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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

OR

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

For the transition period from                             to

Commission File Number 001-36603

LIBERTY TRIPADVISOR HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

46-3337365
(I.R.S. Employer
Identification No.)

12300 Liberty Boulevard, Englewood, Colorado 80112

(Address, including zip code, of Registrant’s principal executive offices)

Registrant’s telephone number, including area code: (720875-5200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Series A common stock

LTRPA

The Nasdaq Stock Market LLC

Series B common stock

LTRPB

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer 

Non-accelerated Filer 

Smaller Reporting Company 

Emerging Growth Company

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

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

The number of outstanding shares of Liberty TripAdvisor Holdings, Inc. common stock as of October 31, 2020 was:

Series A

Series B

Liberty TripAdvisor Holdings, Inc. common stock

72,167,796

2,952,569

Table of Contents

Table of Contents

Part I – Financial Information

Item 1. Financial Statements

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Balance Sheets (unaudited)

I-3

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Operations (unaudited)

I-5

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)

I-6

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Cash Flows (unaudited)

I-7

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Equity (unaudited)

I-8

LIBERTY TRIPADVISOR HOLDINGS, INC. Notes to Condensed Consolidated Financial Statements (unaudited)

I-10

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

I-27

Item 3. Quantitative and Qualitative Disclosures about Market Risk

I-38

Item 4. Controls and Procedures

I-38

Part II Other Information

Item 1. Legal Proceedings

II-1

Item 1A. Risk Factors

II-1

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

II-1

Item 6. Exhibits

II-2

SIGNATURES

II-3

I-2

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

    

September 30,

    

December 31,

 

2020

2019

 

amounts in millions

 

Assets

Current assets:

Cash and cash equivalents

$

453

 

341

Accounts receivable and contract assets, net of allowance for doubtful accounts of $33 million and $25 million, respectively

 

91

 

183

Other current assets

 

77

 

33

Total current assets

 

621

 

557

Property and equipment, net

 

138

 

155

Intangible assets not subject to amortization:

Goodwill (note 5)

 

2,221

 

2,527

Trademarks (note 5)

 

728

 

980

 

2,949

 

3,507

Intangible assets subject to amortization, net

 

221

 

277

Other assets, at cost, net of accumulated amortization

 

201

 

230

Total assets

$

4,130

 

4,726

(continued)

See accompanying notes to condensed consolidated financial statements.

I-3

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

    

September 30,

    

December 31,

 

2020

2019

 

amounts in millions

 

Liabilities and Equity

Current liabilities:

Deferred merchant and other payables

$

52

 

170

Deferred revenue

 

31

 

62

Accrued liabilities and other current liabilities

 

149

 

205

Total current liabilities

 

232

 

437

Long-term debt (note 6)

 

531

 

353

Deferred income tax liabilities

 

189

 

254

Other liabilities

 

357

 

381

Total liabilities

 

1,309

 

1,425

Redeemable preferred stock, $.01 par value. Authorized shares 50,000,000; issued and outstanding 325,000 shares at September 30, 2020 and 0 at December 31, 2019 (note 7)

370

Equity:

Series A common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding 72,167,796 shares at September 30, 2020 and 72,152,848 at December 31, 2019

1

1

Series B common stock, $.01 par value. Authorized shares 7,500,000; issued and outstanding 2,952,569 shares at September 30, 2020 and 2,929,401 December 31, 2019

Series C common stock, $.01 par value. Authorized 200,000,000 shares; no shares issued.

Additional paid-in capital

251

237

Accumulated other comprehensive earnings (loss), net of taxes

 

(28)

 

(29)

Retained earnings

 

(137)

 

111

Total stockholders' equity

 

87

 

320

Noncontrolling interests in equity of subsidiaries

 

2,364

 

2,981

Total equity

 

2,451

 

3,301

Commitments and contingencies (note 9)

Total liabilities, redeemable preferred stock and equity

$

4,130

 

4,726

See accompanying notes to condensed consolidated financial statements.

