TRAVELZOO Q1 FY2025 earnings call

• Leverage Travelzoo's global reach, trusted brand, and relationships with travel suppliers to negotiate more Club Offers for Club Members.
• Travelzoo members are affluent, active, and open to new experiences. 91% say they are open to new destinations and travel ideas.
• Management focus includes growing paying members, converting Legacy Members, adding benefits to paid membership, retaining and growing advertising business from Popular Top 20 product, growing Jack's Flight Club, and developing Travelzoo META with discipline.
• Jack's Flight Club revenue increased 20% y-o-y, premium subscribers up 13%, with over half of the quarter's revenue reinvested in marketing and member acquisition.

Travelzoo's consolidated Q1 revenue was $23.1 million, up 5% from the prior year, reaching the highest quarterly revenue since the pandemic. In constant currencies, revenue was $23.3 million, up 6% y-o-y. Operating income decreased 34% y-o-y to $3.7 million (16% of revenue). The strongest revenue growth came from North America and Jack's Flight Clubs segments; Europe revenues increased 1% y-o-y. Advertising revenue was $20.7 million for Q1 2025. Revenue per membership fees increased to $2.4 million. Non-GAAP operating profit in Q1 2025 was $4.3 million (19% of revenue).

• Expect Q2 2025 revenue growth to double year-over-year.
• Revenue growth to accelerate in subsequent quarters as membership fees are recognized ratably over subscription period.
• Over time, profitability to increase as recurring membership fee revenue is recognized.
• Short-term net income fluctuations possible due to potential increases in marketing costs.

Q: There's been in the press a lot of discussion of foreign travelers not wanting to come to the U.S. And I was wondering how you see that in changes in behavior for travel plans coming from -- in Europe, Canada, outside the U.S.

A: Hi, Theo. Yes, we are hearing this from our travel suppliers. For us, as we said earlier, our travel enthusiasts are very flexible destinations. 91% say they travel wherever they find a great offer and a great deal, so they simply travel to other destinations. So while this is, for sure, a trend in the industry. For us, it's not a negative because our members are very flexible. In fact, they love to travel to new destinations.

Q: North America performed better than Europe in the latest quarter. I was wondering what was the driver of the dynamic of that? Was it domestic travel or international travel? And if it was international travel, was that due to the dollar? Or were there other factors at play there?

A: Look, Michael, in global groups like ours where we operate in different markets. They are just natural fluctuation. So I wouldn't overseeing that. The consolidation doesn't really give a full picture. When you look into market-specific numbers, for example, Germany had a very strong quarter. Revenue was up double digits year-over-year, very different from last quarter, as you might recall. U.K. was slightly lower in comparison to a very strong Q1 that we had last year. So we just have these natural fluctuations. And we believe that Europe revenue will also catch up in its growth year-over-year following quarters.

Q: Just on the member acquisition front, can you maybe talk a little bit how -- I guess, yes, just how consumers who decide to become what is sort of like the main driver is like a specific deal that you're presenting that they decide to -- they want to become a member to access that deal? Or is it other aspects of your marketing efforts?

A: Sure. I can take that question. We are definitely seeing that our Club Offers and our various kind of travel offers are the biggest draw of converting people into Club Members, but we have a whole kind of suite of benefits that ties to the club membership, including [pond] (ph) access, giveaway and other things like that. So I think the main driver is the club offers right now, including in our member acquisition efforts. But we do have quite a robust membership offering.

Q: There's less demand for people to come into the U.S. Are you seeing the same dynamics for people in the U.S. to travel international? Is there less demand for that as well?

A: We see the first but not the second. So yes, we see a bit hesitation in particular, Canadians. Canadians' interest in coming to the U.S. has decreased a lot, but we are not seeing the other way -- we are not seeing it the other way around. So Americans still love to travel to Europe.

Q: It looks like you guys became very aggressive over the course of the quarter in repurchasing shares. It looks like as the stock price corrected along with the broader market. I'm curious as to your thoughts on the balance sheet and the company's capacity and appetite to continue buying shares if the markets remain volatile over the near term.

A: Steve, the opportunity was very attractive last quarter. So since we are confident in our business and we had a lot of cash, we increased our share repurchases. Going forward, we expect the cash balance to increase again. First, because we collect membership fees at the beginning of the subscription period. And second, the business is profitable and cash flow positive with relatively fixed operating expenses. And as you heard, we're quite confident right now in our member acquisition activities, so we now have a better opportunity to invest in member growth than we had maybe a year ago, and that's where we would like to allocate the positive cash that the business is generating