Good day, ladies and gentlemen and thank you for standing by, and welcome to the trivago Q2 Earnings Call 2021. I must advise you that the call is being recorded today, Friday, the 30th of July 2021. We are pleased to be joined on the call today by Axel Hefer, trivago's CEO and Managing Director; and Matthias Tillmann, trivago's CFO and Managing Director. The following discussion, including responses to your questions, reflects management's views as of today, Friday, the 30th of July, 2021 only. trivago does not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as; we expect, we believe, we anticipate or similar statements. Please refer to the Q2 2021 operating and financial review and the Company's other filings with the SEC for information about factors, which could cause trivago's actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in trivago's operating and financial review, which is posted on the Company's IR website at ir.trivago.com. You are encouraged to periodically visit trivago's Investor Relations site for important content. Given the drastic and unprecedented impact of the COVID-19 pandemic on our operating results in 2020, management believes that comparisons of 2021 results against those for the comparable period of 2019 allow for a better understanding of the progress of our recovery from the pandemic. Comparable 2020 results are included in our appendix for our presentation as well as in our financial and operating review, filed as Exhibit 99.1 to the current report on Form 6-K filed on the 29th of July 2021. With that, let me turn the call over to Axel. Please go ahead, sir.

Thank you everyone for joining us today for our Q2 2021 earnings call. I hope everyone is enjoying the summer and getting to travel a bit. After month of lockdown and almost full isolation at home, our teams have been very relieved when our life opened up and travel restarted. Since then, the sentiment of the company has improved a lot. The travel market has returned to some extent, and colleagues and family members have reunited. More recently, we have started to offer on campus vaccination to our staff want one to allow us to move towards our hybrid setup by end of the quarter. We are happy to take note that all the hard work that we have put into our product and marketing initiatives has shown positive results. In the UK, we have launched a new version of our local travel product offering inspiration for weekend activities. Our alternative revenue streams have gained momentum, and a significant number of new customers have been signed up. Our collaborative approach with our advertisers has facilitated a rapid recovery of the auction across multiple markets. While we are enjoying this return to travel, we also very realistic with the current situation. Vaccination levels are still too low in many countries and the fall is coming. We know that cases will increase again, new variants will emerge and restrictions might be reimposed to some extent. In either case, we are staying optimistic in this difficult time and see through the ups and downs. A sustainable recovery has started and we will continue to make progress. With that, I now hand over to Matthias.

Thank you, Axel, and good morning everyone. The positive trend in April that we highlighted during our Q1 call continued throughout the second quarter and in particular in our segment developed Europe we have seen a lot of pent up demand. Globally, our qualified refers improved to 56% of 2019 levels compared to 33% in the first quarter, and our refer revenue improved from 18% of 2019 levels in the first quarter to 42% in the second quarter. Our net loss also improved sequentially to €3.3 million compared to a net loss of €6.7 million in the first quarter. While our adjusted EBITDA turn positive to €4.3 million from minus €4.8 million in the first quarter, exceeding our guidance. In most of our core markets in Europe travel demand started to recover in April. Qualified referrals in that segment were around 35% of 2019 levels in April, which improved to around 65% for the full quarter. In some European markets qualified referrals even exceeded 2019 levels at the end of the quarter, for example, in Germany. With the increase in qualified referrals, we have seen a gradual improvement in our revenue per qualified referral as well. In particular in America and develop Europe, advertisers started to increase their bids following the increase in referrals and bookings. In our segment Rest of World, in particular in APAC, many markets still had to deal with shutdowns and travel restrictions. Hence, the recovery there was much more muted. Our return on advertising spend or ROAS continue to improve year over 2-year, however, less than in the first quarter as we ramped up our investments in brand marketing channels in many markets, in addition to performance market internals. Excluding advertising expenses or operational expenses decreased 10% compared to the second quarter last year. The…

[Operator instructions]. And the first question comes from the line of Naved Khan from Truist securities. Please ask your question. Your line is now open.

