TRAVELZOO - FORM 8-K - EX-99.1 - October 25, 2012

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Exhibit 99.1
 
 
 
Travelzoo
590 Madison Avenue
37th Floor
New York, NY 10022
 
Media Contact:
Lisa Moore
+1 (212) 484-4963
lmoore@travelzoo.com

FOR IMMEDIATE RELEASE
Travelzoo Reports Third Quarter 2012 Results
NEW YORK, October 25, 2012 — Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $35.4 million, down 8% year-over-year
•
Net income of $3.4 million, down 42% year-over-year
•
Earnings per share of $0.22, compared to $0.36 in the prior-year period
•
Cash flow from operations of $6.9 million

Travelzoo Inc., a global Internet media company, today announced financial results for the third quarter ended September 30, 2012, with revenue of $35.4 million, a decrease of 8% year-over-year. Operating income was $4.2 million, down 55% year-over-year. Net income was $3.4 million, with earnings per share of $0.22, down from $0.36 in the prior-year period.

"While we are confident about Travelzoo's long-term opportunity, we are disappointed with our Q3 results," said Chris Loughlin, chief executive officer. "Declines in SuperSearch and Local Deals were not made up by the positive momentum we saw in Getaways. Continued investments into sales team expansion and subscriber growth, as well as enhancements to our hotel and mobile products are affecting profitability in the near-term, but we believe these are the right steps to position Travelzoo for sustainable and profitable future growth."

North America
North America business segment revenue decreased 10% year-over-year to $25.1 million. Operating profit for the third quarter was $3.1 million, or 12% of revenue, down from an operating profit of $7.8 million, or 28% of revenue, in the prior-year period. The decrease in operating profit was a result of a revenue decrease and increased expenses related to sales force expansion and subscriber marketing.

Europe
Europe business segment revenue decreased 4% year-over-year to $10.3 million. In local currency terms, revenue for the third quarter decreased 2% year-over-year. Operating profit was $1.1 million, or 10% of revenue, down from an operating profit of $1.4 million, or 13% of revenue in the prior-year period. The decrease in operating profit was a result of a decrease in revenue and increased expenses related to sales force ramp up and subscriber marketing.





Subscribers
Travelzoo had a total unduplicated number of subscribers in North America and Europe of 22.4 million as of September 30, 2012, up 5% from September 30, 2011. In North America, total unduplicated number of subscribers was 16.1 million as of September 30, 2012, up 3% from September 30, 2011. In Europe, total unduplicated number of subscribers was 6.3 million as of September 30, 2012, up 10% from September 30, 2011.

Income Taxes
Income tax expense was $896,000, compared to $3.3 million in the prior-year period. The effective income tax rate was 21%, compared to 36% in the prior-year period.

Asset Management
During the third quarter 2012, Travelzoo generated $6.9 million of cash from operating activities. Accounts receivable increased by $1.4 million over the prior-year period to $15.4 million. Accounts payable increased by $6.1 million over the prior-year period to $23.3 million. Capital expenditures were $774,000, down from $847,000 in the prior-year period. Travelzoo exited the third quarter with $57.6 million in cash and cash equivalents.

Conference Call
Travelzoo will host a conference call to discuss third quarter results at 11:00 a.m. ET today. Please visit http://www.travelzoo.com/earnings to
•
download the management presentation (PDF format) to be discussed in the conference call;
•
access the webcast.


About Travelzoo
Travelzoo Inc. is a global Internet media company. With more than 25 million subscribers in North America, Europe, and Asia Pacific and 25 offices worldwide, Travelzoo® publishes deals from more than 2,000 travel and entertainment companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value. In Asia Pacific, Travelzoo is independently owned and operated by Travelzoo (Asia) Ltd. and Travelzoo Japan K.K. under a license agreement with Travelzoo Inc.

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 Top 20 are registered trademarks of Travelzoo Inc. All other company and product names mentioned are trademarks of their respective owners.




Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
 
Nine months ended
 
September,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues
$
35,447

 
$
38,661

 
$
114,140

 
$
113,186

Cost of revenues
3,989

 
4,221

 
11,672

 
9,603

Gross profit
31,458

 
34,440

 
102,468

 
103,583

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
17,427

 
16,737

 
49,753

 
51,569

General and administrative
9,836

 
8,478

 
28,583

 
25,167

Unexchanged promotional merger shares
—

 
—

 
3,000

 
20,000

Total operating expenses
27,263

 
25,215

 
81,336

 
96,736

Income from operations
4,195

 
9,225

 
21,132

 
6,847

Other income
135

 
—

 
218

 
105

Income before income taxes
4,330

 
9,225

 
21,350

 
6,952

Income taxes
896

 
3,298

 
6,908

 
10,061

Net income (loss)
$
3,434

 
$
5,927

 
$
14,442

 
$
(3,109
)
Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.22

 
$
0.36

 
$
0.91

 
$
(0.19
)
Diluted
$
0.22

 
$
0.36

 
$
0.90

 
$
(0.19
)
Weighted Average Shares:
 
 
 
 
 
 
 
