trivago N.V. Price & Performance (TRVG)

You are encouraged to periodically visit trivago's Investor Relations website for important content. Finally, unless otherwise stated, all comparisons on this call will be against results for the comparable period of 2024. With that, let me turn the call over to Johannes. Good morning, everyone.

And thank you for joining us today. We are thrilled to announce that we have significantly accelerated our momentum in Q1 twenty twenty five surpassing expectations for both top and bottom line results. In light of this exceptional performance, and our continued growth trajectory, we are pleased to announce that we are raising our full year revenue growth guidance to mid teens percentage and foresee a better than expected adjusted EBITDA profitability. These excellent results reflect the consistent and diligent execution of our strategic plan by our dedicated team over the past two years. Today, I'm pleased to provide you with an update on each of our three strategic focus areas. Our first strategic priority remains brand marketing. Through which we continue to elevate our globally recognized brand. We remain committed to increasing both the efficiency and overall impact of our brand investment. Our AI powered Jurgen Klopp TV Creative Along With Our Localized Campaigns For Brazil and Japan are performing well and we are successfully driving brand revenue growth across all segments. We are also excited about our summer campaign, which has already launched in The U. S. And will gradually roll out globally throughout May. Our recent performance clearly demonstrates the compounding effects of our brand marketing investments we continue to observe the marketing elasticity we had anticipated.

This elasticity enables us to confidently scale our brand investments. While maintaining a disciplined approach to our performance marketing channels. Our second strategic priority to enhance our core hotel search experience. We empower travelers to book with confidence saving them valuable time and money. Over the past quarter, our product teams have further increased their product testing velocity delivering meaningful user experience enhancements and driving notable improvements in conversion rates. We have also made considerable progress in increasing member sign ups by providing more exclusive deals and benefits for our logged in users. Further, we have improved our map functionality and employed new AI powered wholesale filtering features and introduced numerous popular web functionalities into our app. We have also expanded the coverage of AI generated hotel highlights, more than 350,000 hotels and 11 languages. Most notably, we have leveraged advanced machine learning algorithms to deliver even more tailored hotel search results to our users. We are excited about the meaningful impact our investments in AI and machine learning are already having. And the future potential to transform our hotel search experience. Our third strategic priority is to empower our partners to maximize the potential on trivago. We are pleased with the evolution and overall health of our market Our partners increasingly recognize the high quality of leads provided, making trivago a more attractive marketing channel.

We have also made significant progress in expanding trivago book and go to additional partners helping them increase their conversion rates. We are also particularly excited with the outcomes of our strengthened strategic partnership with Orlisto. The collaboration is yielding promising results and we warmly welcome Hollisto as part of the broader trivago team. Overall, our dedicated team has delivered another quarter strong execution and accelerated learning. Our strategic direction continues to advance as our teams remain focused on key priorities designed to create value for our users and advertising partners. We are grateful for our team's diligence, commitment and creativity which continue to propel trivago forward. Thank you. And now I would like to hand over to Robin for a more detailed review of our financial results. Thank you, Johannes, and good morning, everyone. We are thrilled to report that Q1 was an outstanding quarter for trivago. Significantly exceeding our internal expectations representing another strong quarter. We achieved a 22% year over year increase in total revenues. In addition, April's performance continues to show strong double digit revenue growth rates. Our impressive performance was primarily driven by strategic brand marketing investments and product enhancements. We recognized numerous attractive opportunities to further scale our brand marketing investments and expand our business.

We are optimistic that our strong operational performance will translate into significant benefits for shareholders as we continue to execute our strategy. Now let's review our first quarter results and our 2025 outlook. Unless otherwise indicated, all comparisons for 2025 are on a year over year basis. In the first quarter, our total revenue reached €124,100,000 representing a 22% increase compared to the same period in 2024. We are pleased to note this marked our second consecutive quarter of growth. We experienced strong year over year double digit growth across all three reporting segments with referral revenues growing 44% in Rest of World 19% in Developed Europe and 18% in Americas. This growth was primarily driven by increased branded channel traffic and response to our ongoing brand marketing investments. Improvements to our booking conversion and higher traffic volumes. We also continue to observe healthy bidding dynamics on our platform when compared to the same period in 2024. During the first quarter, we reported a net loss of €7,800,000 and achieved an adjusted EBITDA loss of €6,500,000 was better than our internal expectations. Similar to our 2024 performance, we expect negative adjusted EBITDA in the first and second quarter of the year and anticipate positive adjusted EBITDA in the third and fourth quarter of the year.

