UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, ~~2019~~2020

☐ 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)


Delaware (State or other jurisdiction of incorporation or organization)		46-3337365 (I.R.S. Employer Identification No.)

12300 Liberty Boulevard, Englewood, Colorado 80112

(Address, including zip code, of Registrant’s principal executive offices)

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Series A common stock	LTRPA	The Nasdaq Stock Market LLC
Series B common stock	LTRPB	The Nasdaq Stock Market LLC

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 Rule12b-2 of the Exchange Act.

Large Accelerated Filer ☒

Accelerated Filer ☐

Non-accelerated Filer ☐

Smaller Reporting Company ☐

Emerging Growth Company ☐

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 number of outstanding shares of Liberty TripAdvisor Holdings, Inc. common stock as of July 31, ~~2019~~2020 was:


	Series A	Series B	Series A	Series B
Liberty TripAdvisor Holdings, Inc. common stock	72,146,830	2,929,777	72,167,796	2,952,569

Table of Contents

Table of Contents

Part I – Financial Information






Item 1. Financial Statements
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Balance Sheets (unaudited)		I-3
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Operations (unaudited)		I-5
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)		I-6
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Cash Flows (unaudited)		I-7
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Equity (unaudited)		I-8
LIBERTY TRIPADVISOR HOLDINGS, INC. Notes to Condensed Consolidated Financial Statements (unaudited)		I-10


	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	~~I-25~~I-26
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	~~I-33~~I-37
	Item 4. Controls and Procedures	~~I-33~~I-37

Part II – Other Information
	Item 1. Legal Proceedings	II-1
	Item 1A. Risk Factors	II-1
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	II-2
	Item 6. Exhibits	~~II-2~~II-3


SIGNATURES		~~II-3~~II-4

I-2

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(unaudited)


	June 30,		December 31,	June 30,		December 31,
	2019		2018	2020		2019

	amounts in millions			amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	915	672	$	709	341
Accounts receivable and contract assets, net of allowance for doubtful accounts of $22 million and $21 million, respectively		270	212
Accounts receivable and contract assets, net of allowance for doubtful accounts of $32 million and $25 million, respectively					74	183
Other current assets		127	48		80	33
Total current assets		1,312	932		863	557
Property and equipment, net		156	154		145	155
Intangible assets not subject to amortization:
Goodwill		2,441	2,443
Trademarks		1,267	1,266
Goodwill (note 5)					2,214	2,527
Trademarks (note 5)					725	980
		3,708	3,709		2,939	3,507
Intangible assets subject to amortization, net		280	311		237	277
Other assets, at cost, net of accumulated amortization		177	118		209	230
Total assets	$	5,633	5,224	$	4,393	4,726

(continued)

See accompanying notes to condensed consolidated financial statements.

I-3

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets (Continued)

(unaudited)


	June 30,		December 31,	June 30,		December 31,
	2019		2018	2020		2019

	amounts in millions			amounts in millions
Liabilities and Equity
Current liabilities:
Deferred merchant and other payables	$	360	179	$	70	170
Current portion of debt (note 5)		269	220
Deferred revenue		98	63		38	62
Accrued liabilities and other current liabilities		183	151		142	205
Total current liabilities		910	613		250	437
Long-term debt (note 5)		224	267
Long-term debt (note 6)					740	353
Deferred income tax liabilities		338	325		193	254
Other liabilities		343	283		374	381
Total liabilities		1,815	1,488		1,557	1,425
Redeemable preferred stock, $.01 par value. Authorized shares 50,000,000; issued and outstanding 325,000 shares at June 30, 2020 and 0 at December 31, 2019 (note 7)					354	—
Equity:
Preferred stock, $.01 par value. Authorized shares 50,000,000; no shares issued.		—	—
Series A common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding 72,146,830 shares at June 30, 2019 and 72,146,903 at December 31, 2018		1	1
Series B common stock, $.01 par value. Authorized shares 7,500,000; issued and outstanding 2,929,777 shares at June 30, 2019 and December 31, 2018		—	—
Series C common stock, $.01 par value. Authorized 200,000,000 shares; no shares issued.		—	—
Series A common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding 72,167,796 shares at June 30, 2020 and 72,152,848 at December 31, 2019					1	1
Series B common stock, $.01 par value. Authorized shares 7,500,000; issued and outstanding 2,952,569 shares at June 30, 2020 and 2,929,401 December 31, 2019					—	—
Series C common stock, $.01 par value. Authorized 200,000,000 shares; 0 shares issued.					—	—
Additional paid-in capital		215	231		244	237
Accumulated other comprehensive earnings (loss), net of taxes		(30)	(29)		(32)	(29)
Retained earnings		135	133		(103)	111
Total stockholders' equity		321	336		110	320
Noncontrolling interests in equity of subsidiaries		3,497	3,400		2,372	2,981
Total equity		3,818	3,736		2,482	3,301
Commitments and contingencies (note 7)
Total liabilities and equity	$	5,633	5,224
Commitments and contingencies (note 9)
Total liabilities, redeemable preferred stock and equity				$	4,393	4,726

See accompanying notes to condensed consolidated financial statements.

I-4

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended

Six months ended

June 30,

June 30,


2019

2018

2019

2018

amounts in millions, except

per share amounts

Total revenue, net

$
422

433

798

811

Operating costs and expenses:

Operating expense, including stock-based compensation (note 2)

102

92

196

179

Selling, general and administrative, including stock-based compensation (note 2)

228

266

452

509

Depreciation and amortization

41

41

83

80

371

399

731

768

Operating income (loss)

51

34

67

43

Other income (expense):

Interest expense

(6)

(6)

(11)

(12)

Realized and unrealized gains (losses) on financial instruments, net

5

(42)

6

(65)

Other, net

4

—

8

1

3

(48)

3

(76)

Earnings (loss) before income taxes

54

(14)

70

(33)

Income tax (expense) benefit

(31)

(8)

(36)

(24)

Net earnings (loss)

23

(22)

34

(57)

Less net earnings (loss) attributable to noncontrolling interests

20

17

33

13

Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

$
3

(39)

1

(70)

Basic net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):

$
0.04

(0.52)

0.01

(0.93)

Diluted net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):

$
0.04

(0.52)

0.01

(0.93)


	Three months ended			Six months ended
	June 30,			June 30,
	2020		2019	2020	2019

	amounts in millions, except
	per share amounts
Total revenue, net	$	59	422	337	798
Operating costs and expenses:
Operating expense, including stock-based compensation (note 2)		61	102	149	196
Selling, general and administrative, including stock-based compensation (note 2)		99	228	281	452
Depreciation and amortization		42	41	85	83
Restructuring and other related reorganization costs		33	—	42	—
Impairment of goodwill and intangible assets (note 5)		547	—	547	—
		782	371	1,104	731
Operating income (loss)		(723)	51	(767)	67
Other income (expense):
Interest expense		(7)	(6)	(14)	(11)
Other, net		(24)	9	(25)	14
		(31)	3	(39)	3
Earnings (loss) before income taxes		(754)	54	(806)	70
Income tax (expense) benefit		89	(31)	103	(36)
Net earnings (loss)		(665)	23	(703)	34
Less net earnings (loss) attributable to noncontrolling interests		(501)	20	(520)	33
Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders	$	(164)	3	(183)	1

Net earnings (loss) available to common shareholders (note 3)	$	(188)	3	(213)	1

Basic net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):	$	(2.51)	0.04	(2.84)	0.01
Diluted net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):	$	(2.51)	0.04	(2.84)	0.01

See accompanying notes to condensed consolidated financial statements.

I-5

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended

Six months ended

June 30,

June 30,

2019

2018

2019

2018

amounts in millions

Net earnings (loss)

$
23

(22)

34

(57)

Other comprehensive earnings (loss), net of taxes:

Foreign currency translation adjustments

(3)

(24)

(2)

(9)

Other comprehensive earnings (loss)

(3)

(24)

(2)

(9)

Comprehensive earnings (loss)

20

(46)

32

(66)

Less comprehensive earnings (loss) attributable to the noncontrolling interests

18

(2)

32

6

Comprehensive earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

$
2

(44)

0

(72)


	Three months ended			Six months ended
	June 30,			June 30,
	2020		2019	2020	2019

	amounts in millions
Net earnings (loss)	$	(665)	23	(703)	34
Other comprehensive earnings (loss), net of taxes:
Foreign currency translation adjustments		13	(3)	(14)	(2)
Reclassification adjustment for net losses included in net income		1	—	1	—
Other comprehensive earnings (loss)		14	(3)	(13)	(2)
Comprehensive earnings (loss)		(651)	20	(716)	32
Less comprehensive earnings (loss) attributable to the noncontrolling interests		(490)	18	(530)	32
Comprehensive earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders	$	(161)	2	(186)	—

See accompanying notes to condensed consolidated financial statements.

I-6

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

Six months ended

June 30,

2019

2018

amounts in millions

Cash flows from operating activities:






Net earnings (loss)

$
34

(57)

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities

Depreciation and amortization

83

80

Stock-based compensation

63

63

Realized and unrealized (gains) losses on financial instruments, net

(6)

65

Deferred income tax expense (benefit)

12

(6)

Other charges (credits), net

2

(10)

Changes in operating assets and liabilities

Current and other assets

(62)

(74)

Payables and other liabilities

221

296

Net cash provided (used) by operating activities

347

357

Cash flows from investing activities:

Capital expended for property and equipment, including internal-use software and website development

(38)

(31)

Purchases of short term investments and other marketable securities

(69)

(1)

Sales and maturities of short term investments and other marketable securities

20

50

Other investing activities, net

—

(23)

Net cash provided (used) by investing activities

(87)

(5)

Cash flows from financing activities:

Borrowings of debt

114

7

Repayments of debt

(100)

(245)

Shares repurchased by subsidiary

—

(100)

Payment of withholding taxes on net share settlements of equity awards

(26)

(18)

Shares issued by subsidiary

1

3

Other financing activities, net

(4)

—

Net cash provided (used) by financing activities

(15)

(353)

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

(2)

(9)

Net increase (decrease) in cash, cash equivalents and restricted cash

243

(10)

Cash, cash equivalents and restricted cash at beginning of period

672

695

Cash, cash equivalents and restricted cash at end of period

$
915

685


	Six months ended
	June 30,
	2020		2019

	amounts in millions
Cash flows from operating activities:
Net earnings (loss)	$	(703)	34
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities
Depreciation and amortization		85	83
Stock-based compensation		52	63
Realized and unrealized (gains) losses on financial instruments, net		—	(6)
Impairment of goodwill and intangible assets		547	—
Deferred income tax expense (benefit)		(59)	12
Other charges (credits), net		31	2
Changes in operating assets and liabilities
Current and other assets		71	(62)
Payables and other liabilities		(187)	221
Net cash provided (used) by operating activities		(163)	347
Cash flows from investing activities:
Capital expended for property and equipment, including internal-use software and website development		(36)	(38)
Purchases of short term investments and other marketable securities		—	(69)
Sales and maturities of short term investments and other marketable securities		—	20
Other investing activities, net		1	—
Net cash provided (used) by investing activities		(35)	(87)
Cash flows from financing activities:
Borrowings of debt		740	114
Repayments of debt		(352)	(100)
Shares repurchased by subsidiary		(115)	—
Payment of withholding taxes on net share settlements of equity awards		(17)	(26)
Shares issued by subsidiary		—	1
Issuance of redeemable preferred stock		325	—
Other financing activities, net		(15)	(4)
Net cash provided (used) by financing activities		566	(15)
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash		—	(2)
Net increase (decrease) in cash, cash equivalents and restricted cash		368	243
Cash, cash equivalents and restricted cash at beginning of period		341	672
Cash, cash equivalents and restricted cash at end of period	$	709	915

See accompanying notes to condensed consolidated financial statements.

I-7

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated ~~Statement~~Statements of Equity

(unaudited)

Stockholders' equity

Accumulated

Noncontrolling

Additional

other

interest in

Preferred

Common Stock

paid-in

comprehensive

Retained

equity of

Total

Stock

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

amounts in millions

Balance at January 1, 2019

$
—

1

—

—

231

(29)

133

3,400

3,736

Net earnings (loss)

—

—

—

—

—

—

1

33

34

Other comprehensive earnings (loss)

—

—

—

—

—

(1)

—

(1)

(2)

Stock-based compensation

—

—

—

—

18

—

—

53

71

Withholding taxes on net share settlements of stock-based compensation

—

—

—

—

(27)

—

—

—

(27)

Other, net

—

—

—

—

(7)

—

1

12

6

Balance at June 30, 2019

$
—

1

—

—

215

(30)

135

3,497

3,818


	Stockholders' equity

						Accumulated		Noncontrolling
					Additional	other		interest in
	Common Stock				paid-in	comprehensive	Retained	equity of	Total
	Series A		Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity

	amounts in millions
Balance at January 1, 2020	$	1	—	—	237	(29)	111	2,981	3,301
Net earnings (loss)		—	—	—	—	—	(183)	(520)	(703)
Other comprehensive earnings (loss)		—	—	—	—	(3)	—	(10)	(13)
Stock-based compensation		—	—	—	15	—	—	47	62
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(17)	—	—	—	(17)
Shares repurchased by subsidiary		—	—	—	17	—	—	(132)	(115)
Preferred stock adjustment		—	—	—	—	—	(30)	—	(30)
Other, net		—	—	—	(8)	—	(1)	6	(3)
Balance at June 30, 2020	$	1	—	—	244	(32)	(103)	2,372	2,482


	Stockholders' equity										Stockholders' equity

							Accumulated		Noncontrolling							Accumulated		Noncontrolling
						Additional	other		interest in						Additional	other		interest in
	Preferred		Common Stock			paid-in	comprehensive	Retained	equity of	Total		Common Stock			paid-in	comprehensive	Retained	equity of	Total
	Stock		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity

	amounts in millions										amounts in millions
Balance at March 31, 2019	$	—	1	—	—	216	(29)	132	3,443	3,763
Balance at March 31, 2020											$	1	—	—	242	(35)	85	2,838	3,131
Net earnings (loss)		—	—	—	—	—	—	3	20	23		—	—	—	—	—	(164)	(501)	(665)
Other comprehensive earnings (loss)		—	—	—	—	—	(1)	—	(2)	(3)		—	—	—	—	3	—	11	14
Stock-based compensation		—	—	—	—	9	—	—	29	38		—	—	—	6	—	—	23	29
Withholding taxes on net share settlements of stock-based compensation		—	—	—	—	(4)	—	—	—	(4)		—	—	—	(3)	—	—	—	(3)
Preferred stock adjustment												—	—	—	—	—	(24)	—	(24)
Other, net		—	—	—	—	(6)	—	—	7	1		—	—	—	(1)	—	—	1	—
Balance at June 30, 2019	$	—	1	—	—	215	(30)	135	3,497	3,818
Balance at June 30, 2020											$	1	—	—	244	(32)	(103)	2,372	2,482

~~See accompanying notes to condensed consolidated financial statements.~~

I-8

Table of Contents

~~LIBERTY TRIPADVISOR HOLDINGS, INC.~~

~~Condensed Consolidated Statement of Equity (continued)~~

~~(unaudited)~~


	Stockholders' equity											Stockholders' equity

					��			Accumulated		Noncontrolling							Accumulated		Noncontrolling
							Additional	other		interest in						Additional	other		interest in
	Preferred		Common Stock				paid-in	comprehensive	Retained	equity of	Total	Common Stock				paid-in	comprehensive	Retained	equity of	Total
	Stock		Series A	Series B		Series C	capital	earnings (loss)	earnings	subsidiaries	equity		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity

	amounts in millions											amounts in millions
Balance at January 1, 2018	$	—	1	—		—	250	(23)	196	3,329	3,753
Balance at January 1, 2019												$	1	—	—	231	(29)	133	3,400	3,736
Net earnings (loss)		—	—	—		—	—	—	(70)	13	(57)		—	—	—	—	—	1	33	34
Other comprehensive earnings (loss)		—	—	—		—	—	(2)	—	(7)	(9)		—	—	—	—	(1)	—	(1)	(2)
Stock-based compensation		—	—	—		—	18	—	—	52	70		—	—	—	18	—	—	53	71
Shares repurchased by subsidiary		—	—	—		—	(20)	—	—	(80)	(100)
Withholding taxes on net share settlements of stock-based compensation													—	—	—	(27)	—	—	—	(27)
Other, net		—	—	—		—	(24)	—	1	12	(11)		—	—	—	(7)	—	1	12	6
Balance at June 30, 2018	$	—	1	—		—	224	(25)	127	3,319	3,646
Balance at June 30, 2019												$	1	—	—	215	(30)	135	3,497	3,818


