Q4 2023 trivago NV Earnings Call
Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Trivago Q4 Earnings Call 2023. If you'd like to ask a question at the end of the presentation, you can press star-slide by one on your telephone keypad. If you'd like to remove your question, you may press star followed by 2.
Good day, ladies and gentlemen, thank you for standing by.
To the <unk> Q4 earnings call 2023.
Like to ask a question at the end of the presentation. You can press star followed by one on your telephone keypad.
If you'd like to remove your question you May press star two.
Operator: I must advise you the call is being recorded today, Wednesday the 7th of February 2024. We are pleased to be joined on the call today by Johannes Thomas, Trivago's CEO and Managing Director, and Kevin Hu, Trivago's Interim CFO. The following discussion, including responses to your questions, reflects management's views as of today, Wednesday, February 7th, 2024, and it 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 Q4 2023 Operating and Financial Review and the company's other filings with the SEC for information about factors which could cause Trivago's actual results to differ materially from those forward-looking statements. You'll 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.trivago You are encouraged to periodically visit Trivago's investor relations site for important content. Finally, unless otherwise stated, all comparisons in this bill will be against results for the comparable period of 2022.
I must advise you the call is being recorded today Wednesday.
February 2020 full.
We are pleased to be joined on the crude state by Johan Thomas parabolic as CEO, and managing director and Kevin Hu <unk> interim CFO.
Following discussion, including responses to your questions reflects management's views as of today Wednesday February 7th 2024.
Okay. It 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 Q4 2023 operating and financial review and the company's other filings with the SEC.
Information about factors, which could cause <unk> actual results to differ.
Really from those forward looking statements.
You'll find that reconciliations of non-GAAP measures to be most comparable GAAP measures discussed today into cloud guys operating and financial review, which is posted on the company's IR website at <unk>.
<unk> Dot com.
You are encouraged to periodically visit <unk> investor relations site for important content.
Finally, unless otherwise stated all comparisons on the scope will be against results for the comparable period of 2022.
Operator: With that, let me turn the call over to Johannes to begin. Good morning, everyone, and thank you for joining us for the Q4 2023 earnings call. The fourth quarter has unfolded as anticipated. We saw a decline in revenue in line with the trends observed in previous quarters. This decline was primarily due to lower levels of monetization and headwinds in the performance market. Additionally, we have felt the adverse effects of low brand marketing investments in recent years.
With that let me turn the call over to your house to begin.
Your House: Good morning, everyone and thank you for joining us for our Q4 2023 earnings call.
Speaker Change: Fourth quarter has unfolded as anticipated we saw a decline in revenue in line with the trends observed in previous quarters.
Decline was primarily due to lower levels of monetization and headwinds in performance marketing.
Speaker Change: Additionally, we have sales to adverse effects of low brand marketing investments and the recent year.
Johannes Thomas: However, these declines were partially mitigated by volume growth in our rest-of-the-world sector. Jasmine, Andre, and I returned to Trivago about nine months ago, with Kevin providing remarkable support as the interim CFO until Robin's arrival. As a new leadership team, we continue to believe in the potential of the business. The value proposition of trivago remains highly relevant as consumers continue to be price conscious, and the Trivago brand, fanaticg four.
Speaker Change: However, these declines were partially mitigated by volume growth in our rest of the World segment.
Speaker Change: Jasmine <unk> return to pre vogl about nine months ago, with Kevin providing remarkable support as the interim CFO onto Robin arrival.
Speaker Change: As the new leadership team, we continue to believe in the potential of the business.
Speaker Change: The value proposition of <unk> remains highly relevant as consumers continue to be price conscious.
Speaker Change: The <unk> brand.
Speaker Change: And for Us.
Johannes Thomas: We remain confident that maintaining the business at a full year break-even adjusted EVDA will enable us to rebuild our branded visitor baseline and achieve double-digit growth in the medium term. We are committed to executing our strategy to revitalize our brand and enhance our products in every way. Let me now give you an update on our strategic priorities. Our first strategic priority is branded growth. Within just a few months, we've assembled a highly skilled media buying team that effectively optimizes our global brand marketing investments. Additionally, we have undertaken a brand refresh to enhance Trivago's memorability and appeal.
Speaker Change: We remain confident that maintaining the business at a full year breakeven adjusted EBITDA will enable us to rebuild our branded visitor baseline and achieved a double digit growth in the medium term.
Speaker Change: We are committed to executing our strategy to revitalize our brand and enhance our product in every aspect.
Speaker Change: Let me now give you an update on our strategic priorities.
Speaker Change: Our first strategic priority is branded growth.
Speaker Change: Within just a few months with assembled a highly skilled media buying team that effectively optimizes, our global brand and marketing investment we have undertaken a brand refresh to enhance <unk> ability and appeal.
