Trivago's Latest Financial Update and Revised Dividend Dates

This is a follow-up to my initial write-up on Fundflicks regarding Trivago (TRVG). Alongside the release of the latest financial results, there have been changes to the ex-date and payment date.

  • The payment date has been revised to November 13, 2023, instead of November 3, 2023.
  • Similarly, the ex-date has been shifted to November 14, 2023, instead of November 2, 2023.
  • Furthermore, the consolidation of the ADS from 5 to 1 will occur on November 17, 2023.
  • During this period, the ADSs will be traded with a "due bill" that includes the assignment of the right to receive the dividend. This arrangement will continue until the ex-date of November 14, 2023, which is the first business day after the payment date.

The most significant information to note is that the dividend remains unchanged at €$0.5298, and withholding tax still applies to foreign investors.

Additionally, TRVG has announced its latest Q3 FY23 financials:

During this quarter, the company incurred a substantial loss of €$182.6 million, primarily due to higher impairment of indefinite-lived intangible assets and goodwill, amounting to €196.1 million. Without such impairment, TRVG would have been profitable.

However, the company experienced a 14% year-on-year decrease in revenue for the past three months, and an 8% decrease for the past nine months. The reasons cited for these revenue declines include heightened competition, decreased travel in the US and Europe, and reduced advertising expenditure.

Income Statement of TRVG

Balance Sheet of TRVG

In my opinion, this represents a fresh start for TRVG, particularly considering the significant impairment of goodwill. Despite this, the balance sheet remains robust. Following the dividend distribution, the price-to-book ratio is expected to be around 0.84x.

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On a less favorable note, the information provided in the transcript indicates that: 

  1. Adjusted EBITDA is likely to remain flat next year, even if revenue increases. However, it is anticipated to be approximately €$50 million, primarily due to the projected increase in advertising spending.
  2. In the short to mid-term, the company's focus will be on growth, potentially at the expense of profitability, although not adjusted EBITDA.
  3. The performance in the fourth quarter is expected to be stable, likely showing little change.
Moreover, a search through the net suggests that the travel industry is expected to underperform during a presidential election year, specifically in 2024.

Closing Thoughts

Considering these factors, my opinion on TRVG remains unchanged, and I still hold a small position. It is important to recognize that TRVG operates on a straightforward business model, aiming to become the "Google" of hotel searches by earning revenue through click-throughs to partner websites. This business model offers limited flexibility. Nevertheless, with minimal expenditure, TRVG will be able to accumulate cash reserves within a few years. The balance sheet will remain strong, and it appears that within one year, the adjusted EBITDA will be able to recoup approximately 30% of the special dividend. Ultimately, the successful execution by the new management team is of the utmost importance.

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