Travelzoo Reports First Quarter 2014 Revenue Down 5%

2014-04-17
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  • Travelzoo Travelzoo Inc. today announced financial results for the first quarter ended March 31, 2014, with revenue of $40.2 million, a decrease of 5% year-over-year. Operating profit was $7.0 million, down 13% year-over-year. Net income was $4.6 million, with diluted earnings per share of $0.31, down from $0.36 in the prior-year period.

    First Quarter 2014 Financial Highlights:

    • Revenue of $40.2 million, down 5% year-over-year
    • Operating profit of $7.0 million, down 13% year-over-year
    • Net income of $4.6 million
    • Earnings per share of $0.31, compared to $0.36 in the prior-year period

    Travelzoo Inc. today announced financial results for the first quarter ended March 31, 2014, with revenue of $40.2 million, a decrease of 5% year-over-year. Operating profit was $7.0 million, down 13% year-over-year. Net income was $4.6 million, with diluted earnings per share of $0.31, down from $0.36 in the prior-year period.

    "Our European business delivered strong results. North America reported weak revenue. North America was impacted by a reduction in Search marketing spend and slow Local voucher sales," said Chris Loughlin, chief executive officer. "A positive highlight is the record number of mobile downloads we saw in the quarter. We believe in our strategy of quickly adapting to mobile usage."

    North America

    North America business segment revenue decreased 12% year-over-year to $26.4 million. Operating profit for the first quarter was $4.6 million, or 17% of revenue, down from $5.5 million, or 18% of revenue, in the prior-year period.

    Europe

    Europe business segment revenue increased 13% year-over-year to $13.8 million. In local currency terms, revenue increased 6% year-over-year. Operating profit for the first quarter was $2.4 million, or 17% of revenue, down from $2.6 million, or 21% of revenue in the prior-year period.

    Subscribers

    Travelzoo had a total unduplicated number of subscribers in North America and Europe of 23.6 million as of March 31, 2014, up 1% from December 31, 2013. In North America, total unduplicated number of subscribers was 16.7 million as of March 31, 2014, up 1% from December 31, 2013. In Europe, total unduplicated number of subscribers was 6.9 million as of March 31, 2014, up 2% from December 31, 2013.

    Update on Hotel Booking Platform

    Travelzoo launched the first phase of its hotel booking platform at the end of March. A select group of U.S. subscribers can now book hotels any night of the year through Travelzoo. "We are working with many new hotels that previously were unable to accept the Local voucher format," said Chris Loughlin, chief executive officer. "The new platform also makes it easier for our subscribers to book a hotel deal on their mobile phones." The hotel booking platform is expected to begin contributing to revenues in the second quarter, an average of 60 to 70 days after bookings occur. Travelzoo recognizes revenue upon the hotel stay and not at the time of booking.

    Income Taxes

    Income tax expense was $2.5 million, compared to $2.5 million in the prior-year period. The effective income tax rate was 35%, up from 31% in the prior-year period.

    Asset Management

    During the first quarter of 2014, Travelzoo generated $1.8 million of cash from operating activities. Accounts receivable increased by $52,000 over the prior-year period to $15.4 million. Accounts payable increased by $2.1 million over the prior-year period to $29.0 million. Capital expenditures were $1.0 million, up from $900,000 in the prior-year period. As of March 31, 2014, cash and cash equivalents were $61.0 million.

    About Travelzoo

    Travelzoo Inc. is a global Internet media company. With more than 27 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,
    2014 2013
    Revenues $   40,195 $   42,177
    Cost of revenues 4,777 3,985
    Gross profit 35,418 38,192
    Operating expenses:
    Sales and marketing 17,843 19,659
    General and administrative 10,578 10,497
    Total operating expenses 28,421 30,156
    Income from operations 6,997 8,036
    Other income 122 31
    Income before income taxes 7,119 8,067
    Income taxes 2,481 2,472
    Net income $   4,638 $   5,595
    Net income per share:    
    Basic $   0.31 $   0.36
    Diluted $   0.31 $   0.36
    Weighted average shares:
    Basic 14,880 15,362
    Diluted 14,970 15,371
     
             

    Travelzoo Inc.