	Stockholders' equity										Stockholders' equity

							Accumulated		Noncontrolling							Accumulated		Noncontrolling
						Additional	other		interest in						Additional	other		interest in
	Preferred		Common Stock			paid-in	comprehensive	Retained	equity of	Total		Common Stock			paid-in	comprehensive	Retained	equity of	Total
	Stock		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity

	amounts in millions											amounts in millions
Balance at March 31, 2018	$	—	1	—	—	240	(20)	166	3,361	3,748
Balance at March 31, 2019											$	1	—	—	216	(29)	132	3,443	3,763
Net earnings (loss)		—	—	—	—	—	—	(39)	17	(22)		—	—	—	—	—	3	20	23
Other comprehensive earnings (loss)		—	—	—	—	—	(5)	—	(19)	(24)		—	—	—	—	(1)	—	(2)	(3)
Stock-based compensation		—	—	—	—	10	—	—	27	37		—	—	—	9	—	—	29	38
Shares repurchased by subsidiary		—	—	—	—	(18)	—	—	(72)	(90)
Withholding taxes on net share settlements of stock-based compensation												—	—	—	(4)	—	—	—	(4)
Other, net		—	—	—	—	(8)	—	—	5	(3)		—	—	—	(6)	—	—	7	1
Balance at June 30, 2018	$	—	1	—	—	224	(25)	127	3,319	3,646
Balance at June 30, 2019											$	1	—	—	215	(30)	135	3,497	3,818

See accompanying notes to condensed consolidated financial ~~statements.~~statements

I-9

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1) Basis of Presentation

During October 2013, the Board of Directors of Liberty Interactive Corporation and its subsidiaries (“Liberty”) (subsequently renamed Qurate Retail, Inc. (“Qurate Retail”)) authorized a plan to distribute to the stockholders of Liberty’s then-outstanding Liberty Ventures common stock shares of a wholly-owned subsidiary, Liberty TripAdvisor Holdings, Inc. (“TripCo,” “Consolidated TripCo,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires) (the “TripCo Spin-Off”). TripCo does not have any operations outside of its controlling interest in its subsidiary ~~TripAdvisor,~~Tripadvisor, Inc. (“~~TripAdvisor”~~Tripadvisor”). ~~TripAdvisor’s~~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.

The accompanying (a) condensed consolidated balance sheet as of December 31, ~~2018,~~2019, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, ~~2018~~2019 as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i) recognition and recoverability of goodwill, intangible and long-lived assets and (ii) accounting for income taxes to be its most significant estimates. Some of the Company’s estimates and assumptions required increased judgment and carry a higher degree of variability and volatility as a result of COVID-19 (as defined below). As events continue to evolve and additional information becomes available, the Company’s estimates may change materially in future periods.

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. On January 30, 2020 the World Health Organization declared COVID-19 to constitute a “Public Health Emergency of International Concern” and subsequently, on March 11, 2020, declared COVID-19 to constitute a “Pandemic.” The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. COVID-19 has caused material declines in demand within the travel, hospitality, restaurant and leisure industry. The pandemic’s proliferation, concurrent with travel bans, increased governmental restrictions and mandates globally, to limit the spread of the virus, has dampened consumer demand for Tripadvisor’s products and services, which has adversely and materially affected its business, results of operations and financial condition. Tripadvisor believes the travel industry and its business will continue to be adversely and materially affected while travel bans and other government restrictions and mandates continue to remain in place. However, the extent of the impact of the COVID-19 pandemic on its business remains highly uncertain and difficult to predict, as the response to the pandemic continues to be ongoing and shifting as information is rapidly evolving, and the duration and severity of the pandemic are also uncertain and cannot be predicted. In addition, Tripadvisor does not have visibility into when these bans will be lifted, where additional bans may be initiated or where bans that have been previously lifted are reinstated due to resurgence of the virus, nor does it have visibility into the changes to consumer usage patterns on its platform or travel behavior patterns when travel bans and other government restrictions and mandates are fully lifted.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a protracted local and/or global economic recession. Such economic disruption could have a material adverse effect on Tripadvisor’s business as consumers reduce their discretionary spending. Policymakers around the globe have responded with fiscal policy actions to support certain areas of the travel industry and economy as a whole. The magnitude and overall effectiveness of these actions remains uncertain.

The Company's future results of operations and liquidity could also be adversely impacted by delays in payments of outstanding accounts receivable amounts beyond normal payment terms, travel supplier and restaurant insolvencies, and the impact of any initiatives or programs that Tripadvisor may undertake to address financial and operational challenges faced by Tripadvisor and its customers. As of the date of issuance of these condensed consolidated financial statements, the extent and duration to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations in the future continues to be uncertain.

In addition, due to the impact of COVID-19 to Tripadvisor’s business, Tripadvisor did not experience its typical seasonal pattern for revenue and profit during the three months ended June 30, 2020. In addition, cash outflows to travel suppliers related to deferred merchant payables significantly exceeded cash received from travelers during the first six months of 2020, reflecting the decline in consumer demand for Tripadvisor’s products and cancellations of reservations related to COVID-19, contributing significantly to unfavorable working capital trends and material negative operating cash flow during the six months ended June 30, 2020. It is difficult to forecast the seasonality for the upcoming quarters, given the uncertainty related to the extent and duration of the impact from COVID-19 and the shape and timing of a recovery.

On March 26, 2020, TripCo issued and sold 325,000 shares of TripCo’s newly-created 8% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) for a purchase price of $1,000 per share. See further discussion about the Series A Preferred Stock in note 7.

Spin-Off of TripCo from ~~Liberty~~Qurate Retail

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. In connection with the TripCo Spin-Off, TripCo entered into certain agreements, including the ~~reorganization agreement, the~~ services agreement, the facilities sharing agreement and the tax sharing agreement, with ~~Liberty~~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.

The reorganization agreement provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the TripCo Spin-Off, certain conditions to the TripCo Spin-Off and provisions governing the relationship between TripCo and Qurate Retail with respect to and resulting from the TripCo Spin-Off.

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, GCI Liberty, Inc. 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.

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

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~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. Pursuant to the tax sharing agreement, TripCo has agreed to indemnify Qurate Retail, subject to certain limited exceptions, for losses and taxes resulting from the TripCo Spin-Off to the extent such losses or taxes result primarily from, individually or in the aggregate, the breach of certain restrictive covenants made by TripCo (applicable to actions or failures to act by TripCo and its subsidiaries following the completion of the TripCo Spin-Off).

Under these agreements, approximately $1 million was reimbursable to Liberty Media for both of the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, and approximately $2 million was reimbursable to Liberty Media for both of the six months ended June 30, ~~2019~~2020 and ~~2018.~~2019.

(2) Stock-Based Compensation

TripCo Incentive Plans

TripCo has granted to certain of its directors and employees restricted stock units (“RSUs”) and stock options to purchase shares of TripCo common stock (collectively, “Awards”). 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 remeasures the fair value of the Award at each reporting date.

TripCo has calculated the GDFV for all of its equity classified Awards and any subsequent remeasurement of its liability classified Awards using the Black-Scholes-Merton model. TripCo 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 and the implied volatility of publicly traded TripCo options.~~stock. TripCo uses a ~~zero~~0 dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation, the majority of which relates to ~~TripAdvisor~~Tripadvisor as discussed below:


	Three months ended			Six months ended		Three months ended			Six months ended
	June 30,			June 30,		June 30,			June 30,
	2019		2018	2019	2018	2020		2019	2020	2019

	amounts in millions					amounts in millions
Operating expense	$	15	14	27	26	$	10	15	21	27
Selling, general and administrative expense		18	19	36	37		15	18	31	36
	$	33	33	63	63	$	25	33	52	63

Stock-based compensation expense related to ~~TripAdvisor~~Tripadvisor was ~~$32~~$25 million and ~~$31~~$32 million for the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$60~~$51 million and ~~$61~~$60 million for the six months ended June 30, 2020 and 2019, ~~and 2018,~~ respectively.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

TripCo - Outstanding Awards

The following tables present the number and weighted average exercise price (“WAEP”) of the Awards to purchase TripCo common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining contractual life and aggregate intrinsic value of the Awards.


				Weighted						Weighted
				average						average
				remaining	Aggregate					remaining	Aggregate
				contractual	intrinsic					contractual	intrinsic
	Series A	WAEP		life	value		Series A	WAEP		life	value
	in thousands			in years	in millions		in thousands			in years	in millions
Outstanding at January 1, 2019	570	$	15.40
Outstanding at January 1, 2020							717	$	13.65
Granted	—	$	—				21	$	2.11
Exercised	—	$	—				—	$	—
Forfeited/Cancelled	(1)	$	28.08				(271)	$	14.11
Outstanding at June 30, 2019	569	$	15.38	2.8	$	—
Exercisable at June 30, 2019	510	$	14.90	2.4	$	—
Outstanding at June 30, 2020							467	$	12.86	4.8	$	—
Exercisable at June 30, 2020							294	$	16.55	3.9	$	—


				Weighted						Weighted
				average						average
				remaining	Aggregate					remaining	Aggregate
				contractual	intrinsic					contractual	intrinsic
	Series B	WAEP		life	value		Series B	WAEP		life	value
	in thousands			in years	in millions		in thousands			in years	in millions
Outstanding at January 1, 2019	1,797	$	27.83
Outstanding at January 1, 2020							1,824	$	27.63
Granted	27	$	14.28				—	$	—
Exercised	—	$	—				—	$	—
Forfeited/Cancelled	—	$	—				—	$	—
Outstanding at June 30, 2019	1,824	$	27.63	5.5	$	—
Exercisable at June 30, 2019	899	$	27.83	5.5	$	—
Outstanding at June 30, 2020							1,824	$	27.63	4.5	$	31
Exercisable at June 30, 2020							1,824	$	27.63	4.5	$	31

During the six months ended June 30, ~~2019,~~2020, TripCo granted ~~27 thousand options to purchase shares of Series B TripCo common stock and 35~~242 thousand performance-based RSUs of Series B TripCo common stock to our CEO. ~~Such options had a GDFV of $6.41 per share.~~ The RSUs had a GDFV of ~~$14.17~~$3.08 per share at the time they were granted. The ~~options vest on December 31, 2019, and the~~ RSUs cliff vest in 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.

~~There were no options to purchase shares of Series A common stock granted~~Also during the six months ended June 30, ~~2019.~~2020, TripCo granted 30 thousand time-based RSUs of Series B TripCo common stock to our CEO. The RSUs had a GDFV of $4.76 per share and cliff vest on December 10, 2020. This RSU grant was issued in lieu of our CEO receiving 50% of his remaining base salary for the last 3 quarters of calendar year 2020, and he has waived his right to receive the other 50%, in each case, in light of the ongoing financial impact of COVID-19.

There was no activity during the period related to the TripCo Series B options.

As of June 30, ~~2019,~~2020, the total unrecognized compensation cost related to unvested Awards was approximately ~~$3 million.~~$358 thousand. Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately ~~one year.~~two years.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of June 30, ~~2019,~~2020, TripCo reserved ~~2.4~~2.3 million shares of Series A and Series B common stock for issuance under exercise privileges of outstanding stock Awards.

Tripadvisor Equity Grant Awards

The following table presents the number and WAEP of the Awards to purchase Tripadvisor common stock granted to certain officers, employees and directors of Tripadvisor.


				Weighted
				average
	TripAdvisor			remaining	Aggregate
	stock			contractual	intrinsic
	options	WAEP		life	value
	in thousands			in years	in millions
Outstanding at January 1, 2020	6,017	$	50.27
Granted	1,095	$	25.38
Exercised	(2)	$	17.08
Cancelled or expired	(732)	$	46.74
Outstanding at June 30, 2020	6,378	$	46.42	5.8	$	—
Exercisable at June 30, 2020	3,630	$	55.30	3.9	$	—

The weighted average GDFV of options granted was $10.11 for the six months ended June 30, 2020.

As of June 30, 2020, the total unrecognized compensation cost related to unvested Tripadvisor stock options was approximately $29 million and will be recognized over a weighted average period of approximately 2.7 years. The total intrinsic value of stock options exercised was not material and $2 million for the six months ended June 30, 2020 and 2019, respectively.

Additionally, during the six months ended June 30, 2020, Tripadvisor granted approximately 5 million units, vested and released approximately 2 million units, and had cancellations of approximately 3 million units, which included primarily service-based RSUs, as well as a limited number of market-based restricted stock units (“MSUs”) under the 2018 Stock and Annual Incentive Plan. The RSUs’ fair value was measured based on the quoted price of Tripadvisor common stock at the date of grant. As the MSUs provide for vesting based upon Tripadvisor’s total shareholder return, or “TSR,” performance, the potential outcomes of future stock prices and TSR of Tripadvisor and the Nasdaq Composite Total Return Index, was used to calculate the GDFV of these awards. The weighted average GDFV for RSUs and MSUs granted, vested and released, and cancelled during the six months ended June 30, 2020 was $25.28 per share, $47.67 per share, and $38.17 per share, respectively. As of June 30, 2020, the total unrecognized compensation cost related to Tripadvisor RSUs and MSUs was approximately $212 million and will be recognized over a weighted average period of approximately 2.1 years.

On May 27, 2020, Tripadvisor’s Compensation Committee of its Board of Directors approved a modification of Tripadvisor’s Annual RSU grant issued to its employees in the first quarter of 2020, which consisted of reducing the original grant-date vesting period from four years to two years. This modification resulted in the acceleration and recognition of an additional $10 million of stock compensation expense during the three months ended June 30, 2020, given the modified vesting term. There was no change to the original fair value of the impacted RSUs as a result of the modification.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~TripAdvisor Equity Grant Awards~~

~~The following table presents the number and WAEP of the Awards to purchase TripAdvisor common stock granted to certain officers, employees and directors of TripAdvisor.~~

Weighted

average

TripAdvisor

remaining

Aggregate

stock

contractual

intrinsic

options

WAEP

life

value

in thousands

in years

in millions

Outstanding at January 1, 2019

6,041

$
54.00

Granted

675

$
53.31

Exercised

(160)

$
42.41

Cancelled or expired

(209)

$
60.83

Outstanding at June 30, 2019

6,347

$
54.00

6.3

$
20

Exercisable at June 30, 2019

3,516

$
60.19

4.5

$
7

~~The weighted average GDFV of options granted was $21.80 for the six months ended June 30, 2019.~~

As of June 30, 2019, the total unrecognized compensation cost related to unvested TripAdvisor stock options was approximately $41 million and will be recognized over a weighted average period of approximately 2.9 years. The total intrinsic value of stock options exercised was $2 million and $6 million for the six months ended June 30, 2019 and 2018, respectively.

Additionally, during the six months ended June 30, 2019, TripAdvisor granted 2.7 million of primarily service-based restricted stock units (“RSUs”) and market-based restricted stock units (“MSUs”) under the 2018 Stock and Annual Incentive Plan. The RSUs’ fair value was measured based on the quoted price of TripAdvisor common stock at the date of grant. As the MSUs provide for vesting based upon TripAdvisor’s total shareholder return, or “TSR,” performance, the potential outcomes of future stock prices and TSR of TripAdvisor and the Nasdaq Composite Total Return Index, was used to calculate the GDFV of these awards. The weighted average GDFV for RSUs and MSUs granted during the six months ended June 30, 2019 was $53.50 per share. As of June 30, 2019, the total unrecognized compensation cost related to TripAdvisor RSUs and MSUs was approximately $292 million and will be recognized over a weighted average period of approximately 2.8 years.

