TRAVELZOO - FORM 8-K - EX-99.1 - April 18, 2013

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Exhibit 99.1
 
 
 
Travelzoo
590 Madison Avenue
37th Floor
New York, NY 10022
 
Media Contact:
Christie McConnell
Travelzoo, North America
+1 (212) 484-4912 cmcconnell@travelzoo.com

FOR IMMEDIATE RELEASE

Travelzoo Reports First Quarter 2013 Results

NEW YORK, April 18, 2013 — Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $42.2 million, up 7% year-over-year
•
Net income of $5.6 million, up 49% year-over-year
•
Earnings per share of $0.36, compared to $0.23 (GAAP) / $0.42 (non-GAAP) in the prior-year period
•
Cash flow from operations of $6.5 million

Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March 31, 2013, with revenue of $42.2 million, an increase of 7% year-over-year. Operating profit was $8.0 million. Net income was $5.6 million, with earnings per share of $0.36, up from $0.23 in the prior-year period. Non-GAAP earnings per share was $0.36, down from $0.42 in the prior-year period.

"We kicked off 2013 with record revenues, driven by strong performance within our travel segments in both North America and Europe,” said Chris Loughlin, chief executive officer. “We accelerated subscriber growth and made significant improvements in audience engagement across email, social media and mobile apps.  We continued to develop our new hotel booking platform, which we plan to roll out later this year."

North America
North America business segment revenue increased 5% year-over-year to $30.2 million. Operating profit for the first quarter was $5.5 million, or 18% of revenue, down from $7.1 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, hotel booking platform development, traffic acquisition and subscriber marketing.

Europe
Europe business segment revenue increased 14% year-over-year to $12.4 million. In local currency terms, revenue for the first quarter increased 14% year-over-year. Operating profit was $2.5 million, or 21% of revenue, up from an operating profit of $2.4 million, or 23% of revenue in the prior-year period.

Subscribers
Travelzoo had a total unduplicated number of subscribers in North America and Europe of 22.9 million as of March 31, 2013, up 5% from March 31, 2012. In North America, total unduplicated number of subscribers was 16.3 million as of March 31, 2013, up 3% from March 31, 2012. In Europe, total unduplicated number of subscribers was 6.5 million as of March 31, 2013, up 9% from March 31, 2012.

Income Taxes
Income tax expense was $2.5 million, compared to $2.9 million in the prior-year period. The non-GAAP effective income tax rate was 31%, up from 30% in the prior-year period.

Asset Management
During the first quarter 2013, Travelzoo generated $6.5 million of cash from operating activities. Accounts receivable increased by $648,000 over the prior-year period to $15.3 million. Accounts payable increased by $4.5 million over the prior-year period to $26.9 million. Capital expenditures were $900,000, up from $678,000 in the prior-year period. Travelzoo exited the first quarter with $65.1 million in cash and cash equivalents.

Non-GAAP Measures
To give an enhanced view of the company's operating performance, management has calculated non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share by excluding the $3 million charge related to our unexchanged promotional merger shares in the prior-year period. The company believes these metrics assist investors to assess certain business trends in the same way that these trends are analyzed by management. The discussion of non-GAAP operating income, non-GAAP net income, and non-GAAP earnings share are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. As the only difference between GAAP and non-GAAP measures is the charge related to our unexchanged promotional merger shares in the prior- year period, today's reporting should not be viewed as the company's intention to report non-GAAP measures in future periods. Refer to the “Reconciliation of GAAP to Non-GAAP Measures” section of this release for a summary of these non-GAAP measures and their reconciliation to the reported GAAP measures.

Conference Call
Travelzoo will host a conference call to discuss first 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
 
March 31,
 
2013
 
2012
Revenues
$
42,177

 
$
39,333

Cost of revenues
3,985

 
4,054

Gross profit
38,192

 
35,279

Operating expenses:
 
 
 
Sales and marketing
19,659

 
16,265

General and administrative
10,497

 
9,444

Unexchanged promotional merger shares
—

 
3,000

Total operating expenses
30,156

 
28,709

Income from operations
8,036

 
6,570

Other income
31

 
99

Income before income taxes
8,067

 
6,669

Income taxes
2,472

 
2,922

Net income
$
5,595

 
$
3,747

Net income per share:
 
 
 
Basic
$
0.36

 
$
0.23

Diluted
$
0.36

 
$
0.23

Weighted Average Shares:
 
 
 
