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Travelzoo Reports Fourth Quarter 2019 Results and Discusses Impact of Acquisition of Jack’s Flight Club on 2020 Results

NEW YORK, March 02, 2020 (GLOBE NEWSWIRE) -- Travelzoo® (TZOO):

  • Revenue of $26.9 million; consistent year-over-year in constant currencies

  • Cash flow from operations of $9.4 million

  • GAAP operating profit of $0.8 million

  • Earnings per share (EPS) of ($0.05)

  • New Travelzoo® members growth 18% higher

  • Acquisition of fast-growing, highly profitable Jack’s Flight Club completed on January 13.

Travelzoo, a global Internet media company that publishes exclusive offers and experiences for members, today announced financial results for the fourth quarter ended December 31, 2019. Global consolidated revenue was $26.9 million, a decrease of $164,000 year-over-year. In constant currencies, revenue was consistent year-over-year. Travelzoo's reported revenue consists of advertising revenues and commissions, derived from and generated in connection with a much larger amount of purchases made by Travelzoo® members. The operating profit was $818,000. Operating profit was impacted by three factors: special marketing initiatives, including a TV advertising campaign with partner Deutsche Bahn in Germany; one-time HR expenses; and one-time restructuring expenses in Asia Pacific. After increased tax provisions, the reported net loss was $636,000. EPS was ($0.05), down from $0.13 in the prior-year period.

"I would like to thank all Travelzoo employees worldwide who contributed to our solid financial results throughout 2019,” said Holger Bartel, Global CEO of Travelzoo. “We are excited about the prospects of our recent acquisition of Jack’s Flight Club, a highly profitable, best in class subscription service, on Travelzoo’s financial performance going forward. During the month of February alone, about 100,000 Travelzoo members in the UK signed up for Jack’s Flight Club. We will see an immediate contribution to Q1 2020 revenue and EPS. Then, throughout 2020, we plan to introduce Jack’s Flight Club to 30 million Travelzoo members.”

Core Business versus Development Business
Our businesses in Europe and North America (the "Core Business") and our business in Asia Pacific (the "Development Business") are in very different situations. The following table illustrates how the Core Business compares to the Development Business:

 

Core Business

 

Development Business

Q4 2019 Operating profit/loss

+$2.9 million

 

-$2.0 million

Q4 2019 Operating margin

 11%

 

N/A

Contribution to Q4 2019 EPS

+$0.15

 

-$0.20

Contribution to twelve months EPS

+$1.01

 

-$0.67

Europe
Europe business segment revenue increased 2% year-over-year to $9.1 million. In constant currencies, revenue increased 3% year-over-year. Operating profit for the fourth quarter was $823,000, or 9% of revenue, compared to an operating profit of $1.6 million, or 18% of revenue in the prior-year period.

North America
North America business segment revenue decreased 1% year-over-year to $16.2 million. Operating profit for the fourth quarter was $2.0 million, or 13% of revenue, compared to an operating profit of $2.7 million, or 16% of revenue in the prior-year period.

Asia Pacific
During the fourth quarter, our Asia Pacific segment saw a decrease in revenue of 12% year-over-year, a smaller decrease than in previous periods. Segment revenue was $1.6 million. Revenue from China increased by 11% quarter-over-quarter. The operating loss for the fourth quarter was $2.0 million, compared to $1.5 million in the prior-year period. Asia Pacific Q4 2019 operating loss includes one-time restructuring costs primarily related to Japan and Asia Pacific regional headquarters. As a result of the restructuring, fixed costs are expected to be substantially less going forward.

Members
As of December 31, 2019, Travelzoo had a worldwide unduplicated number of members of 30.3 million. In Asia Pacific, unduplicated number of members was 3.6 million as of December 31, 2019, consistent with December 31, 2018. In Europe, unduplicated number of members was 9.1 million as of December 31, 2019, up 4% from December 31, 2018. In North America, unduplicated number of members was 17.7 million as of December 31, 2019, up 1% from December 31, 2018.

The number of new members in Q4 2019 was 609,000, compared to 515,000 in Q4 2018. This represents an increase of 18% in new member growth.

Income Taxes
Income tax expense was $1.3 million, compared to a $1.2 million income tax expense in the prior-year period. Travelzoo saw an unusually high income tax provision recorded for Q4 2019 of 167%, up from 43% in the prior-year period, primarily due to a one-time adjustment to pre-tax profit estimates for North America and Europe. Operating losses from the Development Business were not used to offset operating income from the Core Business.

Asset Management
During the fourth quarter of 2019, Travelzoo generated $9.4 million of cash from operating activities. Accounts payable increased by $7.0 million to $20.4 million in the fourth quarter of 2019. Cash used in investing activities was $124,000. Cash used in financing activities of $2.0 million was for share repurchases. As of December 31, 2019, cash and cash equivalents were $19.5 million.

