Posting record double-digit net income, trivago returns to
profitability in Q3 2018
Financial Highlights
- In the third quarter of 2018, we returned to profitability as
we reduced our Advertising Spend to adapt to the changing dynamics
on our marketplace.
- Net income in the third quarter of 2018 was €10.1 million,
compared to a net loss of €7.7 million in the third quarter of
2017. Net loss in the nine months ended September 30, 2018 was
€32.5 million, compared to net loss of €3.5 million for the same
period in 2017.
- Adjusted EBITDA was €26.6 million in the third quarter of 2018,
compared to an Adjusted EBITDA loss of €7.1 million in the third
quarter of 2017. For the nine months ended September 30, 2018,
Adjusted EBITDA was a loss of €13.0 million, compared to Adjusted
EBITDA of €15.3 million for the same period in 2017.
- Consolidated ROAS improved to 135.9% in the third quarter of
2018 and to 116.8% in the nine months ended September 30, 2018,
respectively, compared to 110.9% and 114.7% in the same periods in
2017.
- While our shift in focus to profitability resulted in
improvements in our Return on Advertising Spend ("ROAS") in the
third quarter of 2018, it also resulted in a decline in revenue and
Qualified Referrals as compared to the same period in 2017.
- Total revenue decreased to €253.7 million in the third quarter
of 2018, representing a decline of 12% year-over-year, compared to
€287.9 million in the same period in 2017. Total revenue decreased
to €748.0 million in the nine months ended September 30, 2018
compared to €853.8 million for the same period in 2017,
representing a 12% decline period-over-period.
- The number of Qualified Referrals decreased to 189.1 million in
the third quarter of 2018, or by 12%, compared to 214.2 million in
the third quarter of 2017. The number of Qualified Referrals
decreased to 555.6 million in the nine months ended September 30,
2018, compared to 587.8 million for the same period in 2017, or by
5% period-over-period.
- Reflecting our performance in the third quarter of 2018, we
increased our profitability guidance for 2018. We now expect
Adjusted EBITDA for 2018 to be between nil and €(10) million.
Operational Highlights
- As of September 30, 2018, we achieved a significant
milestone in our on-boarding effort of alternative accommodation
providers, offering over 1.0 million units of alternative
accommodation, such as vacation rentals and private
apartments.
- After consolidating our core infrastructure, we are focusing on
user experience innovation having launched our new app on both
Android and iOS which features a redesigned user interface,
improved functionalities and an increased focus on in-app
content.
- Our revenue share from mobile websites and apps continued to
exceed 60%.
- We believe our attribution model and product optimization
measures have contributed to continuous improvement in our referred
traffic quality, which would have had a positive effect on our
referral revenues and revenue per qualified referrals, or
RPQR.
- We were able to improve the quality of the traffic that we
referred to our advertisers, particularly in Developed Europe and
RoW, which was evident in the development of Revenue per Qualified
Referral (RPQR) in those segments in the third quarter of
2018.
- We continued to experience lower levels of commercialization as
our largest advertisers appeared to have increased their return on
investment targets for their spend on our marketplace compared to
the same period in 2017.
Rolf Schrömgens, CEO and Founder, "This quarter we
continued to focus on our core principles and what has made us
successful by optimizing our marketing, improving our traffic
quality and putting our users at the center of the
experience. We believe we’ve done just that."
Axel Hefer, CFO, "Our aim was to return to profitability in
a sustainable way by reducing inefficiencies and getting the
business back on track. We believe we are now well-positioned
moving forward and have adjusted our guidance to reflect our
improved outlook."
Financial Summary & Operating
Metrics (€ millions, unless otherwise stated)
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
2018 |
|
|
2017 |
|
|
Δ Y/Y |
|
2018 |
|
|
2017 |
|
|
Δ Y/Y |
Total
Revenue |
253.7 |
|
|
287.9 |
|
|
(12 |
)% |
|
748.0 |
|
|
853.8 |
|
|
(12 |
)% |
Qualified
Referrals (in millions) |
189.1 |
|
|
214.2 |
|
|
(12 |
)% |
|
555.6 |
|
|
587.8 |
|
|
(5 |
)% |
Revenue per
Qualified Referral (in €) |
1.32 |
|
|
1.32 |
|
|
0 |
% |
|
1.33 |
|
|
1.43 |
|
|
(7 |
)% |
Operating
income/(loss) |
17.9 |
|
|
(14.3 |
) |
|
n.m. |
|
(38.0 |
) |
|
(4.8 |
) |
|
n.m. |
Net
income/(loss) |
10.1 |
|
|
(7.7 |
) |
|
n.m. |
|
(32.5 |
) |
|
(3.5 |
) |
|
n.m. |
Net income/(loss)
attributable to trivago N.V. |
10.1 |
|
|
(5.9 |
) |
|
n.m. |
|
(32.5 |
) |
|
(2.9 |
) |
|
n.m. |
Return on
Advertising Spend |
135.9 |
% |
|
110.9 |
% |
|
25.0 ppts |
|
116.8 |
% |
|
114.7 |
% |
|
2.1 ppts |
Adjusted
EBITDA(1) |
26.6 |
|
|
(7.1 |
) |
|
n.m. |
|
(13.0 |
) |
|
15.3 |
|
|
n.m. |
n.m. not meaningful
(1) “Adjusted EBITDA” (Adjusted Earnings Before
Interest, Taxes, Depreciation, Amortization, and Share Based
Compensation) is a non-GAAP measure. Please see “Definitions of
Non-GAAP Measures” and “Tabular Reconciliations for Non-GAAP
Measures” for explanations and reconciliations of non-GAAP measures
used throughout this release.
