TRAVELZOO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - January 22, 2015

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Exhibit 99.1

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

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


FOR IMMEDIATE RELEASE

Travelzoo Reports Fourth Quarter 2014 Results

NEW YORK, January 22, 2015 - Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $31.5 million, down 16% year-over-year
•
Operating profit of $1.2 million, down 72% year-over-year
•
Earnings per share of $0.09, compared to $0.21 in the prior-year period
•
Non-GAAP loss per share of $0.04, compared to non-GAAP earnings per share of $0.21 in the prior-year period
•
Cash flow used by operations of $100,000

Travelzoo Inc., a global Internet media company, today announced financial results for the fourth quarter ended December 31, 2014, with revenue of $31.5 million, a decrease of 16% year-over-year. Net income was $1.2 million, with earnings per share of $0.09. Non-GAAP net loss was $579,000, with non-GAAP loss per share of $0.04. Non-GAAP net loss and non-GAAP loss per share exclude a $1.8 million release of reserve for Travelzoo Inc.'s anticipated settlement agreements in connection with a dispute over unclaimed property audits.

"Investment in products and audience resulted in an operating loss for the quarter," said Chris Loughlin, chief executive officer. "Our objective remains to leverage Travelzoo's global scale and trusted brand for improved earnings in future periods."




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North America
North America business segment revenue decreased 18% year-over-year to $21.1 million. Operating loss for the fourth quarter was $936,000, or (4)% of revenue, down from $2.7 million, or 10% of revenue, in the prior-year period.

Europe
Europe business segment revenue decreased 12% year-over-year to $10.4 million. In local currency terms, revenue decreased 10% year-over-year. Operating profit for the fourth quarter was $337,000, or 3% of revenue, down from $1.8 million, or 15% of revenue in the prior-year period.

Members
Travelzoo had a total unduplicated number of members in North America and Europe of 24.2 million as of December 31, 2014, up 4% from December 31, 2013. In North America, total unduplicated number of members was 16.9 million as of December 31, 2014, up 2% from December 31, 2013. In Europe, total unduplicated number of members was 7.3 million as of December 31, 2014, up 9% from December 31, 2013.

Income Taxes
Income tax benefit was $66,000, compared to $1.3 million income tax expense in the prior-year period, driven by lower operating income.

Asset Management
During the fourth quarter of 2014, Travelzoo used $100,000 of cash from operating activities. Accounts receivable increased by $622,000 over the prior-year period to $14.6 million. Accounts payable decreased by $8.8 million over the prior-year period to $23.0 million. Capital expenditures were $346,000, down from $1.9 million in the prior-year period. As of December 31, 2014, cash and cash equivalents were $54.8 million.

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Non-GAAP Information
To give an enhanced view of Travelzoo's operating performance, management has calculated non-GAAP operating expense, non-GAAP operating profit, non-GAAP operating margin, non-GAAP effective tax rate, non-GAAP net income and non-GAAP earnings per share by excluding the release of a reserve related to our unexchanged promotional shares. 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 these non-GAAP metrics are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Non-GAAP metrics are merely a supplement to, and not a replacement for GAAP financial information. As the only difference between GAAP and non-GAAP information is the release of a reserve related to our unexchanged promotional shares, today’s reporting should not be viewed as Travelzoo’s intention to report non-GAAP information in future periods. Refer to the “Reconciliation of GAAP to Non-GAAP Information” section of this press release for important information.

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 27 million members 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.



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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.


###


4/9



Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
 
Twelve months ended
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Revenues
$
31,498

 
$
37,475

 
$
142,076

 
$
158,234

Cost of revenues
4,279

 
4,670

 
17,906

 
17,402

Gross profit
27,219

 
32,805

 
124,170

 
140,832

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
16,552

 
17,307

 
67,233

 
74,870

General and administrative
11,266

 
11,025

 
43,470

 
41,684

Unexchanged promotional shares
(1,834
)
 
—

 
(7,583
)
 
22,000

Total operating expenses
25,984

 
28,332

 
103,120

 
138,554

Income from operations
1,235

 
4,473

 
21,050

 
2,278

Other income (loss)
(46
)
 
61

 
141

 
429

Income before income taxes
1,189

 
4,534

 
21,191

 
2,707

Income taxes
(66
)
 
1,304

 
4,839

 
7,718

Net income (loss)
$
1,255

 
$
3,230

 
$
16,352

 
$
(5,011
)
Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.09

 
$
0.22

 
$
1.11

 
$
(0.33
)
Diluted
$
0.09

 
$
0.21

 
$
1.10

 
$
(0.33
)
Weighted average shares:
 
 
 
 
 
