Travelzoo

Hello, everyone. Welcome to the Travel Zoo second quarter 2024 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 the 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 this conference call will be made available on the company's investor relations website at TravelZoo.com forward slash IR. It is now my pleasure to turn the floor over to TravelZoo Global CEO, Holger Bartel, and its Finance Director, Lijun Cui. Lijun, we'll start with an overview.

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 site at treblezoo.com slash IR. Let's begin with slide number four. Treblezoo's consolidated Q2 revenue was 21.1 million, consistent with the prior year. In constant currencies, Revenue was $21.2 million, up from $21.1 million year-over-year. Operating income, which way as management called operating profit, increased 23% year-over-year. Q2 operating profit was $4.0 million, or 19% of revenue, up from $3.3 million in the prior year. As of June 30, 2024, we had 30.8 million unduplicated members. consistent with June 30, 2023. Slide five shows that revenue remained consistent in our North America segment and increased in our Europe segment. Operating profit turned positive in Europe. On slide six, we break down our categories of revenues, advertising, membership fees, and other. Advertising revenue was 20.0 million for Q2, 2024. consistent year over year. Revenue from membership fees increased to 1.2 million. We expected this revenue to grow substantially in 2025 for the following reasons. At the beginning of 2024, we introduced a membership fee. Those who already members at the time are exempt from the fee during 2024, but have to pay in 2025. We call this group legacy members. and they represent over 95% of current members. Slide 7 shows an example of membership fee revenue recognition. Revenue from membership fee is recognized readily over the period of the subscription. Member acquisition costs, on the other hand, are recognized in full at the time of the expense. On slide 8, you can see that our GAAP operating margin was 19% in Q2 2024 compared to 15% a year ago. Slide 9 shows that in North America, the GAAP operating margin remained high at 26% for Q2 2024. On slide 10, we provide information on non-GAAP operating profit as we believe it better explains how TravelJuice management evaluates financial performance. Due to 2024, non-GAAP operating profit was $4.8 million. That's 23% of revenue compared to non-GAAP operating profit of $4.0 million in the prior year period. Slide 11 provides information about the items that are included in the calculation of non-GAAP operating profit. Please turn to slide 12. We maintained a solid cash position even after repurchasing 800,000 of the company's outstanding common stock. As of June 30, 2024, consolidated cash, cash equivalents, and restricted cash was $13.2 million. Slide 13 shows how revenues compare to operating expenses. Most of the company's operating expenses, except for marketing, are relatively fixed in the short to mid-term. We believe we can keep fixed costs relatively low in the foreseeable future. Higher revenues would just increase operating margins. For Q3 2024, we expect a growth in revenue year-over-year, albeit at a slower pace than in 2023. However, there could be unexpected fluctuations. We also expect for Q3 2024 higher profitability year-over-year. For 2025, we expect a substantial growth in revenue as a result of additional revenue from membership fees. Now I turn the discussion over to Holger.

Thank you, Li Jun. We will continue to leverage TravelZoo's global reach, trusted brand and strong relationships with top travel suppliers to negotiate more exclusive offers for our 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 15 provides more information about Travel Zoo members. 91% say they are open to new destinations and travel ideas. We are the club of travel enthusiasts. Turning to slide 17, it provides an overview of management's focus. We are working to convert a large number of legacy members into paying members as of January 1st, 2025. Add new benefits to make paid membership even more valuable. Retain and grow our profitable advertising business from the popular top 20 product Utilize higher operating margins to increase EPS, grow ChexFlyClub's profitable subscription revenue, and develop TravelZoom Meta with discipline. Now I'd like to speak about TravelZoom Meta. We are working on the production of the first Metaverse travel experiences. They will be browser enabled. And as stated in previous earnings calls, we are conscious of developing travel through Meta in a financially disciplined way. We will provide additional updates in due time. I'm now handing over to the operator for questions for Holger, Lijun, and me.