Travelzoo Q2 2025 Earnings Report

Travelzoo EPS Results

• Actual EPS: $0.12
• Consensus EPS: $0.23
• Beat/Miss: Missed by -$0.11
• One Year Ago EPS: N/A

Travelzoo Revenue Results

• Actual Revenue: $23.91 million
• Expected Revenue: $23.51 million
• Beat/Miss: Beat by +$396.00 thousand
• YoY Revenue Growth: N/A

Travelzoo Announcement Details

• Quarter: Q2 2025
• Date: 7/23/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 23, 2025
• Conference Call Time: 11:00AM ET

Travelzoo (NASDAQ:TZOO), together with its subsidiaries, operates as an Internet media company that provides travel, entertainment, and local experiences worldwide. It operates in four segments: Travelzoo North America, Travelzoo Europe, Jack's Flight Club, and New Initiatives. The company offers Travelzoo website, Travelzoo Top 20 email newsletters, Standalone email newsletters, Travelzoo Network, Travelzoo mobile applications, Jack's Flight Club website, Jack's Flight Club mobile applications, and Jack's Flight Club newsletters. The company's Travelzoo website and newsletters include local deals and getaways listings that allow members to purchase vouchers for offers from local businesses, such as spas, hotels, and restaurants; Jack's Flight Club, a subscription service that provides members with information about exceptional airfares; and Travelzoo Network, a network of third-party websites that list travel deals published by the company. It serves airlines, hotels, cruise lines, vacations packagers, tour operators, destinations, car rental companies, travel agents, theater and performing arts groups, restaurants, spas, and activity companies. Travelzoo Inc. was incorporated in 1998 and is headquartered in New York, New York.

Travelzoo Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 revenue rose 13% year-over-year to $23.9 million (12% in constant currency), driven by growth across all segments.
• Negative Sentiment: Q2 operating profit fell to $2.1 million (9% margin) from $4 million last year, as higher member acquisition expenses reduced EPS by $0.13.
• Positive Sentiment: Member acquisition cost averaged $38 in Q2 with an immediate payback via a $40 annual fee and $18 of same-quarter transactions, underscoring the favorable ROI.
• Positive Sentiment: Membership fees grew to $3 million in Q2 and are expected to comprise about 25% of total revenue next year, supporting future margin expansion.
• Positive Sentiment: Jack’s Flight Club revenue jumped 33% and premium subscribers rose 15%, while cash reserves totaled $11.2 million with $1.3 million in operating cash flow.

Presentation

[Operator]

Good morning, and welcome to the Travelzoo Second Quarter twenty twenty five Earnings Call. Today's call 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. Call 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.

[Operator]

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 ks 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 www.travelzoo.com/ir.

[Operator]

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 Fight Club, Christina Tsikata and its financial controller, North America, Jeff Hoffman. Jeff will start with an overview.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

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/ir. Let's begin with Slide four.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

Travelzoo's consolidated Q2 revenue was $23,900,000 which is up 13% from the prior year. In constant currencies, revenue was $23,500,000 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 $2,100,000 or 9% of revenue, down from $4,000,000 in the prior year. Let me explain the rationale for our significant increase in marketing expense, which lowered EPS.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

Slide five shows the favorable payback on the acquisition of new club members that we were able to achieve. On the left side, you see that average acquisition cost for a full paying club member was $28 in Q1 and $38 in q two. On the right side, you see that we get this money back right away. The member pays, in The U. S.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

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 ratably over the subscription period, but the acquisition costs are expensed immediately when incurred. Slide seven shows the effect.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

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 $0.13 On Slide eight, you can see that revenue growth came from all segments. With favorable ROI on member acquisition in The U. K, we invested heavily there.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

Jack's Flight Club revenue increased by 33%. Operating profit decreased in both our North America and Europe segments but increased slightly in our Jack's 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 $20,900,000 for Q2 'twenty five. Revenue from membership fees increased to $3,000,000 Membership fees have started to drive significant revenue growth.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

