Q3 2024 trivago NV Earnings Call
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Speaker Change: Good day ladies and gentlemen, thank you for standing by and welcome to the Trevago Secure 3, Ernest Call 2024. All lives have been faced on YouTube to prevent any bad current life.
After the speaker remarks, there will be a question and a session.
If you would like to ask a question during this time, simply press the star, follow a bit number one on your telephone keypad. Do we draw your question? Press star again.
Speaker Change: I must advise you that the call is being recorded today. Wednesday, the 6th of November, 2024.
Speaker Change: We are pleased to be joined by Johannes Thomas, Travego C.O. and Managing Director and Robin Harris, Travego C.F.O. and Managing Director.
The following discussion including responses to your questions reflects management's views as of today Wednesday, November 6, 2020 for all of me.
Trevago does not undertake any obligations to update the revised dis exclamation.
Speaker Change: As always, some of the statements made on today's call are forward-looking. Typically, it was preceded by words such as weak expect.
We believe we have to state our civilised statements.
Speaker Change: Please refer to the Q32024 Operating International Review and to progress all their findings with a SEC for information about factors which could cause, to progress actual results to different material leaf from these forward looking statements.
Speaker Change: You will find reconciliation of non-gab measures to the most comparable gab measures discussed today. Intervago's operating and financial review, which is posted on Intervago's interest their relations website at IRTheTurvago.com.
Speaker Change: You are encouraged to periodically visit Dr. Vagos in the St. Relations website for important content.
Speaker Change: Finally, unless otherwise dated, all comparisons of this call will be against results for the comparable period of 2020.
Speaker Change: We'll see you next week.
Speaker Change: Good morning everyone. Thank you for joining our Q3 2020 for Unitscore.
Speaker Change: In the third quarter of 2024, we deliver solid brand revenue growth in our developed Europe and rest of the world segment, maintaining the positive trajectory.
Speaker Change: While the marriage cost segment fed temporary market headwinds, including software demand early and the quarter, and reduced TV rich due to shifted viewership from major sports and politically events.
Speaker Change: In America, we demonstrated our agility by adjusting our brand investments accordingly.
Speaker Change: This technical response contributed to a better than expected adjusted everyday.
Speaker Change: We will add format changes continue to be a headwind, which we expect to gradually normalize by 21 to 25.
Speaker Change: As we move into Q4, we are seeing a return to typical seasonality patterns, and are excited to be approaching our turning point.
Speaker Change: We are well positioned for growth this quarter and aim for sustainable growth next year. Our discipline approach keeps us on track to achieve break even on a 40 basis in 2024.
Speaker Change: We may be confident in our ability to achieve double digit growth in the medium term.
Speaker Change: Robin will share a third-hand side on Q3 and our future expectations.
Robin Harris: Let me first give you an update on our strategic priorities.
Speaker Change: Our first strategic priority is branded cloth.
Speaker Change: We strive to be top of mind for travelers booking hotels. We are encouraged by the positive return for our brand marketing investment in 2024 and committed to advancing this trajectory.
Speaker Change: For the increase, the effectiveness of our investments, we have secure the partnership with Union Club as the phase of our upcoming marketing campaign.
Speaker Change: As a globally recognized soccer coach celebrated for the remarkable leadership, Bob Geid has Liverpool to triumph in both the Premier League and the Champions League.
Speaker Change: We know that the normal one, among the cycle of sockets legends, clocked and celebrated worldwide for smart personality and authentic character.
Speaker Change: Quality is a perfectly aligned before we stand for.
Speaker Change: The Pestin Carefully Selected After Comprehensive Pre-Testing
Speaker Change: It's resonance with Travago's audience surpassed that of other potential candidates, making him an ideal ambassador for the brand.
Speaker Change: The campaign will take off with a Master Spot recorded in English which will then be localized into various languages you will using advanced AI technology.
Speaker Change: There's a approach built on tobacco spyroning efforts and a idea of marketing.
Speaker Change: First introduced in our brand marketing campaign at the end of last year.
Speaker Change: Our second strategic priority is to improve our hotel search experience.
