and in particular, within Viator and TheFork, to continue accelerating revenue growth, operating scale, and market share gains for the long-term.

For information regarding our business strategy and business models, see the discussion set forth in Part I, Item 1.

“Business,”

of this Form 10-K under the captions “Our Business Strategy”, and “Our Business Models.”

Consolidated Results of Operations

In the second quarter of 2022, as part of our continuous review of the business and in consultation with our CEO, who also serves as our CODM, we evaluated our operations and realigned the reportable segment information which our CODM regularly assesses to evaluate performance for operating decision-making purposes, including allocation of resources.

The revised segment reporting structure includes the following reportable segments:

(1) Tripadvisor Core;

and (3) TheFork.

For further information, including the change in segments and principal revenue streams within these segments, refer to “Note 3:

Revenue Recognition ”

and “Note 19:

Segment and Geographic Information ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

All prior period segment disclosure information has been reclassified to conform to the current reporting structure in this Form 10-K.

These reclassifications had no effect on our consolidated financial statements in any period.

During the fourth quarter of 2022, the Company was the subject of a targeted fraud scheme, resulting in the payment of refunds to an external party for products which were fraudulently subscribed within Tripadvisor Core.

As a result, the Company incurred a loss of approximately $8 million, which was recorded to general and administrative expense on the consolidated statement of operations for the year ended December 31, 2022.

These fraudulent transactions had no impact on revenue, as the fraudulent subscriptions were cancelled in a timely manner by the Company.

Operating process changes were put into place to provide further safeguards against this type of activity happening in the future.

Although we continue to vigorously pursue recovery of our losses and related expenses arising from this incident, there can be no assurance of recovery or of the timing of any such recovery.

A discussion regarding our financial condition and results of operations for fiscal year 2022 compared to fiscal year 2021 is presented below.

A discussion regarding our financial condition and results of operations for fiscal year 2021 compared to fiscal year 2020 can be found in Part II, Item 7.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 18, 2022.

As noted above, during the second quarter of 2022, we revised our segment reporting structure.

We did not include a discussion regarding our financial condition and results of operations for fiscal year 2021 compared to fiscal year 2020, as we believe the changes in our reportable segments is not a material change to understand the financial condition, changes in financial conditions, and results of operations of our revised reportable segments due to the impact of COVID-19 during those years, which is discussed above.

Results of Operations

Selected Financial Data

(in millions, except percentages)

Year ended December 31,

Costs and expenses:

Cost of revenue

Selling and marketing

Technology and content

General and administrative

Depreciation and amortization

Impairment of goodwill

Restructuring and other related reorganization costs

Total costs and expenses:

Operating income (loss)

Other income (expense):

Interest expense

Interest income

Other income (expense), net

Total other income (expense), net

Income (loss) before income taxes

(Provision) benefit for income taxes

Net income (loss)

Other financial data:

Adjusted EBITDA (1)

= not meaningful

(1) Adjusted EBITDA is considered a non-GAAP measure as defined by the SEC.

Please refer to “Adjusted EBITDA”

below for more information, including tabular reconciliations to the most directly comparable GAAP financial measure.

Revenue and Segment Information

Year ended December 31,

Revenue by Segment:

(in millions)

Tripadvisor Core (1)

Intersegment Eliminations (1)

Total revenue

Adjusted EBITDA by Segment:

Tripadvisor Core

Total Adjusted EBITDA

Adjusted EBITDA Margin by Segment (2) :

Tripadvisor Core

= 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 19:

Segment and Geographic Information ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for a discussion of intersegment revenue for all periods presented.

(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 $301 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to increased hotel meta revenue, and, to a lesser extent, an increase in Tripadvisor experiences and dining and Tripadvisor-branded display and platform revenue, all of which was due to the impact of increased consumer travel demand, the easing of travel restrictions and travel industry recovery on our business.

In addition, we estimate this segment's revenue growth was negatively impacted by foreign currency fluctuations of approximately 6% during the year ended December 31, 2022 when compared to the same period in 2021.

Adjusted EBITDA in our Tripadvisor Core segment increased $168 million during the year ended December 31, 2022 when compared to the same period in 2021.

This was primarily due to an increase in revenue as noted above, partially offset by an increase in direct selling and marketing expenses related to SEM and other online paid traffic acquisition costs in response to increased consumer travel demand as travel restrictions eased and the travel industry recovered, and to a lesser extent, increased personnel and overhead costs to support business growth during the travel demand recovery.

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

Year ended December 31,

Tripadvisor Core:

(in millions)

Tripadvisor-branded hotels

Tripadvisor-branded display and platform

Tripadvisor experiences and dining (1)

Total Tripadvisor Core Revenue

(1) Tripadvisor experiences and dining revenue within the Tripadvisor Core segment is shown gross of intersegment (intercompany) revenue, which is eliminated on a consolidated basis.

Refer to “Note 19:

Segment and Geographic Information ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for a discussion of intersegment revenue for all periods presented.

Tripadvisor-branded Hotels Revenue

For the years ended December 31, 2022, 2021, and 2020, 67%, 68%, and 60%, respectively, of our Tripadvisor Core segment revenue was derived from Tripadvisor-branded hotels revenue.

Tripadvisor-branded hotels revenue increased $199 million during the year ended December 31, 2022 when compared to the same period in 2021.

This increase was primarily driven by our hotel meta revenue across all geographic markets, and, to a lesser extent, hotel B2B revenue, which has been slower to recover than hotel meta, due to the impact of increased consumer travel demand, the easing of travel restrictions and travel industry recovery on our business.

As consumer travel demand increased during 2022, the Company saw continued improvement in hotel meta monetization, as CPC rates during 2022 were consistently near or exceeded parity with 2019's comparable period, which enabled increased efficient marketing investment on performance channels, enhancing our 2022 hotel meta revenue growth.

Tripadvisor-branded Display and Platform Revenue

For the years ended December 31, 2022, 2021, and 2020, 13%, 15%, and 14%, respectively, of our Tripadvisor Core segment revenue was derived from Tripadvisor-branded display and platform revenue, which consists of revenue from display-based advertising across our platform.

Tripadvisor-branded display and platform revenue increased $32 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily driven by an increase in marketing spend from our advertisers, particularly DMOs, in correlation with increased consumer travel demand.

Tripadvisor Experiences and Dining Revenue

For the years ended December 31, 2022, 2021, and 2020, 14%, 11%, and 13%, respectively, of our Tripadvisor Core segment revenue was derived from our Tripadvisor experiences and dining revenue, which includes intercompany (intersegment) revenue consisting of affiliate marketing commissions earned primarily from experience bookings, and to a lesser extent, restaurant reservation bookings on Tripadvisor-branded websites and mobile apps, fulfilled by Viator and TheFork, respectively, which are eliminated on a consolidated basis, in addition to revenue earned from Tripadvisor's restaurant service offerings.

Tripadvisor experiences and dining revenue increased by $64 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily driven by increased consumer travel demand for experiences across all geographies, in conjunction with the lifting of various government restrictions on experience activities and the travel industry recovery.

Other Revenue

For the years ended December 31, 2022, 2021, and 2020, 5%, 7%, and 12%, respectively, of our Tripadvisor Core segment revenue was derived from Other revenue, which includes alternative accommodation rentals revenue, in addition to primarily click-based advertising and display-based advertising revenue from our cruise, flights, and rental cars offerings on Tripadvisor websites and mobile apps.

Other revenue increased by $6 million during the

year ended December 31, 2022 when compared to the same period in 2021, primarily due to the impact of increased consumer travel demand and travel industry recovery on our business.

Viator Segment

Viator segment revenue increased by $309 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily driven by the consumer demand recovery for experiences across all geographies, in conjunction with the lifting of various government restrictions on experience activities and the travel industry recovery during the same period.

Viator is also benefitting from a larger macro trend, or secular shift, as the large global market in which it operates continues to grow, and, in addition, migrate online from traditional offline sources.

In addition, we estimate this segment's revenue growth was negatively impacted by foreign currency fluctuations of approximately 16% during the year ended December 31, 2022, when compared to the same period in 2021.

Adjusted EBITDA loss in our Viator segment decreased by $20 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to an increase in revenue as noted above.

This was largely offset by an increase in selling and marketing expenses related to SEM, other online paid traffic acquisition costs, and other marketing costs in response to increased consumer demand for experiences as part of the consumer travel demand recovery and to grow market share, and, to a lesser extent, an increase in direct costs from credit card payments and other revenue-related transaction costs in direct correlation with the increase in revenue, as well as increased personnel and overhead costs to support business growth during the travel demand recovery.

TheFork Segment

TheFork segment revenue increased by $41 million during the year ended December 31, 2022 when compared to the same period in 2021, driven by consumer travel demand recovery and various government restrictions on restaurants being lifted in Europe, combined with the travel industry recovery during the same time period, despite the impact of foreign currency fluctuations, which we estimate negatively impacted this segment's revenue growth during the year ended December 31, 2022 in the amount of approximately 19%, when compared to the same period in 2021.

Adjusted EBITDA loss in TheFork segment decreased by $7 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to an increase in revenue as noted above, and to a lesser extent, incremental non-income tax related government assistance benefits related to COVID-19 relief of $8 million.

This was largely offset by an increase in selling and marketing expenses related to online paid traffic acquisition costs and television advertising costs, in response to consumer travel demand recovery as government restrictions on restaurants were lifted and the travel industry recovered and, to a lesser extent, an increase in personnel and overhead costs to support business growth during the travel demand recovery.

Consolidated Expenses

Cost of Revenue

Cost of revenue consists of expenses that are directly related or closely correlated to revenue generation, including direct costs, such as credit card and other booking transaction payment fees, data center costs, costs associated with prepaid tour tickets, ad serving fees, flight search fees, and other transaction costs.

In addition, cost of revenue includes personnel and overhead expenses, including salaries, benefits, stock-based compensation and bonuses for certain customer support personnel who are directly involved in revenue generation.

Year ended December 31,

(in millions)

Personnel and overhead

Total cost of revenue

Cost of revenue increased $42 million during the year ended December 31, 2022 when compared to the same period in 2021, the majority of which is due to increased direct costs from credit card payment processing fees and other revenue-related transaction costs in our Viator segment in direct correlation with the increase in revenue, as Viator serves as the merchant of record for the majority of its experience booking transactions.

Selling and Marketing

Selling and marketing expenses consist of direct costs, including traffic generation costs from SEM and other online traffic acquisition costs, syndication costs and affiliate marketing commissions, social media costs, brand advertising (including television and other offline advertising), promotions and public relations.

In addition, our selling and marketing expenses consist of indirect costs such as personnel and overhead expenses, including salaries, commissions, benefits, stock-based compensation, and bonuses for sales, sales support, customer support and marketing employees.

Year ended December 31,

(in millions)

Personnel and overhead

Total selling and marketing

Direct selling and marketing costs increased $295 million during the year ended December 31, 2022 when compared to the same period in 2021.

In addition, direct selling and marketing costs as a percentage of total consolidated revenue was 39% during the year ended December 31, 2022, an increase from 33% when compared to the same period in 2021.

These increases were primarily due to an increase of approximately $277 million in SEM, other paid online traffic acquisition spend, and other marketing costs, the substantial majority of which was incurred within our Tripadvisor Core and Viator segments, in order to capture increased consumer travel demand primarily in hotel meta and for experiences, as travel activity restrictions eased and the travel industry recovered, while direct traffic in Tripadvisor Core, including SEO traffic, has been slower to recover, as well as, and to a lesser extent, increased television advertising costs of $12 million in TheFork segment in order to regain brand awareness levels as pandemic related restaurant restrictions subsided in Europe and the industry recovered.

Personnel and overhead costs increased $20 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to an increase in headcount and contingent staff to support business growth during the travel demand recovery.

Technology and Content

Technology and content expenses consist primarily of personnel and overhead expenses, including salaries and benefits, stock-based compensation expense, and bonuses for salaried employees and contractors engaged in the design, development, testing, content support, and maintenance of our platform.

Other costs include licensing, maintenance expense, computer supplies, telecom costs, content translation and localization costs, and consulting costs.

Year ended December 31,

(in millions)

Personnel and overhead

Total technology and content

Technology and content costs increased $10 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to increased personnel and overhead costs resulting from additional headcount and contingent staff to support business growth during the travel demand recovery, partially offset by a decrease in stock-based compensation expense of $10 million.

General and Administrative

General and administrative expenses consist primarily of personnel and related overhead costs, including personnel engaged in leadership, finance, legal, and human resources, as well as stock-based compensation expense for those same personnel.

General and administrative costs also include professional service fees and other fees including audit, legal, tax and accounting, and other operating costs including bad debt expense, non-income taxes, such as sales, use, digital services, and other non-income related taxes.

Year ended December 31,

(in millions)

Personnel and overhead

Professional service fees and other

Total general and administrative

General and administrative costs increased $5 million during the year ended December 31, 2022 when compared to the same period in 2021.

Personnel and overhead costs decreased $4 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to a decrease in stock-based compensation expense of $18 million, partially offset by additional headcount to support business growth during the travel demand recovery.

Professional service fees and other costs increased $9 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to an increase in digital service taxes in Europe of $8 million and an approximate $8 million loss incurred during the fourth quarter of 2022 as the result of a fraud scheme resulting in payments to an external party, as discussed above, partially offset by an increase in non-income tax related government assistance benefits related to COVID-19 relief of $9 million during the year ended December 31, 2022.

Depreciation and amortization

Depreciation expense consists of depreciation on computer equipment, leasehold improvements, furniture, office equipment and other assets, and amortization of capitalized website development costs and right-of-use (“ROU”) assets related to our finance lease.

Amortization consists of the amortization of definite-lived intangibles purchased in business acquisitions.

Year ended December 31,

(in millions)

Amortization of intangible assets

Total depreciation and amortization

Depreciation and amortization decreased $14 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to the completion of amortization related to certain intangible assets from business acquisitions and capitalized website development costs in previous years.

Interest Expense

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

Year ended December 31,

(in millions)

Interest expense

Interest expense did not change materially during the year ended December 31, 2022 when compared to the same period in 2021.

The majority of interest expense reported during the years ended December 31, 2022 and 2021 were as a result of the 2025 Senior Notes.

Refer to “Note 9:

Debt ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information.

Interest Income

Interest income primarily consists of interest earned from bank deposits available on demand, term deposits, money market funds, and marketable securities, including amortization of discounts and premiums on our marketable securities.

Year ended December 31,

(in millions)

Interest income

Interest income increased $14 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to an increase in the average amount of cash invested and increased interest rates received on bank deposits during 2022.

Other Income (Expense), Net

Other income (expense), net generally consists of net foreign exchange gains and losses, forward contract gains and losses, earnings/(losses) from equity method investments, gain/(loss) and impairments on non-marketable investments, gain/(loss) on sale/disposal of businesses, and other non-operating income (expenses).

Year ended December 31,

(in millions)

Other income (expense), net

Other expense, net decreased $5 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to a $5 million allowance for credit losses recorded on our long-term note receivable during 2021, which did not reoccur in 2022.

Refer to “Note 17:

Other Income (Expense), Net ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information.

(Provision) Benefit for Income Taxes

Year ended December 31,

(in millions)

(Provision) benefit for income taxes

Effective tax rate

We recorded a total income tax provision of $47 million for the year ended December 31, 2022.

The change in our income taxes and our effective tax rate during the year ended December 31, 2022, when compared to the same period in 2021, was primarily due to an increase in pretax income recognized during the year ended December 31, 2022.

Refer to “Note 11:

Income Taxes ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information.

Net income (loss)

Year ended December 31,

(in millions)

Net income (loss)

Net income (loss) margin

Net income (loss) improved $168 million during the year ended December 31, 2022 when compared to the same period in 2021, primarily due to an increase in revenue, as described in more detail above under “

Revenue and Segment Information ”, largely offset by an increase in selling and marketing expenses in response to increasing consumer travel demand as travel activity restrictions eased and the travel industry recovered, and to a lesser extent, an increase in personnel and overhead costs to support business growth during the consumer travel demand recovery and increased direct costs from credit card payment fees and other revenue-related transaction costs in direct correlation with the increase in revenue during the year ended December 31, 2022, all of which is described in more detail above under “

Consolidated Expenses.

Adjusted EBITDA

To provide investors with additional information regarding our financial results, we also disclose consolidated Adjusted EBITDA, which is a non-GAAP financial measure.

A “non-GAAP financial measure”

refers to a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in such company’s financial statements.

Adjusted EBITDA is also our segment profit measure and a key measure used by our management and board of directors to understand and evaluate the financial performance of our business and on which internal budgets and forecasts are based and approved.

In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons and better enables management and investors to compare financial results between periods as these costs may vary independent of ongoing core business performance.

Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

We define Adjusted EBITDA as net income (loss) plus:

(1) (provision) benefit for income taxes;

(2) other income (expense), net;

(3) depreciation and amortization;

(4) stock-based compensation and other stock-settled obligations;

(5) goodwill, long-lived asset, and intangible asset impairments;

(6) legal reserves and settlements;

(7) restructuring and other related reorganization costs;

and (8) other non-recurring expenses and income.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results reported in accordance with GAAP.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net income (loss) and our other GAAP results.

Some of these limitations are:

Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

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;

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:

Year ended December 31,

(in millions)

Net income (loss)

Provision (benefit) for income taxes

Other expense (income), net

Restructuring and other related reorganization costs

Impairment of goodwill

Legal reserves and settlements

Non-recurring expenses (income) (1)

Stock-based compensation

Depreciation and amortization

Adjusted EBITDA

(1) The Company incurred a loss of approximately $8 million during the fourth quarter of 2022, as the result of a targeted payment fraud scheme by an external party, as discussed above.

The Company considers such costs to be non-recurring in nature.

To the extent the Company recovers any losses in future periods related to this incident, the Company plans to reduce Adjusted EBITDA by the recovery amount in that same period.

Liquidity and Capital Resources

For a discussion of our liquidity and capital resources as of and our cash flow activities for the fiscal year ended December 31, 2021, see Part II, Item 7.

Our principal source of liquidity is cash flow generated from operations and our existing cash and cash equivalents balance.

Our liquidity needs can also be met through drawdowns under the Credit Facility.

As of December 31, 2022 and 2021, we had $1.0 billion and $723 million, respectively, of cash and cash equivalents, and $496 million of available borrowing capacity under our Credit Facility as of December 31, 2022.

As of December 31, 2022, approximately $157 million of our cash and cash equivalents were held by our international subsidiaries outside of the U.S., of which approximately 40% was held in the U.K.

As of December 31, 2022, the significant majority of our cash was denominated in U.S.

As of December 31, 2022, we had $445 million of cumulative undistributed earnings in foreign subsidiaries which were no longer considered to be indefinitely reinvested.

As of December 31, 2022, we maintained a deferred income tax liability on our consolidated balance sheet, which was not material, for the U.S.

federal and state income tax and foreign withholding tax liabilities on the cumulative undistributed foreign earnings that we no longer consider indefinitely reinvested.

