Travelzoo Reports Fourth Quarter 2012 Results

  Travelzoo Reports Fourth Quarter 2012 Results

Business Wire

NEW YORK -- January 24, 2013

Travelzoo Inc. (NASDAQ: TZOO):

  *Revenue of $37.0 million, up 5% year-over-year
  *Net income of $3.8 million, down 42% year-over-year
  *Earnings per share of $0.24, compared to $0.40 in the prior-year period
  *Cash flow from operations of $13.0 million

Travelzoo Inc., a global Internet media company, today announced financial
results for the fourth quarter ended December 31, 2012, with revenue of $37.0
million, an increase of 5% year-over-year. Operating income was $4.4 million,
down 47% year-over-year. Net income was $3.8 million, with earnings per share
of $0.24, down from $0.40 in the prior-year period. For the full year, revenue
was $151.2 million, an increase of 2% year-over-year. GAAP operating income
was $25.5 million, up 70% year-over-year. Non-GAAP operating income was $28.5
million, down 19% year-over-year. GAAP net income was $18.2 million, with
earnings per share of $1.14, up from $0.20 in the prior-year period. Non-GAAP
net income was $21.2 million, with earnings per share of $1.33, down from
$1.42 in the prior-year period.

"During the fourth quarter of 2012 we continued to execute our strategy of
increasing Travelzoo’s reach, expanding our sales force and developing our
products, particularly in the mobile and hotel categories," said Chris
Loughlin, chief executive officer. "We are pleased with our progress: The
Travelzoo® brand now reaches 26 million subscribers, Getaway sales
accelerated, and in Europe our Travel business grew 23% year-over-year. We
continue to see strong adoption of the Travelzoo brand on mobile; 33% of users
now access our brand through mobile devices.”

North America

North America business segment revenue increased 3% year-over-year to $26.5
million. Operating income for the fourth quarter was $3.4 million, or 13% of
revenue, down from an operating income of $6.5 million, or 25% of revenue, in
the prior-year period. The decrease in operating income was a result of
increased expenses related to sales force expansion and subscriber marketing.

Europe

Europe business segment revenue increased 10% year-over-year to $10.7 million.
In local currency terms, revenue for the fourth quarter increased 8%
year-over-year. Operating income was $969,000, or 9% of revenue, down from an
operating income of $1.7 million, or 17% of revenue in the prior-year period.
The decrease in operating income was a result of increased expenses related to
sales force expansion and subscriber marketing.

Subscribers

Travelzoo had a total unduplicated number of subscribers in North America and
Europe of 22.5 million as of December 31, 2012, up 5% from December 31, 2011.
In North America, total unduplicated number of subscribers was 16.1 million as
of December 31, 2012, up 3% from December 31, 2011. In Europe, total
unduplicated number of subscribers was 6.4 million as of December 31, 2012, up
10% from December 31, 2011.

Income Taxes

Income tax expense was $692,000, compared to $1.9 million in the prior-year
period. The effective income tax rate was 16%, compared to 23% in the
prior-year period.

Asset Management

During the fourth quarter 2012, Travelzoo generated $13.0 million of cash from
operating activities. Accounts receivable increased by $286,000 over the
prior-year period to $13.6 million. Accounts payable increased by $7.0 million
over the prior-year period to $28.7 million. Capital expenditures were
$698,000, up from $558,000 in the prior-year period. Travelzoo exited the
fourth quarter with $61.2 million in cash and cash equivalents.

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 26 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 Inc. All other company and product names
mentioned are trademarks of their respective owners.

                                                           
Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
                                                                       
                                                                       
                   Three months ended                Twelve months ended
                   December 31,                      December 31,
                   2012             2011             2012              2011
                                                                       
Revenues           $  37,028       $  35,156       $  151,168       $  148,342
Cost of              4,073          3,680          15,745          13,283
revenues
Gross profit         32,955         31,476         135,423         135,059
                                                                       
Operating
expenses:
Sales and              18,489           13,921           68,242            65,490
marketing
General and            10,109           9,380            38,692            34,547
administrative
Unexchanged
promotional          -              -              3,000           20,000
merger shares
Total
operating            28,598         23,301         109,934         120,037
expenses
                                                                       
Income from            4,357            8,175            25,489            15,022
operations
                                                                       
