Travelzoo Reports First Quarter 2023 Results

Reserve
Reported revenues include a reserve of $785,000 related to commissions to be earned from vouchers sold. The reserve is initially booked as contra revenue.

Travelzoo North America
North America business segment revenue increased 26% year-over-year to $14.8 million. Operating profit for Q1 2023 was $4.5 million, or 31% of revenue, compared to an operating profit of $1.7 million in the prior-year period.

Travelzoo Europe
Europe business segment revenue remained consistent year-over-year at $5.9 million. At constant currencies, Europe business segment revenue increased 6% year-over-year. Operating profit for Q1 2023 was $457,000, or 8% of revenue, compared to an operating profit of $178,000 in the prior-year period.

Jack's Flight Club
Jack's Flight Club business segment revenue increased 15% year-over-year to $948,000. Jack's Flight Club is a membership subscription service in which Travelzoo has a 60% ownership interest. The number of premium subscribers increased 27% year-over-year. Revenue from increases in subscribers is reported with a lag because we recognize revenue from subscriptions monthly pro rata over the subscription period (quarterly, semi-annually, annually). Non-GAAP operating profit for Q1 2023 was $123,000, compared to a non-GAAP operating profit of $249,000 in the prior-year period. After consolidation with Travelzoo, Jack's Flight Club's net income was $20,000, with $12,000 attributable to Travelzoo as a result of recording $168,000 of amortization of intangible assets related to the acquisition.

New Initiatives
New Initiatives business segment revenue, which includes Licensing and Travelzoo META, was $8,000. Operating loss for Q1 2023 was $217,000.

In June 2020, Travelzoo entered into a royalty-bearing licensing agreement with a local licensee in Japan for the exclusive use of Travelzoo's brand, business model, and members in Japan. In August of 2020, Travelzoo entered into a royalty-bearing licensing agreement with a local licensee in Australia for the exclusive use of Travelzoo's brand, business models, and members in Australia, New Zealand, and Singapore. Under these arrangements, Travelzoo's existing members in Australia, Japan, New Zealand, and Singapore will continue to be owned by Travelzoo as the licensor. Licensing revenue is booked with a lag of one quarter. Travelzoo recorded $8,000 in licensing revenue from the licensee in Australia, New Zealand, and Singapore in Q1 2023. Licensing revenue is expected to increase going forward.

Members and Subscribers
As of March 31, 2023, we had 30.5 million members worldwide. In North America, the unduplicated number of Travelzoo members was 16.3 million as of March 31, 2023, down 2% from March 31, 2022. In Europe, the unduplicated number of Travelzoo members was 9.1 million as of March 31, 2023, consistent with March 31, 2022. Jack's Flight Club had 2.0 million subscribers as of March 31, 2023, up 14% from March 31, 2022.

Discontinued Operations
As announced in a press release on March 10, 2020, Travelzoo decided to exit its Asia Pacific business and operate it as a licensing business going forward. Consequently, the Asia Pacific business has been classified as discontinued operations since March 31, 2020. Prior periods have been reclassified to conform with the current presentation. Certain reclassifications have been made for current and prior periods between the continued operations and the discontinued operations in accordance with U.S. GAAP.

Income Taxes
A provision of $1.4 million for income taxes was recorded for Q1 2023, compared to an income tax expense of $968,000 in the prior-year period. The provision for Q1 2023 does not reflect the expected utilization of NOLs by Travelzoo in the U.S.

Non-GAAP Financial Measures
Management calculates non-GAAP operating income when evaluating the financial performance of the business. Travelzoo's calculation of non-GAAP operating income, also called "non-GAAP operating profit" in this press release and today's earnings conference call, excludes the following items: amortization of intangibles, stock option expenses, and severance-related expenses. This press release includes a table which reconciles GAAP operating income to the calculation of non-GAAP operating income. Non-GAAP operating income is not required by, or presented in accordance with, generally accepted accounting principles in the United States of America ("GAAP"). This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures reported by other companies.

Looking Ahead
For Q2 2023, we currently expect growth in revenue and growth in operating profit to continue year-over-year. During the pandemic, we have been able to lower our fixed costs. We believe we can keep our fixed costs relatively low in the foreseeable future.

Conference Call
Travelzoo will host a conference call to discuss first quarter 2023 results today at 11:00 a.m. ET. Please visit http://ir.travelzoo.com/events-presentations to

• download the management presentation (PDF format) to be discussed in the conference call
• access the webcast.

About Travelzoo
Travelzoo® provides its 30 million members with exclusive offers and one-of-a-kind experiences personally reviewed by our deal experts around the globe. We have our finger on the pulse of outstanding travel, entertainment, and lifestyle experiences. We work in partnership with more than 5,000 top travel suppliers—our long-standing relationships give Travelzoo members access to irresistible deals.

Certain statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may include, but are not limited to, statements about our plans, objectives, expectations, prospects and intentions, markets in which we participate and other statements contained in this press release that are not historical facts. When used in this press release, the words "expect", "predict", "project", "anticipate", "believe", "estimate", "intend", "plan", "seek" and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including changes in our plans, objectives, expectations, prospects and intentions and other factors discussed in our filings with the SEC. We cannot guarantee any future levels of activity, performance or achievements. Travelzoo undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release.

Travelzoo and Jack's Flight Club are registered trademarks of Travelzoo.

Travelzoo Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts)
	Three months ended
	March 31
	2023		2022
Revenues	$                 21,601		$                 18,453
Cost of revenues	2,691		2,832
Gross profit	18,910		15,621
Operating expenses:
Sales and marketing	9,296		8,581
Product development	490		453
General and administrative	4,413		4,668
Total operating expenses	14,199		13,702
Operating income	4,711		1,919
Other income, net	350		1,423
Income from continuing operations before income taxes	5,061		3,342
Income tax expense	1,378		968
Income from continuing operations	3,683		2,374
Loss from discontinued operations, net of tax	(2)		(11)
Net income	3,681		2,363
Net income attributable to non-controlling interest	8		4
Net income attributable to Travelzoo	$                   3,673		$                   2,359
Net income attributable to Travelzoo—continuing operations	$                   3,675		$                   2,370
Net loss attributable to Travelzoo—discontinued operations	$                        (2)		$                      (11)
Income per share—basic
Continuing operations	$                     0.23		$                     0.20
Discontinued operations	$                        —		$                        —
Net income per share—basic	$                     0.23		$                     0.20
Income per share—diluted
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