Travelzoo Reports Second Quarter 2013 Results

  Travelzoo Reports Second Quarter 2013 Results

Business Wire

NEW YORK -- July 18, 2013

Travelzoo Inc. (NASDAQ: TZOO):

  *Revenue of $41.3 million, up 5% year-over-year
  *Net income of $5.2 million, down 28% year-over-year
  *Earnings per share of $0.34, compared to $0.45 in the prior-year period
  *Cash flow from operations of $10.0 million

Travelzoo Inc., a global Internet media company, today announced financial
results for the second quarter ended June30, 2013, with revenue of $41.3
million, an increase of 5% year-over-year. Operating profit was $7.8 million.
Net income was $5.2 million, with earnings per share of $0.34, down from $0.45
in the prior-year period.

"Continued growth in our Travel businesses in North America and Europe drove a
solid quarter," said Chris Loughlin, chief executive officer. "Audience
engagement reached record levels and we made good progress in social media and
mobile. Our earnings were still impacted by our investments into a hotel
booking platform, aimed at simplifying our user experience on web and mobile.
We plan to introduce the platform later this year."

North America

North America business segment revenue increased 5% year-over-year to $30.2
million. Operating profit for the second quarter was $5.9 million, or 20% of
revenue, down from $7.8 million, or 27% 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 and traffic
acquisition.

Europe

Europe business segment revenue increased 4% year-over-year to $11.1 million.
In local currency terms, revenue for the second quarter increased 7%
year-over-year. Operating profit was $1.9 million, or 17% of revenue, down
from an operating profit of $2.5 million, or 24% of revenue in the prior-year
period.

Subscribers

Travelzoo had a total unduplicated number of subscribers in North America and
Europe of 23.0 million as of June30, 2013, up 4% from June30, 2012. In North
America, total unduplicated number of subscribers was 16.4 million as of
June30, 2013, up 3% from June30, 2012. In Europe, total unduplicated number
of subscribers was 6.6 million as of June30, 2013, up 8% from June30, 2012.

Income Taxes

Income tax expense was $2.7 million, compared to $3.1 million in the
prior-year period. The effective income tax rate was 34%, up from 30% in the
prior-year period.

Asset Management

During the second quarter 2013, Travelzoo generated $10.0 million of cash from
operating activities. Accounts receivable increased by $227,000 over the
prior-year period to $15.5 million. Accounts payable increased by $6.8 million
over the prior-year period to $29.0 million. Capital expenditures were $1.2
million, up from $595,000 in the prior-year period. Travelzoo exited the
second quarter with $73.4 million in cash and cash equivalents.

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 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. All other names are trademarks and/or registered
trademarks of their respective owners.

                                                 
Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
                                                     
                       Three months ended            Six months ended
                       June 30,                      June 30,
                       2013          2012           2013          2012
Revenues               $  41,327     $  39,360     $  83,504     $  78,693
Cost of revenues       4,425         3,630         8,411         7,683
Gross profit           36,902        35,730        75,093        71,010
Operating
expenses:
Sales and              19,457         16,061         39,115         32,326
marketing
General and            9,651          9,303          20,149         18,747
administrative
Unexchanged
promotional merger     —             —             —             3,000
shares
Total operating        29,108        25,364        59,264        54,073
expenses
Income from            7,794          10,366         15,829         16,937
operations
Other income           112           (16        )   144           83
(expense)
Income before          7,906          10,350         15,973         17,020
income taxes
Income taxes           2,706         3,090         5,178         6,012
Net income             $  5,200     $  7,260     $  10,795    $  11,008
Net income per                                                   
share:
Basic                  $  0.34      $  0.45      $  0.70      $  0.69
Diluted                $  0.34      $  0.45      $  0.70      $  0.69
Weighted Average
Shares:
Basic                  15,362         15,962         15,362         15,962
Diluted                15,457         16,006         15,427         16,012
                                                                    

                                                           
Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
                                                               
                                               June 30,        December 31,
                                               2013            2012
Assets
Current assets:
Cash and cash equivalents                      $  73,381      $  61,169
Accounts receivable, net                       15,463          13,626
Income taxes receivable                        3,191           6,682
Deposits                                       473             389
Prepaid expenses and other current assets      3,400           2,260
Deferred tax assets                            2,214          2,194      
Total current assets                           98,122          86,320
Deposits, less current portion                 943             1,107
Deferred tax assets, less current portion      1,271           1,710
Restricted cash                                3,517           3,396
Property and equipment, net                    5,811           4,314
Intangible assets, net                         655            986        
Total assets                                   $  110,319    $  97,833 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable                               $   28,962      $   28,695
Accrued expenses                               13,200          11,993
Deferred revenue                               1,828           2,698
Deferred rent                                  262             280
Income tax payable                             1,022          —          
Total current liabilities                      45,274          43,666
Long-term tax liabilities                      10,239          10,030
Deferred rent, less current portion            1,437          798        
Total liabilities                              56,950         54,494     
Common stock                                   163             163
Treasury stock                                 (7,898      )   (7,898     )
Additional paid-in capital                     9,476           8,863
Accumulated other comprehensive loss           (2,115      )   (737       )
Retained earnings                              53,743         42,948     
Total stockholders’ equity                     53,369         43,339     
Total liabilities and stockholders’ equity     $  110,319    $  97,833 
                                                                          

