TRAVELZOO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 17, 2014

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Exhibit 99.1
Travelzoo Inc.
590 Madison Avenue
37th Floor
New York, NY 10022

Media Contact:
Glen Ceremony
Chief Financial Officer Travelzoo Inc.
+1 (212) 484-4998
pr@travelzoo.com 


FOR IMMEDIATE RELEASE

Travelzoo Reports First Quarter 2014 Results

NEW YORK, April 17, 2014 - Travelzoo Inc. (NASDAQ: TZOO):

First Quarter 2014 Financial Highlights:
•
Revenue of $40.2 million, down 5% year-over-year
•
Operating profit of $7.0 million, down 13% year-over-year
•
Net income of $4.6 million
•
Earnings per share of $0.31, compared to $0.36 in the prior-year period

Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March 31, 2014, with revenue of $40.2 million, a decrease of 5% year-over-year. Operating profit was $7.0 million, down 13% year-over-year. Net income was $4.6 million, with diluted earnings per share of $0.31, down from $0.36 in the prior-year period.

"Our European business delivered strong results. North America reported weak revenue. North America was impacted by a reduction in Search marketing spend and slow Local voucher sales,” said Chris Loughlin, chief executive officer. “A positive highlight is the record number of mobile downloads we saw in the quarter. We believe in our strategy of quickly adapting to mobile usage."

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North America
North America business segment revenue decreased 12% year-over-year to $26.4 million. Operating profit for the first quarter was $4.6 million, or 17% of revenue, down from $5.5 million, or 18% of revenue, in the prior-year period.

Europe
Europe business segment revenue increased 13% year-over-year to $13.8 million. In local currency terms, revenue increased 6% year-over-year. Operating profit for the first quarter was $2.4 million, or 17% of revenue, down from $2.6 million, or 21% of revenue in the prior-year period.

Subscribers
Travelzoo had a total unduplicated number of subscribers in North America and Europe of 23.6 million as of March 31, 2014, up 1% from December 31, 2013. In North America, total unduplicated number of subscribers was 16.7 million as of March 31, 2014, up 1% from December 31, 2013. In Europe, total unduplicated number of subscribers was 6.9 million as of March 31, 2014, up 2% from December 31, 2013.

Update on Hotel Booking Platform
Travelzoo launched the first phase of its hotel booking platform at the end of March. A select group of U.S. subscribers can now book hotels any night of the year through Travelzoo. "We are working with many new hotels that previously were unable to accept the Local voucher format," said Chris Loughlin, chief executive officer. "The new platform also makes it easier for our subscribers to book a hotel deal on their mobile phones." The hotel booking platform is expected to begin contributing to revenues in the second quarter, an average of 60 to 70 days after bookings occur. Travelzoo recognizes revenue upon the hotel stay and not at the time of booking.
    
Income Taxes
Income tax expense was $2.5 million, compared to $2.5 million in the prior-year period. The effective income tax rate was 35%, up from 31% in the prior-year period.

Asset Management
During the first quarter of 2014, Travelzoo generated $1.8 million of cash from operating activities. Accounts receivable increased by $52,000 over the prior-year period to $15.4 million. Accounts payable increased by $2.1 million over the prior-year period to $29.0 million. Capital expenditures were $1.0 million, up from $900,000 in the prior-year period. As of March 31, 2014, cash and cash equivalents were $61.0 million.

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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 27 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. All other names are trademarks and/or registered trademarks of their respective owners.


