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Travelzoo Reports Fourth Quarter 2020 Results

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Travelzoo
·14 min read
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NEW YORK, March 17, 2021 (GLOBE NEWSWIRE) -- Travelzoo® (NASDAQ: TZOO):

  • Consolidated revenue of $12.5 million, down 51% from $25.3 million year-over-year

  • Net income of $702,000

  • Non-GAAP consolidated operating profit of $547,000

  • Earnings per share (EPS) of $0.02 attributable to Travelzoo from continuing operations

  • Cash flow from operations of $9.2 million

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, 2020. Consolidated revenue was $12.5 million, down 51% from $25.3 million year-over-year. Reported revenue excludes revenue from discontinued operations in Asia Pacific. Travelzoo's reported revenue consists of advertising revenues and commissions, derived from and generated in connection with purchases made by Travelzoo members.

The reported net income attributable to Travelzoo from continuing operations was $173,000 for Q4 2020. At the consolidated level, including minority interests, the reported net income from continuing operations was $702,000. EPS from continuing operations was $0.02, down from $0.15 in the prior-year period.

Non-GAAP operating profit was $547,000. The calculation of non-GAAP operating profit excludes amortization of intangibles ($0.3 million), stock option expenses ($1.0 million), and severance-related expenses ($0.2 million). See section “Non-GAAP Financial Measures” below.

"We see continued improvement in our business. We are seeing irresistibly priced deals from travel companies, and Travelzoo, as the most trusted media brand publishing and recommending deals, is bringing the very best deals to its members," said Holger Bartel, Global CEO.

"In March 2021, we saw the strongest activity from Travelzoo members in the U.S. since March 2020, as measured by user sessions on the Travelzoo site and app."

Cash Position
As of December 31, 2020, consolidated cash, cash equivalents and restricted cash were $64.2 million.

Reserve
Reported revenues include a reserve of $3.9 million related to commissions to be earned from vouchers sold. The reserve was booked contra revenue and reduced reported Q4 2020 revenue by $1.6 million.

Travelzoo North America
North America business segment revenue decreased 45% year-over-year to $8.9 million. Operating profit for Q4 2020 was $1.3 million, or 15% of revenue, compared to an operating profit of $2.0 million, or 12% of revenue in the prior-year period.

Travelzoo Europe
Europe business segment revenue decreased 71% year-over-year to $2.7 million. Operating loss for Q4 2020 was $2.4 million, compared to an operating profit of $925,000, or 10% of revenue in the prior-year period.

Jack’s Flight Club
On January 13, 2020, Travelzoo acquired 60% of Jack’s Flight Club, a membership subscription service. In Q4 2020, the Jack's Flight Club business segment generated $971,000 in revenue from subscriptions with operating profit of $582,000. After consolidation with Travelzoo, Jack’s Flight Club's net loss was $62,000, with $37,000 attributable to Travelzoo as a result of recording $333,000 of amortization of intangible assets related to the acquisition and haircut of revenue (derived from deferred revenue sold prior to acquisition) of $49,000 due to purchase accounting in accordance with U.S. GAAP.

Licensing
In June 2020, Travelzoo sold its subsidiary in Japan, Travelzoo Japan K.K., to Mr. Hajime Suzuki. In connection with the sale, Travelzoo and Travelzoo Japan K.K. entered into a royalty-bearing licensing agreement for the exclusive use of Travelzoo members in Japan. In August 2020, Travelzoo sold its Singapore subsidiary to Mr. Julian Rembrandt and entered into a royalty-bearing licensing agreement for, among other things, the exclusive use of Travelzoo's members in Australia, New Zealand, and Singapore. Under the licensing agreements, Travelzoo's existing members in Australia, Japan, New Zealand, and Singapore will continue to be owned by Travelzoo as the licensor. Licensing revenue from Japan was $9,000 in Q4 2020. However, licensing revenue is booked with a lag of one quarter.

Members and Subscribers
As of December 31, 2020, we had 30.2 million members worldwide. In Europe, the unduplicated number of Travelzoo members was 8.7 million as of December 31, 2020, down 4% from December 31, 2019. In North America, the unduplicated number of Travelzoo members was 16.3 million as of December 31, 2020, down 8% from December 31, 2019. On March 15, 2021, Travelzoo added more than 2 million new members in the U.S. in connection with a direct competitor from Europe exiting the U.S. market. Jack’s Flight Club had 1.7 million subscribers as of December 31, 2020, up 6% from December 31, 2019.

