TRAVELZOO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 16, 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 Second Quarter 2015 Results

NEW YORK, July 16, 2015 - Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $34.1 million, down 8% year-over-year
(down 3% in constant currencies)
•
Operating profit of $2.6 million
•
Non-GAAP earnings per share of $0.09, compared to $0.30 in the prior-year period
•
950,000 new members

Travelzoo Inc., a global Internet media company, today announced financial results for the second quarter ended June 30, 2015, with revenue of $34.1 million, a decrease of 8% year-over-year. Net income was $1.3 million, with earnings per share of $0.09.

"In the second quarter of 2015, Travelzoo welcomed 950,000 new members,” said Chris Loughlin, chief executive officer. “The strong U.S. dollar had an unfavorable currency effect on reported revenue. We remain ambitious to grow Travelzoo's global brand and business.”






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North America
North America business segment revenue decreased 6% year-over-year to $23.7 million. Operating income for the second quarter was $2.5 million, or 11% of revenue, down from $3.8 million, or 15% of revenue, in the prior-year period.

Europe
Europe business segment revenue decreased 12% year-over-year to $10.3 million. In local currency terms, revenue increased 1% year-over-year. Operating income for the second quarter was $35,000, or 0.3% of revenue, down from $2.9 million, or 24% of revenue in the prior-year period.

Members
Travelzoo had a total unduplicated number of members in North America and Europe of 24.8 million as of June 30, 2015, up 1% from March 31, 2015. In North America, total unduplicated number of members was 17.2 million as of June 30, 2015, same as of March 31, 2015. In Europe, total unduplicated number of members was 7.6 million as of June 30, 2015, up 1% from March 31, 2015.

Income Taxes
Income tax expense was $1.3 million, compared to $2.3 million income tax expense in the prior-year period. The effective income tax rate, as calculated on the basis of non-GAAP Income before tax was 49%, up from 34% in the prior-year period, driven primarily by the geographic mix of taxable income.

Asset Management
During the second quarter of 2015, Travelzoo generated $374,000 of cash from operating activities. Accounts receivable increased by $851,000 over the prior-year period to $17.4 million. Accounts payable decreased by $2.6 million over the prior-year period to $21.5 million. Capital expenditures were $554,000, up from $405,000 in the prior-year period. As of June 30, 2015, cash and cash equivalents were $55.3 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 income, non-GAAP operating margin, non-GAAP effective tax rate, non-GAAP net income and non-GAAP earnings per share by excluding the release of 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 reserve related to our unexchanged promotional shares in prior year periods, 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 second 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.


###

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Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
 
Six months ended
 
 June 30,
 
 June 30,
 
2015
 
2014
 
2015
 
2014
Revenues
$
34,064

 
$
36,883

 
$
70,556

 
$
77,078

Cost of revenues
4,905

 
4,374

 
9,140

 
9,151

Gross profit
29,159

 
32,509

 
61,416

 
67,927

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
17,279

 
15,305

 
35,428

 
33,148

General and administrative
9,307

 
10,570

 
19,613

 
21,148

Unexchanged promotional shares
—

 
(3,500
)
 
—

 
(3,500
)
Total operating expenses
26,586

 
22,375

 
55,041

 
50,796

Income from operations
2,573

 
10,134

 
6,375

 
17,131

Other income (loss)
21

 
56

 
(66
)
 
177

Income before income taxes
2,594

 
10,190

 
6,309

 
17,308

Income taxes
1,268

 
2,266

 
3,074

 
4,747

Net income
$
1,326

 
$
7,924

 
$
3,235

 
$
12,561

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.09

 
$
0.54

 
$
0.22

 
$
0.85

Diluted
$
0.09

 
$
0.54

 
$
0.22

 
$
0.84

Weighted average shares:
 
 
 
 
 
 
 
Basic
14,730

 
14,734

 
14,730

 
14,806

Diluted
14,730

 
14,794

 
14,730

 
14,881



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Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
June 30,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
55,283