Johannes Thomas: By the end of Q4, we launched TV campaigns in over 20 markets and introduced new AI-powered Mr. Trivago spots. We are thrilled by the progress of our team's rapid execution. While it's too early to fully assess the brand campaign's impact, initial results are promising, particularly in developed Europe and the rest of the world. The response in America has been mixed, with North America performing better than London.
Speaker Change: By the end of Q4, we launched TV campaigns in over 20 markets and introduce new AI powered Mr. Chewbacca spots we.
Speaker Change: We are thrilled by the progress on our team's rapid execution.
Speaker Change: While it's too early to fully assess the brand campaigns impact initial results are promising.
Speaker Change: Particularly in developed Europe, and the rest of the world.
Speaker Change: The response in Americas has been mixed with North America performing better than later.
Speaker Change: We are continuously optimizing our brand budget allocation as well as our television creative.
Johannes Thomas: We are continuously optimizing our brand budget allocation, as well as our TV creatives. Over time, we anticipate the efforts will enhance the efficiency of our marketing, and we expect to see the compounding effects to materialize over time. Our second strategic priority is to enhance our hotel search experience. We help travelers find their ideal hotel.
Speaker Change: Over time, we anticipate the efforts will enhance the efficiency of our marketing investment and expect to see the compounding effect to materialize over time.
Speaker Change: Our second strategic priority is to enhance our hotel search experience, we have travelers find the ideal hotel.
Johannes Thomas: Our ongoing website tests have been focused on improving the visual experience of hotels and exposing more relevant content to our users. Notable efforts include AI-generated Hotel Highlights, which we qualified and launched for 60,000 hotels. The Hotel Highlights provide users with key aspects to know about a hotel, helping them in selecting the one that best fits their needs.
Speaker Change: Ongoing website tests has been focused on improving the visual experience of hotels and exposing more relevant content to our users.
Speaker Change: Notable efforts include AI generated hotel highlights, which we qualify them launch for 60000 hotels.
Speaker Change: The hotel highlights provide users with key aspects to know about the hotel, helping them in selecting the ones that best fits then.
Speaker Change: We have also introduced new statics search results pages targeting our users with low travel and tech. This change has led to a higher user engagement and improved quality of leads we send to all partners.
Johannes Thomas: We have also introduced new static search results pages, targeting our users with low-travel intent. This change has led to higher user engagement and improved the quality of leads we send to our partners. Our third strategic priority is to offer the best deal discovery experience. We help travelers find great hotel deals and better prices.
Speaker Change: Our third strategic priority is to offer the best deal discovery experience, we have travelers find create hotel deals and better prices. Our experiments have been aimed at refining how we display and ranked deals in our search results.
Johannes Thomas: Our experiments have been aimed at refining how we display and rank deals in our search results. The more we have improved the rate accuracy on our platform by evolving our deal intelligence and rate accuracy scoring system for our partners. Continuing to improve our deal exposure and rate accuracy will be a focus in the coming months, as we expect these improvements to foster trust and retention among our users. Our fourth strategic priority is our advertising partners. We empower them to realize the full potential of trivago.
Speaker Change: The more we have improved the rate accuracy on our platform by evolving our deal intelligence and rate accuracy, scoring system for our pop.
Speaker Change: Continuing to improve our exposure and rate accuracy will be focused in the coming months as we expect these improvements to foster trust in retention among our users.
Speaker Change: Our fourth strategic priority is our advertising partners, we empower them to realize the full potential answer Basel in Q4 2023, we began testing the second price auction in three key markets.
Johannes Thomas: In Q4 2023, we began testing the second price auction and three key markets. This initiative aims to simplify our auction, and we anticipate that it will unlock user value by delivering more relevant search results. The initial test was successful, and we are in the process of expanding the test.
This initiative aims to simplify our auction and we anticipate that it will unlock user value by delivering more relevant search results.
Speaker Change: The initial test was successful and we are in the process of expanding the test.
Johannes Thomas: If we continue to see satisfying results, we aspire to roll out the second price auction model across all markets before summer. We don't expect this to have a material impact on our monetization in the short term but anticipate positive long-term effects. To sum up, we see great momentum within the organization, improvements in our products, and encouraging indications from our brand investors, which sets the stage for results in the rest of the year. We have streamlined our operations and organizational structure around our strategic priorities with the objective to drive our pace of execution and learning. As we look ahead, we're confident of showcasing our enhancements and a positive brand trajectory. With that, I'd like to pass the baton to Kevin.
Speaker Change: If we continue to see satisfying result, we aspire to rollout the second price auction model across all markets before summer.
Speaker Change: Don't expect this to have a material impact on our monetization in the short term, but anticipate positive long term effects.
Speaker Change: To sum up we see great momentum within the organization improvements in our product and encouraging indications from our brand investment which sets the stage for the results in the rest of the year.
We have streamlined our operations and organizational structure around our strategic priorities with the objective to drive our pace of execution and learning.
