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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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

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

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

	Three months ended March 31,						Three months ended March 31,
	2017			2016			2018			2017
Revenue	$	372		$	352
Revenue (Note 3)							$	378		$	372

Costs and expenses:
Cost of revenue (1)		17			16			20			17
Selling and marketing (2)		207			172			198			207
Technology and content (2)		59			61			67			59
General and administrative (2)		35			37			42			35
Depreciation		19			16			20			19
Amortization of intangible assets		8			8			8			8
Total costs and expenses:		345			310			355			345
Operating income		27			42			23			27
Other income (expense):
Interest expense		(3	)		(4	)		(3	)		(3	)
Interest income and other, net		1			-			1			1
Total other expense, net		(2	)		(4	)		(2	)		(2	)
Income before income taxes		25			38			21			25
Provision for income taxes		(12	)		(9	)		(16	)		(12	)
Net income	$	13		$	29		$	5		$	13

Earnings per share attributable to common stockholders (Note 4):
Basic	$	0.09		$	0.20		$	0.04		$	0.09
Diluted	$	0.09		$	0.20		$	0.04		$	0.09
Weighted average common shares outstanding (Note 4):
Basic		144			145			139			144
Diluted		145			147			140			145

(1) Excludes amortization as follows:
Amortization of acquired technology included in amortization of intangible assets	$	2		$	2		$	2		$	2
Amortization of website development costs included in depreciation		12			11			15			12
	$	14		$	13		$	17		$	14

(2) Includes stock-based compensation expense as follows:
(2) Includes stock-based compensation expense as follows (Note 5):
Selling and marketing	$	5		$	4		$	6		$	5
Technology and content	$	7		$	9		$	12		$	7
General and administrative	$	7		$	6		$	11		$	7

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	March 31,			December 31,			March 31,			December 31,
		2017			2016			2018			2017
ASSETS
Current assets:
Cash and cash equivalents (Note 5)	$	731		$	612
Short-term marketable securities (Note 5)		15			118
Accounts receivable, net of allowance for doubtful accounts of $9 and $9, respectively		232			189
Cash and cash equivalents (Note 6)							$	635		$	673
Short-term marketable securities (Note 6)								15			35
Accounts receivable and contract assets, net of allowance for doubtful accounts of $17 and $16, respectively								281			230
Prepaid expenses and other current assets		25			31			52			55
Total current assets		1,003			950			983			993
Long-term marketable securities (Note 5)		3			16
Property and equipment, net of accumulated depreciation of $128 and $111, respectively		262			260
Intangible assets, net of accumulated amortization of $87 and $80, respectively		161			167
Long-term marketable securities (Note 6)								5			27
Property and equipment, net of accumulated depreciation of $198 and $177, respectively								261			263
Intangible assets, net of accumulated amortization of $120 and $112, respectively								136			142
Goodwill		741			736			763			758
Deferred income taxes, net		37			42			18			16
Other long-term assets		67			67			74			73
TOTAL ASSETS	$	2,274		$	2,238		$	2,240		$	2,272

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	12		$	14		$	7		$	8
Deferred merchant payables		218			128			269			156
Deferred revenue		87			64			101			60
Current portion of debt (Note 6)		7			80
Taxes payable		6			10
Accrued expenses and other current liabilities (Note 8)		122			127
Current portion of debt (Note 7)								7			7
Accrued expenses and other current liabilities								150			141
Total current liabilities		452			423			534			372
Long-term debt (Note 6)		210			91
Long-term debt (Note 7)								―			230
Deferred income taxes, net		13			12			16			14
Other long-term liabilities		215			210			300			293
Total Liabilities		890			736			850			909

Commitments and contingencies (Note 9)
Stockholders’ equity: (Note 10)
Preferred stock, $0.001 par value		-			-			―			―
Authorized shares: 100,000,000
Shares issued and outstanding: 0 and 0
Common stock, $0.001 par value		-			-			―			―
Authorized shares: 1,600,000,000
Shares issued: 135,318,415 and 134,706,467, respectively
Shares outstanding: 128,393,005 and 131,310,980, respectively
Shares issued: 136,396,872 and 135,617,263, respectively
Shares outstanding: 126,669,732 and 126,142,773, respectively
Class B common stock, $0.001 par value		-			-			―			―
Authorized shares: 400,000,000
Shares issued and outstanding: 12,799,999 and 12,799,999, respectively
Additional paid-in capital		843			831			946			926
Retained earnings		958			945			935			926
Accumulated other comprehensive loss		(70	)		(77	)		(34	)		(42	)
Treasury stock-common stock, at cost, 6,925,410 and 3,395,487 shares, respectively		(347	)		(197	)
Treasury stock-common stock, at cost, 9,727,140 and 9,474,490 shares, respectively								(457	)		(447	)
Total Stockholders’ Equity		1,384			1,502			1,390			1,363
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,274		$	2,238		$	2,240		$	2,272

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

														Accumulated																									Accumulated
									Additional					other																				Additional					other
					Class B				paid-in			Retained		comprehensive																Class B				paid-in			Retained		comprehensive
	Common stock				common stock				capital			earnings		income (loss)			Treasury Stock									Common stock				common stock				capital			earnings		income (loss)			Treasury Stock
	Shares		Amount		Shares		Amount										Shares			Amount			Total			Shares		Amount		Shares		Amount										Shares			Amount			Total
Balance as of December 31, 2016		134,706,467	$	-		12,799,999	$	-	$	831		$	945	$	(77	)		(3,395,487	)	$	(197	)	$	1,502
Balance as of December 31, 2017																											135,617,263	$	-		12,799,999	$	-	$	926		$	926	$	(42	)		(9,474,490	)	$	(447	)	$	1,363
Net income													13											13														5											5
Cumulative effect adjustment from adoption of new accounting guidance (Note 2)																																						4											4
Other comprehensive income															7									7																8									8
Issuance of common stock related to exercises of options and vesting of RSUs		611,948		-						3														3			779,609		-						-														-
Repurchase of common stock																		(3,529,923	)		(150	)		(150	)																		(252,650	)		(10	)		(10	)
Withholding taxes on net share settlements of equity awards										(13	)													(13	)										(12	)													(12	)
Stock-based compensation										22														22											32														32

Balance as of March 31, 2017		135,318,415	$	-		12,799,999	$	-	$	843		$	958	$	(70	)		(6,925,410	)	$	(347	)	$	1,384
Balance as of March 31, 2018																											136,396,872	$	-		12,799,999	$	-	$	946		$	935	$	(34	)		(9,727,140	)	$	(457	)	$	1,390

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	Three months ended March 31,						Three months ended March 31,
	2017			2016			2018			2017
Operating activities:
Net income	$	13		$	29		$	5		$	13
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment, including amortization of internal-use software and website development		19			16			20			19
Amortization of intangible assets		8			8			8			8
Stock-based compensation expense		19			19			29			19
Deferred tax expense		7			2
Other, net		(1	)		-			-			6
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, prepaid expenses and other assets		(35	)		(65	)		(55	)		(35	)
Accounts payable, accrued expenses and other liabilities		(8	)		14			-			(8	)
Deferred merchant payables		88			72			110			88
Income tax receivables/payables, net		-			(1	)		15			-
Deferred revenue		24			30			42			24
Net cash provided by operating activities		134			124			174			134

Investing activities:
Capital expenditures, including internal-use software and website development		(18	)		(17	)		(15	)		(18	)
Purchases of marketable securities		-			(16	)		(1	)		-
Sales of marketable securities		102			33			41			102
Maturities of marketable securities		14			11			3			14
Net cash provided by investing activities		98			11			28			98

Financing activities:
Repurchase of common stock		(150	)		(1	)		(4	)		(150	)
Proceeds from 2015 credit facility		270			-			5			270
Payments to 2015 credit facility		(151	)		(90	)		(235	)		(151	)
Payments to 2016 credit facility		(73	)		-			-			(73	)
Proceeds from exercise of stock options		3			2			-			3
Payment of withholding taxes on net share settlements of equity awards		(13	)		(9	)		(12	)		(13	)
Net cash used in financing activities		(114	)		(98	)		(246	)		(114	)
Effect of exchange rate changes on cash and cash equivalents		1			2
Net increase in cash and cash equivalents		119			39
Cash and cash equivalents at beginning of period		612			614
Cash and cash equivalents at end of period	$	731		$	653
Effect of exchange rate changes on cash, cash equivalents and restricted cash								6			1
Net (decrease) increase in cash, cash equivalents and restricted cash								(38	)		119
Cash, cash equivalents and restricted cash at beginning of period								673			612
Cash, cash equivalents and restricted cash at end of period							$	635		$	731

Supplemental disclosure of non-cash investing and financing activities:
Stock-based compensation capitalized with internal-use software and website development costs	$	3		$	3		$	3		$	3

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

We refer to TripAdvisor, Inc. and our wholly-owned subsidiaries as ~~“TripAdvisor,”~~“TripAdvisor”, “the ~~Company,” “us,”~~Company”, “us”, “we” and “our” in these notes to the unaudited condensed consolidated financial statements.

TripAdvisor is an online travel company ~~empowering users~~and our mission is to help people around the world to plan, book and ~~book~~experience the perfect trip. ~~TripAdvisor’s~~We seek to achieve our mission by providing users and travel partners a global platform ~~aggregates reviews and opinions of members~~ about destinations, accommodations, travel activities and ~~attractions,~~experiences, and restaurants ~~throughout the world so~~ that ~~our users have access to trusted advice wherever their trips take them. Our platform helps users plan their trips with our unique~~encompasses rich user-generated content, price comparison tools and ~~enables users to compare real-time pricing~~online reservation and ~~availability so that they can book hotels, flights, cruises, vacation rentals, activities~~related services.

TripAdvisor, Inc., by and ~~attractions,~~through its subsidiaries, owns and ~~restaurant reservations.~~

operates a portfolio of leading online travel brands. Our flagship brand is TripAdvisor. TripAdvisor-branded websites include tripadvisor.com in the United States and localized versions of the website in 48 markets and 28 languages worldwide. In addition to the flagship TripAdvisor brand, we manage and operate the following 2320 other travel media brands, connected by the common goal of providing users the most comprehensive travel-planning and trip-taking resources in the travel industry: www.airfarewatchdog.com, www.bookingbuddy.com, www.citymaps.com, www.cruisecritic.com, www.familyvacationcritic.com, www.flipkey.com, www.thefork.com (including www.lafourchette.com, www.eltenedor.com, www.iens.nl, and www.dimmi.com.au), www.gateguru.com, www.holidaylettings.co.uk, www.holidaywatchdog.com, www.housetrip.com, ~~www.independenttraveler.com,~~ www.jetsetter.com, www.niumba.com, www.onetime.com, www.oyster.com, www.seatguru.com, www.smartertravel.com, www.tingo.com, ~~www.travelpod.com, www.tripbod.com,~~ www.vacationhomerentals.com, and www.viator.com.

We ~~have~~manage our business in two reportable segments: Hotel and Non-Hotel. We derive the substantial portion of our revenue from our Hotel segment, through the sale of advertising, primarily through click-based advertising and commission-based transactions via our instant booking feature and, to a lesser extent, display-based advertising, subscription-based hotel advertising, hotel room reservations sold through our websites, and from content licensing. Our Non-Hotel segment consists of our Experiences, Restaurants, and Rentals offerings. During the quarter we renamed Attractions as “Experiences” and Vacation Rentals ~~Restaurants and Attractions businesses. We derive revenue from~~as “Rentals.” These changes had no impact on the composition of our Non-Hotel segment from subscription and commission-based transaction offerings from our Vacation Rental business; destination activities primarily sold through Viator; and online restaurant reservations booked primarily through thefork.com.segments or on any financial information. For further information on our segments ~~see~~and principal revenue streams within these segments refer to “Note 3: Revenue Recognition” and “Note 12: Segment Information,” in ~~these~~the notes to our unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements present our results of operations, financial position and cash flows on a consolidated basis. The unaudited condensed consolidated financial statements include TripAdvisor, our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. All inter-company accounts and transactions have been eliminated in consolidation.

One of our subsidiaries that operates in China has a variable ~~interest~~interests in an affiliated ~~entity~~entities in China in order to comply with Chinese laws and regulations, which restrict foreign investment in Internet content provision businesses. Although we do not own the capital stock of ~~this~~these Chinese ~~affiliate,~~affiliates, we consolidate ~~its~~their results as we are the primary beneficiary of the cash losses or profits of ~~this~~these variable interest ~~affiliate~~affiliates and have the power to direct the activity of ~~this affiliate.~~these affiliates. Our variable interest ~~entity is~~entities’ financials were not material for all periods presented.

~~We have prepared the~~The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)~~. In~~and include all normal and recurring adjustments that management of the ~~opinion of management, all adjustments~~Company considers necessary for a fair presentation of ~~the results of the interim period have been included. These adjustments consist of normal recurring items.~~ its financial position and operating results. We prepared the unaudited condensed consolidated financial statements following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, we ~~have~~ condensed or omitted certain footnotes or other financial information that are normally required by GAAP for annual financial statements. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation. Our interim unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, previously filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, ~~2016~~2017 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures including notes required by GAAP.

We use estimates and assumptions in the preparation of our unaudited condensed consolidated financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our unaudited condensed consolidated financial statements. These estimates and

assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our unaudited condensed consolidated financial statements include: (i) recognition and recoverability of goodwill, ~~intangible~~definite-lived intangibles and other long-lived assets; and (ii) accounting for income ~~taxes; and (iii) stock-based compensation.~~taxes.

Traveler expenditures in the global travel market tend to follow a seasonal pattern. As such, expenditures by travel partners/advertisers to market to potential travelers and, therefore our financial performance, or revenue and profits, tend to be seasonal as well. ~~As a result, our~~Our financial performance tends to be seasonally highest in the second and third ~~quarter~~quarters of a year, as it is a key period for leisure travel research and trip-taking, which includes the seasonal peak in traveler hotel and rental stays, and tours and experiences taken, compared to the first and fourth quarters which represent seasonal low points. Further significant shifts in our business mix or adverse economic conditions could result in future seasonal patterns that are different from historical trends.

In ~~March 2017,~~June 2016, the Financial Accounting ~~Standards~~Standard Board (“FASB”) issued new accounting guidance which shortens the amortization period for the premium paid on certain purchased callable debt securities to the earliest call date instead of the bond’s maturity. The amendments do not require an accounting change for securities held at a discount; instead, the discount continues to be amortized to maturity. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and will be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We are in the process of evaluating the impact of adopting this new guidance on our consolidated financial statements and related disclosures as well as the date we will adopt this new guidance.

In January 2017, the FASB issued new accounting guidance to clarify the definition of a business and provide additional guidance to assist entities with evaluating whether transactions should be accounted for as asset acquisitions (or asset disposals) or business combinations (or disposals of a business). Under this new guidance, an entity first determines whether substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this criterion is met, the transaction should be accounted for as an asset acquisition as opposed to a business combination. This distinction is important because the accounting for an asset acquisition significantly differs from the accounting for a business combination. This new guidance eliminates the requirement to evaluate whether a market participant could replace missing elements (e.g. inputs or processes), narrows the definition of outputs and requires that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. This new guidance will be effective for us in the first quarter of 2018, with early adoption permitted including for interim or annual periods in which the financial statements have not been issued or made available for issuance. The new guidance will be applied prospectively to any transactions occurring within the period of adoption. We are currently considering our timing of adoption. Upon adoption, the new guidance will impact how we assess acquisitions (or disposals) of assets or businesses and do not expect it will have a material impact on our consolidated financial statements and related disclosures.

In January 2017, the FASB issued new accounting guidance to simplify the accounting for goodwill impairment. The new guidance removes Step two of the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill, which requires a hypothetical purchase price allocation, with the carrying amount of that reporting unit’s goodwill. Under this new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The new guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests occurring after January 1, 2017. The new guidance will be applied prospectively. We are currently evaluating the date we will adopt this guidance and what the impact upon adoption will be, if any.

In November 2016, the FASB issued new accounting guidance on the classification and presentation of restricted cash in the statement of cash flows to address the diversity in practice. This new guidance requires entities to show changes in cash, cash equivalents and restricted cash on a combined basis in the statement of cash flows. In addition, this accounting guidance requires a reconciliation of the total cash, cash equivalent and restricted cash in the statement of cash flows to the related captions in the balance sheet if cash, cash equivalents and restricted cash are presented in more than one line item in the balance sheet. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted, including adoption in an interim period, but any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. Upon adoption, an entity may apply the new guidance only retrospectively to all prior periods presented in the financial statements. We anticipate adopting this new guidance on January 1, 2018, on a retrospective basis, and currently do not expect it will have a material impact on our consolidated financial statements and related disclosures.

In October 2016, the FASB issued new accounting guidance on income tax accounting associated with intra-entity transfers of assets other than inventory. This accounting update, which is part of the FASB's simplification initiative, is intended to reduce diversity in practice and the complexity of tax accounting, particularly for those transfers involving intellectual property. This new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. Upon adoption, an entity may apply the new guidance only on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We expect to adopt this new guidance on January 1, 2018 and are in the process of evaluating the impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued new accounting guidance which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The new guidance specifically addresses the following cash flow topics in an effort to reduce diversity in practice: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon bonds; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. Upon adoption, an entity may apply the new guidance only retrospectively to all prior periods presented in the financial statements. We anticipate adopting this new guidance on January 1, 2018, on a retrospective basis, and we do not expect it will have a material impact on our consolidated financial statements and related disclosures.

~~In June 2016, the FASB~~ issued new accounting guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable, and available-for-sale debt securities. For financial assets measured at amortized cost, this new guidance requires an entity to: (1) estimate its lifetime expected credit losses upon recognition of the financial assets and establish an allowance to present the net amount expected to be collected; (2) recognize this allowance and changes in the allowance during subsequent periods through net income; and (3) consider relevant information about past events, current conditions and reasonable and supportable forecasts in assessing the lifetime expected credit losses. For available-for-sale debt securities, this new guidance made several targeted amendments to the existing other-than-temporary impairment model, including: (1) requiring disclosure of the allowance for credit losses; (2) allowing reversals of the previously recognized credit losses until the entity has the intent to sell, is more-likely-than-not required to sell the securities or the maturity of the securities; (3) limiting impairment to the difference between the amortized cost basis and fair value; and (4) not allowing entities to consider the length of time that fair value has been less than amortized cost as a factor in evaluating whether a credit loss exists. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted, including interim periods within those fiscal years beginning after December 15, 2018. We are currently considering our timing of adoption and in the process of evaluating the impact of adopting this guidance on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued new guidance related to accounting for leases. The new standard requires the recognition of assets (right-of-use-assets) and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. The new guidance will classify leases as either finance or operating leases, with classification determining the presentation of expenses and cash flows on our consolidated financial statements. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For leases with a term of 12 months or less, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases and amounts previously recognized in accordance with the business combinations guidance for leases. ~~Lessees~~We will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from ~~leases.~~leases which include, among other things, the computation and disclosure of our weighted average remaining lease term and discount rate, cash paid for amounts included in the measurement of lease liabilities, and supplemental non-cash information on lease liabilities arising from obtaining the right-of-use assets. These disclosures are intended to ~~supplement~~provide supplemental information to the amounts recorded in the financial statements ~~and to help financial statement~~so that users can better

understand the ~~amount, timing and uncertainty~~nature of ~~cash flows arising from leases.~~an entity’s leasing activities. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted, which will require the recognition and measurement of leases at the beginning of the earliest comparative period presented in the financial statements using a modified retrospective approach. We ~~have not yet determined the date we will adopt~~anticipate adopting this new ~~guidance.~~ guidance in the first quarter of 2019.

We continue to evaluate the new lease guidance and are ~~currently evaluating~~in the ~~expected impact~~process of ~~this new standard~~updating accounting policies, accounting position memos, and ~~have made measurable progress to date. We are currently~~ evaluating our existing population of ~~leases~~contracts to ensure all contracts that meet the definition of a lease contract under the new ~~guidance, updating accounting policy and position memos, and assessing whether~~standard are identified. We are also in the process of implementing additional ~~technology solutions are required internally~~lease software to support our accounting and reporting process, including the ~~requirements under this~~new quantitative and qualitative financial disclosure requirements. In addition, we are evaluating the impact of the system implementation and new accounting ~~guidance.~~guidance on our internal controls. We will continue to ~~evaluate~~provide updates on our assessment of the ~~impact~~effect that this new lease guidance will have on our consolidated financial statements, disclosures, systems and

related internal controls, and will disclose material effects, if any, when known.

In May 2017, the FASB issued new accounting guidance that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications which will reduce diversity in practice. Under the new guidance, an entity will not apply modification accounting to a share-based payment award if the award’s fair value (or calculated value or intrinsic value, if those measurement methods are used), the award’s vesting conditions, and the award’s classification as an equity or liability instrument are the same immediately before and after the change. The guidance also states that an entity is not required to estimate the value of the award immediately before and after the change if the change does not affect any of the inputs to the model used to value the award. We adopted this guidance prospectively in the first quarter of 2018. We believe the new guidance will likely result in fewer changes to the terms of an award being accounted for as modifications.

In January 2017, the FASB issued new accounting guidance to clarify the definition of a business and provide additional guidance to assist entities with evaluating whether transactions should be accounted for as asset acquisitions (or asset disposals) or business combinations (or disposals of a business). Under this new guidance, an entity first determines whether substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this criterion is met, the transaction should be accounted for as an asset acquisition as opposed to a business combination. This distinction is important because the accounting for an asset acquisition significantly differs from the accounting for a business combination. This new guidance eliminates the requirement to evaluate whether a market participant could replace missing elements (e.g. inputs or processes), narrows the definition of outputs and requires that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. We adopted this guidance in the first quarter of 2018 and it will be applied prospectively to any transactions occurring within and after the adoption date.

In November 2016, the FASB issued new accounting guidance on the ~~Company’s~~classification and presentation of restricted cash in the statement of cash flows to address the diversity in practice. This new guidance requires entities to show changes in cash, cash equivalents and restricted cash on a combined basis in the statement of cash flows. In addition, this accounting guidance requires a reconciliation of the total cash, cash equivalent and restricted cash in the statement of cash flows to the related captions in the balance sheet if cash, cash equivalents and restricted cash are presented in more than one line item in the balance sheet. We adopted this guidance in the first quarter of 2018 and applied it retrospectively to all prior periods presented in the financial statements as required under the new guidance. The adoption did not have a material impact on our consolidated financial statements and related ~~disclosures and provide further updates.~~disclosures.

In October 2016, the FASB issued new accounting guidance on income tax accounting associated with intra-entity transfers of assets other than inventory. This accounting update, which is part of the FASB's simplification initiative, is intended to reduce diversity in practice and the complexity of tax accounting, particularly for those transfers involving intellectual property. This new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We adopted this new guidance in the first quarter of 2018 on a modified retrospective basis. Accordingly, we recognized the cumulative effect of initial application of this new guidance as an adjustment to the opening balance of retained earnings, which was not material to our consolidated financial statements.

In August 2016, the FASB issued new accounting guidance which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The new guidance specifically addresses the following cash flow topics in an effort to reduce diversity in practice: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon bonds; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. We adopted this new guidance in the first quarter of 2018 retrospectively and the adoption did not have an impact on our consolidated financial statements and related disclosures.

In January 2016, the FASB issued a new accounting ~~update~~guidance which amends the ~~guidance~~standard on the ~~classification~~recognition and measurement of financial instruments. ~~Although the accounting~~The FASB clarified certain aspects of this guidance by issuing an update ~~retains many current requirements, it significantly revises accounting~~for technical corrections and improvements related to this guidance in February 2018. The guidance (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The accounting update also amends certain fair value disclosures of financial instruments and clarifies thatrequires an entity ~~should evaluate~~to measure equity investments (except those accounted for under the need for a valuation allowance on a deferred tax asset related to available-for-sale debt securities in combination with the entity’s evaluation of their other deferred tax assets. The update requires entities to carry all investments in equity securities, including other ownership interests such as partnerships, unincorporated joint ventures and limited liability companies at fair value, with fair value changes recognized through net income. This requirement does not apply to investments that qualify for equity method ~~accounting, investments~~or those that result in consolidation of the ~~investee or investments in which the entity has elected the practicability exception to~~investee) at fair value ~~measurement. Under current GAAP, available-for-sale investments in equity securities, with a readily determinable fair value, are re-measured to fair value each reporting period~~ with changes in fair value recognized in net income rather than accumulated other comprehensive income ~~(loss). However, under~~on the ~~new guidance, fair value adjustments will be recognized through net income. For~~balance sheet; (2) allows an entity to elect to measure the equity ~~securities currently accounted for under the cost method (as they~~investments that do not have a readily determinable fair ~~value), the~~value using a new ~~guidance requires those~~measurement alternative which measure these equity ~~investments to be carried at fair value with changes in net income, unless an entity elects to measure those~~ investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same ~~issuer. The Company intends to elect this measurement alternative for equity securities without a readily determinable fair value. Additionally, this accounting update will simplify~~issuer; (3) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify ~~impairment. When a qualitative assessment indicates~~impairment; and (4) clarifies that ~~impairment exists,~~ an entity ~~is required~~should evaluate the need for a valuation allowance on a deferred tax asset related to ~~measure~~available-for-sale securities in

combination with the ~~investment at fair value. In addition,~~entity’s evaluation of their other deferred tax assets. We adopted this accounting update eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at amortized costguidance in the ~~balance sheet. This guidance is effective~~first quarter of 2018 and elected to prospectively account for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit riskour investments in ~~other comprehensive income. Upon adoption, an entity will apply the new guidance on~~equity securities of privately-held companies that do not have a modified retrospective basis, which is to record a cumulative-effect adjustment to beginning retained earnings as of the beginning of the first reporting period in which the guidance is adopted, with two exceptions. The amendments related to equity investments without readily determinable fair ~~values (including disclosure requirements) will be effective prospectively.~~value using the measurement alternative. The ~~requirement to use the exit price notion to measure the fair value of financial instruments for disclosure purposes will also be applied prospectively. We anticipate adopting this new guidance~~adoption did not have a material impact on ~~January 1, 2018 and are still evaluating the impact to~~ our consolidated financial statements and related disclosures.

In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers, or ASC 606, Revenue from Contracts with Customers (“ASC 606”), which ~~will replace~~replaced numerous requirements in GAAP, and ~~provide~~provides companies with a single ~~revenue recognition~~ model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In ~~March 2016,~~addition, the FASB has also issued ~~additional guidance~~several amendments to the standard, which clarifies certain aspects of the guidance, including principal versus agent considerations and identifying performance obligations.

In the first quarter of 2018, we adopted ASC 606 under the modified retrospective method for all contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue guidance, while prior period amounts are not adjusted and continue to be reported in ~~April 2016,~~accordance with our previous accounting policies under the ~~FASB issued~~historical revenue guidance, or ASC 605, Revenue Recognition.

