LIBERTY TRIPADVISOR HOLDINGS, INC. 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 thereto.
Overview
The financial information represents the historical consolidated results of TripCo and its subsidiaries as discussed in note 1 in the accompanying consolidated financial statements. In the following discussion, TripCo and its subsidiaries are referred to as "TripCo," "the Company," "us," "we" and "our". All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.
Our "Corporate" category includes corporate expenses.
Tripadvisor's stock price declined in
Strategies and Challenges
Results for TripCo are largely dependent upon the operating performance of Tripadvisor. Therefore, the executive summary below contains the strategies and challenges of Tripadvisor for an understanding of the business objectives of Tripadvisor.
Tripadvisor operates in a unique position in the travel and experiences ecosystem:
?Large, global, and growing addressable markets including travel, experiences, and digital advertising; ?A large, global and engaged audience making meaningful contributions that reinforces a relationship of trust and community; and ?A wealth of high intent data that comes from serving its audience of travelers and experience seekers at different points along their journey - whether they are engaging on Tripadvisor's platforms for inspiration on their next experience, planning a trip, or making a purchasing decision.
Tripadvisor is united in a shared purpose and vision, but operates different value creation strategies for each segment. Tripadvisor manages priorities and levels of investment based upon factors that include the size and maturity of each segment, the size and maturity of the addressable market, growth opportunities, and competitive positioning, among other factors.
In the Tripadvisor Core segment, Tripadvisor offers a compelling value proposition to both travelers and partners across a number of key categories that include accommodations, experiences, and media, among other categories. This
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value proposition is delivered through a collection of durable assets that Tripadvisor believes is difficult to replicate: a trusted brand, authentic user generated content, a large community of contributors, and one of the largest global travel audiences. Tripadvisor's strategy in this segment is to leverage these core assets as well as its technology capabilities to provide travelers with a compelling user experience that helps travelers make the best decisions in each phase of their travel journey, including pre-trip planning, in-destination, and post-trip sharing. Tripadvisor intends to drive new traveler acquisition and repeat audience engagement on its platform by offering meaningful travel guidance solutions and services that reduce friction in the traveler journey and create a deeper, more persistent relationship with travelers. Tripadvisor evaluates investment opportunities across data, product, marketing, and technology that it believes will improve the monetization of its audience through deeper engagement, which, in turn, Tripadvisor expects will drive more value to its partners.
In the
Tripadvisor's investments are focused on continuing to grow both its restaurant base and its diner base by offering innovative tools and features on its platform, and through continued awareness of its brand.
Tripadvisor expects to drive growth through organic investment in data, product, marketing and technology to further enhance the value it delivers to travelers and partners across its brands, platforms, and reportable segments. In addition, Tripadvisor may accelerate growth inorganically by opportunistically pursuing strategic acquisitions.
Current Trends Affecting Tripadvisor's Business
The online travel industry in which Tripadvisor operates is large, highly dynamic and competitive. Described below are the impacts on Tripadvisor's business from COVID-19, other current trends affecting its business and reportable segments, including key drivers of financial results, and uncertainties that may impact Tripadvisor's ability to execute on its objectives and strategies, are below.
COVID-19
The COVID-19 pandemic had a significant negative impact on the global economy
and the travel, leisure, hospitality and restaurant industries in particular
beginning in 2020. Since the beginning of the pandemic, the pervasiveness and
severity of travel restrictions and stay-at-home directives have varied by
country and state; however, as of
Tripadvisor's consolidated revenue for the year ended
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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 period, 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 45% during the year ended
Tripadvisor-branded hotels revenue increased 44% during the year ended
While slower to recover than Tripadvisor-branded hotels revenue,
Tripadvisor-branded display and platform revenue increased 33% during the year
ended
Tripadvisor experiences and dining revenue increased 91% as a result of the
travel demand recovery, combined with the easing of government restrictions, as
well as the continued execution by its business, primarily driven by performance
in Tripadvisor's experiences offering as it continues 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
Other revenue also improved during the year ended
Tripadvisor began to see improvement in its
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,
Tripadvisor saw a notable recovery beginning in
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and restaurant openings remained below pre-pandemic levels through 2022. TheFork segment revenue during 2022 increased 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, Tripadvisor increased its
performance marketing investments in 2022. In Tripadvisor Core, Tripadvisor
observed strong performance in hotel meta primarily driven by increased CPC
pricing during 2022. This environment allowed Tripadvisor to increase
performance marketing at a profitable ROAS (return on advertising spend), while
its direct traffic, including SEO, has been slower to recover. Historically,
Tripadvisor has generated a significant amount of direct traffic from search
engines, such as
The global experiences market is large, growing, and highly fragmented, with the vast majority of bookings still occurring through traditional offline sources.
