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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2019

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 001-36603

LIBERTY TRIPADVISOR HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Registrant's telephone number, including area code: (720) 875-5200

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐   No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐   No ☒

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 ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes ☒    No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The aggregate market value of the voting stock held by non-affiliates of Liberty TripAdvisor Holdings, Inc. computed by reference to the last sales price of such stock, as of the closing of trading on June 28, 2019, was approximately $854 million.

The number of outstanding shares of Liberty TripAdvisor Holdings, Inc.'s common stock as of January 31, 2020 was:

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Documents Incorporated by Reference

The Registrant's definitive proxy statement for its 2020 Annual Meeting of Stockholders is hereby incorporated by reference into Part III of this Annual Report on Form 10-K.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

2019 ANNUAL REPORT ON FORM 10‑K

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PART I.

Item 1. Business.

General Development of Business

Liberty TripAdvisor Holdings, Inc. (“TripCo” or the “Company”) was formed in 2013 as a Delaware corporation.  TripCo was a subsidiary of Liberty Interactive Corporation (subsequently renamed Qurate Retail, Inc. (“Qurate Retail”)) until the completion of its spin-off from Qurate Retail on August 27, 2014 (“TripCo Spin-Off”). Following the TripCo Spin-Off, Qurate Retail and TripCo operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other.  TripCo holds its subsidiary, Tripadvisor, Inc. (“Tripadvisor”) and held its former subsidiary, BuySeasons, Inc. (“BuySeasons”) until BuySeasons was sold on June 30, 2017. As of December 31, 2019, TripCo held an approximate 23% equity interest and 58% voting interest in Tripadvisor.

In connection with the TripCo Spin-Off, TripCo entered into certain agreements, including the services agreement, the facilities sharing agreement and the tax sharing agreement, with Qurate Retail and/or Liberty Media Corporation (“Liberty Media”) (or certain of their subsidiaries) in order to govern certain of the ongoing relationships between the companies after the TripCo Spin-Off and to provide for an orderly transition.

Pursuant to the services agreement (except as described below in respect to Gregory B. Maffei), Liberty Media provides TripCo with general and administrative services including legal, tax, accounting, treasury and investor relations support. TripCo reimburses Liberty Media for direct, out-of-pocket expenses incurred by Liberty Media in providing these services and TripCo pays a services fee to Liberty Media under the services agreement that is subject to adjustment semi-annually, as necessary.

In December 2019, TripCo entered into an amendment to the services agreement with Liberty Media in connection with Liberty Media’s entry into a new employment arrangement with Gregory B. Maffei, TripCo’s Chairman, President and Chief Executive Officer.  Under the amended services agreement, components of his compensation will either be paid directly to him by each of TripCo, Liberty Broadband Corporation (“LBC”), GCI Liberty, Inc. (“GCI Liberty”) and Qurate Retail (collectively, the “Service Companies”) or reimbursed to Liberty Media, in each case, based on allocations among Liberty Media and the Service Companies set forth in the amended services agreement, currently set at 5% for the Company. The new agreement between Liberty Media and Mr. Maffei provides for a five year employment term which began on January 1, 2020 and ends December 31, 2024, with an aggregate annual base salary of $3 million (with no contracted increase), an aggregate one-time cash commitment bonus of $5 million, an aggregate annual target cash performance bonus of $17 million, aggregate annual equity awards of $17.5 million and aggregate equity awards granted in connection with his entry into his new agreement of $90 million (the “upfront awards”). A portion of the grants made to our CEO in the year ended December 31, 2019 related to our Company’s allocable portion of these upfront awards.

Under the facilities sharing agreement, TripCo shares office space with Liberty Media and related amenities at Liberty Media’s corporate headquarters in Englewood, Colorado.

The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Qurate Retail and TripCo and other agreements related to tax matters.

BuySeasons’ results of operations were included in the consolidated financial statements of TripCo until June 30, 2017. BuySeasons is not presented as a discontinued operation as the sale did not represent a strategic shift that had a major effect on TripCo’s operations and financial results.

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Certain statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding business, product and marketing strategies; new product and service offerings; the recoverability of our goodwill and other long-lived assets; projected sources and uses of cash; anticipated debt obligations; fluctuations in interest rates and foreign exchange rates; and the anticipated impact of certain contingent liabilities related to tax rules and other matters arising in the ordinary course of business.  In particular, statements under Item 1. "Business," Item 1A. "Risk Factors," Item 2. "Properties," Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" contain forward-looking statements.  Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

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These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Annual Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.  When considering such forward-looking statements, you should keep in mind the factors described in Item 1A, "Risk Factors" and other cautionary statements contained in this Annual Report.  Such risk factors and statements describe circumstances which could cause actual results to differ materially from those contained in any forward-looking statement.

This Annual Report includes information concerning Tripadvisor, a public company in which we have a controlling interest that files reports and other information with the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Information in this Annual Report concerning Tripadvisor has been derived from the reports and other information filed by Tripadvisor with the SEC.  If you would like further information about Tripadvisor, the reports and other information it files with the SEC can be accessed on the Internet website maintained by the SEC at www.sec.gov.  Those reports and other information are not incorporated by reference in this Annual Report.

Narrative Description of Business

Tripadvisor

Tripadvisor is a leading online travel company and its mission is to help people around the world plan, book and experience the perfect trip. Tripadvisor operates a global travel platform that connects the world’s largest audience of prospective travelers with travel partners through rich content, price comparison tools and online reservation and related services for destinations, accommodations, travel activities and experiences, and restaurants.

Under its flagship brand, Tripadvisor, it launched www.Tripadvisor.com in the United States in 2000.  Since then, Tripadvisor has launched localized versions of the Tripadvisor website in 48 markets and 28 languages worldwide.  Tripadvisor’s rich content and engaged community attract the world’s largest travel audience based on monthly unique visitors, including 463 million average monthly unique visitors in the third quarter of 2019 during the peak summer travel season.

Tripadvisor’s systems infrastructure for Tripadvisor-branded websites is housed at two geographically separate facilities and hosted by Amazon Web Services.  Tripadvisor’s infrastructure installations have multiple communication links as well as continuous monitoring and engineering support. Each facility is fully self-sufficient and operational with its own hardware, networking, software and content, and is structured in an active/passive, fully redundant configuration. Substantially all of its software components, data, and content are replicated in multiple datacenters and development centers, as well as backed up at offsite locations. Tripadvisor’s systems are monitored and protected through multiple layers of security. Several of its individual subsidiaries and businesses have their own data infrastructure and technology teams.

Tripadvisor’s Industry and Market Opportunity

Tripadvisor operates in the global travel industry, focusing exclusively on online travel and travel-related activity, and the online advertising market.

According to Phocuswright, an independent travel, tourism and hospitality research firm, the annual global travel market represents $1.7 trillion in sales and is increasingly shifting online.  As consumer online travel media consumption and online travel commerce activity increases, Tripadvisor believes travel and travel-related businesses will continue to allocate greater percentages of their marketing budgets to online channels in order to grow their businesses. Tripadvisor believes this creates a significant long-term growth opportunity of its business.

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Business Model

Tripadvisor’s businesses match demand, or consumers that seek to discover, research, price compare and book the best travel experiences online with supply from Tripadvisor’s travel partners around the world that provide travel accommodations and experiences.

Consumer Offerings

Tripadvisor enables consumers to plan, book and experience the perfect trip by providing content, supply, price, and convenience. Content and supply have enabled Tripadvisor to become a well-known global brand, one that has attracted the world’s largest travel audience, based on average monthly unique visitors, and influences a significant amount of travel commerce. Tripadvisor is focused on creating the best online experience in travel planning and booking, making it easier for consumers to research destinations and experiences, read and contribute user-generated content, compare destinations and businesses based on quality, price and availability, and complete bookings powered by its travel partners.

Travel Partners

Tripadvisor’s portfolio of travel-related websites, enables its travel partners to be discovered, to advertise and to sell their services to a global travel audience. Travel partners may include hotel chains, independent hoteliers, online travel agencies (“OTAs”), destination marketing organizations, and other travel-related and non-travel related product and service providers – that seek to market and sell their products and services to a global audience. Tripadvisor enables media advertising opportunities – and in some cases, facilitates transactions between consumers and travel partners in a number of ways, including by sending referrals to its travel partners’ websites, facilitating bookings on behalf of its travel partners, or by serving as the merchant of record – particularly in its Experiences and Rentals businesses – and by offering advertising placements on Tripadvisor websites and mobile applications (“app”).

Businesses and Products

Tripadvisor manages its business based on the following reportable segments: (1) Hotels, Media & Platform and (2) Experiences & Dining.

The Hotels, Media & Platform segment includes revenue generated from the following sources:

Tripadvisor also offers subscription-based advertising to hotel partners, owners of B&Bs and other specialty lodging properties, enabling subscribers to advertise their businesses on Tripadvisor’s websites, as well as manage and promote their website URL, email address, phone number, special offers and other information related to their business. Subscription-based advertising services are predominantly sold for a flat fee for a contracted period of time of one year or less. Tripadvisor also offers travel partners the opportunity to advertise and promote their business through hotel sponsored placements on its websites. This service is generally priced on a CPC basis, with payments from travel partners determined by the number of travelers who click on the sponsored link multiplied by the CPC rate for each specific click. CPC rates for hotel sponsored placements that Tripadvisor’s travel partners pay are based on a pre-determined contractual rate.

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In addition, transaction revenue is generated from Tripadvisor’s hotel instant booking feature, which enables hotel shoppers to book directly with a travel partner, with the latter serving as the merchant of record for the transaction, without leaving Tripadvisor’s website. Tripadvisor earns a commission from its travel partners for each traveler that completes a hotel reservation on its website based on a pre-determined contractual commission rate.

The Experiences & Dining segment includes revenue generated from the following sources:

Included in Corporate and other is Tripadvisor’s Rentals, Flights/Cruises/Car, SmarterTravel, and Tripadvisor China business units. Corporate and other includes revenue generated from the following sources:

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For further information regarding segments, including a change in reportable segments during 2019, refer to note 14 in the accompanying consolidated financial statements.

Commercial Relationships

Tripadvisor has a number of commercial relationships that are important to the success of its business.  Although these relationships are memorialized in agreements, many of these agreements are for limited terms or are terminable at will or on short notice. As a result, Tripadvisor seeks to ensure the mutual success of these relationships.  

Tripadvisor has commercial relationships with a majority of the world’s leading OTAs, as well as thousands of other travel partners pursuant to which these companies primarily purchase traveler leads from Tripadvisor, generally on a click-based advertising basis. For the years ended December 31, 2019, 2018 and 2017, Tripadvisor’s two most significant travel partners were Expedia Group, Inc. (“Expedia”) and Booking Holdings Inc. (“Booking Holdings”), which each accounted for more than 10% of Tripadvisor’s consolidated revenue and together accounted for approximately 33%, 37% and 43%, respectively, of its consolidated revenue, with nearly all of this revenue concentrated in the Tripadvisor-branded Hotels revenue line within the Hotels, Media & Platform segment for these reporting periods.

Intellectual Property

Tripadvisor’s intellectual property, including patents, trademarks, copyrights, domain names, trade dress, proprietary technology and trade secrets, is an important component of its business. Tripadvisor relies on its intellectual property rights in its content, proprietary technology, software code, ratings indexes, databases of reviews and forum content. Tripadvisor has acquired some of its intellectual property rights through licenses and content agreements with third parties and these agreements may place restrictions on its use of the intellectual property.

Tripadvisor protects its intellectual property by relying on its terms of use, confidentiality agreements and contractual provisions, as well as on international, national, federal, state and common law rights. Tripadvisor protects its brands by pursuing the trademark registration of its core brands, as appropriate, maintaining its trademark portfolio, securing contractual trademark rights protection when appropriate, and relying on common law trademark rights when appropriate. Tripadvisor also registers copyrights and domain names as deemed appropriate. Additionally, Tripadvisor protects its trademarks, domain names and copyrights with the use of intellectual property licenses and an enforcement program.

Tripadvisor has considered, and will continue to consider, the appropriateness of filing for patents to protect future inventions, as circumstances may warrant.  However, many patents protect only specific inventions and there can be no assurance that others may not create new products or methods that achieve similar results without infringing upon patents owned by Tripadvisor.

In connection with Tripadvisor’s copyrightable content, it posts and institutes procedures under the United States (“U.S.”) Digital Millennium Copyright Act and similar “host privilege” statutes worldwide to gain immunity from copyright liability for photographs, text and other content loaded on its sites by users.  However, differences between statutes, limitations on immunity, and moderation efforts in the many jurisdictions in which Tripadvisor operates may affect its ability to claim immunity.

From time to time, Tripadvisor may be subject to legal proceedings and claims in the ordinary course of its business, including claims of alleged infringement by Tripadvisor of the trademarks, copyrights, patents, and other intellectual property rights of third parties.  In addition, litigation may be necessary in the future to enforce Tripadvisor’s intellectual property rights, protect its trade secrets or determine the validity and scope of proprietary rights claimed by others.  Any such litigation, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could materially harm Tripadvisor’s business.  

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Seasonality

Consumers’ travel expenditures follow a seasonal pattern.  Correspondingly, travel partners’ advertising investments, and therefore Tripadvisor’s revenue and profits, also follow a seasonal pattern.  Tripadvisor’s financial performance tends to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in consumer demand, traveler hotel and rental stays, and travel activities and experiences taken, compared to the first and fourth quarters, which represent seasonal low points. Significant shifts in Tripadvisor’s business mix or adverse economic conditions could result in future seasonal patterns that are different from historical trends.

Terms of Investment in Tripadvisor

We own an approximate 23% equity interest and 58% voting interest in Tripadvisor as of December 31, 2019. Tripadvisor’s amended and restated certificate of incorporation provides that the holders of Tripadvisor common stock, acting as a single class, are entitled to elect a number of directors equal to 25% of the total number of directors, rounded up to the next whole number, which is currently three directors. We consolidate Tripadvisor as we control a majority of the voting interest in Tripadvisor. We are subject to a Governance Agreement with Tripadvisor which provides us with certain director nomination, registration and other rights and imposes certain restrictions on our shares of Class B common stock.

Regulatory Matters

Tripadvisor is subject to a number of laws and regulations that affect companies conducting business on the Internet and relating to the travel industry, the vacation rental industry and the provision of travel services.  As Tripadvisor continues to expand the reach of its brands into additional international markets, it is increasingly subject to additional laws and regulations.  These include laws and regulations regarding, among other matters, consumer privacy, data protection, libel, rights of publicity, content, intellectual property, distribution, electronic contracts and other communications, consumer protection, taxation, online payment services, competition and protection of minors. These laws and regulations are constantly evolving and can be subject to significant change. Many of these laws and regulations are being tested in courts, and could be interpreted by regulators and courts in ways that could harm Tripadvisor’s business. In addition, the application and interpretation of these laws and regulations is often uncertain, particularly in the new and rapidly-evolving industry in which Tripadvisor operates.

In addition, Tripadvisor provides advertising data and information and conducts marketing activities that are subject to consumer protection laws and regulations that regulate unfair and deceptive practices, domestically and internationally, including, in some countries, pricing display requirements, licensing and registration requirements and industry specific value-added tax regimes. The United States (as well as individual states), the European Union (the “E.U.”) (as well as member states) and other countries have adopted laws and regulations that regulate certain aspects of the Internet, among other matters, including online editorial and user-generated content, data privacy, behavioral targeting and online advertising, taxation, and liability for third-party activities.

It is difficult to accurately predict how such legislation will be interpreted and applied or whether new taxes or regulations will be imposed on Tripadvisor’s services, and whether or how Tripadvisor might be affected. Increased regulation of the Internet could increase the cost of doing business or otherwise materially adversely affect Tripadvisor’s business, financial condition or operating results.

