Travelzoo Reports Third Quarter 2012 Results

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 ended

Nine months ended

September 30,

September 30,

2012

2011

2012

2011

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 marketing

17,427

16,737

49,753

51,569

General and administrative

9,836

8,478

28,583

25,167

Unexchanged promotional merger shares

-

-

3,000

20,000

Total operating expenses

27,263

25,215

81,336

96,736

Income from operations

4,195

9,225

21,132

6,847

Other income

135

-

218

105

Income before income taxes

4,330

9,225

21,350

6,952

Income taxes

896

3,298

6,908

10,061

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:

Basic

15,884

16,396

15,935

16,434

Diluted

15,922

16,504

16,041

16,434

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, net

15,440

13,340

Income taxes receivable

10,052

3,625

Deposits

381

278

Prepaid expenses and other current assets

2,757

2,123

Deferred tax assets

1,356

1,754

Total current assets

87,620

59,864

Deposits, less current portion

1,068

776

Deferred tax assets, less current portion

357

344

Restricted cash

3,122

3,103

Property and equipment, net

4,007

3,557

Intangible assets, net

440

704

Total assets

$

96,614

$

68,348

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

23,314

$

21,731

Accrued expenses

12,619

6,311

Deferred revenue

2,506

2,168

Deferred rent

287

114

Income tax payable

-

279

Total current liabilities

38,726

30,603

Long-term tax liabilities

9,874

2,225

Deferred rent, less current portion

831

761

Total liabilities

49,431

33,589

Common stock

163

164

Treasury stock

-

(15,123

)

Additional paid-in capital

8,556

7,656

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 ended

Nine 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 amortization

630

746

1,856

2,054

Deferred income taxes

(3

)

49

(3

)

209

Stock-based compensation

307

187

900

562

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 receivable

53

1,734

(2,069

)

(722

)

Deposits

(17

)

92

(382

)

(568

)

Income tax receivable

689

358

1,819

(2,031

)

Prepaid expenses and other current assets

(161

)

(654

)

(241

)

(771

)

Accounts payable

680

1,840

1,189

7,454

Accrued expenses

897

(2,192

)

6,198

4,992

Deferred revenue

383

170

323

268

Deferred rent

55

83

21

179

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