Good day, ladies and gentlemen. Thank you for standing by and welcome to the trivago's Q3 Earnings Call 2024. All lines are being place on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. I must advise you that, the call is being recorded today, Wednesday, the 6th of November 2024. We are pleased to be joined on the call today by Johannes Thomas, trivago's CEO and Managing Director; and Robin Harries, trivago's CFO and Managing Director. The following discussion, including responses to your question reflects management views as of today, Wednesday, November 6th, 2024, 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 Q3, 2024 operating and financial review and trivago'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 today in trivago's operating and financial review, which is posted under our Investor Relations website at ir.trivago.com. You are encouraged to periodically visit trivago's Investor Relations website for important content. Finally, unless otherwise stated, our comparison on this call be against results for the comparable period of 2023. With that, let me turn the call over to Johannes. Please go ahead.

Good morning, everyone. Thank you for joining our Q3 2024 earnings call. In the third quarter of 2024, we delivered solid brand revenue growth in our Developed Europe and Rest of the World segments, maintaining their positive trajectory. While the married-class segment faced temporary market headwinds, including softer demand earlier in the quarter and reduced TV reach due to shifted viewership from major sports and political events. In Americas, we demonstrated our agility by adjusting our brand investments accordingly. This technical response contributed to a better-than-expected adjusted EBITDA. Google ad format changes continue to be a headwind, which we expect to gradually normalize by Q1 2025. As we move into Q4, we are seeing a return to typical seasonality patterns and are excited to be approaching our turning point. We are well-positioned for growth this quarter and aim for sustainable growth next year. Our disciplined approach keeps us on track to achieve breakeven on a full-year basis in 2024. We remain confident in our ability to achieve double-digits growth in the medium-term. Robin will share further insights on Q3 and our future expectations. Let me first give you an update on our strategic priorities. Our first strategic priority is branded growth. We strive to be top of mind for travelers booking hotels. We are encouraged by the positive returns on our brand marketing investments in 2024 and committed to advancing this trajectory. To further increase the effectiveness of our investments, we have secured a partnership with Jurgen Klopp as a face of our upcoming marketing campaign. As a globally recognized soccer coach celebrated for his remarkable leadership, Klopp guided Liverpool to triumph in both the Premier League and the Champions League. We know that the normal one among a cycle of soccer legends, Klopp is celebrated worldwide for smart personality…

Thank you, Johannes, and good morning, everyone. Q3 was an important quarter for us. We saw better-than-expected revenue growth in our Rest of World segment and a notable improvement in Developed Europe. In the Americas, temporarily unfavorable market conditions impacted our revenue, and we made a tactical decision to adjust our marketing spend accordingly. We have observed a positive start into our fourth quarter. So far, we see revenue growth in Q4 compared to prior year. We believe that after about one-and-a-half year of challenges, we are on the verge of a sustainable turnaround and are confident that we can return to growth in Q4. This turning point could represent a major milestone in our journey to restore trivago's position in the market. As of the end of Q3 2024, we had EUR108 million in cash and had a net working capital of around EUR140 million. Our current market cap is only roughly as high as our cash position, highlighting what we see as a tremendous opportunity in trivago. We have a strong team of over 600 people. We see that, our product is stronger than ever, and the trivago brand remains one of the most recognized global travel brands in a huge and growing market. We are financially healthy, and we believe that, we will be able to outperform the market in the mid-term. We are optimistic about the potential for our market cap to reflect our intrinsic value as our performance begins to demonstrate sustainable growth. Our focus on branded revenue growth continues to be a fruit. Year-over-year, we have seen positive developments here, which remains our top priority. Additionally, our efforts to enhance booking conversions and lead quality are making us an increasingly attractive marketing channel for our partners. Let's now delve into our Q3 results and…

Thank you. Your next question comes from Naved Khan with B. Riley Securities. Please go ahead.