Tripadvisor is observing a secular shift, however, as this market continues to
grow and moves online faster. Tripadvisor is observing similar trends in terms
of online adoption by both consumers and partners in the global restaurants
category, particularly in
Results of Operations-Consolidated
General. We provide in the tables below information regarding our historical Consolidated Operating Results and Other Income and Expense, as well as information regarding the contribution to those items from our reportable segments.
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
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In the second quarter of 2022, as part of a continuous review of our business we
realigned the reportable segment information which our chief operating decision
maker, or CODM, regularly assesses to evaluate performance for operating
decision-making purposes, including evaluation and allocation of resources. The
revised segment reporting structure includes the following reportable segments:
(1) Tripadvisor Core; (2)
Years ended December 31,
2022 2021 2020
amounts in millions
Revenue
Tripadvisor Core $ 966 665 483
Viator 493 184 55
TheFork 126 85 86
Intersegment eliminations (93) (32) (20)
Total revenue 1,492 902 604
Operating expense, excluding stock-based
compensation 301 239 230
SG&A, excluding stock-based compensation 913 573 435
Stock-based compensation 93 125 112
Depreciation and amortization 97 150 168
Restructuring and other related reorganization
costs - - 41
Impairment of goodwill and intangible assets - - 550
Operating income (loss) 88 (185) (932)
Other income (expense):
Interest expense (65) (60) (41)
Dividend and interest income 16 1 3
Realized and unrealized gains (losses) on
financial instruments, net 62 251 (19)
Other, net (8) (12) (25)
5 180 (82)
Earnings (loss) before income taxes 93 (5) (1,014)
Income tax (expense) benefit (47) 43 152
Net earnings (loss) $ 46 38 (862)
Adjusted OIBDA $ 287 90 (61)
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Revenue. Tripadvisor Core revenue increased
Years ended December 31,
2022 2021 2020
amounts in millions
Tripadvisor-branded hotels $ 650 451 292
Tripadvisor-branded display and platform 130 98 69
Tripadvisor experience and dining (1) 134 70 65
Other 52 46 57
Total Tripadvisor Core $ 966 665 483
Tripadvisor experiences and dining revenue within the Tripadvisor Core
(1) segment are shown gross of intersegment (intercompany) revenue, which is
eliminated on a consolidated basis. See note 13 to the accompanying
consolidated financial statements for a discussion of intersegment revenue.
