(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 could grant Awards in respect of a maximum of 5.0 million shares of TripCo common stock through May 23, 2024.  Awards generally vested over 1-5 years and had a term of 7-10 years.  TripCo issued new shares upon exercise of equity awards. The Liberty TripAdvisor Holdings, Inc. 2019 Omnibus Incentive Plan expired on May 23, 2024, and since a new incentive plan was not adopted, TripCo ceased to make any subsequent grants under an incentive plan.

TripCo – Grants

During the years ended December 31, 2023 and 2022, TripCo granted 175 thousand and 367 thousand performance-based RSUs, respectively, of LTRPB to the Company’s CEO. The performance-based RSUs had a GDFV of $1.04 per share and $2.04 per share, respectively, at the time they were granted.  During the year ended December 31, 2024, pursuant to an agreement among TripCo, Liberty Media and the Company’s CEO, TripCo granted a cash award equal to $875,000 in satisfaction of the annual grant pursuant to which the Company’s CEO was entitled under his employment agreement. During the year ended December 31, 2023,  TripCo also granted a cash award equal to $656,250 to the Company’s 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 awards 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 years ended December 31, 2023 and 2022, TripCo granted 31 thousand and 177 thousand performance-based RSUs, respectively, of LTRPA to its employees. The performance-based RSUs had a weighted average GDFV of $0.99 per share and $1.94 per share, respectively, at the time they were granted. Also, during the years ended December 31, 2024 and 2023, TripCo granted cash awards equal to $277,416 and $329,236, respectively, 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, 2022, TripCo granted 293 thousand time-based RSUs of LTRPA to its non-employee directors which had a weighted average GDFV of  $0.70 per share and cliff vested 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.  The volatility used in the calculation for Awards is based on the historical volatility of TripCo common stock.  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. There were no options granted in 2024, 2023 and 2022.

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.

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As of December 31, 2024, there were 600 thousand LTRPB options outstanding and exercisable at a WAEP of $4.23, a weighted average remaining contractual life of 2.9 years and an aggregate intrinsic value of zero. There were no grants, exercises or cancellations of LTRPB options during the year ended December 31, 2024. 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, 2024, all equity Awards are fully vested and therefore there is no unrecognized compensation cost.

As of December 31, 2024, TripCo reserved 1.5 million shares of LTRPA and LTRPB for issuance under exercise privileges of outstanding stock options.

All outstanding Awards are expected to be cancelled upon completion of the proposed Merger with Tripadvisor as the Awards are expected to have no value at that time (see note 1 for addition information about the Merger).

TripCo – Exercises

No TripCo options were exercised in 2024, 2023 or 2022.

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, 2024, 2023 and 2022 was $771 thousand, $815 thousand and $537 thousand, respectively.

As of December 31, 2024, TripCo had no unvested restricted stock or RSUs of LTRPA or LTRPB.

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 TRIP 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 common stock 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 56.7% and the applicable risk free rate for an expected term of 5.2 years for the year ended December 31, 2024, 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 and a 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.

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:

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The weighted average GDFV of service based stock options under their 2011 Plan and 2018 Plan was $13.37 for the year ended December 31, 2024. 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, 2024, the total number of shares reserved for future stock-based awards under the 2018 Plan was approximately 16 million shares. Tripadvisor related stock-based compensation for the year ended December 31, 2024 was approximately $120 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, 2024, Tripadvisor granted approximately 7 million units, vested and released approximately 5 million units, and had cancellations of approximately 2 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 2024 was $24.91 per share, $23.93 per share, and $23.04 per share, respectively. As of December 31, 2024, there were 13 million unvested Tripadvisor RSUs, PSUs and MSUs outstanding.

As of December 31, 2024, total unrecognized compensation cost related to stock-based awards, substantially RSUs, was approximately $245 million which Tripadvisor expects will be recognized over a weighted-average period of 2.5 years.