We evaluated each of our revenue streams and applied ASC 606 as further discussed in “Note 3: Revenue Recognition.” As a result of adoption of the new revenue guidance, certain revenue streams, such as the instant booking revenue recorded under the consumption model which ~~clarifies~~we previously recorded upon completion of the ~~identification~~traveler stay, is now recognized upon booking. The amount of ~~performance obligations and~~the recognized transaction price is recorded as revenue net of the impact of estimated cancellations. We also recorded an adjustment to capitalize certain costs to obtain contracts for existing arrangements as of the implementation ~~guidance for licensing. The two permitted transition methods under~~date. We expect the adoption of this new revenue standard will not have a material impact, either on an annual or quarterly basis, to our consolidated financial statements on an ongoing basis. Our systems and internal controls were not significantly impacted as a result of the accounting ~~guidance are~~changes and we have made the ~~full retrospective method, in which case~~necessary changes to our accounting policies and internal processes to support the ~~guidance would be applied to each prior reporting period presented and~~new revenue recognition standard, including the related disclosures.

We recognized the cumulative effect of ~~applying~~initial application of ASC 606 as an adjustment to the ~~guidance would be recognized at the earliest period shown, or the modified retrospective method,~~opening balance of retained earnings. We recorded a net increase in ~~which case~~opening retained earnings of $4 million as of January 1, 2018 due to the cumulative ~~effect~~impact of ~~applying the guidance would be recognized at the date of initial application. We anticipate adopting this new guidance on January 1, 2018.~~

To date, we have made significant progress toward completing our evaluation of the potential changes from adopting the new standard on our future financial reporting and disclosures. We have established a cross-functional implementation team from across our organization and have made significant progress in the review of our contracts portfolio and our current accounting policies and practices to identify potential differences that could result from applying the requirementsadoption of the new ~~standard to our~~ revenue ~~contracts.~~

~~We continue to evaluate the impact that this new~~ guidance ~~will have, if any, on the Company’s consolidated financial statements, internal controls,~~ and ~~related disclosures and will provide further updates during the second quarter of 2017, including the selection of an adoption method~~.

In October 2016, the FASB issued new accounting guidance which amends the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity should treat indirect interests in the entity held through related parties that are under common control within the reporting entity when determining whether it is the primary beneficiary of that variable interest entity. We adopted this new guidance on January 1, 2017, on a retrospective basis, with no impact on our consolidated financial statements and related disclosures. all other accounts were not materially impacted.

There have been no ~~material~~ changes to our significant accounting policies since December 31, ~~2016.~~2017, other than noted above. See “Note 3: Revenue Recognition” below for further discussion about our revenue recognition policies under ASC 606. For additional information about our significant accounting policies and estimates, refer to “Note 2: Significant Accounting ~~Policies”~~Policies”, in the notes to ~~our unaudited condensed~~ consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

We generate all of our revenue from contracts with customers. We recognize revenue when we satisfy a performance obligation by transferring control of the promised services to a customer in an amount that reflects the consideration that we expect to receive in exchange for those services. When we act as an agent in the transaction under ASC 606, we recognize revenue for only our commission on the arrangement. We determine revenue recognition through the following steps:

At contract inception, we assess the services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a service (or bundle of services) that is distinct. To identify the performance obligations, we consider all of the services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. We have provided qualitative information about our performance obligations for our principal revenue streams

discussed below. There was no significant revenue recognized in the three months ended March 31, 2018 related to performance obligations satisfied in prior periods. We have applied a practical expedient and do not disclose the value of unsatisfied performance obligations that have an original expected duration of less than one year, and we do not have any material unsatisfied performance obligations over one year. The value related to our remaining or partially satisfied performance obligations relates to subscription services that are satisfied over time or services that are recognized at a point in time, but not yet achieved. Our timing of services, invoicing and payments are discussed in more detail below and do not include a significant financing component. Our customer invoices are generally due 30 days from the time of invoicing.

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. Total capitalized costs to obtain a contract were approximately $1 million as of March 31, 2018. We amortize these contract costs on a straight-line basis over the estimated customer life, which is based on historical data. Amortization expense recorded to sales and marketing during the three months ended March 31, 2018 was not material. We assess such assets for impairment when events or circumstances indicate that the carrying amount may not be recoverable.

The recognition of revenue may require the application of judgment related to the determination of the performance obligations, the timing of when the performance obligations are satisfied and other areas. The determination of our performance obligations does not require significant judgment given that we generally do not provide multiple services to a customer in a given transaction, and the point in which control is transferred to the customer is readily determinable. In instances where we recognize revenue over time, we generally have either a subscription service that is recognized over time on a straight-line basis using the time-elapsed output method, or based on other output measures that provide a faithful depiction of the transfer of our services. When an estimate for cancellations is included in the transaction price, we base our estimate on historical data. The estimate is not material. Taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue –producing transaction, that are collected by us from a customer, are reported on a net basis, or in other words excluded from revenue on our consolidated financial statements, which is consistent with prior periods. The application of our revenue recognition policies and a description of our principal activities, organized by segment, from which we generate our revenue, are presented below.

TripAdvisor-branded Click-based Advertising and Transaction Revenue. Our largest source of Hotel segment revenue is generated from click-based advertising on TripAdvisor-branded websites, which is primarily comprised of contextually-relevant booking links to our travel partners’ sites. Our click-based travel partners are predominantly online travel agencies, or OTAs, and direct suppliers in the hotel category. Click-based advertising is generally priced on a cost-per-click, or “CPC”, basis, with payments from advertisers determined by the number of users who click on a link multiplied by the price that partner is willing to pay for that click, or hotel shopper lead. CPC rates that our travel partners are willing to pay are determined in a dynamic, competitive auction process, or metasearch auction. We record click-based advertising revenue as the click occurs and traveler leads are sent to the travel partner websites as our performance obligation is fulfilled at that time. Click-based revenue is generally billed to our travel partners on a monthly basis consistent with the timing of the service.

Transaction revenue is generated from our instant booking feature, which enables hotel shoppers to book directly with a travel partner, or the merchant of record, without leaving our website. We earn a commission from our travel partner for a user that completes a hotel reservation on our website. Our instant booking revenue includes arrangements where commissions are billable on all instant booking hotel reservations and also includes arrangements where the commission is billable only upon the completion of the traveler’s stay resulting from the reservation. Our performance obligation in both arrangements is complete at the time of the booking and the commission earned is recognized upon booking, as we have no post-booking service obligations. The amount of revenue recognized for commissions which are billable contingent upon a travelers stay requires an estimate of the impact of cancellations using historical cancellation rates. Contract assets are recognized at the time of booking for commissions that are billable at the time of stay. We are the agent in these transactions under ASC 606.

TripAdvisor-branded Display-based Advertising and Subscription Revenue. Travel partners can promote their brands in a contextually-relevant manner through a variety of display-based advertising placements on our websites. Our display-based advertising clients are predominately direct suppliers of hotels, airlines and cruises, as well as destination marketing organizations. We also sell display-based advertising to OTAs and other travel related businesses, as well as advertisers from non-travel categories. Display-based advertising is sold predominantly on a cost per thousand impressions, or CPM, basis. The performance obligation in our display-based advertising business is to display a number of advertising impressions on our websites and we recognize revenue for impressions as they are delivered. Services are generally billed monthly. We have applied the practical expedient to measure progress toward completion, as we have the right to invoice the customer in an amount that directly corresponds with the value to the customer of our performance to date, which is measured based on impressions delivered.

In addition, we offer subscription-based advertising to hotels, B&Bs and other specialty lodging properties. Our performance obligation is generally to enable subscribers to advertise their business on our website, including such information as a website URL, email address and phone number, as well as other information. Subscription advertising is predominantly sold for a flat fee, for a contracted period of time which is predominately one year or less. Subscription advertising services are generally billed in advance of service. Subscription advertising revenues are recognized on a straight-line basis over the period of the subscription service as efforts are expended evenly throughout the contract period. When prepayments are received, we recognize deferred revenue for the amount of prepayment in excess of revenue recognized until the performance obligation is satisfied.

Other Hotel Revenue. Our other hotel revenue primarily includes revenue from non-TripAdvisor-branded websites, such as www.bookingbuddy.com, www.cruisecritic.com, and www.onetime.com, which primarily includes click-based advertising and display-based advertising revenue. The performance obligations and timing of customer payments for these brands and methods of recognizing revenue are generally consistent with click-based advertising or display-based advertising revenue, as described above.

We provide information and services for users to research, book and experience activities and attractions in popular travel destinations both through Viator, our dedicated Experiences offering, and on our TripAdvisor website and applications. We also power travel activities and experiences booking capabilities to users for affiliate partners, including some of the world’s top airlines, hotel chains and online and offline travel agencies. We work with local tour or travel activities/experiences operators (“the supplier”) to provide our users with access to book tours, activities and experiences (“the activity”) in popular destinations worldwide. We generate commissions for each booking transaction we facilitate through our online reservation system. We provide post-booking service to the user until the time of the activity, which is the completion of the performance obligation. Revenue is recognized at the time that the activity occurs. We are an agent in the transaction, under ASC 606, for nearly all of these transactions. We generally collect payment from the user at the time of booking that includes both our commission revenue and the amount due to the supplier. Our commission revenue is recorded as deferred revenue until revenue is recognized, and the amount due to the supplier is recorded to deferred merchant payables on our consolidated balance sheet, until payment is made to the supplier after the completion of the activity. To a lesser extent, we earn commissions from third-party merchant partners, who display and promote our supplier activities on their websites to generate bookings. In these transactions, where we are not the merchant of record, we generally invoice and receive commissions directly from the third-party merchant partners. Our performance obligation is to allow the third-party merchant partners to display and promote our supplier activities on their website and we earn a commission when users book and complete an activity. Our performance obligation is complete and revenue is recognized at the time of the booking, as we have no post-booking obligations. We recognize this revenue net of an estimate of the impact of cancellations using historical cancellation rates. Contract assets are recognized for commissions that are billable contingent upon completion of the activity. We are an agent in these transactions, under ASC 606.

We also provide information and services for users to research and book restaurants in popular travel destinations through our dedicated restaurant reservations offering, TheFork, and on our TripAdvisor website and applications. TheFork is an online restaurant booking platform operating on a number of websites (including www.lafourchette.com, www.eltenedor.com, www.iens.nl and www.dimmi.com.au), with a network of restaurant partners located primarily across Europe and Australia. Our bookable restaurants are available on www.thefork.com and on TripAdvisor-branded websites and mobile applications. We primarily generate transaction fees (or per seated diner fees) that are paid by restaurants for diners seated primarily from bookings through TheFork’s online reservation system. The transaction fee is recognized in revenue after the reservation is fulfilled, or as diners are seated by our restaurant customers. Revenue is billed monthly when the transaction fees are payable, which is at the time the diner is seated. To a lesser extent, we also generate subscription fees for access to certain online reservation management services and marketing analytic tools provided by TheFork and TripAdvisor. As the performance obligation is to provide restaurants with access to these services over the subscription period, subscription fee revenue is recognized over the period of the subscription service on a straight-line basis as efforts are expended evenly throughout the contract period. Subscription fees are generally billable in advance of service. When prepayments are received, we recognize deferred revenue for the amount of prepayment in excess of revenue recognized until the performance obligation is satisfied.

In addition, we provide information and services for users to research and book vacation and short-term rental properties, including full home rentals, condominiums, villas, beach rentals, cabins and cottages. Rentals generates revenue primarily by offering individual property owners and managers the ability to list their properties on our websites and mobile applications thereby connecting homeowners with travelers through a free-to-list, commission-based option or, to a lesser extent, by an annual subscription-based fee structure. These properties are listed on www.flipkey.com, www.holidaylettings.co.uk, www.housetrip.com, www.niumba.com, and www.vacationhomerentals.com, and on our TripAdvisor-branded websites and mobile applications. We earn commissions associated with rental transactions through our free-to-list model from both the traveler and the property owner or manager. We provide post-booking service to the traveler and property owners and managers until the time the rental commences, which is the time the performance obligation is completed. Revenue from transaction fees is recognized at the time that the rental commences. We are an

agent in these transactions, under ASC 606. We generally collect payment from the traveler at the time of booking that includes our commissions, which is recorded as deferred revenue until revenue is recognized, and the amount due to the property owner, which is recorded in deferred merchant payables on our consolidated balance sheet, until payment is made to the property owner after the completion of the rental. Payments for term-based subscription fees related to online advertising services for the listing of rental properties are generally due in advance. As the performance obligation is the listing service provided to the property owner or manager over the subscription period, revenue is recognized over the period of the subscription service on a straight-line basis as efforts are expended evenly throughout the contract period. We recognize deferred revenue for the amount of prepayment in excess of revenue recognized until the performance obligation is satisfied.

We expense costs to obtain a contract as incurred, such as sales commissions, when the amortization period would have been one year or less.

We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

The impact of this new revenue recognition guidance on our unaudited condensed consolidated statement of operations for the three months ended March 31, 2018 was as follows:

The impact of the new guidance was not meaningful as of and for the three months ended March 31, 2018 for the unaudited condensed consolidated balance sheet and unaudited condensed consolidated statement of cash flows, respectively.

We disaggregate revenue from contracts with customers into major products/revenue sources. We have 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. As noted in “Note 12: Segment Information”, our business consists of two reportable segments – Hotel and Non-Hotel. A reconciliation of disaggregated revenue to segment revenue is also included below.

The following table provides information about the opening and closing balances of accounts receivables and contract assets from contracts with customers (in millions):

Accounts receivable are recognized when the right to consideration becomes unconditional. Contract assets are rights to consideration in exchange for services that we have 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 we present as deferred revenue on our unaudited condensed consolidated balance sheet. During the three months ended March 31, 2018, $41 million was recognized as revenue which was included in the deferred revenue balance at the beginning of the period. The difference between the opening and closing balances of our contract assets and deferred revenue primarily results from the timing differences between our performance and the customer’s payment. There were no significant changes in contract assets or liabilities during the three months ended March 31, 2018 related to business combinations, impairments, cumulative catch-up or other material adjustments.

The following table presents the amount of stock-based compensation expense related to stock-based awards, primarily stock options and restricted stock units (“RSUs”), on our unaudited condensed consolidated statements of operations during the periods presented:

~~During both the three months ended March 31, 2017 and 2016, respectively, we capitalized $3 million of stock-based compensation expense as internal-use software and website development costs.~~

During the three months ended March 31, 2017, we have issued 1,485,903 service-based non-qualified stock options under the Company’s Amended and Restated 2011 Stock and Annual Incentive Plan (the “2011 Incentive Plan”). These stock options generally have a term of ten years from the date of grant and generally vest equally over a four-year requisite service period.

~~A summary of the status and activity for stock option awards relating to our common stock for the three months ended March 31, 2017, is presented below:~~

Aggregate intrinsic value represents the difference between the closing stock price of our common stock and the exercise price of outstanding, in-the-money options. Our closing stock price as reported on The NASDAQ Global Select Market as of March 31, 2017 was $43.16. The total intrinsic value of stock options exercised was $7 million and $12 million, for the three months ended March 31, 2017 and 2016, respectively.

The fair value of stock option grants under the 2011 Incentive Plan has been estimated at the date of grant using the Black–Scholes option pricing model with the following weighted average assumptions for the periods presented:

The weighted-average grant date fair value of options granted was $17.20 and $24.41 for the three months ended March 31, 2017 and 2016, respectively. The total fair value of stock options vested was $13 million and $23 million, for the three months ended March 31, 2017 and 2016, respectively. Cash received from stock option exercises was $3 million and $2 million for the three months ended March 31, 2017 and 2016, respectively.

During the three months ended March 31, 2017, we issued 3,732,145 RSUs under the 2011 Incentive Plan for which the fair value was measured based on the quoted price of our common stock on the date of grant. These RSUs generally vest over a four-year requisite service period.

~~The following table presents a summary of our RSU activity during the three months ended March 31, 2017:~~

Total current income tax benefits during the three months ended March 31, 2017 and 2016 associated with the exercise or settlement of all TripAdvisor stock-based awards held by our employees were $14 million and $12 million, respectively.

A summary of our remaining unrecognized stock-based compensation expense and the weighted average remaining amortization period at March 31, 2017 related to our non-vested stock options and RSU awards is presented below (in millions, except in years information):

We compute basic earnings per share, (“or Basic ~~EPS”)~~EPS, by dividing net income by the weighted average number of common shares outstanding during the period. We compute the weighted average number of common shares outstanding during the reporting period using the total of common stock and Class B common stock outstanding as of the last day of the previous year end reporting period plus the weighted average of any additional shares issued and outstanding less the weighted average of any common shares repurchased during the reporting period.

Diluted earnings per share, (“or Diluted ~~EPS”) include~~EPS, includes the potential dilution of common equivalent shares outstanding that could occur from stock-based awards and other stock-based commitments using the treasury stock method. We compute Diluted EPS by dividing net income by the sum of the weighted average number of common and common equivalent shares outstanding during the period. We computed the weighted average number of common and common equivalent shares outstanding during the period using the sum of (i) the number of shares of common stock and Class B common stock used in the basic earnings per share calculation as indicated above, and (ii) if dilutive, the incremental weighted average common stock that we would issue upon the assumed exercise of outstanding common equivalent shares, primarily related to stock options and the vesting of restricted stock units using the treasury stock method, and (iii) if dilutive, ~~performance based~~performance-based and market-based awards based on the number of shares that would be issuable as of the end of the reporting period assuming the end of the reporting period was also the end of the contingency period.

Under the treasury stock method, the assumed proceeds calculation includes the actual proceeds to be received from the employee upon exercise of outstanding equity awards and the average unrecognized compensation cost during the period. The treasury stock method assumes that a company uses the proceeds from the exercise of an equity award to repurchase common stock at the average market price for the reporting period.

Below is a reconciliation of the weighted average number of shares of common stock outstanding in calculating Diluted EPS (shares in thousands and dollars in millions, except per share amounts) for the periods presented:

~~The following potential~~Potential common shares, ~~related to~~consisting of outstanding stock options, restricted stock units (“RSUs”) and ~~RSUs were~~market-based stock units (“MSUs”), totaling approximately 12.0 million shares and 6.4 million shares for the three months ended March 31, 2018 and 2017, respectively, have been excluded from the calculation of Diluted EPS ~~(in thousands)~~ because their effect would have been ~~anti-dilutive~~antidilutive. In addition, potential common shares, consisting of performance-based awards, totaling approximately 0.4 million shares and 0.1 million shares for ~~the periods presented:~~

The earnings per share amounts are the same for common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

~~Cash, Cash Equivalents and Marketable Securities~~Stock-Based Compensation Expense

The following tables show our cash and available-for-sale securities’ amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or short and long-term marketable securities astable presents the amount of ~~the dates presented (in millions):~~

Our cash and cash equivalents consist of cash on hand in global financial institutions, money market funds and marketable securities with maturities of 90 days or less at the date purchased. The remaining maturities of our long-term marketable securities range from one to three years and our short-term marketable securities include maturities that were greater than 90 days at the date purchased and have 12 months or less remaining at March 31, 2017 and December 31, 2016, respectively.

We classify our cash equivalents and marketable securities within Level 1 and Level 2 as we value our cash equivalents and marketable securities using quoted market prices (Level 1) or alternative pricing sources (Level 2). The valuation technique we used to measure the fair value of money market funds were derived from quoted prices in active markets for identical assets or liabilities. Fair values for Level 2 investments are considered “Level 2” valuations because they are obtained from independent pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our independent pricing services against fair values obtained from another independent source.

~~There were no material realized gains or losses~~stock-based compensation expense related to ~~sales of our marketable securities for the three months ended March 31, 2017~~stock-based awards, primarily stock options and ~~2016, respectively. Realized gains and losses~~RSUs, on the sale of securities are determined by specific identification of each security’s cost basis. We consider any individual investments in an unrealized loss position to be temporary in nature and do not consider any of our investments other-than-temporarily impaired as of March 31, 2017.

In certain circumstances, we enter into foreign currency forward exchange contracts, or forward contracts, to reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies. We do not use derivatives for trading or speculative purposes.

Our current forward contracts are not designated as hedges and have current maturities of less than 90 days. Consequently, any gain or loss resulting from the change in fair value was recognized in our unaudited condensed consolidated statement of operations. The net loss related to our settled and outstanding forward contracts for the three months ended March 31, 2017 was not material. We recorded a net loss of $1 million for the three months ended March 31, 2016 related to our settled and outstanding forward contracts in our unaudited condensed consolidated statements of operations ~~in “Interest income~~during the periods presented:

During both the three months ended March 31, 2018 and ~~other, net.”~~2017, we capitalized $3 million of stock-based compensation expense as internal-use software and website development costs.

During the ~~notional principal amounts~~three months ended March 31, 2018, we granted 611,235 service-based non-qualified stock options under the Company’s 2011 Stock and Annual Incentive Plan, as amended (the “2011 Incentive Plan”). These stock options generally have a term of ten years from the date of grant and typically vest equally over a four-year requisite service period.

A summary of our ~~outstanding derivative instruments that are not designated as hedging instruments as of~~stock option activity during the ~~dates presented:~~three months ended March 31, 2018, is presented below:

~~Counterparties to~~Aggregate intrinsic value represents the difference between the closing stock price of our ~~foreign currency exchange derivatives consist of major international financial institutions. We monitor our positions~~common stock and the ~~credit ratings~~exercise price of the counterparties involved and, by policy limits, the amount of credit exposure to any one party. While we may be exposed to potential losses due to the credit risk of non-performance by these counterparties, losses are not anticipated and any credit risk amounts associated with our outstanding, ~~or unsettled derivative instruments are deemed to be not material for any period presented.~~

Other financial instruments not measured at fair value on a recurring basis include accounts receivable, accounts payable, deferred merchant payables, short-term debt, accrued and other current liabilities and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value because of the short maturity of these instrumentsin-the-money options. Our closing stock price as reported on ~~our unaudited condensed consolidated balance sheets~~NASDAQ as of March 31, ~~2017 and December 31, 2016, respectively.~~2018 was $40.89. The ~~carrying~~total intrinsic value of stock options exercised was $3 million and $7 million, for the ~~long-term debt from our 2015 Credit Facility bears interest at a variable rate and therefore is also considered to approximate fair value.~~

~~We also hold investments in equity securities of privately-held companies of approximately $14 million at~~three months ended March 31, 2018 and 2017, ~~and December 31, 2016,~~ respectively. These investments are accounted for under the cost method and included in "Other long-term assets" in the Company's unaudited condensed consolidated balance sheet. As of March 31, 2017, we did not estimate the

The fair value of ~~these cost-method investments because there were no identified events or changes in circumstances, since December 31, 2016, which may have a significant adverse impact on~~stock option grants under the ~~carrying values~~2011 Incentive Plan has been estimated at the date of ~~these investments.~~grant using the Black–Scholes option pricing model with the following weighted average assumptions for the periods presented:

The weighted-average grant date fair value of options granted was $17.60 and $17.20 for the three months ended March 31, 2018 and 2017, respectively. The total fair value of stock options vested was $8 million and ~~December~~$13 million for the three months ended March 31, ~~2016.~~

~~NOTE 6: DEBT~~2018 and 2017, respectively. Cash received from stock option exercises was not material and $3 million for the three months ended March 31, 2018 and 2017, respectively.

~~The Company’s outstanding debt consisted of the following as of the dates presented:~~

On June 26, 2015, we entered into a five year credit agreement (the “2015 Credit Facility”) with a group of lenders. The 2015 Credit Facility, among other things, provides for (i) a $1 billion unsecured revolving credit facility, (ii) an interest rate on borrowings and commitment fees based on the Company’s and its subsidiaries’ consolidated leverage ratio; and (iii) uncommitted incremental revolving loan and term loan facilities, subject to compliance with a leverage covenant and other conditions. Any overdue amounts under or in respect of the revolving credit facility not paid when due shall bear interest at (i) in the case of principal, the applicable interest rate plus 2.00% per annum, (ii) in the case of interest denominated in Sterling or Euro, the applicable rate plus 2.00% per annum; and (iii) in the case of interest denominated in US dollars, 2.00% per annum plus the Alternate Base Rate plus the interest rate spread applicable to ABR loans. The Company may borrow from the revolving credit facility in U.S dollars, Euros and British pound sterling with a term of five years expiring June 26, 2020. There is no specific repayment date prior to the five-year maturity date for borrowings under this revolving credit facility. 2018 RSU Activity

During the three months ended March 31, ~~2017,~~2018, we granted 2,590,380 service-based RSUs under the ~~Company borrowed an additional $270 million and repaid $151 million~~2011 Incentive Plan which typically vest over a four-year requisite service period. A summary of our outstanding borrowings on the 2015 Credit Facility. These net borrowings during the quarter were primarily used to repurchase shares of our outstanding common stock under the Company’s repurchase program, which is described below in “Note 10: Stockholders Equity”. Based on the Company’s leverage ratio as of March 31, 2017, our borrowings bear interest at LIBOR plus 125 basis points, or the Eurocurrency Spread. The Company is borrowing under a one-month interest period of 2.125% per annum as of March 31, 2017, using a one-month interest period Eurocurrency Spread, which will reset periodically. Interest will be payable on a monthly basis while the Company is borrowing under the one-month interest rate period. We are also required to pay a quarterly commitment fee, on the daily unused portion of the revolving credit facilityRSU activity for ~~each fiscal quarter~~service-based and fees in connection with the issuance of letters of credit. Unused revolver capacity is subject to a commitment fee of 20.0 basis points, given the Company’s leverage ratio as of March 31, 2017. The 2015 Credit Facility includes $15 million of borrowing capacity available for letters of credit and $40 million for borrowings on same-day notice. As of March 31, 2017, we had issued $3 million of outstanding letters of credit under the 2015 Credit Facility. During the three months ended March 31, 2017 and 2016, we recorded total interest expense and commitment fees on our 2015 Credit Facility of $1 million and $2 million, respectively, to interest expense on our unaudited condensed consolidated statements of operations. All unpaid interest and commitment fee amounts as of March 31, 2017 and December 31, 2016, respectively, were not material.

We 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. Certain wholly-owned domestic subsidiaries of the Company have agreed to guarantee the Company’s obligations under the 2015 Credit Facility. The 2015 Credit Facility contains a number of covenants that, among other things, restrict our 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 our fiscal year. The 2015 Credit Facility also requires us to maintain a maximum leverage ratio and contains certain customary affirmative covenants and events of 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. Additionally, the 2015 Credit Facility includes a subjective acceleration clause, which could be triggered by the lenders, if a representation, warranty or statement made by the Company proves to be incorrect in any material respect, which in turn would permit the lenders to accelerate repayment of any outstanding obligations. The Company believes that the likelihood of the lender exercising this right is remote and, as such, we classify borrowings under this facility as long-term debt. As of March 31, 2017, we were in compliance with all of our debt covenants.

On September 7, 2016, we entered into an uncommitted facility agreement, which provides for a $73 million unsecured revolving credit facility (the “2016 Credit Facility”) with no specific expiration date. The 2016 Credit Facility is available at the lender’s discretion and can be canceled at any time. Repayment terms for borrowings under the 2016 Credit Facility are generally one to six month periods or such other periods as the parties may mutually agree and bear interest at LIBOR plus 112.5 basis points. The Company may borrow from the 2016 Credit Facility in U.S dollars only and we may voluntarily repay any outstanding borrowing at any time without premium or penalty. Any overdue amounts under or in respect of the 2016 Credit Facility not paid when due shall bear interest in the case of principal at the applicable interest rate plus 1.50% per annum. In addition, TripAdvisor, LLC, a wholly-owned domestic subsidiary of the Company, has agreed to guarantee the Company’s obligations under the 2016 Credit Facility. There are no specific financial or incurrence covenants.

