NASDAQ:TRVG trivago Q3 2023 Earnings Report $3.69 +0.21 (+6.01%) As of 09:42 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast trivago EPS ResultsActual EPS$0.20Consensus EPS $0.15Beat/MissBeat by +$0.05One Year Ago EPSN/Atrivago Revenue ResultsActual Revenue$171.81 millionExpected Revenue$176.89 millionBeat/MissMissed by -$5.08 millionYoY Revenue GrowthN/Atrivago Announcement DetailsQuarterQ3 2023Date11/1/2023TimeN/AConference Call DateThursday, November 2, 2023Conference Call Time8:15AM ETUpcoming Earningstrivago's Q1 2025 earnings is scheduled for Tuesday, April 29, 2025, with a conference call scheduled on Wednesday, April 30, 2025 at 8:15 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Earnings HistoryCompany ProfilePowered by trivago Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 2, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good day, ladies and gentlemen. Thank you for standing by, and welcome to the trivago Q3 Earnings Call 2023. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I must advise you that this call is being recorded today, Thursday, 2nd November 2023. We are pleased to be joined on the call today by Johannes Thomas, trivago's CEO and Managing Director as well as Matthias Tillman, trivago's CFO and Managing Director. Operator00:00:36The following discussion, including responses to your questions, reflects management's reviews as of today, Thursday, November 2, 2023 only. Trivago does not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward looking, typically preceded by words such as we expect, We believe we anticipate or similar statements. Please refer to the Q3 2023 operating and financial review on the company's other filings with the SEC for information about factors which could cause trivago's actual results to differ materially from these forward looking statements. You will find reconciliations of non GAAP measures to the most comparable GAAP measures discussed today in trivago's operating and financial review, which is posted on the company's IR website at ir. Operator00:01:28Trivago.com. You are encouraged to periodically visit trivago's Investor Relations site, for important content. Finally, unless otherwise stated, all comparisons on this call will be against results for the comparable period of 2022. With that, let me turn the call over to Johannes. Please go ahead. Speaker 100:01:49Good morning, everyone, and thank you for joining our Q3 2023 earnings call. Following our last conversation, I'm glad to provide you with updates On our journey towards reigniting trivago's growth and presence in the market, our mission is clear. When price savvy travelers think about booking a hotel, We want them to think trivago. We simplify their planning, help them safe and instill confidence in their booking decisions. The quarter unfolded largely as we anticipated. Speaker 100:02:20The continued negative effects of reduced brand marketing during the pandemic, Our normalized monetization and volatility in Google search ads continue to impact us. However, with major uncertainties now behind us and robust travel outlook, we are encouraged by our TV campaign performance this summer. This positive momentum has steered our decision to change course and prioritize growth in the upcoming years. As a result, we expect adjusted EBITDA to be close to flat in 2024. I will now detail 4 strategic priorities that we believe will propel our success. Speaker 100:02:59Our first strategic priority is to reignite our globally recognized brand. We are planning to revamp our brand marketing investments to get back to the forefront of Travelers' Mine. Listing our branded visitor baseline will be key to return to growth and we expect it to be a multiyear effort. As we approach the launch of our winter campaign, we are optimistic that we can demonstrate initial results by the Q1 of 2024. It's essential to note that our brand marketing isn't just about campaigns. Speaker 100:03:30We treat it as a performance marketing channel that can be optimized over time. Drawing from our summer learnings, there's a considerable scope of enhancements across multiple dimensions from media channel and country mix to stronger creatives. As we refine these elements, we plan to prioritize growth as long as we see the anticipated incremental returns. Our second strategic priority is to provide a seamless hotel search experience. We're simplifying the search across hundreds of sites and millions of accommodations, Saving travelers significant time. Speaker 100:04:06We are constantly enhancing the user journey by conducting experiments on all aspects of our product. In the past month, we have qualified a range of product tests with positive impact on our user experience and conversion. We are glad to share that we have completed our image migration to the Google Cloud. This step has improved the quality and selection of our images and will enable us to iterate faster on the visual experience for our users. Our 3rd strategic priority is to deliver the best deal discovery experience. Speaker 100:04:38We want to be the short cut for finding great hotel deals and better prices. This is where we can play our strength and differentiate uniquely. Many travelers are price conscious and due to inflation they have become even more sensitive. Rate disparity has increased since the pandemic, which elevated the value of comparing prices. We've introduced new ways of spotlighting savings and great deals in our search results. Speaker 100:05:04Getting price heavy travelers to return to trivago will be important for our future success. Our 4th strategic priority is to empower partners to realize their full potential on trivago. We're enhancing our marketplace infrastructure with more bidding granularity and rolling out a second price auction test in 3 relevant markets this quarter. By co creating and innovating with our advertising partners, we aim to unlock user value throughout our metasearch and their booking journey. We are deepening our key partnerships and are encouraged by the active engagements we observe. Speaker 100:05:42Our brand strategy supports our commitment to remain a relevant marketing channel for our advertisers, driving high quality traffic to them. In addition to our strategic pillars, we are committed to accelerating our pace of