10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

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.)

141 Needham Street

Newton, MA 02464

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code:

(617) 670-6300

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Class	Outstanding Shares at July 20, 2012
Common Stock, $0.001 par value per share	129,532,102 shares
Class B common stock, $0.001 par value per share	12,799,999 shares

TripAdvisor, Inc.

Form 10-Q

For the Quarter Ended June 30, 2012

Table of Contents

	Page
Part I—Financial Information
Item 1. Unaudited Financial Statements
Consolidated and Combined Statements of Operations (Unaudited) for the Three and Six Months Ended June  30, 2012 and 2011		3
Consolidated and Combined Statements (Unaudited) of Comprehensive Income for the Three and Six Months Ended June 30, 2012 and 2011		4
Consolidated Balance Sheets (Unaudited) at June 30, 2012 and December 31, 2011		5
Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for the Six Months Ended June 30, 2012		6
Consolidated and Combined Statements of Cash Flows (Unaudited) for the Six Months Ended June  30, 2012 and 2011		7
Notes to Unaudited Consolidated and Combined Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures about Market Risk		34
Item 4. Controls and Procedures		34
Part II—Other Information
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		35
Item 4. Mine Safety Disclosures		35
Item 6. Exhibits		35
Signature		37

2

TRIPADVISOR, INC.

UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Revenue	$	141,408		$	110,043		$	273,535		$	205,321
Related-party revenue from Expedia		55,740			59,199			107,328			113,143
Total revenue		197,148			169,242			380,863			318,464
Costs and expenses:
Cost of revenue (exclusive of amortization) (1)		2,926			2,735			5,660			4,966
Selling and marketing(2)		64,243			52,685			131,632			96,880
Technology and content(2)		21,574			13,379			39,415			26,468
General and administrative(2)		18,252			7,944			34,506			16,138
Related-party shared services fee to Expedia		—			1,980			—			3,960
Depreciation		4,715			4,514			8,996			8,616
Amortization of intangible assets		1,760			1,132			3,599			3,249
Spin-off costs		—			1,054			—			1,054
Total costs and expenses		113,470			85,423			223,808			161,331
Operating income		83,678			83,819			157,055			157,133
Other income (expense):
Other interest (expense) income, net		(2,405	)		217			(5,337	)		315
Other, net		(4,539	)		457			(3,843	)		1,422
Total other (expense) income, net		(6,944	)		674			(9,180	)		1,737
Income before income taxes		76,734			84,493			147,875			158,870
Provision for income taxes		(23,569	)		(30,383	)		(46,539	)		(57,389	)
Net income		53,165			54,110			101,336			101,481
Net income attributable to noncontrolling interests		(146	)		(46	)		(206	)		(139	)
Net income attributable to TripAdvisor, Inc.	$	53,019		$	54,064		$	101,130		$	101,342
Earnings Per Share attributable to TripAdvisor, Inc.:
Basic	$	0.38		$	0.41		$	0.74		$	0.76
Diluted		0.37			0.41			0.73			0.76
Weighted Average Common Shares Outstanding:
Basic		139,278			133,461			136,516			133,461
Diluted		141,737			133,461			138,947			133,461
(1) Excludes amortization as follows:
Amortization of acquired technology included in amortization of intangibles	$	182		$	163		$	364		$	325
Amortization of website development costs included in depreciation		2,979			3,029			5,692			5,723
	$	3,161		$	3,192		$	6,056		$	6,048
(2) Includes stock-based compensation as follows:
Selling and marketing	$	923		$	589		$	2,001		$	1,394
Technology and content		2,426			639			3,938			1,527
General and administrative		3,419			740			5,521			1,521

The accompanying notes are an integral part of these consolidated and combined financial statements.

3

TRIPADVISOR, INC.

UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net income	$	53,165		$	54,110		$	101,336		$	101,481
Other comprehensive (loss) income:
Foreign currency translation adjustments		(1,196	)		(127	)		231			658
Comprehensive income		51,969			53,983			101,567			102,139
Less: Comprehensive income attributable to noncontrolling interests		(146	)		(46	)		(206	)		(139	)
Comprehensive income attributable to TripAdvisor, Inc.	$	51,823		$	53,937		$	101,361		$	102,000

The accompanying notes are an integral part of these consolidated and combined financial statements.

4

TRIPADVISOR, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	June 30, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	478,241		$	183,532
Accounts receivable, net of allowance of $3,298 and $5,370 at June 30, 2012 and December 31, 2011, respectively		96,873			67,936
Receivable from Expedia, net		40,158			14,081
Deferred income taxes, net		6,494			6,494
Prepaid expenses and other current assets		8,655			6,279
Total current assets		630,421			278,322
Long-term assets:
Property and equipment, net		38,828			34,754
Other long-term assets		10,380			11,888
Intangible assets, net		40,536			44,030
Goodwill		467,088			466,892
Total long-term assets		556,832			557,564
TOTAL ASSETS	$	1,187,253		$	835,886
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	28,405		$	12,097
Deferred revenue		26,970			19,395
Credit facility borrowings		24,361			26,734
Borrowings, current		30,000			20,000
Taxes payable		14,629			17,229
Accrued expenses and other current liabilities		45,479			34,938
Total current liabilities		169,844			130,393
Long-term liabilities:
Deferred income taxes, net		14,772			16,004
Other long-term liabilities		15,669			15,952
Borrowings, net of current portion		360,000			380,000
Total long-term liabilities		390,441			411,956
Total Liabilities		560,285			542,349
Commitments and Contingencies
Stockholders’ equity:
Preferred stock $0.001 par value		—			—
Authorized shares: 100,000,000
Shares issued and outstanding: 0 and 0
Common Stock $0.001 par value		129			121
Authorized shares: 1,600,000,000
Shares issued and outstanding: 129,511,937 and 120,661,808
Class B common stock $0.001 par value		13			13
Authorized shares 400,000,000
Shares issued and outstanding: 12,799,999 and 12,799,999
Additional paid-in capital		525,806			293,744
Retained earnings		103,499			2,369
Accumulated other comprehensive loss		(2,479	)		(2,710	)
Total stockholders’ equity		626,968			293,537
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,187,253		$	835,886

The accompanying notes are an integral part of these consolidated and combined financial statements.

5

TRIPADVISOR, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2012

(In thousands, except share data)

	Common Stock				Class B common stock				Additional paid-in capital			Retained earnings		Accumulated other comprehensive (loss) income			Total
	Shares		Amount		Shares		Amount
Balance as of December 31, 2011		120,661,808	$	121		12,799,999	$	13	$	293,744		$	2,369	$	(2,710	)	$	293,537
Net income attributable to TripAdvisor, Inc.													101,130					101,130
Currency translation adjustments															231			231
Tax benefits on equity awards										2,172								2,172
Issuance of common stock related to exercise of options and warrants and vesting of RSUs		8,850,129		8						225,761								225,769
Minimum withholding tax on vesting of RSUs										(3,035	)							(3,035	)
Adjustment to the fair value of redeemable noncontrolling interest										(758	)							(758	)
Reclassification of non-employee equity awards to liability										(1,174	)							(1,174	)
Stock-based compensation expense										9,153								9,153
Other										(57	)							(57	)
Balance as of June 30, 2012		129,511,937	$	129		12,799,999	$	13	$	525,806		$	103,499	$	(2,479	)	$	626,968

The accompanying notes are an integral part of these consolidated and combined financial statements.

6

TRIPADVISOR, INC.

UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2012			2011
Operating activities:
Net income	$	101,336		$	101,481
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment, including internal-use software and website development		8,996			8,616
Stock-based compensation		11,460			4,442
Amortization of intangible assets		3,599			3,249
Amortization of deferred financing costs		475			—
Deferred tax benefit		(74	)		(174	)
Excess tax benefits from stock-based compensation		(2,011	)		(1,431	)
Provision for doubtful accounts		(1,300	)		581
Foreign exchange (gain) loss on cash and cash equivalents, net		2,323			(618	)
Other		509			(1,222	)
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		(27,455	)		(25,151	)
Related parties		(34,356	)		—
Prepaid expenses and other current assets		(1,879	)		(1,525	)
Accounts payable		17,812			12,229
Taxes payable		(1,822	)		4,544
Accrued expenses and other current liabilities		6,296			1,925
Deferred revenue		7,568			6,925
Net cash provided by operating activities		91,477			113,871
Investing activities:
Acquisitions, net of cash acquired		—			(4,893	)
Capital expenditures, including internal-use software and website development		(13,249	)		(10,424	)
Distribution proceeds from Expedia related to Spin-Off		7,028			—
Transfers to Expedia, net		—			(90,125	)
Net cash used in investing activities		(6,221	)		(105,442	)
Financing activities:
Acquisitions funded by Expedia		—			5,135
Proceeds from credit facilities		7,627			2,782
Payments on credit facilities		(10,000	)		—
Principal payments on long-term debt		(10,000	)		—
Proceeds from exercise of stock options and warrants		225,769			—
Payment of minimum withholding taxes on RSU vesting		(3,035	)		—
Excess tax benefits from stock-based compensation		2,011			1,431
Net cash provided by financing activities		212,372			9,348
Effect of exchange rate changes on cash and cash equivalents		(2,919	)		814
Net increase in cash and cash equivalents		294,709			18,591
Cash and cash equivalents at beginning of year		183,532			93,133
Cash and cash equivalents at end of period	$	478,241		$	111,724

The accompanying notes are an integral part of these consolidated and combined financial statements.

7

TRIPADVISOR, INC.

UNAUDITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

We refer to TripAdvisor, Inc. and our wholly-owned subsidiaries as “TripAdvisor,” “us,” “we” and “our” in these notes to the consolidated and combined financial statements.

Description of Business

TripAdvisor is an online travel company, empowering users to plan and have the perfect trip. TripAdvisor’s travel research platform aggregates reviews and opinions of members about destinations, accommodations (hotels, bed and breakfasts, specialty lodging and vacation rentals), restaurants and activities throughout the world through our flagship TripAdvisor brand. TripAdvisor-branded websites include tripadvisor.com in the United States and localized versions of the website in 29 other countries, including in China under the brand daodao.com. Beyond travel-related content, TripAdvisor websites also include links to the websites of our travel advertisers allowing travelers to directly book their travel arrangements. In addition to the flagship TripAdvisor brand, we manage and operate websites under 19 other travel brands, connected by the common goal of providing comprehensive travel planning resources across the travel sector. We derive substantially all of our revenue from advertising, primarily through click-based advertising and display-based advertising sales. In addition, we earn revenue through a combination of subscription-based offerings, transaction revenue from our flash sale website, SniqueAway, and from our recently-launched hotel booking site, Tingo, and other revenue including content licensing.

Spin-Off from Expedia

On April 7, 2011, Expedia, Inc. (“Expedia”) announced its plan to separate into two independent public companies in order to better achieve certain strategic objectives of its various businesses. We refer to this transaction as the “Spin-Off.”

On December 20, 2011, following the close of trading on the NASDAQ Global Select Market (“NASDAQ”), the Spin-Off was completed, and TripAdvisor began trading as independent public company on December 21, 2011. Expedia effected the Spin-Off by means of a reclassification of its capital stock that resulted in the holders of Expedia capital stock immediately prior to the time of effectiveness of the reclassification having the right to receive a proportionate amount of TripAdvisor capital stock. A one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, with cash paid in lieu of fractional shares.

In connection with the Spin-Off, Expedia contributed or transferred all of the subsidiaries and assets relating to Expedia’s TripAdvisor Media Group, which were comprised of the TripAdvisor Holdings, LLC combined financial statements, to TripAdvisor and TripAdvisor or one of its subsidiaries assumed all of the liabilities relating to Expedia’s TripAdvisor Media Group. TripAdvisor now trades on the NASDAQ under the symbol “TRIP”.

On December 20, 2011, TripAdvisor Holdings, LLC, distributed approximately $406 million in cash to Expedia in the form of a dividend, prior to completion of the Spin-Off. This distribution was funded through borrowings under a new credit agreement, dated as of December 20, 2011, among TripAdvisor, TripAdvisor Holdings, LLC, TripAdvisor LLC, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Europe Limited, as London agent. Such credit agreement together with all exhibits, schedules, annexes, certificates, assignments and related documents contemplated thereby is referred to herein as the “Credit Agreement.” The Credit Agreement provided for a five-year term loan (the “Term Loan”) to TripAdvisor Holdings, LLC in a principal amount of $400 million, repayable in quarterly installments equal to 1.25% of the original principal amount in year 2012 and 2.5% of the original principal amount in each year thereafter, with the balance payable on the final maturity date. The Credit Agreement also provides for a revolving credit facility (the “Revolving Credit Facility”) with a maximum borrowing capacity of $200 million. All outstanding principal and interest under the Term Loan and the Revolving Credit Facility will be due and payable, and the Revolving Credit Facility will terminate, on December 20, 2016.

Basis of Presentation

The accompanying unaudited consolidated and combined financial statements have been prepared by us in accordance with generally accepted accounting principles, or GAAP, for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles for complete periods have been condensed or omitted pursuant to such regulations. In the opinion of management, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included. All such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated and combined financial statements for the year ended December 31, 2011 filed with the Securities and Exchange Commission (“SEC”) in our Annual Report on Form 10-K on March 15, 2012. The results for interim periods are not necessarily indicative of the results to be expected for the full year.

8

The financial statements and related financial information pertaining to the period preceding the Spin-Off have been presented on a combined basis and reflect the results of TripAdvisor that were ultimately transferred to us as part of the Spin-Off. The financial statements and related financial information pertaining to the period subsequent to the Spin-Off have been presented on a consolidated basis. Prior to the Spin-Off, certain functions, including accounting, legal, tax, corporate development, treasury, employee benefits, financial reporting and real estate management, were historically managed by the corporate division of Expedia on behalf of its subsidiaries. The assets, liabilities and expenses related to the support of these centralized corporate functions have been allocated to us on a specific identification basis to the extent possible. Otherwise, allocations related to these services, in the form of a related-party services fee, were primarily based upon an estimate of the proportion of corporate amounts applicable to us. These allocations were determined on a basis that Expedia and we considered to be a reasonable reflection of the cost of services provided or the benefit received by us. These expenses were allocated based on a number of factors including headcount, estimated time spent and operating expenses. In the opinion of management, the assumptions and allocations have been made on a reasonable basis. Management believes that amounts allocated to TripAdvisor reflect a reasonable representation of the types of costs that would have been incurred if we had performed these functions as a stand-alone company. However, as estimation is inherent within the aforementioned allocation process, these combined financial statements do not include all of the actual amounts that would have been incurred had we been a stand-alone entity during the periods presented and also do not necessarily reflect our future financial position, results of operations and cash flows.

Consolidation

Our consolidated and combined financial statements include the accounts of TripAdvisor, our wholly owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We record our investments in entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method. We record noncontrolling interest in our consolidated and combined financial statements to recognize the minority ownership interest in our consolidated subsidiaries. Noncontrolling interest in the earnings and losses of consolidated subsidiaries represent the share of net income or loss allocated to members or partners in our consolidated entities. Significant intercompany transactions between the TripAdvisor consolidated entities and accounts have been eliminated.

Certain of our subsidiaries that operate in China, have variable interests in affiliated entities in China in order to comply with Chinese laws and regulations, which restrict foreign investment in Internet content provision businesses. Although we do not own the capital stock of some of our Chinese affiliates, we consolidate their results as we are the primary beneficiary of the cash losses or profits of these variable interest affiliates and have the power to direct the activities of these affiliates. Our variable interest entities are not material for all periods presented.

Accounting Estimates

We use estimates and assumptions in the preparation of our consolidated and combined financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated and combined financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our consolidated and combined financial statements include revenue recognition; recoverability of long-lived assets, intangible assets and goodwill; income taxes; useful lives of property and equipment; purchase accounting and stock-based compensation.

Reclassifications

We have reclassified certain amounts related to our prior period results to conform to our current period presentation.

During the fourth quarter of 2011, our management changed our non-GAAP financial measure that we use to measure our operating performance from Operating Income Before Amortization, or OIBA, to Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization, or Adjusted EBITDA. Consequently we have reclassified all of our depreciation expense, which previously had resided in technology and content expense and general and administrative expense, and have presented it as a separate line item on the consolidated and combined statement of operations. This reclassification had no net effect on either total operating expenses or total operating income. The table below provides a summary of that reclassification for the periods presented.

9

	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
	(In thousands)
Depreciation	$	4,514		$	8,616
Technology and content		(3,679	)		(6,969	)
General and administrative		(835	)		(1,647	)
	$	—		$	—

Seasonality

Expenditures by travel advertisers tend to be seasonal. Traditionally, our strongest quarter has been the third quarter, which is a key travel research period, with the weakest quarter being the fourth quarter. However, adverse economic conditions or continued growth of our international operations with differing holiday peaks may influence the typical trend of our seasonality in the future.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

In September 2011, the FASB issued ASU 2011-08. ASU 2011-08 was issued to amend FASB Accounting Standards Codification (“ASC”) (Topic 350): Intangibles—Goodwill and Other. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to first make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. If entities determine, on the basis of qualitative factors, that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. The amendments in this update are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, and we adopted ASU 2011-08 on October 1, 2011 for the fiscal year 2011 goodwill impairment test. The adoption of ASU 2011-08 did not have a material impact on our consolidated and combined financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation on Comprehensive Income (“ASU 2011-05”). Under ASU 2011-05, there will no longer be the option to present items of other comprehensive income in the statement of stockholders’ equity. ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011 on a retrospective basis, with early adoption permitted. Accordingly, we have adopted the presentation requirements of ASU 2011-05 on December 31, 2011. The adoption of ASU 2011-05 did not have a material impact on our consolidated and combined financial statements.

For information about our critical accounting policies and estimates, refer to “Note 2— Significant Accounting Policies,” included in our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011.

NOTE 3: STOCK BASED AWARDS AND OTHER EQUITY INSTRUMENTS

Stock-based compensation expense relates primarily to expense for restricted stock units (“RSUs”) and stock options. Our outstanding RSUs and stock options generally vest over five years and four years, respectively.

For the three and six months ended June 30, 2012, we recognized total stock-based compensation expense of $6.8 million and $11.5 million, respectively. The total income tax benefit related to stock-based compensation expense was $2.5 million and $4.0 million for the three and six months ended June 30, 2012, respectively. For the three and six months ended June 30, 2011, we recognized total stock-based compensation expense of $2.0 million and $4.4 million, respectively. The total income tax benefit related to stock-based compensation expense was $0.8 million and $1.7 million for the three and six months ended June 30, 2011, respectively.

Stock Based Awards and Other Equity Instruments Assumed at Spin-Off

Prior to the Spin-Off, we participated in the Amended and Restated Expedia, Inc. 2005 Stock and Annual Incentive Plan, under which we, through Expedia, granted RSUs, stock options, and other stock-based awards to our directors, officers, employees and consultants. Following the Spin-Off, these existing Expedia stock-based awards were primarily converted as follows:

• Each vested stock option to purchase shares of Expedia common stock converted into an option to purchase shares of Expedia common stock and an option to purchase shares of TripAdvisor common stock;

• Each unvested stock option to purchase shares of Expedia common stock converted into a stock option to purchase shares of common stock of the applicable company for which the employee was employed following the Spin-Off; and

• All RSUs converted into RSUs of the applicable company for which the employee was employed following the Spin-Off.

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In addition, upon Spin-Off, we entered into a warrant agreement (the “Warrant Agreement”) with Mellon Investor Services LLC and issued warrants exercisable for TripAdvisor common stock in respect of previously outstanding warrants exercisable for Expedia common stock that were adjusted on account of Expedia’s reverse stock split and the Spin-Off. The warrants, which totaled 32,186,792 at Spin-Off, were subsequently converted into 7,952,456 shares of our common stock during the six months ended June 30, 2012, prior to their expiration date of May 7, 2012. Refer to our discussion below in this Note 3— 2012 Warrant Activity for a discussion of warrant activity during the six months ended June 30, 2012.

One tranche of warrants (issued in respect of Expedia warrants that had featured an exercise price of $12.23 per warrant prior to adjustment) were exercisable for 0.25 (one-quarter) of a share of TripAdvisor common stock at an exercise price equal to $6.48 per warrant, and the other tranche of warrants (issued in respect of Expedia warrants that had featured an exercise price of $14.45 per warrant prior to adjustment) were exercisable for 0.25 (one-quarter) of a share of TripAdvisor common stock at an exercise price equal to $7.66 per warrant. The exercise price could have been paid in cash or via “cashless exercise” as set forth in the Warrant Agreement. In total, at Spin-Off, the warrants could be converted into a maximum of 8,046,698 shares of our common stock without any further adjustments to the Warrant Agreement.

Below is a summary of our stock-based awards and warrants issued upon completion of the conversion of existing Expedia stock-based awards and warrants into TripAdvisor stock-based awards and warrants on December 20, 2011 and the related weighted-average grant date exercise price for options and warrants and the weighted-average grant date fair value for RSUs:

Options and Stock Warrants:

	Potential Shares of Common Stock (in thousands)		Weighted Average Grant Date Exercise Price
Options		6,575	$	23.65
Warrants—$6.48 TripAdvisor Warrants		6,047	$	25.92
Warrants—$7.66 TripAdvisor Warrants		2,000	$	30.64

RSUs:

	Potential Shares of Common Stock (in thousands)		Weighted Average Grant Date Fair Value
RSUs		893	$	21.09

TripAdvisor, Inc. 2011 Stock and Annual Incentive Plan (“2011 Incentive Plan”)

On December 20, 2011, the 2011 Incentive Plan became effective. A summary of certain important features of the 2011 Incentive Plan can be found in “Note 7— Stock Based Awards and Other Equity Instruments,” in the Notes to our Consolidated and Combined Financial Statements in Item 8 of our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011. The summary of the material terms of the 2011 Incentive Plan is qualified in its entirety by the full text of the 2011 Incentive Plan which is incorporated by reference in our Annual Report on Form 10-K as Exhibit 4.3.