Refer to “Note 11:

Income Taxes ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information.

As of December 31, 2022, we are party to the Credit Facility, which, among other things, provides for a $500 million revolving credit facility with a maturity date of May 12, 2024.

The Company may borrow from the Credit Facility in U.S.

dollars and Euros.

The Credit Facility requires us to maintain a maximum leverage ratio and contains certain customary affirmative covenants and events of default, including a change of control.

We amended the Credit Facility in May 2020 and December 2020 to, among other things, suspend the leverage ratio covenant for quarterly testing of compliance beginning in the second quarter of 2020, replacing it with a minimum liquidity covenant through June 30, 2021 (requiring the Company to maintain $150 million of unrestricted cash, cash equivalent and short-term investments less deferred merchant payables plus available revolver capacity), until the earlier of (a) the first day after June 30, 2021 through maturity on which borrowings and other revolving credit utilizations under the revolving commitments exceed $200 million, and (b) the election of the Company, at which time the leverage ratio covenant (the “Leverage Covenant Holiday”) will be reinstated.

The Company remained in the Leverage Covenant Holiday as of December 31, 2022.

Based on the Company’s existing leverage ratio, any outstanding or future borrowings under the Credit Facility generally bear interest, at the Company’s option, at a rate per annum equal to either (i) the Eurocurrency Borrowing rate, or the adjusted LIBO rate for the interest period in effect for such borrowing;

plus an applicable margin ranging from 1.25% to 2.00% with a London Inter-Bank Offered Rate (“LIBO rate”) floor of 1.00% per annum;

or (ii) the Alternate Base Rate Borrowing, which is the greatest of (a) the Prime Rate in effect on such day, (b) the New York Fed Bank Rate in effect on such day plus 1/2 of 1.00% per annum, and (c) the Adjusted LIBO Rate (or LIBO rate multiplied by the Statutory Reserve Rate) for an interest period of one month plus 1.00%;

in addition to an applicable margin ranging from 0.25% to 1.00%.

In addition, based on the Company’s existing leverage ratio, we are required to pay a quarterly commitment fee, at an applicable rate ranging from 0.15% to 0.30% as of December 31, 2022, on the daily unused portion of the Credit Facility for each fiscal quarter during the Leverage Covenant Holiday and in connection with the issuance of letters of credit.

The Credit Facility includes restrictions on the Company’s ability to make certain payments and distributions, including share repurchases and dividends.

As of December 31, 2022 and 2021, we had no outstanding borrowings and were in compliance with our covenant requirements in effect under the Credit Facility.

While there can be no assurance that we will be able to meet the leverage ratio covenant after the Leverage Covenant Holiday ceases, based on our current projections, we do not believe there is a material risk we will not remain in compliance throughout the next twelve months.

As of December 31, 2022, the Company had $845 million in long-term debt, as a result of the issuance of our 2025 Senior Notes in July 2020 and 2026 Senior Notes in March 2021, as discussed below.

In July 2020, the Company completed the sale of $500 million of our 2025 Senior Notes.

The 2025 Senior Notes provide, among other things, that interest, at an interest rate of 7.0% per annum, is payable on January 15 and July 15 of each year, which began on January 15, 2021, until their maturity on July 15, 2025.

The 2025 Senior Notes are senior unsecured obligations of the Company and are guaranteed by certain of the Company’s domestic subsidiaries.

In March 2021, the Company completed the sale of $345 million of our 2026 Senior Notes.

The 2026 Senior Notes provide, among other things, that interest, at an interest rate of 0.25% per annum, is payable on April 1 and October 1 of each year, which began on October 1, 2021, until their maturity on April 1, 2026.

Concurrently, the Company used a portion of the proceeds from the 2026 Senior Notes to enter into privately negotiated capped call transactions with certain of the initial purchasers of the 2026 Senior Notes and/or their respective affiliates and/or other financial institutions at a cost of approximately $35 million.

The Company intends to use the remainder of the proceeds from this offering for general corporate purposes, which may include repayment of debt, including the

partial redemption and/or purchase of the 2025 Senior Notes prior to maturity.

The 2026 Senior Notes are senior unsecured obligations of the Company and are guaranteed by certain of the Company’s domestic subsidiaries.

The 2025 Senior Notes and 2026 Senior Notes are not registered securities and there are currently no plans to register these notes as securities in the future.

We may from time to time repurchase our outstanding 2025 Senior Notes or 2026 Senior Notes through tender offers, open market purchases, privately negotiated transactions or otherwise.

Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

For further information on the Credit Facility, 2025 Senior Notes, and 2026 Senior Notes, refer to “Note 9:

Debt ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

Significant uses of capital and other liquidity matters

During the year ended December 31, 2020, we repurchased 4,707,450 shares of the Company’s outstanding common stock at an aggregate cost of $115 million, under our share repurchase program.

The Company did not repurchase any shares of outstanding common stock under the share repurchase program during 2022 or 2021 and had $75 million remaining available to repurchase shares of our common stock as of December 31, 2022.

The terms of our Credit Agreement were amended to limit the Company from share repurchases during the Leverage Covenant Holiday and the terms of the 2025 Indenture related to the 2025 Senior Notes also impose certain limitations and restrictions on share repurchases.

Our business typically experiences seasonal fluctuations that affect the timing of our annual cash flows during the year related to working capital.

From our experience bookings, we receive cash from travelers at the time of booking or prior to the occurrence of an experience, and we record these amounts, net of commissions, on our consolidated balance sheet as deferred merchant payables.

We pay the operator, or the experience supplier, after the travelers’

Therefore, we generally receive cash from the traveler prior to paying the operator and this operating cycle represents a source or use of cash to us.

During the first half of the year, experiences bookings typically exceed the amount of completed experiences, resulting in higher cash flow related to working capital, while during the second half of the year, particularly in the third quarter, this pattern reverses and cash flows from these transactions are typically negative.

Certain factors may impact our typical seasonal fluctuations, which may include any significant shifts in our business mix or adverse economic conditions that could result in future seasonal patterns that are different from historical trends.

For example, the negative impact to our business from COVID-19 materially affected our historical trends at varying levels during the years ended December 31, 2021 and 2020, while these trends significantly improved during the year ended December 31, 2022, resulting in increased revenues, and working capital and operating cash flow more akin to typical historical trends.

In addition, new or different payment options offered to our customers could impact the timing of cash flows.

For example, our “Reserve Now, Pay Later”

payment option available in our Viator segment, which allows travelers the option to reserve certain experiences and defer payment until a date no later than two days before the experience date, which although not used in a majority of bookings to date, may continue to increase, and affect the timing of our future cash flows and working capital.

As discussed in “Note 11:

Income Taxes ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K, we have received Notices of Proposed Adjustments issued by the IRS for tax years 2009 through 2011, and 2014 through 2016, as of December 31, 2022.

The statute of limitation of assessment for all years subject to the Notices of Proposed Adjustment remain open.

These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries and would result in an increase to our worldwide income tax expense, for the open tax years, in an estimated range of $85 million to $95 million, exclusive of interest expense, at the close of the audit if the IRS prevails.

In January 2023, we received a final notice regarding a MAP settlement for the 2009 through 2011 tax years, which we accepted in February 2023.

Accepting this MAP settlement will result in an estimated net cash outflow of $70 million to $80 million, inclusive of related interest expense, expected during 2023.

In the first quarter of 2023, we will record additional tax expense as a discrete item, inclusive of interest, in an estimated range of $25 million to $35 million specifically related to this settlement.

This MAP settlement supersedes the Notices of Proposed Adjustment for 2009 through 2011 from the IRS, described above.

We will review the impact of the acceptance of this settlement position to our transfer pricing income tax

reserves for the subsequent tax years during the first quarter of 2023.

Based on this new information received subsequent to year end, adjustments may occur, which could be material.

In addition, we received from HMRC in the U.K.

an issue closure notice relating to adjustments for 2012 through 2016 tax years, as of December 31, 2022.

transition tax adjustments, at the close of the audit if HMRC prevails.

We disagree with the proposed adjustments and we intend to defend our positions through applicable administrative and, if necessary, judicial remedies.

Although the ultimate timing for resolution of certain of these income tax matters is uncertain, any future payments would negatively and materially impact our operating cash flows.

The CARES Act, enacted in March 2020, made tax law changes to provide financial relief to companies as a result of the impact to businesses related to COVID-19.

Key income tax provisions of the CARES Act include changes in NOL carryback and carryforward rules, increase of the net interest expense deduction limit, and immediate write-off of qualified improvement property.

The CARES Act allowed the Company to carry back U.S.

federal NOLs incurred in 2020, generating an expected U.S.

federal tax benefit of $76 million, of which $64 million was refunded during the year ended December 31, 2022.

The remaining refund of $12 million is included in current income taxes payable within accrued expenses and other current liabilities on our consolidated balance sheet as of December 31, 2022 and is expected to be received during the year ended December 31, 2023.

In addition, $25 million of this refund received during the year ended December 31, 2022, was recorded to long-term taxes payable within other long-term liabilities on our consolidated balance sheet as of December 31, 2022, which reflects future transition tax payments expected to be made by the Company related to the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”).

We believe that our available cash and cash equivalents will be sufficient to fund our foreseeable working capital requirements, capital expenditures, existing business growth initiatives, debt and interest obligations, lease commitments, and other financial commitments through at least the next twelve months.

Our future capital requirements may also include capital needs for acquisitions and/or other expenditures in support of our business strategy, which may potentially reduce our cash balance and/or require us to borrow under the Credit Facility or to seek other financing alternatives.

Our cash flows from operating, investing and financing activities, as reflected in our consolidated statements of cash flows, are summarized in the following table:

Year ended December 31,

(in millions)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

During the year ended December 31, 2022, our primary source of cash was from operations, while our primary use of cash was from financing activities (including payment of withholding taxes on net share settlements of equity awards of $20 million) and investing activities (including capital expenditures of $56 million).

This use of cash was funded with cash and cash equivalents, and operating cash flows.

Net cash provided by operating activities for the year ended December 31, 2022, increased by $292 million when compared to the same period in 2021, primarily due to a decrease in net losses of $168 million and an increase in working capital of $154 million.

The increase in working capital was driven primarily by a $64 million U.S.

federal tax refund related to the CARES Act, an increase of $42 million related to the timing of vendor payments due to increased selling and marketing costs, and to a lesser extent, an increase of $18 million in deferred merchant payables reflecting the timing of when cash was received from travelers, principally due to an increase in experiences bookings, net of cancellations, which exceeded our payments to experience operators.

These increases

were partially offset by the increase in accounts receivable related to increased billings, reflective of the increasing consumer demand for travel activities during the year, as well as, and to a lesser extent, a decrease in non-cash items of $30 million which was primarily due to a decrease in stock-based compensation expense and depreciation and amortization, partially offset by a decrease in deferred income tax benefits.

Net cash used in investing activities for the year ended December 31, 2022 decreased by $2 million when compared to the same period in 2021, as capital expenditures by the Company were materially consistent in both fiscal years.

Net cash provided by financing activities for the year ended December 31, 2022 decreased by $290 million when compared to the same period in 2021, primarily due to proceeds received from the issuance of our 2026 Senior Notes of $340 million, net of financing costs, partially offset by payments of $35 million for the Capped Calls in connection with our 2026 Senior Notes during the first quarter of 2021, both of which did not reoccur during the year ended December 31, 2022, and to a lesser extent, cash received for stock option exercises of $8 million during the year ended December 31, 2021, partially offset by a decrease in payment of withholding taxes on net share settlements of equity awards of $24 million during the year ended December 31, 2022 when compared to the same period in 2021.

The following table summarizes our current and long-term material cash requirements, both accrued and off-balance sheet, as of December 31, 2022:

(in millions)

2025 Senior Notes (1)

Expected interest payments on 2025 Senior Notes (2)

2026 Senior Notes (3)

Expected interest payments on 2026 Senior Notes (4)

Finance lease obligations (5)

Operating lease obligations (6)

Expected commitment fee payments on Credit Facility (7)

Purchase obligations and other (8)

Total (9)(10)

(1) Represents outstanding principal on our 2025 Senior Notes due July 2025 and assumes that our existing debt is repaid at maturity.

(2) Expected interest payments on our 2025 Senior Notes are based on a fixed interest rate of 7.0%, as of December 31, 2022 and assumes that our existing debt is repaid at maturity.

(3) Represents outstanding principal on our 2026 Senior Notes due April 2026 and assumes that our existing debt is repaid at maturity.

(4) Expected interest payments on our 2026 Senior Notes are based on a fixed interest rate of 0.25%, as of December 31, 2022 and assumes that our existing debt is repaid at maturity.

(5) Estimated future lease payments for our Headquarters Lease in Needham, Massachusetts.

These amounts exclude expected rental income under non-cancelable subleases.

(6) Estimated future lease payments for our operating leases, primarily for office space, with non-cancelable lease terms.

These amounts exclude expected rental income under non-cancelable subleases.

(7) Expected commitment fee payments are based on the daily unused portion of the Credit Facility, issued letters of credit, and the effective commitment fee rate as of December 31, 2022;

however, these variables could change significantly in the future.

(8) Estimated purchase obligations that are fixed and determinable, primarily related to telecommunication and licensing contracts, with various expiration dates through approximately June 2029.

These contracts have non-cancelable terms or are cancelable only upon payment of significant penalty.

Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

(9) Excluded from the table was $204 million of unrecognized tax benefits, including interest, which is included in other long-term liabilities on our consolidated balance sheet as of December 31, 2022, for which we cannot make a reasonably reliable estimate of the amount and period of payment.

(10) Excluded from the table was $4 million of undrawn standby letters of credit, primarily as security deposits for certain property leases as of December 31, 2022.

As of December 31, 2022, other than the items discussed above, we did not have any off-balance sheet arrangements, that have, or are reasonably likely to have, a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Office Lease Commitments

As of December 31, 2022, we leased approximately 280,000 square feet of office space for our corporate headquarters in Needham, Massachusetts.

Our Headquarters Lease, has an expiration date of December 2030, with an option to extend the lease term for two consecutive terms of five years each.

We account for our Headquarters Lease as a finance lease as of December 31, 2022.

In addition to our Headquarters Lease, we have contractual obligations in the form of operating leases for office space, in which we lease an aggregate of approximately 400,000 square feet, at approximately 30 other locations across North America, Europe, Asia Pacific and South America, in cities such as New York, London, Sydney, Barcelona, Buenos Aires, and Paris, primarily used for sales offices, subsidiary headquarters, and international management teams, pursuant to leases with various expiration dates, with the latest expiring in July 2027.

Contingencies

In the ordinary course of business, we are party to legal, regulatory and administrative matters, including threats thereof, arising out of or in connection with our operations.

These matters may involve claims involving patent and other intellectual property rights (including privacy, alleged infringement of third-party intellectual property rights), tax matters (including value-added, excise, transient occupancy and accommodation taxes), regulatory compliance (including competition, consumer matters and data privacy), defamation and reputational claims.

Periodically, we review the status of all significant outstanding matters to assess any potential financial exposure.

When (i) it is probable that an asset has been impaired or a liability has been incurred;

and (ii) the amount of the loss can be reasonably estimated and is material, we record the estimated loss in our consolidated statements of operations.

We provide disclosures in the notes to the consolidated financial statements for loss contingencies that do not meet both of these conditions if there is a reasonable possibility that a loss may have been incurred that would be material to the consolidated financial statements.

We base accruals on the best information available at the time which can be highly subjective.

Although occasional adverse decisions or settlements may occur, we do not believe that the final disposition of any of these matters will have a material adverse effect on our business.

However, the final outcome of these matters could vary significantly from our estimates.

Finally, there may be claims or actions pending or threatened against us of which we are currently not aware and the ultimate disposition of which could have a material adverse effect on us.

We are also under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax and non-income tax matters.

We have reserved for potential adjustments to our provision for income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities.

Although we believe our tax estimates are reasonable, the final determination of audits could be materially different from our historical income tax provisions and accruals.

The results of an audit could have a material effect on our financial position, results of operations, or cash flows in the period for which that determination is made.

By virtue of consolidated income tax returns previously filed with Expedia, we are currently under an IRS audit for the 2009, 2010 and short-period 2011 tax years.

We are separately under examination by the IRS for the 2014 through 2016, and 2018 tax years, and have various ongoing audits for foreign and state income tax returns.

These audits include questioning the timing and amount of income and deductions and the allocation of income among various tax jurisdictions.

These examinations may lead to proposed or ordinary course adjustments to our taxes.

We are no longer subject to tax examinations by tax authorities for years prior to 2009.

As of December 31, 2022, no material assessments have resulted, except as noted below regarding our 2009, 2010, and 2011 IRS audit with Expedia, our 2014 through 2016 standalone IRS audit, and our 2012 through 2016 HM Revenue & Customs (“HMRC”) audit.

In January 2017 and April 2019, as part of the IRS audit of Expedia, we received Notices of Proposed Adjustment from the IRS for the 2009, 2010, and 2011 tax years.

Subsequently, in August 2020, we received Notices of Proposed Adjustment from the IRS for the 2014, 2015, and 2016 tax years.

The statute of limitation of assessment for all years subject to the Notices of Proposed Adjustment outlined above remain open.

These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries and would result in an increase to our worldwide income tax expense, for the open tax years, in an estimated range of $85 million to $95 million at the close of the audit if the IRS prevails, which includes $20 million to $30 million related to the 2009 through 2011 pre Spin-Off tax years.

The estimated ranges take into consideration competent authority relief and transition tax regulations and is exclusive of deferred tax consequences and interest expense, which would be significant.

We disagree with the proposed adjustments, and we intend to defend our position through applicable administrative and, if necessary, judicial remedies.

Our policy is to review and update tax reserves as facts and circumstances change.

Based on our interpretation of the regulations and available case law, we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable.

In addition to the risk of additional tax for the open years outlined above, if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, we would be subject to significant additional tax liabilities.

We have previously requested competent authority assistance under the MAP for open tax years 2009 through 2011 and 2014 through 2016.

In January 2023, we received a final notice regarding a MAP settlement for the 2009 through 2011 tax years, which we accepted in February 2023.

This MAP settlement supersedes the Notices of Proposed Adjustment for 2009 through 2011 from the IRS, described above.

We will review the impact of the acceptance of this settlement position to our transfer pricing income tax reserves for the subsequent tax years during the first quarter of 2023.

Based on this new information received subsequent to year end, adjustments may occur, which could be material.

In January 2021, we received an issue closure notice relating to adjustments for 2012 through 2016 tax years from HMRC.

transition tax adjustments, at the close of the audit if HMRC prevails.

We disagree with the proposed adjustments and we intend to defend our position through applicable administrative and, if necessary, judicial remedies.

Our policy is to review and update tax reserves as facts and circumstances change.

