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Travelzoo Reports Third Quarter 2012 Results

Income Taxes

Income tax expense was $896,000, compared to $3.3 million in the prior-year period. The effective income tax rate was 21%, compared to 36% in the prior-year period.

Asset Management

During the third quarter 2012, Travelzoo generated $6.9 million of cash from operating activities. Accounts receivable increased by $1.4 million over the prior-year period to $15.4 million. Accounts payable increased by $6.1 million over the prior-year period to $23.3 million. Capital expenditures were $774,000, down from $847,000 in the prior-year period. Travelzoo exited the third quarter with $57.6 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 25 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 ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
 
Revenues $ 35,447 $ 38,661 $ 114,140 $ 113,186
Cost of revenues   3,989   4,221   11,672   9,603
Gross profit   31,458   34,440   102,468   103,583
 
Operating expenses:
Sales and marketing 17,427 16,737 49,753 51,569
General and administrative 9,836 8,478 28,583 25,167
Unexchanged promotional merger shares   -   -   3,000   20,000
Total operating expenses   27,263   25,215   81,336   96,736
 
Income from operations 4,195 9,225 21,132 6,847
 
Other income   135   -   218     105
Income before income taxes 4,330 9,225 21,350 6,952
 
Income taxes 896 3,298 6,908 10,061
       
Net income (loss) $ 3,434 $ 5,927 $ 14,442 $ (3,109)
 
Net income (loss) per share:        
Basic $ 0.22 $ 0.36 $ 0.91 $ (0.19)
Diluted $ 0.22 $ 0.36 $ 0.90 $ (0.19)
 
Weighted Average Shares:
Basic 15,884 16,396 15,935 16,434
Diluted 15,922 16,504 16,041 16,434
 
     
Travelzoo Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands)
 
 
September 30, December 31,
  2012     2011  
 
Assets
Current assets:
Cash and cash equivalents $ 57,634 $ 38,744
Accounts receivable, net 15,440 13,340
Income taxes receivable 10,052 3,625
Deposits 381 278
Prepaid expenses and other current assets 2,757 2,123
Deferred tax assets   1,356     1,754  
Total current assets 87,620 59,864
Deposits, less current portion 1,068 776
Deferred tax assets, less current portion 357 344
Restricted cash 3,122 3,103
Property and equipment, net 4,007 3,557
Intangible assets, net   440     704  
Total assets $ 96,614   $ 68,348  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 23,314 $ 21,731
Accrued expenses 12,619 6,311
Deferred revenue 2,506 2,168
Deferred rent 287 114
Income tax payable   -     279  
Total current liabilities 38,726 30,603
Long-term tax liabilities 9,874 2,225
Deferred rent, less current portion   831     761  
Total liabilities   49,431     33,589  
Common stock 163 164
Treasury stock - (15,123 )
Additional paid-in capital 8,556 7,656
Accumulated other comprehensive loss (728 ) (1,422 )
Retained earnings   39,192     43,484  
Total stockholders' equity   47,183     34,759  
Total liabilities and stockholders' equity $ 96,614   $ 68,348  
 
           
Travelzoo Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
 
Three months ended Nine months ended
September 30, September 30,
  2012     2011     2012     2011  
Cash flows from operating activities:
Net income (loss) $ 3,434 $ 5,927 $ 14,442 $ (3,109 )
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 630 746 1,856 2,054
Deferred income taxes (3 ) 49 (3 ) 209
Stock-based compensation 307 187 900 562
Provision for losses on accounts receivable (84 ) (67 ) 116 (25 )
Tax benefit from exercise of stock options - - - (268 )
Net foreign currency effects (46 ) 52 (6 ) 24
Changes in operating assets and liabilities:
Accounts receivable 53 1,734 (2,069 ) (722 )
Deposits (17 ) 92 (382 ) (568 )
Income tax receivable 689 358 1,819 (2,031 )
Prepaid expenses and other current assets (161 ) (654 ) (241 ) (771 )
Accounts payable 680 1,840 1,189 7,454
Accrued expenses 897 (2,192 ) 6,198 4,992
Deferred revenue 383 170 323 268
Deferred rent 55 83 21 179
Income tax payable (1 ) 165 (284 ) (353 )
Other non-current liabilities   34     645     (190 )   659  
Net cash provided by operating activities   6,850     9,135     23,689     8,554  
 
Cash flows from investing activities:
Purchases of property and equipment   (774 )   (847 )   (2,046 )   (1,902 )
Net cash used in investing activities   (774 )   (847 )   (2,046 )   (1,902 )
 
Cash flows from financing activities:
Cash used in purchase of common stock (3,611 ) (15,124 ) (3,611 ) (15,124 )
Proceeds from exercise of stock options - - - 40
Tax benefit of stock option exercises   -     -     -     268  
Net cash used in financing activities   (3,611 )   (15,124 )   (3,611 )   (14,816 )
 
Effect of exchange rate on cash and cash equivalents 1,008 (817 ) 858 (587 )
 
Net increase (decrease) in cash and cash equivalents 3,473 (7,653 ) 18,890 (8,751 )
Cash and cash equivalents at beginning of period   54,161     40,086     38,744     41,184  
Cash and cash equivalents at end of period $ 57,634   $ 32,433   $ 57,634   $ 32,433  
 
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net 177 2,096 5,568 11,572
 
             
Travelzoo Inc. Segment Information (Unaudited) (In thousands)
 
 
Three months ended September 30, 2012

   North       America   

   Europe   

Elimination   Consolidated
 
Revenue from unaffiliated customers $ 25,147 $ 10,300 $ - $ 35,447
Intersegment revenue   211   10   (221 )   -
Total net revenues   25,358   10,310   (221 )   35,447
Operating income $ 3,121 $ 1,074 $ -   $ 4,195
 
 
Three months ended September 30, 2011

  North     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 $ 7,811 $ 1,414 $ -   $ 9,225
 
 
Nine months ended September 30, 2012

   North       America   

   Europe   

Elimination and Other (a)

  Consolidated
 
Revenue from unaffiliated customers $ 82,415 $ 31,725 $ - $ 114,140
Intersegment revenue   496   41   (537 )   -
Total net revenues   82,911   31,766   (537 )   114,140
Operating income $ 18,094 $ 6,038 $ (3,000 ) $ 21,132
 
 
Nine months ended September 30, 2011

     North           America     

     Europe     

Elimination and Other (a)

  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 $ 23,605 $ 3,242 $ (20,000 ) $ 6,847
 
  (a) Includes a charge related to unexchanged promotional shares for the nine months ended September 30, 2012 and 2011.
 




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