Travelzoo Reports Third Quarter 2012 Results

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Travelzoo Reports Third Quarter 2012 Results

  • Revenue of $35.4 million, down 8% year-over-year
  • Net income of $3.4 million, down 42% year-over-year
  • Earnings per share of $0.22, compared to $0.36 in the prior-year period
  • Cash flow from operations of $6.9 million

NEW YORK--(BUSINESS WIRE)-- Travelzoo Inc., (NAS: TZOO) a global Internet media company, today announced financial results for the third quarter ended September 30, 2012, with revenue of $35.4 million, a decrease of 8% year-over-year. Operating income was $4.2 million, down 55% year-over-year. Net income was $3.4 million, with earnings per share of $0.22, down from $0.36 in the prior-year period.

"While we are confident about Travelzoo's long-term opportunity, we are disappointed with our Q3 results," said Chris Loughlin, chief executive officer. "Declines in SuperSearch and Local Deals were not made up by the positive momentum we saw in Getaways. Continued investments into sales team expansion and subscriber growth, as well as enhancements to our hotel and mobile products are affecting profitability in the near-term, but we believe these are the right steps to position Travelzoo for sustainable and profitable future growth."


North America

North America business segment revenue decreased 10% year-over-year to $25.1 million. Operating profit for the third quarter was $3.1 million, or 12% of revenue, down from an operating profit of $7.8 million, or 28% of revenue, in the prior-year period. The decrease in operating profit was a result of a revenue decrease and increased expenses related to sales force expansion and subscriber marketing.

Europe

Europe business segment revenue decreased 4% year-over-year to $10.3 million. In local currency terms, revenue for the third quarter decreased 2% year-over-year. Operating profit was $1.1 million, or 10% of revenue, down from an operating profit of $1.4 million, or 13% of revenue in the prior-year period. The decrease in operating profit was a result of a decrease in revenue and increased expenses related to sales force ramp up and subscriber marketing.

Subscribers

Travelzoo had a total unduplicated number of subscribers in North America and Europe of 22.4 million as of September 30, 2012, up 5% from September 30, 2011. In North America, total unduplicated number of subscribers was 16.1 million as of September 30, 2012, up 3% from September 30, 2011. In Europe, total unduplicated number of subscribers was 6.3 million as of September 30, 2012, up 10% from September 30, 2011.

Income Taxes

Income tax expense was $896,000, compared to $3.3 million in the prior-year period. The effective income tax rate was 21%, compared to 36% in the prior-year period.

Asset Management

During the third quarter 2012, Travelzoo generated $6.9 million of cash from operating activities. Accounts receivable increased by $1.4 million over the prior-year period to $15.4 million. Accounts payable increased by $6.1 million over the prior-year period to $23.3 million. Capital expenditures were $774,000, down from $847,000 in the prior-year period. Travelzoo exited the third quarter with $57.6 million in cash and cash equivalents.

Conference Call

Travelzoo will host a conference call to discuss third 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 25 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 endedNine months ended
September 30,September 30,
2012201120122011
 
Revenues$35,447$38,661$114,140$113,186
Cost of revenues 3,989 4,221 11,672 9,603
Gross profit 31,458 34,440 102,468 103,583
 
Operating expenses:
Sales and marketing17,42716,73749,75351,569
General and administrative9,8368,47828,58325,167
Unexchanged promotional merger shares - - 3,000 20,000
Total operating expenses 27,263 25,215 81,336 96,736
 
Income from operations4,1959,22521,1326,847
 
Other income 135 - 218  105
Income before income taxes4,3309,22521,3506,952
 
Income taxes8963,2986,90810,061
    
Net income (loss)$3,434$5,927$14,442$(3,109)
 
Net income (loss) per share:    
Basic$0.22$0.36$0.91$(0.19)
Diluted$0.22$0.36$0.90$(0.19)
 
Weighted Average Shares:
Basic15,88416,39615,93516,434
Diluted15,92216,50416,04116,434
 
   
Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
September 30,December 31,
 2012  2011 
 
Assets
Current assets:
Cash and cash equivalents$57,634$38,744
Accounts receivable, net15,44013,340
Income taxes receivable10,0523,625
Deposits381278
Prepaid expenses and other current assets2,7572,123
Deferred tax assets 1,356  1,754 
Total current assets87,62059,864
Deposits, less current portion1,068776
Deferred tax assets, less current portion357344
Restricted cash3,1223,103
Property and equipment, net4,0073,557
Intangible assets, net 440  704 
Total assets$96,614 $68,348 
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$23,314$21,731
Accrued expenses12,6196,311
Deferred revenue2,5062,168
Deferred rent287114
Income tax payable -  279 
Total current liabilities38,72630,603
Long-term tax liabilities9,8742,225
Deferred rent, less current portion 831  761 
Total liabilities 49,431  33,589 
Common stock163164
Treasury stock-(15,123)
Additional paid-in capital8,5567,656
Accumulated other comprehensive loss(728)(1,422)
Retained earnings 39,192  43,484 
Total stockholders' equity 47,183  34,759 
Total liabilities and stockholders' equity$96,614 $68,348 
 
      
Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Three months endedNine months ended
September 30,September 30,
 2012  2011  2012  2011 
Cash flows from operating activities:
Net income (loss)$3,434$5,927$14,442$(3,109)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization6307461,8562,054
Deferred income taxes(3)49(3)209
Stock-based compensation307187900562
Provision for losses on accounts receivable(84)(67)116(25)
Tax benefit from exercise of stock options---(268)
Net foreign currency effects(46)52(6)24
Changes in operating assets and liabilities:
Accounts receivable531,734(2,069)(722)
Deposits(17)92(382)(568)
Income tax receivable6893581,819(2,031)
Prepaid expenses and other current assets(161)(654)(241)(771)
Accounts payable6801,8401,1897,454
Accrued expenses897(2,192)6,1984,992
Deferred revenue383170323268
Deferred rent558321179
Income tax payable(1)165(284)(353)
Other non-current liabilities 34  645  (190) 659 
Net cash provided by operating activities 6,850  9,135  23,689  8,554 
 
Cash flows from investing activities:
Purchases of property and equipment  Read Full Story

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