Michael Kupinski

Michael Kupinski asked about the decline in the floral segment beyond PMOL, the company's market share in consumer floral, and how new initiatives are reshaping competitive positioning across all channels. He also sought an update on commodity price trends, particularly cocoa, and identified the primary positive and negative swing factors for the full-year financial performance. Mr. Kupinski inquired about current consumer behavior, noting the divergence between strong GDP and weak confidence, and the company's capital allocation priorities, including potential acquisitions or asset sales, amidst its corporate reorganization.

Answer

Adolfo Villagomez, CEO, emphasized the current focus on the bottom line through improved marketing and merchandising, viewing the year as a transition to drive profitable traffic while managing the florist network. James Langrock, CFO, confirmed cocoa prices remain significantly elevated year-over-year, but other commodities like eggs, butter, and sugar are stabilizing and are not expected to be headwinds in the back half. Mr. Langrock identified accelerating cost savings as a key controllable positive swing factor, while Mr. Villagomez highlighted the new functional structure, best-in-class practices in merchandising and online experience, and growth in external marketplaces as future tailwinds. Mr. Langrock observed a continued bifurcation in consumer spending, with higher-income households performing better. Regarding capital allocation, Mr. Langrock stated that fiscal 2026 is a foundational year, prioritizing stabilization, operational efficiencies, customer experience, and technology capabilities, though acquisitions would be considered if strategic. Mr. Villagomez added that "everything is on the table" to strengthen the core business.

Michael Kupinski, Director of Research and Managing Director of Media and Entertainment at Noble Capital Markets, questioned the decline in the floral segment beyond PMall, asking about potential market share gains and how new initiatives impact competitive positioning across all channels. He also sought insights into commodity price trends, particularly cocoa, and identified the biggest swing factors for full-year performance. Additionally, Kupinski inquired about current consumer behavior, specifically the bifurcation between higher and lower-income households, and the company's capital allocation priorities, including reinvestment, shareholder returns, acquisitions, and potential divestitures.

Answer

CEO Adolfo Villagomez stated that the current focus is on the bottom line, with the transition year aiming for a stronger future through better marketing and merchandising, acknowledging short-term top-line impact. CFO James Langrock noted that while cocoa prices remain significantly elevated year-over-year, other commodities like eggs, butter, and sugar are stabilizing and are not expected to be a headwind in the back half. Langrock identified accelerating cost savings as the primary controllable positive swing factor. Villagomez added that the new functional structure and leadership, particularly in merchandising and online experience, are expected to drive future improvements. Regarding consumer behavior, Langrock confirmed the continued bifurcation, with higher-income households holding up better. On capital allocation, Langrock emphasized fiscal 2026 as a foundational year focused on stabilization, operational efficiencies, customer experience, and technology, while Villagomez indicated that 'everything is on the table' regarding potential divestitures to strengthen the core business.

Michael Kupinski asked for color on the bifurcated market's impact on customer behavior, whether the company lost market share in the floral business, clarification on tariff impacts on the BloomNet segment, and revenue trends for April.

Answer

President Tom Hartnett confirmed that lower-income consumers continue to pull back on discretionary spending, while Chairman and CEO Jim McCann noted that new high-end products sold out, indicating strength among affluent customers. Hartnett stated the company believes it has maintained or gained floral market share. CFO James Langrock clarified that the tariff-impacted 'wholesale' business includes BloomNet's wholesale operations (Napco). Langrock also mentioned that April revenue would be up due to the Easter shift, but everyday business remains soft, with the full quarter expected to be 'slightly better' than Q3.

Michael Kupinski asked whether marketing issues were related to content or channels, what changes are planned for the marketing strategy, the drivers for the adjusted EBITDA margin outlook, and the potential for M&A activity.

Answer

President Tom Hartnett attributed marketing challenges to lower-cost channels like natural search, with plans to focus more on mid and upper-funnel channels and leverage AI for content efficiency. CEO Jim McCann and CFO James Langrock stated that margin improvements are expected from 'Work Smarter' initiatives and operational efficiencies, not commodity costs, adding that some savings will be reinvested into marketing. McCann also noted that M&A opportunities have improved and the company may be more active if the right accretive opportunity arises.

Michael Kupinski questioned the spending patterns of different customer tiers, the primary risks to full-year revenue guidance, the outlook for commodity costs like cocoa, and trends within the BloomNet florist network.

Answer

CFO Bill Shea stated that affluent customers continue to perform well, while new lower-priced offerings are successfully stimulating the less affluent segment. On commodities, Shea confirmed cocoa prices are locked in through the next holiday season. CEO Jim McCann and President Tom Hartnett added that the BloomNet florist network size is stable, with a focus on deepening relationships by adding more gift products. They expect BloomNet to return to growth in the second half of the fiscal year.

Michael Kupinski asked why the company's FY25 revenue guidance remains cautious despite improving consumer confidence metrics and the potential for interest rate cuts. He also sought an outlook on commodity price trends for FY25, particularly for items like cocoa.

Answer

CEO Jim McCann acknowledged that cautious sentiment from other companies gave them pause. However, CFO Bill Shea and President Tom Hartnett clarified that the guidance is based on internal initiatives like pricing elasticity and category expansion, not on an assumed macroeconomic improvement. Shea detailed that while some commodity costs like wheat and sugar have eased, cocoa prices remain at all-time highs and freight costs are increasing, leading to a forecast of only modest gross margin improvement.