Tripadvisor is subject to laws that require protection of user privacy and user data. As business has evolved, Tripadvisor has begun to receive and store a greater volume of personally identifiable data. These data are increasingly subject to laws and regulations in numerous jurisdictions around the world. For example, the E.U. adopted the General Data Protection Regulation (“GDPR”), effective in May 2018, which requires companies, including Tripadvisor, to meet enhanced requirements regarding the handling of personal data.  In addition, the State of California adopted the Consumer Privacy Protection Act which became effective January 1, 2020 and also enhances privacy rights and consumer protection for residents of California.  In addition, similar laws have been adopted or are currently under discussion in other jurisdictions.  The enactment, interpretation and application of these laws is still in a state of flux.

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On June 23, 2016, the U.K. passed a referendum to exit the E.U., known as Brexit, and the U.K. ceased to be a member of the E.U. on January 31, 2020.  The E.U. and U.K. will continue to work on the terms of the departure through a transition period ending December 31, 2020.  Since the final terms of the U.K.’s exit from the E.U. remain uncertain, Tripadvisor is unable to predict the effect Brexit will have on its business and results of operations; however, Tripadvisor will likely face new regulatory costs and challenges if the U.K. regulations diverge from those of the E.U.

Marketing and Competition

Tripadvisor competes with other companies in rapidly evolving categories of the travel industry.  In these areas, Tripadvisor competes for content, traffic, advertising dollars, and, more generally, to attract and retain users’ attention, both in terms of reach and engagement.  Since Tripadvisor’s products and those of its competitors are typically free, Tripadvisor competes based on its brand, the quality and nature of its product offerings and its online travel search and price comparison services (or metasearch), rather than on price.  As such, Tripadvisor invests heavily in constantly improving its user experience and expanding content, listings and bookable inventory.

Tripadvisor also invests to amplify its global brand and raise consumer awareness of, and engagement with, its end-to-end product offerings. Tripadvisor leverages a number of online and offline marketing channels, including online search engines (primarily Google), social media, email and brand advertising (primarily television advertising). The relative success of Tripadvisor’s marketing strategy is more measurable on some of these channels than others, and can be influenced by changes that Tripadvisor, its travel partners, or its competitors make to their respective products and marketing strategies. During 2019, Tripadvisor’s advertising expense was primarily driven by investments in online search engines, and to a lesser extent, investments in offline marketing channels, which was primarily television advertising. Tripadvisor intends to promote brand awareness through both online and offline advertising efforts. Tripadvisor competes globally with both online and offline, established and emerging, providers of travel, lodging, experiences and restaurant reservation and related services.  The markets for the services Tripadvisor offers are intensely competitive, and current and new competitors can launch new services at a relatively low cost.

Tripadvisor also competes with different types of companies in the various markets and geographies where it operates, including large and small companies in the travel space as well as broader service providers. More specifically:

Employees

Pursuant to a services agreement between Liberty Media and TripCo, 86 Liberty Media corporate employees provide certain management services to TripCo for a determined fee. As of December 31, 2019, Tripadvisor had approximately 4,194 employees. Of those employees, 45% were based in the United States. Tripadvisor believes it has good relationships with its employees, including relationships with employees represented by international works councils or other similar organizations.

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Available Information

All of our filings with the SEC, including our Form 10-Ks, Form 10-Qs and Form 8-Ks, as well as amendments to such filings are available on our Internet website free of charge generally within 24 hours after we file such material with the SEC.  Our website address is www.libertytripadvisorholdings.com.

Our corporate governance guidelines, code of business conduct and ethics, compensation committee charter, nominating and corporate governance committee charter, and audit committee charter are available on our website.  In addition, we will provide a copy of any of these documents, free of charge, to any shareholder who calls or submits a request in writing to Investor Relations, Liberty TripAdvisor Holdings, Inc., 12300 Liberty Boulevard, Englewood, Colorado 80112, Tel. No. (877) 772-1518.

The information contained on our website is not incorporated by reference herein.

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Item 1A. Risk Factors

The risks described below and elsewhere in this annual report are not the only ones that relate to our businesses or our capitalization.  The risks described below are considered to be the most material.  However, there may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that also could have material adverse effects on our businesses.  Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.  If any of the events described below were to occur, our businesses, prospects, financial condition, results of operations and/or cash flows could be materially adversely affected.

Factors Relating to Our Corporate History and Structure

We are a holding company, and we could be unable in the future to obtain cash in amounts sufficient to service our financial obligations or meet our other commitments.

Our ability to meet our financial obligations and other contractual commitments, including to make debt service payments under the Margin Loan Agreement (as defined below) and any other credit facilities that we may obtain in the future, depends upon our ability to access cash. We are a holding company, and our sources of cash include our available cash balances, any dividends and interest we may receive from our investments and proceeds from any asset sales we may undertake in the future. We currently have no plans with respect to any asset sales. The ability of Tripadvisor to pay dividends or to make other payments or advances to us depends on its operating results and any statutory, regulatory or contractual restrictions to which it may be or may become subject.

We do not have access to the cash that Tripadvisor generates from its operating activities.

Tripadvisor generated $424 million, $405 million and $238 million of cash from its operations during the years ended December 31, 2019, 2018 and 2017, respectively. Tripadvisor uses the cash it generates from its operations to fund its investing activities and to service its debt and other financing obligations. We do not have access to the cash that Tripadvisor generates unless Tripadvisor declares a dividend on its capital stock payable in cash, repurchases any or all of its outstanding shares of capital stock for cash or otherwise distributes or makes payments to its stockholders, including us. Other than the special dividend paid in December 2019, Tripadvisor has not historically paid any dividends on its capital stock or, with limited exceptions, otherwise distributed cash to its stockholders and instead has used all of its available cash in the expansion of its business and to service its debt obligations. Covenants in Tripadvisor’s existing debt instruments also restrict the payment of dividends and cash distributions to stockholders. We expect that Tripadvisor will continue to apply its available cash to the expansion of its business.

Our company may have future capital needs and may not be able to obtain additional financing, or refinance our existing indebtedness, on acceptable terms.

We had outstanding borrowings of $355 million (the “Margin Loan”) at December 31, 2019, including paid in kind interest, under a margin loan agreement (the “Margin Loan Agreement”) entered into by our bankruptcy remote wholly-owned subsidiary (“TripSPV”). Borrowings under the Margin Loan Agreement are guaranteed solely by our company and secured by our ownership interest in Tripadvisor. The Margin Loan matures in November 2022, and if we decide to refinance the Margin Loan, we may not be able to do so on acceptable terms. All of our equity interests in Tripadvisor are and will be held through TripSPV. Because our primary asset consists of our equity interests in Tripadvisor and the Margin Loan Agreement prohibits, with limited exceptions, the incurrence of additional indebtedness by TripSPV, our company is very limited in its ability to incur additional financing and our cash reserves may be insufficient to satisfy our financial obligations. In addition, the Margin Loan Agreement provides that, among other triggering events, if at any time the closing price per share of Tripadvisor common stock falls below certain minimum values, a partial repayment of the Margin Loan to a certain specified amount will be due and payable with respect to each such circumstance, together with accrued and unpaid interest. If the company or TripSPV is unable to pay such amounts, the lenders may foreclose on the pledged stock of Tripadvisor that TripSPV holds and any other collateral that then secures TripSPV’s obligations under the Margin Loan Agreement, which would materially adversely affect our asset composition and financial condition as well as our access to capital on a going forward basis.

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In addition, the availability of capital for our company will be subject to prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, all of which are beyond the control of our company. In light of periodic uncertainty in the capital and credit markets, there can be no assurance that sufficient financing will be available on desirable terms, if at all, to fund investments, acquisitions, stock repurchases, dividends, debt refinancing or extraordinary actions or that counterparties in any such financings would honor their contractual commitments. If financing is not available when needed or is not available on favorable terms, our company may be unable to complete acquisitions, repurchase equity or otherwise take advantage of business opportunities, any of which could have a material adverse effect on the business, financial condition and results of operations of our company. If we raise additional funds through the issuance of equity securities, our stockholders may experience significant dilution.

Our company has significant indebtedness, which could adversely affect our business and financial condition.

As discussed above, we entered into the Margin Loan Agreement as the guarantor with TripSPV as the borrower, pursuant to which TripSPV had outstanding borrowings of $355 million at December 31, 2019, including paid in kind interest. As a result of this significant indebtedness, our company may:

In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business. However, there is no assurance that additional financing will be available to our company on terms favorable to us, if at all. If new debt is added to the current debt levels, the risks described above could intensify. In addition, TripSPV is prohibited from incurring additional indebtedness under the Margin Loan Agreement, and we expect our company to have limited capacity to incur indebtedness outside of TripSPV.

Although Tripadvisor has substantial cash flow from operations, we have limited sources of cash and liquidity. Our cash balance is expected to enable us to fund our parent level operating expenses and debt service obligations for the foreseeable future; however, we cannot assure you that we will not experience unexpected expenses or that we will have sufficient liquidity to fund our operations and service our direct debt obligations during the foreseeable future. For additional information about our company’s ability to potentially service our direct debt obligations, see “We are a holding company, and we could be unable in the future to obtain cash in amounts sufficient to service our financial obligations or meet our other commitments.” and “We do not have access to the cash that Tripadvisor generates from its operating activities.” above.

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The Margin Loan Agreement contains various covenants that will restrict the activities of TripSPV and could trigger an early repayment obligation.

As discussed above, we entered into the Margin Loan Agreement as the guarantor with TripSPV as the borrower, pursuant to which we had outstanding borrowings of $355 million, including paid in kind interest at December 31, 2019. The Margin Loan Agreement contains various covenants, including those that limit our ability to, among other things:

In addition, as discussed above, the Margin Loan Agreement provides that, among other triggering events, if at any time the closing price per share of Tripadvisor common stock falls below certain minimum values, a partial repayment of the Margin Loan to certain specified amounts will be due and payable with respect to each such circumstance, together with accrued and unpaid interest, and if the company or TripSPV is unable to pay such amounts, the lenders may foreclose on the pledged stock of Tripadvisor that TripSPV holds and any other collateral that then secures TripSPV’s obligations under the Margin Loan Agreement, which would materially adversely affect our asset composition and financial condition.

Any failure to comply with the restrictions of the Margin Loan Agreement may result in an event of default under the agreement governing such facility. Such default may allow the applicable creditors to accelerate the debt incurred thereunder. For additional information regarding the potential impact of the restrictions in this debt arrangement, see “Our company may have future capital needs and may not be able to obtain additional financing, or refinance our existing indebtedness, on acceptable terms.”

Our company has overlapping directors and officers with Qurate Retail, Liberty Media, LBC and GCI Liberty, which may lead to conflicting interests.

As a result of the TripCo Spin-Off and other transactions between 2011 and 2018 that resulted in the separate corporate existence of Qurate Retail, Liberty Media, LBC and GCI Liberty, most of our executive officers also serve as executive officers of Qurate Retail, Liberty Media, LBC and GCI Liberty and there are overlapping directors. Other than GCI Liberty’s current ownership of shares of LBC’s non-voting Series C common stock, none of the foregoing companies has any ownership interest in any of the others. Our executive officers and members of our company’s board of directors have fiduciary duties to our stockholders. Likewise, any such persons who serve in similar capacities at Qurate Retail, Liberty Media, LBC, GCI Liberty or any other public company have fiduciary duties to that company’s stockholders.  For example, there may be the potential for a conflict of interest when our company, Qurate Retail, Liberty Media, LBC or GCI Liberty looks at acquisitions and other corporate opportunities that may be suitable for each of them. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting more than one of the companies to which they owe fiduciary duties.  Moreover, many of our company’s directors and officers own Qurate Retail, Liberty Media, LBC and/or GCI Liberty stock and equity awards. These ownership interests could create, or appear to create, potential conflicts of interest when the applicable individuals are faced with decisions that could have different implications for our company, Qurate Retail, Liberty Media, LBC and GCI Liberty. Each of our company, LBC and GCI Liberty has renounced its rights to certain business opportunities and their respective restated certificate of incorporation provides that no director or officer of the respective company will breach their fiduciary duty and therefore be liable to the respective company or its stockholders by reason of the fact that any such individual directs a corporate opportunity to another person or entity (including Qurate Retail, Liberty Media, LBC, GCI Liberty and TripCo, as the case may be) instead of the respective company, or does not refer or communicate information regarding such corporate opportunity to the respective company, unless (x) such opportunity was expressly offered to such person solely in his or her capacity as a director or officer of the respective company or as a director or officer of any of the respective company’s subsidiaries, and (y) such opportunity relates to a line of business in which the respective company or any of its subsidiaries is then directly engaged. In addition, any potential conflict that qualifies as a “related party transaction” (as defined in Item 404 of Regulation S-K) is subject to review by an independent committee of the applicable issuer’s board of directors in accordance with its corporate governance guidelines. Any other potential conflicts that arise

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will be addressed on a case-by-case basis, keeping in mind the applicable fiduciary duties owed by the executive officers and directors of each issuer. From time to time, we may enter into transactions with Qurate Retail, Liberty Media, LBC, GCI Liberty and/or their subsidiaries or other affiliates. There can be no assurance that the terms of any such transactions will be as favorable to our company, Qurate Retail, Liberty Media, LBC, GCI Liberty or any of their respective subsidiaries or affiliates as would be the case where there is no overlapping officer or director.

Certain of our inter-company agreements were negotiated while we were a subsidiary of Qurate Retail.

We entered into a number of inter-company agreements covering matters such as tax sharing and our responsibility for certain liabilities previously undertaken by Qurate Retail for certain of our businesses. In addition, we entered into a services agreement with Liberty Media pursuant to which it provides to us certain management, administrative, financial, treasury, accounting, tax, legal and other services, for which we pay Liberty Media a services fee, and pursuant to a recent amendment to the services agreement, components of our President and Chief Executive Officer’s compensation will either be paid directly to him by our company or reimbursed to Liberty Media, in each case, based on the allocation set forth in the amendment. The terms of all of these agreements (other than the amendment to the services agreement relating to Mr. Maffei’s compensation) were established while we were a wholly owned subsidiary of Qurate Retail, and hence may not be the result of arms’ length negotiations. Although we believe that the negotiations with Liberty Media were at arms’ length, the persons negotiating on behalf of Liberty Media also serve as officers of Qurate Retail, as described above. We believe that the terms of these inter-company agreements are commercially reasonable and fair to all parties under the circumstances; however, conflicts could arise in the interpretation or any extension or renegotiation of the foregoing agreements.

Goodwill and other identifiable intangible assets, specifically trademarks, represent a significant portion of our total assets, and we may never realize the full value of our intangible assets.

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As of December 31, 2019, we had intangible assets not subject to amortization, which consisted of goodwill and trademarks, of approximately $3,507 million, which represented approximately 74% of total assets as of December 31, 2019. These intangible assets were recorded in connection with our acquisition of a controlling interest in Tripadvisor in 2012 and subsequent acquisitions by Tripadvisor. We perform our annual assessment of the recoverability of our goodwill and other non-amortizable intangible assets during the fourth quarter, or more frequently if events and circumstances indicate impairment may have occurred. Impairments may result from, among other things, deterioration in financial and operational performance, declines in stock price, increased attrition, adverse market conditions, adverse changes in applicable laws and/or regulations, deterioration of general macroeconomic conditions, fluctuations in foreign exchange rates, increased competitive markets in which Tripadvisor operates in, declining financial performance over a sustained period, changes in key personnel and/or strategy, and a variety of other factors.

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Due to deteriorations in revenue, impairment losses of $288 million and $527 million were recorded during the years ended December 31, 2019 and December 31, 2017, respectively, related to trademarks.  The trademarks were related to the hotels, media & platform reporting unit in 2019 and the legacy hotels reporting unit in 2017, which is now included in the hotels, media & platform reporting unit.  Due to certain marketplace factors impacting Tripadvisor’s operating results, which led to a decline in Tripadvisor’s stock price, an impairment loss of $1,271 million was recorded during the year ended December 31, 2017 related to goodwill, related to the legacy hotels reporting unit, which is now included in the hotels, media & platform reporting unit. TripCo will continue to monitor Tripadvisor’s financial performance, stock price and other events and circumstances that may negatively impact the estimated fair values to determine if an additional impairment assessment is necessary.

