TRAVELZOO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 12.31.15 - February 11, 2016

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

Investor Relations:
Glen Ceremony
Chief Financial Officer
ir@travelzoo.com 


FOR IMMEDIATE RELEASE

Travelzoo Reports Fourth Quarter 2015 Results

NEW YORK, February 11, 2016 — Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $32.1 million, down 3% in constant currencies
•
Revenue up 5% in Europe in constant currencies
•
Non-GAAP earnings per share of $0.03, compared to loss per share of $(0.13) in the prior-year period
•
Operating profit of $976,000
•
Cash flow from operations of $3.1 million

Travelzoo, a global media commerce company, today announced financial results for the fourth quarter ended December 31, 2015, with revenue of $32.1 million and net income of $435,000. In nominal terms, revenue decreased by 6% year-over-year. In constant currencies, revenue decreased by 3% year-over-year. Non-GAAP earnings per share (EPS) was $0.03.

"In the fourth quarter of 2015, the number of Travelzoo members worldwide continued to increase to 28.4 million. Our objective remains to leverage Travelzoo's global scale and trusted brand for further improvements in earnings in future periods," said Holger Bartel, Chairman and Global CEO.


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North America
North America business segment revenue decreased 9% year-over-year to $19.5 million. Operating income for the fourth quarter was $390,000, or 2% of revenue, compared to an operating loss of $931,000 in the prior-year period.

Europe
Europe business segment revenue decreased 2% year-over-year to $10.0 million. In constant currencies, revenue increased 5% year-over-year. Operating income for the fourth quarter was $1.5 million, or 15% of revenue, up from $348,000, or 3% of revenue in the prior-year period.

Asia Pacific
Asia Pacific business segment revenue decreased 6% year-over-year to $2.6 million. In constant currencies, revenue was flat year-over-year. Operating loss for the fourth quarter was $920,000, compared to an operating loss of $1.1 million in the prior-year period.

Members
As of December 31, 2015, Travelzoo had a worldwide unduplicated number of members of 28.4 million, which includes 3.5 million members in Asia Pacific. In North America, unduplicated number of members was 17.2 million as of December 31, 2015, up 2% from December 31, 2014. In Europe, unduplicated number of members was 7.8 million as of December 31, 2015, up 7% from December 31, 2014. In Asia Pacific, unduplicated number of members was 3.5 million as of December 31, 2015, down 1% from December 31, 2014, following the decision by Travelzoo to unsubscribe certain e-mail addresses for technical reasons.

Income Taxes
Income tax expense was $165,000, compared to a $66,000 income tax benefit in the prior-year period, driven by higher non-GAAP operating income.

Asset Management
During the fourth quarter of 2015, Travelzoo generated $3.1 million of cash from operating activities. Accounts receivable increased by $466,000 over the prior-year period to $16.6 million. Accounts payable decreased by $3.2 million over the prior-year period to $23.7 million. Capital expenditures were $397,000, down from $628,000 in the prior-year period. As of December 31, 2015, cash and cash equivalents were $35.1 million.




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Non-GAAP Information and Other
To give an enhanced view of Travelzoo's operating performance, management has calculated non-GAAP operating expense, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP income tax expense (benefit), non-GAAP effective tax rate, non-GAAP net income (loss) and non-GAAP earnings (loss) per share by excluding the release of a tax reserve related to the unexchanged promotional shares in the twelve months ended December 31, 2015 and excluding the release of reserves related to the unexchanged promotional shares in prior-year periods. 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 tax reserve related to the unexchanged promotional shares in twelve months ended December 31, 2015 and the release of reserves related to the 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.

Travelzoo Inc.'s financial results have been adjusted to include the financial results of Asia Pacific for the current and prior periods. In addition, certain prior period statement of operations amounts have been reclassified to conform to current period presentation primarily due to the allocation of facilities costs and separate disclosure of product development costs.

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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 is a global media commerce company. With more than 28 million members in Asia Pacific, Europe, and North America and 25 offices worldwide, Travelzoo® publishes offers from more than 2,000 travel, entertainment and local companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value.

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
 
Twelve months ended
 
 December 31,
 
 December 31,
 
2015
 
2014
 
2015
 
2014
Revenues
$
32,051

 
$
34,291

 
$
141,716

 
$
153,240

Cost of revenues
4,328

 
4,640

 
18,824

 
19,174

Gross profit
27,723

 
29,651

 
122,892

 
134,066

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
17,161

 
20,729

 
79,042

 
83,511

Product development
3,316

 
2,956

 
12,528

 
11,326

General and administrative
6,270

 
7,603

 
24,176

 
29,002

Unexchanged promotional shares
—

 
(1,833
)
 
—

 
(7,583
)
Total operating expenses
26,747

 
29,455

 
115,746

 
116,256

Income from operations
976

 
196

 
7,146

 
17,810

Other income (loss)
(376
)
 
(348
)
 
(1,242
)
 
