Travelzoo (TZOO) Q3 2026 Earnings Call Transcript

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DATE

Tue, Oct. 27, 2026

CALL PARTICIPANTS

• Global Chief Executive Officer - Holger Bartel
• Chair, Chief Membership Officer, General Counsel, and Chief Executive Officer of Jack's Flight Club - Christina Sindoni Ciocca
• Financial Controller, North America - Jeff Hoffman

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TAKEAWAYS

• Revenue -- $22.9 million, representing a 3% increase year over year.
• Constant Currency Revenue -- $23 million, excluding the impact of foreign exchange fluctuations during the period.
• Operating Loss -- $2.6 million, reflecting increased marketing expenditures focused on acquiring club members compared to an operating profit of $500,000 in the prior year.
• Non-GAAP Operating Loss -- $2.1 million, compared with a non-GAAP operating profit of $1.1 million in the same period last year.
• Club Membership Growth -- 65% year over year, driven by the largest quarterly addition of new club members in the company's history.
• Member Acquisition Cost -- $54 per member, a decrease from $62 reported in the second quarter.
• Early Transaction Revenue -- $15 in average revenue per member generated within the first 90 days of membership.
• Deferred Revenue -- Approximately $30 million, which management attributed to the conversion cycle of new members from trial to full subscription.
• 2027 Financial Targets -- $1.20 in estimated earnings per share impact and more than $30 million in membership revenue as recurring renewals increase.
• Cash and Equivalents -- $8.8 million, an increase of $1.2 million compared with the second quarter.
• Member Destination Sentiment -- 90% of members are open to new destinations and travel ideas according to management demographics.
• Unplanned Booking Propensity -- 90% of members reported a likelihood to book an unplanned trip when presented with an attractive offer.
• International Travel Intent -- 62% of members plan to take two or more international trips in 2027.
• Jack's Flight Club Performance -- Revenue declined due to lower deferred revenue resulting from fewer member acquisitions in the first and second quarters.
• Membership Trial Pricing -- $1 in the U.S. and £1 in the U.K. for an initial 30-day trial period.
• Standard Membership Fee -- $50 annually for club access.

SUMMARY

Travelzoo (NASDAQ:TZOO) reported a strategic shift toward a membership-based revenue model, which resulted in a reported operating loss for the third quarter. Management indicated that the loss was primarily driven by increased marketing investments aimed at expanding the paid club member base. The company noted that membership fees are recognized as revenue ratably over a 12-month period. Member acquisition costs are expensed immediately. Management stated it expects this investment to drive higher recurring revenue and improved profitability in 2027 as renewals increase.

• Management reported that slightly more than half of the club members added in the third quarter were new members, with the remainder converted from the legacy member base.
• Travelzoo Meta experiences are scheduled for launch in the fourth quarter of 2026 as an exclusive benefit for club members.
• The company launched a travel enthusiast hotline in the first quarter of 2026 in partnership with Allianz to provide 24/7 assistance to members.
• Holger Bartel stated that the company is integrating artificial intelligence to enhance customization and assist members in finding exclusive offers that cannot be found elsewhere.
• Management noted that Travelzoo members are more likely to maintain leisure travel spending compared to the general population even if household budgets are reduced.
• The company noted that most new members join through a 30-day trial for $1 in the U.S., delaying the creation of deferred revenue until the full membership converts.

INDUSTRY GLOSSARY

• Travelzoo Meta: The company's platform for travel experiences within the metaverse, planned as a club member benefit.
• Jack's Flight Club: A subscription-based service owned by Travelzoo that provides members with alerts for low-cost flight deals.
• Travelzoo Club: The paid membership tier that provides exclusive access to negotiated travel, entertainment, and local deals.
• Ratable Revenue Recognition: An accounting method where subscription revenue is recognized proportionally over the duration of the 12-month membership period.

Full Conference Call Transcript

Operator: And bring back all those happy days. Hello everyone. Thank you for joining us, and welcome to the Travelzoo third quarter 2020 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. Withdraw your question, press star 1 again. The company would like to remind you that all statements made during this conference call 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 2000. 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 ks, 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 Sindoni Ciocca, and its financial controller, North America, Jeff Hoffman. Jeff will start with an overview.

Jeff Hoffman: Thank you, operator, and welcome to those of you joining us. Today, I am stepping in for 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 500 thousand 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. 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 reduce 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 was 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 periods. We believe that 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, do not have acquisition expenses, grows, operating margins are expected to substantially improve. In the short term, fluctuations are likely.

Slide 12 shows that investment of club members of Travelzoo occur in all key markets. Slide 13, we provide information on non GAAP operating profit and operating loss as we believe it better explains how we evaluate financial performance. Q3 26, 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 09/30/2026, our consolidated cash, cash equivalents, restricted cash was 8.8 million. An increase in $1.2 million compared with Q2. We repurchased 252 million shares of our common stock.

Now looking ahead, for Q4 26, 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 will turn the discussion over to Holger.

Holger Bartel: 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 imagined they could. it 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 £59 for stays for 2 at 1 of 15 cozy English inns, a 60-night Hawaii cruise, for around $60 per day, which includes your cabin, food, drinks, entertainment, Also, 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 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 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 2 or more international trips in 2027. Information about their median household, income shows that they have the means to do so. it is 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, 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 temporary 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.

