Travelzoo (TZOO) 2026 Q3 法說會逐字稿

Hello, everyone. Thank you for joining us, and welcome to the Travelzoo third quarter 2026 earnings call. (Operator Instructions) 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 this conference call will be made available on the company's Investor Relations website at travelzoo.com/ir. You can also download a copy of the Q3 presentation in the bottom right-hand corner of your screen.

Now it is my pleasure to turn the floor over to Travelzoo's Global CEO, Holger Bartel; its Chair, Chief Membership Officer and General Counsel and CEO of Jack's Flight Club, Christina Ciocca; and its Financial Controller, North America, Jeff Hoffman. Jeff will start with an overview.

Thank you, operator, and welcome to those of you joining us. Today, I'm stepping in Lijun Qi, 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 again year over year. Consolidated revenue was $22.9 million, up 3% year over year. In constant currencies, revenue was $23 million. We still reported a loss due to our investment in growing Club Members. The Q3 reported loss was $2.6 million compared to reported operating profit of $0.5 million in the prior year period.

Slide 5 explains that we decided to accelerate the shift toward membership fee revenue by more quickly growing paid Club Members. The reported quarterly loss came from higher investment in growing the number of Club Members. Our objective is to increase recurring membership fees revenue.

Please turn to slide 6. Paid Club Members drive recurring revenue from membership fees. In Q3, we added the largest number of Club Members yet. The number of Club Members increased 65% year over year.

Slide 7 explains as a reminder that with subscription businesses, membership fee revenue is recognized ratably over the subscription period, whereas acquisition costs are expensed as marketing costs immediately. Slide 8 shows that marketing costs reduced reported quarterly EPS in the short term but are projected to drive better results in 2027 and beyond when deferred revenues and recurring revenues increase profitability. While marketing costs are negatively impacting EPS this year, we still estimate a positive impact on 2027 EPS of $1.20.

Please turn to slide 9. Even though we invested even more than in Q2 and acquired more members, the average acquisition cost is lower, better in Q3. On the left side, you see that the average acquisition cost of a Club Member was $54 in Q3. 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 within 90 days. In addition, there will be revenue from transaction and advertising and future membership fees from recurring renewals in future period. We believe the total payback is attractive.

Now please turn to slide 10. Both the North America and Europe segments increased revenues. Jack's Flight Club reported a decline due to a decrease in deferred revenue from less members acquired in Q1 and Q2.

On slide 11, you will see the reported GAAP operating margins. As a number of membership renewals, which do not have acquisition expenses grows, operating margins are expected to substantially improve. In the short term, fluctuations are likely.

Slide 12 shows that investments of Club Members of Travelzoo occur in all key markets. 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. In Q3 2026, non-GAAP operating loss was $2.1 million compared with non-GAAP operating profit of $1.1 million in the prior year period.

Slide 14 provides information about the items that are excluded in the calculation of non-GAAP financial information. Please turn to slide 15. As of September 30, 2026, our consolidated cash, cash equivalents and restricted cash was $8.8 million, an increase in $1.2 million compared with Q2. We repurchased 256,898 shares of our common stock.

Now looking ahead, for Q4 2026, we expect year-over-year revenue growth. We also expect revenue growth in the subsequent quarters as membership fees revenue is recognized ratably over the subscription period of 12 months as we grow Club 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'll turn the discussion over to Holger.

Thank you, Jeff. We will continue to leverage Travelzoo's global reach, our trusted brand, and the 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 imagine 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. Our global team negotiates and vets them rigorously. Club Offers cannot be found anywhere else. Some examples, GBP59 for stays for 2 at 1 of 15 cosy English inns, a 16-night Hawaii Cruise for less -- for around $60 per day, which includes your cabin, food, drinks, entertainment, also exclusive offers like a cooking class with a Michelin star chef in Tuscany or for those who want luxury and seclusion, an all-inclusive stay at a 5-star private island in the Maldives.

Membership also provides complimentary access to airport lounges worldwide in case of flight delays. And 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 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 members.

Travelzoo is loved by travel enthusiasts who are affluent, active and open to new experiences. 90% state they are open to new destinations and travel ideas. Almost 90% are likely to book an unplanned trip with an attractive offer. 62% plan to take two or more international trips in 2027.

Information about their median household income shows that they have the means to do so, especially given the outstanding value of our Club Offers. Travelzoo members also hold on to leisure travel longer than the general population if household spending had to be cut.

