Travelzoo Reports First Quarter 2014 Results

NEW YORK--()--Travelzoo Inc. (NASDAQ:TZOO):

First Quarter 2014 Financial Highlights:

  • Revenue of $40.2 million, down 5% year-over-year
  • Operating profit of $7.0 million, down 13% year-over-year
  • Net income of $4.6 million
  • Earnings per share of $0.31, compared to $0.36 in the prior-year period

Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March 31, 2014, with revenue of $40.2 million, a decrease of 5% year-over-year. Operating profit was $7.0 million, down 13% year-over-year. Net income was $4.6 million, with diluted earnings per share of $0.31, down from $0.36 in the prior-year period.

"Our European business delivered strong results. North America reported weak revenue. North America was impacted by a reduction in Search marketing spend and slow Local voucher sales," said Chris Loughlin, chief executive officer. "A positive highlight is the record number of mobile downloads we saw in the quarter. We believe in our strategy of quickly adapting to mobile usage."

North America

North America business segment revenue decreased 12% year-over-year to $26.4 million. Operating profit for the first quarter was $4.6 million, or 17% of revenue, down from $5.5 million, or 18% of revenue, in the prior-year period.

Europe

Europe business segment revenue increased 13% year-over-year to $13.8 million. In local currency terms, revenue increased 6% year-over-year. Operating profit for the first quarter was $2.4 million, or 17% of revenue, down from $2.6 million, or 21% of revenue in the prior-year period.

Subscribers

Travelzoo had a total unduplicated number of subscribers in North America and Europe of 23.6 million as of March 31, 2014, up 1% from December 31, 2013. In North America, total unduplicated number of subscribers was 16.7 million as of March 31, 2014, up 1% from December 31, 2013. In Europe, total unduplicated number of subscribers was 6.9 million as of March 31, 2014, up 2% from December 31, 2013.

Update on Hotel Booking Platform

Travelzoo launched the first phase of its hotel booking platform at the end of March. A select group of U.S. subscribers can now book hotels any night of the year through Travelzoo. "We are working with many new hotels that previously were unable to accept the Local voucher format," said Chris Loughlin, chief executive officer. "The new platform also makes it easier for our subscribers to book a hotel deal on their mobile phones." The hotel booking platform is expected to begin contributing to revenues in the second quarter, an average of 60 to 70 days after bookings occur. Travelzoo recognizes revenue upon the hotel stay and not at the time of booking.

Income Taxes

Income tax expense was $2.5 million, compared to $2.5 million in the prior-year period. The effective income tax rate was 35%, up from 31% in the prior-year period.

Asset Management

During the first quarter of 2014, Travelzoo generated $1.8 million of cash from operating activities. Accounts receivable increased by $52,000 over the prior-year period to $15.4 million. Accounts payable increased by $2.1 million over the prior-year period to $29.0 million. Capital expenditures were $1.0 million, up from $900,000 in the prior-year period. As of March 31, 2014, cash and cash equivalents were $61.0 million.

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 27 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. 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
March 31,
2014 2013
Revenues $   40,195 $   42,177
Cost of revenues 4,777 3,985
Gross profit 35,418 38,192
Operating expenses:
Sales and marketing 17,843 19,659
General and administrative 10,578 10,497
Total operating expenses 28,421 30,156
Income from operations 6,997 8,036
Other income 122 31
Income before income taxes 7,119 8,067
Income taxes 2,481 2,472
Net income $   4,638 $   5,595
Net income per share:    
Basic $   0.31 $   0.36
Diluted $   0.31 $   0.36
Weighted average shares:
Basic 14,880 15,362
Diluted 14,970 15,371
 
         

Travelzoo Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

   March 31,   
2014

December 31,
2013

Assets
Current assets:
Cash and cash equivalents $ 61,035 $ 66,223
Accounts receivable, net 15,355 13,986
Income taxes receivable 1,388 2,656
Deposits 251 396
Prepaid expenses and other current assets 2,538 3,202
Deferred tax assets 1,067 1,143
Restricted cash 200
Funds held for reverse/forward stock split 212   13,668  
Total current assets 81,846 101,474
Deposits, less current portion 1,231 1,168
Deferred tax assets, less current portion 2,032 2,032
Restricted cash 1,480 1,479
Property and equipment, net 10,305 8,245
Intangible assets, net 349   404  
Total assets $ 97,243   $ 114,802  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 28,999 $ 31,766
Accrued expenses 9,820 10,543
Deferred revenue 1,688 1,578
Deferred rent 271 281
Income tax payable 726
Reserve for unexchanged promotional shares 11,500 12,726
Payable to shareholders for reverse/forward stock split 212   13,668  
Total current liabilities 53,216 70,562
Long-term tax liabilities 10,546 10,436
Deferred rent, less current portion 3,111   2,469  
Total liabilities 66,873   83,467  
Common stock 163 163
Treasury stock (21,231 ) (15,662 )
Additional paid-in capital 10,642 10,247
Accumulated other comprehensive loss (613 ) (530 )
Retained earnings 41,409   37,117  
Total stockholders’ equity 30,370   31,335  
Total liabilities and stockholders’ equity $ 97,243   $ 114,802  
 
     

Travelzoo Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 
Three months ended
March 31,
2014   2013
Cash flows from operating activities:
Net income $   4,638 $   5,595
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 701 716
Deferred income taxes 76 193
Stock-based compensation 395 307
Provision for losses on accounts receivable (52 ) 95
Net foreign currency effects (9 ) 94
Changes in operating assets and liabilities:
Accounts receivable (1,288 ) (2,036 )
Deposits 133 (155 )
Income tax receivable 1,266 1,564
Prepaid expenses and other current assets 447 350
Accounts payable (2,984 ) (549 )
Accrued expenses (1,294 ) 850
Deferred revenue 110 (517 )
Deferred rent 5 (110 )
Income tax payable 722
Reserve for unexchanged promotional shares (1,226 )
Other non-current liabilities 111   103  
Net cash provided by operating activities 1,751   6,500  
Cash flows from investing activities:
Release of restricted cash 200
Purchases of property and equipment (1,019 ) (900 )
Net cash used in investing activities (819 ) (900 )
Cash flows from financing activities:
Repurchase of common stock (5,569 )
Reverse/forward stock split, including transaction costs (479 )  
Net cash used in financing activities (6,048 )  
Effect of exchange rate on cash and cash equivalents (72 ) (1,662 )
Net increase (decrease) in cash and cash equivalents (5,188 ) 3,938
Cash and cash equivalents at beginning of period 66,223   61,169  
Cash and cash equivalents at end of period $   61,035   $   65,107  
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net $ 335 $ 10
 
                 

Travelzoo Inc.

Segment Information

(Unaudited)

(In thousands)

 
Three months ended March 31, 2014

      North      

America

    Europe    

Elimination
and Other

Consolidated
Revenue from unaffiliated customers $ 26,353 $ 13,842 $ $ 40,195
Intersegment revenue 221 12 (233)
Total net revenues 26,574 13,854 (233) 40,195
Operating income $ 4,604 $ 2,393 $ $ 6,997
 
Three months ended March 31, 2013 North

America

Europe

Elimination
and Other

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

Contacts

Media:
Travelzoo Inc.
Glen Ceremony, +1-212-484-4998
Chief Financial Officer
pr@travelzoo.com

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Contacts

Media:
Travelzoo Inc.
Glen Ceremony, +1-212-484-4998
Chief Financial Officer
pr@travelzoo.com