Travelzoo

Good morning and welcome to the Travel Zoo's fourth 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 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 1 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 constituted 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 Travel Zoo's Global CEO, Holger Bartel, its Chair, Chief Membership Officer, and General Counsel and CEO of Jack's Fight Club, Christina Chiata, 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 Officers. 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 $22.5 million, up 9% from the prior year. In constant currencies, revenue is $22.1 million, up 7% from the prior year. Operating income, which we as management call operating profit, decreased as expected as we invested more in the growth of club members. Q4 operating profit was 0.6 million, or 3% of revenue, down from 4.9 million in the prior year. Let me explain the rationale for a significant increase in marketing expenses, which lowered EPS. Slide 5 shows that investments in the acquisition of club members are attractive, as they have a quick payback. On the left side, you will see that average acquisition costs for a full-paying club member was $28 in Q1, $38 in Q2, $40 in Q3, and $34 in Q4. On the right side, you see that we get this money back fast. The member pays, in the US in this case here, their $40 annual membership fee right away at the beginning of the membership period. Additionally, we generated $10 in revenue from transactions in the same quarter. This full payback doesn't even consider an increase in advertising revenue and future membership fees and other revenues. Now, slide six shows, as a reminder, that with subscription businesses, membership fee revenue is recognized ratably over the subscription period, whereas acquisition costs are expensed immediately when incurred. Slide seven shows the effect. While we have a quick payback, the reported EPS is different. Higher member acquisition expenses coupled with only a small portion of revenue recognized in the quarter, reduces EPS. In the case of Q4, that effect was a reduction of approximately $0.08. As shown on slide 8, our strategy is fueling membership growth at a rate of 180% year-to-date. New club members come roughly half from legacy members and half from those new to TravelZoo. On slide nine, we break down the main categories of revenues. Advertising and commerce and membership fees. Advertising and commerce revenue was $18.3 million for Q4 2025. Revenue for membership fees increased to $4.1 million. Membership fees, which are more stable and predictable, are adding revenue and are becoming a larger share. This year, we expect them to account for around 25% of revenue. In slide 10, you can see that revenue growth came from all reporting segments. Investment in member acquisition in Europe led to a loss. G&A expenses increased primarily due to a one-time expense related to a global company meeting. Operating profit on our North America and Europe segments was lower. Operating profit on our JAX Flight Club segment remained flat. In slide 11, you can see that our GAAP operating margin was 2% in Q4 2025. hiring more club members has the effect of lower GAAP operating margins. Still, given the favorable ROI, our goal is to further grow the number of club members to accelerate Travel Zoo's growth. Slide 12 shows that the 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 13, we provide information on non-GAAP operating profit, as we believe it better explains how we evaluate financial performance. Q4 2025 non-GAAP operating profit was 0.9 million, or 4% of revenue, compared to non-GAAP operating profit of 5.4 million in the prior year period. Slide 14 provides information about the items that are excluded in the calculation of non-GAAP operating profit. Please turn to slide 15. As of December 31st, 2025, Consolidated cash, cash equivalents, and restricted cash was $10.8 million. Cash flow from operations was $1.5 million. Our cash balance increased accordingly. Now looking ahead, for Q1 2026, we expect year-over-year growth to continue. We expect continued revenue growth in subsequent quarters as membership fees revenues recognized readily over the subscription period of 12 months, as we acquire new members, as more legacy members become club members. Over time, we expect profitability to 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. And we expense marketing costs immediately. Now I turn the discussion over to Holger.

Thank you, Jeff. We will continue to leverage travel with global reach or trusted brand and 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. Please turn to slide 17. Membership empowers travelers to live the life of a modern travel enthusiast to the fullest. while respecting different cultures. Membership provides access to high quality and highly valuable club offers. Our global team negotiates and vets them rigorously. These offers cannot be found anywhere else. Membership also provides complimentary access to airport lounges worldwide in case of flight delays. And we just launched, in partnership with Allianz, the first travel enthusiast hotline, providing 24-7 complimentary assistance wherever club members travel. Culinary journeys created for the travel enthusiast are coming soon. Slide 18 shows a few of the many exclusive club offers that we created for club members during Q4. Our members love luxurious trips, so on the left side, We had a Bali five-star jungle spa retreat for two people at an amazing price of $499. Below, a Costa Rica five-star new resort with an upgrade for TravelZoom members to an ocean view room. A $499 Portugal trip that includes round-trip flights from the US. Or in London, a Top West end show with dinner for 75 pounds per person. Slide 19 shows the worldwide complimentary lounge access in case of flight delays. It's perfect for the travel enthusiast. Slide 20 then provides information about Travel Zoo members. As you see, Travel Zoo is loved by travel enthusiasts who are affluent, active, and open to new experiences. On slide 22, we provide an overview of our management focus. We are working to grow the number of paying members and accelerate revenue growth by converting legacy members and adding new club members. 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 travel through meta with discipline. Now Christina will provide an update on Travel Zoo Meta and Jaxx Flight Club.