Stock Based Awards and Other Equity Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Amount of Stock-Based Compensation Expense Related to Stock-Based Awards

The following table presents the amount of stock-based compensation expense related to stock-based awards on our unaudited condensed consolidated statements of operations during the periods presented:

	Three months ended						Nine months ended
	September 30,						September 30,
	2020			2019			2020			2019
	(in millions)						(in millions)
Cost of revenue	$	—		$	—		$	1		$	1
Selling and marketing		4			5			12			17
Technology and content		12			13			32			40
General and administrative		12			11			35			33
Total stock-based compensation expense		28			29			80			91
Income tax benefit from stock-based compensation		(6	)		(7	)		(17	)		(21	)
Total stock-based compensation expense, net of tax	$	22		$	22		$	63		$	70

Summary of Stock Option Activity

A summary of our stock option activity, consisting primarily of service-based non-qualified stock options, during the nine months ended September 30, 2020, is presented below:

				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, 2019		6,017		$	50.27
Granted		1,091			25.29
Exercised		(2	)		17.22
Cancelled or expired		(1,220	)		46.10
Options outstanding at September 30, 2020		5,886		$	46.52		5.5	$	—
Exercisable as of September 30, 2020		3,360		$	55.74		3.5	$	—
Vested and expected to vest after September 30, 2020 (1)		5,886		$	46.52		5.5	$	—

(1) The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and   therefore do not include a forfeiture rate in our vested and expected to vest calculation unless necessary for a performance condition award.

Weighted-Average Assumptions of Estimated Fair Value of Stock Option Grants

The fair value of stock option grants 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:

	Nine months ended
	September 30,
	2020			2019
Risk free interest rate		1.16	%		2.40	%
Expected term (in years)		5.30			5.19
Expected volatility		43.25	%		42.15	%
Expected dividend yield	—  %			—  %
Weighted-average grant date fair value	$	10.08		$	21.69

Summary of RSU Activity

A summary of our RSU activity during the nine months ended September 30, 2020 is presented below:

				Weighted
				Average
				Grant-		Aggregate
	RSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested RSUs outstanding as of December 31, 2019		8,469		$	45.42
Granted		6,244			24.48
Vested and released (1)		(2,542	)		46.45
Cancelled		(3,452	)		37.59
Unvested RSUs outstanding as of September 30, 2020		8,719		$	32.65	$	171

(1)   Inclusive of 669,525 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 Tripadvisor, Inc. 2018 Stock and Annual Incentive Plan (the “2018 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.

Summary of Unrecognized Stock-Based Compensation Expense and Weighted Average Period Remaining

A summary of our remaining unrecognized stock-based compensation expense and the weighted average remaining amortization period at September 30, 2020 related to our non-vested equity awards is presented below (in millions, except in years information):

	Stock
	Options		RSUs/MSUs
Unrecognized compensation expense	$	22	$	193
Weighted average period remaining (in years)		1.9		1.9

MSUs

Summary of RSU Activity

A summary of our MSU activity during the nine months ended September 30, 2020 is presented below:

				Weighted
				Average
				Grant-		Aggregate
	MSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested MSUs outstanding as of December 31, 2019		389		$	40.99
Granted (1)		133			28.15
Vested and released		―			―
Cancelled		(59	)		51.82
Unvested MSUs outstanding as of September 30, 2020		463		$	35.92	$	9

(1) MSUs provide for vesting based upon the Company’s total shareholder return, or TSR, performance over the period commencing January 1, 2020 through December 31, 2022 relative to the TSR performance of the Nasdaq Composite Total Return Index. Based upon actual attainment relative to the target performance metric, the grantee has the ability to receive up to 200% of the target number of MSUs originally granted, or to receive none at all. These MSUs were granted under the 2018 Plan.