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Travelzoo (TZOO) Reports Third Quarter 2010 Results

  • Revenue of $27.7 million, up 17% year-over-year
  • Operating profit from continuing operations of $5.7 million, up 150% year-over-year
  • Cash flow from operations of $3.1 million
  • Net income per share from continuing operations of $0.22, up 175% from $0.08 in the prior-year period
  • Earnings per share of $0.22, compared to loss per share of ($0.02) in the prior-year period

Travelzoo Inc., a global Internet media company, today announced financial results for the third quarter ended September 30, 2010, with revenue of $27.7 million, an increase of 17% year-over-year. Operating profit from continuing operations was $5.7 million, up 150% year-over-year. Net income from continuing operations was $3.7 million, with diluted net income per share from continuing operations of $0.22, compared to diluted net income per share from continuing operations of $0.08 in the prior-year period. Revenue, operating profit and income from continuing operations for all periods exclude the results of Travelzoo’s former Asia Pacific business segment, which are reported as discontinued operations.

“Travelzoo more than doubled earnings per share and in Europe, we finally reached profitability. We continued our strong revenue growth, despite one fewer Top 20 publishing day in Q3 2010 compared to the same period in 2009,” said Chris Loughlin, CEO of Travelzoo. “Our new Local Deals business has seen rapid adoption among our existing subscribers and the new publication is now in 12 cities across the U.S. We remain keenly focused on growth and further improving earnings per share.”

North America

North America business segment revenue grew 12% year-over-year to $21.3 million. Operating profit was $5.5 million, or 26% of revenue, up from an operating profit of $3.6 million, or 19% of revenue, in the prior-year period.

Europe

Europe business segment revenue grew 37% year-over-year to $6.5 million. In local currency terms, revenue grew 45% year-over-year. Operating profit was $248,000, compared to an operating loss of $1.3 million in the prior-year period. Travelzoo began operations in the U.K. in May 2005, in Germany in September 2006, and in France in March 2007. In May 2008, Travelzoo began publishing its weekly Top 20® list in Spain, after having operated a sales office in Barcelona since November 2006.

Subscribers

Travelzoo had a total unduplicated number of newsletter subscribers in North America and Europe of 18.7 million as of September 30, 2010, up 15% from September 30, 2009, and up 2% from June 30, 2010. In North America, total unduplicated number of subscribers was 14.2 million as of September 30, 2010, up 9% from September 30, 2009 and up 1% from June 30, 2010. In Europe, total unduplicated number of subscribers was 4.5 million as of September 30, 2010, up 38% from September 30, 2009 and up 7% from June 30, 2010.

Income Taxes

Income tax expense was $2.1 million, compared to $1.3 million in the prior-year period for continuing operations. The effective income tax rate was 37%, down from 50% in the prior-year period. During the current quarter, Travelzoo and the Internal Revenue Service (“IRS”) agreed to settle the IRS examination of Travelzoo’s 2005 and 2006 tax years. Travelzoo recorded a tax benefit of approximately $200,000 as a result of the settlement.

Asset Management

During the third quarter, Travelzoo generated $3.1 million of cash from operating activities. Accounts receivable increased by $601,000 quarter-over-quarter and increased by $2.4 million over the prior-year period to $14.2 million. Accounts payable increased by $990,000 quarter-over-quarter and decreased by $77,000 over the prior-year period to $7.3 million. Capital expenditures were $391,000, up from $355,000 in the prior quarter and down from $405,000 in the prior-year period. Travelzoo exited the third quarter with $34.7 million in cash and cash equivalents.

Conference Call

Travelzoo will host a conference call to discuss third 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 Web cast.

About Travelzoo

Travelzoo is a global Internet media company. With more than 21 million subscribers in North America, Europe, and Asia Pacific and 23 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 Inc. All other company and product names mentioned are trademarks of their respective owners.

Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2010 2009 2010 2009
Revenues $ 27,693 $ 23,576 $ 84,317 $ 70,194
Cost of revenues 1,742 1,464 5,012 4,140
Gross profit 25,951 22,112 79,305 66,054
Operating expenses:
Sales and marketing 13,630 13,437 42,671 37,450
General and administrative 6,616 6,395 19,833 18,420
Total operating expenses 20,246 19,832 62,504 55,870
Operating income from continuing operations 5,705 2,280 16,801 10,184
Other income and expense:
Interest income and other income 45 8 132 40
Gain (loss) on foreign currency 20 320 (190 ) 17
Income from continuing operations before income taxes 5,770 2,608 16,743 10,241
Income taxes 2,120 1,308 7,373 5,292
Income from continuing operations 3,650 1,300 9,370 4,949
Loss from discontinued operations, net of tax (1,595 ) (5,097 )
Net income (loss) $ 3,650 $ (295 ) $ 9,370 $ (148 )
Basic net income (loss) per share from:
Continuing operations $ 0.22 $ 0.08 $ 0.57 $ 0.30
Discontinued operations $ $ (0.10 ) $ $ (0.31 )
Net income (loss) $ 0.22 $ (0.02 ) $ 0.57 $ (0.01 )
Diluted net income (loss) per share from:
Continuing operations $ 0.22 $ 0.08 $ 0.57 $ 0.30
Discontinued operations $ $ (0.10 ) $ $ (0.31 )
Net income (loss) $ 0.22 $ (0.02 ) $ 0.57 $ (0.01 )
Shares used in computing basic net income (loss) per share 16,444 16,444 16,444 16,396
Shares used in computing diluted net income (loss) per share 16,453 16,452 16,453 16,413
Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
September 30, December 31,
2010 2009
ASSETS
Cash and cash equivalents $ 34,717 $ 19,776
Accounts receivable, net 14,152 11,279
Income taxes receivable 1,781 6,061
Deposits 210 139
Prepaid expenses and other current assets 1,377 1,103
Deferred tax assets 966 966
Total current assets 53,203 39,324
Deposits, less current portion 319 381
Deferred tax assets, less current portion 52 52
Restricted cash 875 875
Property and equipment, net 3,822 4,089
Intangible assets, net 1,146 1,411
Total assets $ 59,417 $ 46,132
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable 7,331 6,834
Accrued expenses 5,712 4,278
Deferred revenue 1,177 828
Deferred rent 211 134
Income tax payable 500
Total current liabilities 14,931 12,074
Deferred tax liabilities 597 533
Long-term tax liabilities 1,435 2,139
Deferred rent, less current portion 518 615
Common stock 164 164
Additional paid-in capital 6,410 4,772
Accumulated other comprehensive loss (1,016 ) (1,173 )
Retained earnings 36,378 27,008
Total stockholders’ equity 41,936 30,771
Total liabilities and stockholders’ equity $ 59,417 $ 46,132
Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three months ended Nine months ended
September 30, September 30,
2010 2009 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,650 $ (295 ) $ 9,370 $ (148 )
Adjustments to reconcile net income

(loss) to net cash provided by

operating activities:

Depreciation and amortization 619 531 1,766 1,457
Deferred income taxes 64 64
Stock-based compensation 187 562
Provision for losses on accounts receivable 107 (14 ) 106 302
Net foreign currency effects (20 ) (320 ) 190 (17 )
Changes in operating assets and liabilities:
Accounts receivable (414 ) 217 (2,982 ) (766 )
Deposits (24 ) (50 ) (109 ) (75 )
Income tax receivable (984 ) 4,280
Prepaid expenses and other current assets (238 ) (1,213 ) (278 ) 422
Accounts payable 863 (429 ) 594 1,600
Accrued expenses (239 ) 268 1,416 (101 )
Deferred revenue 127 49 348 153
Deferred rent (55 ) (25 ) (20 ) (127 )
Income tax payable 140 1,945 496
Other non-current liabilities (733 ) (704 ) 19
Net cash provided by operating activities 3,050 664 15,099 2,719
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (391 ) (405 ) (1,142 ) (1,608 )
Purchase of intangible asset (1,760 )
Net cash used in investing activities (391 ) (405 ) (1,142 ) (3,368 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 2,158
Proceeds from sale of Asia Pacific business segment 1,073
Net cash provided by financing activities 1,073 2,158
Effect of exchange rate on cash and cash equivalents 183 (109 ) (89 ) 6
Net increase in cash and cash equivalents 2,842 150 14,941 1,515
Cash and cash equivalents at beginning of period 31,875 15,544 19,776 14,179
Cash and cash equivalents at end ofperiod 34,717 15,694 34,717 15,694
Supplemental disclosure of cash flowinformation:
Cash paid for income taxes net of refunds received $ 3,632 $ 553 $ 3,264 $ 4,732
Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
Three months ended

September 30, 2010

North

America

Europe Elimination Consolidated
Revenue from unaffiliated

customers

$ 21,196 $ 6,497 $ $ 27,693
Intersegment revenue 57 14 (71 )
Total net revenues 21,253 6,511 (71 ) 27,693
Operating income $ 5,457 $ 248 $ $ 5,705
Three months ended

September 30, 2009

North

America

Europe Elimination Consolidated
Revenue from unaffiliated

customers

$ 18,830 $ 4,746 $ $ 23,576
Intersegment revenue 84 4 (88 )
Total net revenues 18,914 4,750 (88 ) 23,576
Operating income (loss) $ 3,630 $ (1,317 ) $ (33 ) $ 2,280
Nine months ended

September 30, 2010

North

America

Europe Elimination Consolidated
Revenue from unaffiliated

customers

$ 65,716 $ 18,601 $ $ 84,317
Intersegment revenue 128 79 (207 )
Total net revenues 65,844 18,680 (207 ) 84,317
Operating income (loss) $ 18,310 $ (1,511 ) $ 2 $ 16,801
Nine months ended

September 30, 2009

North

America

Europe Elimination Consolidated
Revenue from unaffiliated

customers

$ 58,474 $ 11,720 $ $ 70,194
Intersegment revenue 208 30 (238 )
Total net revenues 58,682 11,750 (238 ) 70,194
Operating income (loss) $ 13,898 $ (3,661 ) $ (53 ) $ 10,184

Media Contact:

Travelzoo

Christie McConnell, +1-212-484-4912

cmcconnell@travelzoo.com

Thursday, October 21st, 2010 Uncategorized
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