Travelzoo (NASDAQ:TZOO) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Travelzoo reported a 5% year-over-year increase in Q1 revenue to $24.3 million, with a stable operating profit of $3.4 million, representing 14% of revenue.
The company significantly increased marketing expenses to acquire club members, with acquisition costs decreasing over recent quarters and a quick payback period.
Membership fees, which are stable and predictable, are expected to account for over 20% of the company’s revenue this year.
Travelzoo’s strategy focuses on growing club membership by 112% year over year, with revenue growth from advertising, commerce, and membership fees.
Despite geopolitical issues affecting advertising revenue, the company remains optimistic about membership growth and expects profitability to increase over time.
New features like airport lounge access and a travel enthusiast hotline have been added to enhance membership value, and Travelzoo plans to introduce Travelzoo Meta experiences in Q2 2026.
Full Transcript
OPERATOR
Good morning and welcome to the Travelzoo’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 0. 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 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 10K and 10Q 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 [email protected] ir now it is my pleasure to turn over to To Travelzoo’s global CEO, Holger Bartel, its Chair, Chief Membership Officer and General Counsel and CEO of JAX Flight Club, Christina Chaka and its Financial Controller, North America, Jeff Hoffman. Jeff, we’ll start with an overview. Jeff, you may begin.
Jeff
Excuse me. 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 4. Revenue increased 5% year over year. Even though we invested more in the growth of club members, operating Profit remains 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 6 shows as a reminder that with subscription businesses, membership revenue is recognized readily 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 $0.13. We expect EPS to increase over time as shown on slide 8. 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 TravelZoo. On slide 9 we break down our main categories of revenue. Advertising, commerce and membership fees. Advertising and Commerce revenue was 19.7 million for Q1 2026. Revenue for 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 of our North American segment was lower. Operating profit on our Europe segment was higher. Operating profit on our JAX 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 acquisition expenses grows. Operating margins should increase again over time. Slide 12 shows that the investments in club members of Travelzoo 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 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 readily 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.
Holger
Thank you Jeff. 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 fluent, 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. 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 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 travelers who 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 complementary 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 with love 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 epsilon. Grow Czech Fly Club subscription revenue and develop travel through Meta with discipline. Now Christina will provide an update on TravelZumeta and check flight Club
Christina
thank you Holger. We’re excited to announce that we now expect the first Travelzoo Meta experiences to become available in Q2 2026. We’re planning to incorporate access to Travelzoo Meta as a benefit of Travelzoo Club membership for Jax Flight Club to align with Travelzoo and other investment priorities. Our focus is on maximizing revenue growth. To achieve this, we’re working to significantly lower the average cost per acquisition for new members and targeting acquiring into higher subscription fee, lower attrition membership plans like Annual now handing over to the operator for questions for Jeff, Holger and me. Thank you. If you would like to ask a question, please press Star one on your telephone keypad. You may remove yourself from the queue by pressing Star one Again. Please limit yourself to one question and one follow up. We’ll take our first question from Michael Kopinski with Noble Capital Markets. Please go ahead.
Michael Kopinski (Equity Analyst)
Thank you and thanks for taking my questions and congratulations on a great quarter. Quarter First, I just want to ask a little bit about just the current tone of the business right now and in terms of in light of the geopolitical issues that are going on in the world. And if you can just give us an update on that, then obviously we saw a significant sequential improvement in the margins in the quarter. How should we think about the cadence of margin recovery over the next couple of quarters? And then I just have one quick follow up. Hi Michael, So for sure the war in Ukraine and the effect on fuel prices, consumer sentiment, airline ticket prices is affecting us. Towards the end of Q1 we saw advertising indeed slow down. We didn’t see as much of a decline in response among our members because as travel enthusiasts they will just pick other destinations to travel to. But sure, at the end of Q1 we saw lower advertising revenue than we expected at that time, what would have even been better if the war had not happened? We continue to see that a bit at the beginning of Q2 as well. But things are normalizing, but with the news changing daily. The most important thing is that we have not seen much of an impact on member acquisition. We still see consumers signing up for Travel Zoo Club membership, so that’s good. But on, on the advertising side, yes, we are seeing a weakness and hope the war, with all its consequences will be over soon. Regarding the margins, look, it is as we have always explained it. On one hand, if we substantially increase member acquisition, that in the short run has a negative impact on margins. It lowers the margins because we expense member acquisition right away. We recognize the revenue only over the period of 12 months. On the other hand, what we started seeing this quarter is we have more renewals, membership renewals. Our membership with TravelZoo is for one year. So we have a substantially larger number of membership renewals coming up this year. And membership renewals have a positive impact on the margin because they are not associated with member acquisition expense. So it’s hard to predict what the impact will be over the next few quarters because it really depends on what we can invest on member acquisition, how much we can drive member growth even further, and on the other hand, what renewal rates among the upcoming renewals are. But so far we are quite pleased with those. Gotcha. And as far as my follow up call, does the company have specific operational or financial milestones tied to the next 12 to 24 months that align with the recently passed CEO incentive structure? My major objective is to grow the number of club members at Travelzoo as quickly as we can. That’s really our number one priority because that will ultimately drive the success and the financial performance of the business. Sounds good. All right, thanks, Holger.