execution and fostering a culture of rapid learning. We have increased velocity in our product development and have doubled the number of experiments we run on our website. The positive momentum within the organization is very tangible. Now our operations are becoming more streamlined around the aforementioned strategic priorities. Speaker 100:06:14As we look ahead, we are confident of showcasing our enhancements and growth in 2024. As a last point, let me express my gratitude to Matthias for his outstanding service to trivago in the last 7 years. His leadership was instrumental in navigating the challenges of the pandemic and maintaining our financial stability. We're looking forward to Robin Harris, who will join as a new CFO next year. His expertise will enrich the leadership team in executing our new strategy. Speaker 100:06:44With that, I'd like to pass the floor to Matthias. Speaker 200:06:48Thank you, Johannes, and welcome, everyone, on the call. Before I walk you through our Q3 results, I would like to thank our leadership team, supervisory board and all employees for supporting me during the last 7 years. I've learned a lot and enjoyed working with amazing people. I will continue to support the company as a consultant during the Q1 To ensure a smooth transition to my successor, Robin Harrias. Now turning to our results. Speaker 200:07:17I will review our results for the Q3 as well as our thoughts for the year. All comparisons for 2023 are on a year over year basis unless otherwise indicated. Our revenue development in the Q3 was in line with our expectations. Revenue declined by 14% or at the same rate as in the second quarter despite the loss of favorable tailwinds during the first half of twenty twenty three from higher average booking values and foreign exchange headwinds, which negatively impacted our monetization levels. Bidding dynamics in our auction remained stable, albeit at lower monetization levels compared to the prior year. Speaker 200:07:58And we continue to observe ad format tests in Google. The combination led to volume losses on our platforms. However, the dynamic improved slightly compared to the 2nd quarter. The net loss of €182,600,000 in the 3rd quarter is a result of a cumulative impairment charge of €196,100,000 in connection with our annual indefinite lift intangible asset and goodwill impairment analysis. The impairment was primarily driven by adjustments made to our profitability outlook arising from the announced strategy shift to long term growth and Our share price declined during the Q3 of 2023. Speaker 200:08:42Adjusted EBITDA, which excludes the impairment of goodwill, was €60,000,000 down from €33,500,000 in the same period last year. Now on to the dynamics in the different regions. We saw referral revenue declines in Americas and Europe, while referral revenue increased in our segment Rest of World As most countries in that segment continue to recover post COVID, referral revenue declined by 21 Percent 17% in Americas and Developed Europe respectively. The decline was largely driven by a loss in performance marketing volumes As we continue to observe ad format tests in Google, leading to fewer impressions of traditional text ads for us. We started testing the new ad formats. Speaker 200:09:28However, it is still too early to conclude on its potential. Early indication is that the Traffic quality seems to be lower compared to text ads and consequently the new ad formats did not compensate for the loss in high quality traffic from text ads. Referral revenue in our segment Rest of World continued to grow, driven by the recovery in markets like Japan, Turkey or Hong Kong. Overall, our referral revenue increased by 24%, driven by an increase in traffic volumes in all channels and higher average booking values. This was partly offset by negative foreign exchange effects. Speaker 200:10:06Moving on to our operational expenses. Excluding advertising expenses and the impairment of intangible assets and goodwill, our operational expenses decreased by 13%. Compensation expenses, including share based compensation and commission and other fees related to non core products that we stopped last year with the main driver for lower operational expenses. Our cash and cash equivalents balance at the end of the quarter was €299,000,000 We have taken steps to improve our capital structure and reward our investors with a special one time dividend of €184,400,000 which reflects our confidence in the future. Our shareholders approved the distribution of the one time dividend on November 1st, And we anticipate the payment of the distribution to ADS holders to be made on November 13, 2023. Speaker 200:11:02Let me close with an outlook on the Q4. The main travel trends remained stable in October. We continue to see robust travel demand and elevated average booking values on our platforms in all regions. The dynamic in performance marketing channels remains volatile, while monetization levels in our own auction have normalized. As a result, the year over year referral revenue development in October was in line with our Q3 results for all regions. Speaker 200:11:31During the Q3, we announced a shift in strategy, which aims to fuel long term growth. We intend to start intensifying our Our brand marketing investments already in the second half of the fourth quarter. We expect the short term effect on traffic volumes to be limited. However, we are confident that the investments will help us to increase our brand base and traffic over time and keep trivago on top of traveler's minds, which is crucial to For the full year 2023, we expect our adjusted EBITDA to be around €50,000,000 With that, let's open the line for questions. Operator, we are now ready to take the first question, please. Operator00:12:14Thank you. And please do ensure that you have unmuted locally. Our first question today comes from the line of Naved Khan from B. Riley Securities. Please go ahead. Operator00:12:43Your line is now open. Speaker 300:12:46Yes. Hi. Thank you. I just had a couple of questions. Maybe the first one For Johannes, as you kind of start on your brand advertising strategy, Johannes, you're also seeing some pressure on the pro form a channels. Speaker 300:13:00And I'm wondering if you think you can offset the pressure in performance with the initiatives