Travelzoo(TZOO) - 2025 Q1 - Quarterly Report

Revenue and Membership - Travelzoo reached 30 million travelers through its platforms, including Travelzoo and Jack's Flight Club[117]. - Travelzoo introduced an annual membership fee of $40 for new members starting January 1, 2024, while waiving the fee for existing members in 2024[133]. - Total revenues for the three months ended March 31, 2025, were$23.14 million, an increase from $21.985 million in the same period of 2024, representing a growth of approximately 5.3$1.3 million to $2.443 million for the three months ended March 31, 2025, driven by higher subscription fees from Travelzoo and Jack's Flight Club members[164]. - Jack's Flight Club revenues increased by$220,000 to $1.283 million for the three months ended March 31, 2025, with operating loss improving from$(99,000) to $(48,000)[184]. Advertising and Revenue Influences - Travelzoo's advertising revenues are influenced by audience reach, engagement, and advertising rates, particularly as it transitions to a paid membership model[138]. - Advertising revenue decreased by$170,000 to $20.68 million for the three months ended March 31, 2025, primarily due to a$603,000 decrease in revenues from the Travelzoo website[162]. Costs and Expenses - The company expects fluctuations in cost of revenues as a percentage of revenues from quarter to quarter, which may significantly impact results[147]. - Cost of revenues increased by $1.5 million to$4.1 million for the three months ended March 31, 2025, primarily due to increased costs associated with the sale of pre-purchased vouchers[167]. - Sales and marketing expenses rose by $1.6 million to$10.2 million for the three months ended March 31, 2025, largely due to increased member acquisition costs[169]. Operating Performance - Operating income decreased to $3.594 million for North America, down from$4.438 million in the same period of 2024, with operating profit margin dropping from 31.2% to 23.8%[180]. - Travelzoo Europe reported revenues of $6.712 million, a slight increase from$6.662 million in 2024, but operating profit fell significantly from $1.382 million to$228,000[181]. Cash Flow and Financial Position - As of March 31, 2025, the company had $11.5 million in cash and cash equivalents, with$8.3 million held outside the U.S.[186]. - Cash, cash equivalents, and restricted cash decreased by $5.5 million from$17.7 million as of December 31, 2024, primarily due to $8.9 million used for common stock repurchase[187]. - Net cash provided by operating activities for the three months ended March 31, 2025, was$3.3 million, down from $4.6 million in the same period of 2024[190]. - The company reported a negative net working capital of$10.3 million as of March 31, 2025, due to $14.8 million in merchant payables related to unredeemed vouchers[188]. - Net cash used in financing activities for the three months ended March 31, 2025, was$8.9 million, primarily for common stock repurchase[192]. - The company anticipates that cash on hand will be sufficient to cover operating costs for at least the next twelve months[193]. Tax and Contingencies - The effective tax rate remained stable at 26% for both periods, with income tax expense decreasing to $1.2 million from$1.5 million[177]. - As of March 31, 2025, the company had contingencies related to net unrecognized tax benefits of approximately $23.9 million[198]. Future Outlook and Investments - The company anticipates increased costs for acquiring new paying members compared to non-paying members prior to 2024[148]. - The company may need to raise additional capital through equity or debt securities if business developments are less favorable than expected[194]. - The company plans to continue evaluating investments in businesses, products, and technologies, which may increase capital requirements[193]. - Travelzoo launched Travelzoo META in May 2023 to provide metaverse travel experiences, following the acquisition of Metaverse Travel Experiences, Inc.[121].