Great. Thank you, very much and good morning and good afternoon, depending on where you are. My first question is just on the return to positive growth in the fourth quarter. If I just look at the different regions, should we expect Americas to turn positive? I understand there were some transitory issues in the third quarter. Just maybe talk about that. And even Europe, in Europe, we're seeing pretty nice significant improvement sequentially. Should we also see Europe to be positive? Just give us a little bit color there. The second question I have is, just a little bit of commentary around sources in Rest of the World that not Google, but some other sources that you that kind of are helping to drive traffic. Can you just give us a better sense of what kind of marketing channels these might be? Are they social marketing channels or something else? Thank you.

Hi, Naved. This is Robin. Thanks for your questions. Regarding Q4, so far, we see growth in this quarter, which is encouraging. We see that Americas is back as positive. And we see Rest of World is positive. We see improvements in Developed Europe, still a little bit negative, but overall, we're encouraging fourth quarter so far with positive growth. Regarding Rest of World performance marketing, so Google still a headwind, still negative compared to previous year, prior quarter, so the quarter prior year. And the non-Google performance marketing is positive. So that overall performance marketing is positive. And non-Google marketing, Japan is an important market for us and there Yahoo! is pretty strong. And then of course, we also invest into social channels, but yes, that's it.

Your next question comes from the line of Doug Anmuth with JPMorgan. Please go ahead.

Great. This is Tay on for Doug. Thanks for taking the questions. I have two. On the first one, I think you just said U.S. America is back to profit growth. I'm wondering what happened in the quarter that caused the temporary unfavorable market conditions. And the Americas referring to growth means, you've moved beyond that condition? So, if you could explain that a little bit more, at the end of the year, and I have a follow-up.

Yes. Thanks. I will do that. So, we saw in Q3, we saw softer demand at the beginning of Q3, and we saw viewership shift in TV advertising due to major sports event and political events. So, and we are where we performance focus, we look at the numbers and then we saw that it was not as good as expected. And then we reduced our spend, so that we had a better adjusted EBITDA than expected, but this also led to the situation that revenues declined.

Johannes here, so maybe to explain the dynamics a little bit. What you see -- what we mean with viewership shift is if there is more political events, yes, and you had situations of the attacks of Trump, you had EuroCup, you had Copa Americana, you had the Olympics. All of these things basically move viewership from rather normal programs into political viewership, news and so on, as well as sports program. And that shift basically means, where we usually do TV, the effectiveness is lower. We see this rather quickly and we expect this effect to continue and therefore technically adjusted the spend basically.

Got it. That makes sense. And then my follow-up question is, in the prepared remarks, you talked about brand intensity not being close to where you guys were at a pre-pandemic level. So, we're looking ahead and with Jurgen Klopp coming in as your brand ambassador, does this mean, you plan to step-up marketing investments in 4Q and going into 2025 as well?

Yes. So, we are planning to do a similarly impactful campaign that we did this year. So, leaning into brand into that year and the idea with Klopp is and the only reason why we can do it is that, we can leverage AI. We take one celebrity, localize this celebrity into different languages. And so, we haven't done this in the past because if you have, basically very known people in every market, it would become very expensive. We are one person that we bring global that is feasible in terms of investment we make there. And he will basically air in European markets and American markets. We will test them in many different markets and depending on how good it works, we will roll them out to certain markets or not. And we also have done pretesting. So, if we take a testimonial, if we take a speaker, we do very thorough testing whether it resonates with our audience. And we saw very good results with him, one, because he's known. And second, even if people don't know him, he resonates very well with the audience. And that can have a very substantial effect of how efficient our TV spots are and how activating our TV spots are. So, that can -- we see this as an upside for the campaign and increasing the efficiency of our campaign.

Our next question comes from the line of Jeremy Liu from UBS. Please go ahead.

Good morning, everyone. This is Jeremy on for Steven. I have two questions. The first is you called out increased booking conversion across all geos. What drove this and how much more room for improvement do you see here? And second, the commentary regarding 2025 return to growth, what is underpinning that? And are you anticipating an improving backdrop, or are you starting to see more meaningful impact from brand advertising? Thank you.

