Travelzoo Reports Third Quarter 2011 Results

Travelzoo Inc. (NASDAQ: TZOO):

  • Revenue of $38.7 million, up 40% year-over-year
  • Operating profit of $9.2 million, up 62% year-over-year
  • Net income of $5.9 million, up 62% year-over-year
  • Earnings per share of $0.36, compared to $0.22 in the prior year period

Travelzoo Inc., a global Internet media company, today announced financial results for the third quarter ended September 30, 2011, with revenue of $38.7 million, an increase of 40% year-over-year. Operating profit was $9.2 million, up 62% year-over-year. Net income was $5.9 million, with diluted net income per share (EPS) of $0.36, up from $0.22 in the prior-year period.

“In a typically slow third quarter, Travelzoo's growth accelerated; revenues grew at the fastest pace in five years and reached record levels in both North America and Europe," said Chris Loughlin, chief executive officer of Travelzoo. "Our expansion into local deals focuses on growing both the top and the bottom line. Operating margins improved, and operating income and earnings per share increased even more than revenues.

North America

North America business segment revenue grew 32% year-over-year to $28.1 million. Operating profit was $7.8 million, or 28% of revenue, up from $5.5 million, or 26% of revenue, in the prior-year period.

Europe

Europe business segment revenue grew 65% year-over-year to $10.7 million. In local currency terms, revenue grew 59% year-over-year. Operating profit was $1.4 million, compared to an operating profit of $248,000 in the prior-year period.

Subscribers

Travelzoo had a total unduplicated number of newsletter subscribers in North America and Europe of 21.3 million as of September 30, 2011, up 14% from September 30, 2010, and up 3% from June 30, 2011. In North America, total unduplicated number of subscribers was 15.6 million as of September 30, 2011, up 10% from September 30, 2010 and up 2% from June 30, 2011. In Europe, total unduplicated number of subscribers was 5.7 million as of September 30, 2011, up 27% from September 30, 2010 and up 5% from June 30, 2011.

Asset Management

During the third quarter, Travelzoo generated $9.1 million of cash from operating activities. Accounts receivable decreased by $1.9 million quarter-over-quarter and decreased by $86,000 over the prior-year period to $14.1 million. Accounts payable increased by $1.5 million quarter-over-quarter and increased by $9.8 million over the prior-year period to $17.2 million. Capital expenditures were $847,000, up from $356,000 in the prior quarter and up from $391,000 in the prior-year period. Travelzoo exited the third quarter with $32.4 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 24 million subscribers in North America, Europe, and Asia Pacific and 24 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,
2011 2010 2011 2010
Revenues $ 38,661 $ 27,693 $ 113,186 $ 84,317
Cost of revenues 4,221 1,742 9,603 5,012
Gross profit 34,440 25,951 103,583 79,305
Operating expenses:
Sales and marketing 16,737 13,630 51,569 42,671
General and administrative 8,478 6,616 25,167 19,833
Settlement with State of Delaware

-

-

20,000

-

Total operating expenses 25,215 20,246 96,736 62,504
Income (loss) from operations 9,225 5,705 6,847 16,801
Other income and expense:
Interest income and other income 52 45 128 132
Gain (loss) on foreign currency (52 ) 20 (24 ) (190 )
Income (loss) before income taxes 9,225 5,770 6,951 16,743
Income taxes 3,299 2,120 10,061 7,373
Net income (loss) $ 5,926 $ 3,650 $ (3,110 ) $ 9,370
Basic net income (loss) per share $ 0.36 $ 0.22 $ (0.19 ) $ 0.57
Diluted net income (loss) per share $ 0.36 $ 0.22 $ (0.19 ) $ 0.57
Shares used in computing basic net

income (loss) per share

16,396 16,444 16,434 16,444
Shares used in computing diluted

net income (loss) per share

16,504 16,453 16,434 16,453
Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
September 30, December 31,
2011 2010
ASSETS
Cash and cash equivalents $ 32,433 $ 41,184
Accounts receivable, net 14,066 13,290
Income taxes receivable 2,563 264
Deposits 210 129
Prepaid expenses and other current assets 2,278 1,489
Deferred tax assets 1,362 1,411
Total current assets 52,912 57,767
Deposits, less current portion 753 279
Deferred tax assets, less current portion 349 349
Restricted cash 3,102 3,124
Property and equipment, net 3,519 3,425
Intangible assets, net 792 1,058
Total assets $ 61,427 $ 66,002
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable 17,177 9,931
Accrued expenses 11,000 6,080
Deferred revenue 1,587 1,325
Deferred rent 108 218
Income tax payable 294 650
Total current liabilities 30,166 18,204
Deferred tax liabilities 160

