TripAdvisor Inc

Previous wording

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report, and the consolidated financial statements and accompanying notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 Annual Report.

Current wording

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q (this “Quarterly Report”), and the consolidated financial statements and accompanying notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 Annual Report.

Previous wording

This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, but not limited to, those discussed in our 2023 Annual Report, Part I, Item 1A, “Risk Factors,” as well as those discussed elsewhere in this Quarterly Report. Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition and results of operations. Accordingly, readers should not place undue reliance on these forward-looking statements. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. We are not under any obligation to, and do not intend to, publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Please carefully review and consider the various disclosures made in this report and in our other reports filed with the SEC that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

Current wording

This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, but not limited to, those discussed in our 2023 Annual Report, Part I, Item 1A, “Risk Factors,” our subsequent filings with the U.S. Securities and Exchange Commission (the “SEC”) as well as those discussed elsewhere in this Quarterly Report. Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition and results of operations. Accordingly, readers should not place undue reliance on these forward-looking statements. The use of words such as “anticipates,” “continue,” “estimates,” “expects,” “intends,” “may,” “plans,” “will” and “believes,” among others, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. In addition, any statements other than historical statements of fact are forward-looking statements, including statements that refer to expectations, projections or other characterizations of future events or circumstances. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. We are not under any obligation to, and do not intend to, publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Please carefully review and consider the various disclosures made in this report and in our other reports filed with the SEC that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

Previous wording

The Tripadvisor Group operates as a family of brands with a purpose of connecting people to experiences worth sharing. The Company's vision is to be the world’s most trusted source for travel and experiences. The Company operates across three reportable segments: Brand Tripadvisor, 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.

Current wording

The Tripadvisor Group operates as a family of brands with the purpose of connecting people to experiences worth sharing. The Company's vision is to be the world’s most trusted source for travel and experiences. The Company operates across three reportable segments: Brand Tripadvisor, 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.

Previous wording

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

Current wording

The Brand Tripadvisor segment plays an important role in our portfolio. For over two decades, we believe we have built difficult to replicate assets such as a trusted brand, authentic content, a large community of contributors, and one of the largest global travel audiences available. Our long-term strategy for the Brand Tripadvisor segment builds on our heritage and the reasons hundreds of millions of travelers come to Tripadvisor each year. Fundamental to this strategy will be: (1) innovating and enhancing world-class travel guidance and planning products to help travelers make confident decisions in a world where it is hard to find advice you can trust; (2) prioritizing deeper engagement with travelers, increasing members, and repeat customers by leveraging our rich data and technology assets to provide more relevant, curated, and contextual content throughout the traveler journey; and (3) driving a step change in the value we can deliver to our partners by accelerating and diversifying the monetization of our valuable audience across key categories, including hotel meta, media advertising, experiences, and restaurants. As we continue to focus on offering a more compelling product that better meets travelers’ needs across their end-to-end travel journey, we believe we are better able to drive deeper engagement which drives more direct channel growth, including via our mobile app. As this direct engagement with users improves and scales, we are able to collect valuable data and create more relevant opportunities to monetize, which we believe will result in a meaningfully higher average revenue per user over time.

Previous wording

In our Viator and TheFork segments, we provide two-sided marketplaces that connect travelers and diners to operators of bookable experiences and restaurants, respectively. Within our Viator and TheFork segments, we are investing in growth, future scale, and market share gains to accelerate our market leadership position, while improving unit economics on both sides of the marketplace that provide visibility to sustainable future profitability. This means driving awareness and higher quality audience engagement, which we believe will drive greater repeat bookings, more direct traffic, and translate into improved unit economics over time. Our investments on both sides of our marketplace, as well as in our primary offerings, are intended to deliver a differentiated value proposition that we believe will drive sustainable market leadership as our partners, operators, and travelers find themselves in an increasingly competitive marketplace environment. We are focused on continuing to grow both our supplier base and our user base by offering innovative tools and features on our branded platforms, and through continued awareness of our brand through marketing efforts.

Current wording

In our Viator and TheFork segments, we provide two-sided marketplaces that connect travelers and diners to operators of bookable experiences and restaurants, respectively. Within our Viator and TheFork segments, we are investing in growth, future scale, and market share gains to accelerate our market leadership position, while working to improve unit economics on both sides of the marketplace with the goal of sustainable future profitability. This means driving awareness and higher quality audience engagement, which we believe will drive greater repeat bookings, more direct traffic, and translate into improved unit economics over time. Our investments on both sides of our marketplace, as well as in our primary offerings, are intended to deliver a differentiated value proposition that we believe will drive sustainable market leadership as our partners, operators, and travelers find themselves in an increasingly competitive marketplace environment. We are focused on continuing to grow both our supplier base and our user base by offering innovative tools and features on our branded platforms, and through continued awareness of our brand through marketing efforts.

