Stock Based Awards and Other Equity Instruments

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock Based Awards and Other Equity Instruments

NOTE 10: STOCK BASED AWARDS AND OTHER EQUITY INSTRUMENTS

Stock-Based Compensation Expense

The following table presents the amount of stock-based compensation expense related to stock-based awards, primarily stock options and RSUs, on our unaudited condensed consolidated statements of operations during the periods presented:


	Three months ended						Six months ended
	June 30,						June 30,
	2022			2021			2022			2021
	(in millions)						(in millions)
Cost of revenue	$	—		$	—		$	1		$	1
Selling and marketing		3			4			6			8
Technology and content		9			13			18			24
General and administrative		9			15			18			28
Total stock-based compensation expense		21			32			43			61
Income tax benefit from stock-based compensation		(5	)		(6	)		(9	)		(11	)
Total stock-based compensation expense, net of tax	$	16		$	26		$	34		$	50

We capitalized $2 million and $5 million of stock-based compensation expense as website development costs during the three and six months ended June 30, 2022, respectively, and $3 million and $7 million during the three and six months ended June 30, 2021, respectively.

Stock-Based Award Activity and Valuation

2022 Stock Option Activity

A summary of our stock option activity, consisting of service-based non-qualified stock options, is presented below:


				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Options			Price Per		Contractual		Intrinsic
	Outstanding			Share		Life		Value
	(in thousands)					(in years)		(in millions)
Options outstanding at December 31, 2021		5,671		$	47.03
Granted		45			25.84
Exercised (1)		(7	)		24.32
Cancelled or expired		(906	)		44.53
Options outstanding at June 30, 2022		4,803		$	47.34		5.0	$	—
Exercisable as of June 30, 2022		3,476		$	51.47		4.0	$	—
Vested and expected to vest after June 30, 2022 (2)		4,803		$	47.34		5.0	$	—

(1)

Inclusive of approximately 4,000 stock options which were not converted into shares due to net share settlement in order to cover the aggregate exercise price and the required amount of employee withholding taxes. Potential shares which had been convertible under stock options that were withheld under net share settlement remain in the authorized but unissued pool under the 2018 Stock and Annual Incentive Plan (the “2018 Plan”) and can be reissued by the Company. Total payments for the employees’ tax obligations to the taxing authorities due to net share settlements are reflected as a financing activity within the consolidated statements of cash flows.

(2)

The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and therefore do not include a forfeiture rate in our vested and expected to vest calculation unless necessary for a performance condition award.

Aggregate intrinsic value represents the difference between the closing stock price of our common stock and the exercise price of outstanding, in-the-money options. Our closing stock price as reported on Nasdaq as of June 30, 2022 was $17.80. The total intrinsic value of stock options exercised for the six months ended June 30, 2022 was not material, and for the six months ended June 30, 2021 was $8 million.

The fair value of stock option grants has been estimated at the date of grant using the Black–Scholes option pricing model with the following weighted average assumptions for the periods presented:


	Six months ended
	June 30,
	2022			2021
Risk free interest rate		2.21	%		0.66	%
Expected term (in years)		5.14			5.33
Expected volatility		51.21	%		49.69	%
Expected dividend yield	— %			— %
Weighted-average grant date fair value	$	12.13		$	20.39

Our stock options generally have a term of ten years from the date of grant and typically vest equally over a four-year requisite service period. We amortize the grant-date fair value of our stock option grants as stock-based compensation expense over the vesting term on a straight-line basis, with the amount of compensation expense recognized at any date at least equaling the portion of the grant-date fair value of the award that is vested at that date. The total fair value of stock options vested was $7 million and $11 million for the six months ended June 30, 2022 and 2021, respectively.

2022 RSU Activity

A summary of our activity with respect to restricted stock units (“RSUs”), consisting primarily of service-based vesting terms, is presented below:


				Weighted
				Average
				Grant-		Aggregate
	RSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested RSUs outstanding as of December 31, 2021		5,786		$	36.82
Granted		5,440			26.86
Vested and released (1)		(1,528	)		41.52
Cancelled		(847	)		33.92
Unvested RSUs outstanding as of June 30, 2022 (2)		8,851		$	30.17	$	158

(1)

Inclusive of approximately 340,000 RSUs withheld due to net share settlement to satisfy required employee tax withholding requirements. Potential shares which had been convertible under RSUs that were withheld under net share settlement remain in the authorized but unissued pool under the 2018 Plan and can be reissued by the Company. Total payments for the employees’ tax obligations to the taxing authorities due to net share settlements are reflected as a financing activity within the consolidated statements of cash flows.

(2)

We amortize the grant-date fair value of RSUs as stock-based compensation expense over the vesting term, which is typically over a four-year requisite service period on a straight-line basis, with the amount of compensation expense recognized at any date at least equaling the portion of the grant-date fair value of the award that is vested at that date.

A summary of our activity related to market-based RSUs (“MSUs”), is presented below:


				Weighted
				Average
				Grant-		Aggregate
	MSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested MSUs outstanding as of December 31, 2021		120		$	28.15
Cancelled		(35	)		28.15
Unvested MSUs outstanding as of June 30, 2022 (1)		85		$	28.15	$	2

(1)

MSUs provide for vesting based upon the Company’s total shareholder return, or TSR, performance over the period commencing January 1, 2020 through December 31, 2022 relative to the TSR performance of The Nasdaq Composite Total Return Index. Based upon actual attainment relative to the target performance metric, the grantee has the ability to receive up to 200% of the target number of MSUs originally granted, or to receive none at all.

Total current income tax benefits associated with the exercise or settlement of Tripadvisor stock-based awards held by our employees was $1 million and $3 million during the three and six months ended June 30, 2022, respectively, and $5 million and $14 million during the three and six months ended June 30, 2021, respectively.

Unrecognized Stock-Based Compensation

A summary of our remaining unrecognized stock-based compensation expense and the weighted average remaining amortization period at June 30, 2022 related to our non-vested equity awards is presented below (in millions, except in years information):


	Stock
	Options		RSUs/MSUs
Unrecognized compensation expense	$	11	$	212
Weighted average period remaining (in years)		2.3		3.0