~~The Company repaid all outstanding borrowings~~performance-based awards during the three months ended March 31, ~~2017. During~~2018, is presented below:

(2) Inclusive of 269,878 RSUs withheld due to net share settlement to satisfy required employee tax withholding requirements. Potential shares which had been convertible under RSUs that were withheld under net share settlement remain in the authorized but unissued pool under the 2011 Incentive Plan and can be reissued by the Company. Total payments for the employees’ tax obligations to the taxing authorities due to net share settlements are reflected as a financing activity within the unaudited condensed consolidated statements of cash flows.

A summary of our RSU activity for MSUs, during the three months ended March 31, ~~2017, total interest recorded with respect to our 2016 Credit Facility to interest expense on our unaudited condensed consolidated statement of operations was not material.~~

In addition to our borrowings under the 2015 Credit Facility and 2016 Credit Facility, we maintain two credit facilities in China (jointly, the “Chinese Credit Facilities”). As of March 31, 2017 and December 31, 2016, we had short-term borrowings outstanding of $7 million, respectively.

~~We are parties to a $30 million, one-year revolving credit facility with Bank of America (the “Chinese Credit Facility—BOA”) that~~2018 is currently subject to review on a periodic basis with no specific expiration period. Our Chinese Credit Facility—BOA currently bears interest at a rate based on 100% of the People’s Bank of China’s base rate, which was 4.35% as of March 31, 2017. As of March 31, 2017, there were no outstanding borrowings under our Chinese Credit Facility—BOA.presented below:

We are also parties to a RMB 70,000,000 (approximately $10 million), one-year revolving credit facility with J.P. Morgan Chase Bank (“Chinese Credit Facility—JPM”). Our Chinese Credit Facility—JPM currently bears interest at a rate based on 100% of the People’s Bank of China’s base rate, which was 4.35% as of March 31, 2017. As of March 31, 2017, we had $7 million of outstanding borrowings from the Chinese Credit Facility – JPM.

~~Each interim period is considered an integral part of~~ (1)Represents 213,000 MSUs awarded to the ~~annual period and, accordingly, we measure our~~Company’s CEO in November 2017.

Total current income tax ~~expense using an estimated annual effective tax rate. An enterprise is required, at~~benefits associated with the ~~end~~exercise or settlement of ~~each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year~~TripAdvisor stock-based awards held by our employees were $3 million and ~~use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur~~$14 million during ~~the interim period.~~

~~Our effective tax rate for~~ the three months ended March 31, 2018 and 2017, ~~and 2016 was 48.0% and 23.7%,~~ respectively. For the three months ended March 31, 2017, the effective tax rate is greater than the federal statutory rate primarily due to valuation allowances on losses in jurisdictions outside the United States and recognition of stock compensation shortfalls. The change in the effective tax rate for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 rate was primarily due to increased valuation allowances on losses in jurisdictions outside the United States and a lower stock price resulting in stock compensation shortfalls.

~~Our policy is to recognize accrued interest and penalties related to unrecognized tax benefits and income tax liabilities as part~~A summary of our ~~income tax expense. As of March 31, 2017, accrued interest is $6 million, net of federal and state benefit, and no penalties have been accrued.~~

~~By virtue of previously filed consolidated income tax returns filed with Expedia, we are currently under an~~ IRS audit for the 2009, 2010 and 2011 tax years, and have various ongoing state income tax audits. We are separately under examination by the IRS for the 2012 and 2013 tax years and under an employment tax audit by the IRS for the 2013 and 2014 tax years. These audits include questioning of the timing and the amount of income and deductions and the allocation of income among various tax jurisdictions. These examinations may lead to proposed or ordinary course adjustments to our taxes. We are no longer subject to tax examinations by tax authorities for years prior to 2008. As of March 31, 2017, no material assessments have resulted, except as noted below regarding our 2009 and 2010 IRS audit with Expedia.

subsidiaries, and would result in an increase to our worldwide income tax expense in an estimated range of $10 million to $14 million after consideration of competent authority relief, exclusive of interest and penalties. We disagree with the proposed adjustments and we intend to defend our position through applicable administrative and, if necessary, judicial remedies. Our policy is to review and update tax reserves as facts and circumstances change. Based on our interpretation of the regulations and available case law, we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable. In addition to the risk of additional tax for 2009 and 2010 transactions, if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, we would be subject to significant additional tax liabilities.

In July 2015, the United States Tax Court (the “Court”) issued an opinion favorable to Altera Corporation (“Altera”) with respect to Altera’s litigation with the IRS. This opinion was submitted as a final decision under Tax Court Rule 155 during December 2015. The litigation relates to the treatment ofremaining unrecognized stock-based compensation expense ~~in an inter-company cost-sharing arrangement with Altera’s foreign subsidiary. In its opinion,~~and the Court accepted Altera’s position of excluding stock based compensation from its inter-company cost-sharing arrangement. The IRS appealed the Court decision on February 19, 2016. At this time, the U.S. Department of the Treasury has not withdrawn the requirement from its regulations to include stock-based compensation in intercompany cost-sharing arrangements. The Company recorded a tax benefit of $1 million in its consolidated statement of operations for both the three months endedweighted average remaining amortization period at March 31, ~~2017 and March 31, 2016, respectively. The Company will continue~~2018 related to ~~monitor this matter and related potential impacts to its consolidated financial statements~~.our non-vested equity awards is presented below (in millions, except in years information):

~~Accrued expenses and other current liabilities consisted of the following as of the dates presented:~~

The following tables show our cash, cash equivalents, restricted cash and short-term and long-term available-for-sale marketable debt securities, by major security type, that are measured at fair value on a recurring basis and were categorized using the fair value hierarchy, as well as their classification on our unaudited condensed consolidated balance sheets, as of the periods presented (in millions):

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 remaining maturities of our long-term marketable securities range from one to three years and our short-term marketable securities include maturities that were greater than 90 days at the date purchased and have 12 months or less remaining at March 31, 2018 and December 31, 2017, respectively.

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—Valuations are based on quoted market prices for identical assets and liabilities in active markets.

Level 2—Valuations are based on observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations are based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

We classify our cash, cash equivalents, restricted cash and marketable securities within Level 1 and Level 2 as we value these financial instruments using quoted market prices (Level 1) or alternative pricing sources (Level 2). The valuation technique we used to measure the fair value of money market funds was derived from quoted prices in active markets for identical assets or liabilities. Fair values for Level 2 marketable securities are considered “Level 2” valuations because they are obtained from independent pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our independent pricing services against fair values obtained from another independent source.

There ~~have been~~were no material realized gains or losses related to sales of our marketable securities for the three months ended March 31, 2018 and 2017. Realized gains and losses on the sale of securities are determined by specific identification of each security’s cost basis. We consider any unrealized loss position in our available-for-sale marketable debt securities to be temporary in nature and do not consider any of these investments other-than-temporarily impaired as of March 31, 2018.

Derivative financial instruments are carried at fair value on our unaudited condensed consolidated balance sheets. We use foreign currency forward contracts to reduce the effects of foreign currency exchange rate fluctuations on our cash flows primarily for the Euro versus the U.S. Dollar. Our foreign currency forward contracts, which we have entered into to date, have not been designated as hedges and have had current maturities of less than 90 days. Any gain or loss resulting from the change in fair value of the foreign currency forward contracts was recognized in our unaudited condensed consolidated statement of operations in interest income and other, net, and was not material for the three months ended March 31, 2018 and 2017. The Company did not have any outstanding foreign currency derivatives as of March 31, 2018 and December 31, 2017.

Other financial instruments not measured at fair value on a recurring basis include accounts receivable and contract assets, accounts payable, deferred merchant payables, short-term debt, accrued and other current liabilities and long-term debt. The carrying amount of these financial instruments, with the exception of long-term debt, approximate their fair value because of the short maturity of these instruments as reported on our unaudited condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017. The carrying value of the long-term debt from our 2015 Credit Facility bears interest at a variable rate and therefore is also considered to approximate its fair value.

In addition, we also hold investments in equity securities of privately-held companies that do not have a readily determinable

fair value. As of both March 31, 2018 and December 31, 2017, the total carrying value of our equity investments in these privately-held companies were $12 million and are included in other long-term assets on our unaudited condensed consolidated balance sheet. Our policy is to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are impaired and also monitor for any observable price changes. During the three months ended March 31, 2018 and 2017, we did not have any impairment loss on these equity investments.

The Company did not have assets or liabilities measured at fair value on a recurring basis using the Level 3 unobservable inputs at both March 31, 2018 and December 31, 2017.

The Company’s outstanding debt consisted of the following as of the dates presented:

We are party to a five year credit agreement with a group of lenders which, among other things, provides for a $1.2 billion unsecured revolving credit facility (the “2015 Credit Facility”) with a maturity date of May 12, 2022. Borrowings under the 2015 Credit Facility generally bear interest, at the Company’s option, at a rate per annum equal to either (i) the Eurocurrency Borrowing rate, or the adjusted LIBO rate for the interest period in effect for such borrowing; plus an applicable margin ranging from 1.25% to 2.00% (“Eurocurrency Spread”), based on the Company’s leverage ratio; or (ii) the Alternate Base Rate (“ABR”) Borrowing, which is the greatest 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 LIBO Rate (or LIBO rate 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% (“ABR Spread”), based on the Company’s leverage ratio. The Company may borrow from the 2015 Credit Facility in U.S. dollars, Euros and British pound sterling.

During the three months ended March 31, 2018, the Company borrowed an additional $5 million and repaid $235 million of our outstanding borrowings on the 2015 Credit Facility. These net repayments were primarily made from a one-time cash repatriation of $325 million of foreign earnings to the United States during the first quarter of 2018. As of March 31, 2018, there were no outstanding borrowings under the 2015 Credit Facility. We are required to pay a quarterly commitment fee, at an applicable rate ranging from 0.15% to 0.30%, 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 March 31, 2018, our unused revolver capacity was subject to a commitment fee of 0.15%, given the Company’s leverage ratio. The 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 March 31, 2018, we had issued $3 million of outstanding letters of credit under the 2015 Credit Facility. We recorded total interest expense and commitment fees on our 2015 Credit Facility of $1 million for both the three months ended March 31, 2018 and 2017 to interest expense on our unaudited condensed consolidated statements of operations. All unpaid interest and commitment fee amounts as of March 31, 2018 and December 31, 2017, respectively, were not material.

There is no specific repayment date prior to the maturity date for borrowings under this credit agreement. We 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, the Company 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, we classify any borrowings under this facility as long-term debt. The 2015 Credit Facility contains a number of covenants that, among other things, restrict our 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 our fiscal year. The 2015 Credit Facility also requires us to maintain a maximum leverage ratio and contains certain customary affirmative covenants and events of 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. As of March 31, 2018, we were in compliance with all of our debt covenants.

We are party to an uncommitted facility agreement which provides for a $73 million unsecured revolving credit facility (the “2016 Credit Facility”) with no specific expiration date. The 2016 Credit Facility is available at the lender’s discretion and can be canceled at any time. Repayment terms for borrowings under the 2016 Credit Facility are generally one to six month periods or such other periods as the parties may mutually agree and bear interest at LIBO rate plus 112.5 basis points. The Company may borrow from the 2016 Credit Facility in U.S. dollars only and we may voluntarily repay any outstanding borrowing at any time without premium or penalty. There are no specific financial or incurrence covenants.

The Company repaid outstanding borrowings of $73 million during the three months ended March 31, 2017. As of March 31, 2018 and December 31, 2017, there were no outstanding borrowings under the 2016 Credit Facility. During the three months ended March 31, 2017, total interest recorded with respect to our 2016 Credit Facility to interest expense on our unaudited condensed consolidated statement of operations was not material.

In addition to our 2015 Credit Facility and 2016 Credit Facility, we maintain two credit facilities in China (jointly, the “Chinese Credit Facilities”).

We are party to a $30 million, one-year revolving credit facility with Bank of America (the “Chinese Credit Facility—BOA”) that is currently subject to review on a periodic basis with no specific expiration period. Borrowings under our Chinese Credit Facility – BOA generally bear interest at a rate based on 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 March 31, 2018 and December 31, 2017, there were no outstanding borrowings under our Chinese Credit Facility—BOA.

We are also party to a RMB 70,000,000 (approximately $11 million) one-year revolving credit facility with J.P. Morgan Chase Bank (“Chinese Credit Facility-JPM”). Our Chinese Credit Facility—JPM generally bears interest at a rate based on 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 both March 31, 2018 and December 31, 2017, we had $7 million of outstanding borrowings from the Chinese Credit Facility – JPM at a weighted average rate of 4.98% and 5.00%, respectively.

Each interim period is considered an integral part of the annual period and, accordingly, we measure our income tax expense using an estimated annual effective tax rate. An enterprise is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

Our effective tax rate for the three months ended March 31, 2018 and 2017 was 76.2% and 48.0%, respectively. For the three months ended March 31, 2018, the effective tax rate was greater than the federal statutory rate primarily due to international provisions from the U.S. Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”), discussed below, foreign valuation allowances, and the income tax effects of the accounting for share based compensation. The change in the effective tax rate for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 rate was primarily due to the Transition Tax, discussed below, and a lower stock price resulting in stock compensation shortfalls.

The 2017 Tax Act introduced significant changes to ~~our commitments and contingencies since~~U.S. income tax law. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, ~~2016. Refer~~2017, the transition of U.S. international taxation from a worldwide tax system to ~~“Note 13: Commitments~~a territorial system, and ~~Contingencies,”~~a one-time tax on the mandatory deemed repatriation of cumulative foreign earnings (the “Transition Tax”) as of December 31, 2017.

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118, or SAB 118, which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed.

During the quarter ended March 31, 2018, we recorded an incremental $5 million tax expense for the Transition Tax, which we initially recorded in the ~~notes~~quarter ended December 31, 2017, reflecting additional information obtained relating to ~~our consolidated financial statements in Item 8~~earnings and profits, foreign tax credits, and state taxes. Additional work is still necessary for a more detailed analysis of our ~~Annual Report on Form 10-K for~~historical foreign earnings. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.

We are subject to additional requirements of the 2017 Tax Act during the year ended December 31, ~~2016.~~2018. Those provisions include a tax on global intangible low-taxed income (“GILTI”), a limitation of certain executive compensation, and a deduction for foreign derived intangible income (“FDII”). We have elected to account for GILTI as a period cost, and therefore included GILTI expense in the effective tax rate calculation. Our 2018 effective tax rate includes our estimates of these new provisions, with a net tax

benefit of $1 million recorded in Q1. Our estimates may be revised in future periods as we obtain additional data, and as the Internal Revenue Service (“IRS”) issues new guidance implementing the law changes.

~~In the ordinary course of business, we are parties~~Our policy is to ~~regulatory~~recognize accrued interest and ~~legal matters arising out~~penalties related to unrecognized tax benefits and income tax liabilities as part of our ~~operations. These matters may involve claims involving alleged infringement~~income tax expense. As of ~~third-party intellectual property rights (including patent infringement), defamation, taxes, regulatory compliance, privacy issues~~March 31, 2018, accrued interest was $11 million, net of federal and other claims. Periodically, we review the status of all significant outstanding matters to assess any potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has been incurred;state benefit, and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our consolidated statements of operations. We provide disclosures in the notes to the consolidated financial statements for loss contingencies that do not meet both of these conditions if there is a reasonable probability that a loss mayno penalties have been incurred and whether such loss is reasonably estimable. We base accruals made on the best information available at the time which can be highly subjective. Although occasional adverse decisions or settlements may occur, the Company does not believe that the final dispositionaccrued.

By virtue of any of these matters will have a material adverse effect on the business. However, the final outcome of these matters could vary significantly from our estimates. Finally, there may be claims or actions pending or threatened against us of whichconsolidated income tax returns previously filed with Expedia, we are currently ~~not aware~~under an IRS audit for the 2009, 2010 and ~~the ultimate disposition of which could~~short-period 2011 tax years, and have ~~a material adverse effect on us.~~

various ongoing state income tax audits. We are ~~also~~separately under examination by the IRS for the short-period 2011, 2012 and 2013 tax years and under an employment tax audit by the IRS for the 2013 and 2014 tax years. These audits include questioning of the timing and the amount of income and deductions and the allocation of income among various ~~other domestic and foreign~~ tax ~~authorities with regards~~jurisdictions. These examinations may lead to ~~income tax matters. We have reserved for potential~~proposed or ordinary course adjustments to our ~~provision for income taxes that may result from~~taxes. We are no longer subject to tax examinations by ~~or any negotiated agreements~~tax authorities for years prior to 2009. As of March 31, 2018, no material assessments have resulted, except as noted below regarding our 2009 and 2010 IRS audit with ~~these~~Expedia.

In January 2017, as part of the IRS audit of Expedia, we received Notices of Proposed Adjustment from the IRS for the 2009 and 2010 tax ~~authorities. Although~~years. These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries, and would result in an increase to our worldwide income tax expense in an estimated range of $10 million to $14 million after consideration of competent authority relief, exclusive of interest and penalties. We disagree with the proposed adjustments and we intend to defend our position through applicable administrative and, if necessary, judicial remedies. Our policy is to review and update tax reserves as facts and circumstances change. Based on our interpretation of the regulations and available case law, we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable. In addition to the risk of additional tax ~~estimates are reasonable,~~for 2009 and 2010 transactions, if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, we would be subject to significant additional tax liabilities.

In July 2015, the United States Tax Court (the “Court”) issued an opinion favorable to Altera Corporation (“Altera”) with respect to Altera’s litigation with the IRS. This opinion was submitted as a final ~~determination~~decision under Tax Court Rule 155 during December 2015. The litigation relates to the treatment of ~~audits could be materially different~~stock-based compensation expense in an inter-company cost-sharing arrangement with Altera’s foreign subsidiary. In its opinion, the Court accepted Altera’s position of excluding stock based compensation from ~~our historical income~~its inter-company cost-sharing arrangement. The IRS appealed the Court decision on February 19, 2016. At this time, the U.S. Department of the Treasury has not withdrawn the requirement from its regulations to include stock-based compensation in intercompany cost-sharing arrangements. The Company recorded a tax ~~provisions and accruals. The results~~benefit of ~~an audit could have a material effect on our financial position, results~~$1 million in its unaudited condensed consolidated statement of operations ~~or cash flows in~~for both the ~~period for which that determination is made.~~

~~Additionally, we~~three months ended March 31, 2018 and 2017. The Company will continue to accumulate positive cash flows in foreign jurisdictions, which we consider indefinitely reinvested. Any repatriation of funds currently held in foreign jurisdictions may result in higher effective tax ratesmonitor this matter and ~~incremental cash tax payments. In addition, there have been proposals~~related potential impacts to ~~amend U.S. tax laws that would significantly impact the manner in which U.S.~~its consolidated financial statements.

companies are taxed on foreign earnings. Although we cannot predict whether or in what form any legislation will pass, if enacted, it could have a material adverse impact on our U.S. tax expense and cash flows. See “Note 7: Income Taxes” above for further information on potential contingencies surrounding income taxes.

There have been no material changes to our commitments and contingencies since December 31, 2017. Refer to “Note 13: Commitments and Contingencies,” in the notes to our consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2017.

In the ordinary course of business, we are parties to regulatory and legal matters arising out of our operations. These matters may involve claims involving alleged infringement of third-party intellectual property rights (including patent infringement), defamation, taxes, regulatory compliance, privacy issues and other claims. Periodically, we review the status of all significant outstanding matters to assess any potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has been incurred; and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our consolidated statements of operations. We provide disclosures in the notes to the consolidated financial statements for loss contingencies that do not meet both of these conditions if there is a reasonable probability that a loss may have been incurred and whether such loss is reasonably estimable. We base accruals made on the best information available at the time which can be highly subjective. Although occasional adverse decisions or settlements may occur, the Company does not believe that the final disposition of any of these matters will have a material adverse effect on the business. However, the final outcome of these matters could vary significantly from our estimates. Finally, there may be claims or actions pending or threatened against us of which we are currently not aware and the ultimate disposition of which could have a material adverse effect on us.

We are also under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax matters. We have reserved for potential adjustments to our provision for income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities. Although we believe our tax estimates are reasonable, the final determination of audits could be materially different from our historical income tax provisions and accruals. The results of an audit could have a material effect on our financial position, results of operations, or cash flows in the period for which that determination is made.

We continue to accumulate cash flows, in foreign jurisdictions which we consider indefinitely reinvested, although we will continue to evaluate the impact of the 2017 Tax Act on our capital deployment within and outside the U.S. Any repatriation of funds currently held in foreign jurisdictions may result in withholding taxes and state taxes. Refer to “Note 8: Income Taxes” above for further information on potential contingencies surrounding income taxes.

On January ~~25, 2017,~~31, 2018, our Board of Directors authorized ~~the repurchase of~~up to $250 million of share repurchases. Our Board of Directors authorized and directed management, working with the Executive Committee of our ~~shares~~Board of ~~common stock under a new~~Directors, to affect the share repurchase ~~program. The~~program in compliance with applicable legal requirements. This repurchase program has no expiration date but may be suspended or terminated by the Board of Directors at any time. The Executive Committee of our Board of Directors will determine the price, timing, amount and method of such repurchases based on its evaluation of market conditions and other factors, and any shares repurchased will be in compliance with applicable legal requirements, at prices determined to be attractive and in the best interests of both the Company and its stockholders.

During the three months ended March 31, ~~2017,~~2018, we repurchased ~~3,529,923~~252,650 shares of outstanding common stock under the share repurchase program at an aggregate cost of ~~$150~~$10 million, or an average share price of ~~$42.49.~~$39.88, of which $6 million remains payable and is recorded in accrued expenses and other current liabilities on our unaudited condensed consolidated balance sheet at March 31, 2018. As of March 31, ~~2017,~~2018, we ~~have~~had a remaining balance of ~~$100~~$240 million available to repurchase shares of our common stock under the share repurchase program. Subsequent to March 31, 2018, we repurchased an additional 2,329,548 shares for an aggregate cost of $90 million, or an average price of $38.60 per share. As of May 7, 2018, we had a remaining balance of $150 million available to repurchase shares of our common stock under the share repurchase program.

We consider Liberty TripAdvisor Holdings, Inc. (“LTRIP”) a related party. As of March 31, ~~2017,~~2018, LTRIP beneficially owned approximately 18.2 million shares of our common stock and 12.8 million shares of our Class B common stock, which shares constitute ~~14.1%~~14.3% of the outstanding shares of common stock and 100% of the outstanding shares of Class B common stock. Assuming the conversion of all of LTRIP’s shares of Class B common stock into common stock, LTRIP would beneficially own ~~21.9%~~22.2% of the outstanding common stock. Because each share of Class B common stock generally is entitled to ten votes per share and each share of common stock is entitled to one vote per share, LTRIP may be deemed to beneficially own equity securities representing ~~57.0%~~57.4% of our voting power.

We had no related party transactions with LTRIP during both the three months ended March 31, ~~2017~~2018 and ~~2016.~~2017.

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

~~Attractions.~~ We provide information and services for users to research and book activities and attractions in popular travel destinations through our dedicated attractions business, Viator. We generate revenue by charging the operators a commission for each transaction we facilitate through our online reservation systems. In addition to its consumer-direct business, Viator also powers activity and attractions booking capabilities to its affiliate partners, including someRentals. The nature of the world’s top airlines, hotel chains and online and offline travel agencies. Viator’s bookable inventory is available on www.viator.com as well as TripAdvisor-branded websites and mobile applications.

~~Restaurants.~~ ~~Through our restaurant reservations business, The Fork, we provide information and~~ services for users to research and book restaurants. The Fork is an online restaurant booking platform operating on a number of sites (including www.lafourchette.com, www.eltenedor.com, www.iens.nl, www.besttables.com, www.dimmi.com.au, and www.en.couverts.nl), with a network of restaurant partners primarily across Europe and Australia. The Fork generates revenue by charging our restaurant partners a fee for each restaurant guest, or seated diner, that we facilitate through our online reservation systems. The Fork also provides flexible online booking and a premium data and analytics tool, for which the restaurant owner pays a subscription fee. The Fork’s bookable inventory is also available on TripAdvisor-branded websites and mobile applications.

~~Vacation Rentals~~. We provide information and services for users to research and book vacation and short-term rental properties, including full home rentals, condominiums, villas, beach rentals, cabins and cottages. The vacation rentals business generates revenue by offering individual property owners and property managers, the ability to list their properties on our websites and mobile applications through a free-to-list, commission-based option, and to a lesser extent, an annual subscription-based fee structure. These propertiesprovided are listed on a number of platforms, including www.flipkey.com, www.holidaylettings.co.uk, www.housetrip.com, www.niumba.com, and www.vacationhomerentals.com, as well as on our TripAdvisor-branded websites.summarized in “Note 3: Revenue Recognition” above.

Our operating segments are determined based on how our chief operating decision maker manages our business, regularly assesses information and evaluates performance for operating decision-making purposes, including allocation of resources. The chief operating decision maker for the Company is our Chief Executive Officer. Our chief operating decision maker is also our Hotel segment manager. Each Non-Hotel operating segment has a segment manager who is directly accountable to and maintains regular contact with our chief operating decision maker to discuss operating activities, financial results, forecasts, and plans for the segment.CEO.

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

The following tables present our segment information for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017 and include a reconciliation of Adjusted EBITDA to Net Income. We record depreciation of property and equipment, including amortization of internal-use software and website development, amortization of intangible assets, stock-based compensation and other stock-settled obligations, other income (expense), net, other non-recurring expenses and income, net, and income taxes, which are excluded from segment operating performance, in corporate and unallocated. In addition, we do not report our assets, capital expenditures and related depreciation expense by segment as our chief operating decision maker does not use this information to evaluate operating ~~segments using this information. We also~~segments. Accordingly, we do not regularly provide such information by segment to our chief operating decision maker. Intersegment revenue is not material and, in addition, already eliminated in the information by segment provided to our chief operating decision maker. Our consolidated general and administrative expenses, excluding stock-based compensation costs, are shared by all operating segments. Each operating segment receives an allocated charge based on the segment’s percentage of the Company’s total personnel costs.

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

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q, and the consolidated financial statements and accompanying notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, but not limited to, those discussed in this Quarterly

Report on Form 10-Q for the three months ended March 31, ~~2017,~~2018, Part II, Item 1A, ~~“Risk Factors.~~“Risk Factors.” Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition and results of operations. Accordingly, readers should not place undue reliance on these forward-looking statements. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. We are not under any obligation to, and do not intend to, publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Please carefully review and consider the various disclosures made in this report and in our other reports filed with the SEC that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

TripAdvisor is an online travel company and our mission is to help people around the world to plan, book and experience the perfect trip. We seek to achieve our mission by providing users and travel partners a global platform about destinations, accommodations, travel activities and experiences, and restaurants that includes rich user-generated content, price comparison tools and online reservation and related services.

