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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 September 30, 2019

OR

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: 001-35362

 

TRIPADVISOR, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

80-0743202

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

400 1st Avenue

Needham, MA 02494

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code:

(781) 800-5000

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock

TRIP

NASDAQ

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, 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

 

  

Small 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  

 

Class

 

Outstanding Shares at October 31, 2019

Common Stock, $0.001 par value per share

 

126,591,959 shares

Class B common stock, $0.001 par value per share

 

12,799,999 shares

 

 

 

 


 

TripAdvisor, Inc.

Form 10-Q

For the Quarter Ended September 30, 2019

Table of Contents

 

 

  

Page

Part I—Financial Information

 

  

 

Item 1. Unaudited Condensed Financial Statements

 

  

 

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018

  

3

Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018

  

4

Unaudited Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018

  

5

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018

  

6

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

  

8

Notes to Unaudited Condensed Consolidated Financial Statements

  

9

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

30

Item 3. Quantitative and Qualitative Disclosures about Market Risk

  

45

Item 4. Controls and Procedures

  

45

 

Part II—Other Information

  

 

 

Item 1. Legal Proceedings

  

46

Item 1A. Risk Factors

  

46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

  

65

Item 3. Defaults Upon Senior Securities

  

66

Item 4. Mine Safety Disclosures

  

66

Item 5. Other Information

  

66

Item 6. Exhibits

  

66

Signatures

  

67

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

 

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue (Note 3)

 

$

428

 

 

$

458

 

 

$

1,225

 

 

$

1,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue (1)

 

 

25

 

 

 

23

 

 

 

73

 

 

 

67

 

Selling and marketing (2)

 

 

176

 

 

 

206

 

 

 

534

 

 

 

621

 

Technology and content (2)

 

 

76

 

 

 

72

 

 

 

224

 

 

 

207

 

General and administrative (2)

 

 

51

 

 

 

40

 

 

 

138

 

 

 

129

 

Depreciation

 

 

23

 

 

 

20

 

 

 

69

 

 

 

61

 

Amortization of intangible assets

 

 

9

 

 

 

8

 

 

 

23

 

 

 

24

 

Total costs and expenses

 

 

360

 

 

 

369

 

 

 

1,061

 

 

 

1,109

 

Operating income

 

 

68

 

 

 

89

 

 

 

164

 

 

 

160

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(2

)

 

 

(4

)

 

 

(5

)

 

 

(10

)

Interest income and other, net

 

 

7

 

 

 

2

 

 

 

14

 

 

 

-

 

Total other income (expense), net

 

 

5

 

 

 

(2

)

 

 

9

 

 

 

(10

)

Income before income taxes

 

 

73

 

 

 

87

 

 

 

173

 

 

 

150

 

Provision for income taxes

 

 

(23

)

 

 

(18

)

 

 

(63

)

 

 

(45

)

Net income

 

$

50

 

 

$

69

 

 

$

110

 

 

$

105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to common stockholders (Note 4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.36

 

 

$

0.50

 

 

$

0.79

 

 

$

0.76

 

Diluted

 

$

0.36

 

 

$

0.49

 

 

$

0.78

 

 

$

0.75

 

Weighted average common shares outstanding (Note 4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

139

 

 

 

138

 

 

 

139

 

 

 

138

 

Diluted

 

 

140

 

 

 

141

 

 

 

141

 

 

 

140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes amortization as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of acquired technology included in amortization of intangible assets

 

$

3

 

 

$

2

 

 

$

7

 

 

$

6

 

Amortization of website development costs included in depreciation

 

 

15

 

 

 

14

 

 

 

47

 

 

 

44

 

 

 

$

18

 

 

$

16

 

 

$

54

 

 

$

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Includes stock-based compensation expense as follows (Note 5):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

-

 

 

$

-

 

 

$

1

 

 

$

-

 

Selling and marketing

 

$

5

 

 

$

5

 

 

$

17

 

 

$

17

 

Technology and content

 

$

13

 

 

$

13

 

 

$

40

 

 

$

38

 

General and administrative

 

$

11

 

 

$

11

 

 

$

33

 

 

$

35

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

3


 

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

50

 

 

$

69

 

 

$

110

 

 

$

105

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments (1)

 

 

(10

)

 

 

(5

)

 

 

(13

)

 

 

(14

)

Total other comprehensive loss

 

 

(10

)

 

 

(5

)

 

 

(13

)

 

 

(14

)

Comprehensive income

 

$

40

 

 

$

64

 

 

$

97

 

 

$

91

 

 

 

 

