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TRAVELZOO (TZOO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue rose 13% year-over-year to $23.9M, driven by accelerating membership fee recognition and resilient advertising; revenue modestly beat Wall Street consensus ($23.386M*) while EPS missed as the company deliberately stepped up member-acquisition spend and recognized higher cost of revenue ($0.24 EPS consensus* vs $0.143 actual*) .
  • Profitability compressed: GAAP operating income fell to $2.1M (9% margin) and diluted EPS to $0.12, reflecting immediate expensing of marketing and certain “club offer” procurement costs classified in cost of revenue; non-GAAP operating profit was $2.4M .
  • Management expects year-over-year revenue growth to continue in Q3 and to accelerate over subsequent quarters as membership revenue is recognized ratably; near term EPS volatility is possible given opportunistic marketing spend .
  • Strategic push for paid membership is gaining traction: membership fees reached $3.0M in Q2 and are expected to approach ~25% of revenue next year; Jack’s Flight Club grew revenue 33% and swung to operating profit .

Note: Values marked with * retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Strong top-line growth with accelerating membership fees: Q2 advertising and commerce revenue was $20.9M; membership fees reached $3.0M, underscoring traction of the paid membership model; management expects membership fees to account for ~25% of revenue next year .
  • Compelling ROI on subscriber acquisition: average acquisition cost rose from $28 in Q1 to $38 in Q2, yet near-immediate cash payback from membership fees and transactions was achieved; “we would be stupid not to” invest while payback remains favorable .
  • Jack’s Flight Club momentum: revenue +33% YoY to $1.4M and operating profit of $156K, with premium subscribers +15% YoY .

What Went Wrong

  • Margin compression: EBIT margin fell to ~9% as marketing spend was elevated and cost of revenue increased materially (club offers procurement), reducing EPS; GAAP operating income declined to $2.1M vs $4.0M last year .
  • Europe segment loss: Europe posted an operating loss of $883K (14% of revenue) despite 7% revenue growth, due to heavy UK member-acquisition investment .
  • Tax provision and deferred items: Q2 reported income tax provision and reserves were $740K; deferred revenue rose alongside ratable recognition, supporting future periods but limiting near-term EPS .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$20.678 $23.140 $23.906
Diluted EPS ($USD)$0.26 $0.25 $0.12
Gross Profit Margin %86.65% 81.97% 78.40%
EBIT Margin %23.46% 16.14% 8.62%
Operating Income ($USD Millions)$4.851 $3.744 $2.060
Net Income ($USD Millions)$3.200 $3.033 $1.402
Non-GAAP Operating Income ($USD Millions)$5.332 $4.361 $2.421

Actual vs Consensus (S&P Global):

MetricConsensus*Actual*
Revenue ($USD) – Q2 2025$23,386,000*$23,906,000*
Primary EPS ($USD) – Q2 2025$0.237*$0.143*
Revenue ($USD) – Q1 2025$22,993,500*$23,140,000*
Primary EPS ($USD) – Q1 2025$0.25*$0.284*
Revenue ($USD) – Q4 2024$22,059,750*$20,678,000*
Primary EPS ($USD) – Q4 2024$0.32*$0.26*

Note: Values retrieved from S&P Global.

Segment performance (Q2 2025 vs Q2 2024):

SegmentRevenue Q2 2024 ($USD Thousands)Op Profit/Loss Q2 2024 ($USD Thousands)Revenue Q2 2025 ($USD Thousands)Op Profit/Loss Q2 2025 ($USD Thousands)
North America$14,134 $3,717 $16,132 $2,818
Europe$5,951 $512 $6,385 $(883)
Jack’s Flight Club$1,033 $(34) $1,370 $156
New Initiatives$23 $(184) $19 $(31)
Consolidated$21,141 $4,011 $23,906 $2,060

KPIs and balance sheet highlights:

KPIQ4 2024Q1 2025Q2 2025
Advertising & Commerce Revenue ($USD Millions)$19.1 $20.7 $20.9
Membership Fees Revenue ($USD Millions)$1.6 $2.4 $3.0
Cash Flow from Operations ($USD Millions)$7.654 $3.281 $1.300
Cash, Cash Equivalents & Restricted Cash ($USD Millions)$17.744 $12.226 $11.198
Deferred Revenue ($USD Millions)$6.545 $7.838 $8.459
Merchant Payables ($USD Millions)$16.294 $14.833 $12.419
Share Repurchases (Shares)135,792 590,839 172,088
Reach (Members, Millions)30.0 30.0 30.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue growthQ2 2025“Expect year-over-year revenue growth to double” Actual 13% YoY achieved Achieved vs prior commentary
Revenue growthQ3 2025—Expect YoY revenue growth to continue; trend to accelerate in subsequent quarters as membership fees are recognized ratably Maintained/Positive
Profitability trajectory2H25/2026“Over time, expect profitability to increase” Expect profitability to substantially increase over time as recurring membership fees are recognized; near-term EPS may fluctuate due to marketing Maintained emphasis
MarginsMulti-quarter—Expect margins to return to previous levels or exceed them over time as membership base scales Long-term positive
Marketing spendNear term“Might see attractive opportunities to increase marketing; expense immediately” May increase marketing where payback remains favorable; expense immediately Maintained
TaxQ2 2025—Reported tax provision/reserves: $0.74M; plan to utilize NOLs to offset liability Informational

