trivago N.V. Reports Third Quarter 2017 Results
(Thomson Reuters ONE) -
trivago N.V. /
trivago N.V. Reports Third Quarter 2017 Results
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The issuer is solely responsible for the content of this announcement.
Düsseldorf - October 25, 2017 - trivago N.V. (NASDAQ: TRVG) announced financial
results today for the quarter and nine months ended September 30, 2017.
Highlights
* Total revenue increased to ?287.9 million in the third quarter of 2017, or
17% year-over-year, compared to ?246.7 million in the third quarter of
2016, and increased to ?853.8 million in the nine months ended September
30, 2017 compared to ?585.0 million for the same period in 2016,
representing a 46% increase year-over-year
* The number of Qualified Referrals increased by 20% to 214.2 million in the
third quarter of 2017, compared to 179.2 million in the third quarter of
2016, and increased to 587.8 million in the nine months ended September
30, 2017, compared to 413.0 million for the same period in 2016, or 42%
year-over-year
* Net loss increased to ?7.7 million in the third quarter of 2017, from ?1.5
million in the third quarter of 2016, and decreased to ?3.5 million in the
nine months ended September 30, 2017, compared to a net loss of ?51.5
million for the same period in 2016
* Adjusted EBITDA was ?(7.1) million in the third quarter of 2017, compared to
?6.3 million in the third quarter of 2016, and ?15.3 million in the nine
months ended September 30, 2017, compared to ?16.3 million in the nine
months ended September 30, 2016
Financial Summary & Operating Metrics (? millions unless stated)
+---------------------+----------------------------+---------------------------+
| |Three months ended September|Nine months ended September|
| | 30, | 30, |
| +------+---------------------+------+--------------------+
| Metric | 2017 | 2016 ^Y/Y | 2017 | 2016 ^Y/Y |
+---------------------+------+---------------------+------+--------------------+
|Total Revenue 287.9 246.7 17% |853.8 585.0 46% |
| | |
|Qualified Referrals 214.2 179.2 20% |587.8 413.0 42% |
|(in millions) | |
| | |
|Revenue per Qualified 1.32 1.36 (3)% | 1.43 1.40 2% |
|Referral (in ?) | |
| | |
|Operating income (14.3) (0.6) n.m. |(4.8) (50.3) n.m. |
|(loss) | |
| | |
|Net income (loss) (7.7) (1.5) n.m. |(3.5) (51.5) n.m. |
| | |
|Net income (loss) | |
|attributable to (5.9) (1.3) n.m. |(2.9) (51.0) n.m. |
|trivago N.V. | |
| | |
|Return on Advertising 114.8% (390)bps | 116.1% (140)bps |
|Spend 110.9% |114.7% |
| | |
|Adjusted EBITDA ((1)) (7.1) 6.3 n.m. | 15.3 16.3 (6)% |
+--------------------------------------------------+---------------------------+
n.m. - not meaningful
((1)) "Adjusted EBITDA" (Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization) is a non-GAAP measure. Please see "Definitions of Non-GAAP
Measures" and "Tabular Reconciliations for Non-GAAP Measures" on pages 23-24
herein for explanations and reconciliations of non-GAAP measures used throughout
this release.
Discussion of Results
The following discussion should be considered together with our unaudited
financial information included with this release and the section contained in
our annual report on Form 20-F for the year ended December 31, 2016, "Item 5.
Operating and Financial Review and Prospects". Certain information and
disclosures normally included in consolidated financial statements prepared in
accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") have
been omitted from this release.
As used herein, references to "we", "us", the "company", or "trivago", or
similar terms shall mean trivago N.V. and, as the context requires, its
subsidiaries.
We have historically conducted our business through trivago GmbH, and therefore
the comparative historical financial information for the three and nine months
ended September 30, 2016 included herein presents the results of operations and
financial condition of trivago GmbH and its controlled subsidiaries.
Business Overview
Overview
trivago is a global hotel search platform. We are focused on reshaping the way
travelers search for and compare hotels, while enabling hotel advertisers to
grow their businesses by providing access to a broad audience of travelers via
our websites and apps. Our platform allows travelers to make informed decisions
by personalizing their hotel searches and providing access to a deep supply of
hotel information and prices. As of September 30, 2017, we offered access to
approximately 1.8 million hotels and other types of accommodation in over 190
countries.
Our search platform forms the core of our user experience, and can be accessed
globally via 55 localized websites and apps in 33 languages. Our users initially
search via a text-based search function, which supports searches across a broad
range of criteria. This leads through to a listings page that displays search
results and allows for further refinement based on more nuanced filters.
Additionally, we enhance our users' experience by giving them the choice to
display their search results in listings or map formats. Users can search our
platform on desktop and mobile devices, and benefit from a familiar user
interface, resulting in a consistent user experience. In the third quarter of
2017, our revenue share from mobile websites and apps exceeded 60%, which is
consistent with an expected longer-term trend towards mobile search.
Marketing
We believe that building and maintaining the trivago brand and clearly
articulating our value proposition will drive both travelers and advertisers to
our platform. We focus the efforts of our marketing teams and advertising spend
towards building effective messaging to a broad audience.
Brand Marketing
To grow brand awareness and consideration, we invest in brand marketing globally
across a broad range of media, including TV marketing, video marketing (such as
YouTube), radio and out-of-home advertising. The amount and nature of our
marketing spend varies across our markets, depending on multiple factors
including cost efficiency, local media dynamics, the size of the market and our
existing brand presence in that market.
