Travelzoo (TZOO) 8-K Travelzoo Reports Second Quarter 2008 Results

Exhibit 99.1

Travelzoo
590 Madison Avenue
37th Floor
New York, NY 10022

Media Contact:
Mindy Joyce
(212) 521-4218
mjoyce@travelzoo.com

 

FOR IMMEDIATE RELEASE

Travelzoo Reports Second Quarter 2008 Results

NEW YORK, July 24, 2008 -- Travelzoo Inc. (NASDAQ: TZOO):

• Revenue of $21.8 million, up 8% year-over-year

• Operating profit of $1.7 million

• Loss per share of $(0.08), down from earnings per share of $0.17 in the prior-year period

• Income tax rate of 168%

Travelzoo Inc., a global Internet media company, today announced financial results for the second quarter ended June 30, 2008, with revenue of $21.8 million, an increase of 8% year-over-year. Net loss was $1.2 million with diluted loss per share of $(0.08), down from diluted earnings per share of $0.17 in the prior-year period.

“In Q2 2008, we continued to develop Travelzoo into a global brand,” said Ralph Bartel, chairman and chief executive officer, Travelzoo. “The costs related to our aggressive expansion in Asia Pacific and Europe negatively impact our reported operating profit.”

North America

North America business segment revenue grew 3% year-over-year to $19.2 million. North America reported an operating profit of $6.9 million, or 36.1% of revenue, down from an operating profit of $7.3 million, or 39.1% of revenue, in the prior-year period.

Europe

Europe business segment revenue grew 71% year-over-year to $2.6 million. Europe reported an operating loss of $2.0 million, compared to an operating loss of $1.2 million in the prior-year period. The

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increase in operating loss was primarily attributable to expenses associated with the start up of our operations in France. 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 Web site and its weekly Top 20^® list in Spain, after having operated a sales office in Barcelona since November 2006.

Asia Pacific

Asia Pacific business segment revenue was $90,000. Asia Pacific reported an operating loss of $3.2 million, compared to an operating loss of $2.7 million in the prior quarter and an operating loss of $400,000 in the prior-year period. Travelzoo began operations in Hong Kong in April 2007, in Japan in September 2007, in China in October 2007 and in Australia and Taiwan in December 2007.

Income Taxes

Income tax expense was $2.9 million compared to $3.4 million in the prior-year period. Travelzoo’s effective income tax rate was 168.1%, up from 54.2% in the prior-year period. The effective tax rate was impacted by operating losses from our Asia Pacific business segment and Europe business segment. These operating losses were treated as having no recognizable tax benefit.

Asset Management

Travelzoo used $3.1 million of cash for operating activities. Accounts receivable increased $727,000 sequentially and increased $3.0 million over the prior-year period to $11.6 million. Accounts payable increased $462,000 sequentially and increased $1.3 million over the prior-year period to $7.7 million. Travelzoo exited the quarter with $21.0 million in cash and cash equivalents.

Conference Call

Travelzoo will host a conference call to discuss second quarter results at 5:00 p.m. ET today. A live Web cast can be accessed through the company’s investor relations Web site at www.travelzoo.com/ir.

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About Travelzoo

Travelzoo is a global Internet media company. Travelzoo’s media properties, which reach more than 12 million travel enthusiasts in the U.S., Australia, Canada, China, France, Germany, Hong Kong, Japan, Spain, Taiwan and the U.K., include the Travelzoo^® Web site (www.travelzoo.com), the Top 20^® list, the Newsflash™ e-mail alert service, the Travelzoo Network™ and SuperSearch™, a travel search engine. Travelzoo publishes offers from more than 900 advertisers. Travelzoo’s deal experts review offers to find the best travel deals and confirm their true value. Travelzoo’s global headquarters is in New York City.

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.

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Travelzoo Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

	Three months ended June 30,					Six months ended June 30,
		2008			2007		2008			2007
Revenues	$	21,769		$	20,115	$	42,718		$	39,855
Cost of revenues		637			225		1,166			374
Gross profit		21,132			19,890		41,552			39,481
Operating expenses:
Sales and marketing		12,520			10,745		25,914			20,062
General and administrative		6,930			3,392		12,676			6,189
Total operating expenses		19,450			14,137		38,590			26,251
Income from operations		1,682			5,753		2,962			13,230
Other income and expense:
Interest income		77			428		213			792
Gain (loss) on foreign currency		(6	)		36		145			35
Income before income taxes		1,753			6,217		3,320			14,057
Income taxes		2,946			3,371		5,519			7,148
Net income (loss)	$	(1,193	)	$	2,846	$	(2,199	)	$	6,909
Basic net income (loss) per share	$	(0.08	)	$	0.19	$	(0.15	)	$	0.45
Diluted net income (loss) per share		(0.08	)		0.17		(0.15	)		0.42
Shares used in computing basic net income (loss) per share		14,269			15,250		14,260			15,250
Shares used in computing diluted net income (loss) per share		14,269			16,482		14,260			16,481