Speaker Change: As we look ahead, we are confident of showcasing our enhancements and a positive brand trajectory.
Speaker Change: With that I'd like to pass over to Kevin.
Kevin Kopelman: Thank you Johanna.
Kevin Kopelman: Thank you, Johanna. I welcome everyone to our fourth quarter earnings call. I will start with a review of our fourth quarter results, as well as share some early thoughts for 2024. All comparisons for 2023 are on a year-over-year basis unless otherwise noted. During the fourth quarter of 2023, we achieved revenues of 91.7 million euros, which was a 13% decline compared to the prior year's fourth quarter. However, the year-over-year decline was at a similar rate to what was observed in the second and third quarters of this year and with a seasonality trend which was the same as the prior year.
Kevin: Welcome everyone to our fourth quarter earnings call I will start with a review of our fourth quarter results as well as share. Some early thoughts for 2024, all comparisons for 2023 are on a year over year basis, unless otherwise stated.
Kevin: During the fourth quarter of 2023, we achieved revenues of $91 7 million Euro, which was a 13% decline compared to prior year fourth quarter.
Kevin: Year over year decline was at a similar rate to what was observed in the second and third quarters of this year and with the seasonality trend, which was the same as prior year.
Kevin: Lower levels of monetization combined with foreign exchange headwinds negatively impacted our financials in the fourth quarter.
Kevin Kopelman: Lower levels of monetization combined with foreign exchange headwinds negatively impacted our financials in the fourth quarter. Additionally, higher levels of competition in performance marketing channels continue to impact our traffic volume. We also continue to observe ad format tests and changes made in our performance marketing channels with the compliance state set forth for the identified gatekeepers in the European Union's Digital Markets Act, or DMA, approach. Diving in deeper, we see different dynamics amongst our three recording segments. Referral revenues declined by 20% in America and by 14% in our developed Europe segment, while they increased by 14% in our rest of the world segment.
Kevin: Higher levels of competition in performance marketing channels continue to impact our traffic volume.
Kevin: We also continue to observe AD format tests and changes made in our performance marketing channel with the compliance date set forth for the identified gatekeepers in the European Union Digital markets Act or DMA approaching.
Kevin: Diving in deeper we see different dynamics amongst our three reporting segments.
Kevin: <unk> revenues declined by 20% in America and by 14% in our developed Europe segment, while it increased by 14% in our rest of World segment.
Kevin Kopelman: In discussing our year-over-year comparisons and trends, I would like to draw your attention to and remind you of the strong prior year dynamics included in our comparative financials. The declines in our Americas and Developed Europe segments were largely driven by softer bidding dynamics on our platform compared to the same period in 2022 when we had benefited from a strong auction. Higher levels of competition in certain marketing channels continue to result in performance marketing volume loss. Combined with foreign exchange headwinds from the weakening of the US dollar against the euro compared to the same period in 2022, this further contributed to decline. In our rest of the world segment, we continue to see growth driven by the recovery in markets like Japan, where we see a strong increase in travel demand as many markets in our rest of the world segment recover post COVID and also respond to increased marketing investment. Moving on to our operational expenses, we maintained stable operating expenses at 87.3 million euros in the fourth quarter.
Kevin: In discussing our year over year comparisons and trend I would like to draw your attention and remind you of the strong prior year dynamics included in our comparative financial.
Kevin: Declines in our Americas and developed Europe segment were largely driven by softer bidding dynamics on our platform compared to the same period in 2022, when we had benefited from a strong auction.
Kevin: Higher levels of competition in certain marketing channels continue to result in performance marketing volume losses.
Kevin: Combined with foreign exchange headwinds from the weakening of the U S dollar against the euro compared to the same period in 2022 further led the decline.
In our rest of World segment, we continued to see growth driven by the recovery in markets like Japan.
Kevin: Where we see a strong increase in travel demand as many markets in our rest of World segment recover post Covid and also respond to increased marketing investments.
Kevin: Moving on to our operational expenses, we maintained stable operating expenses at 87 3 million euros in the fourth quarter.
Kevin Kopelman: We incurred higher selling and marketing expenses compared to the prior year, which was offset by lower share-based compensation costs and lower personnel costs, primarily attributed to non-core related products that we stopped last year. Overall, we achieved a net income of 2.5 million euros and an adjusted EBITDA of 7.3 million euros during the fourth quarter. For the full year, the net loss was €164.5 million, which was largely driven by the indefinite life intangible asset and goodwill impairment analysis conducted in the third quarter in conjunction with our annual impairment test.
Kevin: We incurred higher selling and marketing expenses compared to prior year, which was offset by lower share based compensation costs and.
Kevin: And by lower personnel costs, primarily attributed to non core related products that we stopped last year.
Kevin: Overall, we achieved a net income of $2 5 million euros, and an adjusted EBITDA of $7 $3 million Euro during the fourth quarter.
