Stock Based Awards and Other Equity Instruments

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock Based Awards and Other Equity Instruments

NOTE 13: STOCK BASED AWARDS AND OTHER EQUITY INSTRUMENTS

Stock-based Compensation Expense

The following table presents the amount of stock-based compensation expense and the related income tax benefit included in our consolidated statements of operations during the periods presented:


	Year ended December 31,
	2023			2022			2021
	(in millions)
Cost of revenue	$	1		$	1		$	1
Selling and marketing		16			12			16
Technology and content		40			36			46
General and administrative		39			39			57
Total stock-based compensation expense		96			88			120
Income tax benefit from stock-based compensation expense		(21	)		(18	)		(23	)
Total stock-based compensation expense, net of tax effect	$	75		$	70		$	97

We capitalized $10 million, $10 million and $13 million of stock-based compensation expense as website development costs during the years ended December 31, 2023, 2022 and 2021, respectively.

Stock and Incentive Plans

On December 20, 2011, our 2011 Stock and Annual Incentive Plan (the “2011 Plan”) became effective and we filed a Registration Statement registering a total of 17,500,000 shares of our common stock, of which 17,400,000 shares were issuable in connection with grants of equity-based awards under our 2011 Plan and 100,000 shares were issuable under our Deferred Compensation Plan for Non-Employee Directors (refer to “Note 12: Employee Benefit Plans” for information on our Deferred Compensation Plan for Non-Employee Directors). At our annual meeting of stockholders held on June 28, 2013, our stockholders approved an amendment to our 2011 Plan to, among other things, increase the aggregate number of shares of common stock authorized for issuance thereunder by 15,000,000 shares.

On June 21, 2018, our stockholders approved the 2018 Stock and Annual Incentive Plan (the “2018 Plan”) and we filed a Registration Statement registering 6,000,000 shares plus the number of shares available for issuance (and not subject to outstanding awards) under the 2011 Plan. As of the effective date of the 2018 Plan, the Company ceased granting awards under the 2011 Plan. On June 8, 2021, our stockholders approved an amendment to the Company’s 2018 Plan to, among other things, increase the aggregate number of shares reserved and available for issuance under the 2018 Plan by 10,000,000 shares. The purpose of this amendment was to provide sufficient reserves of shares of our common stock to ensure our ability to continue to provide new hires, employees and management with equity incentives.

On June 6, 2023, our stockholders approved the TripAdvisor, Inc. 2023 Stock and Annual Incentive Plan (the “2023 Plan”) primarily for the purpose of providing sufficient reserves of shares of our common stock to ensure our ability to continue to provide new hires, employees, and other participants with equity incentives. The 2023 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), and other stock-based awards. As of the effective date of the 2023 Plan, the Company ceased granting awards under the 2018 Plan.

As of December 31, 2023, the total number of shares reserved for future stock-based awards under the 2023 Plan was approximately 19 million shares, calculated as follows: 12 million shares plus the number of shares available for issuance (and not subject to outstanding awards) under the 2018 Plan. All shares of common stock issued to date in respect of the exercise of options, RSUs, or other equity awards have been issued from authorized, but unissued common stock.

Stock Based Award Activity and Valuation

2023 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 as of December 31, 2022		5,462		$	43.48
Granted		164		$	20.15
Cancelled or expired (1)		(1,699	)	$	59.54
Options outstanding as of December 31, 2023		3,927		$	35.56		5.2	$	2
Exercisable as of December 31, 2023		2,893		$	39.30		4.1	$	1
Vested and expected to vest after December 31, 2023 (2)		3,781		$	35.88		5.1	$	2

(1)

Inclusive of 1,100,000 stock options awarded in August 2013 to our former CEO, Stephen Kaufer, that expired during the third quarter of 2023. The expiration of these stock options had no impact to our stock-based compensation expense under GAAP during the third quarter of 2023.

(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 December 31, 2023 was $21.53. The total intrinsic value of stock options exercised for the years ended December 31, 2023 and 2022 was not material, and for the year ended December 31, 2021 was $9 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:


	December 31,
	2023			2022			2021
Risk free interest rate		3.70	%		3.07	%		0.83	%
Expected term (in years)		5.16			5.42			5.45
Expected volatility		53.43	%		51.63	%		49.61	%
Expected dividend yield	— %			— %			— %
Weighted-average grant date fair value	$	10.18		$	9.93		$	18.40

The total fair value of stock options vested for the years ended December 31, 2023, 2022 and 2021 were $7 million, $16 million, and $31 million, respectively. Cash received from stock option exercises for the years ended December 31, 2023 and 2022 was not material, and for the year ended December 31, 2021 was $8 million.