you're taking in the brand So do you think you can more than offset that? Just give us your thoughts there. Also, if I look back historically, Marketing spend as a percentage of revenue has been as high as in the ADE percentage. Should we expect to kind of go back to those levels and then expect optimization from those levels? Or Is that not necessarily a case? Speaker 300:13:38How should we think about that? Speaker 100:13:43Yes. So thank you for your question. I can cover the first one. I think what we clearly see that we can offset the current drop. I think Google is volatile. Speaker 100:13:56It's unclear whether that is A long term volume loss in Google. We are experimenting with a new format. So it's not that this will be gone forever. We're And Google will do changes in their self preferencing in Europe. And that is also something that's hard to predict how this plays out, but this is until Q1 where we expect Changes in volatility and then hopefully things get a bit more clear. Speaker 100:14:28From a brand marketing, we substantially invest into brands and we do believe That we can turn to growth next year, so offsetting that also in the short term. Brand is brand has compounding effect. So it's a multiyear effort of consistently investing into brand. And then you have people coming back in campaign in the first year and then also in the following years. And that's why it's a multiyear effort in brand where you consistently invest build your branded visitor baseline over time And you see the stronger impacts later down the line. Speaker 200:15:07Yes. And Naved, let me take your second question. So Johannes mentioned that for next year, with the shift in strategy, How you should think about our profitability and adjusted EBITDA is that it will We anticipate it to be positive, but we focus on growth, yes? So As we have done in the past, as we've done pre COVID. And when you look at that if you look at our cost structure, You see that as a percentage of revenue, that's likely to be above just above 20% for 2023. Speaker 200:15:51In absolute terms, we believe it will be similar next year. And then, I mean, We indicated already that we expect to grow next year again. We will give more specific guidance At the beginning of the year when we report the Q4, but let's assume we grow and Stable operational expenses that brings that down to like 20%. And if you take that together, then you know that you need to achieve around 125% ROAS To be at adjusted EBITDA breakeven, yes? And that is something I mean, that I always can think of the lower bound. Speaker 200:16:41And when you do the math, then you see that's getting you close to the 80% that we had. One thing I would mention as well is, a, it's still early. I mean, that's the direction we want to take for next year. But obviously, it depends also on what we see. I mentioned that we will start ramping up brand towards the end of the year. Speaker 200:17:04We plan to invest Early next year as well. And obviously, we take the learnings that we see, and that will inform What we continue to do throughout the year 2024. But I guess as a High level, how to think about the dynamics, that's probably a good starting point. Speaker 300:17:25Okay. And so just a quick clarification on the Thoughts on EBITDA there. So when you say flat, you're talking flat in terms of just margin or just absolute dollar amount, how should I think about that? Speaker 200:17:38Exactly. And absolute dollar amounts, we historically, we used To discipline ourselves to not run EBITDA losses, and that is what how we think about it as well now. But you shouldn't expect us to deliver significant positive EBITDA. Speaker 300:17:58Okay. One quick follow-up. So just on the in terms of trends in October, I think your commentary suggests, Johannes that trends were stable in October in terms of demand. Is that a fair assumption or did you see any volatility or Speaker 100:18:20I think we see stable demand and not No concerns that we have on Q4 impact or even long term. Speaker 200:18:30Yes. Just to add to that, so what I said is, On a regional level, when you look at volumes and also pricing, the dynamics were similar to what we reported For the Q3, so no real change. And that was consistent across our three regions. Speaker 300:18:51Understood. Thank you very much. Speaker 200:18:54Thank you, Nabil. Speaker 100:18:55Thank you. Operator00:18:58The next question today comes from the line of James Lee from Mizuho. Please go ahead. Your line is now open. Speaker 400:19:04Great. Thanks for my questions. And I thank you so much for the Tiazza for all your help and your big deal we missed. Couple of questions here. I think you guys have talked about in the past that you're seeing the length of Stays by region and maybe slowing down and decreasing due to maybe consumer trading down. Speaker 400:19:27I was wondering maybe you can Comment about that metric maybe by region. And also it would be helpful maybe you can comment the trends you're seeing and maybe quantify some of the increase or decrease you're seeing in ADRs, especially in Europe and North America. Thanks. Speaker 200:19:48Yes. Thank you, James. On length of stay, let me go through that by region, starting with Europe. What we saw in the Q3 is that length of stay only slightly decreased compared to last year, But we were lapping the effect of the larger decrease during summer last year. So when you look at it relative to 2019 levels, Length of stay was down in by mid teens in Developed Europe. Speaker 200:20:18In Americas, we didn't see the same decrease And this year, we saw a slight decrease, but only slightly lower, so low single digit. And rest of the world, we don't see a meaningful change. So that was roughly stable. So that wasn't the first question. Can you remind me or repeat your second question was on ADRs, right? Speaker 400:20:44Yes, yes. ADRs, the puts and takes by region. Thanks, Matthias? Speaker 200:20:48Yes, sure. No. So starting with Europe again, we saw Slight increases throughout the quarter like low single digits and with the slight decrease in length of stay That led to a stable average booking value. So the basket value was roughly flat in Europe And again, driven by slightly higher ADR, slightly lower length of stay. In Americas, it's Very similar with flattish