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Travelzoo (NASDAQ: TZOO) opened trading on Tuesday to a wave of selling after reporting second quarter results that fell well short of what Wall Street had penciled in. Shares sank as much as 36% intraday, touching a low of $6.68, before retracing slightly. That single session wiped a meaningful chunk off a company whose entire market value now sits around $73 million.
The company, which runs a membership club connecting roughly 30 million travelers to curated deals on flights, hotels, and experiences, posted revenue of $23.2 million for the quarter ended June 30, a 3% decline from $23.9 million a year earlier. That alone might not have rattled investors, but the profit picture told a starker story. Travelzoo swung from an operating profit of $2.1 million in the same quarter last year to an operating loss of $2.8 million this time around. Net loss attributable to the company came in at $2.1 million, translating to a loss of $0.21 per diluted share, compared with earnings of $0.12 per share a year earlier. Analysts had been looking for a profit of roughly $0.14 per share, so the miss was substantial.
Every part of the business felt the pressure. North America revenue slipped 3% to $15.7 million and swung to an operating loss of $1.5 million. Europe revenue fell 2% to $6.2 million with an operating loss of $1.2 million. Jack’s Flight Club, the subscription service in which Travelzoo holds a 60% stake, saw revenue drop 7% to $1.3 million. Management pointed to international conflicts that it said had unsettled both advertisers and travelers during the quarter, calling the impact temporary.
Part of the squeeze came from a deliberate choice rather than a market accident. Travelzoo has been pushing hard to convert casual, free members into paying Club Members, and that effort meant spending more on marketing up front while the resulting membership fee revenue only trickles in, recognized in even portions over the following twelve months. Sales and marketing expenses jumped to $13.7 million from $11.5 million a year earlier, a major driver of the swing into a loss. The company noted that renewals of memberships reached their highest level ever this quarter, which it frames as evidence the strategy is gaining traction even if the near-term numbers look rough.
Cash reserves also thinned out. Travelzoo ended the quarter with $7.6 million in cash, cash equivalents, and restricted cash, down from $11.3 million three months earlier, and operations used $1.7 million in cash rather than generating it. The company still found room to repurchase 200,000 shares for about $1.9 million during the quarter, continuing a buyback program it has leaned on even as its balance sheet shows a stockholders’ deficit of $6.6 million.
Looking ahead, management expects revenue growth to return in the third quarter and to continue into subsequent periods as more Legacy Members convert to paying status and as deferred revenue, which climbed to $13.4 million from $8.7 million at the end of last year, gets recognized over time. Whether that patience pays off is now the central question for anyone watching this small, closely held travel media name. The float is thin, insiders hold a large share of the stock, and that combination tends to make both good and bad news move the price dramatically, as Tuesday’s session showed.
