EX-99.1 2 ex-9919x30x8k.htm EXHIBIT 99.1 EX-99.1 9-30-8K

Exhibit 99.1
Travelzoo Inc.
590 Madison Avenue
37th Floor
New York, NY 10022
 
Media Contact:
Christie McConnell
Travelzoo, North America
+1 (212) 484-4912
cmcconnell@travelzoo.com
FOR IMMEDIATE RELEASE

Travelzoo Reports Third Quarter 2013 Results

NEW YORK, October 17, 2013 - Travelzoo Inc. (NASDAQ: TZOO):

Third Quarter 2013 Financial Highlights:
•
Revenue of $37.3 million, up 5% year-over-year
•
Non-GAAP net income of $3.0 million
•
Non-GAAP earnings per share of $0.19, compared to $0.21 in the prior-year period
•
GAAP net loss of $19.0 million; GAAP loss per share of $1.24
•
Cash flow from operations of $2.2 million

Travelzoo Inc., a global Internet media company, today announced financial results for the third quarter ended September 30, 2013, with revenue of $37.3 million, an increase of 5% year-over-year. Non-GAAP operating income was $4.0 million. Non-GAAP net income was $3.0 million, with non-GAAP earnings per share (non-GAAP EPS) of $0.19, down from non-GAAP EPS of $0.21 in the prior-year period. Non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share exclude a $22.0 million charge related to a reserve for Travelzoo Inc.'s settlement agreements in connection with a dispute over unclaimed property audits.

"Our combined Travel business grew 16% year-over-year, this progress was offset by disappointing results in our Search and Local businesses," said Chris Loughlin, chief executive officer. "We continue to invest in product development in order to make it easier to find and book deals on Travelzoo and to spur future growth. We launched a new home page this quarter and intend to start beta-testing our new hotel booking platform at the beginning of next year.  Purchases on mobile products increased 41% year-over-year.  On the social media side, we are now one of the more active travel brands, with over 1.8 million combined fans and followers on Facebook and Twitter."

1/9

North America
North America business segment revenue increased 4% year-over-year to $26.2 million. Non-GAAP operating income for the third quarter ended September 30, 2013 was $2.5 million, or 10% of revenue, down from $3.1 million, or 12% of revenue, in the prior-year period.

Europe
Europe business segment revenue increased 7% year-over-year to $11.0 million. In local currency terms, revenue for the third quarter September 30, 2013 increased 9% year-over-year. Operating profit was $1.5 million, or 13% of revenue, up from an operating profit of $1.1 million, or 10% of revenue in the prior-year period.

Subscribers
Travelzoo had a total unduplicated number of subscribers in North America and Europe of 23.2 million as of September 30, 2013, up 4% from September 30, 2012. In North America, total unduplicated number of subscribers was 16.5 million as of September 30, 2013, up 3% from September 30, 2012. In Europe, total unduplicated number of subscribers was 6.7 million as of September 30, 2013, up 6% from September 30, 2012.

Income Taxes
Income tax expense was $1.2 million, compared to $896,000 in the prior-year period. The Non-GAAP effective income tax rate was 29%, up from 21% in the prior-year period.

Asset Management
During the third quarter of 2013, Travelzoo generated $2.2 million of cash from operating activities. Accounts receivable decreased by $622,000 over the prior-year period to $14.8 million. Accounts payable increased by $4.4 million over the prior-year period to $27.7 million. Capital expenditures were $1.5 million, up from $774,000 in the prior-year period. As of September 30, 2013, cash and cash equivalents were $77.9 million.

Unclaimed Property Audits
Travelzoo entered into agreements with 34 states to resolve those states’ claims related to unclaimed property audits. As previously disclosed in the Company’s reports on Form 10-K and Form 10-Q, multiple states have claimed that certain shares of Travelzoo, which were not claimed by former shareholders of Travelzoo.com Corporation following the 2002 merger, were unclaimed property. While the Company disputes the states’ claims, the Company determined that it was in its best interest to resolve the disputes and settle with 34 of the states.


