Exhibit 99.1
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| Travelzoo Inc. 590 Madison Avenue 37th Floor New York, NY 10022
Media Contact: Glen Ceremony Chief Financial Officer Travelzoo Inc. +1 (212) 484-4998 pr@travelzoo.com
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FOR IMMEDIATE RELEASE
Travelzoo Reports Second Quarter 2014 Results
NEW YORK, July 17, 2014 - Travelzoo Inc. (NASDAQ: TZOO):
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| • | Revenue of $36.9 million, down 11% year-over-year |
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| • | Operating profit of $10.1 million, up 30% year-over-year |
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| • | Non-GAAP earnings per share of $0.30, compared to $0.34 in the prior-year period |
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| • | Cash used in operations of $509,000 |
Travelzoo Inc., a global Internet media company, today announced financial results for the second quarter ended June 30, 2014, with revenue of $36.9 million, a decrease of 11% year-over-year. Net income was $7.9 million, with earnings per share of $0.54. Non-GAAP net income was $4.4 million, with non-GAAP earnings per share of $0.30. Non-GAAP net income and non-GAAP earnings per share exclude a $3.5 million release of reserve for Travelzoo Inc.'s anticipated settlement agreements in connection with a dispute over unclaimed property audits.
"In North America, our revenues declined due to lower Local and Search revenues, as previously announced. In Europe, our revenues and operating income increased. Europe contributed 43% of our operating income this quarter," said Chris Loughlin, chief executive officer. "We continue to invest in mobile products and in our new hotel booking platform."
North America
North America business segment revenue decreased 17% year-over-year to $25.2 million. Non-GAAP operating profit for the second quarter was $3.8 million, or 15% of revenue, down from $5.9 million, or 20% of revenue, in the prior-year period.
Europe
Europe business segment revenue increased 6% year-over-year to $11.7 million. In local currency terms, revenue decreased 4% year-over-year. Non-GAAP operating profit for the second quarter was $2.9 million, or 24% of revenue, up from $1.9 million, or 17% of revenue in the prior-year period.
Subscribers
Travelzoo had a total unduplicated number of subscribers in North America and Europe of 23.7 million as of June 30, 2014, up 3% from June 30, 2013. In North America, total unduplicated number of subscribers was 16.7 million as of June 30, 2014, up 2% from June 30, 2013. In Europe, total unduplicated number of subscribers was 7.0 million as of June 30, 2014, up 6% from June 30, 2013.
Update on Hotel Booking Platform
Travelzoo began testing its new hotel booking platform in North America in April on desktop and in June on mobile. In the second quarter, the booking engine was presented to a limited number of Travelzoo subscribers. Booking revenue is recognized upon stay, which is typically 40 to 50 days after the booking occurs.
Income Taxes
Income tax expense was $2.3 million, compared to $2.7 million in the prior-year period. The effective income tax rate, as calculated on the basis of non-GAAP income before taxes, was 34%, consistent with prior-year period.
Asset Management
During the second quarter of 2014, Travelzoo used $509,000 of cash from operating activities primarily due to new terms with Local Deals merchants which resulted in faster payments. Accounts receivable increased by $1.1 million over the prior-year period to $16.5 million. Accounts payable decreased by $4.8 million over the prior-year period to $24.1 million. Capital expenditures were $405,000, down from $1.2 million in the prior-year period. As of June 30, 2014, cash and cash equivalents were $60.5 million.
Non-GAAP Information
To give an enhanced view of Travelzoo's operating performance, management has calculated non-GAAP operating expense, non-GAAP North America operating profit, non-GAAP operating profit, non-GAAP operating margin, non-GAAP effective tax rate, non-GAAP net income and non-GAAP earnings per share by excluding the release of reserve related to our unexchanged promotional 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 information. As the only difference between GAAP and non-GAAP information is the release of reserve related to our unexchanged promotional shares, today’s reporting should not be viewed as Travelzoo’s intention to report non-GAAP information in future periods. Refer to the “Reconciliation of GAAP to Non-GAAP Information” section of this press release for important information.
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
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| • | download the management presentation (PDF format) to be discussed in the conference call; |
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.
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.