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The amount of any quantified impairment must be expensed immediately as a charge to results of operations. Any impairment charge relating to goodwill or other intangible assets would have the effect of decreasing our earnings or increasing our losses in such period. At least annually, or as circumstances arise that may trigger an assessment, we will test our goodwill for impairment. There can be no assurance that our future evaluations of goodwill will not result in our recognition of impairment charges, which may have a material adverse effect on our financial statements and results of operations.

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Factors Relating to Tripadvisor

If Tripadvisor is unable to continue to attract a significant amount of visitors to its websites and mobile apps and to cost-effectively convert these visitors into revenue-generating users, and to continue to engage its users, its revenue, financial results and business could be harmed.

Tripadvisor’s long-term success depends on its continued ability to attract a significant number of visitors to its platforms in a cost effective manner, to convert those visitors into consumers and to then to continue to engage those consumers throughout the travel planning, booking and trip-taking phases. Tripadvisor’s traffic and user engagement could be adversely affected by a number of factors, including but not limited to increased competition; inability to provide quality content, inventory or supply to its consumers; declines or inefficiencies in traffic acquisition; reduced awareness of Tripadvisor’s brands; and macroeconomic conditions. Certain of Tripadvisor’s competitors have advertising campaigns expressly designed to drive traffic directly to their websites, and these campaigns may negatively impact traffic to Tripadvisor’s site. Tripadvisor’s traffic growth could decline over time and its success could become increasingly dependent on Tripadvisor’s ability to increase levels of user engagement on its platform. There can be no assurances that Tripadvisor will continue to provide content and products in a manner that meets rapidly changing demand. Any failure to obtain and manage content and products in a cost-effective manner that will engage users, or any failure to provide content and products that are perceived as useful, reliable and trustworthy, could adversely affect user experiences and their repeat behavior, reduce traffic to its websites and negatively impact its business and financial performance.

Tripadvisor relies on Internet search engines and application marketplaces to drive traffic to its platform, certain providers of which offer products and services that compete directly with its products. If links to its websites and apps are not displayed prominently, traffic to Tripadvisor’s platform could decline and its business would be negatively affected.

Tripadvisor relies heavily on Internet search engines to generate a significant amount of traffic to its websites, principally through search engine marketing, or SEM (i.e., the purchase of travel-related keywords) as well as through search engine optimization, or SEO (i.e., free, or organic, search). The number of consumers Tripadvisor attracts from search engines to its platform is due in large part to how and where information from, and links to, Tripadvisor’s websites are displayed on search engine results pages, or SERPs. The display, including rankings, of search results can be affected by a number of factors, many of which are not in Tripadvisor’s control and may change frequently. Search engines frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to Tripadvisor’s websites can be negatively affected. In addition, a search engine could, for competitive or other purposes, alter its search algorithms or results causing Tripadvisor’s websites to place lower in search query results. If a major search engine changes its algorithms in a manner that negatively affects the search engine ranking of Tripadvisor’s websites or those of its travel partners, or if competitive dynamics impact the cost or effectiveness of SEO or SEM in a negative manner, Tripadvisor’s business and financial performance would be adversely affected. Furthermore, Tripadvisor’s failure to successfully manage its SEO and SEM strategies and/or other traffic acquisition strategies could result in a substantial decrease in traffic to its websites, as well as increased costs to the extent Tripadvisor replaces free traffic with paid traffic.

In some instances, search and metasearch companies and application marketplaces may change their displays or rankings in order to promote their own competing products or services or the products or services of one or more of Tripadvisor’s competitors. For example, Google, a significant source of traffic to Tripadvisor’s website accounting for a substantial portion of the visits to its websites, frequently promotes its own competing products in its web search results, which has negatively impacted placement of references to Tripadvisor’s company and its website on the SERP. Google’s promotion of its own competing products, or similar actions by Google in the future that have the effect of reducing Tripadvisor’s prominence or ranking on its search results, could have a substantial negative effect on its business and results of operations.

Tripadvisor also relies on application marketplaces, or app stores such as Apple’s App Store and Google’s Play, to drive downloads of its applications. In the future, Apple, Google or other marketplace operators may make changes to their marketplaces that make access to Tripadvisor’s products more difficult. For example, Google has entered various aspects of the online travel market, including by establishing a flight metasearch product and a hotel metasearch product,

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as well as reservation functionality. Tripadvisor’s applications may receive unfavorable treatment compared to the promotion and placement of competing applications, such as the order in which they appear within marketplaces. Similarly, if problems arise in Tripadvisor’s relationships with providers of application marketplaces, traffic to its site and its user growth could be harmed.

Tripadvisor derives a substantial portion of its revenue from advertising and any significant reduction in spending by advertisers or redirections of advertising spend could harm its business. In addition, Tripadvisor relies on a relatively small number of significant advertising partners and any reduction in spending by or loss of these partners could seriously harm its business.

Tripadvisor derives a substantial portion of its revenue from the sale of advertising, primarily through click-based advertising and, to a lesser extent, display-based and subscription-based advertising. Tripadvisor enters into advertising contracts with its advertising partners; however, the agreement terms are generally limited to legal matters, with campaign details and economics governed by insertion orders, and most of these contracts can be terminated by its partners at will or on short notice. Tripadvisor’s ability to grow advertising revenue with its existing or new advertising partners is dependent in large part on its ability to generate revenue for them relative to other alternatives. Advertisers will not continue to do business with Tripadvisor if their investment in such advertising does not generate sales leads, customers, bookings, or revenue and profit on a cost-effective basis. Tripadvisor’s ability to provide value to its advertising partners depends on a number of factors, including effectiveness of online advertising, competitiveness of its products, traffic quality, perception of its platform, availability and accuracy of analytics and measurement solutions to demonstrate its value, and macroeconomic conditions, whether in the advertising industry generally, among specific types of marketers or within particular geographies. Tripadvisor cannot guarantee that its current advertisers will fulfill their obligations under existing contracts, continue to advertise beyond the terms of existing contracts or enter into any additional contracts with it.

In addition, advertising revenue could be impacted by a number of other factors, including, but not limited to, the following:

The occurrence of any of these or other factors could result in a reduction in demand for Tripadvisor’s ads, which may reduce the prices it receives for ads, or cause marketers to stop advertising with Tripadvisor altogether, either of which would negatively affect Tripadvisor’s revenue and financial results.

Click-based advertising revenue accounts for the majority of Tripadvisor’s advertising revenue. Tripadvisor’s CPC pricing for click-based advertising depends, in part, on competition between advertisers. If its large advertisers become less competitive with each other, merge with each other or with its competitors, focus more on per-click profit than on traffic volume, or are able to reduce CPCs, this could have an adverse impact on Tripadvisor’s click-based advertising revenue which would, in turn, have an adverse effect on its business, financial condition and results of operations.

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Tripadvisor derives a substantial portion of its revenue from a relatively small number of advertising partners and relies significantly on these relationships. For example, for the year ended December 31, 2019, Tripadvisor’s two most significant advertising partners, Expedia and Booking Holdings, accounted for a combined 33% of total revenue. While Tripadvisor enters into master advertising contracts with its partners, as discussed above, most of these contracts can be terminated by its partners at will or on short notice. If any of its significant advertisers were to cease or significantly curtail advertising on Tripadvisor’s websites, Tripadvisor could experience a rapid decline in its revenue over a relatively short period of time which would have a material impact on its business.

Tripadvisor’s business depends on a strong brand and any failure to maintain, protect and enhance its brand could hurt its ability to retain and expand its base of consumers and partners, as well as increase the frequency with which consumers utilize its products and services.  

Tripadvisor believes that the strength of its brands (particularly the Tripadvisor brand) has contributed significantly to its success.  Tripadvisor also believes that maintaining, protecting and enhancing its brands is critical to expanding its base of consumers, increasing the frequency with which consumers utilize its solutions and attracting advertisers and business partners. Tripadvisor’s ability to maintain and protect its brand depends, in part, on its ability to maintain consumer trust in its products and in the quality, integrity, reliability of usefulness of the content and other information found on its platform. For example, if consumers do not view Tripadvisor’s reviews to be useful and reliable, they may seek other sources to obtain the information they are looking for and may not return to Tripadvisor’s platform as often in the future, or at all.  This would negatively impact Tripadvisor’s ability to attract and retain consumers and partners and the frequency with which they use its platform.

Tripadvisor dedicates significant resources to these goals, primarily through its computer algorithms and teams of moderators that are focused on identifying inappropriate, unreliable or deceptive content. Tripadvisor removes those types of content from its website and, in certain cases, takes legal action against individuals or businesses that it believes have engaged in deceptive practices.

Media, legislative or regulatory scrutiny of Tripadvisor’s decisions regarding user privacy, content, advertising, and other issues may adversely affect its reputation and brands. Negative publicity about Tripadvisor, including its content, technology, business practices or strategic plans, could diminish Tripadvisor’s reputation and confidence in Tripadvisor’s brand, thereby negatively affecting the use of its products and potentially even Tripadvisor’s share price. For example, certain media outlets have alleged that Tripadvisor has improperly filtered or screened reviews, that it has not properly verified reviews, or that Tripadvisor manipulates reviews, ranking and ratings in favor of its advertisers against non-advertisers. Tripadvisor expends significant resources to ensure the integrity of its reviews and to ensure that the most relevant reviews are available to its consumers; Tripadvisor does not establish rankings and ratings in favor of its advertisers.  Nevertheless, Tripadvisor’s reputation and brand, the traffic to its platform, its business and potentially even Tripadvisor’s share price may suffer from negative publicity about Tripadvisor or if consumers otherwise perceive that its content is manipulated or biased.  In addition, regulatory inquiries or investigations require management time and attention and could result in further negative publicity, regardless of their merits or ultimate outcomes.  

In addition, unfavorable publicity regarding, for example, Tripadvisor’s practices relating to privacy and data protection, product changes, competitive pressures, litigation or regulatory activity could adversely affect Tripadvisor’s reputation with its consumers and its partners. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of its user base and result in decreased revenue.

Tripadvisor continues to invest significant time and effort towards educating users about its brand and its product offerings and there can be no assurances that these efforts will continue to be successful.

In an effort to enhance its brand, Tripadvisor invests significantly in brand marketing, including, but not limited to, television advertising.  Tripadvisor expects these investments to continue, and potentially even increase, as a result of a variety of factors, including relatively high levels of advertising spending by competitors, the increasing costs of supporting multiple brands, expansion into new geographies, product positioning where Tripadvisor’s brands are less well known and the continued emergence and relative traffic share growth of search engines as destination sites for travelers.  Tripadvisor expects to continue its television advertising campaign and to adjust its marketing efforts and spend among

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the different marketing channels, in each case as Tripadvisor thinks appropriate based on the relative growth opportunity, the expected returns and the competitive environment in the different businesses in which Tripadvisor operates.

Such efforts may not maintain or enhance consumer awareness of Tripadvisor’s brands and, even if Tripadvisor is successful in its branding efforts, such efforts may not be cost-effective or as efficient as they have been historically. If Tripadvisor is unable to maintain or enhance consumer awareness of its brands or to generate demand in a cost-effective manner, it would have a material adverse effect on Tripadvisor’s business and financial performance. In addition, there are no assurances that these actions will have a positive impact on Tripadvisor’s marketing efficiencies or operating margins or when the financial benefit expected to result from these efforts will exceed the costs of such efforts.  Furthermore, some of Tripadvisor’s current and potential competitors have access to significantly greater and more diverse resources than Tripadvisor does, and they may also be able to leverage other aspects of their businesses to enable them to compete more effectively with Tripadvisor.

Consumer adoption and use of mobile devices creates new challenges. If Tripadvisor is unable to operate effectively on these platforms or its products for such devices are not compelling, its business may be adversely affected.

Widespread adoption of mobile devices, such as the iPhone, Android-enabled smartphones and tablets, such as the iPad, coupled with web browsing functionality and development of thousands of useful apps available on these devices, is driving substantial online traffic and commerce to mobile platforms.  Tripadvisor has experienced a significant shift of business to mobile platforms and its advertising partners are also experiencing a rapid shift of traffic to mobile platforms. Tripadvisor anticipates that the rate of use of these devices will continue to grow. The functionality and user experience associated with these alternative devices, such as a smaller screen size or lack of a screen, may make the use of Tripadvisor’s platform through such devices more difficult.  Tripadvisor’s websites and apps, when utilized on mobile phone devices, monetize at a significantly lower rate than desktops and advertising opportunities are more limited on these mobile devices. Additionally, consumer purchasing patterns differ on alternative devices. For example, accommodation reservations made on a mobile device typically are for shorter lengths of stay and are not made as far in advance. Mobile consumers may also be unwilling to download multiple apps from multiple companies providing similar services or contribute high quality content through such devices. As a result, the consumer experience with mobile apps and brand recognition are likely to become increasingly important. Tripadvisor expects that the ways in which consumers engage with its platform will continue to change over time as consumers increasingly engage via alternative devices.    

It is increasingly important for Tripadvisor to develop and maintain effective platforms to drive adoption and user engagement by providing consumers with an appealing, easy-to-use experience. As new devices and platforms are continually being released, it is difficult to predict the problems Tripadvisor may encounter in adapting its products and services to them – and developing competitive new products and services - and Tripadvisor may need to devote significant resources to the creation, support and maintenance of such products.  If Tripadvisor is unable to continue to rapidly innovate and create new, user-friendly and differentiated offerings and efficiently and effectively advertise and distribute on these platforms, or if Tripadvisor’s offerings are not used by consumers, Tripadvisor could lose market share and its business, future growth and results of operations could be adversely affected.

Tripadvisor’s success will also depend on the interoperability of its products with a range of technologies, systems, networks and standards or in creating, maintaining and developing relationships with key participants in related industries, some of which may be Tripadvisor’s competitors. For example, Google’s Android and Apple’s iPhone are the leading smartphones in the world; therefore, Tripadvisor’s products need to synergistically function on their respective operating systems in order to create a positive user experience on a mobile device. However, Google could leverage its Android operating system to give its travel services a competitive advantage, either technically or with prominence on its Google Play app store or within its mobile search results. Similarly, Apple obtained a patent for “iTravel,” a mobile app that would allow a traveler to check in for a travel reservation. In addition, Apple’s iPhone operating system includes “Wallet,” a virtual wallet app that holds tickets, boarding passes, coupons and gift cards, and, along with iTravel, may be indicative of Apple’s intent to enter the travel reservations business in some capacity. Apple has substantial market share in the smartphone category and controls integration of offerings, including travel services, into its mobile operating system. Apple also has more experience producing and developing mobile apps and has access to greater resources than Tripadvisor does. Apple may use or expand iTravel, Wallet, Siri (Apple’s voice recognition “concierge” service), Apple Pay (Apple’s mobile payment system) or another mobile app or functionality as a means of entering the travel reservations

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marketplace. To the extent Google or Apple use their mobile operating systems, app distribution channels or, in the case of Google, search services, to favor their own travel service offerings, there may be an adverse effect on Tripadvisor’s ability to compete in the mobile space. Tripadvisor may not be successful in developing products that operate effectively with these technologies, systems, networks and standards or in creating, maintaining and developing relationships with key participants in related industries. If Tripadvisor experiences difficulties or increased costs in integrating its products into alternative devices, or if manufacturers elect not to include its products in their devices, make changes that degrade the functionality of its products, give preferential treatment to competitive products or prevent Tripadvisor from delivering advertising, Tripadvisor’s user growth and results of operations may be harmed. This risk may be exacerbated by the frequency with which consumers change or upgrade their devices. In the event consumers choose devices that do not already include or support Tripadvisor’s platform or do not install its products when they change or upgrade their devices, Tripadvisor’s traffic and user engagement may be harmed.

In addition, the market for advertising products on mobile and other devices is rapidly evolving. As new devices and platforms are released, consumers may begin consuming content in a manner that is more difficult to monetize. Similarly, as advertising products for mobile and other platforms develop, demand may increase for products that Tripadvisor does not offer or that may alienate its user base, which it must balance against its commitment to prioritizing the quality of user experience over short-term monetization. If Tripadvisor is not able to balance these competing considerations successfully to develop compelling advertising products, advertisers may stop or reduce their advertising with Tripadvisor and Tripadvisor may not be able to generate meaningful revenue from alternative devices despite the expected growth in their usage.