2/9

The multi-state settlement relates to an approximate 700,000 shares of Travelzoo that those states claim may be subject to escheat. An additional 15 states remain that have or may raise claims on a remaining approximate 400,000 shares that were not exchanged following the merger by residents in those states.

The Company expects to make one-time cash payments to the 34 states after further due diligence, which it intends to make from cash on hand. To cover those payments, as well as potential future settlements with the remaining 15 states, the Company recorded an estimated $22.0 million charge in the three months ended September 30, 2013.
    
Non-GAAP Measures
To give an enhanced view of Travelzoo's operating performance, management has calculated non-GAAP operating expense, non-GAAP North America operating income, non-GAAP operating income, non-GAAP operating margin, non-GAAP effective tax rate, non-GAAP net income and non-GAAP earnings per share by excluding the charges related to our unexchanged merger shares. The company believes these metrics assist investors to assess certain business trends in the same way that these trends are analyzed by management. The discussion of these non-GAAP metrics are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Non-GAAP metrics are merely a supplement to, and not a replacement for, GAAP financial measures. As the only difference between GAAP and non-GAAP measures is the charges related to our unexchanged merger shares, today’s reporting should not be viewed as Travelzoo’s intention to report non-GAAP measures in future periods. Refer to the “Reconciliation of GAAP to Non-GAAP Measures” section of this press release for a summary of these non-GAAP measures and their reconciliation to the reported GAAP measures.

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 webcast.

3/9


About Travelzoo
Travelzoo Inc. is a global Internet media company. With more than 26 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.


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.


###



4/9

Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
Revenues
$
37,256

 
$
35,447

 
$
120,759

 
$
114,140

Cost of revenues
4,322

 
3,989

 
12,733

 
11,672

Gross profit
32,934

 
31,458

 
108,026

 
102,468

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
18,449

 
17,427

 
57,563

 
49,753

General and administrative
10,510

 
9,836

 
30,659

 
28,583

Unexchanged promotional merger shares
22,000

 
—

 
22,000

 
3,000

Total operating expenses
50,959

 
27,263

 
110,222

 
81,336

Income (loss) from operations
(18,025
)
 
4,195

 
(2,196
)
 
21,132

Other income
224

 
135

 
369

 
218

Income (loss) before income taxes
(17,801
)
 
4,330

 
(1,827
)
 
21,350

Income taxes
1,235

 
896

 
6,414

 
6,908

Net income (loss)
$
(19,036
)
 
$
3,434

 
$
(8,241
)
 
$
14,442

Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$
(1.24
)
 
$
0.22

 
$
(0.54
)
 
$
0.91

Diluted
$
(1.24
)
 
$
0.21

 
$
(0.54
)
 
$
0.90

Weighted Average Shares:
 
 
 
 
 
 
 
Basic
15,362

 
15,884

 
15,362

 
15,935

Diluted
15,362

 
15,992

 
15,362

 
16,041



5/9

Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
September 30,
2013
 
December 31,
2012
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
77,900

 
$
61,169

Accounts receivable, net
14,818

 
13,626

Income taxes receivable
4,504

 
6,682

Deposits
501

 
389

Prepaid expenses and other current assets
3,483

 
2,260

Deferred tax assets
2,007

 
2,194

Total current assets
103,213

 
86,320

Deposits, less current portion
979

 
1,107

Deferred tax assets, less current portion
1,229

 
1,710

Restricted cash
1,618

 
3,396

Property and equipment, net
6,376

 
4,314

Intangible assets, net
540

 
986

Total assets
$
113,955

 
$
97,833

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
27,676

 
$
28,695

Accrued unexchanged promotional merger shares
25,000

 
3,000

Accrued expenses
10,043

 
8,993

Deferred revenue
1,740

 
2,698

Deferred rent
306

 
280

Income tax payable
1,353

 
—

Total current liabilities
66,118

 
43,666

Long-term tax liabilities
10,388

 
10,030

Deferred rent, less current portion
1,423

 
798

Total liabilities
77,929

 
54,494

Common stock
163

 
163

Treasury stock
(7,898
)
 
