January 24, 2013 at 08:00 AM EST
Travelzoo Reports Fourth Quarter 2012 Results

Travelzoo Inc. (NASDAQ: 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 endedTwelve months ended
December 31,December 31,
2012201120122011
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,
20122011

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 endedTwelve months ended
December 31,December 31,
2012201120122011
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 1,784 576 (285) (146)
Deposits (24) (99) (406) (667)
Income tax receivable

3,351

(1,061)

5,171

(3,093)
Prepaid expenses and other current assets

328

188

87

(584)
Accounts payable 5,211 4,620 6,403 12,074
Accrued expenses (630) (4,737) 5,568 256
Deferred revenue 190 585 513 853
Deferred rent 25 30 45 209
Income tax payable (1) (15) (285) (369)
Other non-current liabilities 156 117 (35) 776
Net cash provided by operating activities 13,010 7,078 36,700 15,631
Cash flows from investing activities:
Purchases of restricted cash (272) - (272) -
Purchases of intangible asset (677) - (677) -
Purchases of property and equipment (698) (558) (2,744) (2,460)
Net cash used in investing activities (1,647) (558) (3,693) (2,460)
Cash flows from financing activities:
Cash used in purchase of common stock (7,898) - (11,509) (15,124)
Proceeds from exercise of stock options - - - 40
Tax benefit of stock option exercises - - - 268
Net cash used in financing activities (7,898) - (11,509) (14,816)
Effect of exchange rate on cash and cash equivalents 70 (209) 927 (795)
Net increase (decrease) in cash and cash equivalents 3,535 6,311 22,425 (2,440)
Cash and cash equivalents at beginning of period 57,634 32,433 38,744 41,184
Cash and cash equivalents at end of period $ 61,169 $ 38,744 $ 61,169 $ 38,744
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes, net (631) 3,453 5,081 15,025
Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)

Three months ended December 31, 2012

North
America

Europe

Elimination

Consolidated

Revenue from unaffiliated customers $ 26,373 $ 10,655 $ - $ 37,028
Intersegment revenue 157 102 (259) -
Total net revenues 26,530 10,757 (259) 37,028
Operating income $ 3,387 $ 969 $ - $ 4,356

Three months ended December 31, 2011

North
America

Europe

Elimination

Consolidated

Revenue from unaffiliated customers $ 25,500 $ 9,656 $ - $ 35,156
Intersegment revenue 124 42 (166) -
Total net revenues 25,624 9,698 (166) 35,156
Operating income $ 6,504 $ 1,671 $ - $ 8,175

Twelve months ended December 31, 2012

North
America

Europe

Elimination
and Other (a)

Consolidated

Revenue from unaffiliated customers $ 108,788 $ 42,380 $ - $ 151,168
Intersegment revenue 728 143 (871) -
Total net revenues 109,516 42,523 (871) 151,168
Operating income $ 21,481 $ 7,008 $ (3,000) $ 25,489

Twelve months ended December 31, 2011

North
America

Europe

Elimination
and Other (a)

Consolidated

Revenue from unaffiliated customers $ 108,549 $ 39,793 $ - $ 148,342
Intersegment revenue 466 134 (600) -
Total net revenues 109,015 39,927 (600) 148,342
Operating income $ 30,110 $ 4,912 $ (20,000) $ 15,022

(a) Includes a charge related to unexchanged promotional merger shares for the twelve months ended December 31, 2012 and 2011.

Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In thousands, except per share amounts)
Twelve months ended
December 31,
20122011
GAAP operating income $ 25,489 $ 15,022
Unexchanged promotional merger shares (a) 3,000 20,000
Non-GAAP operating income $ 28,489 $ 35,022
GAAP net income $ 18,198 $ 3,319
Unexchanged promotional merger shares (a) 3,000 20,000
Non-GAAP net income $ 21,198 $ 23,319
Diluted net Income per share $ 1.14 $ 0.20
Unexchanged promotional merger shares (a) 0.19 1.22
Non-GAAP diluted net income per share $ 1.33 $ 1.42

(a) Includes a charge related to unexchanged promotional merger shares of $20.0
million and $3.0 million for the twelve months ended December 31, 2011 and 2012,
respectively.

Contacts:

Media:
Lisa Moore, +1-212-484-4963
lmoore@travelzoo.com
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