Operating and Financial Review Overview trivago's FY2023 revenue fell 9% to €485.0 million, Adjusted EBITDA dropped 50% to €54.1 million, resulting in a €164.5 million net loss - trivago is a global hotel and accommodation search platform, offering access to over 5.0 million properties in more than 190 countries as of December 31, 20234 Financial Summary & Operating Metrics (€ millions) | Metric | Q4 2023 | Q4 2022 | Δ Y/Y | FY 2023 | FY 2022 | Δ Y/Y | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenue | 91.7 | 104.9 | (13)% | 485.0 | 535.0 | (9)% | | Net income/(loss) | 2.5 | 10.4 | (76)% | (164.5) | (127.2) | 29% | | Adjusted EBITDA | 7.3 | 22.6 | (68)% | 54.1 | 107.5 | (50)% | | Return on Advertising Spend | 155.4% | 180.4% | (25.0) ppts | 147.6% | 164.4% | (16.8) ppts | - Recent trends in Q4 2023 include lower monetization, foreign exchange headwinds, and increased competition in performance marketing channels, leading to traffic declines in Developed Europe and Americas, partially offset by growth in the Rest of World segment7 - For 2024, the company launched new global campaigns and expects higher advertising spend, with Adjusted EBITDA anticipated to be close to breakeven as it reinvests profits into its marketing strategy89 Revenue Analysis FY2023 total revenue fell 9% to €485.0 million, driven by declines in Americas (-19%) and Developed Europe (-9%), offset by 25% growth in Rest of World Revenue by Segment and Type FY2023 Referral Revenue fell 9% to €476.8 million, with Americas down 19% and Developed Europe down 9%, while Rest of World grew 25% Referral Revenue by Segment & Other Revenue (€ millions) | Revenue Type | Q4 2023 | Q4 2022 | Δ % | FY 2023 | FY 2022 | Δ % Y/Y | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Referral Revenue | | | | | | | | Americas | 33.3 | 41.8 | (20)% | 176.4 | 216.4 | (19)% | | Developed Europe | 37.6 | 43.9 | (14)% | 215.7 | 237.7 | (9)% | | Rest of World | 17.9 | 15.7 | 14% | 84.7 | 67.7 | 25% | | Total Referral Revenue | 88.8 | 101.4 | (12)% | 476.8 | 521.8 | (9)% | | Other revenue | 2.9 | 3.4 | (15)% | 8.2 | 13.2 | (38)% | | Total revenue | 91.7 | 104.9 | (13)% | 485.0 | 535.0 | (9)% | - Americas FY23 revenue decreased by 19% due to lower traffic from increased competition, softer bidding dynamics, and a negative foreign exchange impact from the weakening U.S. dollar18 - Developed Europe FY23 revenue decreased by 9%, primarily driven by softer bidding dynamics and lower traffic volumes from increased competition20 - Rest of World FY23 revenue increased by 25%, driven by higher average booking values, better booking conversion, and an increase in traffic volumes, particularly in Japan22 - Other Revenue decreased by 38% in FY23, mainly due to the decision in Q2 2022 to discontinue some B2B products like display ads23 Advertiser Concentration Referral Revenue share from major advertisers shifted in FY2023, with Expedia Group increasing to 36% and Booking Holdings decreasing to 43% Advertiser Revenue Concentration (% of Referral Revenue) | Advertiser Group | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Expedia Group | 34% | 37% | 36% | 33% | | Booking Holdings | 43% | 46% | 43% | 49% | Return on Advertising Spend (ROAS) Consolidated ROAS declined by 16.8 percentage points to 147.6% in FY2023, with all segments experiencing decreases, particularly Rest of World ROAS by Segment (%) | Segment | Q4 2023 | Q4 2022 | Δ ppts | FY 2023 | FY 2022 | Δ ppts | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | 173.4% | 191.8% | (18.4) | 148.3% | 164.4% | (16.1) | | Developed Europe | 152.7% | 170.1% | (17.4) | 146.0% | 158.6% | (12.6) | | Rest of World | 134.5% | 182.3% | (47.8) | 150.1% | 188.8% | (38.7) | | Consolidated ROAS | 155.4% | 180.4% | (25.0) | 147.6% | 164.4% | (16.8) | - In FY 2023, Americas ROAS decreased to 148.3% as the relative decrease in Referral Revenue was greater than the relative decrease in Advertising Spend30 - In FY 2023, Developed Europe ROAS decreased to 146.0% for the same reason as the Americas segment32 - In FY 2023, Rest of World ROAS decreased to 150.1% as the relative increase in Advertising Spend was greater than the relative increase in Referral Revenue, mainly due to increased marketing in Japan34 Expense Analysis Total costs and expenses decreased 2% to €641.6 million in FY2023, despite a €196.1 million impairment, primarily due to a 36% reduction in G&A expenses Expenses by Cost Category - Full Year 2023 vs 2022 (€ millions) | Expense Category | FY 2023 | FY 2022 | Δ % Y/Y | | :--- | :--- | :--- | :--- | | Cost of revenue | 12.0 | 12.7 | (6)% | | Selling and marketing | 345.6 | 342.0 | 1% | | Technology and content | 49.0 | 54.9 | (11)% | | General and administrative | 38.7 | 60.9 | (36)% | | Impairment of intangible