2012 Stock Option Activity

The exercise price for all stock options granted by us to date has been equal to the market price of the underlying shares of common stock at the date of grant. In this regard, when making stock option awards, our practice is to determine the applicable grant date and to specify that the exercise price shall be the closing price of our common stock on the date of grant. Stock options granted during the first six months of 2012 have a term of ten years from the date of grant and vest over a four-year period.

During the six months ended June 30, 2012, we have issued 2,995,725 stock options under the 2011 Incentive Plan with a grant-date fair value per option of $20.51. We will amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting term of four years on a straight-line basis. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

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A summary of the status and activity for stock option awards relating to our common stock for the six months ended June 30, 2012, is presented below:

	Options Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(In thousands)				(In years)		(In thousands)
Options outstanding at January 1, 2012		6,575	$	23.65
Granted		2,996		40.20
Exercised		708		15.94			$	13,123
Cancelled		261		25.49
Options outstanding at June 30, 2012		8,602	$	29.95		5.7	$	126,752
Exercisable as of June 30, 2012		3,539	$	25.04		3.4	$	69,523
Vested and expected to vest after June 30, 2012		7,436	$	28.92		5.8	$	116,148

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 29, 2012 was $44.69.

The estimated fair value of the options granted under the 2011 Incentive Plan was calculated using a Black-Scholes Merton option-pricing model (“Black-Scholes model”). The Black-Scholes model incorporates assumptions to value stock-based awards, which includes the risk-free rate of return, volatility, expected term and expected dividend yield.

Our risk-free interest rate is based on the rates currently available on zero-coupon U.S. Treasury issues, in effect at the time of the grant, whose remaining maturity period most closely approximates the stock option’s expected term assumption. We estimated the volatility of our common stock by using an average of historical stock price volatility of publicly traded companies that we consider peers based on daily price observations over a period equivalent or approximate to the expected term of the stock option grants. The decision to use a weighted average volatility factor of a peer group was based upon the relatively short period of availability of data on our common stock. We estimated our expected term using the simplified method for all stock options as we do not have sufficient historical exercise data on our common stock. Our expected dividend yield is zero, as we have not paid and do not anticipate paying dividends on our common stock in the foreseeable future.

The Black-Scholes assumptions used in calculating the estimated fair value of stock options granted under the 2011 Incentive Plan are as follows:

	Three and Six Months Ended June 30, 2012
Risk free interest rate		1.05	%
Expected term (in years)		6.21
Volatility		53.34	%
Expected dividend yield		0	%

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2012 RSU Activity

During the six months ended June 30, 2012, we issued 59,951 RSUs under the 2011 Incentive Plan for which the fair value was measured based on the quoted price of our common stock at the date of grant of $33.27. We will amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting term of two years on a straight-line basis.

The following table presents a summary of RSU activity on our common stock:

	RSUs Outstanding			Weighted Average Grant- Date Fair Value Per Share
		(In thousands	)
Unvested RSUs outstanding as of January 1, 2012		926		$	21.32
Granted		60			33.27
Vested and released (1)		292			14.38
Cancelled		8			25.63
Unvested RSUs outstanding as of June 30, 2012 (2)		686		$	24.53

(1) Inclusive of 96,951 RSUs withheld to satisfy minimum tax withholding requirements.

(2) Included in RSUs outstanding at June 30, 2012 are 400,000 RSUs awarded to one of our non-employee Directors, for which vesting is tied to achievement of performance targets and a requisite service period.

2012 Stock Warrant Activity

During the six months ended June 30, 2012, there were a total of 32,186,791warrants exercised which resulted in a total of 7,952,456 shares of our common stock being issued during that period, which included 31,641,337 warrants for which the exercise price was paid in cash at a weighted average price of $27.11. We received total exercise proceeds of $214.5 million related to these warrant exercises. In addition there were 545,454 cashless warrants exercised with a weighted average exercise price of $25.92 of which we did not receive any exercise proceeds. As of June 30, 2012, we had no outstanding warrants available which could be convertible to shares of our common stock.

A summary of the unrecognized compensation expense, net of estimated forfeitures and the weighted average period remaining at June 30, 2012 related to our non-vested stock options and RSU awards is presented below (in thousands, except per year information):

	Stock Options		RSUs
Unrecognized compensation expense (net of forfeitures)	$	59,166	$	6,138
Weighted average period remaining (in years)		3.4		1.7

NOTE 4: INCOME TAXES

Each interim period is considered an integral part of the annual period and, accordingly, we measure our tax expense using an estimated annual effective tax rate. An enterprise is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

Our effective tax rate for the three and six months ended June 30, 2012 was 30.7% and 31.5%, respectively. Our effective tax rate for the three and six months ended June 30, 2011 was 36.0% and 36.1%, respectively. For the three and six months ended June 30, 2012, the effective tax rate is less than the federal statutory rate primarily due to earnings in jurisdictions outside the United States, where our effective tax rate is lower, which was partially offset by state income taxes, non-deductible stock compensation and accruals on uncertain tax positions. The change in the effective tax rate for 2012 compared to the 2011 rate was primarily due to an increase in earnings in jurisdictions outside the United States.

Our policy is to recognize accrued interest and penalties related to unrecognized tax benefits and income tax liabilities as part of our income tax expense. As of June 30, 2012, accrued interest is $0.4 million, net of federal benefit, and no penalties have been accrued. We do not anticipate any material releases in the next twelve months.

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We are subject to taxation in the United States and various States and foreign jurisdictions. As of June 30, 2012, the Company’s tax years for 2008, 2009, 2010 and 2011 are subject to examination by the tax authorities. The Company is currently under an IRS audit for 2009 and 2010, and has various ongoing state income tax audits. As of June 30, 2012 no material assessments have resulted from these audits.

NOTE 5: COMMITMENTS AND CONTINGENCIES

There have been no material changes to our commitments and contingencies since December 31, 2011. (Refer to “Note 10— Commitments and Contingencies,” in the Notes to our Consolidated and Combined Financial Statements in Item 8 of our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011.)

In the ordinary course of business, we and our subsidiaries are parties to legal proceedings and claims involving alleged infringement of third-party intellectual property rights, defamation, and other claims. Rules of the SEC require the description of material pending legal proceedings, other than ordinary, routine litigation incident to the registrant’s business, and advise that proceedings ordinarily need not be described if they primarily involve damages claims for amounts (exclusive of interest and costs) not individually exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of management, none of the pending litigation matters that the Company and its subsidiaries are defending involves or is likely to involve amounts of that magnitude. There may be claims or actions pending or threatened against us of which we are currently not aware and the ultimate disposition of which could have a material adverse effect on us.

NOTE 6: DEBT

Term Loan Facility Due 2016 and Revolving Credit Facility

Overview

On December 20, 2011, in connection with the Spin-Off, we entered into the Credit Agreement, which provides $600 million of borrowing including:

• the Term Loan Facility, or Term Loan, in an aggregate principal amount of $400 million with a term of five years due December 2016; and

• the Revolving Credit Facility in an aggregate principal amount of $200 million available in U.S. dollars, Euros and British pound sterling with a term of five years expiring December 2016.

The Term Loan and any loans under the Revolving Credit Facility bear interest by reference to a base rate or a Eurocurrency rate, in either case plus an applicable margin based on our leverage ratio. We are also required to pay a quarterly commitment fee, on the average daily unused portion of the Revolving Credit Facility for each fiscal quarter and fees in connection with the issuance of letters of credit. The Term Loan and loans under the Revolving Credit Facility currently bear interest at LIBOR plus 175 basis points, or the Eurocurrency Spread, or the alternate base rate (“ABR”) plus 75 basis points, and undrawn amounts are currently subject to a commitment fee of 30 basis points.

As of June 30, 2012 we are using a one-month interest period Eurocurrency Spread which is approximately 2.0% per annum. Interest is currently payable on a monthly basis while we are borrowing under the one-month interest rate period. The current interest rates are based on current assumptions, leverage and LIBOR rates and do not take into account that rates will reset periodically.

The Term Loan principal will be repayable in quarterly installments on the last day of each calendar quarter equal to 1.25%, with $10 million paid during the six months ended June 30, 2012. The payments for the year ending December 31, 2012 will be equal to 1.25% of the original principal amount and will be equal to 2.5% of the original principal amount in each year thereafter, with the balance due on the final maturity date.

The Revolving Credit Facility includes $40 million of borrowing capacity available for letters of credit and $40 million for borrowings on same-day notice. Immediately following the Spin-Off, $10 million was drawn down under the Revolving Credit Facility, which was repaid during the three months ended March 31, 2012.

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Total outstanding borrowings under the Credit Agreement consist of the following (in thousands):

	June 30, 2012
Short-Term Debt:
Revolving Credit Facility	$	—
Term Loan		30,000
Total Short-Term Borrowings	$	30,000
Long-Term Debt:
Term Loan	$	360,000
Total Long-Term Borrowings	$	360,000

The remaining future minimum principal payment obligations due under the Credit Agreement related to our Term Loan is as follows as of June 30, 2012 (in thousands):

	Payment Amount
2012	$	10,000
2013	$	40,000
2014	$	40,000
2015	$	40,000
2016	$	260,000
Total	$	390,000

Guarantees

All obligations under the Credit Agreement are unconditionally guaranteed by us and each of our existing and subsequently acquired or organized direct or indirect wholly-owned domestic and foreign restricted subsidiaries, subject to certain exceptions for controlled foreign corporations, foreign subsidiaries where applicable law would otherwise be violated or non-material subsidiaries.

Covenants

The Credit Agreement contains a number of covenants that, among other things, restrict our ability to: incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions or repurchase our capital stock, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change our fiscal year. The Credit Agreement also requires us to maintain a maximum leverage ratio and a minimum cash interest coverage ratio, and contain certain customary affirmative covenants and events of default, including a change of control. If an event of default occurs, the lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of all amounts due under Credit Agreement and all actions permitted to be taken by a secured creditor.

As of June 30, 2012 we believe we are in compliance with all of our debt covenants.

The full text of the Credit Agreement is incorporated by reference into our Annual Report on Form 10-K filed on March 15, 2012 for the year ending December 31, 2011 as Exhibit 4.2.

Chinese Credit Facilities

In addition to our borrowings under the Credit Agreement, we maintain our Chinese Credit Facilities. As of June 30, 2012 and December 31, 2011, we had $24.4 million and $16.7 million of short term borrowings outstanding, respectively.

Certain of our Chinese subsidiaries are entered into a RMB 138,600,000 (approximately $22 million), one-year revolving credit facility with Bank of America (the “Chinese Credit Facility—BOA”) that has a current termination date of December 2012. We currently have $21.3 million of outstanding borrowings from this credit facility as of June 30, 2012. Our Chinese Credit Facility—BOA currently bears interest based at 110% of the People’s Bank of China’s base rate and was 6.44% as of June 30, 2012.

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In addition, during April 2012, certain of our Chinese subsidiaries entered into a RMB 125,000,000 (approximately $20 million) one-year revolving credit facility with J.P. Morgan Chase Bank (“Chinese Credit Facility-JPM”). We currently have $ 3.1 million of outstanding borrowings from this credit facility as of June 30, 2012. The current rate of interest we are paying on our outstanding borrowings from our Chinese Credit Facility—JPM is 6.31% at June 30, 2012.

NOTE 7: SEGMENT INFORMATION

We have one reportable segment: TripAdvisor. We determined our segment based on how our chief operating decision maker manages our business, makes operating decisions and evaluates operating performance. Our primary operating metric for evaluating segment performance is Adjusted EBITDA. Adjusted EBITDA is defined as operating income plus: (1) depreciation of property and equipment, including internal use software and website development; (2) amortization of intangible assets; (3) stock-based compensation; and (4) non-recurring expenses incurred to effect the Spin-Off during the year ended December 31, 2011. Such amounts are detailed in our segment reconciliation below. In addition, please see our discussion of Adjusted EBITDA in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

The following table is a reconciliation of Adjusted EBITDA to operating income and net income for the periods presented (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Adjusted EBITDA	$	96,921		$	92,487		$	181,110		$	174,494
Depreciation (1)		(4,715	)		(4,514	)		(8,996	)		(8,616	)
OIBA (2)		92,206			87,973			172,114			165,878
Amortization of intangible assets		(1,760	)		(1,132	)		(3,599	)		(3,249	)
Stock-based compensation		(6,768	)		(1,968	)		(11,460	)		(4,442	)
Spin-off costs		—			(1,054	)		—			(1,054	)
Operating income		83,678			83,819			157,055			157,133
Other interest (expense) income, net		(2,405	)		217			(5,337	)		315
Other, net		(4,539	)		457			(3,843	)		1,422
Provision for income taxes		(23,569	)		(30,383	)		(46,539	)		(57,389	)
Income before income taxes		53,165			54,110			101,336			101,481
Net income attributable to noncontrolling interest		(146	)		(46	)		(206	)		(139	)
Net income attributable to TripAdvisor, Inc.	$	53,019		$	54,064		$	101,130		$	101,342

(1) Includes internal use software and website development.

(2) Our primary operating metric prior to the Spin-Off for evaluating operating performance was OIBA, as reported on our Registration Statement. OIBA is defined as operating income plus: (1) amortization of intangible assets and any related impairment; (2) stock-based compensation expense; and (3) non-recurring expenses incurred to effect the Spin-Off during the year ended December 31, 2011. This operating metric is no longer being used by our management to measure operating performance and is only being shown above to illustrate the financial impact as we converted to a new operating metric post Spin-Off.

NOTE 8: STOCKHOLDERS’ EQUITY

Common Stock and Class B Common Stock

Our authorized common stock consists of 1.6 billion shares of common stock with par value of $0.001 per share, and 400 million shares of Class B common stock with par value of $0.001 per share. Both classes of common stock qualify for and share equally in dividends, if declared by our Board of Directors. Common stock is entitled to one vote per share and Class B common stock is entitled to 10 votes per share on most matters. Holders of TripAdvisor common stock, acting as a single class, are entitled to elect a number of directors equal to 25% percent of the total number of directors, rounded up to the next whole number, which is currently three directors. Class B common stockholders may, at any time, convert their shares into common stock, on a one for one share basis. Upon conversion, the Class B common stock is retired and is not available for reissue. In the event of liquidation, dissolution, distribution of assets or winding-up of TripAdvisor the holders of both classes of common stock have equal rights to receive all the assets of TripAdvisor after the rights of the holders of the preferred stock have been satisfied.

As discussed in our Annual Report on Form 10-K filed March 15, 2012 (“Note 1— Organization and Basis of Presentation”), in connection with the Spin-Off a one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, which resulted in 120,661,020 shares of Common Stock and 12,799,999 shares of Class B common stock outstanding immediately following the Spin-Off.

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Preferred Stock

In addition to common stock, we are authorized to issue up to 100 million preferred shares, with $ 0.001 par value per share, with terms determined by our Board of Directors, without further action by our stockholders. At June 30, 2012, no preferred shares had been issued.

Share Repurchases

During the period January 1, 2012 through June 30, 2012, our Board of Directors did not authorize any share buyback program and we have not repurchased any shares of outstanding common stock.

Dividends

During the period January 1, 2012 through June 30, 2012, our Board of Directors did not declare any dividends on our outstanding common stock.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the six months ended June 30, 2012 and the year ended December 31, 2011 is comprised of accumulated foreign currency translation adjustments.

NOTE 9: CASH AND CASH EQUIVALENTS

Our cash and cash equivalents consist primarily of cash and liquid financial instruments, including money market funds, with maturities of 90 days or less when purchased.

Cash and cash equivalents by security type at June 30, 2012 were as follows:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	409,120	$	—	$	—	$	409,120
Money market funds—cash equivalent		69,121		—		—		69,121
Total	$	478,241	$	—	$	—	$	478,241

Cash and cash equivalents by security type at December 31, 2011 were as follows:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	114,532	$	—	$	—	$	114,532
Money market funds—cash equivalent		69,000		—		—		69,000
Total	$	183,532	$	—	$	—	$	183,532

NOTE 10: FAIR VALUE MEASUREMENTS

We measure assets and liabilities at fair value based on the expected exit price, which is the amount that would be received on the sale of an asset or amount paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

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The following tables provide a summary of the fair value measurements of our assets as of June 30, 2012 and December 31, 2011:

(in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value at June 30, 2012
Money market funds—cash equivalent (1)	$	69,121	$	—	$	—	$	69,121
Total	$	69,121	$	—	$	—	$	69,121
(in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value at December 31, 2011
Money market funds—cash equivalent (1)	$	69,000	$	—	$	—	$	69,000
Total	$	69,000	$	—	$	—	$	69,000

(1) Cash equivalents include money market investment accounts that hold excess liquid funds. The fair value measurement of these assets is based on quoted market prices in active markets and, therefore, is recorded at fair value on a recurring basis and classified as Level 1 assets.

We did not have any Level 2 or 3 assets for the period ended June 30, 2012 or December 31, 2011.

One of our acquisitions made during 2008 includes noncontrolling interests with certain rights whereby we may acquire, and the minority shareholders may sell to us, the additional shares of the subsidiary, at fair value or at adjusted fair values at our discretion, beginning in the fourth quarter of 2012. Fair value determinations are based on various internal valuation techniques, including market comparables and discounted cash flow projections and are considered a Level 3 liability at June 30, 2012 and December 31, 2011. Certain assumptions are used in determining fair value, including revenue growth rates and discount rates. Changes in these assumptions would impact the fair value. In addition, under certain circumstances the parties may be required to submit to arbitration in order to determine the final fair value of the noncontrolling interests. Changes in the fair value of the shares for which the minority holders may sell to us are recorded to the redeemable noncontrolling interest with charges or credits to additional paid in capital. Our redeemable noncontrolling interest is not material for all periods presented and is included in other current liabilities.

We currently invest excess cash balances primarily in cash deposits and money market investment accounts at major banks. The carrying amount of cash deposits, cash equivalents, trade receivables, related party receivables, prepaid expenses and other current assets, trade payables, accrued and other current liabilities and deferred revenue as reported on the unaudited consolidated and combined balance sheet as of June 30, 2012 and December 31, 2011, approximate their fair value because of the short maturity of those instruments. The carrying value of the borrowings outstanding on our Credit Agreement bear interest at a variable rate and are considered to approximate fair value.

NOTE 11: EARNINGS PER SHARE

As discussed in our Annual Report on Form 10-K filed March 15, 2012 (“Note 1— Organization and Basis of Presentation,”) in connection with the Spin-Off a one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, which resulted in 120,661,020 shares of common stock and 12,799,999 shares of Class B common stock outstanding immediately following the Spin-Off.

Basic Earnings Per Share

For the three and six months ended June 30, 2012, we computed basic earnings per share using the number of shares of common stock and Class B common stock outstanding as of December 31, 2011 plus the weighted average of any additional shares issued and outstanding during the three and six months ended June 30, 2012.

For the three and six months ended June 30, 2011, we computed basic earnings per share using the number of shares of common stock and Class B common stock outstanding immediately following the Spin-Off, as if such shares were outstanding for the entire period.

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Diluted Earnings Per Share

For the three and six months ended June 30, 2012, we computed diluted earnings per share using (i) the number of shares of common stock and Class B common stock outstanding at December 31, 2011, (ii) the weighted average of any additional shares issued and outstanding for the three and six months ended June 30, 2012, and (iii) if dilutive, the incremental weighted average common stock that we would issue upon the assumed exercise of common equivalent shares related to stock options and stock warrants and the vesting of restricted stock units using the treasury stock method during the three and six months ended June 30, 2012, and (iv) if dilutive, performance based awards based on the number of shares that would be issuable as of the end of the reporting period assuming the end of the reporting period was also the end of the contingency period.

Under the treasury stock method, the assumed proceeds calculation includes the actual proceeds to be received from the employee upon exercise, the average unrecognized compensation cost during the period and any tax benefits credited upon exercise to additional paid-in-capital. The treasury stock method assumes that a company uses the proceeds from the exercise of an award to repurchase common stock at the average market price for the period. Windfall tax benefits created upon the exercise of an award would be added to assumed proceeds, while shortfalls charged to additional paid-in-capital would be deducted from assumed proceeds. Any shortfalls not covered by the windfall tax pool would be charged to the income statement and would be excluded from the calculation of assumed proceeds, if any.

For the three and six months ended June 30, 2011, we computed diluted earnings per share using (i) the number of shares of common stock and Class B common stock outstanding immediately following the Spin-Off, as no TripAdvisor equity awards were outstanding prior to the Spin-Off.

