Good morning, and welcome to the Travelzoo's Fourth Quarter 2025 Earnings Call. Today's conference is being recorded. The company would like to remind you that all statements made during this conference call and presented in the slides that are not statements of historical facts, constituted forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could vary materially from those contained in the 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/ir. Now it is my pleasure to turn the floor over to Travelzoo's Global CEO, Holger Bartel; its Chair, Chief Membership Officer and General Counsel and CEO of Jack's Flight Club, Christina Ciocca; and its Financial Controller, North America, Jeff Hoffman. Jeff will start with an overview.

Thank you, operator, and welcome to everyone joining us today. I am stepping in for Lijun, 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/ir. Let's begin with Slide 4. Travelzoo's consolidated Q4 revenue was $22.5 million, reflecting a 9% increase from the previous year. In constant currencies, revenue was $22.1 million, up 7% from the prior year. Operating income, which we refer to as operating profit, decreased as anticipated due to increased investments in the growth of Club Members. Q4 operating profit was $0.6 million, or 3% of revenue, down from $4.9 million the previous year. I’d like to clarify the reasoning behind the notable increase in marketing expenses, which affected EPS. Slide 5 illustrates that our investments in acquiring Club Members are appealing as they provide a quick payback. On the left side, the average acquisition cost for a full paying Club Member was $28 in Q1, $38 in Q2, $40 in Q3, and $34 in Q4. On the right side, you see that we recover this amount quickly, since members in the U.S. pay their $40 annual membership fee upfront. Additionally, we generated $10 in revenue from transactions in the same quarter. This quick payback doesn’t even take into account the additional revenue from advertising and future membership fees. Slide 6 serves as a reminder that in subscription businesses, revenue from membership fees is recognized evenly over the subscription period, while acquisition costs are recognized immediately. Slide 7 illustrates the impact of this. Though we have a rapid payback, reported EPS differs. Increased member acquisition costs, combined with a small portion of revenue recognized this quarter, results in reduced EPS. For Q4, this resulted in an estimated reduction of about $0.08. As shown on Slide 8, our strategy is driving membership growth at an impressive rate of 180% year-to-date. New Club Members come roughly equally from existing members and from those new to Travelzoo. On Slide 9, we categorize our revenues into advertising and commerce and membership fees. Advertising and commerce revenue was $18.3 million for Q4 2025, while membership fee revenue rose to $4.1 million. Membership fees, being more stable and predictable, are contributing significantly to our overall revenue and are increasingly becoming a larger portion of it. This year, we expect them to comprise around 25% of total revenue. On Slide 10, you will see that revenue growth was observed across all reporting segments. Investments in member acquisition in Europe resulted in a loss. General and administrative expenses increased primarily because of a one-time expense associated with a global company meeting. Operating profit in both our North America and Europe segments was lower, while operating profit in our Jack's Flight Club segment remained unchanged. On Slide 11, our GAAP operating margin stood at 2% in Q4 2025. The acquisition of more Club Members impacts our GAAP operating margin negatively. However, considering the favorable return on investment, our objective is to continue increasing the number of Club Members to accelerate Travelzoo's growth. Slide 12 illustrates that our investments in Club Members span all key markets. Over time, we anticipate margins will return to their previous levels, or even surpass them. Slide 13 discusses non-GAAP operating profit, which we believe provides a clearer picture of our financial performance. For Q4 2025, our non-GAAP operating profit was $0.9 million, or 4% of revenue, down from $5.4 million in the same quarter last year. Slide 14 outlines the items excluded from the non-GAAP operating profit calculation. Moving to Slide 15, as of December 31, 2025, our consolidated cash, cash equivalents, and restricted cash totaled $10.8 million, with cash flow from operations at $1.5 million. Our cash balance has increased accordingly. Looking ahead to Q1 2026, we anticipate continued year-over-year growth. We expect revenue growth in the upcoming quarters as we recognize membership fee revenue evenly over the 12-month subscription period and acquire new members, along with more legacy members becoming Club Members. Over time, we forecast an increase in profitability as recurring membership fee revenues are realized. In the short term, we may see fluctuations in reported net income. We might find appealing opportunities for increased marketing spending, which we account for immediately. Now, I will turn the discussion over to Holger.

