UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number
(Exact name of Registrant as specified in its charter)
|
|
(Address, including zip code, of Registrant’s principal executive offices)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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.
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).
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 ☐ | 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
The number of outstanding shares of Liberty TripAdvisor Holdings, Inc. common stock as of April 30, 2022 was:
Series A | Series B | ||||
Liberty TripAdvisor Holdings, Inc. common stock | | | |||
Table of Contents
Part I – Financial Information
I-2
LIBERTY TRIPADVISOR HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(unaudited)
| March 31, |
| December 31, |
| ||
2022 | 2021 |
| ||||
amounts in millions |
| |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | |
| | ||
Accounts receivable and contract assets, net of allowance for credit losses of $ |
| |
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Income taxes receivable | | | ||||
Other current assets |
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Total current assets |
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Property and equipment, net |
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Intangible assets not subject to amortization: | ||||||
Goodwill |
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Trademarks |
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Intangible assets subject to amortization, net |
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Other assets, at cost, net of accumulated amortization |
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Total assets | $ | |
| |
(continued)
See accompanying notes to condensed consolidated financial statements.
I-3
LIBERTY TRIPADVISOR HOLDINGS, INC.
Condensed Consolidated Balance Sheets (Continued)
(unaudited)
| March 31, |
| December 31, |
| ||
2022 | 2021 |
| ||||
amounts in millions |
| |||||
Liabilities and Equity | ||||||
Current liabilities: | ||||||
Deferred merchant and other payables | $ | |
| | ||
Deferred revenue |
| |
| | ||
Current portion of debt (note 5) | | — | ||||
Accrued liabilities and other current liabilities |
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Total current liabilities |
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Long-term debt, including $ |
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Deferred income tax liabilities |
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Financial instrument liabilities (note 4) | | | ||||
Series A Preferred Stock liability (note 6) | | | ||||
Other liabilities |
| |
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Total liabilities |
| |
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Equity: | ||||||
Series A common stock, $ | | | ||||
Series B common stock, $ | ||||||
Series C common stock, $ | ||||||
Additional paid-in capital | | | ||||
Accumulated other comprehensive earnings (loss), net of taxes |
| ( |
| ( | ||
Retained earnings (deficit) |
| ( |
| ( | ||
Total stockholders' equity |
| ( |
| ( | ||
Noncontrolling interests in equity of subsidiaries |
| |
| | ||
Total equity |
| |
| | ||
Commitments and contingencies (note 8) | ||||||
Total liabilities and equity | $ | |
| |
See accompanying notes to condensed consolidated financial statements.
I-4
LIBERTY TRIPADVISOR HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended |
| |||||
March 31, |
| |||||
| 2022 |
| 2021 |
| ||
amounts in millions, except |
| |||||
per share amounts |
| |||||
$ | | | ||||
Operating costs and expenses: | ||||||
Operating expense, including stock-based compensation (note 2) |
| |
| | ||
Selling, general and administrative, including stock-based compensation (note 2) |
| |
| | ||
Depreciation and amortization |
| |
| | ||
| |
| | |||
Operating income (loss) |
| ( |
| ( | ||
Other income (expense): | ||||||
Interest expense |
| ( |
| ( | ||
Realized and unrealized gains (losses) on financial instruments, net | ( | ( | ||||
Other, net |
| ( |
| ( | ||
| ( |
| ( | |||
Earnings (loss) before income taxes |
| ( |
| ( | ||
Income tax (expense) benefit |
| ( |
| | ||
Net earnings (loss) |
| ( |
| ( | ||
Less net earnings (loss) attributable to noncontrolling interests |
| ( |
| ( | ||
Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders | $ | ( |
| ( | ||
Net earnings (loss) available to common shareholders (note 3) | $ | ( | ( | |||
Basic net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3): | $ | ( | ( | |||
Diluted net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3): | $ | ( | ( |
See accompanying notes to condensed consolidated financial statements.
I-5
LIBERTY TRIPADVISOR HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Earnings (Loss)
(unaudited)
Three months ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
amounts in millions | ||||||
Net earnings (loss) | $ | ( | ( | |||
Other comprehensive earnings (loss), net of taxes: | ||||||
Foreign currency translation adjustments |
| ( | ( | |||
Credit risk on fair value debt instruments gains (losses) | | | ||||
Other comprehensive earnings (loss) |
| ( | ( | |||
Comprehensive earnings (loss) |
| ( | ( | |||
Less comprehensive earnings (loss) attributable to the noncontrolling interests |
| ( | ( | |||
Comprehensive earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders | $ | ( | ( |
See accompanying notes to condensed consolidated financial statements.
