Segment Information

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Segment Information

NOTE 12: SEGMENT INFORMATION

Our reporting structure includes two reportable segments: Hotel and Non-Hotel.

Hotel

Our Hotel segment includes revenue generated from services related to hotels, including click-based advertising revenue from making hotel room night reservations available for price comparison and commission-based transactions via our instant booking feature, as well as display-based advertising, subscription-based hotel advertising (or Business Listings), room reservations sold through our websites, and from content licensing. Our Hotel segment also includes click-based advertising revenue from making airline reservations and cruise reservations available for price comparison and booking.  Our chief operating decision maker is also the Hotel segment manager.

Non-Hotel

Our Non-Hotel segment consists of the aggregation of three operating segments, our Attractions, Restaurants and Vacation Rentals businesses.

Attractions.  We provide, primarily through Viator, information and services for researching and booking destination activities around the world. Viator works with local operators to provide travelers with access to tours and activities in popular destinations worldwide, earning a commission for such service. In addition to its consumer-direct business, Viator also provides local experiences to affiliate partners, including some of the world’s top airlines, hotels and travel agencies.

Restaurants.  We have several websites that provide online and mobile reservation services that connect restaurants with diners.  These websites are currently primarily focused on the European and Australian markets, primarily through thefork.com (including www.lafourchette.com, www.eltenedor.com, www.iens.nl, www.besttables.com, and www.dimmi.com.au).  Thefork.com is an online restaurant booking platform with a network of restaurant partners primarily across Europe and Australia.  Thefork.com also helps restaurants to maximize business by providing a flexible online booking and data tool. We generate revenue primarily by charging a fee for each restaurant guest seated through the online reservation systems.

Vacation Rentals. We offer individual property owners and property managers the ability to list their properties available for rental and connect with travelers using a subscription-based fee structure or a free-to-list, commission-based option. Our vacation rental inventory currently includes full home rentals, condos, villas, beach rentals, cabins and cottages.  These properties are listed across a number of platforms, including TripAdvisor Vacation Rentals, U.S.-based FlipKey and Vacation Home Rentals, and European-based Holiday Lettings, HouseTrip, and Niumba businesses.

Each operating segment in our Non-Hotel segment has a segment manager who is directly accountable to and maintains regular contact with our chief operating decision maker to discuss operating activities, financial results, forecasts, and plans for the segment.

Adjusted EBITDA is our segment profit measure and a key measure used by our management and board of directors to understand and evaluate the operating performance of our business and on which internal budgets and forecasts are based and approved. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business.Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.  We define Adjusted EBITDA as net income (loss) plus: (1) provision for income taxes; (2) other income (expense), net; (3) depreciation of property and equipment, including amortization of internal use software and website development; (4) amortization of intangible assets; (5) stock-based compensation and other stock-settled obligations; (6) goodwill, long-lived asset and intangible asset impairments; and (7)  non-recurring expenses and income.  

The following tables present our segment information for the three and nine months ended September 30, 2016 and 2015, and includes a reconciliation of Adjusted EBITDA to Net Income, the most directly comparable financial measure calculated and presented in accordance with GAAP. We record depreciation of property and equipment, including amortization of internal-use software and website development, amortization of intangible assets, stock-based compensation and other stock-settled obligations, other income (expense), net, other non-recurring expenses and income, net, and income taxes, which are excluded from segment operating performance, in corporate and unallocated. In addition, we do not report our assets, capital expenditures and related depreciation expense by segment as our chief operating decision maker does not evaluate operating segments using this information. We also do not regularly provide such information by segment to our chief operating decision maker. Our consolidated general and administrative expenses, excluding stock-based compensation costs, are shared by all operating segments.  Each operating segment receives an allocated charge based on the segment’s percentage of the Company’s total personnel costs.

	Three months ended September 30, 2016
	Hotel		Non-Hotel		Corporate and Unallocated			Total
	(in millions)
Revenue	$	320	$	101	$	-		$	421
Adjusted EBITDA (1)	99			15		-			114
Depreciation						(18	)		(18	)
Amortization of intangible assets						(8	)		(8	)
Stock-based compensation						(22	)		(22	)
Operating income (loss)									66
Other expense, net									(3	)
Income before income taxes									63
Provision for income taxes									(8	)
Net income								$	55

	Three months ended September 30, 2015
	Hotel		Non-Hotel		Corporate and Unallocated			Total
	(in millions)
Revenue	$	340	$	75	$	-		$	415
Adjusted EBITDA (2)	121			9		-			130
Depreciation						(13	)		(13	)
Amortization of intangible assets						(10	)		(10	)
Stock-based compensation						(19	)		(19	)
Operating income (loss)									88
Other income, net									10
Income before income taxes									98
Provision for income taxes									(24	)
Net income								$	74

	Nine months ended September 30, 2016
	Hotel		Non-Hotel			Corporate and Unallocated			Total
	(in millions)
Revenue	$	939	$	225		$	-		$	1,164
Adjusted EBITDA (1)	309			(15	)		-			294
Depreciation							(51	)		(51	)
Amortization of intangible assets							(23	)		(23	)
Stock-based compensation							(64	)		(64	)
Operating income (loss)										156
Other expense, net										(10	)
Income before income taxes										146
Provision for income taxes										(27	)
Net income									$	119

	Nine months ended September 30, 2015
	Hotel		Non-Hotel		Corporate and Unallocated			Total
	(in millions)
Revenue	$	1,003	$	180	$	-		$	1,183
Adjusted EBITDA (2)	377			2		-			379
Depreciation						(42	)		(42	)
Amortization of intangible assets						(26	)		(26	)
Stock-based compensation						(52	)		(52	)
Other non-recurring expenses						(2	)		(2	)
Operating income (loss)									257
Other income, net									8
Income before income taxes									265
Provision for income taxes									(70	)
Net income								$	195

(1)	Includes allocated general and administrative expenses in our Hotel segment of $21 million and $63 million; and in our Non-Hotel segment of $10 million and $28 million for the three and nine months ended September 30, 2016, respectively.
(2)	Includes allocated general and administrative expenses in our Hotel segment of $23 million and $69 million; and in our Non-Hotel segment of $8 million and $23 million for the three and nine months ended September 30, 2015, respectively.