Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2025

The accompanying unaudited condensed consolidated financial statements present our results of operations, financial position and cash flows on a consolidated basis. The unaudited condensed consolidated financial statements include Tripadvisor, our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. All inter-company accounts and transactions have been eliminated in consolidation. One of our subsidiaries that operates in China has variable interests in affiliated entities in China in order to comply with Chinese laws and regulations, which restrict foreign investment in internet content provision businesses. Although we do not own the capital stock of these Chinese affiliates, we consolidate their results as we are the primary beneficiary of the cash losses or profits of these variable interest affiliates and have the power to direct the activity of these affiliates. Our variable interest entities’ financial results were not material for all periods presented. Investments in entities in which we do not have a controlling financial interest are accounted for under the equity method, the fair value option, as available-for-sale securities or at cost adjusted for observable price changes and impairments, as appropriate.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operating results. We prepared the unaudited condensed consolidated financial statements following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, we condensed or omitted certain footnotes or other financial information that are normally required by GAAP for annual financial statements. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation, none of which were material to the presentation of the accompanying unaudited condensed consolidated financial statements, except as discussed below in “Revised Operating Expense Presentation.” Our interim unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024, previously filed with the SEC (the “2024 Annual Report”). The unaudited condensed consolidated balance sheet as of December 31, 2024 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures including notes required by GAAP.

Revised Operating Expense Presentation

As previously disclosed in our 2024 Annual Report, during the fourth quarter of 2024, the Company revised its operating expense captions on its consolidated statement of operations to better align the Company’s financial presentation with how management assesses performance and makes strategic decisions in its business operations, and to provide additional clarity and understanding of our operating expenses for investors. Prior year amounts have been reclassified to conform to the current period presentation. The revised presentation did not result in any changes to previously reported revenues, total costs and expenses, operating income (loss), income (loss) before income taxes, or net income (loss).

The following table below shows the reclassification adjustments made amongst costs and expenses on our unaudited condensed consolidated statement of operations for the periods presented below.


	As Reported March 31, 2024		Adjustments				As Adjusted March 31, 2024
	(in millions)
Costs and expenses:
Cost of sales (formerly Cost of revenue)	$	35	$	(10	)	1	$	25
Marketing (formerly Selling and marketing)		221		(59	)	2		162
Personnel (including stock-based compensation of $28)		—		149		3		149
Technology (formerly Technology and content)		76		(54	)	4		22
General and administrative		56		(27	)	5		29
Depreciation and amortization		22		—				22
Restructuring and other related reorganization costs		—		1		6		1
Total costs and expenses	$	410	$	—			$	410

(1)

Primarily related to the reclass of people costs to Personnel, and data center costs, and to a lesser extent, licensing costs to Technology; partially offset by the reclass of digital service taxes ("DST") and bad debt expense from General and administrative to Costs of sales.

(2)

Primarily related to the reclass of people costs to Personnel, and to a lesser extent, licensing costs to Technology and real estate and office expenses to General and administrative.

(3)

Related to the reclass of people costs, including stock-based compensation expense, from all legacy operating expense captions to Personnel.

(4)

Primarily related to the reclass of people costs to Personnel, and to a lesser extent, the reclass of real estate and office expenses to General and administrative; partially offset by the reclass of data center and licensing costs from all legacy operating expense captions to Technology.

(5)

Primarily related to the reclass of people costs to Personnel, and to a lesser extent, the reclass of DST and bad debt expense to Costs of sales; partially offset by the reclass of real estate and office expenses to General and administrative from all legacy operating expense captions.

(6)

Reclass of Restructuring and other related reorganization costs from General and administrative for comparability with the current period presentation.

