Travelzoo

Good morning, and welcome to the Travel Zoo fourth quarter 2024 earnings call. Today's conference is being recorded. Currently, all callers have been placed in a listen-only mode, and following management's prepared remarks, the call will be opened for your questions. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you need to remove yourself from the queue, press star 2. At any time, if you should need operator assistance, press star 0. 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 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. Issued earlier today. And our recording of this 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 floor over to TravelZoo's global CEO, Holger Bartel, its chair, general counsel and CEO of Jack's Flight Club, Christina Chalka, and its financial controller, North America, Jeff Hoffman. Jeff, we'll start with an overview.

Great. Thank you, operator. And welcome to those of you joining us. Today I'm stepping in for Lejeune Chee, our Chief Accounting Officer. 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 TravelZoo.com forward slash IR. Let's begin with slide four. TravelZoo's consolidated Q4 revenue was $20.7 million, down 2% from the prior year. In constant currencies, revenue was $20.6 million. Operating income, which we as management call operating profit, increased 8% year over year. Q4 operating profit was $4.9 million, or 24% of revenue, up from $4.5 million in the prior year. While operating income increased and outstanding shares decreased, EPS was slightly lower compared to last year, and we'd like to explain why. A year ago, extraordinary income from discontinued operations and relatively high other income from favorable FX trends added $0.05 to quarterly EPS. This year, a strong dollar at the end of 2024 led to negative other income and impacted EPS negatively. Without these effects, the EPS would, in management's opinion, better reflect the positive earnings trend. Slide six shows a revenue increase in both our North America and Jaxx Flight Club segments, while revenues in Europe were lower. This was caused primarily by fluctuations in Germany, which we do not view as a trend. Operating profit increased in both our North America and Jackson Flight Club segments, but decreased in our Europe segment. On slide seven, we break down our categories of revenue. Advertising, membership fee, and other. Advertising revenue was 19.1 million for Q4 2024. Revenue for membership fees increased to 1.6 million. We expect this revenue to grow substantially in 2025. 2024, we introduced a membership fee for TravelSoup. Legacy members who joined before 2024 were exempt from the fee during 2024. Legacy members represent more than 95% of TravelSoup's reach. In 2025, legacy members continue to receive certain travel offers, but club offers and new benefits are only available to club members. We generally see legacy members being excited to become club members. Slide H is an example of membership fee revenue recognition. Revenue from membership fees is recognized relatively over the period of subscription. Member acquisition costs, on the other hand, are recognized painful at the time of the expense. On slide nine, you can see that our gap operating margin was 23% in Q4 2024. Slide 10 shows that in North America, the GAAP operating margin increased to 33% for Q4 2024. On slide 11, we provide information on non-GAAP operating profit as we believe it better explains how Travel Zoo's management evaluates financial performance. Q4 2024 non-GAAP operating profit was $5.4 million. That's 26% of revenue compared to non-GAAP operating profit of $5.2 million in the prior year period. Slide 12 provides information about the items that are excluded in the calculation of non-GAAP operating profit. Please turn to slide 13. Our solid cash position grew even after repurchasing 135,792 shares of the company's outstanding common stock. As of December 31, 2024, consolidated cash, cash equivalents, and restricted cash was $17.7 million. Slide 14 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 thus increase operating margin. Now, looking ahead, in Q1 2025, we expect revenue to increase at a higher pace. The pro-rata portion of membership fee revenue will already add 5% incremental growth this quarter. This percentage is expected to increase over subsequent quarters as membership fee revenue is recognized gradably over the subscription period. We acquire new members, and more legacy members become club members. For the whole year, we expect substantially higher revenue growth. Over time, we expect profitability to further increase as recurring membership fee revenue will be recognized. I'll now turn this discussion over to Holder.

Thank you, Jeff. We will continue to leverage Travel Zoo's global reach, our trusted brand and strong relationships with shop travel suppliers to negotiate more club offers for club members. Travel Zoo members are affluent, active and open to new experiences. We inspire travel enthusiasts to travel to places they never imagined they could. Travel Zoo is the must-have membership for those who love to travel as much as we do. Slide 15 provides more information about Travel Zoo members. 91% say that they are open to new destinations and travel ideas. We are the club of travel enthusiasts. Slide 17 provides an overview of management's focus. We are working to Grow the number of paying members as we continue to convert legacy members and add new club members. 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. Go check flight club's profitable subscription revenue. and develop Travelzoo Meta with discipline. Now, Christina will provide a quick update on Travelzoo Meta and check slides up.