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 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:
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.
