|TRIVAGO N.V. filed this Form 6-K on 07/25/2018|
Balance sheet, cash flows and capitalization
Cash, cash equivalents and restricted cash were €101.3 million as of June 30, 2018, of which €2.6 million is related to long term restricted cash mainly for the new campus building, compared to €192.9 million as of December 31, 2017. The decrease was mainly driven by negative cash flow from operating activities of €74.3 million which is primarily due to a net loss of €42.5 million. Changes in operating assets and liabilities further contributed to the decrease as accounts receivable increased more than accounts payable. Accounts receivable increased by €59.4 million, of which €19.0 million were related party receivables, as of June 30, 2018 compared to December 31, 2017. The increase was mainly driven by late cash receipts from third-party customers towards the end of the second quarter of 2018 and also reflected the seasonality in the revenue development of total referral revenue increasing from €177.2 million in the last quarter of 2017 to €231.1 million in the second quarter of 2018. Accounts payable increased by €24.3 million as of June 30, 2018 compared to December 31, 2017 primarily due to the seasonal ramp-up in advertising expenses, which increased from €149.7 million in the fourth quarter of 2017 to €209.8 million in the second quarter of 2018.
The decrease in cash, cash equivalents and restricted cash was further driven by negative cash flows from investing activities of €17.3 million which predominantly consisted of capital expenditures related to the new campus.
Our current ratio decreased from 3.7 as of December 31, 2017 to 2.6 as of June 30, 2018 as a result of the movement in our accounts receivable and accounts payable.
In June 2018, we moved into the first of two buildings related to our new campus in Düsseldorf. During the construction period of both buildings, we are deemed the accounting owner of the campus and are accounting for the construction as if we were the legal owner of the construction project. As such, an asset for construction-in-process for all incurred construction costs and a liability for those costs that were not funded by trivago have been recorded on our balance sheet. Upon moving into the first building, we continue to be the accounting owner, and we are treating it as a financing, for which we incur interest and depreciation expenses each period. The portion of the future lease obligations allocated to the land is treated as an operating lease. The second building remains under construction and we continue to recognize an asset and liability on our balance sheet for the construction costs that are not funded by trivago.
Update on legal proceedings
The Australian Competition and Consumer Commission, or ACCC, has requested information and documents from us relating to our advertisements in Australia concerning the hotel prices available on our Australian site and our strike-through pricing practice, which is the display adjacent to the price quote in the top position in our search results of a higher price that is crossed out. In May 2018, we completed our provision of documents to the ACCC. We are unable to estimate this matter’s potential effect on our financial position and results of operations.
A consolidated class action is pending against trivago N.V. in the United States District Court for the Southern District of New York alleging securities law violations in our IPO and certain later disclosures. On May 14, 2018, trivago N.V. filed a motion to dismiss this matter, and on June 28, 2018, plaintiffs filed their brief opposing trivago N.V.'s motion to dismiss. We are unable to estimate this matter’s potential effect on our financial position and results of operations.
As we have previously disclosed, the U.K. Competition & Markets Authority, or CMA, announced the launch of an investigation into online hotel booking sites in October 2017. We have been cooperating with the CMA. On June 29, 2018, the CMA announced the launching of enforcement actions against a number of hotel booking sites. The CMA has not advised us of any enforcement action being taken against us. Should the CMA in the future so advise us or require us to provide additional information, we would continue to cooperate as appropriate.