TZOO Travelzoo

Travelzoo Inc. (NASDAQ:TZOO):

• Revenue of $34.0 million, down 6% year-over-year in constant currencies
• Operating profit of $3.8 million
• Earnings per share of $0.14, compared to $0.06 in the prior-year period
• Cash flow from operations of $2.5 million

Travelzoo, a global media commerce company, today announced financial results for the second quarter ended June 30, 2016, with revenue of $34.0 million and operating income of $3.8 million. In nominal terms, revenue decreased by 7% year-over-year. In constant currencies, revenue decreased by 6% year-over-year. Net income was $2.0 million, up 140% year-over-year. Diluted earnings per share (EPS) were $0.14, up from $0.06 in the prior-year period.

“Our strategy of publishing high-quality deals, combined with efficient execution, has led to increased operating profits in Europe and North America,” said Holger Bartel, Chairman and Global CEO. “We intend to leverage Travelzoo’s global reach and trusted brand to grow revenue and increase profitability in future periods.”

Asia Pacific

Asia Pacific business segment revenue decreased 10% year-over-year to $2.4 million. In constant currencies, revenue decreased 10% year-over-year. Operating loss for the second quarter was $1.2 million, compared to an operating loss of $268,000 in the prior-year period.

Europe

Europe business segment revenue decreased 5% year-over-year to $9.7 million. In constant currencies, revenue decreased 2% year-over-year. Operating income for the second quarter was $1.8 million, or 18% of revenue, up from $47,000, or 0.5% of revenue in the prior-year period.

North America

North America business segment revenue decreased 8% year-over-year to $21.9 million. Operating income for the second quarter was $3.2 million, or 15% of revenue, up from $2.5 million or 11% of revenue in the prior-year period.

Members

As of June 30, 2016, Travelzoo had a worldwide unduplicated number of members of 28.9 million. In Asia Pacific, unduplicated number of members was 3.6 million as of June 30, 2016, up 5% from June 30, 2015. In Europe, unduplicated number of members was 8.1 million as of June 30, 2016, up 8% from June 30, 2015. In North America, unduplicated number of members was 17.4 million as of June 30, 2016, up 1% from June 30, 2015.

Income Taxes

Income tax expense was $1.7 million, compared to a $1.3 million income tax expense in the prior-year period. The effective income tax rate was 45%, down from 60% in the prior-year period, driven primarily by the geographic mix of taxable income.

Asset Management

During the second quarter of 2016, Travelzoo generated $2.6 million of cash from operating activities. Accounts receivable decreased by $407,000 over the prior-year period to $18.4 million. Accounts payable decreased by $7.6 million over the prior-year period to $20.8 million. Capital expenditures were $503,000, down from $564,000 in the prior-year period. As of June 30, 2016, cash and cash equivalents were $27.6 million.

Other Information

Travelzoo Inc.'s financial results have been adjusted to include the financial results of Asia Pacific for the current and prior periods. In addition, certain prior period statement of operations amounts have been reclassified to conform to current period presentation primarily due to the allocation of facilities costs and separate disclosure of product development costs. Management presents year-over-year revenue percentage rates of change in constant currencies, calculated using prior-year period foreign currency rates on current-year period non-US revenue, as it believes this is a useful metric that facilitates comparison to historical performance.

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 is a global media commerce company. With more than 28 million members in Asia Pacific, Europe, and North America and 25 offices worldwide, Travelzoo® publishes offers from more than 2,000 travel, entertainment and local companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value.

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, 2016   2015

      2016      

 

      2015      

Revenues $ 34,046 $ 36,792 $ 68,850 $ 75,937 Cost of revenues 3,612   5,208   7,621   9,754   Gross profit 30,434   31,584   61,229   66,183   Operating expenses: Sales and marketing 19,135 20,715 38,094 42,792 Product development 2,089 3,206 4,964 6,295 General and administrative 5,434   5,335   11,247   11,786   Total operating expenses 26,658   29,256   54,305   60,873   Income from operations 3,776 2,328 6,924 5,310 Other income (loss) (91 ) (218 ) 42   (664 ) Income before income taxes 3,685 2,110 6,966 4,646 Income taxes 1,665   1,268   2,897   3,074   Net income $ 2,020   $ 842   $ 4,069   $ 1,572   Net income per share:         Basic $ 0.14   $ 0.06   $ 0.29   $ 0.11   Diluted $ 0.14   $ 0.06   $ 0.29   $ 0.11   Weighted average shares: Basic 14,066 14,730 14,246 14,730 Diluted 14,066 14,730 14,246 14,730    

Travelzoo Inc.Condensed Consolidated Balance Sheets(Unaudited)(In thousands)