Jack’s Flight Club 
On January 13, 2020, Travelzoo completed the acquisition of a majority stake in Jack’s Flight Club. Jack’s Flight Club is a highly profitable, fast-growing and best in class subscription service that monitors flight prices and informs its members about airfare sales and cheap flights. It offers a free subscription as well as a premium service, for which members pay between $40 to $60 annually.

At the time of the acquisition, the immediate contribution to Travelzoo’s financial performance was an additional 5% revenue growth and an additional EPS of $0.20 for 2020. In 2019, the number of premium members of Jack’s Flight Club grew 93% compared to 2018. Travelzoo’s plan is to accelerate this growth by introducing Jack’s Flight Club to Travelzoo members worldwide. Since January 30, more than 100,000 Travelzoo members in the UK alone signed up for Jack’s Flight Club.

Conference Call
Travelzoo will host a conference call to discuss fourth quarter results today at 11:00 a.m. ET. Please visit http://ir.travelzoo.com/events-presentations to

  • download the management presentation (PDF format) to be discussed in the conference call;

  • access the webcast.

About Travelzoo
Travelzoo® provides our 30 million members insider deals and one-of-a-kind experiences personally reviewed by one of our deal experts around the globe. With 22 offices worldwide, we have our finger on the pulse of outstanding travel, entertainment, and lifestyle experiences. For over 20 years we have worked in partnership with more than 5,000 top travel suppliers-our long-standing relationships give Travelzoo members access to irresistible deals.

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.


Travelzoo
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)

 

 

Three months ended

 

 

 

Twelve months ended

 

 

 

December 31,

 

 

 

December 31,

 

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Revenues

$

26,898

 

 

$

27,062

 

 

$

111,412

 

 

$

111,322

 

Cost of revenues

3,206

 

 

2,880

 

 

11,889

 

 

12,268

 

Gross profit

23,692

 

 

24,182

 

 

99,523

 

 

99,054

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

14,753

 

 

13,974

 

 

59,949

 

 

58,519

 

Product development

1,905

 

 

1,799

 

 

6,885

 

 

8,993

 

General and administrative

6,216

 

 

5,620

 

 

23,262

 

 

23,304

 

Total operating expenses

22,874

 

 

21,393

 

 

90,096

 

 

90,816

 

Income from operations

818

 

 

2,789

 

 

9,427

 

 

8,238

 

Other income (loss), net

(135

)

 

(52

)

 

(515

)

 

48

 

Income before income taxes

683

 

 

2,737

 

 

8,912

 

 

8,286

 

Income tax expense

1,319

 

 

1,173

 

 

4,794

 

 

3,625

 

Net income (loss)

$

(636

)

 

$

1,564

 

 

$

4,118

 

 

$

4,661

 

 

 

 

 

 

 

 

 

Basic income (loss) per share

$

(0.05

)

 

$

0.13

 

 

$

0.35

 

 

$

0.38

 

Diluted income (loss) per share

$

(0.05

)

 

$

0.13

 

 

$

0.34

 

 

0.37

 

 

 

 

 

 

 

 

 

Weighted average shares:

 

 

 

 

 

 

 

Basic

11,559

 

 

12,059

 

 

11,809

 

 

12,323

 

Diluted

11,559

 

 

12,151

 

 

12,035

 

 

12,510

 



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

 

December 31,
 2019

 

December 31,
 2018

Assets

Current assets:

 

 

 

Cash and cash equivalents

$

19,505

 

 

$

18,017

 

Accounts receivable, net

13,006

 

 

12,646

 

Income taxes receivable

989

 

 

389

 

Deposits

114

 

 

167

 

Prepaid expenses and other

2,496

 

 

1,947

 

Total current assets

36,110

 

 

33,166

 

Deposits and other

702

 

 

685

 

Deferred tax assets

2,051

 

 

1,645

 

Restricted cash

1,323

 

 

1,444

 

Investment in WeekenGO

2,484

 

 

2,694

 

Operating lease right-of-use assets

9,287

 

 

 

Property and equipment, net

2,982

 

 

3,790

 

Total assets

$

54,939

 

 

$

43,424

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

20,406

 

 

$

17,129

 

Accrued expenses and other

7,477

 

 

7,853

 

Deferred revenue

896

 

 

1,339

 

Operating lease liabilities

5,301

 

 

 

Income tax payable

914

 

 

489

 

Total current liabilities

34,994

 

 

26,810

 

Long-term tax liabilities

359

 

 

418

 

Long-term operating lease liabilities

8,238

 

 

 

Other long-term liabilities

84

 

 

2,137

 

Total liabilities

43,675

 

 

29,365

 

Common stock

115

 

 

120

 

Additional paid-in capital

 

 

 

Accumulated other comprehensive loss

(3,452

)

 

(4,214

)

Retained earnings

14,601

 

 

18,153

 

Total stockholders’ equity

11,264

 

 

14,059

 

Total liabilities and stockholders’ equity

$

54,939

 

 

$

43,424

 



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

 

 

Three months ended

 

 

 

Twelve months ended

 

 

 

December 31,

 