 
$
54,812

Accounts receivable, net
17,380

 
14,608

Income taxes receivable
2,060

 
3,756

Deposits
621

 
74

Prepaid expenses and other
2,312

 
2,802

Deferred tax assets
1,288

 
1,311

Total current assets
78,944

 
77,363

Deposits
522

 
1,087

Deferred tax assets
1,707

 
1,460

Restricted cash
1,344

 
1,393

Property and equipment, net
8,413

 
9,022

Intangible assets, net
55

 
163

Total assets
$
90,985

 
$
90,488

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
21,485

 
$
23,008

Accrued expenses and other
10,830

 
10,135

Deferred revenue
1,105

 
1,192

Income tax payable
581

 
574

Reserve for unexchanged promotional shares
—

 
1,393

Total current liabilities
34,001

 
36,302

Long-term tax liabilities
11,731

 
10,936

Long-term deferred rent and other
3,118

 
3,436

Total liabilities
48,850

 
50,674

Common stock
163

 
163

Treasury stock
(21,517
)
 
(21,517
)
Additional paid-in capital
11,339

 
11,043

Accumulated other comprehensive loss
(4,105
)
 
(2,997
)
Retained earnings
56,255

 
53,122

Total stockholders’ equity
42,135

 
39,814

Total liabilities and stockholders’ equity
$
90,985

 
$
90,488



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Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) 
 
Three months ended
 
Six months ended
 
 June 30,
 
 June 30,
 
2015
 
2014
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
1,326

 
$
7,924

 
$
3,235

 
$
12,561

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
636

 
640

 
1,406

 
1,342

Impairment of software
—

 
249

 
—

 
249

Deferred income taxes
(21
)
 
(584
)
 
(242
)
 
(508
)
Stock-based compensation
148

 
395

 
296

 
790

Provision for losses on accounts receivable
25

 
41

 
51

 
(11
)
Net foreign currency effects
2

 
(6
)
 
113

 
(36
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
(1,178
)
 
(1,123
)
 
(2,943
)
 
(2,411
)
Deposits
41

 
27

 
4

 
160

Income tax receivable
830

 
(717
)
 
1,681

 
549

Prepaid expenses and other
228

 
60

 
509

 
564

Accounts payable
(1,369
)
 
(4,350
)
 
(1,169
)
 
(7,389
)
Accrued expenses and other
(297
)
 
(740
)
 
432

 
(1,920
)
Income tax payable
(121
)
 
1,061

 
23

 
1,783

Reserve for unexchanged promotional shares
—

 
(3,500
)
 
(1,393
)
 
(4,726
)
Other non-current liabilities
124

 
114

 
795

 
225

Net cash provided by (used in) operating activities
374

 
(509
)
 
2,798

 
1,222

Cash flows from investing activities:
 
 
 
 
 
 
 
Release of restricted cash
—

 
—

 
—

 
200

Purchases of property and equipment
(554
)
 
(405
)
 
(737
)
 
(1,424
)
Net cash used in investing activities
(554
)
 
(405
)
 
(737
)
 
(1,224
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Repurchase of common stock
—

 
(287
)
 
—

 
(5,855
)
Reverse/forward stock split, including transaction costs
(102
)
 
—

 
(102
)
 
(479
)
Net cash used in financing activities
(102
)
 
(287
)
 
(102
)
 
(6,334
)
Effect of exchange rate on cash and cash equivalents
1,590

 
668

 
(1,488
)
 
615

Net increase (decrease) in cash and cash equivalents
1,308

 
(533
)
 
471

 
(5,721
)
Cash and cash equivalents at beginning of period
53,975

 
61,035

 
54,812

 
66,223

Cash and cash equivalents at end of period
$
55,283

 
$
60,502

 
$
55,283

 
$
60,502

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid for income taxes, net
$
372

 
$
2,508

 
$
733

 
$
2,843



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Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended June 30, 2015
North
America
 