Michael Kupinski asked for color on revenue weakness, specifically whether it was concentrated in higher-end or lower-end customers. He also questioned if the company lost market share in the floral business, sought clarification on the tariff impact to the BloomNet segment, and asked about revenue trends in April.

Answer

President Tom Hartnett confirmed that challenges continued with lower-income consumers, while retention among 'best and better' customers remained strong. Chairman and CEO James McCann added that newly introduced high-price-point items sold out. Hartnett stated the company believes it has maintained or gained floral market share. CFO James Langrock clarified that the 'wholesale' business impacted by tariffs includes BloomNet's Napco division. Langrock also noted that April revenue would be up due to the Easter shift but that softness in everyday business persists, with the full quarter expected to be slightly better than Q3.

Michael Kupinski asked for an update on the resolution of disruptions affecting SeaWonder and Christie Brinkley brands in Q4, whether G-III's merchandising tweaks for Halston would impact spring or fall lines, and the product roadmap for new brand rollouts. He also sought insights into the types of acquisitions Xcel Brands is contemplating.

Answer

Robert D'Loren, Founder, Chairman, and CEO, confirmed that the disruptions for SeaWonder and Christie Brinkley, caused by vendor tariff issues and HSN's studio move, have been resolved with new sourcing and programming adjustments. He indicated that G-III's Halston adjustments would primarily impact the fall line, with some spring tweaks. D'Loren stated that new brands would begin rolling out in Q1 2026, starting with food and small electronics, with Cesar Millan's pet accessories program expected by fall next year. He reiterated the company's long-standing interest in brand acquisitions and transformative transactions.

Michael Kupinski asked for updates on the resolution of disruptions affecting the Sea Wonder and Christie Brinkley brands, the timeline for G-III's merchandising adjustments for the Halston brand, the product roadmap for new brand rollouts, and insights into potential acquisition targets.

Answer

Robert D'Loren, Founder, Chairman, and CEO of Xcel Brands, confirmed that issues with Sea Wonder and Christie Brinkley, including vendor replacement and HSN transition challenges, have been resolved. He indicated that G-III's Halston merchandising tweaks would primarily impact the fall line, with some adjustments for spring. D'Loren stated that all new brands, including food, small electronics, and pet accessories, are set to launch in Q1 2026, with pet accessories rolling out by fall next year. He also reiterated the company's ongoing interest in brand acquisitions and transformative transactions.

Michael Kupinski of Noble Financial Capital Markets inquired about Xcel Brands' full-year 2025 adjusted EBITDA guidance, liquidity needs for upcoming brand launches, the revenue potential of new influencer brands, the strategy for the Isaac Mizrahi brand, and the focus of potential transformative acquisitions.

Answer

CEO Robert D'Loren confirmed the adjusted EBITDA forecast of $1 million to $2.5 million for 2025, noting it accounts for potential tariff and HSN consolidation impacts. He affirmed current liquidity is sufficient following a $3 million infusion but that more transactions are in the pipeline. D'Loren highlighted the significant potential of new influencer brands, particularly Cesar Millan. He also stated the company is focused on acquiring brands with large social media followings and media companies to extend reach. CFO James Haran clarified the annual operating cost run rate is approximately $9 million.

Michael Kupinski inquired about the performance and outlook for the Halston brand, the background of the Isaac Mizrahi asset value adjustment, expectations for Q4 adjusted EBITDA, the quantifiable revenue impact from recent hurricanes, and the timeline for new brand launches.

Answer

CEO Robert D'Loren stated that the Halston collection looks good and he is comfortable with its 2025 prospects. Regarding Isaac Mizrahi, he explained the company took a conservative valuation approach due to challenges with in-person studio appearances, but a new personality will be introduced in January to increase airtime. CFO James Haran added that Q4 adjusted EBITDA will improve but may not turn positive due to hurricane impacts, which Robert D'Loren quantified as a $450k-$500k revenue disruption. D'Loren also confirmed a new home brand launch for March 2025, with several other deals in the pipeline.

Michael Kupinski of Noble Capital Partners inquired about the performance trajectory of the TWRHLL by Christie Brinkley and Halston brands, Q3 licensing revenue expectations, details on a new Q4 designer launch, the status of the Isaac Mizrahi brand, and future distribution plans for Christie Brinkley products.

Answer

Executive Robert D'Loren stated that the TWRHLL brand exceeded its HSN launch plan by 40% with significant growth planned for 2025 and expansion to other retailers. He confirmed Halston will generate minimum guaranteed royalties in Q3, with a larger ramp expected in 2025. D'Loren also noted a new designer brand will launch on HSN in Q4 with minimal costs, and the Isaac Mizrahi brand is on plan but down year-over-year due to changes in QVC's remote show policy. For Christie Brinkley, expansion into categories like apparel, home, and beauty is planned for major big-box retailers.

Michael Kupinski inquired about the stabilization of core broadcast advertising, the ability to maintain high profit margins despite revenue declines, the impact of government-related advertising, and the progress of the Townsquare Interactive Phoenix office and West Coast expansion.

Answer

CEO Bill Wilson and CFO Stuart Rosenstein addressed the secular decline in broadcast radio, noting Townsquare's outperformance and market share gains, with expectations for stabilization to mid-single-digit declines in 2026 and low single-digits in 2027/2028. They highlighted improved broadcast profit margins (28% in Q3 2025 vs. 25% in Q3 2024) due to expense management and AI deployment. Wilson clarified that government-related advertising saw negative impacts, not incremental buys. Regarding Townsquare Interactive, Wilson expressed satisfaction with the Phoenix office for talent acquisition and emphasized the division's strong profit growth (21% in Q3, 19% YTD) and expanded profit margins (33%), with revenue growth expected to return in 2026.

