Q1 2020 Earnings Call
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Ladies and good day, ladies and gentlemen.
Thank you for standing by and welcome to the Trivago Q1 earnings call. It 2020.
Just advice you the coal is being recorded today. She stays on mine consist may 2020.
We are pleased to be joined on the core today, but I actually thought to Vargas C O and managing director and my teeth to them onto Vakalis CFO.
The following discussion, including responses to all Cook to your questions.
Flex management fees of today today.
She's they may 19, Twentytwenty only.
Tobacco does not undertake any obligation to update or revise this information.
It's over some of the statements made on today's call are forward looking.
He Cooper's proceeded by words, such as we expect me belief you anticipate or similar statements.
Please refer to the Q1 operating and financial overview and the company's other filings with C. S. E. C for information about factors, which could cause trivagos actual results to differ materially from these forward looking statements.
You will find reconsolidation of non-GAAP measures.
To the most compiler Bose GAAP measures discussed today into Vargas operating and financial overview, which is posted on the Companys <unk> site at <unk>.
<unk>, a dart trivago dot com.
You are in college to periodic Lee visitor Vargas investor relationship side.
Four important content.
Finally, unless otherwise stated well comparisons on this call will be against results for the compiler period of 2019.
With that let me turn the call over to axle. Please go ahead Sir.
Good morning, everybody in many thanks for joining our Q1 earnings call [noise].
I Hope you got the chance to read our shareholder letter that we filed yesterday.
We have received very positive feedback on the formats and well continue to publish that going forward.
Before we start the QNX I would like to point out one thing.
Despite all the challenge. This this unprecedented crisis is bringing to ask personally and to the industry.
We are trivago see this as an opportunity.
An opportunity.
Refocus our organization on our core and structurally reduce our cost base.
An opportunity to improve our call matter product, while adding a complement terry and more inspirational local and sustainable travel products and opportunity to diversify our revenues by adding new revenue streams, such as display advertisement and sponsored listings.
As an opportunity to set sustainable performance marketing levels going forward.
We believe that these initiatives will allow us to leave the crisis much stronger than we entered.
With that we're now moving to QNX.
Thank you, ladies and gentlemen, and the first question comes from Naveed Khan from Suntrust. Please ask your question. Your line is now open.
Yeah, that's true.
Just a couple of cushion so.
Excellent then did you give us some more color on the things that you can do to make their site locally relevant and he spoke about Oh daily, including the daily or weekly usage or whatever and do you have to control that and then the other question I had just on the on the shape of the personnel.
Anything that the impact to your topline were made over the the declines in travel bookings I do think the impact on your topline would actually be greater just because Ah you are dependent on the advertisers and then they will it led to come back.
Thanks for the question. So on the question regarding the product development and the complimentary product.
When you look at our coal product. It is basically a product that allows you to find the best deals available for a specific trip that you have in mind. So you know where you want to go and you might or might not know the time already and we help you in a very efficient and effective way to find the best times and the best.
Deals for your trip.
Well, we are currently working on and what we think well increase they engagement and the rather than itself. The website is a more inspirational product.
So basically we are slightly moving up a in the travel funnel that is focused on local travel because we believe that local the travel right now and we see that local travel right. Now is the first travel that as restarting and we believe that local travel will be much more important for the foreseeable future. So it is.
As it is more focus on giving you an idea what actually kind of trip you would like to do and you could do.
That is locally available easy to reach by car and because of that it is a trap that you can do a lot more often than than for example, a summer vacation.
Yeah, and I take the second one another to underpin that I mean at this point as you as you know a it is very difficult to predict when and how much type of activity will come back.
As we mentioned our quarterly report or refer revenue declined by more than 95% in the last week off much you over you.
In April we stabilized on those low levels and even though we are seeing a small uptick now in may.
Q2, a year over year performance will be materially worse than Q1. However, we are focusing on what we can control I mean, we immediately pulled back on performance marketing channels obviously.
When volumes dropped and shifted TV budgets into the second half and into next year.
Ended Additionally, as we mentioned I know a approach shareholder lets already we took several steps to bring down or fixed cost now how that compares to the overall travel market. That's that's something we can only control to some extent and as you know auction has been volatile already before.
Crisis, and we we already started at the beginning of the year to.
Introduce inclement feature in our marketplace, but help us on the monetization front.
We believe that the crisis it makes it likely but the industry will consolidate further which were put additional pressure on the auction.
So it all depends on how successful we are with our initiatives marketplace initiatives to two.
Yeah to basically offset that that pressure, but again at this point, it's it's too early to tell to see whether we come out ahead or with a market or lower than the market.
Okay.
Thank you.
Sure.
Thank you.
And the next question comes from Tom Vide from D.A. Davidson. Please go ahead, Sir your line is now open.
Great. Thank you for taking my questions good morning.
In the prepared remarks or in the letter rather are you talked about.
No possible consolidation on the supply side of things.
Can you do you consider it a bit more.
It would seem that that wouldn't be a good thing for.
Kind of travel intermediaries.
Like yourself, but just curious on your thoughts there and then I guess well I'm also on the topic of validation curious whether you think the rule.
Hi, travel intermediaries, such as Metasearch sites are OTI is kind of changed meaningfully in a post pandemic world and you know whether you know you might see similar consolidation.
On that front as well to the extent that there's that's still meaningful consolidation.
Possible. Thanks.
Sure Yeah. Thanks, Thanks for for the question.
In general that that's right, we anticipate that we and other provide us off performance marketing well have a more consolidated advertise a structure coming out of this.
We believe that well funded industry participants, who can whether the crisis and resume operations fast are likely to take share away from small and medium sized hotels.
I would also Ed that there's less appetite fought for taking on the rest of cancellations. So in a CPC auction you might end up with refer those that are less valuable than you thought as cancellation rates might go up and that's what I meant previously that we started working on on some marketplace features.
But that.
Well, we hope that we can offset that pressure and I don't know axle. If you want to at well give some color on those features and what exactly were working on absolutely. So yeah, I mean asthma see a material so sad and a crisis like this you have to assume that there will be more consolidation.
How much I think nobody knows by now the well we have done even before the crisis. We started tests to diversify our revenue base diversify it and and have overall a broader brought a foundation.