91

Income (loss) before income taxes
600

 
(152
)
 
5,904

 
17,901

Income taxes
165

 
(66
)
 
(4,960
)
 
4,839

Net income (loss)
$
435

 
$
(86
)
 
$
10,864

 
$
13,062

Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.03

 
$
(0.01
)
 
$
0.74

 
$
0.88

Diluted
$
0.03

 
$
(0.01
)
 
$
0.74

 
$
0.88

Weighted average shares:
 
 
 
 
 
 
 
Basic
14,699

 
14,734

 
14,722

 
14,768

Diluted
14,699

 
14,734

 
14,722

 
14,809



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Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
December 31,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
35,128

 
$
55,417

Accounts receivable, net
16,590

 
16,124

Income taxes receivable
1,284

 
3,756

Deposits
782

 
86

Prepaid expenses and other
2,167

 
2,676

Deferred tax assets
1,302

 
1,311

Total current assets
57,253

 
79,370

Deposits
501

 
1,436

Deferred tax assets
1,769

 
1,432

Restricted cash
1,328

 
1,393

Property and equipment, net
7,905

 
9,498

Other assets
15

 
178

Total assets
$
68,771

 
$
93,307

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
23,655

 
$
26,858

Accrued expenses and other
10,140

 
11,814

Deferred revenue
1,277

 
1,472

Income tax payable
477

 
574

Reserve for unexchanged promotional shares
—

 
1,393

Note payable to related party
5,658

 
1,000

Total current liabilities
41,207

 
43,111

Long-term tax liabilities
3,000

 
10,936

Long-term deferred rent and other
3,177

 
3,433

Total liabilities
47,384

 
57,480

Common stock
161

 
163

Treasury stock
(23,241
)
 
(21,517
)
Additional paid-in capital
30,987

 
30,586

Accumulated other comprehensive loss
(3,907
)
 
(2,602
)
Retained earnings
17,387

 
29,197

Total stockholders’ equity
21,387

 
35,827

Total liabilities and stockholders’ equity
$
68,771

 
$
93,307



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Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) 
 
Three months ended
 
Twelve months ended
 
 December 31,
 
 December 31,
 
2015
 
2014
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income (loss)
$
435

 
$
(86
)
 
$
10,864

 
$
13,062

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
591

 
854

 
2,788

 
2,986

Impairment of software
—

 
—

 
—

 
249

Deferred income taxes
65

 
411

 
(341
)
 
303

Stock-based compensation
255

 
148

 
401

 
982

Provision for losses on accounts receivable
79

 
40

 
(20
)
 
35

Net foreign currency effects
292

 
366

 
1,076

 
(16
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
1,071

 
827

 
(980
)
 
(830
)
Deposits
23

 
202

 
141

 
448

Income tax receivable
462

 
(163
)
 
2,443

 
(1,114
)
Prepaid expenses and other
407

 
(368
)
 
534

 
374

Accounts payable
1,332

 
2,290

 
(1,735
)
 
(7,893
)
Accrued expenses and other
(1,335
)
 
(155
)
 
(1,490
)
 
52

Income tax payable
(468
)
 
(1,198
)
 
(161
)
 
608

Reserve for unexchanged promotional shares
—

 
(4,150
)
 
(1,393
)
 
(11,333
)
Other non-current liabilities
(87
)
 
119

 
(7,935
)
 
500

Net cash provided by (used in) operating activities
3,122

 
(863
)
 
4,192

 
(1,587
)
Cash flows from investing activities:
 
 
 
 
 
 
 
Release of restricted cash
—

 
24

 
64

 
226

Purchases of property and equipment
(397
)
 
(628
)
 
(1,282
)
 
(3,813
)
Net cash used in investing activities
(397
)
 
(604
)
 
(1,218
)
 
(3,587
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Payment for Asia Pacific business
—

 
—

 
(16,974
)
 
—

Payment of loan to related party
—

 
—

 
(3,250
)
 
—

Proceeds from loan to related party
—

 
1,000

 
2,224

 
1,000

Increase (decrease) in bank overdraft
—

 
341

 
(341
)
 
341

Repurchase of common stock, net
(1,569
)
 
—

 
(1,569
)
 
(5,555
)
Reverse/forward stock split, including transaction costs
—

 
—

 
(102
)
 
(479
)
Net cash provided by (used in) financing activities
(1,569
)
 
1,341

 
(20,012
)
 
(4,693
)
Effect of exchange rate on cash and cash equivalents
(598
)
 
(2,217
)
 
(3,251
)
 
(3,384
)
Net increase (decrease) in cash and cash equivalents
558

 
(2,343
)
 
(20,289
)
 
(13,251
)
Cash and cash equivalents at beginning of period
34,570

 
57,760

 
55,417

 
68,668

Cash and cash equivalents at end of period
$
35,128

 
$
55,417

 
$
35,128

 
$
55,417

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid for income taxes, net
$
68

