Good day, ladies and gentlemen. Thank you for standing by, and welcome to the trivago Q1 Earnings Call 2024. I must advise you that the call is being recorded today, Wednesday, the 1st of May 2024. We are pleased to be joined on the call today by Johannes Thomas, trivago's CEO Managing Director; and Robin Harries, trivago's CFO and Managing Director, temporarily designated by trivago's Supervisory Board, pending shareholders' confirmation. The following discussion includes responses to your questions reflecting management's views as of today, Wednesday, May 1, 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 Q1 2024 operating and financial review and trivago's other filings with the SEC for information about factors that 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 trivago's 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, all comparisons on this call will be against results for the comparable period of 2023. With that, let me turn the call over to Johannes.

Good morning, everyone. Thank you for joining our Q1 2024 earnings call. To begin, I want to reflect on the journey we've embarked on last year. In May 2023, the new leadership team and I took the helm. In the quarter, when we arrived at trivago, we encountered a business that was declining at a double-digit pace year-over-year. We experienced the aftermath of several years of rather low brand investment while simultaneously dealing with the substantial changes Google began making to their search results and ad formats. At the same time, we were thrilled to observe the enduring appeal and relevance of our value proposition. Our data indicated an increase in the rate disparity since the pandemic, which has increased the value of price comparison. In addition, our research shows that trivago retains a significant global footprint as one of the most recognized global travel brands. Notably, we saw the company's highly capable team and unique culture as a competitive edge in a rapidly changing environment being disrupted by technology and innovation. Our belief in these invaluable assets has only grown stronger since then. We are committed to learning and executing at an unrivaled pace. We have stated our intentions to revitalize our brand and improve our core products with the goal of returning to growth in the near future. We are making long-term oriented decisions to increase our branded visitor baseline, which we expect to yield long-term compounding effects. We have been diligently laying the foundation of our plans, and we believe these efforts will bear fruit throughout the remainder of 2024 and beyond. The addition of Robin to our team as of April 1 is a key milestone. Robin's wealth of expertise and experience enhances our collective division. We're delighted to welcome him back to lead our financial organization and help us execute our growth strategy. Now let me provide you an update on our four strategic priorities. Our first strategic priority is branded growth. We are pleased with the results of our latest campaigns, which are tracking well against our expectations. We're already seeing branded traffic growing on the back of this investment, reaffirming our decisions and strategic direction. Our renewed brand marketing team continues to impress us with its ability to drive positive impacts through new TV ads that are being tested in preparation for our summer campaigns. The importance of our brand has grown even further, as Google has become a less relevant and less appealing marketing channel for us. We are opportunistically participating in new ad formats, though we expect the channel to remain volatile and a substantial headwind. Our second strategic priority is to improve our hotel search experience. We are here to help travelers find the ideal hotel. Our new AI-powered hotel highlights feature has been scaled significantly during the last quarter. It's now available in seven languages across 25 markets and expanded to 120,000 hotels. Fully AI-generated, these hotel highlights are now visible in our search results and provide users with distinct aspects to know about hotels. Our tests indicate an increase in user engagement and improved search experience. We will continue to invest in this differentiating feature of our platform. Our third priority is to offer the best deal discovery experience. We aim to help travelers find great deals and get better prices. Our recent consumer survey revealed that 71% of respondents in the U.S. compare prices from different websites to find the best deals. To deliver on the needs of price-savvy travelers, we have increased the visibility of relevant deals on our platform and made our search results more price-sensitive. By providing more savings options to our users, we aim to create more memorable experiences and increase user retention. Our fourth priority is to create value for our advertising partners. An increased share of branded traffic and continuous product improvements have substantially increased our conversion rate and, therefore, the quality of leads we send to our partners. As a result, we believe that trivago's attractiveness as a marketing channel is growing. We expect this to be appreciated by our partners over time. We have also innovated our auction model and further rolled out our second price auction test last quarter. This auction model simplifies bidding for our partners and reduces the economic risk. Based on the positive feedback and test results, we plan to introduce the second price auction in all markets before the summer. To summarize, we are seeing positive impacts from our brand investments. We expect this to continuously increase our branded visitor baseline and improve monetization in the long run. Despite headwinds, we continue to be optimistic for the summer season and our ability to return the business to double-digit top-line growth in the medium term. With that, I want to say thank you to our teams for all your continued hard work and dedication. Now I'd like to hand over to Robin.