                                               
Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
                                                   
                     Three months ended            Six months ended
                     June 30,                      June 30,
                     2013          2012           2013          2012
Cash flows from
operating
activities:
Net income           $  5,200      $  7,260      $  10,795     $  11,008
Adjustments to
reconcile net
income to net
cash provided by
operating
activities:
Depreciation and     760            599            1,476          1,225
amortization
Deferred income      207            —              400            —
taxes
Stock-based          307            307            613            593
compensation
Provision for
losses on            (45        )   91             50             199
accounts
receivable
Net foreign          19             75             112            40
currency effects
Changes in
operating assets
and liabilities:
Accounts             (91        )   (851       )   (2,127     )   (2,122     )
receivable
Deposits             175            (232       )   20             (364       )
Income tax           2,029          285            3,593          1,130
receivable
Prepaid expenses
and other            (1,382     )   215            (1,032     )   (79        )
current assets
Accounts payable     1,965          48             845            508
Accrued expenses     371            (317       )   1,221          5,302
Deferred revenue     (329       )   (194       )   (847       )   (60        )
Deferred rent        221            41             111            (34        )
Income tax           467            1              1,038          (283       )
payable
Other
non-current          107           (276       )   210           (224       )
liabilities
Net cash
provided by          9,981         7,052         16,478        16,839     
operating
activities
Cash flows from
investing
activities:
Purchases of         (263       )   —              (263       )   —
restricted cash
Purchases of
property and         (1,209     )   (595       )   (2,109     )   (1,272     )
equipment
Net cash used in
investing            (1,472     )   (595       )   (2,372     )   (1,272     )
activities
Cash flows from
financing
activities:
Net cash
provided by
(used in)            —             —             —             —          
financing
activities
Effect of
exchange rate on     (235       )   (855       )   (1,894     )   (150       )
cash and cash
equivalents
Net increase in
cash and cash        8,274          5,602          12,212         15,417
equivalents
Cash and cash
equivalents at       65,107         48,559         61,169         38,744
beginning of
period
Cash and cash
equivalents at       $  73,381    $  54,161    $  73,381    $  54,161 
end of period
Supplemental
disclosure of
cash flow
information:
Cash paid for
income taxes,        $   10         $   3,082      $   20         $   5,391
net
                                                                             

                                                            
Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
                                                                  
Three months        North
ended June 30,      America        Europe         Elimination     Consolidated
2013
Revenue from
unaffiliated        $  30,249     $  11,078     $   —          $    41,327
customers
Intersegment        331           222           (553        )   —
revenue
Total net           30,580        11,300        (553        )   41,327
revenues
Operating           $  5,899     $  1,895     $   —         $    7,794
income
                                                                  
Three months        North
ended June 30,      America        Europe         Elimination     Consolidated
2012
Revenue from
unaffiliated        $   28,712     $   10,648     $    —          $     39,360
customers
Intersegment        205           21            (226        )   —
revenue
Total net           28,917        10,669        (226        )   39,360
revenues
Operating           $  7,831     $  2,535     $   —         $    10,366
income
                                                                  
Six months          North
ended June 30,      America        Europe         Elimination     Consolidated
2013
Revenue from
unaffiliated        $   60,160     $   23,344     $    —          $     83,504
customers
Intersegment        575           330           (905        )   —
revenue
Total net           60,735        23,674        (905        )   83,504
revenues
Operating           $  11,383    $  4,447     $   —         $    15,830
income
                                                                  
Six months          North                         Elimination
ended June 30,      America        Europe         and Other (a)   Consolidated
2012
Revenue from
unaffiliated        $   57,268     $   21,425     $    —          $     78,693
customers
Intersegment        470           31            (501        )   —
revenue
Total net           57,738        21,456        (501        )   78,693
revenues
Operating           $  14,972    $  4,965     $   (3,000 )   $    16,937
income
                                                                        

(a)  Includes a charge related to unexchanged promotional merger shares for
      the six months ended June 30, 2012.

Contact:

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