ADRs and slightly lower length of stay. Speaker 200:21:30But there we had a negative foreign exchange effect as well. And that's why overall the average basket value for us was Slightly down year over year. And then in rest of world, dynamic is still very different as we saw a strong increase in ADRs, let's Call it around 10%. Length of stay roughly flat and then also some foreign exchange headwinds leading to still Higher average basket values, average booking values of around 10%. Does that help? Speaker 400:22:06And if I can yes, great. Thanks for your help. And last question here, are you seeing any changes as you're looking at bookings into 4Q? Help us understand the booking window. Obviously, you saw a little bit elongated look booking window in the first half of the year. Speaker 400:22:21Are you seeing like booking window kind of normalize? And just curious how much of visibility on bookings you're looking at into 2024? Thanks. Speaker 200:22:30Yes. At this point, we don't have great visibility into 2024 because our booking window tends to be between 30 60 days depending on the region and time of the year. And at this time, I mean, what we do see is some bookings for the End of year holiday season. So there we see no big change. So as I said, dynamics are Fairly flat compared to the Q3. Speaker 200:23:04And Overall booking windows have normalized for us, so there's no big difference to 2019. Speaker 100:23:11And I think they have always been rather consistent Without big changes over the last years. Speaker 400:23:19Okay, great. Thank you so much. Operator00:23:30Question today comes from the line of Lloyd Walmsley from UBS. Please go ahead. Your line is now open. Speaker 500:23:39Thanks. 2, if I can. First, just can you help us understand the just the dynamic where you're seeing increased competition And in performance channels on one hand, but reduced bidding dynamics on your platform on another, is that All a function of changing ad formats in Google and there's just more competition for fewer text ads there? Or do you feel like customers are Leaning out of the metasearch more towards Google, anything you can share there would be helpful. And then the second one, Just do you all have a sense for what the changes are going to be, I think you mentioned in Q1 from Google and Europe around self preferencing and how that might impact you. Speaker 500:24:22Any sense of how that will impact things? Thanks. Speaker 200:24:27Hey, Lloyd. Yes, let me take your first And then Johannes can comment on your second. So I think it's I mean, it's a good question. Like why are we seeing lower monetization levels in our own auction, But more competition or more competition in performance marketing channels. Let me first comment on our auction. Speaker 200:24:54It's consistent with what we've seen in the Q2 already. So how we look at it is that Monetization level is normalized. So we see that there is healthy competition in our auction. And what we are seeing in terms of bidding dynamics makes sense. And I think it was rather last year That the auction was a bit hot and we saw inflated levels. Speaker 200:25:24And that's why we're saying It's normalized now. And yes, that's what we have seen in the Q3 as well. Why we see increased competition on performance marketing channels? I think it's more related to the ad test that we mentioned Because what is happening there is that we see different formats being introduced at the expense of the traditional AdWords. And because of that, you see fewer impressions. Speaker 200:25:57And then if you have the same number of advertisers fighting for Fewer slots, that's where you see more competition, not necessarily that people increase their bids because traffic quality change or something. But that is the dynamic there, and I don't think it's related to what you're alluding to That advertisers are leaning out of Meta and shifting to Google. I think it's really The volatility that we see there related to those tests and then optimizing their campaigns On our platform and on other meta platforms. But again, I think what I see makes sense, and It's actually a healthy auction right now. Speaker 100:26:49And let me maybe address the self preferencing. So we expect Google to do changes until Q1 next year in Europe. And what in essence our understanding is that there will be less entry points to Google Hotel Ads, which means that basically the price comparison on Google is less visible, which in the long term should Adapt the habit of users of comparing prices of Google and people more, they search for hotel, They look for images and stuff and then they also compare price on Google natively, and that is Changing the prices will be much less visible from what our interpretation is. In the short term, it's difficult to understand where And I think it's hard to speculate. I think we will adapt and try to learn as much in how Can we can embrace the formats Google has. Speaker 100:27:50At the same time, we'll be curious to see how in the midterm This might be a tailwind for us. Speaker 400:28:00Okay. Thank you. Thank Operator00:28:25There are no additional questions waiting at this time. So I'd like to pass the call back over to the management team for any closing remarks. Speaker 100:28:33Thank you for your continued trust in trivago and joining us today. We are energized by the journey that we have had and are very focused Operator00:28:51This concludes today's conference call. Thank you all for your participation. You may now disconnect your line.Read morePowered by Conference Call Audio Live Call not available Earnings Conference Calltrivago Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K) trivago Earnings Headlinestrivago N.V.'s (NASDAQ:TRVG) market cap rose US$24m last week; public companies who hold 59% profited and so did insidersApril 17, 2025 | finance.yahoo.comTrivago appoints Wolf Schmuhl as CFOApril 16, 2025 | markets.businessinsider.comTrump Orders 'National Digital Asset Stockpile'‘Digital Asset Reserve’ for THIS Coin??? Get all the details before this story gains even more tractionApril 24, 2025 | Crypto 101 Media (Ad)Brokerages Set trivago (NASDAQ:TRVG) PT at $2.94April 16, 2025 | americanbankingnews.comtrivago: I Think It's Dead MoneyApril 15, 2025 | seekingalpha.comtrivago N.V.: trivago Appoints Dr. Wolf