Thank you, Johannes. Good morning, everyone, and welcome to our first quarter earnings call. It feels very good to return to trivago after nearly six years. I would like to express my gratitude to our Interim CFO, Kevin Hu, and the entire team for their outstanding work during the transition and onboarding process, as well as to Johannes, Jasmine, and Andrej, who laid the foundation for strategic initiatives over the last couple of months. I can say that I joined a highly energized team that wants to win. My return alongside Johannes, Jasmine, and Andrej underscores our belief in the tremendous opportunity we see to create value for our users, partners, and shareholders. Today, our market cap is below $200 million despite having over €100 million in cash, generating €485 million in revenues, and €54 million in adjusted EBITDA in 2023. Our valuation today is significantly lower than in 2012 when I first joined trivago. We see tremendous upside potential. Trivago still stands as one of the world's foremost travel brands operating across 53 local websites and apps in key global markets. Our product value proposition remains highly relevant; scaling up brand marketing worked well for us in the past. We already see successes from the initial campaign that started at the end of 2023. We believe that our winning formula still works and remain confident in our ability to progress step by step towards renewed growth on the horizon. Now I would like to discuss our performance in Q1. I will start with a review of our results as well as provide an update on our outlook for the remainder of 2024. All comparisons for 2024 are on a year-over-year basis unless otherwise stated. During the first quarter of 2024, we achieved total revenues of €101.4 million, which was a 9% decline compared to the prior year first quarter. The year-over-year decline was of a lower magnitude than what was observed in the past three quarters. The year started with softer bidding dynamics that gradually improved over the course of the quarter to healthier levels in the Americas, whereas Developed Europe and Rest of the World remained below the previous year. Overall, profitability decreased as we incurred higher selling and marketing expenses. We invested in our brand marketing activities globally as part of our strategy shift to long-term growth. Let me share some additional insights into our brand marketing efforts. We saw first successes from our renewed brand marketing campaign that featured our AI-driven creatives that we launched late last year. We observed a total global brand traffic increase during the first quarter of 2024 compared to the same prior year period. We have seen significant branded traffic growth in Developed Europe and Rest of World and mixed results in the Americas. Our North American markets performed much better than Latin American markets. As we see positive branded traffic developments, our total traffic decreased due to higher performance marketing traffic losses as we continue to observe higher levels of competition on Google. During the first quarter, we continued to observe Google ad changes which have made Google a less attractive marketing channel for us. We continue to invest opportunistically in performance marketing channels, though we plan to maintain or selectively increase our profitability targets. We are not planning to compensate for volume losses stemming from performance marketing channels at the cost of long-term oriented brand investments. The overall volume losses in performance marketing channels were partly offset by our brand marketing gains. I would like to next discuss the results of our three reporting segments. Referral revenues declined by 6% in the Americas and by 15% in our Developed Europe segment, while it increased by 8% in our Rest of World segment. We invested across all three segments, with advertising spend increasing by 45% in the Americas, 12% in Developed Europe, and 51% in our Rest of World segment. The increased brand investments made during the quarter resulted in our return on advertising spend (ROAS), our key ratio that compares referral revenue with advertising spend, to decline across all three segments as a result of our marketing campaigns. The declines in our Americas and Developed Europe segments were largely driven by performance marketing volume losses as a result of continued higher levels of competition. In Developed Europe, the losses were further driven by softer bidding dynamics on our platform compared to the same period in 2023. In our Rest of World segment, we continue to see referral revenue growth primarily driven by higher traffic volumes as a result of increased brand investments and better booking conversion, which was partly offset by softer bidding dynamics. Moving on to our operational expenses, we incurred €16.7 million in higher operating expenses, totaling €113 million during the first quarter of 2024. The increase was primarily driven by €19.1 million in higher advertising spend, which was partly offset by €1.4 million in lower share-based compensation costs. Overall, we had a net loss of €8.4 million and an adjusted EBITDA loss of €9.2 million during the first quarter. Looking ahead, the main travel trends remain solid, and we continue to see strong demand for hotels as we head into summer. We have continued to observe improved booking conversion levels on our platform, providing our partners with high quality and better converting traffic. We expect advertisers to react to this over time. We plan to maintain our profitability targets and do not plan to compensate for performance marketing volume losses, as we continue to focus on our brand marketing campaigns to drive long-term growth. We continue to expect revenues year-over-year to decline in the second quarter and to reverse the trend in the second half of the year. We continue to guide our adjusted EBITDA for the full year to be at around breakeven levels. The initial results of our brand marketing campaigns are overall in line with our expectations, and we remain confident that our brand investments will help us to further increase our branded traffic over time to support long-term growth and profitability. With that, let's open the line for questions. Operator, we are now ready to take the first question, please.

