Trivago N.V. — FY 2018 Form 20-F
Period note: This is an annual report for the fiscal year ended December 31, 2018, not a standalone Q4 filing. It provides some fourth-quarter commentary but does not give a clear, complete set of Q4 financial results. Amounts below are annual unless otherwise stated; monetary amounts are euros.
Business context
Trivago operates a global hotel and accommodation metasearch platform. It earns most revenue when users click on accommodation offers and are referred to advertisers, primarily online travel agencies (OTAs). Expedia Group controls the company. At year-end, the platform listed more than 3.0 million accommodations, including over 1.5 million alternative-accommodation units, across more than 190 countries.
Key financial metrics
| Metric | FY 2018 | FY 2017 | Change |
|---|---|---|---|
| Total revenue | €914.8 million | €1,035.4 million | Down 11.6% |
| Referral revenue | €899.8 million | €1,020.3 million | Down 11.8% |
| Operating loss | €19.2 million | €20.4 million | Loss narrowed |
| Net loss | €21.5 million | €13.0 million | Loss widened |
| Adjusted EBITDA | €14.6 million | €6.7 million | More than doubled |
| Adjusted EBITDA margin | 1.6% | 0.6% | Improved |
| Advertising expense | €732.5 million | €884.7 million | Down 17.2% |
| Operating cash flow | Used €4.6 million | Used €8.5 million | Cash use narrowed |
| Cash and cash equivalents | €161.9 million | €190.2 million | Down €28.3 million |
| Current assets / current liabilities | €265.3 million / €60.9 million | €293.3 million / €78.4 million | Both decreased |
| Credit-facility borrowings | None outstanding | None outstanding | €50 million facility available, uncommitted |
FY 2018 operating margin was approximately negative 2.1%. The balance sheet also included €127.7 million of financing obligations related to the Düsseldorf headquarters. Cash, cash equivalents and restricted cash totaled €164.3 million at year-end. Investing cash outflow was €24.1 million, mainly reflecting capital expenditures, including the headquarters and software development.
Material changes versus the prior year
- Revenue fell after management reduced advertising spend beginning late in Q2 2018 to prioritize profitability. Qualified Referrals declined 8.1%, to 668.3 million; revenue per Qualified Referral (RPQR) declined 3.6%, to €1.35.
- Advertising spend reductions improved full-year return on advertising spend (ROAS) to 123%, from 115% in 2017. Management said ROAS improved substantially in the second half.
- Segment referral revenue declined 19.3% in the Americas and 10.8% in Developed Europe; Rest of World increased 0.6%. Developed Europe RPQR rose 6.9%, while Americas and Rest of World RPQR declined.
- Technology and content expense rose 28.1% to €66.9 million, reflecting higher personnel, third-party IT, depreciation and office costs. General and administrative expense rose 14.5% to €54.3 million.
- Cash used in operations was €4.6 million, with working-capital effects including higher receivables and lower payables. Receivables increased amid delayed advertiser payments.
Outlook, management commentary, risks and unusual items
- Management said it expected revenue declines to continue until comparison periods also reflected the advertising-spend reductions. It did not provide a clear numeric revenue or earnings forecast in the supplied filing text, and said it did not expect future growth rates to match those achieved before 2017.
- Management cited improved traffic quality and signs of higher advertiser CPC bids, particularly in Q4 2018. These claims rely partly on advertiser-provided booking data and company estimates. The filing does not provide a clear standalone Q4 revenue or profit figure.
- Quarterly results remain exposed to rapid changes in CPC bids and advertiser spending, seasonality, foreign exchange, and the company’s ability to adjust advertising quickly. Booking Holdings and its affiliates generated 39% of 2018 revenue; Expedia Group and its affiliates generated 36%. Advertiser agreements may be terminated at will or on three to seven days’ notice.
- Legal matters include an Australian Competition and Consumer Commission proceeding concerning price advertising and strike-through pricing; management recorded a provision, but the filing text does not provide a clear amount. The U.K. CMA investigation was resolved through voluntary undertakings, without an admission or finding of liability. A U.S. securities class action was dismissed in February 2019; plaintiffs could appeal.
- Other notable items: a €1.5 million impairment of software under development; a €0.9 million German social-security assessment described as predominantly relating to prior periods; and €1.8 million interest expense, largely associated with the headquarters financing obligation. A €1.0 million selling and marketing expense was recorded in the annual results but was not included in unaudited Q4 results.
- Management stated that cash, operating cash flow and the credit facility were sufficient for at least the next 12 months. Contractual obligations at year-end totaled €96.7 million, including €76.9 million of lease and financing obligations and €19.8 million of purchase obligations.
Most important facts for investors to verify
- Obtain the original Q4 earnings release or quarterly results to verify standalone Q4 revenue, net income, cash flow and the effect of the €1.0 million year-end expense adjustment.
- Track whether referral revenue and Qualified Referrals stabilize after reduced advertising spend, and whether improved traffic quality translates into sustained RPQR and advertiser bids.
- Monitor advertiser concentration, particularly Booking Holdings and Expedia Group, and changes in their bidding, spending, payment timing or platform participation.
- Review cash conversion, receivables, headquarters financing obligations, lease commitments and the expected effects of the 2019 lease-accounting adoption.
- Follow the ACCC case and provision, CMA undertaking implementation, and any appeal of the dismissed U.S. securities action.