For the full year net loss was $164 5 million euros, which was largely driven by the indefinite lived intangible asset and goodwill impairment analysis conducted in the third quarter in conjunction with our annual impairment test.
Kevin: For the full year, we achieved an adjusted EBITDA of $54 1 million euros.
Kevin Kopelman: For the full year, we achieved an adjusted EBITDA of €54.1 million. During the fourth quarter, we paid out a one-time extraordinary dividend totaling 184.4 million euros and completed a ratio change under the company's American Depository Share Program. I'm extremely proud and would like to thank the many Trivago employees that worked hard on these transactions as we successfully returned capital to our shareholders. We continue to be well capitalized for our operating needs, with cash, cash equivalents, and short-term investments balanced at the end of the quarter in excess of 125 million euros. Looking ahead to 2024, the main travel trends remain solid in January, and we continue to see strong demand for the year ahead. While discussing trends observed in January 2024 compared to January 2023, it is important to note the differing dynamics observed during the first full quarter of 2023. We enjoyed elevated levels of average daily rates and higher monetization, which resulted in referral revenue gains exceeding 30% when comparing January 2023 and January 2022. These gains, however, did not persist throughout the first quarter, as we trended lower by the end of the first quarter of 2023. As a result,
Kevin: During the fourth quarter, we paid out a onetime extraordinary dividend totaling $184 4 million euros and completed a ratio change under the company's American depositary share program.
Speaker Change: Im extremely proud of and would like to thank the many <unk> employees that worked hard on these transactions as we successfully returned capital to our shareholders.
Speaker Change: We continue to be well capitalized for our operating needs with cash cash equivalents and short term investments balance at the end of the quarter in excess of 125 million euros.
Speaker Change: Looking ahead to 2024.
Speaker Change: The main travel trends remained solid in January and we continue to see strong demand for the year ahead.
Speaker Change: While discussing trends observed in January 2024, compared to January 2023. It is important to note the different dynamics observed during the first full quarter of 2023.
Speaker Change: We enjoyed elevated levels of average daily rates and higher monetization, which resulted in referral revenue gains exceeding 30% when comparing January 2023 and January 2022.
Speaker Change: These gains however did not persist throughout the first quarter as we trended lower by the end of the first quarter of 2023.
Speaker Change: As a result.
Speaker Change: We do not believe a comparison of our early January 2024 results to prior year to be particularly meaningful.
Speaker Change: As a result of our previously announced strategy shift we kicked off our new brand marketing campaign in mid December.
Kevin Kopelman: We do not believe a comparison of our early January 2024 results to the prior year to be particularly meaningful. As a result of our previously announced strategy shift, we kicked off our new brand marketing campaign in mid-December. While it is still too early to conclude on the financial results, we are encouraged by early signals. While investments into our brand will have a negative impact on our near-term profitability, for the full year 2024, we continue to expect our adjusted EBITDA to be at around the break-even level. We remain confident that our brand investments will help us increase our brand traffic over time by keeping Trivago on top of travelers' minds. Finally, I'd like to close by sharing an update on our previously announced CFO transition. We look forward to welcoming back Robin Harries, who will be rejoining Trivago and stepping into the leadership team and taking on the role of Chief Financial Officer on April 1st.
While it is still too early to conclude on the financial results. We are encouraged by early signals.
Speaker Change: While investments into our brand will have a negative impact on our near term profitability level.
Speaker Change: Full year 2024, we continue to expect our adjusted EBITDA to be at around breakeven levels.
Speaker Change: We remain confident that our brand investments will help us increase our brand traffic over time, keeping tobacco on top of Travelers' minds.
Speaker Change: Finally, I'd like to close by sharing an update on our previously announced CFO transition.
Speaker Change: We look forward to welcoming back Robin Harry <unk>, who will be rejoining tobacco and stepping into the leadership team and taking on the role as Chief Financial Officer on April 1st.
I'd like to also personally thank all of our survival team that are leaning in during this transition period.
Speaker Change: With that let's open the line for questions.
Speaker Change: Operator, we are now ready to take the first question. Please.
Speaker Change: As a reminder, if you'd like to ask a question you can press star followed by one on the telephone keypad.
Operator: I'd also like to personally thank all our Trivago team that are leaning in during this transition period. With that, let's open the line for questions. Operator, we are now ready to take the first question, please. Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on the telephone keypad. Please ensure you're unmuted locally when asking your question.
Speaker Change: Please ensure your unmetered locally when asking your question.
Speaker Change: Our first question for today comes from Jeremy Liu of UBS Your.
Jeremy Liu: Your line is now open. Please go ahead.
Jeremy Liu: Good morning, guys. This is Jeremy on for Stephen.
Jeremy Liu: Two questions. So first you called out normalizing bookings values for the first time since the pandemic. This quarter is this a matter of supply finally balance with demand or are there. Other factors you want to call out for instance, do you think the consumers trading down in terms of what they are choosing.