So in addition to offering tools that are addressing the existing uncertainty like SCPA bedding. We we are taking I've taken life, a display advertisement and sponsored listings both products that are delivering a different value to all right.
Ties US then they existing I'm CPC based product and that we think well be very important to compensate or overcompensate potential weakness in the auction for the next month so calm.
Thank you.
Thank you.
And the next question comes on the line of Lloyd Walmsley from Deutsche Bank. Please ask your question. Your line is now open.
I think that too if I can Ah first just kind of going back to that CPGA model shift.
Yes, definitely heard of genes are putting pressure throughout the marketing channel after shifted this model and when our question for you is when you. When you look at them Rev shares OTI age are looking for how does that compare to the effect of take rates, you've historically seen in the CPC model yeah with the affiliate models have historically been much lower.
Effective take rates I think and CPC models are wondering how that shaking out and then secondly, going back to the comments on higher consolidation in the industry from larger players. You also mentioned a structurally reduce spending NFC m. can you just talk about why you think spend will be structurally lower.
And then why you think the negative impact to your marketplace you put it at six to 12 months could it be longer anything you can share on the these fronts would be helpful.
Absolutely so on the SCPA model the way, we're thinking about it is its basically a service to our advertisers and and a service that is necessary given that the t. as mentioned before there is obviously.
Very low risk appetite after after I mean, entering this crisis and a very substantial cash outflow pie refunding cancellations and a lot of uncertainty will there be a second wave or will there be new cancellations cancellation rates going up again et cetera, so to offer.
For a C.P.A. allows us basically to to Reengage with many many advertisers sooner rather than later, leveraging our superior data and visibility to really give them more competent have them more active and the ALKS rather than less active.
Did the at the second question that that you asked as well the take rate be higher or lower than it has been before I.
I don't think that that the the first syndications uptake rates right now are really a good proxy for take rates in the future because we have the special situation that there's there's high level of uncertainty. We don't think that the CP a structurally has lower take rates than the CPC based model. It is more.
A tool and the service that isn't particularly valuable for smaller appetizers that are having access to less data anyhow and then the current situation access to a lot less data and and just benefit from us aggregating the data and and bidding on their behalf and and.
And also I'm sharing sharing the risk.
Yeah and ER on your second question.
On the dynamics in performance share units.
I would mention the three key.
Things that we take in consideration and why we believe that.
The auctions will be soft.
Leased in the short to medium term.
The first one as we mentioned consolidation I mean, it's clear if there are few appear players are actively participating but that has a puts pressure on the auction. The second one that I mentioned before his work installation risk.
I think there's a awareness now in the market that.
There should be a risk premium for that and I'm at this point, we we don't know nobody knows if we see a second wave or not and what a click or refer you are buying is worth in the end and then the third one this is more specifically to us.
But that's all a large scale test that we mentioned already lost time.
So even before the crisis.
Hit US we started to.
Based on performance generous.
To to see.
And how we can drive incrementality or how incremental that better analysts for us and.
We started that in February, but then had to cause earlier than anticipated due to the corporate 19 outbreak.
But what I can shares that we got some early earnings learnings and what I can tell you is that we got some indications that we might benefit from reducing our bids in performance Shannon.
Obviously, we need to get more data and we will continue with a test once volumes come back.
Obviously, it's a it's especially situation because now it's a it's a zero and it's like reset. So we also need to see how the dynamic you evolves when when things come back, but then as the right point in time, we will certainly continue artists.
Alright, thanks fast.
Thank you and the next question comes from the line off Ryan Fitzgibbon from Wells Fargo. Please ask your question. Your line is now open.
Thanks, a couple of follow ons, maybe a one to be discussion on different formats.
Can you give us a sense of what those breakdowns are now I know its its its newer days on SCPA, but where do you think they will get too and then.
You just mentioned that's ER the take rates are necessary lower they're more useful to small where advertisers who don't have as much information to bring to bear and leverage do you anticipate.
Snapped back in terms of.
AD format usage at some point when if we get added here, because obviously smaller advertisers may not be able to the weather. The storm and then you're left with larger guys with more data that they can use on their own and so hence maybe more more CPC there.
Yes, so on the on the new formats.
Hi, Dave I assume youre youre, referring to to two to the to the bidding formats here, So CPC versus EPA yeah on on the on the SCPA. We do believe that it is a lot more relevant.
In the recovery phase as as I mentioned before because there is more uncertainty less data and more risk structurally and that will become less relevant once we are at whatever steady state means in the future because of where the easier to predict cancellation rates conversion rates and.
Well the generally speaking more data available.
Having said that it is and it's not it is not something news, so and particularly a smaller EM and smallest advertisers individual hotels to the extremes have for very long time us for this format. So we are basically now I've just re prioritized the development and brought it forward because now it becomes rather.
And for a very sizable part of our Advertiser base.
Thank you Brett.
Thank you and the next question comes from Shyam Patil from Susquehanna. Please ask your question. Your line is now open.
Hi, guys its Ryan on for Schrom.
Can you talk about trends in markets that are opening up sooner than most such as like Hong Kong or Germany has there been any material rebound or anywhere and then secondly, do you anticipate seeing demand for alternative accommodations return a bit faster AMR travelers, maybe preferring at their own place too Big hotel in these times.
Thanks.
Yeah. Thanks, Thanks for your question.
Yes, as I mentioned, we we did see an uptick in may.
In some of the markets, especially in those markets where.
Governments started to relax a shuttle measures.
But I mean, we have every quarter then you should because it because it's still have a very low base and we don't read too much into that at this point in time.
So I think it's way too early to tell and it's also difficult to take one market for example, Germany and look at how the recovery.
Structure looks like at this point, and then and transfer that to two or predict that Paul for other countries given that we entered into the shuttle measures at different stages and also have different measures in place and overall, we don't look too much of the data to be honest, because we think there.
A lot of noise and before we can do that and get a valuable information all of it within volumes need to pick up.
And that also partially Onsolis. Your second question I mean, when we look at Q1, there was no real shift from hotels to an apartment.
It was very similar to what we what we saw before so in April you can you can see that that that people are looking more for apartments, but then again.
Volumes are so low so we don't read too much into that and we need to have more volume on the platform to see whether that's a trend or whether that is just now.
