TripAdvisor 2011 Annual Report Download - page 44

Table of Contents
Adjusted EBITDA
To provide investors with additional information regarding our financial results, we have disclosed Adjusted EBITDA, a non-GAAP
financial measure, within this Annual Report on Form 10-
K. We have provided reconciliations below of Adjusted EBITDA to operating income,
the most directly comparable 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.
We define “Adjusted EBITDA” as operating income (loss), excluding depreciation of property and equipment, which includes internal use
software and website development, amortization of intangible assets, stock-based compensation and non-recurring expenses incurred to effect
the Spin-Off from Expedia during the year ended December 31, 2011. Adjusted EBITDA is the primary metric by which management evaluates
the performance of its business and on which internal budgets are based. In particular, the exclusion of certain expenses in calculating Adjusted
EBITDA facilitates operating performance comparisons on a period-to-period basis. Adjusted EBITDA eliminates items that are either not part
of our core operations such as the costs incurred in connection with the Spin-Off or those costs that do not require a cash outlay, such as stock-
based compensation. Adjusted EBITDA also excludes depreciation and amortization expense, which are based on our estimates of the useful life
of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historical costs and other factors
and may not be indicative of current or future capital expenditures. We believe that by excluding certain items, such as stock-based
compensation and non-recurring expenses, Adjusted EBITDA corresponds more closely to the cash operating income generated from our
business and allows investors to gain an understanding of the factors and trends affecting the ongoing cash earnings capabilities of our business,
from which capital investments are made and debt is serviced.
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. Some of these limitations are:
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various
cash flow metrics, net income and our other GAAP results.
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Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
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Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
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Adjusted EBITDA does not consider the potentially dilutive impact of stock
-
based compensation;
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Although depreciation and amortization are non
-
cash charges, the assets being depreciated and amortized may have to be replaced in
the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital
expenditure requirements; and
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Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its
usefulness as a comparative measure.