Speaker Change: We are aimed to help travel to find the ideal hotel. We're significantly expanded our AI powered hotel highlights, increasing our coverage from 120,000 hotels in 250,000 hotels, across eight languages and 27 markets.
Speaker Change: In so-do end we are enhancing our use of experience by providing more relevant information and put a particular focus on surfacing unique selling points of hotels.
Speaker Change: We've also introduced new personalisation algorithms, improving the relevance of our hotel civil result.
Speaker Change: Our third strategic priority is to offer the best deals covering experience.
Speaker Change: We try to help travelers find great deals and better prices.
Speaker Change: With enhanced deal visibility with expansion of super saving deals to our apps and the introduction of price drop deals which highlight recent price decreases of a hotel.
Speaker Change: We further improved rate accuracy now platform by incorporating our partners full booking We further improved rate accuracy now platform by incorporating our partners full booking
Speaker Change: Ensuring that deals we present a current and still available.
Speaker Change: This is an important initiative as we continue to surface more deals to our users.
Speaker Change: Our first priority is to empower our partners in all platforms.
Speaker Change: We continue to improve our conversion rate to optimizing our marketing mix and enhancing our product.
Speaker Change: As a result, we anticipate that our advertisers will recognize these advancements and find us increasingly attractive as a marketing channel.
Speaker Change: This year, we successfully introduced the second price auction to mitigate economic risk and reduce complexity of our marketplace.
Speaker Change: Particularly for small and medium size advertising.
Speaker Change: We will continue to support our advertising partners with optimizing their bid.
Speaker Change: Through our SmartBitting Solutions and aim to expand our Travago branded Boken Go-Farmor to more advertisers in the course of 2025.
Speaker Change: In summary, on Q3204 results reflect solid brand growth, brand growth, new growth, and develop Europe and rest of the world. Demonstrating the effectiveness of our investments.
Speaker Change: At the same time, we demonstrated our depth of ability and response to situation and market headwinds in the Americas.
Speaker Change: We are diligent, we focus on executing our strategic priorities and expect to deliver a sustainable growth in the near term.
Speaker Change: The Heartful Thank You Goes To All Our Employees whose commitment and heartwork have been vital to our success.
Speaker Change: Your efforts are the driving force behind survivors' progress, we look forward to continue success together. With this, I'll hand over to Robert.
Robert: Thank you Johannes and good morning everyone.
Robert: 2, 3, was an important quarter for us.
Robert: We saw better than expected revenue growth in our rest of work segment and the notable improvement in developed Europe. In the America's temporary, unfavorable market conditions detected our revenue and we made a tactical decision to adjust our marketing spent accordingly.
Speaker Change: We have observed a positive start into our fourth quarter. So far we see revenue growth and Q4 compared to prior year.
Speaker Change: We believe that after about one and a half year of challenges we are on the verge of a sustainable turnaround and our confidence that we can return to growth in Q4.
Speaker Change: This turning point could represent a major milestone in our journey to restore three August position in the market.
Speaker Change: As of the end of Q3 2024 we had 108 million euros in cash and had a net working capital of around 140 million euros.
Speaker Change: Our current market cap is only roughly as high as our cash position, highlighting what we see as a tremendous opportunity in Trivago.
Speaker Change: We have a strong team of over 600 people. We see that our product is stronger than ever and the Trivago brand remains one of the most recognized global travel brands in a huge and growing market.
Speaker Change: Our focus on branded revenue growth continues to be a fruit. Year over year, we have seen positive developments here, which remains our top priority.
Speaker Change: Additionally, our efforts to enhance booking conversions and lead quality are making us an increasingly attractive marketing channel for our partners.
Speaker Change: Let's now delve into our Q3 results and our outlook for the remainder of 2024 and into 2025. Unless I state otherwise, all comparisons for 2024 are on a year-over-year basis.
Speaker Change: In the third quarter, our total revenue was 146.1 million euros, representing a 7% decline compared to the same period in 2023.
Speaker Change: In our rest of world segment, referral revenues increased by 9 percent, while developed Europe showed an 8 percent decline, which was also negative as an improvement from the previous quarter. The Americas experienced a 14 percent decrease.
