Travelzoo Reports First Quarter 2013 Results

Travelzoo Reports First Quarter 2013 Results

NEW YORK--(BUSINESS WIRE)-- Travelzoo Inc. (NAS: 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 March 31, 2013, up 5% from March 31, 2012. In North America, total unduplicated number of subscribers was 16.3 million as of March 31, 2013, up 3% from March 31, 2012. In Europe, total unduplicated number of subscribers was 6.5 million as of March 31, 2013, up 9% from March 31, 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 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

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,

2013

December 31,

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 activities

(900

)

(678

)

Cash flows from financing activities:

Net cash used in financing activities

Effect of exchange rate on cash and cash equivalents

(1,662

)

706

Net increase in cash and cash equivalents

3,938

9,815

Cash and cash equivalents at beginning of period

61,169

38,744

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 ended March 31, 2013

North

America

Europe

Elimination

Consolidated

Revenue from unaffiliated customers

$

29,911

$

12,266

$

$

42,177

Intersegment revenue

262

108

(370

)

Total net revenues

30,173

12,374

(370

)

42,177

Operating income

$

5,484

$

2,552

$

$

8,036

Three months ended March 31, 2012

North

America

Europe

Elimination

and Other (a)

Consolidated

Revenue from unaffiliated customers

$

28,556

$

10,777

$

$

39,333

Intersegment revenue

79

10

(89

)

Total net revenues

28,635

10,787

(89

)

39,333

Operating income

$

7,142