TZOO Travelzoo

Travelzoo® (NASDAQ:TZOO):

• Revenue of $24.7 million, down 9% year-over-year in constant currencies
• Operating profit of $18,000
• Earnings (loss) per share of $(0.05)
• Cash flow from operations of $122,000

Travelzoo, a global publisher of exclusive deals for members, today announced financial results for the third quarter ended September 30, 2017, with revenue of $24.7 million and operating profit of $18,000. In nominal terms, revenue decreased by 8% year-over-year. In constant currencies, revenue decreased by 9% year-over-year. Net loss was $576,000, with earnings (loss) per share of $(0.05).

"Revenues were impacted by the two large hurricanes hitting the Caribbean and parts of the U.S. during the quarter," said Dr. Holger Bartel, Global CEO of Travelzoo. "We intend to leverage Travelzoo's global reach and trusted brand to improve earnings in future periods."

Asia Pacific

Asia Pacific business segment revenue decreased 31% year-over-year to $1.8 million. In constant currencies, revenue decreased 28% year-over-year. Operating loss for the third quarter was $1.7 million, compared to an operating loss of $798,000 in the prior-year period.

Europe

Europe business segment revenue decreased 6% year-over-year to $7.9 million. In constant currencies, revenue decreased 9% year-over-year. Operating profit for the third quarter was $309,000, or 4% of revenue, compared to operating income of $1.4 million, or 17% of revenue in the prior-year period.

North America

North America business segment revenue decreased 5% year-over-year to $15.0 million. Operating profit for the third quarter was $1.4 million, or 9% of revenue, compared to operating income of $1.3 million, or 8% of revenue in the prior-year period.

Members

As of September 30, 2017, Travelzoo had a worldwide unduplicated number of members of 29.5 million. In Asia Pacific, unduplicated number of members was 3.6 million as of September 30, 2017, up 1% from September 30, 2016. In Europe, unduplicated number of members was 8.5 million as of September 30, 2017, up 4% from September 30, 2016. In North America, unduplicated number of members remained at 17.4 million as of September 30, 2017.

Income Taxes

Income tax expense was $680,000, compared to a $748,000 income tax expense in the prior-year period.

Asset Management

During the third quarter of 2017, Travelzoo generated $122,000 of cash for operating activities. Accounts receivable decreased by $5.3 million over the prior-year period to $11.4 million. Accounts payable decreased by $2.6 million over the prior-year period to $16.0 million. Capital expenditures were $180,000, up from $155,000 in the prior-year period. As of September 30, 2017, cash and cash equivalents were $18.8 million.

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® provides our 28 million members insider deals and one-of-a-kind experiences personally reviewed by one of our deal experts around the globe. With more than 25 offices worldwide we have our pulse on outstanding travel, entertainment, and lifestyle experiences. For over 15 years we have worked in partnership with more than 2,000 top travel suppliers—our long-standing relationships allow us access to the very best deals.

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

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

  Three months ended Nine months ended September 30,   September 30, 2017       2016   2017       2016 Revenues $ 24,687 $ 26,823 $ 79,527   $ 87,450 Cost of revenues 3,018   3,270   9,447   10,593 Gross profit 21,669   23,553   70,080   76,857 Operating expenses: Sales and marketing 13,973 14,075 43,542 45,060 Product development 2,315 2,230 7,016 7,019 General and administrative 5,363   5,373   16,056   16,620 Total operating expenses 21,651     21,678   66,614   68,699 Income from continuing operations 18 1,875 3,466 8,158 Other income (expense), net 86   251   111   293 Income from continuing operations before income taxes 104 2,126 3,577 8,451 Income tax expense 680   748   2,660     3,450 Income (loss) from continuing operations $ (576 ) $ 1,378 $ 917 $ 5,001 Income from discontinued operations, net of income taxes —   241   1,938     687 Net income (loss) $ (576 ) $ 1,619   $ 2,855   $ 5,688   Income (loss) per share—basic: Continuing operations $ (0.05 ) $ 0.10 $ 0.07 $ 0.35 Discontinued operations

0.00

  0.02   0.15     0.05 Net income (loss) per share—basic $ (0.05 ) $ 0.12   $ 0.22     $ 0.40   Income (loss) per share—diluted: Continuing operations $ (0.05 ) $ 0.10 $ 0.07 $ 0.35 Discontinued operations 0.00   0.02   0.15     0.05 Net income (loss) per share—diluted $ (0.05 ) $ 0.12   $ 0.22     $ 0.40   Weighted average shares: Basic 12,628 13,839 13,023 14,109 Diluted 12,628 13,867 13,040 14,119          