Declines or disruptions in the economy in general and the travel industry, in particular, could adversely affect Tripadvisor’s businesses and financial performance.

Tripadvisor’s businesses and financial performance are affected by the health of the global economy generally as well as the travel industry and leisure travel in particular. Sales of travel services tend to decline or grow more slowly during economic downturns and recessions when consumers engage in less discretionary spending, are concerned about unemployment or economic weakness, have reduced access to credit or experience other concerns that reduce their ability or willingness to travel. The global economy may be adversely impacted by unforeseen events beyond Tripadvisor’s control, including incidents of actual or threatened terrorism, regional hostilities or instability, unusual weather patterns, natural disasters, political instability and health concerns (including epidemics or pandemics), defaults on government debt, significant increases in fuel and energy costs, tax increases and other matters that could reduce discretionary spending, tightening of credit markets and declines in consumer confidence. Decreased travel spending could reduce the demand for Tripadvisor’s services and have a negative impact on its business and financial performance.

In addition, the uncertainty of macro-economic factors and their impact on consumer behavior, which may differ across regions, makes it more difficult to forecast industry and consumer trends and the timing and degree of their impact on Tripadvisor’s markets and business, which in turn could adversely affect Tripadvisor’s ability to effectively manage its business and its results of operations.

For example, since the United Kingdom (the “U.K.”) initiated the process to exit the European Union (the “E.U.”), known as Brexit, global markets and foreign exchange rates have experienced increased volatility, including a decline in the value of the British pound as compared to the U.S. Dollar.  Tripadvisor has significant operations in both the U.K. and the E.U.  Tripadvisor’s operations and those of its merchants are highly integrated across the U.K. and the E.U. and are highly dependent on the free flow of labor and goods in those regions.  Although the U.K. ceased to be a member of the E.U. on January 31, 2020, the U.K. and E.U. will continue to work on the terms of the departure through a transition period ending December 31, 2020.  As a result, there remains significant uncertainty about the future relationship between the U.K. and the E.U.  The ongoing uncertainty and potential outcomes could negatively impact Tripadvisor’s merchant and customer relationships and financial performance.  In addition, uncertainty could continue to adversely affect consumer confidence and spending in the U.K. Tripadvisor could face new regulatory costs and challenges when the final terms of the governing relationships and final U.K. regulations are determined.  Since the final terms of that exit and the U.K. regulatory environment are uncertain, Tripadvisor is unable to predict the effect Brexit will have on its business and results of operations.

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As another example, Tripadvisor’s financial results may be negatively impacted by the 2019 Novel Coronavirus outbreak.  The extent and duration of such impacts remain largely uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the coronavirus, the extent and effectiveness of containment actions taken and the impact of these and other factors on travel behavior.

Tripadvisor operates in an increasingly competitive global environment and its failure to compete effectively could reduce its market share and harm its financial performance.

Tripadvisor competes in a rapidly evolving and competitive industry. It faces competition for content, consumers, advertisers, online travel search and price comparison services, or what is known in the industry as metasearch, and online reservations. Tripadvisor competes globally with both online and offline, established and emerging, providers of travel, lodging, experiences and restaurant reservation and related services. The markets for the services Tripadvisor offers are intensely competitive, and current and new competitors can launch new services at a relatively low cost.

Tripadvisor also competes with different types of companies in the various markets and geographies where it operates, including large and small companies in the travel space as well as broader service providers.  More specifically:

There has been a proliferation of new channels through which providers can offer accommodations, experiences and restaurant reservations.  Metasearch services may lower the cost for new companies to enter the market by providing a distribution channel without the cost of promoting the new entrant’s brand to drive consumers directly to its website.  Some of Tripadvisor’s competitors and potential competitors offer a variety of online services, many of which are used by competitors more frequently than online travel services.  In addition, in some cases, Tripadvisor’s competitors are willing to make little or no profit on a transaction, or offer travel services at a loss, in order to gain market share. Many of Tripadvisor’s competitors (such as Google, Booking Holdings and Trip.com Group Limited) have significantly greater financial, technical, marketing and other resources than Tripadvisor and have more expertise in developing online commerce and facilitating Internet traffic as well as large client bases. They also have the ability to leverage other aspects of their business to enable them to compete more effectively against Tripadvisor. For example, Google has entered various aspects of the online travel market, including by establishing a flight metasearch product ("Google Flights") and a hotel metasearch product ("Google Hotel Ads") that are growing rapidly, as well as its "Book on Google" reservation functionality and its Google Trips app.

In addition, Google and other large, established companies with substantial resources and expertise in developing online commerce and facilitating Internet traffic have launched travel or travel-related search, metasearch and/or reservation booking services and may create additional inroads into online travel. Google's travel metasearch services, Google Hotel Ads and Google Flights, are growing rapidly and have achieved significant market share in a relatively short time. In addition, many of Tripadvisor’s competitors, including online search companies, continue to expand their voice and artificial intelligence capabilities, which may provide them with a competitive advantage in travel. Tripadvisor cannot provide assurance that it will be able to compete successfully against its current, emerging and future competitors or on platforms that may emerge, or provide differentiated products and services to its traveler base.    

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Tripadvisor competes with certain companies that Tripadvisor also does business with, including some of its click-based advertising travel partners. The consolidation of Tripadvisor’s competitors and travel partners, including Expedia (through its acquisitions of Orbitz, Travelocity, and HomeAway) and Booking Holdings (through its acquisitions of KAYAK and OpenTable), may affect Tripadvisor’s relative competitiveness and its travel partner relationships. Competition and consolidation could result in higher traffic acquisition costs, reduced margins on Tripadvisor’s advertising services, loss of market share, reduced customer traffic to its websites and reduced advertising by travel companies on its websites.

As the industry shifts towards online travel services and the technology supporting it continues to evolve, including platforms such as mobile phone and tablet computing devices, competition is likely to intensify. Competition in Tripadvisor’s industry may result in pricing pressure, loss of market share or decreased user engagement, any of which could adversely affect its business and financial performance.

Tripadvisor relies on information technology to operate its business and remain competitive, and any failure to adapt to technological developments or industry trends could harm its businesses.

Tripadvisor depends on the use of sophisticated information technologies and systems for website and mobile apps, supplier connectivity, communications, reservations, payment processing, procurement, customer service and fraud prevention. Tripadvisor’s future success depends on its ability to continuously improve and upgrade its systems and infrastructure to meet rapidly evolving consumer trends and demands while at the same time maintaining the reliability and integrity of its systems and infrastructure. Tripadvisor may not be able to maintain or replace its existing systems or introduce new technologies and systems as quickly as it would like or in a cost-effective manner. Tripadvisor may not be successful, or as successful as its competitors, in developing technologies and systems that operate effectively across multiple devices and platforms in a way that is appealing to its consumers. In addition, the emergence of alternative devices such as mobile phones and tablets and the emergence of niche competitors who may be able to optimize products, services or strategies for such platforms, will require additional investment in technology. New developments in other areas could also make it easier for competitors to enter Tripadvisor’s markets due to lower up-front technology costs. Technology changes, including new devices, services and home assistants, such as Amazon’s Alexa Voice and Google Home, and developing technologies, such as machine learning and artificial intelligence, could negatively impact Tripadvisor’s business.

If Tripadvisor does not continue to innovate and provide products, services and features that are useful to users, it may not remain competitive, and its business and financial performance could suffer.

Tripadvisor’s success depends in part on continued innovation to provide products, features and services that make its platform compelling to users and engage its consumers. Its competitors are continually developing innovations in online travel-related services and features. As a result, Tripadvisor is continually working to improve its business model and consumer experience in order to engage its consumers and drive user traffic and conversion rates. Tripadvisor has invested, and expects to continue to invest significant resources in developing and marketing these innovations. Tripadvisor can give no assurances that the changes it makes will yield the benefits it expects and will not have unintended or adverse impacts that Tripadvisor did not anticipate. If Tripadvisor is unable to continue offering innovative products and services and quality features that users want to use, existing consumers may become dissatisfied and use competitors’ offerings and it may be unable to attract additional consumers, which could adversely affect its business and financial performance.

Tripadvisor’s dedication to making the user experience its highest priority may cause it to prioritize rapid innovation and user experience over short-term financial results.

Tripadvisor strives to create the best experience for its users, providing them with the information, products and tools to enable them to plan, book and experience the perfect trip.  Tripadvisor believes that in doing so it will increase its rates of conversion, revenuer and, ultimately, its financial performance over the long-term.  Tripadvisor has taken actions in the past and may continue to make decisions in the future that have the effect of reducing its short-term revenue or profitability if it believes that the decisions benefit the overall user experience.  For example, Tripadvisor may introduce new products or changes to existing products or the user experience that decrease rates of conversion but increases revenue. In addition, Tripadvisor’s approach of putting users first may negatively impact its relationship with existing or prospective

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partners. These actions and practices could result in a loss of partners, which in turn could harm Tripadvisor’s results of operations. The short-term reductions in revenue or profitability could be more severe than Tripadvisor anticipates or these decisions may not produce the long-term benefits that Tripadvisor expects, in which case its user growth and engagement, its relationships with consumers and travel partners, and its business and results of operations could be harmed. In addition, if new or enhanced products fail to engage users or if Tripadvisor is unsuccessful in its effort to monetize these initiatives, Tripadvisor may fail to generate sufficient revenue, profit margin or other value to justify its investments, in which case Tripadvisor’s business and results of operations would be adversely affected.  

Tripadvisor is dependent upon the quality of traffic in its network to provide value to Tripadvisor’s partners, and any failure in its ability to deliver quality traffic and/or the metrics to demonstrate the value of the traffic could have a material adverse effect on the value of its websites to its partners and adversely affect its revenue.

Tripadvisor uses technology and processes to monitor the quality of the Internet traffic that it delivers to its partners and has identified metrics to demonstrate the quality of that traffic. These metrics are used to not only identify the value of advertising on Tripadvisor’s website, but also to identify low quality clicks such as non-human processes, including robots, spiders or other software; the mechanical automation of clicking; and other types of invalid clicks or click fraud. Even with such monitoring in place, there is a risk that a certain amount of low-quality traffic, or traffic that online advertisers deem to be invalid, will be delivered to such online advertisers. As a result, Tripadvisor may be required to credit amounts owed to it by its partners. Furthermore, low-quality or invalid traffic may be detrimental to Tripadvisor’s relationships with partners, and could adversely affect its advertising pricing and revenue.

Tripadvisor relies on assumptions and estimates and data to calculate certain of its key metrics, and real or perceived inaccuracies in such metrics may harm Tripadvisor’s reputation and negatively affect its business.

Tripadvisor believes certain metrics are key to Tripadvisor’s business. As both the industry in which Tripadvisor operates and its businesses continue to evolve, so too might the metrics by which Tripadvisor evaluates its businesses and the company.  In addition, while the calculation of the metrics Tripadvisor uses is based on what Tripadvisor believes to be reasonable estimates, Tripadvisor’s internal tools are not independently verified by a third party and have a number of limitations and, furthermore, its methodologies for tracking these metrics may change over time.  For example, a single person may have multiple accounts or browse the Internet on multiple browsers or devices, some consumers may restrict Tripadvisor’s ability to accurately identify them across visits, some mobile apps automatically contact its servers for regular updates with no user action, and it is not always able to capture user information on all of its platforms. As such, the calculations of its unique visitors may not accurately reflect the number of people actually visiting its platforms.  Tripadvisor continues to improve upon its tools and methodologies to capture data and believes that its current metrics are accurate; however, the improvement of its tools and methodologies could cause inconsistency between current data and previously reported data, which could confuse investors or lead to questions about the integrity of its data. Also, if the internal tools Tripadvisor uses to track these metrics under-count or over-count performance or contain algorithm or other technical errors, the data Tripadvisor reports may not be accurate.  Finally, Tripadvisor may, in the future, identify new or other metrics that enable it to more accurately evaluate its business.  Accordingly, readers should not place undue reliance on these metrics.

Tripadvisor relies on the performance of highly skilled personnel and, if it is unable to retain or motivate key personnel, or hire, retain and motivate qualified personnel, Tripadvisor’s business would be harmed.

Tripadvisor’s future success is largely dependent on the talents and efforts of highly skilled individuals. In particular, the contributions of Stephen Kaufer, Tripadvisor’s co-founder, Chief Executive Officer and President, the contributions of key senior management and the contributions of software engineers and other technology professionals, are critical to its overall management and the success of its business. Tripadvisor cannot ensure that it will be able to retain the services of its existing key personnel, and the loss of one or more of its key personnel could seriously harm its business. Tripadvisor does not maintain any key person life insurance policies.

In addition, competition remains intense for well-qualified employees in certain aspects of Tripadvisor’s business, including software engineers, developers, product management and development personnel, and other technology professionals. Tripadvisor’s continued ability to compete effectively depends on its ability to attract new employees and

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to retain and motivate existing employees. As a global company, Tripadvisor aims to attract quality employees from all over the world, so any restrictions on travel for professional or personal purposes, may cause significant disruption to Tripadvisor’s businesses or negatively affect its ability to attract and retain employees on a global basis. If Tripadvisor does not succeed in attracting well-qualified employees or retaining or motivating existing employees, its business would be adversely affected.

Acquisitions, investments, significant commercial arrangements and/or new business strategies could disrupt Tripadvisor’s ongoing business and present new challenges and risks.  

Tripadvisor’s success will depend, in part, on its ability to expand its product offerings in order to grow its business in response to changing technologies, user and travel partner demands and competitive pressures. As a result, Tripadvisor has acquired, invested in and/or entered into significant commercial arrangements with a number of new businesses in the past and its future growth may depend, in part, on future acquisitions, investments, commercial arrangements and/or changes in business strategies.  Such endeavors may involve significant risks and uncertainties, including, but not limited to, the following:

Tripadvisor has invested, and may in the future invest, in privately-held companies and these investments are currently accounted for using the measurement alternative for equity investments without a readily determinable fair value, which measures these investments at cost while subtracting any impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.  Such investments are inherently risky in that such companies are typically at an early stage of development, may have no or

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limited revenue, may not be or may never become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully developed or introduced into the market. Further, Tripadvisor’s ability to liquidate any such investments is typically dependent upon some liquidity event, such as a public offering or acquisition, since no public market exists for such securities.  Valuations of such privately-held companies are inherently complex and uncertain due to the lack of liquid market for the company’s securities.  Moreover, Tripadvisor could lose the full amount of any of its investments and any impairment of its investments could have a material adverse effect on its financial condition and results of operations.

Tripadvisor cannot assure you that these investments will be successful or that such endeavors will result in the realization of the full benefits of synergies, cost savings, innovation and operational efficiencies that may be possible or that Tripadvisor will achieve these benefits within a reasonable period of time.

If Tripadvisor fails to manage its growth effectively, its brand, results of operations and business could be harmed.

Over the years, Tripadvisor has experienced rapid growth in some areas of it business, including through acquisitions of other businesses and in new international markets. Tripadvisor continues to make substantial investments in its technology, product and sales, and marketing organizations. This growth places substantial demands on Tripadvisor’s management and its operational infrastructure. In addition, as Tripadvisor’s business matures, it makes periodic changes and adjustments to its organization in response to various internal and external considerations, including market opportunities, the competitive landscape, new and enhanced products and acquisitions.  These changes may result in a temporary lack of focus or productivity or otherwise impact Tripadvisor’s business.

To manage its growth, Tripadvisor may need to improve its operational, financial and management systems and processes which may require significant capital expenditures and allocation of valuable management and employee resources. As Tripadvisor continues to grow, it must effectively integrate, develop and motivate a large number of new employees, including employees in international markets, while maintaining the beneficial aspects of its company culture. If Tripadvisor does not manage the growth of its business and operations effectively, the quality of its platform and efficiency of its operations could suffer, which could harm its brand, results of operations and business.

