Travelzoo(TZOO) - 2025 Q2 - Quarterly Results

Financial Highlights and Business Overview Travelzoo reported increased Q2 2025 revenue but lower net income due to strategic marketing investments, focusing on growing its paid Club Members base Second Quarter 2025 Financial Highlights Travelzoo reported a 13% year-over-year increase in consolidated revenue to $23.9 million for Q2 2025, though net income and EPS significantly declined due to strategic marketing investments Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Consolidated Revenue | $23.9 million | $21.1 million | +13% | | Consolidated Operating Profit | $2.1 million | $4.0 million | -48.6% | | Net Income Attributable to Travelzoo | $1.4 million | $2.9 million | -52.2% | | Earnings Per Share (EPS) | $0.12 | $0.23 | -47.8% | | Cash Flow from Operations | $1.3 million | $3.3 million | -60.7% | - The significant drop in EPS is a direct result of increased investment in acquiring new Club Members, with immediate expensing of marketing costs impacting short-term profitability while membership fee revenue is recognized ratably over 12 months[2] - Non-GAAP operating profit for Q2 2025 was $2.4 million, excluding $339,000 in stock option expenses, $16,000 in amortization of intangibles, and $6,000 in severance-related expenses[5] Business Strategy and CEO Remarks The company's strategy focuses on expanding its paid 'Club Members' base through aggressive marketing, aiming for quick payback and positive ROI, while transitioning from 'Legacy Members' to a recurring revenue model - CEO Holger Bartel stated the company will continue to negotiate more exclusive 'Club Offers' and add new benefits, such as complimentary airport lounge access during flight delays, to enhance the value proposition for its affluent and active members[6] - In 2024, Travelzoo introduced a paid membership model where 'Legacy Members' have limited access, while paid 'Club Members' receive exclusive offers and benefits, driving conversions from the legacy base[18] Segment Performance North America revenue grew with reduced profit margins, Europe swung to a loss from marketing spend, while Jack's Flight Club showed strong growth and profitability Travelzoo North America The North America segment, the company's largest, reported a 14% year-over-year revenue increase to $16.1 million, but operating profit declined, causing the operating margin to contract from 26% to 17% in Q2 2025 North America Segment Performance (Q2 2025 vs Q2 2024, in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $16.1 | $14.1 | | Operating Profit | $2.8 | $3.7 | | Operating Margin | 17% | 26% | Travelzoo Europe The Europe segment's revenue grew 7% year-over-year to $6.4 million, but it swung to an operating loss of $883,000 from a profit of $512,000 in the prior year, primarily due to increased marketing expenditure Europe Segment Performance (Q2 2025 vs Q2 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $6,400 | $6,000 | | Operating Profit/(Loss) | ($883) | $512 | Jack's Flight Club Jack's Flight Club, a 60%-owned subscription service, demonstrated strong growth with a 33% year-over-year revenue increase to $1.4 million and achieved profitability with a $156,000 operating profit - Revenue increased 33% YoY to $1.4 million, and the number of premium subscribers grew by 15% YoY[9] - The segment turned profitable with an operating profit of $156,000 in Q2 2025, a significant improvement from an operating loss of $34,000 in Q2 2024[9] New Initiatives The New Initiatives segment, encompassing Licensing and Travelzoo META, generated minimal revenue of $19,000 and recorded an operating loss of $31,000 in Q2 2025, with future licensing revenue expected to increase - The segment generated $19,000 in revenue and an operating loss of $31,000 for Q2 2025[10] - Licensing revenue for Q2 2025 included $10,000 from Australia and $7,000 from Japan[12] Financial Position and Outlook The company maintains $11.2 million in cash, generated $1.3 million from operations, and anticipates accelerating revenue growth with increasing long-term profitability Balance Sheet and Cash Flow As of June 30, 2025, Travelzoo's cash, cash equivalents, and restricted cash totaled $11.2 million, with $1.3 million generated from operations, and deferred revenue is expected to continue increasing - Cash, cash equivalents and restricted cash totaled $11.2 million as of June 30, 2025[15] - Cash flow from operations for Q2 2025 was $1.3 million[15] - Deferred revenue is increasing and is expected to continue to grow as membership fee revenue is recognized ratably over the subscription period[15] Shareholder Activities During the second quarter of 2025, Travelzoo actively returned capital to shareholders by repurchasing 172,088 shares of its outstanding common stock - The Company repurchased 172,088 shares of its outstanding common stock in Q2 2025[16] Business Outlook Travelzoo anticipates continued year-over-year revenue growth in Q3 2025, accelerating in subsequent quarters, with long-term profitability expected to increase substantially as recurring membership revenue builds - The company expects year-over-year revenue growth to continue in Q3 2025 and to accelerate in subsequent quarters[17] - Long-term profitability is expected to increase substantially as recurring membership fees are recognized, though short-term fluctuations in net income are possible due to immediate expensing of marketing costs[17] Consolidated Financial Statements This section presents the detailed Q2 2025 consolidated statements of operations, balance sheets, cash flows, segment performance, and GAAP to non-GAAP reconciliations Condensed Consolidated Statements of Operations The income statement for Q2 2025 shows revenues of $23.9 million and a net income of $1.48 million, with revenue growth offset by increased operating expenses, leading to a decline in operating income Q2 2025 vs Q2 2024 Statement of Operations (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $23,906 | $21,141 | | Gross Profit | $18,743 | $18,621 | | Total Operating Expenses | $16,683 | $14,610 | | Operating Income | $2,060 | $4,011 | | Net Income Attributable to Travelzoo | $1,402 | $2,927 | | Diluted EPS | $0.12 | $0.23 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $46.7 million, primarily due to reduced cash, while deferred revenue increased to $8.5 million, and the company reported a total stockholder's deficit of $2.1 million Balance Sheet Highlights (in thousands) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,441 | $17,064 | | Total Assets | $46,735 | $54,722 | | Deferred Revenue | $8,459 | $6,545 | | Total Liabilities | $48,816 | $50,369 | | Total stockholder's equity (deficit) | ($2,081) | $4,353 | Condensed Consolidated Statements of Cash Flows For the three months ended June 30, 2025, net cash provided by operating activities was $1.3 million, while financing activities, mainly share repurchases, used $2.6 million, resulting in a net decrease in cash Q2 2025 vs Q2 2024 Cash Flows (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,300 | $3,306 | | Net cash used in investing activities | ($14) | ($48) | | Net cash used in financing activities | ($2,604) | ($6,807) | | Net increase (decrease) in cash | ($1,029) | ($3,622) | Segment Information This section details Q2 2025 segment performance, with North America contributing $16.1 million in revenue and $2.8 million in operating profit, Europe reporting an operating loss, and Jack's Flight Club showing growth and profitability Q2 2025 Segment Performance (in thousands) | Segment | Total Net Revenues | Operating Profit (Loss) | | :--- | :--- | :--- | | North America | $16,132 | $2,818 | | Europe | $6,385 | ($883) | | Jack's Flight Club | $1,370 | $156 | | New Initiatives | $19 | ($31) | | Consolidated | $23,906 | $2,060 | Reconciliation of GAAP to Non-GAAP Measures Travelzoo provides a reconciliation from GAAP to non-GAAP operating income, adjusting for amortization, stock option, and severance expenses, resulting in a non-GAAP operating income of $2.42 million for Q2 2025 Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Line Item | Amount | | :--- | :--- | | GAAP operating income | $2,060 | | Amortization of intangibles | $16 | | Stock option expenses | $339 | | Severance-related expenses | $6 | | Non-GAAP operating income | $2,421 |