Jeremy Liu: Our first question for today comes from Jeremy Liu of UBS. Your line is now open, please go ahead. Good morning, guys. This is Jeremy on behalf of Stephen.
Jeremy Liu: I have two questions. First, you called out normalizing booking values for the first time since the pandemic this quarter. Is this a matter of supply finally balancing with demand, or are there other factors you want to call out?
Jeremy Liu: Second maybe this is tied to your normalizing booking value comment, but you're also calling out softer bidding dynamics on your platform in the Americas specifically.
Jeremy Liu: I believe for the first time is there anything idiosyncratic about the U S market that you can talk about thank you.
Kevin Kopelman: For instance, do you think the consumer is trading down in terms of what they're choosing? And second, maybe this is tied to your normalizing booking value comment, but you're also calling out softer bidding dynamics on your platform in the Americas specifically, for the first time. Is there anything idiosyncratic about the US market that you can talk about? Thank you. Hi Jeremy, so I can take on the first question about average booking values.
Speaker Change: Hi, Jeremy So I can take on the first question about average booking values. So overall, we continue to see hotel demand to be quite robust and at similar level to prior year.
Speaker Change: Across the three segments I can maybe walk you through a little bit more detail of what we're seeing there. So in developed Europe, we are seeing actually a higher length of stay.
Speaker Change: Which is bringing up the average booking values, whereas in Americas, we see a slight <unk>.
Kevin Kopelman: So overall, we continue to see hotel demand be quite robust and at similar levels to last year. Across the three segments, I can maybe walk you through a bit more detail of what we're seeing there. So in developed Europe, we are seeing a higher length of stay, which is bringing up the average booking values, whereas in America, we see a slight decrease in our average daily rates, which together kind of net out, um, But these average booking values have normalized to compare to prior year levels, which were at a relatively higher level, overall. Yeah, I think that's important, and thank you for asking the question. It's not coming down, so it's normalizing at a high level.
Decrease in our average daily rates, which together kind of net out.
Speaker Change: Okay.
Speaker Change:
Speaker Change: But these average booking values have normalized to compared to prior year levels, which was at a relatively higher level.
Speaker Change: Overall.
Speaker Change: Yeah, I think thats important and thank you for asking the question.
Speaker Change: It's not coming down so it's normalizing on high level.
Speaker Change: And then to your question on the on the bidding dynamics that is nothing we particularly call out on our own.
Speaker Change: And in America, I think overall the quarter and beginning of the year has been volatile as previous years have been as well where last end of Q4 was strong into the year was a little bit softer, but theyre trending towards expected levels.
Kevin Kopelman: And then to your question on the bidding dynamics, that is nothing we particularly call out in America. I think overall, the quarter and beginning of the year have been volatile, as previous years have been as well, where the end of Q4 was stronger, and the beginning of the year was a little bit softer, but they're trending towards expected levels. Thank you. Thank you. Our next question comes from Naveed Khan of B Riley Securities. Your line is now open, please go ahead. Yeah, hi. Thanks a lot.
Speaker Change: Thank you.
Speaker Change: Thanks Keith.
Speaker Change: Question comes from <unk> Khan of B Riley Securities.
Khan: Your line is now open. Please go ahead.
Khan: Yeah, Hi, Thanks Raj so.
Khan: Maybe just a clarification on the <unk>.
Speaker Change: ANZ has spoke about.
Speaker Change: January.
Speaker Change: Yeah.
Raj: So you called out the difficult comps in the beginning of the quarter and you said that it should normalize.
Naved Khan: So, maybe just a clarification on the trend you spoke about, Kevin, about January. Yeah. So he called out the difficult columns in the beginning of the quarter, and he said they should normalize at the end. But give us some thoughts about how we should be modeling for the top line with similar declines in Q4 or less than that. And then Johannes, maybe just on the growth.
Raj: It was a quarter of antibody give us some.
Raj: Some thoughts about how we should be modeling about topline, but similar.
Raj: Similar declines in Q4 and less than that and then Johanna is maybe just on the growth. So.
Raj: Given that.
Raj: The payback from branded advertising come through some kind of a lag should we expect top line to.
Naved Khan: So given that the payback from branded advertising comes with some kind of a lag, should we expect the top line to start showing some growth as you progress into the year? Or do we expect that to be further out, maybe 2025? Sure, so why don't I start with the first question, which was about ABV, Average Book Value. So we do see very similar trends in January so far to what we saw in the fourth quarter already. But maybe I can also provide you with a bit more guidance on the top line and how we're kind of looking at the first quarter. So on the top line, we are expecting to see some revenue declines, but the revenue decline should decelerate during the first half of the year compared to the fourth quarter.
Raj: To start showing some growth and as you progress into the year or do you expect that to be funny about maybe 2025.