(3) Earnings (Loss) Per Common Share (EPS)

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to ~~TripCo~~common shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning

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~~LIBERTY TRIPADVISOR HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

of the periods presented. Excluded from EPS for ~~both~~ the three and six months ended June 30, 2020 and 2019 are less than a million and ~~2018 are~~ 2 million potential common shares due to stock options, respectively, because their inclusion would be antidilutive. Also excluded from EPS for the three and six months ended June 30, 2020, because their inclusion would be antidilutive, were 13 million shares that are contingently issuable at the Company’s election pursuant to an exercise of the Put Right (defined and described in note 7), which were calculated in accordance with the terms of the Certificate of Designations for the Series A Preferred Stock as if the Put Right had been exercised at June 30, 2020.


	Liberty TripAdvisor Holdings Common Stock					Liberty TripAdvisor Holdings Common Stock
	Three months ended		Six months ended			Three months ended		Six months ended
	June 30,		June 30,			June 30,		June 30,
	2019	2018	2019	2018		2020	2019	2020	2019

	number of shares in millions					number of shares in millions
Numerator
Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders					$	(164)	3	(183)	1
Less: Preferred stock carrying value adjustment and transaction costs						24	—	30	—
Net earnings (loss) available to common shareholders					$	(188)	3	(213)	1
Denominator
Basic WASO	75	75	75	75		75	75	75	75
Potentially dilutive shares	—	—	—	—		—	—	—	—
Diluted WASO	75	75	75	75		75	75	75	75

(4) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any material recurring assets or liabilities measured at fair value that would be considered Level 3.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company’s assets and liabilities measured at fair value are as follows:

June 30, 2019

December 31, 2018

June 30, 2020

December 31, 2019

Quoted prices

Significant

Quoted prices

Significant

Quoted prices

Significant

Quoted prices

Significant

in active

other

in active

other

in active

other

in active

other

markets for

observable

markets for

observable

markets for

observable

markets for

observable

identical assets

inputs

identical assets

inputs

identical assets

inputs

identical assets

inputs

Description

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

amounts in millions

Cash equivalents

—

145

140

123

115

—

Marketable securities

—

Variable postpaid forward

—

Variable prepaid forward

—

On ~~June 6, 2016, TripCo~~March 9, 2020, TripSPV, a wholly owned subsidiary of the Company, entered into a variable ~~postpaid~~prepaid forward transaction (the “VPF”) with a financial institution with respect to 72.4 million shares of ~~TripAdvisor~~Tripadvisor common stock held by the Company with a forward floor price of ~~$38.90~~$17.25 per share and a forward cap price of ~~$98.96~~$26.84 per share. ~~TripCo borrowed $259~~Pursuant to the terms of the VPF, TripSPV received a prepayment of $34 million ~~against the variable postpaid forward~~ on ~~June 23, 2016~~March 17, 2020 (see note 5)6). The asset associated with this instrument is included in other ~~current~~ assets in the accompanying condensed consolidated balance sheets. Changes in the fair value of the VPF are recognized in realized and unrealized gains (losses) on financial instruments in the condensed consolidated statements of operations.

The fair value of Level 2 cash equivalents and marketable securities were obtained from pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Marketable securities are included in other current assets and other assets in the accompanying condensed consolidated balance sheets. The fair value of Level 2 derivative assets were derived from a Black-Scholes-Merton model using observable market data as the significant inputs.

~~I-14~~

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~~LIBERTY TRIPADVISOR HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, current portion of debt and long-term debt. With the exception of debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our debt bears interest at a variable rate and therefore is also considered to approximate fair value.

~~(5) Debt~~

~~Outstanding debt at June 30, 2019 and December 31, 2018 is summarized as follows:~~

June 30,

December 31,

2019

2018

amounts in millions

TripCo margin loans

225

220

TripCo variable postpaid forward

269

267

TripAdvisor Credit Facilities

—

—

Deferred financing costs

(1)

—

Total consolidated TripCo debt

$
493

487

Debt classified as current

(269)

(220)

Total long-term debt

$
224

267

~~TripCo Margin Loans and Variable Postpaid Forward~~

In connection with the variable postpaid forward transaction entered into on June 6, 2016, as described in note 4, TripCo borrowed $259 million against the variable postpaid forward on June 23, 2016. The term of the forward is four years. At maturity, the accreted loan amount due will be approximately $272 million.

On June 23, 2016, TripCo amended the terms of two margin loan agreements with respect to borrowings of $200 million. On November 7, 2017, pursuant to another amendment to the margin loan agreements, interest on the margin loans accrued at a rate of 2.4% plus LIBOR per year. During June of 2019, the outstanding borrowings of $200 million in principal and $22 million of paid in kind interest were repaid with proceeds from the 2019 Margin Loan (defined below). Based on the lenders involved in the original margin loan agreements and the 2019 Margin Loan, half of the repayment of the original margin loans was accounted for as a modification of debt and half was accounted for as an extinguishment of debt.

On June 10, 2019, a wholly owned subsidiary of TripCo (“Borrower”) entered into a margin loan agreement which includes borrowings of $225 million under a term loan and an additional $25 million available until June 10, 2020 under a delayed draw term loan (collectively, the “2019 Margin Loan”). Common Stock of TripAdvisor is pledged as collateral pursuant to this agreement. The agreement contains language that indicates that Borrower, as transferor of underlying shares as collateral, has the right to exercise all voting, consensual and other powers of ownership pertaining to the transferred shares for all purposes, provided that it will not vote the shares in any manner that would reasonably be expected to give rise to transfer or certain other restrictions. Similarly, the loan agreement indicates that no lender party shall have any voting rights with respect to the shares transferred, except to the extent that a lender party buys any shares in a sale or other disposition made pursuant to the terms of the loan agreement. The agreement also contains certain restrictions related to additional indebtedness and margin calls. The initial margin call would require the outstanding balance to be reduced to $125 million if at any time the closing price per share of TripAdvisor common stock were to fall below a certain minimum

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~value. Borrowings under~~(5) Goodwill and Other Intangible Assets

Changes in the ~~2019 Margin Loan bear interest at a rate of 2.0% plus LIBOR per annum. In addition, TripCo is required to pay a quarterly commitment fee of 0.75% per annum based on the daily unused~~carrying amount of ~~the 2019 Margin Loan. Interest and commitment fees can be paid in kind or in cash at the election of TripCo. The Company expects that interest and commitment fees will be paid in kind and added~~goodwill are as follows:


		Hotels, Media & Platform	Experiences & Dining	Corporate and other	Total

	(in millions)
Balance at January 1, 2020	$	1,923	333	271	2,527
Allocation to new segment (1)		6	—	(6)	—
Impairments (2)		(279)	—	(18)	(297)
Dispositions (3)		—	—	(18)	(18)
Other (4)		—	6	(4)	2
Balance at June 30, 2020	$	1,650	339	225	2,214

(1)

Re-allocation of goodwill as a result of changes to reporting units related to Tripadvisor internal restructuring.

(2)

TripCo recorded an $18 million goodwill impairment related to a business that was sold in June 2020. See discussion of other impairments below.

(3)

Dispositions relates to the sale of the aforementioned Tripadvisor business.

(4)

Other changes primarily relate to immaterial acquisitions and foreign currency translation on goodwill.

Impairments

Due to the ~~principal amount~~current and expected impact of COVID-19 on Tripadvisor’s operating results, and a sustained decline in Tripadvisor’s stock price, impairments of $250 million of trademarks and $279 million of goodwill were recorded during the 2019 Margin Loan. The maturity date of the 2019 Margin Loan is June 10, 2022. The 2019 Margin Loan contains various affirmative and negative covenants that restrict the activities of the borrower. The loan agreement does not include any financial covenants.

~~During the six~~three months ended June 30, ~~2019, TripCo recorded less than $1 million and $2 million of non-cash interest~~2020, respectively, related to the ~~2019 Margin Loan~~Hotels, Media & Platform reporting unit. The fair value of the trademarks was determined using the relief from royalty method. The fair value of the reporting unit was determined using a combination of market multiples (market approach) and ~~variable postpaid forward, respectively.~~

discounted cash flow (income approach) calculations (Level 3). As of June 30, 2020, accumulated goodwill impairment losses for Tripadvisor totaled $1,568 million.

Based on the quantitative assessment performed during the second quarter and the resulting impairment losses recorded, the estimated fair values of the trademark and Hotels, Media & Platform reporting unit approximate their respective carrying values as of June 30, 2020. 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 future impairment assessments may be necessary.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(6) Debt

Outstanding debt at June 30, 2020 and December 31, 2019 ~~18.2~~is summarized as follows:


	June 30,		December 31,
	2020		2019

	amounts in millions
TripCo margin loan	$	—	355
TripCo variable prepaid forward		40	—
TripAdvisor Credit Facilities		700	—
Deferred financing costs		—	(2)
Total consolidated TripCo debt		740	353
Debt classified as current		—	—
Total long-term debt	$	740	353

TripCo Margin Loan and Variable Prepaid Forward

On March 10, 2020, a wholly owned subsidiary of TripCo amended the margin loan agreement, dated as of June 10, 2019, which, among other things, modified the margin call thresholds which would require mandatory prepayment of the margin loan.

On March 12, 2020, the closing share price of Tripadvisor common stock price fell below the minimum value and triggered the mandatory prepayment of all amounts outstanding under the margin loan. In connection with the VPF entered into on March 9, 2020, as described in note 4, TripCo received a prepayment of $34 million on March 17, 2020. The term of the VPF is three years. At maturity, the accreted loan amount due will be approximately $42 million. As of June 30, 2020, 2.4 million shares of ~~TripAdvisor Common Stock,~~Tripadvisor common stock, with a value of approximately ~~$841~~$46 million, were pledged as collateral pursuant to the ~~2019 Margin Loan agreement~~VPF contract.

On March 26, 2020, the proceeds from the VPF, proceeds from the Series A Preferred Stock (described and ~~variable postpaid forward.~~defined in note 7) issuance, and cash on hand were used to pay all amounts outstanding under the margin loan, which aggregated $363 million, including accrued interest.

~~TripAdvisor~~Tripadvisor Credit Facilities

~~TripAdvisor is party to~~In June 2015, Tripadvisor entered into a five year credit agreement with a group of lenders which, among other things, ~~provides~~provided for a ~~$1.2~~$1 billion unsecured revolving credit facility (the “2015 Credit Facility”) ~~with a maturity date of~~. On May 12, ~~2022. Borrowings under~~2017, the 2015 Credit Facility ~~generally bear interest, at TripAdvisor’s option, at~~was amended to, among other things, (i) increase the aggregate amount of revolving loan commitments available from $1.0 billion to $1.2 billion; and (ii) extend the maturity date of the 2015 Credit Facility from June 26, 2020 to May 12, 2022 (the “First Amendment”). On May 5, 2020, Tripadvisor amended its 2015 Credit Facility (“Second Amendment”) to, among other things, suspend the leverage ratio covenant on this facility beginning in the second quarter of 2020 and ending prior to September 30, 2021 (or such earlier date as elected by Tripadvisor), and replacing it with a ~~rate per annum equal~~minimum liquidity covenant (the “Leverage Covenant Holiday”), that requires Tripadvisor to ~~either (i)~~maintain $150 million of unrestricted cash, cash equivalents and short-term investments less deferred merchant payables plus available revolver capacity, which will apply only during the ~~Eurocurrency Borrowing rate, or~~Leverage Covenant Holiday, provide collateral to secure the ~~adjusted LIBOR for~~obligations under the ~~interest period in effect for such borrowing; plus an applicable margin ranging~~agreement, as well as downsizing its capacity to $1.0 billion from ~~1.25%~~$1.2 billion. No change was made to ~~2.00%, based on TripAdvisor’s leverage ratio; or (ii)~~ the ~~Alternate Base Rate Borrowing, which is~~existing maturity date of the ~~greatest~~2015 Credit Facility of (a) the Prime Rate in effect on such day, (b) the New York Fed Bank Rate in effect on such day plus 1/2 of 1.00% per annum and (c) the Adjusted LIBOR (or LIBOR multiplied by the Statutory Reserve Rate) for an interest period of one month plus 1.00%; in addition to an applicable margin ranging from 0.25% to 1.00%, based on TripAdvisor’s leverage ratio. TripAdvisorMay 12, 2022. Tripadvisor may borrow from the 2015 Credit Facility in U.S. dollars, Euros and British ~~pound sterling.~~pounds. In addition, ~~TripAdvisor’s~~Tripadvisor’s 2015 Credit Facility includes $15 million of borrowing capacity available for letters of credit and $40 million for Swing Line borrowings on same-day notice. As of June 30, ~~2019, TripAdvisor~~2020, Tripadvisor had

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

outstanding borrowings of $700 million classified as long-term debt on the condensed consolidated balance sheet and issued $3 million of outstanding letters of credit under the 2015 Credit Facility. ~~TripAdvisor~~

During March 2020, Tripadvisor borrowed $700 million from the 2015 Credit Facility. These funds were drawn down as a precautionary measure to reinforce Tripadvisor’s liquidity position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic. For the timeframe for which the leverage ratio covenant is suspended, any outstanding or future borrowings under the 2015 Credit Facility bear interest at LIBOR plus a 2.25% margin with a LIBOR floor of 1% per annum. Tripadvisor is also required to pay a quarterly commitment fee, at an applicable rate ~~ranging from 0.15% to 0.30%~~of 0.5%, on the daily unused portion of the revolving credit facility for each fiscal quarter and additional fees in connection with the issuance of letters of credit. As of June 30, ~~2019, TripAdvisor’s~~2020, Tripadvisor was borrowing at an interest rate of 3.25% per annum, using a one-month interest period Eurocurrency Spread, which will reset periodically, and its unused revolver capacity was subject to a commitment fee of ~~0.15%, given TripAdvisor’s leverage ratio.~~0.5%.

~~As of both June 30, 2019~~For the three and ~~December 31, 2018, TripAdvisor had no outstanding borrowings under the 2015 Credit Facility. During the~~ six months ended June 30, ~~2018, TripAdvisor made a net repayment~~2020, Tripadvisor recorded interest expense and commitment fees on its 2015 Credit Facility of ~~$230~~$5 million and $6 million, respectively. For both the three and six months ended June 30, 2019, Tripadvisor recorded interest expense and commitment fees on its 2015 Credit Facility of $1 million to interest expense on the condensed consolidated statements of operations.

In connection with the Second Amendment, Tripadvisor incurred additional lender fees and debt financing costs totaling $4 million during the three months ended June 30, 2020, which were capitalized as deferred financing costs and recorded to other assets on the condensed consolidated balance sheet. These costs will be amortized over the remaining term of the 2015 Credit ~~Facility. These net repayments were primarily made from a one-time cash repatriation~~Facility, using the effective interest rate method, and recorded to interest expense on the condensed consolidated statements of ~~$325 million of foreign earnings to the United States during the first quarter of 2018.~~operations.

There is no specific repayment date prior to the maturity date for any borrowings under this credit agreement. ~~TripAdvisor~~Tripadvisor may voluntarily repay any outstanding borrowing under the 2015 Credit Facility at any time without premium or penalty, other than customary breakage costs with respect to Eurocurrency loans. Additionally, ~~TripAdvisor~~Tripadvisor believes that the likelihood of the lender exercising any subjective acceleration rights, which would permit the lenders to accelerate repayment of any outstanding borrowings, is remote. As such, ~~TripAdvisor~~Tripadvisor classifies any borrowings under this facility as ~~long-term~~long term debt. The 2015 Credit Facility contains a number of covenants that, among other things, restrict ~~TripAdvisor’s~~Tripadvisor’s ability to: incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change its fiscal year. The Second Amendment also prohibits Tripadvisor from repurchasing shares of its common stock, and paying dividends, among other restrictions, during the Leverage Covenant Holiday. In connection with the Second Amendment and as collateral to secure the obligations, Tripadvisor and certain subsidiaries have pledged, and granted security interests and liens in and on, substantially all of their assets. The 2015 Credit Facility also requires ~~TripAdvisor~~Tripadvisor to maintain a ~~maximum leverage ratio~~minimum liquidity covenant and contains certain customary affirmative covenants and events of

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~~LIBERTY TRIPADVISOR HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

default, including a change of control. If an event of default occurs, the lenders under the 2015 Credit Facility will be entitled to take various actions, including the acceleration of all amounts due under the 2015 Credit Facility.

