Travelzoo

Hello, everyone. Welcome to the Travel Zoo First Quarter 2023 Financial Results Conference Call. All participants have been placed in a listen-only mode, and the floor will be open for questions following the presentation. Today's call is being recorded. The company would like to remind you that all statements made during this conference call and presented in the slides that are not statements of historical facts constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could vary materially from those contained in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are described in the company's forms 10-K and 10-Q and other SEC filings. Unless required by law, the company undertakes no obligation to update publicly any forward-looking statements. whether as a result of new information, future events, or otherwise. Please refer to the company's website for important information, including the company's earnings press release issued earlier today. An archived recording of the conference call will be made available on the TravelZoo Investor Relations website at TravelZoo.com forward slash IR. Now it is my pleasure to turn the floor over to TravelZoo's global CEO, Holger Bartel, its finance director, Li Junqi, and its general manager, Travelzoo Meta, Irvina Aluwalia. We soon will start an overview of the first quarter's 2023 financial results.

Thank you, operator, and welcome to those of you joining us today. Please refer to the management presentation to follow along with our prepared remarks. The presentation in PDF format is available on our investor relations website at Travelzoo.com Let's begin with slide number three. Our consolidated Q1 revenue was $21.6 million, up 17% from $18.5 million in the previous year. In constant currencies, revenue was $22.1 million, which is an increase of 19% year-over-year. Operating income, which weighed as management call operating profit, more than doubled year over year. Q1 operating profit was 4.7 million, or 22% of revenue, up from 1.9 million in the prior year. As of March 31st, 2023, we had 30.5 million unduplicated members compared to 30.7 million as of March 31st, 2022. On slide four, We go into more detail about the revenues and operating profits of our two largest business segments, North America and Europe. North America's segment revenue increased 26% year over year from $11.7 million to $14.8 million. The operating profit in North America was $4.5 million in Q1 compared to an operating profit of $1.8 million a year ago. Europe's segment revenue remained consistent year over year. At constant currencies, Europe revenue increased 6% year over year. Europe had an operating profit of 457,000 in Q1 compared to an operating profit of 178,000 in the prior year. On slide five, you can see that our operating margin reached 22% in Q1. up from 11% in the same period last year. The operating margin of 22% in Q1 2023 is much higher than before the pandemic. Before the pandemic, Tribal Zoo's reported operating margin was much lower because of losses from our Asia-Pacific business segment. In March 2020, Tribal Zoo decided to make Asia-Pacific a licensing business going forward. Now the operating margin shows the true profitability of Treble Zoo in North America and Europe. Slide 6 shows that in North America, the operating margin even reached 31% for Q1. On slide 7, we provide information on non-GAAP operating profit as we believe it better explains how Treble Zoo evaluates performance. T1 2023 non-GAAP operating profit was $5.5 million compared to a non-GAAP operating profit of $2.7 million in the prior year. Slide 8 provides more information about the items that are included in the calculation of non-GAAP operating profit. Please turn to slide 9. As of March 31, 2023, Consolidated cash, cash equivalents, and restricted cash was 19.8 million. Our cash balance remained unchanged. Merchant payables decreased by 4.6 million. Slide 10 and 11 detail our revenues by business segment. The North American business segment saw a year-over-year revenue increase of 3.1 million. Turning to slide 11. the Europe business segment, which we report in USD, was and continues to be impacted by the strong dollar. We saw revenue in Q1 remain consistent, but in constant currencies, revenue increased 401,000 year over year. Slide 12 shows that pandemic lead to a significant reduction of fixed costs. We believe we can keep our fixed costs relatively low in the foreseeable future, while revenues are expected to grow. For Q2 2023, we currently expect growth in revenue and growth in operating profit to continue year over year. Now I turn over to Holger.

Thank you, Lijun. We will continue our strategy of leveraging travel with global reach, trusted brands, and our strong relationships with top travel suppliers to negotiate more exclusive offers for Travel Zoo members. With more than 30 million members, 8 million mobile app users, and 4 million social media followers, Travel Zoo is loved by travel enthusiasts who are affluent, active, and open to new experiences. Slide 13 provides more information about Travel Zoo members 87% say they are open to new destinations and travel ideas. Travel Zoo members are travel enthusiasts. Finally, slide 15 provides an overview of what management and our global team are focused on. We want to reach and surpass pre-pandemic number of members and accelerate revenue growth, utilize higher operating margins to significantly increase EPS, grow ChexFlightClub's profitable subscription revenue, and launch TravelSoup Meta.