Next year, we expect them to account for about 25% of revenue. On Slide 10, you can see that our GAAP operating margin was 9%. In Q2 'twenty five, acquiring more club members has the effect of lowering GAAP operating margin. Still, given the currently favorable ROI, we will continue to further grow the number of club members to bring Travelzoo into high growth mode. Slide 11 shows that investments in club members occur in all key markets.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

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 Travelzoo's management evaluates financial performance. Q2 twenty twenty five non GAAP operating profit was $2,400,000 that's 10% of revenue compared to non GAAP operating profit of $4,800,000 in the prior year period. Slide 13 provides information about the items that are excluded in the calculation from non GAAP operating profit. Please turn to Slide 14.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

As of 06/30/2025, consolidated cash, cash equivalents and restricted cash was $11,200,000 Cash flow from operations was $1,300,000 We reduced merchant payables by 2,400,000 and repurchased 172,088 shares. Now looking ahead, for Q3 twenty twenty five, we expect year over year revenue growth to continue. We expect revenue growth to accelerate as a trend in subsequent quarters as membership fees revenue is recognized ratably over this subscription period of twelve 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.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

We might see attractive opportunities to increase marketing. We expense marketing costs immediately. Now I turn the discussion over to Holger.

[Holger Bartel, Global CEO at Travelzoo]

Thank you, Jeff.

[Holger Bartel, Global CEO at Travelzoo]

We will continue to leverage Travelzoo's global reach, trusted brand and our strong relationships with top travel suppliers to negotiate more club offers for club members. Travelzoo members are affluent, active and open to new experiences. We inspire travel enthusiasts to travel to places they never imagined they could. Travelzoo 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 Travelzoo Club membership.

[Holger Bartel, Global CEO at Travelzoo]

Please turn to Slide 16. Travelzoo 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 seventeen and eighteen 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.

[Holger Bartel, Global CEO at Travelzoo]

As Slide nineteen shows, worldwide complementary lounge access in case of flight delays is another popular benefit among club members. Slide twenty provides more information about Travelzoo members. Travelzoo 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 grow Czech's Flight Club's profitable subscription revenue and develop Travelzoo Meta with discipline.

[Holger Bartel, Global CEO at Travelzoo]

Now Christina will provide a quick update on Travelzoo Meta as well as Czech's Flight Club.

[Christina Ciocca, General Counsel & Head of Global Function at Travelzoo]

Thank you, Holger. We continue to work on the production of the first metaverse travel experiences. They will be browser enabled. As stated in previous earnings calls, we are conscious of developing Travelzoometa disciplined way. Are We will provide additional updates in due time.

[Christina Ciocca, General Counsel & Head of Global Function at Travelzoo]

For Jack's Flight Club, revenue increased 33 percent year over year and the number of premium subscribers increased 15%. The increase in revenue is driven primarily by investments in growth of the premium subscribers over the past few years and the increase in the price of the membership fee, which was implemented in Q2 of last year. We plan to continue to invest in growth, especially now as we have even more runway to do so. I'm now handing over to the operator for questions for Jeff, Holger and me.

[Operator]

Thank you. Your first question comes from Theodore O'Neill with Litchfield Hills Research. Please go ahead.

[Theodore O'Neill, CEO at Litchfield Hills Research]

Hey, thanks very much. I'm trying to understand a little more clearly the dynamics of the profitability going forward. And I'm thinking about this Slide seven here with the net impact in the quarter being a loss of $13 So when you talk about the profitability improving over time, does that mean that the acquisition costs go lower or the revenue goes higher? Or both of those things are occurring?

[Holger Bartel, Global CEO at Travelzoo]

Theodore, the Slide seven looks at one specific quarter. It looks at Q2. So in Q2, we had marketing expenses, actually membership acquisition expenses of EUR 2,700,000.0. And then the slide shows the revenue that is specifically generated from the members that we acquired in Q2. You see is that in quarters going forward, so in Q3, Q4, we will continue to generate revenue from these, but we will not have expenses to that cohort of new members that signed up.