 
$
690

 
$
801

 
$
4,606

Note payable for Asia Pacific business
$
—

 
—

 
$
5,658

 
—


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Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended December 31, 2015
North
America
 
Europe
 
Asia Pacific
 
Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
19,404

 
$
10,028

 
$
2,619

 
$
—

 
$
32,051

Intersegment revenue
49

 
(34
)
 
(15
)
 
—

 
—

Total net revenues
19,453

 
9,994

 
2,604

 
—

 
32,051

Operating income
$
390

 
$
1,506

 
$
(920
)
 
$
—

 
$
976

Three months ended December 31, 2014
North
America
 
Europe
 
Asia Pacific
 
Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
21,054

 
$
10,445

 
$
2,792

 
$
—

 
$
34,291

Intersegment revenue
229

 
(215
)
 
(14
)
 
—

 
—

Total net revenues
21,283

 
10,230

 
2,778

 
—

 
34,291

Operating income
$
(931
)
 
$
348

 
$
(1,054
)
 
$
1,833

 
$
196

 
 
 
 
 
 
 
 
 
 
Twelve months ended December 31, 2015
North
America
 
Europe
 
Asia Pacific
 
Other
 
Consolidated
Revenue from unaffiliated customers
$
88,382

 
$
42,588

 
$
10,746

 
$
—

 
$
141,716

Intersegment revenue
519

 
(456
)
 
(63
)
 
—

 
—

Total net revenues
88,901

 
42,132

 
10,683

 
—

 
141,716

Operating income
$
5,710

 
$
3,871

 
$
(2,435
)
 
$
—

 
$
7,146

Twelve months ended December 31, 2014
North
America
 
Europe
 
Asia Pacific
 
Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
95,184

 
$
46,896

 
$
11,160

 
$
—

 
$
153,240

Intersegment revenue
1,006

 
(921
)
 
(85
)
 
—

 
—

Total net revenues
96,190

 
45,975

 
11,075

 
—

 
153,240

Operating income
$
7,787

 
$
5,818

 
$
(3,378
)
 
$
7,583

 
$
17,810

 
 
 
 
 
 
 
 
 
 
(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 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
 
Twelve months ended
 
 December 31,
 
 December 31,
 
2015
 
2014
 
2015
 
2014
GAAP operating expense
$
26,747

 
$
29,455

 
$
115,746

 
$
116,256

Non-GAAP adjustments (a)
—

 
1,833

 
—

 
7,583

Non-GAAP operating expense
$
26,747

 
$
31,288

 
$
115,746

 
$
123,839

 
 
 
 
 
 
 
 
GAAP operating income
$
976

 
$
196

 
$
7,146

 
$
17,810

Non-GAAP adjustments (a)
—

 
(1,833
)
 
—

 
(7,583
)
Non-GAAP operating income (loss)
$
976

 
$
(1,637
)
 
$
7,146

 
$
10,227

 
 
 
 
 
 
 
 
GAAP operating margin
3.0
%
 
0.6
 %
 
5.0
 %
 
11.6
 %
Non-GAAP adjustments (a)
—
%
 
(5.4)
 %
 
—
 %
 
(4.9)
 %
Non-GAAP operating margin
3.0
%
 
(4.8)
 %
 
5.0
 %
 
6.7
 %
 
 
 
 
 
 
 
 
GAAP income tax expense (benefit)
$
165

 
$
(66
)
 
$
(4,960
)
 
$
4,839

Non-GAAP adjustments (b)
—

 
—

 
8,413

 
—

Non-GAAP income tax expense (benefit)
$
165

 
$
(66
)
 
$
3,453

 
$
4,839

 
 
 
 
 
 
 
 
GAAP effective tax rate
27.5
%
 
43.4
 %
 
(84.0)
 %
 
27.0
 %
Non-GAAP adjustments (a) (b)
—
%
 
(40.1)
 %
 
142.5
 %
 
19.9
 %
Non-GAAP effective tax rate
27.5
%
 
3.3
 %
 
58.5
 %
 
46.9
 %
 
 
 
 
 
 
 
 
GAAP net income (loss)
$
435

 
$
(86
)
 
$
10,864

 
$
13,062

Non-GAAP adjustments (a) (b)
—

 
(1,833
)
 
(8,413
)
 
(7,583
)
Non-GAAP net income (loss)
$
435

 
$
(1,919
)
 
$
2,451

 
$
5,479

 
 
 
 
 
 
 
 
GAAP diluted earnings (loss) per share
$
0.03

 
$
(0.01
)
 
$
0.74

 
$
0.88

Non-GAAP adjustments (a) (b)
—

 
(0.12
)
 
(0.57
)
 
(0.51
)
Non-GAAP earnings (loss) per share
$
0.03

 
$
(0.13
)
 
$
0.17

 
$
0.37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 settlement agreements in connection with a dispute over unclaimed property audits.
(b)
Includes an $8.4 million release of a tax reserve for the twelve months ended December 31, 2015, related to the unexchanged promotional shares.

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