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Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| Revenues | $ | 36,883 |
| | $ | 41,327 |
| | $ | 77,078 |
| | $ | 83,504 |
|
| Cost of revenues | 4,374 |
| | 4,425 |
| | 9,151 |
| | 8,411 |
|
| Gross profit | 32,509 |
| | 36,902 |
| | 67,927 |
| | 75,093 |
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| Operating expenses: | | | | | | | |
| Sales and marketing | 15,305 |
| | 19,457 |
| | 33,148 |
| | 39,115 |
|
| General and administrative | 10,570 |
| | 9,651 |
| | 21,148 |
| | 20,149 |
|
| Unexchanged promotional shares | (3,500 | ) | | — |
| | (3,500 | ) | | — |
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| Total operating expenses | 22,375 |
| | 29,108 |
| | 50,796 |
| | 59,264 |
|
| Income from operations | 10,134 |
| | 7,794 |
| | 17,131 |
| | 15,829 |
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| Other income | 56 |
| | 112 |
| | 177 |
| | 144 |
|
| Income before income taxes | 10,190 |
| | 7,906 |
| | 17,308 |
| | 15,973 |
|
| Income taxes | 2,266 |
| | 2,706 |
| | 4,747 |
| | 5,178 |
|
| Net income | $ | 7,924 |
| | $ | 5,200 |
| | $ | 12,561 |
| | $ | 10,795 |
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| Net income per share: | | | | | | | |
| Basic | $ | 0.54 |
| | $ | 0.34 |
| | $ | 0.85 |
| | $ | 0.70 |
|
| Diluted | $ | 0.54 |
| | $ | 0.34 |
| | $ | 0.84 |
| | $ | 0.70 |
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| Weighted average shares: | | | | | | | |
| Basic | 14,734 |
| | 15,362 |
| | 14,806 |
| | 15,362 |
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| Diluted | 14,794 |
| | 15,457 |
| | 14,881 |
| | 15,427 |
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Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
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| | | | | | | |
| | June 30,
2014 | | December 31, 2013 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 60,502 |
| | $ | 66,223 |
|
| Accounts receivable, net | 16,529 |
| | 13,986 |
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| Income taxes receivable | 2,015 |
| | 2,656 |
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| Deposits | 287 |
| | 396 |
|
| Prepaid expenses and other current assets | 2,066 |
| | 3,202 |
|
| Deferred tax assets | 1,216 |
| | 1,143 |
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| Restricted cash | — |
| | 200 |
|
| Funds held for reverse/forward stock split | 199 |
| | 13,668 |
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| Total current assets | 82,814 |
| | 101,474 |
|
| Deposits | 1,183 |
| | 1,168 |
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| Deferred tax assets | 2,476 |
| | 2,032 |
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| Restricted cash | 1,478 |
| | 1,479 |
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| Property and equipment, net | 9,668 |
| | 8,245 |
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| Intangible assets, net | 298 |
| | 404 |
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| Total assets | $ | 97,917 |
| | $ | 114,802 |
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| Liabilities and Stockholders’ Equity | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 24,108 |
| | $ | 31,766 |
|
| Accrued expenses and other | 9,100 |
| | 10,824 |
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| Deferred revenue | 1,801 |
| | 1,578 |
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| Income tax payable | 1,699 |
| | — |
|
| Reserve for unexchanged promotional shares | 8,000 |
| | 12,726 |
|
| Payable to shareholders for reverse/forward stock split | 199 |
| | 13,668 |
|
| Total current liabilities | 44,907 |
| | 70,562 |
|
| Long-term tax liabilities | 10,660 |
| | 10,436 |
|
| Long term deferred rent and other | 3,419 |
