Travelzoo Reports First Quarter 2013 Results

  Travelzoo Reports First Quarter 2013 Results

Business Wire

NEW YORK -- April 18, 2013

Travelzoo Inc. (NASDAQ: TZOO):

  *Revenue of $42.2 million, up 7% year-over-year
  *Net income of $5.6 million, up 49% year-over-year
  *Earnings per share of $0.36, compared to $0.23 (GAAP) / $0.42 (non-GAAP)
    in the prior-year period
  *Cash flow from operations of $6.5 million

Travelzoo Inc., a global Internet media company, today announced financial
results for the first quarter ended March 31, 2013, with revenue of $42.2
million, an increase of 7% year-over-year. Operating profit was $8.0 million.
Net income was $5.6 million, with earnings per share of $0.36, up from $0.23
in the prior-year period. Non-GAAP earnings per share was $0.36, down from
$0.42 in the prior-year period.

“We kicked off 2013 with record revenues, driven by strong performance within
our travel segments in both North America and Europe,” said Chris Loughlin,
chief executive officer. “We accelerated subscriber growth and made
significant improvements in audience engagement across email, social media and
mobile apps. We continued to develop our new hotel booking platform, which we
plan to roll out later this year.”

North America

North America business segment revenue increased 5% year-over-year to $30.2
million. Operating profit for the first quarter was $5.5 million, or 18% of
revenue, down from $7.1 million, or 25% of revenue, in the prior-year period.
The decrease in operating profit was a result of increased expenses related to
sales force expansion, hotel booking platform development, traffic acquisition
and subscriber marketing.

Europe

Europe business segment revenue increased 14% year-over-year to $12.4 million.
In local currency terms, revenue for the first quarter increased 14%
year-over-year. Operating profit was $2.5 million, or 21% of revenue, up from
an operating profit of $2.4 million, or 23% of revenue in the prior-year
period.

Subscribers

Travelzoo had a total unduplicated number of subscribers in North America and
Europe of 22.9 million as of March31, 2013, up 5% from March31, 2012. In
North America, total unduplicated number of subscribers was 16.3 million as of
March31, 2013, up 3% from March31, 2012. In Europe, total unduplicated
number of subscribers was 6.5 million as of March31, 2013, up 9% from
March31, 2012.

Income Taxes

Income tax expense was $2.5 million, compared to $2.9 million in the
prior-year period. The non-GAAP effective income tax rate was 31%, up from 30%
in the prior-year period.

Asset Management

During the first quarter 2013, Travelzoo generated $6.5 million of cash from
operating activities. Accounts receivable increased by $648,000 over the
prior-year period to $15.3 million. Accounts payable increased by $4.5 million
over the prior-year period to $26.9 million. Capital expenditures were
$900,000, up from $678,000 in the prior-year period. Travelzoo exited the
first quarter with $65.1 million in cash and cash equivalents.

Non-GAAP Measures

To give an enhanced view of the company's operating performance, management
has calculated non-GAAP operating income, non-GAAP net income and non-GAAP
earnings per share by excluding the $3 million charge related to our
unexchanged promotional merger shares in the prior-year period. 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
non-GAAP operating income, non-GAAP net income, and non-GAAP earnings share
are not in accordance with GAAP and may differ from non-GAAP methods of
accounting and reporting used by other companies. Non-GAAP numbers are merely
a supplement to, and not a replacement for, GAAP financial measures. As the
only difference between GAAP and non-GAAP measures is the charge related to
our unexchanged promotional merger shares in the prior- year period, today's
reporting should not be viewed as the company's intention to report non-GAAP
measures in future periods. Refer to the “Reconciliation of GAAP to Non-GAAP
Measures” section of this release for a summary of these non-GAAP measures and
their reconciliation to the reported GAAP measures.

Conference Call

Travelzoo will host a conference call to discuss first 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 26million
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 Section27A of
the Securities Act of 1933 and Section21E 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
                                                March 31,
                                                2013      2012
Revenues                                        $ 42,177   $ 39,333
Cost of revenues                                3,985      4,054
Gross profit                                    38,192     35,279
Operating expenses:
Sales and marketing                             19,659     16,265
General and administrative                      10,497     9,444
Unexchanged promotional merger shares           —          3,000
Total operating expenses                        30,156     28,709
Income from operations                          8,036      6,570
Other income                                    31         99
Income before income taxes                      8,067      6,669
Income taxes                                    2,472      2,922
Net income                                      $ 5,595    $ 3,747
Net income per share:                                     
Basic                                           $ 0.36     $ 0.23
Diluted                                         $ 0.36     $ 0.23
Weighted Average Shares:
Basic                                           15,362     15,962
Diluted                                         15,371     16,019
                                                           


Travelzoo Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)
                                                           