Schmuhl as Chief Financial OfficerApril 15, 2025 | finanznachrichten.deSee More trivago Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like trivago? Sign up for Earnings360's daily newsletter to receive timely earnings updates on trivago and other key companies, straight to your email. Email Address About trivagotrivago (NASDAQ:TRVG) N.V., together with its subsidiaries, operates a hotel and accommodation search platform in the United States, Germany, the United Kingdom, Canada, Japan, and internationally. It offers an online meta-search for hotels and accommodation through online travel agencies, hotel chains, and independent hotels. The company provides travel search for different types of accommodations, such as hotels, vacation rentals, and apartments; and enable advertiser access through website and apps. In addition, it offers access to its platform through various localized websites and apps in various languages. The company was incorporated in 2005 and is headquartered in Düsseldorf, Germany. trivago N.V. operates as a subsidiary of Expedia Lodging Partner Services Sarl.View trivago ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InWhy It May Be Time to Buy CrowdStrike Stock Heading Into EarningsCan IBM’s Q1 Earnings Spark a Breakout for the Stock?Genuine Parts: Solid Earnings But Economic Uncertainties RemainBreaking Down Taiwan Semiconductor's Earnings and Future Upside Upcoming Earnings AbbVie (4/25/2025)AON (4/25/2025)Colgate-Palmolive (4/25/2025)HCA Healthcare (4/25/2025)NatWest Group (4/25/2025)Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 6 speakers on the call. Operator00:00:00Good day, ladies and gentlemen. Thank you for standing by, and welcome to the trivago Q3 Earnings Call 2023. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I must advise you that this call is being recorded today, Thursday, 2nd November 2023. We are pleased to be joined on the call today by Johannes Thomas, trivago's CEO and Managing Director as well as Matthias Tillman, trivago's CFO and Managing Director. Operator00:00:36The following discussion, including responses to your questions, reflects management's reviews as of today, Thursday, November 2, 2023 only. Trivago does not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward looking, typically preceded by words such as we expect, We believe we anticipate or similar statements. Please refer to the Q3 2023 operating and financial review on the company's other filings with the SEC for information about factors which could cause trivago's actual results to differ materially from these forward looking statements. You will find reconciliations of non GAAP measures to the most comparable GAAP measures discussed today in trivago's operating and financial review, which is posted on the company's IR website at ir. Operator00:01:28Trivago.com. You are encouraged to periodically visit trivago's Investor Relations site, for important content. Finally, unless otherwise stated, all comparisons on this call will be against results for the comparable period of 2022. With that, let me turn the call over to Johannes. Please go ahead. Speaker 100:01:49Good morning, everyone, and thank you for joining our Q3 2023 earnings call. Following our last conversation, I'm glad to provide you with updates On our journey towards reigniting trivago's growth and presence in the market, our mission is clear. When price savvy travelers think about booking a hotel, We want them to think trivago. We simplify their planning, help them safe and instill confidence in their booking decisions. The quarter unfolded largely as we anticipated. Speaker 100:02:20The continued negative effects of reduced brand marketing during the pandemic, Our normalized monetization and volatility in Google search ads continue to impact us. However, with major uncertainties now behind us and robust travel outlook, we are encouraged by our TV campaign performance this summer. This positive momentum has steered our decision to change course and prioritize growth in the upcoming years. As a result, we expect adjusted EBITDA to be close to flat in 2024. I will now detail 4 strategic priorities that we believe will propel our success. Speaker 100:02:59Our first strategic priority is to reignite our globally recognized brand. We are planning to revamp our brand marketing investments to get back to the forefront of Travelers' Mine. Listing our branded visitor baseline will be key to return to growth and we expect it to be a multiyear effort. As we approach the launch of our winter campaign, we are optimistic that we can demonstrate initial results by the Q1 of 2024. It's essential to note that our brand marketing isn't just about campaigns. Speaker 100:03:30We treat it as a performance marketing channel that can be optimized over time. Drawing from our summer learnings, there's a considerable scope of enhancements across multiple dimensions from media channel and country mix to stronger creatives. As we refine these elements, we plan to prioritize growth as long as we see the anticipated incremental returns. Our second strategic priority is to provide a seamless hotel search experience. We're simplifying the search across hundreds of sites and millions of accommodations, Saving travelers significant time. Speaker 100:04:06We are constantly enhancing the user journey by conducting experiments on all aspects of our product. In the past month, we have qualified a range of product tests with positive impact on our user experience and conversion. We are glad to share that we have completed our image migration to the Google Cloud. This step has improved the quality and selection of our images and will enable us to iterate faster on the visual experience for our users. Our 3rd strategic priority is to deliver the best deal discovery experience. Speaker 100:04:38We want to be the short cut for finding great hotel deals and better prices. This is where we can play our strength and differentiate uniquely. Many travelers are price conscious and due to inflation they have become even more sensitive. Rate disparity has increased since the pandemic, which elevated the value of comparing prices. We've introduced new ways of spotlighting savings and great deals in our search results. Speaker 100:05:04Getting price heavy travelers to return to trivago will