Travelzoo

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. And if you need to remove yourself from the queue, please press star 1 again. At any time, if you should need operator assistance, please 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 the safe harbor provisions of the Private Security Litigations Reform Act of 1995. Actual results could differ 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 earning press release issued earlier today. An archived recording of this conference call will be made available on the company's investor relations website at www.travelzoo.com forward slash IR. Now it is my pleasure to turn the floor over to Travel Zoo's Global CEO, Holger Bartel, its chair, general counsel, and CEO of Jack's Fight Club, Christina Sicotta, 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, I'm stepping in for 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 number four. TravelZoo's consolidated Q2 revenue was $23.9 million, which is up 13% from the prior year. In constant currencies, revenue was $23.5 million, up 12% from the prior year. Operating income, which we as management call operating profit, decreased as we invested more in member growth. Q2 operating profit was 2.1 million, or 9% of revenue, down from 4 million in the prior year. Let me explain the rationale for our significant increase in marketing expense, which lowered EPS. Slide 5 shows the favorable payback on the acquisition of new club members that we were able to achieve. On the left side, you see the average acquisition cost for a full paying club member was $28 in Q1 and $38 in Q2. On the right side, you see that we get this money back right away. The member pays, in the US case here, immediately their $40 annual membership fee. Additionally, we generated $18 in revenue from transactions in the same quarter. This immediate payback doesn't even consider an increase in advertising revenues and future membership fees and other revenues. Now, slide six shows, as a reminder, that with subscription businesses, membership fee revenue is recognized readily over the subscription period, but the acquisition costs are expensed immediately when incurred. Slide seven shows the effect. While we have an immediate payback, the impact on earnings and EPS is different. Higher member acquisition expenses, coupled with only a portion of revenue recognized in the quarter, reduced EPS this quarter. In the case of Q2, that effect was a reduction of 13 cents. On slide eight, you can see that revenue growth came from all segments. With favorable ROI on member acquisition in the UK, we invested heavily there. Jack's Flight Club revenue increased by 33%. Operating profit decreased in both our North America and Europe segments, but increased slightly in our Jaxx Flight Club segment. On slide nine, we break down our categories of revenue, advertising and commerce, membership fees, and other. Advertising and commerce revenue was $20.9 million for Q2-25. Revenue for membership fees increased to $3 million. Membership fees have started to drive significant revenue growth. Next year, we expect them to account for about 25% of revenue. On slide 10, you can see that our gap operating margin was 9%. In Q2-25, acquiring more club members has the effect of lowering gap operating margin. Still, given the currently favorable ROI, we will continue to further grow the number of club members to bring TravelSuit into high growth mode. Slide 11 shows that investments in club members occur in all key markets. Over time, we expect margins to return to previous levels or even exceed them. On slide 12, we provide information on non-GAAP operating profit as we believe it better explains how Tribal Zoo's management evaluates financial performance. Q2 2025 non-GAAP operating profit was $2.4 million. That's 10% of revenue compared to non-GAAP operating profit of $4.8 million in the prior year period. Slide 13 provides information about the items that are excluded in the calculation of non-GAAP operating profit. Please turn to slide 14. As of June 30, 2025, consolidated cash, cash equivalents, and restricted cash was $11.2 million. Cash flow from operations was $1.3 million. We reduced merchant payables by $2.4 million and repurchased 172,088 shares. Now, looking ahead, for Q3 2025, we expect year-over-year revenue growth to continue. We expect revenue growth to accelerate as a trend in subsequent orders as membership fees revenue is recognized radically over the subscription period of 12 months, as we acquire new members, and as more legacy members become club members. Over time, we expect profitability to substantially increase as recurring membership fees revenue will be recognized. In the short term, fluctuations in reported net income are possible. We might see attractive opportunities to increase marketing. We expense marketing costs immediately. Now I turn the discussion over to Holder.

Thank you, Jeff. We will continue to leverage Travel Zoo's global reach, trusted brand, and our strong relationships with top 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. Today, I would like to share a bit of information about the Travel Zoo Club membership. Please turn to slide 16. Travel Zoo is becoming the place where the world's travel enthusiasts get together. Membership allows them to live their life to the fullest, and it comes with an array of benefits, most importantly, club offers that are only available to them. Slide 17 and 18 provide some examples of club offers. From unique experiences like cooking with a Michelin star chef in Tuscany, coupled with an amazing price, to a luxury escape to the Maldives in an overwater villa or an adventure in Iceland. Club offers provide outstanding value and make us travel enthusiasts get up and go even more. As slide 19 shows, worldwide complimentary lounge access in case of flight delays is another popular benefit among club members. Slide 20 provides more information about Travel Zoo members. Travel Zoo is loved by travel enthusiasts who are affluent, active, and open to new experiences. Moving to slide 22, it provides an overview of our management focus. We are working on grow The number of paying members and accelerate revenue growth by converting legacy members and 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. Growth checks fly clubs profitable subscription revenue. and develop TravelZoom Meta with discipline. Now, Christina will provide a quick update on TravelZoom Meta, as well as Jack's Flight Club.