[Holger Bartel, Global CEO at Travelzoo]

Now in Q3, we will sign up new members. So there will be new member acquisition costs for these new members, but we will have the positive impact for members that we acquired in Q1, Q2 and even at the end of last year, which will contribute revenue growth in form of membership fees. So coupled together with all that revenue that is coming in from members that were acquired in the past, that is what's driving overall profitability going forward in the next few quarters and then more so next year.

[Theodore O'Neill, CEO at Litchfield Hills Research]

Okay. Thanks very much. And my other question is about the club offers. So I've got my press release here about the offers from July 17. And I'm wondering about the sort of the pace of these.

[Theodore O'Neill, CEO at Litchfield Hills Research]

Do you expect, like, is this a monthly thing that we will come up with special off these offers? Is this a quarterly sort of what's the what's the expected pace of of these offers?

[Holger Bartel, Global CEO at Travelzoo]

There are several per week. There are many per week, usually a few dozen per week. We do not issue press release for every new club offer. The press releases just show an example of some offers that we released over that period.

[Theodore O'Neill, CEO at Litchfield Hills Research]

Okay. I thought perhaps there was something special there. Okay. Thanks very much.

[Operator]

Your next question comes from the line of Michael Kupinski with NOBLE Capital Markets. Please go ahead.

[Michael Kupinski, Director of Research, Managing Director, Head of Technology Research at Noble Financial Capital Markets]

Thank you for taking my questions. Appreciate it. You stated that you invested in acquiring subscribers and I while I see the marketing expenses went up, it seems like the cost of revenues also went up significantly. I was wondering if you can address the cost of revenues in the quarter.

[Holger Bartel, Global CEO at Travelzoo]

Sure, Michael. We had a few opportunities again to purchase distressed inventory, distressed travel products from suppliers with a highly discounted price. And that allowed us to create very strong club offers. And you heard that they are very important to our members. So that in turn is what we then leverage to attract new members.

[Holger Bartel, Global CEO at Travelzoo]

And it also makes it easier to convert legacy members to club members. And to properly classify these expenses, we had to put them into cost of revenue.

[Michael Kupinski, Director of Research, Managing Director, Head of Technology Research at Noble Financial Capital Markets]

Got you. And so as we kind of look towards the second half of the year, should we look for more normalized or normalized levels? Or how how should we look at that given that this seems like it was more of a onetime opportunity? So can you kind of just give us what might be ongoing?

[Holger Bartel, Global CEO at Travelzoo]

It really depends on the opportunities that we see. Since the travel industry in general, particularly hotels are seeing a little bit weaker demand, I would expect that we will continue to see these opportunities.

[Michael Kupinski, Director of Research, Managing Director, Head of Technology Research at Noble Financial Capital Markets]

Okay. And then I guess in terms of the favorable dynamics in terms of the investments in marketing spend, is that something that we should model going into the second half of the year? Are those favorable dynamics still evident as we go into the third quarter?

[Holger Bartel, Global CEO at Travelzoo]

Well, look, Michael, as we explained, the payback is very, very attractive for us. So essentially, I give someone $28 $38 and right away, they give me $40 or $58 back. I would do that as much as I can. So the question is probably what stops us from doing more of that? And let me explain you what stops us from that is our cool head.

[Holger Bartel, Global CEO at Travelzoo]

Of course, we will only do it as long as the payback is favorable. So as long as we can keep that acquisition cost at $40 or below, and we actually hope we can even lower it further as we gain more experience, we continue to invest in member acquisition. We would be stupid not to do so. So in essence, the market somehow will drive how much we can spend. And that's why it's very difficult to predict for the next couple of quarters how much we will effectively spend on member acquisition.

[Holger Bartel, Global CEO at Travelzoo]

If the conditions are the same, if we can continue to see that very attractive payback, we will continue to invest even if it affects in the very, very short term EPS. But I'm sure you will model this out. And as you then move into next year and you see all this revenue coming in from the new members that we acquired this year because the revenue gets prorated over the next twelve months, then we will finally see the very, very positive impact of the members we are acquiring now.

[Michael Kupinski, Director of Research, Managing Director, Head of Technology Research at Noble Financial Capital Markets]

It appears that the focus on acquiring subscribers, tell me if I'm wrong, but it seems like it was focused in Europe. Can you talk a little bit about the strategy there, particularly about your European strategy?