Below is a reconciliation of the weighted average number of shares of common stock outstanding in calculating diluted earnings per share (in thousands, except for per share information):

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Numerator:
Net income attributable to TripAdvisor	$	53,019	$	54,064	$	101,130	$	101,342
Denominator:
Weighted average shares used to compute Basic EPS		139,278		133,461		136,516		133,461
Weighted average effect of dilutive securities:
Stock options		1,394		—		1,263		—
RSUs		100		—		147		—
Stock warrants		965		—		1,021		—
Weighted average shares used to compute Diluted EPS		141,737		133,461		138,947		133,461
Basic EPS	$	0.38	$	0.41	$	0.74	$	0.76
Diluted EPS	$	0.37	$	0.41	$	0.73	$	0.76

The following potential common shares related to stock options and RSUs were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Stock options		3,901		—		2,861		—
RSUs (1)		—		—		30		—
Total		3,901		—		2,891		—

(1) These totals do not include performance based RSUs representing the right to acquire 400,000 shares of common stock, for which all targets required to trigger vesting have not been achieved during the three and six months ended June 30, 2012; therefore, such awards were excluded from the calculation of weighted average shares used to compute diluted earnings per share for those reporting periods.

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The earnings per share amounts are the same for common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

NOTE 12: RELATED PARTY TRANSACTIONS

Expedia

Following the Spin-Off, TripAdvisor and Expedia are related parties since they are under common control. Revenue we derived from related party transactions with Expedia was $55.7 million and $107.3 million for the three and six months ended June 30, 2012 and was $59.2 million and $113.1 million for the three and six months ended June 30, 2011, respectively, which primarily consisted of click-based advertising and other advertising services provided to Expedia and its subsidiaries and is recorded at contract value, which we believe is a reasonable reflection of the value of the services provided. This related-party revenue represented 28.3% and 28.2% of our total revenue for the three and six months ended June 30, 2012 and for the three and six months ended June 30, 2011, related-party revenue represented 35.0% and 35.5% of our total revenue, respectively.

Our operating expenses for the three and six months ended June 30, 2011 included a related-party shared services fee of $2.0 million and $4.0 million, which was comprised of allocations from Expedia for accounting, legal, tax, corporate development, treasury, financial reporting, real estate management and included an allocation of employee compensation within these functions. This related-party shared service fee ended in connection with the Spin-Off. These allocations were determined on a basis that Expedia and we considered to be a reasonable reflection of the cost of services provided or the benefit received by us. These expenses were allocated based on a number of factors including headcount, estimated time spent and operating expenses. It was not practicable to determine the amounts of these expenses that would have been incurred had we operated as an unaffiliated entity. In the opinion of our management, the allocation method was reasonable.

Other related-party operating expenses which were included within Selling and Marketing expense were $1.8 million and $3.5 million for the three and six months ended June 30, 2012, respectively, which primarily consisted of marketing expense for exit windows. For the three and six months ended June 30, 2011, other related-party operating expenses which were included within Selling and Marketing expense were approximately $1.2 million and $2.0 million.

Our net related party receivable with Expedia and its subsidiaries reflected in our consolidated and combined balance sheets as of June 30, 2012 and December 31, 2011 were $40.2 million and $14.1 million, respectively. We received $7.0 million from Expedia during the first fiscal quarter of 2012, which was owed to us as a result of the subsequent reconciliation process allowed in the Separation Agreement related to the approximate $406 million distribution paid to Expedia immediately prior to the Spin-Off. This balance was included in our related party receivable balance at December 31, 2011.

For purposes of governing certain of the ongoing relationships between us and Expedia at and after the Spin-Off, and to provide for an orderly transition, we and Expedia entered into various agreements, including, among others, the Separation Agreement, the Tax Sharing Agreement, the Employee Matters agreement, the Transition Services Agreement, and commercial agreements. The various commercial agreements, including click-based advertising agreements, content sharing agreements and display-based and other advertising agreements, have terms of one to three years.

The full texts of the Separation Agreement, the Tax Sharing Agreement, the Employee Matters Agreement, the Transition Services Agreement and the Master Advertising Agreement (CPC) are incorporated by reference into our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011 as Exhibits 2.1, 10.2, 10.3, 10.4 and 10.6 (10.6 filed in redacted form pursuant to confidential treatment request), respectively.

Liberty Interactive Corporation and Barry Diller

Mr. Diller, our Chairman of the Board of Directors and Senior Executive, through shares he owns beneficially as well as those subject to an irrevocable proxy granted by Liberty Interactive Corporation, or Liberty, controls approximately 57.1% of the combined voting power of the outstanding TripAdvisor capital stock as of June 30, 2012. As such, Mr. Diller effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other than with respect to the election by the holders of common stock of 25% of the members of our Board of Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s permanent departure from TripAdvisor, the irrevocable proxy would terminate and depending on the capitalization of TripAdvisor at such time, Liberty could effectively control the voting power of our capital stock. On May 3, 2012, Liberty Interactive Corporation, or Liberty, sold 8,450,000 shares of our common stock pursuant to Rule 144 under the Securities Act of 1933, as amended at an average per share price of $40.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, but not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2011, Part I, Item 1A, “Risk Factors,” as well as those discussed elsewhere in this report. Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition and results of operations. Accordingly, readers should not place undue reliance on these forward-looking statements. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. We are not under any obligation to, and do not intend to, publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Please carefully review and consider the various disclosures made in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”) that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

The information included in this management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated and combined financial statements and the notes included in this Quarterly Report on Form 10-Q, and the audited consolidated and combined financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed March 15, 2012 for the year ended December 31, 2011.

Overview

We are the world’s largest online travel company, empowering users to plan and have the perfect trip. Our travel research platform aggregates reviews and opinions from our community about destinations, accommodations (including hotels, resorts, motels, B&Bs, specialty lodging and vacation rentals), restaurants and activities throughout the world through our flagship TripAdvisor brand. Our branded websites include tripadvisor.com in the United States and localized versions of the website in 29 other countries, including in China under the brand daodao.com. Our TripAdvisor branded websites globally received an average of more than 54 million monthly unique visitors for the quarter ended June 2012, according to comScore, and we have built a base of more than 32 million marketable members, which are members we have permission to email on a regular basis, and we feature over 75 million reviews and opinions. Beyond travel-related content, our websites also include links to the websites of our advertisers, including travel advertisers, allowing travelers to directly book their travel arrangements. In addition to the flagship TripAdvisor brand, we now manage and operate websites under 19 other travel brands, connected by the common goal of providing comprehensive travel planning resources across the travel sector. On March 21, 2012, we announced the launch of a new travel brand, Tingo, the first hotel booking site that automatically rebooks hotel rooms at a lower price if the rate drops and then refunds the difference to the travelers’ credit cards when the traveler books a “Money Back” room.

In addition to our flagship TripAdvisor-branded websites, our portfolio of managed and operated websites include whereivebeen.com, everytrail.com, holidaylettings.co.uk, kuxun.cn, flipkey.com, onetime.com, virtualtourist.com, airfarewatchdog.com, holidaywatchdog.com, cruisecritic.com, independenttraveler.com, seatguru.com, bookingbuddy.com, smartertravel.com, travelpod.com, travel-library.com, sniqueaway.com, familyvactioncritic.com and tingo.com. For additional information about our portfolio of brands, see “Other Travel Brands and Websites” in Part I, Item 1, “Business,” in our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011.

Business Model

We derive substantially all of our revenue from the sale of advertising, primarily through click-based advertising and, to a lesser extent, display-based advertising. The remainder of our revenue is generated through a combination of subscription-based offerings, transactions conducted via our flash sale website, SniqueAway, and our recently-launched Tingo hotel booking site, and other revenue including content licensing.

• Click-Based Advertising Revenue . Our largest source of revenue is click-based advertising, which includes our “check rates” feature as well as contextually-relevant branded and unbranded textlinks. Our click-based advertising partners are predominantly online travel agencies and direct suppliers in the hotel, airline and cruise product categories. The “check rates” feature enables users to compare pricing and availability for a particular hotel across different on-line travel agents’ and hotel partners’ booking engines and thereby delivers a highly-targeted audience deep into the booking paths of their websites. Click-based advertising is generally priced on a cost-per-click, or CPC, basis, with payments from advertisers based on the number of users who click on each type of link. Advertisers who increase their CPC rates generally get an increased number of clicks from their click-based advertising on our websites. Most of our click-based advertising contracts can be terminated by the advertisers at will or on short notice.

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• Display-Based Advertising Revenue . We also earn revenue from a variety of display-based advertising placements on our websites through which our advertising partners can promote their brands in a contextually-relevant manner. While our display-based advertising clients include direct suppliers in the hotel, airline and cruise categories and online travel agencies, we have also broadened our advertiser base to include destination marketing organizations, casinos, resorts and attractions, as well as advertisers from non-travel categories. We generally sell our display-based advertising on a cost per thousand impressions, or CPM, basis. Our display-based advertising products also include a number of custom-built products including the sponsorship of certain site features and functionality, as well as certain customized co-branded features.

• Subscription-Based, Transaction and Other Revenue . We also offer advertising via a subscription model that is sold for a flat fee per time period. Managed by our Trip for Business division, this advertising product, Business Listings, is currently offered to hotels, B&Bs and other specialty lodging properties and allows subscribers to list a website URL, email address and phone number on TripAdvisor-branded websites as well as to post special offers for travelers. Our Vacation Rentals division allows individual vacation property owners or managers to pay a subscription fee to list properties on our Holiday Lettings and FlipKey websites, as well as on select TripAdvisor-branded websites. Other sources of revenue include selling discounted hotel room nights and coupons on our flash sale website, SniqueAway, transactions via our Tingo website and licensing our content to third-party sites.

Executive Summary

Our financial results are dependent on our ability to drive our click-based advertising revenue and continue to invest in areas of potential growth, including our social, mobile and global initiatives as well as our subscription-based businesses, which include vacation rentals and business listings, and our transaction –based businesses, which include SniqueAway and Tingo. We have leveraged our position as the largest online travel company to become a critical partner for online advertisers – including hotels, online travel agencies and other travel-related service providers – by providing our customers with access to our large audience of highly-qualified, highly-engaged users. The key drivers of our click-based advertising revenue are described below, as well as a summary of our key growth areas and the current trends impacting our business.

Key Drivers of Click-Based Advertising Revenue

For the three and six months ended June 30, 2012, respectively, 77% and 78% of our total revenue came from our core cost-per-click, or CPC, based lead generation product. For the three and six months ended June 30, 2011, respectively, 79% and 80% of our total revenue came from our core cost-per-click, or CPC, based lead generation product. Revenues derived from CPC based lead generation represented 79% of our total revenue for the year ending December 31, 2011. The key drivers of our click-based advertising revenue include the growth in hotel shoppers, user conversion and lead pricing. Total traffic growth, or growth in monthly visits from unique IP addresses is reflective of our overall brand growth. We continue to refine our ability to track and analyze sub-segments of traffic and its correlation to revenue generation and we believe that hotel shoppers is a more useful indicator of revenue growth. We use the term “hotel shoppers” to refer to users who view a listing of hotels in a city or visitors who view a specific hotel page.

After hotel shoppers, the second driver of our business is user conversion, which is a measure of how many hotel shoppers ultimately click on a CPC link that generates revenue for us. User conversion on our site is primarily driven by three factors: merchandising, commerce coverage and choice. We think of merchandising as the number and location of ads that are available on a page; commerce coverage is whether we have a client who can take an online booking for a particular property; and choice is the number of clients available for any given property, allowing the user to shop for the best price. In summary, our CPC revenue depends on the number of hotel shoppers that we can get interested in a property, whether there is a commerce link available for that hotel shopper to click on for that property and whether there are several commerce choices available for that property, so the hotel shopper can shop around. The other key driver that we look at is the CPC price that online travel agencies and hoteliers are willing to pay us for our leads.

Key Growth Areas

We continue to invest in areas of potential growth, including our social, mobile and global initiatives as well as our subscription-based businesses, which include vacation rentals and business listings.

Social. Our Wisdom of Friends initiative is a core component of our strategic growth plan; 76% of respondents to a recent Nielsen study cited “recommendations from people I know” as the information source that they trust most. We believe that having a strong social presence drives traffic to and engagement on our sites and improves the sites’ “stickiness” amongst the users. As a result, we continue to deepen our integration with Facebook’s Friend Graph. As of June 30, 2012, and according to AppData, an independent application tracking traffic service, TripAdvisor has reached 32 million Facebook users via it’s TripAdvisor Facebook application id. We offer these Facebook users a personalized and social travel planning experience that enables travelers to engage first with their own Facebook friends’ reviews and opinions when planning their perfect trip on TripAdvisor.

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Mobile. Mobile is an investment area that is geared towards creating a more complete user experience by reinforcing the TripAdvisor brand when users are in-market. In the year ended December 31, 2011, we saw strong user uptake, reaching an aggregate of 13 million mobile downloads and approximately 16 million monthly unique users, as measured by our own log files, and as of June 30, 2012, we reached over 22 million mobile downloads of our TripAdvisor, City Guides, and SeatGuru apps and over 27 million monthly unique users. We believe that mobile devices, including smartphones and tablet devices, are increasingly used when travelers begin to plan trips. In order to capture an increasing percentage of these users, we have designed our mobile product to be user-friendly and have chosen not to monetize that platform to its full potential at this time. We expect the long-term benefits of a more engaged mobile audience to outweigh the short-term revenue that we could generate from, for example, an increased number of advertisements.

Vacation Rentals. This product addresses a highly-fragmented $85 billion per-year industry, according to a 2010 Radius Global Market study. Historically, we have built our supply content through acquisitions, namely our U.S.-based FlipKey and U.K.-based Holiday Lettings businesses, but during the fourth quarter of 2011 we announced partnerships aimed at increasing our supply content. We believe that our nearly 200,000 properties, as of December 31, 2011, and our highly-engaged and motivated community, position us extremely well for success.

Business Listings. This product was created in early 2010 to allow hotel and accommodation owners to list pertinent information on TripAdvisor, bringing them closer to the traveler and thereby increasing direct bookings. In the year ended December 31, 2011, we saw nearly 80% subscriber growth, reaching our approximately 35,000 Business Listing customers by the end of the year, which is still only around 6% of our current hotel listings on our TripAdvisor branded sites. We continue to expand our sales force and improve features to attract additional customers from our installed base.

Current Trends Affecting Our Business

Increasing Competition. The travel review industry and, more generally, the business of collecting and aggregating travel-related resources and information, have become increasingly competitive. In recent years, an increasing number of companies, such as search companies Google Inc. and Baidu.com, Inc. and several large online travel agencies, have begun to collect and aggregate travel information and resources. We plan to continue to invest in order to remain the leading source of travel reviews as well as continuing to enhance our content and user experience.

Increasing Use of Internet and Social Media to Access Travel Information. Commerce, information and advertising continue to migrate to the Internet and away from traditional media outlets. We believe that this trend will create strategic growth opportunities, allowing us to attract new consumers and develop unique and effective advertising solutions. Consumers are increasingly using online social media, such as Facebook, as a means to communicate and exchange information, including travel information and opinions. We have made significant efforts related to social networking in order to leverage the expanding use of this channel and enhance traffic diversification and user engagement.

Increasing Mobile Usage. Consumers are increasingly using mobile and tablet computing devices to access the Internet. To address these demands, we continue to extend the platform to develop mobile and tablet applications to allow greater access to our travel information and resources. Although the substantial majority of our mobile users also access and engage with our websites on personal computers where we display advertising, our users could decide to increasingly access our products primarily through mobile devices. Historically we have not displayed graphic advertising on smartphones and our mobile monetization strategies are still developing. Improvement of our mobile offerings is a key company priority which we believe is critical to help us maintain and grow our user base and engagement over the long term and we will continue to invest and innovate in this growing platform.

Click-Based Advertising Revenue. In recent years, the majority of our revenue growth resulted from higher click-based advertising revenue due to increased traffic on our websites, an increase in the volume of clicks on advertisers’ placements, and, in 2011, an increase in the average CPC price. Although click-based advertising revenue growth has generally been driven by traffic volume, we remain focused on the various factors that could impact revenue growth, including, but not limited to, the growth in hotel shoppers, CPC pricing fluctuations, the overall economy, the ability of advertisers to monetize our traffic, the quality and mix of traffic to our websites, and the quality and mix of traffic from our advertising placements to advertisers, as well as advertisers’ evolving approach to transaction attribution models and return on investment targets. We monitor and regularly respond to changes in these factors in order to strategically improve our user experience, customer satisfaction and monetization in this dynamic environment.

Global Economic Conditions. In late 2008 and throughout 2009, weak global economic conditions created uncertainty for travelers and suppliers, and put pressure on discretionary spending on travel and advertising. As a result, our revenue growth slowed in 2009, with a corresponding pull back in sales and marketing and a reduction in general and administrative expenses. Since 2010 the travel industry has been gradually improving. However, global economic conditions remain uncertain, and in particular, we anticipate travel expenditures in Europe to continue to be adversely effected by the economic issues overseas.

Our Strategy

In expanding our global reach, we leverage significant investments in technology, operations, brand-building, and advertiser and other partner relationships. For example, we are able to aggregate a large base of consumer reviews, in a variety of languages, across our global core platform. We expect to continue leveraging this investment when launching additional points of sale in new countries, introducing new product features and adding new business model offerings.

• Investment in Technology. We believe that our ability to continue to innovate by providing additional functionality to our main Internet sites, while at the same time extending that functionality to various platforms such as mobile and tablets, will

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enable us to continue providing an industry-leading user experience. We have a strong culture of speed-to-market with our innovations. By innovating and releasing updates quickly, we believe that we can continue to grow our site visitors and over 75 million reviews and opinions, increase revenue and effectively compete with our competitors.

• New Social Sharing Tools. We intend to continue to expand our social integration and member acquisition efforts with social media, including Facebook, Twitter and other social sharing platforms. We believe that this integration will be critical to continuing to grow and maintain engagement with our user base and increase our content. For example, by tapping into Facebook’s rich social data, TripAdvisor connects users to their friends and shares helpful content about where their friends have traveled and where they would like to visit in the future. While on the TripAdvisor website, friends can discuss their travel plans and recommendations and build out personal profiles of places they have been.

• Investment in Search Engine Marketing. One of the ways that we look to penetrate new markets is to leverage our expertise in search engine marketing, or SEM. SEM is a form of Internet marketing that involves the promotion of websites by increasing their visibility in search engine results pages through the use of paid placement, contextual advertising, and paid inclusion. In certain markets we may bid on keywords to break even or at a loss in order to drive traffic, build our brand, gain more users to our product, collect content and scale more quickly. We think SEM is an important channel because it delivers a significant number of brand impressions and can be a cost-effective method to get people to try our sites.

• International Expansion. We are focused on expanding our footprint globally. We are continuing to expand in Europe, Asia and South America, especially in emerging markets, such as Brazil, Russia, India and China. During 2011, we added new points-of-sale in Taiwan, Malaysia and Egypt, bringing our total TripAdvisor-branded websites to 30 countries and 21 languages. These and the other newer sites in Asia-Pacific represent a longer-term opportunity for us. We believe that China represents a large international opportunity for our business. We currently have two lead product offerings in the Chinese market—DaoDao and Kuxun—both headquartered in Beijing. We continue to invest heavily and operate at a loss in the Chinese market.

• Acquisitions. We have a history of successfully acquiring and integrating companies that expand our footprint either geographically or in market sectors that are complementary to our flagship properties. We intend to continue to seek acquisition targets.

Segment

We have one reportable segment. The segment is determined based on how our chief operating decision maker manages our business, makes operating decisions and evaluates operating performance.

Seasonality

Expenditures by travel advertisers tend to be seasonal. Traditionally, our strongest quarter has been the third quarter, which is a key travel research period, with the weakest quarter historically being the fourth quarter. However, adverse economic conditions or continued growth of our international operations with differing holiday peaks may influence the typical trend of our seasonality in the future.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that we believe are important in the preparation of our consolidated and combined financial statements because they require that we use judgment and estimates in applying those policies. We prepare our consolidated and combined financial statements and accompanying notes in accordance with generally accepted accounting principles in the United States (“GAAP”). Preparation of the consolidated and combined financial statements and accompanying notes requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated and combined financial statements as well as revenue and expenses during the periods reported. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.

There are certain critical estimates that we believe require significant judgment in the preparation of our consolidated and combined financial statements. We consider an accounting estimate to be critical if:

• It requires us to make an assumption because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and

• Changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.

For additional information about our critical accounting policies and estimates, see the disclosure included in our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011.

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New Accounting Pronouncements

For a discussion of new accounting pronouncements, see “Note 2— Significant Accounting Policies,” in the notes to the consolidated and combined financial statements on this Quarterly Report on Form 10-Q. We are an “issuer” (as defined in Section 2(a) of the Sarbanes-Oxley Act of 2002), and, as such, are required to comply with all new and revised accounting standards applicable to public companies.

