Q1 2010 Earnings Call Transcript
April 26, 2010 11:00 am ET
Holger Bartel – CEO
Wayne Lee – CFO
Chris Loughlin – EVP, Europe
Ed Woo – Wedbush
Noah Steinberg [ph] – G2 Investment Partners
Good morning everyone and welcome to the Travelzoo first quarter 2010 financial results conference call.
Previous Statements by TZOO
» Travelzoo Inc. Q4 2009 Earnings Call Transcript
» Travelzoo Q3 2009 Earnings Call Transcript
» Travelzoo Q2 2009 Earnings Call Transcript
At this time all participants have been placed on a listen-only mode and the floor will be open for questions following the presentation. Today’s call is being recorded.
It is now my pleasure to turn the floor over to your host, Holger Bartel, Travelzoo’s Chief Executive Officer. Sir, you may begin.
Thank you, operator. Good morning and thank you all for joining us today for Travelzoo’s first quarter 2010 financial results conference call. I am Holger Bartel, Chief Executive Officer, and with me today are Wayne Lee, the company’s chief financial officer; and Chris Loughlin, Executive Vice President, Europe.
Hello everyone, welcome to our conference call.
Good morning everybody.
I would first like to remind you that all statements made during this conference call and presented in our slides that are not statements of historical facts constitute forward-looking statements, and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could vary materially from those contained in the forward-looking statements.
Factor that could cause actual results to differ materially from those in the forward-looking statements are described in our Forms 10-K and 10-Q and other periodic filings with the SEC. Please note that this call is being webcast from our Investor Relations Web site at www.travelzoo.com/earnings.
Please refer to our Web site for important information including our earnings press release issued earlier this morning, along with the slides that accompany today’s prepared remarks. An archived recording of this conference call will be available on the Travelzoo Investor Relations Web site at
, beginning approximately 90 minutes after the conclusion of this call.
For the format of today’s call, Holger will review management’s prepared presentation, and we will then conclude with a question-and-answer session. If you will please now open our management’s presentation, which is available at
, I will now turn the call over to Holger.
Our presentation will fall into two parts. First, I will talk about financial performance, highlights of our financial performance, and then second I will provide an update on our growth strategy.
Let us all turn to slide 4. I just want to highlight key performance metrics for Q1 2010. We are quite excited, our revenues grew by 24% to $28.5 million that is a new record for our company. Subscribers grew to 17.8 million, and our earnings per share are up from $0.13 to $0.15 year over year. This is a 15% increase.
On the next slide, I am providing more detail on the operating income. As you have heard, operating income for the company in Q1 2010 was $5.2 million that consists of operating income of $6.2 million in North America. In Europe, our operating loss decreased from $1.3 million to $1.0 million. We then had $200,000, which is primarily a foreign currency loss, taxes of $2.5 million, and our net income from continuing operations was $2.5 million. Our effective tax rate is slightly down from 53% to 50%.
On slide 6 let us look at revenues first. Revenues continued to grow in North America, year-over-year growth is 12%, very similar to previous quarters. In Europe, we are quite excited that even though the base grows, we can still maintain the pace of doubling revenues year over year. In Q1 again, our revenues doubled versus the previous year, in fact they increased 107% in US dollars, in local currency they increased 91%.
Slide 7, I already mentioned in our press release that we continued to invest in subscriber acquisition as well as in Fly.com. If you compare Q1 2010 versus the previous year, we actually spent over $1 million, exactly $1.1 million on subscriber acquisition in 2010 compared to Q1 2009. Also Fly.com added over $2 million in expenses versus the previous year. We started Fly.com in February 2009. Nevertheless in spite of these investments of over $3 million, our operating income is still up from $4.5 million to $5.2 million.
Slide 8 gives us more insight into operating expenses. First operating expenses in North America increased by $1.8 million, and as a percentage of revenue they increased from 65% to 67%. What is driving this? The two main reasons for the increase are an increase in salary and employee expenses and an increase in staff that is approximately $700,000, and then it is an increase in marketing for Fly.com that is another $700,000.
On the next slide, we are looking at operating expenses in Europe. We also saw an increase there by $2.8 million but as a percentage of revenues, operating expenses actually decreased from 140% to 111%. We are getting closer to the 100% mark, which is actually where we want to be as soon as possible because that represents our breakeven point. What is driving the increase in operating expenses in Europe is an increase in staff, also increase in salaries and employee expenses that adds up to about $900,000, and we also invested significantly more on subscriber acquisition in Europe that is an increase of $800,000 year over year.