Tripadvisor-branded hotels revenue primarily includes hotel auction revenue and
to a lesser extent, hotel B2B revenue, which includes click-based revenue
generated from hotel sponsored placement advertising that enable hotels to
enhance their visibility on Tripadvisor hotel pages, and subscription-based
advertising services that Tripadvisor offers to travel partners. For the years
ended
For the years ended
Tripadvisor experiences and dining revenue 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 that are fulfilled by
Other revenue includes alternative accommodation rentals revenue, in addition to
primarily click-based advertising and display-based advertising revenue from
cruise, flights and rental car offerings on Tripadvisor websites and mobile
apps. Other revenue increased
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TheFork segment revenue increased
Operating Expense. Operating expense increased
Selling, general and administrative. Selling, general and administrative expense
increased
General and administrative costs increased
Stock-based compensation. Stock based compensation decreased
Depreciation and amortization. Depreciation and amortization decreased
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Operating Income (Loss). Our consolidated operating income (loss) improved
Adjusted OIBDA. To provide investors with additional information regarding our
financial results, we also disclose Adjusted OIBDA, which is a non-GAAP
financial measure. We define Adjusted OIBDA as Operating income (loss) plus
depreciation and amortization, stock-based compensation, separately reported
litigation settlements, restructuring, acquisition and other related costs and
impairment charges. Our chief operating decision maker and management team use
this measure of performance in conjunction with other measures to evaluate our
business and make decisions about our resources. We believe this is an important
indicator of the operational strength and performance of our businesses by
identifying those items that are not directly a reflection of each business'
performance or indicative of ongoing business trends. In addition, this measure
allows us to view operating results, perform analytical comparisons and
benchmarking between businesses and identify strategies to improve performance.
Accordingly, Adjusted OIBDA should be considered in addition to, but not as a
substitute for, operating income, net income, cash flow provided by operating
activities and other measures of financial performance prepared in accordance
with
The following table provides a reconciliation of Operating income (loss) to
Adjusted OIBDA:
Years ended December 31,
2022 2021 2020
amounts in millions
Operating income (loss) $ 88 (185) (932)
Stock-based compensation 93 125 112
Depreciation and amortization 97 150 168
Impairment of goodwill and intangible assets - - 550
Restructuring and other related reorganization costs - - 41
Non-recurring expenses (1) 8 - -
Legal reserves and settlement 1 - -
Adjusted OIBDA $ 287 90 (61)
Tripadvisor incurred a loss of approximately
quarter of 2022, as the result of external fraud, which was recorded to
selling, general and administrative, including stock-based compensation on
(1) the consolidated statement of operations during the year ended
2022. Tripadvisor considers such costs to be non-recurring in nature. To the
extent Tripadvisor recovers any losses in future periods related to this
incident, Tripadvisor plans to reduce Adjusted OIBDA by the recovery amount
in those periods.
Adjusted OIBDA is summarized as follows:
Years ended December 31,
2022 2021 2020
amounts in millions
Tripadvisor Core $ 345 177 64
Viator (11) (31) (72)
TheFork (39) (46) (43)
Corporate (8) (10) (10)
Consolidated TripCo $ 287 90 (61)
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Consolidated Adjusted OIBDA increased
Tripadvisor Core Adjusted OIBDA increased
TheFork Adjusted OIBDA loss decreased
Corporate Adjusted OIBDA loss decreased
Interest expense. Interest expense increased
Dividend and interest income. Dividend and interest income increased
Realized and unrealized gains (losses) on financial instruments, net. Realized and unrealized gains (losses) on financial instruments, net are comprised of changes in the fair value of the following:
Years ended December 31,
2022 2021 2020
amounts in millions
TripCo Exchangeable Senior Debentures due 2051
63 199 (20)
Other 4 2 1
$ 62 251 (19)
The changes in these accounts are primarily due to market factors and changes in
the fair value of the underlying stocks or financial instruments to which these
related. Realized and unrealized gains (losses) on financial instruments, net
decreased
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in unrealized gains of
Other, net. Other, net expense decreased
Income taxes. The Company had income tax expense of
During 2022, the Company recognized additional tax expense related to changes in unrecognized tax benefits and the recognition of excess tax benefits and shortfalls to stock based compensation.
During 2021, the Company recognized additional tax benefit related to unrealized gains attributable to the Company's own stock which is not recognized for tax purposes and the recognition of deferred tax assets for basis differences in the stock of a consolidated subsidiary, partially offset by tax expense related to an increase in the valuation allowance against certain deferred tax assets.
Liquidity and Capital Resources
As of
The following are potential sources of liquidity: available cash balances, proceeds from asset sales, monetization of our investments, outstanding or anticipated debt facilities, debt and equity issuances, and dividend and interest receipts.