Yes, yes.
Certain countries opening up domestically locally.
But again too early to tell but what I, what I would add.
I mean, we started to invest into alternative accommodations over two years ago.
As we thought back then it's important and we integrated into our core product. So I'm showing its side by side two hotels. So whatever the trend will be I think it is important will be important for us going forward and hence strategically for us nothing changes, we will continue to focus on it and making it more relevant.
I'm showing it to tall users.
Oh.
Does that answer your question.
Yes. Thanks.
Perfect. Thanks.
Thank you and the next question comes from the line of stuck on most from JP Morgan. Please ask your question. Your line is now open.
Great. Thanks for taking the questions.
Ive to first you talked a number of changes actual I'm just in terms of the products for example, going more upon all and more local and then also the newer AD formats moving toward display and sponsored listening can you just talk about how much those changes how much has been discussed and in conjunction with your.
We're advertising partners. Just curious are you know what what their view of if they have any view kind of changes that you're making on the platform and then secondly, just on the cost side of things can you help us understand how much cost you're taking out on an annual basis at this point and perhaps give us an update on fixed.
Variable cost structure. Thanks.
So on the on the B to C and B to B product changes a if you want to group them like that I mean for now quite some time, we're working very very close.
Closely together with our key partners and in particularly in the current crisis. If anything we we are even closer and as a crisis for the whole industry and only if we all work together, we won't be able to it to come out sooner rather than later so its in full full alignment or.
With a key partners I'm on the beaches seaside the complimentary product that is focusing on local travel I mean that has obviously well appreciated by our partners because there is wide agreement that domestic and local travel will pick up first and that's what we currently see and that will stay for.
Quite some time, a more relevant experience and product for our users and travelers globally. So there is there is a need for products that that actually supports that demand.
On the beach besides.
The products are jointly developed was it with our partners I mean, they need to and and there is strong interest in particularly for the recovery phase for.
Those two new products that I mentioned and there are there other ideas that we are testing and working on.
And the.
Easiest way to think about it is on a sponsored listings key additional benefit to a traditional auction is that you can get a lot of visibility and a lot of volume into a specific property, which when you think about how capacity can be added and how to hotels can be reopened is actually highly relevant to actually fell.
The hotels that are open very quickly and a very focused manner. So there is there is big interest and big demand for display advertisement. There is also very big demand and there the key value proposition is that it allows for additional messaging that is on our side as in the flow off a user.
Searching for I Commendation, and there in particular the safety standards that is applied to the specific accommodation is highly relevant and can be messaged very well both products as I said I I highly relevant for the recovery phase and so a we expect them to get quite a bit of tracks.
For the month to come with volumes coming back to two more decent levels.
Yes, so and on the cost side.
As we mentioned and I'll, just close or we have stopped all unnecessary spending such as marketing business travel company events and others.
The by far largest bucket a in the is marketing, obviously and we pulled back very quickly on on that one.
So to give you more guidance on quarterly expenses for the remainder of this year I think a good starting point is to look at our cost and expenses in Q1.
And then you would need to adjust for the credit losses that we called out in our release and that Ohio. This quarter given the impact of Cobot 19, and when you then look at the base at that base. It is already lower compared to Q1 29 team for the reasons mentioned above and we expect to have similar savings for the remaining quarters list.
Sure.
But given we started to implement the cost saving initiatives during the quarter the impact should be slightly higher in the coming quarters.
In addition, we spent some time on thinking about the optimal set up going into 2021.
And we believe that we need to be a smaller company and as we mentioned our earnings release, we expect to reduce our personal and related costs by approximately 20 million in 2021.
So that gives you a good idea on the savings for the remainder of this year as well, though for the transition period in Q2 in Q3, the savings will be slightly lower than that and just for clarity I am referring here to expenses between revenue and EBITDA, so not a full GAAP expenses.
Great. Thank you go.
Thank you.
Thank you and the next question comes from the line of Kevin Kopelman Cohen. Please ask your question. Your line is now open.
Hi, Thanks, a lot I had a follow up question on advertising expense, Okay give us more color on the latest trend there specifically.
You see advertising spend declining at similar rates or revenue in the current environment or declining more.
Or lots and Robyn thanks.
Yeah, Kevin Thanks for your question.
As I said before on performance marketing.
We we pulled back immediately and and we said, let all revenue was.
Down more than 95% at end of March and that we stabilized at that level in a in April.
So, yes, there's hardly any spend and on the on the brand marketing side.
We also shifted all oh budget into the second half and into next year. So there's hardly any spend as well.
So right now the there I mean I cannot really talk about trends because we are at the very low base, but obviously, we expect that.
To get back into the markets as we see traffic picking up and that should be highly correlated.
But right now there's I mean, we're not there yet.
Okay. That's very helpful and then.
One other quick follow up.
Talk a little bit more about.
Local traveled trips maybe some examples of what those trips might look like just because I think that that's an important.
Dynamic.
Terminals you mentioned.
Absolutely so the.
The the highest interest that we currently see which is also intuitively clear as is short trips from metropolitan areas to more remote areas and that that obviously different stand a bit by metropolitan area, but if you take Germany. As an example, you should see very very strong interest in that.
Coastal destinations and in the mountains.
And you bring I see no interest and the Metropolitan area. So it's really from crowded areas to two to basically completely non crowds very remote areas that is the the first most obvious use case.
With the overall situation and also the comfort level off travelers improving.
The next use case is more okay. It could actually be closer to a town or some activity that will restart at some point in time, but it should be driving distance. So that you don't have to worry about a flight schedules was a flights be on will there be cancelled where is it too crowded on on planes et cetera.
So that's than a second step in terms of a watch what travelers to feel and perceive as safe travel and then obviously the ultimate stab as returning to normal where you go and anywhere you want probably still was initially some focus on shorter term.
The nations as they are still some uncertainty whether there will be a second wave that will make a.
Long haul flights more complicated and encompass so that's super roughly and simplifying the the evolution of travel the how we see it and the months to come and that's what we are preparing the product for.
Oh, thanks axle thanks to this.
And again.
Thank you and the next question comes from the line of Jason Bazinet from Citi. Please ask your question. Your line is now open.