Based on our interpretation of the regulations and available case law, we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable.

Over the last several years, the OECD has been working on a Base Erosion and Profit Shifting Project to address the tax challenges arising from digitalization.

The OECD/G20 Inclusive Framework has issued various guidelines, policy notes, and proposals that if adopted could result in an overhaul of the international taxation system under which our current tax obligations are determined.

In October 2021, more than 130 countries tentatively signed on to a framework, which calls for a minimum tax rate on corporations of 15% and a reallocation of profits from the largest and most profitable businesses to countries where they make sales.

The proposed framework, once enacted, envisages new international tax rules and the removal of all digital services taxes.

As this framework is subject to further negotiation and implementation by each member country, the timing and ultimate impact of any such changes on our tax obligations is uncertain.

As the OECD/G20 continues to drive toward a consensus framework, several countries which have previously enacted unilateral digital services tax initiatives, such as France, Italy, Spain, and the U.K., will continue to impose these revenue-based taxes until implementation of the consensus framework.

During the years ended December 31, 2022, 2021 and 2020, we recorded $9 million, $1 million and $2 million, respectively, of digital service tax to general and administrative expense on our consolidated statement of operations.

Due to the one-time transition tax on the deemed repatriation of undistributed foreign subsidiary earnings and profits in 2017, as a result of the 2017 Tax Act, the majority of previously unremitted earnings have been subjected to U.S.

federal income tax.

To the extent future distributions from these subsidiaries will be taxable, a deferred tax liability has been accrued which was not material as of December 31, 2022.

As of December 31, 2022, $445 million of our cumulative undistributed foreign earnings were no longer considered to be indefinitely reinvested.

Refer to “Note 11:

Income Taxes ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information on potential tax contingencies, including current audits by the IRS and various other domestic and foreign tax authorities, and other income tax and non-income tax matters.

Certain Relationships and Related Party Transactions

For information on our related party transactions, refer to “Note 18:

Related Party Transactions ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements and accompanying notes in accordance with GAAP.

Preparation of the consolidated financial statements and accompanying notes requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as revenue and expenses during the periods reported.

Management bases its estimates on historical experience, when applicable and other assumptions that it believes are reasonable under the circumstances.

Actual results may differ from estimates under different assumptions or conditions.

There are certain critical estimates that we believe require that management use significant judgment and estimates in applying those policies in the preparation of our consolidated financial statements.

We consider an accounting estimate to be critical if:

It requires us to make an assumption because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate;

Changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.

Refer to “Note 2:

Significant Accounting Policies ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for an overview of our significant accounting policies and any new accounting pronouncements that we have adopted or that we plan to adopt that have had or may have an impact on our financial statements.

A discussion of information about the nature and rationale for our critical accounting estimates is below:

We record income taxes under the asset and liability method.

Deferred tax assets and liabilities reflect our estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax purposes.

We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting.

Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted income tax rates expected to be in effect when we realize the underlying items of income and expense.

We consider all relevant factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income and the carryforward periods available to us for tax reporting purposes, as well as assessing available tax planning strategies.

We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is more likely than not to be realized.

As of December 31, 2022, we had a valuation allowance of approximately $114 million related to certain NOL carryforwards and other foreign deferred tax assets for which it is more likely than not, the tax benefit will not be realized.

We classify deferred tax assets and liabilities as noncurrent on our consolidated balance sheet.

Due to inherent complexities arising from the nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we make certain judgments and estimates.

Therefore, actual income taxes could materially vary from these estimates.

We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that we expect to take in a future tax return.

The determination for required liabilities is based upon an analysis of each

individual tax position, taking into consideration whether it is more likely than not that our tax position, based on technical merits, will be sustained upon examination.

For those positions for which we conclude it is more likely than not it will be sustained, we recognize the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the taxing authority.

The difference between the amount recognized and the total tax position is recorded as a liability.

The ultimate resolution of these tax positions may be greater or less than the liabilities recorded.

Refer to “Note 11:

Income Taxes ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K and “Contingencies”

above for further information, including certain uncertainties, estimates, and potential contingencies related to ongoing audits regarding income taxes.

Qua ntitative and Qualitative Disclosures About Market Risk

Market Risk Management

Market risk refers to the risk of loss arising from adverse changes in stock prices, interest rates and foreign currency exchange rates.

We are exposed to market risks primarily due to our international operations, our ongoing investment and financial activities, as well as changes in economic conditions in all significant markets in which we operate.

The risk of loss can be assessed from the perspective of adverse changes in our future earnings, cash flows, fair values of our assets, and financial condition.

Our exposure to market risk, at any point in time, may include risks related to any borrowings under the Credit Facility, or outstanding debt related to the 2025 Senior Notes and 2026 Senior Notes, derivative instruments, capped calls, cash and cash equivalents, short-term and long-term marketable securities, if any, accounts receivable, intercompany receivables/payables, accounts payable, deferred merchant payables and other balances and transactions denominated in foreign currencies.

We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage and attempt to mitigate our exposure to such risks.

For a discussion of market conditions and impacts on our financials resulting from the COVID-19 pandemic, refer to Part I, Item 1A, " Risk Factors ”, Part II, Item 7, " Management's Discussion and Analysis of Financial Condition and Results of Operations, ”

and “Note 1:

Organization and Business Description ”

in the notes to our consolidated financial statements in Item 8, in this Annual Report on Form 10-K.

Interest Rates

Our primary exposure to changes in interest rates relates primarily to our cash, cash equivalents, investment portfolio at any point in time, 2025 and 2026 Senior Notes, and borrowings, if any, under our existing Credit Facility.

Changes in interest rates affect the amount of interest earned on our cash, cash equivalents, and marketable securities, if any, and the fair value of those securities.

Our interest income and expense is most sensitive to fluctuations in U.S.

interest rates.

We generally invest our excess cash in bank deposits at major global banks, money market funds, and marketable securities.

Our investment policy and strategy are focused on preservation of capital and supporting our liquidity requirements.

We invest in highly-rated securities, and our investment policy limits the amount of credit exposure to any one issuer.

Our investment policy requires our investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss.

As of December 31, 2022 and 2021, respectively, we had no outstanding marketable securities in our investment portfolio, and no outstanding borrowings under our Credit Facility.

In July 2020, we issued 2025 Senior Notes with a principal balance of $500 million at a fixed rate of 7.0% and in March 2021, we issued 2026 Senior Notes with a principal balance of $345 million at a fixed rate of 0.25%.

As of December 31, 2022, the fair value of our 2025 Senior Notes and 2026 Senior Notes were approximately $498 million and $281 million, respectively, based on recently reported market transactions and prices for identical or similar financial instruments obtained from a third-party pricing source.

Since our 2025 Senior Notes and 2026 Senior Notes bear interest at a fixed rate, we are more sensitive to the capital market conditions of our shares than changes in interest rates.

The fair value of the 2025 Senior Notes and 2026 Senior Notes will likely change based on the capital market conditions.

Refer to “Note 4:

Financial Instruments and Fair Value Measurements ”

and “Note 9:

Debt ”

in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information on our cash and cash equivalents, investments and other financial instruments, 2026 Senior Notes, 2025 Senior Notes and our Credit Facility.

We currently do not hedge our interest rate risk;

however, we are continually evaluating the interest rate market, and if we become increasingly exposed to potentially volatile movements in interest rates, and if these movements are material, this could cause us to adjust our financing strategy.

We did not experience material changes in interest rate exposures or any material financial impact from adverse changes in interest rates for the years ended December 31, 2022, 2021 or 2020.

Foreign Currency Exchange Rates

We conduct business in certain international markets, largely in the Europe, including the U.K., and also in countries such as Singapore and Australia.

Because we operate in international markets, we have exposure to different economic climates, political arenas, tax systems and regulations that could affect foreign currency exchange rates.

Some of our subsidiaries maintain their accounting records in their respective local currencies other than the U.S.

Consequently, changes in foreign currency exchange rates may impact the translation of those subsidiary’s financial statements into U.S.

As a result, we face exposure to adverse movements in foreign currency exchange rates as the financial results of our non-U.S.

dollar operations are translated from local currency, or functional currency, into U.S.

dollars upon consolidation.

dollar weakens against the functional currency, the translation of these foreign currency denominated balances will result in increased net assets, revenue, operating expenses, operating income and net income upon consolidation.

Similarly, our net assets, revenue, operating expenses, operating income and net income will decrease upon consolidation if the U.S.

dollar strengthens against the functional currency.

The effect of foreign currency exchange on our business historically has varied from quarter to quarter and may continue to do so, potentially materially.

In order to provide a meaningful assessment of the foreign currency exchange rate risk associated with our consolidated financial statements, we performed a sensitivity analysis.

A hypothetical 10% decrease of the foreign currency exchange rates relative to the U.S.

dollar, or strengthening of the U.S.

dollar, would generate an estimated unrealized loss of approximately $29 million related to a decrease in our net assets as of December 31, 2022, which would initially be recorded to accumulated other comprehensive income (loss) on our consolidated balance sheet.

In addition, foreign currency exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in transactional gains and losses.

We recognize these transactional gains and losses (primarily Euro and British pound currency transactions) in our consolidated statement of operations and have recorded net foreign currency exchange losses of $9 million and $6 million for the years ended December 31, 2022 and 2021, respectively, and a net foreign currency exchange gain of $4 million for the year ended December 31, 2020, in “other income (expense), net”

on our consolidated statements of operations.

Future transactional gains and losses are inherently difficult to predict as they are reliant on how the multiple currencies in which we transact fluctuate in relation to the U.S.

dollar and other functional currencies, and the relative composition and denomination of monetary assets and liabilities each period.

We manage our exposure to foreign currency risk through internally established policies and procedures.

To the extent practicable, we minimize our foreign currency exposures by maintaining natural hedges between our current assets and current liabilities in similarly denominated foreign currencies, as well as, using derivative financial instruments.

We use foreign currency forward exchange contracts (“forward contracts”) to manage certain short-term foreign currency risk to try and reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies.

We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives.

Our objective is to hedge only those foreign currency exposures that can be confidently identified and quantified and that may result in significant impacts to our cash or the consolidated statement of operations.

Our policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures.

The forward contracts which we have entered into to date, have principally addressed foreign currency exchange fluctuation risk between the Euro and the U.S.

We account for these forward contacts, which have not been designated as hedges under GAAP to date, as either assets or liabilities and carry them at fair value.

We had outstanding forward contracts as of December 31, 2022 and 2021, with a total net notional value of $18 million and $9 million, respectively.

These forward contracts were not designated as hedges and had maturities of less than 90 days.

We recognize gains and losses from forward contracts in our consolidated statement of operations upon settlement or a change in fair value, as a result, we recorded net gains of $4 million, $2 million, and $1 million for the years ended December 31, 2022, 2021 and 2020, respectively, in other income (expense), net on our consolidated statements of operations.

Refer to “Note 4:

Financial Instruments and Fair Value Measurements ”

in the notes to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further detail on our derivative instruments.

We expect that we will continue to increase our operations internationally.

Our exposure to potentially volatile movements in foreign currency exchange rates will increase as we increase our operations in these international markets.

The economic impact to us of foreign currency exchange rate movements is linked to variability in real growth, inflation, interest rates, governmental actions, and other factors.

We continue to monitor the current economic environment, including the impact of a potential U.S.

recession and increased inflation globally, which has been heightened by the conflict between Russia and Ukraine.

These changes, if material, could cause us to adjust our foreign currency risk strategies.

Continued uncertainty regarding our international operations and U.K.

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.

Financial Statements and Supplementary Data

Index to Financial Statements and Supplementary Data:

Report of Independent Registered Public Accounting Firm (KPMG LLP, Boston, Massachusetts, Auditor Firm ID:

Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Changes in Stockholders’

Equity for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020

Notes to Consolidated Financial Statements

REP ORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Tripadvisor, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Tripadvisor, Inc.

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’

equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 17, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of Audit Evidence over Revenue

As discussed in Notes 2 and 3 to the consolidated financial statements, and disclosed in the consolidated statements of operations, the Company had $1,492 million in revenue, net of intersegment revenue of $93 million, for the year ended December 31, 2022, of which $966 million was Tripadvisor Core related, $493 million was Viator related and $126 million was TheFork related.

Each of these categories of revenue has

multiple revenue streams and the Company’s processes and information technology (IT) systems differ between each revenue stream.

We identified the evaluation of sufficiency of audit evidence over revenue as a critical audit matter.

This matter required especially subjective auditor judgment due to the number of revenue streams and the related IT applications utilized throughout the revenue recognition processes.

Subjective auditor judgment was required to evaluate that relevant revenue data was captured and aggregated throughout these various IT applications.

This matter also included determining the revenue streams over which procedures would be performed and evaluating the nature and extent of evidence obtained over each revenue stream, both of which included the involvement of IT professionals with specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter.

We applied auditor judgment to determine the nature and extent of procedures to be performed over revenue.

For each revenue stream where procedures were performed:

We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter.

This included controls related to accurate recording of amounts.

For certain revenue streams, we assessed the recorded revenue by selecting a sample of transactions and compared the amounts recognized for consistency with underlying documentation, including evidence of contracts with customers.

For certain revenue streams, we assessed the recorded revenue by comparing the total cash received during the year to the revenue recognized, including evaluating the relevance and reliability of the inputs to the assessment.

We involved IT professionals with specialized skills and knowledge, who assisted in:

Testing certain IT applications used by the Company in its revenue recognition processes.

Testing the transfer of relevant revenue data between certain systems used in the revenue recognition processes.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed.

We have served as the Company’s auditor since 2014.

Boston, Massachusetts

February 17, 2023

TRIPADVISOR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

Year ended December 31,

Revenue (Note 3)

Costs and expenses:

Cost of revenue (1) (exclusive of depreciation and amortization as shown separately below)

Selling and marketing (1)

Technology and content (1)

General and administrative (1)

Depreciation and amortization

Impairment of goodwill (Note 7)

Restructuring and other related reorganization costs (Note 1)

Total costs and expenses

Operating income (loss)

Other income (expense):

Interest expense

Interest income

Other income (expense), net (Note 17)

Total other income (expense), net

Income (loss) before income taxes

(Provision) benefit for income taxes (Note 11)

Net income (loss)

Earnings (loss) per share attributable to common stockholders (Note 16):

Numerator used to compute net income (loss) per share attributable to common stockholders (Note 16):

Weighted average common shares outstanding (Note 16):

(1) Includes stock-based compensation expense as follows (Note 14):

Cost of revenue

Selling and marketing

Technology and content

General and administrative

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

TRIPADVISOR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSI VE INCOME (LOSS)

(in millions)

Year ended December 31,

Net income (loss)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net of tax (1)

Reclassification adjustments included in net income (loss), net of tax

Total other comprehensive income (loss), net of tax

Comprehensive income (loss)

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

Refer to “Note 11:

Income Taxes ”

for further information.

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

TRIPADVISOR, INC.

CONSOLIDATED BALANCE SHEETS

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

Current assets:

Cash and cash equivalents (Note 4)

Accounts receivable and contract assets, net of allowance for credit losses

of $ 28 and $ 28 , respectively (Note 2, Note 3)

Income taxes receivable (Note 11)

Prepaid expenses and other current assets

Total current assets

Property and equipment, net (Note 5, Note 6)

Operating lease right-of-use assets (Note 6)

Intangible assets, net (Note 7)

Goodwill (Note 7)

Non-marketable investments (Note 4)

Deferred income taxes, net (Note 11)

Other long-term assets, net of allowance for credit losses of $ 10 and $ 10 , respectively

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

Deferred merchant payables (Note 2)

Deferred revenue (Note 3)

Accrued expenses and other current liabilities (Note 8)

Total current liabilities

Long-term debt (Note 9)

Finance lease obligation, net of current portion (Note 6)

Operating lease liabilities, net of current portion (Note 6)

Deferred income taxes, net (Note 11)

Other long-term liabilities (Note 10)

Total Liabilities

Commitments and contingencies (Note 12)

Stockholders’

Preferred stock, $ 0.001 par value

Authorized shares:

Shares issued and outstanding:

0 and 0 , respectively

Common stock, $ 0.001 par value

Authorized shares:

1,600,000,000

Shares issued:

146,891,538 and 144,656,649 , respectively

Shares outstanding:

128,046,924 and 125,812,035 , respectively

Class B common stock, $ 0.001 par value

Authorized shares:

Shares issued and outstanding:

12,799,999 and 12,799,999 , respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income (loss)

Treasury stock-common stock, at cost, 18,844,614 and 18,844,614 shares, respectively

Total Stockholders’

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

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

TRIPADVISOR, INC.

CONSOLIDATED STATEMENTS OF CHA NGES IN STOCKHOLDERS’

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

comprehensive

Treasury stock

income (loss)

Balance as of December 31, 2019

Net income (loss)

Cumulative effect adjustment from adoption of new accounting guidance

Other comprehensive income (loss), net of tax

Issuance of common stock related to exercise of options and vesting of RSUs

Repurchase of common stock (Note 15)

Withholding taxes on net share settlements of equity awards

Stock-based compensation (Note 14)

Balance as of December 31, 2020

Net income (loss)

Other comprehensive income (loss), net of tax

Issuance of common stock related to exercise of options and vesting of RSUs

Purchase of capped calls, net of tax of $ 9 million (Note 9)

Withholding taxes on net share settlements of equity awards

Stock-based compensation (Note 14)

Balance as of December 31, 2021

Net income (loss)

Other comprehensive income (loss), net of tax

Issuance of common stock related to exercise of options and vesting of RSUs

Withholding taxes on net share settlements of equity awards

Stock-based compensation (Note 14)

Balance as of December 31, 2022

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

TRIPADVISOR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Year ended December 31,

Operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

Stock-based compensation expense (Note 14)

Deferred income tax expense (benefit) (Note 11)

Provision for expected credit losses (Note 2)

Impairment of goodwill (Note 7)

Loss on sale/disposal of business (Note 17)

Changes in operating assets and liabilities, net of effects from acquisitions and other

Accounts receivable and contract assets, prepaid expenses and other assets

Accounts payable, accrued expenses and other liabilities

Deferred merchant payables

Income tax receivables/payables, net

Deferred revenue

Net cash provided by (used in) operating activities

Investing activities:

Capital expenditures, including capitalized website development

Acquisitions and other investments, net of cash acquired

Other investing activities, net

Net cash provided by (used in) investing activities

Financing activities:

Repurchase of common stock (Note 15)

Proceeds from issuance of 2026 Senior Notes, net of financing costs (Note 9)

Purchase of capped calls in connection with 2026 Senior Notes (Note 9)

Proceeds from issuance of 2025 Senior Notes (Note 9)

Payment of financing costs for the issuance of 2025 Senior Notes (Note 9)

Proceeds from Credit Facility (Note 9)

Payment of financing costs related to Credit Facility (Note 9)

Payments to Credit Facility (Note 9)

Proceeds from exercise of stock options (Note 14)

Payment of withholding taxes on net share settlements of equity awards

Payments of finance lease obligation and other financing activities, net (Note 6)

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplemental disclosure of cash flow information:

Cash paid (received) during the period for income taxes, net of refunds

Cash paid during the period for interest

Supplemental disclosure of non-cash investing and financing activities:

Stock-based compensation capitalized website

development costs (Note 14)

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

TRIPADVISOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND BUSINESS DESCRIPTION

We refer to Tripadvisor, Inc.

and our wholly-owned subsidiaries as “Tripadvisor,”

“Tripadvisor group,”

“the Company,”

“us,”

“we”

and “our”

in these notes to the consolidated financial statements.

