Travelzoo (NASDAQ:TZOO) Q4 2023 Earnings Call Transcript February 28, 2024
Travelzoo reports earnings inline with expectations. Reported EPS is $0.27 EPS, expectations were $0.27. TZOO isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, everyone. Welcome to the Travelzoo Fourth Quarter 2023 Financial Results Conference Call. [Operator Instructions] Today's call 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 constitute 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 the 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, General Counsel, Head of Global Functions, CEO of Jack's Flight Club, Christina Ciocca; and its Finance Director, Lijun Qi. Lijun will start us with an overview.
Lijun Qi : Thank you, operator, and welcome to those of you joining us today. Please refer to the management presentation to follow along with our prepared remarks. The presentation in PDF format is available on our Investor Relations website at travelzoo.com/ir. Let's begin with Slide #4. Travelzoo's revenue, operating profit and member count all increased year-over-year. Our consolidated Q4 revenue was $21.1 million, up 14% from $18.6 million in the prior year period. In constant currency, revenue was $20.8 million, an increase of 12% year-over-year. Operating income which weighed as management called operating profit increased 25% year-over-year. Q4 operating profit was $4.5 million or 21% of revenue, up from $3.6 million in the prior year.
As of December 31, 2023, we had 31.1 million unduplicated members compared to 30.4 million as of December 31, 2022. Slide 5 shows that strong revenue growth continued in our Europe segment and at Jack's Flight Club. On Slide 6, we go into more detail about the revenues and the operating profit of our 2 largest business segments, North America and Europe. North America Q4 segment revenue increased 5% year-over-year to $13.8 million from the prior year period. Operating profit in North America was $4.0 million in Q4 compared to an operating profit of $4.2 million a year ago. Europe Q4 segment revenue increased 34% year-over-year to $6.3 million from $4.7 million in the prior year period. Europe had an operating profit of $832,000 in Q4 compared to an operating profit of $42,000 in the prior year period.
On Slide 7, you can see that our GAAP operating margin was 21% in Q4, up from 19% year-over-year. Slide 8 shows that in North America, the GAAP operating margin remained high at 29%. On Slide 9, we provide information on non-GAAP operating profit as we believe it better explains how Travelzoo's management evaluates financial performance. Q4 2023 non-GAAP operating profit was $5.2 million, that's 25% of revenue compared to non-GAAP operating profit of $4.8 million in the prior year period. Slide 10 provides more information about the items that are excluded in the calculation of non-GAAP operating profit. Please turn to Slide 11. We maintained a solid cash position even after repurchasing 600,000 Travelzoo shares during the quarter. As of December 31, 2023, consolidated cash, cash equivalents and restricted cash was $16.4 million, a decrease of $3.0 million from December 31, 2022.
A busy airport terminal full of travelers eager to utilize the company's services.
Comparably, merchant payables which are future payments that we have to make to partners when vouchers are redeemed decreased by $10.7 million over the same period. Slide 12 and 13, detail of our revenues by business segment. The North America business segment saw a year-over-year revenue increase of 5% to $13.8 million. This was driven by revenue from travel. Revenues from local consisting of local entertainment experiences are still expected to recover from the pandemic. Turn to Slide 13. The Europe business segment saw a year-over-year revenue increase of 34% to $6.3 million. This was driven by particular strength in travel. Slide 14 shows our revenues compared to operating expenses. Most of the company's operating expenses, except for marketing are relatively fixed in the short to midterm.
We believe we can keep fixed costs contained in the foreseeable future, while revenues are expected to grow. Higher revenues were just increased operating margin. For Q1 2024, we expect continued growth in revenue, albeit at a reduced pace from 2023. We expect a high cash flow from operating activities and a high profitability. We plan to continue our outstanding share repurchase program. In December 2023, we announced the introduction of a membership fee for Travelzoo beginning January 1, 2024. Existing members as of 20 -- December 31, 2023, are exempt from the fee during 2024. Therefore, we do not anticipate generating membership fee revenue from existing members before 2025. Now I turn the discussion over to Holger.
Holger Bartel: Thank you, Lijun. Q4 concluded a strong year for Travelzoo, with each quarter achieving year-over-year revenue growth, profitability, and positive cash flow from operations. We will continue to leverage Travelzoo's global reach, our trusted brand and strong relationships with top travel suppliers to negotiate more exclusive offers for our members. It is in times of large increases in travel prices that Travelzoo is most valuable for consumers. Travelzoo members enjoy high-quality travel experiences that represent outstanding value. With more than 30 million members, 8 million mobile app users, and 5 million social media followers, Travelzoo is loved by travel enthusiasts who are affluent, active and open to new experiences.
Slide 15 provides more information about Travelzoo members. 91% say they are open to new destinations and travel ideas. We are indeed the club of travel enthusiasts. Slide 17 provides an overview of what management and our global team are focused on. We want to grow the number of Travelzoo members, leverage our strong existing relationships with top travel suppliers, and add new relationships to negotiate more exclusive offers, utilize higher operating margins to increase EPS, grow Jack's Flight Club's revenue and develop Travelzoo META with discipline. At this point, I'd like to turn over to Christina for a quick update on Jack's Flight Club and Travelzoo META.
Christina Ciocca: Thank you, Holger. Jack's Flight Club had a strong year in 2023, closing Q4 with a 29% increase in revenue year-over-year and a 21% increase in premium members. In 2024, we are excited to keep up this momentum with continued investment in member growth, including in new markets like Canada, implementation of an inflationary price increase for new members and further refinement of our value proposition, all of which we believe will help us to find better marketing efficiencies and grow profitably. Now I'd like to speak about Travelzoo META. Exciting news from Travelzoo META is that we are close to producing the first Metaverse travel experience. There will be browser-enabled. We expect to bring that experience in more new immersive travel experiences to founding members of Travelzoo META on the new Travelzoo META app.
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. Now I'm handing over to the operator for questions for Holger, Lijun and myself.