Basic
15,362

 
15,962

Diluted
15,371

 
16,019






Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
March 31,
2013

 
December 31,
2012

Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
65,107

 
$
61,169

Accounts receivable, net
15,303

 
13,626

Income taxes receivable
5,117

 
6,682

Deposits
398

 
389

Prepaid expenses and other current assets
2,187

 
2,260

Deferred tax assets
2,426

 
2,194

Total current assets
90,538

 
86,320

Deposits, less current portion
1,208

 
1,107

Deferred tax assets, less current portion
1,240

 
1,710

Restricted cash
3,252

 
3,396

Property and equipment, net
5,316

 
4,314

Intangible assets, net
796

 
986

Total assets
$
102,350

 
$
97,833

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
26,909

 
$
28,695

Accrued expenses
12,796

 
11,993

Deferred revenue
2,158

 
2,698

Deferred rent
262

 
280

Income tax payable
559

 
—

Total current liabilities
42,684

 
43,666

Long-term tax liabilities
10,133

 
10,030

Deferred rent, less current portion
1,510

 
798

Total liabilities
54,327

 
54,494

Common stock
163

 
163

Treasury stock
(7,898
)
 
(7,898
)
Additional paid-in capital
9,169

 
8,863

Accumulated other comprehensive loss
(1,954
)
 
(737
)
Retained earnings
48,543

 
42,948

Total stockholders’ equity
48,023

 
43,339

Total liabilities and stockholders’ equity
$
102,350

 
$
97,833






Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
Three months ended
 
March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
5,595

 
$
3,747

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
716

 
627

Deferred income taxes
193

 
—

Stock-based compensation
307

 
287

Provision for losses on accounts receivable
95

 
108

Net foreign currency effects
94

 
(35
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(2,036
)
 
(1,271
)
Deposits
(155
)
 
(132
)
Income tax receivable
1,564

 
845

Prepaid expenses and other current assets
350

 
(295
)
Accounts payable
(549
)
 
460

Accrued expenses
850

 
5,619

Deferred revenue
(517
)
 
134

Deferred rent
(110
)
 
(75
)
Income tax payable
—

 
(284
)
Other non-current liabilities
103

 
52

Net cash provided by operating activities
6,500

 
9,787

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(900
)
 
(678
)
Net cash used in investing activities
(900
)
 
(678
)
Cash flows from financing activities:
 
 
 
Net cash provided by (used in) financing activities
—

 
—

Effect of exchange rate on cash and cash equivalents
(1,662
)
 
706

Net increase in cash and cash equivalents
3,938

 
9,815

Cash and cash equivalents at beginning of period
61,169

 
38,744

Cash and cash equivalents at end of period
$
65,107

 
$
48,559

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for income taxes, net
$
328

 
$
2,309






Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended March 31, 2013
North
America
 
Europe
 
Elimination
 
Consolidated
Revenue from unaffiliated customers
$
29,911

 
$
12,266

 
$
—

 
$
42,177

Intersegment revenue
262

 
108

 
(370
)
 
—

Total net revenues
30,173

 
12,374

 
(370
)
 
42,177

Operating income
$
5,484

 
$
2,552

 
$
—

 
$
8,036

Three months ended March 31, 2012
North
America
 
Europe
 
Elimination and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
28,556

 
$
10,777

 
$
—

 
$
39,333

Intersegment revenue
79

 
10

 
(89
)
 
—

Total net revenues
28,635

 
10,787

 
(89
)
 
39,333

Operating income
$
7,142

 
$
2,428

 
$
(3,000
)
 
$
6,570


 
(a)
Includes a charge related to unexchanged promotional merger shares for the three months ended March 31, 2012.





Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In thousands, except per share and percentage amounts)
 
 
 
 
 
Three months ended
 
 
March 31,
 
 
2013
 
2012
GAAP operating income
 
$
8,036

 
$
6,570

Unexchanged promotional merger shares (a)
 
—

 
3,000

Non-GAAP operating income
 
$
8,036

 
$
9,570

 
 
 
 
 
GAAP net income
 
$
5,595

 
$
3,747

Unexchanged promotional merger shares (a)
 
—

 
3,000

Non-GAAP net income
 
$
5,595

 
$
6,747

 
 
 
 
 
Diluted net income per share
 
$
0.36

 
$
0.23

Unexchanged promotional merger shares (a)
 
—

 
0.19

Non-GAAP diluted net income per share
 
$
0.36

 
$
0.42

 
 
 
 
 
 
 
 
 
 
GAAP operating margin
 
19.1
%
 
16.7
 %
Unexchanged merger shares (a)
 
—

 
7.6
 %
Non-GAAP operating margin
 
19.1
%
 
24.3
 %
 
 
 
 
 
GAAP effective tax rate
 
30.6
%
 
43.8
 %
Unexchanged merger shares (a)
 
—

 
-13.6
 %
Non-GAAP effective tax rate
 
30.6
%
 
30.2
 %

(a)
Includes a charge related to unexchanged promotional merger shares of $3.0 million for the three months ended March 31, 2012.



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