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Results of Operations

Selected Financial Data

(in thousands, except per share data)

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in thousands)									($ in thousands)
Revenue	$	141,408		$	110,043			29	%	$	273,535		$	205,321			33	%
Related-party revenue from Expedia		55,740			59,199			(6	)%		107,328			113,143			(5	)%
Total revenue		197,148			169,242			16	%		380,863			318,464			20	%
Costs and expenses:
Cost of revenue (exclusive of amortization) (1)		2,926			2,735			7	%		5,660			4,966			14	%
Selling and marketing(2)		64,243			52,685			22	%		131,632			96,880			36	%
Technology and content(2)		21,574			13,379			61	%		39,415			26,468			49	%
General and administrative(2)		18,252			7,944			130	%		34,506			16,138			114	%
Related-party shared services fee to Expedia		—			1,980			(100	%)		—			3,960			(100	%)
Depreciation		4,715			4,514			4	%		8,996			8,616			4	%
Amortization of intangible assets		1,760			1,132			55	%		3,599			3,249			11	%
Spin-off costs		—			1,054			(100	%)		—			1,054			(100	%)
Total costs and expenses		113,470			85,423			33	%		223,808			161,331			39	%
Operating income		83,678			83,819			—	%		157,055			157,133			—	%
Other income (expense):
Other interest (expense) income, net		(2,405	)		217			(1,208	%)		(5,337	)		315			(1,794	%)
Other, net		(4,539	)		457			(1,093	%)		(3,843	)		1,422			(370	%)
Total other (expense) income, net		(6,944	)		674			(1,130	%)		(9,180	)		1,737			(628	%)
Income before income taxes		76,734			84,493			(9	%)		147,875			158,870			(7	%)
Provision for income taxes		(23,569	)		(30,383	)		(22	%)		(46,539	)		(57,389	)		(19	%)
Net income		53,165			54,110			(2	%)		101,336			101,481			—	%
Net income attributable to noncontrolling interest		(146	)		(46	)		217	%		(206	)		(139	)		48	%
Net income attributable to TripAdvisor, Inc.		53,019			54,064			(2	%)		101,130			101,342			—	%
Earnings Per Share attributable to TripAdvisor, Inc.
Basic	$	0.38		$	0.41			(7	%)	$	0.74		$	0.76			(3	%)
Diluted		0.37			0.41			(10	%)		0.73			0.76			(4	%)
Weighted Average Common Shares Outstanding:
Basic		139,278			133,461			4	%		136,516			133,461			2	%
Diluted		141,737			133,461			6	%		138,947			133,461			4	%
Other Financial Data:
Adjusted EBITDA (3)	$	96,921		$	92,487			5	%	$	181,110		$	174,494			4	%
(1) Excludes amortization as follows:
Amortization of acquired technology included in amortization of intangibles	$	182		$	163					$	364		$	325
Amortization of website development costs included in depreciation		2,979			3,029						5,692			5,723
	$	3,161		$	3,192					$	6,056		$	6,048
(2) Includes stock-based compensation as follows:
Selling and marketing	$	923		$	589					$	2,001		$	1,394
Technology and content		2,426			639						3,938			1,527
General and administrative		3,419			740						5,521			1,521

(3) See “Adjusted EBITDA” below for more information and for a reconciliation of Adjusted EBITDA to operating income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

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Adjusted EBITDA

To provide investors with additional information regarding our financial results, we have disclosed Adjusted EBITDA in our Quarterly Report on Form 10-Q, a non-GAAP financial measure. We have provided reconciliations below of Adjusted EBITDA to operating income, the most directly comparable GAAP financial measure. A “non-GAAP financial measure” refers to a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in such company’s financial statements.

We define “Adjusted EBITDA” as operating income (loss), excluding depreciation of property and equipment, which includes internal use software and website development, amortization of intangible assets, stock-based compensation and non-recurring expenses incurred to effect the Spin-Off from Expedia during the year ended December 31, 2011. Adjusted EBITDA is the primary metric by which management evaluates the performance of its business and on which internal budgets are based. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis. Adjusted EBITDA eliminates items that are either not part of our core operations such as the costs incurred to spin-off from Expedia or those costs that do not require a cash outlay, such as stock-based compensation. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on our estimates of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historical costs and other factors and may not be indicative of current or future capital expenditures. We believe that by excluding certain items, such as stock-based compensation and non-recurring expenses, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business and allows investors to gain an understanding of the factors and trends affecting the ongoing cash earnings capabilities of our business, from which capital investments are made and debt is serviced.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results reported in accordance with GAAP. Some of these limitations are:

• Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

• Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation;

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and

• Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income and our other GAAP results.

The following table is a reconciliation of Adjusted EBITDA to operating income for the periods presented:

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Adjusted EBITDA	$	96,921		$	92,487		$	181,110		$	174,494
Depreciation (1)		(4,715	)		(4,514	)		(8,996	)		(8,616	)
OIBA (2)		92,206			87,973			172,114			165,878
Amortization of intangible assets		(1,760	)		(1,132	)		(3,599	)		(3,249	)
Stock-based compensation		(6,768	)		(1,968	)		(11,460	)		(4,442	)
Spin-off costs		—			(1,054	)		—			(1,054	)
Operating income	$	83,678		$	83,819		$	157,055		$	157,133

(1) Includes internal use software and website development.

(2) Our primary operating metric prior to the Spin-Off for evaluating operating performance was Operating Income Before Amortization, or OIBA, as reported on our Form S-4 filed with the SEC on November 1, 2011. OIBA is defined as operating income plus: (1) amortization of intangible assets and any related impairment; (2) stock-based compensation expense; and (3) non-recurring expenses incurred to effect the Spin-Off during the year ended December 31, 2011. This operating metric is no longer being used by our management to measure operating performance and is only being shown above to illustrate the financial impact of our conversion to a new operating metric post Spin-Off.

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Reclassifications

Certain reclassifications have been made to conform the prior period’s data to the current format.

Our management has changed the non-GAAP financial measure that we use to measure our operating performance from OIBA to Adjusted EBITDA. Consequently we have reclassified depreciation expense, which previously had resided in technology and content expense and general and administrative expense, and have presented it as a separate line item on the consolidated and combined statement of operations. This reclassification had no net effect on either total operating expenses or total operating income for any period. The table below provides a reconciliation of that reclassification for the periods presented.

	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
	(In thousands)
Depreciation	$	4,514		$	8,616
Technology and content		(3,679	)		(6,969	)
General and administrative		(835	)		(1,647	)
	$	—		$	—

Revenue

We derive substantially all of our revenue through the sale of advertising, primarily through click-based advertising and, to a lesser extent, display-based advertising. In addition, we earn revenue through a combination of subscription-based offerings, transaction revenue from our flash sale website, SniqueAway, our recently-launched hotel booking site, Tingo, and other revenue including content licensing.

	Three months ended June 30,							Six months ended June 30,
	2012		2011		% Change			2012		2011		% Change
	($ in millions)							($ in millions)
Click-based advertising	$	151	$	134		13	%	$	296	$	254		16	%
Display-based advertising		27		23		14	%		48		42		15	%
Subscription, transaction and other		19		12		59	%		37		22		63	%
Total revenue	$	197	$	169		16	%	$	381	$	318		20	%

Revenue increased $28 million or 16%, and $62 million or 20%, during the three and six months ended June 30, 2012, respectively, when compared to the same period in 2011, primarily due to an increase in click-based advertising revenue of $17 million or 13%, and $42 million or 16%, respectively. The primary driver of the increase in click-based advertising revenue was an increase in hotel shoppers during the three and six months ended June 30, 2012 when compared to the same period in 2011, of approximately 30% and over 30%, respectively, partially offset during the three and six months ended June 30, 2012 by lower clicks per hotel shopper due to our site redesign in the third quarter of 2011 and lower revenue per click. Subscription, transaction and other revenue increased by $7 million or 59%, and $15 million or 63%, in the three and six months ended June 30, 2012, respectively, primarily due to growth in Business Listings.

In addition to the above product revenue discussion, related-party revenue from Expedia, which consists primarily of click-based advertising, is as follows:

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Related party revenue from Expedia	$	56		$	59			(6	)%	$	107		$	113			(5	)%
% of revenue		28.3	%		35.0	%					28.2	%		35.5	%

TripAdvisor and Expedia entered into certain commercial arrangements in connection with the Spin-Off. The arrangements generally have terms one to three years and are described in “Note 9— Related Party Transactions “ in the notes to our consolidated and combined financial statements in our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011. In connection with the Spin-Off, Expedia expected to lower its CPC pricing by 10-15%. This change was rolled out throughout the fourth quarter of 2011, and trended towards the upper end of the expected discount range. We expect the decrease in CPC pricing paid by Expedia to continue to negatively impact total revenue for the year ended 2012 by approximately 5%.

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Cost of Revenue

Cost of revenue consists of expenses that are closely correlated or directly related to revenue generation, including ad serving fees, flight search fees, credit card fees and data center costs.

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Cost of revenue	$	3		$	3			7	%	$	6		$	5			14	%
% of revenue		1.5	%		1.6	%					1.5	%		1.6	%

Cost of revenue remained relatively unchanged during the three months ended June 30, 2012 when compared to the same period in 2011. Cost of revenue increased $1 million or 14.0% during the six months ended June 30, 2012 when compared to the same period in 2011, primarily due to increased ad serving fees and increased credit card merchant fees.

Selling and Marketing

Sales and marketing expenses primarily consist of direct costs, including search engine marketing, or SEM, other traffic acquisition costs, syndication costs and affiliate program commissions, brand advertising and public relations. In addition, our indirect sales and marketing expense consists of personnel and overhead expenses, including salaries, commissions, benefits, stock-based compensation expense and bonuses for sales, sales support, customer support and marketing employees.

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Direct costs	$	42		$	34			24	%	$	89		$	61			46	%
Personnel and overhead		22			19			18	%		43			36			19	%
Total selling and marketing	$	64		$	53			22	%	$	132		$	97			36	%
% of revenue		32.6	%		31.1	%					34.6	%		30.4	%

Direct selling and marketing costs increased $8 million or 24%, and $28 million or 46%, during the three and six months ended June 30, 2012 when compared to the same period in 2011, primarily due to increased search engine marketing costs, brand advertising costs and investments in social media costs. We increased our spending on social media in the three and six months ended June 30, 2012 compared to the same period in 2011, in order to increase social engagement `on our websites. Personnel and overhead costs increased $3 million or 18%, and $7 million or 19%, during the three and six months ended June 30, 2012 when compared to the same period in 2011, primarily due to an increase in headcount to support business growth, including international expansion.

Technology and Content

Technology and content expenses consist of personnel and overhead expenses, including salaries and benefits, stock-based compensation expense and bonuses for salaried employees and contractors engaged in the design, development, testing and maintenance of our website. Other costs include licensing and maintenance expense.

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Personnel and overhead	$	20		$	12			68	%	$	36		$	23			53	%
Other		2			1			3	%		3			3			15	%
Total technology and content	$	22		$	13			61	%	$	39		$	26			49	%
% of revenue		10.9	%		7.9	%					10.3	%		8.3	%

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Technology and content costs increased $9 million or 61%, and $13 million or 49%, during the three and six months ended June 30, 2012 when compared to the same periods in 2011, primarily due to increased personnel costs from increased headcount to support business growth, including international expansion, enhanced site features and mobile initiatives, as well as an increase in stock based compensation.

As discussed in our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011, all depreciation costs of technology assets, including web servers and purchased and capitalized website and development activities for all prior periods have been reclassified to depreciation expense on our consolidated and combined statement of operations.

General and Administrative

General and administrative expense consists primarily of personnel and related overhead costs, including executive leadership, finance, legal and human resource functions and stock-based compensation as well as professional service fees and other fees including audit, legal, tax and accounting, and other costs including bad debt expense and our charitable foundation costs.

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Personnel and overhead	$	12		$	6			93	%	$	23		$	13			78	%
Professional service fees and other		6			2			262	%		12			3			253	%
Total general and administrative	$	18		$	8			130	%	$	35		$	16			114	%
% of revenue		9.3	%		4.7	%					9.1	%		5.1	%

General and administrative costs increased $10 million or 130%, and $19 million or 114%, during the three and six months ended June 30, 2012, when compared to the same periods in 2011, primarily due to increased personnel costs related to an increase in stock based compensation, as well as increased headcount as a result of the Spin-Off and to support business growth, as well as additional professional service fees in order to support our operations as a standalone public company. In addition, in connection with the Spin-Off, we assumed Expedia’s obligation to fund a charitable foundation. Our expense related to the funding of this charitable foundation was $2 million and $4 million for the three and six months ended, respectively, as of June 30, 2012.

As discussed above, all depreciation costs of capitalized assets, primarily consisting of furniture and office equipment for prior periods have been reclassified in our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011 to depreciation expense on our consolidated and combined statement of operations.

Related-Party Shared Services Fee

Prior to the Spin-Off, our related-party shared services fee was comprised of allocations from Expedia for accounting, legal, tax, corporate development, treasury, financial reporting, real estate management and included an allocation of employee compensation within these functions. These allocations were determined based on what we and Expedia considered being reasonable reflections of the utilization of services provided or the benefit received by us.

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Related-party shared services fee	$	—		$	2			(100	)%	$	—		$	4			(100	)%
% of revenue		—	%		1.2	%					—	%		1.2	%

Related-party shared services fee costs incurred for the use of Expedia shared services ceased in connection with the Spin-Off. Refer to “Note 12— Related Party Transactions” in this Quarterly Report on Form 10-Q for further information on our relationship with Expedia.

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Depreciation

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Depreciation	$	5		$	5			4	%	$	9		$	9			4	%
% of revenue		2.4	%		2.7	%					2.4	%		2.7	%

There was no significant change in depreciation expense for the three and six months ended June 30, 2012 compared to the same periods in 2011.

Amortization of Intangible Assets

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Amortization of intangible assets	$	2		$	1			55	%	$	4		$	3			11	%
% of revenue		0.9	%		0.6	%					1.0	%		1.0	%

Amortization of intangible assets increased slightly during the three and six months ended June 30, 2012 when compared to the same periods in 2011, primarily due to a decrease in the estimated amount of contingent purchase consideration in the three months ended June 30, 2011 related to the acquisition of Holiday Lettings in June 2010.

Operating Income

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Operating income	$	84		$	84			—	%	$	157		$	157			—	%
% of revenue		42.4	%		49.5	%					41.2	%		49.3	%

Operating income decreased slightly for the three and six months ended June 30, 2012 when compared to the same periods in 2011, primarily due to an increase in revenue of $28 million or 16%, and 62 million or 20%, respectively, which was offset by a corresponding increase to operating expenses of $28 million or 33%, and $62 million or 39%, respectively, particularly in personnel costs to support business growth and operations as a standalone public company, as well as stock based compensation, and traffic acquisition costs to drive higher revenue.

Other Interest ( Expense )Income, Net

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Other interest (expense) income, net	$	(2	)	$	—			(1,208	%)	$	(5	)	$	—			(1,794	%)
% of revenue		(1.2	)%		—	%					(1.4	)%		—	%

Other interest expense, increased $2 million and $5 million during the three and six months ended June 30, 2012 when compared to the same periods in 2011, primarily due to interest expense on our term loan and revolving credit facilities.

Other, Net

Other, net is primarily comprised of net foreign exchange gains and losses for the periods presented.

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Provision for Income Taxes

	Three months ended June 30,									Six months ended June 30,
	2012			2011			% Change			2012			2011			% Change
	($ in millions)									($ in millions)
Provision for income taxes	$	24		$	30			(22	)%	$	47		$	57			(19	)%
Effective tax rate		30.7	%		36.0	%					31.5	%		36.1	%

For the three and six months ended June 30, 2012, the effective tax rate is less than the federal statutory tax rate primarily due to earnings in jurisdictions outside the United States, where our effective tax rate is lower, which was partially offset by state income taxes, non-deductible stock compensation and accruals on uncertain tax positions. The change in the effective tax rate for 2012 compared to the 2011 rate was primarily due to an increase in earnings in jurisdictions outside the United States.

Financial Position, Liquidity and Capital Resources

For the six months ended June 30, 2012 we had $478 million of cash and cash equivalents, and at December 31, 2011 we had $184 million of cash and cash equivalents. The cash and cash equivalent balances consisted of cash and a money market account held in the United Kingdom ($193 million and $165 million for the period ended June 30, 2012 and December 31, 2011, respectively) related to earnings we intend to reinvest permanently outside the United States. Should we distribute earnings of foreign subsidiaries in the form of dividends or otherwise, we may be subject to U.S. income taxes. Cumulative undistributed earnings of foreign subsidiaries that we intend to indefinitely reinvest outside of the United States totaled approximately $312 million as of June 30, 2012. Should we distribute, or be treated under certain U.S. tax rules as having distributed, the earnings of foreign subsidiaries in the form of dividends or otherwise, we may be subject to U.S. income taxes. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation. Cash held is primarily denominated in U.S. dollars and British pound sterling.

In connection with the Spin-Off, we entered into our Revolving Credit Facility with a borrowing capacity of $200 million and have also entered into our five-year, $400 million Term Loan, as discussed in “Note 6— Debt,” in this Quarterly Report on Form 10-Q. Immediately prior to the Spin-Off, we transferred approximately $406 million in the form of a dividend to Expedia, which included an estimate of our cash in excess of $165 million. This distribution included the proceeds from our $400 million Term Loan.

Historically, the cash we generate has been sufficient to fund our working capital and capital expenditure requirements. Management believes that our cash and cash equivalents, combined with expected cash flows generated by operating activities and the our Revolving Credit Facility will be sufficient to fund our ongoing working capital needs, capital expenditure requirements and business growth initiatives and to meet our long term debt obligations and commitments and fund acquisitions for at least the next 12 months.

Our cash flows are as follows (in millions):

	Six Months Ended June 30,
	2012			2011
Net cash provided by (used in):
Operating activities	$	91		$	114
Investing activities	$	(6	)	$	(105	)
Financing activities	$	212		$	9

Operating Activities

For the six months ended June 30, 2012, net cash provided by operating activities decreased by $23 million or 20% when compared to the same period in 2011, primarily due to a decrease in working capital movements which is driven by related party activity with Expedia of $34 million subsequent to the Spin-Off being classified in operating activities as compared to investing activities in the prior year.

Investing Activities

For the six months ended June 30, 2012, net cash provided by investing activities increased by $99 million when compared to the same period in 2011 primarily due to lower net cash transfers to Expedia related to business operations of $90 million which occurred regularly up through the Spin-Off. In addition, we received $7 million during the six months ended June 30, 2012, from Expedia which was owed to us.

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Financing Activities

For the six months ended June 30, 2012, net cash provided by financing activities increased by $203 million when compared to the same period in 2011 primarily due to proceeds from the exercise of our stock options and warrants of $223 million, net of payment of minimum withholding taxes related to the vesting of our RSUs of $3 million during the six months ended June 30, 2012. This was partially offset by $10 million in year to date principal payments on our term loan and a $10 million repayment of our outstanding borrowing on our Revolving Credit Facility for the six months ended June 30, 2012. In addition, during the six months ended June 30, 2011, we received $5 million of funding from Expedia related to an external acquisition, which did not reoccur in 2012.

Commitments and Contingencies and Off-Balance Sheet Arrangements

There have been no material changes to our commitments and contingencies and off-balance sheet arrangements since December 31, 2011. (See “Commitments, Contingencies and Off-Balance Sheet Arrangements” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011.) Other than our contractual obligations and commercial commitments, we did not have any off-balance sheet arrangements as of June 30, 2012 or December 31, 2011.

Related Party Transactions

Liberty Interactive Corporation and Barry Diller

Mr. Diller, our Chairman of the Board of Directors and Senior Executive, through shares he owns beneficially as well as those subject to an irrevocable proxy granted by Liberty Interactive Corporation, or Liberty, controls approximately 57.1% of the combined voting power of the outstanding TripAdvisor capital stock as of June 30, 2012. As such, Mr. Diller effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other than with respect to the election by the holders of common stock of 25% of the members of our Board of Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s permanent departure from TripAdvisor, the irrevocable proxy would terminate and depending on the capitalization of TripAdvisor at such time, Liberty could effectively control the voting power of our capital stock. On May 3, 2012, Liberty Interactive Corporation, or Liberty, sold 8,450,000 shares of our common stock pursuant to Rule 144 under the Securities Act of 1933, as amended at an average per share price of $40.

Refer to “Note 12— Related Party Transactions” above for further information on related party transactions.

Stock-Based Compensation

We adopted the TripAdvisor, Inc. 2011 Stock and Annual Incentive Plan, or the 2011 Incentive Plan, as of December 21, 2011, under which we may grant restricted stock, restricted stock awards, RSUs, stock options and other stock-based awards to our directors, officers, employees and consultants. Refer to “Note 3— Stock Based Awards and Other Equity Instruments” above for further information on the 2011 Incentive Plan.

Stock Option Activity

The exercise price for all stock options granted by us to date has been equal to the market price of the underlying shares of common stock at the date of grant. In this regard, when making stock option awards, our practice is to determine the applicable grant date and to specify that the exercise price shall be the closing price of our common stock on the date of grant. Stock options granted during the first six months of 2012 have had a term of ten years from the date of grant and vest over a four-year period.

During the three and six months ended June 30, 2012, we have issued 2,995,725 stock options under the 2011 Incentive Plan with a grant-date fair value per option of $20.51. We will amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting term of four years on a straight-line basis. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

The estimated fair value of the options granted under the 2011 Incentive Plan was calculated using a Black-Scholes Merton option-pricing model (“Black-Scholes model”). The Black-Scholes model incorporates assumptions to value stock-based awards, which includes the risk-free rate of return, volatility, expected term and expected dividend yield.

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Our risk-free interest rate is based on the rates currently available on zero-coupon U.S. Treasury issues, in effect at the time of the grant, whose remaining maturity period most closely approximates the stock option’s expected term assumption. We estimated the volatility of our common stock by using an average of historical stock price volatility of publicly traded companies that we consider peers based on daily price observations over a period equivalent or approximate to the expected term of the stock option grants. The decision to use a weighted average volatility factor of a peer group was based upon the relatively short period of availability of data on our common stock. We estimated our expected term using the simplified method for all stock options as we do not have sufficient historical exercise data on our common stock. Our expected dividend yield is zero, as we have not paid and do not anticipate paying dividends on our common stock in the foreseeable future.