(7,898
)
Additional paid-in capital
9,851

 
8,863

Accumulated other comprehensive loss
(797
)
 
(737
)
Retained earnings
34,707

 
42,948

Total stockholders’ equity
36,026

 
43,339

Total liabilities and stockholders’ equity
$
113,955

 
$
97,833



6/9

Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income (loss)
$
(19,036
)
 
$
3,434

 
$
(8,241
)
 
$
14,442

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
709

 
630

 
2,185

 
1,856

Deferred income taxes
241

 
(3
)
 
641

 
(3
)
Stock-based compensation
375

 
307

 
989

 
900

Provision for losses on accounts receivable
(94
)
 
(84
)
 
(44
)
 
116

Net foreign currency effects
(74
)
 
(46
)
 
38

 
(6
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
1,021

 
53

 
(1,106
)
 
(2,069
)
Deposits
(3
)
 
(17
)
 
17

 
(382
)
Income tax receivable
(1,424
)
 
689

 
2,169

 
1,819

Prepaid expenses and other current assets
59

 
(161
)
 
(975
)
 
(241
)
Accounts payable
(1,886
)
 
680

 
(1,041
)
 
1,189

Accrued unexchanged promotional shares
22,000

 
—

 
22,000

 
3,000

Accrued expenses
(182
)
 
897

 
1,039

 
3,198

Deferred revenue
(109
)
 
383

 
(956
)
 
323

Deferred rent
188

 
55

 
299

 
21

Income tax payable
254

 
(1
)
 
1,292

 
(284
)
Other non-current liabilities
149

 
34

 
359

 
(190
)
Net cash provided by operating activities
2,188

 
6,850

 
18,665

 
23,689

Cash flows from investing activities:
 
 
 
 
 
 
 
Purchases of restricted cash
2,048

 
—

 
1,786

 
—

Purchases of property and equipment
(1,487
)
 
(774
)
 
(3,596
)
 
(2,046
)
Net cash provided by (used in) investing activities
561

 
(774
)
 
(1,810
)
 
(2,046
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Cash used in purchase of common stock
—

 
(3,611
)
 
—

 
(3,611
)
Net cash used in financing activities
—

 
(3,611
)
 
—

 
(3,611
)
Effect of exchange rate on cash and cash equivalents
1,770

 
1,008

 
(124
)
 
858

Net increase in cash and cash equivalents
4,519

 
3,473

 
16,731

 
18,890

Cash and cash equivalents at beginning of period
73,381

 
54,161

 
61,169

 
38,744

Cash and cash equivalents at end of period
$
77,900

 
$
57,634

 
$
77,900

 
$
57,634

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid for income taxes, net
$
1,897

 
$
177

 
$
1,917

 
$
5,568



7/9

Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended September 30, 2013
North
America
 
Europe
 
Elimination and Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
26,209

 
$
11,047

 
$
—

 
$
37,256

Intersegment revenue
361

 
110

 
(471
)
 
—

Total net revenues
26,570

 
11,157

 
(471
)
 
37,256

Operating income
$
2,506

 
$
1,469

 
$
(22,000
)
 
$
(18,025
)
Three months ended September 30, 2012
North
America
 
Europe
 
Elimination
 
Consolidated
Revenue from unaffiliated customers
$
25,147

 
$
10,300

 
$
—

 
$
35,447

Intersegment revenue
211

 
10

 
(221
)
 
—

Total net revenues
25,358

 
10,310

 
(221
)
 
35,447

Operating income
$
3,121

 
$
1,074

 
$
—

 
$
4,195

Nine months ended September 30, 2013
North
America
 
Europe
 
Elimination and Other (b)
 
