Q3 2024 Travelzoo Earnings Call
Yes.
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Turning to international.
Okay.
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Paul.
Yes.
Okay.
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Tom.
Okay.
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Yes.
Hi.
Yes.
Great.
Yes.
Good morning, Jay.
Okay.
Yeah.
Thank you Robert.
Maybe last question.
Alright.
Ladies and gentlemen.
No.
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Oh gosh.
Thanks, Kevin.
Okay.
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Yes.
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Thank you.
Right.
Great.
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Sure.
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And then one day.
Thanks.
Thanks.
Thank you.
Thanks.
Thank you.
Yes.
Sure.
Yes.
Okay.
Sure.
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Sure.
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Hold on.
And then on the horizon.
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Speaker Change: Good morning, and welcome to the travel <unk> third quarter 2024 earnings call. Today's conference is being recorded currently all callers have been placed in a listen only mode and following management's prepared remarks, the call will be open for your questions. If you would like to ask.
Speaker Change: Question at that time, Please press star and one on your telephone keypad.
Speaker Change: If you would like to remove yourself from the question queue Press star and to.
Speaker Change: At any time, if you do need assistance, Please press star zero.
Speaker Change: The company would like to remind you that all statements made during the 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 1095.
Speaker Change: 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 SEC filings.
Speaker Change: 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.
Speaker Change: Please refer to the company's website for important information, including the company's earnings press release issued earlier today, an archived recording of the conference call will be made available on the company's Investor Relations website at <unk> Dot com forward slash by our.
Speaker Change: Now it is my pleasure to turn the call or to the floor over to travels as global CEO Holger Bartel, its general counsel and head of global functions and CEO of Jack's Flight club Kristina Chocker.
Speaker Change: And its finance controller for North America, Jeff Hoffman.
Speaker Change: Jeff will start with an overview.
Jeff Hoffman: Thank you operator, and welcome to those of you joining us today.
Jeff Hoffman: 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 <unk> Dot com or Slashdot.
Jeff Hoffman: Let's begin with slide number four.
Jeff Hoffman: <unk> consolidated Q3 revenue was $20 1 million.
Jeff Hoffman: 2% from the prior year in constant currency revenue was $20 million. This.
This was a little below our expectations.
Jeff Hoffman: Operating income, which we as management call operating profit increased 30% year over year.
Q3, operating profit was $4 million or 20% of revenue up from $3 1 million in the prior year.
Jeff Hoffman: Slide five shows that higher profits team, particularly from our Europe segment.
Jeff Hoffman: On slide six we break down our category that revenue advertising membership even further.
Jeff Hoffman: Advertising revenue was 18 7 million for Q3 2024.
Jeff Hoffman: Revenue from membership fees was $1 4 million.
Jeff Hoffman: Membership fee.
Jeff Hoffman: Fee revenue is still small we expect to see some.
Potentially drive revenue and profit growth in 2025 for the following reasons.
Jeff Hoffman: At the beginning of 2020, we induced a membership fee.
Jeff Hoffman: Those who are already members at that time are exempt from the theater in 2024.
Jeff Hoffman: Tap to pay in 2025.
Jeff Hoffman: We call this group legacy numbers and they represent over 95% of current members.
Jeff Hoffman: Slide seven shows an example of membership fee revenue recognition.
Revenue from membership fees and is recognized ratably over the period of the subscription.
Jeff Hoffman: Member acquisition costs. However are fully recorded recognizes expenses immediately.
Jeff Hoffman: On slide eight you can see that our GAAP operating.
Jeff Hoffman: Some remained high at 28%, which is typically our slowest quarter of the year.
Jeff Hoffman: Slide nine shows the North America, the GAAP operating margin remained high at 25% for Q3 2024.
Jeff Hoffman: In Europe, the margin increased to 17%.
Jeff Hoffman: On slide 10, we provide information on non-GAAP operating profit as we believe better explains how property management evaluates financial performance.
Jeff Hoffman: Q3, 2024, non-GAAP operating profit was $4 9 million.
Jeff Hoffman: 95% of revenue compared to non-GAAP operating profit of $3 9 million in the prior period year.
Jeff Hoffman: Slide 11 provides information about the items that are excluded.
Jeff Hoffman: Operator.
Speaker Change: Please turn to slide 12.
With operating cash flow of $5 3 million, we maintained a solid cash position, even after purchasing 552000 670 million shares.
Speaker Change: Any common stock during the quarter.
Speaker Change: As of September 32024, consolidated cash cash equivalents and restricted cash was $12 1 million.
Speaker Change: Going forward, we expect our cash balance to increase again as we quick membership fees at the beginning of the subscription periods.
Speaker Change: Slide 15 shows our revenues compared to operating expenses most of the company's operating expenses, except for marketing are relatively fixed in the short to mid term.
