Good day, ladies and gentlemen and thank you for standing by and welcome to the trivago Q1 Earnings Call 2022. At this time, all participants are in listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] I must advise you that the call is being recorded today Wednesday the 4 of May 2022. 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 Wednesday May the 4, 2022 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 Q1 2022 operating and financial review and the company's other filings with the SEC for the 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. Finally, unless otherwise stated, all comparisons on this call will be against results for the comparable period of 2021. With that, let me turn the call over to Axel.

Thank you, everyone for joining us for our Q1 2022 earnings call today. We're living in turbulent times and the escalation of the conflict in Ukraine and sufferings of millions of people in the past few months have shocked all of us. Our teams have supported refugees whenever possible and we are all hoping for the conflict to end soon. As a business, we experienced a temporary drop in travel activity across many European countries at the end of February. But since then we have seen a continuation of the strong improvement in travel sentiment and activity. We continue to expect a very strong summer and believe that autumn and winter will see significantly higher travel activity than the last two years. Two years of pandemic and lockdowns have led to significant staffing shortages in the industry, contributing to rising hotel prices. We believe that the effect of this increase combined with inflation more generally will increase the value of price comparison that we can bring to our users in the months and potentially years to come. We are therefore continuing to focus both our messaging and product development on price comparison, as we believe that our core value proposition is more relevant than ever. Our teams have worked intensively on developing our core product and relevant price features that will be tested and implemented as we head into the summer season. As we have historically relied very heavily on brand marketing, we believe that the market will be ready this year to ramp up our brand marketing spending again across many markets. After very limited branding activities in the last two years, we are confident that we will be able to rebuild our branded baseline over the years to come. We believe that our investment into our brand will be supported by an increasing relevance of metasearch in the future. Another potential tailwind that we are anticipating over the next few years is the increasing regulation of mega platforms and the resulting improvement in free and innovation-based competition. The Digital Markets Act in the European Union is setting new standards and clearly states that self-preferencing of own products will be restricted, particularly for accommodation metasearches, we believe that this will make it much more difficult for search engines to steer traffic into their own metasearch products. To summarize, we believe, that we are in a strong position to meet travelers' increasing need to compare prices and find great deals this summer and beyond -- sorry and beyond. And that competitive dynamics will be in favor of pure-play, meta-players.

Thank you, Axel and good morning everyone. Before I discuss our numbers in detail and talk about trends, I would like to highlight that we are very happy with our financial performance in our underlying business. In the first quarter we achieved an adjusted EBITDA of €21.1 million, which is the highest since the start of the pandemic and only slightly below the €21.4 million in the comparable period in 2019. On April 22nd, the Australian Federal Court issued a judgment in the proceeding brought by the Australian Competition and Consumer Commission against us, ordering us to pay a penalty of AUD44.7 million. We had recorded a provision of AUD15 million, which we had estimated for the probable and estimable loss. The additional accrual in excess of previously established provisions had a negative impact of €21.1 million on our operating expenses leading to a net loss of €10.7 million in the first quarter. While we are disappointed with the outcome of the judgment, we are very encouraged by the current trends in our underlying business, even though you cannot see that in our net income in the first quarter for the reasons just mentioned. With that, out of the way, let me give you a bit more color on some of the trends in the different regions. Macro trends continue to have a significant impact on the travel recovery in the first quarter. In particular in Europe, the spread of Omicron and the war in Ukraine impacted traffic volumes on our platforms. However, as many countries started to lift travel related and other restrictions during the quarter, our qualified results relative to 2019 levels reached 53% on a global level. In our segment Developed Europe, we saw steady improvement every week since the beginning of the year, when qualified referrals…

Thank you. [Operator Instructions] And the first question comes from the line of Naved Khan from Truist. Please go ahead.

Yes. Hi. Thanks a lot. A couple of questions, so maybe just on the outlook for this year, I know you're not guiding for a specific number, but should we expect EBITDA to be positive for the year given that you're going to be spending more into brand spending which you have not done in the last few years or you're not going to be spending at the same level you're going to be spending at a higher level? The other question I had is just on the performance ad efficiency that you called out in your shareholder letter and versus 2019, I think you said you saw more efficiencies what's the driver of that?

Yeah. Sure Naved. So on the outlook of EBITDA, yes; we do not give specific guidance. I mean you have seen the strong EBITDA in Q1 which was similar to Q4. When you think about 2022, I would say, our historical seasonality is a good starting point. And there you have seen that normally EBITDA went down in the second and third quarter as we -- in the second quarter start to invest prior to the summer season. And then, during Q3, the biggest quarter for us and everybody in the industry we continue to push in particular on the brand marketing side and then cut back in Q4. So that will not change. So our approach to that will not change. What I mentioned is, in Q1, if you just look at the EBITDA it looks better than what you have seen historically relative to other quarters, because we did not invest significantly into brand, given at the start of the year we had the impact from Omnicom in most European countries. Then mid-quarter we had the impact of the war in Europe. So that's why we did not push our marketing activities to levels that we had anticipated before. So now, everything that I said on trends in April and what we expect for the summer, we've seen an improvement in Europe we are back to pre-conflict levels and we saw a continuous improvement in April. And now, with the summer in front of us we plan to change that. In May, we will start with the first TV campaign in selective markets, and then plan to ramp-up our investment significantly. So that will push down gross and EBITDA compared to Q1 in Q2 and Q3 and you won't see the positive effect of that brand campaign immediately…

Got it. And a quick clarification if I may. So you – I think you said, you reached pre-pandemic levels subsequently in Europe after we saw the dip. So the improvement you're seeing is without the new ad campaigns and without the benefit of the campaign. So is it fair to assume that your traffic would actually be exceeding those levels when you have your campaigns out for the peak summer season?

