Travelzoo (NASDAQ: TZOO) reported a third-quarter operating loss as it increased spending to acquire paying Club Members, outweighing a modest rise in revenue. The company said the near-term earnings pressure reflects its push toward recurring membership fees, with acquisition costs recorded immediately while subscription revenue is recognized over the membership period.
Revenue for the third quarter of 2026 increased to $22.9 million from $22.2 million a year earlier. GAAP operating results swung to a loss of $2.6 million from a profit of $0.5 million in the third quarter of 2025, producing an operating margin of about negative 11%.
On a non-GAAP basis, Travelzoo recorded an operating loss of $2.1 million, compared with a $1.1 million profit a year earlier. Third-quarter adjustments totaled $0.5 million, including $0.3 million of stock-option expense and $0.2 million of severance-related costs.
Membership investment weighs on earnings
Quarterly marketing spending, defined as direct acquisition costs for new Club Members and trial members, rose to $5.8 million from $4.7 million in the second quarter. That compares with an average of $2.3 million per quarter from the second quarter of 2025 through the first quarter of 2026.
Travelzoo said it added its largest number of Club Members to date during the quarter. Despite the higher overall investment and increased member additions, the average cost of acquiring an annual member in the U.S. was lower than in the second quarter. Management said payback on member acquisition remained positive within a quarter, even though recognized membership revenue is deferred.
Under Travelzoo’s subscription accounting, an annual membership payment is recognized ratably over the subscription period, while the related acquisition expense is recorded when incurred. As a result, the company expects marketing costs to reduce earnings per share in the short term while deferred and recurring revenue contributes more to profitability in later periods.
Travelzoo projects revenue from its Club Membership business, excluding Jack’s Flight Club, at about $17 million in 2026 and more than $30 million in 2027, compared with $7.7 million in 2025. The presentation indicated that this revenue would represent approximately 16% of total revenue in 2026 and 30% in 2027, up from 8% in 2025. Management estimated an incremental marketing-cost impact of negative $0.60 per share in 2026 and a positive impact of about $1.20 per share in 2027.
North America moves to a loss
North America remained Travelzoo’s largest segment, with revenue rising to $14.8 million from $14.2 million a year earlier. The segment recorded a $0.6 million operating loss, compared with a $1.1 million operating profit in the prior-year quarter, as membership investment affected results across key markets.
Europe revenue increased to $6.9 million from $6.6 million. Its operating loss narrowed to $1.2 million from $1.4 million. Jack’s Flight Club generated $1.2 million in revenue, down from $1.4 million, and reported approximately break-even operating results in both periods.
Travelzoo said operating margins should improve substantially as membership renewals increase because renewals do not carry new-member acquisition expenses. The company cautioned, however, that quarterly margins are likely to fluctuate in the short term.
Management prioritizes recurring revenue
Management’s stated priorities include converting Legacy Members and adding new paying Club Members, retaining and expanding the profitable advertising business, and increasing Jack’s Flight Club subscription revenue. The company also plans to launch Travelzoo META, although the presentation did not provide financial targets or a launch timetable for the initiative.
Travelzoo ended the quarter with $8.8 million in cash, cash equivalents and restricted cash, up $1.2 million from $7.6 million at the end of the second quarter but below $9.2 million a year earlier. The company repurchased 256,898 shares during the quarter.
The strategy’s financial outcome depends on converting acquired and trial members into paying subscribers and generating recurring renewals. Travelzoo also noted that actual results could differ materially from its projections because of changes in its plans, expectations and other risks described in its SEC filings.
Find out more
Comments