2023 RSU Activity

A summary of our RSU activity, consisting 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, 2022		8,572		$	28.41
Granted		8,043			20.80
Vested and released (1)		(3,688	)		29.62
Cancelled		(1,407	)		25.59
Unvested RSUs outstanding as of December 31, 2023 (2)		11,520		$	23.06	$	248

(1)

Inclusive of approximately 840,000 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 2023 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 total fair value of RSUs vested for the years ended December 31, 2023, 2022 and 2021 was $109 million, $108 million, and $144 million, respectively.

On December 31, 2021, the Section 16 Committee of our Board of Directors approved and granted to Stephen Kaufer, the Company’s CEO at the time, the following: (i) stock option to purchase 115,200 shares of common stock, 25% of which vested and became exercisable on August 1, 2022, while the balance vests in quarterly installments over the following three years; with an estimated grant-date fair value per option of $12.59, using a Black-Scholes option pricing model; (ii) stock option to purchase 110,026 shares of common stock, which will vest and become exercisable in full on August 1, 2024; with an estimated grant-date fair value per option of $13.18,

using a Black-Scholes option pricing model; and (iii) 106,382 RSUs, 25% of which vested and settled on August 1, 2022, while the balance vests in quarterly installments over the following three years, with an estimated grant-date fair value of $27.26 per RSU, based on the quoted price of our common stock on the date of grant. The estimated fair value of these awards totaled $6 million and was fully recognized as stock-based compensation expense to the consolidated statement of operations for the year ended December 31, 2021, given the Company concluded there was no substantive future requisite service condition for these awards that existed at grant date for GAAP purposes. During the year ended December 31, 2022, the Company reversed $3 million of this previously recorded stock-based compensation expense related to these awards as the Company concluded that certain awards scheduled to vest were no longer achievable as a result of new terms executed in Mr. Kaufer's Consulting Service Agreement entered into on May 3, 2022.

A summary of our performance-based RSUs ("PSUs") and market-based RSUs (“MSUs”) activity is presented below:


	PSUs (1)							MSUs (2)
				Weighted							Weighted
				Average							Average
				Grant-		Aggregate					Grant-		Aggregate
				Date Fair		Intrinsic					Date Fair		Intrinsic
	Outstanding			Value Per Share		Value		Outstanding			Value Per Share		Value
	(in thousands)					(in millions)		(in thousands)					(in millions)
Unvested and outstanding as of December 31, 2022		—		$	—				592		$	10.00
Granted		546			18.45				34			14.80
Cancelled		(27	)		18.45				(54	)		9.26
Unvested and outstanding as of December 31, 2023		519		$	18.45	$	11		572		$	10.35	$	12

(1)

Represents PSUs awarded in February 2023. The PSU awards provide for vesting in two equal annual installments on each of December 31, 2024 and December 31, 2025, based on the extent to which the Company achieves certain financial metrics relative to targets established by the Company’s Compensation Committee of its Board of Directors. The estimated grant-date fair value per PSU was measured based on the quoted price of our common stock at the date of grant, calculated upon the establishment of performance targets, and will be 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. Probable outcome for performance-based awards is updated based upon changes in actual and forecasted operating results or expected achievement of performance goals, as applicable, and the impact of modifications, if any.

(2)

MSUs shall vest three years from grant date, generally with 25% vesting if the weighted-average stock price over a 30-day trading period during the vesting period is equal to or greater than $35.00 but less than $45.00, 50% vesting if equal to or greater than $45.00 but less than $55.00, and 100% vesting if equal to or greater than $55.00, subject to continuous employment with, or performance of services for, the Company. A Monte-Carlo simulation model, which simulated the present value of the potential outcomes of future stock prices was used to calculate the grant-date fair value of our MSU awards. The estimated grant-date fair value of these awards is amortized on a straight-line basis over the requisite service period and is not adjusted based on the actual number of awards that ultimately vest.

As of December 31, 2023, total unrecognized compensation cost related to stock-based awards, substantially RSUs, was $241 million, which the Company expects to recognize over a weighted-average period of 2.6 years.