On December 20, 2011, Expedia Group, Inc.

(“Expedia”) completed a spin-off of Tripadvisor into a separate publicly traded Delaware corporation.

We refer to this transaction as the “Spin-Off.”

Tripadvisor’s common stock began trading on The Nasdaq as an independent public company on December 21, 2011, under the trading symbol “TRIP.”

On December 11, 2012, Liberty Interactive Corporation, or Liberty, purchased an aggregate of approximately 4.8 million shares of common stock of Tripadvisor from Barry Diller, our former Chairman of the Board of Directors and Senior Executive, and certain of his affiliates.

As a result, Liberty beneficially owned approximately 18.2 million shares of our common stock and 12.8 million shares of our Class B common stock.

On August 27, 2014, the entire beneficial ownership of our common stock and Class B common stock held by Liberty was acquired by Liberty TripAdvisor Holdings, Inc., or LTRIP.

Simultaneously, Liberty, LTRIP’s former parent company, distributed, by means of a dividend, to the holders of its Liberty Ventures common stock, Liberty’s entire equity interest in LTRIP.

We refer to this transaction as the “Liberty Spin-Off”.

As a result of the Liberty Spin-Off, effective August 27, 2014, LTRIP became a separate, publicly traded company holding 100 % of Liberty’s interest in Tripadvisor.

As a result of these transactions, and as of December 31, 2022, LTRIP beneficially owned approximately 16.4 million shares of our common stock and 12.8 million shares of our Class B common stock, which constitute nearly 13 % of the outstanding shares of common stock and 100 % of the outstanding shares of Class B common stock.

Assuming the conversion of all of LTRIP’s shares of Class B common stock into common stock, LTRIP would beneficially own nearly 21 % of the outstanding common stock.

Because each share of Class B common stock is entitled to ten votes per share and each share of common stock is entitled to one vote per share , LTRIP may be deemed to beneficially own equity securities representing approximately 56 % of our voting power.

Description of Business

The Tripadvisor group operates as a family of brands with a purpose of connecting people to experiences worth sharing.

Our vision is to be the world’s most trusted source for travel and experiences.

The Company operates across three reportable segments:

Tripadvisor Core, Viator, and TheFork.

Tripadvisor Core’s purpose is to empower everyone to be a better traveler by serving as the world’s most trusted and essential travel guidance platform.

The Tripadvisor brand offers travelers and experience seekers an online global platform for travelers to discover, generate, and share authentic user-generated content (“UGC”) in the form of ratings and reviews for destinations, points-of-interest (“POIs”), experiences, accommodations, restaurants, and cruises in over 40 countries and over 20 languages across the world.

As of December 31, 2022, Tripadvisor offered more than 1 billion user-generated ratings and reviews on nearly 8 million experiences, accommodations, restaurants, airlines, and cruises.

Viator enables travelers to discover and book iconic, unique and memorable experiences from experience operators around the globe.

Our online marketplace is comprehensive, connecting travelers to bookable tours, activities and attractions—consisting of over 300,000 experiences from more than 50,000 operators as of December 31, 2022.

TheFork provides an online marketplace that enables diners to discover and book online reservations at more than 55,000 restaurants in 12 countries, as of December 31, 2022, across the UK, western and central Europe, and Australia.

Risks and Uncertainties

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China, and on March 11, 2020 was declared a global pandemic.

COVID-19 caused material and adverse declines in consumer demand within the travel, hospitality, restaurant, and leisure industry.

The pandemic’s proliferation, concurrent with travel bans, varying levels of governmental restrictions and mandates globally to limit the spread of the virus, dampened consumer demand for our products and services, and impacted consumer sentiment and discretionary spending patterns.

Consequently, the COVID-19 pandemic adversely and materially affected our business, results of operations, liquidity and financial condition during the years ended December 31, 2021 and 2020.

In 2022, we generally experienced a travel demand recovery fueled by the continued easing of government restrictions globally and increased consumer travel demand.

During the year ended December 31, 2020, in response to the COVID-19 pandemic, we took several steps to further strengthen our financial position and balance sheet including but not limited to, restructuring activities, primarily by significantly reducing our ongoing operating expenses and headcount.

During the year ended December 31, 2020, the Company incurred total restructuring and other related reorganization costs of $ 41 million which consisted of employee severance and related benefits.

In addition, in order to maintain financial liquidity and flexibility during this time period, the Company (i) borrowed $ 700 million from our Credit Facility in the first quarter of 2020 (subsequently repaid during the third quarter of 2020);

(ii) amended our Credit Agreement, which included short-term financial covenant relief and the extension of the maturity date from May 12, 2022 to May 12, 2024 ;

and (iii) raised additional financing through the issuance of $ 500 million in Senior Notes by the Company in July 2020, all which are described in more detail in “Note 9:

Debt ”.

We may continue to be subject to risks and uncertainties related to the COVID-19 pandemic.

We believe the travel, leisure, hospitality, and restaurant industries, and our financial results, would be adversely and materially affected upon a resurgence of existing COVID-19 variants (e.g., Delta, Omicron, and BA.5) or if new variants emerge, which result in reinstated travel bans and/or other government restrictions and mandates, all of which would likely negatively impact consumer demand, sentiment and discretionary spending patterns.

Additionally, other distinct health-related events, political instability, geopolitical conflicts, acts of terrorism, fluctuations in currency values, changes in global economic conditions, including the impact of a potential U.S.

recession, and increased inflation, are examples of other events that could have a negative impact on the travel industry, and as a result, our financial results in the future.

Consumers' travel expenditures have historically followed a seasonal pattern.

Correspondingly, travel partner advertising investments, and therefore our revenue and operating profits, have also historically followed a seasonal pattern.

Our financial performance tends to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in consumer demand, including traveler accommodation stays, and travel experiences taken, compared to the first and fourth quarters, which represent seasonal low points.

In addition, during the first half of the year, experience bookings typically exceed the amount of completed experiences, resulting in higher cash flow related to working capital, while during the second half of the year, particularly in the third quarter, this pattern reverses and cash flows from these transactions are typically negative .

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include Tripadvisor, our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses.

All inter-company accounts and transactions have been eliminated in consolidation.

Additionally, certain prior period amounts may have been reclassified for comparability with the current period presentation, none of which were material.

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

We believe that the assumptions underlying our consolidated financial statements are reasonable.

However, these consolidated financial statements do not present our future financial position, or the results of our future operations and cash flows.

One of our subsidiaries that operates in China has variable interests in affiliated entities in China in order to comply with Chinese laws and regulations, which restrict foreign investment in internet content provision businesses.

Although we do not own the capital stock of these Chinese affiliates, we consolidate their results as we are the primary beneficiary of the cash losses or profits of these variable interest affiliates and have the power to direct the activity of these affiliates.

Our variable interest entities’

financial results were not material for all periods presented.

Investments in entities in which we do not have a controlling financial interest are accounted for under the equity method, the fair value option, as available-for-sale securities, or at cost adjusted for observable price changes and impairments, as appropriate.

Accounting Estimates

We use estimates and assumptions in the preparation of our consolidated financial statements in accordance with GAAP.

Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated financial statements.

These estimates and assumptions also affect the reported amount of net income or loss during any period.

Our actual financial results could differ significantly from these estimates.

The significant estimate underlying our consolidated financial statements is accounting for income taxes.

Refer to our accounting policy for income taxes disclosed below and "Note 11:

Income Taxes " for information regarding our significant income tax estimates.

Revenue Recognition

Refer to “Note 3:

Revenue Recognition ”

for a discussion about our revenue recognition policies and other financial disclosures.

Cost of Revenue

Selling and Marketing

Advertising costs

We incur advertising costs, consisting of online advertising expense, primarily SEM and other online traffic costs, and offline advertising costs, including television, to promote our brands.

We expense the costs associated with communicating the advertisements in the period in which the advertisement takes place.

We expense the

production costs associated with advertisements in the period in which the advertisement first takes place.

For the years ended December 31, 2022, 2021 and 2020, we recorded advertising expense of $ 572 million, $ 282 million, and $ 118 million, respectively, in selling and marketing expense on our consolidated statements of operations.

We include prepaid advertising expenses in prepaid expenses and other current assets on our consolidated balance sheet, which was not material as of December 31, 2022 and 2021.

Technology and Content

Other costs include licensing, maintenance expense, computer supplies, telecom costs, content translation and localization costs, and consulting costs.

General and Administrative

Stock-Based Compensation

Stock Options.

Our employee stock options generally consist of service based awards.

The exercise price is equal to the market price of the underlying shares of our common stock at the date of grant.

In this regard, when granting stock option awards, our practice is to determine the applicable grant date and to specify that the exercise price shall be the closing price of our common stock on the date of grant.

Our stock options generally have a term of ten years from the date of grant and typically vest equally over a four-year requisite service period.

We amortize the grant-date fair value of our stock option grants as stock-based compensation expense over the vesting term on a straight-line basis, with the amount of compensation expense recognized at any date at least equaling the portion of the grant-date fair value of the award that is vested at that date.

The estimated grant-date fair value of stock options is calculated using a Black-Scholes Merton option-pricing model (“Black-Scholes model”).

The Black-Scholes model incorporates assumptions to fair value stock-based awards, which includes the risk-free rate of return, expected volatility, expected term, and expected dividend yield.

Our risk-free interest rate is based on the yields currently available on zero-coupon U.S.

Treasury issues, in effect at the time of the grant, whose remaining maturity period most closely approximates the stock option’s expected term assumption.

Our expected volatility is calculated by equally weighting the historical volatility and implied volatility on our own common stock.

Historical volatility is determined using actual daily price observations of our common stock price over a period equivalent to or approximate to the expected term of our stock option grants to date.

Implied volatility represents the volatility calculated from the observed prices of our actively traded options on our common stock.

When measuring implied volatility for a specific employee stock option grant, we generally rely on traded contracts with six month maturities or more and exercise prices approximately equal to the exercise price of the specific option grant.

We estimate our expected term using historical exercise behavior and expected post-vest termination data.

Our expected dividend yield is zero as we have not historically paid regular cash dividends on our common stock and do not expect to pay regular cash dividends for the foreseeable future.

Restricted Stock Units.

Restricted stock units (“RSUs”) are stock awards that are granted to employees entitling the holder to shares of our common stock as the award vests.

RSUs are measured at fair value based on the quoted price of our common stock at the date of grant.

We amortize the fair value of RSUs as stock-based compensation expense over the vesting term, which is typically over a four-year requisite service period on a straight-line basis, with the amount of compensation expense recognized at any date at least equaling the portion of the grant-date fair value of the award that is vested at that date.

Performance-Based Awards.

Performance-based stock options and RSUs vest upon achievement of certain company-based performance conditions and a requisite service period.

On the date of grant, the fair value of a performance-based award is calculated using the same method as our service based stock options and RSUs described above.

We then assess whether it is probable that the individual performance targets would be achieved.

If assessed as probable, compensation expense will be recorded for these awards over the estimated performance period.

At each reporting period, we reassess the probability of achieving the performance targets and the performance period required to meet those targets.

The estimation of whether the performance targets will be achieved and the performance period required to achieve the targets requires judgment, and to the extent actual results or updated estimates differ from our current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised, or the change in estimate will be applied prospectively depending on whether the change affects the estimate of total compensation cost to be recognized or merely affects the period over which compensation cost is to be recognized.

The ultimate number of shares issued and the related compensation expense recognized will be based on a comparison of the final performance metrics to the specified targets.

Market-Based Awards .

We issue market-based performance RSUs, or MSUs, which vest upon achievement of specified levels of market conditions.

The fair value of our MSUs is estimated at the date of grant using a Monte-Carlo simulation model.

The probabilities of the actual number of market-based performance units expected to vest and resultant actual number of shares of common stock expected to be awarded are reflected in the grant date fair values;

therefore, the compensation expense for these awards will be recognized assuming the requisite service period is rendered and are not adjusted based on the actual number of awards that ultimately vest.

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive these awards, and subsequent events are not indicative of the reasonableness of our original estimates of fair value.

The Company accounts for forfeitures in the period in which they occur, rather than estimating expected forfeitures.

We record income taxes under the asset and liability method.

Deferred tax assets and liabilities reflect our estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax purposes.

We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting.

We consider all relevant factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income, and the carryforward periods available to us for tax reporting purposes, as well as assessing available tax planning strategies.

We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is more likely than not to be realized.

Therefore, actual income taxes could materially vary from these estimates.

We classify deferred tax assets and liabilities as noncurrent on our consolidated balance sheet.

We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that we expect to take in a future tax return.

The determination for required liabilities is based upon an analysis of each individual tax position, taking into consideration whether it is more likely than not that our tax position, based on technical merits, will be sustained upon examination.

Cash, Cash Equivalents, Restricted Cash and Marketable Securities

Our cash consists of bank deposits held in global financial institutions.

Our cash equivalents generally consist of highly liquid investments, generally including money market funds, available on demand cash deposits, term deposits, and marketable securities, with maturities of 90 days or less at the date of purchase.

For all periods presented, our restricted cash, which primarily consists of escrowed security deposits, was not material and is included in prepaid expenses and other current assets on our consolidated balance sheet.

We classify marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date and as to whether and when we intend to sell a particular security prior to its maturity date.

Marketable securities with maturities greater than 90 days at the date of purchase and 12 months or less remaining at the balance sheet date will be classified as short-term and marketable securities with maturities greater than 12 months from the balance sheet date will generally be classified as long-term.

We classify marketable equity securities, limited by policy to money market funds and mutual funds, as either a cash equivalent, short-term or long-term based on the nature of each security and its availability for use in current operations.

Our marketable securities are classified and accounted for as available-for-sale, and therefore are carried at fair value, with unrealized gains and losses, net of taxes, reported in accumulated other comprehensive income (loss) as a component of stockholders’

Fair values are determined for each individual security in the investment portfolio.

We determine the appropriate classification of our marketable securities at the time of purchase and reevaluate the designations at each balance sheet date.

We invest in highly-rated securities, and our investment policy limits the amount of credit exposure to any one issuer, industry group and currency.

The policy requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss and providing liquidity of investments sufficient to meet our operating and capital spending requirements and debt repayments.

Realized gains and losses on the sale of marketable securities are determined by specific identification of each security’s cost basis.

We may sell certain of our marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration, liquidity, and duration management.

The weighted average maturity of our total invested cash shall not exceed 18 months , and no security shall have a final maturity date greater than three years , according to our investment policy.

We continually review any available-for-sale securities to determine whether their fair value is below their carrying value.

If the fair value of an available-for-sale security is below their carrying value, and either we intend to sell the security or we will be required to sell before recovery, then the difference between fair value and carrying value is recognized as a loss in other income (expense), net on our consolidated statements of operations.

If we do not intend to sell and we will not be required to sell before recovery, then we analyze whether a portion of the unrealized loss is the result of a credit loss.

When a portion of the unrealized loss is the result of a credit loss, we recognize an allowance for credit losses on our consolidated balance sheet and a corresponding loss in other income (expense), net on our consolidated statements of operations.

Any portion of the unrealized loss on the available-for-sale securities that is not attributable to a credit loss would be recognized as an unrealized loss in accumulated other comprehensive income (loss) within our consolidated statements of changes in stockholders’

The Company's investment portfolio at any point in time may contain various investments, including, in U.S.

treasury and U.S.

government agency securities, taxable and tax-exempt municipal notes, corporate notes and bonds, commercial paper, non-U.S.

government agency securities, overnight demand deposits, and money market funds.

The Company segments its portfolio based on the underlying risk profiles of the securities and has a zero loss expectation for U.S.

treasury and U.S.

government agency securities.

The Company regularly reviews the securities in an unrealized loss position and evaluates the expected credit loss risk by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions.

As of December 31, 2022 and 2021, the Company had no available-for-sale securities.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recognized when the right to consideration becomes unconditional and are recorded net of an allowance for credit losses.

We record accounts receivable at the invoiced amount.

Our customer invoices are generally due 30 days from the time of invoicing.

The Company uses the “expected credit loss”

methodology, allowed under GAAP, in estimating its allowance for credit losses.

We apply the “expected credit loss”

methodology by first assessing our historical losses based on credit sales and then adding in an assessment of expected changes in the foreseeable future, whether positive or negative, to the Company’s ability to collect its outstanding accounts receivables, or the expectation for future losses.

The Company develops its expectation for future losses by assessing the profiles of its customers using their historical payment patterns, any known changes to those customers’

ability to fulfill their payment obligations, and assessing broader economic conditions that may

impact our customers’

ability to pay their obligations.

Where appropriate, the Company performs this analysis using a portfolio approach.

Portfolios comprise customers with similar characteristics and payment history, and we have concluded that the aggregation of these customers into various portfolios does not produce a result that is materially different from considering the affected customers individually.

Customers are assigned internal credit ratings, as determined by the Company, based on our collection profiles.

Customers whose outstanding obligations are less likely to experience a credit loss are assigned a higher internal credit rating, and those customers whose outstanding obligations are more likely to experience a credit loss are assigned a lower credit rating.

We recognize a greater credit loss allowance on the accounts receivable due from those customers in the lower credit tranche, as determined by the Company.

When the Company becomes aware of facts and circumstances affecting an individual customer, it also takes that specific customer information into account as part of its calculation of expected credit losses.

The Company's exposure to credit losses may increase if our customers are adversely affected by changes in macroeconomic pressures or uncertainty associated with local or global economic recessions, or other customer-specific factors.

The following table presents the changes in our allowance for credit losses for the periods presented:

(in millions)

Allowance for credit losses:

Balance, beginning of period

Provision charged to expense

Write-offs, net of recoveries and other

Balance, end of period

Property and Equipment

We record property and equipment at cost, net of accumulated depreciation.

We capitalize certain costs incurred during the application development stage related to the development of websites and internal use software when it is probable the project will be completed and the software will be used as intended.

Capitalized costs include internal and external costs, if direct and incremental, and deemed by management to be significant.

We expense costs related to the planning and post-implementation phases of website development as these costs are incurred.

Maintenance and enhancement costs (including those costs in the post-implementation stages) are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software resulting in added functionality, in which case the costs are capitalized.