I-6
LIBERTY TRIPADVISOR HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended |
| |||||
March 31, |
| |||||
2022 | 2021 |
| ||||
amounts in millions |
| |||||
Cash flows from operating activities: |
|
|
|
| ||
Net earnings (loss) | $ | ( |
| ( | ||
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities | ||||||
Depreciation and amortization |
| |
| | ||
Stock-based compensation |
| |
| | ||
Realized and unrealized (gains) losses on financial instruments, net | | | ||||
Deferred income tax expense (benefit) |
| ( |
| ( | ||
Other charges (credits), net |
| |
| ( | ||
Changes in operating assets and liabilities | ||||||
Current and other assets |
| ( |
| ( | ||
Payables and other liabilities |
| |
| | ||
Net cash provided (used) by operating activities |
| |
| ( | ||
Cash flows from investing activities: | ||||||
Capital expended for property and equipment, including capitalized website development |
| ( |
| ( | ||
Net cash provided (used) by investing activities |
| ( |
| ( | ||
Cash flows from financing activities: | ||||||
Borrowings of debt |
| — |
| | ||
Repurchase of Series A Preferred Stock | — | ( | ||||
Payment of withholding taxes on net share settlements of equity awards |
| ( |
| ( | ||
Subsidiary purchase of capped calls | — | ( | ||||
Other financing activities, net | ( | ( | ||||
Net cash provided (used) by financing activities |
| ( |
| | ||
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash |
| ( |
| ( | ||
Net increase (decrease) in cash, cash equivalents and restricted cash |
| |
| | ||
Cash, cash equivalents and restricted cash at beginning of period |
| |
| | ||
Cash, cash equivalents and restricted cash at end of period | $ | |
| |
See accompanying notes to condensed consolidated financial statements.
I-7
LIBERTY TRIPADVISOR HOLDINGS, INC.
Condensed Consolidated Statements of Equity
(unaudited)
Stockholders' equity | ||||||||||||||||||
Accumulated | Noncontrolling | |||||||||||||||||
Additional | other | interest in | ||||||||||||||||
Common Stock | paid-in | comprehensive | Retained | equity of | Total | |||||||||||||
Series A | Series B | Series C | capital | earnings (loss) | earnings (deficit) | subsidiaries | equity | |||||||||||
amounts in millions | ||||||||||||||||||
Balance at January 1, 2022 |
| $ | |
| — |
| — |
| |
| ( |
| ( |
| |
| | |
Net earnings (loss) | — | — | — | — |
| — |
| ( |
| ( |
| ( | ||||||
Other comprehensive earnings (loss) | — | — | — | — |
| |
| — |
| ( |
| ( | ||||||
Stock-based compensation | — | — | — | |
| — |
| — |
| |
| | ||||||
Withholding taxes on net share settlements of stock-based compensation | — | — | — | ( |
| — |
| — |
| — |
| ( | ||||||
Shares issued by subsidiary | — | — | — | ( | — | — | | — | ||||||||||
Balance at March 31, 2022 | $ | |
| — |
| — |
| |
| ( |
| ( |
| |
| |
Stockholders' equity | ||||||||||||||||||
Accumulated | Noncontrolling | |||||||||||||||||
Additional | other | interest in | ||||||||||||||||
Common Stock | paid-in | comprehensive | Retained | equity of | Total | |||||||||||||
Series A | Series B | Series C | capital | earnings (loss) | earnings (deficit) | subsidiaries | equity | |||||||||||
amounts in millions | ||||||||||||||||||
Balance at January 1, 2021 |
| $ | |
| — |
| — |
| |
| ( |
| ( |
| |
| | |
Net earnings (loss) | — | — | — | — |
| — |
| ( |
| ( |
| ( | ||||||
Other comprehensive earnings (loss) | — | — | — | — |
| |
| — |
| ( |
| ( | ||||||
Stock-based compensation | — | — | — | |
| — |
| — |
| |
| | ||||||
Withholding taxes on net share settlements of stock-based compensation | — | — | — | ( | — | — | — | ( | ||||||||||
Shares issued by subsidiary | — | — | — | ( | — | — | | | ||||||||||
Preferred stock adjustment (note 6) | — | — | — | — | — | ( | — | ( | ||||||||||
Subsidiary purchase of capped calls, net of tax (note 5) | — | — | — | ( | — | — | ( | ( | ||||||||||
Preferred stock repurchased with subsidiary shares (note 6) | — |
| — |
| — |
| |
| — |
| — |
| |
| | |||
Balance at March 31, 2021 | $ | |
| — |
| — |
| |
| ( |
| ( |
| |
| |
See accompanying notes to condensed consolidated financial statements
I-8
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of Liberty TripAdvisor Holdings, Inc. and its controlled subsidiaries (collectively, "TripCo," "Consolidated TripCo," the "Company," "we," "us," or “our,” unless the context otherwise requires). TripCo does not have any operations outside of its controlling interest in its subsidiary Tripadvisor, Inc. (“Tripadvisor”).