We also generate hotel content as a means of engaging with travelers, which is
distributed online including via social media. Mobile app marketing is becoming
increasingly important with the continuous shift from desktop to mobile.
Performance Marketing
We market our services and directly acquire traffic to our websites by
purchasing travel and hotel-related keywords from general search engines and
through advertisements on other online marketing channels. These activities
include advertisements through search engines, such as Baidu, Bing, Google and
Yahoo! (commonly referred to as "Search Engine Marketing" or "SEM"), as well as
through display advertising campaigns on advertising networks, affiliate
websites and social networking sites (commonly referred to as "Display, Email
and Affiliate Advertising" or "DEA").
Allocation of Marketing Spend
We take a data-driven, testing-based approach to making decisions about
allocating marketing spend, where we use our proprietary tools, processes and
algorithms to measure and optimize performance end-to-end, starting with the
pretesting of the creative concept and ending with the optimization of media
spend.
We have taken actions in the past and may continue to make decisions in the
future in this area that have the effect of reducing our short-term revenue or
profitability if we believe that the decisions will improve our revenue and
profitability levels over the long term. The short-term reductions in revenue or
profitability could be more severe than we anticipate or these decisions may not
produce the long-term benefits that we expect, in which case our user growth,
and our business and results of operations could be negatively impacted.
Advertiser Relations
We have dedicated sales teams that manage the process of onboarding advertisers,
maintain ongoing relationships with advertisers, work with advertisers to ensure
they are optimizing their outcomes from the trivago platform and provide
guidance on additional tools and features that could further enhance
advertisers' experience. We offer our advertisers a suite of marketing tools to
help promote their listings on our platform and drive traffic to their websites.
Our advertisers include:
* Online travel agencies (or "OTAs"), including large international players,
such as brands affiliated with Expedia, Inc. ("Expedia") and the Priceline
Group, as well as smaller, regional and local OTAs;
* Hotel chains, including large multi-national hotel chains and smaller
regional chains; and
* Individual hotels.
We generate the large majority of our revenue from OTAs. Certain brands
affiliated as of the date hereof with our majority shareholder, Expedia,
including Brand Expedia, Hotels.com, Orbitz, Travelocity, Hotwire, Wotif and
ebookers, in the aggregate, accounted for 32%, 39% and 36% of our total revenue
for the years ended December 31, 2014, 2015 and 2016, respectively, and
accounted for 35% for the nine months ended September 30, 2017. The Priceline
Group and its affiliated brands, Booking.com and Agoda, accounted for 28%, 27%
and 43% of our total revenue for the years ended December 31, 2014, 2015 and
2016, respectively, and accounted for 47% for the nine months ended September
30, 2017.
For the three months ended September 30, 2017, brands in each case affiliated
with Expedia and the Priceline Group accounted for 34% and 45% of our total
revenue, respectively.
Marketplace
We operate a global marketplace in order to provide consumers with the benefits
of our platform, free of charge, while providing advertisers with a venue to
compete with each other by facilitating a vast quantity of auctions on any
particular day. Advertisers do this by submitting cost-per-click bids on our
marketplace for each user click on an advertised rate for a hotel. By clicking
on a given rate, that user is referred to that advertiser's website where the
user can complete the booking.
Our proprietary algorithm aggregates and evaluates quotes on hotel room prices
from our advertisers. In determining the prominence given to offers and their
placement in our search results, we consider a variety of factors, including the
offered rate, the likelihood our offers match a given user's ideal hotel
criteria, users' ability to complete a booking after clicking on a search
result, other proxies for user experience and cost-per-click bids submitted by
our advertisers.
The dynamics on our marketplace can cause and have caused the Referral Revenue
that we receive from our advertisers to fluctuate. These dynamics include:
* Our advertisers' testing of bidding strategies;
* Advertiser competition for the placement of their offers;
* The fees advertisers are willing to pay based on how they manage their
advertising costs and their targeted return on investment;
* Our advertisers' response to changes made to our marketplace, such as the
relevance assessment; and
* Changes in the likelihood a user will book the offer.
The magnitude of these fluctuations can be influenced by the fact that a large
portion of our revenue is concentrated in Referral Revenue generated from brands
affiliated with Expedia and the Priceline Group. This concentration means that
changes in these advertisers' strategies can have material impacts on our
Referral Revenue. Changes in Referral Revenue resulting from dynamics on our
marketplace, whether or not relating to these advertisers, can occur with little
or no notice to us, and can have a material effect on the quarter-to-quarter
variability of our revenues, and can accordingly negatively impact our financial
condition, cash flows and results of operations.
Recent trends and activities
We are currently modifying our model for allocating our marketing spend, which
we refer to as our attribution model, with the aim of optimizing our investment
mix going forward by focusing more on the end-to-end booking value that we
generate through our platform. In the third quarter of 2017, we completed the
roll-out of this new attribution model in our DEA channel. As the new
attribution model is rolled out in other marketing channels, we expect higher
volatility and potentially a slowdown in qualified referral growth in the near-
term, but we intend for this change to have a long-term positive impact on
Revenue per Qualified Referral (RPQR).
In August 2017, we acquired all material assets of tripl GmbH through a business
combination. The acquisition is intended to enhance trivago's product with
personalization technology that uses big data and a customer-centric approach.
