trivago N.V.(TRVG) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a referral revenue growth of 11% year-on-year in Q1 2023, with January seeing growth exceeding 30% due to robust travel demand and elevated average booking values [5][6] - Net income improved to €9.9 million compared to a net loss of €10.7 million in the previous year, primarily due to the nonrecurrence of a €21.1 million expense related to legal proceedings in Q1 2022 [5][6] - Adjusted EBITDA decreased slightly from €21.1 million in Q1 2022 to €18.6 million in Q1 2023, resulting in a strong adjusted EBITDA margin of 16.8% [6][11] Business Line Data and Key Metrics Changes - Referral revenue in the Americas segment declined by 7% year-on-year, attributed to a loss in performance marketing volumes and a focus on profitability [7][8] - Developed Europe experienced a 19% year-on-year growth in referral revenue, driven by recovery from Omicron-related restrictions and successful brand marketing campaigns [7][8] - The Rest of World segment saw a significant 51% growth in referral revenue, largely due to recovery in Asian markets, particularly Japan [8] Market Data and Key Metrics Changes - Average booking values increased globally by around 10% year-on-year, with the highest increase observed in the Rest of World segment [29] - In April, referral revenue showed a slight decline, with Europe remaining roughly flat, Americas declining by a high-teens percentage, and Rest of World still up over 30% [22] Company Strategy and Development Direction - The company is ramping up brand marketing investments to enhance brand traffic and improve competitive positioning, particularly in response to inflation concerns among consumers [3][4] - Product development focuses on improving price comparison capabilities and increasing coverage of directly bookable rates, with expectations for significant enhancements later in the year [4][33] - The company aims to exceed adjusted EBITDA levels from 2019, emphasizing cost discipline and efficient marketing investments [13] Management's Comments on Operating Environment and Future Outlook - Management noted robust demand in the first quarter, particularly in Asia, while the economic outlook in Western markets remains uncertain [3] - The company anticipates a decrease in return on advertising spend in the upcoming quarters due to increased brand marketing investments, but expects seasonal revenue increases to offset this [12][23] - Management expressed optimism about the recovery in Asia, particularly in Japan and other smaller markets, and plans to continue investing in these regions [35] Other Important Information - The company has approximately €297 million in cash and short-term investments, indicating a strong cash position [11] - The decision to stop providing qualified referrals and revenue per qualified referrals was made to better reflect underlying business dynamics [6] Q&A Session Summary Question: Referral revenue growth expectations and customer communication - Management indicated that referral revenue growth was in line with expectations, with adjustments made based on prior year trends and demand dynamics [15][16] Question: Focus on profitability among clients - Management noted a shift in client focus towards profitability due to economic uncertainty, with expectations that this balance may shift back towards growth as conditions stabilize [17][18] Question: Trends in Q3 and revenue seasonality - Management provided insights on referral revenue trends, indicating a deceleration in growth rates but an expectation for improvement as comparisons become easier [22] Question: ADR trends and summer travel demand - Average daily rates (ADRs) were reported to be elevated across all regions, with demand for summer travel in Europe showing early signs of recovery [29][30] Question: Progress on growth initiatives and Asia recovery - Management discussed ongoing marketing and product initiatives aimed at increasing direct hotel bookings and highlighted positive recovery trends in Japan and other Asian markets [33][35] Question: Consumer reaction to brand advertising investments - Management observed a greater response to current brand campaigns compared to previous years, indicating a positive consumer reaction to the sharpened messaging focused on price comparison [38][39]