Financial

Travelzoo Reports First Quarter 2012 Revenues Up 6%

Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March 31, 2012, with revenue of $39.3 million, an increase of 6% year-over-year. Non-GAAP operating income was $9.6 million. Non-GAAP net income was $6.7 million, with non-GAAP earnings per share (non-GAAP EPS) of $0.42, up from non-GAAP EPS of $0.37 in the prior-year period. Non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share exclude a $3.0 million charge related to our unexchanged merger shares.

Travelzoo

Travelzoo Inc. (NASDAQ: TZOO):

“We believe that our strategic focus on profitable growth and quality-leadership is the right approach in the long run”

First Quarter 2012 Financial Highlights:

  • Revenue of $39.3 million, up 6% year-over-year
  • Non-GAAP net income of $6.7 million, up 12% year-over-year
  • Non-GAAP earnings per share of $0.42, compared to $0.37 in the prior-year period
  • GAAP net income of $3.7 million; GAAP earnings per share of $0.23
  • Cash flow from operations of $9.8 million

Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March 31, 2012, with revenue of $39.3 million, an increase of 6% year-over-year. Non-GAAP operating income was $9.6 million. Non-GAAP net income was $6.7 million, with non-GAAP earnings per share (non-GAAP EPS) of $0.42, up from non-GAAP EPS of $0.37 in the prior-year period. Non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share exclude a $3.0 million charge related to our unexchanged merger shares.

“We believe that our strategic focus on profitable growth and quality-leadership is the right approach in the long run,” said Chris Loughlin, chief executive officer of Travelzoo. “Despite a competitive environment fueled by venture capital and unsustainable, loss making business practices, we have built a healthy, vibrant franchise with a strong following of 25 million subscribers and a clear vision for future growth. We see opportunity on the horizon to take advantage of the shake out.”

North America

North America business segment revenue grew 4% year-over-year to $28.6 million. Non-GAAP operating income for the first quarter was $7.1 million, or 25% of revenue, down from $9.3 million, or 33% of revenue, in the prior-year period.

Europe

Europe business segment revenue grew 14% year-over-year to $10.8 million. In local currency terms, revenue for the first quarter grew 16% year-over-year. Operating income for the first quarter was $2.4 million, compared to an operating profit of $741,000 in the prior-year period.

Subscribers

Travelzoo had a total unduplicated number of newsletter subscribers in North America and Europe of 21.8 million as of March 31, 2012, up 9% from March 31, 2011. In North America, total unduplicated number of subscribers was 15.8 million as of March 31, 2012, up 7% from March 31, 2011. In Europe, total unduplicated number of subscribers was 6.0 million as of March 31, 2012, up 17% from March 31, 2011.

Income Taxes

Income tax expense was $2.9 million, compared to $4.0 million in the prior-year period. The Non-GAAP effective income tax rate was 30%, down from 40% in the prior-year period.

Asset Management

During the first quarter 2012, Travelzoo generated $9.8 million of cash from operating activities. Accounts receivable decreased by $1.8 million over the prior-year period to $14.7 million. Accounts payable increased by $8.8 million over the prior-year period to $22.4 million. Capital expenditures were $678,000, down from $699,000 in the prior-year period. Travelzoo exited the first quarter with $48.6 million in cash and cash equivalents.

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.

   
Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
March 31,
2011 2012
 
Revenues $ 36,960 $ 39,333
Cost of revenues   2,442     4,054

Gross profit

  34,518     35,279
 
Operating expenses:
Sales and marketing 16,131 16,265
General and administrative 8,394 9,444
Unexchanged merger shares   20,000     3,000
Total operating expenses   44,525     28,709
 
Operating income (10,007 ) 6,570
 
Other income and expense:
Interest income and other income 32 64
Loss on foreign currency   31     35
Income before income taxes (9,944 ) 6,669
 
Income taxes 4,011 2,922
   
Net income   ($13,955 ) $ 3,747
 
Net income per share:    
Basic $ (0.85 ) $ 0.23
Diluted $ (0.85 ) $ 0.23
 
Weighted Average Shares:
Basic 16,451 15,962
Diluted 16,451 16,019
 
   
Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
December 31, March 31,
2011 2012
 
Assets
Current assets:
Cash and cash equivalents $ 38,744 $ 48,559
Accounts receivable, net 13,340 14,655
Income taxes receivable 3,625 2,780
Deposits 278 402
Prepaid expenses and other current assets 2,123 2,444
Deferred tax assets   1,754     1,755  

