TRAVELZOO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 9, 2017

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

Investor Relations:
Lijun Qi
ir@travelzoo.com 


FOR IMMEDIATE RELEASE

Travelzoo Reports Fourth Quarter 2016 Results

NEW YORK, February 9, 2017 — Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $29.3 million, down 5% year-over-year in constant currencies
•
Operating profit of $1.9 million, compared to $976,000 in prior-year period
•
Earnings per share (EPS) of $0.07, compared to $0.03 in prior-year period
•
Cash flow from operations of $6.8 million

Travelzoo, a global publisher of travel and entertainment offers, today announced financial results for the fourth quarter ended December 31, 2016, with revenue of $29.3 million and operating income of $1.9 million. In nominal terms, revenue decreased by 9% year-over-year. In constant currencies, revenue decreased by 5% year-over-year. Net income was $943,000, with EPS of $0.07.

"We completed 2016 with the successful launch of the new Travelzoo® site along with increased operating profits and cash flows,” said Holger Bartel, Chairman and Global CEO. “In 2017, we will further increase the number of exclusive offers negotiated for our members.”

Asia Pacific
Asia Pacific business segment revenue decreased 6% year-over-year to $2.4 million. In constant currencies, revenue decreased 9% year-over-year. Operating loss for the fourth quarter ended December 31, 2016 was $808,000, compared to an operating loss of $920,000 in the prior-year period.



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Europe
Europe business segment revenue decreased 15% year-over-year to $8.5 million. In constant currencies, revenue decreased 3% year-over-year. Operating income for the fourth quarter ended December 31, 2016 was $574,000, or 7% of revenue, compared to operating income of $1.5 million, or 15% of revenue in the prior-year period.

North America
North America business segment revenue decreased 6% year-over-year to $18.3 million. Operating income for the fourth quarter ended December 31, 2016 was $2.2 million, or 12% of revenue, up from $390,000 or 2% of revenue in the prior-year period.

Members
As of December 31, 2016, Travelzoo had a worldwide unduplicated number of members of 28.8 million. In Asia Pacific, unduplicated number of members was 3.6 million as of December 31, 2016, up 3% from December 31, 2015. In Europe, unduplicated number of members was 8.2 million as of December 31, 2016, up 4% from December 31, 2015. In North America, unduplicated number of members was 17.2 million as of December 31, 2016, flat from December 31, 2015.

Income Taxes
Income tax expense was $516,000, compared to a $165,000 income tax expense in the prior-year period, driven by higher operating income.

Asset Management
During the fourth quarter of 2016, we generated $6.8 million cash from operating activities. Accounts receivable decreased by $2.0 million over the prior-year period to $14.4 million. Accounts payable decreased by $3.9 million over the prior-year period to $19.7 million. Capital expenditures were $107,000, down from $397,000 in the prior-year period. As of December 31, 2016, cash and cash equivalents were $26.8 million.

Non-GAAP Information
To give an enhanced view of Travelzoo's operating performance, management has calculated non-GAAP income tax expense, non-GAAP effective tax rate, non-GAAP net income and non-GAAP earnings per share by excluding the release of a tax reserve related to the unexchanged promotional shares in the prior period. We believe 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

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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 the prior-year period, 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. Management presents year-over-year revenue percentage rates of change in constant currencies, calculated using prior-year period foreign currency rates on current-year period non-US revenue, as it believes this is a useful metric that facilitates comparison to historical performance.

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® provides our 28 million members insider deals and one of a kind experiences personally reviewed by one of our deal experts around the globe. With more than 25 offices worldwide we have our pulse on outstanding travel, entertainment, and lifestyle experiences. For over 15 years we have worked in partnership with more than 2,000 top travel vendors—our long-standing relationships allow us access to the very best deals.