Tripadvisor is a global company that operates in many different jurisdictions and these operations expose Tripadvisor to additional risks, which risks increase as its business continues to expand.

Tripadvisor operates in a number of jurisdictions both inside and outside of the United States and continues to expand its operations both domestically and internationally. Many regions have different economic conditions, languages, currencies, consumer expectations, legislation, regulatory environments (including labor laws and customs), tax laws, levels of consumer acceptance and use of the Internet for commerce and levels of political stability. Tripadvisor is subject to associated risks typical of global businesses, including but not limited to, the following:

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Tripadvisor’s strategy includes continued expansion in existing international and new international markets.  Many of these markets have different economic conditions, customers, languages, currencies, consumer expectations, levels of consumer acceptance and use of the Internet for commerce, legislation, regulatory environments, tax laws and levels of political stability, and Tripadvisor is subject to associated risks typical of international businesses. International markets have strong local competitors with established brands and travel service providers or relationships that may make expansion in certain markets difficult and costly and take more time than anticipated.  In addition, compliance with legal, regulatory or tax requirements in multiple jurisdictions places demands on Tripadvisor’s time and resources, and it may nonetheless experience unforeseen and potentially adverse legal, regulatory or tax consequences.  In some markets, legal and other regulatory requirements may prohibit or limit participation by foreign businesses, such as by making foreign ownership or management of Internet or travel-related businesses illegal or difficult or may make direct participation in those markets uneconomic, which could make Tripadvisor’s entry or expansion in those markets difficult or impossible, require that Tripadvisor work with a local partner or result in higher operating costs.  If Tripadvisor is unsuccessful in expanding in new and existing markets and effectively managing that expansion, its business and results of operations could be adversely affected. A number of countries are actively pursuing changes to their tax laws applicable to corporate multinationals, such as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).  Foreign governments may enact tax laws that could result in further changes to global taxation and materially affect Tripadvisor’s financial position and results of operations.  

The Tax Act resulted in significant changes to the U.S. corporate income tax system. The Tax Act requires complex computations to be performed that were not previously required under U.S. tax law, significant judgments to be made in the interpretation of the provisions of the Tax Act, and significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the Internal Revenue Service (“IRS”) and other standard-setting bodies could interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered that is different from Tripadvisor’s interpretation.

Tripadvisor is regularly subject to claims, lawsuits, government investigations, and other proceedings that may result in adverse outcomes.

Tripadvisor is regularly subject to claims, lawsuits, government investigations and other proceedings involving, among other matters, patent and intellectual property rights (including alleged infringement of third-party intellectual property rights), tax matters (including value-added, excise, transient, occupancy and accommodation taxes), regulatory compliance (including competition and consumer protection matters), defamation and free speech (including intermediary liability and platform immunity challenges), labor and employment matters and commercial disputes.

Such claims, lawsuits, government investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty. Regardless of the outcome, any of these types of legal proceedings could have an adverse impact on Tripadvisor because of legal costs, diversion of management resources, injunctions or damage awards and other factors. Determining reserves for Tripadvisor’s pending litigation or other legal proceedings is a complex, fact-intensive process that requires significant judgment. It is possible that a resolution of one or more such proceedings could result in substantial damages, fines or penalties that could adversely affect Tripadvisor’s business, consolidated financial position, results of operations, or cash flows in a particular period. These proceedings could also result in reputational harm, criminal sanctions, consent decrees, the release of confidential information or orders preventing Tripadvisor from offering certain features, functionalities, products, or services, requiring a change in Tripadvisor’s business practices or other field action, or requiring development of non-infringing or otherwise altered products or technologies. Any of these consequences could adversely affect its business and results of operations.

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A failure to comply with current laws, rules and regulations or changes to such laws, rules and regulations and other legal uncertainties may adversely affect Tripadvisor’s businesses or financial performance.

Tripadvisor’s business and financial performance could be adversely affected by unfavorable changes in, or interpretations of, existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to Tripadvisor and its business, including those relating to Internet and online commerce, Internet advertising, consumer protection, intermediary liability, data security and privacy, travel and rental licensing and listing requirements and tax. In some cases, these laws continue to evolve.

For example, there is, and likely will continue to be, an increasing number of laws and regulations pertaining to Internet and online commerce that may relate to liability for information retrieved from or transmitted over the Internet, online editorial and user-generated content, user privacy, data security, behavioral targeting and online advertising, taxation, liability for third-party activities and the quality of products and services.  In addition, the growth and development of online commerce may prompt calls for more stringent consumer protection laws and more aggressive enforcement efforts, which may impose additional burdens on online businesses generally.  Also, evolving case law and new legislation involving worker classification, including a new law in California, increases the potential for litigation and government audits in this area and may have ramifications as to how Tripadvisor operates certain segments of its business and its engagement with independent contractors.

Further, Tripadvisor’s Rentals business has been and continues to be subject to regulatory developments globally that affect the rental industry and the ability of companies like Tripadvisor to list those rentals online.  For example, some states and local jurisdictions, both domestically and internationally, have adopted, or are considering adopting, statutes or ordinances that prohibit property owners and managers from renting certain properties on a short-term basis or otherwise limit their ability to do so, and other states and local jurisdictions may introduce similar regulations. Some states and local jurisdictions have fair housing or other laws governing whether and how properties may be rented, which they assert apply to vacation rentals. In addition, many homeowners, condominium and neighborhood associations have adopted, or are considering adopting, rules that prohibit or restrict property owners and managers from short-term rentals.  Operating in this dynamic regulatory environment requires significant management attention and financial resources.  Tripadvisor cannot assure that its efforts will be successful, and the investment and additional resources required to manage growth will produce the desired levels of revenue or profitability.  

Tripadvisor also has been subject, and it will likely be subject in the future, to inquiries from time to time from regulatory bodies concerning compliance with consumer protection, competition, tax, data privacy and travel industry-specific laws and regulations. The failure of its businesses to comply with these laws and regulations could result in fines and/or proceedings against Tripadvisor by governmental agencies, regulatory authorities, courts and/or consumers, which if material, could adversely affect its business, financial condition and results of operations. Further, if such laws and regulations are not enforced equally against other competitors in a particular market, Tripadvisor’s compliance with such laws may put it at a competitive disadvantage vis-à-vis competitors who do not comply with such requirements.

The promulgation of new laws, rules and regulations, or the new interpretation of existing laws, rules and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which Tripadvisor provides services could require it to change certain aspects of its business, operations and commercial relationships to ensure compliance, which could decrease demand for services, reduce revenue, increase costs and/or subject the company to additional liabilities. For example, the E.U. adopted the GDPR, effective in May 2018, implementing enhanced data protection requirements and, in 2018, the State of California adopted the California Consumer Privacy Act (“CCPA”) implementing privacy rights and consumer protections for California residents.  Other jurisdictions have adopted or are contemplating similar legislation. This legislation will continue to change the landscape for the use and protection of data and could increase the cost and complexity of delivering Tripadvisor’s services. Unfavorable changes could decrease demand for products and services, limit marketing methods and capabilities, impede development of new products, result in negative publicity, require significant management time, increase costs and/or subject Tripadvisor to additional liabilities.  Violations of these laws and regulations could result in penalties and/or criminal sanctions against Tripadvisor, its officers or its employees and/or restrictions on the conduct of parts of its business in certain jurisdictions.

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Likewise, the SEC, Department of Justice (“DOJ”) and Office of Foreign Assets Controls (“OFAC”), as well as foreign regulatory authorities, have continued to increase the enforcement of economic sanctions and trade regulations, anti-money laundering, and anti-corruption laws, across industries. U.S. economic sanctions relate to transactions with designated foreign countries, including Cuba, Iran, North Korea, Syria and nationals and others of those countries, Ukraine/Russia related sanctions, as well as certain specifically targeted individuals and entities. Tripadvisor believes that its activities comply with OFAC, E.U., U.K. and other regulatory authorities’ economic sanction and trade regulations, as well as anti-money laundering and anti-corruption regulations, including the Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act and the U.K. Criminal Finances Act. As regulations continue to evolve and regulatory oversight continues to increase, Tripadvisor cannot guarantee that its programs and policies will be deemed compliant by all applicable regulatory authorities. In the event Tripadvisor’s controls should fail or are found to be out of compliance for other reasons, Tripadvisor could be subject to monetary damages, civil and criminal monetary penalties, litigation and damage to its reputation and the value of its brands.

Tripadvisor cannot be sure that its intellectual property is protected from copying or use by others, including potential competitors.

Tripadvisor’s websites rely on content, brands and technology, much of which is proprietary. Tripadvisor protects its proprietary content, brands and technology by relying on a combination of trademarks, copyrights, trade secrets, patents and confidentiality agreements. Any misappropriation or violation of its rights could have a material adverse effect on Tripadvisor’s business. Even with these precautions, it may be possible for another party to copy or otherwise obtain and use Tripadvisor’s proprietary technology, content or brands without authorization or to develop similar technology, content or brands independently.

Effective intellectual property protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and expenses and the costs of defending Tripadvisor’s rights. In addition, effective intellectual property protection may not be available in every jurisdiction in which its services are made available, and policing unauthorized use of its intellectual property is difficult and expensive. Therefore, in certain jurisdictions, Tripadvisor may be unable to protect its intellectual property adequately against unauthorized third-party copying or use, which could adversely affect its business or ability to compete. Tripadvisor cannot be sure that the steps it has taken will prevent misappropriation or infringement of its intellectual property. Furthermore, Tripadvisor may need to go to court or other tribunals or administrative bodies in order to enforce its intellectual property rights, to protect its trade secrets or to determine the validity and scope of the proprietary rights of others. These proceedings might result in substantial costs and diversion of resources and management attention. Tripadvisor’s failure to protect its intellectual property in a cost-effective or effective manner could have a material adverse effect on its business and ability to protect its technology, content and brands.

Tripadvisor currently licenses from third parties and incorporates the technologies and content into its websites. As Tripadvisor continues to introduce new services that incorporate new technologies and content, it may be required to license additional technology or content. Tripadvisor cannot be sure that such technology or content will be available on commercially reasonable terms, if at all.

Tripadvisor’s processing, storage and use of personal information and other data subjects it to additional laws and regulations and failure to comply with those laws and regulations could give rise to liabilities.

Tripadvisor collects, processes, stores and transmits data, including personal information, for its consumers and its workforce. As a result, Tripadvisor is subject to a variety of laws in the United States and abroad regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information, the scope of which is changing; and subject to differing interpretations, and which may be inconsistent between countries or conflict with other existing laws. In addition, the security of data when engaging in electronic commerce is essential to maintaining consumer and travel service provider confidence in its services. The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet have recently come under increased public scrutiny. The U.S. Congress and federal agencies, including the Federal Trade Commission and the Department of Commerce, are reviewing the need for greater regulation for the collection and use of information concerning consumer

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behavior on the Internet in the United States. Various U.S. courts also are considering the applicability of existing federal and state statutes, including computer trespass and wiretapping laws, to the collection and exchange of information online.

In addition, Tripadvisor is subject to legislation intended to enhance the privacy and security of personal data, including credit card information (such as the GDPR and the CCPA and other country specific data protection laws).  There are a number of proposals for data privacy laws pending or proposed in other jurisdictions, including at both the federal and state level of the United States, as well as internationally. Implementing and complying with these laws and regulations may be more costly or take longer than Tripadvisor anticipates, or could otherwise affect its business operations.  Tripadvisor strives to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection. Any failure or perceived failure by Tripadvisor to comply with its privacy policies, privacy-related obligations to consumers or other third parties, or privacy-related legal obligations, may result in governmental enforcement actions, including, for example, fines and/or penalties, compliance orders, litigation or public statements that could harm Tripadvisor’s reputation and cause its users and travel partners to lose trust in it, any of which could have an adverse effect on Tripadvisor’s business, brand, market share and results of operations.

Tripadvisor is subject to risks associated with processing credit card and other payment transactions and failure to manage those risks may subject it to fines, penalties and additional costs and could have a negative impact on its business. 

Tripadvisor accepts payments from consumers and travel partners using a variety of methods, including credit card, debit card, direct debit from a customer’s bank account, and invoicing. For existing and future payment options Tripadvisor offers to its customers, Tripadvisor may become subject to additional regulations and compliance requirements (including obligations to implement enhanced authentication processes). These regulations and/or requirements could result in significant costs and reduce the ease of use of its payment products, and yet may still be susceptible to fraudulent activity. In addition, Tripadvisor may be held liable for accepting fraudulent credit cards on its websites as well as other payment disputes with its customers. For certain payment methods, including credit and debit cards, Tripadvisor pays interchange and other fees, which may increase over time and raise its operating costs and lower profitability. Tripadvisor relies on third parties to provide certain payment methods and payment processing services, including the processing of credit cards and debit cards. In each case, Tripadvisor’s business could be disrupted, if these companies become unwilling or unable to provide these services to Tripadvisor. Tripadvisor is also subject to payment card association operating rules, including data security rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for Tripadvisor to comply. If Tripadvisor fails to comply with these rules or requirements, or if its data security systems are breached or compromised, it may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and/or lose its ability to accept credit and debit card payments, process electronic funds transfers, or facilitate other types of online payments.

Tripadvisor is also subject to a number of other laws and regulations relating to payments, money laundering, international money transfers, privacy and information security, and electronic fund transfers. If Tripadvisor is found to be in violation of applicable laws or regulations, it could be subject to additional requirements and civil and criminal penalties, or forced to cease providing certain services.

System security issues, data protection breaches, cyberattacks and system outage issues could disrupt Tripadvisor’s operations or services provided to its consumers, and any such disruption could damage its reputation and adversely affect its business, financial results and stock price.

Tripadvisor’s reputation and ability to attract, retain and service its consumers and travel partners is dependent upon the reliable performance and security of its computer systems, workforce and those of third parties it utilizes in its operations. Significant security issues, data breaches, cyberattacks and outages, interruptions or delays, in Tripadvisor’s systems or third party systems upon which it relies, could impair Tripadvisor’s ability to display content or process transactions and significantly harm its business. Breaches of Tripadvisor’s security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about Tripadvisor, its consumers or its travel partners could expose Tripadvisor, its consumers and its travel partners to a risk of loss or misuse of this information, damage Tripadvisor’s brand and reputation or otherwise harm its business and financial performance and result in government enforcement actions and litigation and potential liability for Tripadvisor.

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Computer programmers and hackers also may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack Tripadvisor’s products or otherwise exploit any security vulnerabilities of its products, or attempt to fraudulently induce Tripadvisor’s employees, consumers, or others to disclose passwords or other sensitive information or unwittingly provide access to its systems or data. In addition, sophisticated hardware and operating system software and applications that Tripadvisor produces or procures from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the system. Tripadvisor may need to expend significant resources to protect against security breaches or to investigate and address problems caused by cyber or other security problems.

Tripadvisor may be unable to proactively address these techniques or to implement adequate preventive measures and its efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede Tripadvisor’s sales, manufacturing, distribution or other critical functions. Failure to adequately protect against attacks or intrusions, whether for its own systems or systems of vendors, could expose Tripadvisor to security breaches that could have an adverse impact on Tripadvisor’s financial performance.  The costs of enhancing infrastructure to attain improved stability and redundancy may be time consuming and expensive and may require resources and expertise that are difficult to obtain. In addition, to the extent that Tripadvisor experiences a data breach, remediation may be costly and Tripadvisor may not have adequate insurance to cover such costs.

Much of Tripadvisor’s business is conducted with third party partners and vendors, for example, marketing agencies and SaaS providers. A security breach at such third party could be perceived by consumers as a security breach of Tripadvisor’s systems and could result in negative publicity or damage its reputation, expose it to risk of loss or litigation and possible liability and subject Tripadvisor to regulatory penalties and sanctions. In addition, such incidents may also result in a decline in Tripadvisor’s active user base or engagement levels.  Finally, failure of such third parties to comply with applicable disclosure requirements could expose Tripadvisor to liability.