Speaker Change: Our brand investment efforts are yielding positive results, particularly in developed Europe and the rest of world segments.
Speaker Change: where we achieved double-digit revenue growth from branded channel traffic year-over-year. And the America's temporary unfavorable market conditions affected our return on advertising spend ROAS, prompting a tactical reduction in brand marketing investments for this quarter.
Speaker Change: It's important to note that our brand marketing investments are still at an early stage and relatively low compared to pre-COVID levels, presenting significant upside potential in the coming years.
Speaker Change: Despite the positive branded revenue growth, we continue to face challenges in our performance marketing channels, primarily due to the changes in Google advertising formats.
Speaker Change: These changes have introduced volatility and resulted in traffic volume losses. However, we have observed stabilization over the past few weeks, which is encouraging.
Speaker Change: While monetization was softer this quarter compared to the prior year, it remained healthy and stable in the Americas and West of World segments.
Speaker Change: To summarize, the America segment faced challenges due to lower branded revenue growth and headwinds in performance marketing.
Speaker Change: Develop Europe showed a 8% decline which is an improvement from the previous quarter.
Speaker Change: The West of Words segment delivered strong revenue growth, driven by branded revenue and healthy monetization.
Speaker Change: During the third quarter, we reported a net loss of €15.4 million and achieved an adjusted EBITDA of €13.6 million, moving us closer to our full-year goal of break-even adjusted EBITDA.
Speaker Change: This performance exceeded expectations primarily due to a conscious reduction in brand marketing spend in the Americas.
Speaker Change: The net loss was largely driven by a 30 million euro impairment charge related to our annual intangible asset impairment analysis.
Speaker Change: Operational expenses decreased by 176.5 million euros, totaling 100...
Speaker Change: 65.7 million euros for the third quarter, primarily due to the goodwill impairment of 196.1 million euros in Q3 2023, partially offset by the current trademark impairment of 30 million euros.
Speaker Change: Additionally, we saw reductions in selling and marketing expenses, general and administrative expenses, and a slight increase in technology and content expenses.
Speaker Change: Advertising spend decreased by 12% in the Americas and 15% in developed Europe, while increasing by 28% in the rest of the world.
Speaker Change: Overall, we invested 7% less than the same period in 2023. This reduction was driven by Google ad format changes and consciously reduced brand marketing investments in the Americas.
Speaker Change: Brand marketing investments in developed Europe and the rest of the world were higher than in Q3 2023.
Speaker Change: Globally, our return on ad spend, ROAS, remained comparable to Q3 2023, with improvements in developed Europe due to efficient brand marketing and a decrease in rest of world due to opportunistic high marketing investments.
Speaker Change: The ROAS in America was just slightly below Q3'23.
Speaker Change: Looking ahead, the travel demand remains solid and healthy. We continue to provide high quality traffic to our partners and we are optimistic about regaining advertiser appreciation over time.
Speaker Change: We remain confident in our ability to achieve year-over-year top-line growth in Q4 by maintaining a disciplined, result-oriented approach to our marketing investments.
Speaker Change: For the full year 2024, we expect adjusted EVTA to be close to breakeven levels.
Speaker Change: Looking forward to 2025, we anticipate adjusted EVTA levels similar to this year as we remain dedicated to investing in our brand marketing efforts.
Speaker Change: We see substantial opportunities to scale our brand marketing activities, enabling us to reach a larger audience and positively impact overall revenues long-term.
Speaker Change: I plan to attend the Morgan Stanley European Technology Conference in November, as well as the UBS Global Technology Conference and Wells Fargo Annual TMT Summit Conferences in December. I look forward to meeting you in person, so please feel free to reach out. With that, let's open the line for questions. Operator, we are now ready to take the first question.
Speaker Change: Anybody else there?
Speaker Change: The operator, we are ready to take questions.
Speaker Change: Bye-bye.
Speaker Change: Bye-bye.
Speaker Change: Your next question comes from Navid Kong with B Riley Securities. Please go ahead.
Navid Kong: Okay great, thank you very much and good morning, good afternoon, depending on where you are. My first question is just on the on the on the return to the positive growth in the fourth quarter. If I just look at the different regions should we expect?