The accompanying (a) condensed consolidated balance sheet as of December 31, 2021, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2021 as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i) recognition and recoverability of goodwill, intangible and long-lived assets and (ii) accounting for income taxes to be its most significant estimates. Some of the Company’s estimates and assumptions required increased judgment and carry a higher degree of variability and volatility as a result of COVID-19 (as defined below). As events continue to evolve and additional information becomes available, the Company’s estimates may change materially in future periods.
In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China, and on March 11, 2020 was declared a global pandemic. Tripadvisor and the Company continue to be subject to risks and uncertainties as a result of the COVID-19 pandemic.
The timing of widespread vaccine distributions, efficacy against any future or existing variants (e.g. Delta and Omicron) of COVID-19, whether there will be resurgences of the virus and subsequent government restrictions, the extent and effectiveness of containment actions taken, and whether consumers’ demand for travel and hospitality services continue to be negatively impacted remains uncertain. Tripadvisor does not know the future path or potential rate of global or regional COVID-19 resurgences, including existing COVID-19 variants or future variants, if any, nor does it have visibility into when remaining or reinstated restrictions will be lifted, and where additional restrictions may be implemented or reinstated in the future due to resurgence of the virus. Correspondingly, Tripadvisor still does not have forward-looking visibility into the long-term impacts related to consumer demand for travel, usage patterns on its platform, and travel behavior patterns when all travel bans and other government restrictions and mandates are fully lifted.
Therefore, the continuing extent of the impact of the COVID-19 pandemic on Tripadvisor’s business, results of operations, liquidity and financial condition remains uncertain, and is dependent on future developments that cannot be accurately predicted at this time. Tripadvisor continues to believe the travel, leisure, hospitality, and restaurant industries (collectively, the “travel industry”), and Tripadvisor’s financial results, will continue to be adversely and materially affected if any new variants emerge and lingering travel bans and other government restrictions and mandates continue to remain in place or be reinstated, all of which negatively impact consumer demand, sentiment and discretionary spending patterns.
Consumers’ travel expenditures have historically followed a seasonal pattern. Correspondingly, travel partners’ advertising investments, and therefore Tripadvisor’s revenue and operating profits, have also historically followed a
I-9
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
seasonal pattern. Tripadvisor’s financial performance tends to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in consumer demand, traveler hotel and rental stays, and travel activities and experiences taken, compared to the first and fourth quarters, which represent seasonal low points. During the first half of the year, experience and rentals bookings typically exceed the amount of completed experiences and rental stays, 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, which include further significant shifts in Tripadvisor’s business mix or adverse economic conditions that could result in future seasonal patterns that are different from historical trends. For example, although consumer travel demand generally remained materially lower than historic levels due to the impact of COVID-19 on Tripadvisor’s business, these trends improved during 2021, resulting in increased revenues, and working capital and operating cash flow more akin to typical historical seasonality trends, which has continued during the three months ended March 31, 2022. However, it is difficult to predict the seasonality for the upcoming quarters, given the sustained uncertainty related to the continued economic impact of the COVID-19 pandemic and/or potential resurgences, and the pace of continued recovery in Tripadvisor’s key markets.