(1)

Foreign currency translation adjustments exclude income taxes due to our intention to indefinitely reinvest the earnings of our foreign subsidiaries in those operations.  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

4


 

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except number of shares and per share amounts)

 

 

 

 

September 30,

 

 

December 31,

 

 

 

 

2019

 

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents (Note 6)

 

$

838

 

 

$

655

 

Short-term marketable securities (Note 6)

 

 

95

 

 

 

15

 

Accounts receivable and contract assets, net of allowance for doubtful accounts of $24 and $21, respectively (Note 3)

 

 

218

 

 

 

212

 

Prepaid expenses and other current assets

 

 

30

 

 

 

33

 

Total current assets

 

 

1,181

 

 

 

915

 

Property and equipment, net (Note 7)

 

 

265

 

 

 

253

 

Operating lease right-of-use assets (Note 2)

 

 

76

 

 

 

-

 

Intangible assets, net of accumulated amortization of $160 and $140, respectively

 

 

92

 

 

 

118

 

Goodwill (Note 8)

 

 

746

 

 

 

756

 

Deferred income taxes, net

 

 

2

 

 

 

27

 

Other long-term assets

 

 

106

 

 

 

98

 

TOTAL ASSETS

 

$

2,468

 

 

$

2,167

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

16

 

 

$

15

 

Deferred merchant payables

 

 

196

 

 

 

164

 

Deferred revenue (Note 3)

 

 

72

 

 

 

63

 

Accrued expenses and other current liabilities

 

 

184

 

 

 

151

 

Total current liabilities

 

 

468

 

 

 

393

 

Deferred income taxes, net

 

 

8

 

 

 

21

 

Other long-term liabilities (Note 11)

 

 

344

 

 

 

282

 

Total Liabilities

 

 

820

 

 

 

696

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders’ equity: (Note 13)

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value

 

 

-

 

 

 

-

 

Authorized shares: 100,000,000

 

 

 

 

 

 

 

 

Shares issued and outstanding: 0 and 0

 

 

 

 

 

 

 

 

Common stock, $0.001 par value

 

 

-

 

 

 

-

 

Authorized shares: 1,600,000,000

 

 

 

 

 

 

 

 

Shares issued: 138,615,848 and 137,158,010, respectively

 

 

 

 

 

 

 

 

Shares outstanding: 126,559,160 and 125,101,322, respectively

 

 

 

 

 

 

 

 

Class B common stock, $0.001 par value

 

 

-

 

 

 

-

 

Authorized shares: 400,000,000

 

 

 

 

 

 

 

 

Shares issued and outstanding: 12,799,999 and 12,799,999, respectively

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

1,114

 

 

 

1,037

 

Retained earnings

 

 

1,156

 

 

 

1,043

 

Accumulated other comprehensive loss

 

 

(75

)

 

 

(62

)

Treasury stock-common stock, at cost, 12,056,688 and 12,056,688 shares, respectively

 

 

(547

)

 

 

(547

)

Total Stockholders’ Equity

 

 

1,648

 

 

 

1,471

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

2,468

 

 

$

2,167

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5


 

TRIPADVISOR, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in millions, except number of shares)

 

 

Three months ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class B

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

common stock

 

 

capital

 

 

earnings

 

 

income (loss)

 

 

Treasury Stock

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Total

 

Balance as of June 30, 2019

 

 

138,525,158

 

 

$

-

 

 

 

12,799,999

 

 

$

-

 

 

$

1,081

 

 

$

1,106

 

 

$

(65

)

 

 

(12,056,688

)

 

$

(547

)

 

$

1,575

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

(10

)

Issuance of common stock related to exercises of options and vesting of RSUs

 

 

90,690

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Withholding taxes on net share settlements of equity awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 

Balance as of September 30, 2019

 

 

138,615,848

 

 

$

-

 

 

 

12,799,999

 

 

$

-

 

 

$

1,114

 

 

$

1,156

 

 

$

(75

)

 

 

(12,056,688

)

 

$

(547

)

 

$

1,648

 

 

 

 

Nine months ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class B

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

common stock

 

 

capital

 

 

earnings

 

 

income (loss)

 

 

Treasury Stock

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Total

 

Balance as of December 31, 2018

 

 

137,158,010

 

 

$

-

 

 

 

12,799,999

 

 

$

-

 

 

$

1,037

 

 

$

1,043

 

 

$

(62

)

 

 

(12,056,688

)

 

$

(547

)

 

$

1,471

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110

 

Cumulative effect adjustment from adoption of new accounting guidance (Note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3