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Travelzoo Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

		June 30, 2008			December 31, 2007
ASSETS
Cash and cash equivalents	$	21,017		$	22,641
Accounts receivable, net		11,566			9,969
Deposits		202			272
Prepaid expenses and other current assets		1,901			1,982
Deferred tax assets		1,393			1,393
Total current assets		36,079			36,257
Deposits, less current portion		378			349
Restricted cash		875			—
Property and equipment, net		2,156			622
Intangible assets, net		53			58
Total assets	$	39,541		$	37,286
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		7,707			4,960
Accrued expenses		5,265			4,608
Deferred revenue		756			450
Deferred rent		30			37
Total current liabilities		13,758			10,055
Other non-current liabilities		2,084			1,329
Common stock		143			143
Additional paid-in capital		185			—
Accumulated other comprehensive loss		(369	)		(180	)
Retained earnings		23,740			25,939
Total stockholders’ equity		23,699			25,902
Total liabilities and stockholders’ equity	$	39,541		$	37,286

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Travelzoo Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three months ended June 30,						Six months ended June 30,
		2008			2007			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(1,193	)	$	2,846		$	(2,199	)	$	6,909
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		130			48			233			79
Provision for losses on accounts receivable		44			(36	)		66			(8	)
Changes in operating assets and liabilities:
Accounts receivable		(763	)		736			(1,657	)		(1,235	)
Deposits		(105	)		16			42			(67	)
Prepaid expenses and other current assets		(532	)		(381	)		86			(815	)
Accounts payable		77			2,136			2,332			3,580
Accrued expenses		(80	)		(233	)		629			248
Deferred revenue		40			(61	)		305			(37	)
Deferred rent		414			55			714			55
Income tax payable		(1,127	)		(2,974	)		—			3
Other non-current liabilities		33			—			33			—
Net cash provided by (used in) operating activities		(3,062	)		2,152			584			8,712
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(515	)		(169	)		(1,357	)		(246	)
Purchase of restricted cash		—			—			(875	)		—
Net cash used in investing activities		(515	)		(169	)		(2,232	)		(246	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		75			—			75			—
Tax benefit from exercise of stock options		110			—			110			—
Net cash provided by financing activities		185			—			185			—
Effect of exchange rate on cash and cash equivalents		(36	)		4			(161	)		(5	)
Net increase in cash and cash equivalents		(3,428	)		1,987			(1,624	)		8,461
Cash and cash equivalents at beginning of period		24,445			39,889			22,641			33,415
Cash and cash equivalents at end of period		21,017			41,876			21,017			41,876
Supplemental disclosure of cash flow information:
Cash paid for income taxes net of refunds received	$	4,572		$	6,750		$	5,018		$	7,550

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Travelzoo Inc.

Segment Information

(Unaudited)

(In thousands)

Three months ended June 30, 2008	North America		Europe			Asia Pacific			Elimination			Consolidated
Revenue from unaffiliated customers	$	19,129	$	2,550		$	90		$	—		$	21,769
Intersegment revenue		39		19			—			(58	)		—
Total net revenues		19,168		2,569			90			(58	)		21,769
Operating income (loss)	$	6,929	$	(2,013	)	$	(3,235	)	$	1		$	1,682
Three months ended June 30, 2007	North America		Europe			Asia Pacific			Elimination			Consolidated
Revenue from unaffiliated customers	$	18,619	$	1,496		$	—		$	—		$	20,115
Intersegment revenue		77		2			—			(79	)		—
Total net revenues		18,696		1,498			—			(79	)		20,115
Operating income (loss)	$	7,313	$	(1,161	)	$	(400	)	$	1		$	5,753
Six months ended June 30, 2008	North America		Europe			Asia Pacific			Elimination			Consolidated
Revenue from unaffiliated customers	$	38,019	$	4,589		$	110		$	—		$	42,718
Intersegment revenue		64		30			—			(94	)		—
Total net revenues		38,083		4,619			110			(94	)		42,718
Operating income (loss)	$	13,193	$	(4,254	)	$	(5,979	)	$	2		$	2,962
Six months ended June 30, 2007	North America		Europe			Asia Pacific			Elimination			Consolidated
Revenue from unaffiliated customers	$	37,074	$	2,781		$	—		$	—		$	39,855
Intersegment revenue		118		5			—			(123	)		—
Total net revenues		37,192		2,786			—			(123	)		39,855
Operating income (loss)	$	15,473	$	(1,845	)	$	(400	)	$	2		$	13,230

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