On September 7, 2017, the merger of trivago GmbH into and with trivago N.V.
became effective. Pursuant to the merger, our founders exchanged all of their
units of trivago GmbH remaining after our pre-IPO corporate reorganization for
Class B shares of trivago N.V. As of September 30, 2017, 30,907,113 Class A
shares and 319,799,968 Class B shares of trivago N.V. were outstanding.
Starting towards the end of the third quarter 2017, we have seen increased
testing activity on our marketplace by several large advertisers. This activity
has been subsequently accompanied by changes in these advertisers' bidding
strategies and a corresponding adjustment of their cost-per-click bids on our
marketplace. These developments have had a negative impact on our revenues and
profitability. As a result, we have updated our guidance, and now expect total
revenue to grow at a rate between 36% and 39% for 2017. Looking to next year, we
assume that these impacts will make it challenging for us to grow in the first
six months of 2018 and expect to return to a positive growth trajectory in the
second half of 2018. Against this background, we have seen a decline in the
concentration of revenue generated by our largest advertisers during the first
weeks of the fourth quarter of 2017. Although we see challenges going forward,
we believe this presents a longer-term opportunity to diversify our advertiser
base and improve competition on our marketplace.
Under the Sarbanes-Oxley Act, our management must establish, maintain, and make
certain assessments and certifications regarding our internal controls over
financial reporting. In addition, our independent registered public accounting
firm will likely be required to attest to the effectiveness of our internal
controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley
Act since we expect to no longer qualify as an "emerging growth company" under
the JOBS Act by the end of 2017. Satisfying these requirements has required us
to commit a significant amount of time and resources, including for the
development, implementation, evaluation and testing of our internal controls.
While we intend to complete the implementation and assessment of our internal
controls over financial reporting and remediation measures relating to our
existing material weakness during the current year, our implementation efforts
may not be completely successful. We may also discover other weaknesses that
would cause us to need more time and to incur additional costs in order to
remediate such weaknesses.
Operating Metrics
We earn substantially all of our revenue when users of our websites and apps
click on hotel offers in our search results and are referred to one of our
advertisers. We call this our Referral Revenue. Each advertiser determines the
amount that it wants to pay for each referral by bidding for advertisements on
our marketplace. We also earn subscription fees for certain services we provide
to advertisers, although such subscription fees do not represent a significant
portion of our revenue.
Key metrics we use to monitor our revenue include the number of qualified
referrals we make and the revenue we earn for each qualified referral, or RPQR.
Referral Revenue, Other Revenue, Qualified Referrals & RPQR
Referral Revenue by Segment & Other Revenue (? millions)
+----------------------+--------------------------+-------------------------+
| | Three months ended | Nine months ended |
| | September 30, | September 30, |
| +--------------------------+-------------------------+
| |2017 2016 ^ ^% Y/Y |2017 2016 ^ ^% Y/Y |
+----------------------+--------------------------+-------------------------+
| Americas|107.9 96.4 11.5 12% |325.9 223.5 102.4 46% |
| | | |
| Developed Europe|121.0 114.0 7.0 6% |355.1 276.1 79.0 29% |
| | | |
| Rest of World|54.9 33.9 21.0 62% |162.1 79.8 82.3 103% |
+----------------------+--------------------------+-------------------------+
|Total Referral Revenue|283.8 244.2 39.6 16% |843.1 579.3 263.8 46% |
+----------------------+--------------------------+-------------------------+
| Other Revenue| 4.1 2.4 1.7 71% |10.8 5.7 5.1 89% |
+----------------------+--------------------------+-------------------------+
| Total Revenue|287.9 246.7 41.2 17% |853.8 585.0 268.8 46% |
+----------------------+--------------------------+-------------------------+
Note: Some figures may not add due to rounding.
Total Revenue increased by ?41.2 million and ?268.8 million during the quarter
and nine months ended September 30, 2017, respectively, compared to the same
periods in 2016, driven by an increase in advertising spend and a higher brand
awareness in most markets.
Referral Revenue in the third quarter of 2017 increased to ?107.9 million,
?121.0 million and ?54.9 million, in Americas, Developed Europe and Rest of
World (RoW), respectively, or by 12%, 6% and 62%, respectively, as compared to
the same period in 2016. Although we continued to experience positive revenue
effects from increased advertising spend, we saw evidence from our advertising
spend in July that the marginal returns were diminishing in some markets. Our
resulting decision to decelerate growth in advertising spend, along with
adjustment of the cost-per-click bids submitted by advertisers on our
marketplace, contributed to a slow-down in our revenue growth rates as compared
to the prior year. In addition, foreign exchange effects in the third quarter of
2017, in particular resulting from the weakness of the US dollar, negatively
impacted revenue growth as compared to the same period in 2016.
Referral Revenue for the nine months ended September 30, 2017 increased by
46%, 29% and 103% year-over-year in Americas, Developed Europe and RoW,
respectively. These increases were due to strong advertising spend and the
positive revenue effect during the first half of 2017 of the introduction of our
relevance assessment, which is an adjustment to advertisers' cost-per-click bids
based on our assessment of the quality of users' experience after leaving our
website. In the first half of 2017, some advertisers compensated for their lower
relevance assessment through higher cost-per-click bids. We reinvested profits
from the relevance assessment into advertising spend, which also had a positive
effect on Referral Revenue during the first half of 2017. Starting in the final
weeks of June 2017, some of our significant advertisers optimized their websites
and bidding strategy in response to the introduction of the relevance
assessment. As a result, advertisers were able to lower their cost-per-click
bids during the three months ended September 30, 2017, which resulted in an
algorithm-driven pull back in our performance marketing advertising spend and
was accompanied by a deceleration of our branded marketing expenditure.
