The company recorded a 9% increase in fourth-quarter revenue to $22.5 million while transitioning its user base toward a recurring subscription fee structure. Despite top-line gains, net income fell to a near-breakeven level as the company increased marketing expenditures for member acquisition and adjusted to ratable revenue recognition for its new membership fees.
Travelzoo (NASDAQ: TZOO) reported fourth-quarter revenue of $22.5 million, representing a 9% increase from $20.7 million in the prior-year period. Net loss attributable to the company was $19,000, or $0.00 per share, compared with net income of $3.2 million, or $0.26 per share, a year earlier. The shift in profitability reflects a strategic decision to accelerate marketing spend and the accounting impact of deferring membership fee revenue over a 12-month period.
Membership Fee Implementation Driving Deferred Revenue Increase
A primary driver of the current financial results is the continued implementation of a mandatory membership fee introduced in 2024. While legacy members who joined prior to 2024 maintain access to certain offers, new benefits and “Club Offers” are reserved for paying Club Members. The company recognizes these membership fees ratably over a one-year subscription period rather than at the time of collection, leading to a significant increase in deferred revenue on the balance sheet, which reached $8.7 million at year-end.
Travelzoo Sees Strong Revenue Growth but Sharp Drop in Quarterly Profit
Consolidated operating profit for the fourth quarter was $0.6 million, down from $4.9 million in the same period of 2024. On a non-GAAP basis, which excludes $339,000 in stock option expenses and minor amortization, operating profit was $0.9 million. North American revenue rose 6% year-over-year to $14.8 million, while the Europe segment saw a 16% revenue increase to $6.3 million. However, the Europe segment reported an operating loss of $1 million, compared to a profit in the prior year, due to higher costs associated with acquiring new members. Jack’s Flight Club, in which Travelzoo holds a 60% interest, contributed $1.3 million in revenue with an operating profit of $153,000. The company ended the quarter with $10.8 million in cash and cash equivalents and generated $1.5 million in cash flow from operations.
Growth Strategy Focused on Global Reach and Recurring Revenue
Management expects year-over-year revenue growth to continue through the first quarter of 2026 and subsequent periods as legacy members convert to paid status and recurring fees are recognized. The corporate strategy focuses on leveraging a global reach of 30 million travelers to negotiate exclusive offers and expand member benefits, such as complimentary airport lounge access. While management anticipates increased profitability over the long term, they noted that short-term fluctuations in net income remain possible if the company identifies further opportunities to increase marketing spend, which is expensed immediately. No shares were repurchased during the fourth quarter.
Travelzoo’s Strategic Shift to a Subscription Model and Increased Marketing Investment
Travelzoo operates within the travel and lifestyle subscription market, positioning itself as a club for affluent and active travel enthusiasts. The company’s move toward a subscription-based model reflects a broader industry trend toward establishing predictable, recurring revenue streams. To maintain its competitive position, the company increased its sales and marketing investment to $10.9 million in the fourth quarter, a 32% increase over the $8.2 million spent in the fourth quarter of 2024.
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