Travelzoo Reports Second Quarter 2013 Results

Travelzoo Inc. (NASDAQ: TZOO):
  • Revenue of $41.3 million, up 5% year-over-year
  • Net income of $5.2 million, down 28% year-over-year
  • Earnings per share of $0.34, compared to $0.45 in the prior-year period
  • Cash flow from operations of $10.0 million

Travelzoo Inc., a global Internet media company, today announced financial results for the second quarter ended June 30, 2013, with revenue of $41.3 million, an increase of 5% year-over-year. Operating profit was $7.8 million. Net income was $5.2 million, with earnings per share of $0.34, down from $0.45 in the prior-year period.

"Continued growth in our Travel businesses in North America and Europe drove a solid quarter," said Chris Loughlin, chief executive officer. "Audience engagement reached record levels and we made good progress in social media and mobile. Our earnings were still impacted by our investments into a hotel booking platform, aimed at simplifying our user experience on web and mobile. We plan to introduce the platform later this year."

North America

North America business segment revenue increased 5% year-over-year to $30.2 million. Operating profit for the second quarter was $5.9 million, or 20% of revenue, down from $7.8 million, or 27% of revenue, in the prior-year period. The decrease in operating profit was a result of increased expenses related to sales force expansion, hotel booking platform development and traffic acquisition.

Europe

Europe business segment revenue increased 4% year-over-year to $11.1 million. In local currency terms, revenue for the second quarter increased 7% year-over-year. Operating profit was $1.9 million, or 17% of revenue, down from an operating profit of $2.5 million, or 24% of revenue in the prior-year period.

Subscribers

Travelzoo had a total unduplicated number of subscribers in North America and Europe of 23.0 million as of June 30, 2013, up 4% from June 30, 2012. In North America, total unduplicated number of subscribers was 16.4 million as of June 30, 2013, up 3% from June 30, 2012. In Europe, total unduplicated number of subscribers was 6.6 million as of June 30, 2013, up 8% from June 30, 2012.

Income Taxes

Income tax expense was $2.7 million, compared to $3.1 million in the prior-year period. The effective income tax rate was 34%, up from 30% in the prior-year period.

Asset Management

During the second quarter 2013, Travelzoo generated $10.0 million of cash from operating activities. Accounts receivable increased by $227,000 over the prior-year period to $15.5 million. Accounts payable increased by $6.8 million over the prior-year period to $29.0 million. Capital expenditures were $1.2 million, up from $595,000 in the prior-year period. Travelzoo exited the second quarter with $73.4 million in cash and cash equivalents.

Conference Call

Travelzoo will host a conference call to discuss second 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. 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 Six months ended
June 30, June 30,
2013   2012 2013   2012
Revenues $   41,327 $   39,360 $   83,504 $   78,693
Cost of revenues 4,425   3,630   8,411   7,683
Gross profit 36,902   35,730   75,093   71,010
Operating expenses:
Sales and marketing 19,457 16,061 39,115 32,326
General and administrative 9,651 9,303 20,149 18,747
Unexchanged promotional merger shares       3,000
Total operating expenses 29,108   25,364   59,264   54,073
Income from operations 7,794 10,366 15,829 16,937
Other income (expense) 112   (16 ) 144   83
Income before income taxes 7,906 10,350 15,973 17,020
Income taxes 2,706   3,090   5,178   6,012
Net income $   5,200   $   7,260   $   10,795   $   11,008
Net income per share:        
Basic $   0.34   $   0.45   $   0.70   $   0.69
Diluted $   0.34   $   0.45   $   0.70   $   0.69
Weighted Average Shares:
Basic 15,362 15,962 15,362 15,962
Diluted 15,457 16,006 15,427 16,012
 
     

Travelzoo Inc.Condensed Consolidated Balance Sheets(Unaudited)(In thousands)
 