Michael Kupinski asked for color on the search engine referral traffic trends and their long-term impact on the digital advertising outlook. He also inquired about the softer Q3 guidance, local advertiser sentiment, the performance of the Phoenix office, and the specific financial impact from government advertising cuts.

Answer

CEO Bill Wilson explained that while direct digital ad sales are strong, declining search engine referral traffic is negatively impacting indirect remnant revenue, muting overall growth. He views this as a temporary issue and remains confident in the long-term trajectory, supported by programmatic growth and media partnerships. Wilson confirmed advertisers are cautious but still spending, and noted that cuts in government advertising (Doge cuts) created a multi-million dollar headwind in 2025. He added that the Phoenix office is performing well, approaching 50 employees and successfully recruiting talent.

Michael Kupinski of NOBLE Capital Markets inquired about the competitive landscape for Townsquare's Ignite digital advertising business, the revenue contribution from markets without a radio station presence, the advertising overlap between broadcast and digital platforms, and the company's strategy regarding potential FCC deregulation and M&A.

Answer

CEO Bill Wilson explained that operating outside the top 50 markets provides a significant competitive advantage, positioning Ignite as a sophisticated, full-service digital agency. He noted that media partnerships contributed about $1 million in Q1 but are expected to grow significantly. Wilson confirmed that over 85% of broadcast advertisers also use their digital solutions and emphasized that Townsquare's digital profit margins are equal to or higher than broadcast margins, making the ad-dollar shift favorable. Regarding deregulation, he expressed excitement, outlining a dual growth strategy of capital-light media partnerships and potential station acquisitions, citing the successful integration of Cherry Creek as a model.

Michael Kupinski asked for more detail on the Townsquare Interactive turnaround, including subscriber numbers and Q1 outlook. He also inquired about the current average revenue per user (ARPU) for enhanced products, the company's plans to update its 3-to-5-year revenue goals for Ignite and Interactive, and its perspective on potential FCC deregulation and M&A activity in the radio sector.

Answer

CEO Bill Wilson explained that while Townsquare no longer discloses specific subscriber counts for Townsquare Interactive (TSI), the business has successfully returned to growth, with Q1 2025 revenue growth expected to double Q4's rate to approximately 4%. He projected a significant 20% year-over-year profit increase for TSI in Q1 and a return to $2.5 million to $3 million in full-year profit growth. Wilson confirmed ARPU remains around $300. Regarding long-term goals, he anticipates high single-digit growth for the Ignite digital advertising business and a return to historical growth levels for TSI by 2026. On deregulation, Wilson stated that Townsquare is well-positioned as a natural acquirer of broadcast assets in markets outside the top 50 but also highlighted the capital-light Ignite Media Partnership model as an alternative growth path.

Michael Kupinski of Noble Capital Markets asked about the divergence between National Digital and National Broadcast advertising, the potential for national broadcast spot to recover, the performance of core broadcasting ex-political, and details on the new SummitMedia partnership, including revenue contributions, costs, and margin profile.

Answer

CEO Bill Wilson explained that National Digital, while down in Q3, is expected to be flat to slightly up in Q4. Conversely, he noted National Broadcast spot is pacing for a significant decline of over 20% in Q4 and is viewed as a long-term 'cash cow' not expected to return to growth. Wilson attributed core broadcast softness to election-related clutter and the steep national decline. Regarding the SummitMedia partnership, he stated there was no material Q3 revenue, with minimal contributions expected in Q4. The costs are primarily personnel, and the margin profile is slightly lower than the overall Digital Advertising segment, in the high teens.

Michael Kupinski of Noble Financial Capital Markets inquired about the core advertising environment, asking for more detail on advertiser sentiment and whether there is pent-up demand. He also asked about the potential business impact of declining search engine referral traffic and the company's strategy to counter AI-driven content scraping.

Answer

CFO Jason Combs attributed the company's outperformance in Q2 core advertising to its sports strategy but acknowledged broad advertiser hesitancy, especially in the automotive category. President and CEO Adam Symson added that macroeconomic uncertainty is a key factor. Regarding digital strategy, Symson stated that Scripps employs technical solutions to block content scraping and believes that while AI in search may be a headwind for publishers, it could benefit brand-building video advertising mediums.

Michael Kupinski asked for quantification of the advertising lift from the gambling category due to sports programming, an update on the EdgeBeam joint venture's progress and revenue potential, and management's sense of the timing for potential FCC deregulation.

Answer

CFO Jason Combs noted that in markets with local sports deals, gambling advertising growth is stronger but did not provide specific quantification. CEO Adam Symson provided an update on EdgeBeam, stating they are close to hiring a CEO but advised not to model material revenue for Scripps this year, emphasizing its long-term value. Regarding FCC timing, Symson believes action could begin soon, potentially with swaps or deals brought before the commission even before a full slate of commissioners is confirmed, citing a recognized need to level the playing field for local broadcasters.

Michael Kupinski from NOBLE Capital Markets inquired about core advertising trends, asking for color on lagging categories and the outlook for 2025. He also sought an update on the Edge Beam Wireless joint venture, including its revenue potential, timeline for meaningful contribution, and any associated start-up costs.