Yeah, hi. Thanks a lot. I have a quick question on just the outlook for August and September versus June and July, you said you expect the demand to be not as strong as it was in June and July. I'm just wondering if this drops in traffic you're seeing, if the restriction comes up. Is that resurfacing as a demand for like a local booking or is the demand that simply disappears? How much of this is you being cautious versus a real risk maybe in terms of booking trends for the next two months?

So Naved, thanks a lot. So first of all, everything we say regarding future months and second half is obviously based on what we believe and see as of today, I think it's reasonable. But there is as I said, a lot of uncertainty in any predictions that we make as there continues to be high volatility. So meaning, all these changes, particularly in Europe that are still happening have an impact. And we do see in some cases that whenever countries are put on restricted lists or whatever that, travel demand is dropping, and you cannot necessarily see an immediate shift right away, meaning people then book domestic instead. I think for that, it's too much noise and to say that, but overall, we do see a decrease when that happens, as I said. So, I mean, as we have seen new travel restrictions on short notice, that increases, obviously the uncertainty for travelers. And let me give you one specific example. As I mentioned before, Germany announced last week that we were - that when you're coming back from Spain or the Netherlands that you have to quarantined for 10 days, and you can shorten that actually to five days, when you're negatively tested after five days. But when they announced that we saw traffic in Spain dropping on our platform, which obviously was also a result of the increase in new effects in that country. So as we are approaching the end of summer travel period, we expect that the seasonal decline in traffic on our platform will be more pronounced than what we have seen historically, pre-pandemic, as people have to go through more hassle to do the extra travel. And we believe there will be less inclined to do so after the peak summer travel season.

Understood, and maybe just a follow-up on some of the commentary provided in the past. So length of stay, are you continuing to see that being longer. And also, when I look at the QR or the qualified referral volume for Europe and compare that to where it was in the Americas, it was nicely above. And I'm wondering if that's a reflection of European demand now exceeding the Americas or is it the stay allocation of your own ad dollars and that ultimately translating into these QR volumes?

Sure. Let me start with your second question first. I think it's a combination. So we have clearly seen that the U.S. started first to recover. We mentioned that before. And that obviously is our biggest markets in the segment Americas. And that was already the case in March, whereas beginning of April, pretty much all countries in Europe are still in lockdown. And then with more and more countries in Europe opening up and lifting restrictions and the outlook for summer became more positive, we have seen a steep increase in travel demand and activity. And so then going into May, we saw that because of that increase in demand, Europe started to overtake Americas for us and our platform as a segment. And obviously we had plans already before to invest into the recovery as we also mentioned before, and with seeing that positive trend, we were more confident to do it and to do it at the more aggressive levels maybe that we anticipated and then you reinforce what you see, and particularly on the brand side, where we invested according to our plan. So yeah, I will say it's a combination, but first driven by the pickup in demand that we saw in most European markets. On your second question, length of stay, so it has slightly increased in our segments Americas and developed Europe compared to 2019. Average booking value has also increased in both segments, but not as much. But I think there are a lot of mixed effects and most notably destination and trip type shifts, and it's hard to predict how this could look like in a post-pandemic world. In the end, I believe supply and pricing will be relevant, once travel has normalized and there, I do not expect Tectonic [ph] shares. It will be interesting to see how people change their travel behavior outside the peak summer travel season. I mean, that's something to be seen. And I don't know a topic that has come up with more flexible work conditions, it could be that people travel more frequently and combine it with work. But again, I think it's too early to see a meaningful shift there yet.

.:

Thanks Naved.

Thank you. And the next question comes from the line of Brian Fitzgerald from Wells Fargo. Please ask your question, your line is now open.

Hey, guys want to ask a little bit about something on local activities, because they're kind of still rolling and kind of COVID operations and with the release in the new UK version. Wonder if you could talk a little bit about how you may be able to get consumers to come back to trivago after the initial lodging booking either when they are closer to travel dates or in destination or choosing activities while there. And then what level of cross seller penetration are you seeing now in terms of activities? And where do you want that to get to longer term?

