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T

TRAVELZOO (TZOO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered the highest quarterly revenue since the pandemic: revenue $23.1m (+5% y/y), operating profit $3.7m (16% margin), diluted EPS $0.25, and operating cash flow $3.3m; management emphasized the new paid membership model as the key growth driver .
  • Versus S&P Global consensus, Travelzoo modestly beat on revenue ($23.14m actual vs $22.99m consensus*) and beat on Primary EPS ($0.28 actual vs $0.25 consensus*), noting the company-reported diluted EPS was $0.25 .
  • Margin compression was deliberate: management increased member acquisition investment and explained a temporary gross margin headwind from selectively purchasing distressed travel inventory (booked in cost of revenue) and a transient uptick in customer service costs related to new club members .
  • Guide/catalyst: for Q2 2025, management expects year-over-year revenue growth “to double,” with accelerating growth thereafter as membership-fee revenue amortizes; near-term net income could fluctuate with opportunistic marketing spend .
  • Capital allocation remains shareholder-friendly: Travelzoo repurchased 590,839 shares in Q1, ended the quarter with $12.2m in cash and equivalents, and remained cash-flow positive .

What Went Well and What Went Wrong

What Went Well

  • Membership-fee ramp supporting incremental growth: “Membership fees begin to drive significant and incremental revenue growth... It will further accelerate.” (prepared remarks) .
  • Jack’s Flight Club momentum: revenue +20% y/y to $1.3m and premium subscribers +13% y/y; management reinvested >50% of revenue in marketing to compound growth .
  • Clear near-term growth catalyst: Q2 2025 y/y revenue growth expected to “double,” with accelerating growth trend as fee revenue is recognized ratably and more members convert to the paid club .

What Went Wrong

  • Profitability down y/y due to investment: operating profit fell to $3.7m (from $5.6m) as the company leaned into member acquisition to accelerate growth .
  • Gross margin headwinds: classification of selectively purchased distressed inventory into cost of revenue and a temporary increase in customer service costs for new conversions weighed on gross margin; management expects service cost normalization .
  • Europe profitability weakened: Europe operating profit fell to $0.2m (3% margin) from $1.4m (prior-year), even as revenue in the region was roughly flat y/y; management cited market fluctuations by country (Germany strong, U.K. softer) .

Financial Results

Headline P&L vs recent quarters (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$20.1 $20.7 $23.1
Operating Income ($USD Millions)$4.045 $4.834 $3.744
Net Income ($USD Millions)$3.256 $3.264 $3.037
Diluted EPS ($)$0.26 $0.26 $0.25

Q1 2025 vs S&P Global consensus

MetricActualConsensusCommentary
Revenue ($USD Millions)$23.14 $22.9935*Slight beat vs consensus*
Primary EPS ($)$0.28 (S&P Primary EPS actual)*$0.25*Beat on Primary EPS; company-reported diluted EPS was $0.25

Values marked with * retrieved from S&P Global.

Segment breakdown (Q1 2025 vs Q1 2024)

SegmentRevenue Q1’24 ($000s)Revenue Q1’25 ($000s)Op Profit Q1’24 ($000s)Op Profit Q1’25 ($000s)
North America14,273 14,830 4,438 3,594
Europe6,580 6,970 1,382 228
Jack’s Flight Club1,100 1,323 (99) (48)
New Initiatives32 17 (130) (30)
Consolidated21,985 23,140 5,591 3,744

KPIs and cash trends (oldest → newest)

KPIQ3 2024Q4 2024Q1 2025
Advertising Revenue ($m)$19.1 $20.7 $20.7
Membership Fees Revenue ($m)$1.4 $1.6 $2.4
Cash, Cash Equivalents & Restricted Cash ($m)$12.1 $17.7 $12.2
Operating Cash Flow ($m)$5.3 $7.7 $3.3
Deferred Revenue Balance ($m)$3.85 $6.55 $7.84
Shares Repurchased (units)552,679 135,792 590,839