Thank you, Jeff. We will continue to leverage Travelzoo's global reach, our trusted brand and the strong relationships with top travel suppliers to negotiate more Club Offers for Club Members. Travelzoo members are affluent, active and open to new experiences. We inspire travel enthusiasts to travel to places they never imagined they could. Travelzoo is the must-have membership for those who love to travel as much as we do. Please turn to Slide 17. Membership empowers travelers to live the life of a modern travel enthusiast to the fullest while respecting different cultures. Membership provides access to high-quality and 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 of flight delays. And we just launched, in partnership with Allianz, the first Travel Enthusiast Hotline, providing 24/7 complimentary assistance wherever Club Members travel. Culinary Journeys created for the travel enthusiasts are coming soon. Slide 18 shows a few of the many exclusive Club Offers that we created for Club Members during Q4. Our members love luxurious trips. So on the left side, we had a Bali 5-star Jungle Spa Retreat for 2 people at an amazing price of $499. Below, Costa Rica 5-star new resort with an upgrade for Travelzoo members to an Ocean View room. A $499 Portugal trip that includes round-trip flights from the U.S. or in London, a Top West End Show with dinner for GBP 75 per person. Slide 19 shows the worldwide complimentary lounge access in case of flight delays. It's perfect for the travel enthusiasts. Slide 20 then provides information about Travelzoo members. As you see Travelzoo is loved by travel enthusiasts who are affluent, active and open to new experiences. On Slide 22, we provide an overview of our management focus. We are working to grow the number of paying 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 Jack's Flight Club's profitable subscription revenue and develop Travelzoo META with discipline. Now Christina will provide an update on Travelzoo META and Jack's Flight Club.

We are excited to announce that we now expect the first Travelzoo META experiences to become available in Q2 2026. We are planning to incorporate access to Travelzoo META as a benefit of Travelzoo Club Membership. Through Jack's Flight Club, we focused in Q4 on profitability, while acquiring sufficient premium subscribers to offset attrition. This was due to other investment priorities. I'm now handing over to the operator for questions for Jeff, Holger and me.

We will take our first question from Michael Kupinski with NOBLE Capital Markets.

Just a couple of questions on the revenues, particularly on the advertising and commerce, it decreased sequentially, and I was wondering if you can add some color on the reasons that, that was down. And then on membership fees, that increased only $0.5 million from the previous quarter, and that was a slowing of the cadence as well, which was 20% from the previous quarter. So just on the revenue trend. So if you could just add some color both on the membership fees as well as the advertising and commerce as well.

Yes, you are right. Revenue from advertising and commerce was a bit soft in Q4. So far, we see that softness to continue a bit more into Q1 as well. Really no specific reason that we can point out. We've been focused very much on membership and adding new members. And it's, as I said, really no specific reason I can point out why it was a little bit soft. And then membership fees, I think it's probably mostly a rounding issue. The change from Q2 to Q3, Q3 to Q4 was really not that substantial. We expect that to increase, that quarterly revenue increase. We expect that to increase in 2026 as we are looking to spend more on member acquisition this year than in 2025 as long as we can maintain and achieve the positive return and quick payback that Jeff was talking about.

And if I can slip one in. G&A was a little higher than expected. Anything extraordinary in those numbers?

I think Jeff mentioned it, we had a one-time expense related to a global company meeting that we held in Q4. So it's not a permanent increase. It's just a temporary increase in Q4.

Your next question comes from the line of Patrick Sholl with Barrington Research.

Kind of just your comments around profitability and marketing expense. So I think marketing expenses were up like 30% just full year. Do you kind of see that as like the peak level or like that you'd be able to leverage additional growth off of? Or do you kind of see that continuing to move higher? And I guess, can you maybe sort of like reconcile the comments on the payback with like the lower operating cash flow for basically each quarter in 2025 year-over-year?

As I mentioned, as long as we can maintain a good return and the quick payback that Jeff was talking about, we would increase member acquisition in 2026. So we are planning to increase it over 2025. And as we've now explained for a few quarters, that in the short term always impacts EPS. However, as we move throughout 2026, and we have now recurring revenue coming in for members that are renewing after the first year of membership. And for these members, we don't have to spend anything on member acquisition. They are simply renewing their membership. So that revenue will increase without expenses related to that. So that will, over time, improve EPS. But as we said, cautiously in the last few earnings statements, we do not know in advance what the opportunities for member acquisition are. If we really see good opportunities, we might spend very aggressively, and that will certainly impact EPS in the short term as it has in Q3 and Q4.

Okay. And then just could you maybe talk a little bit about churn within that initial member cohort and how you're expecting that to go with the members that you added through 2025. I guess like the thing that kind of kicks that one off is just like the decline in the deferred revenue balance in the quarter.

It's too early to judge that because as you saw from that slide that showed the growth of Club Members, most Club Members joined in the first quarter of 2025. Their renewal is coming up now. So it's a bit too early to comment on that. As you also see, we are adding new benefits for our club members, and we hear that they are very much appreciated by the members, and that will lock these members in over a longer period of time even if they don't necessarily find a specific offer that they would like to buy in a certain quarter at a certain time.

Your next question comes from the line of Steve Silver with Argus Research.

Holger, the slides earlier mentioned the potential for additional advertising revenue from membership fees or how membership revenues might influence advertising revenues. I'm curious about where you believe the paid member base needs to be in order to create a significant impact on that additional advertising revenue.