Thanks for the question. So I think first of all, it's important to say that we are and we've just launched, so we have limited insight. But strategically and also from a user value proposition, we think the product is very exciting, because it allows you A, in the local travel product, to have more reasons to travel. So what are the reasons to travel statically to go to a certain place, but then also looking forward? What are time sensitive reasons to travel, what are certain concerts, exhibitions, et cetera, at a certain destination that are very good reasons to travel to a certain place at a certain point in time. And with our local travel product, we want to inspire travel, as well as generate the booking. And so that's why we think it's a very important feature. But you can also use the same feature without even traveling from a user value proposition but also for us, the big benefit is obviously that you can use the product a lot more often, it is basically relevant every week. To be fair, I mean, we don't have a complete catalogue of activities yet it is a starting point and we will continuously add activities and make it more and more relevant. Therefore, I think it's a bit too early to tell what exactly the cross usage will be but we think it's highly relevant and it's very useful to our users.

Got it. And then maybe one follow-up, if I could. It's just the kind of farewell ROAS as you're seeing on that two year stack, wondering if you could share your expectations for how that might trend as the environment normalizes in the back half of the year, are you seeing any structural changes in the market that would benefit your ROAS on a sustainable basis? Any changes to Google, stuff they've done the Meta search, anything that is going to give you kind of beneficial ROAS tailwinds on a sustainable basis.

Yes, sure. So, first of all, we said that we will invest into the recovery by ramping up TV and online video and other brand campaigns and that is what we started in May and continued in June and July. And this naturally leads to lower our ROAS compared to periods where you significantly reduce your brand marketing investment. Going into Q4 this year, we will balance our marketing spend mix again as we have always done historically, with a lower share of brand spend. On the performance marketing side, our approach has not really changed. So we continue to invest at long-term sustainable ROI targets. And hence overall we expect ROAS to sequentially decline in Q3 versus Q2, and then to increase again in Q4. So what that means for next year, I mean, on the brand marketing side, we usually sit together after the summer season and reflect on the results and plan the next year. So like now a days, it is very interesting to run different campaigns in many markets, we get a ton of learnings. And we will incorporate that into our brand marketing strategy for next year. But again, it's too early to tell if anything, what I can say already is that we got some nice learnings in online video in particular in the U.S. So that could potentially be a play a bigger role in our mix. And on the performance marketing side, I think again there we don't see big changes. We increased ROI targets already before the pandemic and have seen what results and so far, I'm very happy with how we managed through the crisis and the teams have really done an excellent job there. So, I mean, I wouldn't foresee any big changes at this point.

Got it. Thanks Axel, thanks Matthias.

Thank you.

Thank you. And the next question comes from the line of Shyam Patel from SIG. Please ask your question, your line is now open.

Hi, guys, it's Ryan on for Shyam. Just two quick ones for me. First on [indiscernible] on booking windows. Are booking windows changing and markets were travelers coming back is that sort of an indicator of demand or leading or lag indicator? And then secondly, on brand marketing. Use [indiscernible] a relatively temporary pickup in 3Q. Are you planning on sort of elevating that and hoping to capture demand as it continues to come back throughout the next several quarters? Thanks.

Sure. So on booking windows, they have not changed significantly in Americas and Europe going into the peak summer season on our platform at least. And rest of the world on the other hand, the booking window has shortened quite a bit, but I think that is more a result of the overall drop in volumes and travel restriction and all compared to 2019 that we have seen in that segment. On the brand marketing side, I mean for the rest of the as I said, we are in the middle of the peak season right now. So that is when we invest, we started to gradually increase our investment as of early June and will continue throughout the third quarter. And then normally what we do when we go into autumn and winter, we reduce and we will do that this year as well. And there are two main reasons for that. One is that overall volumes normally go down. And as I said before, it could be given the restrictions and uncertainty that this happens even to a larger extent than what we have seen historically. And then secondly, for our largest brand channel TV, normally going into October, November, December, pricing gets more expensive as for the Christmas season, a lot of retailer use TV and driving up prices, and that are the time when for us the seasonal demand is at the low. So there wouldn't foresee any change and then what we will do getting out of coming out of the year and going into January next year, but something we will discuss in the next couple of weeks and months.