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
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
 
Twelve months ended
 
 December 31,
 
 December 31,
 
2016
 
2015
 
2016
 
2015
Revenues
$
29,262

 
$
32,051

 
$
128,552

 
$
141,716

Cost of revenues
3,331

 
4,328

 
14,313

 
18,824

Gross profit
25,931

 
27,723

 
114,239

 
122,892

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
15,751

 
17,161

 
71,029

 
79,042

Product development
2,164

 
3,316

 
9,445

 
12,528

General and administrative
6,077

 
6,270

 
22,697

 
24,176

Total operating expenses
23,992

 
26,747

 
103,171

 
115,746

Income from operations
1,939

 
976

 
11,068

 
7,146

Other loss
(480
)
 
(376
)
 
(187
)
 
(1,242
)
Income before income taxes
1,459

 
600

 
10,881

 
5,904

Income taxes
516

 
165

 
4,250

 
(4,960
)
Net income
$
943

 
$
435

 
$
6,631

 
$
10,864

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.07

 
$
0.03

 
$
0.47

 
$
0.74

Diluted
$
0.07

 
$
0.03

 
$
0.47

 
$
0.74

Weighted average shares:
 
 
 
 
 
 
 
Basic
13,665

 
14,699

 
13,997

 
14,722

Diluted
13,714

 
14,699

 
13,997

 
14,722



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Travelzoo
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
December 31,
2016
 
December 31,
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
26,838

 
$
35,128

Accounts receivable, net
14,415

 
16,398

Income taxes receivable
542

 
1,356

Deposits and other
105

 
782

Prepaid expenses and other
1,773

 
2,167

Deferred tax assets
793

 
1,230

Total current assets
44,466

 
57,061

Deposits and other
702

 
516

Deferred tax assets
1,052

 
1,769

Restricted cash
1,152

 
1,328

Property and equipment, net
6,158

 
7,905

Total assets
$
53,530

 
$
68,579

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
19,714

 
$
23,655

Accrued expenses and other
8,699

 
10,140

Deferred revenue
719

 
1,085

Income tax payable
691

 
477

Note payable to related party
—

 
5,658

Total current liabilities
29,823

 
41,015

Long-term tax liabilities
2,879

 
3,000

Long-term deferred rent and other
2,764

 
3,177

Total liabilities
35,466

 
47,192

Common stock
135

 
150

Additional paid-in capital
—

 
7,759

Accumulated other comprehensive loss
(3,787
)
 
(3,908
)
Retained earnings
21,716

 
17,386

Total stockholders’ equity
18,064

 
21,387

Total liabilities and stockholders’ equity
$
53,530

 
$
68,579



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Travelzoo
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Three months ended
 
Twelve months ended
 
 December 31,
 
 December 31,
 
2016
 
2015
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
943

 
$
435

 
$
6,631

 
$
10,864

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
674

 
590

 
2,530

 
2,788

Deferred income taxes
25

 
138

 
(199
)
 
(269
)
Stock-based compensation
241

 
255

 
933

 
401

Provision for losses on accounts receivable
83

 
79

 
100

 
(20
)
Net foreign currency effects
(7
)
 
(309
)
 
(315
)
 
480

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
2,233

 
1,145

 
1,737

 
(789
)
Income tax receivable
1,115

 
391

 
816

 
2,371

Prepaid expenses and other
971

 
552

 
533

 
675

Accounts payable
1,928

 
1,567

 
(2,463
)
 
(1,139
)
Accrued expenses and other
327

 
(1,173
)
 
(1,747
)
 
(1,681
)
Income tax payable
(1,485
)
 
(467
)
 
287

 
(161
)
Reserve for unexchanged promotional shares
—

 
—

 
—

 
(1,393
)
Other non-current liabilities
(242
)
 
(86
)
 
(121
)
 
(7,935
)
Net cash provided by operating activities
6,806

 
3,117

 
8,722

 
4,192

Cash flows from investing activities:
 
 
 
 
 
 
 
Release of restricted cash
—

 
(2
)
 
—

 
64

Purchases of property and equipment
(107
)
 
(397
)
 
(909
)
 
(1,282
)
Net cash used in investing activities
(107
)
 
(399
)
 
(909
)
 
(1,218
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Payment for the acquisition of Asia Pacific business
—

 
—

 
58

 
(16,974
)
Payment of loan to related party
—

 
—

 
(5,658
)
 
(3,250
)
Proceeds from loan from related party
—

 
—

 
—

 
2,224

Increase in bank overdraft
—

 
—

 
—

 
44

Decrease in bank overdraft
—

 
—

 
—

 
(385
)
Repurchase of common stock
(3,936
)
 
(1,569
)
 
(9,662
)
 
(1,569
)
Reverse/forward stock split, including transaction costs
—

 
—

 
—

 
(102
)
Net cash used in financing activities
(3,936
)
 