We compute depreciation using the straight-line method over the estimated useful lives of the assets, which is three to five years for computer equipment, capitalized website development, office furniture and other equipment.

We depreciate leasehold improvements using the straight-line method, over the shorter of the estimated useful life of the improvement or the remaining term of the lease.

We lease office space in a number of countries around the world, generally under non-cancelable operating lease agreements.

Our Headquarters Lease is our most significant office space lease and is accounted for as a finance lease under GAAP.

The Company has also entered into data center and certain equipment leases, such as network equipment and other leases, which are not material to our consolidated financial statements.

Refer to “Note 6:

Leases ”

for a discussion of our lease accounting policy and other required financial disclosures.

Non-Marketable Equity Investments

We account for non-marketable equity investments through which we exercise significant influence but do not have control over the investee under the equity method.

Under this method, the investment, originally recorded at

cost, is adjusted to recognize the Company’s share of net earnings or losses of the investment as they occur rather than as dividends or other distributions are received.

Losses are limited to the extent of the Company’s investment in, advances to and commitments for the investee.

In the event we are unable to obtain accurate financial information from the investee in a timely manner, we record our share of earnings or losses of such equity investment on a lag.

Non-marketable equity investments that are not accounted for under the equity method and that do not have a readily determinable fair value are accounted for under the measurement alternative, allowed under GAAP.

Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Adjustments are determined primarily based on a market approach as of the transaction date.

We classify our non-marketable equity investments as long-term assets on our consolidated balance sheet as those investments do not have stated contractual maturity dates.

On a quarterly basis, we perform a qualitative assessment considering impairment indicators, if any, to evaluate whether these investments are impaired.

Qualitative factors considered include industry and market conditions, financial performance, business prospects, and other relevant events and factors.

When indicators of impairment exist, we prepare a quantitative assessment of the fair value of our equity investments, which may include using both the market and income approaches which require judgment and the use of estimates, including discount rates, investee revenues and costs, and available comparable market data of private and public companies, among others.

When our assessment indicates that an impairment exists, we measure our non-marketable equity investments at fair value.

Valuations of such privately-held companies are inherently complex and uncertain due to the lack of liquid market for such company’s securities.

In addition, such investments are inherently risky in that such companies are typically at an early stage of development, may have no or limited revenues, may not be or may never become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully developed or introduced into the market.

Business Combinations

We account for acquired businesses using the acquisition method of accounting which requires that tangible assets and identifiable intangible assets acquired and assumed liabilities be recorded at the date of acquisition at their respective fair values.

Any excess purchase price over the estimated fair value of the net tangible and intangible assets acquired is allocated to goodwill.

When determining the fair values of assets acquired and liabilities assumed, management makes estimates and assumptions, especially with respect to intangible assets.

Significant estimates in valuing certain intangible assets may include but are not limited to future expected cash flows from customer and supplier relationships, acquired technology and trade names from a market participant perspective, useful lives and discount rates.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Valuations are performed by management or third-party valuation specialists under management's supervision, where appropriate.

Any changes to provisional amounts identified during the measurement period, calculated as if the accounting had been completed as of the acquisition date, are recognized in the consolidated financial statements in the reporting period in which the adjustment amounts are determined.

Goodwill and Intangible Assets

We assess goodwill, which is not amortized, for impairment annually during the fourth quarter, or more frequently, if events and circumstances indicate impairment may have occurred.

We test goodwill for impairment at the reporting unit level.

Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination in which such goodwill was generated as of the acquisition date.

We evaluate our reporting units when changes in our operating structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach.

Once goodwill has been allocated to the reporting units, it no longer retains its identification

with a particular acquisition and becomes identified with the reporting unit in its entirety.

Accordingly, the fair value of the reporting unit as a whole is available to support the recoverability of its goodwill.

The Company has the option to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

In the evaluation of goodwill for impairment, we generally first perform a qualitative assessment to determine whether it is more likely than not (i.e., a likelihood of more than 50 %) that the estimated fair value of the reporting unit is less than the carrying amount.

Periodically, we may choose to forgo the initial qualitative assessment and proceed directly to a quantitative analysis to assist in our annual evaluation.

When assessing goodwill for impairment, our decision to perform a qualitative impairment assessment for an individual reporting unit in a given year is influenced by a number of factors, including, but not limited to the size of the reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments from the date of acquisition or to establish an updated baseline quantitative analysis, and other performance and market indicators.

During a qualitative assessment, if we determine that it is not more likely than not that the implied fair value of the goodwill is less than its carrying amount, no further testing is necessary.

If, however, we determine that it is more likely than not that the implied fair value of the goodwill is less than its carrying amount, we then perform a quantitative assessment and compare the estimated fair value of the reporting unit to the carrying value.

If the carrying value of a reporting unit exceeds its estimated fair value, the goodwill impairment is measured using the difference between the carrying value and the fair value of the reporting unit;

however, any loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

In determining the estimated fair values of reporting units in a quantitative goodwill impairment test, we generally use a blend, of the following recognized valuation methods:

the income approach (i.e.

discounted cash flows model) and the market valuation approach, which we believe compensates for the inherent risks of using either model on a stand-alone basis.

The discounted cash flows model indicates the fair value of the reporting units based on the present value of the cash flows that we expect the reporting units to generate in the future.

Our significant estimates in the discounted cash flows model include:

weighted average cost of capital;

long-term rate of growth and profitability of the reporting unit;

income tax rates and working capital effects.

The market valuation approach indicates the fair value of the business based on a comparison to comparable publicly traded firms in similar lines of business and other precedent transactions.

Our significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and/or income multiples in estimating the fair value of the reporting units.

Valuations are performed by management or third-party valuation specialists under management's supervision, where appropriate.

We believe that the estimated fair values assigned to our reporting units in impairment tests are based on reasonable assumptions that marketplace participants would use.

However, such assumptions are inherently uncertain and actual results could differ from those estimates.

The use of substantially different assumptions, estimates or judgments could trigger the need for an impairment charge, or materially increase or decrease the amount of any such impairment charge.

During the second quarter of 2022, subsequent to our annual impairment test in the fourth quarter of 2021, the composition of our reportable segments was changed, as discussed in “Note 19:

Segment and Geographic Information .”

Following the change in reportable segments, our new reporting units for the purposes of goodwill impairment testing are as follows:

(1) Tripadvisor Core, (2) Viator (formerly Experiences), and (3) TheFork.

The Tripadvisor Core reporting unit includes the operations of the following legacy reporting units (including the carrying value of their related goodwill):

Hotels, Media & Platform, Rentals, Flights & Car, Cruises, and Tripadvisor Restaurants.

As a result of this reporting unit change, we performed a qualitative assessment on our legacy reporting units prior to operationalizing the new segment reporting structure and determined that it was more likely than not that the fair value of all legacy reporting units was greater than the carrying value, which is consistent with our conclusion reached in the fourth quarter of 2021.

We then performed a goodwill impairment test for each of the three new reporting units (Tripadvisor Core, Viator, and TheFork) upon the change in reportable segments using a quantitative assessment.

We concluded the estimated fair values were significantly in excess of the carrying values for these reporting units, and therefore, no indications of impairment were identified as a result of these changes in the second quarter of 2022.

During the Company's annual goodwill impairment test in the fourth quarter of 2022, a qualitative assessment was performed for all our reporting units.

We determined that it was not more likely than not that the fair value of

any reporting unit was less than its carrying value, and, accordingly, no impairment charges were recorded during the year ended December 31, 2022.

As part of the qualitative assessment for our annual 2022 goodwill impairment analysis of our reporting units, the factors that we considered included, but were not limited to:

(a) changes in macroeconomic conditions in the overall economy and the specific markets in which we operate, (b) our ability to access capital, (c) changes in the online travel industry, (d) changes in the level of competition, (e) evaluation of current and future forecasted financial results of the reporting units, (f) comparison of our current financial performance to historical and budgeted results of the reporting units, (g) change in excess of the Company’s market capitalization over its book value, (h) changes in estimates, valuation inputs, and/or assumptions since the last quantitative analysis of the reporting units during the second quarter of 2022, (i) changes in the regulatory environment, (j) changes in strategic outlook or organizational structure and leadership of the reporting units;

and (k) other relevant factors, and how these factors might impact specific performance in future periods.

Intangible Assets

Intangible assets with estimable useful lives, or definite-lived intangibles, are carried at cost and are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment upon certain triggering events.

We routinely review the remaining estimated useful lives of our definite-lived intangible assets.

If we reduce the estimated useful life assumption, the remaining unamortized balance is amortized over the revised estimated useful life.

Intangible assets that have indefinite lives are not amortized and are tested for impairment annually during the fourth quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Similar to the qualitative assessment for goodwill, we may assess qualitative factors to determine if it is more likely than not that the implied fair value of the indefinite-lived intangible asset is less than its carrying amount.

If we determine that it is not more likely than not that the implied fair value of the indefinite-lived intangible asset is less than its carrying amount, no further testing is necessary.

If, however, we determine that it is more likely than not that the implied fair value of the indefinite-lived intangible asset is less than its carrying amount, we compare the implied fair value of the indefinite-lived asset with its carrying amount.

If the carrying amount of an individual indefinite-lived intangible asset exceeds its implied fair value, the individual asset's carrying value is written down by an amount equal to such excess.

The assessment of qualitative factors is optional and at our discretion.

We may bypass the qualitative assessment for any indefinite-lived intangible asset in any period and resume performing the qualitative assessment in any subsequent period.

We base our quantitative measurement of fair value of indefinite-lived intangible assets, using the relief-from-royalty method.

This method assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them.

This method requires us to estimate future revenues, the appropriate royalty rate and the weighted average cost of capital, however, such assumptions are inherently uncertain and actual results could differ from those estimates.

The use of significantly different assumptions, estimates or judgments could trigger the need for an impairment charge, or materially increase or decrease the amount of any such impairment charge.

Impairment of Long-Lived Assets

We periodically review the carrying amount of our definite-lived intangible assets and other long-term assets, including property and equipment, net and operating lease right-of-use assets, to determine whether current events or circumstances indicate that such carrying amounts may not be recoverable.

Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others.

The Company’s impairment evaluation is performed at the asset group level or the lowest level for which identified cash flows are largely independent, which the Company has defined as the reporting unit level.

If such facts indicate a potential impairment, we assess the recoverability of the asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset of the group.

If the recoverability test indicates that the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using appropriate valuation methodologies which would typically include an estimate of discounted cash flows, using an appropriate discount rate.

Any impairment would be measured by the amount that the carrying values, of such asset groups, exceed their

fair value and would be included in operating income (loss) on the consolidated statement of operations.

Considerable management judgment is necessary to estimate the fair value of asset groups.

Accordingly, actual results could vary significantly from such estimates.

We have not identified any circumstances that would warrant an impairment charge for any recorded definite-lived intangibles or other long-term assets on our consolidated balance sheets at December 31, 2022 or 2021.

Deferred Merchant Payables

In our experiences and rentals free-to-list offerings, we receive payment from travelers at the time of booking or prior to the experience date, and we record these amounts, net of our commissions, on our consolidated balance sheet as deferred merchant payables.

We pay the operators, generally the third-party experience providers and vacation rental owners, after the travelers’

Therefore, we receive payment from the traveler prior to paying the operator and this operating cycle represents a working capital source or use of cash to us.

Our deferred merchant payables balance was $ 203 million and $ 113 million at December 31, 2022 and 2021, respectively, on our consolidated balance sheets.

The increase in our deferred merchant payables during the year ended December 31, 2022 was primarily due to increased consumer demand for travel industry related services, combined with the easing of government travel restrictions put in place due to COVID-19.

Foreign Currency Translation and Transaction Gains and Losses

Our consolidated financial statements are reported in U.S.

Certain of our subsidiaries outside of the U.S.

use the local currency as their functional currency and not the U.S.

Therefore assets and liabilities of our foreign subsidiaries are translated at the spot rate in effect at the applicable reporting date, and the consolidated statements of operations are translated at the average exchange rates in effect during the applicable reporting period.

The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive income (loss) in stockholders’

equity on our consolidated balance sheet.

In addition, our subsidiaries also engage in transactions in currencies other than its functional currency.

Transactions denominated in currencies other than the functional currency are recorded based on foreign currency exchange rates at the time such transactions arise.

Subsequent changes in foreign currency exchange rates result in transaction gains and losses which are reflected in our consolidated statements of operations as unrealized (based on the applicable period-end exchange rate) or realized upon settlement of the transactions.

Accordingly, we have recorded net foreign currency exchange losses of $ 5 million and $ 4 million for the years ended December 31, 2022 and 2021, respectively, and a net foreign currency exchange gain of $ 5 million for the year ended December 31, 2020, in other income (expense), net on our consolidated statements of operations.

These amounts also include transaction gains and losses, both realized and unrealized from forward contracts.

Derivative Financial Instruments

We account for derivative instruments that do not qualify for hedge accounting as either assets or liabilities and carry them at fair value, with any subsequent adjustments to fair value recorded in other income (expense), net on our consolidated statements of operations.

Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in foreign currency exchange rates reported in other income (expense), net on our consolidated statements of operations.

In certain circumstances, we enter into forward contracts to reduce, to the extent practical, our potential exposure to the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies.

Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences.

These differences are not expected to be significant due to the short-term nature of the contracts, which to date, have typically had maturities at inception of 90 days or less.

The net cash received or paid related to our derivative instruments are classified in other investing activities in our consolidated statements of cash flows.

Counterparties to forward contracts consist of major international financial institutions.

We monitor our positions and the credit ratings of the counterparties involved and, by policy limits, the amount of credit exposure to any one party.

We do not use derivatives for trading or speculative purposes.

We did not enter into any cash flow, fair value or net investment hedges during the years ended December 31, 2022, 2021 or 2020.

Refer to “Note 4:

Financial Instruments and Fair Value Measurements ”

for additional information on derivatives.

Fair Value Measurements and Disclosures

We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.

We measure assets and liabilities at fair value based on the expected exit price, which is the amount that would be received on the sale of an asset or amount paid to transfer a liability, as the case may be, in an orderly transaction between market participants in the principal or most advantageous market in which we would transact.

As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability at the measurement date.

The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

GAAP provides the following hierarchical levels of inputs used to measure fair value:

Level 1—Valuations are based on quoted market prices for identical assets and liabilities in active markets.

Level 2—Valuations are based on observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations are based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.

These valuations require significant judgment.

Debt Issuance Costs

We defer costs we incur to issue debt, which are presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, and amortize these costs using the effective interest rate method to interest expense over the term of the debt.

We also defer costs we incur to enter into a credit facility or to amend our existing revolving credit facility, which are presented in the balance sheet as a long-term asset, and amortize these costs using the effective interest rate method to interest expense over the term of the credit facility.

Certain Risks and Concentrations

Our business is subject to certain risks and concentrations, including a concentration related to dependence on our relationships with our customers.

For the years ended December 31, 2022, 2021 and 2020 our two most significant travel partners, Expedia (and its subsidiaries) and Booking (and its subsidiaries), each accounted for 10 % or more of our consolidated revenue and together accounted for approximately 35 %, 34 % and 25 %, respectively, of our consolidated revenue, with nearly all of this revenue concentrated in our Tripadvisor Core segment.

Additionally, our business is dependent on relationships with third-party service operators that we rely on to fulfill service obligations to our customers where the Company is the merchant of record, such as our experience providers and vacation rental owners.

However, no one operator’s inventory resulted in more than 10 % of our revenue on a consolidated basis or at a reportable segment level in any period presented.

Refer to “Note 3:

Revenue Recognition ”

and “Note 19:

Segment and Geographic Information ”

for information regarding concentrations related to geographic and product revenues, respectively.

As of December 31, 2022 and 2021, Expedia accounted for approximately 19 % and 10 %, respectively, of our total accounts receivable and contract assets.

Our overall credit risk related to accounts receivable is mitigated by the relatively short collection period.

Financial instruments, which potentially subject us to concentration of credit risk, generally consist, at any point in time, of cash and cash equivalents, corporate debt securities, forward contracts, capped calls, and accounts receivable.

We maintain cash balances with financial institutions that are in excess of Federal Deposit Insurance Corporation insurance limits in the U.S.

and similar programs outside the U.S.

Our cash is generally composed of available on demand bank deposits or term deposits with major global financial institutions primarily denominated in U.S.

dollars, and to a lesser extent Euros, British pounds, and Australian dollars.

We may invest in highly-rated corporate debt securities, and our investment policy limits the amount of credit exposure to any one issuer, industry group and currency.

Our credit risk related to corporate debt securities is also mitigated by the relatively short maturity period required by our investment policy.

Forward contracts and capped calls are transacted with major

international financial institutions with high credit standings.

Forward contracts, which, to date, have typically had maturities of less than 90 days , also mitigates risk.

Contingent Liabilities

Periodically, we review the status of all significant outstanding matters to assess any potential financial exposure.

When (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our consolidated statement of operations.

We provide disclosure in the notes to the consolidated financial statements for loss contingencies that do not meet both these conditions if there is a reasonable possibility that a loss may have been incurred that would be material to the consolidated financial statements.

Significant judgment may be required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable.

We base accruals made on the best information available at the time which can be highly subjective.

The final outcome of these matters could vary significantly from the amounts included in the accompanying consolidated financial statements.

Treasury Stock

Shares of our common stock repurchased are recorded at cost as treasury stock and result in the reduction of stockholders' equity on our consolidated balance sheet.

We may reissue these treasury shares.

When treasury shares are reissued, we use the average cost method for determining the cost of reissued shares.

If the issuance price is higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in-capital.

If the issuance price is lower than the cost, the difference is first charged against any credit balance in additional paid-in-capital from the previous issuances of treasury stock and any remaining balance is charged to retained earnings.

Earnings Per Share (“EPS”)

Refer to “Note 16:

Earnings Per Share ”

for a discussion as to how we compute Basic EPS and Diluted EPS.

Recently Adopted Accounting Pronouncements

As of December 31, 2022, there are no recently issued accounting standards which are expected to have a material impact on the Company’s financial statements or disclosures.

REVENUE RECOGNITION

We generate all our revenue from contracts with customers.

We recognize revenue when we satisfy a performance obligation by transferring control of the promised services to a customer in an amount that reflects the consideration that we expect to receive in exchange for those services.

When we act as an agent in the transaction, we recognize revenue for only our commission on the arrangement.

We determine revenue recognition through the following steps:

(1) Identification of the contract, or contracts, with a customer

(2) Identification of the performance obligations in the contract

(3) Determination of the transaction price

(4) Allocation of the transaction price to the performance obligations in the contract

(5) Recognition of revenue when, or as, we satisfy a performance obligation.

At contract inception, we assess the services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a service (or bundle of services) that is distinct.

To identify the performance obligations, we consider all of the services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

We have provided qualitative information about our performance obligations for our principal revenue streams discussed below.