Speaker Change: We believe we can keep our fixed cost fixed cost relatively low in the foreseeable future.
Speaker Change: Higher revenues with us increase operating margin.
Speaker Change: Looking ahead.
Speaker Change: Q4, 2024, we expect growth in revenue year over year, albeit a small or a smaller pace than in 2023. However.
Speaker Change: However, there could be unexpected fluctuations.
Speaker Change: We also expect for Q4, 2020 core higher profitability year over year and quarter over quarter.
Speaker Change: For 2025, we expect substantial growth in revenue as a result of official revenue from membership.
Speaker Change: I'll now turn the discussion over to holder.
Speaker Change: Okay.
Speaker Change: Thank you Jeff.
Speaker Change: We will continue to leverage travelers with global reach across the brand.
Speaker Change: And our strong relationships with top travel suppliers to negotiate more club offers for our members.
Kevin Remember Patrick.
Speaker Change: Active and open to new experiences.
Speaker Change: We inspire our members to travel to places in every magazine Big quick.
Speaker Change: Travel.
The <unk> membership for those who love to travel as much as we can.
Speaker Change: Slide 14 provides more information about travelers with members.
Speaker Change: 91% payback, we are open to new destinations and travel idea.
Speaker Change: We are the platform travel enthusiasts.
Speaker Change: On slide 16, we provide an overview of our management focus.
Speaker Change: We are working to convert a large number of legacy members into paying members from January 2020 pipeline.
Speaker Change: At new benefit to meet peak membership even more valuable.
Speaker Change: Retain and grow our profitable advertising from the popular top 20 products.
Speaker Change: Operating margin increased EPA.
Speaker Change: We will take flight plus profitable subscription revenue.
Speaker Change: And developed travel meta.
Speaker Change: I'm now handing over to Christina will speak about Chegg lights up and tablets.
Christina: Thank you Dan.
Speaker Change: Thank you for your Jack's flight club had year over year increases in revenue of 11% to one 2 million and.
Speaker Change: <unk> premium subscribers that's quite keen.
Speaker Change: Earlier in the year as previously announced we implemented a price increase for new subscribers online expanded into Canada and improved our marketing strategy.
Speaker Change: Because of the revenue deferral for subscriptions, we're now starting to see the payoff and these initiatives, including strong ppas and marketing efficiency.
Speaker Change: Expect this trend to continue into Q4 and 2025.
Speaker Change: Our focus continues to be on investing in growth while maintaining profitability.
Speaker Change: Now I would like to speak about travel demand that we are working on the production of the first net adverse travel as Jane said, Hey, Ravi browser any Bob.
Speaker Change: And in previous earnings call, we are conscious that the validation obviously matter in a financially disciplined way.
We will provide additional updates in detail.
Speaker Change: I'm now handing over to the operator for questions for wholesale.
Speaker Change: Sure.
Speaker Change: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad.
Speaker Change: You may remove yourself from the question queue by pressing star and two we.
Speaker Change: Ask that you limit yourself to one question and one follow up.
Speaker Change: We'll take our first question from Theodore O'neill with Litchfield Hills Research. Please go ahead. Your line is open.
Speaker Change: Okay. Thanks very much.
Theodore O'Neill: Two questions for you.
Theodore O'Neill: First one for Hoeger last quarter, you talked about travelers, becoming more cost conscious.
Theodore O'Neill: Rice increases for flights in rooms, with moderate is that still what.
Theodore O'Neill: Youre seeing out there are you seeing any more or less of that and my second question is on the.
Theodore O'Neill: And then the operating margin between North America, and Europe, I would've expected.
Theodore O'Neill: European margin to even lower just relative.
Theodore O'Neill: To economic growth.
Theodore O'Neill: I would expect the north American to be about where it is but I was just surprised about the strength in Europe and I was wondering if you could give us some details on that thank you.
Theodore O'Neill: ICU so.
Theodore O'Neill: Question, Yes, we are.
Theodore O'Neill: Hearing from hotels in the airline that DSD is generally less demand.
Theodore O'Neill: Better prices more deals you might have seen.
Theodore O'Neill: Big brands like Marriott Intercontinental launching big fields on their hotel for fall.
Theodore O'Neill: So that trend continues or accelerates and yet consumers are looking for value.
Theodore O'Neill: We also see that they are looking for net quality destinations on one hand the corp.
Theodore O'Neill: On a go to place if they buy not overcrowded and on the other hand.
Theodore O'Neill: Please instead of less popular.
Theodore O'Neill: Our destination that offer generally better value in that.
Theodore O'Neill: We actually strong by motivating our members to go to places.
Theodore O'Neill: Where there hasnt been that they didn't think about it didn't didn't know existed.
Speaker Change: And on the second question, Yes, we are happy about Europe profit margin.