Together, these effects negatively impacted the revenue growth rate in the third
quarter of 2017 as compared to the first half of 2017.
Other Revenue grew by 71% and 89% in the third quarter and the first nine months
of 2017, respectively, as compared to the same periods in 2016. These increases
were primarily driven by an increase the number of in Hotel Manager Pro
subscriptions for which we receive a fee.
Qualified Referrals by Segment (in millions)
+----------------+--------------------------+-------------------------+
| | Three months ended | Nine months ended |
| | September 30, | September 30, |
| +--------------------------+-------------------------+
| |2017 2016 ^ ^% Y/Y |2017 2016 ^ ^% Y/Y |
+----------------+--------------------------+-------------------------+
| Americas|54.3 45.5 8.8 19% |161.8 112.4 49.4 44% |
| | | |
|Developed Europe|90.1 89.0 1.1 1% |245.8 204.1 41.7 20% |
| | | |
| Rest of World|69.7 44.6 25.1 56% |180.3 96.4 83.9 87% |
+----------------+--------------------------+-------------------------+
| Total|214.2 179.2 35.0 20% |587.8 413.0 174.8 42% |
+----------------+--------------------------+-------------------------+
Note: Some figures may not add due to rounding.
Qualified Referrals (QRs) increased to 54.3 million, 90.1 million and 69.7
million in Americas, Developed Europe and RoW, respectively, in the third
quarter of 2017 or by 19%, 1% and 56%, respectively, as compared to the same
period in 2016. In the nine months ended September 30, 2017, the growth rates
were 44%, 20% and 87% in Americas, Developed Europe and RoW, respectively. The
growth rates reflected an increased awareness of our brand and continued strong
TV advertising spend as well as an increase in performance marketing spend in
the first half of 2017. The significant slow-down in QR growth rates in the
third quarter of 2017 compared to the same period in 2016 was driven by a
deceleration of advertising spend as described above and the roll-out of our new
attribution model.
Revenue Per Qualified Referrals (RPQR) by Segment (in ?)
+-----------------+----------------------------+---------------------------+
| |Three months ended September|Nine months ended September|
| | 30, | 30, |
| +----------------------------+---------------------------+
| |2017 2016 ^% Y/Y |2017 2016 ^% Y/Y |
+-----------------+ ------------------------+---------------------------+
| Americas|1.99 2.12 -6% |2.01 1.99 1% |
| | | |
| Developed Europe|1.34 1.28 5% |1.44 1.35 7% |
| | | |
| Rest of World|0.79 0.76 4% |0.90 0.83 8% |
+-----------------+----------------------------+---------------------------+
|Consolidated RPQR|1.32 1.36 -3% |1.43 1.40 2% |
+-----------------+----------------------------+---------------------------+
During the third quarter of 2017, Revenue per Qualified Referral (RPQR)
decreased by 6% in Americas while it increased by 5% and 4% in Developed Europe
and RoW, respectively, as compared to the same period in 2016. Consolidated RPQR
decreased 3% which was impacted by the increased weighting of RPQR in our RoW
segment, and by the decrease in RPQR in our Americas segment.
We believe that RPQR was negatively impacted by lower commercialization. RPQR in
the third quarter of 2017 reflected a downward adjustment in cost-per-click bids
and increased volatility after advertisers responded to the introduction of the
relevance assessment, as described above. In addition, RPQR in Americas
reflected foreign exchange effects, in particular resulting from the weakness of
the US dollar.
In the third quarter of 2017, we continued to implement measures aimed at
optimizing our platforms. The positive effect of these and previous measures,
the roll-out of our new attribution model in performance marketing channels,
which we believe contributed to higher levels of booking conversion for our
advertisers, and a change in our channel mix led to an increase in RPQR in
Developed Europe and RoW compared to the same period in 2016. These factors
partially offset the negative revenue impacts on RPQR in Americas that are
described above.
During the nine months ended September 30, 2017, RPQR increased by 1%, 7% and
8% in Americas, Developed Europe and RoW, respectively, as compared to the same
period in 2016. In all segments, RPQR was positively impacted in the first half
of 2017 by the introduction of the relevance assessment in our marketplace
algorithm, which was partially offset in the third quarter of 2017 by the
negative revenue effects described above relating to our advertisers'
optimization of their websites and bidding strategy in response to the
introduction of the relevance assessment.