Your first question comes from the line of Naved Khan of B. Riley Securities.

A couple of questions from me. Maybe just from the weakness in the performance channel. I mean we have seen some weakness even in the prior quarters. Did any changes related to the implementation of DMA have any additional impact in March? And can you maybe just talk about the travel demand broadly across different regions? Did you see any changes on that front?

Thank you for the question, Naved. This is Johannes. I think in the first quarter, in terms of performance marketing, there was weakness starting the second half of the year already where Google gradually made changes to their search results and tested new ad formats, and that has gradually increased over time in Q1 from what we observed with the visibility of the new ad formats, particularly in Europe. In the U.S., our observation is that PPA and GHA being more visible has increased in Q1, which we think is probably part of the DMA adjustments. So it basically has increased in visibility. We are participating in these formats, though we are very focused on brands. We see opportunistically where we are joining and what makes sense for us. We are seeing not the performance we would appreciate from a conversion perspective, and we also lack optimization levers that would help us optimize these ads effectively. And I think that's the performance marketing perspective. Robin, can you comment on demand?

Yes. Thanks for the question. Regarding demand, we see robust demand; it remains strong. It's rather increasing. So on that side, it looks quite good.

Okay. Great. Maybe just a related follow-up on your answer to the headwinds and performance. So what gives you the confidence that you can see positive growth in the back half, given these headwinds are continuing in the third channel?

We are seeing a strong response from our branded campaigns. Branded campaigns have a compounding effect over time. So it's a matter of doing the right things and being consistent with the brand. This means optimizing markets and optimizing our creatives. We see room for improvement, and whenever we make improvements, we see further impact. So it's a matter of doing this consistently throughout the year, and we see a very good chance to offset losses in performance marketing. We are certainly learning how to adapt and participate in the new ad formats, which we're trying to optimize over time as well.

Your next question comes from the line of Stephen Ju of UBS.

This is Jeremy on the Stephen. I got two questions. First, on brand marketing, can you talk broadly about how the ROAS and the payback period may be different from performance? And then second, as a follow-up on the demand side, the softer bidding activity you're calling out for Europe and Rest of the World, is this largely a consequence of local currency devaluing relative to global, for example, with the yen and making it more expensive for travelers in APAC? Or is there something underlying you're seeing in terms of consumer demand?

Let me comment on the first part regarding ROAS. The difference in performance marketing is that you have a good level of ROAS with the acquisition of users. And that is basically the beauty of performance marketing; you invest quickly and get a return quickly. With brand, it’s just a little bit of a longer horizon that we put on the perspective. But we see short-term impact and we know what those short-term impacts are as proxies for long-term impact. That's where we have a ton of data and good assumptions on how the branded visitor baseline would evolve over time, and that's translating into a long-term return.