| | 2,469 |
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| Total liabilities | 58,986 |
| | 83,467 |
|
| Common stock | 163 |
| | 163 |
|
| Treasury stock | (21,517 | ) | | (15,662 | ) |
| Additional paid-in capital | 11,037 |
| | 10,247 |
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| Accumulated other comprehensive loss | (83 | ) | | (530 | ) |
| Retained earnings | 49,331 |
| | 37,117 |
|
| Total stockholders’ equity | 38,931 |
| | 31,335 |
|
| Total liabilities and stockholders’ equity | $ | 97,917 |
| | $ | 114,802 |
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Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| Cash flows from operating activities: | | | | | | | |
| Net income | $ | 7,924 |
| | $ | 5,200 |
| | $ | 12,561 |
| | $ | 10,795 |
|
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | | |
| Depreciation and amortization | 640 |
| | 760 |
| | 1,342 |
| | 1,476 |
|
| Impairment of software | 249 |
| | — |
| | 249 |
| | — |
|
| Deferred income taxes | (584 | ) | | 207 |
| | (508 | ) | | 400 |
|
| Stock-based compensation | 395 |
| | 307 |
| | 790 |
| | 613 |
|
| Provision for losses on accounts receivable | 41 |
| | (45 | ) | | (11 | ) | | 50 |
|
| Net foreign currency effects | (6 | ) | | 19 |
| | (36 | ) | | 112 |
|
| Changes in operating assets and liabilities: | | | | | | | |
| Accounts receivable | (1,123 | ) | | (91 | ) | | (2,411 | ) | | (2,127 | ) |
| Deposits | 27 |
| | 175 |
| | 160 |
| | 20 |
|
| Income tax receivable | (717 | ) | | 2,029 |
| | 549 |
| | 3,593 |
|
| Prepaid expenses and other current assets | 60 |
| | (1,382 | ) | | 564 |
| | (1,032 | ) |
| Accounts payable | (4,350 | ) | | 1,965 |
| | (7,389 | ) | | 845 |
|
| Accrued expenses and other | (740 | ) | | 263 |
| | (1,920 | ) | | 485 |
|
| Income tax payable | 1,061 |
| | 467 |
| | 1,783 |
| | 1,038 |
|
| Reserve for unexchanged promotional shares | (3,500 | ) | | — |
| | (4,726 | ) | | — |
|
| Other non-current liabilities | 114 |
| | 107 |
| | 225 |
| | 210 |
|
| Net cash provided by (used in) operating activities | (509 | ) | | 9,981 |
| | 1,222 |
| | 16,478 |
|
| Cash flows from investing activities: | | | | | | | |
| Release (purchase) of restricted cash | — |
| | (263 | ) | | 200 |
| | (263 | ) |
| Purchases of property and equipment | (405 | ) | | (1,209 | ) | | (1,424 | ) | | (2,109 | ) |
| Net cash used in investing activities | (405 | ) | | (1,472 | ) | | (1,224 | ) | | (2,372 | ) |
| Cash flows from financing activities: | | | | | | | |
| Repurchase of common stock | (287 | ) | | — |
| | (5,855 | ) | | — |
|
| Reverse/forward stock split, including transaction costs | — |
| | — |
| | (479 | ) | | — |
|
| Net cash used in financing activities | (287 | ) | | — |
| | (6,334 | ) | | — |
|
| Effect of exchange rate on cash and cash equivalents | 668 |
| | (235 | ) | | 615 |
| | (1,894 | ) |
| Net increase (decrease) in cash and cash equivalents | (533 | ) | | 8,274 |
| | (5,721 | ) | | 12,212 |
|
| Cash and cash equivalents at beginning of period | 61,035 |
| | 65,107 |
| | 66,223 |
| | 61,169 |
|
| Cash and cash equivalents at end of period | $ | 60,502 |
| | $ | 73,381 |
| | $ | 60,502 |
| | $ | 73,381 |
|
| Supplemental disclosure of cash flow information: | | | | | | | |
| Cash paid for income taxes, net | $ | 2,508 |
| | $ | 10 |
| | $ | 2,843 |
| | $ | 20 |
|
Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
|
| | | | | | | | | | | | | | | |
| Three months ended June 30, 2014 | North America | | Europe | | Elimination and Other (a) | | Consolidated |
| Revenue from unaffiliated customers | $ | 25,175 |
| | $ | 11,708 |
| | $ | — |
| | $ | 36,883 |
|
| Intersegment revenue | 302 |
| | 129 |
| | (431 | ) | | — |
|
| Total net revenues | 25,477 |
| | 11,837 |
| | (431 | ) | | 36,883 |
|
| Operating income | $ | 3,771 |
