Travelzoo

Good morning and welcome to the Travel Zoo third quarter 2024 earnings call. Today's conference is being recorded. Currently, all callers have been placed in a listen-only mode. And following the management's prepared remarks, the call will be open for your questions. If you would like to ask a question at that time, please press the star and 1 on your telephone keypad. If you would like to remove yourself from the question queue, press star and 2. At any time, if you do need assistance, please press star and zero. 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 the conference call will be made available on the company's investor relations website at TravelZoo.com forward slash IR. Now it is my pleasure to turn the call to the floor over to TravelZoo's global CEO, Holger Bartel. its General Counsel and Head of Global Functions and CEO of Jack's Flight Club, Christina Chaka, and its Finance Controller for North America, Jeff Hoffman. Jeff, 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 TravelsWeek.com forward slash IRF. Let's begin with slide number four. Travels' consolidated Q3 revenue was 20.1 million, down 2% from the prior year. In constant currencies, revenue was 20 million. This was a little below our expectations. Operating income, which we as management call operating profit, increased 30% year over year. Q3 operating profit was 4 million, or 20% of revenue, up from 3.1 million in the prior year. Slide 5 shows that higher profits came particularly from our Europe segment. On slide 6, we break down our categories of revenue, advertising, membership fees, and other. Advertising revenue was $18.7 million for Q3 2024. Revenue for membership fees was $1.4 million. Membership fee revenue is still small. We expect to substantially drive revenue and profit growth in 2025 for the following reasons. At the beginning of 2024, we introduced a membership fee. Those who were already members at that 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 fees is recognized ratably over the period of the subscription. Member acquisition costs, however, are fully recorded and recognized as expenses immediately. On slide 8, you can see that our GAAP operating income remained high at 20%, which is typically our slowest quarter of the year. Slide 9 shows that in North America, the GAAP operating margin remained high at 25% for Q3 2024. In Europe, the margin increased to 17%. On slide 10, we provide information on non-GAAP operating profit as we believe it better explains how properties management evaluates financial performance. Q3 2024 non-GAAP operating profit was $4.9 million. That's 25% of revenue compared to non-GAAP operating profit of $3.9 million in the prior period year. Slide 11 provides information about the items that are excluded in the calculation of non-GAAP operating profit. Please turn to slide 12. With operating cash flow of $5.3 million, we maintained a solid cash position even after purchasing 552,679 shares of the company's outstanding common stock during the quarter. As of September 30th, 2024, consolidated cash, cash equivalents and restricting cash was $12.1 million. Going forward, we expect our cash balance to increase again as we collect membership fees at the beginning of the subscription periods. Slide 15 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 our fixed costs relatively low in the foreseeable future. Higher revenues would thus increase operating margins. Looking ahead, For Q4 2024, we expect growth in revenue year-over-year, albeit at a smaller pace than in 2023. However, there could be unexpected fluctuations. We also expect for Q4 2024 higher profitability year-over-year and quarter-over-quarter. For 2025, we expect substantial growth in revenue as a result of additional revenue from membership fees. I'll now turn the discussion over to Holder.

Thank you, Jeff. We will continue to leverage Travelzoo's global reach, trusted brand, and our strong relationships with top travel suppliers to negotiate more club offers for our members. Travelzoo members are affluent, active, and open to new experiences. We inspire members to travel to places they never imagined they could. Travelzoo is the must-have membership for those who love to travel as much as we do. Slide 14 provides more information about travel with members. 91% say that they are open to new destinations and travel ideas. We are the club for travel enthusiasts. On slide 16, we provide an overview of our management focus. We are working to convert a large number of legacy members into paying members from January 1st, 2025 on. Add new benefits to make paid membership even more valuable. Retain and grow our profitable advertising business from the popular top 20 products. Utilize higher operating margins to increase EPS. Grow Czech flight clubs' profitable subscription revenue. And develop travel-to-meta with discipline. I'm now handing over to Christina, who will speak about Jack's Flight Club and travel to Meta.