Travelzoo

Good morning and welcome to the Travel Zoo first quarter 2025 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 open for your questions. If you'd like to ask a question at that time, please press star one on your telephone keypad. If you need to remove yourself from the queue, press star one again. At any time, if you should need operator assistance, press star zero. 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 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 Choka, and its financial controller, North America, Jeff Hoffman. Jeff, we'll start with an overview.

Thank you, Operator. And welcome to those of you joining us today. Today I'm stepping in Phil Lejeune, 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 Q1 revenue was 23.1 million, up 5% from the prior year. and reaching the highest quarterly revenue since the pandemic. In constant currencies, revenue was 23.3 million, up 6% from the prior year. Operating income, which we as management call operating profit, decreased 34% year over year as we invested more in member growth. Q1 operating profit was 3.7 million, or 16% of revenue, down from 5.6 million in the prior year. Slide five shows the strongest revenue growth came from our North America and Jaxx Flight Club segments, while revenues in Europe increased 1% from the prior year. Operating profit decreased in both our North America and Europe segments, but increased slightly in our Jaxx Flight Club segment. On slide six, we break down our categories of revenue, advertising, membership fees, and other. Advertising revenue was 20.7 million for Q1 2025. Revenue for membership fees increased to $2.4 million. Membership fees begin to drive significant and incremental revenue growth. It will further accelerate. In 2024, we introduced a membership fee for TravelZoom. Legacy members who joined before 2024 continue to receive certain travel offers. However, club offers and new benefits are only available to club members who pay the membership fee. Therefore, we are seeing many legacy members become club members over time, in addition to new members who join. Slide 7 shows an example of membership fee revenue recognition. Revenue from membership fees is recognized variably over the period of subscription. Member acquisition costs, on the other hand, are recognized in full at the time of the expense. Slide 8 illustrates that as we grow members, the differing recording of expenses and revenues creates a short-term negative impact on operating income. A continuous addition of new members every quarter increases quarterly revenue only over time. Particularly in the first quarter, that revenue number is even smaller as membership fees are prorated for any members who join during the quarter. Marketing expenses are recorded immediately in each quarter. After a few quarters, quarterly revenue for membership fees exceeds the advertising expense and the impact turns positive. On slide nine, you will see that GAAP operating margin was 16% in Q1 2025. Our GAAP operating margin is lower simply because we have started to invest more. Our goal is to accelerate growth in members. Slide 10 shows that in North America, the GAAP operating margin decreased to 24%, and in Europe, the GAAP operating margin remained flat at 3% for Q1 2025. This is driven by the investments in member growth, which occurs in all key markets. In Europe, this overshadows a great financial improvement in Germany, where we saw strong revenue growth year over year. On slide 11, we provide information on non-GAAP operating profit, as we believe it better explains how travel management evaluates financial performance. Q1 2025 non-GAAP operating profit was $4.3 million. That's 19% of revenue compared to non-GAAP operating profit of $6 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. We repurchased 590,839 shares of the company's outstanding common stock. As of March 31st, 2025, consolidated cash, cash equivalents, and restricted cash was 12.2 million. Slide 14 shows our revenues compared 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. But higher investments in member growth are increasing total expenses. We expect these investments to accelerate revenue growth in coming quarters. Now looking ahead. For Q2 2025, we expect year-over-year revenue growth to double. We expect revenue growth to accelerate as a trend in subsequent quarters as membership fees revenue is recognized readily over the subscription period as required in members and as more legacy members become club members. Over time, we expect profitability to increase as recurring membership fee revenue will be recognized. In the short term, fluctuations in net income are possible because we might see attractive opportunities to increase marketing. We believe we expense marketing costs immediately. Now I'm going to turn the discussion over to Holger.

Thank you, Jeff. We will continue to leverage Travelzoo's global reach, our trusted brand, and the strong relationships with top travel suppliers to negotiate more club offers for club members. Travel Zoo members are fluent, active, and they are 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. Site 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. slide 17 provides an overview of management's focus we are working to grow the mem grow the number of paying members and accelerate revenue growth by converting legacy members and by adding new club members add new benefits to the paid membership retain and grow our profitable advertising business from the popular top 20 product accelerate revenue growth which drives future profits in spite of temporary lower EPS, grow ChexFlightClub's profitable subscription revenue, and develop TravelZoom Meta with discipline. Now Christina will provide a quick update on TravelZoom Meta and ChexFlightClub.