Travelzoo Common Stock 2026 Q3 Earnings Call

Thank you, operator, and welcome to those of you joining us. Today, I'm stepping in for Lijun, 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 relation 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. More 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 U.S. 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 the 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 investment 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 30th, 2026, our consolidated 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 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. Our global team negotiates and vets them rigorously. Club Offers cannot be found anywhere else. Some examples, 59 GBP for stays for two 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 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 five-star private island in the Maldives. Membership also provides complimentary access to airport lounges worldwide in case of flight delays. 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 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 temporary lower EPS, grow Jack's Flight Club's subscription revenue, and launch Travelzoo META. 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. Now handing over to the operator for questions for Jeff, Holger, and me.