Operational expenses increased by €20,700,000 totaling €133,700,000 for the first quarter. This was mainly due to a €21,400,000 increase in selling and marketing resulting from higher brand marketing investments made over the course of the quarter. Advertising spend increased by €10,400,000 or 31% in The Americas euros 7,300,000.0 or 50% in Rest of World and by €2,700,000 or 7% in Developed Europe driven largely by brand marketing investments in all segments. The overall increase in operating expense was partly offset by €1,300,000 reduction in general and administrative expenses during the quarter. Despite the significant scaling of our marketing investments, our ROAS remained globally stable at 118.1% for Q1 compared to 119.2 in the prior year. We observed a significant growth improvement in Developed Europe increasing from 121% in Q1 twenty twenty four to 134% in Q1 twenty twenty five. We observed reductions in The Americas from 114.5% to 102.7% and in Rest of World from 125.1% to 120.3%. As of the end of Q1 twenty twenty five, we have €118,600,000 in cash and cash equivalents no long term debt, continuing to maintain our strong financial position. We feel confident about the future as our product caters to cost conscious consumers.

We are optimistic about our outlook and therefore raising our full year 2025 guidance to mid teens percentage revenue growth and positive adjusted EBITDA similar to last year's levels. Looking further ahead, we believe significant potential remains to further scale our brand marketing investments which we expect will positively impact our overall revenues as we steer towards regaining pre COVID revenue levels in the future. With that, let's open the line for questions. Operator, we are now ready to take the first question.

At this time, I would like to We can't hear you anymore. Sorry.

Your first question comes from the line of Naved Khan with B. Riley Securities. Your line is now open. Please go ahead.

Great. Thank you very much. I think this is really good good performance. I have a question on maybe the reason the reason of performance you do talk about April being strong, but if I had to look at The US versus other markets, is there any particular trend to call out maybe maybe weaker consumer or curious about what you're seeing across these regions and what kind of end influences your overall guidance. Also maybe just talk about trends like consumer price sensitivity, and booking conversions and things like that in the in The US. Thank you. Hi, Naved. It's Robin. Thanks for the question. And regarding the most recent performance in the market, we said April is still strong double digit growth. We see it in all regions. Very strong as Q1. And in terms of trends, let me provide a little bit more color on ADRs and search interest, so what we see. So we saw in our internal data for Q1 that ADRs were up in all three segments. Length of stay was slightly up in Americas and Developed Europe Rest of the world was stable. And ABB was also up in all three segments in Q1.

So when we look into Q2, click prices and ABB on a global level in Q2 was slightly up. And length of stay was rather stable. And when we look into the regions, so developed Europe and rest of the world positive, Americas slightly negative, but overall it looks healthy on a global level. Yes. So we are optimistic about the outlook for trivago. Because as I said April is very strong again. We have enough room for further scale brand marketing investments and have the right product for price heavy users. And we believe that this will lead to further growth for trivago. When we Related to search interest on our platforms, we saw strong demand on our platforms across all segments in Q1 and are still seeing it in April. There are geo shifts, but once rings of trivago is that we are a global business and operating in over 50 operate on over 50 localized websites and apps. And for example, there was less traffic from Canada and Mexico into into The U. S. But on the other hand, was a strong domestic U. S. Demand. And overall, we are seeing strong demand on a global level on our platforms.