 
 
Basic
14,730

 
14,997

 
14,768

 
15,269

Diluted
14,730

 
15,072

 
14,809

 
15,269



5/9



Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
December 31,
2014
 
December 31,
2013
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
54,812

 
$
66,223

Accounts receivable, net
14,608

 
13,986

Income taxes receivable
3,889

 
2,656

Deposits
74

 
396

Prepaid expenses and other
2,610

 
3,202

Deferred tax assets
1,302

 
1,143

Restricted cash
—

 
200

Funds held for reverse/forward stock split
192

 
13,668

Total current assets
77,487

 
101,474

Deposits
1,087

 
1,168

Deferred tax assets
1,336

 
2,032

Restricted cash
1,393

 
1,479

Property and equipment, net
9,022

 
8,245

Intangible assets, net
163

 
404

Total assets
$
90,488

 
$
114,802

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
23,008

 
$
31,766

Accrued expenses and other
9,943

 
10,824

Deferred revenue
1,192

 
1,578

Income tax payable
574

 
—

Reserve for unexchanged promotional shares
1,393

 
12,726

Payable to shareholders for reverse/forward stock split
192

 
13,668

Total current liabilities
36,302

 
70,562

Long-term tax liabilities
10,936

 
10,436

Long term deferred rent and other
3,436

 
2,469

Total liabilities
50,674

 
83,467

Common stock
163

 
163

Treasury stock
(21,517
)
 
(15,662
)
Additional paid-in capital
11,043

 
10,247

Accumulated other comprehensive loss
(2,997
)
 
(530
)
Retained earnings
53,122

 
37,117

Total stockholders’ equity
39,814

 
31,335

Total liabilities and stockholders’ equity
$
90,488

 
$
114,802



6/9



Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) 
 
Three months ended
 
Twelve months ended
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income (loss)
$
1,255

 
$
3,230

 
$
16,352

 
$
(5,011
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
790

 
795

 
2,824

 
2,980

Impairment of software
—

 
—

 
249

 
—

Deferred income taxes
545

 
65

 
437

 
706

Stock-based compensation
148

 
395

 
982

 
1,384

Provision for losses on accounts receivable
45

 
15

 
40

 
(29
)
Net foreign currency effects
85

 
(5
)
 
68

 
33

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
835

 
932

 
(1,154
)
 
(173
)
Deposits
157

 
(67
)
 
398

 
(50
)
Income tax receivable
(296
)
 
1,873

 
(1,248
)
 
4,042

Prepaid expenses and other
(458
)
 
161

 
(4
)
 
(1,058
)
Accounts payable
2,270

 
3,623

 
(6,883
)
 
2,826

Accrued expenses and other
(247
)
 
693

 
(306
)
 
1,076

Income tax payable
(1,198
)
 
(1,298
)
 
608

 
(6
)
Reserve for unexchanged promotional shares
(4,150
)
 
(12,274
)
 
(11,333
)
 
9,726

Other non-current liabilities
119

 
47

 
500

 
406

Net cash provided by (used in) operating activities
(100
)
 
(1,815
)
 
1,530

 
16,852

Cash flows from investing activities:
 
 
 
 
 
 
 
Release of restricted cash
—

 
—

 
200

 
1,786

Purchases of property and equipment
(346
)
 
(1,866
)
 
(3,260
)
 
(5,461
)
Net cash used in investing activities
(346
)
 
(1,866
)
 
(3,060
)
 
(3,675
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Repurchase of common stock
—

 
(7,764
)
 
(5,855
)
 
(7,764
)
Reverse/forward stock split, including transaction costs
—

 
(688
)
 
(479
)
 
(688
)
Net cash used in financing activities
—

 
(8,452
)
 
(6,334
)
 
(8,452
)
Effect of exchange rate on cash and cash equivalents
(1,948
)
 
456

 
(3,547
)
 
329

Net increase (decrease) in cash and cash equivalents
(2,394
)
 
(11,677
)
 
(11,411
)
 
5,054

Cash and cash equivalents at beginning of period
57,206

 
77,900

 
66,223

 
61,169

Cash and cash equivalents at end of period
$
54,812

 
$
66,223

 
$
54,812

 
$
66,223

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid for income taxes, net
$
690

 
$
691

 
$
4,606

 
$
2,609



7/9



Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended December 31, 2014
North
America
 
Europe
 
Elimination and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
21,054

 
$
10,444

 
$
—

 
$
31,498

Intersegment revenue
228

 
8

 
(236
)
 
—

Total net revenues
21,282

 
10,452

 
(236
)
 
31,498

Operating income (loss)
$
(936
)
 