I-4

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended

 

Nine months ended

 

September 30,

 

September 30,

 

    

2020

    

2019

    

2020

    

2019

 

amounts in millions, except

 

per share amounts

 

Total revenue, net

$

151

428

488

1,225

Operating costs and expenses:

Operating expense, including stock-based compensation (note 2)

 

59

 

100

208

296

Selling, general and administrative, including stock-based compensation (note 2)

 

107

 

231

388

682

Depreciation and amortization

 

41

 

42

126

125

Restructuring and other related reorganization costs

42

Impairment of goodwill and intangible assets (note 5)

3

550

 

210

 

373

1,314

1,103

Operating income (loss)

 

(59)

 

55

(826)

122

Other income (expense):

Interest expense

 

(13)

 

(5)

(27)

(16)

Other, net

 

 

19

(25)

33

 

(13)

 

14

(52)

17

Earnings (loss) before income taxes

 

(72)

 

69

(878)

139

Income tax (expense) benefit

 

12

 

(21)

115

(57)

Net earnings (loss)

 

(60)

 

48

(763)

82

Less net earnings (loss) attributable to noncontrolling interests

 

(43)

 

32

(563)

65

Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

$

(17)

 

16

(200)

17

Net earnings (loss) available to common shareholders (note 3)

$

(34)

16

(247)

17

Basic net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):

$

(0.45)

0.21

(3.29)

 

0.23

Diluted net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):

$

(0.45)

0.21

(3.29)

 

0.23

See accompanying notes to condensed consolidated financial statements.

I-5

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

amounts in millions

Net earnings (loss)

$

(60)

48

(763)

82

Other comprehensive earnings (loss), net of taxes:

Foreign currency translation adjustments

 

16

(15)

2

(17)

Reclassification adjustment for net losses included in net income

1

Other comprehensive earnings (loss)

 

16

(15)

3

(17)

Comprehensive earnings (loss)

 

(44)

33

(760)

65

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

(31)

20

(561)

52

Comprehensive earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

$

(13)

13

(199)

13

See accompanying notes to condensed consolidated financial statements.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

Nine months ended

 

September 30,

 

2020

2019

 

amounts in millions

 

Cash flows from operating activities:

    

    

    

    

Net earnings (loss)

$

(763)

 

82

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities

Depreciation and amortization

 

126

 

125

Stock-based compensation

 

81

 

94

Realized and unrealized (gains) losses on financial instruments, net

1

(20)

Impairment of goodwill and intangible assets

550

Deferred income tax expense (benefit)

 

(62)

 

6

Other charges (credits), net

 

29

 

11

Changes in operating assets and liabilities

Current and other assets

 

66

 

(6)

Payables and other liabilities

 

(227)

 

53

Net cash provided (used) by operating activities

 

(199)

 

345

Cash flows from investing activities:

Capital expended for property and equipment, including internal-use software and website development

 

(46)

 

(60)

Purchases of short term investments and other marketable securities

 

 

(118)

Sales and maturities of short term investments and other marketable securities

 

 

40

Other investing activities, net

(1)

(2)

Net cash provided (used) by investing activities

 

(47)

 

(140)

Cash flows from financing activities:

Borrowings of debt

 

1,240

 

114

Repayments of debt

 

(1,052)

 

(100)

Shares repurchased by subsidiary

(115)

Payment of withholding taxes on net share settlements of equity awards

 

(18)

 

(28)

Issuance of redeemable preferred stock

325

Other financing activities, net

(26)

(3)

Net cash provided (used) by financing activities

 

354

 

(17)

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

 

4

 

(11)

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

 

112

 

177

Cash, cash equivalents and restricted cash at beginning of period

 

341

 

672

Cash, cash equivalents and restricted cash at end of period

$

453

 

849

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Equity

(unaudited)

Stockholders' equity

Accumulated

Noncontrolling

Additional

other

interest in

Common Stock

paid-in

comprehensive

Retained

equity of

Total

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

amounts in millions

Balance at January 1, 2020

    

$

1

    

    

    

237

    

(29)

    

111

    

2,981

    

3,301

Net earnings (loss)

 

 

(200)

    

(563)

    

(763)

Other comprehensive earnings (loss)

 

1

 

    

2

    

3

Stock-based compensation

23

 

 

    

70

    

93

Withholding taxes on net share settlements of stock-based compensation

(18)

 

 

    

    

(18)

Shares repurchased by subsidiary

17

(132)

(115)

Preferred stock adjustment

(47)

(47)

Other, net

 

 

 

(8)

 

 

(1)

    

6

    

(3)

Balance at September 30, 2020

$

1

 

 

 

251

 

(28)

 

(137)