There was no significant revenue recognized in the years ended December 31, 2022, 2021 and 2020 related to performance obligations satisfied in prior periods, respectively.

We have applied a practical expedient and do not disclose the

value of unsatisfied performance obligations that have an original expected duration of less than one year.

The Company expects to complete its performance obligations within one year from the initial transaction date.

The value related to our remaining or partially satisfied performance obligations relates to subscription services that are satisfied over time or services that are recognized at a point in time, but not yet achieved.

Our timing of services, invoicing and payments are discussed in more detail below and do not include a significant financing component.

Our customer invoices are generally due 30 days from the time of invoicing.

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year.

Although the substantial majority of our contract costs have an amortization period of less than one year , we have determined contract costs arising from certain sales incentives have an amortization period in excess of one year given the high likelihood of contract renewal.

Sales incentives are not paid upon renewal of these contracts and therefore are not commensurate with the initial sales incentive costs.

As of both December 31, 2022 and 2021, there were $ 4 million of unamortized contract costs in other long-term assets on our consolidated balance sheet.

We amortize these contract costs on a straight-line basis over the estimated customer life, which is based on historical customer retention rates.

Amortization expense recorded to selling and marketing expense on our consolidated statements of operations during each of the years ended December 31, 2022, 2021 and 2020, was $ 1 million .

We assess such asset for impairment when events or circumstances indicate that the carrying amount may not be recoverabl e.

No impairments were recognized during the years ended December 31, 2022, 2021 and 2020.

The recognition of revenue may require the application of judgment related to the determination of the performance obligations, the timing of when the performance obligations are satisfied and other areas.

The determination of our performance obligations does not require significant judgment given that we generally do not provide multiple services to a customer in a transaction, and the point in which control is transferred to the customer is readily determinable.

In instances where we recognize revenue over time, we generally have either a subscription service that is recognized over time on a straight-line basis using the time-elapsed output method, or based on other output measures that provide a faithful depiction of the transfer of our services.

When an estimate for cancellations is included in the transaction price, we base our estimate on historical cancellation rates and current trends.

Taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue–producing transaction, that are collected by us from a customer, are reported on a net basis, or in other words excluded from revenue on our consolidated financial statements.

The application of our revenue recognition policies and a description of our principal activities, organized by reportable segment, from which we generate our revenue, are presented below.

Tripadvisor Core Segment

Tripadvisor-branded Hotels Revenue .

Our largest source of Tripadvisor Core segment revenue is generated from click-based advertising on Tripadvisor-branded websites, which we refer to as our hotel meta (formerly referred to as hotel auction) revenue, which is primarily comprised of contextually-relevant booking links to our travel partners’

Our click-based travel partners are predominantly online travel agencies, or OTAs, and hotels.

Click-based advertising is generally priced on a cost-per-click, or “CPC”

basis, with payments from travel partners determined by the number of travelers who click on a link multiplied by the CPC rate for each specific click.

CPC rates are determined in a dynamic, competitive auction process, where the travel partner bids for rates and availability to be listed on our platform.

When a CPC bid is submitted, the travel partner agrees to pay us the bid amount each time a traveler clicks on the link to that travel partner’s websites.

Bids can be submitted periodically –

as often as daily –

on a property-by-property basis.

We record click-based advertising revenue as the click occurs and traveler leads are sent to the travel partner websites as our performance obligation is fulfilled at that time.

Click-based revenue is generally billed to our travel partners on a monthly basis consistent with the timing of the service.

We also generate revenue from our cost-per-action, or “CPA”

model, which consists of contextually-relevant booking links to our travel partners’

websites which are advertised on our platform.

We earn a commission from our travel partners, based on a pre-determined contractual commission rate, for each traveler who clicks to and books a hotel reservation on the travel partners’

website, which results in a traveler stay.

CPA revenue is billable only upon the completion of each traveler’s stay resulting from a hotel reservation.

The travel partners provide the service to the travelers and we act as an agent under GAAP.

Our performance obligation is complete at the time of the hotel reservation booking, and the commission earned is recognized upon booking, as we have no post-booking service

We recognize this revenue net of an estimate of the impact of cancellations, using historical cancellation rates and current trends.

Contract assets are recognized at the time of booking for commissions that are billable upon the completion of a traveler's stay.

CPA revenue is generally billed to our travel partners monthly for traveler stays completed in that month.

In addition, we offer business-to-business (“B2B”) solutions to hotels, including subscription-based advertising to hotels, owners of B&Bs, and other specialty lodging properties.

Our performance obligation is generally to enable subscribers to advertise their businesses on our platform, as well as to manage and promote their website URL, email address, phone number, special offers and other information related to their business.

Subscription-based advertising services are predominantly sold for a flat fee for a contracted period of time of one year or less and revenue is recognized on a straight-line basis over the period of the subscription service as efforts are expended evenly throughout the contract period.

Subscription-based advertising services are generally billed at the inception of the service.

When prepayments are received, we recognize deferred revenue initially on our consolidated balance sheet for the amount of prepayment in excess of revenue recognized, until the performance obligation is satisfied.

To a lesser extent, we offer travel partners the opportunity to advertise and promote their business through hotel sponsored placements on our platform.

This service is generally priced on a CPC basis, with payments from travel partners determined by the number of travelers who click on the sponsored link multiplied by the CPC rate for each specific click.

CPC rates for hotel sponsored placements that our travel partners pay are generally based on bids submitted as part of an auction by our travel partners.

When a CPC bid is submitted, the travel partner agrees to pay us the bid amount each time a traveler clicks on a link to our travel partner’s websites.

Bids may be submitted periodically –

as often as daily –

on a property-by-property basis.

We record this click-based advertising revenue as the click occurs and traveler leads are sent to the travel partner as our performance obligation is fulfilled at that time.

Hotel sponsored placements revenue is generally billed to our travel partners monthly, consistent with the timing of the service.

Tripadvisor-branded Display and Platform Revenue.

We offer travel partners the ability to promote their brands through display-based advertising placements across our platform.

Our display-based advertising clients are predominantly direct suppliers of hotels, airlines and cruises, as well as destination marketing organizations.

We also sell display-based advertising to OTAs and other travel related businesses, as well as advertisers from non-travel categories.

Display-based advertising is sold predominantly on a cost per thousand impressions, or CPM, basis.

The performance obligation in our display-based advertising arrangements is to display a number of advertising impressions on our platform and we recognize revenue for impressions as they are delivered.

Services are generally billed monthly.

We have applied the practical expedient to measure progress toward completion, as we have the right to invoice the customer in an amount that directly corresponds with the value to the customer of our performance to date, which is measured based on impressions delivered.

Tripadvisor Experiences and Dining Revenue .

We generate revenue from our experiences and restaurant service offerings on Tripadvisor-branded websites and mobile apps.

Tripadvisor receives intercompany (intersegment) revenue consisting of affiliate marketing commissions earned primarily from experience bookings and, to a lesser extent, restaurant reservation bookings, on Tripadvisor-branded websites and mobile apps, fulfilled by Viator and TheFork, respectively, which are eliminated on a consolidated basis.

The performance obligations, timing of customer payments for our experiences and dining transactions, and methods of revenue recognition are consistent with the Viator and TheFork segments, as described below.

In addition, Tripadvisor restaurant service offerings, or B2B restaurants offering, generate subscription fees for subscription-based advertising to our restaurant partners that allow restaurants to manage and promote their website URL, email address, phone number, special offers and other information related to their business, as well as access to certain online reservation management services, marketing analytic tools, and menu syndication services.

As the performance obligation is to provide restaurants with access to these services over the subscription period, subscription fee revenue is recognized over the period of the subscription service on a straight-line basis as efforts are expended evenly throughout the contract period.

Subscription-based advertising services are generally billed at the inception of the service.

In addition, we offer restaurant partners the opportunity to advertise and promote their business through restaurant media advertising placements on our platform.

This service is generally priced on a CPC basis, with payments from restaurant partners determined by the number of clicks by consumers on the sponsored link multiplied by the CPC rate for each specific click.

CPC rates for media advertising placements agreed to by our restaurant partners are based on a pre-determined

contractual rate.

We record this click-based advertising revenue as the click occurs and diner leads are sent to the restaurant partner as our performance obligation is fulfilled at that time.

Click-based revenue is generally billed to our restaurant partners monthly, consistent with the timing of the service.

Other Revenue .

We also offer travelers alternative accommodations rentals (formerly referred to as vacation rentals), cruises, flights, and rental cars solutions on our platforms which complement our end-to-end travel experience.

Our alternative accommodation rentals offering provides information and services that allow travelers to research and book vacation and short-term rental properties, including full homes, condominiums, villas, beach properties, cabins and cottages.

Our alternative accommodation rentals offering primarily generates revenue by offering individual property owners and managers the ability to list their properties on our platform thereby connecting with travelers through a free-to-list, commission-based option.

These properties are listed on our Tripadvisor-branded websites and mobile apps, and Tripadvisor's portfolio of travel media brands, including, www.flipkey.com, www.holidaylettings.co.uk, www.niumba.com, and www.vacationhomerentals.com.

We earn commissions associated with rental transactions through our free-to-list model from both the traveler and the property owner or manager.

We provide post-booking service to the travelers, property owners and managers until the time the rental commences, which is the time the performance obligation is completed.

Revenue from transaction fees is recognized at the time that the rental commences.

We act as an agent in the transactions, under GAAP, as we do not control any properties before the property owner provides the accommodation to the traveler and do not have inventory risk.

We generally collect payment from the traveler at the time of booking, representing the amount due to the property owner or manager, as well as our commission.

That portion of the payment representing our commission is recorded as deferred revenue on our consolidated balance sheet until revenue is recognized, and that portion of the payment representing the amount due to the property owner is recorded as a deferred merchant payable on our consolidated balance sheet until payment is made to the property owner after the completion of the rental.

In addition, Other Revenue includes revenue generated from cruises, flights, and rental cars offerings on Tripadvisor-branded websites and mobile apps and Tripadvisor’s portfolio of brands, which primarily includes click-based advertising and display-based advertising revenue.

The performance obligations, timing of customer payments for these offerings, and methods of revenue recognition are generally consistent with click-based advertising and display-based advertising revenue, as described above.

Viator Segment

We provide an online marketplace that allows travelers to research and book tours, activities and attractions in popular travel destinations across the globe through our stand-alone Viator-branded platform, which includes website, mobile web, and mobile app.

Through Viator, we also power traveler bookings of tours, activities and attractions on behalf of third-party distribution partner websites, including the Tripadvisor platform as well as many of the world’s major OTA, airlines, hotels, online and offline travel agencies, and other prominent content and eCommerce brands.

We work with local tour, activities, and experience operators (“operators”) to provide travelers (“customers”) the ability to book tours, activities and attractions (the “experience”) in destinations worldwide.

We generate commissions for each booking transaction we facilitate through our online reservation system, in exchange for certain activities, including the use of the Company’s booking platform, post-booking customer support (24/7) until the time of the experience and payment processing activities as the merchant of record, which is the completion of the performance obligation.

These activities are not distinct from each other and are not separate performance obligations.

As a result, the Company’s single performance obligation is to facilitate an experience, which is complete upon the time the experience occurs, and when revenue is recognized.

We do not control the experience or have inventory risk before the operator provides the experience to our customer and therefore act as agent for substantially all of these transactions under GAAP.

We collect payment from the customer prior to the experience occurring, which includes both our commission and the amount due to the operator.

We record our commissions as deferred revenue on our consolidated balance sheet when payment is received, including amounts which are refundable subject to cancellation, until the experience occurs when revenue is recognized.

The amount due to the operator is recorded as a deferred merchant

payable on our consolidated balance sheet until completion of the experience, after which payment is made to the operator.

To a much lesser extent, we earn commissions from third-party distribution partners, in this case the customers, who display and promote on their websites the operator experiences available on our platform to generate bookings.

In these transactions, we are not the merchant of record, and we generally invoice and receive commissions directly from the third-party distribution partners.

Our performance obligation is to allow the third-party distribution partners to display and promote on their website experiences, offered by operators who utilize our platform, and we earn a commission when travelers book and complete an experience on the third-party distribution partner website.

We do not control the service or have inventory risk, and therefore act as an agent for these transactions under GAAP.

We receive payment prior to the experience date in the majority of these transactions and make payments to the operators after the experience is complete.

Our performance obligation is complete, and revenue is recognized at the time of the booking, as we have no post-booking obligations to the customer.

We recognize this revenue net of an estimate of the impact of cancellations, which is not material, using historical cancellation rates and current trends.

Contract assets are recognized for commissions that are contractually billable contingent upon completion of the experience.

TheFork Segment

We provide information and services for consumers to research and book restaurants through our dedicated online restaurant reservations platform, TheFork.

We primarily generate transaction fees (or per seated diner fees) that are paid by our restaurant customers for diners seated primarily from bookings through TheFork’s online reservation system.

The transaction fee is recognized as revenue after the reservation is fulfilled, or as diners are seated by our restaurant customers.

We invoice restaurants monthly for transaction fees.

To a lesser extent, we also generate subscription fees for providing access to certain online reservation management services, marketing analytic tools, and menu syndication services.

Our performance obligation is to provide restaurants with access to these services over the subscription period, which generally is one-month, and we recognize revenue once our performance obligation is met and invoice restaurants monthly for these subscription services.

Practical Expedients and Exemptions

We expense costs to obtain a contract as incurred, such as sales incentives, when the amortization period would have been one year or less.

We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Disaggregation of Revenue

We disaggregate revenue from contracts with customers into major products/revenue sources.

We have determined that disaggregating revenue into these categories achieves the disclosure objective under GAAP, which is to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

As noted in “Note 19:

Segment and Geographic Information ”

our business consists of three reportable segments –

(1) Tripadvisor Core;

and (3) TheFork.

A reconciliation of disaggregated revenue to reportable segment revenue is included below.

Year ended December 31,

Major products/revenue sources (1):

(in millions)

Tripadvisor Core

Tripadvisor-branded hotels

Tripadvisor-branded display and platform

Tripadvisor experiences and dining (2)

Total Tripadvisor Core

Intersegment eliminations (2)

Total Revenue

(1) Our revenue is recognized primarily at a point in time for all reported segments.

(2) Tripadvisor experiences and dining revenue within the Tripadvisor Core segment are shown gross of intersegment (intercompany) revenue, which is eliminated on a consolidated basis.

See “Note 19:

Segment and Geographic Information ”

for a discussion of intersegment revenue for all periods presented.

Contract Balances

The following table provides information about the opening and closing balances of accounts receivable and contract assets, net of allowance for credit losses, from contracts with customers (in millions):

December 31, 2022

December 31, 2021

Accounts receivable

Contract assets

Accounts receivable are recognized when the right to consideration becomes unconditional.

Contract assets are rights to consideration in exchange for services that we have transferred to a customer when that right is conditional on something other than the passage of time, such as commission payments that are contingent upon the completion of the service by the principal in the transaction.

The difference between the opening and closing balances of our contract assets primarily results from the timing difference between when we satisfy our performance obligations and the time when the principal completes the service in the transaction.

During the year ended December 31, 2021, bad debt expense recorded to our allowance for expected credit losses on accounts receivable and contract assets decreased by $ 14 million, when compared to the same period in 2020, primarily due to improved collection trends with our customers driven by the ongoing travel industry recovery from COVID-19 during that year.

Contract liabilities generally include payments received in advance of performance under the contract, and are realized as revenue as the performance obligation to the customer is satisfied, which we present as deferred revenue on our consolidated balance sheet.

As of January 1, 2022 and 2021, we had $ 36 million and $ 28 million, respectively, recorded as deferred revenue on our consolidated balance sheets, of which $ 34 million and $ 23 million, respectively, was recognized in revenue and $ 2 million and $ 4 million was refunded due to cancellations by travelers during the years ended December 31, 2022 and 2021, respectively.

The difference between the opening and closing balances of our deferred revenue primarily results from the timing differences between when we receive customer payments and the time in which we satisfy our performance obligations.

There were no significant changes in contract assets or deferred revenue during the years ended December 31, 2022 and 2021 related to business combinations, impairments, cumulative catch-ups or other material adjustments.

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Cash, Cash Equivalents and Marketable Securities

As of December 31, 2022 and 2021, we had $ 1.0 billion and $ 723 million of cash and cash equivalents, respectively, which consisted of available on demand cash deposits and term deposits with maturities of 90 days or less at the date of purchase, in each case, with major global financial institutions.

We had no outstanding investments classified as either short-term or long-term marketable securities as of December 31, 2022 and 2021, respectively, and there were no purchases or sales of any marketable securities during the years ended December 31, 2022, 2021 and 2020.

The following table shows our cash equivalents, which are measured at fair value on a recurring basis and categorized using the fair value hierarchy, as well as their classification on our consolidated balance sheet as of December 31, 2022 (in millions):

Amortized Cost

Fair Value (1)

Cash Equivalents

Term deposits

(1) We did not have any unrealized gains and losses related to our cash equivalents.

We had no material financial assets or liabilities measured at fair value on a recurring basis as of December 31, 2021.

We generally classify any existing cash equivalents and marketable securities within Level 1 and Level 2 as we value these financial instruments using quoted market prices (Level 1) or alternative pricing sources (Level 2).

The valuation technique we use to measure the fair value of money market funds is derived from quoted prices in active markets for identical assets or liabilities.

Fair values for Level 2 investments are considered “Level 2”

valuations because they are obtained from independent pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets.

Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our independent pricing services against fair values obtained from another independent source.

Derivative Financial Instruments

We generally use forward contracts to reduce the effects of foreign currency exchange rate fluctuations on our cash flows for the Euro versus the U.S.

For the periods ended December 31, 2022, 2021 and 2020, respectively, our forward contracts have not been designated as hedges and generally had maturities of less than 90 days .

Our outstanding or unsettled forward contracts were carried at fair value on our consolidated balance sheets at December 31, 2022 and 2021.

We measure the fair value of our outstanding or unsettled derivatives using Level 2 fair value inputs, as we use a pricing model that takes into account the contract terms as well as current foreign currency exchange rates in active markets.

We recognize any gain or loss resulting from the change in fair value of our forward contracts in other income (expense), net on our consolidated statement of operations.

We recorded a net gain of $ 4 million, $ 2 million, and $ 1 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to our forward contracts.

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

December 31, 2022

December 31, 2021

(in millions)

Foreign currency exchange-forward contracts (1)(2)

(1) Derivative contracts address foreign currency exchange fluctuations for the Euro versus the U.S.

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 December 31, 2022 and 2021, respectively, was not material.

The notional amount of a forward contract is the contracted amount of foreign currency to be exchanged and is not recorded on the consolidated balance sheet.

Other Financial Assets and Liabilities

As of December 31, 2022 and 2021, financial instruments not measured at fair value on a recurring basis including accounts payable, accrued expenses and other current liabilities, and deferred merchant bookings, were carried at cost on our consolidated balance sheets, which approximates their fair values because of the short-term nature of these items.