Tripadvisor has acquired a number of companies over the years and may continue to do so in the future. As a result of these acquisitions, Tripadvisor may increase the volume of personal data that it collects, stores, processes and transmits.  While Tripadvisor makes significant efforts to address any information security issues and personal data protection issues with respect to its acquisitions, Tripadvisor may still inherit such risks when it integrates the acquired businesses.

Media coverage of data breaches and consumer rights has escalated, in part because of the increased number of enforcement actions, investigations and lawsuits. Security breaches could result in negative publicity, damage to reputation, exposure to risk of loss or litigation and possible liability due to regulatory penalties and sanctions. As this focus and attention on privacy and data protection increases, Tripadvisor also risks exposure to potential liabilities and costs resulting from the compliance with, or any failure to comply with applicable legal requirements, conflicts among these legal requirements or differences in approaches to privacy and security. Security breaches could also cause travelers and potential consumers to lose confidence in Tripadvisor’s security, which would have a negative effect on the value of its brand.

Evolving guidance on use of “cookies” and similar technology could negatively impact the way Tripadvisor does business.

A "cookie" is a text file that is stored on a user's web browser by a website. Cookies are common tools used by thousands of websites, including Tripadvisor’s, to, among other things, store or gather information (e.g., remember log-on details so a user does not have to re-enter them when revisiting a website), market to consumers, improve site security and enhance the user experience on a website. Cookies and similar tracking technologies are valuable tools for websites and apps like Tripadvisor’s to improve the customer experience and increase conversion on their websites. Many countries have adopted data protection laws that introduce regulations governing the use of "cookies and other similar tracking technologies” by websites and app developers servicing consumers. To the extent any such regulations require "opt-in" or “affirmative” consent before certain cookies or trackers can be placed on a user's device, or the ability of users to “opt-out” or control their preferences, Tripadvisor’s ability to serve certain customers in the manner it currently does, including with respect to retargeting or personalized advertising, might be adversely affected and its ability to continue to improve

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and optimize performance on Tripadvisor’s websites might be impaired, either of which could negatively affect a consumer's experience using its services and its business, market share and results of operations.

Tripadvisor may have future capital needs and may not be able to obtain additional financing on acceptable terms.

Tripadvisor is currently party to a credit agreement with respect to a $1.2 billion revolving credit facility maturing in May 2022 ( “2015 Credit Facility”), as more fully discussed in note 7. This agreement includes restrictive covenants that may impact the way Tripadvisor manages its business and may limit its ability to secure significant additional financing in the future on favorable terms. Tripadvisor’s ability to secure additional financing and satisfy its financial obligations outstanding from time to time will depend upon its future operating performance, which is subject to then prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond its control. There can be no assurance that sufficient financing will be available or desirable, or even any, terms to fund investments, acquisitions, stock repurchases, dividends, debt refinancing or extraordinary actions or that counterparties in any such financings would honor their contractual commitments.

Tripadvisor has indebtedness which could adversely affect its business and financial condition.

As of December 31, 2019, Tripadvisor had no outstanding long-term debt; however, Tripadvisor continues to have existing credit facilities from which it can borrow significant amounts. As such, Tripadvisor is still subject to risks relating to its potential indebtedness that include:

In addition, it is possible that Tripadvisor may need to incur additional indebtedness in the future in the ordinary course of business. The terms of the 2015 Credit Facility allow Tripadvisor to incur additional debt subject to certain limitations; however, there is no assurance that additional financing will be available to Tripadvisor on terms favorable to it, if at all. In addition, if new debt is added to the then existing debt levels, the risks described above could intensify.

Tripadvisor’s 2015 Credit Facility provides for various provisions that limit its discretion in the operation of its business and require Tripadvisor to meet financial maintenance tests and other covenants and the failure to comply with these covenants could have a material adverse effect on Tripadvisor.

Tripadvisor is party to a credit agreement providing for the 2015 Credit Facility. The agreements that govern the 2015 Credit Facility contain various covenants, including those that limit Tripadvisor’s ability to, among other things:

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These covenants may limit Tripadvisor’s ability to optimally operate its business. In addition, the 2015 Credit Facility requires that Tripadvisor meet certain financial tests, including a leverage ratio test. Any failure to comply with the restrictions of the 2015 Credit Facility may result in an event of default under the agreements governing such facility. Such default may allow the creditors to accelerate the debt incurred thereunder. In addition, lenders may be able to terminate any commitments they had made to supply Tripadvisor with further funds (including periodic rollovers of existing borrowings).

Tripadvisor’s effective income tax rate is impacted by a number of factors that could have a material impact on its financial results and could increase the volatility of those results.

Due to the global nature of its business, Tripadvisor is subject to income taxes in the United States and other foreign jurisdictions. In the event Tripadvisor incurs net income in certain jurisdictions but incurs losses in other jurisdictions, it generally cannot offset the income from one jurisdiction with the loss from another. This lack of flexibility increases Tripadvisor’s effective income tax rate. Furthermore, significant judgment is required to calculate Tripadvisor’s worldwide provision for income taxes and depends on its ability to operate its business in a manner consistent with its corporate structure and intercompany arrangements. In the ordinary course of its business, there are many transactions and calculations where the ultimate tax determination is uncertain.

Tripadvisor believes its tax estimates are reasonable. However, Tripadvisor is routinely under audit by federal, state and foreign taxing authorities.  The taxing authorities of jurisdictions in which Tripadvisor operates may challenge its methodologies for valuing developed technology or intercompany arrangements, including its transfer pricing, or determine that the manner in which it operates its business does not achieve the intended tax consequences, which would increase Tripadvisor’s effective income tax rate and harm its financial position and results of operations.  As Tripadvisor operates in numerous taxing jurisdictions, the application of tax laws can also be subject to diverging and sometimes conflicting interpretations by taxing authorities of these jurisdictions.  It is not uncommon for taxing authorities of different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property. For example, the OECD has recently recommended changes to numerous long-standing international tax principles. If countries amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact Tripadvisor’s tax liabilities. Any of these changes could affect Tripadvisor’s financial performance.

The final determination of audits could be materially different from Tripadvisor’s income tax provisions and accruals and could have a material effect on its financial position, results of operations, or cash flows in the period or periods for which that determination is made. Also, Tripadvisor’s future effective income tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets or changes in tax laws or their interpretation. If Tripadvisor’s effective income tax rates were to increase, its results of operations and cash flows would be adversely affected.

The income tax effects of the accounting for share-based compensation may significantly impact Tripadvisor’s effective income tax rate. In periods in which Tripadvisor’s stock price is higher than the grant-date price of the share-based compensation awards vesting in that period, it will recognize excess tax benefits that will decrease its income tax rate.  In periods in which Tripadvisor’s stock price is lower than the grant-date price of the share-based compensation awards vesting in that period, its effective income tax rate will increase.

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Application of U.S. state and local or international tax laws, changes in tax laws or tax rulings, or the examination of Tripadvisor’s tax positions, could materially affect its financial position and results of operations.

As an international business, Tripadvisor is subject to income taxes and non-income-based taxes in the United States and various other international jurisdictions Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. Tripadvisor’s existing corporate structure and intercompany arrangements have been implemented in a manner Tripadvisor believes is in compliance with current prevailing tax laws. However, due to economic and political conditions, tax rates and tax regimes in various jurisdictions may be subject to significant changes and the tax benefits that Tripadvisor intends to eventually derive could be undermined due to changing tax laws. Governments are increasingly focused on ways to increase tax revenue, which has contributed to an increase in audit activity, more aggressive positions taken by tax authorities and an increase in tax legislation.  Any such additional taxes or other assessments may be in excess of Tripadvisor’s current tax provisions or may require Tripadvisor to modify its business practices in order to reduce its exposure to additional taxes going forward, any of which could have a material adverse effect on Tripadvisor’s business, results of operations and financial condition.  

The Tax Act has resulted in significant changes to the U.S. corporate income tax system. The tax law changes by the Tax Act are broad and complex and there are still uncertainties about how the Tax Act will be interpreted at both the U.S. federal and state levels. The U.S. Treasury Department, the IRS and other standard-setting bodies could interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered that is different from Tripadvisor’s interpretation. This could materially change the taxes that Tripadvisor recorded since 2017, and the expected future impact of the Tax Act on its business.  

The OECD has been working on a Base Erosion and Profit Shifting Project, and issued the Action 1 report in 2015 to address the tax challenges arising from digitalization. Since then, the OECD/G20 Inclusive Framework has issued various guidelines, policy notes, and proposals that if adopted could result in an overhaul of the international taxation system under which Tripadvisor’s current tax obligations are determined. As the OECD/G20 Inclusive Framework drives toward a consensus long-term solution, several countries have introduced unilateral digital service tax initiatives which impose new types of non-income taxes, including taxes based on a percentage of revenue. In July 2019, France signed into law a 3% digital services tax to be applied retroactively as of January 1, 2019.  Tripadvisor recorded an estimate of $3 million for digital service tax to general and administrative expense on its consolidated statement of operations during the year ended December 31, 2019, however it continues to assess the financial impact of this new law. Tripadvisor is also monitoring other U.S. states and countries in which it does business, such as Italy, Spain, and the U.K., which have enacted or proposed similar taxes that will be applicable or are likely to be applicable during 2020. Tripadvisor will continue to monitor developments and determine the financial impact worldwide of these initiatives.

Any changes to international tax laws, including new definitions of permanent establishment, could affect the tax treatment of Tripadvisor’s foreign earnings and adversely impact its effective income tax rate. Further, changes to tax laws and additional reporting requirements could increase the complexity, burden and cost of compliance. Due to the large and expanding scale of Tripadvisor’s international business activities, any changes in U.S. or international taxation of its activities or the combined effect of tax laws in multiple jurisdictions may increase Tripadvisor’s worldwide effective income tax rate, increase the complexity and costs associated with tax compliance (especially if changes are implemented or interpreted inconsistently across tax jurisdictions) and adversely affect its cash flows and results of operations.

In addition, the taxing authorities in the United States and other jurisdictions where Tripadvisor does business regularly examine its income and other tax returns as well as the tax returns of Expedia, Tripadvisor’s former parent. The ultimate outcome of these examinations (including the IRS audit described below) cannot be predicted with certainty. Should the IRS or other taxing authorities assess additional taxes as a result of examinations, Tripadvisor may be required to record charges to its operations, which could harm its operating results and financial condition. 

Changes in the tax treatment of companies engaged in e-commerce may adversely affect the commercial use of Tripadvisor’s sites and its financial results.

Due to the global nature of the internet, it is possible that various states or foreign countries might attempt to levy additional or new sales, income or other taxes relating to Tripadvisor’s activities. Tax authorities at the international,

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federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce. For example, Congress is considering various approaches to legislation that would require companies engaged in e-commerce to collect sales tax on Internet revenue and a growing number of U.S. states and certain foreign jurisdictions have adopted or are considering proposals to impose obligations on remote sellers and online marketplaces to collect taxes on their behalf. Additionally, the U.S. Supreme Court’s ruling in South Dakota v. Wayfair Inc., which a Court reversed longstanding precedent that remote sellers are not required to collect state and local sales taxes, may have an adverse impact on Tripadvisor’s business. Also, as described in more detail above, the European Commission released two draft directives on the Taxation of the Digital Economy and, on July 24, 2019, President Macron signed into law the French Digital Services Tax.  New or revised international, federal, state or local tax regulations or court decisions may subject Tripadvisor or its customers to additional sales, occupancy, income and other taxes.  Tripadvisor cannot predict the effect of these and other attempts to impose sales, income or other taxes on e-commerce. New or revised taxes and, in particular, sales taxes, occupancy taxes, value added taxes (“VAT”) and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of selling products and services over the Internet. New taxes could also create significant increases in internal costs necessary to capture data and collect and remit taxes. Any of these events could have a material adverse effect on Tripadvisor’s business, financial condition and operating results.

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Taxing authorities may successfully assert that Tripadvisor should have collected or in the future should collect sales and use, occupancy, VAT or similar taxes, and Tripadvisor could be subject to liability with respect to past or future sales, which could adversely affect its operating results.

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Tripadvisor does not collect and remit sales and use, occupancy, VAT or similar taxes in all jurisdictions in which it has sales, based on its belief that such taxes are not applicable or legally required. Several states and other taxing jurisdictions have presented or threatened Tripadvisor with assessments, alleging that Tripadvisor is required to collect and remit certain taxes there. While Tripadvisor does not believe that it is subject to such taxes and intends to vigorously defend its position in these cases, it cannot be sure of the outcome of its discussions and/or appeals with these states or cases that are pending in the courts. In the event of an adverse outcome, Tripadvisor could face assessments for additional time periods since the last assessments it received, plus any additional interest and penalties. Tripadvisor also expects additional jurisdictions may make similar assessments or pass similar new laws in the future, and any of the jurisdictions where Tripadvisor has sales may apply more rigorous enforcement efforts or take more aggressive positions in the future that could result in greater tax liability allegations. Such tax assessments, penalties and interest or future requirements may materially adversely affect Tripadvisor’s business, financial condition and operating results.

Tripadvisor continues to be subject to significant potential tax liabilities in connection with its spin-off from Expedia (the “Spin-Off”).

Under the tax sharing agreement between Tripadvisor and Expedia entered into in connection with the Spin-Off, Tripadvisor is generally required to indemnify Expedia for any taxes resulting from the Spin-Off (and any related interest, penalties, legal and professional fees, and all costs and damages associated with related stockholder litigation or controversies) to the extent such amounts resulted from (i) any act or failure to act by Tripadvisor described in the covenants in the tax sharing agreement, (ii) any acquisition of Tripadvisor’s equity securities or assets or those of a member of its group, or (iii) any failure of the representations with respect to Tripadvisor or any member of its group to be true or any breach by Tripadvisor or any member of its group of any covenant, in each case, which is contained in the separation documents or in the documents relating to the IRS private letter ruling and/or the opinion of counsel.

Tripadvisor continues to be responsible for potential tax liabilities in connection with consolidated income tax returns filed with Expedia prior to or in connection with the Spin-Off. By virtue of previously filed consolidated tax returns with Expedia, Tripadvisor is currently under IRS audit for the 2009, 2010, and 2011 tax years. In connection with that audit, Tripadvisor received, in January 2017 and April 2019, Notices of Proposed Adjustment from the IRS for the 2009, 2010 and 2011 tax years, which would result in an increase in Tripadvisor’s worldwide income tax expense. The proposed adjustments would result in a reimbursement to Expedia in an estimated range totaling $15 million to $20 million for those specific years related to the pre spin-off years after consideration of competent authority relief, exclusive of interest and penalties. The outcome of these matters or any other audits could subject Tripadvisor to significant tax liabilities.

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Tripadvisor is subject to fluctuation in foreign currency exchange risk.

Tripadvisor conducts a significant and growing portion of its business outside the United States, but reports its results in U.S. dollars. As a result, Tripadvisor faces exposure to movements in foreign currency exchange rates, particularly those related to the Euro, British pound and Australian dollar. These exposures include, but are not limited to re-measurement of gains and losses from changes in the value of foreign denominated assets and liabilities; translation gains and losses on foreign subsidiary financial results that are translated into U.S. dollars upon consolidation; and planning risk related to changes in exchange rates between the time Tripadvisor prepares its annual and quarterly forecasts and when actual results occur. For example, Brexit caused significant volatility in currency exchange rates, especially between the U.S. dollar and the British pound. Continued uncertainty regarding the final terms of Brexit may result in future exchange rate volatility. In addition, in the event that one or more European countries were to replace the Euro with another currency, Tripadvisor’s sales into such countries, or into Europe generally, would likely be adversely affected until stable exchange rates are established. Accordingly, fluctuations in foreign currency exchange rates, such as the strengthening of the U.S. dollar against the Euro or the British pound, could adversely affect Tripadvisor’s net revenue growth in future periods.