Answer

CFO Jason Combs explained that Q1 core advertising was guided down low to mid-single digits due to economic uncertainty impacting the automotive and retail categories. He noted that while a bounce-back from political ad displacement is expected later in the year, it could be offset by economic headwinds. President and CEO Adam Symson discussed the Edge Beam Wireless JV, highlighting its 97% U.S. household reach and long-term potential in datacasting. However, he advised not to model material revenue for 2025, though he expects to share more details soon.

Michael Kupinski from NOBLE Financial Capital Markets asked for the revenue contribution from key political markets, the dollar amount of savings from the Scripps Networks restructuring, and the outlook for post-election advertising categories.

Answer

Chief Financial Officer Jason Combs noted that key political states represent about a third of their markets but did not break down revenue contribution. He specified the Scripps News changes would yield about $35 million in annualized savings. Chief Operating Officer Lisa Knutson highlighted sequential improvement in services and automotive advertising post-election.

Michael Kupinski of Noble Financial Capital Markets inquired about Q3 national advertising pacing, the potential impact of declining referral search traffic on the Digital Marketing Services (DMS) business, and any signs of recovery in key advertising categories.

Answer

EVP & CFO Frank Lopez-Balboa responded that national ad pacing has not yet shown improvement but noted the category is lumpy. President & CEO Mary Berner clarified that referral search is a minimal part of their digital business and does not significantly impact their DMS offerings. Lopez-Balboa added that while local spot is slightly better than national, key categories like automotive remain pressured, though Cumulus is well-positioned to benefit from a potential interest-rate-driven recovery.

Michael Kupinski of Noble Capital Markets inquired about the primary drivers for the Q1 decline in the network business, the monthly revenue cadence during the quarter, the company's outlook on potential FCC deregulation, and the current status of asset sales.

Answer

CFO Francisco Lopez-Balboa explained that the network's performance was impacted by general market weakness, not programming changes, and noted that revenue pacing slowed late in the quarter. CEO Mary Berner expressed optimism about FCC deregulation, expecting a notice of proposed rulemaking by late summer or fall. Lopez-Balboa also reiterated the company's goal to generate $10 million to $15 million from asset sales this year, highlighting a key property in Nashville.

Michael Kupinski inquired about the 2025 outlook for the Westwood One network, the specific ad categories driving broadcast weakness, the margins for the Digital Marketing Services (DMS) business, and the potential for non-core asset sales to accelerate debt reduction.

Answer

CEO Mary Berner and CFO Francisco Lopez-Balboa responded that evaluating network show performance is an ongoing process and that Q4 cost cuts included rightsizing content. Lopez-Balboa detailed that advertising weakness was broad-based but acute in interest-rate sensitive sectors like auto and mortgages. He confirmed DMS contribution margins are around 35% with investments focused on ROI-positive hires, not technology. He also affirmed the company has non-core assets, like land in Nashville and broadcast sticks, that it will look to monetize to reduce debt.

Michael Kupinski of Noble Capital Markets inquired about the specific drivers of Digital Marketing Services (DMS) growth, the outlook for political advertising revenue, the reasons for advertiser hesitancy around the election, and performance trends in the network radio business.

Answer

President and CEO Mary Berner detailed that DMS growth is fueled by a full suite of presence products like SEO and website development. CFO Francisco Lopez-Balboa explained that Q4 political revenue is tracking as expected despite a tough 2020 comparison, with potential upside remaining. Berner added that advertisers are pausing due to economic uncertainty and a desire to avoid the 'clutter' of political ads. Lopez-Balboa noted that while Q3 network radio benefited from the summer games and NFL timing, Q4 may be less robust, but local spot is pacing stronger.

Michael Kupinski of Noble Financial Capital Markets questioned the progress of tariff mitigation efforts, the source of caution in the H2 outlook, and the financial impact of the solar customer bankruptcy in the contact center segment.

Answer

CEO Michael Benstock stated that tariff mitigation has been successful and margins are protected, with most price increases taking effect in Q3. CFO Mike Koempel explained the main Q2 impact from the bankruptcy was a credit loss reserve, not revenue, but acknowledged it creates a revenue headwind for H2. He added that the strong sales pipeline is expected to offset this softness over time, with most new revenue likely materializing next year.

Jacob Mutchler, on behalf of Michael Kupinski, asked for more comments on the price elasticity of branded products and how the company is balancing profitability against the opportunity to gain market share by potentially absorbing some tariff costs.

Answer

Executive Michael Benstock explained that pricing is very elastic. For branded merchandise, which is priced order-by-order, tariffs are built into the price. For the uniform business, most contracts were updated after the first Trump administration to allow for tariff-related price increases. He stated the company expects to recoup the 'lion's share' of tariff costs from clients, while also working with them to find alternative, non-tariff-impacted products to fit their budgets, suggesting a focus on maintaining profitability while providing flexible solutions.

Michael Kupinski asked about the unique factors driving Mexico's sustained growth, whether that successful playbook could be applied to other Latin American markets, and which other LatAm countries present growth opportunities.

Answer

CEO Aviv Sher explained that while their playbook is replicable, doing so in new markets like Brazil would require significantly more capital than their initial Mexico investment due to higher media costs and competition. He noted Mexico's success was aided by lower competition, a strong retail presence, and organic market growth. Regarding other LatAm markets, Sher identified Colombia as a challenge due to a new VAT on deposits, forcing a scale-back to a breakeven strategy, while Panama has shown some offsetting success.

Michael Kupinski inquired about potential investment increases in markets beyond Mexico, such as Argentina, and asked for a geographical breakdown of how the company expects to achieve its full-year guidance.