So we are confident that we can outgrow short term volatility And yes, because we have diversity in our countries, And maybe to the search interest for five and four and five star hotels This remains slightly below prior years in all three segments. Click days to stay was a little bit higher in three segments. Travel average travel distance clicked during Q1 in 2025 was slightly up. And yes, so that's it regarding the travel trends what we see on trivago Great. And then maybe just a quick follow-up on the on on on Hollister. Has has the team joined trivago and maybe any any kind of color commentary on that front? Yes. Maybe I can elaborate on the strategic context. We exercised our call today. So we're excited to acquire the remaining 70% of Hollisto. And the strategic rationale we outlined mid of last year, there's an extensive post that you might want to look into I think overall, the goal is to simplify trivago. There is the popular brands everybody knows on trivago. There is the direct website on trivago. And then there's a lot of brands that have great deals, but not much brand strength, which comes with a downside on trust and conversion rates.

And by us, offering the book and go product that Hollisto has built exclusively for Hollisto, taking that product and offering it to all our partners, we think can lift conversion rates and the user experience on our platform. And we are very excited to have the team back on board. We have OKRs in place, goals that we wanted to achieve. The team has executed internally. And the Volista team as well. Very well on those projects, exceeding some project expectation delivering on others. And we are very happy working closer together with them because we can intensify and rely on this strategic direction of building a more seamless experience for travelers. So that's great. The company will continue to operate standalone. Certainly as a fully owned subsidiary. We will get a bit closer on what we operationally execute and align strategic objectives. And that's a great advantage now with the full ownership that we we have interest aligned among both companies. And we expect this to have an impact in the medium term. Higher conversion rates, higher retention better user from a better user experience. Can propel results in the near term, midterm and long term. And maybe Robin, you want to elaborate on the details of the deal?

Yeah. Sure. So yesterday we executed the call and we will probably close the deal in the middle of the year. Impacts of the full acquisitions are not reflected in our adjusted guidance yet. So we increased the guidance to mid teens revenue growth and adjusted EBITDA, to last year level But there is the impact of the acquisitions not reflected in here. We will provide more color on this after the closing. But the deal will have a further positive on our top line. We don't expect a negative impact on our bottom line. [indiscernible] Thanks so much. Congrats. Thank you. Thank you.

Your next question comes from the line of Tom White with D. A. Davidson. Please go ahead.

Great. Good morning. Thanks for taking my question. A couple on AI, if I could.

Could you talk about how you sort of think about the risks potential risks posed by the AI hyperscalers as it relates to changing how travelers may search and book travel? Versus the opportunities that maybe AI technology creates for your own business? And then I had a follow-up.

I think if you look at the general Gen AI product I think they certainly on the upper funnel on the research layer, they can support travelers in their research And the resonance with that is decent, travelers use it. Are decently satisfied. But if it comes to vertical transaction, picking a hotel, that the user experience of a chat based and user experience that this is kind of the winning formula in terms of user experience. And and finding the hotel is I think is to be decided if we look at being is there a use case or not? Yes, there is a use case. For instance, if you if you know the three hotels you usually go when you go to New York and you're savvy on that and you tell AI book the best one with this and this room. And you basically have a very narrow use case. AI can probably deliver on that. How we generally see it, it is that other search engine, let's say Google, they didn't take over travel. Although building a hotel product. We're probably an additional segment of how travelers use sites. As we know, use dozens of sites in their travel research think this will not fundamentally change.

It's a high stake product. People don't want to make mistakes. So they really invest time into comparing using different tools. I also think this wouldn't change. We have a mega brand. So everything around our brand investment is the best hedge we can do against the risk. Of AI AI taking a bigger stake which is not the case yet. And I think it will take time as well. I think we have a chance. We are in the process. AI is being in our search results. Being at our hotel highlights that every hotel has these days. Being at our AI search experience that you can use trivago in a free text search experience. So these things we are very excited about because they are born today. They're in front of users. We see that they have an impact on conversion and user experience.

So we're excited about the opportunities. And the question is which brand brings these features in front of users? Faster and positions themselves as having these features available. And we think we are on top of that and happy with where we are today. And continue to invest into it.

Great. Appreciate that. Just a follow-up on the brand investments. I think you referenced sort of the compounding benefits. And I guess I'm curious whether that includes maybe sort of like a halo effect or up uplift in efficiencies in non branded channels like search or social? Just curious whether you're seeing sort of a palpable benefit there and whether that could further compound here over time? Thanks.

