trivago N.V.

Good day, ladies and gentlemen. Thank you for standing by and welcome to Trivago's second quarter earnings call 2025. After the speaker's remarks, there will be a question and answer session. To ask a question, simply press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. I must advise you the call is being recorded today, Wednesday, the 6th of August, 2025. We are pleased to be joined on the call today by Johannes Thomas, Trivago's CEO and Managing Director, and Wolf Schmuel, Trivago's CFO and Managing Director. The following discussion, including responses to your questions, reflects management's views as of Tuesday, August 5, 2025 only, unless expressly stated otherwise, in which case it reflects management's views as of today, Wednesday, August 6, 2025 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 second quarter 2025 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 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 the call will be against results for the comparable period of 2024. With that, let me turn the call over to Johannes.

Thank you everyone for joining us on our Q2 2025 earnings call. I'm pleased to report strong financial performance with 17% revenue growth year-over-year, marking our third consecutive quarter of growth and second consecutive quarter of double-digit growth across all segments. Geographic performance was robust across all regions, with rest of the world leading at 32% year-over-year growth, followed by developed Europe at 20% and Americas at 10%. We achieved this accelerated growth despite FX headwinds and while slightly improving adjusted EBITDA year over year. These results demonstrate that our strategic initiatives are working. Our brand marketing investments are driving returns, our product improvements are converting users, and our teams are executing diligently across the organization. I'm pleased to provide you with an update on each of our three strategic focus areas. Please have a look at our investor presentation, which illustrates the core topics I'm highlighting. Our first strategic priority is brand marketing, through which we continue to elevate our globally recognized brand. We are committed to further expanding brand marketing investments and continuously improving its efficiency. As we entered the summer travel season, our branded traffic remained a key driver for our growth in Q2. We experienced double-digit branded revenue across all geographic segments. This success was a result of our multi-year investment strategy, continued optimization, and the rollout of our new brand marketing campaign in May 2025. Our global AI-powered campaign features legendary soccer coach Jürgen Klopp and our local campaigns in Japan, Brazil, and Germany follow localized strategies to maximize impact. We expect this success to elevate our branded visitor baseline for the rest of the year and beyond, showcasing compounding effects of our brand marketing investments. Our second strategic priority is to enhance our core hotel search experience. We empower travelers to book with confidence and saving them valuable time and money. Our teams demonstrate continued high levels of testing velocity on our platform. Our hundreds of product tests and enhancements have returned notable conversion rates, improvements, and Q2, which we expect to improve marketing efficiency and user satisfaction. We have focused our product development efforts on improving our cohort search functionalities. Filters are now more visible on top of our search results, and we released AI smart filters where users can refine their search results through free text filtering. We are particularly thrilled about the launch of our new AI-powered review summaries for more than 230,000 hotels in 11 languages. They transform thousands of guest reviews and further content into digestible yet comprehensive insights. Unlike our AI highlights that showcase Hotel USP's crisp and at-a-glance, these summaries dive deeper into traveler experiences with hotels' facilities, amenities, rooms, and services. perfect for travelers that value thorough research and authentic guest perspectives. At the end of 2024, we announced our first of its kind, AI Smart Search. After several iterations, we integrated this natural language search functionality into our core hotel search experience, substantially elevating its usage. We believe that this will further accelerate user adoption and our pace of learning in the space of AI. I would also like to highlight our continued commitment to increasing retention among our core user base. We aim to make price savvy travelers loyal to our platform, which allows us to further personalize the experience on Trivago. Leveraging advanced machine learning, we have launched our fifth generation of personalized ranking, which continued driving conversion rates tangibly. In the last two years, we have almost doubled the amount of revenue that stems from our members. In Q2 2025, we achieved the important milestone of generating 20% of our referral revenue from logged-in users. This is a result of an improved member value proposition that offers features such as price alerts and exclusive deals. We remain focused on expanding our member proposition and enhancing our offering. Further, we completed Project Trinity. which aim to rethink the way we display prices to our users. We have simplified the price comparison experience on Trivago by preferably displaying direct rates, a great deal, and a popular side right next to each other, visibly in our search results. This has tangibly improved our comparison functionality, enabling users to intuitively grasp our value proposition from their very first visit. Importantly, this new price display also creates the foundation needed to bring our Trivago Book and Go vision to the forefront. Our third strategic priority is to empower our partners to maximize their potential on Trivago. In the past two years, we onboarded dozens of partners to our smart bidding and transaction-based model. By today, we have more than 100 partners on this model and doubled its share of revenue in our marketplace since 2023. Historically, Trivago offered a CPC-based model to all advertising partners. In the recent years, we emphasized our focus on the transaction-based model. Partners pay a fixed commission percentage for a booking while we optimize the exposure on Trivago. This model has simplified our platform for small and medium-sized partners and enhances their competitiveness in our marketplace. For Trivago, it offers a chance to reduce volatility in our auction. I'm also thrilled to share that at the end of July, 2025, we completed the acquisition of Holisto by acquiring all remaining equity interests. Holisto is an AI driven travel technology company that serves as a hotel rate aggregator and white label booking engine provider. Together with Holisto, we successfully launched Trivago Book and Go with pilot partners who have achieved substantial conversion improvements and increased their market share on our platform. We will continue to execute on this strategic direction and aim to onboard more partners throughout the year. Once again, our accessional team has demonstrated strong operational excellence and rapid progress on our strategic initiative. Our teams are maintaining sharp focus on the critical priorities that drive value both for our users and advertising partners. We recognize that our progress is only possible thanks to the collective efforts and commitment of everyone in our team. Thanks a lot for your hard work and dedication. Now, I'm pleased to pass the call to Volk, our new CFO since June, for a detailed financial review.

