Stock Based Awards and Other Equity Instruments

3 Months Ended

Mar. 31, 2024

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 and the related income tax benefit included in our unaudited condensed consolidated statements of operations during the periods presented:

	Three months ended
	March 31,
	2024			2023
	(in millions)
Selling and marketing	$	6		$	4
Technology and content		12			10
General and administrative		10			9
Total stock-based compensation		28			23
Income tax benefit from stock-based compensation		(5	)		(5	)
Total stock-based compensation, net of tax effect	$	23		$	18

We capitalized $2 million of stock-based compensation expense as website development costs during both the three months ended March 31, 2024 and 2023.

Stock-Based Award Activity and Valuation

2024 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, 2023		3,927		$	35.56
Granted		28			24.82
Exercised (1)		(80	)		24.36
Canceled or expired		(188	)		50.00
Options outstanding at March 31, 2024		3,687		$	34.98		5.0	$	8
Exercisable as of March 31, 2024		2,841		$	38.34		4.1	$	3
Vested and expected to vest after March 31, 2024 (2)		3,541		$	35.30		4.9	$	8

(1)Inclusive of approximately 67,000 stock options withheld due to net share settlement to satisfy required employee tax withholding requirements. 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 Tripadvisor, Inc. 2023 Stock and Annual Incentive Plan (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 Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and therefore does not include a forfeiture rate in our vested and expected to vest calculation unless necessary for a performance condition award.

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 weighted-average grant date fair value of stock options issued during the three months ended March 31, 2024 and 2023, using a Black-Scholes Merton option-pricing model, was $13.20 and $11.16, respectively. The total fair value of stock options vested was $3 million and $2 million for the three months ended March 31, 2024 and 2023, respectively. 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 March 31, 2024 was $27.79. The total intrinsic value of stock options exercised was not material for each of the three months ended March 31, 2024 and 2023.

2024 Restricted Stock Units (“RSUs”) Activity

A summary of our RSUs 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, 2023		11,520		$	23.06
Granted		4,938			26.84
Vested and released (1)		(1,873	)		23.85
Canceled		(232	)		22.62
Unvested RSUs outstanding as of March 31, 2024 (2)		14,353		$	24.26	$	399

(1)Inclusive of approximately 424,000 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 Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and therefore does not include a forfeiture rate in our vested and expected to vest calculation unless necessary for a performance condition award.

RSUs are measured at fair value based on the quoted price of our common stock at the date of grant. 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. The total fair value of RSUs vested was $45 million and $50 million for the three months ended March 31, 2024 and 2023, respectively.

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, 2023		519		$	18.45				572		$	10.35
Granted		575			27.03					―			―
Canceled		(60	)		18.45				(81	)		9.26
Unvested and outstanding as of March 31, 2024		1,034		$	23.22	$	29		491		$	10.53		$	14

(1)Represents PSUs awarded in February 2023 and February 2024. The February 2023 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 and Section 16 Committees of its Board of Directors (jointly, the “Compensation Committee”). The February 2024 PSU awards provide for vesting in two equal annual installments on each of December 31, 2025 and December 31, 2026, based on the extent to which the Company achieves certain financial metrics relative to targets established by the Compensation Committee. The estimated grant-date fair value per PSUs were 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.

Total current income tax benefits associated with the exercise or settlement of Tripadvisor stock-based awards held by our employees was $4 million and $3 million during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, total unrecognized compensation cost related to stock-based awards, substantially RSUs, was $352 million, which the Company expects to recognize over a weighted-average period of 3.0 years.