~~TripAdvisor also maintains two credit facilities in China (jointly, the “TripAdvisor Chinese Credit Facilities”) as of June 30, 2019. TripAdvisor’s~~Tripadvisor’s Chinese subsidiary iswas party to a $30 million, one-year revolving credit facility with Bank of America ~~that is currently subject to review on a periodic basis with no specific expiration period. TripAdvisor is also party to a RMB 70,000,000 (approximately $10 million) one-year revolving~~as of December 31, 2019. In June 2020, Tripadvisor terminated this credit facility. Tripadvisor had 0 outstanding borrowings under this credit facility with J.P. Morgan Chase Bank. TripAdvisor’s Chinese Credit Facilities generally bear interest at a rate based on the People’s Bank of China benchmark, including certain adjustments which may be made in accordance with market conditions at the time of ~~borrowing. As of June 30, 2019 and~~termination or at December 31, ~~2018, there were no outstanding borrowings under the TripAdvisor Chinese Credit Facilities.~~

~~Debt Covenants~~

~~As of June 30, 2019, the Company and TripAdvisor were in compliance with their respective debt covenants.~~

~~(6) Leases~~

In February 2016 and subsequently, the Financial Accounting Standards Board (“FASB”) issued new guidance which revises the accounting for leases (“ASC 842”). Under the new guidance, entities that lease assets are required to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases regardless of whether they are classified as finance or operating leases. In addition, new disclosures are required to meet the objective of enabling users of the financial statements to better understand the amount, timing, and uncertainty of cash flows arising from leases. We adopted ASC 842 on January 1, 2019 and elected the optional transition method that allowed for a cumulative-effect adjustment in the period of adoption. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported under the accounting standards in effect for those periods.

We elected the following practical expedients available in transition upon adoption of ASC 842 and accounting policy updates: 1) the “practical expedients package of three”, which allows us to not reassess the following: a) whether any expired or existing contracts are or contain a lease as of the adoption date, b) the lease classification of any expired or existing leases as of the adoption date; and c) the accounting treatment for initial direct costs for existing leases as of the adoption date; 2) the “short-term lease recognition exemption”, which allows entities to forego recognition of right-of-use (“ROU”) assets and lease liabilities for leases with a lease term of twelve months or less and which also do not include an option to renew the lease term that the entity is reasonably certain to exercise; 3) elect by asset class as an accounting policy, to combine lease and non-lease components as a single component and subsequently account for the combined single component as the lease component; and 4) apply the portfolio approach to similar types of leases where the Company does not reasonably expect the outcome to differ materially from applying the new guidance to individual leases.

TripAdvisor’s lease contracts contain both lease and non-lease components. TripAdvisor accounts separately for the lease and non-lease components of office space leases and certain other leases, such as data center leases. However, for certain categories of equipment leases, such as network equipment and others, TripAdvisor accounts for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases that have similar characteristics, TripAdvisor applies a portfolio approach to effectively account for operating lease ROU assets and lease liabilities, hence TripAdvisor does not expect the outcome to differ materially from applying the new guidance to individual leases.

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~~LIBERTY TRIPADVISOR HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~The adoption of ASC 842 did not have a material impact to our consolidated statement of operations and statement of cash flows during the three and six months ended June 30,~~ 2019. ~~The effect of the adoption on our unaudited condensed consolidated balance sheet as of January 1, 2019 from the adoption of ASC 842 is as follows:~~

Balance at December 31, 2018

Adjustments due to ASC 842

Balance at January 1, 2019

in millions
Assets:

Other current assets
$
48

(3)

45

Property and equipment, net
$
154

8

162

Other assets, at cost, net of accumulated amortization
$
118

73

191

Liabilities:

Accrued liabilities and other current liabilities
$
151

21

172

Deferred income tax liabilities
$
325

1

326

Other liabilities
$
283

53

336

Retained earnings
$
133

1

134

Noncontrolling interests in equity of subsidiaries
$
3,400

2

3,402

~~Operating Leases~~

TripAdvisor leases office space in a number of countries around the world under non-cancelable lease agreements. TripAdvisor’s office space leases, exclusive of its Corporate Headquarters Lease, are operating leases. Operating lease ROU assets and liabilities are recognized at the lease commencement date, or the date the lessor makes the leased asset available for use, based on the present value of the lease payments over the lease term using TripAdvisor’s estimated incremental borrowing rate.

TripAdvisor’s office space operating leases expire at various dates with the latest maturity in June 2027. Certain leases include options to extend the lease term for up to 6 years and/or terminate the leases within 1 year, which TripAdvisor includes in the lease terms if it is reasonably certain to exercise these options.

~~Finance Lease~~

In June 2013, TripAdvisor entered into its Corporate Headquarters Lease and pursuant to that lease, the landlord built an approximately 280,000 square foot rental building in Needham, Massachusetts (the “Premises”) and leased the Premises to TripAdvisor as its new corporate headquarters for an initial term of 15 years and 7 months or through December 2030. TripAdvisor also has an option to extend the term of the Corporate Headquarters Lease for two consecutive terms of five years each. As required under the transition guidance in ASC 842, TripAdvisor assessed the lease classification for its Corporate Headquarters Lease and concluded it should be classified and accounted for as a finance lease upon adoption on January 1, 2019. Accordingly, on January 1, 2019, TripAdvisor derecognized the previous assets and liabilities associated with the Corporate Headquarters Lease’s previous build-to-suit designation, with the exception of prepaid rent, as discussed below, and recognized an ROU asset and a finance lease liability of $114 million and $88 million, respectively, on its condensed consolidated balance sheet. The difference between the finance lease ROU asset and finance lease liability consists of net assets and liabilities of $26 million, primarily related to structural improvements paid by TripAdvisor, net of tenant incentives and accumulated amortization, which is classified as net prepaid rent under the new guidance.

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~~LIBERTY TRIPADVISOR HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Finance lease ROU assets and finance lease liabilities commencing after January 1, 2019 are recognized similar to an operating lease, at the lease commencement date or the date the lessor makes the leased asset available for use. Finance lease ROU assets are generally amortized on a straight-line basis over the lease term, and the carrying amount of the finance lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable, and (2) reduced to reflect lease payments made during the period. Amortization expense for finance lease ROU assets and interest accretion on finance lease liabilities are recorded to depreciation and interest expense, respectively, in the condensed consolidated statements of operations.

~~The components of lease expense during the three and six months ended June 30, 2019 were as follows:~~

Three months ended

Six months ended

June 30, 2019

June 30, 2019

in millions

Operating lease cost (1)
$
6

12

Finance lease cost:

Amortization of right-of-use assets (2)
$
2

5

Interest on lease liabilities (3)

1

2

Total finance lease cost
$
3

7

Sublease income (1)

(1)

(2)

Total lease cost, net
$
8

17

~~(1)~~

~~Included in operating expense, including stock-based compensation in the condensed consolidated statement of operations.~~

~~(2)~~

~~Included in depreciation expense in the condensed consolidated statement of operations.~~

~~(3)~~

~~Included in interest expense in the condensed consolidated statement of operations.~~

~~Supplemental balance sheet information related to leases is as follows:~~

June 30, 2019

in millions

Operating leases:

Operating lease right-of-use assets (1)
$
75

Current operating lease liabilities (2)
$
18

Operating lease liabilities (3)

67

Total operating lease liabilities
$
85

Finance Lease:

Finance lease right-of-use assets (4)
$
110

Current finance lease liabilities (2)
$
5

Finance lease liabilities (3)

80

Total finance lease liabilities
$
85

~~(1)~~

~~Included in other assets, at cost, net of accumulated amortization in the condensed consolidated balance sheet.~~

~~(2)~~

~~Included in accrued liabilities and other current liabilities in the condensed consolidated balance sheet.~~

~~(3)~~

~~Included in other liabilities in the condensed consolidated balance sheet.~~

~~(4)~~

~~Included in property and equipment, net in the condensed consolidated balance sheet.~~

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Tripadvisor Senior Notes

~~Additional information related~~On July 9, 2020, Tripadvisor completed the sale of $500 million aggregate principal amount of 7.000% senior notes due July 15, 2025 (the "Senior Notes") in a private offering. The Senior Notes were issued pursuant to ~~leases~~an Indenture, dated July 9, 2020, among Tripadvisor, the Guarantors and Wilmington Trust, National Association, as trustee (the “Indenture”). The Indenture provides, among other things, that interest is ~~as follows for~~payable on the ~~periods presented:~~

Six months ended

June 30, 2019

in millions

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from operating leases
$
14

Operating cash outflows from finance lease
$
2

Financing cash outflows from finance lease
$
3

Right-of-use assets obtained in exchange for lease liabilities:

Operating leases
$
97

Finance lease
$
88


		~~As of June 30, 2019~~
~~Weighted-average remaining lease term~~
~~Operating leases~~		~~4.8 years~~
~~Finance lease~~		~~11.5 years~~
~~Weighted-average discount rate~~
~~Operating leases~~		~~4.32%~~
~~Finance lease~~		~~4.49%~~

~~Future lease payments under non-cancellable leases~~Senior Notes on January 15 and July 15 of each year, beginning on January 15, 2021. The Senior Notes are senior unsecured obligations of Tripadvisor and are guaranteed by each of its domestic subsidiaries that guarantees Tripadvisor’s 2015 Credit Facility. In July 2020, Tripadvisor used the proceeds of $490 million, net of approximately $10 million in debt issuances costs, to repay a portion of its 2015 Credit Facility borrowings outstanding as of June 30, ~~2019 were as follows:~~2020.

Operating Leases

Finance Lease

in millions

Remainder of 2019
$
10

4

2020

21

9

2021

20

10

2022

19

10

2023

12

10

Thereafter

12

67

Total future lease payments
$
94

110

Less: imputed interest

(9)

(25)

Total
$
85

85

Debt Covenants

As of June 30, ~~2019, we did~~2020, Tripadvisor was in compliance with their debt covenants.

(7) Redeemable Preferred Stock

On March 15, 2020, TripCo and Gregory B. Maffei entered into an Investment Agreement (the “Investment Agreement”) with Certares Holdings LLC, Certares Holdings (Blockable) LLC and Certares Holdings (Optional) LLC with respect to an investment in TripCo’s Series A Preferred Stock, which was later assigned to Certares LTRIP LLC (“Certares” or the “Purchaser”). Pursuant to the assigned Investment Agreement, on March 26, 2020, TripCo issued 325,000 shares of Series A Preferred Stock to Certares for a purchase price of $1,000 per share.

Priority

The Series A Preferred Stock ranks senior to the shares of common stock of TripCo, with respect to dividend rights, rights of redemption and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of TripCo. The Series A Preferred Stock has a liquidation value equal to the sum of (i) $1,000, plus (ii) all unpaid dividends (whether or not declared) accrued with respect to such share.

Voting and Convertibility

Holders of Series A Preferred Stock are not entitled to any voting powers, except as otherwise specified in the Certificate of Designations or as required by Delaware law. Shares of Series A Preferred Stock are not convertible into TripCo common stock.

Dividends

Dividends on each share of Series A Preferred Stock will accrue on a daily basis at a rate of 8.00% of the liquidation value and will be payable annually, commencing after March 26, 2020. Dividends on each share of Series A Preferred Stock may be paid, at TripCo’s election, in cash, shares of the Company’s Series A common stock (“LTRPA”), or, at the election of the Purchaser, shares of the Company’s Series C common stock (“LTRPK”), provided, in each case, such shares are listed on a national securities exchange and are actively traded (such LTRPK shares, together with the LTRPA shares, the “Eligible Common Stock”), or a combination of cash and Eligible Common Stock. If a dividend is not declared and paid on the dividend payment date, the dividend amount will be added to the then-applicable liquidation price of the Series A Preferred Stock.

Redemption

The Company is required to redeem for cash shares of Series A Preferred Stock on the earlier of (i) the first business

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

day after the fifth anniversary of March 26, 2020, or (ii) subject to certain exceptions, a change in control of TripCo. The “Redemption Price” in a mandatory redemption or the exercise of a holder’s put right will equal the greater of (i) the sum of the liquidation value on the redemption date, plus all unpaid dividends accrued since the last dividend date, and (ii) the product of the (x) initial liquidation value, multiplied by (y) an accretion factor (determined based on a formula set forth in the Certificate of Designations for the Series A Preferred Stock) with respect to the Tripadvisor Common Stock, less (z) the aggregate amount of all dividends paid in cash or shares of Eligible Common Stock from March 26, 2020 through the applicable redemption date.

Put Right

Following March 26, 2021, the Purchaser will have the right to cause TripCo to redeem all of the outstanding shares of Series A Preferred Stock at the Redemption Price for, at the election of TripCo, cash, shares of Eligible Common Stock, shares of Tripadvisor Common Stock or any combination of the foregoing, subject to certain limitations (the “Put Option”). The Purchaser may exercise its put right by delivering notice to TripCo within a certain number of days following the filing by TripCo of its periodic reports with the SEC, and TripCo will have 180 days from the delivery of such notice to redeem the outstanding Series A Preferred Stock. If TripCo determines not to redeem the Series A Preferred Stock within that 180-day period, TripCo may facilitate the sale of the Series A Preferred Stock and, if necessary, make the Purchaser whole for any shortfall from the redemption price. The Company evaluated the Put Option as an embedded derivative and determined it is not required to be bifurcated.

Recognition

As the Series A Preferred Stock is redeemable and the redemption triggers are outside of TripCo’s control, the Company is required to classify the shares outside of permanent equity. The Company will calculate the carrying value of the Series A Preferred Stock pursuant to the Redemption Price calculation, and any changes in the carrying value of the Series A Preferred Stock will be recorded directly to retained earnings, or to additional ~~operating~~paid-in capital in the absence of retained earnings. The Company must adjust net earnings for the change in the carrying value of the Series A Preferred Stock to determine the net earnings attributable to common shareholders to be used in the calculation of EPS. For the three and six months ended June 30, 2020, the adjustments for the Redemption Price, including transaction costs, were approximately $24 million and $30 million, respectively.

(8) Stockholders’ Equity

Preferred Stock

TripCo’s preferred stock is issuable, from time to time, with such powers, designations, preferences and relative, participating, optional or ~~finance leases that have not yet commenced but that create significant~~other rights and ~~obligations~~qualifications, limitations or restrictions thereof, as shall be stated and expressed in a resolution or resolutions providing for ~~us.~~the issue of such preferred stock adopted by TripCo’s Board of Directors. See note 7 for a description of TripCo’s Series A Preferred Stock.

Common Stock

Series A common stock entitles the holders to 1 vote per share, Series B common stock entitles the holders to 10 votes per share and Series C common stock, except as otherwise required by applicable law, entitles the holder to 0 voting rights. As of June 30, 2020, 0 shares of Series C common stock have been issued. All series of TripCo common stock participate on an equal basis with respect to dividends and distributions.

Subsidiary Purchases of Common Stock

During the six months ended June 30, 2020, Tripadvisor repurchased 4,707,450 shares of its outstanding common stock for $115 million in the aggregate. NaN shares were repurchased during the three months ended June 30, 2020. As of

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~~(7)~~LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

June 30, 2020, Tripadvisor had approximately $75 million remaining available to repurchase shares of its common stock under this share repurchase program.

(9) Commitments and Contingencies

Litigation

In the ordinary course of business, the Company and its subsidiaries are parties to legal proceedings and claims arising out of our operations. These matters may relate to claims involving alleged infringement of third-party intellectual property rights, defamation, taxes, regulatory compliance and other claims. Although it is reasonably possible that the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.

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~~LIBERTY TRIPADVISOR HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(8)~~(10) Segment Information

TripCo, through its ownership interests in ~~TripAdvisor,~~Tripadvisor, is primarily engaged in the online commerce industries. TripCo identifies its reportable segments as (A) those operating segments that represent 10% or more of its consolidated annual revenue, annual adjusted operating income before depreciation and amortization (“Adjusted OIBDA”) or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of TripCo’s annual pre-tax earnings.

During the first quarter of 2019, as part of a continuous review of our business, we realigned our reportable segment information which our chief operating decision maker, or CODM, regularly assesses to evaluate performance for operating decision-making purposes, including evaluation and allocation of resources.

The revised segment reporting structure includes the following reportable segments: (1) Hotels, Media & Platform; and (2) Experiences & Dining. All prior period segment disclosure information has been reclassified to conform to the current reporting structure in this Form 10-Q. These reclassifications had no effect on our condensed consolidated financial statements in any period.