$
337

 
$
1,834

 
$
1,235

Three months ended December 31, 2013
North
America
 
Europe
 
Elimination and Other (b)
 
Consolidated
Revenue from unaffiliated customers
$
25,586

 
$
11,889

 
$
—

 
$
37,475

Intersegment revenue
194

 
11

 
(205
)
 
—

Total net revenues
25,780

 
11,900

 
(205
)
 
37,475

Operating income
$
2,680

 
$
1,793

 
$
—

 
$
4,473

 
 
 
 
 
 
 
 
Twelve months ended December 31, 2014
North
America
 
Europe
 
Elimination and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
95,183

 
$
46,893

 
$
—

 
$
142,076

Intersegment revenue
1,350

 
163

 
(1,513
)
 
—

Total net revenues
96,533

 
47,056

 
(1,513
)
 
142,076

Operating income
$
7,679

 
$
5,788

 
$
7,583

 
$
21,050

Twelve months ended December 31, 2013
North
America
 
Europe
 
Elimination and Other (b)
 
Consolidated
Revenue from unaffiliated customers
$
111,955

 
$
46,279

 
$
—

 
$
158,234

Intersegment revenue
814

 
452

 
(1,266
)
 
—

Total net revenues
112,769

 
46,731

 
(1,266
)
 
158,234

Operating income
$
16,568

 
$
7,710

 
$
(22,000
)
 
$
2,278


(a)
Includes a $1.8 million and a $7.6 million release of reserve for the three and twelve months ended December 31, 2014, respectively, related to anticipated settlement agreements in connection with a dispute over unclaimed property audits.
(b)
Includes a charge of $22.0 million for the twelve months ended December 31, 2013 related to settlement agreements in connection with a dispute over unclaimed property audits.

8/9



Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Information
(Unaudited)
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Twelve months ended
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
GAAP operating expense
$
25,984

 
$
28,332

 
$
103,120

 
$
138,554

Unexchanged promotional shares (a) (b)
(1,834
)
 
—

 
(7,583
)
 
22,000

Non-GAAP operating expense
$
27,818

 
$
28,332

 
$
110,703

 
$
116,554

 
 
 
 
 
 
 
 
GAAP operating income
$
1,235

 
$
4,473

 
$
21,050

 
$
2,278

Unexchanged promotional shares (a) (b)
(1,834
)
 
—

 
(7,583
)
 
22,000

Non-GAAP operating income (loss)
$
(599
)
 
$
4,473

 
$
13,467

 
$
24,278

 
 
 
 
 
 
 
 
GAAP operating margin
3.9
 %
 
11.9
%
 
14.8
 %
 
1.4
 %
Unexchanged promotional shares (a) (b)
(5.8
)%
 
—
%
 
(5.3
)%
 
13.9
 %
Non-GAAP operating margin
(1.9
)%
 
11.9
%
 
9.5
 %
 
15.3
 %
 
 
 
 
 
 
 
 
GAAP effective tax rate
(5.6)
 %
 
28.8
%
 
22.8
 %
 
285.1
 %
Unexchanged promotional shares (a) (b)
15.8
 %
 
0.1
%
 
12.7
 %
 
(253.9)
 %
Non-GAAP effective tax rate
10.2
 %
 
28.9
%
 
35.5
 %
 
31.2
 %
 
 
 
 
 
 
 
 
GAAP net income (loss)
$
1,255

 
$
3,230

 
$
16,352

 
$
(5,011
)
Unexchanged promotional shares (a) (b)
(1,834
)
 
—

 
(7,583
)
 
22,000

Non-GAAP earnings (loss)
$
(579
)
 
$
3,230

 
$
8,769

 
$
16,989

 
 
 
 
 
 
 
 
Earnings (loss) per share
$
0.09

 
$
0.21

 
$
1.10

 
$
(0.33
)
Unexchanged promotional shares (a) (b)
(0.13
)
 
—

 
(0.51
)
 
1.44

Non-GAAP earnings (loss) per share (c)
$
(0.04
)
 
$
0.21

 
$
0.59

 
$
1.11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Includes a $1.8 million and a $7.6 million release of reserve for the three and twelve months ended December 31, 2014, respectively, related to anticipated settlement agreements in connection with a dispute over unclaimed property audits.
(b)
Includes a charge of $22.0 million for the twelve months ended December 31, 2013 related to settlement agreements in connection with a dispute over unclaimed property audits.
(c)
Shares used to calculate non-GAAP earnings per share for the twelve months ended December 31, 2013 were 15,355,160 which were different than the shares used in GAAP loss per share calculation due to the anti-dilutive effect on the GAAP loss per share.

9/9


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