Oh, thanks, so much I just had a very basic question for the travel industry overall.
What portion of all hotel rooms, or or nights, if you will.
Were related to this local travel segment that didn't involve airfare.
And what and what if you know what share of though TV market did represent.
Prior to Cook.
I mean to be perfectly honest I don't know the exact answer to your question. What I do know is that Thats. The majority off the travel on our side quite significant majority is domestic and ER and Europe domestic I would.
I would classify as the secondary elsewhere to make comparable to the U.S.
And the majority of the travel is within driving distance are possible to drive.
But yeah that I I don't have the exact answer to your question.
Okay. So can I I'll give you are back of the envelope can you tell me. If you think this is wrong that 55% of hotel room nights do not involve air travel globally that seen does that seem plausible to you.
That that would looking at our data would be plausible, but I don't know whether our data as representative.
Understood. Thank you very much.
Thank you and the next question comes from Brian Nowak from Morgan Stanley. Please ask your question. Your line is now open.
Hi, This is a Alex Wong on for Brian. Thanks for taking the question on just two please first as you guys talked about sort of positioning the business for some trends that you might expect coming out of this crisis, especially if equity local can you talk about perhaps the need to maybe diversify the portfolio.
And maybe add offerings, such as you know rental cars or greater emphasis on alternative accommodations or more local attraction to really capitalize on this this local trip trends and then the second question really as we think about the the top line in the business between.
The trend of Q R and RPQ. Our is your way to help us think about the composition of what you saw in March and April lines. You think about you know that coming months in quarters, how those two metrics might trend.
Absolutely so on diversification that let me answer that a bit broader and not not focused on specific ideas.
I mean, we have we have test that quite a few things already pre the crisis and and we do believe that it is important to it to permanently challenge. Your your are set up and your product offering and.
That's why we actually started to work on display advertisement and sponsor listings already end of last year, which now pro proves to be actually quite beneficial but in particular in a situation like like the one that we're currently facing where the future market might look very different than the market that we've experienced for the last.
Last years. It is very important to be very open and really look at opportunities and see which opportunities our rights for your business. So.
Well I can say as we are very open we are testing various different different ideas and.
We will we will make a fact based decision which ones. We do believe are accretive to our value proposition and which ones are more distraction to our organization.
Yes, and on your second question on trends in Q, our NRP Q.
Obviously that that's a difficult one.
Because it doesn't make a tunnel send that looking at that now, but how we think about it going forward.
Q as basically all volume component and that should be oh that should correlate with I'm trying to volumes coming back.
And I'll keep you asked more the monetization piece and then we talked about before.
But we do expect a pressure in the auction going forward and we hope to mitigate that with the marketplace changes, but that will come later so.
Super High level I would expect that we do see an improvement in Q a year over year trends first and then RPQ are.
Well, we're probably like that but.
To be honest right now, it's not really an auction.
And for all four RPQ onto makes sense and look at the monetization et cetera, you need certain certain volumes and certain level of activity.
So again, it really depends on how the shakes out.
So.
Yeah, I think that's like the my two cents on on the two metrics if that helps.
Great. Thanks, guys.
Thank you. Thank you and before we take our next question My I'd just remind you if you wish to ask a question. Please press star one on your telephone creep Pat.
And your next question comes from the line of James Lee from Me to Securities. Please ask your question. Your line is now open.
Great. Thanks for taking my questions King guidance, maybe talk about some the subsidies you're getting from the government and how they are giving you maybe some cushion on liquidity and also maybe help us the snow on the stand skews may have you done any stress tests on your balance sheet.
The in Tangoe Coven 19 is worse than your expectation do you need to come bedding market to raise capital and also lastly, and maybe help us understand the search trends into the summer travel season, a little bit will love to see.
You know would love to know what you're seeing out there in terms of destination any demographic and you know ship what changes from a search results there. Thanks.
Yes, Thanks James.
So on your first question on subsidies.
We mentioned that we.
Utilized scheme quote quote so but in Germany. So basically you put people on reduced working hours.
And we did that in April, but then move to everybody back to 100% in May when we announced the restructuring so only a few employees were on zero office in April.
And as we kept most people on at least 50%.
This overall won't move the needle in the second.
Quarter in terms of cost them.
Regarding your second question on the balance sheet.
I mean as of end of Q1, we had over 200 million euros in cash equivalents and short term investments with no debt on our balance sheet.
We have adjusted our cost base to set up the company for lower Trevor volumes in 2021 compared to 29 team.
So even on scenarios with no recovery in travel in Twentytwenty and subdued travel activity in 2021, we're confident that we have sufficient liquidity.
And lastly on trends yeah, as I said, it's <unk>.
It's very very tricky to to read anything into into.
Anything we are seeing right now on the platform, obviously, we do see that local Trevor.
Gainshare brothers International travel, but I guess that's clear.
As I mentioned before we also see that apartments are gaining was hotel, but I.
I wouldn't worry too much into that it's a it's no indication of what we would see once volumes volume come back to more normal levels.
But for the short term.
We anticipate we expect that people will look more more locally and what Rob.
Company in Germany will look at base, driven cost and not Italy, or Spain and Greece.
But it also depends on how bought US a win bought us the opening.
Et cetera, et cetera, and what to perceive safety is enough from from our users.
But that's that's all I can say at this point.
Okay. Thank you.
Thanks.
Thank you and that most our last question for today. Please continue.
Yeah, Thanks, everyone for joining us today.
Yep.
The travel industry is facing an unprecedented challenge.
But travel well come back.
The slope of the recovery is uncertain and it will be key to stay flexible and adapt quickly.
The past months have not been easy for any of us at Trivago.
We had to take tough decisions moved to a fully remodeled set up and deal with a very difficult business environment.
But it has been very comforting to see how well our team has responded to these challenges.
Adopting at an amazing pace.
With a positive forward looking attitude.
With our dynamic and entrepreneurial culture, our lean organization and our collaborative approach with our partners. We believe that we are well set up to navigate through the quarters to come.
Last but not least.
We are using the time of low travel activities to fundamentally improve our value proposition to both towards our users and our advertisers.
And leave the crisis stronger than we entered many thanks for your time and stay safe.