Speaker Change: America has to turn positive. I understand there were some transitory issues in the third quarter.
Speaker Change: Let's maybe talk about that.
Speaker Change: And even Europe, we are seeing pretty nice, significant, you know, improvement sequentially. Should we also see Europe to be positive? Just give us a little bit of color there. The second question I have is just on your commentary around
Speaker Change: sources in rest of the world that you know not Google but some other sources that you said kind of are helping drive traffic. Can you just give us some a better sense of what kind of marketing channels these might be or the social marketing channels or something else? Thank you.
Speaker Change: I have it. This is Robin. Thanks for your questions.
Speaker Change: Regarding Q4, so far we see growth in this quarter, which is encouraging. We see that America is back, is positive. We see the rest of the world is positive. We see improvements in the Bureau, still a little bit negative, but overall we are encouraging Q4 so far with positive growth.
Speaker Change: regarding...
Speaker Change: Regarding the rest of the world, performance marketing, so Google.
Speaker Change: still a headwind, still negative compared to previous year, prior quarter, the quarter prior year, and the non-Google performance marketing is positive. So that overall performance marketing is positive.
Speaker Change: And non-Google marketing, you know, Japan is an important market for us and their Yahoo is pretty strong. And then, of course, we also invest into social channels. But, yeah, that's it.
Speaker Change: Got it. Thank you, guys.
Speaker Change: Your next question comes from the line of Doug and Muth with J.P. Morgan. Please go ahead.
Speaker Change: Great. This is Dave Alfredo. Thanks for taking the questions. I have two. I'll take the first one.
Speaker Change: And if you just start.
Speaker Change: Yes, thanks. I will do that.
Speaker Change: So we saw in Q3, we saw softer demand at the beginning of Q3 and we saw viewership shifts in TV advertising due to major sports events and
Speaker Change: political events so and we are where we
Speaker Change: Well, we performance focus, we look at the numbers, and then we saw that it was not as good as expected. And then we reduced our spend so that we had a better adjusted EBITDA than expected, but this also led to the situation that revenues declined.
Speaker Change: And maybe to Johannes here, so maybe to explain the dynamics a little bit.
Speaker Change: What you see with what we mean with viewership shifts, if there is more...
Speaker Change: political events, yeah, and you had situations of the attacks of Trump.
Speaker Change: You had the Euro Cup, you had Copa Americana, you had the Olympics. All of these things basically move viewership from rather normal programs into political viewership, news and so on, as well as... as well as...
Speaker Change: as well as the sports program. And that ship basically means where we usually do TV, the effectiveness is lower. We see this rather quickly and we expected this effect to continue on therefore technically adjusted to spend basically.
Speaker Change: Got it. And then my follow-up question is, in the preparatory mark, you talked about
Speaker Change: for an intensity map.
Speaker Change: You know, being close to where you guys were at a pre-pandemic level. So, we're looking ahead and with Jurgen Klopp coming in as your brand ambassador, does this mean you plan to step up marketing investments in 4Q and going into 2025 as well?
Speaker Change: Yes, so we are planning to...
Speaker Change: do a similarly impactful campaign that we did this year.
Speaker Change: So leaning into brand into that year and the idea with Klopp is and the only reason why we can do it is that we can leverage AI. We take one celebrity, localize this celebrity into different languages.
Speaker Change: And he will basically air in European markets, in American markets. We will test him in many different markets and depending on how good it works, we will roll him out to certain markets or not.
Speaker Change: And we also have done pre-testing, so if we take a testimonial, if we take a speaker, we do very thorough testing, whether it resonates with our audience.
Speaker Change: and we saw very good results with him. One, because he's known, and second, even if people don't know him, he resonates very well with the audience. And that can have a very substantial effect of how efficient our TV spots are and how activating our TV spots are.
Speaker Change: We see this as an upside for the campaign and increasing the efficiency of our campaign.
Speaker Change: Thank you.
Speaker Change: Got it. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Jeremy New from UBS. Please go ahead.
Speaker Change: Hey, good morning, everyone. This is Jeremy on for Stephen. I have two questions.
