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Travelzoo Reports Second Quarter 2016 Results

TZOO

Travelzoo Reports Second Quarter 2016 Results

Travelzoo Inc. (NASDAQ:TZOO):

  • Revenue of $34.0 million, down 6% year-over-year in constant currencies
  • Operating profit of $3.8 million
  • Earnings per share of $0.14, compared to $0.06 in the prior-year period
  • Cash flow from operations of $2.5 million

Travelzoo, a global media commerce company, today announced financial results for the second quarter ended June 30, 2016, with revenue of $34.0 million and operating income of $3.8 million. In nominal terms, revenue decreased by 7% year-over-year. In constant currencies, revenue decreased by 6% year-over-year. Net income was $2.0 million, up 140% year-over-year. Diluted earnings per share (EPS) were $0.14, up from $0.06 in the prior-year period.

“Our strategy of publishing high-quality deals, combined with efficient execution, has led to increased operating profits in Europe and North America,” said Holger Bartel, Chairman and Global CEO. “We intend to leverage Travelzoo’s global reach and trusted brand to grow revenue and increase profitability in future periods.”

Asia Pacific

Asia Pacific business segment revenue decreased 10% year-over-year to $2.4 million. In constant currencies, revenue decreased 10% year-over-year. Operating loss for the second quarter was $1.2 million, compared to an operating loss of $268,000 in the prior-year period.

Europe

Europe business segment revenue decreased 5% year-over-year to $9.7 million. In constant currencies, revenue decreased 2% year-over-year. Operating income for the second quarter was $1.8 million, or 18% of revenue, up from $47,000, or 0.5% of revenue in the prior-year period.

North America

North America business segment revenue decreased 8% year-over-year to $21.9 million. Operating income for the second quarter was $3.2 million, or 15% of revenue, up from $2.5 million or 11% of revenue in the prior-year period.

Members

As of June 30, 2016, Travelzoo had a worldwide unduplicated number of members of 28.9 million. In Asia Pacific, unduplicated number of members was 3.6 million as of June 30, 2016, up 5% from June 30, 2015. In Europe, unduplicated number of members was 8.1 million as of June 30, 2016, up 8% from June 30, 2015. In North America, unduplicated number of members was 17.4 million as of June 30, 2016, up 1% from June 30, 2015.

Income Taxes

Income tax expense was $1.7 million, compared to a $1.3 million income tax expense in the prior-year period. The effective income tax rate was 45%, down from 60% in the prior-year period, driven primarily by the geographic mix of taxable income.

Asset Management

During the second quarter of 2016, Travelzoo generated $2.6 million of cash from operating activities. Accounts receivable decreased by $407,000 over the prior-year period to $18.4 million. Accounts payable decreased by $7.6 million over the prior-year period to $20.8 million. Capital expenditures were $503,000, down from $564,000 in the prior-year period. As of June 30, 2016, cash and cash equivalents were $27.6 million.

Other Information

Travelzoo Inc.'s financial results have been adjusted to include the financial results of Asia Pacific for the current and prior periods. In addition, certain prior period statement of operations amounts have been reclassified to conform to current period presentation primarily due to the allocation of facilities costs and separate disclosure of product development costs. Management presents year-over-year revenue percentage rates of change in constant currencies, calculated using prior-year period foreign currency rates on current-year period non-US revenue, as it believes this is a useful metric that facilitates comparison to historical performance.

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 is a global media commerce company. With more than 28 million members in Asia Pacific, Europe, and North America and 25 offices worldwide, Travelzoo® publishes offers from more than 2,000 travel, entertainment and local companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value.

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,
2016   2015

      2016      

 

      2015      

Revenues $ 34,046 $ 36,792 $ 68,850 $ 75,937
Cost of revenues 3,612   5,208   7,621   9,754  
Gross profit 30,434   31,584   61,229   66,183  
Operating expenses:
Sales and marketing 19,135 20,715 38,094 42,792
Product development 2,089 3,206 4,964 6,295
General and administrative 5,434   5,335   11,247   11,786  
Total operating expenses 26,658   29,256   54,305   60,873  
Income from operations 3,776 2,328 6,924 5,310
Other income (loss) (91 ) (218 ) 42   (664 )
Income before income taxes 3,685 2,110 6,966 4,646
Income taxes 1,665   1,268   2,897   3,074  
Net income $ 2,020   $ 842   $ 4,069   $ 1,572  
Net income per share:        
Basic $ 0.14   $ 0.06   $ 0.29   $ 0.11  
Diluted $ 0.14   $ 0.06   $ 0.29   $ 0.11  
Weighted average shares:
Basic 14,066 14,730 14,246 14,730
Diluted 14,066 14,730 14,246 14,730
 
 