Thank you, ladies and gentlemen that does conclude our conference for today. Thank you for participating you may disconnect speakers. Please standby.
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Ladies and good day, ladies and gentlemen.
Thank you for standing by and welcome to the Trivago Q1 earnings call 2020.
I must advise you the coal is being recorded today to stay the 19th of my.
On T. 20.
We are pleased to be joined on the core today, but actually he felt to boggling, she oh and managing director.
She has to them on Trivago CFO.
The following discussion, including responses to all Cook to your questions reflect management's views as of today today.
They may 19 Twentytwenty only.
She boggled does not undertake any obligation to update or revise this information.
It's over some of the statements made on todays call all forward looking.
To Cooper's receded by words, such as we expect the belief, we anticipate or similar statements.
Please refer to the Q1 operating and financial overview and the company's other filings with the S. E. C for information about factors, which could cause trivagos actual results to differ materially from these forward looking statements.
You would find reconsolidation of non-GAAP measures.
To the most compiler both GAAP measures discussed today into Vargas operating and financial overview, but just posted on the Companys <unk> website at <unk>.
Oh adult Trivago dot com.
You want in college to periodically visits of August investor relationship side.
Four important content.
Finally, unless otherwise stated all comparisons on this call what would be against results for the compiler period of 2019.
With that let me turn the call over to OXXO. Please go ahead Sir.
Good morning, everybody, maybe thanks for joining our Q1 earnings call.
I Hope you had the chance to read our shareholder that so that we filed yesterday.
We have received very positive feedback on the formats and well continue to publish it going forward.
Before we start the Q and I would like to point out one thing.
Despite all the challenges this unprecedented crisis is bringing to ask personally onto the industry.
We have trivago see this as an opportunity.
An opportunity to focus our organization on our core and structurally reduce our cost base.
An opportunity to improve or coal, that's a product, while adding a complimentary and more inspirational local and sustainable travel product.
An opportunity to diversify our revenue by adding new revenue streams, such a display advertisement and sponsored listings.
As an opportunity to set sustainable performance marketing levels going forward.
We believe that these initiatives will allow us to leave the crisis much stronger than we entered.
Well that we're now moving to QNX.
Thank you, ladies and gentlemen, and the first question comes from Nabil to Khan from Suntrust. Please ask your question. Your line is now open.
No that's true.
Just a couple of questions. So.
Excellent they didn't do any more color on the things that you can do to make their site locally relevant.
Well come out.
Oh daily, including the daily or weekly says Oh, what do you have to control that and then the other person I had just.
On the shape of the piano do anything that the impact to your topline were met the deep hasn't travel bookings I do think the impact on your topline would actually be greater just because you are dependent on advertisers and.
Maybe that led to come back.
Thanks for the question. So on the question regarding the product development and the complimentary product.
When you look at our coal product. It is basically a product that allows you to find the best deals available for a specific trip that you have in mind. So you know where you want to go and you might or might not know the time already and we help you in a very efficient and effective way to find the best times and the best.
Do you have for your trip.
Well, we are currently working on and what we think well increase they engagement and rather than itself the website as a more inspirational product.
So basically we are slightly moving up a in the travel follow that is focused on local travel because we believe that local the trouble right now and we see that local travel right. Now is the first traveled that as restarting and we believe that local travel will be much more important for the foreseeable future. So it is.
Yes. It is more focused on giving you an idea was actually kind of trip you would like to do and you could do.
That is locally available easy to reach by car.
And because of that it as a trap that you can do a lot more often than than for example, a summer vacation.
Yeah, and I'd take the second one now that are on the piano.
I mean at this point, yes, yes, you know, it's very difficult to predict when and how much time activity would come back.
As we mentioned our quarterly report or refer revenue declined by more than 95% in the last week of mochi over you.
In April we stabilized on those low level, that's an even though we are seeing a small uptick now in may our Q2, a year over year performance will be materially worse than Q1.
However, we are focusing on what we can't control I mean, we immediately pulled back on performance marketing channels obviously.
When volumes dropped and shifted TV budgets into the second half and into next year.
And then additionally, as we mentioned I know a approach older lets already we took several steps to bring down our fixed cost now how that compares to the overall travel market. That's that's something we can only control to some extent as you know auction aspinwall the tide already before the crisis.
And we already started at the beginning of the yet to.
Introduce implemented feature in our marketplace, but help us on the monetization front.
We believe that the crisis it makes it likely but the industry will consolidate further out which were put additional pressure on the auction.
So it all depends on how successful we all with our initiatives marketplace initiatives to two.
Yeah, so basically offset that that pressure, but again at this point, it's it's too early to tell to see whether we come out a ahead, all with a market all lower than the market.
Hey.
Thank you.
Sure.
Thank you.
And the next question comes from Tom White from D.A. Davidson. Please go ahead, Sir your line is now open.
Great. Thank you for taking my question good morning.
In the prepared remarks or in the letter rather you talked about.
No possible consolidation on the supply side of things <unk>.
Can you dig into that a bit more it would be it would seem that that wouldn't be a good thing for.
Kinda travel intermediaries.
Like yourself, but just curious on your thoughts there and then.
Well I'm also on the topic of validation curious whether you think the role of.
Travel intermediaries, such as Metasearch sites are OTI is kinda changers meaningfully in a post pandemic world and you know whether.
You might see similar consolidation or on that front as well to the extent that there's that's still meaningful consolidation.
Possible. Thanks.
Sure Yeah. Thanks, Thanks for the question.
In general that that's why we anticipate that we and other provide us off performance marketing well have a more consolidated advertise a structural coming out of this.
We believe that well funded industry participants, who can whether the crisis and RECIUM operations foster likely to take share away from small and medium sized hotels.
I would also at that that's less appetite for put taking on the rest of cancellations. So in a CPC auction you might end up with refer those that are less valuable than you thought as cancellation rates might go up and that's what I meant previously that we started working on on some marketplace feature.
That that.
Well, we hope that we can offset that pressure and I don't know axle. If you want to two at a well give some color on those features and what exactly were working on absolutely. So yeah, I mean as well see a lot yes, I sat in a crisis like this you have to assume that there will be more consolidation.
How much I think nobody knows by now the well we have done even before the crisis, we started tests to diversify our revenue base and diversify it and have overall a broader brought a a foundation.