Stock Warrant Activity

During the six months ended June 30, 2012, there were a total of 32,186,791 warrants exercised which resulted in a total of 7,952,456 shares of our common stock being issued during that period, which included 31,641,337 warrants for which the exercise price was paid in cash at a weighted average price of $27.11. We received total exercise proceeds of $214.5 million related to these warrant exercises. In addition there were 545,454 cashless warrants exercised with a weighted average exercise price of $25.92 of which we did not receive any exercise proceeds. As of June 30, 2012, we had no outstanding warrants available which could be convertible to shares of our common stock.

Refer to “Note 3— Stock Based Awards and Other Equity Instruments” above for further information on current year equity award activity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Management

There has been no material change in our market risk during the three and six months ended June 30, 2012. For additional information, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in Part II of our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of June 30, 2012, our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2012, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s, or the SEC’s, rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting.

There were no changes to our internal control over financial reporting that occurred during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we and our subsidiaries are parties to legal proceedings and claims involving alleged infringement of third-party intellectual property rights, defamation, and other claims. Rules of the SEC require the description of material pending legal proceedings, other than ordinary, routine litigation incident to the registrant’s business, and advise that proceedings ordinarily need not be described if they primarily involve damages claims for amounts (exclusive of interest and costs) not individually exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of management, none of the pending litigation matters that TripAdvisor and our subsidiaries are defending involves or is likely to involve amounts of that magnitude. There may be claims or actions pending or threatened against us of which we are currently not aware and the ultimate disposition of which could have a material adverse effect on us.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I—Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 which could materially affect our business, financial condition or future results. During the quarter ended June 30, 2012, there have been no material changes in our risk factors from those disclosed in Part 1, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

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

During the quarter ended June 30, 2012, we did not issue or sell any shares of our common stock, Class B common stock or other equity securities pursuant to unregistered transactions in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended.

Item 4. Mine Safety Disclosures

Not applicable.

Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.

Exhibit No.	Exhibit Description	Filed Herewith	Incorporated by Reference
			Form	SEC File No.	Exhibit	Filing Date
31.1	Certification of the Chairman and Senior Executive Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.3	Certification of the Chief Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of the Chairman and Senior Executive pursuant Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of the Chief Executive Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002	X
32.3	Certification of the Chief Financial Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002	X

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101* The following financial statements from the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2012, formatted in XBRL: (i) Unaudited Consolidated and Combined Statements of Operations, (ii) Unaudited Consolidated and Combined Statements of Comprehensive Income, (iii) Unaudited Consolidated Balance Sheets, (iv) Unaudited Consolidated Statement of Changes in Stockholders’ Equity, (v) Unaudited Consolidated and Combined Statements of Cash Flows, and (vi) Unaudited Notes to Consolidated and Combined Financial Statements, tagged as blocks of text.

* XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TripAdvisor, Inc.
By:	/s/    JULIE M.B. BRADLEY
	Julie M.B. Bradley
	Chief Financial Officer

July 26, 2012

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EX-31.1

Exhibit 31.1

Certification

I, Barry Diller, Chairman and Senior Executive of TripAdvisor, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2012 of TripAdvisor, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. [Intentionally omitted];

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2012	/s/ BARRY DILLER
	Barry Diller
	Chairman and Senior Executive

EX-31.2

Exhibit 31.2

Certification

I, Stephen Kaufer, Chief Executive Officer of TripAdvisor, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2012 of TripAdvisor, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. [Intentionally omitted];

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2012	/s/ STEPHEN KAUFER
	Stephen Kaufer
	President and Chief Executive Officer

EX-31.3

Exhibit 31.3

Certification

I, Julie M.B. Bradley, Chief Financial Officer of TripAdvisor, Inc. certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2012 of TripAdvisor, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. [Intentionally omitted];

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2012	/s/ JULIE M.B. BRADLEY
	Julie M.B. Bradley
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of TripAdvisor, Inc. (the “Company”) for the quarter ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barry Diller, Chairman and Senior Executive of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1) the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 26, 2012	/s/ BARRY DILLER
	Barry Diller
	Chairman and Senior Executive

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of TripAdvisor, Inc. (the “Company”) for the quarter ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen Kaufer, Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1) the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 26, 2012	/s/ STEPHEN KAUFER
	Stephen Kaufer
	President and Chief Executive Officer

EX-32.3

Exhibit 32.3

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of TripAdvisor, Inc. (the “Company”) for the quarter ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Julie M.B. Bradley, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1) the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 26, 2012	/s/ JULIE M.B. BRADLEY
	Julie M.B. Bradley
	Chief Financial Officer

XML

Debt (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Long Term Debt
Total Long-Term Borrowings	$ 360,000	$ 380,000
Term Loan [Member]
Long Term Debt
Total Long-Term Borrowings	360,000
Revolving Credit Facility [Member]
Short Term Debt
Total Short-Term Borrowings
Term Loan [Member]
Short Term Debt
Total Short-Term Borrowings	$ 30,000

XML

Earnings Per Share (Details 1) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Calculation of diluted net income per share related to stock options and RSU's
Diluted net income per share	3,901		2,891
Stock options [Member]
Calculation of diluted net income per share related to stock options and RSU's
Diluted net income per share	3,901		2,861
RSU's [Member]
Calculation of diluted net income per share related to stock options and RSU's
Diluted net income per share			30

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule showing summary of fair value measurements of assets
Assets at Fair Value	$ 69,121	$ 69,000
Money market funds-cash equivalent [Member]
Schedule showing summary of fair value measurements of assets
Assets at Fair Value	69,121	69,000
Level 1 [Member]
Schedule showing summary of fair value measurements of assets
Assets at Fair Value	69,121	69,000
Level 1 [Member] | Money market funds-cash equivalent [Member]
Schedule showing summary of fair value measurements of assets
Assets at Fair Value	69,121	69,000
Level 2 [Member]
Schedule showing summary of fair value measurements of assets
Assets at Fair Value
Level 2 [Member] | Money market funds-cash equivalent [Member]
Schedule showing summary of fair value measurements of assets
Assets at Fair Value
Level 3 [Member]
Schedule showing summary of fair value measurements of assets
Assets at Fair Value
Level 3 [Member] | Money market funds-cash equivalent [Member]
Schedule showing summary of fair value measurements of assets
Assets at Fair Value

XML

Stock Based Awards and Other Equity Instruments (Details 3)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Schedule of Black-Scholes assumptions used in calculating the estimated fair value of stock options
Risk free interest rate	1.05%	1.05%
Expected term (in years)	6 years 2 months 16 days	6 years 2 months 16 days
Volatility	53.34%	53.34%
Expected dividend yield	0.00%	0.00%

XML

Cash and Cash Equivalents (Tables)

6 Months Ended

Jun. 30, 2012

Cash and Cash Equivalents [Abstract]

Schedule of cash and cash equivalents by security type

Cash and cash equivalents by security type at June 30, 2012 were as follows:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	409,120	$	—	$	—	$	409,120
Money market funds—cash equivalent		69,121		—		—		69,121
Total	$	478,241	$	—	$	—	$	478,241

Cash and cash equivalents by security type at December 31, 2011 were as follows:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	114,532	$	—	$	—	$	114,532
Money market funds—cash equivalent		69,000		—		—		69,000
Total	$	183,532	$	—	$	—	$	183,532

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Related Party Transactions (Details) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Related Party (Textual) [Abstract]
Revenue derived from related party transactions	$ 55,740,000		$ 59,199,000	$ 107,328,000	$ 113,143,000
Percentage of related party revenue to total revenue	28.30%		35.00%	28.20%	35.50%
Related-party shared services fee to Expedia			1,980,000		3,960,000
Other related-party operating expenses included within Selling and Marketing expense	1,800,000		1,200,000	3,500,000	2,000,000
Net related party receivable with Expedia and its subsidiaries	40,200,000			40,200,000		14,100,000
Amount received from related party		7,000,000
Distribution to related party prior to spinoff		$ 406,000,000
Chief Executive Officer [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Percentage of voting power	57.10%			57.10%
Related Party (Textual) [Abstract]
Percentage of voting power	57.10%			57.10%
Board of Directors Chairman [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Percentage of voting power	25.00%			25.00%

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Reconciliation of Adjusted EBITDA to operating income and net income
Adjusted EBITDA	$ 96,921	$ 92,487	$ 181,110	$ 174,494
Depreciation	(4,715)	(4,514)	(8,996)	(8,616)
OIBA	92,206	87,973	172,114	165,878
Amortization of intangible assets	(1,760)	(1,132)	(3,599)	(3,249)
Stock-based compensation	(6,768)	(1,968)	(11,460)	(4,442)
Spin-off costs		(1,054)		(1,054)
Operating income	83,678	83,819	157,055	157,133
Other interest (expense) income, net	(2,405)	217	(5,337)	315
Other, net	(4,539)	457	(3,843)	1,422
Provision for income taxes	(23,569)	(30,383)	(46,539)	(57,389)
Income before income taxes	53,165	54,110	101,336	101,481
Net income attributable to noncontrolling interest	(146)	(46)	(206)	(139)
Net income attributable to TripAdvisor, Inc.	$ 53,019	$ 54,064	$ 101,130	$ 101,342

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Taxes (Textual) [Abstract]
Effective tax rate	30.70%	36.00%	31.50%	36.10%
Accrued interest	$ 0.4		$ 0.4
Accrued penalties	$ 0		$ 0

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Numerator:
Net income attributable to TripAdvisor, Inc.	$ 53,019	$ 54,064	$ 101,130	$ 101,342
Denominator:
Weighted average shares used to compute Basic EPS	139,278	133,461	136,516	133,461
Weighted average effect of dilutive securities:
Weighted average shares used to compute Diluted EPS	141,737	133,461	138,947	133,461
Basic EPS	$ 0.38	$ 0.41	$ 0.74	$ 0.76
Diluted EPS	$ 0.37	$ 0.41	$ 0.73	$ 0.76
Stock options [Member]
Weighted average effect of dilutive securities:
Share-based Payment Arrangements	1,394		1,263
RSU's [Member]
Weighted average effect of dilutive securities:
Share-based Payment Arrangements	100		147
Warrants $6.48 Trip Advisor Warrants [Member]
Weighted average effect of dilutive securities:
Share-based Payment Arrangements	965		1,021

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Significant Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

In September 2011, the FASB issued ASU 2011-08. ASU 2011-08 was issued to amend FASB Accounting Standards Codification (“ASC”) (Topic 350): Intangibles—Goodwill and Other. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to first make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. If entities determine, on the basis of qualitative factors, that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. The amendments in this update are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, and we adopted ASU 2011-08 on October 1, 2011 for the fiscal year 2011 goodwill impairment test. The adoption of ASU 2011-08 did not have a material impact on our consolidated and combined financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation on Comprehensive Income (“ASU 2011-05”). Under ASU 2011-05, there will no longer be the option to present items of other comprehensive income in the statement of stockholders’ equity. ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011 on a retrospective basis, with early adoption permitted. Accordingly, we have adopted the presentation requirements of ASU 2011-05 on December 31, 2011. The adoption of ASU 2011-05 did not have a material impact on our consolidated and combined financial statements.

For information about our critical accounting policies and estimates, refer to “Note 2— Significant Accounting Policies,” included in our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011.

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Stockholders' Equity (Details) (USD $)	6 Months Ended
	Jun. 30, 2012 Vote	Mar. 15, 2012	Dec. 31, 2011
Stockholders Equity (Textual) [Abstract]
Vote per common stock share	One
Percentage of directors elected by common stock holders	25.00%
Preferred Common Stock Shares Authorized	100,000,000		100,000,000
Preferred Common Stock Par value per share	$ 0.001		$ 0.001
Common Stock [Member]
Stockholders Equity (Textual) [Abstract]
Common stock, shares authorized	1,600,000,000		1,600,000,000
Common stock, par value	$ 0.001		$ 0.001
Common stock shares outstanding prior to spin off	120,661,808	120,661,020	120,661,808
Class B common stock [Member]
Stockholders Equity (Textual) [Abstract]
Common stock, shares authorized	400,000,000		400,000,000
Common stock, par value	$ 0.001		$ 0.001
Authorized Class B common stock shares	400,000,000
Common Stock Class B par value per share	$ 0.001
Vote per common Class B stock share	10
Common stock shares outstanding prior to spin off	12,799,999	12,799,999	12,799,999

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Organization and Basis of Presentation (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Jun. 30, 2012 Country Brands	Dec. 20, 2011
Organization and Basis of Presentation (Textual) [Abstract]
Number of countries with localized version of websites		29
Number of other travel bands with websites		19
Distribution of cash dividend to Expedia Inc by the company			$ 406
Period of loan to TripAdvisor Holdings, LLC	5 years
Principal amount of loan to TripAdvisor Holdings, LLC			400
Repayment of loan in quarterly installments			1.25%
Repayment of loan in quarterly installments in subsequent years			2.50%
Revolving credit facility, Maximum			$ 200

XML

Organization and Basis of Presentation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011
Summary of prior period reclassification of Depreciation Expense
Depreciation	$ 4,514	$ 8,616
Technology and content	(3,679)	(6,969)
General and administrative	(835)	(1,647)
Total prior period reclassifications

XML

Cash and Cash Equivalents (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of cash and cash equivalents by security type
Amortized Cost	$ 478,241	$ 183,532
Gross Unrealized Gains
Gross Unrealized Losses
Cash and Cash Equivalents Fair Value	478,241	183,532
Cash [Member]
Schedule of cash and cash equivalents by security type
Amortized Cost	409,120	114,532
Gross Unrealized Gains
Gross Unrealized Losses
Cash Fair Value	409,120	114,532
Money market funds-cash equivalent [Member]
Schedule of cash and cash equivalents by security type
Amortized Cost	69,121	69,000
Gross Unrealized Gains
Gross Unrealized Losses
Cash Equivalents Fair Value	$ 69,121	$ 69,000

XML

Stock Based Awards and Other Equity Instruments (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Dec. 20, 2011 Stock options [Member]	Dec. 20, 2011 Warrants $6.48 Trip Advisor Warrants [Member]	Dec. 20, 2011 Warrants-$7.66 Trip Advisor Warrants [Member]
Summary of options and stock warrants and weighted average grant date exercise price
Potential Shares of Common Stock	8,602	6,575	6,575	6,047	2,000
Weighted Average Grant Date Exercise Price			$ 23.65	$ 25.92	$ 30.64

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Stock Based Awards and Other Equity Instruments (Details 1) (Restricted Stock Units (RSU) [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 20, 2011
Restricted Stock Units (RSU) [Member]
Summary of Restricted Stock Unit
Potential shares of common stock	893
Weighted-average grant date exercise price	$ 21.09

XML

Organization and Basis of Presentation

6 Months Ended

Jun. 30, 2012

Organization and Basis of Presentation [Abstract]

ORGANIZATION AND BASIS OF PRESENTATION

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

We refer to TripAdvisor, Inc. and our wholly-owned subsidiaries as “TripAdvisor,” “us,” “we” and “our” in these notes to the consolidated and combined financial statements.

Description of Business

TripAdvisor is an online travel company, empowering users to plan and have the perfect trip. TripAdvisor’s travel research platform aggregates reviews and opinions of members about destinations, accommodations (hotels, bed and breakfasts, specialty lodging and vacation rentals), restaurants and activities throughout the world through our flagship TripAdvisor brand. TripAdvisor-branded websites include tripadvisor.com in the United States and localized versions of the website in 29 other countries, including in China under the brand daodao.com. Beyond travel-related content, TripAdvisor websites also include links to the websites of our travel advertisers allowing travelers to directly book their travel arrangements. In addition to the flagship TripAdvisor brand, we manage and operate websites under 19 other travel brands, connected by the common goal of providing comprehensive travel planning resources across the travel sector. We derive substantially all of our revenue from advertising, primarily through click-based advertising and display-based advertising sales. In addition, we earn revenue through a combination of subscription-based offerings, transaction revenue from our flash sale website, SniqueAway, and from our recently-launched hotel booking site, Tingo, and other revenue including content licensing.

Spin-Off from Expedia

On April 7, 2011, Expedia, Inc. (“Expedia”) announced its plan to separate into two independent public companies in order to better achieve certain strategic objectives of its various businesses. We refer to this transaction as the “Spin-Off.”

On December 20, 2011, following the close of trading on the NASDAQ Global Select Market (“NASDAQ”), the Spin-Off was completed, and TripAdvisor began trading as independent public company on December 21, 2011. Expedia effected the Spin-Off by means of a reclassification of its capital stock that resulted in the holders of Expedia capital stock immediately prior to the time of effectiveness of the reclassification having the right to receive a proportionate amount of TripAdvisor capital stock. A one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, with cash paid in lieu of fractional shares.

In connection with the Spin-Off, Expedia contributed or transferred all of the subsidiaries and assets relating to Expedia’s TripAdvisor Media Group, which were comprised of the TripAdvisor Holdings, LLC combined financial statements, to TripAdvisor and TripAdvisor or one of its subsidiaries assumed all of the liabilities relating to Expedia’s TripAdvisor Media Group. TripAdvisor now trades on the NASDAQ under the symbol “TRIP”.

On December 20, 2011, TripAdvisor Holdings, LLC, distributed approximately $406 million in cash to Expedia in the form of a dividend, prior to completion of the Spin-Off. This distribution was funded through borrowings under a new credit agreement, dated as of December 20, 2011, among TripAdvisor, TripAdvisor Holdings, LLC, TripAdvisor LLC, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Europe Limited, as London agent. Such credit agreement together with all exhibits, schedules, annexes, certificates, assignments and related documents contemplated thereby is referred to herein as the “Credit Agreement.” The Credit Agreement provided for a five-year term loan (the “Term Loan”) to TripAdvisor Holdings, LLC in a principal amount of $400 million, repayable in quarterly installments equal to 1.25% of the original principal amount in year 2012 and 2.5% of the original principal amount in each year thereafter, with the balance payable on the final maturity date. The Credit Agreement also provides for a revolving credit facility (the “Revolving Credit Facility”) with a maximum borrowing capacity of $200 million. All outstanding principal and interest under the Term Loan and the Revolving Credit Facility will be due and payable, and the Revolving Credit Facility will terminate, on December 20, 2016.

Basis of Presentation

The accompanying unaudited consolidated and combined financial statements have been prepared by us in accordance with generally accepted accounting principles, or GAAP, for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles for complete periods have been condensed or omitted pursuant to such regulations. In the opinion of management, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included. All such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated and combined financial statements for the year ended December 31, 2011 filed with the Securities and Exchange Commission (“SEC”) in our Annual Report on Form 10-K on March 15, 2012. The results for interim periods are not necessarily indicative of the results to be expected for the full year.

The financial statements and related financial information pertaining to the period preceding the Spin-Off have been presented on a combined basis and reflect the results of TripAdvisor that were ultimately transferred to us as part of the Spin-Off. The financial statements and related financial information pertaining to the period subsequent to the Spin-Off have been presented on a consolidated basis. Prior to the Spin-Off, certain functions, including accounting, legal, tax, corporate development, treasury, employee benefits, financial reporting and real estate management, were historically managed by the corporate division of Expedia on behalf of its subsidiaries. The assets, liabilities and expenses related to the support of these centralized corporate functions have been allocated to us on a specific identification basis to the extent possible. Otherwise, allocations related to these services, in the form of a related-party services fee, were primarily based upon an estimate of the proportion of corporate amounts applicable to us. These allocations were determined on a basis that Expedia and we considered to be a reasonable reflection of the cost of services provided or the benefit received by us. These expenses were allocated based on a number of factors including headcount, estimated time spent and operating expenses. In the opinion of management, the assumptions and allocations have been made on a reasonable basis. Management believes that amounts allocated to TripAdvisor reflect a reasonable representation of the types of costs that would have been incurred if we had performed these functions as a stand-alone company. However, as estimation is inherent within the aforementioned allocation process, these combined financial statements do not include all of the actual amounts that would have been incurred had we been a stand-alone entity during the periods presented and also do not necessarily reflect our future financial position, results of operations and cash flows.

Consolidation

Our consolidated and combined financial statements include the accounts of TripAdvisor, our wholly owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We record our investments in entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method. We record noncontrolling interest in our consolidated and combined financial statements to recognize the minority ownership interest in our consolidated subsidiaries. Noncontrolling interest in the earnings and losses of consolidated subsidiaries represent the share of net income or loss allocated to members or partners in our consolidated entities. Significant intercompany transactions between the TripAdvisor consolidated entities and accounts have been eliminated.

Certain of our subsidiaries that operate in China, have variable interests in affiliated entities in China in order to comply with Chinese laws and regulations, which restrict foreign investment in Internet content provision businesses. Although we do not own the capital stock of some of our Chinese affiliates, we consolidate their results as we are the primary beneficiary of the cash losses or profits of these variable interest affiliates and have the power to direct the activities of these affiliates. Our variable interest entities are not material for all periods presented.

Accounting Estimates

We use estimates and assumptions in the preparation of our consolidated and combined financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated and combined financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our consolidated and combined financial statements include revenue recognition; recoverability of long-lived assets, intangible assets and goodwill; income taxes; useful lives of property and equipment; purchase accounting and stock-based compensation.

