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 June 30, 2019

☐ 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: (720) 875-5200

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 July 31, 2019 was:


	Series A	Series B
Liberty TripAdvisor Holdings, Inc. common stock	72,146,830	2,929,777

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(unaudited)


	June 30,		December 31,
	2019		2018
	amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	915	672
Accounts receivable and contract assets, net of allowance for doubtful accounts of $22 million and $21 million, respectively		270	212
Other current assets		127	48
Total current assets		1,312	932
Property and equipment, net		156	154
Intangible assets not subject to amortization:
Goodwill		2,441	2,443
Trademarks		1,267	1,266
		3,708	3,709
Intangible assets subject to amortization, net		280	311
Other assets, at cost, net of accumulated amortization		177	118
Total assets	$	5,633	5,224

(continued)

See accompanying notes to condensed consolidated financial statements.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets (Continued)

(unaudited)


	June 30,		December 31,
	2019		2018
	amounts in millions
Liabilities and Equity
Current liabilities:
Deferred merchant and other payables	$	360	179
Current portion of debt (note 5)		269	220
Deferred revenue		98	63
Accrued liabilities and other current liabilities		183	151
Total current liabilities		910	613
Long-term debt (note 5)		224	267
Deferred income tax liabilities		338	325
Other liabilities		343	283
Total liabilities		1,815	1,488
Equity:
Preferred stock, $.01 par value. Authorized shares 50,000,000; no shares issued.		—	—
Series A common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding 72,146,830 shares at June 30, 2019 and 72,146,903 at December 31, 2018		1	1
Series B common stock, $.01 par value. Authorized shares 7,500,000; issued and outstanding 2,929,777 shares at June 30, 2019 and December 31, 2018		—	—
Series C common stock, $.01 par value. Authorized 200,000,000 shares; no shares issued.		—	—
Additional paid-in capital		215	231
Accumulated other comprehensive earnings (loss), net of taxes		(30)	(29)
Retained earnings		135	133
Total stockholders' equity		321	336
Noncontrolling interests in equity of subsidiaries		3,497	3,400
Total equity		3,818	3,736
Commitments and contingencies (note 7)
Total liabilities and equity	$	5,633	5,224

See accompanying notes to condensed consolidated financial statements.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(unaudited)


	Three months ended			Six months ended
	June 30,			June 30,
	2019		2018	2019	2018
	amounts in millions, except
	per share amounts
Total revenue, net	$	422	433	798	811
Operating costs and expenses:
Operating expense, including stock-based compensation (note 2)		102	92	196	179
Selling, general and administrative, including stock-based compensation (note 2)		228	266	452	509
Depreciation and amortization		41	41	83	80
		371	399	731	768
Operating income (loss)		51	34	67	43
Other income (expense):
Interest expense		(6)	(6)	(11)	(12)
Realized and unrealized gains (losses) on financial instruments, net		5	(42)	6	(65)
Other, net		4	—	8	1
		3	(48)	3	(76)
Earnings (loss) before income taxes		54	(14)	70	(33)
Income tax (expense) benefit		(31)	(8)	(36)	(24)
Net earnings (loss)		23	(22)	34	(57)
Less net earnings (loss) attributable to noncontrolling interests		20	17	33	13
Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders	$	3	(39)	1	(70)

Basic net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):	$	0.04	(0.52)	0.01	(0.93)
Diluted net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):	$	0.04	(0.52)	0.01	(0.93)

See accompanying notes to condensed consolidated financial statements.

I-5

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)


	Three months ended			Six months ended
	June 30,			June 30,
	2019		2018	2019	2018
	amounts in millions
Net earnings (loss)	$	23	(22)	34	(57)
Other comprehensive earnings (loss), net of taxes:
Foreign currency translation adjustments		(3)	(24)	(2)	(9)
Other comprehensive earnings (loss)		(3)	(24)	(2)	(9)
Comprehensive earnings (loss)		20	(46)	32	(66)
Less comprehensive earnings (loss) attributable to the noncontrolling interests		18	(2)	32	6
Comprehensive earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders	$	2	(44)	0	(72)

See accompanying notes to condensed consolidated financial statements.