Answer

CEO Aviv Sher stated the company is currently defensive, focusing on its core Mexico market, but noted some improvements in Panama. CFO Oscar Iglesias added that Spain's unit economics remain attractive for investment. To reach full-year guidance, Iglesias expects a pickup from most markets, supported by cost savings in Argentina from the end of the River Plate sponsorship, alongside primary growth from Spain and Mexico.

Michael Kupinski asked about factors beyond currency and sporting events that affected Mexico's Q4 results, inquired about 2025 growth investments in markets outside of Mexico like Peru, Chile, and Brazil, and requested an update on the company's position in Argentina.

Answer

CFO Oscar Iglesias highlighted that strong momentum built later in Q4, particularly in December, drove lower CPAs and has continued into 2025. CEO Aviv Sher added that the reported flat growth in Mexico masks nearly 20% nominal growth in local currency due to FX headwinds. Regarding expansion, Aviv Sher explained that the ROI is still highest in core markets (Mexico, Spain), and Brazil is too large to enter without a partner. For Argentina, he stated that growth is stalled as they have been unable to secure a license for the crucial province of Buenos Aires, limiting their operations to the city.

Michael Kupinski from Noble Financial Capital Markets asked for an explanation of the significant increase in cost of revenues. He also questioned if the favorable marketing spend dynamics would continue, inquired about the European subscriber acquisition strategy, and asked about the potential for a future premium subscription tier.

Answer

Global CEO Holger Bartel attributed the higher cost of revenue to opportunistic purchases of distressed travel inventory, which were used to create compelling club offers. He expects these opportunities to continue amid weaker hotel demand. Bartel confirmed Travelzoo will keep investing heavily in marketing as long as the immediate payback remains attractive. He noted that strong member acquisition occurred in both North America and Europe, with heavy UK investment driving the reported loss in Europe. Regarding subscription tiers, Bartel stated the company is keeping it simple for now but will evaluate a price increase for 2026.

Michael Kupinski from Noble Financial Capital Markets asked for clarification on the significant increase in cost of revenues, whether the high marketing spend should be modeled going forward, the geographic focus of subscriber acquisition, and the potential for a premium subscription tier.

Answer

Global CEO Holger Bartel stated that the cost of revenue increased due to opportunistic purchases of distressed travel inventory for strong club offers. He confirmed Travelzoo will continue investing heavily in marketing as long as the ROI remains favorable. While the UK saw strong growth, member acquisition occurred in both North America and Europe. Regarding a premium tier, Bartel said the company is keeping its model simple for now but will evaluate a price increase for 2026.

Michael Kupinski inquired about the significant increase in the cost of revenues, the sustainability of favorable marketing spend dynamics into the second half of the year, the geographic focus of subscriber acquisition, and the potential for introducing a premium subscription tier.

Answer

Global CEO Holger Bartel attributed the higher cost of revenue to opportunistic purchases of distressed travel inventory to create strong club offers. He stated that as long as the ROI on member acquisition remains favorable, the company will continue to invest heavily. He clarified that member acquisition was strong in both North America and Europe, particularly the UK. Regarding subscriptions, the company is considering a price increase for 2026 but is not currently planning a premium tier to maintain simplicity.

Michael Kupinski from Noble Financial Capital Markets asked for an explanation of the significant increase in cost of revenues, whether the favorable marketing spend dynamics would continue, and about the company's European subscriber acquisition strategy. He also inquired about the potential for a future premium subscription tier.

Answer

Global CEO Holger Bartel attributed the higher cost of revenue to opportunistic purchases of distressed travel inventory to create compelling club offers. He confirmed the company will continue investing heavily in member acquisition as long as the ROI remains attractive. He noted that acquisition was strong in both North America and the UK, with the UK's success impacting Europe's short-term profitability. Regarding a premium tier, Bartel stated the focus is on simplicity for now, but a price increase for the single tier will be evaluated for 2026.

Michael Kupinski from NOBLE Capital Markets questioned the significant increase in cost of revenues, the sustainability of favorable marketing ROI, the geographic focus of subscriber acquisition, and the potential for a future premium subscription tier.

Answer

Global CEO Holger Bartel attributed higher cost of revenues to purchasing distressed travel inventory for strong offers, a trend he expects to continue amid soft hotel demand. He confirmed the company will keep investing in marketing as long as the ROI is positive. He noted acquisition was strong in both North America and Europe, with heavy UK investment driving Europe's reported loss. Bartel stated that while a price increase will be evaluated for 2026, the company is currently focused on a single membership tier.

Michael Kupinski from Noble Financial Capital Markets asked for clarification on the significant increase in cost of revenues, whether the favorable marketing spend dynamics would continue, the geographic focus of subscriber acquisition, and the potential for a premium subscription tier.

Answer

Global CEO Holger Bartel attributed the higher cost of revenue to opportunistic purchases of distressed travel inventory for strong club offers. He confirmed the company will continue investing heavily in member acquisition as long as the ROI is favorable. Bartel noted that acquisition was strong in both North America and Europe, with heavy UK investment impacting Europe's profitability. He added that while a premium tier is a good idea, the focus is on simplicity for now, with a potential price increase to be evaluated for 2026.

Michael Kupinski from NOBLE Capital Markets asked about the drivers of North America's stronger performance versus Europe and questioned the factors impacting gross margins, including the new subscription model.

Answer

Executive Holger Bartel attributed the regional performance difference to natural business fluctuations, highlighting Germany's strength against a tough prior-year comparison for the U.K. Regarding gross margins, he explained they were impacted by purchasing distressed travel inventory to create compelling club offers and a temporary increase in customer service costs related to the new membership launch.