Previous wording

The online travel industry in which we operate is large, highly dynamic and increasingly competitive. We describe below current trends affecting our overall business and segments, including uncertainties that may impact our ability to execute on our objectives and strategies. Public health-related events, such as a pandemic, political instability, geopolitical conflicts, including the evolving events in the Middle East, 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 in the future.

Current wording

The online travel industry in which we operate is large, highly dynamic and competitive. We describe below current trends affecting our overall business and segments, including uncertainties that may impact our ability to execute on our objectives and strategies. Public health-related events, such as a pandemic, political instability, geopolitical conflicts, including the evolving events in the Middle East, 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 in the future.

Previous wording

The global experiences market is large, growing, and highly fragmented, with the vast majority of bookings still occurring through traditional offline sources. We are observing a secular shift, however, as this market continues to grow and accelerate the pace of online adoption. Likewise, the global restaurants category is also benefiting from increased online adoption by both consumers and restaurant partners, particularly in Europe. Given the competitive positioning of our businesses relative to the attractive growth prospects in these categories, we expect to continue to invest in these categories across Tripadvisor Group and, in particular, within the Viator and TheFork segments, to continue accelerating revenue growth, operating scale, and market share gains for the long-term.

Current wording

The global experiences market is large, growing, and highly fragmented, with the vast majority of bookings still occurring through traditional offline sources. We are observing a secular shift, however, as this market continues to grow and accelerate the pace of online adoption. Likewise, the global restaurants category is also benefiting from increased online adoption by both consumers and restaurant partners, particularly in Europe. Given the competitive positioning of our businesses relative to the attractive growth prospects in the experiences and restaurant categories, we expect to continue to invest in these categories across Tripadvisor Group and, in particular, within the Viator and TheFork segments, to continue accelerating revenue growth, operating scale, and market share gains for the long-term.

Previous wording

As disclosed in our 2023 Annual Report, in August 2023, we received a NOPA from the IRS for the 2014 through 2016 tax years relating to certain transfer pricing arrangements with our foreign subsidiaries. In response, we requested competent authority assistance under the MAP for the 2014 through 2016 tax years. In January 2024, we received notification of a MAP resolution agreement for the 2014 through 2016 tax years, which we accepted in February 2024. During the six months ended June 30, 2024, we recorded additional income tax expense as a discrete item, inclusive of interest, of $45 million related to this settlement on our unaudited condensed consolidated statement of operations, including $46 million recorded during the first quarter of 2024. We reviewed the impact of the acceptance of this settlement position against our existing transfer pricing income tax reserves for the subsequent open tax years during the first quarter of 2024, which resulted in an income tax benefit, inclusive of estimated interest, of $4 million. During the three months ended June 30, 2024, we made a payment to the IRS of $141 million, inclusive of estimated interest, to satisfy this audit settlement. We anticipate a competent authority refund from a foreign jurisdiction and certain federal tax benefits, net of state tax payments due, associated with this IRS audit settlement which will be substantially settled in the next twelve months, resulting in an estimated net cash inflow of $25 million to $35 million, inclusive of related interest. Refer to “Note 8: Income Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 of this Quarterly Report for further information regarding potential material contingencies related to ongoing audits regarding income taxes.

Current wording

As disclosed in our 2023 Annual Report, in August 2023, we received a NOPA from the IRS for the 2014 through 2016 tax years relating to certain transfer pricing arrangements with our foreign subsidiaries. In response, we requested competent authority assistance under the MAP for the 2014 through 2016 tax years. In January 2024, we received notification of a MAP resolution agreement for the 2014 through 2016 tax years, which we accepted in February 2024. During the three and nine months ended September 30, 2024, we recorded an income tax benefit of $4 million and an income tax expense of $41 million, respectively, as discrete items, inclusive of interest, related to this settlement on our unaudited condensed consolidated statements of operations. During the three months ended June 30, 2024, we made a payment to the IRS of $141 million, inclusive of estimated interest, and during the three months ended September 30, 2024, we made various state tax payments of $18 million, inclusive of estimated interest, related to this settlement. We anticipate a competent authority refund from a foreign jurisdiction and certain federal tax benefits, net of state tax payments due, associated with this IRS audit settlement which will be substantially settled in the next twelve months, resulting in an estimated net cash inflow of $50 million to $60 million, inclusive of related interest. Refer to “Note 8: Income Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 of this Quarterly Report for further information regarding potential material contingencies related to ongoing audits regarding income taxes.

Previous wording

On July 8, 2024, the Company entered into an Amendment to its Credit Facility. The Amendment provides for a new $500 million term loan B credit facility maturing July 8, 2031, with an interest rate based on SOFR plus 2.75% (the “Term Loan B Facility”). The Term Loan B Facility was offered at 99.75% of par and is required to be paid down at 1.00% of the aggregate principal amount per year. Subsequently, on July 15, 2024, the Company used proceeds from the Term Loan B Facility, to redeem the $500 million aggregate principal amount of the Company’s outstanding 2025 Senior Notes. Refer to “Note 14: Subsequent Events” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information.