As we continue to add new members, we are also able to increase or maintain our advertising rates. There isn't a specific point where we can say it makes a significant difference. However, our growth allows us to not only maintain but also enhance our advertising business. We are particularly focused on driving membership growth aggressively in 2026 because that revenue, which is currently around $4 million, is recurring and very stable. In contrast, advertising and commerce revenues are somewhat dependent on factors such as the number and quality of offers we can source and the appetite of our advertisers. Membership revenue is more stable and consistent, which is why we transitioned to a paid subscription model and created Travelzoo Club two years ago.

That's helpful. Great. And one more question if I may. Can you discuss the underlying trends that contributed to the lower cost of acquiring new customers in Q4? I know you've mentioned taking advantage of opportunities as they come and possibly being more aggressive in certain periods compared to others. However, could you elaborate on the trends between Q3 and Q4 that resulted in the reduced cost per acquired member?

Christina is overseeing this. So she will respond to this question, Steve.

Sure. So I think it's a combination of factors. It's hard to pinpoint exactly what drove the lower cost per acquisition. But in general, actually Q4, we tend to see more difficult cost per acquisitions with certain channels like META and Google, but we were able to manage that with kind of optimization that we made through the user experience. We had member days in Q4 that helped to drive the lower CPAs and we were kind of cautious with spending as efficiently as possible. So I think that resulted in a lower CPA in Q4 as compared to Q3.

It's contingent, though, Steve, on how much we invest in member acquisition. If we scale it as we are planning to do now in 2026, that normally makes CPAs go up a little bit. But from that slide, you see that we were still under the threshold of where we could spend because $34 and then we get $40 back from the membership fee and we get additional revenue from these members, we could have spent more in Q4. And so our plan is going forward to get a little bit closer to that threshold. And having said that, CPA on the one hand, as Christina explained, CPA, we have a positive impact on CPA through learning how to do things better. On the other hand, CPA will go up if we spend more. But as long as we are staying within that quick payback, we feel comfortable that we can maintain that. Someone mentioned earlier a question about cash, maybe it was Pat or Michael. As you see, our operating cash flow in Q4 was positive. In general, member acquisition, as long as we can maintain the numbers that we showed on this earlier slide, we are able to finance that member acquisition through the cash we are generating because the member has to pay their 12-month membership fee at the beginning of the membership. So that brings in this $40 and if we can acquire them below $40, the impact on our cash situation is basically neutral.

Your next question comes from the line of Ed Woo with Ascendant Capital.

My question is, what are you seeing out there in terms of the industry travel outlook for this year 2026?

In the travel industry, we're observing trends similar to those in the U.S. economy. Luxury travel is experiencing significant growth, with hotel rates at 5-star properties globally reaching record highs and a strong increase anticipated from 2024 to 2025. Conversely, budget travel is facing more difficulties. Our member demographic skews towards higher income individuals who are able to afford 5-star accommodations, which may partially explain the softer performance we saw in advertising and commerce during Q4 and Q1. Currently, it is somewhat challenging to secure aggressive offers from luxury properties, but the supply is increasing with many new hotels opening worldwide that will need to attract guests. We believe this situation will improve in the future, reflecting similar trends we see in the overall U.S. economy.

Great. And this is the same trend you're seeing in Europe and Asia?

Yes. There's no big difference between the market. More pronounced in the U.S., I would say, just let me add that, yes, but the trend is the same, but it's a bit more pronounced in the U.S.

Your next question comes from the line of Theodore O'Neill with Litchfield Hills Research. Please go ahead.

Holger, the new annual fees for 2026 are $50 per member. Will existing members who are currently paying $40 now pay $50, or does the $50 fee apply only to new members?

Good catch, Theo. Yes, I was talking about $40 because we were speaking about Q4. In the U.S., we increased the membership fee to $50, correct. We did not increase it in other markets. We increased it on January 1, but then we gave existing members an opportunity to renew at the old rate of $40 before the end of January. But anyone who didn't take advantage of the opportunity has to pay the $50 now going forward, whether that's someone new to Travelzoo or whether that is anyone who is renewing their membership that expires after February 1.

Okay. And on the balance sheet, accounts receivable dropped. So it looks like your DSOs went up. Is that a happy coincidence? Or was there an active plan to try to bring receivables down?

I'm glad to see that our team is doing a better job collecting receivables. Jeff, do you have any more insight on that part of the balance sheet?

No, I would say that more aggressive outreach with our clients to ensure that we're getting paid on a timely basis is consistent with prior quarters. I think it was most likely a happy coincidence.

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.

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

This concludes today's Travelzoo's Fourth Quarter 2025 Earnings Call and webcast. You may disconnect your lines at this time, and have a wonderful day.