TripAdvisor, Inc., by and through its subsidiaries, owns and operates a portfolio of leading online travel brands. ~~TripAdvisor, our~~Our flagship brand, TripAdvisor, is the world’s largest travel site and its mission is to help people around the world plan, book and experience the perfect trip. We accomplish this by, among other things, aggregating millions of travelers’ reviews and opinions about destinations, accommodations, activities and attractions, and restaurants worldwide, thereby creating the foundation for abased on monthly unique platform that enables users to research and plan their travel experiences. Our platform also enables users to compare real-time pricing and availability for these experiences as well as to book hotels, flights, cruises, vacation rentals, tours, activities and attractions, and restaurants, either on a TripAdvisor site or app, or on the site or app of one of our travel partner sites.

visitors. Our TripAdvisor-branded websites include tripadvisor.com in the United States and localized versions of the TripAdvisor website in 48 markets and 28 languages worldwide. Our TripAdvisor-branded websites reached nearly 390 million average monthly unique visitors during the quarter ended March 31, 2017, according to our internal log files. We currently feature over 500TripAdvisor features approximately 630 million reviews and opinions on 7approximately 7.5 million places to stay, places to eat and things to do – including ~~1,080,000~~approximately 1.2 million hotels, inns, B&Bs and ~~accommodations and 820,000 vacation rentals, 4.3~~specialty lodging, 800,000 rental properties, 4.6 million restaurants and ~~790,000~~940,000 travel activities and ~~attractions~~experiences worldwide. We also enable users to compare prices and/or book a number of these travel experiences on either a TripAdvisor site or mobile app, or on the site or app of one of our travel partners.

In addition to the flagship TripAdvisor brand, we ~~now~~ manage and operate the following 2320 other travel media brands, connected by the common goal of providing users the most comprehensive travel-planning and trip-taking resources in the travel industry: www.airfarewatchdog.com, www.bookingbuddy.com, www.citymaps.com,, www.cruisecritic.com, www.familyvacationcritic.com, www.flipkey.com, www.thefork.com (including www.lafourchette.com, www.eltenedor.com, www.iens.nl, and ~~www.dimmi.com.au~~)www.dimmi.com.au), www.gateguru.com, www.holidaylettings.co.uk, www.holidaywatchdog.com, www.housetrip.com,~~, www.independenttraveler.com,~~ www.jetsetter.com, www.niumba.com, www.onetime.com, www.oyster.com, www.seatguru.com, www.smartertravel.com, www.tingo.com, ~~www.travelpod.com, www.tripbod.com,~~ www.vacationhomerentals.com, and www.viator.com.

Our reporting structure includes two reportable segments: Hotel and Non-Hotel. Our Non-Hotel reportable segment consists of ~~three operating segments, which includes~~ our Experiences, Restaurants and Rentals offerings. During the quarter we renamed Attractions ~~Restaurants~~as “Experiences” and Vacation Rentals ~~businesses. The~~as “Rentals.” These changes had no impact on the composition of our segments ~~are determined based~~or on ~~how the chief operating decision maker regularly assesses~~any financial information. Financial information and ~~evaluates performance for operating decision-making purposes, including allocation of resources.~~ additional descriptive information related to our segments is contained in “Note 12: Segment Information”, in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q.

As the world’s largest online travel platform, ~~we believe we are~~as measured by unique monthly visitors, TripAdvisor represents an attractive ~~marketing channel~~platform for travel advertisers—including hotel chains, independent hoteliers, online travel agencies, or OTAs, destination marketing organizations, and other travel-related and non-travel related product and service providers—who seek to market and sell their products and services to our large user base. ~~We offer~~Our product offerings and platform enable users ~~the ability~~ to ~~do real-time~~find, research and price ~~comparison through our metasearch product, as well as the ability to book~~shop for hotels, flights, cruises, ~~vacation rentals,~~rental properties, tours, travel activities and ~~attractions,~~experiences, and restaurants, and book these travel events either directly on our ~~website through~~websites or mobile apps, or on our ~~instant booking product.~~travel partners’ websites or mobile apps. The key drivers of our financial results are described below, including a summary of our long-term growth strategy, current trends affecting our business, and our segment information.

Our mission is to help people around the world plan, book and experience the perfect trip. We ~~leverage significant investments~~seek to deliver this by: leveraging our user-generated content and global brand to attract users to our websites and applications; providing users with the best user experience throughout all phases of the travel journey; deepening our partnerships with travel partners, by providing them with a global platform of advertising opportunities to generate qualified leads and bookings; and investing in technology, ~~operations, brand-building, and relationships with advertisers~~product development, marketing, and other ~~partners to expand our business and enhance our global competitive position. We continue to focus on the following~~strategic areas ~~to grow our business:~~

~~Delivering a Great User Experience.~~ In 2016, in addition to completing the global instant booking rollout to all users on all devices worldwide, we also made it easier for users to find the best room prices on our site, whether offered through hotel metasearch or instant booking. We believe our continued progress in creating end-to-end travel solutions on our platform will result in better user experiences, and ultimately drive higher conversion to transactions for our partners and higher revenue per hotel shopper for our hotel business. Our innovative culture supports bringing product enhancements to market at speed. In doing so,that we believe ~~that we~~ can ~~continue to~~ improve the user experience and engagement by growing, among other things, high-quality content, best room price availability on hotel listings, in-destination bookable supply, and real-time email and push notifications, thereby also enhancing our ~~competitive positioning.~~long-term business prospects.

•

~~Increasing Traffic~~Drive user engagement with our platform. Since our founding, the TripAdvisor brand has become a globally-recognized travel brand, one that is synonymous with travel reviews and travel research. We believe that our user-generated content and our brand have enabled us to ~~Our Platform.~~build a large, highly engaged and loyal community of travelers who view TripAdvisor as a valuable resource to help them discover, plan, and book their travel experiences, and for millions of users, TripAdvisor gives them an interactive platform to share their travel experiences. We seek to amplify our global brand and ~~products~~raise user awareness about, and engagement with, our end-to-end product offerings, such as the ability to price shop and book, as we aim to attract users to our websites and applications through various channels, including domain direct and various online and offline ~~performance-based~~ marketing channels, in order to increase the number of users who navigate to our site either directly, also known as domain direct traffic, or from other marketing channels. We have leveraged, at different points in time, a number of offline advertising channels, including permanent branding campaigns such as TripAdvisor branded campaigns (such as awards, certificates, stickers and badges) and television advertising. We also leverage a number of online advertising channels, including: customer relationship management email campaigns, or “CRM”; social networks; search ~~engine marketing, or “SEM”, which promotes websites by increasing their visibility in search engine results~~engines through ~~paid placements, contextual advertising, and paid inclusions; and retargeting, which targets consumers based on their search behavior. In addition, for sources of user traffic, we rely on~~ search engine optimization, or SEO, ~~which promotes websites~~

~~with relevant~~ and ~~current content that rank well in “organic,” or unpaid~~ search engine ~~results, as well as referrals from partners whose sites contain links to TripAdvisor content, badges~~marketing, or ~~widgets. In order to continue growing unique visitors to our websites~~SEM, and ~~enhancing the quality of those visits, we intend to invest in, some or all of, the aforementioned channels, as well as any new channels that we may identify in the future.~~recently, through television brand advertising.

~~Enhancing Our Mobile Offerings~~.Deliver the best user experience possible on our platform. ~~Innovating~~We believe that giving users more value throughout their TripAdvisor experience is key to our future success. To accomplish this, we have made and will continue to make product improvements in order to provide a more enjoyable and engaging end-to-end user experience throughout all phases of the travel journey – from inspiration and discovery, to researching, price shopping and booking, to in-destination activities and places to eat, and, finally, to sharing the details of these travel experiences on TripAdvisor. These enhancements include growing the number of hotels, inns, B&Bs and specialty lodging, rental properties, restaurants, travel activities and experiences listed on our platform to approximately 7.5 million worldwide as of March 31, 2018. In addition to listings and content, we have provided users more options to price compare and book their travel experiences. During 2017, we launched a more engaging hotel shopping experience that focused on helping hotel shoppers find the best prices on a redesigned TripAdvisor website and mobile application. In order to better serve travelers’ needs when they are in-destination, we have continued to rapidly expand our bookable supply in Experiences and Restaurants. We believe that our continued focus on delivering an increasingly more robust user experience will ultimately result in more repeat usage on our platform, more value for our partners, and greater monetization for our business. We seek to quickly identify what users need to conduct their travel research and booking and to deliver product enhancements quickly.

Deepen relationships with our travel partners. We are a global platform consisting of listing and advertising opportunities that help generate impressions, brand awareness, qualified leads and bookings for travel partners. As of March 31, 2018, TripAdvisor had approximately 1.2 million hotels, inns, B&Bs and specialty lodging, 800,000 rental properties, 4.6 million restaurants, and 940,000 travel activities and experiences worldwide. We believe that continuing to grow the number of listings and bookable supply, especially in our in-destination Experiences and Restaurants offerings, will enable TripAdvisor to not only delight users in more moments during more trips, but also help partners drive transactions for their business. We are also increasingly providing business-to-business services that are designed to help our partners grow their business. For example, TripAdvisor’s Business Advantage and Premium for Restaurants offer hoteliers and restauranteurs, respectively, affordable marketing analytics tools to help them attract customers and more effectively manage their business pages on TripAdvisor.

Invest in technology, product, marketing and other strategic areas. Continuous product testing and speed to market are two of our most important priorities, as they enable us to create a richer user experience. We operate on a regular product release cycle, where releases contain new product features for our websites and mobile applications. For example, innovating and improving our mobile ~~products is a~~phone offerings are key ~~priority as~~priorities since mobile ~~devices continue~~phone adoption continues to ~~proliferate~~scale and consumers increasingly conduct more internet searches and commerce on these devices. During the quarter ended March 31, ~~2017, nearly~~2018, more than half of our average monthly unique visitors came from mobile ~~phone,~~phones, growing ~~28%~~approximately 25% year-over-year, according to our internal log files. We anticipate that the growth rate in mobile phone monthly unique visitors will continue to exceed the growth rate of our overall monthly unique visitors, resulting in an increased proportion of users continuing to use their mobile ~~devices~~phones to access the full range of services available on our websites and applications. We are investing significant resources to improve the features, functionality, engagement, and commercialization of our travel products on our mobile websites and applications.

~~Growing Attractions, Restaurants and Vacation Rentals Businesses.~~ A significant percentage of our users come to our websites for content on 790,000 activities and attractions, 4.3 million restaurants, and 820,000 vacation rentals, and we believe that continuing to build in-destination listings gives us a unique opportunity to delight users in more moments during more trips. We continue to execute this strategy and increase the stickiness of our products by investing in increasing bookable supply and strengthening our user engagement through our mobile platform.

Current Trends in Our Business

The online travel industry, in which we operate, is large and growing, and also remains highly dynamic and competitive.

Hotel Segment

~~In our hotel segment, we~~We have ~~invested significant time~~ and ~~resources towards enabling users~~will continue to book hotels on our sites and applications through our instant booking feature. We began with the accelerated rollout in our two largest markets – the United States and the United Kingdom – in the third quarter of 2015, and completed an accelerated and staged global rollout of this feature to all of our markets during the first half of 2016. During 2016, the instant booking feature monetized at a lower revenue per hotel shopper rate than our metasearch feature, and therefore was dilutive to our TripAdvisor-branded click-based and transaction revenue growth and to our overall revenue per hotel shopper. However, in the second half of 2016, TripAdvisor-branded click-based and transaction revenue growth rates improved as we lapped the instant booking rollout in the United States, our largest market, increased spend in our online paid marketing channels, and mademake product enhancements throughout the year. These trends have continued through the first quarter of 2017. In addition, the majority of our instant booking revenue is recorded under the consumption model and is recognized at the time the traveler consumes, or completes, the stay. Comparatively, revenue recognized under our metasearch feature is recorded whenthat help us deliver a traveler makes the click-through to the travel partners’ websites. In future periods, greater contribution from our instant booking consumption model to TripAdvisor-branded click-based and transaction revenue could result in additional revenue recognized at the time of a consumed stay and therefore a shift in the timing of our revenue recognition.

~~During 2016 and into the first quarter of 2017, we continued to improve our~~comprehensive hotel shopping experience ~~which included an improved display of our metasearch~~by increasing content on destinations, properties and instant booking features to hotel shoppers, as well as improving booking transaction acumen, which includes improving the on-site experience by offering the best price value proposition, improving room-level content,rooms, optimizing the room selection process and ~~booking path,~~helping users find the best prices with our hotelier and ~~on-boarding more~~OTA partners. On the supply side, we continue to focus on adding partners with ~~strong branding and~~unique brands, unique supply ~~channels~~or competitive room prices, which enables us to continue to provide consumers with a comprehensive selection of accommodations in order to ~~achieve increased initial and~~drive higher repeat bookings. We have continued to explore and develop additional opportunities to reach a broader audience with our booking capabilities through online and offline marketing investment. We now offer users an end-to-end hotel shopping experience, which we believe has improved the hotel shopping experience, as well as educated users about our more comprehensive offering, which we believe will enable us to drive more conversionsusage, conversion of hotel shoppers to ~~bookings, ultimately resulting in higher bookings for our partners~~bookers and higher ~~revenue per hotel shopper~~cost-per-click rates on our platform.

In We aim to maximize the ~~first quarter~~number of ~~2017, average monthly unique~~ hotel shoppers, ~~increased 9%, when compared~~which we define as the users who view either a listing of hotels in a city or on a specific hotel page on our platform in any given period, as long as the expected returns from any investments we may make to ~~the same period in 2016, according~~achieve this objective are at or above our desired return targets. We continue to ~~our log files. The increase is primarily due~~compete with other travel companies and search engines who also seek to ~~the success in our online marketing strategy for desktop~~attract hotel shoppers to their websites and ~~tablet devices and the general trend of an increasing number of~~apps.

Over time, hotel shoppers visiting our websites and ~~apps on mobile phones, partially offset by the impact of the global launch of~~applications from paid online marketing channels, such as SEM, have grown faster than traffic from unpaid online marketing channels, such as SEO, thereby increasing our instant booking product feature in certain of our non-U.S. markets, a continued intense competitive environment, and other travel market dynamics. One of our key strategic objectives is to grow our brand awareness and grow the numberaggregate cost of hotel shopper acquisition. Over the past year, however, we have taken important steps to optimize our marketing investment mix, reducing investments in paid online marketing channels and increasing investments in offline channels, such as our TripAdvisor-branded television campaign which was launched in June 2017. As expected, in the near-term, our reduced investments in paid online marketing channels has contributed to slower growth of monthly unique hotel shoppers onas well as declines in our ~~platforms.~~click-based and transaction revenue while improving our near-term Hotel segment year-over-year profitability.

During the quarter ended March 31, 2018, we continued to invest in our TripAdvisor-branded advertising campaign as we aim to increase user awareness for and long-term engagement with TripAdvisor’s price shopping tools and establish a more durable, long-lasting direct relationship with users in order to enhance our long-term growth. We ~~continue~~also continued to leverage a number of other marketing channels, both paid and unpaid, to achieve this objective, including online efforts such as ~~SEM,~~ social media and ~~email campaigns,~~customer relationship management, or CRM.

We also aim to maximize the click-based revenue per hotel shopper on our platform in any given period. In recent periods, our revenue per hotel shopper has declined primarily due to a few reasons: lower partner CPCs in our click-based metasearch auction in the second half of 2017 and decreased investment in less efficient online paid marketing channels, as well as ~~offline efforts such as TripAdvisor branded campaigns. Over time, the traffic visiting our websites~~continued accelerated hotel shopper growth on mobile phones. Although revenue per hotel shopper for mobile phones is growing, mobile phones continue to generate significantly lower revenue per shopper than desktop and applications from paid marketing channels has generally grown faster than traffic from unpaid sources due to competition from other travel companies and search engines, which has impacted our profitability.

tablet devices. During the ~~first~~ quarter ended March 31, 2018, the growth rate of ~~2017,~~ hotel shoppers that visited our websites and ~~applications~~apps on mobile phones continued to grow significantly faster than ~~traffic from~~that of hotel shoppers using desktop and tablet devices. As a result, ~~this~~the growth in hotel shoppers on mobile phones has remained a headwind against our overall revenue per hotel shopper and our TripAdvisor-branded click-based and transaction ~~revenue,~~revenue. However, we believe our mobile phone product enhancements, as well as the continued general trend of consumer adoption of mobile phones ~~monetize significantly less than desktop and tablet. This is due to a number of factors, including the fact that mobile phone is still in the early stages of~~for eCommerce

adoption, our partners reduced ability to attribute booking behavior on their websites and applications back to TripAdvisor, limited advertising opportunities on smaller screen devices, lower cost-per-click, lower booking intent, and lower average gross booking value based on consumer purchasing patterns. Mobile phone product development continues to be an area of strategic growth and investment, and we activity; will continue to ~~invest and innovate in this growing platform in order~~contribute to ~~increase our user base, engagement and monetization over the long term.~~

~~As a global travel business specializing in discretionary leisure travel, we believe our hotel shopper growth,~~ revenue per hotel shopper growth on mobile phones.

The general trend of increasing traffic to our websites and ~~Hotel segment financial performance~~apps on mobile phones also ~~were negatively impacted by macroeconomic~~continues to increase overall average monthly unique visitors on our platform. This also reduces our ability to grow TripAdvisor-branded display-based advertising revenue, as we continue to prioritize delivering users a cleaner user experience over maximizing the number of advertising impressions we can sell in a given period. Through ongoing product enhancements and ~~geopolitical dynamics, including foreign currency exchange rates~~marketing efforts, we aim to continue to deliver increased value to users and ~~terrorism events, among other factors.~~partners and improve mobile phone monetization.

Non-Hotel Segment

~~TripAdvisor’s~~We are creating a more comprehensive, end-to-end user experience ~~extends beyond~~through our ~~hotel business. In~~Non-Hotel offerings. Over the ~~first~~past few years, we have seen continued demand growth for these offerings and our key ongoing objectives are to grow users and demand, make product and platform enhancements, and grow bookable supply in our marketplaces to help drive bookings and increase marketing opportunities for more partners on our platform. We continued to achieve those objectives during the quarter ~~of 2017, monthly~~ended March 31, 2018. Monthly unique users to ~~non-hotel~~these pages on our websites and applications ~~– including attractions, restaurants, and vacation rentals –~~ continued to ~~grow. In efforts~~grow, particularly on mobile phones. We also continue to ~~address this growing demand~~enhance our product and ~~engagement with these products we have invested in improving~~supply initiatives by enhancing the overall user experience on all ~~devices as well as~~devices. We grew bookable products on our platform in ~~building our inventory of global supply of bookable attractions, restaurants,~~both Experiences and ~~vacation rentals.~~Restaurants. We have also continued to increasingly leverage strong user growth on the TripAdvisor-branded platform to drive increased bookings in Experiences. In ~~addition~~Rentals, the offering continues to ~~achieving strong supply growth,~~shift from a subscription model to a free-to-list model, and we continue to ~~drive increased mobile engagement and mobile bookings with new mobile ticketing capabilities and mobile push notifications, including in-destination suggestions~~focus on ~~the best things~~delivering users a larger selection of high-quality accommodation listings in order to ~~do, helpful tips~~deliver a better user experience through more selection, which in turn helps support higher conversion on ~~the best nearby restaurants, and popular dish recommendations.~~ our platform.

Continued successful execution of our key growth strategies ~~resulted in 18%~~and increased operating efficiencies primarily contributed to this segment’s revenue growth ~~in this segment in~~and improved profitability during the ~~first~~ quarter ~~of 2017, when~~ended March 31, 2018, as compared to the same period in ~~2016. Increasing traffic to and engagement with our Non-Hotel businesses, as well as increasing our global supply to offer users more choice are~~2017. Our ongoing strategic ~~objectives.~~objectives are to continue to enhance the user experience, to grow traffic and drive increased user engagement, to grow bookable supply, and to grow bookings in this segment.

Segments

Refer to “Note 12: Segment ~~Information”~~Information” and “Note 3: Revenue Recognition” in the notes to the unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q for financial information and additional descriptive information related to our segments.

Employees

As of March 31, ~~2017,~~2018, we had ~~3,312~~3,255 employees. Of these employees, approximately ~~51%~~50% were based in the United States. We believe we have good relationships with our employees, including relationships with employees represented by international works councils or other similar organizations.

Seasonality

Traveler expenditures in the global travel market tend to follow a seasonal pattern. As such, expenditures by travel partners/advertisers to market to potential travelers and, therefore, our financial performance, or revenue and profits, tend to be seasonal as well. ~~As a result, our~~Our financial performance tends to be seasonally highest in the second and third ~~quarter~~quarters of a year, as it is a key period for leisure travel research and trip-taking, which includes the seasonal peak in traveler hotel and rental stays, and tours and experiences taken, compared to the first and fourth quarters which represent seasonal low points. Further significant shifts in our business mix or adverse economic conditions could result in future seasonal patterns that are different from historical trends.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that we believe are important in the preparation of our consolidated financial statements because they require that management use judgment and estimates in applying those policies. We prepare our consolidated financial statements and accompanying notes in accordance with GAAP. Preparation of the consolidated financial statements and accompanying notes requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as revenue and expenses during the periods reported. Management bases its estimates on historical experience, when applicable and other assumptions that it believes are reasonable under the circumstances. Actual results may differ from estimates under different assumptions or conditions.

There are certain critical estimates that we believe require significant judgment in the preparation of our consolidated financial statements. We consider an accounting estimate to be critical if:

It requires us to make an assumption because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and

Changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017.

~~New~~

Significant Accounting Policies and ~~Recently Adopted~~New Accounting Pronouncements

~~New~~Refer to “Note 2: Significant Accounting ~~Pronouncements Not Yet Adopted~~

In March 2017, the FASB issued new accounting guidance which shortens the amortization period for the premium paid on certain purchased callable debt securities to the earliest call date instead of the bond’s maturity. The amendments do not require an accounting change for securities held at a discount; instead, the discount continues to be amortized to maturity. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and will be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We arePolicies” in the ~~process of evaluating the impact of adopting this new guidance on~~notes to our unaudited condensed consolidated financial statements ~~and related disclosures as well as the date~~in Item 1 in this Quarterly Report on Form 10-Q for an overview of new accounting pronouncements that we ~~will~~have adopted or that we plan to adopt ~~this new guidance.~~that have had or may have an impact on our unaudited condensed consolidated financial statements.

In January 2017, the FASB issued new accounting guidance to clarify the definition of a business and provide additional guidance to assist entities with evaluating whether transactions should be accounted for as asset acquisitions (or asset disposals) or business combinations (or disposals of a business). Under this new guidance, an entity first determines whether substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this criterion is met, the transaction should be accounted for as an asset acquisition as opposed to a business combination. This distinction is important because the accounting for an asset acquisition significantly differs from the accounting for a business combination. This new guidance eliminates the requirement to evaluate whether a market participant could replace missing elements (e.g. inputs or processes), narrows the definition of outputs and requires that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. This new guidance will be effective for usNotably, in the first quarter of 2018, we adopted new revenue guidance, or ASC 606, Revenue from Contracts with early adoption permitted including for interim or annual periods in which the financial statements have not been issued or made available for issuance. The new guidance will be applied prospectively to any transactions occurring within the period of adoption. We are currently considering our timing of adoption. Upon adoption, the new guidance will impact how we assess acquisitions (or disposals) of assets or businesses and do not expect it will have a material impact on our consolidated financial statements and related disclosures.

in the financial statements. We anticipate adopting this new guidance on January 1, 2018, on a retrospective basis, and currently do not expect it will have a material impact on our consolidated financial statements and related disclosures.

In June 2016, the FASB issued new accounting guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable, and available-for-sale debt securities. For financial assets measured at amortized cost, this new guidance requires an entity to: (1) estimate its lifetime expected credit losses upon recognition of the financial assets and establish an allowance to present the net amount expected to be collected; (2) recognize this allowance and changes in the allowance during subsequent periods through net income; and (3) consider relevant information about past events, current conditions and reasonable and supportable forecasts in assessing the lifetime expected credit losses. For available-for-sale debt securities, this new guidance made several targeted amendments to the existing other-than-temporary impairment model, including: (1) requiring disclosure of the allowance for credit losses; (2) allowing reversals of the previously recognized credit losses until the entity has the intent to sell, is more-likely-than-not required to sell the securities or the maturity of the securities; (3) limiting impairment to the difference between the amortized cost basis and fair value; and (4) not allowing entities to consider the length of time that fair value has been less than amortized cost as a factor in evaluating whether a credit loss exists. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted, including interim periods within those fiscal years beginning after December 15, 2018. We are currently considering our timing of adoption and in the process of evaluating the impact of adopting this guidance on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued new guidance related to accounting for leases. The new standard requires the recognition of assets (right-of-use-assets) and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. The new guidance will classify leases as either finance or operating leases, with classification determining the presentation of expenses and cash flows on our consolidated financial statements. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For leases with a term of 12 months or less, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases and amounts previously recognized in accordance with the business combinations guidance for leases. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and to help financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted, which will require the recognition and measurement of leases at the beginning of the earliest comparative period presented in the financial statements using a modified retrospective approach. We have not yet determined the date we will adopt this new guidance.

We are currently evaluating the expected impact of this new standard and have made measurable progress to date. We are currently evaluating our existing population of leases under the new guidance, updating accounting policy and position memos, and assessing whether additional technology solutions are required internally to support the requirements under this accounting guidance.

~~We will continue to evaluate the impact that this new guidance will have, if any, on the Company’s consolidated financial statements and related disclosures and provide further updates.~~

In January 2016, the FASB issued a new accounting update which amends the guidance on the classification and measurement of financial instruments. Although the accounting update retains many current requirements, it significantly revises accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The accounting update also amends certain fair value disclosures of financial instruments and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale debt securities in combination with the entity’s evaluation of their other deferred tax assets. The update requires entities to carry all investments in equity securities, including other ownership interests such as partnerships, unincorporated joint ventures and limited liability companies at fair value, with fair value changes recognized through net income. This requirement does not apply to investments that qualify for equity method accounting, investments that result in consolidation of the investee or investments in which the entity has elected the practicability exception to fair value measurement. Under current GAAP, available-for-sale investments in equity securities, with a readily determinable fair value, are re-measured to fair value each reporting period with changes in fair value recognized in accumulated other comprehensive income (loss)Customers. However, under the new guidance, fair value adjustments will be recognized through net income. For equity securities currently accounted for under the cost method (as they do not have a readily determinable fair value), the new guidance requires those equity investments to be carried at fair value with changes in net income, unless an entity elects to measure those investments, at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company intends to elect this measurement alternative for equity securities without a readily determinable fair value. Additionally, this accounting update will simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. In addition, this accounting update eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at amortized cost in the balance sheet. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. Upon adoption, an entity will apply the new guidance on a modified retrospective basis, which is to record a cumulative-effect adjustment to beginning retained earnings as of the beginning of the first reporting period in which the guidance is adopted, with two exceptions. The amendments related to equity investments without readily determinable fair values (including disclosure requirements) will be effective prospectively. The requirement to use the exit price notion to measure the fair value of financial instruments for disclosure purposes will also be applied prospectively. We anticipate adopting this new guidance on January 1, 2018 and are still evaluating the impact to our consolidated financial statements and related disclosures.