Other income         92             197            309             302
Income before          4,449            8,372            25,798            15,324
income taxes
                                                                       
Income taxes           692              1,944            7,600             12,005
                                                                    
Net income         $  3,757        $  6,428        $  18,198        $  3,319
                                                                       
Net income per                                                      
share:
Basic              $  0.24         $  0.40         $  1.15          $  0.20
Diluted            $  0.24         $  0.40         $  1.14          $  0.20
                                                                       
Weighted
average
shares:
Basic                  15,659           15,962           15,866            16,315
Diluted                15,659           16,026           15,901            16,414
                                                                           

                                                       
Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
                                                                  
                                                                  
                                               December 31,       December 31,
                                               2012               2011
                                                                  
  Assets
  Current assets:
  Cash and cash equivalents                    $   61,169         $  38,744
  Accounts receivable, net                         13,626            13,340
  Income taxes receivable                          6,682             3,625
  Deposits                                         389               278
  Prepaid expenses and other                       2,260             2,123
  current assets
  Deferred tax assets                             2,194            1,754
  Total current assets                             86,320            59,864
  Deposits, less current portion                   1,107             776
  Deferred tax assets, less                        1,710             344
  current portion
  Restricted cash                                  3,396             3,103
  Property and equipment, net                      4,314             3,557
  Intangible assets, net                          986              704
  Total assets                                 $   97,833         $  68,348
                                                                  
  Liabilities and Stockholders'
  Equity
  Current liabilities:
  Accounts payable                             $   28,695         $  21,731
  Accrued expenses                                 11,993            6,311
  Deferred revenue                                 2,698             2,168
  Deferred rent                                    280               114
  Income tax payable                              -                279
  Total current liabilities                        43,666            30,603
  Long-term tax liabilities                        10,030            2,225
  Deferred rent, less current                     798              761
  portion
  Total liabilities                               54,494           33,589
  Common stock                                     163               164
  Treasury stock                                   (7,898)           (15,123)
  Additional paid-in capital                       8,863             7,656
  Accumulated other comprehensive                  (737)             (1,422)
  loss
  Retained earnings                               42,948           43,484
  Total stockholders' equity                      43,339           34,759
  Total liabilities and                        $   97,833         $  68,348
  stockholders' equity
                                                                     

                                                         
Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
                                                                        
                       Three months ended              Twelve months ended
                       December 31,                    December 31,
                       2012            2011            2012             2011
  Cash flows
  from operating
  activities:
  Net income           $ 3,757         $ 6,428         $ 18,198         $ 3,319
  Adjustments to
  reconcile net
  income to net
  cash
  provided by
  operating
  activities:
    Depreciation
    and                  683             671             2,539            2,725
    amortization
    Deferred             (2,174)         (546)           (2,178)          (337)
    income taxes
    Stock-based          307             187             1,207            750
    compensation
    Provision
    for losses           46              76              162              52
    on accounts
    receivable
    Tax benefit
    from
    exercise of          -               -               -                (268)
    stock
    options
    Net foreign
    currency             1               58              (4)              81
    effects
    Changes in
    operating
    assets and
    liabilities:
    Accounts             1,784           576             (285)            (146)
    receivable
    Deposits             (24)            (99)            (406)            (667)
    Income tax           3,351           (1,061)         5,171            (3,093)
    receivable
    Prepaid
    expenses and
    other                328             188             87               (584)
    current
    assets
    Accounts             5,211           4,620           6,403            12,074
    payable
    Accrued              (630)           (4,737)         5,568            256
    expenses
    Deferred             190             585             513              853
    revenue
    Deferred             25              30              45               209
    rent
    Income tax           (1)             (15)            (285)            (369)
    payable
    Other
    non-current         156            117            (35)            776
    liabilities
  Net cash
  provided by           13,010         7,078          36,700          15,631
  operating
  activities
                                                                        
  Cash flows
  from investing
  activities:
    Purchases of
    restricted           (272)           -               (272)            -
    cash
    Purchases of
    intangible           (677)           -               (677)            -
    asset
    Purchases of
    property and        (698)          (558)          (2,744)         (2,460)
    equipment
  Net cash used
  in investing          (1,647)        (558)          (3,693)         (2,460)
  activities
                                                                        