assets and goodwill | 196.1 | 184.6 | 6% | | Total costs and expenses | 655.3 | 641.6 | (2)% | - General and administrative expenses decreased by 36% in FY 2023, mainly due to the non-recurrence of a €20.7 million expense in 2022 related to a proceeding by the Australian Competition and Consumer Commission (ACCC)4951 - An impairment charge of €196.1 million was recorded in Q3 2023, consisting of €95.5 million for Developed Europe goodwill, €86.5 million for Americas goodwill, and €14.2 million for indefinite-lived intangible assets53 - Technology and content expenses decreased by 11% in FY 2023, primarily due to lower personnel costs from a lower headcount following reorganizations and project discontinuations in 20224547 Profitability Analysis FY2023 net loss widened to €164.5 million, driven by lower revenues and higher impairment, with Adjusted EBITDA falling 50% to €54.1 million Profitability Summary (€ millions) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Operating income/(loss) | 4.4 | 17.8 | (156.6) | (120.3) | | Net income/(loss) | 2.5 | 10.4 | (164.5) | (127.2) | | Adjusted EBITDA | 7.3 | 22.6 | 54.1 | 107.5 | - The larger net loss in FY 2023 was driven by lower revenues and a higher impairment charge of €196.1 million, compared to €184.6 million in 2022, partly offset by the non-recurrence of a €20.7 million legal expense from the prior year62 - Adjusted EBITDA for FY 2023 decreased by €53.4 million (50%) to €54.1 million, driven by lower revenues of €50.0 million and lower ROAS63 - The effective tax rate for FY 2023 was (8.2%), differing from the statutory rate of 31.2% primarily due to non-deductible goodwill impairment and share-based compensation expenses58 Balance Sheet and Cash Flows Total cash, cash equivalents, and restricted cash decreased by €146.7 million to €102.2 million in FY2023, primarily due to a €184.4 million extraordinary dividend - Total cash, cash equivalents and restricted cash decreased from €248.9 million at year-end 2022 to €102.2 million at year-end 202366 - The main driver of the cash decrease was a €184.4 million one-time extraordinary dividend paid to shareholders in Q4 202367 - Net cash provided by operating activities for FY 2023 was €27.8 million, driven by non-cash adjustments (like the €196.1 million impairment) to the net loss6668 - The current ratio decreased from 7.1 as of Dec 31, 2022 to 5.2 as of Dec 31, 2023, largely due to the dividend payment reducing current assets73 Financial Statements This section presents the unaudited condensed consolidated balance sheets, statements of operations, and cash flows for FY2023 and FY2022 Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Cash Flows Earnings Per Share (EPS) and Ownership FY2023 basic and diluted EPS were (€0.48), reflecting the increased net loss, with 348.4 million shares outstanding (32% Class A, 68% Class B) Earnings Per Share | Period | Basic EPS | Diluted EPS | | :--- | :--- | :--- | | Q4 2023 | €0.01 | €0.01 | | Q4 2022 | €0.03 | €0.03 | | FY 2023 | (€0.48) | (€0.48) | | FY 2022 | (€0.36) | (€0.36) | Ownership Structure as of Dec 31, 2023 | Share Class | Number of Shares | % of Total | | :--- | :--- | :--- | | Class A | 110,919,270 | 32% | | Class B | 237,476,895 | 68% | | Total | 348,396,165 | 100% | Non-GAAP Measures and Reconciliations This section defines Adjusted EBITDA, a key non-GAAP metric, and provides its reconciliation from net income/(loss), with FY2023 Adjusted EBITDA at €54.1 million - Adjusted EBITDA is defined as net income/(loss) adjusted for income taxes, interest, depreciation & amortization, impairments, share-based compensation, and certain other items like restructuring or significant legal settlements9394 Reconciliation of Net Income/(Loss) to Adjusted EBITDA (€ millions) | Reconciliation Item | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net income/(loss) | (164.5) | (127.2) | | Expense for income taxes | 12.4 | 6.6 | | Total other (income)/expense, net | (4.7) | (0.0) | | Depreciation & Amortization | 4.6 | 6.1 | | Impairment of intangible assets and goodwill | 196.1 | 184.6 | | Share-based compensation | 9.5 | 15.3 | | Certain other items | 0.5 | 20.7 | | Adjusted EBITDA | 54.1 | 107.5 | Risk Factors (Safe Harbor Statement) The company identifies forward-looking risks, including its new marketing strategy, reliance on Google, advertiser concentration, and increasing competition - Key risks include reliance on the success of its brand marketing strategy, dependence on Google for traffic, and concentration of revenue from a few large OTAs100 - Other risks cited are the potential negative impact of a worsening economy, further asset impairments, geopolitical instability, and increasing industry competition100
trivago N.V.(TRVG) - 2023 Q4 - Annual Report