In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers which will replace numerous requirements in GAAP, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In March 2016, the FASB issued additional guidance which clarifies principal versus agent considerations and, in April 2016, the FASB issued further guidance which clarifies the identification of performance obligations and the implementation guidanceResults for ~~licensing. The two permitted transition methods under this new accounting guidance are the full retrospective method, in which case the guidance would be applied to each prior~~ reporting period presented and the cumulative effect of applying the guidance would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the guidance would be recognized at the date of initial application. We anticipate adopting this new guidance onperiods beginning after January 1, ~~2018.~~

~~To date, we have made significant progress toward completing our evaluation of the potential changes from adopting~~2018 are presented under the new ~~standard on~~revenue guidance, while prior period amounts are not adjusted and continue to be reported in accordance with our ~~future financial reporting~~previous accounting policies under the historical revenue guidance, or ASC 605, Revenue Recognition. Refer to “Note 2: Significant Accounting Policies” and ~~disclosures. We have established a cross-functional implementation team from across our organization and have made significant progress~~“Note 3: Revenue Recognition” in the ~~review of our contracts portfolio and our current accounting policies and practices~~notes to identify potential differences that could result from applying the requirements of the new standard to our revenue contracts. We continue to evaluate the impact that this new guidance will have, if any, on the Company’s consolidated financial statements, internal controls, and related disclosures and will provide further updates during the second quarter of 2017, including the selection of an adoption method.

~~Recently Adopted Accounting Pronouncements~~

In October 2016, the FASB issued new accounting guidance which amends the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity should treat indirect interests in the entity held through related parties that are under common control within the reporting entity when determining whether it is the primary beneficiary of that variable interest entity. We adopted this new guidance on January 1, 2017, on a retrospective basis, with no impact on our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q for further discussion about our new revenue recognition policy and ~~related disclosures.~~ its impact to our unaudited consolidated financial statements under this new revenue guidance.

~~Results~~

There have been no other significant changes to our significant accounting policies and estimates, other than revenue recognition, as discussed above, as compared to the significant accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. For additional information about our accounting policies and estimates, refer

to “Note 2: Significant Accounting Policies” in the notes to our consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2017.

Statement of Operations

Selected Financial Data

(in millions, except percentages)

		Three months ended March 31,						% Change				Three months ended March 31,						% Change
		2017			2016			2017 vs. 2016				2018			2017			2018 vs. 2017
Revenue		$	372		$	352			6	%		$	378		$	372			2	%

Costs and expenses:
Cost of revenue			17			16			6	%			20			17			18	%
Selling and marketing			207			172			20	%			198			207			(4	)%
Technology and content			59			61			(3	)%			67			59			14	%
General and administrative			35			37			(5	)%			42			35			20	%
Depreciation			19			16			19	%			20			19			5	%
Amortization of intangible assets			8			8			0	%			8			8			0	%
Total costs and expenses:			345			310			11	%			355			345			3	%
Operating income			27			42			(36	)%			23			27			(15	)%
Other income (expense):
Interest expense			(3	)		(4	)		(25	%)			(3	)		(3	)		0	%
Interest income and other, net			1			-			100	%			1			1			0	%
Total other expense, net			(2	)		(4	)		(50	)%			(2	)		(2	)		0	%
Income before income taxes			25			38			(34	)%			21			25			(16	)%
Provision for income taxes			(12	)		(9	)		33	%			(16	)		(12	)		33	%
Net income		$	13		$	29			(55	)%		$	5		$	13			(62	)%

Other Financial Data:
Adjusted EBITDA (1)		$	73		$	85			(14	)%		$	80		$	73			10	%

(1) See “Adjusted EBITDA” discussion below for more information and for a reconciliation of Adjusted EBITDA to net income for the periods presented.	(1) See “Adjusted EBITDA” discussion below for more information and for a reconciliation of Adjusted EBITDA to net income for the periods presented.										(1) See “Adjusted EBITDA” discussion below for more information and for a reconciliation of Adjusted EBITDA to net income for the periods presented.

Revenue and Segment Information

	Three months ended March 31,						% Change			Three months ended March 31,						% Change
	2017			2016			2017 vs. 2016			2018			2017			2018 vs. 2017
Revenue by Segment:	(in millions)									(in millions)
Hotel	$	314		$	303			4	%	$	299		$	314			(5	)%
Non-Hotel		58			49			18	%		79			58			36	%
Total revenue	$	372		$	352			6	%	$	378		$	372			2	%
Adjusted EBITDA by Segment (1):
Hotel	$	88		$	106			(17	)%	$	88		$	88			0	%
Non-Hotel		(15	)		(21	)		29	%		(8	)		(15	)		47	%
Total Adjusted EBITDA	$	73		$	85			(14	)%	$	80		$	73			10	%
Adjusted EBITDA Margin by Segment (2):
Hotel		28	%		35	%					29	%		28	%
Non-Hotel		(26	)%		(43	)%					(10	)%		(26	)%

Our Hotel segment revenue ~~increased~~decreased by ~~$11~~$15 million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, primarily due to a $22 million ~~increase~~decrease in TripAdvisor-branded click-based and transaction revenue, ~~primarily due to an increase in revenue per hotel shopper of 2% and an increase in average monthly unique hotel shoppers of 9%,~~ partially offset by ~~a decrease~~an increase of $3$6 million in TripAdvisor-branded display-based advertising and subscription revenue, and $8$1 million in other hotel revenue, all of which are discussed ~~below.~~

~~Adjusted EBITDA in our Hotel segment decreased $18 million during three months ended March 31, 2017,~~below, as well as a favorable impact of foreign currency fluctuations when compared to the same period in ~~2016, primarily due to increased SEM and online traffic acquisition costs, partially offset by an increase in revenue. Our~~ 2017.

Hotel segment ~~adjusted~~Adjusted EBITDA ~~margin decelerated~~was flat during the three months ended March 31, 2018 compared to the same period in 2017, primarily due to a decrease in Hotel segment revenue which was offset by a decrease in our overall marketing spend on traffic acquisition primarily due to the optimization of our marketing investment mix between online and offline channels and to a lesser extent the favorable impact of foreign currency fluctuations, when compared to the same period in ~~2016, primarily due to an increase in SEM and online traffic acquisition costs to support growth.~~2017.

The following is a detailed discussion of the revenue sources within our Hotel segment:

TripAdvisor-branded click-based and transaction revenue includes ~~click-based~~cost-per-click-based advertising revenue from our TripAdvisor-branded websites ~~and~~as well as transaction-based revenue from our hotel instant booking feature. For the three months ended March 31, 2018 and 2017, 63% and ~~2016,~~ 67% ~~and 62%~~, respectively, of our total Hotel segment revenue ~~came~~was derived from our TripAdvisor-branded click-based and transaction revenue. TripAdvisor-branded click-based and transaction revenue ~~increased~~decreased $22 million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, primarily due to ~~an increase~~a decrease of 2%11% in revenue per hotel shopper, ~~and an increase of 9% in average monthly unique hotel shoppers during the quarter,~~ which is explained below.

Our largest source of Hotel segment revenue is click-based advertising revenue from our TripAdvisor-branded websites, which ~~includes~~include links to our travel partners’ sites and contextually-relevant branded and related text links. Click-based advertising is generated primarily through our metasearch auction, a description of which follows. Our click-based ~~advertising~~travel partners are predominantly OTAs and ~~direct suppliers in the hotel product category.~~hoteliers. Click-based advertising is generally priced on a cost-per-click, or ~~“CPC”,~~CPC basis, with payments to us from advertisers based on the number of ~~users who click~~user clicks on each type of link, or in other words, athe conversion of a hotel shopper to a paid click. CPC is the price that ~~partners~~

~~are~~a partner is willing to pay us for a hotel shopper lead and is determined in a competitive process that enables our partners to ~~use our proprietary, automated bidding system to~~ submit CPC bids to have their rates and availability listed on our site. When a ~~partner submits a~~ CPC bid ~~they are agreeing~~is submitted, the partner agrees to pay us the bid amount ~~of that bid~~ each time a user subsequently clicks on the link to ~~the~~that partner’s website. Bids can be submitted periodically – as often as daily– on a property-by-property basis. ~~The size of the bid relative to other bids received is the primary factor~~Primary factors used to determine the placement of partner links on our site ~~including on hotel comparison search results~~include, but are not limited to, nightly room rate, the size of the bid relative to other bids, and ~~on property detail pages.~~other variables. CPCs are generally lower in markets outside the U.S. market, and hotel shoppers visiting via mobile phones currently monetize at a significantly lower rate than hotel shoppers visiting via desktop or tablet.

Our ~~transaction~~Hotel segment transaction-based revenue is comprised of revenue from our hotel instant booking feature, which enables the merchant of record, generally an OTA or hotel partner, to pay a commission to TripAdvisor for a user that completes a hotel reservation onvia our website. Instant booking revenue is currently recognized under two different models: the transaction model and the consumption model. Our transaction model commission revenue is recorded at the time a traveler books a hotel reservation on our site with one of our transaction partners. Our transaction partners are liable for commission payments to us upon booking and the partner assumes the cancellation risk. When a traveler makes a hotel reservation on our site with one of our consumption partners, which comprises the majority of our instant booking revenue, revenue is not recorded until the traveler completes the stay as our consumption partners are liable for commission payment only upon the completion of stay by the traveler. OTA and hotel partner placement, as well as comparative hotel prices available to the traveler in the booking process under both models, are determined by a bidding process within our proprietary automated bidding system, based on a number of variables, primarily hotel room prices, but also including other factors, such as conversion rates and commission rates, depending on the specific hotel selected. Instant booking commissions are primarily a function of average gross booking value generated from hotel reservations, cancellation rates experienced, and commission rates negotiated with each of our partners.

The key drivers of TripAdvisor-branded click-based and transaction revenue include ~~the~~ growth in average monthly unique hotel shoppers and ~~in particular,~~ revenue per hotel shopper growth, the latter of which measures how effectively we convert our hotel shoppers into revenue. We measure performance by calculating revenue per hotel shopper on an aggregate basis by dividing total TripAdvisor-branded click-based and transaction revenue by total average monthly unique hotel shoppers on TripAdvisor-branded websites for the periods presented.

While we believe that total traffic growth, or growth in monthly visits from unique visitors, is reflective of our overall brand growth, we also track and analyze sub-segments of our traffic and their correlation to revenue generation and utilize data regarding hotel shoppers as one of the key indicators of revenue growth. Hotel shoppers are visitors who view either a listing of hotels in a city or on a specific hotel page. The number of hotel shoppers tends to vary based on seasonality of the travel industry and general economic conditions, as well as other factors outside of our control. Given these factors, as well as the trend towards increased usage on mobile phones, ~~and international expansion,~~ quarterly and annual hotel shopper growth is a difficult metric to forecast.

The table below ~~table~~ summarizes our revenue per hotel shopper calculation and growth rate, in aggregate, for the periods ~~presented:~~

~~Our overall~~presented (in millions, except calculated revenue per hotel shopper ~~increased 2%~~and percentages):

Revenue per hotel shopper decreased 11% during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, according to our internal log files. ~~This performance~~The decrease was primarily driven by lower CPCs in our click-based metasearch auction, the ~~easing of dilutive effects from the global launch~~optimizing of our ~~instant booking product feature~~marketing investment mix from online to offline channels, as discussed above, as well as the ~~product rollout laps year-over-year in certain markets, such as the U.S. and the U.K., including strong growth in U.S. revenue per hotel shopper, increased percentage~~general trend of traffic from paid marketing channels, and product enhancements since last year from various company initiatives. This was partially offset by a continued year-over-year decrease in revenue per hotel shopper in certain non-U.S. markets due to the staggered launch of the instant booking feature throughout the first half of 2016, a greater percentage of hotel shoppers visiting ~~TripAdvisor~~TripAdvisor-branded websites and apps ~~via~~on mobile phones, ~~as well as other factors, including increased competition, macroeconomic and geopolitical factors and fluctuations in~~partially offset by favorable foreign currency ~~exchange rates.~~ fluctuation impacts when compared to the same period in 2017.

Our aggregate average monthly unique hotel shoppers on TripAdvisor-branded websites ~~increased by 9%~~remained flat during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, according to our internal log files. ~~The increase in hotel shoppers for~~In the ~~three months~~quarter ended March 31, ~~2017 is primarily due~~2018, we continued to ~~the success in our online marketing strategy for desktop and tablet devices, as well as~~experience the general trend of an increasing number of hotel shoppers visiting our websites and apps on mobile ~~phones,~~

phones; however, this increase was partially offset by the optimizing of our marketing investment mix from online to offline channels, which ~~has grown significantly faster than traffic from desktop and tablet devices during this period. While increasing the absolute number of~~is a current headwind to hotel shoppers, on our sites remains a priority, in the first quarter of 2017, our ability to grow non-U.S. hotel shoppers has been negatively impacted by global launch of our instant booking product feature, increased competition, macroeconomic and geopolitical factors, including foreign currency exchange rates and terrorism events, among other factors.as discussed above.

For the three months ended March 31, 2018 and 2017, 24% and ~~2016,~~ 21% ~~and 22%~~, respectively, of our Hotel segment revenue ~~came~~was derived from our TripAdvisor-branded display-based advertising and subscription revenue, which primarily consists of revenue from display-based advertising and subscription-based hotel advertising ~~revenue (or Business Advantage).~~revenue.

Our TripAdvisor-branded display-based advertising and subscription revenue ~~decreased~~increased by $3$6 million or 4%9%, during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016.~~2017. The ~~decrease in~~majority of the increase was from our display-based advertising revenue, which was primarily due to ~~a decrease~~an increase in impressions sold, ~~while~~partially offset by the ~~decrease in subscription revenue was a result~~general trend of ~~lower sales productivity in 2016 which resulted in a lower recurring revenue base during the quarter-ended March 31 2017. Display-based advertising revenue~~an increasing percentage of our traffic visiting our websites and ~~subscription revenue each declined at comparable rates during this period.~~apps on mobile phones.

For the three months ended March 31, 2018 and 2017, 13% and ~~2016,~~ 12% ~~and 15%~~, respectively, of our Hotel segment revenue ~~came~~was derived from other hotel revenues. Our other hotel revenue primarily includes revenue from non-TripAdvisor branded websites, such as ~~smartertravel.com, independenttraveler.com,~~www.bookingbuddy.com, www.cruisecritic.com and ~~bookingbuddy.com, including~~www.onetime.com, primarily through click-based advertising revenue and display-based advertising revenue ~~and room reservations sold~~generated through these websites. Our other hotel revenue ~~decreased by $8 million~~remained relatively flat during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016, primarily due to a reallocation of spend amongst marketing channels within the Hotel segment.~~2017.

Our Non-Hotel segment revenue increased by $9$21 million or ~~18%~~36% during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, primarily driven by increased bookings ~~increased~~in Experiences and Restaurants and to a lesser extent favorable foreign currency fluctuation impacts, when compared to the same period in 2017.

Experiences offerings continued to generate strong revenue growth driven by the following factors: growth in bookings sourced by TripAdvisor, bookable supply ~~and user demand in our Attractions and Restaurants businesses.~~

~~Our Attractions business continued to benefit from an increase in its bookable supply of attraction listings, attraction partners, continued~~growth, as well as growth in ~~our user base globally,~~free and ~~enhanced user~~paid traffic sources. Another contributing factor is the improved shopping experience from the ~~introduction of~~ new features in Experiences, such as ~~attractions on~~ instant booking for mobile phone, which enables users to purchase tickets and tours seamlessly ~~without leaving the mobile app. These factors are all contributing to more consumer choice, increased conversion, and continued~~as well as other key feature improvements. Continued strong revenue growth ~~as a result of~~in Restaurants offerings was attributed to seated diner growth, mobile bookings growth, user experience improvements, and increased ~~bookings. In our Restaurants business, we have experienced continued revenue growth due to increased bookings in our more established markets, in addition to an increase in~~ bookable supply of restaurant listings ~~during the three months ended March 31, 2017,~~as well as increased revenue from TripAdvisor websites. Rentals’ revenue was relatively flat, when compared to the same period in ~~2016.~~2017, primarily due to the continued migration of our subscription model to our free-to-list model, which we believe will have a longer term return, partially offset by the growth in our free-to-list revenues in 2018 as compared to the same period in 2017.

Adjusted EBITDA in our Non-Hotel segment increased $6$7 million or 47% during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016.~~2017. This increase was primarily ~~due to increased revenue~~driven by the increase in our Non-Hotel segment revenue as well as increased operational efficiencies, partially offset ~~primarily~~ by increased personnel and overhead costs of ~~$5 million. The Attractions, Restaurants and Vacation Rentals businesses are all at the earlier stages of their~~$8 million to support growth ~~and business life cycle which require early investment to fund growth initiatives, such as additional personnel, and a contributing factor to~~in this ~~reportable~~ segment ~~operating at a loss for the periods presented.~~

~~The following table presents our consolidated revenue by geographic region. Revenue by geography is based on the geographic location of our websites.~~

~~Our U.S. revenue increased $26 million, or 14%,~~ during the three months ended March 31, ~~2017, when compared to the same period in 2016. U. S. revenue represented 57%~~2018, and 52%, of total revenue during the three months ended March 31, 2017 and 2016, respectively. This increase was primarily due to an increase in U.S. TripAdvisor-branded click-based and transaction revenue, primarily driven by growth in U.S. revenue per hotel shopper and an increased percentage of traffic from paid marketing channels during the three months ended March 31, 2017, when compared to the same period in 2016, as noted above, and also due to growth in our attractions business. Revenue outside of the U.S., or non-U.S. revenue, decreased $6 million, or 4%, during the three months ended March 31, 2017, when compared to the same period in 2016. Our non-U.S. revenue also declined as a percentage of total revenue during the three months ended March 31, 2017 when compared to the same period in 2016, as non-U.S. revenue represented 43% and 48%, of total revenue during the three months ended March 31, 2017 and 2016, respectively. This was primarily due to the timing of our instant booking feature rollout in certain non-U.S. markets during the first half of 2016, and its associated dilutive impact to TripAdvisor-branded click-based and transaction revenue, as compared to the rollout in our U.S market, which was completed in the third quarter of 2015, and the impact of the fluctuation of foreign currency exchange rates against the U.S. Dollar, partially offset by growth in our restaurants business. In addition, our non-U.S. hotel shoppers have generally monetized at lower revenue per hotel shopper rates than hotel shoppers in the U.S. market for all periods presented.offline advertising costs.

Cost of revenue consists of expenses that are directly related or closely correlated to revenue generation, including direct costs, such as credit card and other booking transaction payment fees, data center costs, ad serving fees, flight search fees, ~~credit card fees~~ and other transaction ~~costs, and data center~~ costs. In addition, cost of revenue includes personnel and overhead expenses, including salaries, benefits, stock-based compensation and bonuses for certain customer support personnel who are directly involved in revenue generation.

Cost of revenue increased $1$3 million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016, primarily~~2017, due to increased direct costs from ~~merchant~~ credit card and other transaction payment fees in our Non-Hotel ~~segment.~~segment as a result of revenue growth, as well as an increase in other transaction costs related to revenue generation.

Selling and marketing expenses primarily consist of direct costs, including traffic generation costs from SEM and other online traffic acquisition costs, syndication costs and affiliate program commissions, social media costs, brand advertising, television and other offline advertising, promotions and public relations. In addition, our sales and marketing expenses consist of indirect costs such as personnel and overhead expenses, including salaries, commissions, benefits, stock-based compensation expense and bonuses for sales, sales support, customer support and marketing employees.

Direct selling and marketing costs ~~increased $32~~decreased $14 million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, primarily due to ~~increased~~decreased SEM and online traffic acquisition costs of ~~$31~~$38 million ~~on a consolidated basis.~~in our Hotel segment, partially offset by our television advertising campaign spend of $24 million in our Hotel segment during the three months ended March 31, 2018 which we did not incur during the three months ended March 31, 2017. Personnel and overhead costs increased $3 $5

million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, primarily due to an increase in headcount in our Non-Hotel segment ~~which was needed~~ to support business growth.

Technology and content expenses consist primarily of personnel and overhead expenses, including salaries and benefits, stock-based compensation expense and bonuses for salaried employees and contractors engaged in the design, development, testing, content support, and maintenance of our websites and mobile apps. Other costs include licensing, maintenance expense, computer supplies, telecom costs, content translation costs, and consulting costs.

Technology and content costs ~~decreased $2~~increased $8 million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016. Personnel and overhead costs remained flat during the three months ended March 31,~~ 2017, ~~when compared to the same period in 2016,~~ primarily due to an increase in ~~headcount~~personnel and overhead costs related to stock-based compensation of $5 million and increased personnel costs to support the business growth ~~offset by a decrease~~ in ~~stock-based compensation.~~our Non-Hotel segment.

General and administrative expenses consist primarily of personnel and related overhead costs, including personnel engaged in executive leadership, finance, legal, and human resources, ~~including~~as well as stock-based ~~compensation.~~compensation expense for those same personnel. General and administrative costs also include professional service fees and other fees including audit, legal, tax and accounting, and other costs including bad debt expense, non-income taxes, such as sales, use and ~~charitable contributions.~~other non-income related taxes.

General and administrative costs ~~decreased $2~~increased $7 million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016. Professional service fees~~2017. Personnel and ~~other decreased $4~~overhead costs increased $5 million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, primarily ~~due~~related to ~~a decrease~~an increase in ~~consulting costs, legal costs,~~stock-based compensation of $4 million. Professional service fees and ~~non-income taxes. Personnel and~~

~~overhead costs~~other increased $2 million during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016,~~2017, primarily ~~related~~due to an increase in ~~stock-based compensation.~~ bad debt expense and consulting costs.

Depreciation expense consists of depreciation on computer equipment, leasehold improvements, furniture, office equipment and other assets, our corporate headquarters building and amortization of capitalized software and website development costs.

Depreciation expense increased $3$1 million during the three months ended March 31, ~~2017~~2018 when compared to the same period in ~~2016~~2017 primarily due to increased amortization related to capitalized software and website development costs.

Amortization consists of the amortization of purchased definite-lived intangibles.

Amortization of intangible assets ~~did not materially change~~remained flat during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016.~~2017.

Interest expense primarily consists of interest incurred, commitment fees and debt issuance cost amortization related to our 2015 Credit Facility, 2016 Credit Facility and Chinese Credit Facilities, as well as interest on our financing obligation related to our corporate headquarters.

Interest expense ~~did not materially change~~remained flat during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016.~~2017. Refer to “Note ~~6: Debt”~~7: Debt” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q for additional information on our ~~2015 Credit Facility, 2016 Credit Facility, and Chinese Credit Facilities.~~credit facilities.

Interest income and other, net primarily consists of interest earned from our money market funds and marketable securities, amortization of discounts and premiums on our marketable securities, net foreign exchange gains and losses, and gains and losses on sales of our marketable ~~securities and sale of businesses.~~securities.

Interest income and other, net ~~increased $1 million~~remained flat during the three months ended March 31, ~~2017,~~2018, when compared to the same period in ~~2016, primarily due to the fluctuation of foreign exchange rates and settlement of our forward contracts.~~2017.

Our effective tax ~~rate increased during~~rates for the three months ended March 31, 2018 and 2017 ~~over~~were 76.2% and 48.0%, respectively. For the ~~same period in 2016,~~three months ended March 31, 2018, the effective tax rate was greater than the federal statutory rate primarily due to the international provisions from the 2017 Tax Act, increased foreign valuation allowances, ~~on losses in jurisdictions outside~~and the ~~United States and a lower stock price resulting in~~recognition of stock compensation shortfalls.

For the three months ended March 31, 2017, the effective tax rate iswas greater than the federal statutory rate primarily due to valuation allowances on losses in jurisdictions outside the United States and recognition of stock compensation shortfalls. The increase in our effective tax rate for the three months ended March 31, 2018, when compared to the same period in 2017 was primarily due to the international provisions related to the 2017 Tax Act. Refer to “Note 8 - Income Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q for further information.

To provide investors with additional information regarding our financial results, we also disclose Adjusted EBITDA, which is a non-GAAP financial measure. A “non-GAAP financial measure” refers to a numerical measure of a company’s historical or future

financial performance, financial position, or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in such company’s financial statements.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results reported in accordance with GAAP. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net income and our other GAAP results.

The following table presents a reconciliation of Adjusted EBITDA to Net Income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the periods presented:

For information on our relationship with Liberty TripAdvisor Holdings, Inc., refer to “Note 11: Related Party ~~Transactions”~~Transactions” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q. We had no related party transactions with LTRIP during the three months ended March 31, 2018 and 2017, ~~and 2016,~~ respectively.

Refer to “Note 3: 5: Stock Based Awards and Other Equity ~~Instruments”~~Instruments” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q for further information on current year equity award activity, including the issuance of ~~1,485,903~~611,235 service-based stock options with a weighted average grant-date fair value per option of ~~$17.20 and 3,732,145~~$17.60, 2,590,380 service-based RSUs with a weighted average grant-date fair value of ~~$42.90~~$41.44, and 71,425 MSUs with a weighted average grant-date fair value of $59.40 during the three months ended March 31, ~~2017.~~2018.

The following section explains how we have generated and used our cash during the year, describes our current capital resources and discusses our future known financial commitments.

~~Our cash flows from operating, investing and financing activities, as reflected in the unaudited condensed consolidated statements of cash flows, are summarized in the following table:~~

Our principal source of liquidity is cash flows generated from operations, although liquidity needs can also be met through drawdowns under our 2015 Credit Facility, 2016 Credit Facility, and Chinese Credit Facilities. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, we had ~~$749~~$655 million and ~~$746~~$735 million, respectively, of cash, cash equivalents, and ~~short~~short-term and long-term available-for-sale marketable debt securities. As of March 31, ~~2017,~~2018 approximately ~~$572~~$316 million of our cash and cash equivalents, and ~~short~~$20 million of short-term and long-term available-for-sale marketable debt securities are held by our subsidiaries outside the United ~~States.~~States, with the majority in the United Kingdom. As of March 31, 2018, the majority of total cash on hand is denominated in U.S. dollars. Cumulative undistributed earnings of foreign subsidiaries that we intend to indefinitely reinvest outside of the United States totaled approximately ~~$822~~$569 million as of March 31, ~~2017.~~2018. Should we distribute, or be treated under certain U.S. tax rules as having distributed, the earnings of foreign subsidiaries in the form of dividends or otherwise, we may be subject to U.S. income taxes. To date, we have permanently reinvested our foreign earnings outside of the United States and we currently do not intend to repatriate these earnings to fund U.S. operations. ~~Determination of the~~The amount of any unrecognized deferred income tax ~~liability~~ on this temporary difference is not ~~practicable because~~material.