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

 
      June 30,
2016
  December 31,
2015
Assets
Current assets:
Cash and cash equivalents $                     27,560 $ 35,128
Accounts receivable, net 18,400 16,398
Income taxes receivable 833 1,356
Deposits 488 782
Prepaid expenses and other 1,828 2,167
Deferred tax assets 1,129   1,230  
Total current assets 50,238 57,061
Deposits 719 501
Deferred tax assets 570 1,769
Restricted cash 1,398 1,328
Property and equipment, net 7,228 7,905
Other assets   15  
Total assets $                     60,153   $ 68,579  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 20,843 $ 23,655
Accrued expenses and other 10,982 10,140
Deferred revenue 1,040 1,085
Income tax payable 1,639 477
Note payable to related party   5,658  
Total current liabilities 34,504 41,015
Long-term tax liabilities 3,053 3,000
Long-term deferred rent and other 2,906   3,177  
Total liabilities 40,463   47,192  
Common stock 144 150
Additional paid-in capital 1,716 7,759
Accumulated other comprehensive loss (3,625 ) (3,908 )
Retained earnings 21,455   17,386  
Total stockholders’ equity 19,690   21,387  
Total liabilities and stockholders’ equity $                     60,153   $ 68,579  
 
 

Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

 
 

  Three months ended  

  Six months ended
June 30, June 30,
2016   2015

      2016      

 

      2015      

Cash flows from operating activities:
Net income $ 2,020 $ 842 $ 4,069 $ 1,572

Adjustments to reconcile net income to net cash provided
by (used in) operating activities:

Depreciation and amortization 608 687 1,250 1,510
Deferred income taxes 233 (20 ) (211 ) (242 )
Stock-based compensation 230 148 442 296
Provision for losses on accounts receivable 36 25 44 52
Net foreign currency effects (23 ) (54 ) 236 (165 )
Changes in operating assets and liabilities:
Accounts receivable (1,241 ) (996 ) (2,265 ) (2,876 )
Deposits (25 ) 91 38 73
Income tax receivable (397 ) 830 525 1,681
Prepaid expenses and other 147 140 182 635
Accounts payable (740 ) (1,732 ) (2,210 ) (1,236 )
Accrued expenses and other 937 (421 ) 484 143
Income tax payable 665 (121 ) 1,268 23
Reserve for unexchanged promotional shares (1,393 )
Other non-current liabilities 46   123   53   795  
Net cash provided by (used in) operating activities 2,496   (458 ) 3,905   868  
Cash flows from investing activities:
Release of restricted cash 57
Purchases of property and equipment (503 ) (564 ) (648 ) (753 )
Net cash used in investing activities (503 ) (564 ) (648 ) (696 )
Cash flows from financing activities:
Payment for Asia Pacific business 58
Payment of loan to related party (5,658 )
Proceeds from related party loan 1,500 2,250
Decrease in bank overdraft (281 ) (237 )
Repurchase of common stock, net (3,048 )   (4,956 )  
Net cash provided by (used in) financing activities (3,048 ) 1,219   (10,556 ) 2,013  
Effect of exchange rate on cash and cash equivalents (192 ) 1,698   (269 ) (1,125 )
Net increase (decrease) in cash and cash equivalents (1,247 ) 1,895 (7,568 ) 1,060
Cash and cash equivalents at beginning of period 28,807   54,582   35,128   55,417  
Cash and cash equivalents at end of period $ 27,560   $ 56,477   $ 27,560   $ 56,477  
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net $ 1,022 $ 372 $ 1,072 $ 733
Cash paid for interest on related party loan $ $ $ 110 $
 
 

Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)

 
Three months ended June 30, 2016      

  Asia Pacific  

  Europe  

     North     
     America     

  Consolidated
Revenue from unaffiliated customers $ 2,412 $           9,946 $         21,688 $ 34,046
Intersegment revenue 35   (247 ) 212  
Total net revenues 2,447   9,699   21,900   34,046
Operating income (loss) $ (1,224 ) $           1,791   $         3,209   $ 3,776
Three months ended June 30, 2015

  Asia Pacific  

Europe

     North     
     America     

Consolidated
Revenue from unaffiliated customers 2,728 10,337 23,727 36,792
Intersegment revenue (15 ) (78 ) 93  
Total net revenues 2,713   10,259   23,820   36,792
Operating income (loss) $ (268 ) $           47   $         2,549   $ 2,328
 
Six months ended June 30, 2016

  Asia Pacific  

Europe

     North     
     America     

Consolidated
Revenue from unaffiliated customers $ 4,671 $ 20,912 $ 43,267 $ 68,850
Intersegment revenue 36   (321 ) 285  
Total net revenues 4,707   20,591   43,552   68,850
Operating income (loss) $ (2,268 ) $           3,885   $         5,307   $ 6,924
Six months ended June 30, 2015

  Asia Pacific  

Europe

     North     
     America     

Consolidated
Revenue from unaffiliated customers $ 5,381 $ 22,116 $ 48,440 $ 75,937
Intersegment revenue (20 ) (295 ) 315  
Total net revenues 5,361   21,821   48,755   75,937
Operating income (loss) $ (1,101 ) $           1,776   $         4,635   $ 5,310
 

Travelzoo Inc.
Investor Relations:
Molly Yu
ir@travelzoo.com



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