Expenses
Costs and Expenses | As a % of Revenue
-----------------------+----------------------
Three months ended | Three months ended
September 30, | September 30,
-----------------------+----------------------
2017 2016 ^% Y/Y|2017 2016 ^ in bps
-----------------------+----------------------
(? millions) |
|
Cost of revenue 1.8 1.0 80 %| 1 % 0 % 100
|
of which share-based |
compensation 0.0 0.0 n.m.|
|
Selling and marketing 274.4 224.0 23 %| 95 % 91 % 400
|
of which share-based |
compensation 0.8 1.0 (20 )%|
|
Technology and content 13.4 10.1 33 %| 5 % 4 % 100
|
of which share-based |
compensation 0.8 0.5 60 %|
|
General and administrative 12.1 9.7 25 %| 4 % 4 % -
|
of which share-based |
compensation 3.2 1.8 78 %|
|
Amortization of intangible |
assets 0.4 2.5 (84 )%| 0 % 1 % (100 )
-----------------------+----------------------
Total costs and expenses 302.2 247.3 22 %|105 % 100 % 500
|
Costs and Expenses | As a % of Revenue
-----------------------+---------------------
Nine months ended | Nine months ended
September 30, | September 30,
-----------------------+---------------------
2017 2016 ^% Y/Y|2017 2016 ^ in bps
-----------------------+---------------------
(? millions) |
|
Cost of revenue 4.3 3.1 39 %| 1 % 1 % -
|
of which share-based compensation 0.1 0.7 (86 )%|
|
Selling and marketing 781.2 536.5 46 %| 91 % 92 % (100 )
|
of which share-based compensation 2.7 10.4 (74 )%|
|
Technology and content 38.1 40.6 (6 )%| 4 % 7 % (300 )
|
of which share-based compensation 2.8 15.3 (82 )%|
|
General and administrative 32.2 43.7 (26 )%| 4 % 7 % (300 )
|
of which share-based compensation 6.7 25.6 (74 )%|
|
Amortization of intangible assets 2.8 11.3 (75 )%| 0 % 2 % (200 )
-----------------------+---------------------
Total costs and expenses 858.6 635.3 35 %|101 % 109 % (800 )
|
Note: Some figures may not add due to rounding.
Share-based compensation
Share-based compensation was ?4.9 million in the quarter ended September 30,
2017, compared to ?3.2 million in the third quarter of 2016. Share-based
compensation was ?12.3 million in the nine months ended September 30, 2017
compared to ?52.0 million in the same period in 2016.
Share-based compensation expense for the nine months ended September 30, 2016
included an effect related to Expedia, Inc.'s exercise of a call right with
respect to certain shares held by trivago employees which were originally
awarded in prior years in the form of share-based options pursuant to the
trivago employee option plan and subsequently exercised by such employees.
Expedia, Inc. elected to exercise its call right at a premium to fair value, the
aggregate payment of which, ?62.5 million, was recorded as a Contribution from
Parent in Members' Equity. Expedia, Inc.'s exercise resulted in an incremental
share-based compensation charge of ?43.7 million in the nine months ended
September 30, 2016 pursuant to liability award treatment. The differential
between the settlement amount and the incremental share-based compensation
charge reflects share-based compensation expense recorded on these awards in
previous periods. For the nine months ended September 30, 2016, ?50.7 million of
expense was due to the mark-to-market treatment of certain shares pursuant to
liability award treatment. For the nine months ended September 30, 2017, there
was no expense related to liability award treatment as all existing awards at
the time of our IPO in December 2016, and all new awards granted subsequent to
the IPO are accounted for as equity-classified awards.
Cost of revenue
Cost of revenue was ?1.8 million in the third quarter of 2017, compared to ?1.0
million for the same period in 2016, and increased by ?1.2 million in the nine
months ended September 30, 2017, or by 39% compared to the same period 2016.
Cost of revenue in both periods reflects the growth of our business as we
continue to make investments to reach scale, and was offset by decreases in
share-based compensation. Cost of revenue includes data center and server costs
as well as user support functions.
Selling and marketing
In the third quarter of 2017, selling and marketing expense grew to ?274.4
million, of which ?255.9 million, or 93%, was advertising expense. The increase
was driven by higher advertising spend across all regions with ?98.5 million,
?94.0 million and ?63.4 million spent in Americas, Developed Europe and RoW,
respectively, compared to ?85.9 million, ?88.3 million and ?38.5 million,
respectively, spent in the third quarter of 2016. Selling and marketing expense
was 95% of revenues in the third quarter of 2017, up from 91% in the third
quarter of 2016 as we were unable to pull back planned television advertising
spend quickly enough to respond to the speed of the RPQR slowdown. As a
consequence, we faced lower than anticipated Return on Advertising Spend (ROAS).
ROAS stabilized since through a reduction of marketing expenses.
For the nine months ended September 30, 2017, selling and marketing expense
increased to ?781.2 million, or 46% compared to the same period 2016, of which
?735.0 million, or 94%, was advertising expense. This increase was also driven
by higher advertising spend across all regions. Selling and marketing expense
was 91% of revenues in the nine months ended September 30, 2017, compared to
92% for the same period in 2016.
Technology and content
For the third quarter of 2017, total technology and content expense increased by
?3.3 million, or 33% period over period, primarily driven by an increase in
personnel costs as the company continues to increase its headcount and make
investment in hotel content expansion. In the third quarter of 2017, ?13.4
million of technology and content expense included ?0.8 million of share-based
compensation and ?0.4 million of depreciation of internal-use software and
website development, compared to ?0.5 million and ?0.3 million in the third
quarter of 2016, respectively.
In the nine months ended September 30, 2017, total technology and content
decreased by ?2.5 million, or 6% period over period, to ?38.1 million. The
decrease was driven by share-based compensation which was ?2.8 million in the
nine months ended September 30, 2017 compared to ?15.3 million for the same
period in 2016.
General and administrative
For the third quarter of 2017, general and administrative expense increased by
?2.4 million, or 25% period over period, and for the nine months ended September
30, 2017, decreased by ?11.5 million, or 26% period over period. The decrease in
the nine months ended September 30, 2017 was driven by declines in share-based
compensation, partly offset by increases in personnel and recruiting costs and
professional fees and other. The increase in these costs also drove the increase
in general and administrative expenses in the third quarter of 2017.