Depending on the size of the exposures and the relative movements of exchange rates, if Tripadvisor were to choose not to hedge or were to fail to hedge effectively its exposure, Tripadvisor could experience a material adverse effect on its financial statements and financial condition. As seen in some recent periods, in the event of severe volatility in exchange rates, the impact of these exposures can increase, and the impact on results of operations can be more pronounced. In addition, the current environment and the increasingly global nature of Tripadvisor’s business have made hedging these exposures more complex. Tripadvisor hedges certain short-term foreign currency exposures with the purchase of forward exchange contracts. These forward exchange contracts only help mitigate the impact of changes in foreign currency rates that occur during the term of the related contract period and carry risks of counter-party failure. There can be no assurance that its forward exchange contracts will have their intended effects.

Significant fluctuations in foreign currency exchange rates can affect consumer travel behavior. Volatility in foreign currency exchange rates and its impact on consumer behavior, which may differ across regions, makes it more difficult to forecast industry and consumer trends and the timing and degree of their impact on Tripadvisor’s markets and business, which in turn could adversely affect its ability to effectively manage its business and adversely affect its results of operations.

Future sales of shares of Tripadvisor’s or our common stock in the public market, or the perception that such sales may occur, may depress its or our stock price.

Sales of  substantial amounts of Tripadvisor’s common stock in the public market, particularly sales by its directors, officers, employees and significant stockholders, or the perception that these sales might occur, could depress the market price of its common stock and hence our common stock and could impact our respective abilities to raise capital through the sale of additional equity securities. For example, sales of or hedging transactions, such as collars, in our shares by any of our directors or executive officers could cause a perception in the marketplace that our stock price (and hence Tripadvisor's stock price) has peaked or that adverse events or trends have occurred or may be occurring at our company or Tripadvisor. This perception could result notwithstanding any personal financial motivation for these insider transactions. In addition, we have the right to require Tripadvisor to file registration statements covering Tripadvisor shares we own or to include Tripadvisor shares in registration statements that it may file for itself or other stockholders. If we or some other Tripadvisor stockholder sells substantial amounts of Tripadvisor’s common stock in the public market, or if there is a perception in the public market that we might sell shares of Tripadvisor common stock, the market price of Tripadvisor’s common stock could decrease significantly. A decline in the price of shares of Tripadvisor’s common stock or our common stock might impede its or our ability to raise capital through the issuance of additional shares of common stock or other equity securities.

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Factors Relating to our Common Stock and the Securities Market

Our stock price may be disproportionately affected by the results of operations of Tripadvisor and developments in its business.

The fair value of our investment in Tripadvisor, on an as-converted basis, was approximately $941 million as of December 31, 2019, which represents a significant portion of our total market value. Since the TripCo Spin-Off in 2014, our share price has had a tendency to move in tandem with the share price of Tripadvisor's common stock. As a result, our stock price may be disproportionately affected by the results of operations of Tripadvisor and developments in its business.

It may be difficult for a third party to acquire us, even if doing so may be beneficial to our stockholders.

Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a change in control of our company that a stockholder may consider favorable. These provisions include the following:

In addition, Gregory B. Maffei, our Chairman, President and Chief Executive Officer, beneficially owns shares representing the power to direct approximately 39% of the aggregate voting power in our company, due to his beneficial ownership of approximately 97% of the outstanding shares of our Series B common stock as of January 31, 2020.

Holders of a single series of our common stock may not have any remedies if an action by our directors has an adverse effect on only that series of our common stock.

Principles of Delaware law and the provisions of our certificate of incorporation may protect decisions of our board of directors that have a disparate impact upon holders of any single series of our common stock. Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of our stockholders, including the holders of all series of our common stock. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all common stockholders regardless of class or series and does not have separate or additional duties to any group of stockholders. As a result, in some circumstances, our directors may be required to make a decision that is viewed as adverse to the holders of one series of our common stock. Under the principles of Delaware law and the business judgment rule, holders may not be able to

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successfully challenge decisions that they believe have a disparate impact upon the holders of one series of our stock if our board of directors is disinterested and independent with respect to the action taken, is adequately informed with respect to the action taken and acts in good faith and in the honest belief that the board is acting in the best interest of all of our stockholders.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties.

In connection with the TripCo Spin-Off, a wholly owned subsidiary of Liberty Media entered into a facilities sharing agreement with TripCo, pursuant to which TripCo shares office facilities with Liberty Media and related amenities at Liberty Media’s corporate headquarters located at 12300 Liberty Boulevard, Englewood, Colorado.

Tripadvisor did not legally own any real estate as of December 31, 2019. Tripadvisor currently leases approximately 280,000 square feet for its corporate headquarters in Needham, Massachusetts, pursuant to a lease with an expiration date of December 2030, with an option to extend the lease term for two consecutive terms of five years each. Tripadvisor also leases an aggregate of approximately 505,000 square feet of office space in approximately 50 other locations across North America, Europe, Asia Pacific and South America, primarily for its sales offices, subsidiary headquarters and international management teams, pursuant to lease agreements. Tripadvisor believes that its current facilities are adequate for its current operations and that additional leased space can be obtained on reasonable terms if needed.

Item 3. Legal Proceedings

In the ordinary course of its business, our subsidiary Tripadvisor and its subsidiaries are party to legal proceedings and claims arising out of their operations. These matters may relate to claims involving alleged infringement of third-party intellectual property rights, defamation, taxes, regulatory compliance and other claims. We do not believe there are any material pending legal proceedings or claims to which we or our subsidiaries are party or of which any of our property is the subject. There may be claims or actions pending or threatened against us or our subsidiaries of which we are currently not aware and the ultimate disposition of which could have a material adverse effect on us.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters of Equity Securities.

Market Information

Our Series A and Series B common stock trade on the Nasdaq Global Select Market under the symbols “LTRPA” and “LTRPB,” respectively. Stock price information for securities traded on the Nasdaq Global Select Market can be found on the Nasdaq’s website at www.nasdaq.com. The following table sets forth the range of high and low sales prices of shares of our Series B common stock for the years ended December 31, 2019 and 2018. Although our Series B common stock is traded on the Nasdaq Global Select Market, an established published trading market does not exist for the stock, as it is not actively traded.

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Holders

As of January 31, 2020, there were approximately 838 and 44 record holders of our Series A and Series B common stock, respectively.  The foregoing numbers of record holders do not include the number of stockholders whose shares are held nominally by banks, brokerage houses or other institutions, but include each such institution as one shareholder.

Dividends

We have not paid any cash dividends on our common stock, and we have no present intention of so doing.  Payment of cash dividends, if any, in the future will be determined by our board of directors in light of our earnings, financial condition and other relevant considerations.

Securities Authorized for Issuance Under Equity Compensation Plans

Information required by this item is incorporated by reference to our definitive proxy statement for our 2020 Annual Meeting of stockholders.

Purchases of Equity Securities by the Issuer

There were no repurchases of our common stock during the three months ended December 31, 2019. 3,336 shares of our Series A common stock were surrendered by our officers and employees to pay withholding taxes and other deductions in connection with the vesting of their restricted stock during the three months ended December 31, 2019.

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Item 6. Selected Financial Data.

The following tables present selected historical information relating to our financial condition and results of operations for the past five years. Certain prior period amounts have been reclassified for comparability with current year presentation. The following data should be read in conjunction with our consolidated financial statements.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying consolidated financial statements and the notes thereto.

See note 2 in the accompanying consolidated financial statements for an overview of new accounting standards that we have adopted or that we plan to adopt that have had or may have an impact on our financial statements.

Overview

Liberty TripAdvisor Holdings, Inc. (“TripCo” or the “Company”) holds its subsidiary Tripadvisor, Inc. (“Tripadvisor”) and held its former subsidiary, BuySeasons, Inc. (“BuySeasons”) until BuySeasons was sold on June 30, 2017. As of December 31, 2019, TripCo held an approximate 23% equity interest and 58% voting interest in Tripadvisor.  

The financial information represents the historical consolidated results of TripCo and its subsidiaries as discussed in note 1 in the accompanying consolidated financial statements. In the following discussion, TripCo and its subsidiaries are referred to as “TripCo,” “the Company,” “us,” “we” and “our” in the notes to the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Our “Corporate and Other” category includes our interest in BuySeasons, until its disposition on June 30, 2017, and corporate expenses.

Strategies and Challenges

Executive Summary

Results for TripCo are largely dependent upon the operating performance of Tripadvisor. Therefore, the executive summary below contains the strategies and challenges of Tripadvisor for an understanding of the business objectives of Tripadvisor.

Tripadvisor’s Growth Strategy

Tripadvisor’s growth strategy aims to increase revenue by deepening customer engagement on its platform by pursuing the following key strategies, including:

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Current Trends Affecting Tripadvisor’s Business

The online travel industry is large and growing and remains highly dynamic and competitive.  Tripadvisor’s overall strategy is to deliver more value to consumers and travel partners in order to generate more monetization on its platform. While Tripadvisor operates with a long-term growth focus, its specific growth objectives and resource allocation strategies can differ in both duration and magnitude within the reportable segments. Descriptions of these dynamics, as well as other trends in Tripadvisor’s business, are below.

Hotels, Media & Platform Segment

Tripadvisor operates the Hotels, Media & Platform segment by delivering consumers a holistic product experience and by offering travel partners a diversified number of advertising opportunities.

For consumers, Tripadvisor seeks to implement product enhancements that deliver a more engaging and comprehensive hotel shopping experience. This includes providing rich, immersive content – reviews, photos, videos and ratings, among other contributions – as well as increasing the number of travel partners and properties as well as the available hotel supply on its platform. Tripadvisor believes providing consumers tools to discover, research, price shop and book a comprehensive selection of accommodations, helps increase brand awareness and brand loyalty and, over time, can result in deeper consumer engagement, more qualified leads delivered to travel partners and greater monetization on its platform.

Tripadvisor seeks to monetize its influence and achieve revenue growth through hotel-related product improvements, supply and marketing efforts and customer advertising opportunities. Tripadvisor relies heavily on search engines, such as Google, to generate a significant amount of hotel shoppers to its websites, principally through search engine marketing, or SEM, as well as through search engine optimization, or SEO. Tripadvisor defines hotel shoppers as visitors who view either a listing of hotels in a city or on a specific hotel page.  Given Tripadvisor’s ongoing focus on Hotels, Media & Platform profitability, a key ongoing objective is to attract or acquire hotel shoppers at or above its desired marketing return on investment targets. To that end, starting in mid-2017, Tripadvisor began to reduce inefficient direct selling and marketing investments on paid online channels, primarily SEM, to improve profitability. This reduced the number of hotel shoppers to Tripadvisor’s platform and reduced Tripadvisor-branded hotels revenue, specifically in hotel metasearch auction into 2019, while generating meaningful overall Hotels, Media & Platform segment profit growth and margin expansion, including year-over-year profit growth during both the years ended December 31, 2019 and December 31, 2018. Following moderate revenue growth resulting from SEO during 2018, Tripadvisor experienced revenue headwinds in this marketing channel in 2019 and expects this trend to continue, which it believes is impacted by search engines (primarily Google) increasing the prominence of their own hotel products in search results. Tripadvisor believes executing its long-term growth strategy can enable Tripadvisor to deepen customer engagement on its platform, monetize its influence and stabilize – and eventually grow – Hotels, Media & Platform segment revenue.

For example, in Tripadvisor-branded display and platform revenue, Tripadvisor enables travel partners to amplify their brand, generate brand impressions, and potentially drive qualified leads and bookings for their businesses. Historically, Tripadvisor has limited both the type and number of display-based advertising opportunities it makes available to travel partners, particularly on mobile phone, which, in turn, has limited display-based advertising revenue growth. However, Tripadvisor is working on initiatives to better leverage its audience, content, data, travel influence and platform breadth to open up new media advertising opportunities through a more modern, high-powered advertising suite spanning native, video and programmatic solutions. Tripadvisor also intends to deliver this broadened solution to a larger set of advertising travel endemic and non-travel endemic advertising partners, including industries such as airlines, finance and beauty.

In addition, Tripadvisor is focused on initiatives to increase its traffic quality and deepen customer engagement on its platform, including membership growth, personalization, and mobile app initiatives Tripadvisor believes can lead to increased monetization over time in this segment. For example, there remains not only an opportunity to continue to grow its member base, but also to deepen member engagement by making membership more valued, through building communities and leveraging content to further personalize trip-planning features.

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Experiences & Dining Segment

During 2019, Tripadvisor’s Experiences & Dining segment growth strategy prioritized near-term investments for platform expansion and bookings and revenue growth. Tripadvisor has increased investments in product, supply and marketing to enhance its long-term growth prospects. Tripadvisor has done this by, for example, growing bookable supply in newer experience categories in lower-priced options, such as events, tickets, and other experiences, and also non-English markets and mobile offerings.  These categories have grown rapidly and added to Tripadvisor’s total bookable experience products, which reached approximately 345,000 as of December 31, 2019. Tripadvisor believes offering consumers more selection can contribute to its goals to build deeper, more durable consumer relationships with its platform.

Tripadvisor also continues to seek selective acquisition opportunities in this segment. For example, in December 2019, Tripadvisor acquired U.K.-based Bookatable, which offers an online restaurant reservation and booking platform. This further strengthens Tripadvisor’s position in certain of its existing European markets as well as expands it into new countries, such as the U.K., Germany, Austria, Finland and Norway. Once fully integrated, Bookatable should add approximately 14,000 more restaurants to TheFork’s online restaurant booking platform, which, including Booktable, had approximately 84,000 total bookable restaurants, as of December 31, 2019.

Over the long-term, Tripadvisor’s Experiences and Dining offerings enable Tripadvisor to deliver consumers a more comprehensive experience, which Tripadvisor believes will increase awareness of, loyalty to, and engagement with its products, drive more bookings to Experiences and Dining partners and generate greater revenue and increased profitability on its platform. Given the significant market opportunities in these large and growing categories, as well as competition aiming to provide consumers a similar multimodal experience, Tripadvisor expects to continue to invest to drive bookings and revenue growth.

Corporate and other

Corporate and other is a combination of Rentals, Flights/Cruises/Car, SmarterTravel, and Tripadvisor China business units.  In 2019, Tripadvisor contributed a portion of its business in China, including a long-term exclusive brand and content license and other assets, to form a new entity with Ctrip Investment Holding Ltd., in return for a 40% equity ownership interest. This investment is being accounted for as an equity method investment.  

Profits have been relatively stable to positive and revenue has declined in recent periods primarily due to strategic re-alignments and resource re-allocation to other areas of business. Tripadvisor operates these offerings opportunistically as they complement its overall strategic objectives to deliver more value to consumers and travel partners.

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Results of Operations—Consolidated

General.  We provide in the tables below information regarding our historical Consolidated Operating Results and Other Income and Expense, as well as information regarding the contribution to those items from our reportable segments.

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Revenue. Tripadvisor’s Hotels, Media & Platform revenue decreased by $62 million and $21 million for the years ended December 31, 2019 and 2018, respectively, as compared to the corresponding prior year periods.  Tripadvisor’s Hotels, Media & Platform segment has two revenue sources, as described below: (1) Tripadvisor-branded hotels, which includes Hotel auction and B2B revenue; and (2) Tripadvisor-branded display and platform. The decreases in Hotels, Media & Platform revenue are detailed as follows:

Tripadvisor-branded hotels revenue primarily includes hotel metasearch auction revenue, and to a lesser extent, hotel B2B revenue, which includes click-based revenue generated from hotel sponsored placements that enable hotels to enhance their visibility on Tripadvisor hotel pages, and subscription-based advertising services that Tripadvisor offers to travel partners.  For the years ended December 31, 2019, 2018 and 2017, 83%, 85% and 85%, respectively, of Tripadvisor’s total Hotels, Media & Platform segment revenue was derived from Tripadvisor-branded hotels revenue. Tripadvisor-branded hotels revenue decreased $69 million or 8% during the year ended December 31, 2019 when compared to the same period in 2018.  This decrease was due to factors impacting Tripadvisor’s hotel metasearch auction revenue, primarily reduced revenue generated through its SEO marketing channel, which Tripadvisor believes is impacted by search engines (primarily Google) increasing the prominence of their own hotel products in search results.  Tripadvisor-branded hotels revenue was also impacted by its progressive optimizations in SEM and other online paid traffic acquisition spend, and to a lesser extent, the general trend of an increasing percentage of hotel shoppers visiting via mobile phones which monetize at a significantly lower rate than hotel shoppers visiting via desktop or tablet. Declines in Tripadvisor-branded hotels was partially offset, to a lesser extent, by growth in hotel sponsored placements revenue.