    

2,364

    

2,451

Stockholders' equity

Accumulated

Noncontrolling

Additional

other

interest in

Common Stock

paid-in

comprehensive

Retained

equity of

Total

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

amounts in millions

Balance at June 30, 2020

$

1

 

 

 

244

 

(32)

 

(103)

    

2,372

    

2,482

Net earnings (loss)

(17)

(43)

(60)

Other comprehensive earnings (loss)

4

12

16

Stock-based compensation

8

23

31

Withholding taxes on net share settlements of stock-based compensation

(1)

(1)

Preferred stock adjustment

(17)

(17)

Balance at September 30, 2020

$

1

251

(28)

(137)

2,364

2,451

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Table of Contents

Stockholders' equity

Accumulated

Noncontrolling

Additional

other

interest in

Common Stock

paid-in

comprehensive

Retained

equity of

Total

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

amounts in millions

Balance at January 1, 2019

    

$

1

    

    

    

231

    

(29)

    

133

    

3,400

    

3,736

Net earnings (loss)

 

 

17

    

65

    

82

Other comprehensive earnings (loss)

 

(4)

 

    

(13)

    

(17)

Stock-based compensation

28

 

 

    

80

    

108

Withholding taxes on net share settlements of stock-based compensation

(28)

(28)

Other, net

 

 

 

(8)

 

 

1

    

13

    

6

Balance at September 30, 2019

$

1

 

 

 

223

 

(33)

 

151

    

3,545

    

3,887

Stockholders' equity

 

Accumulated

Noncontrolling

 

Additional

other

interest in

 

Common Stock

paid-in

comprehensive

Retained

equity of

Total

 

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

 

amounts in millions

 

Balance at June 30, 2019

$

1

 

 

 

215

 

(30)

 

135

    

3,497

    

3,818

Net earnings (loss)

16

32

48

Other comprehensive earnings (loss)

(3)

(12)

(15)

Stock-based compensation

10

27

37

Withholding taxes on net share settlements of stock-based compensation

(1)

(1)

Other, net

(1)

1

Balance at September 30, 2019

$

1

223

(33)

151

3,545

3,887

See accompanying notes to condensed consolidated financial statements

I-9

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1) Basis of Presentation

During October 2013, the Board of Directors of Liberty Interactive Corporation and its subsidiaries (“Liberty”) (subsequently renamed Qurate Retail, Inc. (“Qurate Retail”)) authorized a plan to distribute to the stockholders of Liberty’s then-outstanding Liberty Ventures common stock shares of a wholly-owned subsidiary, Liberty TripAdvisor Holdings, Inc. (“TripCo,” “Consolidated TripCo,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires) (the “TripCo Spin-Off”). TripCo does not have any operations outside of its controlling interest in its subsidiary Tripadvisor, Inc. (“Tripadvisor”). Tripadvisor’s financial performance tends to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in consumer demand, traveler hotel and rental stays, and travel activities and experiences taken, compared to the first and fourth quarters, which represent seasonal low points.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2019, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2019 as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The preparation of financial statements in conformity with GAAP requires management 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. Actual results could differ from those estimates. The Company considers (i) recognition and recoverability of goodwill, intangible and long-lived assets and (ii) accounting for income taxes to be its most significant estimates. Some of the Company’s estimates and assumptions required increased judgment and carry a higher degree of variability and volatility as a result of COVID-19 (as defined below). As events continue to evolve and additional information becomes available, the Company’s estimates may change materially in future periods.

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. Tripadvisor and the Company continue to be subject to risks and uncertainties as a result of the COVID-19 pandemic. COVID-19 has 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, has dampened consumer demand for Tripadvisor’s products and services, and impacted consumer sentiment and discretionary spending patterns, all of which have adversely and materially impacted Tripadvisor’s results of operations, liquidity and financial condition during the three months and nine months ended September 30, 2020. In addition, given the volatility in global markets and economies, and the financial difficulties faced by many of Tripadvisor’s travel suppliers and restaurant customers, Tripadvisor has materially increased its provision for expected credit losses (also referred to as provision for bad debt or provision for uncollectible accounts) on its accounts receivable. Moreover, Tripadvisor may continue to incur higher than normal cash outlays to refund consumers for cancellations of prepaid bookings. Any increase in Tripadvisor’s provision for expected credit losses and cash outlays to consumers would also have a corresponding adverse effect on Tripadvisor's results of operations and related cash flows.