Reclassifications

We have reclassified certain amounts related to our prior period results to conform to our current period presentation.

During the fourth quarter of 2011, our management changed our non-GAAP financial measure that we use to measure our operating performance from Operating Income Before Amortization, or OIBA, to Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization, or Adjusted EBITDA. Consequently we have reclassified all of our depreciation expense, which previously had resided in technology and content expense and general and administrative expense, and have presented it as a separate line item on the consolidated and combined statement of operations. This reclassification had no net effect on either total operating expenses or total operating income. The table below provides a summary of that reclassification for the periods presented.

	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
	(In thousands)
Depreciation	$	4,514		$	8,616
Technology and content		(3,679	)		(6,969	)
General and administrative		(835	)		(1,647	)
	$	—		$	—

Seasonality

Expenditures by travel advertisers tend to be seasonal. Traditionally, our strongest quarter has been the third quarter, which is a key travel research period, with the weakest quarter being the fourth quarter. However, adverse economic conditions or continued growth of our international operations with differing holiday peaks may influence the typical trend of our seasonality in the future.

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Stock Based Awards and Other Equity Instruments (Details 2) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Options Outstanding
Options outstanding, beginning balance	6,575
Granted	2,996
Exercised	708
Cancelled	261
Options outstanding, ending balance	8,602
Options exercisable, ending balance	3,539
Options vested and expected to vest	7,436
Weighted Average Exercise Price, Remaining Contractual Life and Aggregate Intrinsic Value
Options outstanding, weighted average exercise price, beginning balance	$ 23.65
Options outstanding Weighted average remaining contractual life options outstanding, beginning balance	5 years 8 months 12 days
Granted	$ 40.20
Exercised	$ 15.94
Options exercised, aggregate intrinsic value	$ 13,123
Cancelled	$ 25.49
Options outstanding, weighted average exercise price, ending balance	$ 29.95
Options Outstanding Weighted average remaining contractual life options outstanding, ending balance	5 years 8 months 12 days
Options outstanding, aggregate intrinsic value, Ending balance	126,752
Options outstanding, exercisable weighted average exercise price, ending balance	$ 25.04
Options, exercisable, weighted average remaining contractual life	3 years 4 months 24 days
Options, exercisable, aggregate intrinsic value, ending balance	69,523
Options, vested and expected to vest, outstanding, weighted average exercise price	$ 28.92
Options, vested and expected to vest outstanding, weighted average remaining contractual life	5 years 9 months 18 days
Options, vested and expected to vest, outstanding, aggregate intrinsic value	$ 116,148

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Debt (Details1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Schedule showing remaining future minimum principal payment obligations
2012	$ 10,000
2013	40,000
2014	40,000
2015	40,000
2016	260,000
Total	$ 390,000

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Consolidated and Combined Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Consolidated and Combined Statements of Operations [Abstract]
Revenue	$ 141,408		$ 110,043		$ 273,535		$ 205,321
Related-party revenue from Expedia	55,740		59,199		107,328		113,143
Total revenue	197,148		169,242		380,863		318,464
Costs and expenses:
Cost of revenue (exclusive of amortization)	2,926	[1]	2,735	[1]	5,660	[1]	4,966	[1]
Selling and marketing	64,243	[2]	52,685	[2]	131,632	[2]	96,880	[2]
Technology and content	21,574	[2]	13,379	[2]	39,415	[2]	26,468	[2]
General and administrative	18,252	[2]	7,944	[2]	34,506	[2]	16,138	[2]
Related-party shared services fee to Expedia			1,980				3,960
Depreciation	4,715		4,514		8,996		8,616
Amortization of intangible assets	1,760		1,132		3,599		3,249
Spin-off costs			1,054				1,054
Total costs and expenses	113,470		85,423		223,808		161,331
Operating income	83,678		83,819		157,055		157,133
Other income (expense):
Other interest (expense) income, net	(2,405)		217		(5,337)		315
Other, net	(4,539)		457		(3,843)		1,422
Total other (expense) income, net	(6,944)		674		(9,180)		1,737
Income before income taxes	76,734		84,493		147,875		158,870
Provision for income taxes	(23,569)		(30,383)		(46,539)		(57,389)
Net income	53,165		54,110		101,336		101,481
Net income attributable to noncontrolling interest	(146)		(46)		(206)		(139)
Net income attributable to TripAdvisor, Inc.	53,019		54,064		101,130		101,342
Earnings Per Share attributable to TripAdvisor, Inc:
Basic	$ 0.38		$ 0.41		$ 0.74		$ 0.76
Diluted	$ 0.37		$ 0.41		$ 0.73		$ 0.76
Weighted Average Common Shares Outstanding:
Basic	139,278		133,461		136,516		133,461
Diluted	141,737		133,461		138,947		133,461
(1) Excludes amortization as follows:
Amortization of acquired technology included in amortization of intangibles	182		163		364		325
Amortization of website development costs included in depreciation	2,979		3,029		5,692		5,723
Excluded Amortization	3,161		3,192		6,056		6,048
(2) Includes stock-based compensation as follows:
Selling and marketing	923		589		2,001		1,394
Technology and content	2,426		639		3,938		1,527
General and administrative	$ 3,419		$ 740		$ 5,521		$ 1,521

[1] Excludes amortization as follows:

[2] Includes stock-based compensation as follows:

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Cash and Cash Equivalents (Details Textual)	Jun. 30, 2012
Cash and Cash Equivalents (Textual) [Abstract]
Money market funds maturity date	90 days or less

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Consolidated and Combined Statements of Changes in Stockholders' Equity (Unaudited) (USD $) In Thousands, except Share data	Total	Common Stock	Class B common stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive (loss) income
Beginning balance at Dec. 31, 2011	$ 293,537	$ 121	$ 13	$ 293,744	$ 2,369	$ (2,710)
Beginning balance, shares at Dec. 31, 2011		120,661,808	12,799,999
Net income attributable to TripAdvisor, Inc.	101,130				101,130
Currency translation adjustments	231					231
Tax benefits on equity awards	2,172			2,172
Issuance of common stock related to exercise of options and warrants and vesting of RSU's	225,769	8		225,761
Issuance of common stock related to exercise of options and warrants and vesting of RSU's, shares		8,850,129
Minimum withholding tax on vesting of RSU's	(3,035)			(3,035)
Adjustment to the fair value of redeemable noncontrolling interest	(758)			(758)
Reclassification of non-employee equity awards to derivative liability	(1,174)			(1,174)
Stock-based compensation expense	9,153			9,153
Other	(57)			(57)
Ending balance at Jun. 30, 2012	$ 626,968	$ 129	$ 13	$ 525,806	$ 103,499	$ (2,479)
Ending balance, shares at Jun. 30, 2012		129,511,937	12,799,999

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Stock Based Awards and Other Equity Instruments (Details 5) (USD $)	6 Months Ended
	Jun. 30, 2012
Summary of the unrecognized compensation expense, net of estimated forfeitures and the weighted average period remaining [Textual Abstract]
Weighted average period remaining (in years), stock options	5 years 8 months 12 days
Restricted Stock Units (RSU) [Member]
Summary of the unrecognized compensation expense, net of estimated forfeitures and the weighted average period remaining [Textual Abstract]
Unrecognized compensation expense (net of forfeitures), RSUs	6,138
Weighted average period remaining (in years), RSUs	1 year 8 months 12 days
Stock options [Member]
Summary of the unrecognized compensation expense, net of estimated forfeitures and the weighted average period remaining [Textual Abstract]
Unrecognized compensation expense (net of forfeitures), stock options	59,166
Weighted average period remaining (in years), stock options	3 years 4 months 24 days

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Stock Based Awards and Other Equity Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Stock Based Awards and Other Equity Instruments [Abstract]

Summary of options and stock warrants and weighted average grant date exercise price

Below is a summary of our stock-based awards and warrants issued upon completion of the conversion of existing Expedia stock-based awards and warrants into TripAdvisor stock-based awards and warrants on December 20, 2011 and the related weighted-average grant date exercise price for options and warrants and the weighted-average grant date fair value for RSUs:

Options and Stock Warrants:

	Potential Shares of Common Stock (in thousands)		Weighted Average Grant Date Exercise Price
Options		6,575	$	23.65
Warrants—$6.48 TripAdvisor Warrants		6,047	$	25.92
Warrants—$7.66 TripAdvisor Warrants		2,000	$	30.64

Summary of Restricted Stock Unit

	Potential Shares of Common Stock (in thousands)		Weighted Average Grant Date Fair Value
RSUs		893	$	21.09

Summary of the status and activity for stock option awards relating to common stock

A summary of the status and activity for stock option awards relating to our common stock for the six months ended June 30, 2012, is presented below:

	Options Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(In thousands)				(In years)		(In thousands)
Options outstanding at January 1, 2012		6,575	$	23.65
Granted		2,996		40.20
Exercised		708		15.94			$	13,123
Cancelled		261		25.49
Options outstanding at June 30, 2012		8,602	$	29.95		5.7	$	126,752
Exercisable as of June 30, 2012		3,539	$	25.04		3.4	$	69,523
Vested and expected to vest after June 30, 2012		7,436	$	28.92		5.8	$	116,148

Schedule of Black-Scholes assumptions used in calculating the estimated fair value of stock options

The Black-Scholes assumptions used in calculating the estimated fair value of stock options granted under the 2011 Incentive Plan are as follows:

	Three and Six Months Ended June 30, 2012
Risk free interest rate		1.05	%
Expected term (in years)		6.21
Volatility		53.34	%
Expected dividend yield		0	%

Summary of RSU activity on common stock

The following table presents a summary of RSU activity on our common stock:

	RSUs Outstanding			Weighted Average Grant- Date Fair Value Per Share
		(In thousands	)
Unvested RSUs outstanding as of January 1, 2012		926		$	21.32
Granted		60			33.27
Vested and released (1)		292			14.38
Cancelled		8			25.63
Unvested RSUs outstanding as of June 30, 2012 (2)		686		$	24.53

(1) Inclusive of 96,951 RSUs withheld to satisfy minimum tax withholding requirements.

(2) Included in RSUs outstanding at June 30, 2012 are 400,000 RSUs awarded to one of our non-employee Directors, for which vesting is tied to achievement of performance targets and a requisite service period.

Summary of the unrecognized compensation expense, net of estimated forfeitures and the weighted average period

A summary of the unrecognized compensation expense, net of estimated forfeitures and the weighted average period remaining at June 30, 2012 related to our non-vested stock options and RSU awards is presented below (in thousands, except per year information):

	Stock Options		RSUs
Unrecognized compensation expense (net of forfeitures)	$	59,166	$	6,138
Weighted average period remaining (in years)		3.4		1.7

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Stock Based Awards and Other Equity Instruments (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of stock options issued			2,996,000
RSU's withheld to satisfy minimum tax withholding requirements			96,951
Conversion of Stock [Line Items]
Weighted average exercise price of cashless warrants			$ 25.92
Stock Based Awards and Other Equity Instruments (Textual) [Abstract]
Stock-based compensation	$ (6,768,000)	$ (1,968,000)	$ (11,460,000)	$ (4,442,000)
Total income tax benefit related to stock-based compensation expense	2,500,000	800,000	4,000,000	1,700,000
Warrants issued in spinoff not listed on recognized stock exchange			32,186,792
Conversion of warrant into common stock			7,952,456
Expiration date of conversion			May 07, 2012
Expected dividend yield	0.00%		0.00%
Proceeds from Issuance of Warrants			$ 214,500,000
Cashless warrants exercised			545,454
Options outstanding, exercisable weighted average exercise price	$ 25.04		$ 25.04
Outstanding warrants to purchase common stock	0		0
One Tranche of Warrants [Member]
Conversion of Stock [Line Items]
Exercise price of warrants prior to adjustment			$ 12.23
Common stock shares issued for each warrant			25.00%
Exercise price per warrant			$ 6.48
Other Tranche of Warrants [Member]
Conversion of Stock [Line Items]
Exercise price of warrants prior to adjustment			$ 14.45
Common stock shares issued for each warrant			25.00%
Exercise price per warrant			$ 7.66
Warrants $6.48 Trip Advisor Warrants [Member]
Conversion of Stock [Line Items]
Warrants exercised			32,186,791
Common stock issued in lieu of warrants	7,952,456		7,952,456
Weighted average exercise price of warrants			$ 27.11
Warrants for which exercise price was paid in cash			31,641,337
Warrants $6.48 Trip Advisor Warrants [Member] | Maximum [Member]
Conversion of Stock [Line Items]
Warrants converted into common stock shares at spin-off			8,046,698
Stock options [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Vesting period			4 years
RSU's [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Amortization term for stock based compensation expenses			2 years
Vesting period			5 years
RSU's issued under incentive plan			59,951
Fair value of RSU's issued			$ 33.27
RSU's awarded to non employee directors			400,000
2012 Stock Option Activity [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Term of Stock Options Granted			10 years
Vesting period of stock options			4 years
Number of stock options issued			2,995,725
Grant date fair value per option			$ 20.51
Closing stock price	$ 44.69		$ 44.69
Vesting period			4 years

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

Reconciliation of adjusted EBITDA to operating income and net income

The following table is a reconciliation of Adjusted EBITDA to operating income and net income for the periods presented (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Adjusted EBITDA	$	96,921		$	92,487		$	181,110		$	174,494
Depreciation (1)		(4,715	)		(4,514	)		(8,996	)		(8,616	)
OIBA (2)		92,206			87,973			172,114			165,878
Amortization of intangible assets		(1,760	)		(1,132	)		(3,599	)		(3,249	)
Stock-based compensation		(6,768	)		(1,968	)		(11,460	)		(4,442	)
Spin-off costs		—			(1,054	)		—			(1,054	)
Operating income		83,678			83,819			157,055			157,133
Other interest (expense) income, net		(2,405	)		217			(5,337	)		315
Other, net		(4,539	)		457			(3,843	)		1,422
Provision for income taxes		(23,569	)		(30,383	)		(46,539	)		(57,389	)
Income before income taxes		53,165			54,110			101,336			101,481
Net income attributable to noncontrolling interest		(146	)		(46	)		(206	)		(139	)
Net income attributable to TripAdvisor, Inc.	$	53,019		$	54,064		$	101,130		$	101,342

(1) Includes internal use software and website development.

(2) Our primary operating metric prior to the Spin-Off for evaluating operating performance was OIBA, as reported on our Registration Statement. OIBA is defined as operating income plus: (1) amortization of intangible assets and any related impairment; (2) stock-based compensation expense; and (3) non-recurring expenses incurred to effect the Spin-Off during the year ended December 31, 2011. This operating metric is no longer being used by our management to measure operating performance and is only being shown above to illustrate the financial impact as we converted to a new operating metric post Spin-Off.

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Consolidated and Combined Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities:
Net income	$ 101,336	$ 101,481
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment, including internal-use software and website development	8,996	8,616
Stock-based compensation	11,460	4,442
Amortization of intangible assets	3,599	3,249
Amortization of deferred financing costs	475
Deferred tax (benefit)	(74)	(174)
Excess tax benefits from stock-based compensation	(2,011)	(1,431)
Provision for doubtful accounts	1,300	581
Foreign exchange (gain) loss on cash and cash equivalents, net	2,323	(618)
Other	509	(1,222)
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(27,455)	(25,151)
Related parties	(34,356)
Prepaid expenses and other current assets	(1,879)	(1,525)
Accounts payable	17,812	12,229
Taxes payable	(1,822)	4,544
Accrued expenses and other current liabilities	6,296	1,925
Deferred revenue	7,568	6,925
Net cash provided by operating activities	91,477	113,871
Investing activities:
Acquisitions, net of cash acquired		(4,893)
Capital expenditures, including internal-use software and website development	(13,249)	(10,424)
Distribution proceeds from Expedia related to Spin-Off.	7,028
Transfers to Expedia, net		(90,125)
Net cash used in investing activities	(6,221)	(105,442)
Financing activities:
Acquisitions funded by Expedia		5,135
Proceeds from credit facilities	7,627	2,782
Payments on credit facilities	(10,000)
Principal payments on long-term debt	(10,000)
Proceeds from exercise of stock options and warrants	225,769
Payment of minimum withholding taxes on RSU vesting	(3,035)
Excess tax benefits from stock-based compensation	2,011	1,431
Net cash provided by financing activities	212,372	9,348
Effect of exchange rate changes on cash and cash equivalents	(2,919)	814
Net increase in cash and cash equivalents	294,709	18,591
Cash and cash equivalents at beginning of year	183,532	93,133
Cash and cash equivalents at end of period	$ 478,241	$ 111,724

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Consolidated and Combined Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated and Combined Statements of Comprehensive Income [Abstract]
Net income	$ 53,165	$ 54,110	$ 101,336	$ 101,481
Other comprehensive (loss) income:
Foreign currency translation adjustments	(1,196)	(127)	231	658
Comprehensive income	51,969	53,983	101,567	102,139
Less: Comprehensive income attributable to noncontrolling interests	(146)	(46)	(206)	(139)
Comprehensive income attributable to TripAdvisor, Inc.	$ 51,823	$ 53,937	$ 101,361	$ 102,000

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 10: FAIR VALUE MEASUREMENTS

We measure assets and liabilities at fair value based on the expected exit price, which is the amount that would be received on the sale of an asset or amount paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The following tables provide a summary of the fair value measurements of our assets as of June 30, 2012 and December 31, 2011:

(in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value at June 30, 2012
Money market funds—cash equivalent (1)	$	69,121	$	—	$	—	$	69,121
Total	$	69,121	$	—	$	—	$	69,121
(in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value at December 31, 2011
Money market funds—cash equivalent (1)	$	69,000	$	—	$	—	$	69,000
Total	$	69,000	$	—	$	—	$	69,000

(1) Cash equivalents include money market investment accounts that hold excess liquid funds. The fair value measurement of these assets is based on quoted market prices in active markets and, therefore, is recorded at fair value on a recurring basis and classified as Level 1 assets.

We did not have any Level 2 or 3 assets for the period ended June 30, 2012 or December 31, 2011.

One of our acquisitions made during 2008 includes noncontrolling interests with certain rights whereby we may acquire, and the minority shareholders may sell to us, the additional shares of the subsidiary, at fair value or at adjusted fair values at our discretion, beginning in the fourth quarter of 2012. Fair value determinations are based on various internal valuation techniques, including market comparables and discounted cash flow projections and are considered a Level 3 liability at June 30, 2012 and December 31, 2011. Certain assumptions are used in determining fair value, including revenue growth rates and discount rates. Changes in these assumptions would impact the fair value. In addition, under certain circumstances the parties may be required to submit to arbitration in order to determine the final fair value of the noncontrolling interests. Changes in the fair value of the shares for which the minority holders may sell to us are recorded to the redeemable noncontrolling interest with charges or credits to additional paid in capital. Our redeemable noncontrolling interest is not material for all periods presented and is included in other current liabilities.

We currently invest excess cash balances primarily in cash deposits and money market investment accounts at major banks. The carrying amount of cash deposits, cash equivalents, trade receivables, related party receivables, prepaid expenses and other current assets, trade payables, accrued and other current liabilities and deferred revenue as reported on the unaudited consolidated and combined balance sheet as of June 30, 2012 and December 31, 2011, approximate their fair value because of the short maturity of those instruments. The carrying value of the borrowings outstanding on our Credit Agreement bear interest at a variable rate and are considered to approximate fair value.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 20, 2012 Common Stock	Jul. 20, 2012 Class B common stock
Entity Registrant Name	TripAdvisor, Inc.
Entity Central Index Key	0001526520
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		129,532,102	12,799,999

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 11: EARNINGS PER SHARE

As discussed in our Annual Report on Form 10-K filed March 15, 2012 (“Note 1— Organization and Basis of Presentation,”) in connection with the Spin-Off a one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, which resulted in 120,661,020 shares of common stock and 12,799,999 shares of Class B common stock outstanding immediately following the Spin-Off.

Basic Earnings Per Share

For the three and six months ended June 30, 2012, we computed basic earnings per share using the number of shares of common stock and Class B common stock outstanding as of December 31, 2011 plus the weighted average of any additional shares issued and outstanding during the three and six months ended June 30, 2012.

For the three and six months ended June 30, 2011, we computed basic earnings per share using the number of shares of common stock and Class B common stock outstanding immediately following the Spin-Off, as if such shares were outstanding for the entire period.

Diluted Earnings Per Share

For the three and six months ended June 30, 2012, we computed diluted earnings per share using (i) the number of shares of common stock and Class B common stock outstanding at December 31, 2011, (ii) the weighted average of any additional shares issued and outstanding for the three and six months ended June 30, 2012, and (iii) if dilutive, the incremental weighted average common stock that we would issue upon the assumed exercise of common equivalent shares related to stock options and stock warrants and the vesting of restricted stock units using the treasury stock method during the three and six months ended June 30, 2012, and (iv) if dilutive, performance based awards based on the number of shares that would be issuable as of the end of the reporting period assuming the end of the reporting period was also the end of the contingency period.

Under the treasury stock method, the assumed proceeds calculation includes the actual proceeds to be received from the employee upon exercise, the average unrecognized compensation cost during the period and any tax benefits credited upon exercise to additional paid-in-capital. The treasury stock method assumes that a company uses the proceeds from the exercise of an award to repurchase common stock at the average market price for the period. Windfall tax benefits created upon the exercise of an award would be added to assumed proceeds, while shortfalls charged to additional paid-in-capital would be deducted from assumed proceeds. Any shortfalls not covered by the windfall tax pool would be charged to the income statement and would be excluded from the calculation of assumed proceeds, if any.