About trivagotrivago is a leading global hotel
search platform focused on reshaping the way travelers search for
and compare hotels and alternative accommodations. Incorporated in
2005 in Düsseldorf, Germany, the platform allows travelers to make
informed decisions by personalizing their hotel search and
providing them access to a deep supply of hotel information and
prices. trivago enables its advertisers to grow their businesses by
providing access to a broad audience of travelers via its websites
and apps. As of September 30, 2018, trivago has
established 55 localized platforms connected to over two and a
half million hotels and alternative accommodations, in over
190 countries.
For more information, trivago’s earnings releases and other
financial information are available at ir.trivago.com and
visit company.trivago.com/press for all corporate
news.
ENDS
For more details, refer to our Q3 report, which is available on
the Securities and Exchange Commission's website
(http://www.sec.gov).
Conference Calltrivago N.V. will webcast a
conference call to discuss third quarter 2018 financial results and
certain forward-looking information on Wednesday, October 24, 2018
at 8:00 a.m. Eastern Time (ET). The webcast will be open to the
public and available via http://ir.trivago.com. trivago N.V.
expects to provide access to the webcast on the IR
website for at least three months subsequent to the
initial broadcast.
Notes & Definitions:
Current Ratio: The current ratio is used to
measure the company´s ability to pay off its short-term liabilities
with its current assets and is an important measure of liquidity.
The current ratio is calculated by dividing the company´s total
current assets by the company´s total current liabilities.
Referral Revenue: We use the term “referral” to
describe each time a visitor to one of our websites or apps clicks
on a hotel offer or advertisement in our search results and is
referred to one of our advertisers. We charge our advertisers for
each referral on a cost-per-click (CPC) basis.
ROAS: The ratio of our referral revenue to our
advertising spend in a given period, or return on
Advertising Spend. We invest in multiple marketing
channels, such as: TV; out-of-home advertising; search engine
marketing; display advertising campaigns on advertising networks,
affiliate websites, social networking sites and email marketing;
online video; mobile app marketing and content marketing.
RPQR: We use average revenue per
qualified referral, to measure how effectively we convert
qualified referrals to revenue. RPQR is calculated as referral
revenue divided by the total number of qualified referrals in a
given period.
QR: We define a qualified
referral as a unique visitor per day that generates at
least one referral. For example, if a single visitor clicks on
multiple hotel offers in our search results in a given day, they
count as multiple referrals, but as only one qualified
referral.
Definitions of Non-GAAP
MeasuresAdjusted EBITDA:We define
adjusted EBITDA as net income (loss):
- Less: income/(loss) from equity method investment
- Plus: expense/(benefit) for income taxes,
- Plus: total other (income)/expense, net,
- Plus: depreciation of property and equipment, including
amortization of internal use software and website development
- Plus: amortization of intangible assets, and
- Plus: share-based compensation
Adjusted EBITDA is a non-GAAP financial measure.
A “non-GAAP financial measure” refers to a numerical measure of a
company’s historical or future financial performance, financial
position, or cash flows that excludes (or includes) amounts that
are included in (or excluded from) the most directly comparable
measure calculated and presented in accordance with U.S. GAAP in
such company’s financial statements. We present this non-GAAP
financial measure because it is used by management to evaluate our
operating performance, formulate business plans, and make strategic
decisions on capital allocation. We also believe that this non-GAAP
financial measure provides useful information to investors and
others in understanding and evaluating our operating performance
and consolidated results of operations in the same manner as our
management and in comparing financial results across accounting
periods. Our use of adjusted EBITDA has limitations as an
analytical tool, and you should not consider it in isolation or as
a substitute for analysis of our results reported in accordance
with U.S. GAAP, including net loss. Some of these limitations
are:
- Adjusted EBITDA does not reflect our cash expenditures or
future requirements for capital expenditures or contractual
commitments;
- Adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized may have to be replaced
in the future, and adjusted EBITDA does not reflect cash capital
expenditure requirements for such replacements or for new capital
expenditure requirements; and
- Other companies, including companies in our own industry, may
calculate adjusted EBITDA differently than we do, limiting its
usefulness as a comparative measure.