 

 

December 31,

 

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(636

)

 

$

1,564

 

 

$

4,118

 

 

$

4,661

 

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

 

 

 

 

 

 

 

Depreciation and amortization

319

 

 

438

 

 

1,318

 

 

1,828

 

Stock-based compensation

539

 

 

152

 

 

1,414

 

 

915

 

Deferred income tax

(173

)

 

(240

)

 

258

 

 

(336

)

Loss on equity investment in WeekenGO

210

 

 

133

 

 

821

 

 

218

 

Net foreign currency effects

21

 

 

119

 

 

80

 

 

42

 

Other

210

 

 

(53

)

 

342

 

 

(119

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

(601

)

 

(433

)

 

(728

)

 

(1,519

)

Income tax receivable

(60

)

 

479

 

 

(600

)

 

129

 

Prepaid expenses and other

(505

)

 

(316

)

 

(508

)

 

104

 

Accounts payable

7,032

 

 

3,575

 

 

3,061

 

 

(25

)

Accrued expenses and other

200

 

 

248

 

 

(242

)

 

 

Income tax payable

409

 

 

(327

)

 

373

 

 

(392

)

Other liabilities

2,463

 

 

(58

)

 

1,647

 

 

(189

)

Net cash provided by operating activities

9,428

 

 

5,281

 

 

11,354

 

 

5,317

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Proceeds from sale of property and equipment

 

 

 

 

 

 

150

 

Investment in WeekenGO

 

 

 

 

(673

)

 

(3,083

)

Purchases of property and equipment

(124

)

 

(86

)

 

(474

)

 

(752

)

Net cash used in investing activities

(124

)

 

(86

)

 

(1,147

)

 

(3,685

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Repurchase of common stock

(2,040

)

 

(2,419

)

 

(10,808

)

 

(5,292

)

Proceeds from exercise of stock options, net of taxes paid for net share settlement of equity awards

 

 

 

 

1,712

 

 

 

Net cash used in financing activities

(2,040

)

 

(2,419

)

 

(9,096

)

 

(5,292

)

Effect of exchange rate on cash, cash equivalents and restricted cash

651

 

 

(547

)

 

256

 

 

(880

)

Net increase (decrease) in cash, cash equivalents and restricted cash

7,915

 

 

2,229

 

 

1,367

 

 

(4,540

)

Cash, cash equivalents and restricted cash at beginning of period

12,913

 

 

17,232

 

 

19,461

 

 

24,001

 

Cash, cash equivalents and restricted cash at end of period

$

20,828

 

 

$

19,461

 

 

$

20,828

 

 

$

19,461

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for income taxes, net

$

944

 

 

$

1,313

 

 

$

4,720

 

 

$

4,276

 


Travelzoo
Segment Information
(Unaudited)
(In thousands)

Three months ended December 31, 2019

Asia
Pacific

 

Europe

 

North
America

 

Consolidated

Revenue from unaffiliated customers 

$

1,580

 

 

$

9,937

 

 

$

15,381

 

 

$

26,898

Intersegment revenue

(8

)

 

(788

)

 

796

 

 

 

Total net revenues

1,572

 

 

9,149

 

 

16,177

 

 

26,898

 

Operating income (loss)

$

(2,042

)

 

$

823

 

 

$

2,037

 

 

$

818

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2018

Asia
Pacific

 

Europe

 

North
America

 

Consolidated

Revenue from unaffiliated customers 

$

1,777

 

 

$

9,213

 

 

$

16,072

 

 

$

27,062

Intersegment revenue

9

 

 

(222

)

 

213

 

 

 

Total net revenues

1,786

 

 

8,991

 

 

16,285

 

 

27,062

 

Operating income (loss)

$

(1,510

)

 

$

1,626

 

 

$

2,673

 

 

$

2,789

 


Twelve months ended December 31, 2019

Asia
Pacific

 

Europe

 

North
America

 

Consolidated

Revenue from unaffiliated customers 

$

6,402

 

 

$

39,556

 

 

$

65,454

 

 

$

111,412

Intersegment revenue

88

 

 

(2,658

)

 

2,570

 

 

 

Total net revenues

6,490

 

 

36,898

 

 

68,024

 

 

111,412

 

Operating income (loss)

$

(7,511

)

 

$

4,359

 

 

$

12,579

 

 

$

9,427

 

 

 

 

 

 

 

 

 

Twelve months ended December 31, 2018

Asia
Pacific

 

Europe

 

North
America

 

Consolidated

Revenue from unaffiliated customers 

$

7,869

 

 

$

36,468

 

 

$

66,985

 

 

$

111,322

Intersegment revenue

(10

)

 

(319

)

 

329

 

 

 

Total net revenues

7,859

 

 

36,149

 

 

67,314

 

 

111,322

 

Operating income (loss)

$

(6,322

)

 

$

4,973

 

 

$

9,587

 

 

$

8,238

 


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

Investor Relations:
Lijun Qi
ir@travelzoo.com