So in addition to offering tools that are addressing the existing on certain say like CP a bidding. We we are taking a lot more I've taken life, a display advertisement and sponsor outlets. Thanks, both products that are delivering a different value to all right.
A tie that into existing CPC based product and that we think well be very important to compensate overcompensate potential weakness and the auction for the next month so calm.
Thank you.
Thank you.
And the next question comes on the line of Lloyd Wamsley from Deutsche Bank. Please ask your question. Your line is now open.
Thanks, I have two if I can.
First just kind of going back to that.
Model.
Yes.
Definitely hurdle.
Pressure throughout the marketing channel after shifted this model and win a question for you. When you. When you look at the Rev shares OTI age are looking for how does that compare to the effective take rates, you've historically seen in CPC model.
Models have historically been much lower effective take rates I think and CPC model. So wondering how that shaking out and then.
Secondly, going back to the comments on higher consolidation in the industry.
From larger players you also mentioned structurally reduce spending in SCM can you just talk about why you think.
And we'll be structurally lower and then why you think the negative impact to your marketplace.
So you put it at six to 12 months.
Would it be longer anything you can share on the these fronts would be helpful.
Absolutely so on the SCPA model the way, we're thinking about it as its basically a service to our appetizers and and service that is necessary given that the T.F. matching before there is obviously I'm very low risk appetite after.
After I mean entering this crisis under very substantial cash outflow by responding constellations add a lot of out of certain say whether that be a second wave or will there be new cancellations cancellation rates going up again et cetera. So.
Offer a C.P.A. allows us basically to to reengage with many many advertisers sooner rather than data.
Leveraging our superior data that visibility can really give them more competent have them more active and the ALKS rather than less active.
Yeah. The at the second question that that you asked as well the take rate be higher or lower than it has been before.
I don't think that that the first indication of take rates right now are really a good proxy for take rights and the future because we have the special situation that does this high level off on certain team. We don't think that the cpis structurally has lower take rates that CPC based model. It is more.
A tool and the service that isn't particularly valuable for smaller appetizers that are having access to less data anyhow and then the current situation access to a lot less data and and just benefits from us aggregating the data and and that bidding on their behalf and.
And also I'm sharing sharing the risk.
Yeah and ER on your second question on dynamics in performance trend that I, what I would mention that three key.
Things that we take in consideration and why we believe that.
The auctions will be soft or at least in the short to medium term.
The first one as we mentioned consolidation I mean, it's clear if if the pure pay a play as a actively participating but that's a puts pressure on the auction. The second one that I mentioned before us work cancellation risk.
I think there's a awareness now in the market that that there should be a risk premium for that and I'm. At this point, we we don't know nobody knows if we see a second wave or not and what a click or refer you are buying is it's worth in the end and then the third one this is more specifically to us.
But that's all a lasco test, but then we mentioned already lost time.
So even before the crisis.
Hit US we started to.
Don on performance on those two.
So to see.
How we can drive incremental deal how incremental that that try analysts for us and.
We started that in February, but then had to cost earlier than anticipated due to the corporate 19 outbreak.
But what I can show that we got some early owning a learnings and what I can tell you is that we got some indications that we might benefit from reducing our but any performance trends.
But obviously, we need to get more data and we will continue with a test once volumes come back.
Obviously, it's a it's especially situation because now it's a it's a zero.
And it's like reset so we also need to see how other than that make you evolves when when things come back, but then at the right point in time, we will certainly continue artists.
Alright, thanks fast.
Thank you and the next question comes from Milan off right Sheva from Wells Fargo. Please ask your question. Your line is not open.
Hi, Thanks, a couple of follow ons, maybe a one to the discussion on different formats.
Can you give us a sense of what those breakdowns are now I know its its its newer days on on SCPA, but where do you think they will get too and then.
You just mentioned that's ER the take rates are necessary, they lower they're more useful to small where advertisers who don't have as much information to bring to bear and leverage do you anticipate.
Snap back in terms of AD format usage at some point when if we get adding here because obviously smaller advertisers may not be able to the weather. The storm and then you're left with larger guys with more data that they can use on their own and so hence maybe more more CPC there.
Yes, so on the on the new formats.
Hi, Dave I assume youre youre, referring to to to the to the bidding formats, yeah, So CPC versus EPA.
On on the on the SCPA, we do believe that it is a lot more relevant.
In the recovery Phase has as I mentioned before because there's more uncertainty less data and more risk structurally and that will become less relevant once we are at whatever a steady state means in the future because it will be easier to predict cancellation rates a conversion rights and.
Well, we generally speaking more data available.
Having said that it is it's not it's not something news, so and particularly a smaller EM and smallest advertisers individual hotel. So they extremes have for very long time off for this format. So are we are basically now.
Just re prioritized the development and brought it forward because now it becomes rather than for a very sizable part of our advertiser base.
Thank you Brad.
Thank you and the next question comes from Shyam Patil from Susquehanna. Please ask your question. Your line is now open.
Hi, guys its Ryan on for shop.
Can you talk about trends in markets that are opening up sooner than most such as like Hong Kong or Germany.
Is there been any material rebounds anywhere and then secondly, do you anticipate seeing demand for alternative accommodations return a bit faster AMR travelers, maybe preferring at their own place to a big hotel Nissan's. Thanks.
Yeah. Thanks, Thanks for your question.
Yes, as I mentioned, we we did see an uptick in may.
In some of the markets, especially in those markets where.
Governments started to relax a shuttle measures.
I mean, we have every quarter, then usually because it because it's still a very low base and we don't read too much into that at this point in time.
So I think it's it's way too early to tell and it's also difficult to take one market for example, Germany and look at how the recovery.
Structure looks like at this point, and then and transfer that through two or predict that fall from other countries given that we entered into the settlement at different stages and also have different measures in place and overall, we don't look too much of the data to be honest, because we think there.
A lot of noise.
Before we can do that and get a.
You bet inflammation all of it we think volumes a need to pick up.
And that also partially Onsolis. Your second question I mean, when we look at Q1, there was no real shift from hotels to 'em apartment.
It was very similar to what we what we saw before so.
In April you can you can see that that that people are looking more for apartments, but then again.