On March 26, 2020, TripCo issued and sold
TripCo has entered into certain agreements, including the services agreement, the facilities sharing agreement and the tax sharing agreement, with Qurate Retail, Inc. and/or Liberty Media Corporation (“Liberty Media”) (or certain of their subsidiaries). Pursuant to the services agreement (except as described below in respect to Gregory B. Maffei), Liberty Media provides TripCo with general and administrative services including legal, tax, accounting, treasury and investor relations support. TripCo reimburses Liberty Media for direct, out-of-pocket expenses incurred by Liberty Media in providing these services and TripCo pays a services fee to Liberty Media under the services agreement that is subject to adjustment semi-annually, as necessary.
In December 2019, TripCo entered into an amendment to the services agreement with Liberty Media in connection with Liberty Media’s entry into a new employment arrangement with Gregory B. Maffei, TripCo’s Chairman, President and Chief Executive Officer. Under the amended services agreement, components of his compensation will either be paid directly to him by each of TripCo, Liberty Broadband Corporation, and Qurate Retail (collectively, the “Service Companies”) or reimbursed to Liberty Media, in each case, based on allocations among Liberty Media and the Service Companies set forth in the amended services agreement, currently set at
Under the facilities sharing agreement, TripCo shares office space with Liberty Media and related amenities at Liberty Media’s corporate headquarters in Englewood, Colorado.
The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Qurate Retail and TripCo and other agreements related to tax matters.
Under these agreements, approximately $
(2) Stock-Based Compensation
TripCo Equity Awards
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
I-10
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
received in exchange for an equity classified Award based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and re-measures the fair value of the Award at each reporting date.
TripCo has calculated the GDFV for all of its equity classified Awards and any subsequent re-measurement of its liability classified Awards using the Black-Scholes-Merton model. TripCo estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of TripCo common stock. TripCo uses a
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 |
| |||||
March 31, |
| |||||
| 2022 |
| 2021 |
| ||
amounts in millions |
| |||||
Operating expense | $ | | | |||
Selling, general and administrative expense |
| |
| | ||
$ | |
| |
Stock-based compensation expense related to Tripadvisor was $
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, 2022 |
| | $ | | |||||||
Granted |
| — | $ | — | |||||||
Exercised |
| — | $ | — | |||||||
Forfeited/Cancelled |
| — | $ | — | |||||||
Outstanding at March 31, 2022 |
| | $ | |
| $ | — | ||||
Exercisable at March 31, 2022 |
| | $ | |
| $ | — |
I-11
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
|
|
|
|
| Weighted |
|
|
| |||
average |
| ||||||||||
remaining | Aggregate |
| |||||||||
contractual | intrinsic |
| |||||||||
Series B | WAEP | life | value |
| |||||||
in thousands | in years | in millions |
| ||||||||
Outstanding at January 1, 2022 |
| | $ | |
| ||||||
Granted |
| — | $ | — |
| ||||||
Exercised |
| — | $ | — |
| ||||||
Forfeited/Cancelled |
| — | $ | — | |||||||
Outstanding at March 31, 2022 |
| | $ | |
| $ | | ||||
Exercisable at March 31, 2022 |
| | $ | |
| $ | |
During the three months ended March 31, 2022, TripCo granted
As of March 31, 2022, the total unrecognized compensation cost related to unvested Awards was approximately $
As of March 31, 2022, TripCo reserved
Tripadvisor Equity Grant Awards
The following table presents the number and WAEP of the Awards to purchase Tripadvisor common stock (“TRIP 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, 2022 |
| | $ | | |||||||
Granted |
| | $ | | |||||||
Exercised |
| ( | $ | | |||||||
Cancelled or expired | ( | $ | | ||||||||
Outstanding at March 31, 2022 |
| | $ | |
| $ | | ||||
Exercisable at March 31, 2022 |
| | $ | |
| $ | |
The weighted average GDFV of options granted was $
As of March 31, 2022, the total unrecognized compensation cost related to unvested Tripadvisor stock options was approximately $
I-12
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Additionally, during the three months ended March 31, 2022, Tripadvisor granted approximately
(3) Earnings (Loss) Per Common Share (EPS)
Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to common shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. Excluded from EPS for the three months ended March 31, 2022 and 2021, are
Liberty TripAdvisor Holdings Common Stock | ||||
Three months ended | ||||
March 31, | ||||
2022 | 2021 | |||
number of shares in millions | ||||
Numerator | ||||
Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders | $ | ( | ( | |
Less: Series A Preferred Stock carrying value adjustment and transaction costs | — | | ||
Net earnings (loss) available to common shareholders | $ | ( | ( | |
Denominator | ||||
Basic WASO |
| |
| |
Potentially dilutive shares |
| |
| |
Diluted WASO |
| |
| |
(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.