Basic
15,884

 
16,396

 
15,935

 
16,434

Diluted
15,922

 
16,504

 
16,041

 
16,434






Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
September 30,
2012

 
December 31,
2011

Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
57,634

 
$
38,744

Accounts receivable, net
15,440

 
13,340

Income taxes receivable
10,052

 
3,625

Deposits
381

 
278

Prepaid expenses and other current assets
2,757

 
2,123

Deferred tax assets
1,356

 
1,754

Total current assets
87,620

 
59,864

Deposits, less current portion
1,068

 
776

Deferred tax assets, less current portion
357

 
344

Restricted cash
3,122

 
3,103

Property and equipment, net
4,007

 
3,557

Intangible assets, net
440

 
704

Total assets
$
96,614

 
$
68,348

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
23,314

 
$
21,731

Accrued expenses
12,619

 
6,311

Deferred revenue
2,506

 
2,168

Deferred rent
287

 
114

Income tax payable
—

 
279

Total current liabilities
38,726

 
30,603

Long-term tax liabilities
9,874

 
2,225

Deferred rent, less current portion
831

 
761

Total liabilities
49,431

 
33,589

Common stock
163

 
164

Treasury stock
—

 
(15,123
)
Additional paid-in capital
8,556

 
7,656

Accumulated other comprehensive loss
(728
)
 
(1,422
)
Retained earnings
39,192

 
43,484

Total stockholders’ equity
47,183

 
34,759

Total liabilities and stockholders’ equity
$
96,614

 
$
68,348






Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income (loss)
$
3,434

 
$
5,927

 
$
14,442

 
$
(3,109
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
630

 
746

 
1,856

 
2,054

Deferred income taxes
(3
)
 
49

 
(3
)
 
209

Stock-based compensation
307

 
187

 
900

 
562

Provision for losses on accounts receivable
(84
)
 
(67
)
 
116

 
(25
)
Tax benefit from exercise of stock options
—

 
—

 
—

 
(268
)
Net foreign currency effects
(46
)
 
52

 
(6
)
 
24

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
53

 
1,734

 
(2,069
)
 
(722
)
Deposits
(17
)
 
92

 
(382
)
 
(568
)
Income tax receivable
689

 
358

 
1,819

 
(2,031
)
Prepaid expenses and other current assets
(161
)
 
(654
)
 
(241
)
 
(771
)
Accounts payable
680

 
1,840

 
1,189

 
7,454

Accrued expenses
897

 
(2,192
)
 
6,198

 
4,992

Deferred revenue
383

 
170

 
323

 
268

Deferred rent
55

 
83

 
21

 
179

Income tax payable
(1
)
 
165

 
(284
)
 
(353
)
Other non-current liabilities
34

 
645

 
(190
)
 
659

Net cash provided by operating activities
6,850

 
9,135

 
23,689

 
8,554

Cash flows from investing activities:
 
 
 
 
 
 
 
Purchases of property and equipment
(774
)
 
(847
)
 
(2,046
)
 
(1,902
)
Net cash used in investing activities
(774
)
 
(847
)
 
(2,046
)
 
(1,902
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Cash used in purchase of common stock
(3,611
)
 
(15,124
)
 
(3,611
)
 
(15,124
)
Proceeds from exercise of stock options
—

 
—

 
—

 
40

Tax benefit of stock option exercises
—

 
—

 
—

 
268

Net cash used in financing activities
(3,611
)
 
(15,124
)
 
(3,611
)
 
(14,816
)
Effect of exchange rate on cash and cash equivalents
1,008

 
(817
)
 
858

 
(587
)
Net increase (decrease) in cash and cash equivalents
3,473

 
(7,653
)
 
18,890

 
(8,751
)
Cash and cash equivalents at beginning of period
54,161

 
40,086

 
38,744

 
41,184

Cash and cash equivalents at end of period
$
57,634

 
$
32,433

 
$
57,634

 
$
32,433

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid for income taxes, net
177

 
2,096

 
5,568

 
11,572






Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended September 30, 2012
North
America
 
Europe
 
Elimination
 
Consolidated
Revenue from unaffiliated customers
$
25,147

 
$
10,300

 
$
—

 
$
35,447

Intersegment revenue
211

 
10

 
(221
)
 
—

Total net revenues
25,358

 
10,310

 
(221
)
 
35,447

Operating income
$
3,121

 
$
1,074

 
$
—

 
$
4,195

Three months ended September 30, 2011
North
America
 
Europe
 
Elimination
 
Consolidated
Revenue from unaffiliated customers
$
27,944

 
$
10,717

 
$
—

 
$
38,661

Intersegment revenue
130

 
30

 
(160
)
 
—

Total net revenues
28,074

 
10,747

 
(160
)
 
38,661

Operating income
$
7,811

 
$
1,414

 
$
—

 
$
9,225

Nine months ended September 30, 2012
North
America
 
Europe
 
Elimination
and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
82,415

 
$
31,725

 
$
—

 
$
114,140

Intersegment revenue
496

 
41

 
(537
)
 
—

Total net revenues
82,911

 
31,766

 
(537
)
 
114,140

Operating income
$
18,094

 
$
6,038

 
$
(3,000
)
 
$
21,132

Nine months ended September 30, 2011
North
America
 
Europe
 
Elimination
and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
83,048

 
$
30,138

 
$
—

 
$
113,186

Intersegment revenue
342

 
92

 
(434
)
 
—

Total net revenues
83,390

 
30,230

 
(434
)
 
113,186

Operating income
$
23,605

 
$
3,242

 
$
(20,000
)
 
$
6,847


 
(a)
Includes a charge related to unexchanged promotional merger shares for the nine months ended September 30, 2012 and September 30, 2011.



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