TripCo evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA, gross margin, and revenue or sales per customer equivalent. In addition, TripCo reviews nonfinancial measures such as unique website visitors, conversion rates and active customers, as appropriate.

~~Beginning in the first quarter of 2019, we~~We have identified the following as reportable segments:

●

Hotels, Media & Platform – includes the following revenue sources: (1) ~~TripAdvisor-branded~~Tripadvisor-branded hotels revenue – primarily consisting of ~~TripAdvisor-branded~~Tripadvisor-branded hotel metasearch auction-based revenue, transaction revenue from ~~TripAdvisor’s~~Tripadvisor’s hotel instant booking feature, subscription-based advertising revenue and hotel sponsored placements advertising revenue; and (2) ~~TripAdvisor-branded~~Tripadvisor-branded display and platform revenue – consisting of ~~TripAdvisor-branded~~Tripadvisor-branded display-based revenue. All direct general and administrative costs are included in the applicable segments and business units, however, all corporate general and administrative costs are included in the Hotels, Media & Platform reportable segment. In addition, the Hotels, Media & Platform reportable segment includes all ~~TripAdvisor-related~~Tripadvisor-related brand advertising expenses (primarily television advertising) and technical infrastructure and other costs supporting the ~~TripAdvisor~~Tripadvisor platform.

●

Experiences & Dining – ~~TripAdvisor~~Tripadvisor provides information and services for consumers to research, book and experience activities and attractions in popular travel destinations both through Viator, ~~TripAdvisor’s~~Tripadvisor’s dedicated Experiences business, and on ~~TripAdvisor’s~~Tripadvisor’s website and mobile apps. ~~TripAdvisor~~Tripadvisor generates commissions for each booking transaction it facilitates through its online reservation system. ~~TripAdvisor~~Tripadvisor also provides information and services for consumers to research and book restaurants in popular travel destinations through its dedicated restaurant reservations business, TheFork, and on ~~TripAdvisor-branded~~Tripadvisor-branded websites and mobile apps.

~~TripAdvisor’s~~Tripadvisor’s accounting policies are the same as those described in the Company’s Summary of Significant Accounting Policies included in the Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Performance Measures

~~TripAdvisor~~Tripadvisor disaggregates revenue from contracts with customers into major products/revenue sources. ~~TripAdvisor~~Tripadvisor has determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Revenue is recognized primarily at a point in time for all reported segments.


	Three months ended			Six months ended			Three months ended			Six months ended
	June 30,			June 30,			June 30,			June 30,
	2019		2018	2019		2018	2020		2019	2020		2019

	amounts in millions						amounts in millions
Hotels, Media & Platform
TripAdvisor-branded hotels	$	211	231	$	427	447	$	31	211		168	427
TripAdvisor-branded display and platform		43	41		81	77		7	43		39	81
Total Hotels, Media & Platform		254	272		508	524		38	254		207	508

Experiences & Dining		125	98		206	161		14	125		97	206
Corporate and other		43	63		84	126		7	43		33	84
Total Revenue	$	422	433	$	798	811	$	59	422		337	798

The following table provides information about the opening and closing balances of accounts receivable and contract assets from contracts with customers:


	June 30, 2019		December 31, 2018	June 30, 2020		December 31, 2019

	amounts in millions			amounts in millions
Accounts receivable	$	261	205	$	69	176
Contract assets		9	7		5	7
Total	$	270	212	$	74	183

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~~LIBERTY TRIPADVISOR HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Accounts receivable are recognized when the right to consideration becomes unconditional. Contract assets are rights to consideration in exchange for services that ~~TripAdvisor~~Tripadvisor has transferred to a customer when that right is conditional on something other than the passage of time, such as commission payments that are contingent upon the completion of the service by the principal in the transaction. Contract liabilities generally include payments received in advance of performance under the contract, and are realized as revenue as the performance obligation to the customer is satisfied, which ~~TripAdvisor~~Tripadvisor presents as deferred revenue on its consolidated balance sheets. As of January 1, ~~2019, TripAdvisor~~2020, Tripadvisor had ~~$63~~$62 million recorded as deferred revenue on its condensed consolidated balance sheet, of which $12 million and $44 million were recognized as revenue and $4 million and $10 million were refunded due to cancellations by travelers during the three and six months ended June 30, 2020, respectively. As of January 1, 2019, Tripadvisor had $63 million recorded as deferred revenue in the condensed consolidated balance sheet, of which $12 million and $46 million ~~was~~were recognized ~~into~~as revenue and $1 million and $2 million were refunded due to cancellations by travelers during the three and six months ended June 30, 2019, respectively. As of January 1, 2018, TripAdvisor had $59 million recorded as deferred revenue on its unaudited condensed consolidated balance sheet, of which $13 million and $45 million was recognized in revenue during the three and six months ended June 30, 2018, respectively. The difference between the opening and closing balances of ~~TripAdvisor’s~~Tripadvisor’s deferred revenue primarily results from the timing differences between when ~~TripAdvisor~~Tripadvisor receives customer payments and the time in which ~~TripAdvisor~~Tripadvisor satisfies its performance obligations. The difference between the opening and closing balances of ~~TripAdvisor’s~~Tripadvisor’s contract assets primarily results from the timing difference between when ~~TripAdvisor~~Tripadvisor satisfies its

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

performance obligations and the time when the principal completes the service in the transaction. There were no significant changes in contract assets or deferred revenue during the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 related to business combinations, impairments, cumulative catch-ups or other material adjustments. However, to the extent the COVID-19 pandemic continues, Tripadvisor may incur additional significant and unanticipated cancellations, re-bookings and similar matters from its customers related to future travel, accommodations and tour bookings, which had been reserved by travelers and recorded as deferred revenue as of June 30, 2020 and December 31, 2019.

For segment reporting purposes, TripCo defines Adjusted OIBDA ~~a non-GAAP measure,~~ as revenue less operating expenses, and selling, general and administrative expenses (excluding stock-based compensation), adjusted for specifically identified non-recurring transactions. TripCo believes this measure is an important indicator of the operational strength and performance of its 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 management to view operating results, and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, equity settled liabilities (including stock-based compensation), separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. 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 GAAP. TripCo generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

Adjusted OIBDA is summarized as follows:


	Three months ended			Six months ended		Three months ended			Six months ended
	June 30,			June 30,		June 30,			June 30,
	2019		2018	2019	2018	2020		2019	2020	2019

	amounts in millions					amounts in millions
Hotels, Media & Platforms	$	108	85	212	162
Hotels, Media & Platform						$	(33)	108	20	212
Experiences & Dining		7	16	(17)	12		(38)	7	(57)	(17)
Corporate and other		10	7	18	12		(5)	10	(4)	18
Consolidated TripCo	$	125	108	213	186	$	(76)	125	(41)	213

In addition, we do not report assets, capital expenditures and related depreciation expense by segment as our CODM does not use this information to evaluate operating segments. Accordingly, we do not regularly provide such information by segment to our CODM.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table provides a reconciliation of ~~Consolidated segment~~ Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:


	Three months ended			Six months		Three months ended			Six months ended
	June 30,			ended June 30,		June 30,			June 30,
	2019		2018	2019	2018	2020		2019	2020	2019

	amounts in millions					amounts in millions
Consolidated segment Adjusted OIBDA	$	125	108	213	186
Adjusted OIBDA						$	(76)	125	(41)	213
Stock-based compensation		(33)	(33)	(63)	(63)		(25)	(33)	(52)	(63)
Depreciation and amortization		(41)	(41)	(83)	(80)		(42)	(41)	(85)	(83)
Restructuring charges							(33)	—	(42)	—
Impairment of goodwill and intangible assets							(547)	—	(547)	—
Operating income (loss)		51	34	67	43		(723)	51	(767)	67
Interest expense		(6)	(6)	(11)	(12)		(7)	(6)	(14)	(11)
Realized and unrealized gain (losses) on financial instruments, net		5	(42)	6	(65)
Other, net		4	—	8	1		(24)	9	(25)	14
Earnings (loss) before income taxes	$	54	(14)	70	(33)	$	(754)	54	(806)	70

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

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business and marketing strategies; the ~~recoverability~~impacts of ~~our goodwill~~the coronavirus (“COVID-19”); improvements in revenue; cost reduction measures and ~~other long-lived assets;~~related impacts; our projected sources and uses of cash; the payment of dividends by Tripadvisor, Inc. (“Tripadvisor”); 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. 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:

●

~~customer~~general business conditions, economic uncertainty or downturn, including the impacts of COVID-19 pandemic to unemployment levels and demand ~~for products~~within the travel, hospitality, restaurant and ~~services and the ability of our subsidiary to adapt to changes in demand;~~leisure industry;

●

~~competitor responses~~our ability to ~~products and services;~~obtain cash in amounts sufficient to service our obligations;

●

the ~~levels~~ability of our Company and ~~quality~~Tripadvisor to obtain additional financing or of ~~online traffic~~Tripadvisor to ~~TripAdvisor, Inc.’s (“TripAdvisor”) businesses’ websites and~~refinance its existing indebtedness in the ~~ability to convert visitors into contributors or consumers;~~future;

●

the ~~expansion~~effects of ~~social integration~~Tripadvisor’s current or our Company’s and ~~member acquisition efforts with social media;~~Tripadvisor’s future indebtedness and the related agreements;

●

impairments of intangible assets;

●

Tripadvisor’s ability to attract visitors to its websites and mobile apps and cost-effectively convert visitors into revenue-generating users;

●

the impact of changes in search engine algorithms and dynamics or search engine disintermediation;

●

~~uncertainties inherent~~reductions in spending by advertisers or the ~~development and integration~~loss of ~~new business lines and business strategies;~~advertising partners;

●

~~our future financial performance, including availability, terms and deployment of capital;~~damage to Tripadvisor’ brands;

●

~~our ability to successfully integrate and recognize anticipated efficiencies and benefits from~~declines or disruptions in the ~~businesses we acquire;~~

●

~~impairment of goodwill~~economy in general or ~~other intangible assets such as trademarks or other intellectual property arising from acquisitions;~~the travel industry in particular;

●

the ability of ~~suppliers and vendors~~Tripadvisor to ~~deliver equipment, software and services;~~successfully compete in an increasingly competitive global environment;

●

~~availability~~the ability of ~~qualified~~Tripadvisor to adapt to technological developments or industry trends;

●

the retention and motivation of key personnel;

●

~~changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations~~the impact of ~~the Federal Communications Commission~~acquisitions, investments, significant commercial arrangements and ~~adverse outcomes from regulatory proceedings;~~new business strategies on Tripadvisor’s ongoing business;

●

~~changes in business models;~~challenges associated with operating globally;

●

claims, lawsuits, government investigations and other proceedings as well as changes ~~in the nature of key strategic relationships with partners~~to laws, rules and ~~vendors;~~regulations and any resulting adverse outcomes;

●

~~domestic~~infringement on intellectual property rights by competitors or Tripadvisor;

●

the occurrence of system security issues, data protection breaches, cyberattacks and ~~international economic and business conditions and industry trends, including the impact of “Brexit” and those conditions and trends which result~~system outage issues;

●

fluctuations in ~~declines or disruptions in the travel industry;~~foreign currency exchange rates;

●

consumer spending levels, including the availability and amount of individual consumer debt;

●

~~costs related to the maintenance and enhancement of brand awareness;~~

●

~~advertising spending levels;~~

●

~~rapid technological changes;~~

●

~~failure to protect the security of personal information about customers and users, subjecting us to potentially costly government enforcement actions or private litigation and reputational damage;~~

●

~~the regulatory and competitive environment of the industries in which we operate;~~

●

~~fluctuations in foreign currency exchange rates;~~ and

●

threatened terrorist attacks, political unrest in international markets and ongoing military action around the world.

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For additional risk factors, please see Part I, Item 1A1A. Risk Factors of the Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, as well as Part ~~II.~~II, Item 1A. Risk Factors in each of the Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2019~~2020 and ~~Part II. Item 1A. Risk Factors of~~ this Quarterly Report on Form 10-Q. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly 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.

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 condensed consolidated financial statements and the notes thereto.

Overview

The accompanying financial statements and the other information herein refer to Liberty TripAdvisor Holdings, Inc. as “TripCo,” “Consolidated TripCo,” the “Company,” “us,” “we” and “our” unless the context otherwise requires. We own an approximate ~~22%~~23% economic interest and ~~57%~~59% voting interest in ~~TripAdvisor~~Tripadvisor as of June 30, ~~2019.~~2020. All significant intercompany accounts and transactions have been eliminated in the accompanying condensed consolidated financial statements.

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China, and on March 11, 2020 was declared a global pandemic, followed by government travel restrictions and quarantine orders around the globe. The COVID-19 pandemic has caused a significant negative impact on the travel, hospitality, restaurant, and leisure industry; and consequently adversely and materially affected Tripadvisor’s business, results of operations and financial condition during the three and six months ended June 30, 2020. Among other impacts, COVID-19 has negatively impacted global consumer demand and consumers’ ability to travel, thereby resulting in many of Tripadvisor’s travel partners, particularly hotels, experience providers and restaurants to operate at significantly reduced service levels.

Beginning in late February 2020 and progressively worsening through March 2020, Tripadvisor experienced a significant decline in consumer demand for its products and services as well as an increase in customer cancellations. The adverse impact to Tripadvisor’s business from COVID-19 intensified in the second half of March, driven by the pandemic’s proliferation and increased governmental restrictions and mandates globally that additionally impacted the travel, hospitality, restaurant, and leisure industry and further dampened consumer demand for Tripadvisor’s products and services. In the second half of March and throughout April, significant year-over-year revenue declines generally stabilized across Tripadvisor’s segments and products. During April 2020 and May 2020 consolidated revenue was approximately 10% of last year’s comparable period and June 2020 revenue was approximately 20% of last year’s comparable period. In addition, while still down significantly year-over-year, monthly unique users, which is reflective of traffic growth trends on Tripadvisor’s websites, have improved since April 2020. In April, May, and June of 2020, monthly unique users on Tripadvisor websites were approximately 33%, 45%, and 60% of last year’s comparable periods, respectively.

In addition, Tripadvisor incurred significant and unanticipated cancellations by travelers related to future travel, accommodations and tour bookings in the post-COVID-19 timeframe, which had been reserved by travelers in the pre-COVID-19 timeframe, including a significant number of bookings recorded as deferred revenue as of December 31, 2019. Tripadvisor has been working with travelers and travel partners to address cancellations, re-bookings, and in certain cases it has provided its travel partners extended payment terms, discounts and other incentives. Tripadvisor also has business continuity programs in place to ensure that employees are safe and that its teams continue to function effectively while working remotely. As the COVID-19 pandemic continues to develop, governments, corporations and other authorities may continue to implement restrictions, reinstate restrictions where restrictions were previously lifted, or other policies that continue to adversely impact Tripadvisor’s business. Tripadvisor also believes the travel industry and its business will continue to be materially and adversely affected while such travel restrictions remain in place. Although Tripadvisor cannot predict with certainty the full impact of the COVID-19 pandemic on its third quarter 2020 financial results, it currently expects that its third quarter 2020 financial results will be negatively impacted to a material degree, in comparison to the same period in 2019.

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The ultimate extent of the COVID-19 pandemic and its impact on travel, regional and global markets, and overall economic activity in currently affected countries or globally is unknown and difficult to predict. Therefore, the extent and duration of the impact of the COVID-19 pandemic on Tripadvisor’s business over the long term remains largely uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the timing and availability of a vaccine, the extent and effectiveness of containment actions taken, including mobility and travel restrictions, and the impact of these and other factors on consumer travel behavior.

In response to the impact of COVID-19, Tripadvisor has taken several steps to further strengthen its financial position and balance sheet, and maintain financial liquidity and flexibility, including restructuring and reducing its ongoing operating expenses, by borrowing funds from its 2015 Credit Facility, amending its 2015 Credit Facility, and issuing its $500 million in Senior Notes in July 2020, all of which are described in more detail below.