Great, thanks.

Thank you.

Thank you. And the next question comes from the line of James Lee from Mizuho. Please ask your question, your line is now open.

Great. Thanks for taking my questions. On the shareholder letter, you guys talk about mix shift towards hotels versus alternative accommodation. Can you maybe elaborate or even quantify that mix shift, and which regions are you seeing the most impact? And also secondly, big picture question. As you kind of evaluate your product portfolio, which products do you want to double down and which products do you want to rationalize as a part of your long-term goal to transition your business into a more or less content discovery business that drives top of the funnel advertising as they're just relying on transaction advertising? Thanks.

So on your first question on the accommodation mix, last year we've seen a very significant shift towards alternative accommodation. And I think we've talked about it in length. What we are seeing this year is that with the market recovering further, that shift towards alternative accommodation is partially reverting, not to the starting point that we've seen in 2019, but somewhere in between, which also makes sense because hotel capacity can be added much more quickly. And with the higher level of recovery in many, many markets, the destination makes us as also becoming a bit more normal then pre-pandemic levels. Having said that, we do believe that the longer term trend towards alternative accommodation will continue even after the pandemic, but not to the same extent and as disruptive as it might have seemed in last summer season. On your second question, on our product strategy and product focus. We've been for many, many, many years, a single product company, just hotel price comparison. And we've only relatively speaking recently with alternative accommodation in November 2017 and then with some of the newer products, really, starting last year, added more and more products. And our general believe is that it is important to really serve our customers for various different needs that are all centered around travel rather than just one very specific, which is what we used to do in the past. And by doing that, providing overall a better service and being on top of everybody's mind and more engaged with our users throughout the year. So that doesn't mean that we are strategically moving in a completely different direction. So up funnel more inspiration. It's all about a portfolio of products that serve the various needs of our core users.

Great, thanks.

Thank you. And the next question comes from the line of Jason Bazinet from Citi. Please ask your question, your line is now open.

Thanks. So I have sort of an unusual question. During earlier this year, many buy siders were just very animated about owning any sort of reopening stock. And the thesis was, is that there would be a quarter or two of sort of an overshoot, something that was above sort of the 2019 run rate, just as all this sort of pent up demand got unleashed. And more recently, I've heard from some clients that they're nervous that the demand in some markets might be so strong that the hotels themselves need the OTAs and therefore Meta search less, because the demand is so strong in some markets. Do you think that thesis has any credence or is that just sort of a little bit not consistent with what you're seeing in the real world? Thanks.

That is a very good question. The answer is not that straightforward. The demand patterns are still not even, and also the as last summer, you've got leisure destinations at the beach in the mountains with significantly greater demand than city destinations, big cities. And so, in the leisure destinations, the demand is very strong. Whether that leads overall to a shift in the market dynamics, I would be skeptical whether that were to be true, because it's a very special situation. But I wouldn't rule out that some individual hotels are focusing more on their own efforts, but I don't see a strategic shift in the distribution structure and the market.

Understood. Thank you.

Thank you. And the next question comes from the line of Kevin Kopelman from Cowen. Please ask your question, your line is now open.

Great, thank you so much. Just I had one question. Can you discuss what you're seeing from advertiser intensity as it relates to what you believe they're seeing a downstream conversion? And maybe just talk about how that has compared to before the pandemic and how that's developed? Thanks.

Yeah. So on the auction dynamics, we've seen this quarter, a significant improvement in the overall auction dynamics, really driven by a broadly more optimistic view, about the summer and also obviously, about the potential cancellation risk. So it has really been very broad across all our long year partners. And the result of that has been a significant improvement in the auction. How that would compare to pre-pandemic? That's very difficult to answer to be perfectly honest. So what we can say is that that the trend in the last couple of months has been very positive and there is generally speaking a lot more optimism, in particularly for summer, there's a lot of optimism, but as we've also said, I mean, our view is that there is some risk and autumn and winter coming. And I wouldn't be surprised if some of our advertisers would have a similar view.