June 30,2013

December 31,2012
Assets
Current assets:
Cash and cash equivalents $   73,381 $   61,169
Accounts receivable, net 15,463 13,626
Income taxes receivable 3,191 6,682
Deposits 473 389
Prepaid expenses and other current assets 3,400 2,260
Deferred tax assets 2,214   2,194  
Total current assets 98,122 86,320
Deposits, less current portion 943 1,107
Deferred tax assets, less current portion 1,271 1,710
Restricted cash 3,517 3,396
Property and equipment, net 5,811 4,314
Intangible assets, net 655   986  
Total assets $   110,319   $   97,833  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 28,962 $ 28,695
Accrued expenses 13,200 11,993
Deferred revenue 1,828 2,698
Deferred rent 262 280
Income tax payable 1,022    
Total current liabilities 45,274 43,666
Long-term tax liabilities 10,239 10,030
Deferred rent, less current portion 1,437   798  
Total liabilities 56,950   54,494  
Common stock 163 163
Treasury stock (7,898 ) (7,898 )
Additional paid-in capital 9,476 8,863
Accumulated other comprehensive loss (2,115 ) (737 )
Retained earnings 53,743   42,948  
Total stockholders’ equity 53,369   43,339  
Total liabilities and stockholders’ equity $   110,319   $   97,833  
 
     

Travelzoo Inc.Condensed Consolidated Statements of Cash Flows(Unaudited)(In thousands)
 
Three months ended Six months ended
June 30, June 30,
2013   2012 2013   2012
Cash flows from operating activities:
Net income $   5,200 $   7,260 $   10,795 $   11,008

Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization 760 599 1,476 1,225
Deferred income taxes 207 400
Stock-based compensation 307 307 613 593
Provision for losses on accounts receivable (45 ) 91 50 199
Net foreign currency effects 19 75 112 40
Changes in operating assets and liabilities:
Accounts receivable (91 ) (851 ) (2,127 ) (2,122 )
Deposits 175 (232 ) 20 (364 )
Income tax receivable 2,029 285 3,593 1,130
Prepaid expenses and other current assets (1,382 ) 215 (1,032 ) (79 )
Accounts payable 1,965 48 845 508
Accrued expenses 371 (317 ) 1,221 5,302
Deferred revenue (329 ) (194 ) (847 ) (60 )
Deferred rent 221 41 111 (34 )
Income tax payable 467 1 1,038 (283 )
Other non-current liabilities 107   (276 ) 210   (224 )
Net cash provided by operating activities 9,981   7,052   16,478   16,839  
Cash flows from investing activities:
Purchases of restricted cash (263 ) (263 )
Purchases of property and equipment (1,209 ) (595 ) (2,109 ) (1,272 )
Net cash used in investing activities (1,472 ) (595 ) (2,372 ) (1,272 )
Cash flows from financing activities:
Net cash provided by (used in) financing activities        
Effect of exchange rate on cash and cash equivalents (235 ) (855 ) (1,894 ) (150 )
Net increase in cash and cash equivalents 8,274 5,602 12,212 15,417
Cash and cash equivalents at beginning of period 65,107 48,559 61,169 38,744
Cash and cash equivalents at end of period $   73,381   $   54,161   $   73,381   $   54,161  
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net $ 10 $ 3,082 $ 20 $ 5,391
 
         

Travelzoo Inc.Segment Information(Unaudited)(In thousands)
 
Three months ended June 30, 2013

NorthAmerica
Europe Elimination Consolidated
Revenue from unaffiliated customers $   30,249 $   11,078 $   $   41,327
Intersegment revenue 331   222   (553 )
Total net revenues 30,580   11,300   (553 ) 41,327
Operating income $   5,899   $   1,895   $     $   7,794
 
Three months ended June 30, 2012

NorthAmerica
Europe Elimination Consolidated
Revenue from unaffiliated customers $ 28,712 $ 10,648 $ $ 39,360
Intersegment revenue 205   21   (226 )
Total net revenues 28,917   10,669   (226 ) 39,360
Operating income $   7,831   $   2,535   $     $   10,366
 
Six months ended June 30, 2013

NorthAmerica
Europe Elimination Consolidated
Revenue from unaffiliated customers $ 60,160 $ 23,344 $ $ 83,504
Intersegment revenue 575   330   (905 )
Total net revenues 60,735   23,674   (905 ) 83,504
Operating income $   11,383   $   4,447   $     $   15,830
 
Six months ended June 30, 2012

NorthAmerica
Europe

Eliminationand Other (a)
Consolidated
Revenue from unaffiliated customers $ 57,268 $ 21,425 $ $ 78,693
Intersegment revenue 470   31   (501 )
Total net revenues 57,738   21,456   (501 ) 78,693
Operating income $   14,972   $   4,965   $   (3,000 ) $   16,937
 
(a)   Includes a charge related to unexchanged promotional merger shares for the six months ended June 30, 2012.

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