I-13
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company’s assets and liabilities measured at fair value are as follows:
March 31, 2022 | December 31, 2021 |
| ||||||||||||
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 |
| $ | |
| |
| |
| | | — | |||
TripCo Exchangeable Senior Debentures due 2051 | $ | |
| — |
| |
| | — | | ||||
Financial instrument liabilities | $ | | — | | | — | |
On March 9, 2020, TripSPV, a wholly owned subsidiary of the Company, entered into a variable prepaid forward transaction (the “VPF”) with a financial institution with respect to
As of March 31, 2022, Tripadvisor had $
The fair value of TripCo’s
Other Financial Instruments
Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, and long-term debt (excluding the Debentures). With the exception of debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. See note 5 for a description of the fair value of the Company’s fixed rate debt.
I-14
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Realized and Unrealized Gains (Losses) on Financial Instruments
Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 |
| ||
amounts in millions | ||||||
TripCo Exchangeable Senior Debentures due 2051 | $ | ( |
| ( |
| |
Financial instrument liabilities | ( | ( | ||||
$ | ( |
| ( |
|
The Company has elected to account for the Debentures using the fair value option. Changes in the fair value of the Debentures and financial instrument liabilities recognized in the condensed consolidated statement of operations are primarily due to market factors primarily driven by changes in the fair value of the underlying shares of the financial instruments. During the three months ended March 31, 2021, the fair value adjustment recognized in the condensed consolidated statement of operations included approximately $
(5) Debt
Outstanding debt at March 31, 2022 and December 31, 2021 is summarized as follows:
March 31, | December 31, |
| ||||
2022 | 2021 |
| ||||
amounts in millions |
| |||||
TripCo Exchangeable Senior Debentures due 2051 | $ | | | |||
TripCo variable prepaid forward | | | ||||
Tripadvisor Credit Facility | — | — | ||||
Tripadvisor Senior Notes due 2025 | | | ||||
Tripadvisor Convertible Senior Notes due 2026 | | | ||||
Deferred financing costs | ( | ( | ||||
Total consolidated TripCo debt | |
| | |||
Debt classified as current |
| ( |
| — | ||
Total long-term debt | $ | |
| |
TripCo Exchangeable Senior Debentures due 2051
On March 25, 2021, TripCo issued $
I-15
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
in part, on or after March 27, 2025. Holders of Debentures also have the right to require TripCo to purchase their Debentures on March 27, 2025. The redemption and purchase price will generally equal
TripCo used a portion of the net proceeds from the sale of the Debentures to fund the cash portion of the purchase price for the repurchase of a portion of the Series A Preferred Stock (see note 6 below).
Variable Prepaid Forward
In connection with the VPF entered into on March 9, 2020, as described in note 4, TripCo received a prepayment of $
Tripadvisor Credit Facility
Tripadvisor is party to a credit agreement with a group of lenders, initially entered into in June 2015 (as amended, the “Credit Agreement”), which, among other things, provides for a $
As of March 31, 2022 and December 31, 2021, Tripadvisor had
Tripadvisor amended its Credit Facility during 2020 to, among other things; suspend the leverage ratio covenant for quarterly testing of compliance beginning in the second quarter of 2020, replacing it with a minimum liquidity covenant through June 30, 2021 (requiring Tripadvisor to maintain $
Tripadvisor remained in the Leverage Covenant Holiday as of March 31, 2022. Based on Tripadvisor’s existing leverage ratio, any outstanding or future borrowings under the Credit Facility generally bear interest, at Tripadvisor’s option, at a rate per annum equal to either (i) the Eurocurrency Borrowing rate, or the adjusted LIBO rate for the interest period in effect for such borrowing; plus an applicable margin ranging from
I-16
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
portion of the Credit Facility for each fiscal quarter during the Leverage Covenant Holiday and in connection with the issuance of letters of credit.
