(10) Stock-Based Compensation

TripCo – Incentive Plans

TripCo has granted Awards to certain of its directors and employees. TripCo measures the cost of employee services received in exchange for an equity classified Award based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award).  The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and re-measures the fair value of the Award at each reporting date.

Pursuant to the Liberty TripAdvisor Holdings, Inc. 2019 Omnibus Incentive Plan, the Company may grant Awards in respect of a maximum of 5.0 million shares of TripCo common stock.  Awards generally vest over 1-5 years and have a term of 7-10 years.  TripCo issues new shares upon exercise of equity awards.

TripCo – Grants

During the years ended December 31, 2023, 2022 and 2021, TripCo granted 175 thousand, 367 thousand and 154 thousand performance-based RSUs, respectively, of LTRPB to our CEO. The performance-based RSUs had a GDFV of $1.04, $2.04 and $7.07 per share, respectively, at the time they were granted.  During the year ended December 31, 2023, TripCo also granted a cash award equal to $656,250 to our CEO, and together with the performance-based RSUs, satisfied the annual grant pursuant to which he was entitled under his employment agreement. The performance-based RSUs and the cash award cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.

During the year ended December 31, 2021, TripCo granted to its employees 47 thousand options to purchase shares of LTRPA.  Such options had a weighted average GDFV of $3.25 per share and vest between two and three years. During the year ended December 31, 2021, TripCo granted 8 thousand time-based RSUs of LTRPA to its employees. Such time-based RSUs had a weighted average GDFV of $6.73 per share and vested 50% in March 2023 and vest 50% in March 2024.  During the years ended December 31, 2023, 2022 and 2021, TripCo granted 31 thousand, 177 thousand and 72 thousand performance-based RSUs, respectively, of LTRPA to its employees. The performance-based RSUs had a weighted average GDFV of $0.99, $1.94 and $6.73 per share, respectively, at the time they were granted. Also, during the year ended December 31, 2023, TripCo granted cash awards equal to $329,236 to its employees. The performance-based RSUs and cash awards generally cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives.

During the year ended December 31, 2021, TripCo granted 26 thousand options to purchase shares of LTRPA to its non-employee directors.  Such options had a weighted average GDFV of $2.90 per share, and generally cliff vest over a one year vesting period.  Also during the years ended December 31, 2022 and 2021, TripCo granted 293 thousand and 154 thousand time-based RSUs, respectively, of LTRPA to its non-employee directors which had a weighted average GDFV of  $0.70 per share and $2.53 per share, respectively, and generally cliff vest over a one year vesting period.

The Company has calculated the GDFV for all of its equity classified awards and any subsequent re-measurement of its liability classified awards using the Black-Scholes-Merton model.  The Company estimates the expected term of the Awards based on historical exercise and forfeiture data.  For grants made in 2021, the range of expected terms was 4.9 years to 5.0 years.  The volatility used in the calculation for Awards is based on the historical volatility of TripCo common

stock.  For grants made in 2021, the range of volatilities was 82.1% to 86.8%. There were no options granted in 2023 and 2022. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

TripCo – Outstanding Awards

The following table presents the number and weighted average exercise price (“WAEP”) of options to purchase LTRPA granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the options.

​

​

As of December 31, 2023, there were 600 thousand LTRPB options outstanding and exercisable at a WAEP of $4.23 and a weighted average remaining contractual life of 3.9 years. There were no grants or exercises of LTRPB options during the year ended December 31, 2023. On May 31, 2023, TripCo and our CEO agreed that TripCo would cancel the CEO’s vested and unexercised nonqualified stock options to purchase 1.8 million shares of LTRPB, which had been granted in December 2014 with an exercise price equal to $27.83 per share, in exchange for an immaterial cash payment.

As of December 31, 2023, the total unrecognized compensation cost related to unvested equity Awards was $1.1 million. Such amount will be recognized in the Company’s statements of operations over a weighted average period of approximately one year.

As of December 31, 2023, TripCo reserved 1.6 million shares of LTRPA and LTRPB for issuance under exercise privileges of outstanding stock options.

TripCo – Exercises

No TripCo options were exercised in 2023, 2022 or 2021.

TripCo – Restricted Stock and Restricted Stock Units

The aggregate fair value of all restricted stock and restricted stock units of TripCo common stock that vested during the years ended December 31, 2023, 2022 and 2021 was $815 thousand, $537 thousand and $2.8 million, respectively.

As of December 31, 2023, TripCo had approximately 1.2 million unvested restricted stock and RSUs of LTRPA and LTRPB held by certain directors, officers and employees of the Company with a weighted average GDFV of $3.95 per share.