Share-based compensation was ?3.2 million in the third quarter of 2017, compared
to 1.8 million in the third quarter of 2016, and ?6.7 million in the nine months
ended September 30, 2017 compared to ?25.6 million in the same period in 2016.
The company continued to build up internal expertise in the finance, legal and
internal audit departments. Personnel and recruiting costs increased by ?1.2
million in the third quarter of 2017 and by ?4.3 million in the nine months
ended September 30, 2017, as compared to the same period in 2016.
Professional fees, including costs incurred as a publicly traded company,
increased by ?0.9 million in the third quarter of 2017 and by ?5.9 million in
the nine months ended September 30, 2017, compared to the respective periods in
2016. A significant portion of the increase is due to expenses incurred in
connection with the merger of trivago GmbH into and with trivago N.V.
We are planning to move into our new campus in 2018. The contractual lease
agreements triggered build-to-suit treatment under U.S. GAAP. We have bifurcated
our lease payments pursuant to the premises into a portion that is allocated to
the building (a reduction to the financing obligation) and a portion that is
allocated to the land on which the building was constructed. The portion of the
lease obligations allocated to the land is treated as an operating lease that
commenced in July 2015. For the quarter ended September 30, 2017, we recorded
?0.4 million of non-cash land rent expense in connection with this lease,
unchanged compared to the same period in 2016.
Amortization of intangible assets
Amortization of intangible assets was ?0.4 million in the third quarter of
2017, compared to ?2.5 million in the third quarter of 2016 and was ?2.8 million
in the nine months ended September 30, 2017, compared to ?11.3 million in the
same period in 2016. These amortization costs relate predominantly to intangible
assets recognized by Expedia, Inc. upon the acquisition of a majority stake in
trivago in 2013, which were allocated to trivago. The amortization expense
decreased as some of these intangible assets reached the end of their useful
lives.
Net income (loss) attributable to trivago and Adjusted EBITDA((1)) (? millions)
+-----------------------+---------------------------+--------------------------+
| | Three months ended | Nine months ended |
| | September 30, | September 30, |
| +---------------------------+--------------------------+
| | 2017 2016 ^? |2017 2016 ^? |
+-----------------------+ ---------------------+--------------------------+
|Operating income (loss)|(14.3) (0.6) (13.7) |(4.8) (50.3) 45.5 |
| | | |
|Other income (loss) | | |
| | | |
|Interest expense |(0.0) (0.0) 0.0 |(0.0) (0.1) 0.1 |
| | | |
|Other, net | 0.3 0.3 0.0 | 0.1 0.5 (0.4) |
| +---------------------------+--------------------------+
|Total other income | 0.3 0.3 0.0 | 0.1 0.4 (0.3) |
|(expense), net | | |
| | | |
| | | |
| | | |
|Income (loss) before |(14.0) (0.3) (13.7) |(4.7) (49.9) 45.2 |
|income taxes | | |
| | | |
|Expense (benefit) for |(6.3) 1.2 (7.5) |(1.3) 1.6 (2.9) |
|income taxes | | |
| +---------------------------+--------------------------+
|Net income (loss) |(7.7) (1.5) (6.2) |(3.5) (51.5) 48.0 |
| | | |
| | | |
| +---------------------------+--------------------------+
|Net (income) loss | | |
|attributable to | 1.9 0.2 1.6 | 0.5 0.5 0.0 |
|noncontrolling | | |
|interests | | |
| +---------------------------+--------------------------+
|Net income (loss) | | |
|attributable to trivago|(5.9) (1.3) (4.6) |(2.9) (51.0) 48.1 |
|N.V. | | |
| +---------------------------+--------------------------+
| | | |
| | | |
|Adjusted EBITDA |(7.1) 6.3 (13.4) |15.3 16.3 (1.0) |
+-----------------------+---------------------------+--------------------------+
Note: Some figures may not add due to rounding.
n.m. - not meaningful
((1)) Adjusted EBITDA is a non-GAAP measure. See pages 23-24 herein for a
description and reconciliation to the corresponding GAAP measure.
Net loss attributable to trivago N.V. of ?5.9 million in the third quarter of
2017 reflected our inability to pull back planned television advertising spend
quickly enough as described above. This also negatively impacted Return on
Advertising Spend (ROAS) in the third quarter of 2017. Adjusted EBITDA was
?(7.1) million in the third quarter of 2017, compared to ?6.3 million the third
quarter of 2016.
Net loss attributable to trivago N.V. was ?2.9 million in the nine months ended
September 30, 2017, improving significantly compared to the same period in 2016
due to a significant decline in share-based compensation expense. In the nine
months ended September 30, 2017, Adjusted EBITDA decreased by ?1.0 million to
?15.3 million, compared to the same period in 2016. The decrease in Adjusted
EBITDA was negatively impacted by our inability to pull back planned television
advertising spend described above.
Income taxes
Income tax benefit was ?6.3 million in the third quarter of 2017 compared to
?1.2 million income tax expense in the third quarter of 2016. The total weighted
average tax rate was 30%, which is mainly driven by the German statutory rate of
approximately 31%. The slightly lower rate is due to permanent differences in
Germany. Our effective tax rate was 44.8% in the third quarter of 2017, compared
to -413% for the same period in 2016. The effective tax rates for the third
quarters of 2017 and 2016 were primarily driven by discrete income tax items,
specifically due to share-based compensation expenses which are non-deductible
for tax purposes.