Yes. I think that's a very good perspective, and I would second that to some degree. And if you have brand investment, if you are more top of mind of travelers, if they your brand then in social, if they see your brand on Google, we can see that there is an impact on click through rates in other formats. So that has been something we have seen historically. And in markets where we have leaned in, that has collateral effects on that as well. I think most powerful is a compounding effect over time. That we are stacking up branded visitor baseline year over year that is landing into the different segments And we are seeing that materializing today because we now have done it for two years. And that's why we believe there's sustainable growth ahead. Thank you.

Your next question comes from the line of Ron Josey with Citi. Please go ahead.

Hi, this is Robert on for Ron. Thanks for taking the question. Would love to just double click on hotel search performance here. It's great to see AI generate highlights now covering 350,000 hotels, and increased conversion rates, but can you talk to maybe some of the initial learnings on this product and then perhaps expand on your plans for AI smart search?

Yeah. Let me elaborate on that. I think for what you can see, the AI highlights today for 350,000 hotels. We added I think four languages last quarter as well. So we're expanding languages, words available. We are trying different models powering these AI highlights We had started out with using Google. We are trying other models. Comparing them in order to get out uniqueness. And what you can see, if you go to other websites, you might see something like the hotel has a gym or the hotel has a nice breakfast or so. What you see in our AI highlights is really the differentiation. And there's a test out there where we show you one very unique thing with an image It might be a rooftop bar. It might be an amazing spa. It might be a Michelin star restaurant, which we try to point out and give you this very much uniqueness about the hotel. So these days, you scroll through a search result and you're mostly anchored on the image. And we see our users not just looking at images anymore, but also at the hotel highlights as a second factor for efficiently comparing hotels. And our esources less information is more.

So we are not kind of putting a lot of content in users, but rather little and distinct content. And that's what AI has made possible here. So we are testing different models. Different sortings. If you would use If you would use a filter, we're adapting the hotel highlights If you use the map and click on hotel in the map, we would adapt the hotel highlights. So you see a hotel highlight that's related to the location. We are working with dynamic content. So depending on what you are searching you see dynamic content being produced in there. That relates to our AI search experience. Where we have brought this into our core experience before you had to go to ai.trivago.com. Now you see it featured in our search box that you can type whatever you want. And we have made that available to a broad user base. And we basically push more users into it. Are not dogmatic about users should use this. It's more complementing our search and making new ways of searching available. You have no platform where you could basically search I want a hotel with a pool next to Route 66, which is a semantically quite complicated thing to understand for a machine.

And usually, you have cities or regions that you refer to when populating your list. So that's really cool that you have new ways of searching and that's possible. We are working on making the list even more relevant. Then it's a question of how do you commercialize the list Do you show only relevant hotels? How do you mix in commercialization into that list? And we are progressing gradually on it.

Got it. That's great. And then just one one follow-up. [indiscernible] localized marketing campaigns in Brazil and Japan specifically. In the prepared remarks. So as you continue to roll these campaigns out, can you tell us about the performance there so far? And then what are you seeing in terms of incremental traffic or ROAS in each of those regions?

Yeah. Maybe, I can explain here. So overall, we are happy with the global campaign that features with Jurgen Klopp. And then we sometimes have local campaigns with certain Without going too much into details, so we can want to unveil too much, but Japan is a nice case. We have launched a campaign very recently and we say in this spot five or six times trivago, The term trivago is not as easily spelled for Japanese speakers. So we are bringing with this campaign the term trivago more tangibly to users and have the goal to increase brand awareness. Not activation. Where you have a strong brand, you want to activate users and convert them into visiting you. And then in some markets, we want to prepare the brand more top of mind in terms of awareness. Certainly, that activates as well, but then just getting the brand and and people's mind. And that was the objective in Japan. It has worked fantastically from what we see so far. And wherever we see there's value in doing that, we would continue to do that. And we are overall very happy with the incremental ROAS we're seeing. I commented on that before.

We see specificity across all segments. And that's why we are confident that we have room to invest more on top of compounding effects, have incremental investment that we can scale in all regions. And that's what we will continue what we will continue to do.

Great. Thank you.