During the six months ended June 30, 2020, Tripadvisor borrowed $700 million from its 2015 Credit Facility. Tripadvisor used these proceeds to reinforce its liquidity position in light of uncertainty in the global markets resulting from the COVID-19 pandemic. In addition, on May 5, 2020, Tripadvisor amended its 2015 Credit Facility (the “Second Amendment”) to, among other things, suspend the leverage ratio covenant for each fiscal quarter ending after the effective date of the Second Amendment and ending prior to September 30, 2021; and replace it with a minimum liquidity covenant, and provide collateral to secure the obligations under the agreement, as well as downsize its capacity to $1.0 billion from $1.2 billion. Tripadvisor believes this additional flexibility will be important given its limited ability to predict its future financial performance due to the uncertainty associated with COVID-19 and the measures implemented in reaction to COVID-19. Also, on July 9, 2020, Tripadvisor completed the sale of $500 million aggregate principal amount of 7.000% senior notes due July 15, 2025 (the "Senior Notes") in a private offering. The Indenture provides, among other things, that interest is payable on the Senior Notes on January 15 and July 15 of each year, beginning on January 15, 2021. The Senior Notes are senior unsecured obligations of Tripadvisor and are guaranteed by each of its domestic subsidiaries that guarantees Tripadvisor’s 2015 Credit Facility. Tripadvisor subsequently used the proceeds of $490 million, net of $10 million in debt issuances costs, to repay a portion of its 2015 Credit Facility borrowings outstanding as of June 30, 2020.

In addition, due to the impact of COVID-19 to Tripadvisor’s business, Tripadvisor did not experience its typical seasonal pattern for revenue and profit during the three months ended June 30, 2020. In addition, cash outflows to travel suppliers related to deferred merchant payables significantly exceeded cash received from travelers during the first six months of 2020, reflecting the decline in consumer demand for Tripadvisor products and cancellations of reservations related to COVID-19, contributing significantly to unfavorable working capital trends and material negative operating cash flow during the six months ended June 30, 2020. It is difficult to forecast the seasonality for the upcoming quarters, given the uncertainty related to the extent and duration of the impact from COVID-19 and the shape and timing of a recovery.

During the first quarter of ~~2019,~~2020, Tripadvisor instituted a cost reduction initiatives to preserve cash flows, including targeted workforce reduction measures largely in the Experiences and Dining segment, in addition to optimizing and reducing brand advertising as Tripadvisor pivots to leverage newer and expectantly more effective mediums to its historically television-focused campaign.

In response to the economic impact of the COVID-19 pandemic, Tripadvisor instituted additional cost reduction measures during the latter part of the first quarter of 2020, which included the elimination of the majority of discretionary spending, business travel, non-critical vendor relationships, brand advertising, cessation of nearly all new hiring and contingent staff, reduction of targeted employee benefits, and the furloughing of over 100 employees. On April 28, 2020, management approved and Tripadvisor announced an additional cost reduction initiative in response to the continued economic and financial impacts to Tripadvisor as a ~~continuous review~~result of ~~our business, we realigned~~ the ~~reportable segment information~~COVID-19 pandemic, to include the following:

●

Enacted a workforce reduction eliminating more than 900 employees;

●

Furloughing additional employees bringing the total furloughed employees during March and April 2020 to approximately 850 employees, primarily in Tripadvisor’s European operations at TheFork; and

●

Making targeted reductions of Tripadvisor’s office lease portfolio, primarily either through subleasing or allowing property leases to expire.

As of June 30, 2020, Tripadvisor had approximately 150 employees who remained furloughed.

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Tripadvisor incurred total pre-tax restructuring and other related reorganization costs of approximately $33 million and $42 millionduring the three and six months ended June 30, 2020, respectively, as a result of these measures.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which ~~our chief~~among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating ~~decision maker,~~loss carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Based on Tripadvisor’s preliminary evaluation of the CARES Act, it qualifies for certain employer payroll tax credits and the deferral of payroll and other tax payments in the future, as well as certain income tax related provisions. Most notably, during the three and six months ended June 30, 2020, Tripadvisor recorded an income tax benefit of $5 million and $19 million, respectively, resulting from a loss carryback provision under the CARES Act. In addition, during the three months ended June 30, 2020, Tripadvisor recorded qualified payroll tax credits which reduced operating expenses by $4 million.

Due to ~~evaluate performance for~~the impact of COVID-19 on Tripadvisor’s operating ~~decision-making purposes, including evaluation~~results, which led to a decline in Tripadvisor’s stock price, TripCo recorded a goodwill impairment of $279 million during the three months ended June 30, 2020, related to the hotels, media and ~~allocation~~platform reporting unit. Based on the quantitative assessment performed during the second quarter and the resulting impairment loss recorded, the carrying value of ~~resources. The revised segment reporting structure includes~~ the ~~following reportable segments: (1)~~ Hotels, Media ~~& Platform;~~ and ~~(2) Experiences & Dining. All prior period segment disclosure information has been reclassified~~Platform reporting unit approximates its estimated fair value as of June 30, 2020. Declines in the future revenue outlook, cash flows, or other changes in the business, may necessitate future impairments, which could be material. TripCo will continue to ~~conform~~monitor Tripadvisor’s financial performance, stock price and other events and circumstances that may negatively impact the estimated fair values to determine if future impairment assessments may be necessary.

Tripadvisor’s stock price declined in March 2020, which triggered the mandatory prepayment of TripCo’s margin loan (see note 6 to the ~~current reporting structure in this Form 10-Q. These reclassifications had no effect on our~~accompanying condensed consolidated financial ~~statements in any period.~~ statements). In order to repay the margin loan, TripCo entered into an agreement with Certares LTRIP LLC (“Certares”), with respect to 325,000 shares of TripCo’s newly-created 8% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) (see note 7 to the accompanying condensed consolidated financial statements).

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Results of Operations—Consolidated—June 30, ~~2019~~2020 and ~~2018~~2019

General. We provide in the tables below information regarding our consolidated Operating Results and Other Income and Expense.


	Three months ended			Six months ended		Three months ended			Six months ended
	June 30,			June 30,		June 30,			June 30,
	2019		2018	2019	2018	2020		2019	2020	2019

	amounts in millions					amounts in millions
Revenue
Hotels, Media & Platforms	$	254	272	508	524
Hotels, Media & Platform						$	38	254	207	508
Experiences & Dining		125	98	206	161		14	125	97	206
Corporate and other		43	63	84	126		7	43	33	84
Total revenue		422	433	798	811		59	422	337	798
Operating expense		87	78	169	153		51	87	128	169
SG&A		210	247	416	472		84	210	250	416
Stock-based compensation		33	33	63	63		25	33	52	63
Depreciation and amortization		41	41	83	80		42	41	85	83
Restructuring and other related reorganization costs							33	—	42	—
Impairment of goodwill and intangible assets							547	—	547	—
Operating income		51	34	67	43		(723)	51	(767)	67
Other income (expense):
Interest expense		(6)	(6)	(11)	(12)		(7)	(6)	(14)	(11)
Realized and unrealized gains (losses) on financial instruments, net		5	(42)	6	(65)
Other, net		4	—	8	1		(24)	9	(25)	14
��		3	(48)	3	(76)
							(31)	3	(39)	3
Earnings (loss) before income taxes		54	(14)	70	(33)		(754)	54	(806)	70
Income tax (expense) benefit		(31)	(8)	(36)	(24)		89	(31)	103	(36)
Net earnings (loss)	$	23	(22)	34	(57)	$	(665)	23	(703)	34

Adjusted OIBDA	$	125	108	213	186	$	(76)	125	(41)	213

~~Revenue~~

~~TripAdvisor’s~~Revenue. Tripadvisor’s Hotels, Media & ~~Platforms~~Platform revenue decreased ~~$18~~$216 million and ~~$16~~$301 million during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in the prior year. The ~~decreases~~decrease in Hotels, Media & ~~Platforms~~Platform revenue ~~are~~is detailed as follows:

Three months ended

Six months ended

June 30,

June 30,

2019

2018

2019

2018

amounts in millions

TripAdvisor-branded hotels

$
211

231

427

447

TripAdvisor-branded display and platform

43

41

81

77

Total Hotels, Media & Platform

$
254

272

508

524


	Three months ended			Six months ended
	June 30,			June 30,
	2020		2019	2020	2019

	amounts in millions
TripAdvisor-branded hotels	$	31	211	168	427
TripAdvisor-branded display and platform		7	43	39	81
Total Hotels, Media & Platform	$	38	254	207	508

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~~TripAdvisor-branded~~Tripadvisor-branded hotels revenue primarily includes hotel ~~metasearch~~ auction ~~as well as other~~revenue, and to a lesser extent hotel B2B revenue, which includes click-based revenue ~~such as~~generated from hotel sponsored placements advertising that enable hotels to enhance their visibility on ~~TripAdvisor’s~~Tripadvisor’s hotel pages, and subscription-based advertising services that are offered to travel partners. ~~TripAdvisor’s travel partners are predominately online travel agencies~~For the three and ~~hoteliers.~~six months ended June 30, 2020, 82% and 81%, respectively, of Tripadvisor’s Hotels, Media & Platform segment revenue was derived from Tripadvisor-branded hotels revenue. For the three and six months ended June 30, 2019, 83% and 84%, respectively, of ~~TripAdvisor’s Hotels, Media & Platform segment revenue was derived from TripAdvisor-branded hotels revenue. For both the three and six months ended June 30, 2018, 85% of TripAdvisor’s~~Tripadvisor’s total Hotels, Media & Platform segment revenue was derived from ~~TripAdvisor-branded~~Tripadvisor-branded hotels revenue. ~~TripAdvisor-branded~~Tripadvisor-branded hotels revenue decreased ~~$20~~$180 million ~~during both the three~~ and six months ended June 30, 2019, when compared to the same periods in 2018. This decrease was primarily due to factors impacting TripAdvisor’s hotel metasearch auction revenue including optimized investments in search engine marketing (“SEM”) and other online paid traffic acquisition costs, and to a lesser extent, reduced revenue from TripAdvisor’s search engine optimization marketing channel, which TripAdvisor believes is related to search engines increasing the prominence of their own hotel products in search results, and adverse changes in foreign currency when compared to the same periods in 2018, all of which was partially offset by growth in TripAdvisor’s hotel sponsored placements advertising revenue.

~~Revenue per hotel shopper in TripAdvisor’s metasearch auction increased~~$259 million during the three and six months ended June 30, ~~2019, while the average monthly unique hotel shoppers declined during the three and six months ended June 30, 2019,~~2020, respectively, when compared to the same periods in ~~2018. Revenue per hotel shopper grew~~2019. These decreases were primarily ~~due~~driven by reduced consumer demand as a result of the proliferation of COVID-19, and subsequent widespread travel restrictions and service limitations on travel and supply partners imposed by local and federal governments in response to ~~product enhancements~~the COVID-19 pandemic. In addition, particularly in the month of January and ~~competition for TripAdvisor’s high quality hotel shopper leads from travel partners, partially offset~~most of February 2020 (pre-COVID-19 timeframe), Tripadvisor experienced reduced revenue generated through its search engine optimization marketing channel, which it believes is impacted by a greater percentage of hotel shoppers visiting TripAdvisor-branded websites and apps on mobile phones, which TripAdvisor continued to experience during the first half of 2019. The decrease in average monthly unique hotel shoppers was primarily due to TripAdvisor’s reduction of direct selling and marketing spend on TripAdvisor’s least-profitable paid online marketing campaigns to improve return on investment and TripAdvisor believes search engines (primarily Google) increasing the prominence of their own hotel products in search results.

~~Subscription-based~~Tripadvisor-branded display-based advertising revenue ~~was relatively flat~~decreased by $36 million and $42 million during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in ~~2018.~~2019, primarily driven by a decrease in marketing spend from Tripadvisor’s advertisers due to lack of consumer demand resulting from the impact of the COVID-19 pandemic.

~~TripAdvisor-branded display-based advertising~~Experiences & Dining segment revenue ~~increased~~decreased by $2$111 million ~~or 5%,~~ and $4$109 million ~~or 5%,~~ during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in ~~2018, primarily due~~2019. Revenue in this segment was negatively impacted by a significant reduction in consumer demand as a result of the proliferation of COVID-19; concurrent with many jurisdictions globally adopting laws, rules, regulations or decrees intended to address COVID-19, including implementing various travel restrictions, “shelter in place” or “social distancing” mandates, or restricting access to city centers or popular tourist destinations, restaurants and limiting access to experience offerings in surrounding areas. However, restaurants across many European markets saw restrictions ease during the second quarter of 2020, which was met with an increase in ~~pricing, partially offset by a decrease~~consumer demand. By the end of June 2020, restaurant reservations in ~~impressions sold.~~

~~Experiences & Dining segment~~TheFork approached volume levels of approximately 50% of that in January and most of February 2020 (or pre-COVID-19 timeframe). In addition, this segment’s revenue ~~increased by $27~~benefitted from incremental revenue year-over-year of approximately $7 million ~~or 28%,~~ and ~~$45~~$18 million, ~~or 28%,~~respectively, during the three and six months ended June 30, 2020 related to its December 2019 ~~respectively, when compared to the same periods in 2018, primarily driven by growth in both Experiences bookings~~acquisitions of Bookatable and ~~Restaurants bookings, as well as Restaurants media advertising placement revenue, partially offset by adverse changes in foreign currency, when compared to the same periods in 2018.~~

Experiences revenue growth during the three and six months ended June 30, 2019, when compared to the same periods in 2018, was primarily driven by growth in consumer demand and bookable supply on TripAdvisor’s platform contributing to bookings growth. TripAdvisor believes platform expansion and improvements contributed to Experiences revenue growth. Restaurants revenue growth during the three and six months ended June 30, 2019, when compared to the same periods in 2018, was primarily driven by growth in seated diners and bookings growth on mobile, in addition to restaurant sponsored placements advertising and subscription revenue growth.SinglePlatform.

Corporate and other revenue, which primarily includes click-based advertising and display-based advertising revenue from rentals, flights, ~~cruise~~cars, and ~~car rental~~cruise offerings on ~~TripAdvisor~~Tripadvisor websites and ~~non-TripAdvisor branded websites, such as www.smartertravel.com, www.bookingbuddy.com, www.cruisecritic.com and www.onetime.com,~~Tripadvisor China, decreased by ~~$20~~$36 million ~~or 32%,~~ and ~~$42~~$51 million ~~or 33%~~ during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in ~~2018. This was~~2019, primarily ~~driven~~due to decreased consumer demand, similar to Tripadvisor’s other businesses, as a result of the proliferation of COVID-19, and subsequent widespread global travel restrictions and service limitations on travel and supply partners imposed by local and federal governments and reduced travel partner spend in response to COVID-19.

Operating expense. Operating expense declined $36 million and $41 million for the ~~elimination of some marginal~~three and ~~unprofitable revenue within these offerings, as well as strategic resource re-allocation of investment across other areas of TripAdvisor’s business and continued competition~~six months ended June 30, 2020, respectively, compared to the same periods in the ~~Rentals offering.~~prior year. The decrease was due to a decrease in technology and content costs of $18 million and $21 million during the three and six months ended June 30, 2020, respectively, when compared to the same periods in 2019, primarily due to decreased personnel and overhead costs across all of Tripadvisor’s business as a result of reduction in headcount related to its cost-reduction measures in response to COVID-19. In addition, cost of revenue decreased $17 million and $20 million for the three and six months ended June 30, 2020, compared to the same periods in the prior year, primarily due to decreased direct costs from credit card payment and other transaction costs in the Experiences & Dining segment.

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~~Operating~~Selling, general and administrative. Selling, general and administrative expense

~~The most significant driver of operating expense is technology and content costs, which increased $5~~ declined $126 million and ~~$12~~$166 million, ~~during~~for the three and six months ended June 30, ~~2019,~~2020, respectively, ~~when~~ compared to the same periods in ~~2018. The increases were primarily related to additional headcount to support~~ the business growth of TripAdvisor’s Experiences & Dining businesses, partially offset by a decrease in personnel and overhead costs in TripAdvisor’s other businesses, as a result of strategic personnel re-allocation across TripAdvisor’s businesses.