And just to add to that, I mean, as you know, Kevin, we have no great visibility on cancellation rates, et cetera, or anything that would impact our advertisers' conversion. But a good proxy for us is looking at our CPC bids in our auction. And unless there's a large shift in conversion, ROI targets of our advertisers or other mix effects, CPC bids are good indication for current and expected cancellation rates. And as I said, we have seen a gradual improvement CPC bids throughout the second quarter, and that is reflected in the RPQR. So the trends I talked about and what you can see from our disclosure, the improvement there is potentially coming or it's potentially also related to that. So just looking at this, I would assume that cancellation rates have come down overall sequentially.

Thanks, Matthias. Thanks, Axel. That's very helpful.

Thanks, Kevin.

Thank you. And the next question comes from the line of Doug Anmuth from JPMorgan. Please ask your question, your line is now open.

Hi, this is Dae Lee, on for Doug. Thanks for taking the questions. I'd like to first one, just talk a bit more about your brand marketing diversification efforts. What benefits are you seeing in these new channels and does this change how you approach TV going forward? And then secondly, you talked about a new B2B backend services that you're piloting with multiple partners, what service are you providing and why did you decide to go down this route?

Thanks Dae. I will take the first question. So I mean, overall, we do not disclose our exact channel mix and what we're doing there. But on a higher level, I mean, brand marketing as we said, in the past, very focused on TV. TV is our largest channel in that segment and we will continue to invest in that. At the same time, we started to not only this year, but last year and the year before started with smaller tests in alternative branded channels, obviously, a big one being online video. And there, we scaled up this year more than then last year. And we talked about that before, the key reason being that when you're in the first phase of the recovery and the full market is not back yet, TV as a mass medium can be quite expensive and then we want to be more targeted, and that you can achieve with online video. And that's what we have done there, obviously other interesting aspects as well like different demographics, different target groups, things you cannot easily do on TV, you can do maybe better on other channels. On the other hand, obviously you have to look at the pricing as well as you have to look at conversion and how that translates and longer term into repeat behavior. That is obviously still something where we need to get more data and need to do more tests. But we are happy with what we are seeing so far.

On your second question. Unlike with our B2C products, we are looking at the market and trying to identify customer needs. And on the B2B side, what we've seen last year is that with a significant drop in volumes there we think that a new opportunity arose. On the one side, a lot of travel companies have seen that their volume dropped quite a bit. And it was increasingly difficult using own infrastructure to provide a good service to their own users by having fresh prices, fresh content, fresh availabilities available, without and prohibitive costs in maintaining the infrastructure. On the other hand, a lot of advertisers were also increasingly struggling with maintaining marketing channels that were becoming too small, because if you drop below a certain volume of data, it is very, very difficult to submit precise bids and bids that are not multi factor random. So we saw that opportunity and thought that we could actually step into this opportunity and provide a service where everybody is winning. The travel websites that get much more accurate prices and much fresher availabilities, and rates, the advertisers by not having to manage multiple platforms that are sub scale, but basically leveraging our scale and our infrastructure and our connectivity and us by providing a service that is an alternative revenue stream. That it's more diversified from our core business and follow the very different logic. So we started to work on that opportunity last year and we now have the first partners' life and testing. So it's like with a lot of the other things that we talked about, it's very exciting, we are very, very excited about it. But it's a bit too early to tell, and to estimate how big and how successful this new product line could be. But it is obviously a great moment to have a product life and to get real customer and real world feedback.

Got it. Thanks, Matthias. Thanks, Axel.

Thanks, Lee.

Thank you. And our next question comes from the line of Tom White from Davidson. Please ask your question, your line is now open.

Great, thank you for taking my questions. I guess first off, maybe a follow up to the question about auction dynamics and cancellation rates. I remember a couple quarters ago, you guys talked about exploring kind of a cost per acquisition product, that factored in cancellation and I was curious, whether that's still a focus, and whether that's giving you any insight into kind of trends and cancellation rates? And then second, the different products that you guys have talked about over the last several months, in terms of trying to diversify the business a bit. So sponsored listings display, tourism activities, maybe this new B2B thing, any sense like what percentage of revenues that is sort of in total, those might come to represent in 12 18 24 months? Thank you.