Consolidated
Revenue from unaffiliated customers
$
86,368

 
$
34,391

 
$
—

 
$
120,759

Intersegment revenue
757

 
440

 
(1,197
)
 
—

Total net revenues
87,125

 
34,831

 
(1,197
)
 
120,759

Operating income
$
13,888

 
$
5,916

 
$
(22,000
)
 
$
(2,196
)
Nine months ended September 30, 2012
North
America
 
Europe
 
Elimination and Other (b)
 
Consolidated
Revenue from unaffiliated customers
$
82,415

 
$
31,725

 
$
—

 
$
114,140

Intersegment revenue
496

 
41

 
(537
)
 
—

Total net revenues
82,911

 
31,766

 
(537
)
 
114,140

Operating income
$
18,094

 
$
6,038

 
$
(3,000
)
 
$
21,132




 
(a)
Includes a charge of $22.0 million for the three months ended September 30, 2013 related to settlement agreements in connection with a dispute over unclaimed property audits.
(b)
Includes a charge of $22.0 million and $3.0 million for the nine months ended September 30, 2013 and 2012, respectively, related to settlement agreements in connection with a dispute over unclaimed property audits.


8/9

Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
GAAP operating expense
$
50,959

 
$
27,263

 
$
110,222

 
$
81,336

Unexchanged merger shares (a) (b)
22,000

 
—

 
22,000

 
3,000

Non-GAAP operating expense
$
28,959

 
$
27,263

 
$
88,222

 
$
78,336

 
 
 
 
 
 
 
 
GAAP operating income (loss)
$
(18,025
)
 
$
4,195

 
$
(2,196
)
 
$
21,132

Unexchanged merger shares (a) (b)
22,000

 
—

 
22,000

 
3,000

Non-GAAP operating income
$
3,975

 
$
4,195

 
$
19,804

 
$
24,132

 
 
 
 
 
 
 
 
GAAP operating margin
(48.4)
 %
 
11.8
%
 
(1.8)
 %
 
18.5
 %
Unexchanged merger shares (a) (b)
59.1
 %
 
—
%
 
18.2
 %
 
2.6
 %
Non-GAAP operating margin
10.7
 %
 
11.8
%
 
16.4
 %
 
21.1
 %
 
 
 
 
 
 
 
 
GAAP effective tax rate
(6.9)
 %
 
20.7
%
 
(351.1)
 %
 
32.4
 %
Unexchanged merger shares (a) (b)
36.4
 %
 
—
%
 
382.9
 %
 
(4.0)
 %
Non-GAAP effective tax rate
29.4
 %
 
20.7
%
 
31.8
 %
 
28.4
 %
 
 
 
 
 
 
 
 
GAAP net income (loss)
$
(19,036
)
 
$
3,434

 
$
(8,241
)
 
$
14,442

Unexchanged merger shares (a) (b)
22,000

 
—

 
22,000

 
3,000

Non-GAAP net income
$
2,964

 
$
3,434

 
$
13,759

 
$
17,442

 
 
 
 
 
 
 
 
Earnings (loss) per share
$
(1.24
)
 
$
0.21

 
$
(0.54
)
 
$
0.90

Unexchanged merger shares (a) (b)
1.43

 
—

 
1.42

 
0.19

Non-GAAP earnings per share (c)
$
0.19

 
$
0.21

 
$
0.88

 
$
1.09

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Includes a charge of $22.0 million for the three months ended September 30, 2013 related to settlement agreements in connection with a dispute over unclaimed property audits.
(b)
Includes a charge $22.0 million and $3.0 million for the nine months ended September 30, 2013 and 2012, respectively, related to settlement agreements in connection with a dispute over unclaimed property audits.
(c)
Shares used to calculate non-GAAP earnings per share for the three months ended September 30, 2013 were 15,482,802, 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. Shares used to calculate non-GAAP earnings per share for the nine months ended September 30, 2013 were 15,550,982, 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.


9/9