|6 Months Ended
Jun. 30, 2023
(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 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 options and any subsequent re-measurement of its liability classified options using the Black-Scholes-Merton model. TripCo estimates the expected term of the options based on historical exercise and forfeiture data. The volatility used in the calculation for options is based on the historical volatility of TripCo common stock. TripCo uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.
Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation, the majority of which relates to Tripadvisor as discussed below:
Stock-based compensation expense related to Tripadvisor was $25 million and $21 million for the three months ended June 30, 2023 and 2022, respectively, and $48 million and $43 million for the six months ended June 30, 2023, and 2022, respectively.
TripCo - Outstanding Awards
The following table presents the number and weighted average exercise price (“WAEP”) of options 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 options.
As of June 30, 2023, there were 600 thousand Series B TripCo options outstanding andat a WAEP of $4.23 and a weighted average remaining contractual life of 4.4 years. There were no grants or of Series B TripCo common stock during the six months ended June 30, 2023. On May 31, 2023, TripCo and our CEO agreed that TripCo would cancel the CEO’s vested and unexercised nonqualified stock options to purchase 1.8 million shares of Series B TripCo common stock, which had been granted in December 2014 with an exercise price equal to $27.83 per share, in exchange for an immaterial cash payment.
During the six months ended June 30, 2023, pursuant to an agreement among TripCo, Liberty Media Corporation and our CEO, TripCo granted 175 thousand performance-based RSUs of Series B TripCo common stock to our CEO and a cash award equal to $656,250 in satisfaction of the annual grant pursuant to which he was entitled under his employment agreement. The RSUs had a GDFV of $1.04 per share at the time they were granted. The RSUs and the cash award cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.
As of June 30, 2023, the total unrecognized compensation cost related to unvested Awards was approximately $2.2 million. Such amount will be recognized in the Company's condensed consolidated statements of operations over a
weighted average period of approximately 1.5 years.
As of June 30, 2023, TripCo reserved 1.7 million shares of Series A and Series B common stock for issuance under exercise privileges of outstanding stock options.
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.
The weighted average GDFV of options granted was $10.46 per share for the six months ended June 30, 2023.
Additionally, during the six months ended June 30, 2023, Tripadvisor granted approximately 7 million units, and vested and released approximately 2 million units, which included primarily service-based RSUs, as well as a limited number of performance-based RSUs (“PSUs”) and market-based restricted stock units (“MSUs”) under the 2018 Stock and Annual Incentive Plan. The estimated GDFV per RSU and PSU was measured based on the quoted price of TRIP common stock at the date of the grant, with PSUs calculated upon the establishment of performance targets and amortized on a straight-line basis over the requisite service period. Based upon actual attainment relative to the target financial metrics, employees have the ability to receive up to 200% of the target number originally granted, or to be issued none at all. 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, PSUs and MSUs granted, vested and released, and cancelled during the six months ended June 30, 2023 was $21.46 per share, $30.55 per share, and $25.82 per share, respectively.
As of June 30, 2023, the total unrecognized compensation cost related to Tripadvisor stock-based awards, substantially RSUs, was approximately $288 million and will be recognized over a weighted average period of approximately 3.0 years.