Travelzoo Stock Takes Off on Earnings as Travel Rebounds

It’s no secret that the COVID-19 pandemic utterly decimated the global travel industry. But demand is starting to rebound in many markets as vaccination rates rise.

Travel deal publisher Travelzoo (NASDAQ: TZOO) reported second quarter earnings this morning, which showed strong growth for core operating metrics compared to the depressed levels of a year ago.

As of 2:55 p.m. EDT Wednesday, Travelzoo shares had gained 18%.

Travel is staging a comeback

Revenue in the second quarter surged 172% to $19.1 million, translating into earnings per share from continuing operations of $0.22. Keep in mind that Travelzoo had previously exited its Asia-Pacific business in early 2020, with that segment now being classified as discontinued operations.

Additionally, Travelzoo had divested its subsidiary in Japan last summer, entering into a licensing agreement that will generate royalties for Travelzoo in exchange for using the brand.

A couple of months later, Travelzoo also sold its Singapore subsidiary under a similar arrangement. Simply put, Travelzoo is quite a different company today than it was a year ago, which hinders comparability to prior periods. However, those deals did not result in any licensing revenue in the second quarter.

Following the divestitures last year, Travelzoo now primarily operates only in North America and Europe.

The North American business is recovering much faster, according to the company, and that segment’s operating profit has already rebounded to 2019 levels. Revenue in North America was $14 million in the second quarter, with Europe generating $4.2 million in sales. 

“We see continued improvement in our business,” CEO Holger Bartel said in a statement. “We seize the exceptional industry opportunities for providing 30 million Travelzoo members exclusive and irresistible travel, entertainment, and local offers and experiences.”

The company finished the quarter with 31.3 million members. Unduplicated members in North America were 17.7 million, with another 8.5 million unduplicated members in Europe. Travelzoo had previously acquired a majority stake in Jack’s Flight Club, a membership subscription service.

Jack’s Flight Club revenue fell 9% to $860,000, but was still able to contribute $98,000 to Travelzoo’s bottom line after consolidating the investment’s results.

Travelzoo had dramatically cut costs at the beginning of the pandemic, reducing the overall fixed cost base substantially. Since fixed costs comprise the majority of total expenses, the company says that it is poised to enjoy operating leverage as sales recover.

Due to continued uncertainty, particularly as the COVID-19 Delta variant is causing case numbers to spike in many countries, Travelzoo was coy regarding its outlook.

The company merely said that it expects to report higher revenue and profitability in the third quarter on a sequential basis. Travelzoo is optimistic that its current recovery trend can sustain, while it will continue working to reduce fixed costs.

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