Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.20.2
Segment Information
9 Months Ended
Sep. 30, 2020
Segment Information  
Segment Information

(10) 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, and to a lesser extent, subscription-based advertising, hotel sponsored placements revenue and cost-per-action 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 activities and attractions in popular travel destinations both through Viator, Tripadvisor’s dedicated Experiences business, 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 business, 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, 2019.

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

Nine months ended

September 30,

September 30,

2020

    

2019

2020

    

2019

amounts in millions

Hotels, Media & Platform

TripAdvisor-branded hotels

$

67

197

235

624

TripAdvisor-branded display and platform

13

41

52

122

Total Hotels, Media & Platform

80

238

287

746

Experiences & Dining

53

141

150

346

Corporate and other

18

49

51

133

Total Revenue

$

151

428

488

1,225

The following table provides information about the opening and closing balances of accounts receivable and contract assets from contracts with customers:

September 30, 2020

December 31, 2019

amounts in millions

Accounts receivable

$

80

176

Contract assets

11

7

Total

$

91

183

Accounts receivable are recognized when the right to consideration becomes unconditional. Contract assets are rights to consideration in exchange for services that Tripadvisor has transferred to a customer when that right is conditional on something other than the passage of time, such as commission payments that are contingent upon the completion of the service by the principal in the transaction. Contract liabilities generally include payments received in advance of performance under the contract, and are realized as revenue as the performance obligation to the customer is satisfied, which Tripadvisor presents as deferred revenue on its consolidated balance sheets. As of January 1, 2020, Tripadvisor had $62 million recorded as deferred revenue on its condensed consolidated balance sheet, of which $5 million and $49 million were recognized as revenue and $1 million and $11 million were refunded due to cancellations by travelers during the three and nine months ended September 30, 2020, respectively. As of January 1, 2019, Tripadvisor had $63 million recorded as deferred revenue in the condensed consolidated balance sheet, of which $10 million and $56 million were recognized as revenue and $2 million was refunded due to cancellations by travelers during the nine months ended September 30, 2019. During the three months ended September 30, 2019, refunds due to cancellations by travelers were not material. The difference between the opening and closing balances of Tripadvisor’s deferred revenue primarily results from the timing differences between when Tripadvisor receives customer payments and the time in which Tripadvisor satisfies its performance obligations. The difference between the opening and closing balances of Tripadvisor’s contract assets primarily results from the timing difference between when Tripadvisor satisfies its performance obligations and the time when the principal completes the service in the transaction. There were no significant changes in contract assets or deferred revenue during the nine months ended September 30, 2020 and 2019 related to business combinations, impairments, cumulative catch-ups or other material adjustments. However, to the extent the COVID-19 pandemic continues, Tripadvisor may incur additional significant and unanticipated cancellations by consumers related to future travel, accommodations and tour bookings, which had been reserved by travelers and recorded as deferred revenue as of

September 30, 2020 and December 31, 2019.

For segment reporting purposes, TripCo defines Adjusted OIBDA as revenue less operating expenses, and selling, general and administrative expenses (excluding stock-based compensation), adjusted for specifically identified non-recurring transactions. TripCo believes this measure is an important indicator of the operational strength and performance of its businesses by identifying those items that are not directly a reflection of each business’ performance or indicative of ongoing business trends. In addition, this measure allows management to view operating results, and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, equity settled liabilities (including stock-based compensation), separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. TripCo generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

Adjusted OIBDA is summarized as follows:

Three months ended

 

Nine months ended

September 30,

September 30,

2020

2019

 

2020

2019

amounts in millions

Hotels, Media & Platform

    

$

4

    

93

25

    

306

Experiences & Dining

1

15

(56)

(1)

Corporate and other

 

9

 

20

4

 

36

Consolidated TripCo

$

14

 

128

(27)

 

341

In addition, we do not report assets, capital expenditures and related depreciation expense by segment as our CODM does not use this information to evaluate operating segments. Accordingly, we do not regularly provide such information by segment to our CODM.

The following table provides a reconciliation of Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

amounts in millions

Adjusted OIBDA

    

$

14

    

128

    

(27)

    

341

Stock-based compensation

 

(29)

 

(31)

(81)

 

(94)

Depreciation and amortization

 

(41)

 

(42)

(126)

 

(125)

Restructuring charges

(42)

Impairment of goodwill and intangible assets

(3)

(550)

Operating income (loss)

(59)

55

(826)

122

Interest expense

 

(13)

 

(5)

(27)

 

(16)

Other, net

 

 

19

(25)

 

33

Earnings (loss) before income taxes

$

(72)

 

69

(878)

 

139