TRAVELZOO - FORM 8-K - EX-99.1 - EXHIBIT - January 29, 2013

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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 Fourth Quarter 2012 Results
NEW YORK, January 24, 2013 — Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $37.0 million, up 5% year-over-year
•
Net income of $3.8 million, down 42% year-over-year
•
Earnings per share of $0.24, compared to $0.40 in the prior-year period
•
Cash flow from operations of $13.0 million

Travelzoo Inc., a global Internet media company, today announced financial results for the fourth quarter ended December 31, 2012, with revenue of $37.0 million, an increase of 5% year-over-year. Operating income was $4.4 million, down 47% year-over-year. Net income was $3.8 million, with earnings per share of $0.24, down from $0.40 in the prior-year period. For the full year, revenue was $151.2 million, an increase of 2% year-over-year. GAAP operating income was $25.5 million, up 70% year-over-year. Non-GAAP operating income was $28.5 million, down 19% year-over-year. GAAP net income was $18.2 million, with earnings per share of $1.14, up from $0.20 in the prior-year period. Non-GAAP net income was $21.2 million, with earnings per share of $1.33, down from $1.42 in the prior-year period.

"During the fourth quarter of 2012 we continued to execute our strategy of increasing Travelzoo's reach, expanding our sales force and developing our products, particularly in the mobile and hotel categories," said Chris Loughlin, chief executive officer. "We are pleased with our progress: The Travelzoo® brand now reaches 26 million subscribers, Getaway sales accelerated, and in Europe our Travel business grew 23% year-over-year. We continue to see strong adoption of the Travelzoo brand on mobile; 33% of users now access our brand through mobile devices."

North America
North America business segment revenue increased 3% year-over-year to $26.5 million. Operating income for the fourth quarter was $3.4 million, or 13% of revenue, down from an operating income of $6.5 million, or 25% of revenue, in the prior-year period. The decrease in operating profit was a result of increased expenses related to sales force expansion and subscriber marketing.

Europe
Europe business segment revenue increased 10% year-over-year to $10.7 million. In local currency terms, revenue for the fourth quarter increased 8% year-over-year. Operating income was $969,000, or 9% of revenue, down from an operating income of $1.7 million, or 17% of revenue in the prior-year period. The decrease in operating income was a result of a increased expenses related to sales force expansion and subscriber marketing.

Subscribers
Travelzoo had a total unduplicated number of subscribers in North America and Europe of 22.5 million as of December 31, 2012, up 5% from December 31, 2011. In North America, total unduplicated number of subscribers was 16.1 million as of December 31, 2012, up 3% from December 31, 2011. In Europe, total unduplicated number of subscribers was 6.4 million as of December 31, 2012, up 10% from December 31, 2011.

Income Taxes
Income tax expense was $692,000, compared to $1.9 million in the prior-year period. The effective income tax rate was 16%, compared to 23% in the prior-year period.

Asset Management
During the fourth quarter 2012, Travelzoo generated $13.0 million of cash from operating activities. Accounts receivable increased by $286,000 over the prior-year period to $13.6 million. Accounts payable increased by $7.0 million over the prior-year period to $28.7 million. Capital expenditures were $698,000, up from $558,000 in the prior-year period. Travelzoo exited the fourth quarter with $61.2 million in cash and cash equivalents.






Conference Call
Travelzoo will host a conference call to discuss fourth 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 26 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
 
Twelve months ended
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
Revenues
$
37,028

 
$
35,156

 
$
151,168

 
$
148,342

Cost of revenues
4,073

 
3,680

 
15,745

 
13,283

Gross profit
32,955

 
31,476

 
135,423

 
135,059

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
18,489

 
13,921

 
68,242

 
65,490

General and administrative
10,109

 
9,380

 
38,692

 
34,547

Unexchanged promotional merger shares
—

 
—

 
3,000

 
20,000

Total operating expenses
28,598

 
23,301

 
109,934

 
120,037

Income from operations
4,357

 
8,175

 
25,489

 
15,022

Other income
92

 
197

 
309

 
302

Income before income taxes
4,449

 
8,372

 
25,798

 
15,324

Income taxes
692

 
1,944

 
7,600

 
12,005

Net income
$
3,757

 
$
6,428

 
$
18,198

 
$
3,319

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.24

 
$
0.40

 
$
1.15

 
$
0.20

Diluted
$
0.24

 
$
0.40

 
$
1.14

 
$
0.20

Weighted Average Shares:
 
 
 
 
 
 
 
Basic
15,659

 
15,962

 
15,866

 
16,315

Diluted
15,659

 
16,026

 
15,901

 
16,414






Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
December 31,
2012

 
December 31,
2011

Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
61,169

 
$
38,744

Accounts receivable, net
13,626

 
13,340

Income taxes receivable
6,682

 
3,625

Deposits
389

 
278

Prepaid expenses and other current assets
2,260

 
2,123

Deferred tax assets
2,194

 
1,754

Total current assets
86,320

 
59,864

Deposits, less current portion
1,107

 
776

Deferred tax assets, less current portion
1,710

 
344

Restricted cash
3,396

 
3,103

Property and equipment, net
4,314

 
3,557

Intangible assets, net
986

 
704

Total assets
$
97,833

 
$
68,348

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
28,695

 
$
21,731

Accrued expenses
11,993

 
6,311

Deferred revenue
2,698

 
2,168

Deferred rent
280

 
114

Income tax payable
—

 
279

Total current liabilities
43,666

 
30,603

Long-term tax liabilities
10,030

 
2,225

Deferred rent, less current portion
798

 
761

Total liabilities
54,494

 
33,589

Common stock
163

 
164

Treasury stock
(7,898
)
 