While we have seen varying degrees of containment of the virus in certain countries and some signs of travel

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

recovery, the degree of containment and the recovery in travel has varied region-to-region globally, as well as state-to-state in the U.S., and there have been instances where cases of COVID-19 have started to increase again after a period of decline. Tripadvisor does not have visibility into when remaining bans will be lifted, where additional bans may be initiated, or where bans that have been previously lifted are reinstated due to resurgence of the virus, nor does it have forward-looking visibility into the short or long-term changes to consumer usage patterns on its platform or travel behavior patterns when travel bans and other government restrictions and mandates are fully lifted. Therefore, the ultimate extent of the impact of the COVID-19 pandemic on Tripadvisor’s business, results of operations, liquidity and financial condition remains highly uncertain and difficult to predict, as the response to the pandemic continues to be ongoing and shifting, and the ultimate duration and severity of the pandemic remains uncertain and unpredictable. However, Tripadvisor continues to believe the travel, hospitality, restaurant and leisure industry, and its business, will continue to be adversely and materially affected while the pandemic continues to proliferate and travel bans and other government restrictions and mandates continue to remain in place or be reinstated, all of which negatively impact consumer demand, sentiment and discretionary spending patterns.

Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic to varying degrees, and it is possible that it could result in a protracted local and/or global economic recession. Such economic disruption could also have a material adverse effect on Tripadvisor’s business as consumers reduce their discretionary spending. Policymakers around the globe have responded with fiscal policy actions to support certain areas of the travel industry and economy as a whole. The continued magnitude and overall effectiveness of these actions remain uncertain.

In response to the impact of COVID-19, Tripadvisor has taken several steps to further strengthen its financial position and balance sheet, and maintain financial liquidity and flexibility, including significantly reducing its ongoing operating expenses and headcount, borrowing funds of $700 million from its 2015 Credit Facility (as defined in note 6) in the first quarter of 2020 (subsequently repaid during the third quarter of 2020), amending its 2015 Credit Facility, which included short-term financial covenant relief, and raising additional financing through the issuance of $500 million in Senior Notes (as defined in note 6) in July 2020, all of which are described in more detail in note 6.  

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), an emergency economic stimulus package in response to the COVID-19 pandemic, which among other things contains numerous income tax provisions. Some of these income tax provisions are effective retroactively for fiscal years ended before the date of enactment. As a result of the CARES Act, Tripadvisor has recorded an income tax benefit of $3 million and $22 million during the three and nine months ended September 30, 2020, respectively.  

In addition, certain governments have passed legislation to help businesses during the COVID-19 pandemic through loans, wage subsidies, tax relief or other financial aid, and some of these governments have extended or are considering extending these programs. Tripadvisor has participated in several of these programs, including the CARES Act in the U.S., the United Kingdom's job retention scheme and certain other jurisdictions' programs. In addition, in certain countries, such as within the European Union, Singapore, Australia, and other jurisdictions, Tripadvisor is also participating in programs where government assistance is in the form of wage subsidies and reductions in wage-related employer taxes paid by Tripadvisor. During the three and nine months ended September 30, 2020, Tripadvisor recognized government grants and other assistance benefits of $3 million and $10 million, respectively, of which $5 million has been received as of September 30, 2020. These amounts are recorded as a reduction of personnel and overhead costs in the unaudited condensed consolidated statements of operations. As of September 30, 2020, Tripadvisor has recorded a receivable of $5 million, included in other current assets in the unaudited condensed consolidated balance sheets, for payments expected to be received for the programs where it has met the qualifying requirements and it is probable that payment will be received. These payments, primarily related to qualified payroll tax credits under the CARES Act, are expected to be received in 2020.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In addition, due to the impact of COVID-19 on Tripadvisor’s business, Tripadvisor did not experience its typical seasonal pattern for revenue and profit during the three and nine months ended September 30, 2020. In addition, cash outflows to travel suppliers related to deferred merchant payables significantly exceeded cash received from travelers during the first nine months of 2020, primarily reflecting the decline in consumer demand for Tripadvisor’s products and cancellations of reservations related to COVID-19, contributing significantly to unfavorable working capital trends and material negative operating cash flow during the nine months ended September 30, 2020. It is difficult to forecast the seasonality for the upcoming quarters, given the uncertainty related to the ultimate extent and duration of the impact from COVID-19, the timing of development and widespread availability of a vaccine, and the shape and timing of a recovery. In addition, significant shifts in Tripadvisor’s business mix or adverse economic conditions could result in future seasonal patterns that are different from historical trends.