Yes. Let me take the first one, the conversion. So, we do continuous improvement in the product and we do hundreds of tests every quarter and we see a ton of positive tests and we continue to see it. There is continuous upside on the conversion rate from a product perspective also that, we can carry into the future. And one, the conversion rate is a proxy for we send better quality of leads to our users, but also users have better experience on trivago and there's a high likeliness to come back at a later point or talk about us. And that's why we also think there is a sustaining effect for segment of the users. And then, at the same time, we are more efficient in how we do marketing. And also, if we look at brand marketing that drives conversion rate as well. So, both product improvements as well as brand marketing improvements impacted. Given we want to see branded revenue growth, the share of branded business will increase and that can also further drive conversion rates basically.

And to the second question regarding the outlook, we believe that, we are reaching the turning point in Q4. We expect that there will be growth in '25. Revenue growth will be closer to the 10% than to the 0%, so high single-digits growth. And the drivers are branded revenue growth. So, we see that the things that we do, they bear fruits. We are happy about the development. We see huge room to further scale the investments. And secondly, we have better comps next year, because Q1 this year, there we had experienced heavy Google drop, so the comps are better next year. So, in a nutshell, it's positive brand revenue development and better performance marketing comps.

And you can also look at how much we spent pre-pandemic. It was substantially higher than what we did today in brand. So, there's quite an upside in how much brand investment we can do efficiently, which is making us confident apart from comps becoming better.

[Operator Instructions]. Thank you. Our next question comes from the line of James Lee from Mizuho. Please go ahead.

Hello. This is Jack for James Lee. I have two questions. First, what are you seeing in terms of the average booking value and any particular reasons to call out? And the second question, on the broader travel environment, how would you describe user trends into holiday bookings? And how these trends translate into auction bidding demand at trivago?

Thanks, Jack. Happy to take the question. This is Robin. ABV Q3, we can describe what we see in our internal data. And this can be influenced by marketing mix and product changes and doesn't need to reflect necessarily travel trends. But on our internal data, overall, ABV in Q3 was relatively stable versus prior year. In Americas, ABV was slightly down, driven by a decline in ADRs and stable length of stay. Developed Europe, ABV was slightly up, driven by stable ADRs and high length of stay. And in rest of world, ABV was stable, driven by higher ADRs and lower length of stay. Regarding outlook of Q4 in terms of ABV, from our internal search request for Q4, we see a solid we see solid ABV outlook. In Americas ABV might be slightly down. Our click prices for Q4 are slightly down, and length of stay slightly up. Rest of World ABV might be slightly down. And Developed Europe ABV might be slightly up. Yes, so there we see click prices and length of stay slightly up. In terms of demand for Q4, we think Q4 will be solid, travel trends, locality, yes.

Our next question comes from the line of Ron Josey from Citi. Please go ahead.

Great. Thanks for taking the question. So, I wanted to talk a little bit more about this hotel coverage. I think you mentioned Johannes of extending that to 250,000 of hotels. So just wanted to understand the progress there from where we're coming from, I think 125,000 or so to that 250,000. So, any insights on greater supply and how you plan to do that would be great. And then, just a quick follow-up, we've talked about Google ad format changes impacting results for the better part of a year or so, comps getting easier in the back half or sorry in 2025. Are you seeing things improve sequentially? I'm wondering where things are with these actual format changes. Thank you.

So, on the hotel initiative, I want to highlight this is not a supply topic. This is a content topic. What we have been using is AI in order to identify, what's the hotel really unique about, what are the highlights and things to know about the hotel. So instead of just skimming what you can see in our search results list, we have now in our search results list two, three sentences that summarize the key qualities of the hotel. This is something we have rolled out, I think beginning of the year, and we have further rolled this out, extended it to more languages and platforms and the algorithms behind it have improved. So, you're not seeing as a nice location on all hotels, but really unique things that differentiate hotels. So, that's really a content initiative. And I think this is what excites us here, we are the ones that are on the front line here. And it's really from what we see a great engagement from users to consume content, but you don't need to read tons of reviews. You really get the summary in a nutshell. And that's a great way of differentiating and being as a meta an aggregate of content as well and not just not prices. And then your second question, can you repeat your second question please?