be important for our future success. Our 4th strategic priority is to empower partners to realize their full potential on trivago. We're enhancing our marketplace infrastructure with more bidding granularity and rolling out a second price auction test in 3 relevant markets this quarter. By co creating and innovating with our advertising partners, we aim to unlock user value throughout our metasearch and their booking journey. We are deepening our key partnerships and are encouraged by the active engagements we observe. Speaker 100:05:42Our brand strategy supports our commitment to remain a relevant marketing channel for our advertisers, driving high quality traffic to them. In addition to our strategic pillars, we are committed to accelerating our pace of execution and fostering a culture of rapid learning. We have increased velocity in our product development and have doubled the number of experiments we run on our website. The positive momentum within the organization is very tangible. Now our operations are becoming more streamlined around the aforementioned strategic priorities. Speaker 100:06:14As we look ahead, we are confident of showcasing our enhancements and growth in 2024. As a last point, let me express my gratitude to Matthias for his outstanding service to trivago in the last 7 years. His leadership was instrumental in navigating the challenges of the pandemic and maintaining our financial stability. We're looking forward to Robin Harris, who will join as a new CFO next year. His expertise will enrich the leadership team in executing our new strategy. Speaker 100:06:44With that, I'd like to pass the floor to Matthias. Speaker 200:06:48Thank you, Johannes, and welcome, everyone, on the call. Before I walk you through our Q3 results, I would like to thank our leadership team, supervisory board and all employees for supporting me during the last 7 years. I've learned a lot and enjoyed working with amazing people. I will continue to support the company as a consultant during the Q1 To ensure a smooth transition to my successor, Robin Harrias. Now turning to our results. Speaker 200:07:17I will review our results for the Q3 as well as our thoughts for the year. All comparisons for 2023 are on a year over year basis unless otherwise indicated. Our revenue development in the Q3 was in line with our expectations. Revenue declined by 14% or at the same rate as in the second quarter despite the loss of favorable tailwinds during the first half of twenty twenty three from higher average booking values and foreign exchange headwinds, which negatively impacted our monetization levels. Bidding dynamics in our auction remained stable, albeit at lower monetization levels compared to the prior year. Speaker 200:07:58And we continue to observe ad format tests in Google. The combination led to volume losses on our platforms. However, the dynamic improved slightly compared to the 2nd quarter. The net loss of €182,600,000 in the 3rd quarter is a result of a cumulative impairment charge of €196,100,000 in connection with our annual indefinite lift intangible asset and goodwill impairment analysis. The impairment was primarily driven by adjustments made to our profitability outlook arising from the announced strategy shift to long term growth and Our share price declined during the Q3 of 2023. Speaker 200:08:42Adjusted EBITDA, which excludes the impairment of goodwill, was €60,000,000 down from €33,500,000 in the same period last year. Now on to the dynamics in the different regions. We saw referral revenue declines in Americas and Europe, while referral revenue increased in our segment Rest of World As most countries in that segment continue to recover post COVID, referral revenue declined by 21 Percent 17% in Americas and Developed Europe respectively. The decline was largely driven by a loss in performance marketing volumes As we continue to observe ad format tests in Google, leading to fewer impressions of traditional text ads for us. We started testing the new ad formats. Speaker 200:09:28However, it is still too early to conclude on its potential. Early indication is that the Traffic quality seems to be lower compared to text ads and consequently the new ad formats did not compensate for the loss in high quality traffic from text ads. Referral revenue in our segment Rest of World continued to grow, driven by the recovery in markets like Japan, Turkey or Hong Kong. Overall, our referral revenue increased by 24%, driven by an increase in traffic volumes in all channels and higher average booking values. This was partly offset by negative foreign exchange effects. Speaker 200:10:06Moving on to our operational expenses. Excluding advertising expenses and the impairment of intangible assets and goodwill, our operational expenses decreased by 13%. Compensation expenses, including share based compensation and commission and other fees related to non core products that we stopped last year with the main driver for lower operational expenses. Our cash and cash equivalents balance at the end of the quarter was €299,000,000 We have taken steps to improve our capital structure and reward our investors with a special one time dividend of €184,400,000 which reflects our confidence in the future. Our shareholders approved the distribution of the one time dividend on November 1st, And we anticipate the payment of the distribution to ADS holders to be made on November 13, 2023. Speaker 200:11:02Let me close with an outlook on the Q4. The main travel trends remained stable in October. We continue to see robust travel demand and elevated average booking values on our platforms in all regions. The dynamic in performance marketing channels remains volatile, while monetization levels in our own auction have normalized. As a result, the year over year referral revenue development in October was in line with our Q3 results for all regions. Speaker 200:11:31During the Q3, we announced a shift in strategy, which aims to fuel long term growth. We intend to start intensifying our Our brand marketing investments already in the second half of the fourth quarter. We expect the short term effect on traffic volumes to be limited. However, we are confident that the investments will help us to increase our brand base and traffic over time and keep trivago on top of traveler's