TripAdvisor 2013 Annual Report Download - page 54

Adjusted EBITDA
To provide investors with additional information regarding our financial results, we have disclosed Adjusted
EBITDA in this Annual Report on Form 10-K, a non-GAAP financial measure. We have provided
reconciliations below of Adjusted EBITDA to net 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 net income (loss) plus: (1) provision for income taxes; (2) other (income)
expense, net; (3) depreciation of property and equipment, including internal use software and website
development; (4) amortization of intangible assets; (5) stock-based compensation; and (6) non-recurring
expenses. 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 non-recurring expenses, or those costs that
do not require a cash outlay, such as stock-based compensation. Adjusted EBITDA also excludes depreciation
and amortization expense, which is 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 that 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:
• Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital
expenditures or contractual commitments;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
• Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation;
• 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;
• Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
and
• Other companies, including companies in our own industry, may calculate Adjusted EBITDA
differently than we do, limiting its usefulness as a comparative measure.
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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