Michael Kupinski asked for details on Travelzoo's new subscription model, including its value proposition, pricing, legacy member conversion expectations, and the impact on advertisers. He also followed up with a question about current travel demand trends in North America versus Europe.

Answer

Holger Bartel (executive) explained the subscription costs $40 annually in the U.S. and provides access to exclusive 'club offers' and special 'member days' events. He stated that conversion is proceeding as planned and that paid members show higher engagement. Regarding travel trends, Bartel noted that the affluent travel segment remains strong in the U.S., while some consumer hesitation in Europe creates opportunities for Travelzoo to secure better deals.

Michael Kupinski from NOBLE Capital Markets asked about the expected 2025 revenue mix between advertising and memberships, drivers for Q4 revenue growth, potential changes to the membership fee strategy, and the membership fee for Jack's Flight Club.

Answer

Executive Holger Bartel stated that Travelzoo is not providing a forecast for the 2025 revenue mix or paid member count at this time. He clarified that substantial membership revenue growth is expected in 2025, not Q4 2024, due to the exemption for legacy members. Executive Christina Ciocca added that the Jack's Flight Club fee is comparable across regions, at approximately $60 in the U.S.

The analyst asked about trends in freight costs, the company's shipping strategy in light of trade policy issues, the anticipated impact of tariffs in the second half of the year, the magnitude of planned price increases, and the key drivers behind positive consumer trends.

Answer

The company confirmed increased air freight in Q1 and expects higher freight and tariff costs in Q2, which they are navigating by adjusting shipping methods. For the latter half of the year, they are mitigating tariff impacts through supplier negotiations, sourcing diversification, and strategic price increases that have been well-received by wholesale buyers. Positive consumer trends are attributed to strong product performance, particularly in linen, and an extended selling season for the spring collection due to delayed pre-fall shipments.

Inquired about the financial impact of the wholesale revenue shift into Q4, how tariffs are affecting product plans and SKU counts, and whether the strategy of shifting from air to ship freight has changed.

Answer

The Q4 wholesale shift was not material to Q4's results but will have a more significant impact on Q1 2025. Due to tariffs, the company is actively moving production out of China, which will result in some SKU reduction for the fall season. The freight strategy is now a mix of sea and air; using boats provides flexibility with tariff timing via bonded warehouses, while air freight may be used for precision and faster inventory turns.

Inquired about the specific value of sales shifted into Q2, the product development cadence for the men's line, and whether increased marketing spend is needed to attract higher-income consumers.

Answer

The majority of the beat to guidance was due to the accelerated wholesale shipments. The men's line expansion is focused on the new bottoms program (new fit, better fabric) and potential opportunities with a licensing partner for suiting. The company acknowledges the need for increased top-of-funnel marketing investment in 2025 to drive brand awareness and attract the full-price, higher-income consumer, encouraged by recent strong performance at Nordstrom.

Michael Kupinski of Noble Financial Capital Markets inquired about the impact of freight costs and evolving trade policies on margins, the scale of planned price increases, and the key drivers behind positive consumer trends.

Answer

CFO Yuji Okumura acknowledged that higher freight costs, partly from increased air shipping, impacted Q1 margins and are expected to continue in Q2 as the company navigates tariff timing. CEO Brendan Hoffman added that for the second half of the year, the company is mitigating tariff impacts through supplier negotiations, sourcing diversification away from China, and strategic, item-specific price increases that have been well-received by wholesale partners. Hoffman also attributed strong consumer demand to the success of seasonal products like linen and the strength of the core spring collection, which maintained sales momentum despite delayed pre-fall shipments.

Michael Kupinski from NOBLE Financial inquired about the quantifiable impact of the wholesale revenue shift into Q4, whether tariffs would cause SKU reductions, and if the company's freight strategy of shifting from air to sea has changed.

Answer

CFO Yuji Okumura clarified that the wholesale shipment shift was not material to Q4's overall results but does have a more significant impact on the outlook for Q1 2025. CEO Brendan Hoffman added that some SKU reduction is likely for the fall season as production moves out of China. Regarding logistics, Hoffman stated the company is primarily using sea freight for flexibility but may use air freight for more precise delivery and faster inventory turns.

Michael Kupinski inquired about Snail Inc.'s strategy for revenue diversification, the potential financial impact of the MoU with Mega Matrix, the drivers behind increased marketing costs, and the company's overall approach to achieving profitability.

Answer

Peter Kang, SVP of Business Development and Operations, detailed the company's diversification strategy through new games and a short drama business. Co-CEO Tony Tian clarified that while it's early to quantify revenue from the Mega Matrix MoU, it will contribute to the top line. Peter Kang also explained that recent marketing cost increases were tied to GDC and new launches and are not expected to recur at the same rate. He concluded by outlining the path to profitability through cost controls and diversified monetization streams like premium mods and mobile microtransactions.

Michael Kupinski of Noble Capital Markets inquired about the Xbox release timeline for Bellwright, its potential inclusion in Game Pass, Snail's strategy for managing its development pipeline, and its approach to marketing resource allocation.

Answer

Peter Kang, SVP of Business Development and Operations, stated that Bellwright is anticipated for an Xbox release in Q4 2025, with Game Pass discussions ongoing with Microsoft. He explained Snail's strategy involves a mix of third-party publishing deals and internal development to diversify its portfolio. Kang also provided release windows for upcoming titles like Robots at Midnight (H1 2025), Honeycomb (H2 2025), and Echoes of Elysium (H2 2025), and noted that marketing budgets are determined analytically based on a game's target market size.