On March 26, 2020, TripCo issued and sold 325,000 shares of TripCo’s newly-created 8% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) for a purchase price of $1,000 per share. See further discussion about the Series A Preferred Stock in note 7.

Spin-Off of TripCo from Qurate Retail  

Following the TripCo Spin-Off, Qurate Retail and TripCo operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the TripCo Spin-Off, TripCo entered into certain agreements, including the services agreement, the facilities sharing agreement and the tax sharing agreement, with Qurate Retail and/or Liberty Media Corporation (“Liberty Media”) (or certain of their subsidiaries) in order to govern certain of the ongoing relationships between the companies after the TripCo Spin-Off and to provide for an orderly transition.

Pursuant to the services agreement (except as described below in respect to Gregory B. Maffei), Liberty Media provides TripCo with general and administrative services including legal, tax, accounting, treasury and investor relations support. TripCo reimburses Liberty Media for direct, out-of-pocket expenses incurred by Liberty Media in providing these services and TripCo pays a services fee to Liberty Media under the services agreement that is subject to adjustment semi-annually, as necessary.

In December 2019, TripCo entered into an amendment to the services agreement with Liberty Media in connection with Liberty Media’s entry into a new employment arrangement with Gregory B. Maffei, TripCo’s Chairman, President and Chief Executive Officer.  Under the amended services agreement, components of his compensation will either be paid directly to him by each of TripCo, Liberty Broadband Corporation, GCI Liberty, Inc. and Qurate Retail (collectively, the “Service Companies”) or reimbursed to Liberty Media, in each case, based on allocations among Liberty Media and the Service Companies set forth in the amended services agreement, currently set at 5% for the Company.

Under the facilities sharing agreement, TripCo shares office space with Liberty Media and related amenities at Liberty Media’s corporate headquarters in Englewood, Colorado.

The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Qurate Retail and TripCo and other agreements related to tax matters.

Under these agreements, approximately $1 million was reimbursable to Liberty Media for both of the three months ended September 30, 2020 and 2019, and approximately $3 million and $2 million was reimbursable to Liberty Media for the nine months ended September 30, 2020 and 2019, respectively.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(2) Stock-Based Compensation

TripCo Incentive Plans

TripCo has granted to certain of its directors and employees restricted stock units (“RSUs”) and stock options to purchase shares of TripCo common stock (collectively, “Awards”). TripCo measures the cost of employee services received in exchange for an equity classified Award based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award).  The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.

TripCo has calculated the GDFV for all of its equity classified Awards and any subsequent remeasurement of its liability classified Awards using the Black-Scholes-Merton model. TripCo estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of TripCo common stock. TripCo uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation, the majority of which relates to Tripadvisor as discussed below:

Three months ended

 

Nine months ended

 

September 30,

 

September 30,

 

    

2020

    

2019

    

2020

    

2019

 

amounts in millions

 

Operating expense

$

12

13

33

40

Selling, general and administrative expense

 

17

 

18

48

 

54

$

29

 

31

81

 

94

Stock-based compensation expense related to Tripadvisor was $28 million and $29 million for the three months ended September 30, 2020 and 2019, respectively, and $80 million and $91 million for the nine months ended September 30, 2020 and 2019, respectively.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

TripCo - Outstanding Awards

The following tables present the number and weighted average exercise price (“WAEP”) of the Awards to purchase TripCo common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining contractual life and aggregate intrinsic value of the Awards.