Volumes, our sole also we don't read too much into that and we need to have more volume on the platform to see whether that's a trend or whether that is just now.
Yes.
In certain countries opening up domestically locally.
But again too early to tell but what I, what I would add I mean, we started to invest into alternative accommodations over two years ago.
As we thought back then it's it's important and we integrated into our core product so I'm showing at side by side toward Ted So whatever the trend will it be I think it is important will be important parts going forward and hence strategically for us nothing changes, we will continue to focus on it and making it more relevant.
I'm showing it to tall users.
Does that answer the question.
Yeah. Thanks.
Perfect. Thanks.
Thank you and the next question comes from the line of stuck on most from JP Morgan. Please ask your question. Your line is now open.
Great. Thanks for taking questions.
Ive to first you talked a number of changes axle I'm just in terms of the products for example, going more upon all in more local and then also the newer AD formats moving toward display and sponsored listening can you just talk about how much those changes how much has been discussed and in conjunction with your.
We're advertising partners. Just curious are you know what what their view of a if they have any view kind of changes that you're making on the platform and then secondly, just on the cost side of things can you help us understand.
How much cost you're taking out on an annual basis at this point and perhaps give us an update on fixed and variable cost structure. Thanks.
So on the on the B to C and B to B product changes, a if you want to group them like that I.
I mean for now quite some time, we're working very very close.
I'll say together with our key partners and in particularly in the current crisis. If anything we we are even closer and as a crisis for the whole industry and only if we all work together, we won't be able to it to come outside sooner rather than later, so its and full full alignment or was.
Well the key partners I'm on the beach will see side.
The complimentary product that is focusing on local travel I mean that has obviously well appreciated by our partners because there is wide agreement that domestic on local travel well pick up first and that's what we currently see and that would stay for quite some time a more relevant.
Experience and product.
For our users on travelers globally. So there is there is a need for products that that actually supports that demand.
On the Vito besides.
The products are jointly developed with our partners I mean, they need to and and there is strong interest in particularly for the recovery phase for.
Those two new products that I mentioned and there are there other ideas that we are testing and working on.
And the.
Easiest way to think about it is on a sponsored listings key additional benefit to a traditional auction is that you can get a lot of visibility and a lot of volume into a specific property, which when you think about how capacity can be added and how to hotels can reopen is actually highly relevant to actually fell.
The hotels that are open very quickly and a very focused manner. So there is there is big interests and big demand for display advertisement. There is also very big demand and they are the key value proposition as that it allows for additional messaging that is on our aside as in the flow off a user.
Searching for I Commendation, and there in particular the safety standards that is applies to the specific accommodation is highly relevant and can be messaged very well both products as I said I I didn't relevant for the recovery phase and so a we expect them to get quite a bit of trucks.
For the month to come with volumes coming back to two more decent levels.
Yeah, so and on the cost side.
And as we mentioned and noticed closer we have stopped all unnecessary spending such as marketing business trying to accompany events and others.
The by far largest bucket a in a is marketing obviously and we pulled back very quickly on on that one.
So to give you more guidance on quarterly expenses for the remainder of this year I think a good starting point is to look at our cost and expenses in Q1.
There you would need to adjust for the credit losses that we called out in our release and that Ohio. This quarter given the impact of Cobot 19.
And then you then look at the base at that base. It is already lower compared to Q1 2019 for the reasons mentioned above.
We expect to have similar savings for the remaining quarters this year.
But given we started to implement the cost saving initiatives during the quarter the impact should be slightly higher in the coming quarters.
In addition, we spent some time on thinking about the optimal set up going into 2021.
And we believe that we need to be a smaller company and as we mentioned our earnings release, we expect to reduce our personnel and related costs by approximately 20 million in 2021.
So that gives you a good idea on the savings for the remainder of this year as well, though for the transition period in Q2 in Q3, the savings will be slightly lower than that and just for clarity I am referring here to expenses between revenue and EBITDA, so not a for GAAP expenses.
Great. Thank you but.
Thank you.
Thank you and the next question comes from the line off Kevin Kopelman from Cowen. Please ask your question. Your line is now open.
Hi, Thanks, a lot I had a follow up question on advertising expense, Okay give us more color on latest trend there specifically.
You see advertising spend declining at a similar rate to revenue and the current environment or declining more.
Or less than Robyn thanks.
Yeah, Kevin Thanks for your question.
As I said before that when performance marketing, we we pulled back immediately and we said that all revenue was.
Don more than 95% at end of March and that we stabilized at that level in a in April.
So, yes, there's hardly any spend and on the on the brand marketing side.
We also shifted all oh budget into the second half and into next year. So there's hardly any spend as well.
So right now the there I mean I cannot really talk about trends because we are at a very low base, but obviously, we expect that.
To get back into the markets as we see traffic picking up and that should be highly correlated.
But right now then I mean, we're not there yet.
Okay. That's very helpful and then.
One other quick follow up.
Talk a little bit more about.
Local travel trips maybe some examples of what those trips might look like just because I think that that are important.
Dynamic.
Terminated you mentioned.
Absolutely so the.
The the highest interest that we currently see where just also intuitively clear as its short trips from metropolitan areas to more remote areas and that that ultimately their first then a bit by metropolitan area, but if you take Germany. As an example, you shouldn't see very very strong interest in that.
Coastal destinations and and the mountains and you bring I see no interest and the Metropolitan area. So it's really from crowded areas two to two basic be completely non crowds very remote areas that is the first most obvious use case.
With the overall situation and also the comfort level off travelers improving.
The the next use case is more okay. It could actually be closer to a town or some activity that will restart at some point in time, but it should be driving distance. So that you don't have to worry about a flight schedules well the flights be on will there be cancelled where is it too crowded on on planes you sat trust.
That's than a second step and times off a watch what to travel us do feel and perceive as safe travel and then obviously the ultimate Stabbers returning to normal where you go and anywhere you want probably still was initially some focus on short term testing.
Nations as there are still some uncertainty whether there will be a second wave that will make 'em a long haul flights more complicated and that conversation. So that's super roughly and simplifying the the evolution of travel the how we see it and the in the months to come and that's what we are preparing the product for.
Oh, thanks axle thanks to this.
And again.