Michael Kupinski of Noble Capital Markets inquired about the impact of the Steam summer sale on quarterly sales and gross margins, and also sought an update on the viewership and future prospects of 'ARK: The Animated Series'.

Answer

CFO Heidy Kingwan Chow confirmed the Steam summer sale was successful, significantly improving unit sales and gross profit for the quarter. Peter Kang, Senior VP, Director of Business Development and Operations, explained that distribution partner Paramount+ controls data for 'ARK: The Animated Series,' so viewership numbers could not be disclosed, but noted the second half of season one is still planned for release.

Michael Kupinski of Noble Capital Markets inquired about the potential for a major sell-side customer to rebuild spending, the expected revenue mix between the buy-side and sell-side for the full year, and details on the company's cost-cutting initiatives.

Answer

CEO Mark Walker explained that the company is focused on building direct connections with DSP partners to grow the sell-side business, anticipating a positive impact in the second half of 2025. He projected buy-side revenue around $40 million, with the sell-side making up the remainder of the $90-$110 million guidance. CFO Diana Diaz clarified that cost savings are from fixed costs, specifically staff reductions, which already reduced Q1 operating expenses by 19% and are expected to be ongoing.

Michael Kupinski of NOBLE Capital Markets inquired if the focus on buy-side initiatives represented a strategic shift, asked for quantification of annualized cost savings, and questioned the expected timeline for returning to positive cash flow.

Answer

CEO Mark Walker clarified that the buy-side focus is the result of a two-year strategy, not a new shift, aimed at growing the higher-margin business. CFO Diana Diaz quantified further annualized cost savings for 2025 at approximately $1.5 million to $2 million. Diaz also projected a return to positive cash flow in the second half of 2025, aligning with anticipated revenue growth from new initiatives.

Michael Kupinski inquired about the flexibility of the company's cost structure, specifically its ability to scale down infrastructure, the drivers behind the 2025 revenue guidance, and the outlook for achieving positive adjusted EBITDA in 2025.

Answer

Executive Mark Walker explained that the company's technology infrastructure is highly flexible, allowing them to scale costs up or down with demand, which was crucial for managing OpEx during the recent downturn. He stated that the 2025 revenue ramp will be driven by both rebuilding previous business and diversifying the client base. CFO Diana Diaz projected that adjusted EBITDA would increase quarterly throughout 2025 as revenue builds, following a pattern similar to 2022.

Michael Kupinski of NOBLE Capital Markets inquired about the financial impact of a recent client loss, the current business environment and Q4 revenue outlook, potential R&D savings in 2025, and the reasons for increased sales and marketing expenses.

Answer

Executive Keith Randall quantified the lost client's revenue at approximately $250,000 annually and projected flat Q4 revenue. Executive David Shworan described the business environment as 'excellent' with a strong pipeline, noting significant deferred revenue is expected in Q4. Shworan also confirmed plans to reduce R&D spending as major projects conclude and explained that sales and marketing costs rose due to an expansion of the sales team to increase market presence.

Michael Kupinski of Noble Capital Markets inquired about the drivers of recent revenue performance, asking for a breakdown between competitive pricing, lower client volumes, and client losses. He also sought the annualized revenue impact from clients lost in Q4 2023, clarification on the forecast for a "strong end of the year," and whether the pipeline-to-revenue conversion time has lengthened. Additionally, he asked about the reasons for the client losses, management's satisfaction with the ROI on past product development spending, and the market opportunity for new features planned for the second half of the year.

Answer

CEO David Shworan and CFO Keith Randall addressed the questions. Keith Randall explained that some revenue decline was due to clients switching to less expensive exchange data, a trend that impacts top-line revenue but has a smaller effect on the bottom line. He clarified that client losses in Q4 were due to an acquisition, a business discontinuation, and some spending reductions. For the second half, Randall projected flat revenue for Q3 and approximately 5% year-over-year growth for Q4. David Shworan noted that while he wished for a faster revenue impact from their significant product investments, the strategic move to proprietary data was crucial for reducing risk and enabling innovation, as evidenced by a growing prospect pipeline. He highlighted upcoming products like paper trading, new charting tools, and an integrated web platform as key growth drivers.

Inquired about holiday event booking trends, opportunities to mitigate off-season EBITDA drag at water parks, and whether location and weather patterns are a key factor for future water park acquisitions.

Answer

Holiday event bookings are pacing up 10% year-over-year. While off-season opportunities at water parks exist, the operational challenges are significant and the off-season EBITDA drag is minor compared to high in-season profits. Water park locations are considered on a case-by-case basis, driven by financial return, and can serve as a useful weather hedge for their bowling business in the same market.

Inquired about plans to convert Bowlero centers to the Lucky Strike brand and sought more detail on the financial returns and strategic opportunity of the water park acquisition.

Answer

The company plans to convert most Bowlero centers to the Lucky Strike brand as part of a two-brand strategy. The water park acquisition is expected to generate superior returns compared to new bowling centers, with a significant roll-up opportunity in a space with similar business mechanics.

Michael Kupinski inquired about the timeline for the new centralized sales structure to impact revenue growth and efficiency. He also asked about the influence of the broader economy on recent performance, the outlook for the second half, the strategy to revitalize the Marketing Services segment, and plans for international expansion.

