TRAVELZOO Q3 FY2024 earnings call

• Leverage Travelzoo's global reach, trusted brands, and strong relationships with travel suppliers to negotiate more club offers for members.
• Work to convert legacy members into paying members from January 1, 2025.
• Add new benefits to make paid membership more valuable.
• Retain and grow profitable advertising business from top 20 products.
• Jack's Flight Club had year-over-year revenue increase of 11% to $1.2 million and premium subscribers up 14% in Q3.
• Working on production of first metaverse travel experiences for Travelzoo META, browser-enabled and developed in a financially disciplined way.

Travelzoo's consolidated Q3 revenue was $20.1 million, down 2% from the prior year. In constant currencies, revenue was $20 million. Operating income increased 30% year-over-year, with Q3 operating profit at $4 million (20% of revenue). Advertising revenue was $18.7 million for Q3 2024, and membership fees were $1.4 million. North America GAAP operating margin was 25% for Q3 2024, while Europe's margin increased to 17%. Q3 2024 non-GAAP operating profit was $4.9 million, 25% of revenue.

• Expect Q4 2024 revenue growth year-over-year but at a smaller pace than 2023, with higher profitability year-over-year and quarter-over-quarter.
• Anticipate substantial revenue growth in 2025 due to additional membership fee revenue.

Q: Last quarter, you talked about travelers becoming more cost conscious and price increases for flights and rooms would moderate. Is that still what you're seeing out there? Are you seeing any more or less of that? And on the operating margin between North America and Europe, why was Europe's margin stronger than expected?

A: On the first question, hotels and airlines are seeing less demand and better prices, with consumers looking for value and less crowded destinations. On the second question, Europe's profit margin increased due to efficient operations this quarter and expectation of continued trend.

Q: Can you give an idea of what the mix might be between advertising and membership fees in 2025 as you roll out membership fees? And any improving trends in Americas and Europe in Q4, and any membership fees filtering into Q4? And any changes to initial thoughts on membership fees?

A: No forecast yet on membership revenue mix in 2025. In Q4, expect things to normalize but no substantial growth in membership fees yet due to legacy member exemption in 2024. No changes to initial thoughts disclosed yet.

Q: Any updated thinking on paid membership benefits, including potential bundling with Travelzoo META? And uses of cash moving forward?

A: Four member benefits in works related to better travel experience, to be revealed soon. Continue share repurchases as stock price is attractive, and plan to invest in marketing for customer acquisition on paid membership side.

Q: Is Jack's Flight Club in all markets now? Do you think it could encompass a majority of Travelzoo members? What's the membership fee comparison between U.S. and Europe?

A: Jack's Flight Club is in U.K., Canada, U.S., and certain European countries, with expansion into other European countries and consideration of alternative languages. Travelzoo members have interest, and membership fee is $60 in U.S. and comparable in Europe depending on currency.

Q: Any areas needing additional investment in customer service or deal research with shift to subscription-oriented service? And on advertisers' expectations with transition to paid product?

A: Participated in member meetings to learn more, and will continue to improve. Advertisers will maintain reach in 2025, with members who pay membership fees being more active and engaged, allowing maintenance or growth of advertising revenues.