LTRIP and Tripadvisor Merger Agreement and Loan Agreement

As of March 31, 2025, Liberty Tripadvisor Holdings, Inc. (“LTRIP”) was a controlling stockholder of Tripadvisor and related party. As of March 31, 2025, LTRIP beneficially owned approximately 14.0 million shares of our common stock and 12.8 million shares of our Class B common stock, which constituted approximately 11% of the outstanding shares of common stock and 100% of the outstanding shares of Class B common stock. Assuming the conversion of all LTRIP’s shares of Class B common stock into common stock, LTRIP would beneficially own approximately 19% of the outstanding common stock as of such date. 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 would have beneficially owned equity securities representing approximately 55% of our voting power as of March 31, 2025. We had no related party transactions with LTRIP during each of the three months ended March 31, 2025 and 2024, except as discussed below.

On December 18, 2024, the Company, LTRIP and Telluride Merger Sub Corp., a Delaware corporation (“Merger Sub”) and an indirect wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, (i) Merger Sub will be merged with and into LTRIP (the “Merger”), with LTRIP surviving the Merger as the surviving corporation and an indirect, wholly-owned subsidiary of the Company, and (ii) immediately following the Merger, LTRIP (as the surviving corporation in the Merger) will be merged with and into TellurideSub LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of the Company (“ParentSub LLC”) (such merger, the “ParentSub LLC Merger”), with ParentSub LLC surviving the ParentSub LLC Merger as the surviving company and a wholly-owned subsidiary of the Company.

On April 29, 2025, the Merger was consummated, and per the Merger Agreement, (i) the shares of LTRIP Series A Common Stock and Series B Common Stock issued and outstanding immediately prior to the effective time of the Merger were converted into the right to receive $0.2567 per share in cash, totaling approximately $20 million in the aggregate; and (ii) all of the shares of LTRIP's 8% Series A Cumulative Redeemable Preferred Stock issued and outstanding immediately prior to the effective time of the Merger were converted into the right to receive, in the aggregate, approximately $42.5 million in cash, without interest, and 3,037,959 validly

issued, fully paid and non-assessable shares of the Company's common stock, with an estimated fair value of approximately $39 million, as calculated using the Company's closing stock price on April 28, 2025; and (iii) LTRIP's 0.50% Exchangeable Senior Debentures (the “Exchangeable Debentures”) of $326 million were repaid during March 2025 by LTRIP with the use of loan proceeds from the Company, as discussed below, while the remaining $4 million will be repaid by the Company approximately 30 days after the consummation of the Merger. The aggregate transaction price of the Merger was approximately $430 million.

Pursuant to the Merger Agreement, the Company agreed to provide a loan facility (the “Loan Agreement”) to LTRIP to enable LTRIP to repurchase or settle the Exchangeable Debentures prior to the closing of the Merger. On March 20, 2025, the Company, as Lender, LTRIP, as Borrower, and LTRIP’s wholly owned subsidiaries, as guarantors (the “Guarantors”), entered into the Loan Agreement. Pursuant to the Loan Agreement, the Company extended credit in the form of a term loan facility in an aggregate principal amount of $327 million subject to the terms and conditions therein. The Loan Agreement provided that LTRIP was required to use the proceeds from loans under the Loan Agreement solely to repurchase or settle its exchange obligations with respect to the Exchangeable Debentures in accordance with the terms of the Exchangeable Debentures Indenture and the Merger Agreement and pay related fees, costs and expenses incurred in connection therewith. The Loan Agreement subsequently expired in accordance with the terms of the Merger Agreement upon consummation of the Merger, or April 29, 2025, and the loan balance of $327 million is no longer payable to the Company and was assumed in the aggregate transaction price of the Merger, as discussed below.

At March 31, 2025, the outstanding balance of the Loan Agreement of $327 million has been recorded to “stockholder note receivable - related party” as a reduction to stockholders’ equity in our unaudited condensed consolidated balance sheet. This amount will be reclassified to treasury stock upon consummation of the Merger (see Merger accounting discussion below).