Answer

Executive Kirk Davis explained that the new sales structure's impact will materialize through the rest of the year and into 2025, driven by a strong pipeline and a focus on organic lead generation. He stated that the company's untapped potential currently outweighs macroeconomic concerns, citing good visibility in segments like Fulfillment. While stopping short of forecasting specific sequential growth due to sales cycle timing, Davis expressed optimism for the Marketing Services segment's turnaround in 2025, aided by new leadership and services, and highlighted Europe as a key international growth driver.

Michael Kupinski of Noble Capital Markets inquired about the drivers behind the significant expense growth since 2021, the performance and outlook for the publishing division, potential investments in a new movie, the current broadcast advertising environment, and the timing of the recently announced $10 million in cost savings.

Answer

Executive Evan Masyr attributed the expense increase primarily to investments in in-house digital personnel to improve long-term margins. He also noted that Q2 publishing expenses were higher due to an increased inventory obsolescence reserve and confirmed an investment in a new Dinesh D'Souza film is on the balance sheet. Masyr described the Q3 spot market as 'sluggish.' CEO David Santrella added that the bulk of the cost savings will be realized starting in Q3, with a partial impact in the quarter.

Michael Kupinski from NOBLE Capital Markets inquired about the significant expense growth since 2021 despite flat revenues, the drivers behind publishing expenses, the 2024 book title outlook, investments in a new film, the current broadcast advertising environment, and the timing of recently announced cost savings.

Answer

CEO David Santrella attributed the expense increase to strategic investments in in-house digital personnel and services. He clarified that a Q2 publishing expense increase was due to a one-time inventory reserve adjustment and noted major book releases are slated for Q4. Santrella confirmed an investment in a new Dinesh D'Souza film and described the Q3 broadcast ad market as sluggish. Regarding the $10 million in savings, Santrella and CFO Evan Masyr explained that the impact would begin in Q3 and be fully realized in Q4.

Michael Kupinski of NOBLE Capital Markets asked for clarification on Q1 spot revenue, the outlook for the new Miami stations, drivers for expense increases and Q2 revenue guidance, the advertising climate, and the timing of cost savings.

Answer

CEO David Santrella clarified that national spot revenue grew 20.7% while local spot fell 8.3%. He expressed cautious optimism for faster-than-projected profitability in Miami. Santrella and COO David Evans explained that 2023 is an investment year for digital initiatives, with expense increases expected to cycle in Q1 2024. Evans noted that the $5 million in annual savings from recent layoffs will be realized evenly over the next four quarters. Both executives described the ad environment as cautious due to economic uncertainty.

Michael Kupinski of NOBLE Capital Markets, Inc. questioned the risk of regulatory changes in other unregulated markets similar to the Netherlands situation and asked which countries might present future challenges. He also explored how a cautious expansion strategy in markets like Canada could affect revenue growth, inquired about preferred refinancing methods beyond the ATM, and requested the number of shares outstanding.

Answer

Chairman and CEO Grant Johnson explained that while the online gaming market is constantly evolving, there are no other imminent regulatory risks of the same magnitude as the Netherlands. He identified Canada as a market that will require a formal application process. Johnson clarified that the revenue outlook is not negatively impacted, as it doesn't yet include potential contributions from new, less-regulated products like LANDuel and OMEGA. Regarding liquidity, he mentioned the ATM, a shelf for private placements, and amicable negotiations with a fund for a stable payback plan. CFO Dan Marks offered to follow up with the exact number of shares outstanding.

Michael Kupinski of NOBLE Capital Markets inquired about the drivers behind Q1 gross margins, the specific revenue contribution from the newly acquired Bethard, and the expected capital expenditure for new Helix centers. He also asked for an updated timeline on generating revenue from New Jersey and the company's current monthly cash burn rate.

Answer

CFO Dan Marks stated that gross margins, which benefited from the Bethard acquisition, are expected to remain in the high-50% to 60% range. CEO Grant Johnson detailed that CapEx for Helix centers ranges from $500,000 to $1.5 million with an 18-month ROI target. Johnson also projected that the New Jersey esports betting platform would be live before the end of the calendar year, with Ohio and Ontario as the next likely expansion targets. Marks confirmed the monthly cash burn is just under $1 million.

Michael Kupinski asked about the expected revenue contribution from New Jersey, the sources of Q4 revenue, the forward-looking run rate for G&A and marketing expenses, the company's cash burn and capital position, and potential synergies from cross-selling opportunities.

Answer

CFO Dan Marks stated that New Jersey revenue expectations are initially conservative and a small part of the $100M guidance. He confirmed Q4 revenues were in line, though margins were slightly down while handle increased. Marks noted G&A would normalize lower without $3-4M in one-off Q4 costs and that marketing spend would rise in absolute terms but fall as a percentage of revenue due to cross-sell synergies. He also detailed how cross-selling between brands saves on customer acquisition costs, creating material upside.

Michael Kupinski of Noble Capital Markets inquired about Q3 gross profit margins, the impact of the Lucky Dino acquisition on margins, extraordinary items in G&A expenses, the performance of the EGL acquisition, reopening trends for Helix, and the composition of the Q4 revenue guidance.

Answer

CFO Dan Marks explained that gross margins were strong at 67%, driven by high-margin VIP performance from the newly acquired Lucky Dino brands, and he expects margins to normalize in the mid-50% range. He also identified approximately $1.5 million in one-off transaction fees within G&A. CEO Grant Johnson added that EGL tournament data is forthcoming as major events begin in the next month, Helix centers are expected to return to full capacity in June, and the Q4 revenue guidance assumes one month of contribution from the ggCircuit/Helix acquisition.