(1,569
)
 
(15,262
)
 
(20,012
)
Effect of exchange rate on cash and cash equivalents
(764
)
 
(591
)
 
(841
)
 
(3,251
)
Net increase (decrease) in cash and cash equivalents
1,999

 
558

 
(8,290
)
 
(20,289
)
Cash and cash equivalents at beginning of period
24,839

 
34,570

 
35,128

 
55,417

Cash and cash equivalents at end of period
$
26,838

 
$
35,128

 
$
26,838

 
$
35,128

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
      Cash paid for income taxes, net
$
1,111

 
$
59

 
$
3,309

 
$
801

      Cash paid for interest on related party loan
$
—

 
$
—

 
$
110

 
$
128

      Note payable for Asia Pacific business
$
—

 
$
—

 
$
—

 
$
5,658


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Travelzoo
Segment Information
(Unaudited)
(In thousands)
 
Three months ended December 31, 2016
Asia Pacific
 
Europe
 
North
America
 
Consolidated
Revenue from unaffiliated customers
$
2,456

 
$
8,722

 
$
18,084

 
$
29,262

Intersegment revenue
(7
)
 
(192
)
 
199

 
—

Total net revenues
2,449

 
8,530

 
18,283

 
29,262

Operating income (loss)
$
(808
)
 
$
574

 
$
2,173

 
$
1,939

Three months ended December 31, 2015
Asia Pacific
 
Europe
 
North
America
 
Consolidated
Revenue from unaffiliated customers
2,619

 
10,028

 
19,404

 
32,051

Intersegment revenue
(15
)
 
(34
)
 
49

 
—

Total net revenues
2,604

 
9,994

 
19,453

 
32,051

Operating income (loss)
$
(920
)
 
$
1,506

 
$
390

 
$
976

 
 
 
 
 
 
 
 
Twelve months ended December 31, 2016
Asia Pacific
 
Europe
 
North
America
 
Consolidated
Revenue from unaffiliated customers
$
9,658

 
$
38,637

 
$
80,257

 
$
128,552

Intersegment revenue
64

 
(701
)
 
637

 
—

Total net revenues
9,722

 
37,936

 
80,894

 
128,552

Operating income (loss)
$
(3,866
)
 
$
6,085

 
$
8,849

 
$
11,068

Twelve months ended December 31, 2015
Asia Pacific
 
Europe
 
North
America
 
Consolidated
Revenue from unaffiliated customers
$
10,746

 
$
42,588

 
$
88,382

 
$
141,716

Intersegment revenue
(63
)
 
(456
)
 
519

 
—

Total net revenues
10,683

 
42,132

 
88,901

 
141,716

Operating income (loss)
$
(2,435
)
 
$
3,871

 
$
5,710

 
$
7,146

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


                                                                   

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Travelzoo
Reconciliation of GAAP to Non-GAAP Information
(Unaudited)
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Twelve months ended
 
 December 31,
 
 December 31,
 
2016
 
2015
 
2016
 
2015
GAAP income tax expense (benefit)
$
516

 
$
165

 
$
4,250

 
$
(4,960
)
Non-GAAP adjustments*
—

 
—

 
—

 
8,413

Non-GAAP income tax expense
$
516

 
$
165

 
$
4,250

 
$
3,453

 
 
 
 
 
 
 
 
GAAP effective tax rate
35.4
%
 
27.5
%
 
39.1
%
 
(84.0)
 %
Non-GAAP adjustments*
—
%
 
—
%
 
—
%
 
142.5
 %
Non-GAAP effective tax rate
35.4
%
 
27.5
%
 
39.1
%
 
58.5
 %
 
 
 
 
 
 
 
 
GAAP net income
$
943

 
$
435

 
$
6,631

 
$
10,864

Non-GAAP adjustments*
—

 
—

 
—

 
(8,413
)
Non-GAAP net income
$
943

 
$
435

 
$
6,631

 
$
2,451

 
 
 
 
 
 
 
 
GAAP diluted earnings per share
$
0.07

 
$
0.03

 
$
0.47

 
$
0.74

Non-GAAP adjustments*
—

 
—

 
—

 
(0.57
)
Non-GAAP earnings per share
$
0.07

 
$
0.03

 
$
0.47

 
$
0.17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


* 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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