Sure, on the auction dynamics, we do offer a gross CPA automated bidding feature to all of our partners that is not factoring cancellations. But is basically invoicing not by click, but by gross bookings. And we do have a product for individual hotels, that is actually invoicing on a net CPA basis, so which was recently launched and is currently, basically in testing in terms of scale. So, again, it's a bit too early to tell what the real impact is of the net CPA product for individual hotels. The gross CPA product for our larger partners is very popular with in particularly smaller partners. Whereas that the big partners have their own algorithms and their own bidding teams and prefers to bid on their own, but for a lot of our medium sized and smaller partners, it's a great service, and then the feedback is very positive. On the alternative revenue streams. It is, - I mean we're making good progress. So we are we are signing up more and more partners, as I also mentioned in my opening remarks, but it's in your business there we have to be honest to ourselves and we have a very, very sizeable a core business. So it will take some time for these new activities to make up a significant share of our overall revenue. But we're still excited about it and think that it is important for us to diversify way from our core revenue streams and be less dependent on the pure CPC auction.

Thank you. And the next question comes from the line of Brian Nowak from Morgan Stanley. Please ask your question, your line is now open.

Hi, this is Alex Wong, on for Brian. Thanks for taking my questions. Can you just talk on the alternative revenue stream? Alex, you mentioned [Technical difficulty].

So, you're breaking up there, we can't - Alex you're breaking up there, we can barely hear you. I mean, I guess you're asking about the new products display ads and sponsored listings, but I couldn't understand your question.

So, let me - thank you. You are asking about the outlook for the next 12 months, so let me try to answer that question. So we are - in a way there are two directions and two levers. One is to have new advertisement products for existing partners, onboard the partners to the products, get them up the learning curve, experiment with the products and calibrate them. That is what we are doing right now and we see that the benefit is complementary to our existing core product because the product allows some messaging on the website, which our core product doesn't that's purely transactional. But the more exciting part and that's, I think, more related to what you're after, what is the outlook, we are also onboarding, completely new partners that are not in the core travel segment, but more travel related and we've on boarded a significant number of DMOs. And that is quite exciting, because they are going more in cycles where you onboard and secure a budget that is then used over the next month and then in some cases even over the next year. And that is a segment where in the past we have not managed to make significant inroads and right now we actually have signed up a significant number of DMOs already. So that's very exciting and promising. Again, in the current market environment, it is almost impossible to forecast what will happen in the next 12 months because it's not only the volume complexity, but also the mix in destinations travel restrictions that can have a huge impact on certain campaigns by our partners and then not each one of our partner is benefiting and also hit by search and travel and by restriction and travel to the same extent. So we're taking a pragmatic approach there. We are working on these initiatives and trying to get better every day and some of them will have a greater impact of it sooner and some of it later. But I think that's all we can do in a highly volatile environment.

Thank you. [Operator instructions]. There are no further questions at this point. Let me handover to Matthias, for closing remarks.

Many thanks for taking the time to participate in today's earnings call. As we look forward, I want to reiterate how proud I am of what our company and our employees have achieved in this unprecedented time. Travel is an essential part of our life. It's not going away, but it will look different than what we have been used to. We are thinking about our business beyond COVID and remained focused on building a product that will be part of our users' daily life. We will emerge from this as a stronger company agile and will adapt for the long run. Before I close, I would like to say a few words about the catastrophic floods that have hit us in the past few weeks. My hometown has been completely flooded, many villages and whole regions have been wiped out. Despite all the tragedy and the suffering from this disaster, we should also see this as a warning sign. What our future will look like if we individually as businesses and as societies don't change our behavior. I wish you a safe and enjoyable rest of the summer and look forward to speaking to you next quarter.

Thank you. This concludes today's conference call. Thank you for participating, you may all disconnect.