Speaker Change: Greeting and getting closer to the one off.
Speaker Change: North America.
Speaker Change: <unk> operated very.
Speaker Change: Efficiency in Europe, this quarter and can you.
Speaker Change: The trend to continue.
Speaker Change: Thank you very much.
Speaker Change: We will take our next question from Michael Kaplinsky with Noble capital markets. Please go ahead. Your line is open.
Speaker Change: I think.
Michael Kaplinsky: Hey, everyone. Just a couple of quick questions here regarding the membership can you give us an idea of what you're anticipating in terms of 2008 2025, the mix might be between advertising and membership fees, particularly as you rollout your.
Speaker Change: Membership fees and then.
Speaker Change: In terms of you indicated that Q4 should so should show some revenue growth are you seeing improving trends in Americas and what are you seeing that in terms of Europe and then are there.
Speaker Change: Are there any membership fees that are starting to filter into Q4 that might be accounting for the improving trend. There and then the final part of that is in terms of the membership the rollout.
Speaker Change: I know that you're testing various models in length and terms and pricing and so forth. I was just wondering have you made any changes to your initial thoughts in terms of the membership fees going forward and if so would that might be.
Speaker Change: Okay.
Speaker Change: Right.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Can you repeat that again.
Speaker Change: You bet.
Speaker Change: UK increased quite substantially next year.
Speaker Change: We think up to Q4.
We see membership fee revenue increase even more in 2025 before.
Speaker Change: Members of Bill.
Speaker Change: And.
Speaker Change: You also.
Speaker Change: Bo.
Speaker Change: The next question again about membership fee.
Speaker Change: Q4.
Speaker Change: Yes.
We're starting to definitely increase.
Speaker Change: As you saw in Q.
Speaker Change: We.
Speaker Change: U S was really the only market where revenues were.
Speaker Change: We're down against our expectation so.
Speaker Change: Wasn't wasn't a big deal for US we just had.
Speaker Change: Some advertisers.
Speaker Change: Move that spend into.
Speaker Change: The future and then we had one who was supposed to launch in Q3. The website wasn't great in Q4. So Q in Q4, we expect things to normalize but as I said no. We don't expect a substantial growth in membership in Q4, just because of the strategy that we're pursuing.
Speaker Change: Given the existing members make sense in 2024.
Speaker Change: And holder I missed the.
Speaker Change: The first part of my question is the little jumbled.
Speaker Change: And I think that was related to the revenue mix between advertising and membership fees in 2025 could you just repeat that for me.
Speaker Change: Okay.
Speaker Change: I think we don't make any forecast yet with regards to how many members how many team members be expecting 2025.
Speaker Change: So we also don't make any forecast yet.
Speaker Change: For how much membership revenue, we expect to generate in the queue.
Speaker Change: I gotcha, Okay. Thank you.
And we will take our next question from Steve Silver with Argus Research. Please go ahead. Your line is open.
Steve Silver: Thank you operator, and thanks for taking the questions.
In the management focus slide you talked about adding new benefits to the paid membership.
Steve Silver: I'm just curious if there's any updated thinking in terms of what that might entail.
Steve Silver: Even just in terms of potentially bundling the paid membership and <unk>.
Steve Silver: <unk> Mehta memberships down the line.
Steve Silver: Meta is ready for a broad rollout I'm curious to know whether what some of those details might be about the paid membership benefits.
Steve Silver: And then.
Steve Silver: A follow up would be given the strong cash flows that the company has announced especially in Q3.
Steve Silver: What are the <unk>.
Steve Silver: Uses of cash that Youre thinking about moving forward, whether it's just the continued share repurchases and then marketing expenses for customer acquisition on the paid membership side. Thanks.
Steve Silver: Okay.
Speaker Change: So Steve on the member benefits.
Steve Silver: For in the works right now.
Steve Silver: <unk>.
Steve Silver: And our men do.
Steve Silver: Remember we have about them in the next few weeks.
Steve Silver: The multiyear deal with traveling bedroom because the volume if you are traveling with men when you travel a lot because we are traveling.
Steve Silver: We would like you to.
Steve Silver: Just have a better travel experience so you'll hear more about that with regard to the cash flow.
You saw we just announced another share repurchase program. So we will continue to repurchase this year, because we feel it's a good investment right now the stock price is still attractive.
Steve Silver: In 2025, when do you expect.
Steve Silver: Even higher cash flows.
Steve Silver: Belief we can.
Steve Silver: We invest more in marketing and growing our member base.
Steve Silver: Addition towards improving earnings per share.
Speaker Change: Okay, great. Thanks for the color.
Speaker Change: And we will take our next question from Ed Woo with <unk> capital. Please go ahead. Your line is open.
Speaker Change: Yes. Thanks for taking my question congratulations on the growth Jack's flight club had a pretty good year over year growth.