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue growth (y/y)Q2 2025“For Q1 2025, revenue to increase at a higher pace; 2025 substantially higher revenue growth” “For Q2 2025, y/y revenue growth to double; trend to accelerate in subsequent quarters” Raised (more specific acceleration)
Profitability trajectory2025+“Over time, profitability to further increase as recurring membership fees are recognized” “Over time, profitability to increase as recurring membership fees are recognized” Maintained
Marketing spend impactNear termExpect fluctuations; opportunistic marketing, expensed immediately Expect fluctuations; opportunistic marketing, expensed immediately Maintained
Membership conversion2025Legacy members exempt during 2024; fee to contribute in 2025 Seeing legacy members become Club Members over time; additive to new members Maintained/Progressing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
Membership fees modelQ3: Fee begins 1/1/24; 2025 revenue uplift expected . Q4: 2025 revenue to grow substantially from membership fees .Membership fees $2.4m in Q1; management: fees driving incremental growth and will accelerate .Strengthening contribution
Marketing investment & marginsQ3/Q4: OpEx disciplined; marketing lower y/y in Q3 .GAAP op margin 16%; investing more to accelerate member growth .Near-term margin pressure
Gross margin driversNot highlighted previously.Temporary headwinds from distressed inventory classified in cost of revenue and higher customer service for new members .Transient headwind
Regional performanceQ3: Europe improved; Q4: Europe revenue -13% y/y .Germany strong; Europe margin 3% as investments weigh .Mixed, improving in Germany
Jack’s Flight ClubQ3: Rev +11% y/y; Q4: Rev +19% y/y .Rev +20% y/y; premium subs +13% y/y; reinvesting >50% of rev in marketing .Consistent growth
Capital allocationQ3: 552,679 shares repurchased ; Q4: 135,792 shares .590,839 shares repurchased; confident in member growth ROI .Active buybacks
Travelzoo METAQ3/Q4: Included in New Initiatives .Browser-enabled experiences in development; disciplined approach .Early development

Management Commentary

  • “Membership fees begin to drive significant and incremental revenue growth... It will further accelerate.” — Prepared remarks .
  • “For Q2 2025, we expect year-over-year revenue growth to double... We expect revenue growth to accelerate as a trend in subsequent quarters...” — Prepared remarks .
  • “In Q1, we had a few opportunities to purchase distressed travel products... This allowed us to create strong club offers... we had to classify it in cost of revenue... customer service also increased a bit year-over-year... we think this will go back to where it was.” — Q&A .
  • “The opportunity [to repurchase shares] was very attractive... we are confident in our business... we now have a better opportunity to invest in member growth... and that’s where we would like to allocate the positive cash.” — Q&A .
  • “Germany had a very strong quarter — revenue was up double digits y/y... U.K. was slightly lower... we believe Europe revenue will also catch up.” — Q&A .

Q&A Highlights

  • Macro/travel flows: Industry reports of lower inbound to U.S.; management sees members flex to other destinations, limiting impact on Travelzoo .
  • Regional dynamics: Variability by country — Germany double-digit y/y growth; U.K. slightly lower vs a strong prior-year comp; expectation of Europe catching up .
  • Gross margin mechanics: Temporary gross margin pressure due to distressed inventory purchases (classified in cost of revenue) and higher initial customer service for new club members; expected to normalize .
  • Member acquisition: Club offers are the leading conversion driver; broader benefits suite supports the offer .
  • Capital allocation: Aggressive Q1 buybacks were opportunistic; future cash expected to rebuild via upfront fee collection and profitability; capital likely prioritized to member growth .

Estimates Context

  • Q1 2025 results vs S&P Global consensus: Revenue $23.14m vs $22.99m consensus (beat); S&P “Primary EPS” actual $0.28 vs $0.25 consensus (beat). Company-reported diluted EPS was $0.25 . Values marked with * retrieved from S&P Global.
  • Implication: Modest top-line outperformance with stronger Primary EPS; estimate revisions may reflect accelerating membership-fee contribution and sequentially higher deferred revenue, though near-term margin forecasts may need to incorporate higher marketing and cost-of-revenue dynamics discussed on the call .

Key Takeaways for Investors

  • Paid membership is now a tangible growth lever: membership fees reached $2.4m in Q1 and should accelerate as conversions and new adds compound and revenue amortizes .
  • Management is deliberately trading near-term margin for higher member/LTV growth; gross margin headwinds look transitory (distressed inventory and onboarding service costs) .
  • Clear near-term catalyst: Q2 y/y revenue growth expected to “double,” with further acceleration in subsequent quarters — a potential stock narrative inflection .
  • Cash generation remains solid and capital returns active, but expect cash to be redeployed into member acquisition given attractive ROI and confident tone .
  • Europe remains mixed with bright spots (Germany), supporting the case for sustained international growth as marketing ramps .
  • Deferred revenue and paid membership penetration are the KPIs to watch for durability of the model; both moved up (deferred revenue $7.84m at Q1-end) .
  • Execution risk sits in balancing marketing intensity with profitability; management signaled willingness to accept NI volatility near term to accelerate the member base .

Values marked with * retrieved from S&P Global.