Current wording

On July 8, 2024, under the Amended Credit Agreement, the Company issued a $500 million Term Loan B Facility maturing July 8, 2031, with an interest rate based on secured overnight financing rate ("SOFR") plus 2.75%. On July 15, 2024, the Company used these borrowed funds to fully redeem its outstanding $500 million, 2025 Senior Notes. The Term Loan B Facility was offered at 99.75% of par and is required to be paid down at 1.00% of the aggregate principal amount per year, repayable in quarterly installments on the last day of each calendar quarter, commencing December 31, 2024, equal to 0.25% of the original principal amount with the balance due on the maturity date. Refer to “Note 6: Debt” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information.

Previous wording

As of June 30, 2024, the Company had approximately 2,850 employees. Approximately 59%, 35%, and 6% of the Company’s current employees are based in Europe, the U.S., and the rest of world (“ROW”), respectively. Additionally, we use independent contractors to supplement our workforce. We believe we have good relationships with our employees and contractors, including relationships with employees represented by international works councils or other similar organizations.

Current wording

As of September 30, 2024, the Company had approximately 2,890 employees. Approximately 60%, 35%, and 5% of the Company’s current employees are based in Europe, the U.S., and the rest of world (“ROW”), respectively. Additionally, we use independent contractors to supplement our workforce. We believe we have good relationships with our employees and contractors, including relationships with employees represented by international works councils or other similar organizations.

Previous wording

There have been no material changes to our significant accounting policies or new accounting pronouncements that we are required to adopt that may have an impact on our unaudited condensed consolidated financial statements since December 31, 2023, as compared to those described under “Note 2: Significant Accounting Policies,” in the notes to consolidated financial statements in Item 8 of our 2023 Annual Report.

Current wording

There have been no material changes to our significant accounting policies or new accounting pronouncements that we have been required to adopt that may have an impact on our unaudited condensed consolidated financial statements since December 31, 2023, as compared to those described under “Note 2: Significant Accounting Policies,” in the notes to consolidated financial statements in Item 8 of our 2023 Annual Report.

Previous wording

Brand Tripadvisor segment revenue decreased by $29 million and $33 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to a decrease in our hotel meta revenue and, to a lesser extent, a decrease in hotel B2B revenue.

Current wording

Brand Tripadvisor segment revenue decreased by $35 million and $68 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to a decrease in our hotel meta revenue and, to a lesser extent, a decrease in hotel B2B revenue.

Previous wording

Adjusted EBITDA in our Brand Tripadvisor segment decreased by $12 million and $7 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, while adjusted EBITDA margin remained constant and increased 1 percentage point during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023. The decrease in Adjusted EBITDA was primarily due to a decrease in revenue as noted above, and to a lesser extent, an increase in brand advertising costs, direct revenue generation costs related to data center and media production costs, primarily in media and advertising, partially offset by a decrease in direct selling and marketing expenses related to online paid traffic acquisition costs, and personnel and overhead costs driven by a reduction in headcount related to cost reduction measures taken during 2023. The improvement in adjusted EBITDA margin during the six months ended June 30, 2024, when compared to the same period in 2023, was largely due to the decrease of selling and marketing costs as a percent of revenue, partially offset by an increase in cost of revenue direct costs and technology and content personnel costs as a percent of revenue.

Current wording

Adjusted EBITDA in our Brand Tripadvisor segment decreased by $24 million and $31 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, while Adjusted EBITDA margin decreased 4 percentage points and 1 percentage point during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023. The decrease in Adjusted EBITDA was primarily due to a decrease in revenue, as noted above, and to a lesser extent a decrease in the segment's operating expenses during the three and nine months ended September 30, 2024, when compared to the same periods in 2023, of $11 million and $37 million, respectively, primarily related to a decrease in direct selling and marketing expenses, primarily paid online traffic acquisition costs, and to a lesser extent a decrease in overall personnel and overhead costs. The decrease in Adjusted EBITDA margin during the three and nine months ended September 30, 2024, when compared to the same periods in 2023, was largely due to an increase in technology and content personnel and overhead costs, and to a lesser extent, an increase in direct costs within cost of revenue, as a percent of revenue.

Previous wording

Tripadvisor-branded hotels revenue decreased by $24 million and $34 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to a decrease in our hotel meta revenue and, to a lesser extent, a decrease in hotel B2B revenue, as the Company transitions from a sales-led model to a self-service model. The decrease in our hotel meta revenue was primarily driven by declines in our U.S. and European hotel meta revenue and, to a lesser extent, ROW hotel meta revenue, primarily due to weaker demand due to increased competition in paid online marketing channels and continued headwinds impacting free channels, or SEO, during the second quarter of 2024, contributing to a decrease in click volumes.