Johanna: Sure. So why don't I start with the first question.
Johanna: Which was about the ABV average booking values. So we do see in January so far very similar trends to what we saw in the fourth quarter already.
Johanna: But maybe I can also provide you a bit more guidance on the topline and how we're kind of looking at the first quarter.
Johanna: So on the top line, we are expecting to see some revenue declines.
Johanna: To see the revenue declined decelerate during the first half of the year compared to the fourth quarter.
Naved Khan: For the first quarter, we're expecting a mid-single-digit decline. And that segment would be that would be true for our America segment and also for our developed Europe segment, while we expect for the rest of the world, we would continue to expect similar levels of growth for the first quarter. And then maybe I can extend that to the rest of the year. I think our overall expectation for us for the first half is negative.
Johanna: For the first quarter, we're expecting mid single digit declines.
Johanna: And that segment would be that would be true for our Americas segment and also for our developed Europe segment, while we expect for the rest of World. We would continue to expect similar levels of growth for the first quarter.
Johanna: And then maybe I can extend to the rest of the year I think overall expectation for us that first half is negative.
Johannes Thomas: And then the second half turns positive when our brand investments are paying off because there's compounding effects kicking in. And the early signals that we are seeing in all segments are supporting our hypothesis on this.
Johanna: And then second half turns into positive when our brand investments are.
Johanna: Are paying off.
Johanna: Because there's some compounding effects kicking in and the early signals that we're seeing.
Johanna: In all segments are are supporting our hypothesis on this.
Naved Khan: That's very helpful. And then maybe a quick follow-up, if I may. So, you know, it seems like you continue to see more competition in the performance channels. Is the trend pretty much the same as we saw in the last couple of quarters, or has it worsened or maybe improved a little bit? Can you give us some color on that?
Speaker Change: Got it that's very helpful. And then maybe a quick follow up if I may so.
Speaker Change: It seems like you continue to see more competition in the performance goodbye from incentives.
Speaker Change:
Speaker Change: As the trend pretty much the same as you saw in the last couple of quarters or has it worsened or maybe improved a little bit.
Speaker Change: Give us some color on that and then.
Johannes Thomas: And then as the DMA rolls out in Europe, any thoughts in terms of what we can expect in terms of impact on the business? Yeah, so it's no big change in terms of impact. We continued to have a negative impact until roughly the second quarter. That is when the ad changes started, when the headwind started.
Speaker Change: BMO was Howard in Europe.
Speaker Change: Any cars in terms of what we can expect.
Speaker Change: In terms of impact on the business.
Speaker Change: Yes, so that is no.
Speaker Change: Big change in terms of.
Speaker Change: Terms of impact we continue to have a negative impact onto roughly.
Speaker Change: Second quarter that is when the AD changes started.
Speaker Change: When the headwind started so until then we expect some.
Johannes Thomas: So until then, we expect some headwinds to continue. Though it's volatile, we are seeing Google do changes as they aim to comply towards March. I think it's the 8th of March.
Speaker Change: Some headwind to continue though it's volatile we are seeing Google to do changes.
Speaker Change: The they aim to comply.
Speaker Change: Towards March I think it's eight of March and we see big changes were in Europe, and they are not linking to their hotel product any more from the search results page.
Johannes Thomas: And we see bigger changes where, in Europe, they are not linking to their hotel product anymore from the search results page. They instead have a places card on the right side where they show hotels similar to other attractions you can find on Google. And at the same time, they have increased the exposure of PPAs, at least from what we observe. And we have launched and participated in that auction across all relevant markets in order to learn and gain share if we see conversion rates improving. And that is a problem we have called out in the past. We see much lower conversion rates on PPA compared to text ads.
Speaker Change: They instead have them.
Speaker Change: Places caught on the ride side, where they show the hotel similar to other attractions you can find them on Google.
Speaker Change: And at the same time, they have increase the exposure of our ppas at least from what we observed and we.
Speaker Change: We have launched and participated in that auction across all relevant market in order to learn and gained share. If we if we see conversion rates improving and that is the problem we called out in the past.
Speaker Change: We see much lower conversion rates on PPA compared to text ads and that is something where.
Johannes Thomas: And that is something where we are trading off, where we are basically investing, and it's still unclear what changes will be present in the future that depends on the test of Google and also what will be accepted by the commission. Thank you. Thank you. Our next question comes from Doug Anmuth from J.P. Morgan. Your line is now open, please go ahead. Great. This is Dae Lee on behalf of Doug.
Speaker Change: Where we're trading where we are basically investing.
Speaker Change: And it's still unclear what changes will be.
Speaker Change: <unk> will be present in the future that depends on the test of Google and also what will be accepted by the commission.
Speaker Change: Great.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Doug Anmuth from Jpmorgan.
Doug Anmuth: Your line is now open. Please go ahead.