Finally, on Slide 27, we provide an overview of our management focus. We are working to grow the number of paying club members and accelerate revenue growth by converting Legacy Members and adding new Club Members. Retain and grow our profitable advertising business, accelerate revenue growth, which drives future profits in spite of temporarily lower EPS, grow Jack's Flight Club's subscription revenue and launch Travelzoo META. Now Christina will provide an update on Travelzoo META and Jack's Flight Club.

We expect the first Travelzoo META experiences to become available in Q4 of 2026. Access to Travelzoo META will be an exclusive benefit of Travelzoo Club membership. For Jack's Flight Club, to align with Travelzoo and other investment priorities, our focus is on revenue growth by growing members. I'm now handing over to the operator for questions for Jeff, Holger and me.

(Operator Instructions) Patrick Sholl, Barrington Research.

I guess just at this point, about a year -- almost two years into having moved from the Legacy Members and bringing them to pay. I'm just kind of curious if you could talk about anything you've seen in terms of like main drivers of user churn -- of subscriber churn and kind of efforts around retention and what those have looked like as you've gotten more experience with the product.

Patrick, what we are hearing from the Club Members is what's mostly driving their retention and renewal are the great offers, the exclusive offers that we provide them. I gave a few examples. That's really what's most important to our members. These are offers that you do not find anywhere else.

Some others also, of course, value the benefits. We have added more benefits over time. Just as I said, the Travel Enthusiast Hotline. These are also adding to continued interest in the membership. It allows us to grow the number of members. As we said earlier, this quarter in Q3, we added the most Club Members ever. So we are confident in the future.

Okay. And then I think earlier in the call, you said that this was a record quarter for new member additions. As kind of looking at the cash flow statement, there was kind of like a deceleration in the increase in deferred revenue. I was just kind of curious if you could like reconcile some of that disparity, if that's just the timing of member additions and versus trial starts and just maybe just some of the factors that go into that.

Exactly. The quick answer is that most new members join with a trial, which in the US is $1. In UK, it's GBP1. Only when they then convert after 30 days to the full membership, that's when we recognize the revenue and when it creates deferred revenue. So it's exactly what you explained.

Yes. So would we be expecting like a significant acceleration in deferred revenue in Q4? Or is there just a difference between the conversion from that trial to a full year membership?

It's the 30-day delay. The more members we add, the higher and more fast deferred revenue will grow. It's exactly what you said.

Michael Kupinski, NOBLE Capital Markets.

You highlighted a decline in average US acquisition cost to $54 from $62 in the second quarter. What drove that improvement? And how sustainable is it that you can continue to accelerate membership growth at that rate? And I guess, is there an opportunity to bring those acquisition costs back down towards the $27 level that you reported in the first quarter?

You are correct, Michael. We added more members at a lower acquisition cost. We're very happy about that trend. Christina, do you want to add what's driving that?

Sure. I think the main driving factors of the efficiencies that we found in Q3 is a combination of we had a lot of great offers that we use on various channels like Facebook that drive a lot of interest in the membership.

And so we were able to have large volumes of offers running, which allows us to scale our spend up. And then when we see that there's interest in those offers, it allows us to get the efficiencies down despite scaling up spend significantly.

Got you. It certainly worked for me. I'm going on a trip next week. The follow-up, the Club Members increased an impressive 65%, as you mentioned, year-over-year. Can you provide more color on how much of that growth came from converting existing Legacy Members versus attracting entirely new members?

And then your presentation projected membership revenue increasing from approximately $17 million to more than $30 million in 2027. And how much of that growth is already supported by existing paid memberships and deferred revenue versus assumptions for new membership acquisition and renewals?

Michael, the answer to your first question is it's typically about half-half. In Q3, it was more new members, a little bit more than half. And to answer your second question, that number of $30 million is based on members we have already. What we are expecting -- how many of them we are expecting to renew and new members that we are signing up.

As Patrick mentioned earlier, there is already substantial deferred revenue, around $13 million on the balance sheet that will continue to increase. And then with all the new revenue and payments that are coming in, that's how we get to around $30 million. That's our expectation for next year.

Edward Woo, Ascendiant Capital.

As we are heading into 2027, what's your travel outlook so far? What are you seeing out there? And there's a lot of news about unrest in Europe, a lot of protests. Do you think that's going to have any impact on your travel business?

