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Annual Report of Trivago NV for the Fiscal Year Ended 31 December 2016

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Annual Report of Trivago NV for the Fiscal Year Ended 31 December 2016 Annual report of trivago N.V. for the fiscal year ended 31 December 2016 1 Table of Contents Dutch Statutory Board Report 1. Introduction 3 2. Company and Business overview 4 3. Financial Overview 14 4. Risk Management and Risk Factors 24 5. Corporate Governance 47 6. Compensation Report 53 7. Related Party Disclosures 54 8. Protective Measures 56 9. Outlook 56 Financial Statements 2016 10. Consolidated Financial Statements 57 11. Company Financial Statements 103 Other Information 12. Other Information 113 2 1. Introduction In this board report, the terms "trivago", "we", "us", "our" and "the Company" refer to trivago N.V. and, where appropriate, its subsidiaries. Unless stated otherwise, information presented in this board report is as at 31 December 2016. Our financial statements are presented in euros and, unless otherwise specified, all monetary amounts are in euros. Any references in this board report to "$", "US$", "U.S.$", "U.S. dollars", "dollars" and all references to "€" and "euros" mean euros, unless otherwise noted. The exchange rate calculated at the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank in New York on the period-end date for the applicable period, which as of December 31, 2015 was €1.00 = $1.0859 and as of 31 December 2016 was €1.00 = $1.0552. You should not assume that, on that or any other date, one could have converted these amounts of euro into U.S. dollars at this or any other exchange rate. We have historically conducted our business through trivago GmbH, and therefore our historical financial statements present the results of operations and financial condition of trivago GmbH and its controlled subsidiaries. In connection with our initial public offering (the "IPO"), trivago N.V. became the holding company of trivago GmbH, and the historical consolidated financial statements of trivago GmbH became the historical consolidated financial statements of trivago N.V. The historical financial statements of trivago GmbH and its controlled subsidiaries make reference to the members' equity as trivago GmbH Class A units and trivago GmbH Class B units. The equity of a GmbH is not unitized into shares under German corporate law. However, pursuant to the company's articles of association, we unitized members' equity into trivago GmbH Class A units and Class B units, with each trivago GmbH Class B unit having 1/1,000 of the voting rights of a trivago GmbH Class A unit. 1.1. Preparation This board report has been prepared by trivago's management and has been approved by trivago's management board (the "Management Board") and trivago's Supervisory Board (the "Supervisory Board") pursuant to Section 2:391 of the Dutch Civil Code ("DCC"). It contains (i) trivago's Dutch statutory annual accounts as defined in Section 2:361(1) DCC and (ii) the information to be added pursuant to Section 2:392 DCC (to the extent relevant). The financial statements included in sections 10 and 11 of this board report have been prepared in accordance with the International Financial Reporting Standards, as adopted by the European Commission ("EU IFRS") and title 9 of Book 2 Dutch civil code. The report of trivago's independent auditor, Ernst & Young Accountants LLP, is included in section 12.5. 1.2. Forward-looking statements This board report contains forward-looking statements, that are based on our management's beliefs and assumptions and on information currently available to our management. All statements other than present and historical facts and conditions contained in this annual report, including statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for future operations, are forward-looking statements. When used in this annual report, the words "aim", "anticipate", "assume", "believe", "contemplate", "continue", "could", "due", "estimate", "expect", "goal", "intend", "may", "objective", "plan", "predict", "potential", "positioned", "seek", "should", "target", "will", "would", and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about: • our future financial performance, including our revenue, cost of revenue, operating expenses and our ability to achieve and maintain profitability; • our ability to generate positive cash flow and the sufficiency of our operating cash flow to meet our liquidity needs; • our expectations regarding the development of our industry and the competitive environment in which we operate; • our development of new products and services; • our ability to increase the number of visits to our hotel search platform and referrals to our advertisers; • our ability to attract and maintain relationships with advertisers and increase the number of hotels on our marketplace; • the growth in the usage of our mobile devices and our ability to successfully monetize this usage; and • our ability to receive a positive tax ruling and complete the post-IPO merger. You should refer to the section 4.2 of this board report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this board report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation 3 to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should read this board report and the documents that we reference in this annual report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward- looking statements by these cautionary statements. 2. Company and Business Overview 2.1. History and development of the Company We were incorporated on 7 November 2016 as travel B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law. In connection with the IPO in 16 December 2016, we converted into a public company with limited liability (naamloze vennootschap) under Dutch law pursuant to a deed of amendment and conversion and changed our legal name to trivago N.V. We are registered with the trade register (handelsregister) of the Chamber of Commerce (Kamer van Koophandel) in the Netherlands under number 67222927. Our corporate seat (statutaire zetel) is in Amsterdam, the Netherlands, and our registered office is at Bennigsen-Platz 1, 40474 Düsseldorf, Germany. As of December 31, 2016, we had 1,233 employees. 2.2. Organizational structure trivago N.V. acts as a holding company of trivago GmbH, the historical operating company of the trivago group. In this annual report, unless the context otherwise requires, the terms “we,” “us,” “our,” “trivago” and the “company” refer to trivago GmbH, travel B.V. and trivago N.V., and their respective consolidated subsidiaries, as applicable. 2.2.1. Current organizational structure In connection with the IPO, the Company underwent a corporate reorganization, and as of December 31, 2016, trivago N.V. is the parent holding company of trivago GmbH. Prior to the IPO, Expedia owned 63.5% and Messrs. Schrömgens, Vinnemeier and Siewert, (whom we collectively refer to as the “Founders”) owned 36.5%, in aggregate, of the voting power in trivago GmbH. Prior to the completion of the IPO, Expedia contributed all of its shares in trivago GmbH to travel B.V. in a capital increase in exchange for newly issued Class B shares of travel B.V., which were converted into Class B shares of trivago N.V. The Founders contributed 940 units of trivago GmbH, representing 6.7% of their aggregate shareholding in trivago GmbH, to travel B.V. in a capital increase in exchange for newly issued Class A shares of travel B.V., which were converted into Class A shares of trivago N.V. As a result of these contributions, 96.3% of the share capital and 99.6% of the voting power in travel B.V. was held by Expedia and 3.7% of the share capital and 0.4% of the voting power in travel B.V. was held by the Founders, whereas 66.0% of the voting power in trivago GmbH was held by travel B.V. and 34.0% of the voting power in trivago GmbH was held by the Founders. ADSs representing the Class A shares of the Founders in trivago N.V. were subsequently sold in the IPO and additional 20,826,606 ADSs (base offering and full exercise of over-allotment option) representing newly issued Class A shares in trivago N.V. were issued. Following the closing of the IPO, a substantial portion of the net proceeds to trivago N.V. from the offering of the newly issued Class A shares in trivago N.V. were transferred to trivago GmbH in exchange for units that were newly issued by trivago GmbH, which we refer to as the capital increase. The number of new shares of trivago GmbH to be subscribed for was the equivalent of the number of ADSs representing newly issued Class A shares by trivago N.V. in the offering, divided by the so called IPO Exchange Ratio of 8,510.66824, rounded to the nearest whole unit.
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