(15,123
)
Additional paid-in capital
8,863

 
7,656

Accumulated other comprehensive loss
(737
)
 
(1,422
)
Retained earnings
42,948

 
43,484

Total stockholders’ equity
43,339

 
34,759

Total liabilities and stockholders’ equity
$
97,833

 
$
68,348






Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
Three months ended
 
Twelve months ended
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
3,757

 
$
6,428

 
$
18,198

 
$
3,319

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
683

 
671

 
2,539

 
2,725

Deferred income taxes
(2,174
)
 
(546
)
 
(2,178
)
 
(337
)
Stock-based compensation
307

 
187

 
1,207

 
750

Provision for losses on accounts receivable
46

 
76

 
162

 
52

Tax benefit from exercise of stock options
—

 
—

 
—

 
(268
)
Net foreign currency effects
1

 
58

 
(4
)
 
81

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
1,784

 
576

 
(285
)
 
(146
)
Deposits
(24
)
 
(99
)
 
(406
)
 
(667
)
Income tax receivable
3,351

 
(1,061
)
 
5,171

 
(3,093
)
Prepaid expenses and other current assets
328

 
188

 
87

 
(584
)
Accounts payable
5,211

 
4,620

 
6,403

 
12,074

Accrued expenses
(630
)
 
(4,737
)
 
5,568

 
256

Deferred revenue
190

 
585

 
513

 
853

Deferred rent
25

 
30

 
45

 
209

Income tax payable
(1
)
 
(15
)
 
(285
)
 
(369
)
Other non-current liabilities
156

 
117

 
(35
)
 
776

Net cash provided by operating activities
13,010

 
7,078

 
36,700

 
15,631

Cash flows from investing activities:
 
 
 
 
 
 
 
Purchases of restricted cash
(272
)
 
—

 
(272
)
 
—

Purchases of intangible asset
(677
)
 
—

 
(677
)
 
—

Purchases of property and equipment
(698
)
 
(558
)
 
(2,744
)
 
(2,460
)
Net cash used in investing activities
(1,647
)
 
(558
)
 
(3,693
)
 
(2,460
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Cash used in purchase of common stock
(7,898
)
 
—

 
(11,509
)
 
(15,124
)
Proceeds from exercise of stock options
—

 
—

 
—

 
40

Tax benefit of stock option exercises
—

 
—

 
—

 
268

Net cash used in financing activities
(7,898
)
 
—

 
(11,509
)
 
(14,816
)
Effect of exchange rate on cash and cash equivalents
70

 
(209
)
 
927

 
(795
)
Net increase (decrease) in cash and cash equivalents
3,535

 
6,311

 
22,425

 
(2,440
)
Cash and cash equivalents at beginning of period
57,634

 
32,433

 
38,744

 
41,184

Cash and cash equivalents at end of period
$
61,169

 
$
38,744

 
$
61,169

 
$
38,744

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid (received) for income taxes, net
$
(631
)
 
$
3,453

 
$
4,937

 
$
15,025






Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended December 31, 2012
North
America
 
Europe
 
Elimination
 
Consolidated
Revenue from unaffiliated customers
$
26,373

 
$
10,655

 
$
—

 
$
37,028

Intersegment revenue
157

 
102

 
(259
)
 
—

Total net revenues
26,530

 
10,757

 
(259
)
 
37,028

Operating income
$
3,387

 
$
969

 
$
—

 
$
4,356

Three months ended December 31, 2011
North
America
 
Europe
 
Elimination
 
Consolidated
Revenue from unaffiliated customers
$
25,500

 
$
9,656

 
$
—

 
$
35,156

Intersegment revenue
124

 
42

 
(166
)
 
—

Total net revenues
25,624

 
9,698

 
(166
)
 
35,156

Operating income
$
6,504

 
$
1,671

 
$
—

 
$
8,175

Twelve months ended December 31, 2012
North
America
 
Europe
 
Elimination
and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
108,788

 
$
42,380

 
$
—

 
$
151,168

Intersegment revenue
728

 
143

 
(871
)
 
—

Total net revenues
109,516

 
42,523

 
(871
)
 
151,168

Operating income
$
21,481

 
$
7,008

 
$
(3,000
)
 
$
25,489

Twelve months ended December 31, 2011
North
America
 
Europe
 
Elimination
and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
108,549

 
$
39,793

 
$
—

 
$
148,342

Intersegment revenue
466

 
134

 
(600
)
 
—

Total net revenues
109,015

 
39,927

 
(600
)
 
148,342

Operating income
$
30,110

 
$
4,912

 
$
(20,000
)
 
$
15,022


 
(a)
Includes a charge related to unexchanged promotional merger shares for the twelve months ended December 31, 2012 and December 31, 2011.





Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In thousands, except per share amounts)
 
 
Twelve months ended
 
 
December 31,
 
 
2012
 
2011
GAAP operating income
 
$
25,489

 
$
15,022

Unexchanged promotional merger shares (a)
 
3,000

 
20,000

Non-GAAP operating income
 
$
28,489

 
$
35,022

 
 
 
 
 
GAAP net income
 
$
18,198

 
$
3,319

Unexchanged promotional merger shares (a)
 
3,000

 
20,000

Non-GAAP net income
 
$
21,198

 
$
23,319

 
 
 
 
 
Diluted net Income per share
 
$
1.14

 
$
0.20

Unexchanged promotional merger shares (a)
 
0.19

 
1.22

Non-GAAP diluted net income per share
 
$
1.33

 
$
1.42

 
 
 
 
 
 
 
 
 
 
(a) Includes a charge related to unexchanged promotional merger shares of $20.0 million and $3.0 million for the twelve months ended December 31, 2011 and 2012, respectively.



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