For the three and six months ended June 30, 2011, we computed diluted earnings per share using (i) the number of shares of common stock and Class B common stock outstanding immediately following the Spin-Off, as no TripAdvisor equity awards were outstanding prior to the Spin-Off.

Below is a reconciliation of the weighted average number of shares of common stock outstanding in calculating diluted earnings per share (in thousands, except for per share information):

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Numerator:
Net income attributable to TripAdvisor	$	53,019	$	54,064	$	101,130	$	101,342
Denominator:
Weighted average shares used to compute Basic EPS		139,278		133,461		136,516		133,461
Weighted average effect of dilutive securities:
Stock options		1,394		—		1,263		—
RSUs		100		—		147		—
Stock warrants		965		—		1,021		—
Weighted average shares used to compute Diluted EPS		141,737		133,461		138,947		133,461
Basic EPS	$	0.38	$	0.41	$	0.74	$	0.76
Diluted EPS	$	0.37	$	0.41	$	0.73	$	0.76

The following potential common shares related to stock options and RSUs were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Stock options		3,901		—		2,861		—
RSUs (1)		—		—		30		—
Total		3,901		—		2,891		—

(1) These totals do not include performance based RSUs representing the right to acquire 400,000 shares of common stock, for which all targets required to trigger vesting have not been achieved during the three and six months ended June 30, 2012; therefore, such awards were excluded from the calculation of weighted average shares used to compute diluted earnings per share for those reporting periods.

The earnings per share amounts are the same for common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 478,241	$ 183,532
Accounts receivable, net of allowance of $3,298 and $5,370 at June 30, 2012 and December 31, 2011, respectively	96,873	67,936
Receivable from Expedia, net	40,158	14,081
Deferred income taxes, net	6,494	6,494
Prepaid expenses and other current assets	8,655	6,279
Total current assets	630,421	278,322
Long-term assets:
Property and equipment, net	38,828	34,754
Other long-term assets	10,380	11,888
Intangible assets, net	40,536	44,030
Goodwill	467,088	466,892
Total long-term assets	556,832	557,564
TOTAL ASSETS	1,187,253	835,886
Current liabilities:
Accounts payable	28,405	12,097
Deferred revenue	26,970	19,395
Credit facility borrowings	24,361	26,734
Borrowings, current	30,000	20,000
Taxes payable	14,629	17,229
Accrued expenses and other current liabilities	45,479	34,938
Total current liabilities	169,844	130,393
Long-term liabilities:
Deferred income taxes, net	14,772	16,004
Other long-term liabilities	15,669	15,952
Borrowings, net of current portion	360,000	380,000
Total long-term liabilities	390,441	411,956
Total Liabilities	560,285	542,349
Commitments and Contingencies
Stockholders' equity:
Preferred stock $0.001 par value Authorized shares: 100,000,000 Shares issued and outstanding: 0 and 0
Additional paid-in capital	525,806	293,744
Retained earnings	103,499	2,369
Accumulated other comprehensive loss	(2,479)	(2,710)
Total stockholders' equity	626,968	293,537
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	1,187,253	835,886
Common Stock
Stockholders' equity:
Common Stock	129	121
Total stockholders' equity	129	121
Class B common stock
Stockholders' equity:
Common Stock	13	13
Total stockholders' equity	$ 13	$ 13

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 5: COMMITMENTS AND CONTINGENCIES

There have been no material changes to our commitments and contingencies since December 31, 2011. (Refer to “Note 10— Commitments and Contingencies,” in the Notes to our Consolidated and Combined Financial Statements in Item 8 of our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011.)

In the ordinary course of business, we and our subsidiaries are parties to legal proceedings and claims involving alleged infringement of third-party intellectual property rights, defamation, and other claims. Rules of the SEC require the description of material pending legal proceedings, other than ordinary, routine litigation incident to the registrant’s business, and advise that proceedings ordinarily need not be described if they primarily involve damages claims for amounts (exclusive of interest and costs) not individually exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of management, none of the pending litigation matters that the Company and its subsidiaries are defending involves or is likely to involve amounts of that magnitude. There may be claims or actions pending or threatened against us of which we are currently not aware and the ultimate disposition of which could have a material adverse effect on us.

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 4: INCOME TAXES

Each interim period is considered an integral part of the annual period and, accordingly, we measure our tax expense using an estimated annual effective tax rate. An enterprise is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

Our effective tax rate for the three and six months ended June 30, 2012 was 30.7% and 31.5%, respectively. Our effective tax rate for the three and six months ended June 30, 2011 was 36.0% and 36.1%, respectively. For the three and six months ended June 30, 2012, the effective tax rate is less than the federal statutory rate primarily due to earnings in jurisdictions outside the United States, where our effective tax rate is lower, which was partially offset by state income taxes, non-deductible stock compensation and accruals on uncertain tax positions. The change in the effective tax rate for 2012 compared to the 2011 rate was primarily due to an increase in earnings in jurisdictions outside the United States.

Our policy is to recognize accrued interest and penalties related to unrecognized tax benefits and income tax liabilities as part of our income tax expense. As of June 30, 2012, accrued interest is $0.4 million, net of federal benefit, and no penalties have been accrued. We do not anticipate any material releases in the next twelve months.

We are subject to taxation in the United States and various States and foreign jurisdictions. As of June 30, 2012, the Company’s tax years for 2008, 2009, 2010 and 2011 are subject to examination by the tax authorities. The Company is currently under an IRS audit for 2009 and 2010, and has various ongoing state income tax audits. As of June 30, 2012 no material assessments have resulted from these audits.

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Debt (Tables)

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

Summary of total outstanding borrowings

Total outstanding borrowings under the Credit Agreement consist of the following (in thousands):

	June 30, 2012
Short-Term Debt:
Revolving Credit Facility	$	—
Term Loan		30,000
Total Short-Term Borrowings	$	30,000
Long-Term Debt:
Term Loan	$	360,000
Total Long-Term Borrowings	$	360,000

Schedule showing remaining future minimum principal payment obligations

The remaining future minimum principal payment obligations due under the Credit Agreement related to our Term Loan is as follows as of June 30, 2012 (in thousands):

	Payment Amount
2012	$	10,000
2013	$	40,000
2014	$	40,000
2015	$	40,000
2016	$	260,000
Total	$	390,000

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Related Party Transactions

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 12: RELATED PARTY TRANSACTIONS

Expedia

Following the Spin-Off, TripAdvisor and Expedia are related parties since they are under common control. Revenue we derived from related party transactions with Expedia was $55.7 million and $107.3 million for the three and six months ended June 30, 2012 and was $59.2 million and $113.1 million for the three and six months ended June 30, 2011, respectively, which primarily consisted of click-based advertising and other advertising services provided to Expedia and its subsidiaries and is recorded at contract value, which we believe is a reasonable reflection of the value of the services provided. This related-party revenue represented 28.3% and 28.2% of our total revenue for the three and six months ended June 30, 2012 and for the three and six months ended June 30, 2011, related-party revenue represented 35.0% and 35.5% of our total revenue, respectively.

Our operating expenses for the three and six months ended June 30, 2011 included a related-party shared services fee of $2.0 million and $4.0 million, which was comprised of allocations from Expedia for accounting, legal, tax, corporate development, treasury, financial reporting, real estate management and included an allocation of employee compensation within these functions. This related-party shared service fee ended in connection with the Spin-Off. These allocations were determined on a basis that Expedia and we considered to be a reasonable reflection of the cost of services provided or the benefit received by us. These expenses were allocated based on a number of factors including headcount, estimated time spent and operating expenses. It was not practicable to determine the amounts of these expenses that would have been incurred had we operated as an unaffiliated entity. In the opinion of our management, the allocation method was reasonable.

Other related-party operating expenses which were included within Selling and Marketing expense were $1.8 million and $3.5 million for the three and six months ended June 30, 2012, respectively, which primarily consisted of marketing expense for exit windows. For the three and six months ended June 30, 2011, other related-party operating expenses which were included within Selling and Marketing expense were approximately $1.2 million and $2.0 million.

Our net related party receivable with Expedia and its subsidiaries reflected in our consolidated and combined balance sheets as of June 30, 2012 and December 31, 2011 were $40.2 million and $14.1 million, respectively. We received $7.0 million from Expedia during the first fiscal quarter of 2012, which was owed to us as a result of the subsequent reconciliation process allowed in the Separation Agreement related to the approximate $406 million distribution paid to Expedia immediately prior to the Spin-Off. This balance was included in our related party receivable balance at December 31, 2011.

For purposes of governing certain of the ongoing relationships between us and Expedia at and after the Spin-Off, and to provide for an orderly transition, we and Expedia entered into various agreements, including, among others, the Separation Agreement, the Tax Sharing Agreement, the Employee Matters agreement, the Transition Services Agreement, and commercial agreements. The various commercial agreements, including click-based advertising agreements, content sharing agreements and display-based and other advertising agreements, have terms of one to three years.

The full texts of the Separation Agreement, the Tax Sharing Agreement, the Employee Matters Agreement, the Transition Services Agreement and the Master Advertising Agreement (CPC) are incorporated by reference into our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011 as Exhibits 2.1, 10.2, 10.3, 10.4 and 10.6 (10.6 filed in redacted form pursuant to confidential treatment request), respectively.

Liberty Interactive Corporation and Barry Diller

Mr. Diller, our Chairman of the Board of Directors and Senior Executive, through shares he owns beneficially as well as those subject to an irrevocable proxy granted by Liberty Interactive Corporation, or Liberty, controls approximately 57.1% of the combined voting power of the outstanding TripAdvisor capital stock as of June 30, 2012. As such, Mr. Diller effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other than with respect to the election by the holders of common stock of 25% of the members of our Board of Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s permanent departure from TripAdvisor, the irrevocable proxy would terminate and depending on the capitalization of TripAdvisor at such time, Liberty could effectively control the voting power of our capital stock. On May 3, 2012, Liberty Interactive Corporation, or Liberty, sold 8,450,000 shares of our common stock pursuant to Rule 144 under the Securities Act of 1933, as amended at an average per share price of $40.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 8: STOCKHOLDERS’ EQUITY

Common Stock and Class B Common Stock

Our authorized common stock consists of 1.6 billion shares of common stock with par value of $0.001 per share, and 400 million shares of Class B common stock with par value of $0.001 per share. Both classes of common stock qualify for and share equally in dividends, if declared by our Board of Directors. Common stock is entitled to one vote per share and Class B common stock is entitled to 10 votes per share on most matters. Holders of TripAdvisor common stock, acting as a single class, are entitled to elect a number of directors equal to 25% percent of the total number of directors, rounded up to the next whole number, which is currently three directors. Class B common stockholders may, at any time, convert their shares into common stock, on a one for one share basis. Upon conversion, the Class B common stock is retired and is not available for reissue. In the event of liquidation, dissolution, distribution of assets or winding-up of TripAdvisor the holders of both classes of common stock have equal rights to receive all the assets of TripAdvisor after the rights of the holders of the preferred stock have been satisfied.

As discussed in our Annual Report on Form 10-K filed March 15, 2012 (“Note 1— Organization and Basis of Presentation”), in connection with the Spin-Off a one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, which resulted in 120,661,020 shares of Common Stock and 12,799,999 shares of Class B common stock outstanding immediately following the Spin-Off.

Preferred Stock

In addition to common stock, we are authorized to issue up to 100 million preferred shares, with $ 0.001 par value per share, with terms determined by our Board of Directors, without further action by our stockholders. At June 30, 2012, no preferred shares had been issued.

Share Repurchases

During the period January 1, 2012 through June 30, 2012, our Board of Directors did not authorize any share buyback program and we have not repurchased any shares of outstanding common stock.

Dividends

During the period January 1, 2012 through June 30, 2012, our Board of Directors did not declare any dividends on our outstanding common stock.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the six months ended June 30, 2012 and the year ended December 31, 2011 is comprised of accumulated foreign currency translation adjustments.

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Debt

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

DEBT

NOTE 6: DEBT

Term Loan Facility Due 2016 and Revolving Credit Facility

Overview

On December 20, 2011, in connection with the Spin-Off, we entered into the Credit Agreement, which provides $600 million of borrowing including:

• the Term Loan Facility, or Term Loan, in an aggregate principal amount of $400 million with a term of five years due December 2016; and

• the Revolving Credit Facility in an aggregate principal amount of $200 million available in U.S. dollars, Euros and British pound sterling with a term of five years expiring December 2016.

The Term Loan and any loans under the Revolving Credit Facility bear interest by reference to a base rate or a Eurocurrency rate, in either case plus an applicable margin based on our leverage ratio. We are also required to pay a quarterly commitment fee, on the average daily unused portion of the Revolving Credit Facility for each fiscal quarter and fees in connection with the issuance of letters of credit. The Term Loan and loans under the Revolving Credit Facility currently bear interest at LIBOR plus 175 basis points, or the Eurocurrency Spread, or the alternate base rate (“ABR”) plus 75 basis points, and undrawn amounts are currently subject to a commitment fee of 30 basis points.

As of June 30, 2012 we are using a one-month interest period Eurocurrency Spread which is approximately 2.0% per annum. Interest is currently payable on a monthly basis while we are borrowing under the one-month interest rate period. The current interest rates are based on current assumptions, leverage and LIBOR rates and do not take into account that rates will reset periodically.

The Term Loan principal will be repayable in quarterly installments on the last day of each calendar quarter equal to 1.25%, with $10 million paid during the six months ended June 30, 2012. The payments for the year ending December 31, 2012 will be equal to 1.25% of the original principal amount and will be equal to 2.5% of the original principal amount in each year thereafter, with the balance due on the final maturity date.

The Revolving Credit Facility includes $40 million of borrowing capacity available for letters of credit and $40 million for borrowings on same-day notice. Immediately following the Spin-Off, $10 million was drawn down under the Revolving Credit Facility, which was repaid during the three months ended March 31, 2012.

Total outstanding borrowings under the Credit Agreement consist of the following (in thousands):

	June 30, 2012
Short-Term Debt:
Revolving Credit Facility	$	—
Term Loan		30,000
Total Short-Term Borrowings	$	30,000
Long-Term Debt:
Term Loan	$	360,000
Total Long-Term Borrowings	$	360,000

The remaining future minimum principal payment obligations due under the Credit Agreement related to our Term Loan is as follows as of June 30, 2012 (in thousands):

	Payment Amount
2012	$	10,000
2013	$	40,000
2014	$	40,000
2015	$	40,000
2016	$	260,000
Total	$	390,000

Guarantees

All obligations under the Credit Agreement are unconditionally guaranteed by us and each of our existing and subsequently acquired or organized direct or indirect wholly-owned domestic and foreign restricted subsidiaries, subject to certain exceptions for controlled foreign corporations, foreign subsidiaries where applicable law would otherwise be violated or non-material subsidiaries.

Covenants

The Credit Agreement contains a number of covenants that, among other things, restrict our ability to: incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions or repurchase our capital stock, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change our fiscal year. The Credit Agreement also requires us to maintain a maximum leverage ratio and a minimum cash interest coverage ratio, and contain certain customary affirmative covenants and events of default, including a change of control. If an event of default occurs, the lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of all amounts due under Credit Agreement and all actions permitted to be taken by a secured creditor.

As of June 30, 2012 we believe we are in compliance with all of our debt covenants.

The full text of the Credit Agreement is incorporated by reference into our Annual Report on Form 10-K filed on March 15, 2012 for the year ending December 31, 2011 as Exhibit 4.2.

Chinese Credit Facilities

In addition to our borrowings under the Credit Agreement, we maintain our Chinese Credit Facilities. As of June 30, 2012 and December 31, 2011, we had $24.4 million and $16.7 million of short term borrowings outstanding, respectively.

Certain of our Chinese subsidiaries are entered into a RMB 138,600,000 (approximately $22 million), one-year revolving credit facility with Bank of America (the “Chinese Credit Facility—BOA”) that has a current termination date of December 2012. We currently have $21.3 million of outstanding borrowings from this credit facility as of June 30, 2012. Our Chinese Credit Facility—BOA currently bears interest based at 110% of the People’s Bank of China’s base rate and was 6.44% as of June 30, 2012.

In addition, during April 2012, certain of our Chinese subsidiaries entered into a RMB 125,000,000 (approximately $20 million) one-year revolving credit facility with J.P. Morgan Chase Bank (“Chinese Credit Facility-JPM”). We currently have $ 3.1 million of outstanding borrowings from this credit facility as of June 30, 2012. The current rate of interest we are paying on our outstanding borrowings from our Chinese Credit Facility—JPM is 6.31% at June 30, 2012.

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Segment Information

6 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

SEGMENT INFORMATION

NOTE 7: SEGMENT INFORMATION

We have one reportable segment: TripAdvisor. We determined our segment based on how our chief operating decision maker manages our business, makes operating decisions and evaluates operating performance. Our primary operating metric for evaluating segment performance is Adjusted EBITDA. Adjusted EBITDA is defined as operating income plus: (1) depreciation of property and equipment, including internal use software and website development; (2) amortization of intangible assets; (3) stock-based compensation; and (4) non-recurring expenses incurred to effect the Spin-Off during the year ended December 31, 2011. Such amounts are detailed in our segment reconciliation below. In addition, please see our discussion of Adjusted EBITDA in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

The following table is a reconciliation of Adjusted EBITDA to operating income and net income for the periods presented (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Adjusted EBITDA	$	96,921		$	92,487		$	181,110		$	174,494
Depreciation (1)		(4,715	)		(4,514	)		(8,996	)		(8,616	)
OIBA (2)		92,206			87,973			172,114			165,878
Amortization of intangible assets		(1,760	)		(1,132	)		(3,599	)		(3,249	)
Stock-based compensation		(6,768	)		(1,968	)		(11,460	)		(4,442	)
Spin-off costs		—			(1,054	)		—			(1,054	)
Operating income		83,678			83,819			157,055			157,133
Other interest (expense) income, net		(2,405	)		217			(5,337	)		315
Other, net		(4,539	)		457			(3,843	)		1,422
Provision for income taxes		(23,569	)		(30,383	)		(46,539	)		(57,389	)
Income before income taxes		53,165			54,110			101,336			101,481
Net income attributable to noncontrolling interest		(146	)		(46	)		(206	)		(139	)
Net income attributable to TripAdvisor, Inc.	$	53,019		$	54,064		$	101,130		$	101,342

(1) Includes internal use software and website development.

(2) Our primary operating metric prior to the Spin-Off for evaluating operating performance was OIBA, as reported on our Registration Statement. OIBA is defined as operating income plus: (1) amortization of intangible assets and any related impairment; (2) stock-based compensation expense; and (3) non-recurring expenses incurred to effect the Spin-Off during the year ended December 31, 2011. This operating metric is no longer being used by our management to measure operating performance and is only being shown above to illustrate the financial impact as we converted to a new operating metric post Spin-Off.

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Cash and Cash Equivalents

6 Months Ended

Jun. 30, 2012

Cash and Cash Equivalents [Abstract]

CASH AND CASH EQUIVALENTS

NOTE 9: CASH AND CASH EQUIVALENTS

Our cash and cash equivalents consist primarily of cash and liquid financial instruments, including money market funds, with maturities of 90 days or less when purchased.

