Travelzoo Reports Fourth Quarter 2012 Results

Travelzoo Reports Fourth Quarter 2012 Results

NEW YORK--(BUSINESS WIRE)-- Travelzoo Inc. (NAS: 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 revenues

4,073

3,680

15,745

13,283

Gross profit

32,955

31,476

135,423

135,059

Operating expenses:

Sales and marketing

18,489

13,921

68,242

65,490

General and administrative

10,109

9,380

38,692

34,547

Unexchanged promotional merger shares

-

-

3,000

20,000

Total operating expenses

28,598

23,301

109,934

120,037

Income from operations

4,357

8,175

25,489

15,022

Other income

92

197

309

302

Income before income taxes

4,449

8,372

25,798

15,324

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 current assets

2,260

2,123

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 current portion

1,710

344

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 portion

798

761

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 loss

(737)

(1,422)

Retained earnings

42,948

43,484

Total stockholders' equity

43,339

34,759

Total liabilities and stockholders' equity

$

97,833

$

68,348

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 amortization

683

671

2,539

2,725

Deferred income taxes

(2,174)

(546)

(2,178)

(337)

Stock-based compensation

307

187

1,207

750

Provision for losses on accounts receivable

46

76

162

52

Tax benefit from exercise of stock options

-

-

-

(268)

Net foreign currency effects

1

58

(4)

81

Changes in operating assets and liabilities:

Accounts receivable

1,784