So what I said is in Developed Europe that, beginning of April, we reached pre-conflict levels again. So we saw an improvement at the beginning of the year as countries in Europe were lifting restrictions. So week by week relative to 2019 levels, our qualified referrals were improving. And then we saw the dip from the impact of the war. And then it took a couple of weeks, until we saw an improvement again. And yes at the beginning of the second quarter, we basically recovered from that dip. And then I gave you a data point in April. So for the full month we were at 70% of 2019 levels. So that was not driven by brand marketing spend. That is correct. So now that we are ramping up, I would expect that this will further drive volumes to our platforms. How much to be seen to be honest. But yes, we expect obviously a further improvement from our marketing activities.

Understood. Thank you.

Thank you. Next question comes from the line of Shyam Patil from Susquehanna. Please go ahead.

Hi, guys. It's Ryan on for Shyam. So you guys talked about inflation and rising hotel prices driving more customers to Meta for price comparison. So just generally do you view that as a tailwind for your business because of pull that dynamic, or could it be a bit of a headwind as well because it might reduce demand at prices become too expensive?

Yes, sure. So it is a very good question. And the way we are looking at it and we've also done quite a bit of market research there. So our view is that general inflation even outside of travel is leading to more cost consciousness overall. So because you can feel that prices are going up pretty much in your daily life. And cost consciousness is something that is very, very positive for us. And we've also seen it in -- in previous recessions if people are more price conscious and then obviously the value that we contribute to the search process is going up. So that we see as a big opportunity. And that as I said that's also the focus of our brand communication and also for our product development. On the volume side I think you had in principal right if there is high inflation if the budgets are getting tighter then obviously people cannot spend as much as they've done before. Having said that, we are right now coming out of pandemic. And there is still a big backlog in a way of experiences and spending time with friends and spending time with families and in really doing the trip that you wanted to do now for a few years. So we don't think that it would have an impact on the volumes for this year. For the years to come and the trajectory I guess that's a bit too early to tell, but we think that overall it is in our favor and it will be in our favor for quite a while.

Great. Thanks for the color.

Thank you. The next question comes from the line of Doug Anmuth from JPMorgan. Please go ahead.

Hi. This is Dae Lee on for Doug. Thanks for taking the questions. I have two. So a number of large OTAs have talked about increasing spend into the recovery. I was curious if you're seeing this increased activity on your platform and how the bidding intensity looks like relative to pre-pandemic levels right now? And then secondly, could you elaborate on the -- on what kind of -- or what level of marketing efficiency you're targeting in 2Q or 2022 as you significantly ramp marketing investments if there's a kind of OI level that you guys are targeting?

Yes. Hey, Dae. Sure. So on your first question so it's something we talked about last quarter as well. We have seen that the competition in our auction increased as large advertisers but other advertisers as well became more active and increased their bids, auction dynamics from our perspective are very healthy. If we compare to 2019, we are roughly on similar levels. So -- and that was very different at the beginning of the pandemic. We talked about that. You could see that in our revenue per qualified referral, they dropped quite significantly because many appetites were cutting back and then we're slow to recover or to come back to the auction. And that has changed. And we -- in Q1, when I look at RPQR, I mentioned -- or you can see that it's close to 2019 levels again. Looking at April, we approached 2019 levels again as well. And yes, part of that is because our monetization levels, which is a result of the auction is back to those levels. So on your second question, in terms of targeting, we do have certain targets for our performance channels. We executed against that in a disciplined way for the last couple of quarters. It's not a big side though. We obviously, always look at the elasticity we look at the traffic quality. We -- and based on that we change and make decisions. But obviously, we want to invest at profitable levels. With regards to brand marketing, it's slightly different. So there obviously, the first dollar you invest is at sub-100 ore. So it's paying back over time. And we have our models where we estimate the payback period, how long that is. It's different by market. And based on that, we determine the short-term rows. So let's say, in campaign for the period on the campaign, what we like to see in terms of returns so that we think it's long-term profitable for us. So there we have targets. And then on a global level, we don't have a specific target but we want to rebuild our brand baseline as I said. And as long as we see opportunities, we are happy to invest and we'll push forward. Q – Dae Lee: Got it. Thank you, Matthias.

Thanks, Dae.

Thank you. There are no more questions at this time. I would like to hand back over to the speakers.

Yes. Thank you for taking the time to participate in today's earnings call. We believe that in the months to come, we will see strong demand for accommodation and an increasing need to compare prices, to save money and to find good alternatives. We're excited about this outlook and are very much looking forward to the summer. Take care and see you next quarter.

That does conclude our conference for today. Thank you for participating. You may all disconnect.