Jeremy New: So the first is, you called out increased booking conversion across all geos, what drove this and how much more room for improvement do you see here?
Speaker Change: And second, the commentary regarding 2025 return to growth.
Speaker Change: What is underpinning that and are you anticipating an improving backdrop or are you starting to see more meaningful impact from brand advertising? Thank you.
Speaker Change: Yeah, so let me take the first one, the
Speaker Change: So we do continuous improvement in the product and we do hundreds of tests every quarter and we see a ton of positive tests and we continue to see it.
Speaker Change: that we can carry into the future and one and the conversion rate is a proxy for we send better quality of leads to our users, but also users have better experience on Trivago, and there's a higher likeliness to Come back at a later point or talk about us
Speaker Change: And that's why we also think there is a sustaining effect for a segment of the users.
Speaker Change: And then at the same time, we are more efficient in how we do marketing.
Speaker Change: also if we look at brand marketing that drives conversion rate as well.
Speaker Change: So, both product improvements as well as brand marketing improvements.
Speaker Change: impacted. Given we want to see branded revenue growth, the share of branded business will increase and that can also further drive conversion rates basically.
Speaker Change: And to the second question regarding the outlook.
Speaker Change: We believe that we are reaching the turning point in Q4. We expect that there will be growth in 2025.
Speaker Change: growth, revenue growth will be closer to the 10% than to the 0%, so high single digit growth, and the drivers are branded revenue growth, so we see that the
Speaker Change: The things that we do, they bear fruit. We are happy about the development we see.
Speaker Change: huge room to further scale the investments. And secondly, we have better comps next year because Q1.
Speaker Change: It's positive brand revenue development and better performance marketing comps.
Speaker Change: And you can also look at how much we spent pre-pandemic. It was substantially higher than what we did today in brand. So there's quite an upside in how much brand investment we can do efficiently, which is making us confident about coms becoming better.
Speaker Change: Thank you. Again, should you have a question, please press star 1 on your telephone keypad. Our next question comes from the line of James Lee from Miss Uhu. Please go ahead.
Speaker Change: Hello, this is Jack for James Lee. I have two questions. So first, what are you seeing in terms of the average booking value and...
Speaker Change: Any particular regions to call out? And the second question, on the broader travel environment, how would you describe user trends into holiday bookings and how these trends translating to auction bidding demand? Nager.
Speaker Change: Thanks, Jack. I'm happy to take the question. This is Robin.
Robin Harris: So, ABV Q3, we can describe what we see in our internal data, and this can be influenced by marketing mix and product changes.
Robin Harris: In America, ABV was slightly down, driven by a decline in ADRs and stable length of stay. In developed Europe, ABV was slightly up.
Speaker Change: From our internal search requests for Q4, we see a solid
Speaker Change: We see solid ABV outlook, and America's ABV might be slightly down, our click prices for Q4 are slightly down, length of stay slightly up, rest of world ABV might be slightly down.
Speaker Change: Yeah, and develop Europe, ABV might be slightly up. Yeah, so there we see click prices.
Speaker Change: So in terms of demand for Q4, we think Q4 will be solid.
Speaker Change: Yeah.
Speaker Change: Oh, thank you.
Speaker Change: See you soon.
Speaker Change: Our next question comes from the line of Ron Josie from Citi. Please go ahead.
Ron Josie: Great, thanks for...
Ron Josie: and how you plan to do that would be great. And then just a quick follow-up, you know, we've talked about Google ad format changes impacting results for the better part of a year or so, comps get easier in the back half, or sorry, in 2025. Are you seeing things improve sequentially? I'm wondering where things are with these ad format changes. Thank you.
Speaker Change: So on the on the hotel initiative
Speaker Change: Identify what's the hotel really unique about. What are the highlights and things to know about a hotel?
Speaker Change: So, instead of just skimming what you can see in our search results list.
Speaker Change: sentences that summarize the key qualities of the hotel.
Speaker Change: I think beginning of the year, and we have further rolled this out, extended it to more languages and platforms, and the algorithms behind it have improved. So you're not seeing, you know, it has a nice location on all hotels, but really unique things that differentiate hotels.