                                                   March 31,     December 31,

                                                   2013          2012
Assets
Current assets:
Cash and cash equivalents                          $ 65,107      $  61,169
Accounts receivable, net                           15,303        13,626
Income taxes receivable                            5,117         6,682
Deposits                                           398           389
Prepaid expenses and other current assets          2,187         2,260
Deferred tax assets                                2,426        2,194      
Total current assets                               90,538        86,320
Deposits, less current portion                     1,208         1,107
Deferred tax assets, less current portion          1,240         1,710
Restricted cash                                    3,252         3,396
Property and equipment, net                        5,316         4,314
Intangible assets, net                             796          986        
Total assets                                       $ 102,350    $  97,833  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable                                   $ 26,909      $  28,695
Accrued expenses                                   12,796        11,993
Deferred revenue                                   2,158         2,698
Deferred rent                                      262           280
Income tax payable                                 559          —          
Total current liabilities                          42,684        43,666
Long-term tax liabilities                          10,133        10,030
Deferred rent, less current portion                1,510        798        
Total liabilities                                  54,327       54,494     
Common stock                                       163           163
Treasury stock                                     (7,898    )   (7,898     )
Additional paid-in capital                         9,169         8,863
Accumulated other comprehensive loss               (1,954    )   (737       )
Retained earnings                                  48,543       42,948     
Total stockholders’ equity                         48,023       43,339     
Total liabilities and stockholders’ equity         $ 102,350    $  97,833  
                                                                            


Travelzoo Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)
                                                  
                                                       Three months ended
                                                       March 31,
                                                       2013        2012
Cash flows from operating activities:
Net income                                             $ 5,595      $ 3,747
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization                          716          627
Deferred income taxes                                  193          —
Stock-based compensation                               307          287
Provision for losses on accounts receivable            95           108
Net foreign currency effects                           94           (35      )
Changes in operating assets and liabilities:
Accounts receivable                                    (2,036   )   (1,271   )
Deposits                                               (155     )   (132     )
Income tax receivable                                  1,564        845
Prepaid expenses and other current assets              350          (295     )
Accounts payable                                       (549     )   460
Accrued expenses                                       850          5,619
Deferred revenue                                       (517     )   134
Deferred rent                                          (110     )   (75      )
Income tax payable                                     —            (284     )
Other non-current liabilities                          103         52       
Net cash provided by operating activities              6,500       9,787    
Cash flows from investing activities:
Purchases of property and equipment                    (900     )   (678     )
Net cash provided by (used in) investing               (900     )   (678     )
activities
Cash flows from financing activities:
Net cash used in financing activities                  —           —        
Effect of exchange rate on cash and cash               (1,662   )   706
equivalents
Net increase in cash and cash equivalents              3,938        9,815
Cash and cash equivalents at beginning of              61,169      38,744   
period
Cash and cash equivalents at end of period             $ 65,107    $ 48,559 
Supplemental disclosure of cash flow
information:
Cash paid for income taxes, net                        $ 328        $ 2,309
                                                                             

                                                                             
Travelzoo Inc.

Segment Information

(Unaudited)

(In thousands)
                                                          
Three months         North
ended March                          Europe   Elimination   Consolidated
31, 2013             America
Revenue from
unaffiliated         $  29,911       $  12,266      $  —          $  42,177
customers
Intersegment         262            108           (370      )   —          
revenue
Total net            30,173         12,374        (370      )   42,177     
revenues
Operating            $  5,484       $  2,552      $  —         $  8,036   
income
Three months         North                          Elimination
ended March                          Europe                       Consolidated
31, 2012             America                        and Other
                                                    (a)
Revenue from
unaffiliated         $  28,556       $  10,777      $  —          $  39,333
customers
Intersegment         79             10            (89       )   —          
revenue
Total net            28,635         10,787        (89       )   39,333     
revenues
Operating            $  7,142       $  2,428      $  (3,000 )   $  6,570   
income

(a)  Includes a charge related to unexchanged promotional merger shares for
      the three months ended March 31, 2012.

                                                                      
Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In thousands, except per share and percentage amounts)
                                             
                                                  Three months ended
                                                  March 31,
                                                  2013       2012
GAAP operating income                             $ 8,036     $ 6,570
Unexchanged promotional merger shares (a)         —          3,000   
Non-GAAP operating income                         $ 8,036     $ 9,570
                                                                      
GAAP net income                                   $ 5,595     $ 3,747
Unexchanged promotional merger shares (a)         —          3,000   
Non-GAAP net income                               $ 5,595     $ 6,747
                                                                      
Diluted net income per share                      $ 0.36      $ 0.23
Unexchanged promotional merger shares (a)         —          0.19    
Non-GAAP diluted net income per share             $ 0.36      $ 0.42
                                                                      
                                                                      
GAAP operating margin                             19.1    %   16.7    %
Unexchanged merger shares (a)                     —          7.6     %
Non-GAAP operating margin                         19.1    %   24.3    %
                                                                      
GAAP effective tax rate                           30.6    %   43.8    %
Unexchanged merger shares (a)                     —          -13.6   %
Non-GAAP effective tax rate                       30.6    %   30.2    %

(a)  Includes a charge related to unexchanged promotional merger shares of
      $3.0 million for the three months ended March 31, 2012.
      

Contact:

Media:
Travelzoo, North America
Christie McConnell, +1 212-484-4912
cmcconnell@travelzoo.com