I-6

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six months ended
	June 30,
	2019		2018
	amounts in millions
Cash flows from operating activities:
Net earnings (loss)	$	34	(57)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities
Depreciation and amortization		83	80
Stock-based compensation		63	63
Realized and unrealized (gains) losses on financial instruments, net		(6)	65
Deferred income tax expense (benefit)		12	(6)
Other charges (credits), net		2	(10)
Changes in operating assets and liabilities
Current and other assets		(62)	(74)
Payables and other liabilities		221	296
Net cash provided (used) by operating activities		347	357
Cash flows from investing activities:
Capital expended for property and equipment, including internal-use software and website development		(38)	(31)
Purchases of short term investments and other marketable securities		(69)	(1)
Sales and maturities of short term investments and other marketable securities		20	50
Other investing activities, net		—	(23)
Net cash provided (used) by investing activities		(87)	(5)
Cash flows from financing activities:
Borrowings of debt		114	7
Repayments of debt		(100)	(245)
Shares repurchased by subsidiary		—	(100)
Payment of withholding taxes on net share settlements of equity awards		(26)	(18)
Shares issued by subsidiary		1	3
Other financing activities, net		(4)	—
Net cash provided (used) by financing activities		(15)	(353)
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash		(2)	(9)
Net increase (decrease) in cash, cash equivalents and restricted cash		243	(10)
Cash, cash equivalents and restricted cash at beginning of period		672	695
Cash, cash equivalents and restricted cash at end of period	$	915	685

See accompanying notes to condensed consolidated financial statements.

I-7

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statement of Equity

(unaudited)


	Stockholders' equity

							Accumulated		Noncontrolling
						Additional	other		interest in
	Preferred		Common Stock			paid-in	comprehensive	Retained	equity of	Total
	Stock		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)		—	—	—	—	—	—	1	33	34
Other comprehensive earnings (loss)		—	—	—	—	—	(1)	—	(1)	(2)
Stock-based compensation		—	—	—	—	18	—	—	53	71
Withholding taxes on net share settlements of stock-based compensation		—	—	—	—	(27)	—	—	—	(27)
Other, net		—	—	—	—	(7)	—	1	12	6
Balance at June 30, 2019	$	—	1	—	—	215	(30)	135	3,497	3,818


	Stockholders' equity

							Accumulated		Noncontrolling
						Additional	other		interest in
	Preferred		Common Stock			paid-in	comprehensive	Retained	equity of	Total
	Stock		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity
	amounts in millions
Balance at March 31, 2019	$	—	1	—	—	216	(29)	132	3,443	3,763
Net earnings (loss)		—	—	—	—	—	—	3	20	23
Other comprehensive earnings (loss)		—	—	—	—	—	(1)	—	(2)	(3)
Stock-based compensation		—	—	—	—	9	—	—	29	38
Withholding taxes on net share settlements of stock-based compensation		—	—	—	—	(4)	—	—	—	(4)
Other, net		—	—	—	—	(6)	—	—	7	1
Balance at June 30, 2019	$	—	1	—	—	215	(30)	135	3,497	3,818

See accompanying notes to condensed consolidated financial statements.

I-8

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statement of Equity (continued)

(unaudited)


	Stockholders' equity

							Accumulated		Noncontrolling
						Additional	other		interest in
	Preferred		Common Stock			paid-in	comprehensive	Retained	equity of	Total
	Stock		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity
	amounts in millions
Balance at January 1, 2018	$	—	1	—	—	250	(23)	196	3,329	3,753
Net earnings (loss)		—	—	—	—	—	—	(70)	13	(57)
Other comprehensive earnings (loss)		—	—	—	—	—	(2)	—	(7)	(9)
Stock-based compensation		—	—	—	—	18	—	—	52	70
Shares repurchased by subsidiary		—	—	—	—	(20)	—	—	(80)	(100)
Other, net		—	—	—	—	(24)	—	1	12	(11)
Balance at June 30, 2018	$	—	1	—	—	224	(25)	127	3,319	3,646


	Stockholders' equity

							Accumulated		Noncontrolling
						Additional	other		interest in
	Preferred		Common Stock			paid-in	comprehensive	Retained	equity of	Total
	Stock		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity
	amounts in millions
Balance at March 31, 2018	$	—	1	—	—	240	(20)	166	3,361	3,748
Net earnings (loss)		—	—	—	—	—	—	(39)	17	(22)
Other comprehensive earnings (loss)		—	—	—	—	—	(5)	—	(19)	(24)
Stock-based compensation		—	—	—	—	10	—	—	27	37
Shares repurchased by subsidiary		—	—	—	—	(18)	—	—	(72)	(90)
Other, net		—	—	—	—	(8)	—	—	5	(3)
Balance at June 30, 2018	$	—	1	—	—	224	(25)	127	3,319	3,646

See accompanying notes to condensed consolidated financial statements.