During the three months ended March 31, 2018, we borrowed an additional $5 million and repaid $235 million of outstanding borrowings under the 2015 Credit Facility. These net repayments were primarily made from a one-time cash repatriation of $325 million of foreign earnings to the United States during the three months ended March 31, 2018. As of March 31, 2018, we had no outstanding borrowings and approximately $1.2 billion of borrowing capacity available under our 2015 Credit Facility. Additionally, we also had $73 million and approximately $34 million of borrowing capacity available under our 2016 Credit Facility and Chinese Credit Facilities, respectively. As of March 31, 2018, we had no outstanding borrowings under the 2016 Credit Facility and $7 million outstanding short-term borrowings under our Chinese Credit Facilities, at a weighted average interest rate of 4.98%. For further discussion on our credit facilities refer to “Note 7: Debt” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q.

Our business experiences seasonal fluctuations that affect the timing of our annual cash flows related to working capital. In our Rentals free-to-list model and our Experiences offering, we receive cash from travelers at the time of booking and we record these amounts, net of commissions, on our consolidated balance sheets as deferred merchant payables. We pay the suppliers, or the property rental owners and experience providers, respectively, after the travelers’ use. Therefore, we receive cash from the traveler prior to paying the supplier and this operating cycle represents a working capital source or use of cash to us. During the first half of the ~~complexities~~year rentals and experiences bookings typically exceed stays and tour-taking, resulting in higher cash flow related to working capital, while during the second half of the ~~hypothetical calculation. The majority~~year, particularly in the third quarter, this pattern reverses and cash flows from these transactions are typically negative. While we expect the impact of ~~cash on hand is denominated~~seasonal fluctuations to continue, further significant shifts in ~~U.S. dollars.~~our business mix or adverse economic conditions could result in future seasonal patterns that are different from historical trends.

On January ~~25, 2017,~~31, 2018, our Board of Directors authorized the repurchase of up to $250 million of our shares of common stock under a new share repurchase program. ~~During~~Our Board of Directors authorized and directed management, working with the ~~three months ended March 31, 2017, we repurchased 3,529,923 shares~~Executive Committee of our ~~outstanding common stock at an aggregate cost~~Board of ~~$150 million. The~~Directors, to affect the share repurchase program in compliance with applicable legal requirements. This new share repurchase program has no expiration date but may be suspended or terminated by the Board of Directors at any time. ~~The Executive Committee~~During the three months ended March 31, 2018, we repurchased 252,650 shares of our ~~Board~~outstanding common stock at an aggregate cost of ~~Directors will determine the price, timing, amount and method~~$10 million, of ~~such repurchases based on its evaluation of market conditions and other factors, and any shares repurchased will be in compliance with applicable legal requirements,~~which $6 million remains payable at ~~prices determined to be attractive and in the best interests of both the Company and its stockholders.~~March 31, 2018. As of March 31, ~~2017,~~2018, we ~~have a remaining balance of $100~~had $240 million available to repurchase shares of our common stock under the share repurchase program.

~~During the three months ended~~ Subsequent to March 31, ~~2017,~~2018, we ~~borrowed~~repurchased an additional ~~$270~~2,329,548 shares for an aggregate cost of $90 million. As of May 7, 2018, we had a remaining balance of $150 million ~~and repaid $151 million of outstanding borrowings under the 2015 Credit Facility. These net borrowings during the quarter were primarily used~~available to repurchase shares of our ~~outstanding~~ common stock under the ~~Company’s~~ share repurchase program. As of March 31, 2017, we had outstanding borrowings of $210 million in long-term debt, within our U.S. subsidiaries, and approximately $787 million of borrowing capacity available under our 2015 Credit Facility, which we are borrowing under a one-month interest period at 2.125% per annum, which will reset periodically. In addition, we had $73 million of additional borrowing capacity available under our 2016 Credit Facility. The Company repaid all outstanding borrowings under the 2016 Credit Facility during the three months ended March 31, 2017. Finally, as of March 31, 2017, we had short-term borrowings of $7 million and approximately $33 million of available borrowing capacity under our Chinese Credit Facilities, which currently bear interest at a rate based on 100% of the People’s Bank of China’s base rate, or 4.35%. For further discussion on our credit facilities refer to “Note 6: Debt” in the notes to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Historically, the cash we generate from operations has been sufficient to fund our working capital requirements, capital expenditures, and to meet our long term debt obligations and other financial commitments. Management believesWe believe that our available cash and marketable securities, combined with expected cash flows generated by operating activities and available cash from our credit facilities, will be sufficient to ~~satisfy~~fund our ~~anticipated~~foreseeable working capital requirements, capital expenditures, ~~and~~existing business growth ~~initiatives; meet our long term~~initiatives, debt obligations, lease commitments, and other financial ~~commitments; fund any additional share repurchases that may be made, or potential acquisitions~~commitments through at least the next twelve months. Our future capital requirements may also include capital needs for acquisitions, share repurchases,

and/or other expenditures in support of our business strategy, thus may potentially reduce our cash balance and/or increase our debt. We expect total capital expenditures for 2018 to be comparable to our 2017 spending levels.

Our cash flows from operating, investing and financing activities, as reflected in the unaudited condensed consolidated statements of cash flows, are summarized in the following table:

For the three months ended March 31, ~~2017,~~2018, net cash provided by operating activities increased by ~~$10~~$40 million or 8%30% when compared to the same period in ~~2016,~~2017, primarily due to a net increase in working capital movements of ~~$19~~$43 million, and to a lesser extent, non-cash items affecting cash flow of $7$5 million, which iswas primarily due to an increase in stock-based compensation expense of $10 million, partially offset by a decrease in other, net of $6 million, driven primarily by deferred income tax ~~expense,~~expense. These increases were partially offset by a decrease in net income of ~~$16~~$8 million. The increase in working capital movements of ~~$19~~$43 million was primarily related to an increase in ~~operating~~ cash ~~flow~~received from ~~deferred merchant payables due~~customers related to ~~growth~~bookings in ~~our Attractions business, in addition to the~~Experiences, as well as timing of collection of receivables, income tax and non-income tax payments and refunds, vendor payments, and ~~collection of receivables.~~other merchant payments.

For the three months ended March 31, ~~2017,~~2018, net cash provided by investing activities ~~increased~~decreased by ~~$87~~$70 million when compared to the same period in ~~2016,~~2017, primarily due to a net ~~increase~~decrease in cash generated byfrom the purchases, sales and maturities of our marketable ~~securities.~~securities of $73 million, partially offset by a decrease in capital expenditures of $3 million.

For the three months ended March 31, ~~2017,~~2018, net cash used in financing activities increased by ~~$16~~$132 million when compared to the same period in ~~2016,~~2017, primarily due to ~~payments~~a net repayment on our 2015 Credit Facility of ~~$150~~$230 million ~~for~~during the three months ended March 31, 2018, as compared to net borrowings of $119 million during the three months ended March 31, 2017, partially offset by a decrease in cash used to purchase shares of our common stock ~~share repurchases~~ under our share repurchase program ~~and~~of $146 million during the three months ended March 31, 2018 as compared to the same period in 2017, as well as a repayment of our 2016 Credit Facility borrowings of $73 million ~~in 2017, partially offset by additional net borrowings on our 2015 Credit Facility of $119 million in~~during the three months ended March 31, 2017, ~~as compared to repayments under our 2015 Credit Facility of $90 million during the three months ended March 31, 2016.~~which did not reoccur in 2018.

Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements

There have been no material changes outside the normal course of business to our contractual obligations and commercial commitments since December 31, ~~2016.~~2017. As of March 31, ~~2017,~~2018, other than our contractual obligations and commercial commitments, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC. Refer to “Liquidity and Capital Resources” in Part II, Item 7. —Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 for a discussion of our contractual obligations and commercial commitments.

In the ordinary course of business, we and our subsidiaries are parties to regulatory and legal matters. These matters may relate to claims involving alleged infringement of third-party intellectual property rights, defamation, taxes, regulatory compliance and other claims. Periodically, we review the status of all significant outstanding matters to assess the potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has been incurred, and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our consolidated statements of operations. We provide disclosure in the notes to the consolidated statements for loss contingencies that do not meet both of these conditions if there is a reasonable possibility that a loss may have been incurred that would be material to the financial statements. Significant judgment is required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable. We base accruals made on the best information available at the time which can be highly subjective. Although occasional adverse decisions or settlements may occur, the Company does not believe

that the final disposition of any of these matters will have a material adverse effect on the business. However, the final outcome of these matters could vary significantly from our estimates. Moreover, such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources, divert management's attention from the Company's business objectives and adversely affect the Company's business, results of operations, financial condition and cash flows. There may also be claims or actions pending or threatened against us of which we are currently not aware and the ultimate disposition of which would have a material adverse effect on us.

On December 22, 2017, the 2017 Tax Act was signed into United States tax law. The legislation significantly changes U.S. tax law by, among other provisions, lowering corporate income tax rates, and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The 2017 Tax Act permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, which was effective January 1, 2018. This legislation is resulting in additional uncertainty in our income tax liability, as we obtain additional data to comply with new provisions and as the IRS issues new guidance interpreting the law changes.

By virtue of previously filed consolidated income tax returns filed with Expedia, we are currently under an IRS audit for the 2009, 2010, and short-period 2011 tax years, and have various ongoing state income tax audits. We are separately under examination by the IRS for the short-period 2011, 2012 and 2013 tax years and ~~under~~have commenced an employment tax audit bywith the IRS for the 2013 and 2014 tax years. These audits include questioning of the timing and the amount of income and deductions and the allocation of income among various tax jurisdictions. These examinations may lead to proposed or ordinary course adjustments to our taxes. We are no longer subject to tax examinations by tax authorities for years prior to ~~2008.~~2009. As of ~~March~~December 31, 2017, no material assessments have resulted, except as noted below regarding our 2009 and 2010 IRS audit with Expedia.

In January 2017, as part of the Company’s IRS audit of Expedia, we received Notices of Proposed Adjustment from the IRS for the 2009 and 2010 tax years. These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries, and would result in an increase to our worldwide income tax expense in an estimated range of $10 million to $14 million after consideration of competent authority relief, exclusive of interest and penalties. We disagree with the proposed adjustments and we intend to defend our position through applicable administrative and, if necessary, judicial remedies. Our policy is to review and update tax reserves as facts and circumstances change. Based on our interpretation of the regulations and available case law, we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable. In addition to the risk of additional tax for 2009 and 2010 transactions, if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, we would be subject to significant additional tax liabilities.

Refer to amend U.S. tax laws that would significantly impact the manner in which U.S. companies are taxed on foreign earnings. Although we cannot predict whether or in what form any legislation will pass, if enacted, it could have a material adverse impact on our U.S. tax expense and cash flows.

~~See~~ “Note 7: 8: Income ~~Taxes”~~Taxes” in the notes to our unaudited condensed consolidated financial statements in Item 1 in this Quarterly Report on Form 10-Q for further information on the impact of the 2017 Tax Act, potential contingencies surrounding current audits by the IRS and various other domestic and foreign tax authorities, and other income tax matters.

We are exposed to certain market risks, including changes in interest rates and foreign currency exchange rates that could adversely affect our results of operations or financial condition. Our exposure to market risk includes our revolving credit facilities, derivative instruments and cash and cash equivalents, ~~short term and long term~~ marketable securities, accounts receivable and contracts receivable, intercompany receivables, accounts payable and deferred merchant payables denominated in foreign currencies. We manage our exposure to these risks through established policies and procedures and by assessing the anticipated near-term and long-term fluctuations in interest rates and foreign currency exchange rates. Our objective is to mitigate potential income statement, cash flow and market exposures from changes in foreign currency exchange rates and interest rates.

There has been no material change in our market risk profile during the three months ended March 31, ~~2017.~~2018. For additional information, ~~see~~refer to “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A. in Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

As of March 31, ~~2017,~~2018, our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of March 31, ~~2017,~~2018, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes to our internal control over financial reporting that occurred during the quarter ended March 31, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In the ordinary course of business, we are parties to legal proceedings and claims involving alleged infringement of third-party intellectual property rights, defamation, taxes, regulatory compliance and other claims. Rules and regulations promulgated by the SEC require the description of material pending legal proceedings, other than ordinary, routine litigation incident to the registrant’s business, and advise that proceedings ordinarily need not be described if they primarily involve damages claims for amounts (exclusive of interest and costs) not individually exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of management, none of the pending litigation matters that we are defending involves or is likely to involve amounts of that magnitude. There may be claims or actions pending or threatened against us of which we are currently not aware and the ultimate disposition of which could have a material adverse effect on us.

You should consider carefully the risks described below together with all of the other information included in this Quarterly Report as they may impact our business, results of operations and/or financial condition. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business, results of operations or financial condition. If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected.

If we are unable to continue to increase visitors to our websites and mobile apps and to cost-effectively convert these visitors into revenue-generating users, our revenue, financial results and business could be harmed.

Our long term success depends on our continued ability to maintain and increase the overall number of visitors flowing through our platforms in a cost effective manner and to engage users throughout the travel planning, booking and ~~booking phases and to attract consumers who will share their reviews from their trips.~~trip-taking phases. The primary asset that we use to attract visitors to our websites and convert these visitors into engaged users and bookers is our ability to collect or create, organize and distribute high-quality, commercially valuable content and products that meet users’ specific interests. Our traffic and user engagement could be adversely affected by a number of factors, including but not limited to increased competition, reduced consumer awareness of our brands, declines or inefficiencies in traffic acquisition, and macroeconomic conditions. Certain of our competitors have advertising campaigns expressly designed to drive consumer traffic directly to their websites, and these campaigns may negatively impact traffic to our site. There can be no assurances that we will continue to provide content and products in a ~~cost-effective manner or in a~~ manner that meets rapidly changing consumer ~~demand.~~demand, that encourages users to book on our platform and that is cost-effective. Any failure to obtain and manage content and products in a cost-effective manner that will engage users, or any failure to provide content and products that are perceived as useful, reliable and trustworthy, could adversely affect user experiences and their repeat behavior, reduce traffic to our websites and negatively impact our business and financial performance.

~~Our dedication~~We rely on internet search engines and application marketplaces to ~~making the user experience~~drive traffic to our ~~highest priority may cause us~~platform, certain providers of which offer products and services that compete directly with our products. If links to ~~prioritize rapid innovation~~our website and ~~user experience over short-term financial results.~~applications are not displayed prominently, traffic to our platform could decline and our business would be negatively affected.

We ~~strive~~rely heavily on internet search engines, such as Google, to ~~create~~generate a significant amount of traffic to our websites, principally through the ~~best experience~~purchase of travel-related keywords (what is also known as search engine marketing, or SEM) as well as through free, or organic, search (what is also known as search engine optimization, or SEO). The number of users we attract from search engines to our platform is due in large part to how and where information from and links to our website are displayed on search engine results pages. The display, including rankings, of unpaid search results can be affected by a number of factors, many of which are not in our control and may change frequently. Search engines frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our websites can be negatively affected. In addition, a search engine could, for competitive or other purposes, alter its search algorithms or results causing our ~~users, providing them with~~websites to place lower in organic search query results. If a major search engine changes its algorithms in a manner that negatively affects the ~~information, research~~search engine ranking of our websites or those of our partners, or if competitive dynamics impact the cost or effectiveness of SEO or SEM in a negative manner, our business and ~~tools to enable them to plan, book, and experience the perfect trip. We believe that in doing so we will increase our rates of conversion, revenue per shopper and, ultimately, our~~ financial performance ~~over the long-term. We have taken actions in the past~~would be adversely affected. Furthermore, our failure to successfully manage our SEO and may continue to make decisions going forward that have the effect of reducing our short-term revenue or profitability if we believe that the decisions benefit the aggregate user experience. For example, we may introduce changes to existing products or new products that direct users away from formats or use cases where we have a proven means of monetization, e.g. our instant book product. In addition, our approach of putting users first may negatively impact our relationship with existing or prospective advertisers. These actions and practicesSEM strategies could result in a ~~loss of advertisers,~~substantial decrease in traffic to our websites, as well as increased costs if we were to replace free traffic with paid traffic.

In addition, to the extent that Google or other leading search or metasearch engines that have a significant presence in our key markets, disintermediate OTAs or travel content providers, whether by offering their own comprehensive travel planning or shopping capabilities, or by referring leads to suppliers, other favored partners or themselves directly, there could be a negative effect on search results and traffic to our site, which in turn could ~~harm~~have a material adverse impact on our ~~results~~business and financial performance.

We also rely on application marketplaces, or app stores such as Apple’s App Store and Google’s Play, to drive downloads of ~~operations. The short-term reductions in revenue~~our applications. In the future, Apple, Google or ~~profitability could be~~other marketplace operators may make changes to their marketplaces that make access to our products more ~~severe than we anticipate or these decisions~~difficult. For example, Google has entered various aspects of the online travel market, including by establishing a flight metasearch product and hotel metasearch product as well as reservation functionality. Our applications may ~~not produce~~receive unfavorable treatment compared to the ~~long-term benefits that we expect,~~promotion and placement of competing applications, such as the order in which ~~case our user growth and engagement,~~they appear within marketplaces. Similarly, if problems arise in our relationships with ~~users and advertisers,~~providers of application marketplaces, traffic to our site and our ~~business and results of operations~~user growth could be harmed.

We derive a substantial portion of our revenue from advertising and any significant reduction in spending by advertisers or redirections of advertising spend could harm our business.

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

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

We rely on a relatively small number of significant advertising partners and any reduction in spending by or loss of these partners could seriously harm our business.

We derive a substantial portion of our revenue from a relatively small number of advertising partners and rely significantly on our relationships. For example, for the year ended December 31, ~~2016,~~2017, our two most significant advertising partners, Expedia and ~~Priceline~~Booking Holdings (and their subsidiaries), accounted for a combined ~~46%~~43% of total revenue. While we enter into master advertising

contracts with our partners, ~~the terms of these agreements generally address matters such~~ as ~~privacy and compliance, payment terms and conditions, termination and indemnities and~~discussed above, most of these contracts can be terminated by our partners at will or on short notice.If any of our significant advertisers were to cease or significantly curtail advertising on our websites, we could experience a rapid decline in our revenue over a relatively short period of time which would have a material impact on our business.

~~Changes~~Our dedication to making the user experience our highest priority may cause us to prioritize rapid innovation and user experience over short-term financial results.

We strive to create the best experience for our users, providing them with the information, products and tools to enable them to plan, book, and experience the perfect trip. We believe that in ~~internet search engine algorithms~~doing so we will increase our rates of conversion, our revenue per hotel shopper and, ~~dynamics,~~ultimately, our financial performance over the long-term. We have taken actions in the past and may continue to make decisions in the future that have the effect of reducing our short-term revenue or ~~search engine disintermediation, could~~profitability if we believe that the decisions benefit the overall user experience. For example, we may introduce changes to existing products or new products that direct users away from formats or use cases where we have a ~~negative~~proven means of monetization. In addition, our approach of putting users first may negatively impact ~~on traffic for~~ our ~~sites~~relationship with existing or prospective advertisers. These actions and ~~ultimately,~~practices could result in a loss of advertisers, which in turn could harm our results of operations. The short-term reductions in revenue or profitability could be more severe than we anticipate or these decisions may not produce the long-term benefits that we expect, in which case our user growth and engagement, our relationships with users and advertisers, and our business and results of ~~operations.~~operations could be harmed.

Our business depends on a strong brand and any failure to maintain, protect and enhance our brand would hurt our ability to retain and expand our base of users and advertisers, as well as increase the frequency with which users utilize our products and services.

We ~~rely heavily~~believe that the strength of our brands (particularly the TripAdvisor brand) has contributed significantly to our success. We also believe that maintaining, protecting and enhancing our brands is critical to expanding our base of users, increasing the frequency with which users utilize our solutions and attracting advertisers and business partners. Our ability to maintain and protect our brand depends, in part, on ~~internet search engines, such~~our ability to maintain consumer trust in our products and in the quality and integrity of the user content and other information found on our platform. We believe that consumers must trust the integrity of our content and that they must believe that our content is reliable as ~~Google,~~well as useful. If consumers do not view our reviews to ~~generate~~be useful and reliable, they may seek other sources to obtain the information they are looking for and may not return to our platform as often in the future, or at all. This would negatively impact our ability to attract and retain users and advertisers and the frequency with which they use our platform. We dedicate significant resources to these goals, primarily through our computer algorithms to identify inappropriate or deceptive content removing content from our website that violates our terms of service and, in certain cases, taking legal action against businesses that we believe engage in deceptive practices.

Media, legislative, or regulatory scrutiny of our decisions regarding user privacy, content, advertising, and other issues may adversely affect our reputation and brands. Negative publicity about our company, including our content, technology, business practices or strategic plans, could diminish our reputation and confidence in our brand, thereby negatively affecting the use of our products. For example, certain media outlets have reported that we have improperly filtered or screened reviews, that we have not properly verified reviews, or that we manipulate reviews, ranking and ratings in favor of our advertisers against non-advertisers. We expend significant resources to ensure the integrity of our reviews and to ensure that the most relevant reviews are available to our users; we do not establish rankings and ratings in favor of our advertisers. Nevertheless, our reputation and brand, the traffic to our ~~websites, principally through the purchase of travel-related keywords as well as through free,~~platform and our business may suffer from negative publicity about our company or ~~organic, search. Pricing and operating dynamics for these traffic sources can change rapidly, both technically and competitively. Search engines frequently update and change the logic~~if users otherwise perceive that ~~determines the placement and display of results of a user’s search, such that the purchased~~our content is manipulated or ~~algorithmic placement of links to our websites can be negatively affected.~~biased. In addition, ~~a search engine could, for competitive~~regulatory inquiries or other purposes, alter its search algorithms or results causing our websites to place lower in organic search query results. If a major search engine changes its algorithms in a manner that negatively affects the search engine ranking of our websites or those of our partners, or if competitive dynamics impact the cost or effectiveness

~~of SEO or SEM in a negative manner, our business~~investigations require management time and ~~financial performance would be adversely affected. Furthermore, our failure to successfully manage our SEO~~attention and ~~SEM strategies~~ could result in ~~a substantial decrease in traffic to our websites, as well as increased costs if we were to replace free traffic with paid traffic.~~further negative publicity, regardless of their merits or ultimate outcomes.

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

We continue to invest significant time and effort towards educating users about our brand and our product offerings and there can be no assurances that ~~Google~~these efforts will be successful.

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

among the different marketing channels, in each case as we think appropriate based on the relative growth opportunity, the expected returns and the competitive environment in the different segments and businesses in which we operate.

Such efforts may not maintain or ~~other leading search or metasearch engines that have a significant presence~~enhance consumer awareness of our brands and, even if we are successful in our ~~key markets, disintermediate OTAs~~branding efforts, such efforts may not be cost-effective or ~~travel content providers, whether by offering their own comprehensive travel planning~~as efficient as they have been historically. If we are unable to maintain or ~~shopping capabilities,~~enhance consumer awareness of our brands or ~~by referring leads~~ to ~~suppliers, other favored partners or themselves directly, there could be~~generate demand in a cost-effective manner, it would have a material adverse ~~impact~~effect on our business and financial performance. ~~To the extent~~In addition, there are no assurances that these actions will have a ~~negative effect on search results and traffic to our site, our business and financial performance could be adversely affected.~~

We also rely on application marketplaces, such as Apple’s App Store and Google’s Play, to drive downloads of our applications. In the future, Apple, Google or other marketplace operators may make changes to their marketplaces that make access to our products more difficult. For example, our applications may receive unfavorable treatment compared to the promotion and placement of competing applications, such as the order in which they appear within marketplaces. Similarly, if problems arise in our relationships with providers of application marketplaces, traffic to our site and our user growth could be harmed.

~~We continue to focus on our “instant booking” feature despite anticipated and unanticipated challenges and risks which could have a negative~~positive impact on our ~~business~~marketing efficiencies or operating margins or when the financial benefit expected to result from these efforts will exceed the costs of such efforts. Furthermore, some of our current and ~~financial performance.~~

~~Instant booking is a feature that enables users~~potential competitors have access to book a hotel reservation directly with a hotel or online travel agency partner while remaining on the TripAdvisor website. We believe that allowing users to book directly online without leaving the TripAdvisor site will result in a better user experience, increased user engagement and, ultimately, additional revenue to the Company. We began rolling out this feature out the U.S. in 2014 and completed the roll out in non-U.S. markets in 2016. We are currently focused on (i) improving the shopping experience to drive increased user engagement, better conversionsignificantly greater and more ~~bookings,~~diversified resources than we do, and ~~(ii) continuing~~they may also be able to ~~earn users’ trust as~~leverage other aspects of their ~~booking site of choice.~~

~~There are, however, additional risks associated~~businesses to enable them to compete more effectively with this feature. Currently our instant booking feature is monetizing at a lower revenue per hotel shopper rate compared to our metasearch feature. While we expect to close this monetization gap, primarily by continuing to streamline our booking path to enhance user experience, persistently promoting the TripAdvisor brand as a booking channel and continuing to seek partners with strong branding and supply channels, there is no guarantee that these initiatives will ultimately be successful and, if not, our revenue may be materially adversely affected. In addition, instant booking revenue recorded under the consumption model is recognized at the time the traveler completes his or her stay. Comparatively, revenue recognized under our metasearch feature is recorded when a traveler makes the click-through to the travel partners’ websites. In future periods, greater contribution of revenue from our instant booking consumption model would result in additional revenue recognized at the time of a consumed stay and thus a shift in the timing of our revenue recognition.us.

Consumer adoption and use of mobile phone devices creates new challenges and, if we are unable to operate effectively on mobile phone devices, our business may be adversely affected.

The number of people who access the internet through mobile phones ~~has increased substantially in the last few years~~continues to increase and we anticipate that the rate of use of these devices will continue to grow. ~~The~~A significant percentage of our traffic comes from users accessing our sites on mobile ~~market in general remains a rapidly evolving market~~phones and we expect this percentage to continue to increase. In order to attract and retain engaged users of our mobile platform, the mobile products and services we introduce must be compelling. In addition, the mobile phones continue to monetize at a significantly lower rate than desktops and ~~tablets. As new devices~~tablets and ~~platforms~~advertising opportunities are ~~released, users may begin consuming content in a manner that is more difficult to monetize. Advertising opportunities may be~~ more limited on mobile phone devices. ~~In addition, given the~~Given device sizes and technical limitations of these devices, mobile phone consumers may not be willing to download multiple apps from multiple companies providing similar service and instead prefer to use one or a limited number of apps for their hotel, restaurant and ~~attractions~~experiences activity. In addition, as new devices and platforms are released, users may begin consuming content in a manner that is more difficult to monetize.

To address these growing user demands, we continue to extend our platform to develop and improve upon our mobile applications and monetization strategies. If we are unable to continue to rapidly innovate and create new, user-friendly and differentiated mobile phone offerings and websites optimized for mobile phone devices and efficiently and effectively advertise and distribute on these platforms, or if our mobile phone offerings are not used by consumers, our future growth and results of operations could be negatively impacted.

Declines or disruptions in the economy in general and travel industry in particular could adversely affect our businesses and financial performance.

