Travelzoo

Good morning and welcome to the Travel Zoo's first quarter 2026 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, please press star zero. The company would like to remind you that all statements made today during this conference call and presented in the slides that are not statements of historical facts constitutes forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ 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 Form 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 over to TravelZoo's global CEO, Holger Bartel, its chair, chief membership officer, and general counsel, and CEO of Jack's Flight Club, Christina Chaka, and its financial controller, North America, Jeff Hoffman. Jeff, we'll start with an overview. Jeff, you may begin.

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 four. Revenue increased 5% year over year. Even though we invested more in the growth of club members, operating profit remained stable. Q1 consolidated revenue was 24.3 million. In constant currencies, revenue was 23.6 million, up 2% from the prior year period. Q1 operating profit was 3.4 million, or 14% of revenue, compared to 3.8 million in the prior year period. Let me explain the rationale for our significant increase in marketing expenses. Slide 5 shows that investments in the acquisition of club members are attractive, as they have a quick payback. On the left side, you see that the average acquisition cost of a club member was $28 in Q1 2025, $38 in Q2, $40 in Q3, $34 in Q4, and $27 in Q1 2026. On the right side, you see that we get this money back fast. the member pays, in the US case here, their $50 annual membership fee right at the beginning of the membership period. Additionally, we generated an average $14 per member in revenue from transactions in Q1. This full payback doesn't even consider an increase in advertising revenues and future membership fees and other revenues in Q2 and future periods. Now, slide six shows, as a reminder, that with subscription businesses, Membership revenue is recognized relatively over the subscription period, whereas acquisition costs are expensed immediately when incurred. Slide 7 shows the effect. Higher member acquisition expenses, coupled with only a small portion of revenue recognized in the quarter, reduces EPS in the same quarter. In the case of Q1, that effect was a reduction of approximately 13 cents. We expect EPS to increase over time. As shown on slide eight, our strategy is fueling member growth at a rate of 112% year-over-year. New club members come roughly half from legacy members and half from those new to Travel Zoo. On slide nine, we break down our main categories of revenue, advertising and commerce, and membership fees. Advertising and commerce revenue was $19.7 million for Q1 2026. Revenue from membership fees increased to $4.6 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 over 20% of revenue. On slide 10, you can see that revenue growth came from all reporting segments. With attractive ROI and member acquisition, we invested both in North America and Europe segments. Operating profit of our North American segment was lower. Operating profit on our Europe segment was higher. Operating profit on our Jaxx Flight Club segment remained flat. On slide 11, you see that our GAAP operating margin for Q1 was 14%. Acquiring more club member reduces operating margin in the short term. As the number of membership renewals, which do not require an acquisition expenses, grows, operating margins should increase again over time. Slide 12 shows that the investments in club members of Travel Zoo 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 operating – how we evaluate financial performance. Q1 2026 non-GAAP operating profit was 3.5 million, or 14% of revenue, compared to non-GAAP operating profit of 4.4 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 March 31, 2026, Consolidated cash, cash equivalents, and restricted cash was $11.3 million. Cash flow from operations was $3.9 million. Our cash balance increased even though we repurchased 500,000 shares of our common stock. Now looking ahead, for Q2 2026, we expect year-over-year growth to continue. We also expect continued revenue growth in subsequent quarters as membership fees Revenue is recognized relatively 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 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. As a reminder, we expense marketing costs immediately. Now I turn the discussion over to Holger.

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 fluent, 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 travel enthusiast to the fullest while respecting different cultures. Membership provides access to high quality and highly valuable club offers. Have a look at slide 18. A trip to the Azores for $299, including four nights hotel and flights from the US. A week at a Tuscan castle with car hire for 299 pounds per person. Or a special member rate at one of the most iconic resorts in the US where 23 presidents have stayed. all the way to a five-star luxury trip to Anguilla, which was voted the best island in the Caribbean for 40% off, especially for Travel Zoo Club members. Club offers cannot be found anywhere else. Our global team negotiates and vets them rigorously. Membership also provides complimentary access to airport lounges worldwide in case of flight delays. In Q1 2026, we also launched in partnership with Allianz, the first travel enthusiast hotline. It provides 24-7 complimentary assistance wherever you travel. Culinary journeys curated for the travel enthusiast are coming soon. Slide 19 shows the worldwide complimentary lounge access in case of flight delays. It is perfect for the travel enthusiast. Slide 20 provides information about sentiment and demographics of new members. Travels who is loved by travel enthusiasts who are affluent, active, and open to new experiences. 90% state that they are open to new destinations and travel ideas. Almost 70% plan to take two or more international trips in 2026. And information about their median household income shows that they have the means to do so, especially given the outstanding value of our club offers. Finally, slide 22 provides 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 subscription revenue, and develop TravelSoup Meta with discipline. Now, Christina will provide an update on TravelSoup Meta and ChexFlightClub.