I-9

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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. Pursuant to the tax sharing agreement, TripCo has agreed to indemnify Qurate Retail, subject to certain limited exceptions, for losses and taxes resulting from the TripCo Spin-Off to the extent such losses or taxes result primarily from, individually or in the aggregate, the breach of certain restrictive covenants made by TripCo (applicable to actions or failures to act by TripCo and its subsidiaries following the completion of the TripCo Spin-Off).

Under these agreements, approximately $1 million was reimbursable to Liberty Media for both of the three months ended June 30, 2019 and 2018, and approximately $2 million was reimbursable to Liberty Media for both the six months ended June 30, 2019 and 2018.

(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).

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 and the implied volatility of publicly traded TripCo options. 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			Six months ended
	June 30,			June 30,
	2019		2018	2019	2018
	amounts in millions
Operating expense	$	15	14	27	26
Selling, general and administrative expense		18	19	36	37
	$	33	33	63	63

Stock-based compensation expense related to TripAdvisor was $32 million and $31 million for the three months ended June 30, 2019 and 2018, respectively, and $60 million and $61 million for the six months ended June 30, 2019 and 2018, respectively.

I-11

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, 2019	570	$	15.40
Granted	—	$	—
Exercised	—	$	—
Forfeited/Cancelled	(1)	$	28.08
Outstanding at June 30, 2019	569	$	15.38	2.8	$	—
Exercisable at June 30, 2019	510	$	14.90	2.4	$	—


				Weighted
				average
				remaining	Aggregate
				contractual	intrinsic
	Series B	WAEP		life	value
	in thousands			in years	in millions
Outstanding at January 1, 2019	1,797	$	27.83
Granted	27	$	14.28
Exercised	—	$	—
Forfeited/Cancelled	—	$	—
Outstanding at June 30, 2019	1,824	$	27.63	5.5	$	—
Exercisable at June 30, 2019	899	$	27.83	5.5	$	—

During the six months ended June 30, 2019, TripCo granted 27 thousand options to purchase shares of Series B TripCo common stock and 35 thousand performance-based RSUs of Series B TripCo common stock to our CEO. Such options had a GDFV of $6.41 per share. The RSUs had a GDFV of $14.17 per share at the time they were granted. The options vest on December 31, 2019, and the RSUs cliff vest in one year, 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.

There were no options to purchase shares of Series A common stock granted during the six months ended June 30, 2019.

As of June 30, 2019, the total unrecognized compensation cost related to unvested Awards was approximately $3 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately one year.

As of June 30, 2019, TripCo reserved 2.4 million shares of Series A and Series B common stock for issuance under exercise privileges of outstanding stock Awards.

I-12

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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, 2019	6,041	$	54.00
Granted	675	$	53.31
Exercised	(160)	$	42.41
Cancelled or expired	(209)	$	60.83
Outstanding at June 30, 2019	6,347	$	54.00	6.3	$	20
Exercisable at June 30, 2019	3,516	$	60.19	4.5	$	7

The weighted average GDFV of options granted was $21.80 for the six months ended June 30, 2019.

As of June 30, 2019, the total unrecognized compensation cost related to unvested TripAdvisor stock options was approximately $41 million and will be recognized over a weighted average period of approximately 2.9 years. The total intrinsic value of stock options exercised was $2 million and $6 million for the six months ended June 30, 2019 and 2018, respectively.

Additionally, during the six months ended June 30, 2019, TripAdvisor granted 2.7 million of primarily service-based restricted stock units (“RSUs”) and 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 during the six months ended June 30, 2019 was $53.50 per share. As of June 30, 2019, the total unrecognized compensation cost related to TripAdvisor RSUs and MSUs was approximately $292 million and will be recognized over a weighted average period of approximately 2.8 years.

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

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to TripCo 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

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

of the periods presented. Excluded from EPS for both the three and six months ended June 30, 2019 and 2018 are 2 million potential common shares, because their inclusion would be antidilutive.


	Liberty TripAdvisor Holdings Common Stock
	Three months ended		Six months ended
	June 30,		June 30,
	2019	2018	2019	2018
	number of shares in millions
Basic WASO	75	75	75	75
Potentially dilutive shares	—	—	—	—
Diluted WASO	75	75	75	75

(4) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any material recurring assets or liabilities measured at fair value that would be considered Level 3.

The Company’s assets and liabilities measured at fair value are as follows:

June 30, 2019

December 31, 2018

Quoted prices

Significant

Quoted prices

Significant

in active

other

in active

other

markets for

observable

markets for

observable

identical assets

inputs

identical assets

inputs

Description

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

amounts in millions

Cash equivalents

—

145






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-25
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	I-33
	Item 4. Controls and Procedures	I-33

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-2
	Item 6. Exhibits	II-2


SIGNATURES		II-3