Current wording

Tripadvisor-branded hotels revenue decreased by $30 million and $64 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to a decrease in our hotel meta revenue and, to a lesser extent, a decrease in hotel B2B revenue, as the Company transitions from a sales-led model to a self-service model. The decrease in our hotel meta revenue during the three months ended September 30, 2024, when compared to the same period in 2023, was primarily driven by continued headwinds impacting free channels, including SEO traffic, contributing to a decrease in click volumes, and to a lesser extent, a deceleration in cost-per-click (“CPC”) rates, particularly in the U.S. The decrease in our hotel meta revenue during the nine months ended September 30, 2024, when compared to the same period in 2023, was driven by declines in our U.S. hotel meta revenue and, to a lesser extent, our European hotel meta revenue, primarily due to weaker demand related to increased competition in paid online marketing channels and continued headwinds impacting free channels, including SEO traffic, during the second and third quarters of 2024, contributing to a decrease in click volumes.

Previous wording

Media and advertising revenue consists of revenue from display-based advertising (or “media advertising”) across our Tripadvisor Group platform and decreased $1 million during the three months ended June 30, 2024, and increased $1 million during the six months ended June 30, 2024, when compared to the same periods in 2023, partially due to the timing of certain advertising campaigns.

Current wording

Media and advertising revenue consists of revenue from display-based advertising (or “media advertising”) across our Tripadvisor Group platform. Media and advertising revenue increased $2 million and $4 million during the three and nine months ended September 30, 2024, when compared to the same periods in 2023, primarily due to an increase in overall advertising campaigns and pricing.

Previous wording

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, are eliminated on a consolidated basis, in addition to revenue earned from Tripadvisor's restaurants service offerings. Tripadvisor experiences and dining revenue decreased $2 million during the three months ended June 30, 2024, when compared to the same period in 2023, primarily due to a decline in dining revenue as we move from a sales-led model to a self-service model, and to a lesser extent some deceleration in experiences growth during the second quarter. Tripadvisor experiences and dining revenue increased $1 million during the six months ended June 30, 2024, when compared to the same period in 2023, driven by experiences revenue, mostly offset by a decline in dining revenue as we move from a sales-led model to a self-service model, as noted above.

Current wording

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, are eliminated on a consolidated basis, in addition to revenue earned from Tripadvisor's restaurants service offerings. Tripadvisor experiences and dining revenue decreased $4 million during the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to a decline in dining revenue as we move from a sales-led model to a self-service model, and to a lesser extent some deceleration in experiences growth during the third quarter of 2024, as our near-term segment marketing strategy emphasizes profitability. Tripadvisor experiences and dining revenue decreased $3 million during the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to a decline in dining revenue as we move from a sales-led model to a self-service model, as noted above, partially offset by an increase in experiences revenue, despite some deceleration in experiences revenue growth, as noted above, during the second and third quarters of 2024.

Previous wording

Other revenue includes alternative accommodation rentals revenue, in addition to click-based advertising and display-based advertising revenue from our cruise, flights, and rental cars offerings on Tripadvisor websites and mobile apps. Other revenue decreased $2 million and $1 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to a decline in alternative accommodation rentals revenue, partially offset by an increase in cruise revenue.

Current wording

Other revenue includes alternative accommodation rentals revenue, in addition to click-based advertising and display-based advertising revenue from our cruise, flights, and rental cars offerings on Tripadvisor websites and mobile apps. Other revenue decreased $3 million and $5 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to a decline in alternative accommodation rentals revenue as we continue to strategically de-emphasize this offering.

Previous wording

Viator segment revenue increased by $28 million and $54 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, driven by consumer demand for experiences across all geographies, driving growth in bookings. The increase in revenue during the three months ended June 30, 2024, when compared to the same period in 2023, was slightly offset by the timing of the Easter holiday during the second quarter of 2023, while the Easter holiday occurred during the first quarter in 2024, and as noted above, some deceleration in growth in the Brand Tripadvisor point-of-sale during the second quarter of 2024. We continue to believe that Viator is benefiting from a larger macro trend, as the large global market in which it operates continues to grow and migrate online from traditional offline sources.

Current wording

Viator segment revenue increased by $25 million and $79 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, driven by consumer demand for experiences across all geographies, driving growth in bookings, partially offset by some deceleration in revenue growth in the Brand Tripadvisor point-of-sale during the second and third quarters of 2024, as noted above. We continue to believe that Viator is benefiting from a larger macro trend, as the large global market in which it operates continues to grow and migrate online from traditional offline sources.

