Travelzoo

Good morning and welcome to the Travel Zoo second 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 opened for your questions. If you would 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 the 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 Ciocca, 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 Lijun, 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. Consolidated revenue was $23.2 million, down 3% year over year. In constant currencies, revenue was $23.1 million. International conflicts negatively impacted all business segments. Management considered this a temporary effect. In Q2, we continued to invest significantly in growing club members. This led to a reported loss. The Q2 reported loss was $2.8 million compared to reported operating profit of $2.1 million in the prior year period. Slide 5 just explains that we decided to accelerate the shift toward recurring membership revenues by more quickly growing paying club members. On the right side, you see the number of club members have steadily increased and we estimate further growth this year and in 2027. Please turn to slide six. We are scaling member acquisition to the point where payback still occurs quickly. On the left side, you see that the average acquisition cost of a club member was $62 in Q2. On the right side, you see that even at this level, there's an attractive return on investment. 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 of $15 per member in revenue from transactions in Q2. This doesn't even consider an increase in advertising revenues and future membership fees and other revenues in Q3 and future periods. Slide 7 explains, as a reminder, that with subscription businesses, membership fee revenue is recognized relatively over the subscription period whereas acquisition costs are expensed as marketing costs immediately when incurred. Slide 8 shows that marketing costs reduce reported quarterly EPS in the short term but are projected to drive better results in 2027 and beyond. While marketing costs are negatively impact EPS this year, we now estimate for 2027 EPS of $1.20. On slide 9, we break down our main categories of revenue. Advertising and commerce revenue was $18.2 million for Q2 2026. Revenue for membership fees increased to $5 million. Membership fees, which are more stable and predictable, are adding revenue and becoming a larger share, which we anticipate to increase further. This year, we expect them to account for over 20% of revenue. Please turn to slide 10. International conflicts affected revenue in all reporting segments. On slide 11, you can see that our reported gap operating margin for Q2 is negative 12%. Accelerated growth of club members reduces operating margin in the short term. As the number of membership renewals, which do not have acquisition expenses, grows, operating margins are expected to become more attractive over time. Slide 12 shows that investments of 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 and operating loss, as we believe it better explains how we evaluate financial performance. Key 226, non-GAAP operating loss was 2.1 million compared to non-GAAP operating profit of 2.4 million in the prior year period. Slide 14 provides information about the items that are excluded from the calculation of non-GAAP financial information. Please turn to slide 15. As of June 30, 2026, consolidated cash, cash equivalents, and restricted cash was $7.6 million. Our cash balance decreased, but not because of increased member acquisition. We reduced merchant payables by $2.7 million and repurchased $1.9 million of shares of our common stock. The increase in marketing doesn't affect cash significantly. We expect our cash balances to rebound next quarter. Now looking ahead, for Q3 2026, we expect year-over-year revenue growth. We also expect revenue growth in subsequent quarters as membership fees revenue is recognized readily over the subscription period of 12 months and 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 likely. 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 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 their life as a travel enthusiast to the fullest while respecting different cultures. Membership provides access to high quality and high valuable club offers Our global team negotiates and vets them rigorously. Club offers cannot be found anywhere else. Membership also provides complimentary access to airport lounges worldwide in case of flight delays. In Q1 2026, we 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 enthusiasts are coming soon. Slide 18 shows a few of the many exclusive club offers that we created for club members during the quarter. For example, a trip to Rome at a luxury hotel with flights from the UK for £249 per person. A vacation in Hawaii with three nights at the Hilton Resort including flights for $499. one of the hottest musicals in London right now is Paddington it's very difficult to get tickets but travel to club members who go to London and travel there we have a deal for you 89 pounds per person and it even includes dinner or a fourth example the Mexico San Regis in Punta Mita where we have an ocean view escape for two with butler service that saves travel through members over two thousand dollars over the regular price. Slide 19 shows the worldwide complimentary lounge access and cable flight delays. It is perfect for the travel enthusiast, and it's good on any flight that you take, not only on trips that you booked with travel, so any flights that you booked anywhere on an airline website or any travel agent, wherever. Wherever in the world you are, you benefit from this lounge access. Slide 20 provides information about sentiment and demographics of members. Travels with love by travel enthusiasts who are affluent, active, and open to new experiences. 90% of our members 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 medium household income shows that they have the means to do so. especially giving the outstanding value of our club offers. Slide 22 provides an overview of management's 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, Go Jack's Flight Club subscription revenue and launch Travel Zoo Meta with discipline. Now Christina will provide an update on Travel Zoo Meta and Jack's Flight Club.