Weighted

average

remaining

Aggregate

contractual

intrinsic

Series A

WAEP

life

value

in thousands

in years

in millions

Outstanding at January 1, 2020

 

717

$

13.65

Granted

 

77

$

2.72

Exercised

 

$

Forfeited/Cancelled

 

(271)

$

14.11

Outstanding at September 30, 2020

 

523

$

11.80

 

4.8

$

Exercisable at September 30, 2020

 

294

$

16.55

 

3.6

$

    

    

    

    

    

Weighted

    

    

 

average

 

remaining

Aggregate

 

contractual

intrinsic

 

Series B

WAEP

life

value

 

in thousands

in years

in millions

 

Outstanding at January 1, 2020

 

1,824

$

27.63

 

Granted

 

$

 

Exercised

 

$

 

Forfeited/Cancelled

 

$

Outstanding at September 30, 2020

 

1,824

$

27.63

 

4.2

$

15

Exercisable at September 30, 2020

 

1,824

$

27.63

 

4.2

$

15

During the nine months ended September 30, 2020, TripCo granted 242 thousand performance-based RSUs of Series B TripCo common stock to our CEO. The RSUs had a GDFV of $3.08 per share at the time they were granted.  The RSUs cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.

Also during the nine months ended September 30, 2020, TripCo granted 30 thousand time-based RSUs of Series B TripCo common stock to our CEO.  The RSUs had a GDFV of $4.76 per share and cliff vest on December 10, 2020.  This RSU grant was issued in lieu of our CEO receiving 50% of his remaining base salary for the last three quarters of calendar year 2020, and he has waived his right to receive the other 50%, in each case, in light of the ongoing financial impact of COVID-19.

There was no activity during the period related to the TripCo Series B options.

As of September 30, 2020, the total unrecognized compensation cost related to unvested Awards was approximately $373 thousand. Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 2.7 years.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of September 30, 2020, TripCo reserved 2.3 million shares of Series A and Series B common stock for issuance under exercise privileges of outstanding stock Awards.

Tripadvisor Equity Grant Awards

The following table presents the number and WAEP of the Awards to purchase Tripadvisor common stock granted to certain officers, employees and directors of Tripadvisor.

Weighted

average

TripAdvisor

remaining

Aggregate

stock

contractual

intrinsic

options

WAEP

life

value

in thousands

in years

in millions

Outstanding at January 1, 2020

 

6,017

$

50.27

Granted

 

1,091

$

25.29

Exercised

 

(2)

$

17.22

Cancelled or expired

(1,220)

$

46.10

Outstanding at September 30, 2020

 

5,886

$

46.52

 

5.5

$

Exercisable at September 30, 2020

 

3,360

$

55.74

 

3.5

$

The weighted average GDFV of options granted was $10.08 for the nine months ended September 30, 2020.

As of September 30, 2020, the total unrecognized compensation cost related to unvested Tripadvisor stock options was approximately $22 million and will be recognized over a weighted average period of approximately 1.9 years. The total intrinsic value of stock options exercised was not material and $2 million for the nine months ended September 30, 2020 and 2019, respectively.

Additionally, during the nine months ended September 30, 2020, Tripadvisor granted approximately 6 million units, vested and released approximately 3 million units, and had cancellations of approximately 4 million units, which included primarily service-based RSUs, as well as a limited number of market-based restricted stock units (“MSUs”) under the 2018 Stock and Annual Incentive Plan. The RSUs’ fair value was measured based on the quoted price of Tripadvisor common stock at the date of grant. As the MSUs provide for vesting based upon Tripadvisor’s total shareholder return, or “TSR,” performance, the potential outcomes of future stock prices and TSR of Tripadvisor and the Nasdaq Composite Total Return Index, was used to calculate the GDFV of these awards. The weighted average GDFV for RSUs and MSUs granted, vested and released, and cancelled during the nine months ended September 30, 2020 was $24.56 per share, $46.45 per share, and $37.83 per share, respectively. As of September 30, 2020, the total unrecognized compensation cost related to Tripadvisor RSUs and MSUs was approximately $193 million and will be recognized over a weighted average period of approximately 1.9 years.

On May 27, 2020 and July 15, 2020, Tripadvisor’s Compensation Committee of its Board of Directors approved modifications of Tripadvisor’s Annual RSU and stock option grants, respectively, issued to its employees in the first quarter of 2020. Such modifications reduced the original grant-date vesting period from four years to two years. Tripadvisor estimates these modifications resulted in the acceleration and recognition of an additional $6 million and $11 million of stock compensation expense during the three and nine months ended September 30, 2020, respectively, given the modified vesting term.  There was no change to the original fair value of the impacted RSUs or stock options as a result of the modification.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(3) Earnings (Loss) Per Common Share (EPS)

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to common shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. Excluded from EPS for both of the three and nine months ended September 30, 2020 are 1 million potential common shares due to stock options, because their inclusion wo