~~Selling, general and administrative~~

prior year. The most significant driver of selling, general and administrative expense is selling and marketing costs, which consist of direct selling and marketing costs and indirect costs, such as personnel and overhead. ~~Selling~~Direct selling and marketing costs decreased ~~$38~~$124 million and ~~$59~~$174 million during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in ~~2018,~~2019, primarily due to ~~an overall~~a decrease in ~~SEM~~search engine marketing (“SEM”) and other online traffic acquisition costs across all of Tripadvisor’s segments and businesses, and television advertising costs driven by ~~TripAdvisor’s~~Tripadvisor’s Hotels, Media & Platform segment, as a cost reduction measure in response to the financial impact to Tripadvisor and ~~other businesses,~~decline in consumer demand caused by the COVID-19 pandemic. In addition, personnel and overhead costs decreased during the three and six months ended June 30, 2020, when compared to the same periods in 2019, as a result of a reduction in headcount related to Tripadvisor’s cost-reduction measures in response to COVID-19. The decreases were partially offset by an increase ~~of marketing expenditures~~ in ~~the~~personnel costs in Tripadvisor’s Experiences & Dining ~~segment.~~segment related to additional headcount from its business acquisitions in December 2019.

~~Operating Income (Loss).~~Restructuring and other related reorganization costs. ~~Our consolidated operating results increased by $17~~Tripadvisor incurred pre-tax restructuring and other related reorganization costs of $33 million and ~~$24~~$42 million during the three and six months ended June 30, ~~2019,~~2020, respectively. The costs consist of employee severance and related benefits. In response to COVID-19, during the second quarter of 2020, Tripadvisor committed to restructuring actions intended to reinforce its financial position, reduce its cost structure, and improve operational efficiencies, which resulted in headcount reductions. In addition, Tripadvisor engaged in a smaller scale restructuring action in the first quarter of 2020 to reduce its cost structure and improve its operational efficiencies, which resulted in headcount reductions for which Tripadvisor recognized $9 million in restructuring and other related reorganization costs.

Impairment of goodwill and intangible assets. Due to the current and expected impact of COVID-19 on Tripadvisor’s operating results, and a sustained decline in Tripadvisor’s stock price, impairments of $250 million for trademarks and $297 million for goodwill were recorded during the three months ended June 30, 2020.

Operating Income (Loss). Our consolidated operating income decreased $774 million and $834 million during the three and six months ended June 30, 2020, respectively, when compared to the same periods in the prior year. Operating income was impacted by the above explanations, combined with an increase in depreciation and amortization expense of $3 million due to increased amortization related to capitalized software and website development costs and incremental amortization related the adoption of the new leasing standard during the six months ended June 30, 2019.explanations.

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 ~~revenue less operating expenses~~Operating income (loss) plus depreciation and ~~selling, general~~amortization, stock-based compensation, separately reported litigation settlements, restructuring, acquisition and ~~administrative (“SG&A”) expenses (excluding stock-based compensation), adjusted for specifically identified non-recurring transactions.~~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. This measure of performance excludes such costs as depreciation and amortization, stock-based compensation and restructuring and impairment charges that are included in the measurement of operating income pursuant to U.S. generally accepted accounting principles (“GAAP”). 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 ~~GAAP.~~ ~~See note 8 to the accompanying condensed consolidated financial statements for~~U.S. generally accepted accounting principles. The following table provides a reconciliation of Operating income (loss) to Adjusted OIBDA.

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Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

amounts in millions

Operating income (loss)

$
(723)

51

(767)

67

Stock-based compensation

25

33

52

63

Depreciation and amortization

42

41

85

83

Restructuring charges

33

—

42

—

Impairment of goodwill and intangible assets

547

—

547

—

Adjusted OIBDA

$
(76)

125

(41)

213

Adjusted OIBDA ~~to operating income (loss) and earnings (loss) before income taxes.~~is summarized as follows:


	Three months ended			Six months ended		Three months ended			Six months ended
	June 30,			June 30,		June 30,			June 30,
	2019		2018	2019	2018	2020		2019	2020	2019

	amounts in millions					amounts in millions
Adjusted OIBDA
Hotels, Media & Platforms	$	108	85	212	162
Hotels, Media & Platform						$	(33)	108	20	212
Experiences & Dining		7	16	(17)	12		(38)	7	(57)	(17)
Corporate and other		10	7	18	12		(5)	10	(4)	18
Consolidated TripCo	$	125	108	213	186	$	(76)	125	(41)	213

Consolidated Adjusted OIBDA ~~increased $17~~decreased $201 million and ~~$27~~$254 million during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in the prior year. Hotels, Media & ~~Platforms~~Platform Adjusted OIBDA ~~increased $23~~decreased $141 million and ~~$50~~$192 million during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same ~~period~~periods in the prior year, primarily due to a decrease in revenue, as noted above, partially offset by reduced television advertising costs, as well as direct selling and marketing expenses related to SEM and

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other online paid traffic acquisition costs ~~on TripAdvisor’s least-profitable paid online marketing campaigns~~in response to ~~improve return on investment.~~ a decline in consumer demand related to COVID-19, and to a lesser extent, a reduction in headcount as a result of workforce reductions.

Experiences & Dining Adjusted OIBDA decreased $9$45 million ~~or 56%,~~ and ~~$29~~$40 million during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the corresponding periods in the prior year, primarily due to ~~increased people costs to drive product and supply investments, as well as marketing investments to fund long-term growth initiatives, partially offset by an increase~~a decrease in revenue, as noted ~~above.~~above, partially offset primarily by reduced selling and marketing expenses related to SEM and other online paid traffic acquisition costs, in response to reduced consumer demand and lack of availability of dine-in restaurants, experiences and tours as a result of COVID-19, and to a lesser extent, decreased direct costs from credit card payment and other transaction costs due to the reduced revenue as a result of COVID-19 and a reduction in headcount as a result of workforce reductions.

Corporate and other Adjusted OIBDA ~~increased $3~~decreased $15 million and $6$22 million during the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in ~~2018. These increases were~~2019. This decrease was primarily due to ~~reduced costs related to marketing and operational re-alignments,~~a decrease in revenue, partially offset by ~~decreases~~reduced selling and marketing expenses related to SEM and other online paid traffic acquisition costs in ~~revenue,~~response to a decline in consumer demand due to COVID-19, and a reduction in headcount as ~~described above.~~a result of workforce reductions. Corporate and other Adjusted OIBDA also includes $2 ~~million and $1~~ million of TripCo level selling, general and administrative expenses for both of the three months ended June 30, 2020 and 2019, and ~~2018, respectively,~~includes $6 million and $4 ~~million and $3~~ million of TripCo level selling, general and administrative expenses for the six months ended June 30, 2020 and 2019, respectively. TripCo corporate level expenses for the six months ended June 30, 2020 were higher due to legal fees and ~~2018, respectively.~~other expenses incurred related to the margin loan.

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Other Income and Expense

Components of Other income (expense) are presented in the table below.


	Three months ended			Six months ended		Three months ended			Six months ended
	June 30,			June 30,		June 30,			June 30,
	2019		2018	2019	2018	2020		2019	2020	2019

	amounts in millions					amounts in millions
Interest expense
TripAdvisor	$	(2)	(3)	(3)	(6)
Corporate		(4)	(3)	(8)	(6)
Consolidated TripCo	$	(6)	(6)	(11)	(12)
Realized and unrealized gains (losses) on financial instruments, net
TripAdvisor	$	—	(3)	—	(3)
Tripadvisor						$	(7)	(2)	(9)	(3)
Corporate		5	(39)	6	(62)		—	(4)	(5)	(8)
Consolidated TripCo	$	5	(42)	6	(65)	$	(7)	(6)	(14)	(11)
Other, net
TripAdvisor	$	4	—	8	1
Tripadvisor						$	(21)	4	(19)	8
Corporate		—	—	—	—		(3)	5	(6)	6
Consolidated TripCo	$	4	—	8	1	$	(24)	9	(25)	14

Interest expense. Interest expense ~~remained flat~~increased $1 million and ~~decreased $1~~$3 million for the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in the prior ~~year, primarily~~year. The increase for the three and six months ended June 30, 2020 was due to ~~lower finance costs related to TripAdvisor’s Headquarters Lease~~amounts outstanding under ~~ASC 842 and lower average~~the Tripadvisor credit facility that were not outstanding ~~borrowings on TripAdvisor’s 2015 Credit Facility (as defined~~ in ~~note 5 to~~ the ~~accompanying condensed consolidated financial statements). These decreases at TripAdvisor were~~same periods in the prior year, partially offset by ~~increased corporate interest expense due to higher outstanding borrowings under~~the repayment of the TripCo margin ~~loans.~~

~~Realized and unrealized gains (losses) on financial instruments, net.~~ ~~Realized and unrealized gains (losses) on financial instruments, net is primarily comprised of~~loan during the ~~change in the fair value of the variable postpaid forward as described in notes 4 and 5 to the accompanying condensed consolidated financial statements.~~three months ended March 31, 2020.

Other, net. Other, net ~~increased $4~~decreased $33 million and $7$39 million for the three and six months ended June 30, ~~2019,~~2020, respectively, when compared to the same periods in the prior ~~year,~~year. The decrease for the three months ended June 30, 2020 was primarily due to ~~an increase~~a loss on the sale of certain Tripadvisor businesses, unrealized losses on derivative instruments compared to unrealized gains on derivative instruments in the prior year, and less interest income ~~earned from TripAdvisor’s money market funds and other investments~~at Tripadvisor compared to the prior year. The decrease for the six months ended June 30, 2020 was primarily due to ~~increased~~a loss on the sale of certain Tripadvisor businesses, less interest ~~rates~~income at Tripadvisor compared to the prior year, unrealized gains on derivative instruments in the prior year and ~~increased investment, as well as lower foreign currency transaction losses as~~no similar gains in the current year, a ~~result~~loss on early extinguishment of debt due to the mandatory prepayment of the ~~fluctuation~~TripCo margin loan during the three months ended March 31, 2020, and an impairment of ~~foreign exchange rates during 2019.~~an investment at Tripadvisor.

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Income taxes. During the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, we had losses before income taxes of $754 million and earnings before income taxes of $54 million, ~~and losses before income taxes of $14 million,~~ respectively, and we had income tax benefit of $89 million and income tax expense of $31 ~~million and $8~~ million, respectively. During the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, we had losses before income taxes of $806 million and earnings before income taxes of $70 million, ~~and losses before income taxes of $33 million,~~ respectively, and we had income tax benefit of $103 million and tax expense of $36 million, respectively. For the three months ended June 30, 2020, the Company recognized additional tax expense related to the impairment of goodwill that is not deductible for tax purposes, partially offset by tax benefits related to state taxes. For the six months ended June 30, 2020, the Company recognized additional tax expense related to the impairment of goodwill that is not deductible for tax purposes and ~~$24 million, respectively.~~changes in unrecognized tax benefits, partially offset by tax benefits related to state taxes and losses generated in 2020 that are eligible for carryback to tax years with federal income tax rates greater than the U.S. statutory tax rate of 21%. For the three and six months ended June 30, 2019, ~~the~~the Company recognized additional tax to reverse the cumulative income tax benefit taken for excluding stock-based compensation from inter-company cost sharing arrangements. For the three and six months ended June 30, 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, changes in the valuation allowance, changes in unrecognized tax benefits and the recognition of excess tax benefits and shortfalls related to stock-based compensation. These expense items were partially offset by a $5 million income tax benefit reflecting additional information related to provisions of the Tax Cuts and Jobs Act during the three months ended June 30, 2018.

Net earnings (loss). We had net ~~earnings~~loss of ~~$23~~$665 million and net ~~losses~~earnings of ~~$22~~$23 million for the three months ended June 30, 2020 and 2019, respectively, and ~~2018, respectively,~~net loss of $703 million and net earnings of $34 ~~million and net losses of $57~~ million for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The change in net earnings was the result of the above described fluctuations in our revenue and expenses.

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Liquidity and Capital Resources

As of June 30, ~~2019,~~2020, 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 of purchase.

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 June 30, ~~2019,~~2020, TripCo had a cash balance of ~~$915~~$709 million. Approximately ~~$901~~$698 million of the cash balance, at June 30, ~~2019,~~2020, is held at ~~TripAdvisor.~~Tripadvisor. Although TripCo has a ~~57%~~59% voting interest in ~~TripAdvisor, TripAdvisor~~Tripadvisor, Tripadvisor is a separate public company with a significant non-controlling interest, as TripCo has only a ~~22%~~23% economic interest in ~~TripAdvisor.~~Tripadvisor. Even though TripCo controls ~~TripAdvisor~~Tripadvisor through its voting interest and board representation, decision making with respect to using ~~TripAdvisor’s~~Tripadvisor’s cash balances must consider ~~TripAdvisor’s~~Tripadvisor’s minority holders. Accordingly, any potential distributions of cash from ~~TripAdvisor~~Tripadvisor to TripCo would generally be on a pro rata basis based on economic ownership interests. Covenants in ~~TripAdvisor’s~~Tripadvisor’s debt instruments also restrict the payment of dividends and cash distributions to stockholders. Approximately ~~$319~~$108 million of the ~~TripAdvisor~~Tripadvisor cash and cash equivalents balance is held by foreign subsidiaries, with ~~the majority held~~approximately 50% located in the United Kingdom. As of June 30, 2020, the significant majority of Tripadvisor’s cash was denominated in U.S. dollars. As of June 30, 2020, Tripadvisor had $553 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 the Company’s Form 10-K for the year ended December 31, 2019 for additional information.

As of June 30, 2020, Tripadvisor had outstanding borrowings of $700 million. These funds were drawn down as a precautionary measure to reinforce Tripadvisor’s liquidity position and preserve financial flexibility in light of current uncertainty in the global markets resulting from COVID-19; given Tripadvisor’s limited ability to predict its future financial performance due to the uncertain time period government travel restrictions and other implemented measures in reaction to COVID-19 will continue or potentially re-emerge in its key markets; such as the U.S. and Europe.

On May 5, 2020, Tripadvisor amended its 2015 Credit Facility to, among other things, suspend the leverage ratio covenant on this facility beginning in the second quarter of 2020 and ending prior to September 30, 2021 (or such earlier date as elected by Tripadvisor) (the “Leverage Covenant Holiday”), and replacing it with a minimum liquidity covenant, that requires Tripadvisor to maintain $150 million of unrestricted cash, cash equivalents and short-term investments less deferred merchant payables plus available revolver capacity, which will apply only during the Leverage Covenant Holiday, as well as downsizing its capacity to $1.0 billion from $1.2 billion. The Second Amendment also prohibits Tripadvisor from making payments and distributions, including share repurchases and dividends during the Leverage Covenant Holiday. No change was made to the existing maturity date of the 2015 Credit Facility of May 12, 2022. This amendment therefore reduced Tripadvisor’s available borrowing capacity under the 2015 Credit Facility to $297 million as of June 30, 2020, given its existing borrowings of $700 million, as discussed above, and undrawn standby letters of credit of $3 million as of June 30, 2020. During the ~~six months ended June 30, 2018, TripAdvisor borrowed an additional $5 million and repaid $235 million of~~Leverage Covenant Holiday, any outstanding or future borrowings under the 2015 Credit Facility ~~(as defined in note 5 to the accompanying condensed consolidated financial statements). These net repayments were primarily made from~~bear interest at LIBOR plus a ~~one-time repatriation~~2.25% margin with a LIBOR floor of $325 million of foreign earnings to the United States. Cumulative undistributed earnings of foreign subsidiaries that TripAdvisor intends to indefinitely reinvest outside of the United States totaled approximately $728 million1% per annum, which as of June 30, ~~2019. Should TripAdvisor distribute, or be treated under certain U.S. tax rules as having distributed,~~2020, resulted in a borrowing rate of 3.25% per annum.