Accounts receivable and contract assets, on our consolidated balance sheets, as well as certain other financial assets, were measured at amortized cost and are carried at cost less an allowance for expected credit losses to present the net amount expected to be collected.

The following table shows the aggregate principal and fair value amount of our outstanding 2025 Senior Notes and 2026 Senior Notes as of the periods presented, which are classified as long-term debt on our consolidated balance sheets, and considered Level 2 fair value measurements.

Refer to “Note 9:

Debt ”

for additional information related to our 2025 Senior Notes and 2026 Senior Notes.

December 31, 2022

December 31, 2021

(in millions)

2025 Senior Notes

Aggregate principal amount

Carrying value amount (1)

Fair value amount (2)

2026 Senior Notes

Aggregate principal amount

Carrying value amount (3)

Fair value amount (2)

(1) Net of $ 5 million and $ 7 million of unamortized debt issuance costs as of December 31, 2022 and 2021, 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 $ 4 million and $ 5 million of unamortized debt issuance costs as of December 31, 2022 and 2021, respectively.

The Company did no t have any assets or liabilities measured at fair value on a recurring basis using Level 3 unobservable inputs at both December 31, 2022 and 2021.

Assets Measured at Fair Value on a Non-recurring Basis

Non-Marketable Investments

Equity Securities Accounted for under the Equity Method

In November 2019, the Company and Ctrip Investment Holding Ltd, a majority-owned subsidiary of Trip.com Group Limited, entered into an agreement to combine certain assets in China through the creation of a new entity, Chelsea Investment Holding Company PTE, Ltd.

Tripadvisor contributed a portion of its business in China, including a long-term exclusive brand and content license and other assets, in return for a 40 % equity investment in Chelsea Investment Holding Company PTE Ltd.

This investment resulted in the Company recording an initial equity method investment of $ 41 million and a $ 39 million deferred income liability attributable to the brand and content license in the fourth quarter of 2019.

The Company expects to earn the deferred income ratably over a 15-year period, congruent with the initial term of the brand and content license, and recorded in other income (expense), net on the consolidated statement of operations.

The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence over, but not control, the investee.

The carrying value of this minority investment was $ 32 million and $ 34 million as of December 31, 2022 and 2021, respectively, and is included in non-marketable investments on our consolidated balance sheets.

During the years ended December 31, 2022, 2021 and 2020, we recognized $ 2 million, $ 3 million and $ 3 million, respectively, representing our share of the investee’s net loss in other income (expenses), net within the consolidated statements of operations.

The Company evaluates this investment for impairment when factors indicate that a decline in the value of its investment has occurred and the carrying amount of its investment may not be recoverable.

An impairment loss, based on the excess of the carrying value over the estimated fair value of the investment based on Level 3 inputs, is recognized in earnings when an impairment is deemed to be other than temporary.

Due to ongoing operating losses, primarily due to the ongoing negative impact of COVID-19 in China, we performed a qualitative assessment to evaluate whether this equity investment is impaired as of December 31, 2022.

During the years ended December 31, 2022, 2021 and 2020, respectively, we did no t record any impairment loss on this equity investment.

The remaining deferred income liability of $ 31 million is presented in accrued expenses and other current liabilities and other long-term liabilities on our consolidated balance sheet of $ 3 million and $ 28 million, respectively, as of December 31, 2022.

During the year ended December 31, 2020, the Company entered into various commercial agreements with Chelsea Investment Holding Company PTE Ltd.

and/or its subsidiaries.

Transactions under these agreements with the equity method investee are considered related-party transactions, and were not material for the years ended December 31, 2022, 2021 and 2020, respectively.

Other Equity Investments

We also hold a minority investment in equity securities of a privately-held company, which is at an early stage of development and does not have a readily determinable fair value.

As of both December 31, 2022 and 2021, the total carrying value of this investment was $ 2 million, and included in non-marketable investments on our consolidated balance sheets.

Our policy is to measure this equity investment at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer such observable price changes may include instances where the investee issues equity securities to new investors, thus creating a new indicator of fair value, as an example.

On a quarterly basis, we perform a qualitative assessment considering impairment indicators, if any, to evaluate whether this investment is impaired and monitor for any observable price changes.

During the years ended December 31, 2022, 2021 and 2020, we did no t record any impairment loss on this equity investment or note any observable price change indicators.

Other Long-Term Assets

In June 2020, the Company was issued collateralized notes (the “Notes Receivable”) with a total principal amount of $ 20 million from a privately-held company, in exchange for an existing equity investment held in the investee by the Company, and other-long term receivables, net, which the Company held due from the same investee.

The Company has classified the Notes Receivable as held-to-maturity, as the Company has concluded it has the positive intent and ability to hold the Notes Receivable until maturity, with 50 % due in five years and remaining 50 % due in 10 years from issuance date.

The Company recorded a $ 5 million and $ 3 million allowance for credit losses under GAAP during the years ended December 31, 2021 and 2020, respectively, in other income (expense), net on the consolidated statement of operations, related to the Notes Receivable.

As of both December 31, 2022 and 2021, the carrying value of the Notes Receivable was $ 9 million, net of accumulated allowance for credit losses, and is classified in other long-term assets, net on our consolidated balance sheet at amortized cost.

On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate whether the Notes Receivable are impaired and monitor for changes to our allowance for credit losses.

Other non-financial assets, such as property and equipment, goodwill, intangible assets, and operating lease right-of-use assets are adjusted to fair value when an impairment charge is recognized or the underlying investment is sold.

Such fair value measurements, if necessary, are based predominately on Level 3 inputs.

Refer to “Note 5:

Property and Equipment, Net ”, “Note 6:

Leases ”

and “Note 7:

Goodwill and Intangibles Assets, Net ”

for additional information regarding those assets.

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following for the periods presented:

December 31, 2022

December 31, 2021

(in millions)

Capitalized website development

Finance lease right-of-use asset (Note 6)

Leasehold improvements

Computer equipment and purchased software

Furniture, office equipment and other

accumulated depreciation

As of December 31, 2022 and 2021, the carrying value of our capitalized website development costs, net of accumulated amortization, was $ 91 million and $ 97 million, respectively.

For the years ended December 31, 2022, 2021 and 2020, we capitalized $ 56 million, $ 55 million and $ 63 million, respectively, related to website development costs.

For the years ended December 31, 2022, 2021 and 2020, we recorded amortization of capitalized website development costs o f $ 61 m illion, $ 64 million and $ 67 million, respectively, which is included in depreciation expense on our consolidated statements of operations for those years.

During the year ended December 31, 2022, we retired and subsequently disposed of certain capitalized website development projects, which were no longer in use and fully depreciated, with a total cost of $ 22 million.

We determine whether a contract is or contains a lease at inception of a contract.

We define a lease as a contract, or part of a contract, that conveys the right to control the use of identified property or equipment (an identified asset) for a period of time in exchange for consideration.

Control over the use of the identified asset means that we have both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

Our lease contracts contain both lease and non-lease components which we combine as a single component under our accounting policy by asset class, except for office space leases and certain other leases, such as colocation data center leases, which we account separately for the lease and non-lease components.

For leases which the consideration in the contract is allocated to lease and non-lease components, we base it on each component’s relative standalone price.

We determine standalone prices for the lease components based on the prices for which other lessors lease similar assets on a standalone basis.

We determine standalone prices for the non-lease component based on the prices that third-party suppliers charge for services for similar assets on a standalone basis.

If observable standalone prices are not readily available, we estimate the standalone prices based on other available observable information.

However, for certain categories of equipment leases, such as network equipment and others, we account for the lease and non-lease components as a single lease component.

Additionally, for certain equipment leases that have similar characteristics, we apply a portfolio approach to effectively account for operating lease right-of-use ROU assets and operating lease liabilities.

The Company uses its estimated incremental borrowing rate as the discount rate in measuring the present value of our lease payments given the rate implicit in our leases is not typically readily determinable.

Given we do not currently borrow on a collateralized basis, our incremental borrowing rate is estimated to approximate the interest rate in which the Company would expect to pay on a collateralized basis over a similar term and payments, and in economic environments where the leased asset is located.

We use the portfolio approach to determine the discount rate for leases with similar characteristics or when the Company is reasonably certain that doing so would not materially affect the accounting for those leases to which a single discount rate is applied.

We establish assets and liabilities for the estimated construction costs incurred under lease arrangements where we are considered the owner for accounting purposes only, or build-to-suit leases, to the extent we are

involved in the construction of structural improvements or take construction risk prior to commencement of a lease.

Upon occupancy of facilities under build-to-suit leases, we assess whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance under GAAP.

If we continue to be the deemed owner, for accounting purposes, the facilities are accounted for as finance obligations.

Finance Leases

Finance lease ROU assets and finance lease liabilities are recognized at the lease commencement date or the date the lessor makes the leased asset available for use.

Finance lease ROU assets are generally amortized on a straight-line basis over the lease term, and the carrying amount of finance lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable, and (2) reduced to reflect lease payments made during the period.

Amortization expense for finance lease ROU assets and interest accretion on finance lease liabilities are recorded to depreciation and interest expense, respectively, in our consolidated statement of operations.

We lease approximately 280,000 square feet of office space for our corporate headquarters in Needham, Massachusetts (the “Headquarters Lease”).

The Headquarters Lease has an expiration date of December 2030 , with an option to extend the lease term for two consecutive terms of five years each.

Our Headquarters Lease is accounted for as a finance lease.

Operating Leases

Our office space leases, exclusive of our Headquarters Lease, are operating leases, which we lease an aggregate of approximately 400,000 square feet at approximately 30 locations across North America, Europe, Asia Pacific and South America, in cities such as New York, London, Sydney, Barcelona, Buenos Aires and Paris, primarily used as sales offices, subsidiary headquarters, and for international operations, pursuant to leases with various expiration dates, with the latest expiring in July 2027 .

Operating lease ROU assets and liabilities are recognized at lease commencement date, or the date the lessor makes the leased asset available for use, based on the present value of lease payments over the lease term using the Company’s estimated incremental borrowing rate.

ROU assets associated with operating leases comprise the initial lease liability, and are then adjusted for any prepaid or deferred rent payments, unamortized initial direct costs, and lease incentives received.

Amortization expense for operating lease ROU assets and interest accretion on operating lease liabilities are recognized as a single operating lease cost in our consolidated statement of operations, which results effectively in recognition of rent expense on a straight-line basis over the lease period.

The carrying amount of operating lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable;

and (2) reduced to reflect lease payments made during the period.

We present the combination of both the amortization of operating lease ROU assets and the change in the operating lease liabilities in the same line item within the adjustments to reconcile net income (loss) to net cash provided by operating activities in our consolidated statement of cash flows.

Lease incentives are recognized as reductions of rental expense on a straight-line basis over the term of the lease.

Certain of our operating leases include options to extend the lease terms for up to 6 years and/or terminate the leases within 1 year , which we include in our lease term if we are reasonably certain to exercise these options.

Payments under our operating leases are primarily fixed, however, certain of our operating lease agreements include rental payments which are adjusted periodically for inflation.

We recognize these costs as variable lease costs on our consolidated statement of operations, which were not material during the years ended December 31, 2022, 2021 and 2020.

In addition, our short-term lease costs were not material in any period presented.

We also establish assets and liabilities at the present value of estimated future costs to return certain of our leased facilities to their original condition to satisfy any asset retirement obligations.

Such assets are depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs and are included in other long-term liabilities on our consolidated balance sheet.

Our asset retirement obligations were not material as of both December 31, 2022 and 2021.

Operating and finance lease assets and liabilities are included on our consolidated balance sheet as follows for the periods presented:

Presentation on Consolidated Balance Sheet

(in millions)

Noncurrent Lease Assets:

Finance lease

Property and equipment, net

Operating lease

Operating lease right-of-use-assets

Total lease assets

Current Lease Liabilities:

Finance lease

Accrued expenses and other current liabilities

Operating lease

Accrued expenses and other current liabilities

Total current lease liabilities

Noncurrent Lease Liabilities:

Finance lease

Finance lease liability, net of current portion

Operating lease

Operating lease liabilities, net of current portion

Total noncurrent lease liabilities

Total lease liabilities

As of December 31, 2022, we did not have any additional operating or finance leases that have not yet commenced but that create significant rights and obligations for us.

The components of lease expense were as follows for the periods presented:

Year ended December 31,

(in millions)

Operating lease cost (1)

Finance lease cost:

Amortization of right-of-use assets (2)

Interest on lease liabilities (3)

Total finance lease cost

Sublease income (1)

Total lease cost, net

(1) Operating lease costs, net of sublease income, are included within operating expenses in our consolidated statements of operations.

(2) Amount is included in depreciation expense in our consolidated statements of operations.

(3) Amount is included in interest expense in our consolidated statements of operations.

Additional information related to our leases is as follows for the periods presented:

Year ended December 31,

Supplemental Cash Flows Information:

(in millions)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from operating leases

Operating cash outflows from finance lease

Financing cash outflows from finance lease

Right-of-use assets obtained in exchange for lease liabilities:

Operating leases

Year ended December 31,

Weighted-average remaining lease term:

Operating leases

Finance lease

Weighted-average discount rate:

Operating leases

Finance lease

Future lease payments under non-cancelable leases as of December 31, 2022 were as follows:

Year Ending December 31,

Operating Leases

Finance Lease

(in millions)

Total future lease payments

Less imputed interest

Total lease liabilities

GOODWILL AND INTANGIBLE ASSETS, NET

The following table summarizes our goodwill activity by reportable segment for the periods presented:

Hotels, Media & Platform

Experiences & Dining

Tripadvisor Core

(in millions)

Balance as of December 31, 2020

Foreign currency translation adjustments

Balance as of December 31, 2021

Foreign currency translation adjustments

Allocation to new segments (1)

Balance as of December 31, 2022

(1) Refer to “Note 19:

Segment and Geographic Information ”

for information regarding our reportable segment changes in the second quarter of 2022.

(2) Other consists of the combination of Rentals, Flights & Car, and Cruises, and did not previously constitute a reportable segment.

There were no goodwill impairment charges recognized on our consolidated statements of operations during the years ended December 31, 2022 and 2021, respectively.

Refer to “Note 2:

Significant Accounting Policies ”

for discussion regarding the Company’s 2022 interim and annual goodwill impairment assessments.

During 2020, the Company recognized a goodwill impairment charge of $ 3 million, which represented all goodwill previously allocated to our former Tripadvisor China reporting unit.

This impairment was driven by strategic operating decisions made by the Company.

As of both December 31, 2022 and 2021, accumulated goodwill impairment losses totaled $ 3 million, which was associated with the Tripadvisor Core segment as of December 31, 2022 and Other as of December 31, 2021.

Intangible assets, acquired in business combinations and recorded at fair value on the date of purchase, consisted of the following for the periods presented:

(in millions)

Intangible assets with definite lives

accumulated amortization

Intangible assets with definite lives, net

Intangible assets with indefinite lives

Amortization expense for definite-lived intangible assets was $ 13 million, $ 20 million, and $ 26 million, for the years ended December 31, 2022, 2021 and 2020, respectively.

Our indefinite-lived intangible assets relate to trade names and trademarks for the Tripadvisor brand.

During the Company's annual indefinite-lived intangible impairment test during the fourth quarter of 2022, a qualitative

assessment was performed.

As part of our qualitative assessment we considered, amongst other factors, the amount of excess fair value of our trade names and trademarks to the carrying value of those same assets, changes in estimates, and valuation input assumptions, since our previous quantitative analysis.

After considering these factors and the impact that changes in such factors would have on the inputs used in our previous quantitative assessment, we determined that it was more likely than not that our indefinite-lived intangible assets were no t impaired as of December 31, 2022.

There were no impairment charges recognized to our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020 related to our intangible assets.

The following table presents the components of our intangible assets with definite lives for the periods presented:

December 31, 2022

December 31, 2021

Weighted Average

Remaining Life

(in millions)

Trade names and trademarks

Customer lists and supplier relationships

Subscriber relationships

Technology and other

Our definite-lived intangible assets are being amortized on a straight-line basis.

The straight-line method of amortization is currently our best estimate, or approximates to date, the distribution of the economic use of these intangible assets.

The estimated amortization expense for intangible assets with definite lives for each of the next five years, and the expense thereafter, assuming no subsequent impairment of the underlying assets or change in estimate of remaining lives, is expected to be as follows (in millions):

2028 and thereafter

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following for the periods presented:

December 31, 2022

December 31, 2021

(in millions)

Accrued salary, bonus, and other employee-related benefits

Accrued marketing costs

Interest payable (1)

Current income taxes payable (2)

Finance lease liability - current portion (3)

Operating lease liabilities - current portion (3)

(1) Amount relates primarily to unpaid interest accrued on our 2025 Senior Notes.

Refer to “Note 9:

Debt ”

for further information.

(2) Refer to “Note 11:

Income Taxes ”

for further information regarding our income tax liabilities.

(3) Refer to “Note 6:

Leases ”

for further information regarding our lease obligations.

The Company’s outstanding debt consisted of the following for the periods presented:

December 31, 2022

Outstanding Principal Amount

Unamortized Debt Issuance Costs

Carrying Value

(in millions)

Long-Term Debt:

2025 Senior Notes

2026 Senior Notes

Total Long-Term Debt

December 31, 2021

Outstanding Principal Amount

Unamortized Debt Issuance Costs

Carrying Value

(in millions)

Long-Term Debt:

2025 Senior Notes

2026 Senior Notes

Total Long-Term Debt

Credit Facility

We are party to a credit agreement with a group of lenders initially entered into in June 2015 (as amended, the “Credit Agreement”), which, among other things, provides for a $ 500 million secured revolving credit facility (the “Credit Facility”) with a maturity date of May 12, 2024 .

The Company may borrow from the Credit Facility in U.S.

dollars and Euros.

In addition, the Credit Facility includes $ 15 million of borrowing capacity available for letters of credit and $ 40 million for Swing Line borrowings on same-day notice.

As of December 31, 2022 and 2021, we had issued $ 4 million and $ 3 million, respectively, of undrawn standby letters of credit under the Credit Facility.

The Credit Facility, among other things, requires us to maintain a maximum leverage ratio and contains certain customary affirmative covenants and events of default, including a change of control.

We amended the Credit Facility during 2020 to, among other things:

suspend the leverage ratio covenant for quarterly testing of compliance beginning in the second quarter of 2020, replacing it with a minimum liquidity covenant through June 30, 2021 (requiring the Company to maintain $ 150 million of unrestricted cash, cash equivalents and short-term investments less deferred merchant payables plus available revolver capacity), until the earlier of (a) the first day after June 30, 2021 through maturity on which borrowings and other revolving credit utilizations under the revolving commitments exceed $ 200 million, and (b) the election of the Company, at which time the leverage ratio covenant will be reinstated (the “Leverage Covenant Holiday”).

