TripAdvisor 2014 Annual Report Download - page 40

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(7) 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. Adjusted EBITDA is the primary metric by which
management evaluates the performance of our business and on which internal budgets are based. 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 (6) non-recurring expenses. Such amounts are detailed below. See a discussion of “Adjusted
EBITDA” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within this
Annual Report on Form 10-K.
We have provided a reconciliation below of Adjusted EBITDA to net income, the most directly comparable GAAP financial
measure.
 Year Ended December 31,
2014 2013 2012  2011 2010
(in millions)
Adjusted EBITDA ....................................................... $468 $ 379 $ 352 $ 323 $ 261
Depreciation (1) ....................................................... (47) (30) (20 ) (18) (13)
Amortization of intangible assets ............................ (18) (6) (6 ) (8) (15)
Stock-based compensation ....................................... (63) (49) (30 ) (17) (7)
Spin-Off costs .......................................................... — — — (7) —
Other expense, net ................................................... (18) (10) (14 ) (1) (2)
Provision for income taxes ...................................... (96) (79) (87 ) (94) (85)
Net income ................................................................... $226 $ 205 $ 195 $ 178 $ 139
(1) Includes amortization of internal use software and website development costs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
TripAdvisor, Inc. owns and operates a portfolio of leading online travel brands. TripAdvisor, our flagship brand, is the world’s
largest travel site, and our mission is to help people around the world plan and book the perfect trip. We accomplish this by, among
other things, aggregating millions of travelers’ reviews and opinions about accommodations, destinations, activities and attractions,
and restaurants throughout the world so that our users have access to trusted advice wherever their trip takes them. Our platform not
only helps users plan their trip with our unique user-generated content, but also enables users to compare real-time pricing and
availability so that they can book hotels, vacation rentals, flights, activities and attractions, and restaurants.
Our branded websites include tripadvisor.com in the United States and localized versions of the TripAdvisor website in 45 other
countries, including China under the brand, daodao.com. Our TripAdvisor-branded websites reached more than 315 million monthly
unique visitors during the year ended December 31, 2014, according to Google Analytics. We currently feature more than 200 million
reviews and opinions on 1.6 million accommodations – including more than 915,000 hotels and accommodations and 650,000
vacation rentals – as well as 2.4 million restaurants and more than 500,000 attractions in 147,000 destinations throughout the world. In
addition to user-generated content, our websites feature price comparison tools, links to partner websites, including travel advertisers,
where users can book their travel arrangements. Users may now also complete hotel bookings directly without our partners through
tripadvisor.com and also through the TripAdvisor mobile application where coverage is available. In addition to the flagship
TripAdvisor brand, we now manage and operate 24 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.
Executive Summary
Our long-term financial results are principally dependent on our ability to grow click-based advertising revenue, or CPC
revenue. We are investing in areas of potential CPC revenue growth, including Instant Booking, international expansion and
innovations in the mobile user experience. We are also investing in display-based advertising, Business Listings, Vacation Rentals,
Restaurants and Attractions. As the largest online travel website, we are an attractive marketing channel for advertisers—including
hotel chains, independent hoteliers, online travel agencies, destination marketing organizations, and other travel-related and non-travel
related product and service providers— who seek to sell their products and services to our large user base. The key drivers of our
click-based and display-based advertising revenue are described below, as well as a summary of our key growth areas, current trends
impacting our business and our reporting segments, which currently consists of our Hotel segment and Other segment.