Thank you, Johannes, and good morning, everyone. We are thrilled to report that the second quarter of 2025 was a successful one for Trivago and marked yet another strong performance. We achieved a 70% year-over-year increase in total revenue and an 18% increase in referral revenue, which was driven by sustained branded traffic growth while maintaining a stable return on advertising spend. This reaffirms the effectiveness of our marketing strategy. Despite economic uncertainties and foreign exchange-related headwinds, we remain confident about our outlook. Therefore, continue to expect mid-teens percentage revenue growth for the full year of 2025 and a positive adjusted EBITDA similar to last year's level. We identify numerous attractive opportunities to further scale our brand marketing investments and expand our business. We are excited to have reached 20% of referral revenue from locked-in users, underscoring our progress in fostering user loyalty and engagement. Now let's review our second quarter results and our 2025 outlooks. Unless otherwise indicated, all comparisons for 2025 are on a year-over-year basis. In the second quarter, our total revenue reached €139.3 million, representing a 17% increase compared to the same period in 2024. We are pleased to note this marks our third consecutive quarter of growth. We experienced yet another quarter of strong year-over-year double-digit growth across all three reporting segments, with referral revenues growing 32% in the rest of the world, 20% in developed Europe, and 10% in America. This growth was primarily driven by increased branded channel traffic in response to our ongoing brand marketing investments, as well as product improvements and enhancing our booking conversions. During the second quarter, we reported a net loss of €6.5 million. We achieved a better than expected adjusted EBITDA loss of €5.1 million, similar to our 2024 performance. We saw negative adjusted EBITDA in the first and second quarter of the year and anticipate positive adjusted EBITDA in the third and fourth quarter of the year. Operational expenses increased by 19.9 million Euro, totaling 147.3 million Euro for the second quarter. This was mainly due to a 21.8 million Euro increase in selling and marketing, resulting from higher brand marketing investments made over the course of the quarter. Advertising spend increased by 9.5 million Euro, or 26%, in developed Europe. 5.9 million euro or 31% in rest of world and 5.5 million euro or 14% in the Americas, driven largely by brand marketing investments in all segments. The overall increase in operating expense was partly offset by a 1.5 million euro reduction in general and administrative expenses and a 0.3 million euro reduction in technology and content expenses during the quarter. Despite the significant scaling of our marketing investments, we maintained a solid global ROAS at 119% for Q2 compared to 122.7% in the prior year. We observed a slight ROAS improvement in rest of world increasing from 115.7% in Q2 2024 to 117.1% in Q2 2025, while we observed reductions in the Americas from 120.7% to 116.9%, and in developed Europe from 128.5% to 122.1%. At the end of Q2 2025, we held €111.2 million in cash and cash equivalents and no long-term debt, continuing to maintain our strong financial position. We are excited to announce that on July 31st, we successfully completed the acquisition of Holisto. The promising results from our joint initiatives gave us confidence to exercise our call option at the end of April 2025 already. For the remaining five months of this year, we anticipate Holisto will generate low double-digit million euros in revenue for Trivago's consolidated group results, while continuing to operate at near break-even levels. Holisto plays a pivotal role in enhancing the user experience by expanding our Trivago-branded booking funnel which will help us drive conversion rates. With that, let's open the line for questions. Operator, we are now ready to take the first question.