Regarding travel trends, what we see across the three segments is that ADRs are slightly down in the segment based on our trivago internal data. We see that length of stay is slightly down in the Americas and Rest of the World, slightly up in Europe. This leads to slightly lower ABVs in the Americas and Rest of the World and stable ABVs in Europe. When we look at the five-star hotels, we see a share of four- to five-star hotels that continues to decline across all three segments. This indicates that people are more price-sensitive. We also see this in the Rest of the World; especially when you look into Japan, we see ADRs going down there as well.

Next question comes from the line of James Lee of Mizuho.

Great. My question is on AI investments. Can you help us understand what you're doing there specifically? Are you developing apps on top of the foundational model? If so, can you give a sense of what you're working with and what use cases you're developing that could differentiate your product versus your peers?

Yes. Thank you for asking the question. I think it's pretty central to our efforts. On one side, there are a ton of things we do internally to improve operations and be more efficient. We create a lot of awareness, and it's on everybody's strategic priority internally to think about it. If you see our TV ads, we mention how we are leveraging AI to localize our ads. In the past, we had a lot of different speakers per market, which was quite expensive, and production took a very long time. Now we use AI to localize our TV ads. This is something you see teams innovating and leveraging AI at the edge of what's actually possible, and that's what we expect from every team in the company. Regarding our product, I've mentioned the AI highlights. You can go to New York and look at the Mandarin Oriental and see snippets like 'unbeatable views' and then we provide context such as 'breathtaking panoramas of Manhattan.' These are not human-generated; they are AI-generated. To be able to do this at scale for 120,000 hotels, we have built the infrastructure. We have tested a range of models and are experimenting with different approaches. We have a solid setup that works for us now, is operational, and effective, and we continue doing that. We're not sharing who we work with, and this changes over time as we don't want to be locked into one model, but continue to run on what we see as having the biggest impact. Lastly, we are focusing on content aggregation, bringing what's really relevant for users into their minds when it's relevant. We are also excited about natural language search. Everybody in the search field is certainly thinking about conversational search and how to create a different experience for the user. That's why we have built core models on how we do not use 'city plus date' and 'region' and work with a research environment that gives you a list of hotels. We call this natural language search that we're exploring, but it's super early in our space. We can expect that all players in the search space, including us, will find ways of using AI to make search results more relevant. We have been using machine learning and AI for a long time in displaying more relevant search results, but improving our search and showing more relevant content while leveraging it in marketing will be our focus.

Your next question comes from the line of Ron Josey of Citi.

I wanted to ask Johannes. You talked a little about trivago's second-price auction test and plans to launch that shortly. Can you talk to us a little more about the results you're seeing from the testing there and what makes you feel confident about moving forward with that? Additionally, can you provide some thoughts on the DMA and the DSA and some of the newer rules and regulations regarding the gatekeepers and how trivago is positioned here?