Travelzoo

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

  September 30, 2017 December 31, 2016 Assets Current assets: Cash and cash equivalents $ 18,822 $ 26,838 Accounts receivable, net 11,434 14,415 Income taxes receivable 1,540 542 Deposits 396 105 Prepaid expenses and other 1,961 1,773 Deferred tax assets —   793   Total current assets 34,153 44,466 Deposits and other 508 702 Deferred tax assets 1,800 1,052 Restricted cash 1,438 1,152 Property and equipment, net 5,265   6,158   Total assets $ 43,164   $ 53,530   Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 15,966 $ 19,714 Accrued expenses and other 7,932 8,699 Deferred revenue 897 719 Income tax payable 936   691   Total current liabilities 25,731 29,823 Long-term tax liabilities 2,563 2,879 Long-term deferred rent and other 2,721   2,764   Total liabilities 31,015   35,466   Common stock 125 135 Additional paid-in capital — — Accumulated other comprehensive loss (3,556 ) (3,787 ) Retained earnings 15,580   21,716   Total stockholders’ equity 12,149   18,064   Total liabilities and stockholders’ equity $ 43,164   $ 53,530            

Travelzoo

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

  Three months ended Nine months ended September 30, September 30, 2017     2016 2017     2016 Cash flows from operating activities: Net income (loss) $ (576 ) $ 1,619 $ 2,855 $ 5,688 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 504 606 1,605 1,856 Discontinued operations gain on sale of Fly.com domain name — — (2,890 ) — Deferred income taxes 97 (13 ) 28 (224 ) Stock-based compensation 206 251 686 692 Provision for losses on accounts receivable (7 ) (28 ) (34 ) 17 Net foreign currency effects (69 ) (71 ) (293 ) (308 ) Changes in operating assets and liabilities: Accounts receivable 1,301 1,715 3,388 (547 ) Income tax receivable (903 ) (823 ) (868 ) (299 ) Prepaid expenses and other (199 ) (538 ) (417 ) (387 ) Accounts payable 1,359 (2,177 ) (4,695 ) (4,391 ) Accrued expenses and other (1,450 ) (2,628 ) (1,009 ) (2,074 ) Income tax payable (70 ) 504 109 1,772 Other non-current liabilities (71 ) 69   (349 ) 121   Net cash provided by (used in) operating activities 122   (1,514 ) (1,884 ) 1,916   Cash flows from investing activities: Proceeds from sale of Fly.com domain name — — 2,890 — Purchases of property and equipment (180 ) (155 ) (486 ) (802 ) Net cash provided by (used in) investing activities (180 ) (155 ) 2,404   (802 ) Cash flows from financing activities: Acquisition of the Asia Pacific business — — — 58 Payment of loan to related party — — — (5,658 ) Repurchase of common stock, net (2,732 ) (771 ) (9,556 ) (5,727 ) Net cash used in financing activities (2,732 ) (771 ) (9,556 ) (11,327 ) Effect of exchange rate on cash and cash equivalents 281   (281 ) 1,020   (76 ) Net decrease in cash and cash equivalents (2,509 ) (2,721 ) (8,016 ) (10,289 ) Cash and cash equivalents at beginning of period 21,331   27,560   26,838   35,128   Cash and cash equivalents at end of period $ 18,822   $ 24,839   $ 18,822   $ 24,839   Supplemental disclosure of cash flow information: Cash paid for income taxes, net $ 1,628 $ 1,126 $ 4,858 $ 2,198 Cash paid for interest on related party loan $ — $ — $ — $ 110                  

Travelzoo

Segment Information

(Unaudited)

(In thousands)

  Three months ended September 30, 2017 Asia Pacific Europe NorthAmerica Consolidated Revenue from unaffiliated customers $ 1,767 $ 8,008 $ 14,912 $ 24,687 Intersegment revenue 6   (62 ) 56   — Total net revenues 1,773   7,946   14,968   24,687 Operating profit (loss) $ (1,679 ) $ 309   $ 1,388   $ 18 Three months ended September 30, 2016 Asia Pacific Europe NorthAmerica Consolidated Revenue from unaffiliated customers $ 2,521 $ 8,614 $ 15,688 $ 26,823 Intersegment revenue 36   (140 ) 104   — Total net revenues 2,557   8,474   15,792   26,823 Operating profit (loss) $ (798 ) $ 1,412   $ 1,261   $ 1,875   Nine months ended September 30, 2017 Asia Pacific Europe NorthAmerica Consolidated Revenue from unaffiliated customers $ 5,574 $ 25,231 $ 48,722 $ 79,527 Intersegment revenue (38 ) (317 ) 355   — Total net revenues 5,536   24,914   49,077   79,527 Operating profit (loss) $ (4,385 ) $ 1,526   $ 6,325   $ 3,466 Nine months ended September 30, 2016 Asia Pacific Europe NorthAmerica Consolidated Revenue from unaffiliated customers $ 7,173 $ 28,893 $ 51,384 $ 87,450 Intersegment revenue 78   (403 ) 325   — Total net revenues 7,251   28,490   51,709   87,450 Operating profit (loss) $ (3,080 ) $ 5,022   $ 6,216   $ 8,158  

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Investor Relations:TravelzooLijun Qiir@travelzoo.com