The Company remained in the Leverage Covenant Holiday as of December 31, 2022.

plus an applicable margin ranging from 1.25 % to 2.00 % with a London Inter-Bank Offered Rate (“LIBO rate”) floor of 1.00 % per annum;

or (ii) the Alternate Base Rate Borrowing, which is the greatest of (a) the Prime Rate in effect on such day, (b) the New York Fed Bank Rate in effect on such day plus 1/2 of 1.00% per annum , and (c) the Adjusted LIBO Rate (or LIBO rate multiplied by the Statutory Reserve Rate) for an interest period of one month plus 1.00 % ;

in addition to an applicable margin ranging from 0.25 % to 1.00 %.

In addition, based on the Company’s existing leverage ratio

, we are required to pay a quarterly commitment fee, at an applicable rate ranging from 0.15 % to 0.30 % as of December 31, 2022, on the daily unused portion of the Credit Facility for each fiscal quarter during the Leverage Covenant Holiday and in connection with the issuance of letters of credit.

As of December 31, 2022 and 2021, the Company had no outstanding borrowings under the Credit Facility.

During the first quarter of 2020, the Company borrowed $ 700 million under the Credit Facility.

These funds were drawn down as a precautionary measure to reinforce the Company’s liquidity position and preserve financial flexibility in light of uncertainty in the global markets resulting from COVID-19.

The Company repaid these borrowings in full during July 2020.

For the years ended December 31, 2022, 2021 and 2020, we recorded total interest expense and commitment fees on the Credit Facility of $ 1 million, $ 3 million and $ 10 million , respectively, to interest expense on our consolidated statements of operations.

In connection with the amendments to our Credit Facility in 2020, we incurred additional lender fees and debt financing costs totaling $ 7 million, which were capitalized as deferred financing costs and recorded to other long-term assets on the consolidated balance sheet, while $ 2 million of previously deferred financing costs related to the Credit Facility were immediately recognized to interest expense on our consolidated statement of operations for the year ended December 31, 2020.

As of December 31, 2022 and 2021, the Company had $ 2 million and $ 4 million, respectively, remaining in deferred financing costs in connection with the Credit Facility.

These costs will be amortized over the remaining term of the Credit Facility, using the effective interest rate method, and recorded to interest expense on our consolidated statement of operations.

There is no specific repayment date prior to the maturity date for any borrowings under the Credit Agreement.

We may voluntarily repay any outstanding borrowing under the Credit Facility at any time without premium or penalty, other than customary breakage costs with respect to Eurocurrency loans.

Additionally, the Company believes that the likelihood of the lender exercising any subjective acceleration rights, which would permit the lenders to accelerate repayment of any outstanding borrowings, is remote.

As such, we classify any borrowings under this facility as long-term debt.

The Credit Agreement contains a number of covenants that, among other things, restrict our ability to incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change our fiscal year.

The Credit Agreement also limits the Company from repurchasing shares of its common stock and paying dividends, among other restrictions, during the Leverage Covenant Holiday.

In addition, to secure the obligations under the Credit Agreement, the Company and certain subsidiaries have granted security interests and liens in and on substantially all of their assets as well as pledged shares of certain of the Company’s subsidiaries.

The Credit Agreement also contains certain customary affirmative covenants and events of default, including a change of control.

If an event of default occurs, the lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of all amounts due under the Credit Facility.

As of December 31, 2022 and 2021, we were in compliance with our covenants.

2025 Senior Notes

On July 9, 2020 , the Company completed the sale of $ 500 million aggregate principal amount of 7.0 % Senior Notes due 2025 (the “2025 Senior Notes”), pursuant to a purchase agreement, dated July 7, 2020 , among the Company, the guarantors party thereto and the initial purchasers party thereto in a private offering to qualified institutional buyers.

The 2025 Senior Notes were issued pursuant to an indenture, dated July 9, 2020 (the “2025 Indenture”), among the Company, the guarantors and the trustee.

The 2025 Indenture provides, among other things, that interest is payable on the 2025 Senior Notes semiannually on January 15 and July 15 of each year, which began on January 15, 2021 , and continue until their maturity date of July 15, 2025 .

The 2025 Senior Notes are senior unsecured obligations of the Company and are guaranteed by certain of the Company’s domestic subsidiaries .

The Company has the option to redeem all or a portion of the 2025 Senior Notes at any time on or after July 15, 2022 at the redemption prices set forth in the 2025 Indenture, plus accrued and unpaid interest, if any.

Subject to certain limitations, in the event of a Change of Control Triggering Event (as defined in the 2025 Indenture), the Company will be required to make an offer to purchase the 2025 Senior Notes at a price equal to 101 % of the aggregate

principal amount of the 2025 Senior Notes repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.

These features have been evaluated as embedded derivatives under GAAP;

however, the Company has concluded they do not meet the requirements to be accounted for separately.

As of both December 31, 2022 and 2021, unpaid interest on our 2025 Senior Notes totaled approximately $ 16 million and was included in accrued expenses and other current liabilities on our consolidated balance sheets, an d $ 35 million, $ 35 million and $ 17 m illion was recorded as interest expense on our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020, respectively.

In the third quarter of 2020, the Company used all proceeds from the 2025 Senior Notes to repay a portion of our Credit Facility outstanding borrowings.

The 2025 Indenture contains covenants that, among other things and subject to certain exceptions and qualifications, restrict the ability of the Company and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness or issue disqualified stock or certain preferred stock;

pay dividends and make other distributions or repurchase stock;

make certain investments;

create or incur liens;

create restrictions affecting the ability of restricted subsidiaries to make distributions, loans or advances or transfer assets to the Company or the restricted subsidiaries;

enter into certain transactions with the Company’s affiliates;

designate restricted subsidiaries as unrestricted subsidiaries;

and merge, consolidate or transfer or sell all or substantially all of the Company’s assets.

2026 Senior Notes

On March 25, 2021, we entered into a purchase agreement for the sale of $ 300 million aggregate principal amount of 0.25 % Convertible 2026 Senior Notes due 2026 (the “2026 Senior Notes”) in a private offering to qualified institutional buyers.

The 2026 Senior Notes included an over-allotment option that provided the initial purchasers of the 2026 Senior Notes with the option to purchase an additional $ 45 million aggregate principal amount of the 2026 Senior Notes;

such over-allotment option was fully exercised.

In connection with the issuance of the 2026 Senior Notes, the Company entered into an Indenture, dated March 25, 2021 (the “2026 Indenture”), among the Company, the guarantors party thereto and the trustee.

The terms of the 2026 Senior Notes are governed by the 2026 Indenture.

The 2026 Senior Notes mature on April 1, 2026 , unless earlier converted, redeemed or repurchased.

The 2026 Senior Notes are senior unsecured obligations of the Company, although guaranteed by certain of the Company’s domestic subsidiaries, with interest payable semiannually in arrears on April 1 and October 1 of each year, which began on October 1, 2021 .

As of December 31, 2022 and 2021, unpaid interest on our 2026 Senior Notes was not material.

The 2026 Senior Notes will be redeemable, in whole or in part, at our option at any time, and from time to time, on or after April 1, 2024 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2026 Senior Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of our common stock exceeds 130 % of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice;

and (2) the trading day immediately before the date we send such notice .

In addition, calling any such note for redemption will constitute a make-whole fundamental change with respect to that note, in which case the conversion rate applicable to the conversion of that note will be increased in certain circumstances if it is converted after it is called for redemption.

The 2026 Senior Notes are unconditionally guaranteed, on a joint and several basis, by the guarantors on a senior, unsecured basis.

The 2026 Senior Notes are our general senior unsecured obligations and rank equally in right of payment with all of our existing and future senior indebtedness, and senior in right of payment to all of our future subordinated indebtedness.

The 2026 Senior Notes will be effectively subordinated to any of our existing and future secured indebtedness, including borrowings under the Credit Facility, to the extent of the value of the assets securing such indebtedness.

Holders may convert their 2026 Senior Notes at any time prior to the close of business on the business day immediately preceding January 1, 2026, in multiples of $ 1,000 principal amount, only under the following conditions and circumstances:

during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $ 1,000 principal amount of 2026 Senior Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

upon the occurrence of specified corporate events as described in the 2026 Indenture.

In addition, holders may convert their 2026 Senior Notes, in multiples of $ 1,000 principal amount, at their option at any time beginning on or after January 1, 2026, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the 2026 Senior Notes, without regard to the foregoing circumstances.

The initial conversion rate for the 2026 Senior Notes is 13.5483 shares of common stock per $ 1,000 principal amount of 2026 Senior Notes, which is equivalent to an initial conversion price of approximately $ 73.81 per share of common stock, or approximately 4.7 million shares of common stock, subject to adjustment upon the occurrence of certain specified events as set forth in the 2026 Indenture.

Upon conversion, the Company may choose to pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock.

The Company accounts for the 2026 Senior Notes as a liability measured at its amortized cost, and no other features of the 2026 Senior Notes are bifurcated and recognized as a derivative .

The proceeds from the issuance of the 2026 Senior Notes were approximately $ 340 million, net of debt issuance costs of $ 5 million comprised primarily of the initial purchasers’

discount, and the Company used a portion of the proceeds from the 2026 Senior Notes to enter into capped call transactions, as discussed below.

T he Company intends to use the remainder of the proceeds from this offering for general corporate purposes, which may include repayment of debt, including the partial redemption and/or purchase of our 2025 Senior Notes prior to maturity.

The debt issuance costs will be amortized over the remaining term of the 2026 Senior Notes, using the effective interest rate method, and recorded to interest expense on our consolidated statement of operations.

During the years ended December 31, 2022 and 2021, our effective interest rate on our 2026 Senior Notes, including debt issuance costs, was approxi mately 0.47 % and 0.53 %, respectively, and $ 1 million was recorded as interest expense on our consolidated statements of operations for both the years ended December 31, 2022 and 2021.

The 2026 Senior Notes are unsecured and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or restrictions on the issuance or repurchase of securities by the Company.

Capped Call Transactions

In connection with the issuance of the 2026 Senior Notes, the Company entered into privately negotiated capped call transactions (the “Capped Calls”) with certain of the initial purchasers of the 2026 Senior Notes and/or their respective affiliates and/or other financial institutions (the “Option Counterparties”) at a cost of approximately $ 35 million.

The Capped Calls are separate transactions entered into by the Company with each of the Option Counterparties, and are not part of the terms of the 2026 Senior Notes and therefore will not affect any noteholder’s rights under the 2026 Senior Notes.

Noteholders will not have any rights with respect to the Capped Calls.

The Capped Calls cover, subject to anti-dilution adjustments, substantially similar to those applicable to the conversion rate of the 2026 Senior Notes, the number of shares of common stock initially underlying the 2026 Senior Notes, or up to approximately 4.7 million shares of our common stock.

The Capped Calls are expected generally to reduce potential dilution to the common stock upon any conversion of 2026 Senior Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of such converted 2026 Senior Notes, as the case may be, with such reduction and/or offset subject to a cap.

The strike price of the

Capped Calls is $ 73.81 , while the cap price of the Capped Calls will initially be $ 107.36 per share of our common stock, which represents a premium of 100 % over the close price of our common stock of $ 53.68 per share on March 22, 2021 and is subject to certain customary adjustments under the terms of the Capped Calls.

The Capped Calls are considered indexed to our own stock and are considered equity classified under GAAP, and included as a reduction to additional paid-in-capital within stockholders’

equity on our consolidated balance sheets as of both December 31, 2022 and 2021.

The Capped Calls are not accounted for as derivatives and their fair value is not remeasured each reporting period.

In addition, upon entering into the Capped Calls we recorded an associated deferred tax asset of $ 9 million, as we made an income tax election allowable under the IRS regulations in order to recover the cost of the Capped Calls as interest expense for income tax purposes only over the term of the 2026 Senior Notes.

OTHER LONG-TERM LIABILITIES

Other long-term liabilities consisted of the following for the periods presented:

December 31, 2022

December 31, 2021

(in millions)

Unrecognized tax benefits (1)

Deferred gain on equity method investment (2)

Long-term income taxes payable (3)

(1) Refer to “Note 11:

Income Taxes ”

for information regarding our unrecognized tax benefits.

Amounts include accrued interest related to this liability .

(2) Amount relates to long-term portion of a deferred income liability recorded as a result of an equity method investment made in the fourth quarter of 2019.

Refer to “Note 4:

Financial Instruments and Fair Value Measurements ”

for additional information .

(3) Amount relates to the long-term portion of transition tax payable related to the 2017 Tax Act.

Refer to “Note 11:

Income Taxes ,”

for additional information.

The following table presents a summary of our domestic and foreign income (loss) before income taxes for the periods presented:

Year Ended December 31,

(in millions)

Income (loss) before income taxes

The components of our provision (benefit) for income taxes consisted of the following for the periods presented:

Year Ended December 31,

(in millions)

Current income tax expense (benefit):

Current income tax expense (benefit)

Deferred income tax expense (benefit):

Deferred income tax expense (benefit)

Provision (benefit) for income taxes

The significant components of our deferred tax assets and deferred tax liabilities consisted of the following for the periods presented:

(in millions)

Deferred tax assets:

Stock-based compensation

Net operating loss carryforwards

Provision for accrued expenses

Lease financing obligation

Foreign advertising spend

Tax credit carryforward

Capitalized research expenses (1)

Interest carryforward

Total deferred tax assets

valuation allowance

Net deferred tax assets

Deferred tax liabilities:

Intangible assets

Property and equipment

Prepaid expenses

Building - corporate headquarters

Total deferred tax liabilities

Net deferred tax asset (liability)

(1) As required by the 2017 tax Cuts and Jobs Act, effective January 1, 2022, our research and development expenditures were capitalized and amortized, which resulted in a deferred tax asset.

At December 31, 2022, we had federal, state, and foreign net operating loss carryforwards (“NOLs”) of approximately $ 2 million, $ 97 million, and $ 306 million, respectively.

federal NOLs of $ 2 million expire at various times starting from 2029 .

State NOLs of $ 13 million may be carried forward indefinitely, while the remaining state NOLs of $ 84 million expire at various times starting from 2024 .

Foreign NOLs of $ 302 million may be carried forward indefinitely, while the remaining foreign NOLs of $ 4 million expire at various times starting from 2023 .

As of December 31, 2022, we had a valuation allowance of approximately $ 114 million rela ted to certain NOL carryforwards and other foreign deferred tax assets for which it is more likely than not, the tax benefit will not be realized.

This amount represented a decrease of $ 9 million, as compared to the balance as of December 31, 2021.

The decrease was primarily related to a change in a deferred tax asset in our U.K.

subsidiaries.

Except for such foreign deferred tax assets, discussed above, we expect to realize all of our deferred tax assets.

Due to the negative impact from COVID-19 in recent years and the continued risks and uncertainties that remain, in addition to economic uncertainty of a potential U.S.

recession and global inflationary pressures, we will continue to monitor our financial performance to determine if the valuation allowance against our deferred tax assets may be necessary in the future.

A reconciliation of the provision (benefit) for income taxes to the amounts computed by applying the statutory federal income tax rate to income (loss) before income taxes is as follows for the periods presented:

Year Ended December 31,

(in millions)

Income tax expense at the federal statutory rate

Foreign rate differential (1)

State income taxes, net of effect of federal tax benefit

Unrecognized tax benefits and related interest

Rate differential on US NOL carryback (2)

Research tax credit

Stock-based compensation

Change in valuation allowance

Local income tax on intercompany transaction

Executive compensation

Provision (benefit) for income taxes

(1) During 2021, we extinguished intercompany debt which resulted in a reduction of our overall foreign rate differential.

(2) As a result of the CARES Act, an income tax benefit of $ 23 million was recorded during the year ended December 31, 2020 related to the income tax rate differential in tax years applicable to U.S.

loss carryforwards that became eligible for carryback.

The CARES Act allowed the Company to carryback our U.S.

federal NOLs incurred in 2020, generating an expected U.S.

federal tax benefit of $ 76 million, of which $ 64 million was refunded during the year ended December 31, 2022.

The remaining refund of $ 12 million is included in income taxes payable on our consolidated balance sheet as of December 31, 2022 and is expected to be received during the year ending December 31, 2023.

In addition, $ 25 million of this refund received was recorded to long-term taxes payable on our consolidated balance sheet as of December 31, 2022, which reflects future transition tax payments to be made by the Company related to the 2017 Tax Act.

In addition, certain governments have passed legislation to assist businesses during the COVID-19 pandemic through loans, wage subsidies, wage tax relief or other financial aid.

We participated in several of these programs, including the CARES Act in the U.S., the United Kingdom's job retention scheme, as well as similar programs in other global jurisdictions.

In addition, in certain countries, such as within the European Union, Singapore, Australia, and other global jurisdictions, we also participated in programs where government assistance was in the form of wage subsidies and reductions in wage-related employer taxes paid by us.

We recognize these government assistance benefits when there is a reasonable assurance of compliance with the conditions associated with the assistance and the amount is received.

During the years ended December 31, 2022, 2021 and 2020, we recognized government grants and other assistance benefits of $ 12 million, $ 9 million and $ 12 million , respectively.

These amounts are not income tax related and were recorded as a reduction of personnel and overhead costs within operating costs in the consolidated statements of operations.

The Company does not expect any additional future benefits of this nature.

Due to the one-time transition tax on the deemed repatriation of undistributed foreign subsidiary earnings and profits in 2017, the majority of previously unremitted earnings have been subjected to U.S.

federal income tax.

the extent future distributions from these subsidiaries will be taxable, a deferred tax liability has been accrued which was not material as of December 31, 2022.

As of December 31, 2022, $ 445 million of our cumulative undistributed foreign earnings were no longer considered to be indefinitely reinvested.

For purposes of governing certain of the ongoing relationships between Tripadvisor and Expedia at and after the Spin-Off, and to provide for an orderly transition, Tripadvisor and Expedia entered into various agreements at the time of the Spin-Off, which Tripadvisor has satisfied its obligations.

However, Tripadvisor continues to be subject to certain post Spin-Off obligations under the Tax Sharing Agreement.

Under the Tax Sharing Agreement between Tripadvisor and Expedia, Tripadvisor is generally required to indemnify Expedia for any taxes resulting from the Spin-Off (and any related interest, penalties, legal and professional fees, and all costs and damages associated with related stockholder litigation or controversies) to the extent such amounts resulted from (i) any act or failure to act by Tripadvisor described in the covenants in the tax sharing agreement, (ii) any acquisition of Tripadvisor equity securities or assets or those of a member of the Tripadvisor group, or (iii) any failure of the representations with respect to Tripadvisor or any member of our group to be true or any breach by Tripadvisor or any member of the Tripadvisor group of any covenant, in each case, which is contained in the separation documents or in the documents relating to the IRS private letter ruling and/or the opinion of counsel.

The full text of the Tax Sharing Agreement is incorporated by reference in this Annual Report on Form 10-K as Exhibit 10.2.