Previous wording

Adjusted EBITDA in our Viator segment improved by $12 million and $13 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, and adjusted EBITDA margin improved by 5 percentage points and 4 percentage points during three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023. These improvements in adjusted EBITDA were primarily due to increased leverage as we scale the business and drive greater bookings from more profitable repeat customers. These improvements were partially offset by our continued investment in marketing in response to consumer demand for experiences and increased investment to grow market share, acquire new customers, and drive brand awareness. In addition, increased personnel and overhead costs to support business growth and invest in our product experience and, to a lesser extent, increased digital service taxes, and an increase in revenue generation costs resulting from credit card payments in direct correlation with the increase in revenue, all negatively impacted adjusted EBITDA. The improvements in adjusted EBITDA margin were primarily due to a decrease in selling and marketing costs as a percent of revenue.

Current wording

Adjusted EBITDA in our Viator segment improved by $13 million and $28 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, and Adjusted EBITDA margin improved by 4 percentage points and 5 percentage points during three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023. These improvements in Adjusted EBITDA were primarily due to increased leverage as we scale the business and drive a greater number of bookings from more profitable repeat customers. These improvements were partially offset by our continued investment in marketing, primarily paid online traffic acquisition costs, in response to consumer demand for experiences and increased investment focusing on growing market share, acquiring new customers, and driving brand awareness. In addition, increased personnel and overhead costs to support business growth and invest in our product experience and, to a lesser extent, increased licensing costs, and an increase in revenue generation costs resulting from credit card payments in direct correlation with the increase in revenue, all negatively impacted Adjusted EBITDA. The improvements in Adjusted EBITDA margin were primarily due to a decrease in selling and marketing costs, largely brand marketing, as a percent of revenue.

Previous wording

TheFork segment revenue increased by $4 million and $10 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023. These improvements were driven by increased consumer demand for dining in Europe, including increased bookings and pricing, during the three and six months ended June 30, 2024, when compared to the same periods in 2023.

Current wording

TheFork segment revenue increased by $7 million and $18 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023. These improvements were driven by increased consumer demand for dining in Europe, including increased bookings and pricing, during the three and nine months ended September 30, 2024, when compared to the same periods in 2023. In addition, we estimate this segment's revenue growth rate was positively impacted by foreign currency fluctuations of approximately 2% during both the three and nine months ended September 30, 2024 when compared to the same periods in 2023.

Previous wording

Adjusted EBITDA in TheFork segment improved by $7 million and $14 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, while adjusted EBITDA margin improved by 18 percentage points and 19 percentage points during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023. The improvement in adjusted EBITDA was primarily due to an increase in revenue as noted above, and lower personnel and overhead costs. The improvement in adjusted EBITDA margin was primarily due to lower personnel and overhead costs as a percent of revenue, and to a lesser extent, selling and marketing costs as a percent of revenue as a result of efficient marketing spend.

Current wording

Adjusted EBITDA in TheFork segment improved by $6 million and $19 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, while Adjusted EBITDA margin improved by 12 percentage points and 16 percentage points during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023. The improvement in Adjusted EBITDA was primarily due to an increase in revenue as noted above, and lower personnel and overhead costs. The improvement in Adjusted EBITDA margin was primarily due to lower personnel and overhead costs as a percent of revenue.

Previous wording

Cost of revenue increased $5 million and $11 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023. The increase in cost of revenue was primarily due to increased direct revenue generation costs related to data center costs and media production costs in our Brand Tripadvisor segment, as well as, increased direct costs from credit card payment processing fees and other revenue-related transaction costs in our Viator segment in direct correlation with the increase in revenue, as Viator serves as the merchant of record for the significant majority of its experience booking transactions.

Current wording

Cost of revenue increased $4 million and $15 million during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023. The increase in cost of revenue during the three months ended September 30, 2024, when compared to the same period in 2023, was primarily due to increased direct costs from credit card payment processing fees and other revenue-related transaction costs in our Viator segment in direct correlation with the increase in revenue, as Viator serves as the merchant of record for the significant majority of its experience booking transactions. The increase in cost of revenue during the nine months ended September 30, 2024, when compared to the same period in 2023, was primarily due to increased direct costs from credit card payment processing fees and other revenue-related transaction costs in our Viator segment, as noted above, as well as, increased direct revenue generation costs related to data center costs and media production costs in our Brand Tripadvisor segment.

Previous wording

Direct selling and marketing costs as a percentage of consolidated revenue was 42% during both the three and six months ended June 30, 2024, a slight decrease from 43% when compared to the same periods in 2023. Direct selling and marketing costs decreased by $4 million and remained flat during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily driven by a decrease in paid online traffic acquisition costs in Brand Tripadvisor of $17 million and $26 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023. These decreases were partially offset by an increase in paid online traffic acquisition costs in Viator of $9 million and $24 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, to capture consumer demand, including increased investment within our Viator segment to grow market share, acquire new customers, and drive brand awareness.