Earnings Call Themes & Trends

TopicQ4 2024 (Prior Two Quarters: Q4 2024)Q1 2025 (Prior Two Quarters: Q1 2025)Q2 2025 (Current)Trend
Paid membership transition & revenue mixMembership fees $1.6M; legacy members excited; ratable recognition highlighted Membership fees $2.4M; fixed costs low; revenue growth to accelerate as fees recognize Membership fees $3.0M; expected ~25% of revenue next year Strengthening
Subscriber acquisition ROI & marketingPlan to ramp marketing with favorable model Demonstrated payback; continued investment Average acquisition cost $38; immediate payback; continue investing as long as payback favorable Aggressive but disciplined
Cost of revenue & “club offer” procurementDistressed inventory procurement noted Similar dynamics; temporary customer service costs Cost of revenue $5.163M vs $2.520M YoY; procurement classified in cost of revenue Elevated near term
Macro travel demandEurope softness, Germany one-off Lower demand enabling strong offers; flexible members Hotels/prices soft; suppliers filling rooms; affluent members not trading down Slightly softer macro; favorable sourcing
Regional strategyNA strong margins; Germany weak NA outperformed; natural fluctuations Heavy UK acquisition drove Europe loss; NA also strong acquisition UK focus; near-term Europe margin drag
Jack’s Flight ClubRevenue +19% YoY; profitable Revenue +20% YoY; investment continues Revenue +33% YoY; operating profit Accelerating growth
Travelzoo METADisciplined development; browser-enabled experiences Disciplined development Continued disciplined build; updates in due time Steady, low-spend

Management Commentary

  • “We will continue to leverage Travelzoo's global reach, trusted brand, and strong relationships with top travel suppliers to negotiate more Club Offers… Travelzoo is the must-have membership for those who love to travel as much as we do.” — Holger Bartel, CEO .
  • “Higher member acquisition expenses, coupled with only a portion of revenue recognized in the quarter, reduced EPS this quarter.” — Jeff Hoffman .
  • “We would be stupid not to” invest in member acquisition as long as payback is favorable; acquisition cost at or below $40 drives immediate payback. — Holger Bartel .
  • “We expect revenue growth to accelerate as a trend in subsequent quarters… Over time, we expect profitability to substantially increase.” — Management outlook .

Q&A Highlights

  • Profitability dynamics: Q2 member-acquisition expenses of ~$2.7–$2.8M reduced EPS by ~$0.13; cohort revenue recognition supports future periods without the same cohort costs .
  • Cost of revenue spike: Procurement of distressed travel inventory to create strong club offers classified in cost of revenue; expected to continue if demand remains softer .
  • Geography: Europe loss driven by highly efficient UK acquisition; NA also saw strong acquisition; strategic allocation follows ROI .
  • Pricing/membership tiers: Not pursuing premium tier now; will evaluate membership fee increases for 2026 given perceived value .
  • Macro: Travel demand soft but enables deal sourcing; affluent members not trading down; industry focused on short-term outlook amid uncertainty .

Estimates Context

  • Q2 2025: Revenue beat consensus ($23.386M* vs $23.906M*), but EPS missed ($0.237* vs $0.143*), consistent with management’s explanation of immediate marketing expense and delayed revenue recognition .
  • Q1 2025: Both revenue and EPS beat (Revenue $22.994M* vs $23.140M*; EPS $0.25* vs $0.284*). Q4 2024: Both missed (Revenue $22.060M* vs $20.678M*; EPS $0.32* vs $0.26*)*.
  • Note: S&P Global “actual” EPS may reflect their normalization methodology and can differ from company-reported diluted EPS ($0.12 in Q2 2025) .

Note: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term EPS headwinds are the byproduct of a high-ROI member-acquisition strategy with immediate cash payback and ratable revenue recognition; revenue trajectory is poised to accelerate into 2H25 and 2026 as membership fees scale .
  • Europe’s operating loss is strategic (UK acquisition efficiency), not structural; margins are expected to normalize or exceed past levels as the membership base matures .
  • Elevated cost of revenue is tied to opportunistic procurement of distressed inventory to fuel club offer differentiation and conversion; expect continued opportunities if travel demand remains soft .
  • Jack’s Flight Club is a credible growth lever (revenue +33% YoY; profitability), reinforcing the subscription revenue mix shift .
  • Capital allocation remains shareholder-friendly: ongoing share repurchases (172,088 shares in Q2) alongside disciplined META investments and marketing spend driven by payback economics .
  • Watch for potential membership fee pricing changes in 2026 as value proposition strengthens, which could further enhance unit economics .
  • Trading lens: expect volatility tied to EPS misses versus consensus when marketing is opportunistically increased; revenue beats and membership KPI momentum are the likely positive catalysts near term .