Speaker Change: So that's really a content initiative.
Speaker Change: And I think this is what excites us here. We are the ones that are on the front line here. And it's really, from what we see, a great engagement from users to consume content. But you don't need to read tons of reviews. You really get the summary in a nutshell. And that's a great way of differentiating and being, as a meta, an aggregator of content as well, and not just prices.
Speaker Change: And then your second question, can you repeat your second question please?
Speaker Change: Just if we're seeing improvements in performance marketing as we lap or get to lapping the Google performance changes.
Speaker Change: Yeah, we we expect that the comms will normalize
Speaker Change: In these new formats, we're expanding our coverage, our participation with an opportunistical mindset.
Speaker Change: So, we are not trying to regain shares through that format, but rather take opportunities that we see there, and we see that gradually our teams become more and more competitive in those formats as well.
Speaker Change: So we have overall, you know, it's a...
Speaker Change: over the year and this has been one of the initiatives that we call out because we see relevant conversion improvements to this which is an indicator for we help users to to take better decisions basically.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our final question comes from the line of Tom White from Dave Davidson. Please go ahead.
Tom White: Okay, thanks for taking my questions. Just a couple on the branded channel commentary. You know, there's a few different things I guess that go into that. Could you maybe just...
Tom White: Maybe sort of rank, you know, which of the various kind of drivers of that you know, you think is driving kind of the most success. Is it some of the investments in kind of app downloads? Is it SEO? And then you've made reference a couple times to, you know, kind of
Speaker Change: The upside in terms of how much you can invest, like relative to where brand spend was, this branded channel spend was kind of pre-pandemic. Can you just sort of remind us like what the dollar amount of that spend or percentage of marketing spend that was pre-pandemic?
Speaker Change: Rent marketing
Speaker Change: We do brand marketing in several channels. So this is TV advertising, this is connected TV, this is YouTube. We also do social campaigns. We don't disclose the breakout of it, so but we are testing all and
Speaker Change: And we tested, we scaled investments in some markets, we started new markets. So in the past, we did TV advertising, for example, in 50 countries at the same time. So at the moment, we are just...
Speaker Change: to TV advertising in a little bit more than 20 countries, and in those countries there is still room to further scale investments.
Speaker Change: So it's...
Speaker Change: There are several channels where we can scale investments. We test a lot and Yeah, of course besides the media buying itself. It's also the spots where we see opportunities
Speaker Change: to improve the spots. That's why we did the deal with you and Klopp. We saw quite good results and the TV spot or the creatives for your marketing campaigns, they are super important. They can really uplift campaigns.
Speaker Change: looking at all our opportunities there and the amount of investments or the amount how much we can scale the investments we are quite confident that we have enough room to grow for the for the next couple of years.
Speaker Change: Okay, thanks. And just a quick follow-up. You can look at pre-pandemic marketing investments.
Speaker Change: They are public, we are not breaking them out, but that gives you a feeling of how much room there is.
Speaker Change: As well, so in markets we optimize across channels.
Speaker Change: And we are in markets where we are already investing. We are investing across different TV channels, shows. We are investing between markets. So if America doesn't work for us, we take money and invest it in other markets.
Speaker Change: as an example, and then adding new markets is something we are also exploring.
Speaker Change: Okay, that's very helpful, thanks.
Speaker Change: I just had a quick follow-up on the answer to the 2025 guide. Did I hear you correctly that kind of the hope or the target is closer to 10 than kind of low single digits? Thank you.
Speaker Change: Yes, yes. It's closer, I said, it's closer to 10 than to zero.
Speaker Change: Thank you.
Speaker Change: Thank you. That concludes our Q&A session. I would now like to turn the call over back to Johannes Thomas for final closing comments.
Johannes Thomas: We greatly appreciate your questions and continued interest. I want to reiterate our confidence in the path ahead. Our team remains committed to delivering value to our users, partners, and shareholders. We are excited about the opportunities in the coming quarters and look forward to updating you on our progress. Thank you again for joining us and have a great day.
Speaker Change: This concludes today's conference call. You may now disconnect.