Your next question comes from the line of Doug Emmaus with JPMorgan. Please go ahead. [indiscernible] Is Jay on for Doug. Thanks for taking our questions. I just wanted to revisit your full year guide. For a bit. So could you explain where you're seeing upside relative to what you guided to about you know, three months ago? Is it more on the volume side, or is it on the monetization side and secondly, on the same side, you guys are assuming macro environment will hold steady in your full year guide. Just wanted to hear your thoughts on how a macro slowdown or a business could affect your side and how you how you will approach [indiscernible] In this potentially slower environment? Thank you.

Yes. This is Robin. Thanks for the question.

So regarding the guidance, we see huge potential in scaling our brand marketing investments. We have been doing this now for a couple of months. As Johannes said, Q1 was super strong. We had 22% total revenue growth. And the ROAS were stable, yes? So we increased the the ad spend 24%, but ROAS was just 1% below previous year. Q1. So this is, I think, strong indication that we see really good good impact of our brand marketing campaigns. And moving forward for the rest of the year, we will further increase and scale our brand marketing investments Last quarter, we also uploaded an investor presentation where we highlighted that in 2024, we only invested 50% of the Brand Market that we invested in 2019. So and we sometimes mention that one more objective come back to pre COVID levels, where we say this is around 2019. And so and therefore it's important to scale brand marketing investments again. And that's what we are doing and we see that this is successful. And we will do this in all three segments yes, so Rest of the World very strong growth in Q1, we believe that we can further scale We expect nice growth throughout the year.

But same applies to Europe and to Americas. We really scale investments in the markets where we are already in. Then we might add new markets. So overall, this is clearly the driver. And then you ask about the demand. So for us when we look at our platform, I mean with 22% in this market revenue growth, so we see really strong demand. And as I said, we have we see some differences in regional traffic For example, there are less Canadians and Mexicans going into The U. S. But on the other hand, we see strong domestic travel in The U. S. Yeah. Yeah. And maybe, you asked what do we do, in terms of if there is volatility, what we do with our advertisement. I think we have shown during the pandemic and historically many times that we are able to cut investment very quickly. Just look back into Q3 last year, we have seen that due to mega events I think it was Olympics, the World Cup, was [indiscernible] We have seen that elasticity has come down, performance has worsened and we immediately cut substantial amount of spend. So we are very responsive on that. We also don't do long term commitments usually.

With our brand investments. And I think that will keep us flexible. I would like to call out one more driver. I think Robin has talked about brand. I think the other more substantial one that we shared in our investor presentation in February as slide where we showed the increase in conversion rate. I think it was around we showed an index of increasing of around 35% And that has a substantial impact on any marketing initiative And that's why we talk so often about conversion rate. If we are converted increasing our conversion, let's say, by 10%, this has a big impact on marketing efficiency. And we are disciplined of not spending this on performance marketing. We are very much focused on investing the incremental returns we have into our brand marketing initiatives. It is TV, but it's also social. It is also many other initiatives we are having around brand marketing. So the conversion rate is really an important one and that's where our teams do a great job. In accelerating the pace of increasing our conversion rate, and we still have a lot of pockets to increase conversion rate further. I talked about some AI features.

That have contributed to that, but we do hundreds of tests. Continuously and that adds up and has other compounding effects. [indiscernible] user satisfaction, user retention, and so on, which is very exciting to see. Got it. Thank you.

That concludes our Q and A session. I will now turn the call back over to the management for closing remarks.

Thank you. Before we conclude the call today, I would like to extend a special thank you to our CFO, Robin Harriet, who will be leaving trivago We sincerely appreciate his hard work, dedication and leadership and we wish him all the best for his next endeavor. At the same time, we are thrilled to welcome Doctor. Volk Schmull as our new CFO Wolff has consistently proven himself during his tenure at trivago. And is a natural fit for the role, bringing a wealth of experience in finance and strategic development As a leadership team, we are very excited to build on the momentum and transform the company together with them. And with that, I want to say thank you for joining the call today. We are well positioned for sustainable growth. We remain focused on executing on our strategy and look forward to sharing our progress during the next quarterly call. Thanks a lot and have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.