As of
As of
As of
The Credit Facility requires Tripadvisor to maintain a maximum leverage ratio
and contains certain customary affirmative covenants and events of default,
including a change of control. Tripadvisor amended the Credit Facility in
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million, and (b) the election of Tripadvisor, at which time the leverage ratio covenant (the "Leverage Covenant Holiday") will be reinstated.
Tripadvisor remained in the Leverage Covenant Holiday as of
As of
As of
In
In
The 2025 Senior Notes and 2026 Convertible Senior Notes are not registered securities and there are currently no plans to register these notes as securities in the future. Tripadvisor may from time to time repurchase its outstanding 2025 Senior Notes or 2026 Convertible Senior Notes through tender offers, open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, Tripadvisor's liquidity requirements, contractual restrictions and other factors.
Historically, Tripadvisor's operating cash flows have been sufficient to fund
its working capital requirements, capital expenditures and long term debt
obligations and other financial commitments and are expected to be sufficient in
future periods.
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Years ended December 31,
2022 2021 2020
amounts in millions
Cash flow information
Tripadvisor cash provided (used) by operating
activities $ 400 108 (194)
Corporate and other cash provided (used) by
operating activities (10) (11) (21)
Net cash provided (used) by operating activities
Tripadvisor cash provided (used) by investing activities$ (52) (54) (56) Corporate and other cash provided (used) by investing activities - - -
Net cash provided (used) by investing activities
Tripadvisor cash provided (used) by financing activities$ (27) 263 341 Corporate and other cash provided (used) by financing activities 5 43 4
Net cash provided (used) by financing activities
During the year ended
The projected use of TripCo's corporate cash will primarily be to pay fees (not
expected to exceed
Tripadvisor believes that its available cash and cash equivalents will be sufficient to fund Tripadvisor's foreseeable working capital requirements, capital expenditures, existing business growth initiatives, debt and interest obligations, lease commitments, tax-related payments and other financial commitments through at least the next twelve months. Tripadvisor's future capital requirements may also include capital needs for acquisitions, and/or other expenditures in support of its business strategy, and may potentially reduce Tripadvisor's cash balance and/or require Tripadvisor to borrow under its Credit Facility or to seek other financing alternatives.
Off-Balance Sheet Arrangements and Material Cash Requirements
We have contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business including potential tax obligations associated with certain transactions following the formation of TripCo. Although it is reasonably possible we may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying consolidated financial statements.
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The following table summarizes current and long-term material cash requirements,
both accrued and off-balance sheet, as of
Payments due by period
Less than More than
Total 1 year 1 - 3 years 3 - 5 years 5 years
amounts in millions
Material Cash Requirements
Finance and operating lease
obligations (1) $ 106 24 31 23 28
Long-term debt (2) 1,232 - 557 345 330
Expected interest payments (3) 142 38 61 4 39
Series A Preferred Stock (4) 276 - 276 - -
Other obligations (5) 42 23 17 1 1
Total $ 1,798 85 942 373 398
Estimated future lease payments for Tripadvisor's Headquarters Lease in
under non-cancelable subleases. See note 6 in the accompanying consolidated
financial statements for further information.
Amounts are stated at the face amount at maturity of our debt instruments and (2) may differ from the amounts stated in our consolidated balance sheet to the
extent debt instruments have elements which are reported at fair value.
Amounts do not assume additional borrowings or refinancings of existing debt.
(3) Amounts are based on our outstanding debt at
that our existing debt is repaid at maturity.
Amount that will be paid to settle debt host component of Series A Preferred
Stock on March 27, 2025 , assuming TripCo does not exercise its call right, asdescribed in note 8 to the accompanying consolidated financial statements, (4) prior to such date. This amount differs from the preferred stock liability
balance stated in our consolidated balance sheet as the liability is being
accreted to the amount to be paid upon settlement. See note 8 to the
accompanying consolidated financial statements for further information.
(5) Includes purchase obligations, expected commitment fee payments on the Credit
Facility and long term income taxes payable.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Listed below are the accounting estimates that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.