minds, which is crucial to For the full year 2023, we expect our adjusted EBITDA to be around €50,000,000 With that, let's open the line for questions. Operator, we are now ready to take the first question, please. Operator00:12:14Thank you. And please do ensure that you have unmuted locally. Our first question today comes from the line of Naved Khan from B. Riley Securities. Please go ahead. Operator00:12:43Your line is now open. Speaker 300:12:46Yes. Hi. Thank you. I just had a couple of questions. Maybe the first one For Johannes, as you kind of start on your brand advertising strategy, Johannes, you're also seeing some pressure on the pro form a channels. Speaker 300:13:00And I'm wondering if you think you can offset the pressure in performance with the initiatives you're taking in the brand So do you think you can more than offset that? Just give us your thoughts there. Also, if I look back historically, Marketing spend as a percentage of revenue has been as high as in the ADE percentage. Should we expect to kind of go back to those levels and then expect optimization from those levels? Or Is that not necessarily a case? Speaker 300:13:38How should we think about that? Speaker 100:13:43Yes. So thank you for your question. I can cover the first one. I think what we clearly see that we can offset the current drop. I think Google is volatile. Speaker 100:13:56It's unclear whether that is A long term volume loss in Google. We are experimenting with a new format. So it's not that this will be gone forever. We're And Google will do changes in their self preferencing in Europe. And that is also something that's hard to predict how this plays out, but this is until Q1 where we expect Changes in volatility and then hopefully things get a bit more clear. Speaker 100:14:28From a brand marketing, we substantially invest into brands and we do believe That we can turn to growth next year, so offsetting that also in the short term. Brand is brand has compounding effect. So it's a multiyear effort of consistently investing into brand. And then you have people coming back in campaign in the first year and then also in the following years. And that's why it's a multiyear effort in brand where you consistently invest build your branded visitor baseline over time And you see the stronger impacts later down the line. Speaker 200:15:07Yes. And Naved, let me take your second question. So Johannes mentioned that for next year, with the shift in strategy, How you should think about our profitability and adjusted EBITDA is that it will We anticipate it to be positive, but we focus on growth, yes? So As we have done in the past, as we've done pre COVID. And when you look at that if you look at our cost structure, You see that as a percentage of revenue, that's likely to be above just above 20% for 2023. Speaker 200:15:51In absolute terms, we believe it will be similar next year. And then, I mean, We indicated already that we expect to grow next year again. We will give more specific guidance At the beginning of the year when we report the Q4, but let's assume we grow and Stable operational expenses that brings that down to like 20%. And if you take that together, then you know that you need to achieve around 125% ROAS To be at adjusted EBITDA breakeven, yes? And that is something I mean, that I always can think of the lower bound. Speaker 200:16:41And when you do the math, then you see that's getting you close to the 80% that we had. One thing I would mention as well is, a, it's still early. I mean, that's the direction we want to take for next year. But obviously, it depends also on what we see. I mentioned that we will start ramping up brand towards the end of the year. Speaker 200:17:04We plan to invest Early next year as well. And obviously, we take the learnings that we see, and that will inform What we continue to do throughout the year 2024. But I guess as a High level, how to think about the dynamics, that's probably a good starting point. Speaker 300:17:25Okay. And so just a quick clarification on the Thoughts on EBITDA there. So when you say flat, you're talking flat in terms of just margin or just absolute dollar amount, how should I think about that? Speaker 200:17:38Exactly. And absolute dollar amounts, we historically, we used To discipline ourselves to not run EBITDA losses, and that is what how we think about it as well now. But you shouldn't expect us to deliver significant positive EBITDA. Speaker 300:17:58Okay. One quick follow-up. So just on the in terms of trends in October, I think your commentary suggests, Johannes that trends were stable in October in terms of demand. Is that a fair assumption or did you see any volatility or Speaker 100:18:20I think we see stable demand and not No concerns that we have on Q4 impact or even long term. Speaker 200:18:30Yes. Just to add to that, so what I said is, On a regional level, when you look at volumes and also pricing, the dynamics were similar to what we reported For the Q3, so no real change. And that was consistent across our three regions. Speaker 300:18:51Understood. Thank you very much. Speaker 200:18:54Thank you, Nabil. Speaker 100:18:55Thank you. Operator00:18:58The next question today comes from the line of James Lee from Mizuho. Please go ahead. Your line is now open. Speaker 400:19:04Great. Thanks for my questions. And I thank you so much for the Tiazza for all your help and your big deal we missed. Couple of questions here. I think you guys have talked about in the past that you're seeing the length of Stays by region and maybe slowing down and decreasing due to maybe consumer trading down. Speaker 400:19:27I was wondering maybe you can Comment about that metric maybe by region. And also it would be helpful maybe you can comment the trends you're seeing and maybe quantify some of the increase or decrease you're seeing in ADRs, especially in Europe and North America. Thanks. Speaker 200:19:48Yes. Thank you, James. On length of stay, let me go through that by region, starting with Europe. What we saw in the Q3 is that length of stay only slightly decreased compared to last year, But we were lapping the effect of the larger decrease during summer last year. So when you look at it relative to 2019 levels, Length of stay was down in by mid teens in Developed Europe. Speaker 200:20:18In Americas, we