Travelzoo Q1 2023 Earnings Call

Subscription revenue.

And launch travelers who made up.

At this point I'd like to turn over to arena.

Hi, everyone, but today I would like to refer you to the update that we provided on March 22nd as soon as there are important new developments. These little issue a press release.

Hunting over to the operator for questions for a holdup lease youth and me.

Thank you the floor is now open for questions. If you do have a question. Please press the star followed by one on your Touchtone phones at this time once again, if you do have a question ladies and gentlemen that is star followed by one on your Touchtone phones in the interest of time, we ask that you. Please limit yourself to one question and one follow up question.

Thank you.

Our first question comes from Michael Kopinski from Noble capital markets. Please go ahead. Your line is open.

Thank you and congratulations on your strong quarter first of all.

I have a couple of questions can you talk a little bit about the trends in Europe , which appears to be lagging that the recovery in North America, what what are the dynamics that youre seeing there.

In that region.

Hi, Michael Yes.

Yes.

In Q4, we saw the same Europe was lagging a little bit it's still the case, but we have a feeling that in Q2. This will change and we will file you see also growth in Europe .

It looks like Europe always took six to nine months longer in all the trends coming out of the pandemic.

Behavior is not significantly different it's just a bit delayed.

Gotcha, and then in terms of I see that your cash position now is increased and your merchant revenues merchant liabilities have come down can you just talk a little bit about the.

The pace of the voucher redemptions and what you foresee in terms of the liability on that standpoint, and it sounds like you're at a position now where you're building cash and just wanted to do.

Check on what your outlook might be there.

Yes, when we did the cash protection last year, we are before cost at our cash billings will reach the lowest at the end of the fourth quarter 2022, and that's exactly what's happened.

So now it's going up again, and we believe it will continue.

Reason is as you pointed out most of the vouchers that we sold at the beginning of the pandemic 2020, 'twenty one 'twenty two most of them have expired.

They have been redeemed.

And the number of vouchers that are outstanding and you can see that in the merchant payables is continuously decreasing so from here on we expect the cash balance to continue to improve and we're happy that our working.

Working capital net working capital is also improving so so is there any trend.

And if I could just have one quick follow up.

Would it be uses of cash at this point can you talk a little bit about capital allocation.

But you don't really see that much in the numbers is that in Q1, we actually used the increased profitability to invest more in member acquisition in particular.

Our goal is to reach the number of members as I said the members that we had before the pandemic.

As quickly as possible and surpassed it.

In Q1 that was the case actually in Q1 for the first time in three years.

Total number of members went up quarter over quarter, if we disregard members that we acquired from <unk>.

Another business that has been struggling so that's one area, where we are investing more and we will continue to invest more because we want to bring member growth back Steve.

This is the.

The best basis for future growth.

And then of course, we are also investing in initiatives like meta when we see best in test flight club, but these are very controlled investments.

And then last but not least we also have a still a share repurchase program that was approved last year that at some point of time, we're looking to compete.

Gotcha. Thank you.

Our next question comes from Jim Goss from Barrington Research. Please go ahead. Your line is open.

Hey, Jim Thank you hi.

<unk>.

Yeah, it's good to see the margins continuing to improve that seem to be the safest coming out of the pandemic.

It does seem that the subscriber base has been somewhat flattish and I'm wondering if you could outline what plans you might have to try to.

Kick those numbers a bit higher is that possible or have you penetrated with a lot of the subscriber base. You do you think would fall into the category of air travel enthusiasts affluent active etcetera.

Are there ways to get those numbers higher and benefit the margins that much more.

Yes, absolutely that's one of our priorities as I stated, Jim and we actually started seeing progress in Q1, the member number increased quarter over quarter for the first time.

We invested the most in Q1 2023 that we have invested in the last three years.

In spite of that we were still able to significantly improve profitability. So.

That's the plan that was our plan for the last year, that's our plan going forward and everything is going according exactly to this plan.