        June 30, 2016   December 31, 2015 Assets Current assets: Cash and cash equivalents $                     27,560 $ 35,128 Accounts receivable, net 18,400 16,398 Income taxes receivable 833 1,356 Deposits 488 782 Prepaid expenses and other 1,828 2,167 Deferred tax assets 1,129   1,230   Total current assets 50,238 57,061 Deposits 719 501 Deferred tax assets 570 1,769 Restricted cash 1,398 1,328 Property and equipment, net 7,228 7,905 Other assets —   15   Total assets $                     60,153   $ 68,579   Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 20,843 $ 23,655 Accrued expenses and other 10,982 10,140 Deferred revenue 1,040 1,085 Income tax payable 1,639 477 Note payable to related party —   5,658   Total current liabilities 34,504 41,015 Long-term tax liabilities 3,053 3,000 Long-term deferred rent and other 2,906   3,177   Total liabilities 40,463   47,192   Common stock 144 150 Additional paid-in capital 1,716 7,759 Accumulated other comprehensive loss (3,625 ) (3,908 ) Retained earnings 21,455   17,386   Total stockholders’ equity 19,690   21,387   Total liabilities and stockholders’ equity $                     60,153   $ 68,579      

Travelzoo Inc.Condensed Consolidated Statements of Cash Flows(Unaudited)(In thousands)

   

  Three months ended  

  Six months ended June 30, June 30, 2016   2015

      2016      

 

      2015      

Cash flows from operating activities: Net income $ 2,020 $ 842 $ 4,069 $ 1,572

Adjustments to reconcile net income to net cash providedby (used in) operating activities:

Depreciation and amortization 608 687 1,250 1,510 Deferred income taxes 233 (20 ) (211 ) (242 ) Stock-based compensation 230 148 442 296 Provision for losses on accounts receivable 36 25 44 52 Net foreign currency effects (23 ) (54 ) 236 (165 ) Changes in operating assets and liabilities: Accounts receivable (1,241 ) (996 ) (2,265 ) (2,876 ) Deposits (25 ) 91 38 73 Income tax receivable (397 ) 830 525 1,681 Prepaid expenses and other 147 140 182 635 Accounts payable (740 ) (1,732 ) (2,210 ) (1,236 ) Accrued expenses and other 937 (421 ) 484 143 Income tax payable 665 (121 ) 1,268 23 Reserve for unexchanged promotional shares — — — (1,393 ) Other non-current liabilities 46   123   53   795   Net cash provided by (used in) operating activities 2,496   (458 ) 3,905   868   Cash flows from investing activities: Release of restricted cash — — — 57 Purchases of property and equipment (503 ) (564 ) (648 ) (753 ) Net cash used in investing activities (503 ) (564 ) (648 ) (696 ) Cash flows from financing activities: Payment for Asia Pacific business — — 58 — Payment of loan to related party — (5,658 ) — Proceeds from related party loan — 1,500 — 2,250 Decrease in bank overdraft — (281 ) — (237 ) Repurchase of common stock, net (3,048 ) —   (4,956 )   Net cash provided by (used in) financing activities (3,048 ) 1,219   (10,556 ) 2,013   Effect of exchange rate on cash and cash equivalents (192 ) 1,698   (269 ) (1,125 ) Net increase (decrease) in cash and cash equivalents (1,247 ) 1,895 (7,568 ) 1,060 Cash and cash equivalents at beginning of period 28,807   54,582   35,128   55,417   Cash and cash equivalents at end of period $ 27,560   $ 56,477   $ 27,560   $ 56,477   Supplemental disclosure of cash flow information: Cash paid for income taxes, net $ 1,022 $ 372 $ 1,072 $ 733 Cash paid for interest on related party loan $ — $ — $ 110 $ —    

Travelzoo Inc.Segment Information(Unaudited)(In thousands)

  Three months ended June 30, 2016      

  Asia Pacific  

  Europe  

     North          America     

  Consolidated Revenue from unaffiliated customers $ 2,412 $           9,946 $         21,688 $ 34,046 Intersegment revenue 35   (247 ) 212   — Total net revenues 2,447   9,699   21,900   34,046 Operating income (loss) $ (1,224 ) $           1,791   $         3,209   $ 3,776 Three months ended June 30, 2015

  Asia Pacific  

Europe

     North          America     

Consolidated Revenue from unaffiliated customers 2,728 10,337 23,727 36,792 Intersegment revenue (15 ) (78 ) 93   — Total net revenues 2,713   10,259   23,820   36,792 Operating income (loss) $ (268 ) $           47   $         2,549   $ 2,328   Six months ended June 30, 2016

  Asia Pacific  

Europe

     North          America     

Consolidated Revenue from unaffiliated customers $ 4,671 $ 20,912 $ 43,267 $ 68,850 Intersegment revenue 36   (321 ) 285   — Total net revenues 4,707   20,591   43,552   68,850 Operating income (loss) $ (2,268 ) $           3,885   $         5,307   $ 6,924 Six months ended June 30, 2015

  Asia Pacific  

Europe

     North          America     

Consolidated Revenue from unaffiliated customers $ 5,381 $ 22,116 $ 48,440 $ 75,937 Intersegment revenue (20 ) (295 ) 315   — Total net revenues 5,361   21,821   48,755   75,937 Operating income (loss) $ (1,101 ) $           1,776   $         4,635   $ 5,310  

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Travelzoo Inc.Investor Relations:Molly Yuir@travelzoo.com