Our businesses and financial performance are affected by the health of the global economy generally as well as the travel industry and leisure travel in particular. Sales of travel services tend to decline or grow more slowly during economic downturns and

recessions when consumers engage in less discretionary spending, are concerned about unemployment or economic weakness, have reduced access to credit or experience other concerns that reduce their ability or willingness to travel. The global economy may be adversely impacted by unforeseen events beyond our control including incidents of actual or threatened terrorism, regional hostilities or instability, unusual weather patterns, natural disasters, political instability and health concerns (including epidemics or pandemics), defaults on government debt, significant increases in fuel and energy costs, tax increases and other matters that could reduce discretionary spending, tightening of credit markets and further declines in consumer confidence. Decreased travel ~~expenditures~~spending could reduce the demand for our services and have a negative impact on our business ~~working capital~~ and financial performance.

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

~~On June 23, 2016,~~ For example, the United ~~Kingdom held a~~Kingdom’s referendum ~~in which a majority of voters voted~~ to exit the European Union, (“Brexit”). Since the referendum, global markets and foreign currency exchange rates have experienced increased volatility, including a sharp decline in the value of the British Pound Sterling relative to the U.S. dollar. To leave the European Union, the United Kingdom must provide official notice of its decision and negotiate the terms of its exit. This process could take two years or more. The effects of Brexit will depend on, among other things, the terms, nature and timetable of the exit and the parties have not yet established these terms,known as Brexit, could adversely affect European and global economic or market conditions, ~~and~~ could contribute to instability in global financial ~~markets. Any of these effects of Brexit,~~markets and ~~others we cannot anticipate,~~ may have a negative effect on the travel industry and ~~may adversely affect~~ our business.

We rely on the value of our brands and consumer trust in our brands. If we are not able to protect, maintain and enhance our brands, or if events occur that damage our reputation and brands, our business may be harmed.

We believe that the strength of our brands (particularly the TripAdvisor brand) has contributed significantly to our success and that maintaining and enhancing our brands is critical to expanding our base of users, to creating content and to attracting advertisers. As a result, we invest significantly in brand marketing. We expect these investments to continue, or even increase, as a result of a variety of factors, including relatively high levels of advertising spending from competitors, the increasing costs of supporting multiple brands, expansion into new geographies, products and product positioning where our brands are less well known, inflation in media pricing, and the continued emergence and relative traffic share growth of search engines as destination sites for travelers. Such efforts may not maintain or enhance consumer awareness of our brands and, even if we are successful in our branding efforts, such efforts may not be cost-effective or as efficient as they have been historically. If we are unable to maintain or enhance consumer awareness of our brands or to generate demand in a cost-effective manner, it would have a material adverse effect on our business and financial performance.

Our ability to protect, maintain and enhance our brand also depends largely on our ability to maintain consumer confidence in our products, in the quality and integrity of our content and other information found on our platform. If consumers do not believe our recommended reviews to be useful and reliable, they may seek other services to obtain the information for which they are looking and may not return to our platform as often in the future, or at all. In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection, product changes, competitive pressures, litigation or regulatory activity, could adversely affect our reputation with our users and our advertisers. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of our user base and result in decreased revenue, which could adversely affect our business and financial results.

We operate in an increasingly competitive global environment and our failure to compete effectively could reduce our market share and harm our financial performance.

We compete in rapidly evolving and competitive markets. We face competition for content, users, advertisers, online travel search and price comparison services, or what is known in the industry as hotel metasearch, and online reservations. In the competition to attract users to our platform, we rely on our ability to acquire traffic through offline brand recognition and brand-direct efforts such as ~~online search,~~SEO, SEM, email and television. These marketing strategies can be impacted by competitive site content, changes to

our website architecture and page designs, changes to search engine ranking algorithms, updates in competitor advertising strategies, or changes to display ordering in search engine results such as preferred placement for internal products offered by search engines.

We also compete with different types of companies in the various markets and geographies where we participate, ~~in,~~ including large and small companies in the travel space as well as broader service providers. More specifically:

In our Hotel segment, we face competition from OTAs (including Expedia, Inc. and Booking Holdings, Inc. and certain of their respective subsidiaries), hotel metasearch providers (including trivago, KAYAK, Ctrip.com International, Ltd., and HotelsCombined), large online search, social media, and marketplace companies (including Google, Microsoft Bing, Yahoo, Baidu, Facebook, Alibaba, and Amazon), traditional offline travel agencies, and global hotel chains seeking to promote direct bookings.

•

In our Hotel segment, we face competition from OTAs (including Expedia, Inc. and The Priceline Group Inc. and certain of their respective subsidiaries), hotel metasearch providers (including Trivago, Kayak, Ctrip.com International, Ltd., and HotelsCombined), large online search, social media, and marketplace companies (including Google, Microsoft Bing, Yahoo, Baidu, Facebook, Alibaba, and Amazon), traditional offline travel agencies, and global hotel chains seeking to promote direct bookings.

We also face competition from different companies in each of the operating segments in our Non-Hotel segment. ~~Our Attractions business~~Experiences competes with traditional travel agencies, wholesalers, and individual tour operators as well as Airbnb and similar websites that have added other travel services such as tours and activities. ~~Our~~ Restaurants ~~business~~ competes with other online restaurant reservation services, such as SeatMe (owned by Yelp) and OpenTable (a subsidiary of ~~Priceline)~~Booking Holdings). ~~Our Vacation~~ Rentals ~~business~~ competes with companies focused on alternative lodging, shared accommodations and online accommodation searches, including Airbnb, HomeAway (a subsidiary of Expedia) and booking.com (a subsidiary of ~~Priceline)~~Booking Holdings).

Many of our competitors have significantly greater financial, technical, marketing and other resources ~~compared to~~than us and have more expertise in developing online commerce and facilitating internet traffic as well as large client bases. They also have the ability to leverage other aspects of their business to enable them to compete more effectively against us. In addition, many of our competitors, including online search companies, continue to expand their voice and artificial intelligence capabilities, which may provide them with a competitive advantage in travel. We cannot assure you that we will be able to compete successfully against our current, emerging and future competitors or on platforms that may emerge, or provide differentiated products and services to our traveler base.

Certain of the companies we do business with, including some of our click-based advertising partners, are also our competitors. The consolidation of our competitors and partners, including Expedia (through its acquisitions of Orbitz, Travelocity, and HomeAway) and ~~Priceline~~Booking Holdings (through its acquisitions of ~~Kayak~~KAYAK and OpenTable), may affect our relative competitiveness and our partner relationships. Competition and consolidation could result in higher traffic acquisition costs, reduced margins on our advertising services, loss of market share, reduced customer traffic to our websites and reduced advertising by travel companies on our websites.

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

We rely on information technology to operate our business and remain competitive, and any failure to adapt to technological developments or industry trends could harm our businesses.

We depend on the use of sophisticated information technologies and systems for, among other things, website and mobile apps, supplier connectivity, communications, reservations, payment processing, procurement, customer service and fraud prevention. Our future success depends on our ability to continuously improve and upgrade our systems and infrastructure to meet rapidly evolving consumer trends and demands while at the same time maintaining the reliability and integrity of our systems and infrastructure. We may not be able to maintain or replace our existing systems or introduce new technologies and systems as quickly as we would like or in a cost-effective manner. We may not be successful, or as successful as our competitors, in developing technologies and systems that operate effectively across multiple devices and platforms in a way that is appealing to our users.

In addition, the emergence of alternative platforms such as ~~smartphone~~mobile phone and tablet computing devices and the emergence of niche competitors who may be able to optimize products, services or strategies for such platforms will require new investment in technology. New developments in other areas ~~such as cloud computing,~~ could also make it easier for competition to enter our markets due to lower up-front technology costs. Technology changes, including new devices, services and home assistants, such as Amazon’s Alexa Voice and Google Home, and developing technologies, such as machine learning and artificial intelligence, could negatively impact our business.

If we do not continue to innovate and provide ~~tools~~products, services and ~~services~~features that are useful to travelers, we may not remain competitive, and our business and financial performance could suffer.

Our success depends in part on continued innovation to provide products, features and services that make our platform compelling to travelers. Our competitors are continually developing innovations in online travel-related services and features. As a result, we are continually working to improve our business model and user experience in order to drive user traffic and conversion rates. We can give no assurances that the changes we make will yield the benefits we expect and will not have unintended or adverse impacts that we did not anticipate. If we are unable to continue offering innovative products and services and quality features that travelers want to use, existing users may become dissatisfied and use competitors’ offerings and we may be unable to attract additional users, which could adversely affect our business and financial performance.

We are dependent upon the quality of traffic in our network to provide value to online advertisers, and any failure in our quality control could have a material adverse effect on the value of our websites to our advertisers and adversely affect our revenue.

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

We rely on assumptions and estimates and data to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

We believe that certain metrics are key to our business, including but not limited to unique visitors, hotel shoppers, and revenue per hotel ~~shopper, and number of reviews and opinions.~~shopper. As both the industry in which we operate and our business ~~continues~~continue to evolve, so too might the metrics by which we evaluate our business. While the calculation of these metrics is based on what we believe to be reasonable estimates, our internal tools are not independently verified by a third party and have a number of limitations and, furthermore, our methodologies for tracking these metrics may change over time. For example, a single person may have multiple accounts or browse the internet on multiple browsers or devices, some users may restrict our ability to accurately identify them across visits, some mobile applications automatically contact our servers for regular updates with no user action, and we are not always able to capture user information on all of our platforms. As such, the calculations of our unique visitors may not accurately reflect the number of people actually visiting our platforms. We continue to improve upon our tools and methodologies to capture data and believe that our current metrics are ~~more~~ accurate; however, the improvement of our tools and methodologies could cause inconsistency between current data and previously reported data, which could confuse investors or lead to questions about the integrity of our data. Also if the internal tools we use to track these metrics under-count or over-count performance or contain algorithm or other technical errors, the data we report may not be accurate. In addition, historically, certain metrics were calculated by independent third parties. Accordingly readers should not place undue reliance on these numbers.

The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business.

Our future success depends upon the continued contributions of our senior corporate management and other key employees. In particular, the contributions of Stephen Kaufer, our co-founder, ~~President and~~ Chief Executive ~~Officer,~~and President, are critical to our overall management. We cannot ensure that we will be able to retain the services of these individuals, and the loss of one or more of our key personnel could seriously harm our business. We do not maintain any key person life insurance policies.

In addition, competition remains intense for well-qualified employees in certain aspects of our business, including software engineers, developers, product management and development personnel, and other technology professionals. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate existing employees. As a global company, we aim to attract quality employees from all over the world, so any restrictions on travel for professional or personal purposes ~~such as those put in place in the United States in early 2017,~~ may cause significant disruption to our businesses or negatively affect our ability to attract and retain employees on a global basis. If we do not succeed in attracting well-qualified employees or retaining or motivating existing employees, our business would be adversely affected.

~~The online vacation rental market is rapidly evolving and if we fail to predict the manner in which the market develops, our business and prospects may suffer.~~

We offer vacation rental services on our TripAdvisor-branded sites as well as through our U.S.-based FlipKey and Vacation Home Rentals and European-based Holiday Lettings and Niumba businesses. The vacation rental market has been and continues to be, subject to regulatory development that affects the vacation rental industry and the ability of companies like us to list those vacation rentals online. For example, some states and local jurisdictions have adopted or are considering statutes or ordinances that prohibit property owners and managers from renting certain properties for fewer than 30 consecutive days or otherwise limit their ability to do so, and other states and local jurisdictions may introduce similar regulations. Some states and local jurisdictions also have fair housing or other laws governing whether and how properties may be rented, which they assert apply to vacation rentals. Many homeowners, condominium and neighborhood associations have adopted rules that prohibit or restrict short-term vacation rentals. In addition, many of the fundamental statutes and ordinances that impose taxes or other obligations on travel and lodging companies were established before the growth of the internet and e-commerce, which creates a risk of these laws being used in ways not originally intended that

could burden property owners and managers or otherwise harm our business. Operating in this dynamic regulatory environment and in new and untested jurisdictions requires significant management attention and financial resources. We cannot assure that our efforts will be successful, and the investment and additional resources required to manage growth will produce the desired levels of revenue or profitability.

We may be subject to claims that we violated intellectual property rights of others and these claims can be extremely costly to defend and could require us to pay significant damages and limit our ability to operate.

Certain companies in the internet and technology industries that own patents, copyrights, trademarks and trade secrets frequently enter into litigation based on allegations of infringement or other violations of those intellectual property rights in order to extract value from technology companies, such as royalties in connection with grants of licenses. We have received in the past, and expect to receive in the future, ~~to receive~~ notices that claim we have misappropriated or misused other parties’ intellectual property rights. Any intellectual property claim against us, regardless of merit, could be time-consuming and expensive to settle or litigate and could divert management’s attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology or content found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. Even if a license is available, we could be required to pay significant royalties, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, or content, which could require significant effort and expense and make us less competitive in the relevant market. Any of these results could harm our business and financial performance.

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

Our success will depend, in part, on our ability to expand our product offerings and expand user engagement in order to grow our business in response to changing technologies, user and advertiser demands and competitive pressures. As a result, we have acquired, invested in and/or entered into significant commercial arrangements with a number of new ~~business~~businesses in the past and our future growth may depend, in part, on future acquisitions, investments, commercial ~~arrangements/~~arrangements and/or changes in business strategies, any of which could be material to our financial conditions and results of operations. Such endeavors may involve significant risks and uncertainties, including, but not limited to, the following:

Expected and unexpected costs incurred in identifying and pursuing these endeavors, and performing due diligence on potential targets that may or may not be successful;

Use of cash resources and incurrence of debt and contingent liabilities in funding these endeavors that may limit other potential uses of our cash, including stock repurchases, retirement of outstanding indebtedness and/or dividend payments;

Amortization expenses related to acquired intangible assets and other adverse accounting consequences;

Diversion of management’s attention or other resources from our existing business;

Difficulties and expenses in integrating the operations, products, technology, privacy protection systems, information systems or personnel of the company, including the assimilation of corporate cultures;

Difficulties in implementing and retaining uniform standards, controls, procedures, policies and information systems;

The assumption of known and unknown debt and liabilities of the acquired company, including costs associated with litigation, cybersecurity risks assumed, and other claims relating to the acquired company;

Failure of any company which we have acquired, in which we have invested, or with which we have a commercial arrangement, to achieve anticipated revenues, earnings or cash flows or to retain key management or employees;

Failure to generate adequate returns on acquisitions and investments;

With respect to minority investments, limited management or operational control and reputational risk, which risk is heightened if the controlling person in such case has business interests, strategies or goals that are inconsistent with ours;

Entrance into markets in which we have no direct prior experience and increased complexity in our business;

Impairment of goodwill or other intangible assets such as trademarks or other intellectual property arising from acquisitions; and

Adverse market reaction to acquisitions.

We have ~~recently~~ invested, and may in the future invest, in privately-held companies and these investments are currently accounted for ~~under~~using the measurement alternative for equity investments without a readily determinable fair value, which measure these investments at cost ~~method.~~minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Such investments are inherently risky in that such companies are typically at an early stage of development, may have no or limited revenues, may not be or may never become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully developed or introduced into the market. Further, our ability to liquidate any such investments is typically dependent upon some liquidity event, such as a public offering or

acquisition, since no public market exists for such securities. Valuations of such privately-held companies are inherently complex and uncertain due to the lack of liquid market for the company’s securities. Moreover, we could lose the full amount of any of our investments and any impairment of our investments could have a material adverse effect on our financial condition and results of operations.

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

If we fail to manage our growth effectively, our brand, results of operations and business could be harmed.

WeOver the years, we have experienced rapid growth in some of our ~~headcount and operations,~~business, including through acquisitions of other businesses and in new international markets. We continue to make substantial investments in our technology, product and sales and marketing organizations. This growth places substantial demands on management and our operational infrastructure. In addition, as our business matures, we make periodic changes and adjustments to our organization in response to various internal and external considerations, including market opportunities, the competitive landscape, new and enhanced products and acquisitions. These changes may result in a temporary lack of focus or productivity or otherwise impact our business.

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

We are regularly subject to claims, suits, government investigations, and other proceedings that may result in adverse outcomes.

We are regularly subject to claims, suits, government investigations and other proceedings involving competition, intellectual property, privacy and data protection, consumer protection, tax, labor and employment, commercial disputes, content generated by our users, free speech issues, goods and services offered by advertisers or publishers using our platforms, short-term and vacation rentals and other matters. In addition, our businesses face intellectual property litigation that exposes us to the risk of exclusion and cease and desist orders, which could limit our ability to sell products and services.

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

~~Our non-U.S.~~We are a global company that operates in many different jurisdictions and these operations ~~involve~~expose us to additional risks, ~~and our exposure to these~~which risks ~~increases~~increase as our business continues to ~~expand globally.~~expand.

We operate in a number of jurisdictions both inside and outside of the United States and continue to expand our ~~non-U.S. operations.~~operations both domestically and internationally. Many ~~of these~~ regions have different economic conditions, languages, currencies, consumer expectations, legislation, regulatory environments (including labors laws and customs), tax laws, levels of consumer acceptance and use of the internet for commerce ~~legislation, regulatory environments (including labors laws and customs), tax laws~~ and levels of political stability. We are subject to associated risks typical of ~~certain non-U.S.~~global businesses, including, but not limited to, the following:

~~Local economic~~•Compliance with additional laws and regulations, including the Foreign Corrupt Practices Act and the U.K. Bribery Act (including the European Union’s General Data Protection Regulation, or ~~political instability;~~GDPR), data privacy requirements, labor and employment law, laws regarding advertisements and promotions and anti-competition regulations;

~~Threatened or actual acts of terrorism;~~

•

•Compliance with additional laws applicable to companies operating internationally as well as local laws and regulations, including the Foreign Corrupt Practices Act and U.K. Bribery Act, data privacy requirements, labor and employment law, laws regarding advertisements and promotions and anti-competition regulations;

Diminished ability to legally enforce contractual rights;

•Increased risk and limits on enforceability of intellectual property rights;

~~Restrictions on, or adverse consequences related to, the withdrawal of non-U.S. investment and earnings;~~

•Restrictions on repatriation of cash as well as restrictions on investments in operations in certain countries;

•Financial risk arising from transactions in multiple currencies as well as foreign currency exchange restrictions;

~~Slower adoption of the internet as an advertising, broadcast and commerce medium in certain of those markets as compared to the United States;~~

•Difficulties in managing staff and operations due to distance, time zones, language and cultural differences; ~~and~~

•Uncertainty regarding liability for services, content and intellectual property rights, including uncertainty as a result of local laws and lack of ~~precedent.~~precedent;

~~We have a business operating~~•Economic or political instability; and

•Threatened or actual acts of terrorism.

A number of countries are actively pursuing changes to their tax laws applicable to corporate multinationals, such as the recently enacted U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Foreign governments may enact tax laws in ~~China, which creates particular risks and uncertainties relating~~response to the ~~laws~~2017 Tax Act that could result in ~~China.~~ further changes to global taxation and materially affect our financial position and results of operations.

The ~~laws~~2017 Tax Act resulted in significant changes to the U.S. corporate income tax system. The 2017 Tax Act requires complex computations to be performed that were not previously required in U.S. tax law, significant judgments to be made in interpretation of the provisions of the 2017 Tax Act and ~~regulations~~significant estimates in calculations, and the preparation of ~~China restrict foreign investment in areas including air-ticketing~~analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS and ~~travel agency services, internet content provision, mobile communication~~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 our interpretation. As we complete our analysis of the 2017 Tax Act, collect and ~~related businesses. Although~~prepare necessary data, and interpret additional guidance, we may make adjustments to provisional amounts that we have ~~established effective control of~~recorded that may materially impact our ~~Chinese business through a series of agreements, future developments~~provision for income taxes in the ~~interpretation or enforcement of Chinese laws and regulations or a dispute relating to these agreements could restrict our ability to operate or restructure this business or to engage~~period in ~~strategic transactions. The success of this business, and of any future investments in China, is subject to risks and uncertainties regarding~~which the ~~application, development and interpretation of China’s laws and regulations.~~adjustments are made.

A failure to comply with current laws, rules and regulations or changes to such laws, rules and regulations and other legal uncertainties may adversely affect our business or financial performance.

Our business and financial performance could be adversely affected by unfavorable changes in or interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to us and our business, including those relating to the internet and online commerce, internet advertising, ~~and online commerce,~~ consumer protection, data security and privacy, travel and ~~vacation~~ rental licensing and listing requirements and tax. In some cases, these laws continue to evolve.

For example, there is, and will likely continue to be, an increasing number of laws and regulations pertaining to the internet and online commerce that may relate to liability for information retrieved from or transmitted over the internet, online editorial and user-generated content, user privacy, data security, behavioral targeting and online advertising, taxation, liability for third-party activities and the quality of products and services. In addition, enforcement authorities ~~in the United States~~ continue to rely on their authority under existing consumer protection laws to take action against companies relating to data privacy and security practices. The growth and development of online commerce may prompt calls for more stringent consumer protection laws and more aggressive enforcement efforts, which may impose additional burdens on online businesses generally.

Further, ~~our vacation rentals business~~Rentals has been and continues to be subject to regulatory developments that affect the ~~vacation~~ rental industry and the ability of competitors like us to list those ~~vacation~~ rentals online. For example, some states and local jurisdictions have adopted or are considering adopting statutes or ordinances that prohibit property owners and managers from renting certain properties for fewer than 30 consecutive days. Some states and local jurisdictions also have fair housing or other laws governing whether and how properties may be rented, which they assert apply to ~~vacation~~ rentals. ~~Many~~In addition, many homeowners, condominium and neighborhood associations have adopted ~~rules~~or are considering adopting statutes or ordinances that prohibit or restrict property owners and managers from short-term ~~vacation~~ rentals.

We also have been subject, and we will likely be subject in the future, to inquiries from time to time from regulatory bodies concerning compliance with consumer protection, competition, tax and travel industry-specific laws and regulations. The failure of our businesses to comply with these laws and regulations could result in fines and/or proceedings against us by governmental agencies and/or consumers, which if material, could adversely affect our business, financial condition and results of operations. Further, if such

laws and regulations are not enforced equally against other competitors in a particular market, our compliance with such laws may put us at a competitive disadvantage vis-à-vis competitors who do not comply with such requirements.

The promulgation of new laws, rules and regulations, or the new interpretation of existing laws, rules and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we provide services could require us to change certain aspects of our business, operations and commercial relationships to ensure compliance, which could decrease demand for services, reduce revenues, increase costs and/or subject the company to additional liabilities. Unfavorable changes could decrease demand for products and services, limit marketing methods and capabilities, increase costs and/or subject us to additional liabilities. Violations of these laws and regulations could result in ~~finds~~fines and/or criminal sanctions against us, our officers or our employees and/or prohibitions on the conduct of our business.

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

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

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

We currently license from third parties and incorporate the technologies and content into our websites. As we continue to introduce new services that incorporate new technologies and content, we may be required to license additional technology, or content. We cannot be sure that such technology or content will be available on commercially reasonable terms, if at all.

Our processing, storage and use of personal information and other data ~~exposes~~subjects us to ~~risks of external~~additional laws and ~~internal security breaches~~regulations and failure to comply with those laws and regulations could give rise to liabilities.

We collect, process, store and transmit data, including personal information, for our users. As a result, we are subject to a variety of laws in the United States and abroad regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other consumer data, the scope of which are changing, subject to differing interpretations, and may be inconsistent between countries or conflict with other rules. In addition, the security of data when engaging in electronic commerce is essential to maintaining consumer and travel service provider confidences in our services. The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the internet have recently come under increased public scrutiny. The U.S. Congress and federal agencies, including the Federal Trade Commission and the Department of Commerce, are reviewing the need for greater regulation for the collection and use of information concerning consumer behavior on the internet. Various U.S. courts are also considering the applicability of existing federal and state statutes, including computer trespass and wiretapping laws, to the collection and exchange of information online. In addition, ~~the European Union has adopted~~we are subject to GDPR, a new data protection legal framework adopted by the European Union effective in May ~~2018, which~~2018. These data protection laws and regulations are intended to protect the privacy and security of personal data, including credit card information. Implementation of and compliance with these laws and regulations may ~~result in a greater compliance burden for companies, including us, with users in Europe and increased costs of compliance.~~

~~Potential security breaches to our systems, whether resulting from internal~~be more costly or ~~external sources,~~take longer than we anticipate, or could significantly harm our business. A party, whether internal or external, that is able to circumvent our security systems could misappropriate user information or proprietary information or cause significant interruptions in our operations. In the past, we have experienced “denial-of-service” type attacks on our systems that have made portions of our websites unavailable for short periods of time as well as unauthorized access of our systems and data. We also face risks associated with security breaches affecting third parties conducting business over the internet. Much ofotherwise affect our business is conducted with third party marketing affiliates or, more recently, through business partners powering our instant booking feature. In addition, we frequently use third parties to process credit card payments. A security breach at such third party could be perceived by consumers as a security breach of our systems and could result in negative publicity, damage

our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions. In addition, such third parties may not comply with applicable disclosure requirements, which could expose us to liability.operations.

We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection. Any failure or perceived failure by us to comply with our privacy policies, privacy-related obligations to users or other third parties, or privacy-related legal obligations, ~~or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data,~~ may result in governmental enforcement actions, litigation or public statements that could harm our reputation and cause our customers and members to lose trust in us, which could have an adverse effect on our business, brand, market share and results of operations.

We have acquired a number of companies over the years and may continue to do so in the future. While we make significant efforts to address any information technology security issues with respect to our acquisitions, we may still inherit such risks when we integrate the acquired businesses.

We are subject to payments-related risks and failure to manage those risks may subject us to fines, penalties and additional costs and could have a negative impact on our business.

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

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

Any significant system disruption in or unauthorized access to our computer systems or those of third parties that we utilize, including those relating to cybersecurity or arising from cyberattacks, could result in a loss or degradation of service, unauthorized disclosure of data or theft of intellectual property, and could harm our business.

Our reputation and ability to attract, retain and service our users and partners is dependent upon the reliable performance and security of our computer systems and those of third parties we utilize in our operations. In the past, we have experienced cyberattacks, such as computer viruses, security intrusions, “denial-of-service” or “bot” type attacks that have made portions of our websites unavailable for short periods of time as well as allowed unauthorized access of our systems and data. Significant interruptions, outages, delays or security breaches in internal systems or systems of third parties that we rely upon, could impair our ability to process transactions or display content and significantly harm our business. A party, whether internal or external, that is able to circumvent our security systems could misappropriate user information or proprietary information or cause significant interruptions in our operations. We also face risks associated with security breaches affecting third parties conducting business over the internet. Much of our business is conducted with third party marketing affiliates or, more recently, through business partners powering our instant booking feature. A security breach at such third party could be perceived by consumers as a security breach of our systems and could result in negative publicity or damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions. In addition, failure of such third parties to comply with applicable disclosure requirements could expose us to liability.