didn't see the same decrease And this year, we saw a slight decrease, but only slightly lower, so low single digit. And rest of the world, we don't see a meaningful change. So that was roughly stable. So that wasn't the first question. Can you remind me or repeat your second question was on ADRs, right? Speaker 400:20:44Yes, yes. ADRs, the puts and takes by region. Thanks, Matthias? Speaker 200:20:48Yes, sure. No. So starting with Europe again, we saw Slight increases throughout the quarter like low single digits and with the slight decrease in length of stay That led to a stable average booking value. So the basket value was roughly flat in Europe And again, driven by slightly higher ADR, slightly lower length of stay. In Americas, it's Very similar with flattish ADRs and slightly lower length of stay. Speaker 200:21:30But there we had a negative foreign exchange effect as well. And that's why overall the average basket value for us was Slightly down year over year. And then in rest of world, dynamic is still very different as we saw a strong increase in ADRs, let's Call it around 10%. Length of stay roughly flat and then also some foreign exchange headwinds leading to still Higher average basket values, average booking values of around 10%. Does that help? Speaker 400:22:06And if I can yes, great. Thanks for your help. And last question here, are you seeing any changes as you're looking at bookings into 4Q? Help us understand the booking window. Obviously, you saw a little bit elongated look booking window in the first half of the year. Speaker 400:22:21Are you seeing like booking window kind of normalize? And just curious how much of visibility on bookings you're looking at into 2024? Thanks. Speaker 200:22:30Yes. At this point, we don't have great visibility into 2024 because our booking window tends to be between 30 60 days depending on the region and time of the year. And at this time, I mean, what we do see is some bookings for the End of year holiday season. So there we see no big change. So as I said, dynamics are Fairly flat compared to the Q3. Speaker 200:23:04And Overall booking windows have normalized for us, so there's no big difference to 2019. Speaker 100:23:11And I think they have always been rather consistent Without big changes over the last years. Speaker 400:23:19Okay, great. Thank you so much. Operator00:23:30Question today comes from the line of Lloyd Walmsley from UBS. Please go ahead. Your line is now open. Speaker 500:23:39Thanks. 2, if I can. First, just can you help us understand the just the dynamic where you're seeing increased competition And in performance channels on one hand, but reduced bidding dynamics on your platform on another, is that All a function of changing ad formats in Google and there's just more competition for fewer text ads there? Or do you feel like customers are Leaning out of the metasearch more towards Google, anything you can share there would be helpful. And then the second one, Just do you all have a sense for what the changes are going to be, I think you mentioned in Q1 from Google and Europe around self preferencing and how that might impact you. Speaker 500:24:22Any sense of how that will impact things? Thanks. Speaker 200:24:27Hey, Lloyd. Yes, let me take your first And then Johannes can comment on your second. So I think it's I mean, it's a good question. Like why are we seeing lower monetization levels in our own auction, But more competition or more competition in performance marketing channels. Let me first comment on our auction. Speaker 200:24:54It's consistent with what we've seen in the Q2 already. So how we look at it is that Monetization level is normalized. So we see that there is healthy competition in our auction. And what we are seeing in terms of bidding dynamics makes sense. And I think it was rather last year That the auction was a bit hot and we saw inflated levels. Speaker 200:25:24And that's why we're saying It's normalized now. And yes, that's what we have seen in the Q3 as well. Why we see increased competition on performance marketing channels? I think it's more related to the ad test that we mentioned Because what is happening there is that we see different formats being introduced at the expense of the traditional AdWords. And because of that, you see fewer impressions. Speaker 200:25:57And then if you have the same number of advertisers fighting for Fewer slots, that's where you see more competition, not necessarily that people increase their bids because traffic quality change or something. But that is the dynamic there, and I don't think it's related to what you're alluding to That advertisers are leaning out of Meta and shifting to Google. I think it's really The volatility that we see there related to those tests and then optimizing their campaigns On our platform and on other meta platforms. But again, I think what I see makes sense, and It's actually a healthy auction right now. Speaker 100:26:49And let me maybe address the self preferencing. So we expect Google to do changes until Q1 next year in Europe. And what in essence our understanding is that there will be less entry points to Google Hotel Ads, which means that basically the price comparison on Google is less visible, which in the long term should Adapt the habit of users of comparing prices of Google and people more, they search for hotel, They look for images and stuff and then they also compare price on Google natively, and that is Changing the prices will be much less visible from what our interpretation is. In the short term, it's difficult to understand where And I think it's hard to speculate. I think we will adapt and try to learn as much in how Can we can embrace the formats Google has. Speaker 100:27:50At the same time, we'll be curious to see how in the midterm This might be a tailwind for us. Speaker 400:28:00Okay. Thank you. Thank Operator00:28:25There are no additional questions waiting at this time. So I'd like to pass the call back over to the management team for any closing remarks. Speaker 100:28:33Thank you for your continued trust in trivago and joining us today. We are energized by the journey that we have had and are very focused Operator00:28:51This concludes today's conference call. Thank you all for your participation. You may now disconnect your line.Read morePowered by