Recognition and Recoverability of
We account for acquired businesses using the acquisition method of accounting
which requires that the assets acquired and liabilities assumed be recorded at
the date of acquisition at their respective fair values. Any excess of the
purchase price over the estimated fair values of the net assets acquired is
recorded as goodwill. We test goodwill for impairment at the reporting unit
level (operating segment or one level below an operating segment).
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Our non-financial instrument valuations are primarily comprised of our annual assessment of the recoverability of our goodwill and other nonamortizable intangibles, such as trademarks and our evaluation of the recoverability of our other long-lived assets upon certain triggering events and the initial recognition of such assets through the application of the purchase accounting method. If the carrying value of our definite lived intangible assets and long-lived assets exceeds their expected undiscounted cash flows, we are required to write the carrying value down to fair value. Any such writedown is included in impairment of long-lived assets in our consolidated statement of operations. A high degree of judgment is required to estimate the fair value of our long-lived assets. We may use quoted market prices, prices for similar assets, present value techniques and other valuation techniques to prepare these estimates. We may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques. Due to the high degree of judgment involved in our estimation techniques, any value ultimately derived from our long-lived assets may differ from our estimate of fair value.
We perform our annual assessment of the recoverability of our goodwill and other non-amortizable intangible assets during the fourth quarter, or more frequently, if events and circumstances indicate impairment may have occurred. The accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. The accounting guidance also allows entities the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to the quantitative impairment test. The entity may resume performing the qualitative assessment in any subsequent period. In evaluating goodwill on a qualitative basis, the Company reviews the business performance of each reporting unit and evaluates other relevant factors as identified in the relevant accounting guidance to determine whether it is more likely than not that an indicated impairment exists for any of our reporting units. The Company considers whether there are any negative macroeconomic conditions, industry specific conditions, market changes, increased competition, increased costs in doing business, management challenges, the legal environments and how these factors might impact company specific performance in future periods. As part of the analysis, the Company also considers fair value determinations for certain reporting units that have been made at various points throughout the current and prior year for other purposes. If, based on the qualitative analysis, it is more likely than not that an impairment exists, the Company performs the quantitative impairment test.
During the second quarter of 2022, the composition of our reportable segments was revised. As a result of the change in reporting units, we assessed the recoverability of our goodwill and concluded the estimated fair values were in excess of the carrying values for these reporting units. Therefore, no indications of impairment were identified as a result of these changes in the second quarter of 2022.
As of
Goodwill Trademarks Total
amounts in millions
Tripadvisor Core $ 1,977 726 2,703
Viator 119 - 119
TheFork 104 - 104
$ 2,200 726 2,926
During the second quarter of 2020, due to the impact of COVID-19 on
Tripadvisor's operating results, and a sustained decline in Tripadvisor's stock
price, impairments of
TripCo will continue to monitor Tripadvisor's financial performance, stock price and other events and circumstances that may negatively impact the estimated fair values to determine if future impairment assessments may be necessary.
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Income Taxes
We are required to estimate the amount of tax payable or refundable for the current year and the deferred income tax liabilities and assets for the future tax consequences of events that have been reflected in our financial statements or tax returns for each taxing jurisdiction in which we operate. This process requires our management to make judgments regarding the timing and probability of the ultimate tax impact of the various agreements and transactions that we enter into. Based on these judgments we may record tax reserves or adjustments to valuation allowances on deferred tax assets to reflect the expected realizability of future tax benefits. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate, our inability to generate sufficient future taxable income or unpredicted results from the final determination of each year's liability by taxing authorities. These changes could have a significant impact on our financial position.
Additionally, Tripadvisor records liabilities to address uncertain tax positions taken in previously filed tax returns or that are expected to be taken 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 the tax position, based on its technical merits, will be sustained upon examination. For those positions for which a conclusion is reached that it is more likely than not it will be sustained, the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the taxing authority is recognized. 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.
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