Cash and cash equivalents by security type at June 30, 2012 were as follows:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	409,120	$	—	$	—	$	409,120
Money market funds—cash equivalent		69,121		—		—		69,121
Total	$	478,241	$	—	$	—	$	478,241

Cash and cash equivalents by security type at December 31, 2011 were as follows:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	114,532	$	—	$	—	$	114,532
Money market funds—cash equivalent		69,000		—		—		69,000
Total	$	183,532	$	—	$	—	$	183,532

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Stock Based Awards and Other Equity Instruments (Details 4) (Restricted Stock [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Restricted Stock [Member]
Summary of RSU's activity on common shares, RSU's Outstanding
Unvested RSU's outstanding, beginning balance	926
Granted	60
Vested and released	292
Cancelled	8
Unvested RSU's outstanding, ending balance	686
Summary of RSU's activity on common shares, Weighted average grant date fair value per share
Unvested RSU's outstanding, weighted average grant date fair value per share, beginning balance	$ 21.32
Granted	$ 33.27
Vested and released	$ 14.38
Cancelled	$ 25.63
Unvested RSU's outstanding, weighted average grant date fair value per share, ending balance	$ 24.53

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Organization and Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2012

Organization and Basis of Presentation [Abstract]

Schedule showing summary of reclassifications

	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
	(In thousands)
Depreciation	$	4,514		$	8,616
Technology and content		(3,679	)		(6,969	)
General and administrative		(835	)		(1,647	)
	$	—		$	—

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Earnings Per Share (Details Textual)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Jun. 30, 2012 Common Stock [Member]	Mar. 15, 2012 Common Stock [Member]	Dec. 31, 2011 Common Stock [Member]	Jun. 30, 2012 Class B common stock [Member]	Mar. 15, 2012 Class B common stock [Member]	Dec. 31, 2011 Class B common stock [Member]
Earnings Per Share (Textual) [Abstract]
Common stock shares outstanding prior to spin off			120,661,808	120,661,020	120,661,808	12,799,999	12,799,999	12,799,999
Performance based RSU's issued and outstanding	400,000	400,000

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Debt (Details Textual)	3 Months Ended	6 Months Ended			6 Months Ended		6 Months Ended		6 Months Ended	12 Months Ended
	Mar. 31, 2012 USD ($)	Jun. 30, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 20, 2011 USD ($)	Jun. 30, 2012 Term Loan [Member]	Dec. 20, 2011 Term Loan [Member] USD ($)	Jun. 30, 2012 Revolving Credit Facility [Member]	Dec. 20, 2011 Revolving Credit Facility [Member] USD ($)	Jun. 30, 2012 Chinese Credit Facility [Member] USD ($)	Dec. 31, 2011 Chinese Credit Facility [Member] USD ($)	Jun. 30, 2012 Chinese Credit Facility BOA [Member] USD ($)	Aug. 31, 2010 Chinese Credit Facility BOA [Member] USD ($)	Aug. 31, 2010 Chinese Credit Facility BOA [Member] CNY	Jun. 30, 2012 Chinese Credit Facility JPM [Member] USD ($)	Mar. 31, 2012 Chinese Credit Facility JPM [Member] USD ($)	Mar. 31, 2012 Chinese Credit Facility JPM [Member] CNY	Jun. 30, 2012 Letter of Credit [Member] USD ($)	Jun. 30, 2012 Borrowings on same-day notice [Member] USD ($)
Line of Credit Facility [Line Items]
Borrowing in connection with spin off						$ 600,000,000						$ 22,000,000	138,600,000
Term loan facility principal amount		390,000,000				400,000,000		200,000,000
Period of term loan facility						5 years		5 years
Borrowings, maturity date					Dec. 01, 2016		Dec. 01, 2016
Borrowings, interest rate description		interest at LIBOR plus 175 basis points, or the Eurocurrency Spread, or the alternate base rate (“ABR”) plus 75 basis points
Borrowings, interest rate basis		6.44%			1.75%						110.00%			6.31%
Borrowings alternate base rate		0.75%
Commitment fee on undrawn amount		0.30%
Borrowing capacity under revolving credit facility				200,000,000													40,000,000	40,000,000
Short term borrowings outstanding									24,400,000	16,700,000
Extended revolving credit facility of Chinese subsidiaries with BOA															20,000,000	125,000,000
One month interest period Eurocurrency Spread		2.00%
Credit facility borrowings		24,361,000	26,734,000								21,300,000			3,100,000
Debt (Textual) [Abstract]
Revolving Credit Facility	10,000,000
Term loan principal repayment		1.25%
Term loan first installment		$ 10,000,000
Principal repayment of term loan		2.50%
Interest rate of Chinese Credit Facility BOA		Chinese Credit Facility—BOA currently bears interest based at 110% of the People’s Bank of China’s base rate, which was 6.44% as of June 30, 2012.

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Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Allowance for doubtful receivable	$ 3,298	$ 5,370
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	100,000,000	100,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Stock
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	1,600,000,000	1,600,000,000
Common stock, shares issued	129,511,937	129,511,937
Common stock, shares outstanding	120,661,808	120,661,808
Class B common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	12,799,999	12,799,999
Common stock, shares outstanding	12,799,999	12,799,999

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Stock Based Awards and Other Equity Instruments

6 Months Ended

Jun. 30, 2012

Stock Based Awards and Other Equity Instruments [Abstract]

STOCK BASED AWARDS AND OTHER EQUITY INSTRUMENTS

NOTE 3: STOCK BASED AWARDS AND OTHER EQUITY INSTRUMENTS

Stock-based compensation expense relates primarily to expense for restricted stock units (“RSUs”) and stock options. Our outstanding RSUs and stock options generally vest over five years and four years, respectively.

For the three and six months ended June 30, 2012, we recognized total stock-based compensation expense of $6.8 million and $11.5 million, respectively. The total income tax benefit related to stock-based compensation expense was $2.5 million and $4.0 million for the three and six months ended June 30, 2012, respectively. For the three and six months ended June 30, 2011, we recognized total stock-based compensation expense of $2.0 million and $4.4 million, respectively. The total income tax benefit related to stock-based compensation expense was $0.8 million and $1.7 million for the three and six months ended June 30, 2011, respectively.

Stock Based Awards and Other Equity Instruments Assumed at Spin-Off

Prior to the Spin-Off, we participated in the Amended and Restated Expedia, Inc. 2005 Stock and Annual Incentive Plan, under which we, through Expedia, granted RSUs, stock options, and other stock-based awards to our directors, officers, employees and consultants. Following the Spin-Off, these existing Expedia stock-based awards were primarily converted as follows:

• Each vested stock option to purchase shares of Expedia common stock converted into an option to purchase shares of Expedia common stock and an option to purchase shares of TripAdvisor common stock;

• Each unvested stock option to purchase shares of Expedia common stock converted into a stock option to purchase shares of common stock of the applicable company for which the employee was employed following the Spin-Off; and

• All RSUs converted into RSUs of the applicable company for which the employee was employed following the Spin-Off.

In addition, upon Spin-Off, we entered into a warrant agreement (the “Warrant Agreement”) with Mellon Investor Services LLC and issued warrants exercisable for TripAdvisor common stock in respect of previously outstanding warrants exercisable for Expedia common stock that were adjusted on account of Expedia’s reverse stock split and the Spin-Off. The warrants, which totaled 32,186,792 at Spin-Off, were subsequently converted into 7,952,456 shares of our common stock during the six months ended June 30, 2012, prior to their expiration date of May 7, 2012. Refer to our discussion below in this Note 3— 2012 Warrant Activity for a discussion of warrant activity during the six months ended June 30, 2012.

One tranche of warrants (issued in respect of Expedia warrants that had featured an exercise price of $12.23 per warrant prior to adjustment) were exercisable for 0.25 (one-quarter) of a share of TripAdvisor common stock at an exercise price equal to $6.48 per warrant, and the other tranche of warrants (issued in respect of Expedia warrants that had featured an exercise price of $14.45 per warrant prior to adjustment) were exercisable for 0.25 (one-quarter) of a share of TripAdvisor common stock at an exercise price equal to $7.66 per warrant. The exercise price could have been paid in cash or via “cashless exercise” as set forth in the Warrant Agreement. In total, at Spin-Off, the warrants could be converted into a maximum of 8,046,698 shares of our common stock without any further adjustments to the Warrant Agreement.

Below is a summary of our stock-based awards and warrants issued upon completion of the conversion of existing Expedia stock-based awards and warrants into TripAdvisor stock-based awards and warrants on December 20, 2011 and the related weighted-average grant date exercise price for options and warrants and the weighted-average grant date fair value for RSUs:

Options and Stock Warrants:

	Potential Shares of Common Stock (in thousands)		Weighted Average Grant Date Exercise Price
Options		6,575	$	23.65
Warrants—$6.48 TripAdvisor Warrants		6,047	$	25.92
Warrants—$7.66 TripAdvisor Warrants		2,000	$	30.64

RSUs:

	Potential Shares of Common Stock (in thousands)		Weighted Average Grant Date Fair Value
RSUs		893	$	21.09

TripAdvisor, Inc. 2011 Stock and Annual Incentive Plan (“2011 Incentive Plan”)

On December 20, 2011, the 2011 Incentive Plan became effective. A summary of certain important features of the 2011 Incentive Plan can be found in “Note 7— Stock Based Awards and Other Equity Instruments,” in the Notes to our Consolidated and Combined Financial Statements in Item 8 of our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011. The summary of the material terms of the 2011 Incentive Plan is qualified in its entirety by the full text of the 2011 Incentive Plan which is incorporated by reference in our Annual Report on Form 10-K as Exhibit 4.3.

2012 Stock Option Activity

The exercise price for all stock options granted by us to date has been equal to the market price of the underlying shares of common stock at the date of grant. In this regard, when making stock option awards, our practice is to determine the applicable grant date and to specify that the exercise price shall be the closing price of our common stock on the date of grant. Stock options granted during the first six months of 2012 have a term of ten years from the date of grant and vest over a four-year period.

During the six months ended June 30, 2012, we have issued 2,995,725 stock options under the 2011 Incentive Plan with a grant-date fair value per option of $20.51. We will amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting term of four years on a straight-line basis. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

A summary of the status and activity for stock option awards relating to our common stock for the six months ended June 30, 2012, is presented below:

	Options Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(In thousands)				(In years)		(In thousands)
Options outstanding at January 1, 2012		6,575	$	23.65
Granted		2,996		40.20
Exercised		708		15.94			$	13,123
Cancelled		261		25.49
Options outstanding at June 30, 2012		8,602	$	29.95		5.7	$	126,752
Exercisable as of June 30, 2012		3,539	$	25.04		3.4	$	69,523
Vested and expected to vest after June 30, 2012		7,436	$	28.92		5.8	$	116,148

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 29, 2012 was $44.69.

The estimated fair value of the options granted under the 2011 Incentive Plan was calculated using a Black-Scholes Merton option-pricing model (“Black-Scholes model”). The Black-Scholes model incorporates assumptions to value stock-based awards, which includes the risk-free rate of return, volatility, expected term and expected dividend yield.

Our risk-free interest rate is based on the rates currently available on zero-coupon U.S. Treasury issues, in effect at the time of the grant, whose remaining maturity period most closely approximates the stock option’s expected term assumption. We estimated the volatility of our common stock by using an average of historical stock price volatility of publicly traded companies that we consider peers based on daily price observations over a period equivalent or approximate to the expected term of the stock option grants. The decision to use a weighted average volatility factor of a peer group was based upon the relatively short period of availability of data on our common stock. We estimated our expected term using the simplified method for all stock options as we do not have sufficient historical exercise data on our common stock. Our expected dividend yield is zero, as we have not paid and do not anticipate paying dividends on our common stock in the foreseeable future.

The Black-Scholes assumptions used in calculating the estimated fair value of stock options granted under the 2011 Incentive Plan are as follows:

	Three and Six Months Ended June 30, 2012
Risk free interest rate		1.05	%
Expected term (in years)		6.21
Volatility		53.34	%
Expected dividend yield		0	%

2012 RSU Activity

During the six months ended June 30, 2012, we issued 59,951 RSUs under the 2011 Incentive Plan for which the fair value was measured based on the quoted price of our common stock at the date of grant of $33.27. We will amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting term of two years on a straight-line basis.

The following table presents a summary of RSU activity on our common stock:

	RSUs Outstanding			Weighted Average Grant- Date Fair Value Per Share
		(In thousands	)
Unvested RSUs outstanding as of January 1, 2012		926		$	21.32
Granted		60			33.27
Vested and released (1)		292			14.38
Cancelled		8			25.63
Unvested RSUs outstanding as of June 30, 2012 (2)		686		$	24.53

(1) Inclusive of 96,951 RSUs withheld to satisfy minimum tax withholding requirements.

(2) Included in RSUs outstanding at June 30, 2012 are 400,000 RSUs awarded to one of our non-employee Directors, for which vesting is tied to achievement of performance targets and a requisite service period.

2012 Stock Warrant Activity

During the six months ended June 30, 2012, there were a total of 32,186,791warrants exercised which resulted in a total of 7,952,456 shares of our common stock being issued during that period, which included 31,641,337 warrants for which the exercise price was paid in cash at a weighted average price of $27.11. We received total exercise proceeds of $214.5 million related to these warrant exercises. In addition there were 545,454 cashless warrants exercised with a weighted average exercise price of $25.92 of which we did not receive any exercise proceeds. As of June 30, 2012, we had no outstanding warrants available which could be convertible to shares of our common stock.

A summary of the unrecognized compensation expense, net of estimated forfeitures and the weighted average period remaining at June 30, 2012 related to our non-vested stock options and RSU awards is presented below (in thousands, except per year information):

	Stock Options		RSUs
Unrecognized compensation expense (net of forfeitures)	$	59,166	$	6,138
Weighted average period remaining (in years)		3.4		1.7

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Reconciliation of weighted average number of shares of common stock outstanding

Below is a reconciliation of the weighted average number of shares of common stock outstanding in calculating diluted earnings per share (in thousands, except for per share information):

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Numerator:
Net income attributable to TripAdvisor	$	53,019	$	54,064	$	101,130	$	101,342
Denominator:
Weighted average shares used to compute Basic EPS		139,278		133,461		136,516		133,461
Weighted average effect of dilutive securities:
Stock options		1,394		—		1,263		—
RSUs		100		—		147		—
Stock warrants		965		—		1,021		—
Weighted average shares used to compute Diluted EPS		141,737		133,461		138,947		133,461
Basic EPS	$	0.38	$	0.41	$	0.74	$	0.76
Diluted EPS	$	0.37	$	0.41	$	0.73	$	0.76

Calculation of diluted net income per share related to stock options and RSUs

The following potential common shares related to stock options and RSUs were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Stock options		3,901		—		2,861		—
RSUs (1)		—		—		30		—
Total		3,901		—		2,891		—

(1) These totals do not include performance based RSUs representing the right to acquire 400,000 shares of common stock, for which all targets required to trigger vesting have not been achieved during the three and six months ended June 30, 2012; therefore, such awards were excluded from the calculation of weighted average shares used to compute diluted earnings per share for those reporting periods.

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Commitments and Contingencies (Details) (Maximum [Member])	6 Months Ended
	Jun. 30, 2012
Maximum [Member]
Commitments and Contingencies (Textual) [Abstract]
Criteria percentage of damages claims	10.00%

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Organization and Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2012

Organization and Basis of Presentation [Abstract]

Description of Business

Description of Business

TripAdvisor is an online travel company, empowering users to plan and have the perfect trip. TripAdvisor’s travel research platform aggregates reviews and opinions of members about destinations, accommodations (hotels, bed and breakfasts, specialty lodging and vacation rentals), restaurants and activities throughout the world through our flagship TripAdvisor brand. TripAdvisor-branded websites include tripadvisor.com in the United States and localized versions of the website in 29 other countries, including in China under the brand daodao.com. Beyond travel-related content, TripAdvisor websites also include links to the websites of our travel advertisers allowing travelers to directly book their travel arrangements. In addition to the flagship TripAdvisor brand, we manage and operate websites under 19 other travel brands, connected by the common goal of providing comprehensive travel planning resources across the travel sector. We derive substantially all of our revenue from advertising, primarily through click-based advertising and display-based advertising sales. In addition, we earn revenue through a combination of subscription-based offerings, transaction revenue from our flash sale website, SniqueAway, and from our recently-launched hotel booking site, Tingo, and other revenue including content licensing.

Spin-Off from Expedia

Spin-Off from Expedia

On April 7, 2011, Expedia, Inc. (“Expedia”) announced its plan to separate into two independent public companies in order to better achieve certain strategic objectives of its various businesses. We refer to this transaction as the “Spin-Off.”

On December 20, 2011, following the close of trading on the NASDAQ Global Select Market (“NASDAQ”), the Spin-Off was completed, and TripAdvisor began trading as independent public company on December 21, 2011. Expedia effected the Spin-Off by means of a reclassification of its capital stock that resulted in the holders of Expedia capital stock immediately prior to the time of effectiveness of the reclassification having the right to receive a proportionate amount of TripAdvisor capital stock. A one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, with cash paid in lieu of fractional shares.

In connection with the Spin-Off, Expedia contributed or transferred all of the subsidiaries and assets relating to Expedia’s TripAdvisor Media Group, which were comprised of the TripAdvisor Holdings, LLC combined financial statements, to TripAdvisor and TripAdvisor or one of its subsidiaries assumed all of the liabilities relating to Expedia’s TripAdvisor Media Group. TripAdvisor now trades on the NASDAQ under the symbol “TRIP”.

On December 20, 2011, TripAdvisor Holdings, LLC, distributed approximately $406 million in cash to Expedia in the form of a dividend, prior to completion of the Spin-Off. This distribution was funded through borrowings under a new credit agreement, dated as of December 20, 2011, among TripAdvisor, TripAdvisor Holdings, LLC, TripAdvisor LLC, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Europe Limited, as London agent. Such credit agreement together with all exhibits, schedules, annexes, certificates, assignments and related documents contemplated thereby is referred to herein as the “Credit Agreement.” The Credit Agreement provided for a five-year term loan (the “Term Loan”) to TripAdvisor Holdings, LLC in a principal amount of $400 million, repayable in quarterly installments equal to 1.25% of the original principal amount in year 2012 and 2.5% of the original principal amount in each year thereafter, with the balance payable on the final maturity date. The Credit Agreement also provides for a revolving credit facility (the “Revolving Credit Facility”) with a maximum borrowing capacity of $200 million. All outstanding principal and interest under the Term Loan and the Revolving Credit Facility will be due and payable, and the Revolving Credit Facility will terminate, on December 20, 2016.

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated and combined financial statements have been prepared by us in accordance with generally accepted accounting principles, or GAAP, for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles for complete periods have been condensed or omitted pursuant to such regulations. In the opinion of management, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included. All such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated and combined financial statements for the year ended December 31, 2011 filed with the Securities and Exchange Commission (“SEC”) in our Annual Report on Form 10-K on March 15, 2012. The results for interim periods are not necessarily indicative of the results to be expected for the full year.

The financial statements and related financial information pertaining to the period preceding the Spin-Off have been presented on a combined basis and reflect the results of TripAdvisor that were ultimately transferred to us as part of the Spin-Off. The financial statements and related financial information pertaining to the period subsequent to the Spin-Off have been presented on a consolidated basis. Prior to the Spin-Off, certain functions, including accounting, legal, tax, corporate development, treasury, employee benefits, financial reporting and real estate management, were historically managed by the corporate division of Expedia on behalf of its subsidiaries. The assets, liabilities and expenses related to the support of these centralized corporate functions have been allocated to us on a specific identification basis to the extent possible. Otherwise, allocations related to these services, in the form of a related-party services fee, were primarily based upon an estimate of the proportion of corporate amounts applicable to us. These allocations were determined on a basis that Expedia and we considered to be a reasonable reflection of the cost of services provided or the benefit received by us. These expenses were allocated based on a number of factors including headcount, estimated time spent and operating expenses. In the opinion of management, the assumptions and allocations have been made on a reasonable basis. Management believes that amounts allocated to TripAdvisor reflect a reasonable representation of the types of costs that would have been incurred if we had performed these functions as a stand-alone company. However, as estimation is inherent within the aforementioned allocation process, these combined financial statements do not include all of the actual amounts that would have been incurred had we been a stand-alone entity during the periods presented and also do not necessarily reflect our future financial position, results of operations and cash flows.

Consolidation

Consolidation

Our consolidated and combined financial statements include the accounts of TripAdvisor, our wholly owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We record our investments in entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method. We record noncontrolling interest in our consolidated and combined financial statements to recognize the minority ownership interest in our consolidated subsidiaries. Noncontrolling interest in the earnings and losses of consolidated subsidiaries represent the share of net income or loss allocated to members or partners in our consolidated entities. Significant intercompany transactions between the TripAdvisor consolidated entities and accounts have been eliminated.

Certain of our subsidiaries that operate in China, have variable interests in affiliated entities in China in order to comply with Chinese laws and regulations, which restrict foreign investment in Internet content provision businesses. Although we do not own the capital stock of some of our Chinese affiliates, we consolidate their results as we are the primary beneficiary of the cash losses or profits of these variable interest affiliates and have the power to direct the activities of these affiliates. Our variable interest entities are not material for all periods presented.

Accounting Estimates

Accounting Estimates

We use estimates and assumptions in the preparation of our consolidated and combined financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated and combined financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our consolidated and combined financial statements include revenue recognition; recoverability of long-lived assets, intangible assets and goodwill; income taxes; useful lives of property and equipment; purchase accounting and stock-based compensation.

Reclassifications

Reclassifications

We have reclassified certain amounts related to our prior period results to conform to our current period presentation.

During the fourth quarter of 2011, our management changed our non-GAAP financial measure that we use to measure our operating performance from Operating Income Before Amortization, or OIBA, to Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization, or Adjusted EBITDA. Consequently we have reclassified all of our depreciation expense, which previously had resided in technology and content expense and general and administrative expense, and have presented it as a separate line item on the consolidated and combined statement of operations. This reclassification had no net effect on either total operating expenses or total operating income. The table below provides a summary of that reclassification for the periods presented.

Seasonality

Seasonality

Expenditures by travel advertisers tend to be seasonal. Traditionally, our strongest quarter has been the third quarter, which is a key travel research period, with the weakest quarter being the fourth quarter. However, adverse economic conditions or continued growth of our international operations with differing holiday peaks may influence the typical trend of our seasonality in the future.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In September 2011, the FASB issued ASU 2011-08. ASU 2011-08 was issued to amend FASB Accounting Standards Codification (“ASC”) (Topic 350): Intangibles—Goodwill and Other. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to first make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. If entities determine, on the basis of qualitative factors, that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. The amendments in this update are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, and we adopted ASU 2011-08 on October 1, 2011 for the fiscal year 2011 goodwill impairment test. The adoption of ASU 2011-08 did not have a material impact on our consolidated and combined financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation on Comprehensive Income (“ASU 2011-05”). Under ASU 2011-05, there will no longer be the option to present items of other comprehensive income in the statement of stockholders’ equity. ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011 on a retrospective basis, with early adoption permitted. Accordingly, we have adopted the presentation requirements of ASU 2011-05 on December 31, 2011. The adoption of ASU 2011-05 did not have a material impact on our consolidated and combined financial statements.

For information about our critical accounting policies and estimates, refer to “Note 2— Significant Accounting Policies,” included in our Annual Report on Form 10-K filed on March 15, 2012 for the year ended December 31, 2011.