Doug Anmuth: Great. This is Katie on for Doug Thanks for taking the questions.
Dae K. Lee: Thanks for taking the questions. The first one is on their motivation trends so far this year. How do you think about mouse evasion and headwinds easing as we move through 2024?
Katie: Well first of all.
Katie: Regarding their monetization trends so far this year.
Katie: How do you think about amortization headwinds easing as we move through political new floor and then secondly.
Dae K. Lee: And then secondly, how should we think about the magnitude of your ad spend this year relative to how much you spent last year? Should we be expecting a single-digit type of growth, or will it be more in the double-digit type of level? Yeah, thank you for your question. Monetization, as we said, is trending towards expectations. It's very hard to predict where this is going throughout the year.
Katie: How do you how should we think about the magnitude of your AD spend this year relative to how much you spent last year should we be expecting a single digit type of growth or will it be more in the double digit type of levels.
Speaker Change: Yes. Thank you for your question so monetization as we sat it's it's trending towards expectations, it's very hard to predict where this is going.
Speaker Change: Throughout the year and our conversation with our with our partners. They signal that they are happy with our incremental <unk> our brand investments.
Johannes Thomas: In our conversation with our partners, they signal that they are happy with our incrementality. Our brand investments deliver additional incrementality and improve the quality of the leads we are sending. We do product improvements that deliver improved quality of the leads we are sending. So, that is basically our general perspective on monetization, that we wouldn't see big changes. In terms of spend, we certainly invest substantially more in brand marketing and less in performance marketing.
Speaker Change: Deliver.
Speaker Change: Additionally, incrementally to improve quality of the leads we are sending we do product improvements that they deliver improved quality of Av.
Speaker Change: Fleets, we're sending so that is basically our general perspective on monetization that we wouldn't see it.
Speaker Change: Big changes.
Speaker Change: In terms of our spend we certainly invest substantially more in brand marketing and.
And less in performance marketing and we see a shift off of brand marketing, taking a bigger share of our of our business and.
Johannes Thomas: And we see a shift to brand marketing taking a bigger share of our business. And whether we will see single or double-digit growth depends on what happens in Google and how the compounding effect kicks in throughout the year. So it's a bit early to give a clear signal on that.
Speaker Change: And whether we will see.
Speaker Change: Similar double digit growth depends on what happens in Google and how does the compounding effect kick in throughout the throughout the year. So it's a bit early to to give a clear signal on that what we are confident that we can deliver double digit growth in the medium term.
Johannes Thomas: What we are confident about is that we can deliver double-digit growth in the medium term, and that is basically where we are guiding at this point. Thank you. Our next question comes from Ron Josie of City. Ron, your line is now open. Please go ahead. Hey guys, this is Robert.
Speaker Change: And that is basically where we are guiding at this point.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Ron Josey of city from.
Ron Josey: Your line is now open. Please go ahead.
Ron Josey: Hey, guys. This is Robert on for Ron Thanks for taking the questions.
Robert: Thanks for taking the questions. The first question is on ad spend for next year. How should we think about the allocation of these investments in terms of targeting existing markets versus expanding to new markets? And which new markets are you guys leaning into the most? And maybe I'll pause and ask the second question.
Robert: First question is on AD spend for next year, how should we thing about the allocation of investments in terms of strengthening existing markets versus new markets.
Robert: Which new markets are you guys leaning into the most I mean, maybe I apologize second question after.
Speaker Change: So we're not commenting on any individual markets and gender.
Johannes Thomas: So we're not commenting on individual markets, and generally, we are not dogmatic about where we invest; it's path dependent. So we have invested in more than 20 markets by the end of Q4. We might try out additional markets, and it's basically the relevant markets that we have that we are running on at the moment. And we are focusing on those where the unit economics work for us. So we are investing in the brand to see the response, and then understanding where it's most efficient to put our dollars. And that is a gradual process that we will optimize over time.
Speaker Change: Generally we're not talk Matt take about where we invest into its path dependent. So we have invested in more than 20 markets by end of Q4, we might try out additional markets and it's basically because of the relevant markets that we have.
Speaker Change: With that we are running on at the moment and we are focusing on those where the unit economics work for us. So we are investing into brand and see the response and then.
Speaker Change: And then understand where it's most efficient to put our to put our dollars and that is a graduate process that we optimize over time.
Kevin Kopelman: Okay, I got it. It's helpful. And then the second question on the adjusted EBITDA guide, relatively unchanged from last quarter. Can you guys maybe just walk through where you see the most opportunity for outperformance here? Sure. So for the adjusted EBITDA, with these additional investments into our brand, we will expect to have a negative impact on the near-term profitability level. So in the first half of the year, we would expect that adjusted EBITDA to be negative, but we would stay disciplined. So this would be a low single-digit number that's negative, and then that would trend more positively in the second half of the year.