Speaker Change: Is it in all markets don't you said the interest expense.
Speaker Change: And what do you think the long term.
Speaker Change: Jack's flight club.
Speaker Change: In contrast, a majority of covered members.
Speaker Change: <unk>.
Speaker Change: Alright.
Speaker Change: <unk>.
Speaker Change: So for right now in the UK, Canada U S and.
Speaker Change: Countries throughout Europe.
Looking into other countries, particularly in Europe, where we can expand.
Speaker Change: Considering whether we launch with.
Speaker Change: I'll turn it language additions beyond English.
Speaker Change: And so that.
The consideration is that as you start your strategic planning for Tommy.
And then in terms of conversion of challenging numbers.
Speaker Change: And it's always an attention when we acquired this business we have.
Speaker Change: Ian that Calvin.
Member's interest in Jack's flight club.
Speaker Change: Now that <unk> obtained a first step we are reconsidering, what that will look like and ways in which we can kind of offer both services to travelers.
Speaker Change: Does that still a bit of a cubic epi.
Speaker Change: Congress intended discussion.
Speaker Change: What is the membership fee for Jack's flight club in the U S versus in Europe are they pretty comparable.
Speaker Change: Yeah.
Speaker Change: And at $60.
And in Europe.
Speaker Change: What depend depending on the currency.
Speaker Change: And basically comparable frankly very badly.
Speaker Change: Great well, thanks for answering my questions and I wish you guys. Good luck. Thank you.
And we will take our next question from Patrick <unk> with Barrington Research. Please go ahead. Your line is open.
Speaker Change: Hi, Thank you.
Speaker Change: I just had a follow up question on <unk>.
Speaker Change: You talked about on.
Ensuring that.
Speaker Change: People that travel with Charles a lot have a better travel experience and it was kind of wondering with the shifts to.
The subscription oriented service. If there is any areas that you felt needed additional investment on either customer service or.
Speaker Change: Thank you.
Speaker Change: Research.
Speaker Change: Or anything in those areas and I had a couple of follow ups.
Yeah.
Speaker Change: Over the last couple of weeks I had the pleasure of participating in many meetings with our existing member reorganized lunches.
Speaker Change: The U K and the U S and came out.
Speaker Change: And it provides a good opportunity to learn more from our members.
Speaker Change: We are very excited about 2025 D are also because the most important thing that our members are getting from travelers.
Speaker Change: The best surprises on the exclusive experiences that we negotiate for them.
Speaker Change: When we explained to them why a membership fee, which make travel to what you'd call a closed user group wide. While this enables us to deliver even better to our members.
Speaker Change: And they really understand why we are going in this direction delighted because ultimately.
Speaker Change: The membership fee, which you don't ultimately its a pretty nominal amount $40 in the U S 30 pounds in the UK.
Speaker Change: It's relatively insignificant to the hundreds or sometimes thousands of dollars that you compete with a travel with you to once they understand it and see that.
Speaker Change: It allows us to escape things like price parity for hotels, and so forth and bring them more and better offers we get very excited then.
Speaker Change: That's why we feel very positive about this move and we feel very good about 2025 now.
Speaker Change: You had a couple of more questions.
Speaker Change: Yeah. So I mean, maybe it's just sort of asking something that Mike had another way but.
Speaker Change: Stephen with your advertisers I guess.
Speaker Change: They're sort of their expectations on the.
Speaker Change: The reach of your of your membership base with the when you transition to.
Speaker Change: The legacy members onto the paid product.
Steve Silver: So we decided that for our enterprise as we will maintain their reach into 2025.
Speaker Change: Even if you're doing.
Speaker Change: Convert to amendable to paying member in 2025, and you're asking a travel to remember for a long time, just still able to see the offer is still able to keep top 20, you will see that a bit later than the others and there's lots of other benefits.
Speaker Change: Missing out on.
Speaker Change: You cannot buy the offer that we negotiate exclusively but for our advertisers we have come up with a plan that maintains the reach for them and so with this strategy.
Speaker Change: We also anticipate to maintain or even grow our advertising revenues next year, and lastly think of a member who is paying a membership fee that member is now even more looking forward could you offer that they are receiving youre more engaged to pay for something that previously what three so now you really want to take advantage.
Speaker Change: And we see that members already in 2024, who pay the membership fee because they joined in 2020 before that they are more active and more engaged than those that haven't seen a membership fee previously.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: And this does conclude the Q&A portion for today's call I would like to turn the call back over to Mr. <unk> for closing remarks.
Speaker Change: Thanks to your investors that thank you so much again for your time and support and we look forward to speaking with you again next quarter have a great day.
Speaker Change: Yeah.
Speaker Change: This concludes today's travels <unk> third quarter 2024 earnings call and webcast. You may disconnect. Your lines at this time and have a wonderful day.
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