Current wording

Direct selling and marketing costs as a percentage of consolidated revenue was 42% during the nine months ended September 30, 2024, compared to 43% in the same period in 2023. Direct selling and marketing costs decreased by $3 million during the nine months ended September 30, 2024, when compared to the same period in 2023, primarily driven by a decrease in overall marketing costs in Brand Tripadvisor of $28 million, partially offset by an increase in overall marketing costs in our Viator segment of $21 million, in order to capture consumer demand, including increased investment within our Viator segment focused on growing market share, acquiring new customers, and driving brand awareness.

Previous wording

Personnel and overhead costs decreased $3 million and $4 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily driven by a reduction in headcount related to our cost-reduction measures taken during 2023 in Brand Tripadvisor, partially by offset by an increase in personnel and overhead costs to support business growth and investment in our product experience in Viator.

Current wording

Personnel and overhead costs decreased $3 million during the nine months ended September 30, 2024, when compared to the same period in 2023, primarily driven by a reduction in headcount related to our cost-reduction measures taken during 2023 in Brand Tripadvisor and TheFork, partially by offset by an increase in personnel and overhead costs to support business growth in Viator, as well as, an increase in stock-based compensation.

Previous wording

Personnel and overhead costs increased by $2 million and remained flat during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily driven by an increase in stock-based compensation of $4 million and $5 million, respectively, largely offset by a reduction in headcount related to cost reduction measures taken during 2023 in our Brand Tripadvisor segment.

Current wording

Personnel and overhead costs increased by $2 million and did not materially change during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily driven by an increase in stock-based compensation, largely offset by a reduction in headcount related to cost reduction measures taken during 2023 in our Brand Tripadvisor segment.

Previous wording

Professional service fees and other costs increased by $16 million during the six months ended June 30, 2024, when compared to the same period in 2023, primarily due to an estimated accrual for the potential settlement of a regulatory related matter of $10 million during the first quarter of 2024, and to a lesser extent, incremental digital service tax costs of $4 million, as noted above, and increased bad debt expense of $2 million.

Current wording

Professional service fees and other costs increased by $17 million during the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to an estimated accrual for the potential settlement of a regulatory related matter of $10 million during the first quarter of 2024, and to a lesser extent, incremental digital service tax costs of $5 million, primarily resulting from enacted tax legislation in Canada during June 2024.

Previous wording

Depreciation and amortization did not change materially during both the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023.

Current wording

Depreciation and amortization did not change materially during both the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023.

Previous wording

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

Current wording

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

Previous wording

Interest expense did not change materially during the three and six months ended June 30, 2024 when compared to the same periods in 2023, as our capital structure did not change significantly as of June 30, 2024. The majority of interest expense reported during the three and six months ended June 30, 2024 and 2023 was related to the 2025 Senior Notes. Refer to “Note 6: Debt” and “Note 14: Subsequent Events” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information on material capital structure changes subsequent to June 30, 2024.

Current wording

Interest expense increased $2 million during both the three and nine months ended September 30, 2024 when compared to the same periods in 2023, primarily due to the issuance of our Term Loan B Facility in July 2024, which has currently increased our cost of capital. The majority of interest expense reported during the three months ended September 30, 2024 was primarily related to the Term Loan B Facility, while during the three ended September 30, 2023 and both the nine months ended September 30, 2024 and 2023, interest expense incurred was primarily related to the 2025 Senior Notes which were redeemed in July 2024. Refer to “Note 6: Debt” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information on material capital structure changes and cost of capital during the third quarter of 2024.

Previous wording

Interest income increased $1 million and $3 million during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase in the average amount of cash invested and increased interest rates received on bank deposits, as well as an increase in interest earned on money market funds during the three and six months ended June 30, 2024.

Current wording

Interest income increased $3 million during the nine months ended September 30, 2024, respectively, when compared to the same period in 2023, primarily due to an increase in the average amount of cash invested.

Previous wording

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).

Current wording

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, gain/(loss) on extinguishment of debt, and other non-operating income (expenses).

Previous wording

Other expense, net decreased $1 million during the three months ended June 30, 2024, when compared to the same period in 2023, primarily due to net foreign exchange gains and losses incurred as a result of foreign currency movements. Other expense, net increased $2 million during the six months ended June 30, 2024, when compared to the same period in 2023, primarily due to a loss on disposal of certain assets, partially offset by net foreign exchange gains and losses incurred as a result of foreign currency movements.

Current wording

Other expense, net increased $2 million during the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to a $2 million loss on extinguishment of the 2025 Senior Notes. Other expense, net increased $4 million during the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to a loss on disposal of certain assets and aforementioned loss on extinguishment of debt of $2 million, partially offset by net foreign exchange gains incurred as a result of foreign currency movements.