Thank you for your question. Regarding the second-price auction, I think it has been a very big project for us. We have been working on this now for about nine months, which has involved great effort. This is work with our partners internally, and it’s quite a complex infrastructure change. We have rolled this out in record speed and very consistently. The intentions were twofold: on the one hand, we want to improve our search results. In the first-price auction, the problem arises when advertisers bid up, and the hotel gets pushed up in the ranking very quickly. This means you can pay hotels to rank higher, and that may lead to not showcasing the best hotels first. The second-price auction is milder. We expect that we will have more stable search results over time, which we are already seeing indications of. An important qualification is whether we are improving the user experience, which is our goal. The second aspect is that our partners are working on Google and other marketing channels in the second-price auction. We simplify it for them so that they don’t have to think about first and second prices; we make it simpler for them. Also, when you bid in a second-price auction, you don’t have the risk of overbidding, and you don’t need to figure out who the next highest bidder is to avoid overpaying in the auction. That risk is eliminated, which means the marketplace overall becomes more efficient and allows medium-sized players to be more aggressive without significant economic risk. We see beneficial signals from both the user side and feedback from our partners that they are satisfied with the results we’re achieving with our auction. When we reach a tipping point where partners are excited about it, we will see the results on our user end and that's when we want to push forward. Our goal is to have it done by the end of the month ideally, but there’s a little bit of complexity involved. We want to have stable auctions rolled out to partners before summer. We want to establish a new normal that everyone feels good about and can optimize effectively. Regarding the DMA, I commented on that, and we are in a new reality with Google, where this is being assessed by the commission. We will find out what the commission is happy with and what they are not. Overall, we see fewer entry points in Europe into GHA. Their hotel product has been weakened from our perspective, which is good for us in the long term. In the short term, it's still a headwind as they made PPAs more visible, and PPAs do not convert as well as text ads did. It is difficult to predict where this will go, as Google continues experimenting. It's volatile and hard to predict how this will normalize. We are learning quickly how to find our sweet spot in this situation. Given our focus on brand, this is less relevant for us already because it hasn't been a major issue for some time, and we now see traction in our brand. We aim to offset any challenges we face and view this as an opportunity when the dynamics in that space improve.

Your next question comes from the line of Brian Fitzgerald of Wells Fargo.

In the prepared remarks, you mentioned that branded traffic volumes are growing nicely in Developed Europe and Rest of the World, but not so much in Latin America. To what extent is that a function of you running materially different campaigns? Or is it just the timing in the markets there? Is there anything different regarding Latin America concerning your branded campaigns?

In Latin America, we have strategically not focused on that market at the beginning of the year. The reason was that the levels of optimization and the focus we put there were not at the levels we liked. We are trying to determine where we have the best dynamics across the globe and where we want to invest our money. That was not the place where we saw the returns we wanted, so we quickly stopped investing in those markets to allocate budgets to markets with more elasticity.

Your next question comes from Doug Anmuth of JPMorgan.

This is Dae on for Doug. I have two questions. The first one, I'm curious to hear your thoughts on why you're seeing softer bidding dynamics and if that's applicable across all advertisers and why specifically Developed Europe and Rest of the World and what makes Americas different. I have a follow-up.

Thanks for the question. We observed that big advertisers started with softer bidding at the beginning of Q1, but went back to more healthy levels in the Americas while remaining softer in Developed Europe and Rest of the World. We expect that branded traffic and higher conversions will be appreciated by our partners over time. At the moment in the Americas, there seems to be more heated competition on our platforms, which leads to better bidding dynamics. However, things remain softer in Developed Europe and Rest of the World compared to last year.

So I guess related to that, you kind of briefly touched on that already, but what do you think is needed for advertisers to react or appreciate the higher quality and better converting traffic that you're sending right now?

I think the most important factor in our engagement with advertisers is that they are very engaged, whether they are large, small, or medium-sized suppliers. We have active discussions ongoing. What they certainly want is incremental traffic. If we compete on Google and buy the same traffic, and it's not incremental for them, it isn't attractive. In recent years, our share of performance marketing has increased, and now we're leaning back into brand. We expect them to see more incrementality from our branded campaigns. This is already supported by much higher conversion rates. Branded traffic converts significantly better, along with product improvements leading to increased conversion rates. We hope that, in the next review, advertisers will see that our traffic provides incremental value, making us more compelling in relation to other channels. How quickly this materializes remains to be seen.

With no further questions, this concludes our Q&A session. I will now turn the conference back over to Johannes for closing remarks.

We are committed to delivering sustainable growth and creating long-term value for our shareholders. The success of the company will be driven by our continuous transformation in marketing and innovation in our core product. I'd like to thank everyone for participating in our earnings call. We appreciate your time and your ongoing interest in our company. We look forward to updating you on our progress and results on the next call. Thank you, and have a great day.

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