Tripadvisor-branded hotels revenue decreased $18 million or 2% during the year ended December 31, 2018 when compared to the same period in 2017.  This decrease was primarily due to factors impacting Tripadvisor’s hotel metasearch auction revenue including travel partners bidding lower CPCs in its hotel metasearch auction during the second half of 2017, which created difficult year-over-year comparisons during the first half of 2018.  The decrease in revenue can also be attributed to a significant reduction of Tripadvisor’s direct marketing spend on its least-profitable paid online marketing campaigns as part of its progressive optimizations in SEM and other online paid traffic acquisition spend, as well as a greater percentage of hotel shoppers visiting Tripadvisor-branded websites and apps on mobile phones.  The decline in Tripadvisor-branded hotels revenue was partially offset, to a lesser extent, by growth in its hotel sponsored placements revenue and product enhancements focused on increasing traffic quality.

For the years ended December 31, 2019, 2018, and 2017, 17%, 15%, and 15%, respectively, of total Hotels, Media & Platform segment revenue was derived from Tripadvisor-branded display and platform revenue.  Tripadvisor-branded display and platform revenue increased $7 million or 5% during the year ended December 31, 2019, when compared to the same period in 2018, primarily due to an increase in pricing, and to a lesser extent, new initiatives launched in the later part of 2019.  Tripadvisor-branded display and platform revenue decreased $3 million or 2% during the year ended December 31, 2018, when compared to the same period in 2017, primarily due to a general trend of an increasing percentage of traffic visiting Tripadvisor’s websites on mobile phones, which yielded smaller impression opportunities due to the smaller screen size.  

For the years ended December 31, 2019, 2018 and 2017, Experiences & Dining segment revenue accounted for 29%, 23% and 17%, respectively, of total consolidated revenue. Experiences & Dining segment revenue increased by $84 million or 23% during the year ended December 31, 2019 when compared to the same period in 2018, primarily driven by growth in both Experiences and Dining bookings, including increased bookings and revenue from Tripadvisor websites, partially offset by adverse changes in foreign currency, which Tripadvisor estimates negatively impacted Experiences & Dining revenue by 4%.  Experiences & Dining segment revenue increased by $108 million or 41% during the year ended

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December 31, 2018, when compared to the same period in 2017, primarily driven by growth in both Experiences and Restaurants bookings, including increased bookings and revenue from Tripadvisor websites.

Experiences revenue growth during the years ended December 31, 2019 and 2018, when compared to the same periods in 2018 and 2017, respectively, was primarily driven by growth in consumer demand, mobile reservations, and bookable supply on Tripadvisor’s platform contributing to overall bookings growth, as consumers are offered a greater selection of travel experiences, which Tripadvisor believes was supported by platform improvements for both consumers and suppliers and expansion. Dining revenue growth during the years ended December 31, 2019 and 2018, when compared to the same period in 2018 and 2017, respectively, was primarily driven by growth in the following: seated diners, bookable supply of restaurant listings, mobile reservations, dining sponsored placement revenue and subscription service revenue, as well as, to a lesser extent, incremental revenue related to 2019 acquisitions.

Corporate and other revenue, which primarily includes click-based advertising and display-based advertising revenue from rentals, and flights, cruises and car offerings on Tripadvisor and non-Tripadvisor branded websites, such as www.smartertravel.com, www.bookingbuddy.com, www.cruisecritic.com and www.onetime.com, decreased by $77 million or 32%, and $41 million or 14% during the years ended December 31, 2019 and 2018, respectively, when compared to the same periods in 2018 and 2017.  This was primarily driven by the elimination of some marginal and unprofitable revenue within these offerings near the end of 2018, as well as strategic resource re-allocation of investment across other areas of Tripadvisor’s business and continued competition in the rentals offering.

Operating Expense. The most significant drivers of operating expense are technology and content costs, which increased by $15 million during the year ended December 31, 2019 when compared to the same period in 2018, primarily due to additional headcount in the Experiences & Dining segment to support business growth, partially offset by a decrease of personnel and overhead costs in Corporate and other as a result of strategic personnel re-allocation across the business.  Technology and content costs increased by $21 million during the year ended December 31, 2018, when compared to the same period in 2017, primarily due to increased personnel and overhead costs, primarily as a result of an increase to headcount to support the business growth in Tripadvisor’s Experiences & Dining businesses, as well as an increase in software and other professional licensing costs.

Selling, general and administrative. The most significant driver of selling, general and administrative expense is selling and marketing expenses.  These include direct costs, including traffic generation costs from SEM and other online traffic acquisition costs, syndication costs and affiliate program commissions, social media costs, brand advertising (including television and other offline advertising), promotions and public relations. In addition, indirect sales and marketing expense consists of personnel and overhead expenses, including salaries, commissions, benefits, bonuses for sales, sales support, customer support and marketing employees.

Total selling and marketing costs decreased $108 million during the year ended December 31, 2019 when compared to the same period in 2018, primarily due to an overall decrease in SEM and other online traffic acquisition costs, as well as lower television advertising costs, driven by the Hotels, Media & Platform segment and Corporate and other.  This decrease was partially offset by an increase in similar marketing expenditures in the Experiences & Dining segment and increased personnel and overhead costs related to additional headcount in the Experiences & Dining segment to support business growth.

Total selling and marketing costs decreased $71 million during the year ended December 31, 2018 when compared to the same period in 2017, primarily due to decreased SEM and online traffic acquisition costs in Tripadvisor’s Hotels, Media & Platform businesses, partially offset by an increase in its television advertising campaign spend of $40 million during the year ended December 31, 2018, and by an increase in online and offline advertising costs in its Experiences & Dining businesses during the year ended December 31, 2018, when compared to the same period in 2017, as well as increased personnel and overhead costs due to an increase in headcount to support business growth.

Stock-based compensation. Stock based compensation increased $8 million and $20 million for the years ended December 31, 2019 and 2018, respectively, when compared to the same period in the prior year due to continued grants of stock options.

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Depreciation and amortization.  Depreciation and amortization increased $9 million during the year ended December 31, 2019 when compared to the same period in 2018, primarily due to incremental amortization for the right-of-use asset related to Tripadvisor’s headquarters lease in Needham, Massachusetts (Tripadvisor’s “Headquarters Lease”) recorded upon adoption of ASC 842 and to a lesser extent increased amortization related to capitalized software and website development costs.

Depreciation and amortization decreased $53 million during the year ended December 31, 2018 when compared to the same period in 2017, due to the decrease in amortization expense associated with certain intangible assets that were fully amortized in 2017.

Impairment of intangible assets.  Due to deteriorations in revenue, impairment losses of $288 million and $527 million were recorded during the years ended December 31, 2019 and December 31, 2017, respectively, related to trademarks.  The trademarks were related to the hotels, media & platform reporting unit in 2019 and the legacy hotels reporting unit in 2017, which is now included in the hotels, media & platform reporting unit.  Due to certain marketplace factors impacting Tripadvisor’s operating results, which led to a decline in Tripadvisor’s stock price, an impairment loss of $1,271 million was recorded during the year ended December 31, 2017 related to goodwill, related to the legacy hotels reporting unit, which is now included in the hotels, media & platform reporting unit.

Operating Income (Loss). Our consolidated operating income (loss) declined $287 million and improved $1,920 million for the years ended December 31, 2019 and 2018, respectively, as compared to the corresponding prior year periods. Operating income was impacted by the above explanations.

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Adjusted OIBDA. To provide investors with additional information regarding our financial results, we also disclose Adjusted OIBDA, which is a non-GAAP financial measure.  We define Adjusted OIBDA as Operating income (loss) plus depreciation and amortization, stock-based compensation, separately reported litigation settlements, restructuring, acquisition and other related costs and impairment charges. Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our business and make decisions about our resources. We believe this is an important indicator of the operational strength and performance of our businesses by identifying those items that are not directly a reflection of each business’ performance or indicative of ongoing business trends. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. generally accepted accounting principles.  The following table provides a reconciliation of Operating income (loss) to Adjusted OIBDA:

Adjusted OIBDA is summarized as follows:

Consolidated Adjusted OIBDA increased $14 million and $94 million for the years ended December 31, 2019 and 2018, respectively, as compared to the corresponding prior year periods. Hotels, Media & Platform Adjusted OIBDA increased $49 million for the year ended December 31, 2019 when compared to the same period in 2018, primarily due to reduced direct selling and marketing expenses related to SEM and other online paid traffic acquisition channels, and television advertising, which more than offset the decrease in revenue.  Hotels, Media & Platform Adjusted OIBDA increased $62 million for the year ended December 31, 2018 when compared to the same period in 2017, primarily due to a decrease in direct selling and marketing expenses related to SEM and other online paid traffic acquisition costs as Tripadvisor continued to optimize and improve its marketing efficiency from its online marketing campaigns, which more than offset the decrease in revenue.

Experiences & Dining Adjusted OIBDA decreased $43 million during the year ended December 31, 2019 when compared to the same period in 2018, primarily due to increased people costs to drive product and supply investments, as well as increased marketing investments to fund long-term growth initiatives, partially offset by an increase in revenue, as noted above.  Experiences & Dining Adjusted OIBDA increased $25 million during the year ended December 31, 2018 when compared to the same period in 2017, primarily due to an increase in revenue, as noted above, partially offset by increased people costs to drive product and supply investments and increased marketing investments to fund long-term growth initiatives.

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Corporate and other Adjusted OIBDA increased $8 million and $7 million during the years ended December 31, 2019 and 2018, when compared to the same periods in 2018 and 2017, respectively, primarily due to reduced costs related to marketing and operational re-alignments, primarily offset by a decrease in revenue, as described above.  Corporate and other Adjusted OIBDA also includes $8 million, $5 million and $6 million of TripCo level selling, general and administrative expenses for the years ended December 31, 2019, 2018 and 2017, respectively.

Other Income and Expense

Components of Other Income (Expense) are presented in the table below.

Interest expense.  Interest expense decreased $4 million during the year ended December 31, 2019, when compared to the same period in 2018, primarily due to lower finance costs related to Tripadvisor’s Headquarters Lease under ASC 842 and no outstanding borrowings on Tripadvisor’s 2015 Credit Facility (as defined in note 7 in the accompanying consolidated financial statements). These decreases at Tripadvisor were partially offset by increased corporate interest expense due to higher outstanding borrowings under the margin loan agreement entered into by TripCo’s bankruptcy remote wholly-owned subsidiary (the “Margin Loan”) for the year ended December 31, 2019.  Interest expense increased $1 million during the year ended December 31, 2018, when compared to the same period in 2017, related to higher average outstanding borrowings and effective interest rates on corporate debt during 2018, partially offset by no outstanding borrowings on Tripadvisor’s debt during the year ended December 31, 2018.

Realized and unrealized gains (losses) on financial instruments, net. Realized and unrealized gains (losses) on financial instruments, net is primarily comprised of the change in the fair value of the variable postpaid forward (the “VPF”) as described in notes 5 and 7 in the accompanying consolidated financial statements. TripCo unwound the VPF during the fourth quarter of 2019.

Other, net.  The primary components of other, net are income and interest earned on money market funds and marketable securities offset by net foreign exchange losses.  Other, net also includes a loss on disposition of $18 million during the year ended December 31, 2017 resulting from the sale of BuySeasons on June 30, 2017. Other, net income increased $8 million for the year ended December 31, 2019, when compared to the same period in 2018, primarily due to an increase in interest income earned from Tripadvisor’s money market funds and other investments due to increased average interest rates and increased average invested funds during 2019.  Other, net income increased $22 million for the year ended December 31, 2018, when compared to the same period in 2017, primarily due to no dispositions in 2018, as well as transactions gains and losses at Tripadvisor as a result of the fluctuation of foreign exchanges rates.

Income taxes.  The Company had income tax benefits of $16, income tax expenses of $57 million, and income tax benefits of $229 million for the years ended December 31, 2019, 2018 and 2017, respectively.

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During 2019, the Company recognized additional tax expense for changes in unrecognized tax benefits and dividends from Tripadvisor not recognized for book purposes, net of a dividends received deduction.  These expense items were partially offset by a net income tax benefit from earnings in foreign jurisdictions taxed at rates other than the 21% United States (“U.S.”) federal tax rate and federal income tax credits.

During 2018, the Company recognized additional tax expense related to the recognition of deferred tax liabilities for basis differences in the stock of a consolidated subsidiary and changes in unrecognized tax benefits. These expense items were partially offset by a net income tax benefit from earnings in foreign jurisdictions taxed at rates other than the 21% U.S. federal tax rate.

The Company recorded a discrete net tax benefit in the period ending December 31, 2017. This net benefit primarily consists of a net benefit for the corporate rate reduction, offset partially by a net tax expense related to a transition tax on the deemed repatriation of foreign earnings.  In addition, the Company recognized an impairment loss on its goodwill that is not deductible for tax purposes.

Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders.  We had net losses attributable to Liberty TripAdvisor Holdings, Inc. shareholders of $22 million, $64 million and $397 million for the years ended December 31, 2019, 2018 and 2017, respectively. The changes in net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders were the result of the above-described fluctuations in our revenue, expenses and other gains and losses.

Liquidity and Capital Resources

As of December 31, 2019, substantially all of our cash and cash equivalents consist of cash on hand in global financial institutions, money market funds and marketable securities, with maturities of 90 days or less at the date purchased.

The following are potential sources of liquidity: available cash balances, proceeds from asset sales, monetization of our investments, outstanding or anticipated debt facilities, debt and equity issuances, and dividend and interest receipts.

As of December 31, 2019, TripCo had a cash balance of $341 million. Approximately $319 million of the cash balance is held at Tripadvisor. Although TripCo has a 58% voting interest in Tripadvisor, Tripadvisor is a separate public company with a significant non-controlling interest, as TripCo has only a 23% equity interest in Tripadvisor. Even though TripCo controls Tripadvisor through its voting interest and board representation, decision making with respect to using Tripadvisor’s cash balances must consider Tripadvisor’s minority holders. Accordingly, any potential distributions of cash from Tripadvisor to TripCo would generally be on a pro rata basis based on economic ownership interests. Covenants in Tripadvisor’s debt instruments also restrict the payment of dividends and cash distributions to stockholders. See note 7 in the accompanying consolidated financial statements.

As of December 31, 2019, approximately $151 million of TripCo cash is held by Tripadvisor foreign subsidiaries, of which approximately 50% were located in the U.K., with the majority of Tripadvisor’s international cash denominated in U.S. dollars, Euros, and, to a lesser extent, British pounds, Australian dollars and other currencies.  As of December 31, 2019, Tripadvisor had $619 million of cumulative undistributed earnings in foreign subsidiaries.  As a result of the Tax Act, foreign earnings may now generally be repatriated back to the U.S. without incurring U.S. federal income tax.  See note 9 in the accompanying consolidated financial statements for additional information.

On November 1, 2019, Tripadvisor’s Board of Directors declared a special cash dividend of $3.50 per share, or approximately $488 million in the aggregate.  The dividend was payable on December 4, 2019 to stockholders of record on November 20, 2019.  TripCo received approximately $108 million based on our ownership in Tripadvisor. Tripadvisor funded this special cash dividend with available cash primarily from the U.S. and to a lesser extent from a foreign subsidiary, with no material related income tax impacts.

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As of December 31, 2019, Tripadvisor had no outstanding borrowings and approximately $1.2 billion in borrowing capacity available under the 2015 Credit Facility and $30 million of borrowing capacity available under the Tripadvisor Chinese Credit Facility—BOA (as defined in note 7 in the accompanying consolidated financial statements).  

Historically, Tripadvisor’s operating cash flows have been sufficient to fund its working capital requirements, capital expenditures and long term debt obligations and other financial commitments and are expected to be sufficient in future periods.