Assets held by LTRIP substantially consist of shares of the Company’s common stock. As a result, following the consummation of the Merger, the Company accounts for the Merger as a repurchase of the Company's common stock previously held by LTRIP. As such: (i) the aggregate transaction price will be recorded as an increase to treasury stock within stockholders’ equity on our unaudited condensed consolidated balance sheet, and (ii) the cash portion of the aggregate transaction price will be reflected as a financing cash outflow within our unaudited condensed consolidated statement of cash flows. The amount anticipated to be allocated to treasury stock on the unaudited condensed consolidated balance sheet will include the aggregate transaction price of approximately $430 million, plus all direct expenses and fees associated with the repurchase of the Company’s common stock, which are estimated to be approximately $20 million.

Immediately following the consummation of the Merger, on April 29, 2025, the Board of Directors retired the shares of Tripadvisor common stock and Class B common stock previously held by LTRIP, thereby canceling approximately 26.8 million shares of the Company, which reduced the Company’s outstanding shares by the same number.

As a result of the Merger, the Company is no longer a controlled company under the Nasdaq Stock Market Listing Rules (the “Nasdaq Rules”) and no longer subject to the Governance Agreement by and among the Company, Liberty Interactive Corporation and Barry Diller, dated as of December 20, 2011 (as amended by the Assignment and Assumption of Governance Agreement, dated August 12, 2014).

Risks and Uncertainties

The U.S. and other countries have seen increased economic uncertainty (including with respect to tariffs, the threat of tariffs and changes in trade policies), market volatility, elevated levels of inflation and fluctuating discretionary spending patterns by consumers, all of which may impact our business. If macroeconomic conditions deteriorate, consumer demand and spending may decline, we may not be able to pass on increased costs to our customers and any inability to navigate the macroeconomic environment could harm our business, results of operations and financial condition.

Additionally, natural disasters, public health-related events, political instability, geopolitical conflicts, including the evolving events in the Middle East and between Ukraine and Russia, acts of terrorism, fluctuations in currency values, and changes in global economic conditions are examples of other events that could have a negative impact on the travel industry, and as a result, our financial results.

Accounting Estimates

We use estimates and assumptions in the preparation of our unaudited condensed consolidated financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our unaudited condensed consolidated financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our unaudited condensed consolidated financial statements is accounting for income taxes. Refer to “Note 7: Income Taxes” for information regarding our significant income tax estimates.

Seasonality

Consumer travel expenditures have historically followed a seasonal pattern. Correspondingly, travel partner advertising investments, and therefore our revenue and operating profits, have also historically followed a seasonal pattern. Our financial performance tends to be highest in the second and third quarters of a given year, which includes the seasonal peak in consumer demand, including traveler accommodation stays, and travel experiences taken, compared to the first and fourth quarters, which represent seasonal low points. In addition, during the first half of the year, experience bookings typically exceed the amount of completed experiences, resulting in higher cash flow related to working capital; while during the second half of the year, particularly in the third quarter, this pattern reverses and cash flows from these transactions are typically negative. Other factors may also impact typical seasonal fluctuations, such as significant shifts in our business mix, adverse economic conditions, public health-related events, as well as other factors.

Significant Accounting Policies

There have been no material changes to our accounting policies since December 31, 2024, as described under “Note 2: Significant Accounting Policies”, in the notes to consolidated financial statements in Item 8 of our 2024 Annual Report.

Recently Adopted Accounting Pronouncement

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued new accounting guidance requiring entities to provide additional information in the income tax rate reconciliation and additional disclosures about income taxes paid. The new accounting guidance requires entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. This guidance is effective for the 2025 annual period and can be applied either prospectively or retrospectively. We are currently in the process of evaluating the impact of this new accounting guidance on our consolidated financial statements for the year ended December 31, 2025 and related disclosures.

New Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued new accounting guidance that clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This guidance is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).

In November 2024, the FASB issued new accounting guidance expanding disclosure requirements related to certain income statement expenses. The guidance requires tabular footnote disclosure of certain operating expenses disaggregated into categories, such as employee compensation, depreciation, and intangible asset amortization, included within each interim and annual income statement's expense caption, as applicable. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively.

We are currently considering our timing of adoption and are in the process of evaluating the impact of adopting these newly issued accounting rules on our consolidated financial statements and related disclosures.