We may need to expend significant resources to protect against security breaches or to investigate and address problems caused by ~~breaches, and reductions~~breaches. Reductions in website availability could cause a loss of substantial business volume during the occurrence of any such incident. Because the techniques used to sabotage security change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address these techniques or to implement adequate preventive measures. Security breaches could result in negative publicity, damage to reputation, exposure to risk of loss or litigation and possible liability due to regulatory penalties and sanctions. Media coverage of data breaches has escalated, in part because of the increased number of enforcement actions, investigations and lawsuits. As this focus and attention on privacy and data protection increases, we also risk exposure to potential liabilities and costs resulting from the compliance with, or any failure to comply with, applicable legal requirements, conflicts among these legal requirements or differences in approaches to privacy and security. Security breaches could also cause travelers and potential users to lose confidence in our security, which would have a negative effect on the value of our brand. Failure to adequately protect against attacks or intrusions, whether for our own systems or systems of vendors, could expose us to security breaches that could have an adverse impact on financial performance.

~~System interruption and the lack of redundancy in some of our internal information systems may harm our business.~~

We rely on computer systems to deliver content and services. We have experienced and may in the future experience system interruptions that make some or all of these systems unavailable or prevent us from efficiently providing content and services to users and third parties. Significant interruptions, outages or delays in internal systems, or systems of third parties that we rely upon, or deterioration in the performance of any such systems, would impair our ability to process transactions or display content and decrease the quality of the services we offer to travelers and users. These interruptions could include security intrusions and attacks on our systems for fraud or service interruption (called “denial of service” or “bot” attacks). Fire, flood, power loss, telecommunications failure, break-ins, earthquakes, acts of war or terrorism, acts of God, computer viruses, electronic intrusion attempts from both external and internal sources and similar events or disruptions may damage or impact or interrupt computer or communications systems or business processes at any time. If we experience frequent or persistent system failures, our reputation and brand could be permanently and significantly harmed.

~~Although we have put measures in place to protect certain portions of our facilities and assets, any~~Any of these events could cause system interruption, delays and loss of critical data, and could prevent us from providing content and services to users, travelers and/or third parties for a significant period of time. In addition, remediation may be costly and we may not have adequate insurance to cover such costs. Moreover, the costs of enhancing infrastructure to attain improved stability and redundancy may be time consuming and expensive and may require resources and expertise that are difficult to obtain.

The online short-term and vacation rental market is rapidly evolving and if we fail to predict the manner in which the market develops, our business and prospects may suffer.

We offer short-term and vacation rental services on our TripAdvisor-branded sites as well as through our U.S.-based FlipKey and Vacation Home Rentals and European-based Holiday Lettings and Niumba businesses. The short-term and vacation rental market has been and continues to be, subject to regulatory development globally that affects the industry and the ability of companies like us to list these rental properties online. For example, some states and local jurisdictions, both domestically and internationally, have adopted, or are considering adopting, statutes or ordinances that prohibit property owners and managers from renting certain properties for fewer than 30 consecutive days or otherwise limit their ability to do so, and other states and local jurisdictions may introduce similar regulations. Some states and local jurisdictions also have fair housing or other laws governing whether and how properties may be rented, which they assert apply to vacation rentals. Many homeowners, condominium and neighborhood associations have adopted rules that prohibit or restrict short-term rentals. Many of the fundamental statutes and ordinances that impose taxes or other obligations on travel and lodging companies were established before the growth of the internet and e-commerce, which creates a risk of these laws being used in ways not originally intended that could burden property owners and managers or otherwise harm our business. Operating in this dynamic regulatory environment requires significant management attention and financial resources. We cannot assure that our efforts will be successful, and the investment and additional resources required to manage growth will produce the desired levels of revenue or profitability.

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

~~On June 26, 2015, we entered into~~We are currently party to a ~~new~~ credit agreement with respect to a $1$1.2 billion ~~five-year~~ revolving credit facility ormaturing in May 2022 (as more fully discussed below, the “2015 Credit ~~Facility.”~~Facility”). This agreement includes restrictive covenants that may impact the way we manage our business and may limit our ability to secure significant additional financing in the future on favorable terms. Our ability to secure additional financing and satisfy our financial obligations ~~under indebtedness~~ outstanding from time to time will depend upon our future operating performance, which is subject to then prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond our control. ~~In light of periodic uncertainty in the capital and credit markets, there~~There can be no assurance that sufficient financing will be available on desirable, or even any, terms to fund investments, acquisitions, stock repurchases, dividends, debt refinancing or extraordinary actions or that counterparties in any such financings would honor their contractual commitments.

We have indebtedness which could adversely affect our business and financial condition.

~~We currently have~~At March 31, 2018, there were no outstanding ~~$210 million~~borrowings in long-term debt. ~~Risks~~However, we continue to have existing credit facilities from which we can borrow significant amounts; as such, we are still subject to risks relating to our indebtedness that include:

Increasing our vulnerability to general adverse economic and industry conditions;

Requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;

Making it more difficult for us to optimally capitalize and manage the cash flow for our businesses;

Limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;

Possibly placing us at a competitive disadvantage compared to our competitors that have less debt;

Limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable; and

Exposing us to the risk of increased interest rates because our outstanding debt is expected to be subject to variable rates of interest.

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

Our 2015 Credit Facility provides for various provisions that limit our discretion in the operation of our business and require us to meet financial maintenance tests and other covenants and the failure to comply with their covenants could have a material adverse effect on us.

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

Incur indebtedness;

Pay dividends on, redeem or repurchase our capital stock;

Enter into certain asset sale transactions, including partial or full spin-off transactions;

Enter into secured financing arrangements;

Enter into sale and leaseback transactions; and

Enter into unrelated businesses.

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

Our effective tax rate is impacted by a number of factors that could have a material impact on our financial results and could increase the volatility of those results.

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

We believe our tax estimates are reasonable. However, we are routinely under audit by federal, state and foreign taxing authorities. The taxing authorities of jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing, or determine that the manner in which we operate our

business does not achieve the intended tax consequences, which would increase our effective tax rate and harm our financial position and results of operations. As we operate in numerous taxing jurisdictions, the application of tax laws can also be subject to diverging and sometimes conflicting interpretations by taxing authorities of these jurisdictions. It is not uncommon for taxing authorities of different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property. The final determination of audits could be materially different from our income tax provisions and accruals and could have a material effect on our financial position, results of operations, or cash flows in the period or periods for which that determination is made.

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

Additionally, we continue to accumulate positive cash flows in foreign jurisdictions, which we consider indefinitely ~~reinvested.~~reinvested, although we will continue to evaluate the impact of the 2017 Tax Act on our capital deployment within and outside the U.S. Any repatriation of funds currently held in foreign jurisdictions may result in ~~higher effective tax rates~~withholding taxes and incremental cash tax payments. In addition, there have been proposals to amend U.S. tax laws that would significantly impact the manner in which U.S. companies are taxed on foreign earnings. Although we cannot predict whether or in what form any legislation will pass, if enacted, it could have a material adverse impact on our U.S. tax expense and cash flows.state taxes.

Changes in tax laws or tax rulings, or the examination of our tax positions, could materially affect our financial position and results of operations.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. Our existing corporate structure and intercompany arrangements have been implemented in a manner we believe is in compliance with current prevailing tax laws. However, the tax benefits that we intend to eventually derive could be undermined due to changing tax

laws. ~~In particular,~~A number of countries are actively pursuing changes to their tax laws applicable to corporate multinationals, such as the ~~current~~recently enacted 2017 Tax Act. Foreign governments or U.S. ~~administration and key members of Congress have made public statements indicating that~~states may enact tax ~~reform is a priority, resulting~~laws in ~~uncertainty not only with respect~~response to the ~~future corporate tax rate, but also~~2017 Tax Act that could result in further changes to global taxation and materially affect our financial position and results of operations.

The 2017 Tax Act has resulted in significant changes to the U.S. corporate income tax ~~consequences of income derived from income related~~system. The 2017 Tax Act requires complex computations to ~~intellectual property earned overseas~~be performed that were not previously required in ~~low tax jurisdictions. Certain changes to~~ U.S. tax ~~laws, including limitations on the ability~~law, significant judgments to ~~defer U.S. taxation on earnings outside~~be made in interpretation of the ~~United States until those earnings are repatriated~~provisions of the 2017 Tax Act, significant estimates in calculations, and the preparation of analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the 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 our interpretation. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret additional guidance, we may make adjustments to ~~the United States, as well as changes to U.S. tax laws~~provisional amounts that we have recorded that may ~~be enacted~~materially impact our provision for income taxes in the ~~future, could affect~~period in which the ~~tax treatment of our foreign earnings.~~adjustments are made.

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

In connection with the Spin-Off, we could be subject to significant tax liabilities.

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

We continue to be responsible for potential tax liabilities in connection with consolidated income tax returns filed with Expedia prior to or in connection with the Spin-Off. By virtue of previously filed consolidated tax returns with Expedia, we are currently under an IRS audit for the 2009, 2010, and short-period 2011 tax years. In connection with that audit, we received, in January 2017, notices of proposed adjustment from the IRS for the 2009 and 2010 tax years, which would result in an increase in our worldwide income tax expense. The proposed adjustments would result in an increase to our worldwide income tax expense in an estimated range oftotaling $10 million to $14 million for those specific years after consideration of competent authority relief, exclusive of interest and penalties. We are also subject to various ongoing state income tax audits. The outcome of these matters or any other audits could subject us to significant tax liabilities.

We are subject to fluctuation in foreign currency exchange risk.

We conduct a significant and growing portion of our business outside the United States but report our results in U.S. dollars. As a result, we face exposure to movements in foreign currency exchange rates, particularly those related to the Euro, British pound sterling, and Australian dollar. These exposures include, but are not limited to, re-measurement of gains and losses from changes in the value of foreign denominated assets and liabilities; translation gains and losses on foreign subsidiary financial results that are

translated into U.S. dollars upon consolidation; and planning risk related to changes in exchange rates between the time we prepare our annual and quarterly forecasts and when actual results occur.

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

Significant fluctuations in foreign currency exchange rates can affect consumer travel behavior. Volatility in foreign currency exchange rates and its impact on consumer behavior, which may differ across regions, makes it more difficult to forecast industry and

consumer trends and the timing and degree of their impact on our markets and business, which in turn could adversely affect our ability to effectively manage our business and adversely affect our results of operations.

Liberty TripAdvisor Holdings, Inc. currently is a controlling stockholder.

Liberty TripAdvisor Holdings, Inc., or LTRIP, effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other than with respect to the election by the holders of our common stock of 25% of the members of our Board of Directors and matters as to which Delaware law requires separate class votes), including but not limited to, corporate transactions such as mergers, business combinations or dispositions of assets, the authorization or issuance of new equity or debt securities and determinations with respect to our business direction and policies. Our Chairman ~~Greg~~Gregory Maffei and ~~Director~~one of our Directors Albert Rosenthaler also serve as officers and directors of LTRIP. LTRIP ~~which has investments in other companies,~~ may have interests that differ from those of our other stockholders and they may vote in a way with which our other stockholders may not agree or that may be adverse to other stockholders’ interests. LTRIP is not restricted from investing in other businesses involving or related to our business. ~~Liberty’s~~LTRIP’s control of us, as well as the existing provisions of our organizational documents and Delaware law, may discourage or prevent a change of control that might otherwise be beneficial, which may reduce the market price of our common stock.

We are currently relying on the “controlled company” exemption under NASDAQ Stock Market Listing Rules, pursuant to which “controlled companies” are exempt from certain corporate governance requirements otherwise applicable under NASDAQ listing rules.

The NASDAQ Stock Market Listing Rules exempt “controlled companies,” or companies of which more than 50% of the voting power is held by an individual, a group or another company, from certain corporate governance requirements, including those requirements that:

A majority of the Board of Directors consist of independent directors;

Compensation of officers be determined or recommended to the Board of Directors by a majority of its independent directors or by a compensation committee comprised solely of independent directors; and

Director nominees be selected or recommended to the Board of Directors by a majority of its independent directors or by a nominating committee that is composed entirely of independent directors.

We currently rely on the controlled company exemption for certain of the above requirements. Accordingly, our stockholders will not be afforded the same protections generally as stockholders of other NASDAQ-listed companies with respect to corporate governance for so long as we rely on these exemptions from the corporate governance requirements.

If we are unable to successfully maintain effective internal control over financial reporting, investors may lose confidence in our reported financial information and our stock price and business may be adversely impacted.

As a public company, we are required to maintain internal control over financial reporting and our management is required to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year. Additionally, we are required to disclose in our Annual Reports on Form 10-K our management’s assessment of the effectiveness of our internal control over financial reporting and a registered public accounting firm’s attestation report on this assessment. If we are not successful in maintaining effective internal control over financial reporting, there could be inaccuracies or omissions in the consolidated financial

information we are required to file with the SEC. Additionally, even if there are no inaccuracies or omissions, we could be required to publicly disclose the conclusion of our management that our internal control over financial reporting or disclosure controls and procedures are not effective. These events could cause investors to lose confidence in our reported financial information, adversely impact our stock price, result in increased costs to remediate any deficiencies, attract regulatory scrutiny or lawsuits that could be costly to resolve and distract management’s attention, limit our ability to access the capital markets or cause our stock to be delisted from NASDAQ or any other securities exchange on which we are then listed.

The market price and trading volume of our common stock may be volatile and may face negative pressure.

Our stock price has experienced, and could continue to experience in the future, substantial volatility. The market price of our common stock is affected by a number of factors, including the risk factors described in this section and other factors beyond our control. Factors affecting the trading price of our common stock could include:

Quarterly variations in our or our competitors’ results of operations;

Changes in earnings estimates or recommendations by securities analysts;

~~Failure to meet market expectations;~~

•

Failure to meet market expectations;

The announcement of new products or product enhancements by us or our competitors;

Repurchases of our common stock pursuant to our share repurchase program which could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock;

Developments in our industry, including changes in governmental regulations; and

General market conditions and other factors, including factors related to our operating performance or the operating performance of our competitors.

Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations and general economic, political and market conditions, such as recessions, interest rate changes or foreign currency exchange fluctuations, may negatively impact the market price of our common stock regardless of our actual operating performance.

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

For the ~~period~~three months ended March 31, ~~2017,~~2018, the average daily trading volume of our common stock on NASDAQ was approximately ~~2.8~~3.2 million shares. If our existing stockholders or their distributees sell substantial amounts of our common stock in the public market, the market price of the common stock could decrease significantly. The perception in the public market that our existing stockholders might sell shares of common stock could also depress the trading price of our common stock. In addition, certain stockholders have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. If LTRIP or some other stockholder sells substantial amounts of our common stock in the public market, or if there is a perception in the public market that LTRIP might sell shares of our common stock, the market price of our common stock could decrease significantly. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.

Our certificate of incorporation and bylaws contain provisions that could delay or prevent a change of control of our company or changes in our Board of Directors that our stockholders might consider favorable. These provisions include:

Authorization and issuance of Class B common stock that entitles holders to ten votes per share;

Authorization of the issuance of preferred stock which can be created and issued by the Board of Directors without prior stockholder approval, with rights senior to those of our common stock;

Prohibiting our stockholders from filling board vacancies or calling special stockholder meetings; and

Limiting who may call special meetings of stockholders.

•

~~Limiting who may call special meetings of stockholders.~~

We are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation, bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our Board of Directors or initiate actions that are opposed by our then-current Board of Directors, including a merger, tender offer or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our Board of Directors could cause the market price of our common stock to decline.

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

Unregistered Sales of Equity Securities

During the quarter ended March 31, ~~2017,~~2018, we did not issue or sell any shares of our common stock, Class B common stock or other equity securities pursuant to unregistered transactions in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended.

Share Repurchases

On January ~~25, 2017,~~31, 2018, TripAdvisor’s Board of Directors authorized up to $250 million of share repurchases. Our Board of Directors authorized and directed management, working with the Executive Committee of our Board of Directors, ~~authorized~~to affect the ~~repurchase of $250 million of our shares of common stock under a new~~ share repurchase ~~program. The~~program in compliance with applicable legal requirements. This new repurchase program has no expiration ~~date~~ but may be suspended or terminated by the Board of Directors at any time. The Executive Committee of our Board of Directors will determine the price, timing, amount and method of such repurchases based on its evaluation of market conditions and other factors, and any shares repurchased will be in compliance with applicable legal requirements, at prices determined to be attractive and in the best interests of both the Company and its stockholders.time

During the three months ended March 31, ~~2017,~~2018, we repurchased ~~3,529,923~~252,650 shares of outstanding common stock under the share repurchase program, as set forth in the table below:

Period	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs		Total Number of Shares Purchased		Average Price Paid per Share (1)			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to January 31	—			—		—		$	250,000,000	—			—		—		$	250,000,000
February 1 to February 28	—			—		—		$	250,000,000	—			—		—		$	250,000,000
March 1 to March 31		3,529,923	$		42.49		3,529,923	$	100,000,041		252,650	$		39.88		252,650	$	239,924,296

Total		3,529,923					3,529,923				252,650					252,650

~~As of March 31, 2017, we have a remaining balance of $100 million to repurchase shares of our common stock under the share repurchase program.~~


(1)	This amount excludes fees and commissions associated with the share repurchase.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other In~~formation~~

On May 9, 2017, the Company entered into an employment agreement with Dermot Halpin, President of Vacation Rentals and Attractions. As previously disclosed, in November 2016, Mr. Halpin agreed to assume responsibility for our Attractions business when Barrie Seidenberg announced her intention to transition from the Company to pursue other opportunities. Mr. Halpin’s employment arrangement was modified to reflect the additional responsibilities assumed by Mr. Halpin. More specifically, the Company and Mr. Halpin have agreed as follows:

~~Mr. Halpin will receive a base salary of $430,000.~~

~~Mr. Halpin will have a target of 75% of his base salary for an annual discretionary bonus.~~

While Mr. Halpin’s employment may be terminated with or without Cause, if Mr. Halpin is terminated without Cause (as defined in the agreement), or Mr. Halpin resigns for Good Reason (as defined in the agreement), Mr. Halpin will receive, among other things, (i) cash severance equivalent to 12 months of his base salary, (ii) reimbursement of health premium benefits for a period of time, and (iii) acceleration of equity that would have vested during the 12 month period following the termination. The Company will also consider, in good faith, the payment of Mr. Halpin’s annual bonus on a pro rata basis for the year in which the termination occurs.

~~Effective May 9, 2017, Mr. Halpin also received a grant of 85,269 RSUs, such RSUs vesting in three equal annual installments commencing on December 31, 2017.~~

The description of the Agreement is summary in nature and is qualified in its entirety by reference to the full text of the Agreement, which is attached hereto as Exhibit 10.1 and is incorporated by reference herein. Unless otherwise specified, capitalized terms used above without definitions have the meanings set forth in the Agreement.Information

Not applicable.

Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.

Exhibit

Filed

Incorporated by Reference

No.

Exhibit Description

Herewith

Form

SEC File No.

Exhibit

Filing Date

10.1+

~~Offer Letter dated May 9, 2017 between Dermot Halpin and TripAdvisor LLC~~Form of Option Agreement (Domestic)

10.2+

Form of Option Agreement (International)

10.3+

Form of Restricted Stock Unit Agreement (Domestic)

10.4+

Form of Restricted Stock Unit Agreement (International)

10.5+

Form of Restricted Stock Unit Agreement (French)

10.6+

Form of Restricted Stock Unit Agreement (Performance Based) (Domestic)

10.7+

Form of Restricted Stock Unit Agreement (Performance Based) (French)

31.1

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following financial statements from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, ~~2017,~~2018, formatted in XBRL: (i) Unaudited Condensed Consolidated Statements of Operations, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income, (iii) Unaudited Condensed Consolidated Balance Sheets, (iv) Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity, (v) Unaudited Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.

+ Indicates a management contract or a compensatory plan, contract or arrangement.

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 hereunto duly authorized.

TripAdvisor, Inc.
By:		/s/ Ernst Teunissen
		Ernst Teunissen
		Chief Financial Officer

By:		/s/ Noel Watson
		Noel Watson
		Chief Accounting Officer

May ~~9, 2017~~8, 2018

5958

Class		Outstanding Shares at May 4, ~~2017~~2018
Common Stock, $0.001 par value per share		~~128,426,960~~124,603,606 shares
Class B common stock, $0.001 par value per share		12,799,999 shares

		Page
Part I—Financial Information
Item 1. Unaudited Condensed Financial Statements
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017		3
Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017		4
Unaudited Condensed Consolidated Balance Sheets at March 31, ~~2017~~2018 and December 31, ~~2016~~2017		5
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, ~~201~~20187		6
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017		7
Notes to Unaudited Condensed Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2325
Item 3. Quantitative and Qualitative Disclosures about Market Risk		4039
Item 4. Controls and Procedures		4140
Part II—Other Information
Item 1. Legal Proceedings		4140
Item 1A. Risk Factors		4140
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5655
Item 3. Defaults Upon Senior Securities		56
Item 4. Mine Safety Disclosures		56
Item 5. Other Information		5756
Item 6. Exhibits		5857
Signatures		5958

	Three months ended March 31, 2018
Major products/revenue sources:	(in millions)
Click-based advertising and transaction revenue	$	189
Display-based advertising and subscription revenue		71
Other hotel revenue		39
Total Hotel Revenue (1)		299

Non-Hotel Revenue (1)		79
Total Revenue	$	378

				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Options			Price Per		Contractual		Intrinsic
	Outstanding			Share		Life		Value
	(in thousands)					(in years)		(in millions)
Options outstanding at December 31, 2016		5,818		$	57.60
Granted		1,486			42.89
Exercised (1)		(374	)		29.10
Cancelled or expired		(170	)		85.55
Options outstanding at March 31, 2017		6,760		$	55.24		6.4	$	13
Exercisable as of March 31, 2017		2,885		$	47.97		4.9	$	12
Vested and expected to vest after March 31, 2017 (2)		6,760		$	55.24		6.4	$	13

	Three months ended
	March 31,
	2018		2017
Net income	$	5	$	13
Other comprehensive income:
Foreign currency translation adjustments (1)		8		7
Total other comprehensive income		8		7
Comprehensive income	$	13	$	20

	As Reported - ASC 606 March 31, 2018			Impact of Accounting under ASC 606			Adjusted - ASC 605 March 31, 2018
	(in millions)
Revenue	$	378		$	(4	)	$	374
Operating income		23			(4	)		19
Income before income taxes		21			(4	)		17
Provision for income taxes		(16	)		1			(15	)
Net income		5			(3	)		2

	March 31, 2018		December 31, 2017
Accounts receivable	$	269	$	230
Contract assets		12		-
Total	$	281	$	230

				Weighted
				Average
				Grant-		Aggregate
	RSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested RSUs outstanding as of December 31, 2016		2,856		$	69.35
Granted		3,732			42.90
Vested and released (1)		(692	)		67.30
Cancelled		(104	)		63.40
Unvested RSUs outstanding as of March 31, 2017		5,792		$	52.65	$	250
Expected to vest after March 31, 2017 (2)		5,792		$	52.65	$	250

	Stock
	Options		RSUs
Unrecognized compensation expense	$	64	$	283
Weighted average period remaining (in years)		2.9		3.4

	Three months ended March 31,
	2017(1)		2016(1)
Stock options		4,433		2,871
RSUs		2,014		887
Total		6,447		3,758

	March 31, 2017
									Cash and		Short-Term		Long-Term
	Amortized		Unrealized		Unrealized		Fair		Cash		Marketable		Marketable
	Cost		Gains		Losses		Value		Equivalents		Securities		Securities
Cash	$	727	$	-	$	-	$	727	$	727	$	-	$	-
Level 1:
Money market funds		4		-		-		4		4		-		-
Level 2:
U.S. agency securities		3		-		-		3		-		2		1
Certificates of deposit		1		-		-		1		-		1		-
Corporate debt securities		14		-		-		14		-		12		2
Subtotal		18		-		-		18		-		15		3
Total	$	749	$	-	$	-	$	749	$	731	$	15	$	3

	December 31, 2016
									Cash and		Short-Term		Long-Term
	Amortized		Unrealized		Unrealized		Fair		Cash		Marketable		Marketable
	Cost		Gains		Losses		Value		Equivalents		Securities		Securities
Cash	$	595	$	-	$	-	$	595	$	595	$	-	$	-
Level 1:
Money market funds		17		-		-		17		17		-		-
Level 2:
U.S. agency securities		23		-		-		23		-		21		2
U.S. treasury securities		8		-		-		8		-		8		-
Certificates of deposit		16		-		-		16		-		15		1
Commercial paper		5		-		-		5		-		5		-
Corporate debt securities		82		-		-		82		-		69		13
Subtotal		134		-		-		134		-		118		16
Total	$	746	$	-	$	-	$	746	$	612	$	118	$	16

	March 31, 2018
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash, Cash Equivalents and Restricted Cash		Short-Term Marketable Securities		Long-Term Marketable Securities
Cash and restricted cash (1)	$	340	$	—	$	—	$	340	$	340	$	—	$	—
Level 1:
Money market funds		295		—		—		295		295		—		—
Level 2:
U.S. agency securities		4		—		—		4		—		4		—
Certificates of deposit		2		—		—		2		—		2		—
Corporate debt securities		14		—		—		14		—		9		5
Subtotal		20		—		—		20		—		15		5
Total	$	655		—		—	$	655	$	635	$	15	$	5

	Three months ended March 31, 2017											Three months ended March 31, 2018
	Hotel		Non-Hotel			Corporate and Unallocated			Total			Hotel		Non-Hotel			Corporate and Unallocated			Total
	(in millions)											(in millions)
Revenue	$	314	$	58		$	-		$	372		$	299	$	79		$	-		$	378
Adjusted EBITDA (1)	88			(15	)		-			73		88			(8	)		-			80
Depreciation							(19	)		(19	)							(20	)		(20	)
Amortization of intangible assets							(8	)		(8	)							(8	)		(8	)
Stock-based compensation							(19	)		(19	)							(29	)		(29	)
Operating income										27											23
Other expense, net										(2	)										(2	)
Income before income taxes										25											21
Provision for income taxes										(12	)										(16	)
Net income										13											5

	Three months ended March 31, 2016											Three months ended March 31, 2017
	Hotel		Non-Hotel			Corporate and Unallocated			Total			Hotel		Non-Hotel			Corporate and Unallocated			Total
	(in millions)											(in millions)
Revenue	$	303	$	49		$ -			$	352		$	314	$	58		$	-		$	372
Adjusted EBITDA (1)	106			(21	)	-				85		88			(15	)		-			73
Depreciation							(16	)		(16	)							(19	)		(19	)
Amortization of intangible assets							(8	)		(8	)							(8	)		(8	)
Stock-based compensation							(19	)		(19	)							(19	)		(19	)
Operating income										42											27
Other expense, net										(4	)										(2	)
Income before income taxes										38											25
Provision for income taxes										(9	)										(12	)
Net income										29											13



(1)	Includes allocated general and administrative expenses in our Hotel segment of ~~$19~~$20 million and ~~$22~~$19 million; and in our Non-Hotel segment of $9$12 million and $9 million for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively.



(1)	Included in Adjusted EBITDA is a general and administrative expense allocation for each segment, which is based on the segment’s percentage of our total personnel costs, excluding stock-based compensation. ~~See~~Refer to “Note 12: Segment Information,” in the notes to our unaudited condensed consolidated financial statements for more information.
(2)	We define “Adjusted EBITDA Margin by Segment”, as Adjusted EBITDA by segment divided by revenue by segment.

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ (Do not check if a small reporting company)

Small reporting company

Emerging growth company