Travelzoo ((TZOO)) has held its Q3 earnings call. Read on for the main highlights of the call.
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During Travelzoo’s recent earnings call, the sentiment was mixed, reflecting both optimism and challenges. The company reported notable revenue and membership growth, driven by exclusive offers that have piqued consumer interest. However, concerns were raised about the decline in operating profit, negative cash flow, and increased member acquisition costs. Additionally, advertising revenue, particularly in the U.K., remains a significant hurdle for the company.
Revenue Growth
Travelzoo’s consolidated revenue for the third quarter of 2025 reached $22.2 million, marking a 10% increase from the previous year. When adjusted for constant currencies, the revenue was $21.9 million, reflecting a 9% year-over-year growth. This growth underscores the company’s ability to expand its financial base despite economic challenges.
Member Growth
The company’s strategy has been effective in driving member growth, achieving a remarkable 135% increase year-to-date. Revenue from membership fees rose to $3.6 million, and these fees are projected to constitute about 25% of the company’s revenue next year. This shift towards a membership-driven model is expected to provide a more stable revenue stream.
Jack’s Flight Club Performance
Jack’s Flight Club, a key component of Travelzoo’s offerings, reported a 12% increase in revenue year-over-year. Furthermore, the number of premium subscribers grew by 8%, indicating strong consumer interest and engagement with the service.
Exclusive Offers
Travelzoo continues to attract customers with exclusive deals, such as an all-inclusive Caribbean vacation for $399 and a stay at a 4-star hotel in Rome for EUR 99 for two nights. These offers are instrumental in driving membership and revenue growth.
Decline in Operating Profit
Despite revenue growth, Travelzoo’s operating profit for Q3 was only $0.5 million, or 2% of revenue, a significant drop from $4 million in the previous year. This decline is attributed to increased marketing expenses, which have impacted the company’s profitability.
Negative Cash Flow and Reduced Cash Reserves
The company reported a negative cash flow from operations amounting to $0.4 million. Additionally, consolidated cash, cash equivalents, and restricted cash stood at $9.2 million, indicating a reduction in cash reserves.
Increased Acquisition Costs
The cost of acquiring new Club Members has risen, with the average acquisition cost increasing from $28 in Q1 to $40 in Q3. This increase poses a challenge to maintaining profitability while expanding the member base.
Advertising Revenue Concerns
Travelzoo faces slower-than-expected advertising revenue, particularly in the U.K., due to economic uncertainties. This slowdown presents a challenge in achieving the desired revenue growth from advertising streams.
Forward-Looking Guidance
Looking ahead, Travelzoo expects continued year-over-year revenue growth into Q4 2025, with further acceleration anticipated in subsequent quarters. This growth is driven by the recognition of membership fees over a 12-month period and the conversion of Legacy Members to Club Members. While short-term fluctuations in net income are expected due to marketing expenses, the company remains optimistic about long-term profitability. Membership fees are projected to account for about 25% of total revenue next year, signaling a shift towards a more predictable revenue model.
In summary, Travelzoo’s earnings call highlighted a blend of positive growth indicators and significant challenges. While the company is experiencing strong revenue and membership growth, it faces hurdles such as declining operating profit and increased acquisition costs. The forward-looking guidance suggests optimism for future growth, with a focus on a membership-driven revenue model. Investors and stakeholders will be keenly watching how Travelzoo navigates these challenges and capitalizes on growth opportunities in the coming quarters.