There is no specific repayment date prior to the maturity date for any borrowings under the Credit Agreement. Tripadvisor may voluntarily repay any outstanding borrowing under the Credit Facility at any time without premium or penalty, other than customary breakage costs with respect to Eurocurrency loans. Additionally, Tripadvisor believes that the likelihood of the lender exercising any subjective acceleration rights, which would permit the lenders to accelerate repayment of any outstanding borrowings, is remote. As such, borrowings under this facility are classified as long-term debt. The Credit Agreement contains a number of covenants that, among other things, restrict Tripadvisor’s ability to incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change its fiscal year. The Credit Agreement also limits Tripadvisor from repurchasing shares of its common stock and paying dividends, among other restrictions, during the Leverage Covenant Holiday. In addition, to secure the obligations under the Credit Agreement, Tripadvisor and certain subsidiaries have granted security interests and liens in and on, substantially all of their assets as well as pledged shares of certain of Tripadvisor’s subsidiaries. The Credit Agreement also contains certain customary affirmative covenants and events of default, including a change of control. If an event of default occurs, the lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of all amounts due under the Credit Facility.
2025 Senior Notes
On July 9, 2020, Tripadvisor completed the sale of $
Tripadvisor has the option to redeem all or a portion of the 2025 Senior Notes at any time on or after July 15, 2022 at the redemption prices set forth in the 2025 Indenture, plus accrued and unpaid interest, if any. Tripadvisor may also redeem all or any portion of the 2025 Senior Notes at any time prior to July 15, 2022, at a price equal to
As of March 31, 2022, Tripadvisor estimated the fair value of its outstanding 2025 Senior Notes to be approximately $
The 2025 Indenture contains covenants that, among other things and subject to certain exceptions and qualifications, restrict the ability of Tripadvisor and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness or issue disqualified stock or certain preferred stock; pay dividends and make other distributions or repurchase stock; make
I-17
LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
certain investments; create or incur liens; sell assets; create restrictions affecting the ability of restricted subsidiaries to make distributions, loans or advances or transfer assets to Tripadvisor or the restricted subsidiaries; enter into certain transactions with Tripadvisor’s affiliates; designate restricted subsidiaries as unrestricted subsidiaries; and merge, consolidate or transfer or sell all or substantially all of Tripadvisor’s assets.
2026 Convertible Senior Notes
On March 25, 2021, Tripadvisor sold, pursuant to a purchase agreement $
The 2026 Convertible Senior Notes will be redeemable, in whole or in part, at Tripadvisor’s option at any time, and from time to time, on or after April 1, 2024 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2026 Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of Tripadvisor’s common stock exceeds
The 2026 Convertible Senior Notes are unconditionally guaranteed, on a joint and several basis, by the guarantors on a senior, unsecured basis. The 2026 Convertible Senior Notes are Tripadvisor’s general senior unsecured obligations and rank equally in right of payment with all of its existing and future senior indebtedness, and senior in right of payment to all of its future subordinated indebtedness. The 2026 Convertible Senior Notes will be effectively subordinated to any of Tripadvisor’s existing and future secured indebtedness, including borrowings under its Credit Facility, to the extent of the value of the assets securing such indebtedness.
Holders may convert their 2026 Convertible Senior Notes at any time prior to the close of business on the business day immediately preceding January 1, 2026 in multiples of $
● | during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of TRIP common stock for at least |
● | during the business day period after any consecutive trading day period (the “measurement period”) in which the trading price per $ |
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LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
day of the measurement period was less than |
● | upon the occurrence of specified corporate events as described in the 2026 Indenture. |
In addition, holders may convert their 2026 Convertible Senior Notes, in multiples of $
The initial conversion rate for the 2026 Convertible Senior Notes is
Tripadvisor accounts for the 2026 Convertible Senior Notes as a liability measured at its amortized cost, and no other features of the 2026 Convertible Senior Notes are bifurcated and recognized as a derivative. The proceeds from the issuance of the 2026 Convertible Senior Notes were approximately $
The 2026 Convertible Senior Notes are unsecured and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or restrictions on the issuance or repurchase of securities by the Company.