Additionally, in the third quarter of 2017, a deferred tax asset of ?3.2 million
will be utilized on previously unrecognized cumulative net operating losses.
This was the result of the merger of trivago GmbH into and with trivago N.V.,
which gave rise to an increase in expected future taxable income that can be
used to offset against these losses at the level of trivago N.V.
In the nine months ended September 30, 2017, income tax benefit was ?1.3 million
compared to income tax expenses of ?1.6 million in the same period in 2016. Our
effective tax rate was 26.8% compared to -3.2% for the respective periods. This
is mainly due to the effect of non-deductible share-based compensation and the
recognition of the deferred tax asset.
Balance sheet, cash flows and capitalization
Cash, cash equivalents and restricted cash were ?191.0 million as of
September 30, 2017, compared to ?228.2 million as of December 31, 2016. The
decrease was mainly driven by accounts receivable increasing more than accounts
payable in the nine months ended September 30, 2017. Accounts receivable
increased by ?56.8 million, of which ?43.9 million are related party
receivables, as of September 30, 2017 compared to December 31, 2016, driven by
higher revenues of ?118.7 million in the third quarter of 2017 compared to the
fourth quarter of 2016. The increase in our receivables also reflected seasonal
fluctuations in the demand for our services, in particular as a result of
seasonally lower patterns in travel bookings during the holiday season in
December 2016. The increase in related party receivables was driven by a
standardization of related party payment terms, which delayed our receipt of
related party revenue until after month-end close
Accounts payable increased by ?22.9 million, or 57%, as of September 30, 2017
compared to December 31, 2016, due to the seasonal ramp-up in advertising
expenses, which increased by ?131.6 million, or 106%, in the third quarter of
2017 compared to the fourth quarter of 2016. Our current ratio decreased from
4.8 at the end of the fourth quarter of 2016 to 3.7 at the end of the third
quarter of 2017 as a result of the movement in Accounts Receivables and Accounts
Payables.
Our plan to move into a newly leased campus building in Düsseldorf's media
harbor results in a steadily increasing capitalization on the balance sheet of
capital lease costs, amounting to ?76.8 million as of September 30, 2017
compared to ?35.7 million as of December 31, 2016.
trivago N.V. Condensed consolidated balance sheets
(? thousands, except share data) (unaudited)
ASSETS As of September As of December
30, 2017 31, 2016
-------------------------------------------------------------------------------
Current assets:
Cash & cash equivalents ? 188,291 ? 227,298
Restricted cash 2,699 884
Accounts receivable, less allowance
of ?716 and ?152 at September
30, 2017 and December 31, 2016,
respectively 49,565 36,658
Accounts receivable, related party 60,389 16,505
Tax receivable 2,589 -
Prepaid expenses and other current
assets 14,398 11,529
-----------------------------------------
Total Current Assets 317,931 292,874
-----------------------------------------
Property and equipment, net 95,902 46,862
Other long-term assets 1,417 955
Intangible assets, net 173,732 176,052
Goodwill 490,620 490,503
-----------------------------------------
TOTAL ASSETS ? 1,079,602 ? 1,007,246
-----------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ? 62,837 ? 39,965
Income taxes payable 2,777 3,433
Deferred revenue 9,363 5,078
Accrued expenses and other current
liabilities 11,394 12,627
-----------------------------------------
Total current liabilities 86,371 61,103
Deferred income taxes 51,166 53,156
Other long-term liabilities 81,880 38,565
Redeemable noncontrolling interests 381 351
Stockholders' equity:
Class A common stock, ?0.06 par value
- 700,000,000 shares authorized,
30,907,113 and 30,026,635 shares
issued and outstanding as of
September 30, 2017 and December
31, 2016, respectively 1,854 1,802
Class B common stock, ?0.60 par value
- 320,000,000 shares authorized,
319,799,968 shares issued and
outstanding as of September 30, 2017
and December 31, 2016, respectively 191,880 125,405
Reserves 726,737 584,667
Contribution from parent 122,200 122,200
Accumulated other comprehensive
income (loss) (117 ) 21
Retained earnings (accumulated
deficit) (182,750 ) (179,837 )
-----------------------------------------
Total stockholders' equity
attributable to trivago N.V. 859,804 654,258
Noncontrolling interest - 199,813
-----------------------------------------
Total stockholders' equity 859,804 854,071
-----------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ? 1,079,602 ? 1,007,246
-----------------------------------------
trivago N.V. Condensed consolidated statements of operations
(? thousands, except per share data) (unaudited)
Three months ended Nine months ended
September September September September
30, 2017 30, 2016 30, 2017 30, 2016
------------------------------------------------------------
Revenue ? 188,760 ? 156,533 ? 556,831 ? 378,689
Revenue from
related party 99,100 90,129 297,009 206,313
------------------------------------------------------------
Total revenue 287,860 246,662 853,840 585,002
Costs and
expenses:
Cost of revenue,
including related
party, excluding
amortization
(1)(2)(3) 1,846 1,021 4,355 3,118
Selling and
marketing (1) 274,393 223,894 781,173 536,545
Technology and
content, including
related party
(1)(3) 13,429 10,098 38,128 40,608
General and
administrative,
including related
party (1)(3) 12,082 9,722 32,153 43,725
Amortization of
intangible assets 412 2,527 2,798 11,330
------------------------------------------------------------
Operating income
(loss) (14,302 ) (600 ) (4,767 ) (50,324 )
Other income
(expense)
Interest expense (11 ) (41 ) (42 ) (127 )
Other, net 305 345 95 533
------------------------------------------------------------
Total other
income (expense),
net 294 304 53 406
------------------------------------------------------------
Income (loss)
before income
taxes (14,008 ) (296 ) (4,714 ) (49,918 )
Provision
(benefit) for
income taxes (6,282 ) 1,226 (1,261 ) 1,580
------------------------------------------------------------
Net loss (7,726 ) (1,522 ) (3,453 ) (51,498 )
Net loss
attributable to
noncontrolling
interests 1,855 273 540 524
------------------------------------------------------------
Net loss
attributable to
trivago N.V. ? (5,871 ) ? (1,249 ) ? (2,913 ) ? (50,974 )
------------------------------------------------------------
Earnings per share
attributable to
trivago N.V.
