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Stock Based Awards and Other Equity Instruments | 3 Months Ended
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Mar. 31, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock Based Awards and Other Equity Instruments | NOTE 8: STOCK BASED AWARDS AND OTHER EQUITY INSTRUMENTS Stock-Based Compensation Expense 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 |
|  | March 31, |
|  | 2021 |  |  | 2020 |
|  | (in millions) |
Selling and marketing |  | $ | 4 |  |  | $ | 4 |
Technology and content |  |  | 12 |  |  |  | 11 |
General and administrative |  |  | 13 |  |  |  | 11 |
Total stock-based compensation |  |  | 29 |  |  |  | 26 |
Income tax benefit from stock-based compensation |  |  | (5 | ) |  |  | (6 | )
Total stock-based compensation, net of tax effect |  | $ | 24 |  |  | $ | 20 |
We capitalized $3 million and $4 million of stock-based compensation expense as internal-use software and website development costs during the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2020, the Company reversed $3 million of previously recorded stock-based compensation expense related to certain performance-based RSUs. As of March 31, 2020, the Company concluded that performance metrics required to be met in order for these awards to fully vest were no longer expected to be achievable, due to COVID-19’s impact on our business. Stock-Based Award Activity and Valuation 2021 Stock Option Activity A summary of our stock option activity, consisting primarily of service-based non-qualified stock options during the three months ended March 31, 2021, 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, 2020 |  |  | 5,615 |  |  | $ | 46.31 |  |  |  |  |  |  |  |  |
Granted |  |  | 699 |  |  |  | 45.92 |  |  |  |  |  |  |  |  |
Exercised (1) |  |  | (628 | ) |  |  | 34.70 |  |  |  |  |  |  |  |  |
Cancelled or expired |  |  | (94 | ) |  |  | 40.93 |  |  |  |  |  |  |  |  |
Options outstanding at March 31, 2021 |  |  | 5,592 |  |  | $ | 47.66 |  |  |  | 5.6 |  |  | $ | 62 |
Exercisable as of March 31, 2021 |  |  | 3,203 |  |  | $ | 55.64 |  |  |  | 3.7 |  |  | $ | 22 |
Vested and expected to vest after March 31, 2021 (2) |  |  | 5,592 |  |  | $ | 47.66 |  |  |  | 5.6 |  |  | $ | 62 |
| (1) | Inclusive of 357,148 stock options which were not converted into shares due to net share settlement in order to cover the aggregate exercise price and the required amount of employee withholding taxes. Potential shares which were withheld in connection with exercised stock options due to net share settlement to satisfy required employee tax withholding requirements and payment of the aggregate exercise price 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.
| (2) | 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.
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 Nasdaq as of March 31, 2021 was $53.79. The total intrinsic value of stock options exercised for the three months ended March 31, 2021 was $8 million. This amount was not material for the three months ended March 31, 2020. 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:
|  | Three months ended |
|  | March 31, |
|  | 2021 |  |  | 2020 |
Risk free interest rate |  |  | 0.65 | % |  |  | 1.18 | %
Expected term (in years) |  |  | 5.33 |  |  |  | 5.30 |
Expected volatility |  |  | 49.69 | % |  |  | 42.64 | %
Expected dividend yield |  | — % |  |  | — % |
Weighted-average grant date fair value |  | $ | 20.35 |  |  | $ | 10.18 |
Our 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. We amortize the grant-date fair value of our stock option grants as stock-based compensation expense over the vesting term on a straight-line basis, with the amount of compensation expense recognized at any date at least equaling the portion of the grant-date fair value of the award that is vested at that date. The total fair value of stock options vested was $8 million for both the three months ended March 31, 2021 and 2020. 2021 RSU Activity A summary of our activity with respect to restricted stock units (“RSUs”), consisting primarily of service-based vesting terms, during the three months ended March 31, 2021 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, 2020 |  |  | 8,111 |  |  | $ | 32.29 |  |  |  |  |
Granted |  |  | 2,078 |  |  |  | 45.79 |  |  |  |  |
Vested and released (1) |  |  | (2,360 | ) |  |  | 33.94 |  |  |  |  |
Cancelled |  |  | (307 | ) |  |  | 32.14 |  |  |  |  |
Unvested RSUs outstanding as of March 31, 2021 |  |  | 7,522 |  |  | $ | 35.50 |  |  | $ | 405 |
| (1) | Inclusive of 534,159 RSUs withheld due to net share settlement to satisfy required employee tax withholding requirements. Potential shares which were withheld in connection with settlement of RSUs to satisfy required employee tax withholding requirements remain in the authorized but unissued pool under 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.
We amortize the grant-date fair value of RSUs as stock-based compensation expense over the vesting term, which is typically over a four-year requisite service period on a straight-line basis, with the amount of compensation expense recognized at any date at least equaling the portion of the grant-date fair value of the award that is vested at that date. A summary of our activity related to market-based RSUs (“MSUs”) during the three months ended March 31, 2021 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, 2020 |  |  | 174 |  |  | $ | 37.29 |  |  |  |  |
Granted |  |  | ― |  |  |  | ― |  |  |  |  |
Vested and released |  |  | ― |  |  |  | ― |  |  |  |  |
Cancelled |  |  | ― |  |  |  | ― |  |  |  |  |
Unvested MSUs outstanding as of March 31, 2021 |  |  | 174 |  |  | $ | 37.29 |  |  | $ | 9 |
Total current income tax benefits associated with the exercise or settlement of Tripadvisor stock-based awards held by our employees was $9 million and $12 million during the three months ended March 31, 2021 and 2020, respectively. Unrecognized Stock-Based Compensation A summary of our remaining unrecognized stock-based compensation expense and the weighted average remaining amortization period at March 31, 2021 related to our non-vested equity awards is presented below (in millions, except in years information):
|  | Stock |  |  |  |  |
|  | Options |  |  | RSUs/MSUs |
Unrecognized compensation expense |  | $ | 28 |  |  | $ | 212 |
Weighted average period remaining (in years) |  |  | 2.6 |  |  |  | 2.5 |

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- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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