As of March 31, 2022, Tripadvisor estimated the fair value of its outstanding 2026 Convertible Senior Notes to be approximately $
Capped Call Transactions
In connection with the issuance of the 2026 Convertible Senior Notes, Tripadvisor entered into privately negotiated capped call transactions (the “Capped Calls”) with certain of the initial purchasers of the 2026 Convertible Senior Notes and/or their respective affiliates and/or other financial institutions (the “Option Counterparties”) at a cost of approximately $
The Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the 2026 Convertible Senior Notes, the number of shares of TRIP common stock initially underlying the 2026 Convertible Senior Notes, or up to approximately
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LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
converted 2026 Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap. The strike price of the Capped Calls is $
The Capped Calls are considered indexed to Tripadvisor’s own stock and are considered equity under GAAP. The Capped Calls are reported as a reduction to additional paid-in-capital and noncontrolling interest in equity of subsidiaries within stockholders’ equity as of March 31, 2022 and December 31, 2021, respectively. In addition, Tripadvisor recorded a deferred tax asset of $
Debt Covenants
As of March 31, 2022, Tripadvisor was in compliance with its debt covenants.
(6) Redeemable Preferred Stock
On March 15, 2020, TripCo and Gregory B. Maffei entered into an Investment Agreement (the “Investment Agreement”) with Certares Holdings LLC, Certares Holdings (Blockable) LLC and Certares Holdings (Optional) LLC with respect to an investment in TripCo’s Series A Preferred Stock, which was later assigned to Certares LTRIP LLC (“Certares” or the “Purchaser”). Pursuant to the assigned Investment Agreement, on March 26, 2020, TripCo issued
On March 22, 2021, TripCo and Certares entered into a stock repurchase agreement (the “Repurchase Agreement”). Pursuant to the Repurchase Agreement, on March 29, 2021, TripCo repurchased
There were
Priority
The Series A Preferred Stock ranks senior to the shares of common stock of TripCo, with respect to dividend rights, rights of redemption and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of TripCo. The Series A Preferred Stock has a liquidation value equal to the sum of (i) $
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LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Voting and Convertibility
Holders of Series A Preferred Stock are not entitled to any voting powers, except as otherwise specified in the Certificate of Designations or as required by Delaware law. Shares of Series A Preferred Stock are not convertible into TripCo common stock.
Dividends
Dividends on each share of Series A Preferred Stock accrue on a daily basis at a rate of
Redemption
The Company is required to redeem for cash shares of Series A Preferred Stock on the earlier of (i) the first business day after the fifth anniversary of March 26, 2020, or (ii) subject to certain exceptions, a change in control of TripCo. The “Redemption Price” in a mandatory redemption will equal the greater of (i) the sum of the liquidation value on the redemption date, plus all unpaid dividends accrued since the last dividend date, and (ii) the product of the (x) initial liquidation value, multiplied by (y) an accretion factor (determined based on a formula set forth in the Certificate of Designations) with respect to the TRIP common stock, less (z) the aggregate amount of all dividends paid in cash or shares of Eligible Common Stock from March 26, 2020 through the applicable redemption date.
Put Right
Following March 26, 2021, during certain periods, the Purchaser had the right to cause TripCo to redeem all of the outstanding shares of Series A Preferred Stock at the Redemption Price for, at the election of TripCo, cash, shares of Eligible Common Stock, shares of TRIP common stock or any combination of the foregoing, subject to certain limitations (the “Put Option”). The Company evaluated the Put Option as an embedded derivative and determined it was not required to be bifurcated. As a result of the Repurchase Agreement, Certares has permanently waived the Put Option.