OPERATOR
Your next question comes from the line of Patrick Scholl with Barrington Research. Please go ahead.
Patrick Scholl
Hi. Thanks for taking the question. You kind of touched on this with Mike’s question. You had a lot more renewal activity this quarter. Can you maybe talk a little bit about like the renewal rate churn and like what share of those members that renewed were at the price increase.
Holger
So, Patrick, we are not disclosing the renewal rate. We are. It is in line with our expectations. Our objective is to bring it up further. The membership fee in the US changed to $50 at the beginning of Q1 and on February 1st. Also, legacy members had to pay the $50. So for starting February 1st, the membership fee was $50 for anyone who renewed after February 1st in the US in the other markets, we did not change the membership fee during the quarter. A very large chunk of renewals is actually coming up on April 1st because as you might recall, back in 2024 we offered members an original legacy members, an original incentive to receive 15 months of membership for the price of 12. We’re very, very hesitant with any kind of promotions, but that’s what we did back then in order to reward the loyalty of our legacy members. These memberships, and it’s a quite large number, ended on March 31, 2026. So on April 1, 2026, we had quite a large number of renewals. And as I said, we are not disclosing the renewal rate, but we were actually quite happy with what the week was. Okay, wait, so with the. You wouldn’t receive the inflow cash until April 1st then for the renewals then this large group of legacy members is renewing or has renewed on April 1st or the following few days? Not in Q1 yet.
Patrick Scholl
Okay. And then could. Could you maybe talk about like just some of the features that you’ve added to the subscription service and if like what has sort of been helpful and kind of support. What do you. What do you find helpful in supporting renewal activity?
Holger
Look, we have several features. Different members like different things, different members find different things important. What is common among all of them is that they love our offers. Our offers. As I previously said, we work very hard of them. And that’s the number one reason why members love our membership. They are travel enthusiasts, they want to travel and we provide them offers to live that life of a travel enthusiast.
OPERATOR
Your next question comes from the line of Steve Silver with Argus Research. Please go ahead.
Steve Silver
Thanks operator and thanks for taking my questions. It’s great to see the recovery in operating margins in Q1. Curious your thoughts on as you continue to expand the perks that you’re offering under club membership, whether it’s the lounge access or the. Now with rolling meta into the club membership, I’m curious as to what the implications might be of adding new perks into club membership and the impact that might have on maintaining expanding operating margins going forward.
Holger
Most importantly, we do these things so that members get more out of their membership. We are very, very selective in what we find is valuable and exciting for travel enthusiasts. We vet that very much. We like to also be innovative. So far, the benefits that we are offering associated with TravelZoo membership do not incur significant expenses for us. Let me put it that way. Great.
Steve Silver
And one more if I may now it’s been a couple of quarters now since you’ve announced the lounge access, among some of the other perks with club membership. How often are you tracking those just to see if it’s generating the kind of traffic that you expected when launching these kind of features?
Holger
We monitor it continuously and our members really love it.
Steve Silver
Okay, fair enough. Thanks so much.
OPERATOR
Your next question comes from the line of Ed Wu with Ascendient Capital. Please go ahead.
Ed Wu
Yeah, also, congratulations on the subscriber growth. My question, I know it’s, you know, you mentioned that it’s slowed down toward the end of Q1 and a little Q2 because of the war. But, you know, absent taking that out, how what’s the overall, you know, travel industry doing and how does the summer travel season looking?
Holger
Are people kind of holding off to wait until the war is over, or are people still booking for their summer travel season as they are right around now? Look at summer behaving like normal. They are booking their trips. Others are hesitant. One of the benefits of our offers is that a lot of them come with full refundability. So we try to take a lot of risk out for the travel enthusiasts, we want them to dream about their next trip. We don’t want people to just sit in front of the tv, hear negative news out of Iran. So we feel our members are excited to travel in summer, and we create the offers in a way that it really works well for them. That sounds good. Thanks for answering my questions and I wish you guys good luck. Thank you. Thank you. Same to you, 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
Great. Dear investors, thank you for your time and support. We look forward to speaking with you again next quarter. Have a great day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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