###


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Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
 
March 31,
 
2014
 
2013
Revenues
$
40,195

 
$
42,177

Cost of revenues
4,777

 
3,985

Gross profit
35,418

 
38,192

Operating expenses:
 
 
 
Sales and marketing
17,843

 
19,659

General and administrative
10,578

 
10,497

Total operating expenses
28,421

 
30,156

Income from operations
6,997

 
8,036

Other income
122

 
31

Income before income taxes
7,119

 
8,067

Income taxes
2,481

 
2,472

Net income
$
4,638

 
$
5,595

Net income per share:
 
 
 
Basic
$
0.31

 
$
0.36

Diluted
$
0.31

 
$
0.36

Weighted average shares:
 
 
 
Basic
14,880

 
15,362

Diluted
14,970

 
15,371



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Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
March 31,
2014
 
December 31,
2013
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
61,035

 
$
66,223

Accounts receivable, net
15,355

 
13,986

Income taxes receivable
1,388

 
2,656

Deposits
251

 
396

Prepaid expenses and other current assets
2,538

 
3,202

Deferred tax assets
1,067

 
1,143

Restricted cash
—

 
200

Funds held for reverse/forward stock split
212

 
13,668

Total current assets
81,846

 
101,474

Deposits, less current portion
1,231

 
1,168

Deferred tax assets, less current portion
2,032

 
2,032

Restricted cash
1,480

 
1,479

Property and equipment, net
10,305

 
8,245

Intangible assets, net
349

 
404

Total assets
$
97,243

 
$
114,802

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
28,999

 
$
31,766

Accrued expenses
9,820

 
10,543

Deferred revenue
1,688

 
1,578

Deferred rent
271

 
281

Income tax payable
726

 
—

Reserve for unexchanged promotional shares
11,500

 
12,726

Payable to shareholders for reverse/forward stock split
212

 
13,668

Total current liabilities
53,216

 
70,562

Long-term tax liabilities
10,546

 
10,436

Deferred rent, less current portion
3,111

 
2,469

Total liabilities
66,873

 
83,467

Common stock
163

 
163

Treasury stock
(21,231
)
 
(15,662
)
Additional paid-in capital
10,642

 
10,247

Accumulated other comprehensive loss
(613
)
 
(530
)
Retained earnings
41,409

 
37,117

Total stockholders’ equity
30,370

 
31,335

Total liabilities and stockholders’ equity
$
97,243

 
$
114,802



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Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) 
 
Three months ended
 
March 31,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net income
$
4,638

 
$
5,595

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
701

 
716

Deferred income taxes
76

 
193

Stock-based compensation
395

 
307

Provision for losses on accounts receivable
(52
)
 
95

Net foreign currency effects
(9
)
 
94

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(1,288
)
 
(2,036
)
Deposits
133

 
(155
)
Income tax receivable
1,266

 
1,564

Prepaid expenses and other current assets
447

 
350

Accounts payable
(2,984
)
 
(549
)
Accrued expenses
(1,294
)
 
850

Deferred revenue
110

 
(517
)
Deferred rent
5

 
(110
)
Income tax payable
722

 
—

Reserve for unexchanged promotional shares
(1,226
)
 
—

Other non-current liabilities
111

 
103

Net cash provided by operating activities
1,751

 
6,500

Cash flows from investing activities:
 
 
 
Release of restricted cash
200

 
—

Purchases of property and equipment
(1,019
)
 
(900
)
Net cash used in investing activities
(819
)
 
(900
)
Cash flows from financing activities:
 
 
 
Repurchase of common stock
(5,569
)
 
—

Reverse/forward stock split, including transaction costs
(479
)
 
—

Net cash used in financing activities
(6,048
)
 
—

Effect of exchange rate on cash and cash equivalents
(72
)
 
(1,662
)
Net increase (decrease) in cash and cash equivalents
(5,188
)
 
3,938

Cash and cash equivalents at beginning of period
66,223

 
61,169

Cash and cash equivalents at end of period
$
61,035

 
$
65,107

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for income taxes, net
$
335

 
$
10



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Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended March 31, 2014
North
America
 
Europe
 
Elimination and Other
 
Consolidated
Revenue from unaffiliated customers
$
26,353

 
$
13,842

 
$
—

 
$
40,195

Intersegment revenue
221

 
12

 
(233
)
 
—

Total net revenues
26,574

 
13,854

 
(233
)
 
40,195

Operating income
$
4,604

 
$
2,393

 
$
—

 
$
6,997

Three months ended March 31, 2013
North
America
 
Europe
 
Elimination and Other
 
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

 
 
 
 
 
 
 
 

 

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