available to
common
stockholders (4):
Basic ? (0.02 ) - ? (0.01 ) -
Diluted ? (0.02 ) - ? (0.01 ) -
Shares used in
computing earnings
per share:
Basic 268,521 - 249,039 -
Diluted 268,521 - 249,039 -
(1) Includes
share-based
compensation as
follows:
Cost of revenue ? 33 ? 13 ? 85 ? 724
Selling and
marketing 817 913 2,707 10,396
Technology and
content, net of
capitalized
internal-use
software and
website
development costs 801 486 2,841 15,278
General and
administrative 3,244 1,763 6,677 25,612
(2) Amortization
of internal use
software and
website
development costs
included in
Technology and
content is as
follows:
Amortization of
acquired
technology
included in
amortization of
intangible assets 24 - 24 ? 3,750
Amortization of
internal use
software and
website
development costs
included in
technology and
content 449 303 1,248 732
Amortization of
internal use
software and
website
development costs
included in
general and
administrative 58 - 58 -
(3) Includes
related party
expense as
follows:
Cost of revenue ? 0 - ? 33 -
Technology and
content 113 - 242 -
General and
administrative 29 1,184 120 2,892
Selling and
marketing 2 - 2 -
(4) Represents
earnings per share
of Class A and
Class B common
stock and
weighted-average
shares of Class A
and Class B common
stock outstanding
for the period
from January
1, 2017 through
September
30, 2017, the
period following
the capitalization
of the parent
company and IPO.
trivago N.V. Condensed consolidated statements of cash flows
(? thousands) (unaudited)
Three months ended Nine months ended
September September September September
30, 2017 30, 2016 30, 2017 30, 2016
--------------------------------------------------------
Operating activities:
Net income (loss) ? (7,726 ) ? (1,522 ) ? (3,453 ) ? (51,498 )
Adjustments to
reconcile net loss to
net cash used:
Depreciation (property
and equipment and
internal-use software
and website
development) 1,869 1,262 4,999 3,331
Amortization of
intangible assets 412 2,527 2,798 11,330
Share-based
compensation 4,895 3,175 12,310 52,010
Deferred income taxes (1,057 ) (1,097 ) (1,990 ) (3,390 )
Foreign exchange
(gain) loss (307 ) (344 ) (173 ) (573 )
Bad debt expense 452 759 564 1,596
Non-cash charge,
contribution from
Parent - 1,185 - 2,893
Changes in operating
assets and
liabilities:
Restricted cash (342 ) - (1,815 ) (95 )
Accounts receivable,
including related
party 32,526 (10,383 ) (57,462 ) (45,530 )
Prepaid expense and
other assets (733 ) 222 (3,376 ) (1,091 )
Accounts payable (42,226 ) (342 ) 24,303 32,594
Accrued expenses and
other liabilities 291 5,072 3,827 5,446
Deferred revenue 1,658 1,424 4,285 2,365
Taxes
payable/receivable,
net (6,041 ) 2,214 (3,245 ) 4,433
--------------------------------------------------------
Net cash (used in) /
provided by operating
activities (16,329 ) 4,152 (18,428 ) 13,821
--------------------------------------------------------
Investing activities:
Acquisition of
business, net of cash
acquired (673 ) - (673 ) -
Capital expenditures,
including internal-use
software and website
development (6,077 ) (1,578 ) (11,614 ) (6,363 )
--------------------------------------------------------
Net cash used in
investing activities (6,750 ) (1,578 ) (12,287 ) (6,363 )
--------------------------------------------------------
Financing activities:
Payments of initial
public offering costs - (683 ) (4,038 ) (683 )
Dividends paid to NCI - - (158 ) -
Proceeds from issuance
of credit facility - 10,000 - 10,000
Payment on credit
facility - (20,000 ) - (30,000 )
Proceeds from exercise
of option awards 41 - 41 -
Tax payments for
shares withheld (3,062 ) - (3,062 ) -
Proceeds from exercise
of members' equity
awards - 1 - 1
--------------------------------------------------------
Net cash used in
financing activities (3,021 ) (10,682 ) (7,217 ) (20,682 )
--------------------------------------------------------
Datum: 25.10.2017 - 12:59 Uhr
Sprache: Deutsch
News-ID 565228
Anzahl Zeichen: 65590
contact information:
Town:
Düsseldorf
Kategorie:
Business News
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"trivago N.V. Reports Third Quarter 2017 Results"
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