The Company is not able to provide a
reconciliation of this adjusted EBITDA guidance to net
income/(loss), the comparable GAAP measure, because certain items
that are excluded from adjusted EBITDA cannot be reasonably
predicted or are not in our control. In particular, it is unable to
forecast the timing or magnitude of share-based compensation,
interest, taxes, depreciation and amortization without unreasonable
efforts, and these items could significantly impact, either
individually or in the aggregate, net income/(loss) in the
future.
Tabular Reconciliations for Non-GAAP
MeasuresAdjusted EBITDA (Adjusted Earnings Before
Interest, Taxes, Depreciation & Amortization and Share
Based Compensation) (€ millions)
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net
income/(loss) |
|
€ |
10.1 |
|
|
€ |
(7.7) |
|
|
€ |
(32.5) |
|
|
€ |
(3.5) |
Income from
equity method investment |
0.1 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
Income/(loss) before equity method investment |
€ |
10.0 |
|
|
€ |
(7.7) |
|
|
€ |
(32.5) |
|
|
€ |
(3.5) |
|
Expense/(benefit)
for income taxes |
7.1 |
|
|
(6.3) |
|
|
(6.8) |
|
|
(1.3) |
|
Income/(loss) before income taxes |
€ |
17.1 |
|
|
€ |
(14.0 |
|
|
€ |
(39.3) |
|
|
€ |
(4.7) |
|
Add/(less): |
|
|
|
|
|
|
|
Interest
expense |
0.7 |
|
|
0.0 |
|
|
1.0 |
|
|
0.0 |
|
Other, net |
0.1 |
|
|
(0.3 |
|
|
0.4 |
|
|
(0.1) |
|
Operating
income/(loss) |
€ |
17.9 |
|
|
€ |
(14.3) |
|
|
€ |
(38.0) |
|
|
€ |
(4.8) |
|
Depreciation |
3.0 |
|
|
1.9 |
|
|
8.5 |
|
|
5.0 |
|
Amortization of
intangible assets |
0.4 |
|
|
0.4 |
|
|
1.3 |
|
|
2.8 |
|
EBITDA |
€ |
21.2 |
|
|
€ |
(12.0) |
|
|
€ |
(28.2) |
|
|
€ |
3.0 |
|
Share-based
compensation |
5.4 |
|
|
4.9 |
|
|
15.2 |
|
|
12.3 |
|
Adjusted
EBITDA |
€ |
26.6 |
|
|
€ |
(7.1) |
|
|
€ |
(13.0) |
|
|
€ |
15.3 |
|
Note: Some figures may not add due to
rounding.
Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995
This release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are not guarantees of future
performance. These forward-looking statements are based on
management’s expectations as of October 24, 2018 and assumptions
which are inherently subject to uncertainties, risks and changes in
circumstances that are difficult to predict. The use of words such
as “intend” and “expect,” among others, generally identify
forward-looking statements. However, these words are not the
exclusive means of identifying such statements. In addition, any
statements that refer to expectations, projections or other
characterizations of future events or circumstances are
forward-looking statements and may include statements relating to
future revenue, expenses, margins, profitability, net income /
(loss), earnings per share and other measures of results of
operations and the prospects for future growth of trivago N.V.’s
business.
Actual results and the timing and outcome of
events may differ materially from those expressed or implied in the
forward-looking statements for a variety of reasons, including,
among others:
- any reduction in spending or any change in bidding strategy by
one or more of our largest advertisers and the effect of these
changes on our profitability and revenue levels;
- the extent to which our advertisers prioritize profitability
over traffic growth;
- our ability to be profitable in future quarters and to return
to a growth trajectory as our business matures;
- our ability to increase advertiser diversity on our
market;
- the success of measures we are implementing aimed at maximizing
the life-time value of the user, including the “attribution model”
with respect to the allocation of performance marketing Advertising
Spend;
- global political and economic instability and other events
beyond our control;
- increasing competition and consolidation in our industry;
- our advertiser concentration;
- our ability to maintain and increase our brand awareness as we
reduce our Advertising Spend;
- our ability to maintain and/or expand relationships with, and
develop new relationships with, hotel chains and independent hotels
as well as OTAs;
- our reliance on search engines, which may change their
algorithms;
- any inaccuracies in, or misinterpretation of, the assumptions
and estimates and data we use to make decisions about our
business;
- the potential development and impact on us of legal and
regulatory proceedings to which we are or may become subject;
- our reliance on technology;
- our ability to establish and maintain an effective system of
internal control over financial reporting and avoid any future
material weakness;
- our ability to attract, train and retain executives and other
qualified employees; and
- our entrepreneurial culture and decentralized decision
making;
as well as other risks and uncertainties
detailed in our public filings with the SEC, including trivago's
Annual Report on Form 20-F for the fiscal year ended December 31,
2017 as such risks and uncertainties may be updated from time to
time. Except as required by law, we undertake no obligation to
update any forward-looking or other statements in this release,
whether as a result of new information, future events or
otherwise.
Contacts
Investor
Relations Communicationsir@trivago.com
comms@trivago.com
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