Christina Sindoni Ciocca: 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. Now handing over to the operator for questions for Jeff, Holger, and me.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Patrick Scholl at Barrington Research. Your line is now open. Please go ahead.

Patrick William Sholl: Hi. Thanks for taking the question. I guess, just at this point, about a year in almost 2 years into having moved from the legacy members and bringing them into the paid model. was just kind of curious if you could talk about anything you have 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 have gotten more experience with the product. Thank you.

Holger Bartel: Hi, Patrick. What we are hearing from the club members is what is mostly driving their retention and renewal are the great offers, the exclusive offers that we provide them I gave a few examples. that is really what is 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.

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

Holger Bartel: Exactly. The quick answer is that most new members join with a trial, which in The US is $1. In the U.K., it is £1. Only when they then convert after 30 days to the full membership that is when we recognize the revenue and when it creates deferred revenue. So it is exactly what you explained. Yes. So I just thought, 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 is the 30 day delay, the more members we add, the higher and faster deferred revenue will grow. it is exactly what you said. Okay. Thank you.

Operator: Next question is from the line of Michael Kupinski from Noble Capital Markets. Your line is now open. Please go ahead.

Michael Kupinski: Thank you and thanks for taking my questions. You had highlighted a decline in average U. S. 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?

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

Christina Sindoni Ciocca: Sure. I think the main driving factors of the efficiency 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 is interest in those offers, it allows us to get the efficiencies down despite scaling up spend significantly.

Michael Kupinski: Gotcha. It certainly worked for me. I am 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?

Holger Bartel: Michael, the answer to your first question is it is typically about 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 of around $30 million on the balance sheet that will continue to increase And then with all the new revenue and payments that are coming in, that is how we get to around 30 million. that is our expectation for next year. Gotcha.

Thanks for that color. that is all I have for now.

Operator: Your next question comes from the line of Edward Woo from Ascendiant Capital. Your line is now open. Please go ahead.

Edward Moon Woo: Yes. Thank you for taking my question. As we are heading into 2027, what is your travel outlook so far? What are you seeing out there? and there is a lot of news about unrest in Europe, a lot of protests. Do you think that is going to have any impact on your travel business?

Holger Bartel: What we are seeing in travel is similar to what we are seeing in other industries On the 1 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 is what we are-- that is 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.

Edward Moon Woo: My 1 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? You guys are getting more calls of people worried because people cannot fill the hotel room because of the news, plus that you guys would be able to drive more deals.

Holger Bartel: Yes. that is the case. If the hotels are empty, or are struggling, they come to us. When it is low season, they come to us. And that is where we help. And as we have seen before, our travel enthusiasts are very open to going wherever we can give them good deals. So that is 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 is what our entire business is benefiting from. Great. Well, thanks for answering my question, and I wish you good luck. Sure. Thanks, Edward.

Operator: Your next question is from the line of Steven Silver from Argus Research. Your line is now open. Please go ahead.

Steven Silver: Thanks, operator, and thanks for taking my questions as well. In the quarter, there was a sizable decrease in accounts receivable that supported the operational cash flow So it is now closer towards the levels that they were at the end of 25. I am just curious as to your thoughts on that level whether it is kind of where you would expect it to be moving forward whether you think there is a little bit more leverage in accounts receivable to support cash flows in the near term?

Holger Bartel: 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.

Steven Silver: Great. And 1 more if I may. So with the expected launch of Meta in this quarter, I am curious as to whether you guys have done any studies or just trying to size up if there is any pent up demand for meta ahead of its launch, or is it gonna be the kind of thing where the product is going to launch within the club membership, and then you would market it after launch?

Christina Sindoni Ciocca: Christina. We would include it as a part of club membership and market it as we launch, essentially. But in terms of your question of pent up demand, there is no real comp. Anything comparable to what we are what we want to do with Travelzoo Meta and what the plan is for Travelzoo Meta. So it is hard to say, but, obviously, we have 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.

Holger Bartel: Look, Steven. Our travel enthusiasts. We obviously love to travel all the time, but we cannot. So when we cannot travel, Why not travel in the metaverse? So we feel it is very complementary to what we have, right? and that is 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 come with Travelzoo. Okay. Fair enough. Thanks for the extra color.

Operator: Your next question comes from the line of Theodore O'Neill from Litchfield Hills Research. Your line is now open. Please go ahead.

Theodore Rudd O’Neill: Oh, thanks very much. So my question is about AI travel agents. And, you Meta's Muse platform introduced AI travel agent near the beginning of the month. And you know, it is 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 cannot see into Travelzoo. Like, they cannot see into Airbnb because those offers are all contained within the platform itself. Am I understanding that correctly?

Holger Bartel: Yes. 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 is different between Travelzoo and OTAs? Most of what you find with travel agents, OTAs, it is 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 cannot. 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 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 who 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 is worth joining Travelzoo, the overall resounding answer is yes.

Most say it is worth it because once you are a member, you see what we are-- what we are doing, you are very happy that you joined. Right. Okay. Thanks very much.

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

Holger Bartel: 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.

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

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