[Holger Bartel, Global CEO at Travelzoo]

It was both. Actually, we acquired even more club members in North America. You just noticed that in Europe, we reported a loss. So one might wonder why was there specifically a loss in Europe this quarter. And the answer is simply that member acquisition in The UK went extremely well.

[Holger Bartel, Global CEO at Travelzoo]

Members, consumers were very attracted to our model. We have a good brand there. Our offers are strong. So we were able to acquire club members there at a very attractive price. And so we put more money into The UK and that's what drove the income in Europe lower than it was last year.

[Michael Kupinski, Director of Research, Managing Director, Head of Technology Research at Noble Financial Capital Markets]

And my final question, Holger, thanks for all the questions. Can you talk about the prospect of maybe a premium subscription level? I know that you you talked a bit in previous calls about the prospect that the the $40 annual fee is seemingly pretty low given the value that you have for your membership. And I was just wondering if you had given us some thought about the rollout of more of a premium subscription level and whether or not that might be for 2026 or maybe out in 2027.

[Holger Bartel, Global CEO at Travelzoo]

Good idea, Michael. We are not looking at it right now. We want to keep things simple. So we will go with this one tier. However, you are right.

[Holger Bartel, Global CEO at Travelzoo]

From conversations that we have with our members, we see that our membership fee is probably too low. And for 2026, we will evaluate by what extent we would like to increase it, if so.

[Michael Kupinski, Director of Research, Managing Director, Head of Technology Research at Noble Financial Capital Markets]

Great. Thanks for all the questions. Appreciate it. Good luck.

[Operator]

Your next question comes from the line of Patrick Scholl with Barrington Research. Please go ahead.

[Patrick Sholl, Vice President at Barrington Research Associates]

Hi. I just have another question on the, subscriber acquisition spending. Are are you essentially saying that you would limit how much you are willing to pay on SAC to that annual membership fee? And then just on in terms of, like, the benefits for the members, like, if we think of, like, maybe, like, a gross contribution for the membership fee, I guess, you know, how how should we maybe think about, like, how that nets out versus some of the benefits? Obviously, excluding, you know, the benefit of being able to access and purchase the the deals they present to them.

[Holger Bartel, Global CEO at Travelzoo]

So, Pat, what I meant is that the effectiveness and the ROI of member acquisition is what will limit our activity to acquire new club members. If our acquisition cost to acquire new club members in U. S, for example, was way higher than $58 we would obviously slow down. We would maybe even discontinue investing in certain channels that we use to acquire new members. So that's what I meant.

[Holger Bartel, Global CEO at Travelzoo]

As long as the payback is positive, then we have no reason not to invest because even from a cash perspective, the $38 is mostly what we pay to advertising channels, be it Meta, Google or some others, while the $40 is something that comes in from the member right away. So as soon as they join, they pay the $40 membership fee with their credit card. So even from a cash perspective, there's no limitation on how much we could do. So answering your second part, when we when I speak with members, I meet with them a lot, they value different benefits differently. The number one thing why they love to be members of Travelzoo is because if because as we say, they are we are travel enthusiasts.

[Holger Bartel, Global CEO at Travelzoo]

They love to go to new places. I met a couple that went to an Italian lake in Italy. They said we had never even heard of it, but Travelzoo told us about it. It sounded so exciting. We just decided to go.

[Holger Bartel, Global CEO at Travelzoo]

We just came back and we booked already another trip. So that's what Travelzoo Club what the Travelzoo Club is all about. And others really appreciate these benefits like free lounge access for flights. In fact, we had one member who already registered over 50 flights over the next few months for this benefit. So even people who travel very frequently see such a good value in being a Travelzoo member because of that.

[Patrick Sholl, Vice President at Barrington Research Associates]

Okay. And so I I understand that it's, the cohort cohort of subscribers, in a year ago were much lower. But I I was just kind of curious if you if there's any sort of things that you've learned in terms of being able to retain, subscribers, and just how how that those retention efforts have been working.

