Travelzoo (NASDAQ:TZOO) Q4 2022 Earnings Call Transcript March 25, 2023
Operator: Hello, everyone. Welcome to the Travelzoo Fourth Quarter 2022 Financial Results Conference Call. . 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 periodic filings with the SEC. 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.
Photo by Rolands Varsbergs on Unsplash
Please refer to the company’s website for important information, including the company’s earnings press release issued earlier this morning. An archived recording of this conference call will be made available on the Travelzoo Investor Relations website at travelzoo.com/ir. Now it’s my pleasure to turn the floor over to Travelzoo’s Global CEO, Holger Bartel; its Chief Financial Officer, Wayne Lee; and its General Manager, Travelzoo META, Arveena Ahluwalia. Wayne will start with an overview of the fourth quarter 2022 financial results.
Wayne Lee: Thank you, Regina, and welcome to those of you joining us today. Please open or refer to the management presentation to follow along with our prepared remarks. The presentation in PDF format is available on our Investor Relations website at travelzoo.com/ir. Let’s begin with Slide #3. Revenue growth accelerated in Q4, leading to much stronger earnings. Our consolidated Q4 revenue was $18.6 million, up 36% from $13.7 million in the previous year, and in constant currencies, it was $19.4 million, which is an increase of 42% year-over-year. Operating income, which we, as management, call operating profit was $3.6 million, which is approximately 19% of revenues compared to an operating loss of $3.8 million in the prior year.
As of December 31, we had $30.4 million unduplicated members compared to $30.3 million as of December 31, 2021. On Slide 4, we go into more details about the revenue and operating profit of our 2 more significant business segments, North America and Europe. North America segment revenue increased 53% year-over-year from $8.6 million to $13.1 million. The operating profit in North America was $3.7 million in Q4 compared to an operating loss of $2.1 million a year ago. Europe segment revenue increased from $4.3 million to $4.7 million or 9% year-over-year. At constant currencies, Europe revenue increased 23% year-over-year. Europe had an operating profit of $42,000 in Q4 compared to an operating loss of $1.7 million in the prior year. On Slide 5, you can see that our operating margin for all of 2022 reached 11%, which is at a level higher than our operating margins before the pandemic in 2020.
Before the pandemic, Travelzoo’s reported operating margin was much lower because of operating losses from our Asia Pacific segment. In March 2020, Travelzoo decided to exit its Asia Pacific business and operate it as a licensing business going forward. Now the operating margin shows the true profitability of Travelzoo in North America and in Europe. Slide 6 shows that our operating margin in North America reached 29% for Q4. On Slide 7, we provide information on non-GAAP operating profit as we believe it better explains how Travelzoo evaluates performance. This slide shows the non-GAAP operating profit, which was $4.8 million in Q4 compared to a loss of $2.4 million in the prior year. Slide 8 provides more information about the items that are excluded in the calculation of non-GAAP operating profit.
Please turn to Slide 9. As of December 31, 2022, consolidated cash, cash equivalents and restricted cash was $19.4 million. The cash balance reached the expected level as the number of vouchers outstanding has decreased greatly at the end of 2022. Slides 10 and 11 detail our revenue by business segment. The North America business segment saw a year-over-year revenue increase of $4.5 million. Turning to Slide 11. The Europe business segment, which we report in U.S. dollars was and continues to be impacted by the strong dollar. We saw revenue in Q4 increased by $384,000. But in constant currencies, revenue increased $1 million year-over-year. Slide 12 shows that the pandemic led to a significant reduction of fixed costs. We believe we can keep our fixed costs relatively low in the foreseeable future, while revenues are expected to grow.
For Q1 2023, we currently expect higher revenue and profitability. During the pandemic, we have been able to lower our fixed costs. We believe we can keep our fixed costs relatively low in the foreseeable future. Now I turn over to Holger.
Holger Bartel: Thank you, Wayne. Revenue growth accelerated in both North America and in Europe, leading to much stronger earnings. As the recovery from the pandemic continues, we will leverage Travelzoo’s global reach and trusted brand to further improve earnings in future periods. With more than 30 million members, 7 million mobile app users and 4 million social media followers, travelers with love by travel enthusiasts, who are affluent, active and open to new experiences. Slide 13 provides more information about our members. 87% say they are open to new destinations and travel ideas. So Travelzoo members are travel enthusiasts. Slide 15 provides an overview of what management and our global team are focused on. We want to reach and surpass pre-pandemic number of members and accelerate revenue growth.
We want to utilize higher operating margins to significantly increase EPS, grow Jack’s Flight Club’s profitable subscription revenue and launch Travelzoo META. At this point, I’d like to turn over to Arveena.
Arveena Ahluwalia: Hi, everyone. Today’s update will be super quick since the team is pretty busy with the launch of Phase 1 of Travelzoo META in the coming weeks. For today, please turn to the next slide for a first look at one of Travelzoo META’s marketing teaser. With that, I’m handing over to the operator for questions for Holger, Wayne and me.
See also 15 Best High Yield Dividend Stocks to Buy and 15 Most Promising Stocks to Buy According to Analysts.
To continue reading the Q&A session, please click here.