What we are seeing in travel ad is similar to what we are seeing in other industries. On the one hand, people have money continue to spend. They are spending even more. On the other hand, people at the very low income end have to cut things.

Fortunately, most of our members are on the upper end. And I would even think most of them would pay a substantially higher membership fee than $50, but that's what we are -- that's what we have set it at right now. With regards to the situation in Europe, in the past, we have always seen that this impacts travel behavior rather short term. Maybe someone might not be traveling to France right now, but it quickly changes and then people travel again.

My one follow-up question would be, obviously, you benefit and you thrive when hotels or travel suppliers have issues filling the rooms. Is that a flip side that you guys are getting more calls of people worried because people can't fill these hotel rooms because of the news press that you guys would be able to drive more deals?

Yes, that's the case. If the hotels are empty or are struggling, they come to us. When it's low season, they come to us, and that's where we help. And as we've seen before, our travel enthusiasts are very open to going wherever we give them good deals. So that's the great flexibility about our club and our members that they are not predetermined on where they want to go. They are open to new experiences, and that's what our entire business is benefiting from.

Steven Silver, Argus Research.

So in the quarter, there was a sizable reduction in accounts receivable that supported the operational cash flow. So it's now closer towards the levels that they were at, at the end of 2025. I'm just curious as to your thoughts on that level, whether it's kind of where you would expect it to be moving forward or whether you think there's a little bit more leverage in accounts receivable to support cash flows in the near term?

Good observation. Yes, Steven, we stated in Q2 that accounts receivable were exceptionally high for very specific reasons. Now we are back to normal, and we expect to remain at this level.

Great. And one more, if I may. So with the expected launch of META in this quarter, I'm curious as to whether you guys have done any studies or just trying to size up if there's any pent-up demand for META ahead of its launch? Or is it going to be the kind of thing where the product is going to launch within the club membership and then you'd market it after launch?

Christina?

We would include it as a part of club membership and market it as we launched essentially. But in terms of your question of pent-up demand, there's no real -- anything comparable to what we're -- what we want to do with Travelzoo META and what the plan is for Travelzoo META. So it's hard to say.

But obviously, we've been working on this for some time and have been kind of assessing the market and the products and services that are similar that are out there to optimize this as much as we could to make it a really valuable part of Travelzoo Club membership.

Look, Steven, we are travel enthusiasts. We obviously love to travel all the time, but we can't. So we can't travel. Why not travel in the Metaverse? So we feel it's very complementary to what we have right now, and that's why we made the decision to make it part of the Travelzoo Club membership. You can also purchase it separately, but our idea is really to make it part of the membership package for travel enthusiasts that comes with Travelzoo.

Theodore O'Neill, Litchfield Hills Research.

So my question is about AI travel agents. And Meta's Muse platform introduced AI travel agent near the beginning of the month. And it's had some impact on Expedia and Booking. And less so, I think, for Airbnb and for Travelzoo. And I was wondering a couple of things. Have you thought about integrating AI into your platform?

And second is, are these AI travel agents like that Muse has, they can't see into Travelzoo like they can't see into Airbnb because those offers are all contained within the platform itself. Am I understanding that correctly?

Obviously, AI is on top of our minds every day. We are integrating it in the business, in making it easier for our members to find offers in customization. What's different between Travelzoo and OTAs, most of what you find with travel agents, OTAs, it's the same everywhere.

We have stressed many times, offers from Travelzoo are exclusive. You cannot find them anywhere else. So when some people say, Travelzoo is not needed anymore, I can just use AI to find deals. No, you can't because we are creating and negotiating offers that you do not find anywhere else.

With regards to your second question, yes, we are working on that very actively. There is a way to allow the AI agents to access Travelzoo offers even though they are behind the wall of a paid membership. Someone cannot access the full details of an offer, but AI agents like ChatGPT or Google are able and will be able even more so to alert people are searching for deals that there are deals with Travelzoo, and it will explain that in order to take advantage of this deal, you just have to join the club.

And when you ask them whether it's worth joining Travelzoo, the overall resounding answer is yes. Most say it's worth it because once you are a member and you see what we are doing, you're very happy that you joined.

There are no further questions at this time. I will now turn the call back to Mr. Holger Bartel for closing remarks.

Great. Dear investors, thank you again for your time and support. We look forward to speaking with you again next quarter. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.