Speaker Change: Okay got it that's helpful. And then second question on the adjusted EBIT guidance relatively unchanged from last quarter, but can you guys. Maybe just walk through where you see the most opportunity for outperformance here.
Speaker Change: Sure.
Speaker Change: So far the adjusted EBITDA with these additional investments into our brand we will expect to have a negative impact on the near term profitability level.
Speaker Change: So in the first half year, we would expect that adjusted EBITDA to be negative, but we would stay disciplined. So this would be a low single digit number.
Speaker Change: And then that would trend more positively towards the second half of the year Alright. When you mentioned about the payoff the dividends of the brand investments that we're making to get us to the full year breakeven.
Kevin Kopelman: When Johannes mentioned the payoffs, the dividends of the brand investments that we're making to get us to the full-year break-even. In terms of OPEC spend, I would imagine that we would keep that at a very stable level consistent with the prior year. And this is OPEX adjusted for advertising spend and shareways competency. Great, thank you. Thank you. Thank you. Our next question comes from Stan Velikov of World Fargo. Your line is now open, please go ahead. Hi everyone.
Sure.
In terms of Opex spend I would imagine that we would keep that at a very stable level.
Speaker Change: <unk> with prior year.
Speaker Change: And this is opex adjusted for advertising spend and share based compensation costs.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Stan <unk>.
Stan: <unk> of Wells Fargo.
Stan: It is now open. Please go ahead.
Stan: Hi, everyone. Thanks for taking our question.
Stan Velikov: Thanks for taking our question. I'm curious how you're looking at the progression of brand spend through the year, and what cadence should we expect to see in 2024, because your prepared remarks kind of implied that brand spend would be gradually increasing. So we are not commenting on where exactly we spend. What we do, in general, is we spend more consistently.
Stan: Yeah.
I'm curious how you're looking at the progression of our brand spend through the year.
Speaker Change: What guidance should we expect to see in 2024.
Speaker Change: Your prepared remarks kind of implied the brand's presence would be gradually increasing.
Speaker Change: Okay.
Speaker Change: So we are we're not commenting on where exactly we spent what we what we do in general as we spent more consistently and this seasonality to two last year's will not substantially change from our brand spend this is maybe.
Johannes Thomas: And the seasonality to last year's will not substantially change from our brand spend. This is maybe how we can, or you can think about it. Okay, great. Thank you, Thank you. As a reminder, if you'd like to ask a question, you can press star 551 on your telephone keypad. Our next question comes from Kevin Kopelman from TD Cohen. Kevin, your line is now open; please go ahead. Thanks so much. Could you touch on Google's deprecation of or planned deprecation of cookies in Chrome?
Speaker Change: Now we can.
Speaker Change: Or we can think about it.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay, great. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you'd like to ask a question you can press star followed by one on the telephone keypad.
Speaker Change: Our next question comes from Kevin Kopelman from TD Cohen.
Kevin Kopelman: Kevin Your line is now.
Open. Please go ahead.
Kevin Kopelman: Thanks, so much.
Kevin Kopelman: Could you touch on Google's deprecation of planned deprecation of cookies in chrome.
Kevin Kopelman: How important or how big of a change will that be for Trivago and any impact you might see? Thanks, that is on our radar and we are working on our product display campaigns and so on on finding ways to do that it will not have a material impact on our business. Also, here because the brand is very strong, performance marketing is strong, and there is no big impact on those channels.
Kevin Kopelman: How important or how big of a change will that'd be for Chicago and any impact that you might see.
Kevin Kopelman: Yes.
Kevin Kopelman: Yeah.
Kevin Kopelman: That is on our radar and we are working on our.
Kevin Kopelman: Brought our display campaigns and so on finding ways to do that it will not have a material impact on our on our business also here because brand is very strong our performance marketing.
Kevin Kopelman: And there is no big impact on those channels.
Kevin Kopelman: Yeah.
Johannes Thomas: Perfect, thank you. Thank you. At this time, we currently have no further questions, so I'll hand it back to Johannes for any further remarks.
Speaker Change: Perfect. Thank you.
Speaker Change: Thank you.
Speaker Change: At this time, we currently have no further questions. So I'll hand back to you for any further remarks.
Speaker Change: Okay.
Johannes Thomas: Thank you for joining us today. Our mission is clear. We want to be the obvious choice for price-savvy travelers searching for a hotel.
Speaker Change: Thank you for joining us today, our mission is clear we want to be the obvious choice for price savvy travelers searching for hotel, we are energized and fully committed to the journey ahead and thank you again for your trust and we look forward to sharing our continued progress with you.
Johannes Thomas: We are energized and fully committed to the journey ahead. And thank you again for your trust, and we look forward to sharing our continued progress with you. Thank you for joining us on today's call. You may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: Thank you for joining today's call you may now disconnect your lines.
Speaker Change: [music].
Operator: ...