Thank you and the next question comes from the line of Jason Bazinet from Citi. Please ask your question. Your line is now open.
Oh, thanks, so much I just had a very basic question for the travel industry overall.
What portion of all hotel rooms, or or nights, if you will.
Were related to this local travel segment that didn't involve airfare.
And what and what if you know what share of though TV market did it represent.
Prior to Cook.
I mean to be perfectly honest I don't know the exact answer to your question a lot I do know is that that's the majority off the travel on our side are quite significant majority is domestic.
And and in Europe, domestic I, what I would classify as the second area so to make comparable to the U.S.
And the majority of the travel is within driving distance all possible to drive.
But yeah that I don't have the exact answer to your question.
Okay. So Tonight I'll give you are back at the envelope can you tell me. If you think this is wrong that 65% of hotel room nights do not involves air travel globally that seems that seeing plausible to you.
That was looking at our data what be plausible, but I don't know whether our data as representative.
Understood. Thank you very much.
Thank you.
The next question comes from Brian Nowak from Morgan Stanley. Please ask your question. Your line is now open.
Hi, This is a Alex Wong on for Brian. Thanks for taking the question on just two please first as you guys talked about sort of positioning the business for.
Some trends that you might expect coming out of this crisis, especially if equity local can you talk about perhaps the need to maybe diversify the portfolio and maybe add offerings, such as you know rental cars or greater emphasis on alternative accommodations or more local attraction to really capitalize on this this local trip.
Yes.
And then the second question really as we think about the the top line in the business between.
The trend of Q R and RPQ are is there a way to help us think about the composition of what you saw in March and April and you think about that coming months in quarters, how those two metrics might trend.
Absolutely so on diversification that let me answer that a bit broader and not not focused on specific ideas.
I mean, we have we have test that quite a few things already pre the crisis and we do believe that it is important to permanently shut lunch I'm sure you're set up and your product offering and.
That's why we actually started to work on I'll, just say advertisement. That's one of the listings are already end of last year, which now pro proves to be actually quite beneficial but in particular in a situation like like via the one that we're currently facing where the future market might look very different than the market that we've experienced for the last.
Last year as it is very important to be very open and really look at opportunities and see which opportunities our rights for you on business. So what I can just say as we are very open we are testing various different different ideas and we will we will make a fact basis.
Session, which was we do believe are accretive to our value proposition and which ones are more distraction to our organization.
Yeah and on your second question on trends in Q, our NRP Q.
Obviously that that's a difficult one.
Because it doesn't make a tunnel sent that looking at that now, but how we think about it going forward.
Q as basically all volume component and that should be oh that should correlate with I'm trying to volumes coming back.
And I think you asked more the monetization piece and then we talked about before.
But we do expect a pressure in the auction going forward and we hope to mitigate that with the with the marketplace changes, but that would come later so.
Super High level I would expect that we do see an improvement in Q a year over year trends first and then RPQ, our well, we're probably like that but.
To be honest right now, it's it's not really an auction and falloff RPQ ought to make sense and look at the monetization et cetera, you need certain certain volumes and certain level of activity.
So again, it really depends on how that shakes out.
So yeah I think that's like the my two cents on on the two metrics if that hubs.
Great. Thanks, guys.
Thank you. Thank you and before we take our next question My I'd just remind you if you wish to ask a question. Please press star one on your telephone creep pot.
And your next question comes from the line of James Lee from Me to Securities. Please ask your question. Your line is now open.
Great. Thanks for taking my questions King guidance, maybe talk about from the subsidies you're getting from the government and how they're giving you maybe some cushion on liquidity and also maybe help us the snow on the stand excuse me every done any stress tests on your balance sheet you know if the in Tangoe coven, 19th worse than your expectation do you.
You need to competitive market to raise capital and also lastly, and maybe help us understand the search trends into the summer travel season, a little bit will love to see.
Well, let to know what you're seeing out there in terms of destination any demographic and ship what changes.
On the search results there thanks.
Yes.
Thanks, James I'm. So on your first question on subsidies, we mentioned that we.
Utilized scheme quote quote so but in Germany. So basically you put people on reduced working hours.
And we did that in April, but then move to everybody back to 100% in May when we announced the restructuring so only a few employees were on zero AWS and I approach and as we kept most people on at least 50%.
This overall won't move the needle in the second.
Caught in terms of cost.
Regarding your second question on the balance sheet.
I mean as of end of Q1, we had over 200 million euros in cash equivalents and short term investments with no debt on our balance sheet.
We have adjusted our cost base to set up the company follow a troubled volumes in 2021 compared to 29 team.
So even on a scenarios with no recovery in trouble in Twentytwenty and subdue travel activity and 2021, we're confident that we have sufficient liquidity.
And lastly on trends yeah, as I said, it's <unk>.
It's very very tricky to to read anything into into anything we are seeing right now on the platform. Obviously, we do see that local Trevor Gainshare brothers International travel about I guess that's clear.
As I mentioned before we also see that apartments are gaining was hotel.
But I wouldn't read too much into that it's a it's no indication of what we would see ones volumes volume come back to more normal level.
But for the short term.
We anticipate we expect that people will look more more locally and what Rob.
Examined in Germany will look at the German cost and not Italy, or Spain agreed.
Bob.
It also depends on how bought us a when bought us the opening.
Et cetera, et cetera, and what they perceive safety is up from from our users, but that's that's all I can say at this point.
Okay. Thank you.
Thanks.
Thank you and that most our last question for today. Please continue.
Yeah, Thanks, everyone for joining us today.
Yep.
The travel industry is facing an unprecedented challenge, but travel well come back.
The slope of the recovery is uncertain and it will be key to stay flexible and adapt quickly.
The past months have not been easy for any of us add to trivago.
We had to take tough decisions moved to a fully remote set up and deal with a very difficult business environment.
But it has been very comforting to see how well our team has responded to these challenges adopting at an amazing pace.
With a positive forward looking attitude.
With our dynamic and entrepreneurial culture, our lean organization and our collaborative approach with our partners. We believe that we are well set up to navigate through the quarters to come.
Last but not least.
We are using the time of low travel activity to fundamentally improve or value proposition to both towards our users and our advertisers.
And leave the crisis stronger than we entered many thanks for your time and stay safe.