Just if we're seeing improvements in performance marketing, as we lap or get to lapping the Google performance changes?

Yes. We expect that, the comps will normalize. We are embracing the new formats in Google. We have seen the new formats stabilize and have reached an exposure level that's rather stable now. In these new formats, we're expanding our coverage, our participation with an opportunistic mindset. So, we are not trying to regain shares through that format, but rather take opportunities that we see there and we see that gradually our teams become more and more competitive in those formats as well.

And just real quick on the follow-up to the content side and the aggregation or the summaries, just talk to us a little bit about the conversion rates as a result, given it's been in market for the better part of this year? Thank you.

So, we have -- overall, it's accumulation of many tests we are doing that have moved conversion rate substantially over the whole year. We gradually, but substantially increased conversion rate over the year. And this has been one of the initiatives that we call out, because we see relevant conversion improvements through this, which is an indicator for we help users to take better decisions basically. So, this is one specific activity that drove conversion, and then there are others as well that are happening on a continuous basis.

Our final question comes from the line of Tom White from D. A. Davidson. Please go ahead.

Great. Thanks for taking my questions. Just a couple on the branded channel commentary. There's a few different things, I guess, that go into that. Could you maybe just maybe sort of rank, which of the various kind of drivers of that you think is driving kind of the most success? Is it some of the investments in kind of app downloads? Is it SEO? And then, you've made reference a couple of times to kind of the upside in terms of how much you can invest like relative to where brand spend was, this branded channel spend was kind of pre-pandemic. Can you just sort of remind us like what's the dollar amount of that spend or percentage of marketing spend that was pre-pandemic?

Yes. This is Robin. Brand marketing -- we do brand marketing in several channels. So, there is TV advertising, there is connected TV, there is YouTube. We also do social campaigns. We don't disclose a breakout of it. But we are testing all. Yes, so overall, the brand marketing investment is just a small portion of what it was in pre-COVID level. And we started in the end of last year, we started in around 20 markets. Then, we tested, we scaled investments in some markets. We tested, we started new markets. So, in the past, we did TV advertising, for example, in 50 countries at the same time. So, at the moment, we are just doing TV advertising in a little bit more than 20 countries. And in those countries, there are still room to further scale investments. It's several channels where we can scale investments. We test a lot. And yes, of course, besides the media buying itself, it's also the spots where we see opportunities to improve the spots. That's why we did the deal with Jurgen Klopp. We saw quite good results and the TV spot or the creative for all your marketing campaigns there are super important. They can really uplift campaigns. Looking at all our opportunities there and the amount of investments or how much we can scale the investments, we are quite confident that we have enough room to grow for the next couple of years.

Okay. And just a quick follow-up on...

You can look at pre-pandemic marketing investments. They are public. We are not breaking them out, but that gives you a feeling of how much room there is. As well -- so in markets, we optimize across channels. And we are -- in markets where we are already investing, we are investing across different TV channels, shows. We are investing into between markets. So, if Americas doesn't work for us, we take money and invest it in other markets, as an example. And then adding new markets is something we are also exploring.

Okay. That's very helpful. Thanks. And just -- I just had a quick follow-up on the answer to the 2025 debt. Did I hear you correctly that kind of the hope of the target is closer to 10 than kind of low single-digits? Thank you.

Yes, yes. It's closer, as said, it's closer to 10 than to zero.

Thank you. That concludes our Q&A session. I would now like to turn the call over back to Johannes Thomas for final closing comments.

We greatly appreciate your questions and continued interest. I want to reiterate our confidence in the path ahead. Our team remains committed to delivering value to our users, partners and shareholders. We are excited about the opportunities in the coming quarters and look forward to updating you on our progress. Thank you again for joining us and have a great day.

This concludes today's conference call. You may now disconnect.