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TRAVELZOO (TZOO)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $22.2M, up 10% year over year, while GAAP operating profit fell to $0.5M (2% margin) as the company front-loaded marketing to acquire Club Members; diluted EPS was $0.01 .
  • Versus Wall Street consensus, Travelzoo modestly missed revenue ($22.20M vs $22.92M*) and posted a large EPS miss ($$0.01 vs $0.14*); management attributed EPS pressure to immediate expensing of member acquisition costs while membership fees are recognized ratably .
  • Non-GAAP operating profit was $1.1M (5% of revenue), with adjustments for stock option expense ($0.4M), severance ($0.17M), and minimal amortization .
  • Guidance: management expects year-over-year revenue growth to continue in Q4 and to accelerate in subsequent quarters as membership fees scale; short-term EPS volatility remains likely given opportunistic marketing; potential membership fee increases in certain markets are under evaluation for 2026 .
  • Stock narrative: accelerating membership-driven recurring revenue and attractive member acquisition ROI are medium-term positives; near-term advertising softness (especially UK) and cost-of-revenue upticks from inventory deals weigh on margins and estimates .

What Went Well and What Went Wrong

What Went Well

  • Membership strategy drove revenue +10% YoY to $22.2M; in constant currency +9% YoY; management reiterated “quick payback” on member acquisition and expects membership to be ~25% of revenue next year .
  • Non-GAAP operating profit of $1.1M (5% margin) highlights underlying profitability excluding transient items; adjustments were primarily stock option expenses and severance .
  • Management emphasized unique Club Offers and value to members: “Travelzoo is the must-have membership for those who love to travel as much as we do” . Attractive benefits include complimentary worldwide lounge access in case of flight delays, which management says members “really love” .

What Went Wrong

  • EPS of $0.01 declined sharply vs $0.26 prior year due to immediate expensing of elevated marketing and ratable revenue recognition for membership fees; GAAP operating margin compressed to 2% .
  • Europe swung to an operating loss of $0.64M (–10% margin) driven by heavy UK member acquisition despite favorable ROI, and consolidated operating profit fell vs last year .
  • Advertising demand was softer than usual in Q3; UK advertisers exhibited hesitancy ahead of expected tax hikes, pressuring near-term advertising revenue .

Financial Results

Core P&L and Margins (quarterly)

MetricQ1 2025Q2 2025Q3 2025
Revenues ($USD)$23.14M $23.91M $22.20M
Operating Income ($USD)$3.74M $2.06M $0.49M
Net Income ($USD)$3.03M $1.40M $0.15M
Diluted EPS ($USD)$0.25 $0.12 $0.01
Gross Profit Margin %82.0%* (GP $18.97M; Rev $23.14M) 78.4%* (GP $18.74M; Rev $23.91M) 79.6%* (GP $17.68M; Rev $22.20M)
EBIT Margin %16.4%*8.6%*2.2%*
Net Income Margin %13.7%*5.9%*0.7%*

Values with * are derived from S&P Global or calculations using reported line items. Values retrieved from S&P Global.

Segment Breakdown (Q3 2025 vs Q3 2024)

SegmentRevenue ($USD) Q3’24Revenue ($USD) Q3’25Op. Profit ($USD) Q3’24Op. Profit ($USD) Q3’25
North America (Total net rev.)$12.82M $14.23M $3.15M $1.13M
Europe (Total net rev.)$6.02M $6.57M $1.03M $(0.64)M
Jack’s Flight Club (Total net rev.)$1.23M $1.38M $0.03M $0.02M
New Initiatives (Total net rev.)$0.03M $0.03M $(0.16)M $(0.02)M
Consolidated$20.10M $22.20M $4.05M $0.49M

KPIs and Operational Data

KPIQ1 2025Q2 2025Q3 2025
Advertising & Commerce Revenue ($USD)$20.7M $20.9M $18.6M
Membership Fees Revenue ($USD)$2.4M $3.0M $3.6M
Non-GAAP Operating Profit ($USD)$4.4M $2.4M $1.1M
Cash, Cash Equivalents & Restricted ($USD)$12.2M $11.2M $9.2M
Cash Flow from Operations ($USD)$3.3M $1.3M $(0.4)M
Shares Repurchased590,839 172,088 148,602
Avg Acquisition Cost per Annual Club Member (US)—$38 $40

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (YoY growth trajectory)Q4 2025Expect YoY growth to continue; acceleration in subsequent quarters Expect YoY growth to continue; acceleration trend in subsequent quarters as membership fees are recognized Maintained
Profitability trajectoryMulti-quarterProfitability to substantially increase over time as recurring membership fees scale; short-term EPS fluctuations possible Same: profitability expected to rise over time; EPS may fluctuate short term due to marketing expensing Maintained
Membership fee pricing2026 (evaluation)Indicated $40 may be low; premium tier not planned Evaluating increasing the membership fee in certain markets, potentially early next year (not yet decided) New/Under evaluation
Jack’s Flight Club premium subsQ4 2025Investing for growth Expect greater YoY increase in premium subscribers in Q4 due to Q3 promotions Raised (qualitative)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Member acquisition ROI/paybackImmediate payback; $28–$38 acquisition cost; EPS reduced short term by ~$0.13 in Q2 Avg acquisition cost $40; immediate payback; EPS reduced by ~$0.15 in Q3 Similar ROI; cost slightly higher
Membership fees share of revenueFees ramping: $2.4M (Q1), $3.0M (Q2); targeting ~25% next year Fees $3.6M; reiterates ~25% next year Increasing
Advertising environment“Weaker demand” enabled distressed inventory; cost of rev up; hotels/airlines softer Q3 generally slow; softness in UK amid tax policy uncertainty; US feels good Mixed; UK softer
Cost of revenue (inventory deals)Purchased distressed inventory; higher cost of revenue; lower margins Mix remains small; acknowledged year-over-year increase in cost of revenues Persistent
Regional trends (UK)Heavy UK member acquisition drove EU loss; inventory opportunities UK advertiser hesitancy ahead of tax hikes; still investing heavily given favorable ROI Softer ads; continued member growth
Travelzoo METABrowser-enabled metaverse experiences; disciplined investment Continued disciplined development; updates TBD Steady
Jack’s Flight ClubRevenue +20–33% YoY; premium subs +13–15% YoY Revenue +12% YoY; premium subs +8% YoY; expect higher Q4 growth Moderating near term; improving Q4

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 for Club Members… Travelzoo is the must-have membership for those who love to travel as much as we do.” — Holger Bartel, Global CEO .
  • “Acquiring more club members has the effect of lowering GAAP operating margin… given the favorable ROI, our goal is to further grow the number of club members to accelerate Travelzoo’s growth.” — Jeff Hoffman (prepared remarks) .
  • “We expect revenue growth to accelerate… as membership fees revenue is recognized ratably… Over time, we expect profitability to substantially increase… In the short term, fluctuations in reported net income are possible.” — Jeff Hoffman (prepared remarks) .
  • “We’re looking and will most likely increase the membership fee in certain markets next year… because the $40 just seems maybe a little bit too low.” — Holger Bartel (Q&A) .

Q&A Highlights

  • Member acquisition economics: CAC rose modestly ($38→$40) due to scaling; optimization and “Member Days” can lower CAC; company will continue investing if payback remains attractive .
  • Advertising environment: Q3 was seasonally slow; notable UK hesitancy ahead of potential tax hikes; US sentiment “quite good” .
  • Cost of revenues/mix: Inventory purchases contribute to cost of revenues; remains relatively small; acknowledged YoY increase (~$2M) tied to lower-margin inventory deals .
  • Retention and renewals: Growing cohorts; automated renewal with low deactivation; larger renewal waves at year-end and end of Q1; strategies underway to support retention .
  • JFC and META: JFC premium subs expected to accelerate in Q4 on Q3 promotions; META remains disciplined, browser-enabled experiences in development .

Estimates Context

  • Q3 2025 vs consensus: Revenue $22.20M actual vs $22.92M estimate*; Primary EPS $0.035 actual vs $0.14 estimate* — a modest revenue miss and a significant EPS miss. Note: reported GAAP diluted EPS was $0.01, reflecting immediate expensing of marketing and ratable fee recognition .
  • Trajectory: Q2 2025 revenue beat ($$23.91M vs $23.39M*) with EPS miss ($$0.1428 vs $0.2367*); Q1 2025 revenue beat ($$23.14M vs $22.99M*) with EPS above S&P’s actual ($$0.2844 vs $0.25 reported diluted) indicating definitional differences (Primary EPS vs GAAP diluted) .
    Values retrieved from S&P Global.
MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($USD)$22.99M*$23.39M*$22.92M*
Revenue Actual ($USD)$23.14M*$23.91M*$22.20M*
Primary EPS Consensus Mean ($USD)$0.25*$0.2367*$0.14*
Primary EPS Actual ($USD)$0.2844*$0.1428*$0.035*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term EPS risk persists: the company is prioritizing fast-payback member acquisition (CAC ~$40 in Q3) that depresses GAAP EPS when fees are recognized ratably; expect quarterly EPS volatility but improving profitability as fee cohorts mature .
  • Mix shift to recurring membership fees: fees reached $3.6M in Q3 and are expected to be ~25% of revenue next year, supporting visibility and margin recovery over time .
  • Advertising softness and UK macro caution: Q3 ads were softer seasonally, with UK advertisers hesitant ahead of tax changes; ads likely a swing factor for quarterly variability .
  • Europe loss reflects aggressive UK member acquisition: management leaned into favorable UK ROI despite short-term operating loss; strategic decision supports medium-term growth .
  • Inventory deals boost value but pressure margins: cost of revenues rose with distressed inventory purchases to create strong offers; this supports member growth but compresses reported margins short term .
  • Capital allocation: ongoing buybacks (148,602 shares in Q3) amid confidence, while maintaining flexibility to fund growth; cash and restricted cash stood at $9.2M at quarter-end .
  • Pricing optionality: management is evaluating membership fee increases in certain markets in 2026, a lever to accelerate monetization and margin expansion if executed carefully .