Total current assets

59,864 70,595
Deposits, less current portion 776 807
Deferred tax assets, less current portion 344 344
Restricted cash 3,103 3,097
Property and equipment, net 3,557 3,674
Intangible assets, net   704     616  
Total assets $ 68,348   $ 79,133  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 21,731 $ 22,420
Accrued expenses 6,311 9,010
Accrued expenses for unexchanged shares - 3,000
Deferred revenue 2,168 2,316
Deferred rent 114 99
Income tax payable   279     -  
Total current liabilities 30,603 36,845
Long-term tax liabilities 2,225 2,276
Deferred rent, less current portion   761     712  
Total liabilities   33,589     39,833  
Common stock 164 164
Treasury stock (15,123 ) -
Additional paid-in capital 7,656 7,943
Accumulated other comprehensive loss (1,422 ) (915 )
Retained earnings   43,484     32,108  
Total stockholders' equity   34,759     39,300  
Total liabilities and stockholders' equity $ 68,348   $ 79,133  
 
   
Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Three months ended
March 31,
2011 2012
Cash flows from operating activities:
Net income $ (13,955 ) $ 3,748
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 643 627
Deferred income taxes 86 -
Stock-based compensation 187 287
Provision for losses on accounts receivable 18 108
Tax benefit from exercise of stock options (268 ) -
Net foreign currency effects (31 ) (35 )
Changes in operating assets and liabilities:
Accounts receivable (2,918 ) (1,271 )
Deposits (561 ) (132 )
Income tax receivable 264 845
Prepaid expenses and other current assets 193 (295 )
Accounts payable 3,436 460
Accrued expenses 3,433 2,619
Accrued expense for unexchanged merger shares 20,000 3,000
Deferred revenue 19 134
Deferred rent 13 (75 )
Income tax payable 89 (284 )
Other non-current liabilities   14     51  
Net cash provided by operating activities   10,662     9,787  
 
Cash flows from investing activities:
Purchases of property and equipment (699 ) (678 )
Purchases of restricted cash   -     -  
Net cash used in investing activities   (699 )   (678 )
 
Cash flows from financing activities:
Proceeds from exercise of stock options 40 -
Repurchase of common stock - -
Tax benefit of stock option exercises 268 -
Proceeds from sale of Asia Pacific business segment   -     -  
Net cash provided by (used in) financing activities   308     -  
 
Effect of exchange rate on cash and cash equivalents 243 706
 
Net increase (decrease) in cash and cash equivalents 10,514 9,815
Cash and cash equivalents at beginning of period   41,184     38,744  
Cash and cash equivalents at end of period $ 51,698   $ 48,559  
 
Supplemental disclosure of cash flow information:
Cash paid or (refunds received) for income taxes, net (3,558 ) 2,309
 
       
Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
North

 

Elimination and

 

Three months ended March 31, 2012 America

Europe

Other (a)

Consolidated

 
Revenue from unaffiliated customers $ 28,556 $ 10,777 $ - $ 39,333
Intersegment revenue   79   10   (89 )   -  
Total net revenues   28,635   10,787   (89 )   39,333  
Operating income $ 7,142 $ 2,428 $ (3,000 ) $ 6,570  
 
 
North

 

Elimination and

 

Three months ended March 31, 2011 America

Europe

Other (a)

Consolidated

 
Revenue from unaffiliated customers $ 27,517 $ 9,443 $ - $ 36,960
Intersegment revenue   101   5   (106 )   -  
Total net revenues   27,618   9,448   (106 )   36,960  
Operating income $ 9,252 $ 741 $ (20,000 ) $ (10,007 )
 
 
(a) Includes a charge related to unexchanged merger shares of $20.0 million and $3.0 million for the three months ended March 31, 2011 and 2012, respectively.
 
   
Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
March 31,
2011 2012
 
 
GAAP operating expense $ 44,525 $ 28,709

Unexchanged merger shares (a)

  20,000     3,000  
Non-GAAP operating expense $ 24,525 $ 25,709
 
GAAP North America operating income (loss) $ (10,748 ) $ 4,142
Unexchanged merger shares (a)   20,000     3,000  
Non-GAAP North America operating income $ 9,252 $ 7,142
 
GAAP operating income $ (10,007 ) $ 6,570
Unexchanged merger shares (a)   20,000     3,000  
Non-GAAP operating income $ 9,993 $ 9,570
 
GAAP operating margin -27.1 % 16.7 %
Unexchanged merger shares (a)   54.1 %   7.6 %
Non-GAAP operating margin 27.0 % 24.3 %
 
GAAP effective tax rate -40.3 % 43.8 %
Unexchanged merger shares (a)   80.2 %   -13.6 %
Non-GAAP effective tax rate 39.9 % 30.2 %
 
GAAP net income (loss) $ (13,955 ) $ 3,747
Unexchanged merger shares (a)   20,000     3,000  
Non-GAAP net income $ 6,045 $ 6,747
 
Earnings (loss) per share $ (0.85 ) $ 0.23
Unexchanged merger shares (a) (b)   1.22     0.19  
Non-GAAP earnings per share (b) $ 0.37 $ 0.42
 

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

(b) Shares used to calculate March 31, 2011 non-GAAP earnings per share were 16,551, which were different than the shares used in GAAP loss per share calculation due to the anti-dilutive effect on the GAAP loss per share.



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