Europe
 
Elimination
 
Consolidated
Revenue from unaffiliated customers
$
23,727

 
$
10,337

 
$
—

 
$
34,064

Intersegment revenue
259

 
177

 
(436
)
 
—

Total net revenues
23,986

 
10,514

 
(436
)
 
34,064

Operating income
$
2,538

 
$
35

 
$
—

 
$
2,573

Three months ended June 30, 2014
North
America
 
Europe
 
Elimination and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
25,175

 
$
11,708

 
$
—

 
$
36,883

Intersegment revenue
302

 
129

 
(431
)
 
—

Total net revenues
25,477

 
11,837

 
(431
)
 
36,883

Operating income
$
3,771

 
$
2,863

 
$
3,500

 
$
10,134

 
 
 
 
 
 
 
 
Six months ended June 30, 2015
North
America
 
Europe
 
Elimination
 
Consolidated
Revenue from unaffiliated customers
$
48,440

 
$
22,116

 
$
—

 
$
70,556

Intersegment revenue
472

 
215

 
(687
)
 
—

Total net revenues
48,912

 
22,331

 
(687
)
 
70,556

Operating income
$
4,617

 
$
1,758

 
$
—

 
$
6,375

Six months ended June 30, 2014
North
America
 
Europe
 
Elimination and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
51,528

 
$
25,550

 
$
—

 
$
77,078

Intersegment revenue
716

 
141

 
(857
)
 
—

Total net revenues
52,244

 
25,691

 
(857
)
 
77,078

Operating income
$
8,375

 
$
5,256

 
$
3,500

 
$
17,131

 
 
 
 
 
 
 
 
(a)
Includes a $3.5 million release of reserve for the three and six months ended June 30, 2014 related to settlement agreements in connection with a dispute over unclaimed property audits.


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Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Information
(Unaudited)
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
GAAP operating expense
$
26,586

 
$
22,375

 
$
55,041

 
$
50,796

Unexchanged promotional shares (a)
—

 
(3,500
)
 
—

 
(3,500
)
Non-GAAP operating expense
$
26,586

 
$
25,875

 
$
55,041

 
$
54,296

 
 
 
 
 
 
 
 
GAAP operating income
$
2,573

 
$
10,134

 
$
6,375

 
$
17,131

Unexchanged promotional shares (a)
—

 
(3,500
)
 
—

 
(3,500
)
Non-GAAP operating income
$
2,573

 
$
6,634

 
$
6,375

 
$
13,631

 
 
 
 
 
 
 
 
GAAP operating margin
7.6
%
 
27.5
 %
 
9.0
 %
 
22.2
 %
Unexchanged promotional shares (a)
—
%
 
(9.5
)%
 
—
 %
 
(4.5
)%
Non-GAAP operating margin
7.6
%
 
18.0
 %
 
9.0
 %
 
17.7
 %
 
 
 
 
 
 
 
 
GAAP effective tax rate
48.9
%
 
22.2
 %
 
48.7
 %
 
27.4
 %
Unexchanged promotional shares (a)
—
%
 
11.6
 %
 
—
 %
 
7.0
 %
Non-GAAP effective tax rate
48.9
%
 
33.8
 %
 
48.7
 %
 
34.4
 %
 
 
 
 
 
 
 
 
GAAP net income
$
1,326

 
$
7,924

 
$
3,235

 
$
12,561

Unexchanged promotional shares (a)
—

 
(3,500
)
 
—

 
(3,500
)
Non-GAAP net income
$
1,326

 
$
4,424

 
$
3,235

 
$
9,061

 
 
 
 
 
 
 
 
Earnings per share
$
0.09

 
$
0.54

 
$
0.22

 
$
0.84

Unexchanged promotional shares (a)
—

 
(0.24
)
 
—

 
(0.24
)
Non-GAAP earnings per share
$
0.09

 
$
0.30

 
$
0.22

 
$
0.60

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Includes a $3.5 million release of reserve for the three and six months ended June 30, 2014 related to settlement agreements in connection with a dispute over unclaimed property audits.


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