TripCo Call Right
Pursuant to the Repurchase Agreement, beginning March 27, 2024, TripCo has the option, from time to time, to call and repurchase any and all of the outstanding shares of the Series A Preferred Stock at the optional repurchase price (the "Call Right"), which is the greater of (x) the sum of the liquidation value of a share of Series A Preferred Stock as of the optional repurchase date plus all unpaid dividends accrued on such share from the most recent dividend payment date through such optional repurchase date and (y) (i) the initial liquidation value of such share of Series A Preferred Stock as of the original issue date multiplied by an accretion factor with respect to the TRIP common stock (determined based on the Accretion Factor formula set forth in the Certificate of Designations as modified such that the Reference Stock VWAP is determined as of the date that is
Restriction on transfer of Series A Preferred Stock
Subject to exceptions contained in the Investment Agreement and the Repurchase Agreement, the shares of Series A Preferred Stock generally are non-transferable; provided that TripCo has agreed not to unreasonably withhold its consent
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LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
to certain transfers of up to
Recognition
Prior to the partial redemption, as the Series A Preferred Stock was redeemable and the redemption triggers were outside of TripCo’s control, the Company was required to classify the shares outside of permanent equity. The Company calculated the carrying value of the Series A Preferred Stock pursuant to the Redemption Price calculation, and any changes in the carrying value of the Series A Preferred Stock were recorded directly to retained earnings. Immediately prior to the partial redemption, the Company recognized a $
(7) Stockholders’ Equity
Preferred Stock
TripCo’s preferred stock is issuable, from time to time, with such powers, designations, preferences and relative, participating, optional or other rights and qualifications, limitations or restrictions thereof, as shall be stated and expressed in a resolution or resolutions providing for the issue of such preferred stock adopted by TripCo’s Board of Directors. See note 6 for a description of TripCo’s Series A Preferred Stock.
Common Stock
Series A common stock entitles the holders to
Subsidiary Purchases of Common Stock
As of March 31, 2022, Tripadvisor had approximately $
(8) Commitments and Contingencies
Litigation
In the ordinary course of business, the Company and its subsidiaries are parties to legal proceedings and claims arising out of our operations. These matters may relate to claims involving patent and intellectual property rights (including alleged infringement of third-party intellectual property rights), tax matters (including value-added, excise, transient occupancy and accommodation taxes), regulatory compliance (including competition and consumer matters), defamation and other
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LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
claims. Although it is reasonably possible that the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying consolidated financial statements.
(9) Segment Information
TripCo, through its ownership interests in Tripadvisor, is primarily engaged in the online commerce industries. TripCo identifies its reportable segments as (A) those operating segments that represent 10% or more of its consolidated annual revenue, annual adjusted operating income before depreciation and amortization (“Adjusted OIBDA”) or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of TripCo’s annual pre-tax earnings.
TripCo evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA, gross margin, and revenue or sales per customer equivalent. In addition, TripCo reviews nonfinancial measures such as unique website visitors, conversion rates and active customers, as appropriate.
We have identified the following as reportable segments:
● | Hotels, Media & Platform – includes the following revenue sources: (1) Tripadvisor-branded hotels revenue – primarily consisting of hotel auction revenue, subscription-based advertising, and hotel sponsored placements revenue; and (2) Tripadvisor-branded display and platform revenue – consisting of display-based advertising revenue. All direct general and administrative costs are included in the applicable segments and business units, however, all corporate general and administrative costs are included in the Hotels, Media & Platform reportable segment. In addition, the Hotels, Media & Platform reportable segment includes all Tripadvisor-related brand advertising expenses (primarily television advertising) and technical infrastructure and other costs supporting the Tripadvisor platform. |
● | Experiences & Dining – Tripadvisor provides information and services for consumers to research and book tours, activities and experiences in popular travel destinations both through Viator, Tripadvisor’s dedicated Experiences offering, and on Tripadvisor’s website and mobile apps. Tripadvisor generates commissions for each booking transaction it facilitates through its online reservation system. Tripadvisor also provides information and services for consumers to research and book restaurants in popular travel destinations through its dedicated restaurant reservations offering, TheFork, and on Tripadvisor-branded websites and mobile apps. |
Tripadvisor’s accounting policies are the same as those described in the Company’s Summary of Significant Accounting Policies included in the Annual Report on Form 10-K for the year ended December 31, 2021.
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LIBERTY TRIPADVISOR HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Performance Measures
Tripadvisor disaggregates revenue from contracts with customers into major products/revenue sources. Tripadvisor has determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Revenue is recognized primarily at a point in time for all reported segments.
Three months ended | ||||||
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| March 31, | ||||
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| 2022 |
| 2021 | ||
| amounts in millions | |||||
Hotels, Media & Platform | ||||||
TripAdvisor-branded hotels |
| $ | ||||
TripAdvisor-branded display and platform |
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Total Hotels, Media & Platform |
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| ||||
Experiences & Dining |
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Corporate and other | ||||||
Total Revenue |
| $ | | |
The following table provides information about the balances of accounts receivable and contract assets, net of allowance for credit losses, from contracts with customers: