Good morning and welcome to the TravelZoo 3rd Quarter 2025 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 a question at that time, please press star 1 on your telephone keypad. If you need to remove yourself from the queue, please press star 1 again. At any time, if you should need an operator's assistance, please press star zero. The company would like to remind you that all statements made during this conference call and presented in the slides are not statements of historical facts, constitute forward-looking statements, and are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could vary materially from those contained in 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. 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. Please refer to the company's website for important information, including the company's earnings press release issued earlier today. An archived recording of this conference call will be made available on the company's investor relations website at TravelZoo.com forward slash IR. Now it is my pleasure to turn the floor over to TravelZoo's global CEO, Holger Bartel, its chair, general counsel, and CEO of Jack's Light Club, Prisida Cholka, and its financial controller, North America, Jeff Hoffman. Jeff, we'll start now with an overview.

Thank you, operator, and welcome to those of you joining us. Today, I'm stepping in for Lejeune, our chief accounting officer. 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 travelzoo.com forward slash IR. Let's begin with slide four. Travel Zoo's consolidated Q3 revenue was $22.2 million, up 10% from the prior year. In constant currencies, revenue was $21.9 million, up 9% from the prior year. Operating income, which we as management call operating profit, decreased as we invested more in growth of club members. Q3 operating profit was $0.5 million, or 2% of revenue, down from $4 million in the prior year. Let me explain the rationale for our significant increase in marketing expense, which lowered EPS. slide five shows that investments in the acquisition of club members are attractive as they have a quick payback on the left side you see that the average acquisition cost for a full paying club member was 28 in q1 38 in q2 and 40 in q3 on the right side you see that we get this money back fast the member pays in the u.s case here their 40 annual membership fee right at the beginning of the membership period additionally we generated 15 in revenue from transactions in the same quarter this full payback doesn't even consider an increase in advertising revenue and future membership fees and other revenues now slide six shows as a reminder that with subscription businesses membership fee is is recognized rateably over the subscription period whereas acquisition costs are expensed immediately when incurred slide seven shows the effect while we have a quick payback reporting the reported eps is different higher member acquisition expenses coupled with only a portion of revenue recognized in the quarter reduced eps this quarter in the case of q3 that effect was a reduction of 15 cents as shown on slide eight our strategy is fueling member growth at a rate of 135 euro year to date new club members come roughly half from legacy members and half from those new travels on slide nine we break down our made our main categories of revenues advertising and commerce and membership fees advertising and commerce revenue was 18.6 million for q3 2025 revenue for membership fees increased to 3.6 million membership fees which are more stable and predictable are adding revenue and are becoming a larger share. Next year, we expect them to account for about 25% of revenue. On slide 10, you can see that revenue growth came from all reporting segments. With favorable ROI on member acquisition in the UK, we invested heavily there. JAX flight club revenue increased 12%. Operating profit was lower in both our North America and Europe segments and was slightly less in our JAX flight club segment on slide 11 you can see the gap operating margin was two percent in q3 2025 acquiring more club members has the effect of lowering gap operating margins still given the farewell roi our goal is to further grow the number of club members to excel to accelerate travels as growth slide 12 shows the investment in club members occur in all key markets over time we expect margins to return to previous levels or even exceed them On slide 13, we provide information on non-GAAP operating profit as we believe it better explains how we evaluate financial performance. Q3 2025 non-GAAP operating profit was $1.1 million. That's approximately 5% of revenue, compared to non-GAAP operating profit of $4.9 million in the prior year period. Slide 14 provides information about the items that are excluded in the calculation of non-GAAP operating profit. Please turn to slide 15. As of September 30th, 2025, consolidated cash, cash equivalents, and restricted cash was $9.2 million. Cash flow from operations was negative $0.4 million. We reduced merchant payables by $0.7 million and repurchased 148,602 shares. Now looking ahead, for Q4 2025, we expect year-over-year revenue growth to continue. We expect revenue growth to accelerate as a trend in subsequent quarters, as membership fees revenue is recognized rateably over the subscription period of 12 months, as we acquire new members, and as more legacy members become club members. Over time, we expect profitability to substantially increase as recurring membership fees revenue will be recognized. In the short term, fluctuations in reported net income are possible. We might see attractive opportunities to increase marketing. We expense marketing costs immediately. Now I'm going to turn the discussion over to Holger.

Thank you, Jeff. We will continue to leverage travels with global reach, trusted brand, and our strong relationships with top travel suppliers to negotiate more club offers for club members travel zoo members are affluent active and open to new experiences we inspire travel enthusiasts to travel to places they never imagined they could travel zoo is the must-have membership for those who love to travel as much as we do today i would like to share a bit more information about the travel zoo club membership please turn to slide 17. TravelZoo is becoming the must-have membership for travel enthusiasts. Membership empowers you to live your life as a travel enthusiast to the fullest while respecting different cultures. Membership provides access to high quality and high valuable, highly valuable club offers. Our global team negotiates and vets them rigorously. These offers cannot be found anywhere else membership also provides complimentary access to airport lounges worldwide in case your flight is delayed culinary travel deals curated for the travel enthusiasts are coming slide 18 shows a few of the many exclusive club offers that we created for club members during Q3 for example travel zoo members could head to an all-inclusive vacation in the Caribbean for 499 dollars which even includes round-trip flights or attend the futuristic ABBA Voyage Show in London at a special member price. In Rome travel zoo members would pay 99 euro for two nights at the four-star hotel while the general public would pay three times as much. To high-end luxury resorts like the Fairmont Mayakoba here are particularly popular with members. These are all offers that you can only get as a travel zoo member you will not find them anywhere else slide 19 shows the worldwide complimentary lounge access in case of flight delays it's perfect for the travel enthusiast slide 20 provides information about travel zoo members travel zoo is loved by travel enthusiasts who are affluent active and open to slide 22 provides an overview of our management focus we are working to grow the number of team members and accelerate revenue growth by converting legacy members and adding new club members retain and grow our profitable advertising business from the popular top 20 product accelerate revenue growth which drives future profits in spite of temporary lower EPS grow checks like clubs profitable subscription revenue and develop TravelZoo Meta with discipline. Now Christina will provide an update on TravelZoo Meta and CheckSlide Club.

Thank you, Holger. We continue to work on the production of the first Metaverse travel experiences. They will be browser enabled. As stated in previous earnings calls, we are conscious of developing TravelZoo Meta in a financially disciplined way. We will provide additional updates in due time. For CheckSlide club revenue increased 12% year over year and the number of premium subscribers increased 8%. We continue to invest in the growth of premium subscribers. We expect to see a greater increase in premium subscribers year over year in Q4 due to promotional activities that took place in Q3. I'm now handing over to the operator for questions for Jeff Holger and me.

Thank you. At this time, if you wish to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 1 again. Please limit yourself to one question and one follow-up. We'll take our first question from Theodore O'Neill from Litchfield Hills Research. Please go ahead. Your line is open.

Thanks very much. I'm looking at slide 9. And it's clear here that if I look at the advertising and commerce revenue on our ruling, the numbers are rising. So clearly this is all working in your favor and I was wondering what do you think is driving the popularity of these of the options that you're providing out there for travel experiences because in light of economic uncertainty I think a number of us would have thought these numbers would be going in the other direction if you I think the slide that shows the offers that we are negotiating for our members shows that very well the travel opportunities you receive from travel

zoo and they are exclusive to our members are so much better when what the regular person can get that they motivate people to travel they motivate people to travel even more they make it also more affordable and even they allow our members to go as you saw with this example from fairmont mayakoba to go on luxury vacations when they normally could only afford a relatively inexpensive trip. So travel enthusiasts are people who love to travel. They can't get enough of it and I think the TravelZoo membership is what enables them to live that to the fullest and I think that's why we are seeing the popularity of the membership continuing to increase.

Looking at the membership numbers which are clearly increasing here, how does that reconcile with your expectations?

It's in line with expectations and please remember that the number that's shown on this slide includes also Chex Flight Club. Chex Flight Club is not growing quite as fast as TravelZoom membership. TravelZoom membership is even growing much faster than what you might think when you look at this data on the right. But in general, we're in line with what we are expecting. We obviously always want to grow faster, and we are very optimistic with the return that we are receiving on our marketing investments that we can even accelerate the growth more Because as we say here, we expect next year membership revenue to account for at least 25%. Membership revenue is recurring, it's attractive, and the combination of membership revenue and a continued strong advertising business will ultimately create a travel-to-business that is more profitable than in the past.

Thanks very much.

Our next question comes from Michael Kupinski from Noble Capital Markets. Please go ahead. Your line is open.

Thank you. Thanks for taking my questions. I see that the cost of customer acquisition has gone up a little bit, and I was just wondering if you could just talk a little bit about what's driving that and at what price would you say that you're not getting the benefit? I know $40, you're still getting a benefit from the membership, but at what price do you think that you would not see an attractive return from that?

Sure, it didn't change that much from 38 to 40.

I think it's just a minor fluctuation, but I let Christina comment a bit more on what's driving the success in member acquisition. sure so i agree with what holger said it hasn't gone up too much um the only reason that i believe it would have gone up even the two dollars is just we're scaling and spending more and that's kind of just what naturally happens as you start to scale up and spend more on member acquisition on certain channels um but we are doing everything we can to counteract that um by finding optimizations that will enable us to not have that kind of cost per acquisition go up too much more. And yeah, I think in general, we have been finding ways to optimize and channels that work for us. And it also helps that we have such strong club offers.

To what Holger said previously, that's really what's working for us is people see these amazing club offers and they want to join and that helps us to get to our efficiencies great Michael Michael four times a year we have member days member days what's special about the office and member days are these are offers that only club members can see you could see other offers if you are like just get a preview of the offer but these offers and member days are offers that you can only see once you are a paying club member they drive member acquisition but on the other hand what's important here is these are offers that some of our travel partners like to create and make even more aggressive because they know these can only be seen by a very very small select and very closed group of members so put yourself into the shoes of this luxury hotel and do you want do you want name out to millions of people on Expedia that you're offering a discount no you don't want to travel to provides the opportunity here for these luxury hotels and similar travel partners to create offers that are hidden away from the public but that can be enjoyed by people we love them so that's that's why for example these member days have been quite critical in driving member acquisition and what we are seeing is that during those periods and we are we are looking to boost these even more during those periods cpa is even substantially lower than the 40 we see here so in short it's really the strength of offers and the better the offers are that's what's impacting the cpa and of course over time our marketing efforts will also become more efficient so we also think there's a good chance that we can drive cpa in certain quarters even lower than the $40, but as long as we see this attractive payback, which we illustrated a couple of times before, we will continue to invest because if we get the money back within a quarter, if the profitability is there long term, even if it's in the short term, even in the short term, we see a hit on profitability, it's the right thing to do, and we're actually quite happy that we're in this situation.

Thanks for the color there, Holger. And can you talk a little bit about the current advertising environment? I would have thought that it would have been a little bit stronger in the quarter. But can you just talk a little bit about how you see that and whether or not it might be improving, especially now in the North America, given that we're seeing, you know, the Fed rate cuts and so forth? Do you anticipate that it will improve? Or do you think that, you know, just kind of give us your general thoughts about the advertising environment?

Look, you have a good eye, Michael. Yes, this quarter was a bit slower on the advertising revenue side as it normally would be. Q3 is generally our slowest quarter, but, yeah, there were a couple of advertisers who pulled back. But we have these fluctuations from one quarter to the next all the time. You know, sometimes it's more, sometimes it's less. In general, you know, the feeling in the U.S. is quite good. But where we really see hesitances in the UK, and not just us, and I'm hearing this from other companies as well, travel companies and any kind of consumer company in the UK, there is probably an announcement about quite aggressive tax hikes at the end of November. But until people hear what exactly is going on, the businesses are hesitant to spend, consumers are hesitant to buy. So there I would say we are seeing a relatively soft advertising business in general. In all the other markets, what we are seeing, I would not over-interpret that. It's just a natural fluctuation from one quarter to the next.

Gotcha. Thank you.

Our next question comes from Patrick Scholl from Barrington Research. please go ahead your line is open hi could you maybe talk a little bit on some of the retention efforts around subscribers that became paying members around in either q4 of last year I realize that's a really small cohort or at you know the legacy members that became paying members at the start of this year just any sort of like commentary around like retention metrics or how you would expect, like, the retention costs relative to initial acquisition costs?

Really good question. Christina, do you want to respond to that one?

Sure. Of course, we're constantly tracking retention and renewals. I will say that the volumes have not been massive just yet, and we expect much more renewals, especially for the legacy members that joined in Q4 of last year. They actually did not start their membership until January 1st. So I think we'll be expecting to have many more renewals starting in Q1 of next year. So we're working on implementing different strategies to kind of ensure they renew. But the main thing is just making sure we get them content and information about the club membership while they are a member and hit kind of their preferences so that they see the value in the membership and want to stay. And so far, we are seeing fairly good renewal rates, especially coming from legacy members that became club members. So we're hoping that trend will continue next year when we have larger quantities of renewals.

So as in like they're actively opting in to make sure that it's renewed? Because they wouldn't have, like, they would have until end of year to cancel. I guess, how do you...

For the ones that joined, that's a good point. For the ones that joined previously, not necessarily on any specific promotions, we're starting to see some renewals. I guess many of them are not legacy members but new to travel do. But we are seeing other kind of conversion rates and things for legacy members that are trending in the right direction.

Okay. I understand Pat's question might be about renewal itself. It's an automated renewal. They don't have to actively renew. So they will automatically renew unless they cancel. and then as you mentioned pet as you mentioned very correctly we have a very large group of renewals coming up at the end of this year and then again at the end of q1 those are really large numbers of renewals and we can see already from like we already we already we can already see a little bit we can forecast renewals rates quite well because we can look at how many of these members have already deactivated their automated renewal on these two groups it's actually very very small because they've been with travels over a long time but the reason I also mention it at that point of time when they renew with the membership fee comes in and that's why we are expecting also quite a nice income of cash at the end of this year and then again at the end of Q1 we're also looking and will most likely increase the membership fee in certain markets next year maybe already at the beginning of the year because because to forty dollars just seems seems maybe a little bit too low and people who lose use the membership really love it and from what we are hearing is we have an opportunity to increase the membership fees they're not decided yet just to be clear but we are we are looking into it very seriously okay and then just on the

advertising and commerce components of revenue could you maybe talk about like maybe just how the mix of that has shifted maybe over the last, you know, four quarters?

It's really a relatively small portion where we have the opportunity to buy travel inventory, for example, hotel rooms in advance, which is where that then has an impact on cost of revenue. But it's a relatively small part, and it hasn't really changed dramatically, nor do we expect it to change dramatically.

So, like, that goes into cost of revenues, and, you know, that was about, like, a $2 million increase year over year. So is that kind of like that component that we should be thinking about as being a relatively lower margin? And that would kind of be the, I guess, delta on the advertising side then? Yes. Okay. Yeah. And then, you know, just on like the overall travel environment, are you seeing like any like kind of difference between the types of travel services offered in terms of what's more, I guess, active in offering deals, whether it's like flights or hotels? we are not seeing any changes it's still the same men consumers in general particularly our travel enthusiasts they're looking for value they're looking for amazing offers and they're looking for experiences and they want to do something new they are not looking for something boring they are looking

for vacations that reward them that are exciting for them but most of all they are really looking for great value as I said and that's where the travel zoo membership comes in and offers them exactly that and offers them more opportunity to travel because that's what they would like.

Okay.

Our next question comes from Steve Silver from Argus Research. Please go ahead. Your line is open.

Thanks, operator, and thanks for taking my question as well. Holger, the presentation cites additional advertising revenues as a potential incremental value driver over time. I'm curious whether there's any color you can provide on your thinking, just in terms of the timeline for reaching some of the thresholds to reach that critical mass, or whether you think that those opportunities might be either more near, mediate, or longer term, based on the current member acquisition rate?

In the past, we've seen a roughly time delay of one year. It's difficult to predict this, Steve, and that's why we didn't put a number on it. So we just illustrated on the slide as, you know, obviously if I have more members, if I have a bigger audience, I can increase my advertising fees. But right now it's not something we are so focused on incredibly, probably more maybe 2026 or 2027, because right now our main focus is really on getting the number of club members up and providing them a service that they absolutely do not want to give up on.

That's helpful. Thank you. And one last one, if I may. There's been a lot of chatter, particularly in North America, just in terms of flights being delayed, whether it's the shutdown or a shortage of air traffic controls, all of those types of issues. I'm curious as to whether there is the risk of any capacity issues at these airport lounges, if there was an increase in flight cancellations, those types of things, or whether airport lounges are equipped to take on a higher number of potential people if flights are delayed at that kind of pace.

So far, we haven't heard about any issues or problems. Our members would certainly let us know. You know, Thanksgiving at the end of November is the big travel period, so hopefully all the travel issues will be resolved by then and people can travel safely and without too much interruption. But, you know, it's nice for our members to know that this service and this benefit exists when they need it.

Okay, fair enough. Thanks for taking the questions.

Our last question comes from Ed Wu from Ascendient Capital. Please go ahead. Your line is open.

Yeah, a little bit more on, you know, what you're seeing out in the, you know, travel environment, you know, with all the economic issues and stuff. Are you seeing any change in the consumer? Either they want to travel spending down or traveling less. And also on the supply side, are you hearing much from your hotel or travel providers that they are having issues filling seats with consumers or that they have to lower their prices?

Last week, I read a report that there's increasing disparity between more affluent consumers who continue to travel and travel even more. and those who really really have to watch their budget luckily you know our lucky our members travel zoom members are very affluent i mean you saw like a really high percentage of them that have incomes over 200 000 so our members are not cheap they are not on the low income side so they are more in the group of people travel more so as long as we provide them with excellent opportunities and with fantastic offers they will continue to travel great um are you hearing uh any concerns from the travel suppliers either that they feel like they have to advertise more to fill their rooms or are there any concerns or do they feel optimistic you know heading into the holidays and next year we haven't heard any we haven't heard anything that really changes how they are looking at it i think uh they are they are more they're more focused now on keeping occupancy rates high you know compared to the covid period when it was just normal that the hotel was not busy so um yeah i mean i i would not say it goes much more beyond what we seasonally have seen in the past but you know the economy in the u.s particular is still doing well and let's see what happens in 2026 as we've said in the past if we have more travel suppliers for example hotels as you say that have trouble being full they come to us and they will create offers for us and now that we have a disclosed user group that allows them to do this very discreetly we are we are really positioned to be a great partner for them great thanks for answering my questions and I wish you guys good luck.

Thank you. Thanks Ed. You too.

Okay. This concludes the Q&A portion of today's call. I would like to turn the call back over to Mr. Holger Bartel for closing remarks.

Great. Dear investors, thank you again for your time and support today. We look forward to speaking with you again next quarter. Have a great day.

This concludes today's TravelZoo 3rd quarter 2025 earnings call and webcast. You may disconnect your lines at this time and have a wonderful day.