On July 9, 2020, Tripadvisor completed the ~~earnings of foreign subsidiaries in the form of dividends or otherwise, TripAdvisor may be subject to U.S. income taxes. To date, TripAdvisor has permanently reinvested its foreign earnings outside~~sale of the ~~United States~~Senior Notes in a private offering. The Indenture pursuant to which the Senior Notes were issued provides, among other things, that interest is payable on the Senior Notes on January 15 and ~~it currently does not intend~~July 15 of each year, beginning on January 15, 2021. The Senior Notes are senior unsecured obligations of Tripadvisor and are guaranteed by each of its domestic subsidiaries that guarantees Tripadvisor’s 2015 Credit Facility. Tripadvisor has subsequently used the proceeds of $490 million, net of approximately $10 million in debt issuances costs, to ~~repatriate these earnings to fund U.S. operations. The amount~~repay a portion of ~~any unrecognized deferred income tax on this temporary difference is not material.~~

Asits 2015 Credit Facility borrowings outstanding as of June 30, 2019, TripAdvisor had no outstanding borrowings and approximately $1.2 billion in borrowing capacity available under the 2015 Credit Facility and approximately $40 million of borrowing capacity available under the TripAdvisor Chinese Credit Facilities. In addition, TripCo has an additional $25 million available until June 10, 2020 under a delayed draw term loan as part of the 2019 Margin Loan (as defined in note 5 to the accompanying condensed consolidated financial statements).2020.

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Table of Contents

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.


	Six months ended			Six months ended
	June 30,			June 30,
	2019		2018	2020		2019

	amounts in millions			amounts in millions
Cash flow information
TripAdvisor cash provided (used) by operating activities	$	363	360
Tripadvisor cash provided (used) by operating activities				$	(148)	363
Corporate cash provided (used) by operating activities		(16)	(3)		(15)	(16)
Net cash provided (used) by operating activities	$	347	357	$	(163)	347

TripAdvisor cash provided (used) by investing activities	$	(87)	(5)
Tripadvisor cash provided (used) by investing activities				$	(34)	(87)
Corporate cash provided (used) by investing activities		—	—		(1)	—
Net cash provided (used) by investing activities	$	(87)	(5)	$	(35)	(87)

TripAdvisor cash provided (used) by financing activities	$	(28)	(353)
Tripadvisor cash provided (used) by financing activities				$	561	(28)
Corporate cash provided (used) by financing activities		13	—		5	13
Net cash provided (used) by financing activities	$	(15)	(353)	$	566	(15)

During the six months ended June 30, ~~2019,~~2020, TripCo’s primary uses of cash were original principal debt repayments of ~~$100~~$352 million, ~~purchases~~repurchases of ~~marketable securities~~Tripadvisor common stock of ~~$69~~$115 million, capital expenditures of ~~$38~~$36 million and payment of withholding taxes on net share settlements on equity awards of ~~$26~~$17 million. These uses of cash were funded primarily with cash provided by operations, borrowings of debt of ~~$114~~$740 million and ~~proceeds from sales and maturities~~the issuance of ~~marketable securities~~redeemable preferred stock of ~~$20 million.~~$325 million (see note 7 to the accompanying condensed consolidated financial statements).

The projected use of TripCo’s corporate cash will primarily be to pay fees (not expected to exceed approximately $4 million annually) to Liberty Media Corporation (“Liberty Media”) for providing certain services pursuant to the services agreement and the facilities sharing agreement that TripCo entered into with Liberty Media or its subsidiaries, payment of dividends on the Series A Preferred Stock (unless added to the liquidation preference), and to pay any other corporate level expenses. We anticipate that TripCo’s corporate cash balance (without other financial resources potentially available as discussed above) to be sufficient to maintain operations through a refinancing arrangement on the margin loans and the variable postpaid forward described in notes 4 and 5 to the accompanying condensed consolidated financial statements. The debt service costs of the margin loan agreement entered into by our bankruptcy remote wholly-owned subsidiary are paid in kind and become outstanding principal. In addition, debtDebt service costs accrue on the variable ~~postpaid~~prepaid forward borrowing described in note 56 to the accompanying condensed consolidated financial statements. At maturity, the accreted loan amount due under the variable ~~postpaid~~prepaid forward will be approximately ~~$272~~$42 million. ~~At the maturity of these obligations, a~~A number of options are available to satisfy ~~them~~the liability as discussed above in potential sources of liquidity.

~~TripAdvisor’s~~Tripadvisor believes that its available cash and cash equivalents, ~~and marketable securities,~~ combined with ~~expected cash flows generated by operating activities and~~ available borrowings from its ~~credit facilities,~~2015 Credit Facility, and in light of the Senior Notes offering in July 2020, are expected to be sufficient to fund ~~TripAdvisor’s~~Tripadvisor’s foreseeable working capital requirements, capital expenditures, existing business growth initiatives, debt obligations, lease commitments, and other financial commitments through at least the next twelve months. ~~TripAdvisor’s~~Tripadvisor’s future capital requirements may also include capital needs for acquisitions, ~~share repurchases,~~ and/or other expenditures in support of its business strategy, and may potentially reduce ~~TripAdvisor’s~~Tripadvisor’s cash balance and/or increase its debt. In addition, Tripadvisor’s capital requirements may increase due to the impact of the COVID-19 pandemic which has already resulted in reduced revenue, and the extent to which it may further impact the ability of Tripadvisor’s customers to fulfill their payment obligations. Given the uncertainty in the rapidly changing market and economic conditions related to the COVID-19 pandemic, Tripadvisor will continue to evaluate the nature and extent of the impact to its liquidity and capital requirements.

As a result of the COVID-19 pandemic, Tripadvisor’s stock price fell sharply in March 2020, which triggered the mandatory prepayments of TripCo’s margin loan (see note 6 to the accompanying condensed consolidated financial statements). In order to repay the margin loan, TripCo entered into an agreement with Certares, with respect to 325,000 shares of TripCo’s newly-created Series A Preferred Stock. As discussed in note 7 to the accompanying condensed consolidated financial statements, Certares may exercise its put right after March 26, 2021, and TripCo will have 180 days from the delivery of such notice to redeem the outstanding Series A Preferred Stock.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities and the conduct of operations by ~~TripAdvisor~~Tripadvisor in different foreign countries. Market risk refers to the risk of loss arising from adverse changes in stock prices, interest rates and foreign currency exchange rates. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks.

We are exposed to changes in interest rates primarily as a result of our borrowing and investment activities, which include investments in fixed and floating rate debt instruments and borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future requirements, market conditions and other factors. We expect to manage our exposure to interest rates by maintaining what we believe is an appropriate mix of fixed and variable rate debt. We believe this best protects us from interest rate risk. We expect to achieve this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to maturity, (ii) issuing variable rate debt with appropriate maturities and interest rates, and (iii) entering into interest rate swap arrangements when we deem appropriate. As of June 30, ~~2019,~~2020, our debt is comprised of the following amounts:

Variable rate debt

Fixed rate debt

Variable rate debt

Fixed rate debt

Principal

Weighted avg

Principal

Weighted avg

Principal

Weighted avg

Principal

Weighted avg

amount

interest rate

amount

interest rate

amount

interest rate

amount

interest rate

amount in millions

TripAdvisor

—

N/A

—

N/A

Tripadvisor

700

3.3%

—

N/A

TripCo debt

225

4.3

269

1.3

—

N/A

1.5

TripCo is exposed to foreign exchange rate fluctuations related primarily to the monetary assets and liabilities and the financial results of ~~TripAdvisor’s~~Tripadvisor’s foreign subsidiaries. Assets and liabilities of foreign subsidiaries for which the functional currency is the local currency are translated into U.S. dollars at period-end exchange rates, and the statements of operations are generally translated at the average exchange rate for the period. Exchange rate fluctuations on translating foreign currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation adjustments are recorded in accumulated other comprehensive earnings (loss) as a separate component of stockholders’ equity. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which are reflected in income as unrealized (based on period-end translations) or realized upon settlement of the transactions. Cash flows from our operations in foreign countries are translated at the average rate for the period. Accordingly, TripCo may experience economic loss and a negative impact on earnings and equity with respect to our holdings solely as a result of foreign currency exchange rate fluctuations.

Item 4. Controls and Procedures.

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and its principal accounting and financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of June 30, ~~2019~~2020 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There has been no change in the Company's internal control over financial reporting that occurred during the three months ended June 30, ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Except as discussed below, there have been no material changes in the Company’s risk factors from those disclosed in Part I, Item 1A of its Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 and in Part II, Item 1A of its Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2019.~~2020.

~~Application~~

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

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 ~~international tax laws,~~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 ~~tax~~applicable laws and/or ~~tax rulings,~~ 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 ~~the examination~~strategy, and a variety of ~~TripAdvisor’s tax positions, could materially affect TripAdvisor’s financial position and results of operations.~~other factors.

Due to deteriorations in revenue, an ~~international business, TripAdvisor is subject~~impairment loss of $288 million was recorded during the year ended December 31, 2019, related to ~~incomes taxes~~trademarks for the hotels, media & platform reporting unit.

Due to the impact of COVID-19 on Tripadvisor’s future revenue outlook, TripCo recorded a trademark impairment of $250 million during the three months ended June 30, 2020 related to the hotels, media and ~~non-income-based taxes~~platform reporting unit. Based on the quantitative assessment performed during the three months ended June 30, 2020 and the resulting impairment loss recorded, the carrying fair value of the trademark approximates its estimated fair value as of June 30, 2020. Further declines in Tripadvisor’s future revenue outlook could result in a decrease 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~~fair value of the law are issued or applied. TripAdvisor’s existing corporate structure and intercompany arrangements have been implemented in a manner it 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 change 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 revenues, 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 2017 Tax Act has resulted in significant changes to the U.S. corporate income tax system. The tax law changes by the 2017 Tax Act are broad and complex and there are still uncertainties about how the 2017 Tax Act will be interpreted at both the U.S. federal and state levels. 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 2017 Tax Act will be applied or otherwise administered that is different from TripAdvisor’s interpretation. This could materially change the taxes recorded in 2017 and 2018, and the expected future impact of the 2017 Tax Act on TripAdvisor’s business.

In July 2016, the European Council formally adopted an Anti-Tax Avoidance Directive in July 2016, which was further amended in February 2017. This Directive is aimed at preventing aggressive tax planning, increasing tax transparency and creating a fairer tax environment for all businesses in the European Union. The Organization for Economic Cooperation and Development is working towards a consensus-based solution to the challenges of the digitalization of the economy by 2020. In addition, on March 21, 2018, the European Commission released two draft directives on the Taxation of the Digital Economy. One directive aims at a more comprehensive solution whereby EU countries would be able to levy corporate income tax on companies that have digital presence in those countries regardless of whether they have a physical presence in those countries. The second directive provides for an interim solution whereby EU countries are to apply a 3% revenue based Digital Services Tax (“DST”), which if enacted, would be effective beginning in 2020. In the interim, certain EU countries have proposed legislation to implement DST that, if enacted, would impose a tax on revenue earned by larger companies from users of digital services located in these respective EU countries as early as 2019. On July 11, 2019, France’s Parliament approved a law implementing a 3% digital services tax on French revenues, retroactive to January 1, 2019. On July 24, 2019, the French DST was signed into law by President Macron. TripAdvisor is currently assessing the financial impact of this new law. TripAdvisortrademark. TripCo will continue to monitor ~~developments~~events and ~~determine the financial impact worldwide of these initiatives.~~

~~Any changes to international tax laws, including new definitions of permanent establishment, could~~circumstances that may affect the ~~tax treatment~~fair value or carrying value of ~~TripAdvisor’s foreign~~its trademark.

We previously recorded an impairment loss of $1,271 million during the year ended December 31, 2017 related to goodwill, related to the legacy hotels reporting unit due to a decline in Tripadvisor’s stock price.

Due to the impact of COVID-19 on Tripadvisor’s operating results, which led to a decline in Tripadvisor’s stock price, TripCo recorded a goodwill impairment of $279 million during the three months ended June 30, 2020, related to the hotels, media and platform reporting unit. Based on the quantitative assessment performed during the second quarter and the resulting impairment loss recorded, the carrying value of the Hotels, Media and Platform reporting unit approximates its estimated fair value as of June 30, 2020. Declines in the future revenue outlook, cash flows, or other changes in the business, may necessitate future impairments, which could be material. 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 future impairment assessments may be necessary.

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 ~~and adversely impact TripAdvisor’s effective income tax rate. Further, changes to tax laws and additional reporting requirements could increase the complexity, burden and cost~~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 ~~compliance.~~goodwill will not result in our

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~~Due to the large and expanding scale~~recognition of ~~TripAdvisor’s international business activities, any changes in U.S. or international taxation of TripAdvisor’s activities or the combined~~additional impairment charges, which may have a material adverse 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 TripAdvisor’s cash flowson our financial statements and results of operations.

In addition, the taxing authorities in the United States and other jurisdictions where TripAdvisor does business regularly examines TripAdvisor’s income and other tax returns as well as the tax returns of Expedia, TripAdvisor’s former parent. The ultimate outcome of these examinations 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 TripAdvisor’s operating results and financial condition.

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

~~179~~No shares of Liberty TripAdvisor Holdings, Inc. 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 June 30, ~~2019.~~2020.

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Item 6. Exhibits

(a)

Exhibits

Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):


Exhibit No.		Name
4.1		Indenture, dated July 9, 2020, among Tripadvisor, Inc., and the guarantors party thereto and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to Tripadvisor’s Current Report on Form 8-K (File No. 001-35362), filed with the SEC on July 9, 2020).
4.2		Form of Senior Note (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.2 to Tripadvisor’s Current Report on Form 8-K (File No. 001-35362), filed with the SEC on July 9, 2020).
10.1		Second Amendment, dated as of May 5, 2020, by and among Tripadvisor, Inc., Tripadvisor Holdings, LLC, Tripadvisor LLC and other Subsidiary Loan Parties party thereto, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and London Agent, BofA Securities, Inc., BMP Capital Markets Corp., BNP Paribas Securities Corp., SunTrust Robinson Humphrey, Inc., and U.S. Bank National Association, as Joint Lead Arrangers and Joint Bookrunners; Bank of America, N.A., BMO Capital Markets Corp., BNP Paribas Securities Corp., SunTrust Robinson Humphrey, Inc. and U.S. Bank National Association, as Co-Syndication Agents; and Barclay’s Bank PLC, Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, National Association, as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to Tripadvisor, Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 7, 2020 (File No. 001-35362)).
10.2		Time-Based Restricted Stock Units Agreement between the Registrant and Gregory B. Maffei under the Liberty TripAdvisor Holdings, Inc. 2019 Omnibus Incentive Plan.*
31.1		Rule 13a-14(a)/15d-14(a) Certification*
31.2		Rule 13a-14(a)/15d-14(a) Certification*
32		Section 1350 Certification**
101.INS		Inline XBRL Instance Document* - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document*
101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document*
101.LAB		Inline XBRL Taxonomy Label Linkbase Document*
101.PRE		Inline XBRL Taxonomy Presentation Linkbase Document*
101.DEF		Inline XBRL Taxonomy Definition Document*
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

* Filed herewith

** Furnished herewith

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SIGNATURES

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


	LIBERTY TRIPADVISOR HOLDINGS, INC.

Date: August ~~7, 2019~~6, 2020	By:	/s/ GREGORY B. MAFFEI
		Gregory B. Maffei Chairman, President and Chief Executive Officer

Date: August ~~7, 2019~~6, 2020	By:	/s/ BRIAN J. WENDLING
		Brian J. Wendling Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

~~II-3~~II-4


	Balance at December 31, 2018		Adjustments due to ASC 842	Balance at January 1, 2019
	in millions
Assets:
Other current assets	$	48	(3)	45
Property and equipment, net	$	154	8	162
Other assets, at cost, net of accumulated amortization	$	118	73	191

Liabilities:
Accrued liabilities and other current liabilities	$	151	21	172
Deferred income tax liabilities	$	325	1	326
Other liabilities	$	283	53	336
Retained earnings	$	133	1	134
Noncontrolling interests in equity of subsidiaries	$	3,400	2	3,402


	June 30, 2019
		in millions
Operating leases:
Operating lease right-of-use assets (1)	$	75

Current operating lease liabilities (2)	$	18
Operating lease liabilities (3)		67
Total operating lease liabilities	$	85

Finance Lease:
Finance lease right-of-use assets (4)	$	110

Current finance lease liabilities (2)	$	5
Finance lease liabilities (3)		80
Total finance lease liabilities	$	85


	Operating Leases		Finance Lease
		in millions
Remainder of 2019	$	10	4
2020		21	9
2021		20	10
2022		19	10
2023		12	10
Thereafter		12	67
Total future lease payments	$	94	110
Less: imputed interest		(9)	(25)
Total	$	85	85