| | $ | 2,863 |
| | $ | 3,500 |
| | $ | 10,134 |
|
| Three months ended June 30, 2013 | North America | | Europe | | Elimination and Other | | Consolidated |
| Revenue from unaffiliated customers | $ | 30,249 |
| | $ | 11,078 |
| | $ | — |
| | $ | 41,327 |
|
| Intersegment revenue | 331 |
| | 222 |
| | (553 | ) | | — |
|
| Total net revenues | 30,580 |
| | 11,300 |
| | (553 | ) | | 41,327 |
|
| Operating income | $ | 5,899 |
| | $ | 1,895 |
| | $ | — |
| | $ | 7,794 |
|
| | | | | | | | |
| Six months ended June 30, 2014 | North
America | | Europe | | Elimination and Other (a) | | Consolidated |
| Revenue from unaffiliated customers | $ | 51,528 |
| | $ | 25,550 |
| | $ | — |
| | $ | 77,078 |
|
| Intersegment revenue | 716 |
| | 141 |
| | (857 | ) | | — |
|
| Total net revenues | 52,244 |
| | 25,691 |
| | (857 | ) | | 77,078 |
|
| Operating income | $ | 8,375 |
| | $ | 5,256 |
| | $ | 3,500 |
| | $ | 17,131 |
|
| Six months ended June 30, 2013 | North
America | | Europe | | Elimination and Other | | Consolidated |
| Revenue from unaffiliated customers | $ | 60,160 |
| | $ | 23,344 |
| | $ | — |
| | $ | 83,504 |
|
| Intersegment revenue | 575 |
| | 330 |
| | (905 | ) | | — |
|
| Total net revenues | 60,735 |
| | 23,674 |
| | (905 | ) | | 83,504 |
|
| Operating income | $ | 11,382 |
| | $ | 4,447 |
| | $ | — |
| | $ | 15,829 |
|
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| (a) | Includes a $3.5 million release of reserve for the three and six months ended June 30, 2014 related to anticipated settlement agreements in connection with a dispute over unclaimed property audits. |
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| | | | | | | | | | | | | | | |
| Travelzoo Inc. |
| Reconciliation of GAAP to Non-GAAP Information |
| (Unaudited) |
| (In thousands, except per share amounts) |
| | | | | | |
| | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| GAAP operating expense | $ | 22,375 |
| | $ | 29,108 |
| | $ | 50,796 |
| | $ | 59,264 |
|
| Unexchanged promotional shares (a) | (3,500 | ) | | — |
| | (3,500 | ) | | — |
|
| Non-GAAP operating expense | $ | 25,875 |
| | $ | 29,108 |
| | $ | 54,296 |
| | $ | 59,264 |
|
| | | | | | | | |
| GAAP operating income | $ | 10,134 |
| | $ | 7,794 |
| | $ | 17,131 |
| | $ | 15,829 |
|
| Unexchanged promotional shares (a) | (3,500 | ) | | — |
| | (3,500 | ) | | — |
|
| Non-GAAP operating income | $ | 6,634 |
| | $ | 7,794 |
| | $ | 13,631 |
| | $ | 15,829 |
|
| | | | | | | | |
| GAAP operating margin | 27.5 | % | | 18.9 | % | | 22.2 | % | | 19.0 | % |
| Unexchanged promotional shares (a) | (9.5 | )% | | — | % | | (4.5 | )% | | — | % |
| Non-GAAP operating margin | 18.0 | % | | 18.9 | % | | 17.7 | % | | 19.0 | % |
| | | | | | | | |
| GAAP effective tax rate | 22.2 | % | | 34.2 | % | | 27.4 | % | | 32.4 | % |
| Unexchanged promotional shares (a) | 11.6 | % | | — | % | | 7.0 | % | | — | % |
| Non-GAAP effective tax rate | 33.8 | % | | 34.2 | % | | 34.4 | % | | 32.4 | % |
| | | | | | | | |
| GAAP net income | $ | 7,924 |
| | $ | 5,200 |
| | $ | 12,561 |
| | $ | 10,795 |
|
| Unexchanged promotional shares (a) | (3,500 | ) | | — |
| | (3,500 | ) | | — |
|
| Non-GAAP net income | $ | 4,424 |
| | $ | 5,200 |
| | $ | 9,061 |
| | $ | 10,795 |
|
| | | | | | | | |
| Earnings per share | $ | 0.54 |
| | $ | 0.34 |
| | $ | 0.84 |
| | $ | 0.70 |
|
| Unexchanged promotional shares (a) | (0.24 | ) | | — |
| | (0.24 | ) | | — |
|
| Non-GAAP earnings per share | $ | 0.30 |
| | $ | 0.34 |
| | $ | 0.60 |
| | $ | 0.70 |
|
| | | | | | | | |
| | | | | | | | |
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| (a) | Includes a $3.5 million release of reserve for the three and six months ended June 30, 2014 related to anticipated settlement agreements in connection with a dispute over unclaimed property audits. |