[Holger Bartel, Global CEO at Travelzoo]

The majority of members, club members that we have right now became club members at the 2024 because they were legacy members. They were members who have been traveling for a long time and they were excluded. They now have their membership until the end of the year. So we only will start having really good and reliable data on renewal rates starting at the 2026 unfortunately.

[Patrick Sholl, Vice President at Barrington Research Associates]

Yes. No. I I understand that. I was just under the impression that, you know, you had brought in some numbers before that. That was that was all I was really asking about.

[Patrick Sholl, Vice President at Barrington Research Associates]

But okay. Alright. I think that's all I had. Thank you.

[Holger Bartel, Global CEO at Travelzoo]

Sure.

[Operator]

Your next question comes from the line of Ed Woo with Adhesion Capital. Please go ahead.

[Edward Woo, Director of Research & Senior Analyst at Ascendiant Capital]

Yeah. Congratulations on the subscriber growth. My question is what are you seeing out in the travel industry, you know, in The US as well as in Europe in terms of, you know, is it, you said it was a little bit soft. Have you noticed any, you know, is it getting worse? Is it stabilized? Thank you.

[Holger Bartel, Global CEO at Travelzoo]

Hi, Ed. There's not much difference right now between North America and Europe. As you have seen, prices for flights are coming down. It's not like the airlines are flying empty. Hotel prices are coming down.

[Holger Bartel, Global CEO at Travelzoo]

That all indicates a bit lower demand. And we are this allows us to develop these strong offers. I mean, you saw some of these club offers. They provide excellent value. And that's what we do by taking advantage of how the travel industry is evolving.

[Edward Woo, Director of Research & Senior Analyst at Ascendiant Capital]

Great. So, you know, you you did mention that, you know, when it is a little bit weaker in the hotels and travel suppliers need to fill in their rooms, Have you noticed any change in consumer behavior? Have you noticed, you know, maybe your high end spenders trading down or or spending less?

[Holger Bartel, Global CEO at Travelzoo]

No. We have not heard that from our members. Our members are actually quite affluent. And from all the conversations and meetings we have had, we haven't heard that they would be trending down. But, you know, they are Travelzoo members, so it allows them to go to very luxurious places and incredible experiences at prices that are much better than what other people are paying.

[Holger Bartel, Global CEO at Travelzoo]

So that by effect allows them to do more with less.

[Edward Woo, Director of Research & Senior Analyst at Ascendiant Capital]

Great. And then my last question is just, you know, I'll say you talked to lot these travel suppliers. Do you think that people just see this as kind of like a little bit of a blip? Or do they are people a little bit concerned heading into the back half and maybe possibly into 2026 in terms of the weakening travel trends?

[Holger Bartel, Global CEO at Travelzoo]

Right now, everyone is thinking quite short term because the whole environment is a bit insecure. I'm sure People don't know what's happening in The US with the political administration and so forth. So no one is really making any long term predictions.

[Edward Woo, Director of Research & Senior Analyst at Ascendiant Capital]

Great. Well, thanks for answering my questions, and I wish you guys good luck. Thank you.

[Jeff Hoffman, Controller - Hotels at Travelzoo]

Sure. You're welcome, Ed.

[Operator]

This concludes the Q and A portion of today's call. I would like to turn the call back over to Mr. Holger Bartel for closing remarks.

[Holger Bartel, Global CEO at Travelzoo]

Sure. Dear investors, thank you so much for your time and support today, and we look forward to speaking with you again next quarter.

[Operator]

This concludes today's Travelzoo's second quarter twenty twenty five earnings call and webcast. You may disconnect your lines at this time and have a wonderful day.

Participants

Executives

• Jeff Hoffman, Controller - Hotels
• Holger Bartel, Global CEO
• Christina Ciocca, General Counsel & Head of Global Function

Analysts

• Theodore O'Neill, CEO at Litchfield Hills Research
• Michael Kupinski, Director of Research, Managing Director, Head of Technology Research at Noble Financial Capital Markets
• Patrick Sholl, Vice President at Barrington Research Associates
• Edward Woo, Director of Research & Senior Analyst at Ascendiant Capital