Tripadvisor – Equity Grant Awards

On June 21, 2018, Tripadvisor’s stockholders approved the 2018 Stock and Annual Incentive Plan (the “2018 Plan”) primarily for the purpose of providing sufficient reserves of shares of Tripadvisor’s common stock to ensure its ability to continue to provide new hires, employees and management with equity incentives. The number of shares reserved and available for issuance under the 2018 Plan is 6,000,000 plus the number of shares available for issuance (and not subject to outstanding awards) under the Amended and Restated 2011 Stock and Annual Incentive Plan (the “2011 Plan”), as of the effective date of the 2018 Plan and no additional awards will be granted under the 2011 Plan.  The 2018 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, RSUs, and other stock-based awards to Tripadvisor’s directors, officers, employees and consultants. On June 8, 2021, Tripadvisor stockholders approved an amendment to the 2018 Plan to, among other things, increase the aggregate number of shares reserved and available for issuance under the 2018 Plan by 10,000,000 shares. The purpose of this amendment was to provide sufficient reserves of shares of TRIP to ensure its ability to continue to provide new hires, employees and management with equity incentives.

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

Grants were valued using a volatility of 53.4% and the applicable risk free rate for an expected term of 5.2 years for the year ended December 31, 2023, volatility of 51.6% and the applicable risk free rate for an expected term of 5.4 years for the year ended December 31, 2022 and a volatility of 49.6% and the applicable risk free rate for an expected term of 5.5 years for the year ended December 31, 2021.

Performance-based stock options and RSUs vest upon achievement of certain Tripadvisor company-based performance conditions and a requisite service period. On the date of grant, the fair value of stock options is calculated using a Black-Scholes-Merton model, which incorporates assumptions to value stock-based awards, including the risk-free rate of return, expected volatility, expected term and expected dividend yield. If, upon grant, Tripadvisor assesses the achievement of performance targets as probable, compensation expense is recorded for the awards over the estimated performance period on a straight-line basis. At each reporting period, the probability of achieving the performance targets and the performance period required to meet those targets is assessed. To the extent actual results or updated estimates differ from Tripadvisor’s estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised, or the change in estimate will be applied prospectively depending on whether the change affects the estimate of total compensation cost to be recognized or merely affects the period over which compensation cost is to be recognized.

The following table presents the number, WAEP and aggregate intrinsic value of stock options to purchase shares of TRIP granted under their 2011 Plan and 2018 Plan:

​

​

The weighted average GDFV of service based stock options under their 2011 Plan and 2018 Plan was $10.18 for the year ended December 31, 2023. These stock options generally have a term of ten years from the date of grant and typically vest equally over a four year requisite service period. As of December 31, 2023, the total number of shares reserved for future stock-based awards under the 2018 Plan was approximately 19 million shares. Tripadvisor related stock-based compensation for the year ended December 31, 2023 was approximately $96 million.

Restricted Stock Units and Market-based Restricted Stock Units

RSUs are stock awards that are granted to employees entitling the holder to shares of TRIP as the award vests. RSUs are measured at fair value based on the quoted price of TRIP at the date of grant. The fair value of RSUs is amortized as stock-based compensation expense over the vesting term on a straight-line basis, with the amount of compensation expense recognized at any date at least equaling the portion of the GDFV of the award that is vested at that date.

Tripadvisor issues market-based performance restricted stock units (“MSUs”), which vest upon achievement of specified levels of market conditions. The fair value of the MSUs is estimated at the date of grant using a Monte-Carlo simulation model. The probabilities of the actual number of market-based performance units expected to vest and resultant actual number of shares of TRIP expected to be awarded are reflected in the grant date fair values; therefore, the compensation expense for these awards will be recognized assuming the requisite service period is rendered and are not adjusted based on the actual number of awards that ultimately vest.

Tripadvisor also issues a limited amount of performance-based RSUs (“PSUs”). The estimated GDFV per PSU was measured based on the quoted price of TRIP common stock at the date of the grant, calculated upon the establishment of performance targets and amortized on a straight-line basis over the requisite service period. 

During the year ended December 31, 2023, Tripadvisor granted approximately 9 million units, vested and released approximately 4 million units, and had cancellations of approximately 1 million units, which included primarily service-based RSUs, PSUs and market-based MSUs under the 2018 Plan. The weighted average GDFV for RSUs, PSUs and MSUs granted, vested and released, and cancelled during 2023 was $20.63 per share, $29.62 per share, and $24.87 per share, respectively. As of December 31, 2023, there were 13 million unvested Tripadvisor RSUs, PSUs and MSUs outstanding.

As of December 31, 2023, total unrecognized compensation cost related to stock-based awards, substantially RSUs, was approximately $241 million which will be recognized over a weighted-average period of 2.6 years.