Travelzoo (NASDAQ:TZOO) Q1 2024 Earnings Call Transcript April 24, 2024
Travelzoo beats earnings expectations. Reported EPS is $0.3101, expectations were $0.29. TZOO isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Travelzoo First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Lijun Qi, Principal Accounting Officer. You may begin your conference.
Lijun Qi: Thank you, operator, and welcome to those of you joining us today. 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. Travelzoo’s revenue, operating profit and member count all increased year-over-year. Our consolidated Q1 revenue was $22.0 million, up 2% from $21.6 million in the prior year. In constant currency, revenue was $21.8 million, an increase of 1% year-over-year. Operating income, which weigh as management core operating profit, increased 19% year-over-year. Q1 operating profit was $5.6 million or 25% of revenue, up from $4.7 million in the prior year.
As of March 31, 2024, we had 31.0 million unduplicated members, compared to 30.5 million as of March 31, 2023. Slide 5 shows that revenue growth in our Europe segment more than offset a slight decline in North America. On Slide 6, we break down our categories of revenue: advertising, membership fees and other. Advertising revenue increased 1% year-over-year to $20.9 million from the prior-year period. Revenue from membership fees increased 16% year-over-year to $1.1 million from the prior-year period. On a consolidated level, we expect revenue from membership fees to grow over time. During 2024, membership fees have been made for legacy Travelzoo members. Slide 7 shows an example of membership fee revenue recognition. Revenue from membership fees is recognized ratably over the period of the subscription.
Member acquisition costs, on the other hand, are recognized in full at the time of the expense. On Slide 8, you can see that our GAAP operating margin increased to 25% in Q1 2024. Slide 9 shows that in North America, the GAAP operating margin remained high at 31% for Q1 2024. On Slide 10, we provide information on non-GAAP operating profit as we believe it better explains how Travelzoo’s management evaluates financial performance. Q1 2024 non-GAAP operating profit was $6.0 million. That’s 27% of revenue compared to non-GAAP operating profit of $5.5 million in the prior-year period. Slide 11 provides information about the items that excluded in the calculation of non-GAAP operating profit. Please turn to Slide 12. We maintained a solid cash position even after repurchasing 400,000 Travelzoo shares during the quarter.
As of March 31, 2024, consolidated cash, cash equivalents and restricted cash was $16.9 million, an increase of $476,000 from December 31, 2023. Comparably, merchant payables, which are future payments that we have to make to partners when vouchers are redeemed, decreased by $2.8 million over the same period. Slide 13 shows how revenues compared to operating expenses. Most of the company’s operating expenses, except for marketing, are relatively fixed in the short to midterm. We believe we can keep fixed costs relatively low in the foreseeable future. Higher revenues would adjust increase operating margin. For Q2 2024, we expect continued growth in revenue year-over-year, albeit at a slower pace than in 2023. We also expect for Q2 2024 higher profitability year-over-year.
We recognizemembership fee revenue ratably over the subscription period. Legacy Travelzoo members as of December 31, 2023 are exempt from the fee during 2024. Therefore, we do not anticipate generating membership fee revenue from these members before 2025. Now, I turn the discussion over to Holger.
Holger Bartel: Thank you, Lijun. We will continue to leverage Travelzoo’s global reach, our trusted brand and strong relationships with top travel suppliers to negotiate more exclusive offers for members. It is in times of large increases in travel prices that Travelzoo is most valuable for consumers. Travelzoo members enjoy a high-quality travel experiences that represent outstanding value. With more than 30 million members, 8 million mobile app users and 4 million social media followers, Travelzoo is loved by travel enthusiasts, who are affluent, active and open to new experiences. Slide 15 provides more information about Travelzoo members. 91% say they are open to new destinations and travel ideas. We are the club of travel enthusiasts.
Slide 17 provides an overview of what management and our global team are focused on. We want to grow the number of Travelzoo members. We want to leverage strong existing relationships with top travel suppliers and add new relationships to negotiate more exclusive offers, utilize higher operating margins to increase EPS, grow Jack’s Flight Club’s profitable subscription revenue and develop Travelzoo META with discipline. At this point, I’d like to turn over to Christina for an update on both Jack’s Flight Club and Travelzoo META.
Christina Ciocca: Thank you, Holger. In Q1, Jack’s Flight Club subscription revenue increased 16% year-over-year to $1.1 million. The number of premium subscribers increased 11% year-over-year. In 2024, we want to keep up this momentum with continued investment in member growth, including in new markets like Canada, further refine Jack’s Flight Club’s strong value proposition and optimize marketing. Now I’d like to speak about Travelzoo META. We are making progress with the production of the first Metaverse travel experience. It will be browser-enabled. As stated in previous earnings calls, we’re conscious of developing Travelzoo META in a financially disciplined way. We will provide additional updates in due time. I’m now handing over to the operator for questions for Holger, Lijun and me.
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