    Condensed Consolidated Balance Sheets

    (Unaudited)

    (In thousands)

     

       March 31,   

    2014

    December 31,

    2013

    Assets
    Current assets:
    Cash and cash equivalents $ 61,035 $ 66,223
    Accounts receivable, net 15,355 13,986
    Income taxes receivable 1,388 2,656
    Deposits 251 396
    Prepaid expenses and other current assets 2,538 3,202
    Deferred tax assets 1,067 1,143
    Restricted cash 200
    Funds held for reverse/forward stock split 212   13,668  
    Total current assets 81,846 101,474
    Deposits, less current portion 1,231 1,168
    Deferred tax assets, less current portion 2,032 2,032
    Restricted cash 1,480 1,479
    Property and equipment, net 10,305 8,245
    Intangible assets, net 349   404  
    Total assets $ 97,243   $ 114,802  
    Liabilities and Stockholders’ Equity
    Current liabilities:
    Accounts payable $ 28,999 $ 31,766
    Accrued expenses 9,820 10,543
    Deferred revenue 1,688 1,578
    Deferred rent 271 281
    Income tax payable 726
    Reserve for unexchanged promotional shares 11,500 12,726
    Payable to shareholders for reverse/forward stock split 212   13,668  
    Total current liabilities 53,216 70,562
    Long-term tax liabilities 10,546 10,436
    Deferred rent, less current portion 3,111   2,469  
    Total liabilities 66,873   83,467  
    Common stock 163 163
    Treasury stock (21,231 ) (15,662 )
    Additional paid-in capital 10,642 10,247
    Accumulated other comprehensive loss (613 ) (530 )
    Retained earnings 41,409   37,117  
    Total stockholders’ equity 30,370   31,335  
    Total liabilities and stockholders’ equity $ 97,243   $ 114,802  
     
         

    Travelzoo Inc.

    Condensed Consolidated Statements of Cash Flows

    (Unaudited)

    (In thousands)

     
    Three months ended
    March 31,
    2014   2013
    Cash flows from operating activities:
    Net income $   4,638 $   5,595
    Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation and amortization 701 716
    Deferred income taxes 76 193
    Stock-based compensation 395 307
    Provision for losses on accounts receivable (52 ) 95
    Net foreign currency effects (9 ) 94
    Changes in operating assets and liabilities:
    Accounts receivable (1,288 ) (2,036 )
    Deposits 133 (155 )
    Income tax receivable 1,266 1,564
    Prepaid expenses and other current assets 447 350
    Accounts payable (2,984 ) (549 )
    Accrued expenses (1,294 ) 850
    Deferred revenue 110 (517 )
    Deferred rent 5 (110 )
    Income tax payable 722
    Reserve for unexchanged promotional shares (1,226 )
    Other non-current liabilities 111   103  
    Net cash provided by operating activities 1,751   6,500  
    Cash flows from investing activities:
    Release of restricted cash 200
    Purchases of property and equipment (1,019 ) (900 )
    Net cash used in investing activities (819 ) (900 )
    Cash flows from financing activities:
    Repurchase of common stock (5,569 )
    Reverse/forward stock split, including transaction costs (479 )  
    Net cash used in financing activities (6,048 )  
    Effect of exchange rate on cash and cash equivalents (72 ) (1,662 )
    Net increase (decrease) in cash and cash equivalents (5,188 ) 3,938
    Cash and cash equivalents at beginning of period 66,223   61,169  
    Cash and cash equivalents at end of period $   61,035   $   65,107  
    Supplemental disclosure of cash flow information:
    Cash paid for income taxes, net $ 335 $ 10
     
                     

    Travelzoo Inc.

    Segment Information

    (Unaudited)

    (In thousands)

     
    Three months ended March 31, 2014

          North      

    America

        Europe    

    Elimination

    and Other

    Consolidated
    Revenue from unaffiliated customers $ 26,353 $ 13,842 $ $ 40,195
    Intersegment revenue 221 12 (233)
    Total net revenues 26,574 13,854 (233) 40,195
    Operating income $ 4,604 $ 2,393 $ $ 6,997
     
    Three months ended March 31, 2013 North

    America

    Europe

    Elimination

    and Other

    Consolidated
    Revenue from unaffiliated customers $ 29,911 $ 12,266 $ $ 42,177
    Intersegment revenue 262 108 (370)
    Total net revenues 30,173 12,374 (370) 42,177
    Operating income $ 5,484 $ 2,552 $ $ 8,036



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