-

Long term tax liabilities

2,109 1,449
Deferred rent, less current portion 734 460
Common stock 160 164
Treasury stock (15,119 )

-

Additional paid in capital

7,468 6,598
Accumulated other comprehensive loss (1,306 ) (1,038 )
Retained earnings 37,055 40,165
Total stockholders' equity 28,258 45,889
Total liabilities and

stockholders' equity

$ 61,427 $ 66,002

Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three months ended Nine months ended
September 30, September 30,
2011 2010 2011 2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 5,926 $ 3,650 $ (3,110 ) $ 9,370
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 746 619 2,054 1,766
Deferred income taxes 49 64 209 64
Stock-based compensation 187 187 562 562
Provision for losses on accounts
receivable (67 ) 107 (25 ) 106
Tax benefit of stock option exercises - - (268 ) -
Net foreign currency effects 52 (20 ) 24 190
Changes in operating assets and
liabilities:
Accounts receivable 1,734 (414 ) (722 ) (2,982 )
Deposits 92 (24 ) (568 ) (109 )
Income tax receivable 359 (984 ) (2,031 ) 4,280
Prepaid expenses and other current
assets (668 ) (238 ) (785 ) (278 )
Accounts payable 1,840 863 7,454 594
Accrued expenses (2,192 ) (239 ) 4,992 1,416
Deferred revenue 170 127 268 348
Deferred rent 83 (55 ) 179 (20 )
Income tax payable 165 140 (353 ) 496
Other non-current liabilities 659 (733 ) 673 (704 )
Net cash provided by (used in)
operating activities 9,135 3,050 8,553 15,099
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (847 ) (391 ) (1,902 ) (1,142 )
Net cash used in investing activities (847 ) (391 ) (1,902 ) (1,142 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options - - 40 -
Repurchase of common stock (15,124 ) - (15,124 ) -
Tax benefit of stock option exercises - - 268 -
Proceeds from sale of Asia Pacific
business segment - - - 1,073
Net cash provided by financing

activities

(15,124 ) - (14,816 ) 1,073

Effect of exchange rate on cash and cash
equivalents (817 ) 183 (586 ) (89 )
Net increase (decrease) in cash and
cash equivalents (7,653 ) 2,842 (8,751 ) 14,941
Cash and cash equivalents at beginning of
period 40,086 31,875 41,184 19,776
Cash and cash equivalents at end of period

$

32,433

$

34,717

$

32,433

$

34,717
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes, net $ 2,096 $ 3,632 $ 11,572 $ 3,264
Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
Three months ended

North

September 30, 2011

America

Europe

Elimination

Consolidated

Revenue from
unaffiliated customers $ 27,944 $ 10,717 $

-

$ 38,661
Intersegment revenue 130 30 (160 )

-

Total net revenues 28,074 10,747 (160 ) 38,661
Operating income (loss) $ 7,811 $ 1,414 $

-

$ 9,225
Three months ended North

September 30, 2010 America

Europe

Elimination

Consolidated

Revenue from
unaffiliated customers $ 21,196 $ 6,497 $

-

$ 27,693
Intersegment revenue 57 14 (71 )

-

Total net revenues 21,253 6,511 (71 ) 27,693
Operating income (loss) $ 5,457 $ 248 $

-

$ 5,705

Nine months ended North

September 30, 2011

America

Europe

Elimination

Consolidated

Revenue from
unaffiliated customers $ 83,048 $ 30,138 $

-

$ 113,186
Intersegment revenue 342 92 (434 )

-

Total net revenues 83,390 30,230 (434 ) 113,186
Operating income (loss) $ 3,605 $ 3,242 $

-

$ 6,847

Nine months ended North

September 30, 2010

America

Europe

Elimination

Consolidated

Revenue from
unaffiliated customers $ 65,716 $ 18,601 $

-

$ 84,317
Intersegment revenue 128 79 (207 )

-

Total net revenues 65,844 18,680 (207 ) 84,317
Operating income (loss) $ 18,310 $ (1,511 ) $ 2 $ 16,801

Contacts:

Travelzoo Inc.
Christie McConnell, +1-212-484-4912
cmcconnell@travelzoo.com
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