  Cash flows
  from financing
  activities:
    Cash used in
    purchase of          (7,898)         -               (11,509)         (15,124)
    common stock
    Proceeds
    from
    exercise of          -               -               -                40
    stock
    options
    Tax benefit
    of stock            -              -              -               268
    option
    exercises
  Net cash used
  in financing          (7,898)        -              (11,509)        (14,816)
  activities
                                                                        
  Effect of
  exchange rate
  on cash and            70              (209)           927              (795)
  cash
  equivalents
                                                                        
  Net increase
  (decrease) in          3,535           6,311           22,425           (2,440)
  cash and cash
  equivalents
  Cash and cash
  equivalents at        57,634         32,433         38,744          41,184
  beginning of
  period
  Cash and cash
  equivalents at       $ 61,169        $ 38,744        $ 61,169         $ 38,744
  end of period
                                                                        
  Supplemental
  disclosure of
  cash flow
  information:
  Cash paid
  (received) for         (631)           3,453           5,081            15,025
  income taxes,
  net
                                                                        

                                                                         
Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
                                                                                       
  
                                                                                     
  Three months        North
  ended               America                 Europe                 Elimination       Consolidated
  December 31,
  2012
                                                                                       
  Revenue from
  unaffiliated        $     26,373        $     10,655       $  -              $   37,028
  customers
  Intersegment             157                102            (259)             -
  revenue
  Total net                26,530             10,757         (259)             37,028
  revenues
  Operating           $     3,387         $     969          $  -              $   4,356
  income
                                                                                       
                                                                                       
  
                                                                                     
  Three months        North
  ended               America                 Europe                 Elimination       Consolidated
  December 31,
  2011
                                                                                       
  Revenue from
  unaffiliated        $         25,500        $         9,656        $  -              $   35,156
  customers
  Intersegment             124                42             (166)             -
  revenue
  Total net                25,624             9,698          (166)             35,156
  revenues
  Operating           $     6,504         $     1,671        $  -              $   8,175
  income
                                                                                       
                                                                                       
  
                                                                    Elimination       
  Twelve              North                                          and Other
  months ended        America                 Europe                 (a)               Consolidated
  December 31,
  2012
                                                                                       
  Revenue from
  unaffiliated        $         108,788       $         42,380       $  -              $   151,168
  customers
  Intersegment             728                143            (871)             -
  revenue
  Total net                109,516            42,523         (871)             151,168
  revenues
  Operating           $     21,481        $     7,008        $  (3,000)        $   25,489
  income
                                                                                       
                                                                                       
  
                                                                    Elimination       
  Twelve              North                                          and Other
  months ended        America                 Europe                 (a)               Consolidated
  December 31,
  2011
                                                                                       
  Revenue from
  unaffiliated        $         108,549       $         39,793       $  -              $   148,342
  customers
  Intersegment             466                134            (600)             -
  revenue
  Total net                109,015            39,927         (600)             148,342
  revenues
  Operating           $     30,110        $     4,912        $  (20,000)       $   15,022
  income
                                                                                       
  (a) Includes a charge related to unexchanged promotional merger shares for the twelve months
  ended December 31, 2012 and 2011.
  

                                                             
Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In thousands, except per share amounts)
                                                                    
                                                                    
                                                  Twelve months ended
                                                  December 31,
                                                  2012              2011
                                                                    
GAAP operating income                             $   25,489       $  15,022
Unexchanged promotional merger shares                3,000          20,000
(a)
Non-GAAP operating income                         $    28,489       $   35,022
                                                                    
GAAP net income                                   $    18,198       $   3,319
Unexchanged promotional merger shares                3,000          20,000
(a)
Non-GAAP net income                               $    21,198       $   23,319
                                                                    
Diluted net Income per share                      $    1.14         $   0.20
Unexchanged promotional merger shares                0.19           1.22
(a)
Non-GAAP diluted net income per share             $    1.33         $   1.42
                                                                    
                                                                    
(a) Includes a charge related to unexchanged promotional merger shares of
$20.0
million and $3.0 million for the twelve months ended December 31, 2011 and
2012,
respectively.


Contact:

Media:
Lisa Moore, +1-212-484-4963
lmoore@travelzoo.com
 
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