It's a good time to bring more traveling enthusiasm to our community because it's still 2023 still looks like a strong year, where people want to travel they want to see new destinations you heard 87% of our members wanted to see new places. They are open to growing somewhere new and we are sometimes even surprised when we speak about.

New destinations to our members like lasers like Nepal, Sri Lanka, how many of the members are actually responding to that they're not interested.

In that end.

Beyond that we will also start testing additional formats to acquire members in particular some of the areas people stop experimenting with this video formats. So yes 2023, our plan is to increase the member base and as soon as possible.

About 900000 behind the peak, we had before the pandemic and as you know.

<unk> 2000, 2021, it didn't grow but now we want to bring it back and I think we will probably reach that in the next few quarters.

In that regard are there specific ways you can use to increase your visibility to create awareness of travel zoo and what it offers.

Is it are there.

Certain marketing message you're using for that purpose.

What's driving what is of course driving interest in travels throughout the office that we have so that's what brings members to us Rob.

<unk> is the office are so good that often people think they are not.

They are not real they are maybe too good to be true.

So what we are working on is how do we actually leverage our existing members and those are our biggest fans when we speak with existing members.

Particularly though if he was there's a lot they are true fans of travelers, who and how can we use the our experience in the all year long.

<unk> of travelers.

To build a trust to new members that our office are indeed, not only just very good in terms of price, but they are actually very good experience. They don't have to worry.

And they are not too good to be true they are actually true so pets.

That's an important message that we need to bring our costs more.

Okay, and just one last one regarding the.

Catch up in Europe , that's taking place I'm wondering what the ultimate balance between North America and Europe .

Might be from your point of view.

I would say in the next two years. It will go back to the same ratio that we saw before the pandemic in 2019 in the first quarter of 2020.

Okay. Thank you very much okay. Thanks, Jim.

Our next question comes from Steve Silver from Argus Research. Please go ahead. Your line is open.

Thank you operator, and congratulations to the team on the improving balance sheet.

Working capital has not seen these levels in quite some time, so it's really great to see.

Most of my questions have been answered.

But I guess one.

In the press release it mentions the expectation that licensing revenue would be expected to increase in and to date.

The licensing revenue has been a modest revenue contributor.

Just trying to get a sense as to whether there's anything you're seeing in terms of activity.

Licensing regions that gives you the confidence that Tim had revenues will move somewhat meaningfully just trying to get your sense as to.

Even if it wouldn't be a major contributor to travel zoos revenues, just trying to get some thoughts around the activity that the licensee might be seeing in that region. Thanks.

Mhm.

These relationships are actually very important beyond let me just briefly on all their re important beyond the.

Revenue.

They generate for us, which is FCC not significant right now.

These teams, particularly for example, the team that we have in Southeast Asia, Australia via working to source.

Force exclusive offers for our members in North America, and Europe and some of these offers in the pandemic, particularly examples are particular examples our Maldives Bali <unk>.

Upward Thailand. These offers have been very very well received so that's an important part of these relationships as well, but look these licensees.

<unk> with the same situation as we did our sales in North America and Europe . The pandemic came they need to receive a member growth. Some of the members had not heard from us in a while because we stopped publishing offers to them or the licensees, we assume publishing office to them only recently.

And so it just takes a little bit of time to get these businesses back in growth mode, but they are important relationships and the same way how they source offers for our members.

Europe and North America.

Also present to them the office that resource outside of our territories for PNM, but so it's a good relationship and.

We believe particularly in you see it in the numbers and the improved operating margin for the business as a whole operating these regions as licensed businesses rather than.

Company owned so to speak.

<unk> is much more attractive for us and we are looking to see if there are some other markets so countries or regions, where we can replicate that model.

Great. Thanks for the color and congratulations again.

We have no further questions in queue I'll turn the call back over to Mr. Holger Bartel.

Great. Thank you everyone for dialing in today and.

We look forward to speaking with you again next quarter have a great day.

Yeah.

Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect. Your lines at this time have a nice day.