Previous wording

Our effective tax rate for the three months ended June 30, 2024 differs from the U.S. federal statutory rate of 21%, primarily due to state taxes and unfavorable stock-based compensation tax effects. Our effective tax rate for the six months ended June 30, 2024 differs from the U.S. federal statutory rate of 21%, primarily as a result of a discrete item recorded during the first quarter of 2024, as described below.

Current wording

Our effective tax rate for the three months ended September 30, 2024 differs from the U.S. federal statutory rate of 21%, primarily due to unfavorable stock-based compensation tax effects. Our effective tax rate for the nine months ended September 30, 2024 differs from the U.S. federal statutory rate of 21%, primarily as a result of a discrete item recorded during the first quarter of 2024, as described below.

Previous wording

We recorded an income tax provision of $14 million and $57 million for the three and six months ended June 30, 2024, respectively. The change in our income tax provision and our effective tax rate during the six months ended June 30, 2024, when compared to the same period in 2023, was primarily the result of an IRS audit settlement, which we recorded additional income tax expense as a discrete item, inclusive of interest, of $45 million related to this settlement on our unaudited condensed consolidated statement of operations, including $46 million recorded during the first quarter of 2024. In addition, we reviewed the impact of the acceptance of this settlement position against our existing transfer pricing income tax reserves for the subsequent open tax years during the first quarter of 2024, which resulted in an income tax benefit, inclusive of estimated interest, of $4 million. During the three months ended March 31, 2023, we recorded a net income tax expense of $55 million related to an IRS audit settlement and related adjustment to existing transfer pricing income tax reserves for subsequent tax years. Refer to “Note 8: Income Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information.

Current wording

We recorded an income tax provision of $27 million and $84 million for the three and nine months ended September 30, 2024, respectively. The change in our income tax provision and our effective tax rate during the nine months ended September 30, 2024, when compared to the same period in 2023, was primarily the result of an IRS audit settlement, which we recorded an income tax expense of $41 million, as a discrete item, inclusive of interest, primarily during the first quarter of 2024, related to this settlement on our unaudited condensed consolidated statement of operations. In addition, we reviewed the impact of the acceptance of this settlement position against our existing transfer pricing income tax reserves for the subsequent open tax years during the first quarter of 2024, which resulted in an income tax benefit, inclusive of estimated interest, of $4 million. During the nine months ended September 30, 2023, specifically in the first quarter of 2023, we recorded a net income tax expense of $55 million related to an IRS audit settlement and related adjustment to existing transfer pricing income tax reserves for subsequent tax years. Refer to “Note 8: Income Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report for further information.

Previous wording

Net income did not materially change during the three months ended June 30, 2024 when compared to the same period in 2023. Improvements in net income were largely driven by a decrease in income tax expense of $6 million, as well as a decrease in direct selling and marketing costs and personnel and overhead costs primarily in our Brand Tripadvisor segment, as described in more detail above under “Consolidated Expenses,” and to a lesser extent, an increase in revenue, as described in more detail above under “Revenue and Segment Information”. These improvements were offset by increased direct selling and marketing costs in response to consumer demand and investment to grow market share in our experiences offerings, increased direct revenue generation costs related to data center costs and media production costs in our Brand Tripadvisor segment, as well as, increased direct costs from credit card payment and other revenue-related transaction costs in direct correlation with the increase in experiences revenue, increased personnel and overhead costs to support growth in our Viator segment, and incremental digital service tax costs, all of which is described in more detail above under “Consolidated Expenses.”

Current wording

Net income increased $12 million during the three months ended September 30, 2024 when compared to the same period in 2023. Improvements in net income were largely driven by restructuring costs incurred of $18 million in the three months ended September 30, 2023, which did not reoccur during the three months ended September 30, 2024, a decrease in income tax expense of $10 million, as well as a decrease in direct selling and marketing costs primarily in our Brand Tripadvisor segment. These improvements were largely offset by increased direct revenue generation costs related to data center costs and media production costs in our Brand Tripadvisor segment, an increase in direct selling and marketing costs in our Viator segment, as well as, increased direct costs from credit card payment and other revenue-related transaction costs in direct correlation with the increase in experiences revenue. All drivers discussed above are described in more detail above under “Consolidated Expenses.”

Previous wording

Net loss improved by $14 million during the six months ended June 30, 2024 when compared to the same period in 2023. The improvement in net loss was largely driven by increased revenue, as described in more detail above under “Revenue and Segment Information”, a decrease in income tax expense of $21 million, as described in more detail above under “(Provision) Benefit for Income Taxes”, as well as a decrease in direct selling and marketing costs and personnel and overhead costs primarily in our Brand Tripadvisor segment, as described in more detail above under “Consolidated Expenses”. These improvements were largely offset by increased direct selling and marketing costs in response to consumer demand and investment to grow market share in our experiences offerings, increased direct revenue generation costs related to data center costs and media production costs in our Brand Tripadvisor segment, as well as, increased direct costs from credit card payment and other revenue-related transaction costs in direct correlation with the increase in experiences revenue, increased personnel and overhead costs to support growth in our Viator segment, and an estimated accrual for the potential settlement of a regulatory related matter of $10 million during the first quarter of 2024, all of which is described in more detail above under “Consolidated Expenses.”

Current wording

Net loss improved by $26 million during the nine months ended September 30, 2024 when compared to the same period in 2023. The improvement in net loss was largely driven by increased revenue, as described in more detail above under “Revenue and Segment Information”, a decrease in income tax expense of $31 million, as described in more detail above under “(Provision) Benefit for Income Taxes”, restructuring costs incurred of $18 million in the nine months ended September 30, 2023, which did not reoccur during the nine months ended September 30, 2024. In addition, a decrease in direct selling and marketing costs in our Brand Tripadvisor segment, as well as a decrease in personnel and overhead costs primarily in our Brand Tripadvisor segment, also contributed to the net loss improvement during the nine months ended September 30, 2024. These improvements were largely offset by increased direct selling and marketing costs in our Viator segment, increased direct revenue generation costs related to data center costs and media production costs in our Brand Tripadvisor segment, as well as, increased direct costs from credit card payment and other revenue-related transaction costs in direct correlation with the increase in experiences revenue, and increased personnel and overhead costs to support growth in our Viator segment, and an estimated accrual for the potential settlement of a regulatory related matter of $10 million during the first quarter of 2024. All drivers discussed above are described in more detail above under “Consolidated Expenses.”

Previous wording

Adjusted EBITDA is also our segment profit measure and a key measure used by our management and Board of Directors to understand and evaluate the financial performance of our business and on which internal budgets and forecasts are based and approved. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons and better enables management and investors to compare financial results between periods as these costs may vary independent of ongoing core business performance. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. We define Adjusted EBITDA as net income (loss) plus: (1) (provision) benefit for income taxes; (2) other income (expense), net; (3) depreciation and amortization; (4) stock-based compensation and other stock-settled obligations; (5) goodwill, long-lived asset, and intangible assets impairments; (6) legal reserves and settlements, including indirect tax reserves related to audit settlements and the impact of one-time changes resulting from enacted tax legislation; (7) restructuring and other related reorganization costs; and (8) non-recurring expenses and income.

Current wording

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 expense (income), net; (3) depreciation and amortization; (4) stock-based compensation and other stock-settled obligations; (5) goodwill, long-lived asset, and intangible assets impairments; (6) legal reserves and settlements, including indirect tax reserves related to audit settlements and the impact of one-time changes resulting from enacted tax legislation; (7) restructuring and other related reorganization costs (benefit); and (8) non-recurring expenses (income).

Previous wording

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;

Current wording

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, as well as restructuring and other related reorganization costs (benefit);

Previous wording

The Company expensed certain transaction costs of $2 million and $3 million during the three and six months ended June 30, 2024, respectively, to general and administrative expenses on our unaudited condensed consolidated statements of operations. The Company expensed $3 million of previously capitalized transaction costs during the first quarter of 2023 to general and administrative expenses on our unaudited condensed consolidated statement of operations. The Company considers such costs to be non-recurring in nature.

Current wording

The Company expensed certain transaction costs of $1 million and $4 million during the three and nine months ended September 30, 2024, respectively, to general and administrative expenses on our unaudited condensed consolidated statements of operations. The Company expensed $3 million of previously capitalized transaction costs during the first quarter of 2023 to general and administrative expenses on our unaudited condensed consolidated statement of operations. The Company considers such costs to be non-recurring in nature.

Previous wording

Includes a one-time charge of $4 million during the second quarter of 2024, resulting from enacted tax legislation in Canada during June 2024 related to digital services taxes, which requires retrospective application back to January 1, 2022. This amount represents the one-time retrospective liability for the periods prior to April 1, 2024, while the liability for the three months ended June 30, 2024 and all prospective periods are and will be included within adjusted EBITDA. In addition, this amount includes an estimated accrual for the potential settlement of a regulatory related matter of $10 million, expensed during the first quarter of 2024. These costs are reflected in general and administrative expenses on our unaudited condensed consolidated statements of operations.

Current wording

Includes a one-time charge of $4 million during the second quarter of 2024, resulting from enacted tax legislation in Canada during June 2024 related to digital services taxes, which requires retrospective application back to January 1, 2022. This amount represents the one-time retrospective liability for the periods prior to April 1, 2024, while all prospective periods are included within Adjusted EBITDA. In addition, this amount includes an estimated accrual for the potential settlement of a regulatory related matter of $10 million, expensed during the first quarter of 2024. These costs are reflected in general and administrative expenses on our unaudited condensed consolidated statements of operations.