Discontinued Operations
As announced in a press release on March 10, 2020, Travelzoo decided to exit its Asia Pacific business which in 2019 reduced EPS by $0.60. The Asia Pacific business was classified as discontinued operations at March 31, 2020. Prior periods have been reclassified to conform with the current presentation. Certain reclassifications have been made for current and prior periods between the continued operations and the discontinued operations in accordance with U.S. GAAP.

Income Taxes
Income tax benefit was $368,000 in Q4 2020, compared to an income tax expense of $1.1 million in the prior-year period.

Non-GAAP Financial Measures
Management calculates non-GAAP operating income when evaluating the financial performance of the business. Travelzoo’s calculation of non-GAAP operating income, also called “non-GAAP operating profit” in this press release and today’s earnings conference call, excludes the following items: impairment of intangibles and goodwill, amortization of intangibles, stock option expenses, severance- related expenses. This press release includes a table which reconciles GAAP operating income to the calculation of non-GAAP operating income. Non-GAAP operating income is not required by, or presented in accordance with, generally accepted accounting principles in the United States of America ("GAAP"). This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures reported by other companies.

Looking Ahead
We currently see a trend of recovery of our revenue. We have been able to reduce our operating expenses significantly. As a result of recovery of revenue and substantially lower operating expenses, we currently expect to achieve for Q1 a result close to break-even or a profit.

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,

  • and 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. 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)

Three months ended

Twelve months ended

(In thousands, except per share amounts)

December 31,

December 31,

2020

2019

2020

2019

Revenues

$

12,483

$

25,326

$

53,601

$

104,925

Cost of revenues

2,795

3,046

10,563

11,435

Gross profit

9,688

22,280

43,038

93,490

Operating expenses:

Sales and marketing

6,305

12,737

30,616

51,342

Product development

495

1,853

3,081

6,709

General and administrative

3,785

4,764

20,494

18,398

Impairment of intangible asset and goodwill

2,920

Total operating expenses

10,585

19,354

57,111

76,449

Operating income (loss)

(897

)

2,926

(14,073

)

17,041

Other income (loss), net

677

(90

)

455

(42

)

Income (loss) from continuing operations before income taxes

(220

)

2,836

(13,618

)

16,999

Income tax expense (benefit)

(368

)

1,116

(2,438

)

4,712

Income (loss) from continuing operations

148

1,720

(11,180

)

12,287

Income (loss) from discontinued operations, net of tax

554

(2,319

)

(3,390

)

(8,132

)

Net income (loss)

702

(599

)

(14,570

)

4,155

Net income (loss) attributable to non-controlling interest

(25

)

(1,147

)

Net income (loss) attributable to Travelzoo

$

727

$

(599

)

$

(13,423

)

$

4,155

Net income (loss) attributable to Travelzoo—
continuing operations

$

173

$

1,720

$

(10,033

)

$

12,287

Net income (loss) attributable to Travelzoo—
discontinued operations

$

554

$

(2,319

)

$

(3,390

)

$

(8,132

)

Income (loss) per share—basic

Continuing operations

$

0.02

$

0.15

$

(0.88

)

$

1.04

Discontinued operations

$

0.05

$

(0.20

)

$

(0.30

)

$

(0.69

)

Net income (loss) per share —basic

$

0.06

$

0.05

$

(1.18

)

$

0.35

Income (loss) per share—diluted

Continuing operations

$

0.01

$

0.15

$

(0.88

)

$

1.02

Discontinued operations

$

0.04

$

(0.20

)

$

(0.30

)

$

(0.69

)

Net income (loss) per share—diluted

$

0.06

$

0.05

$

(1.18

)

$

0.35

Shares used in per share calculation from continuing operations—basic

11,315

11,559

11,344

11,809

Shares used in per share calculation from discontinued operations—basic

11,315

11,559

11,344

11,809

Shares used in per share calculation from continuing operations—diluted

12,605

11,691

11,344

12,035

Shares used in per share calculation from discontinued operations—diluted

12,605

11,559

11,344

11,809


Travelzoo
Condensed Consolidated Balance Sheets

(Unaudited)
(In thousands)

December 31,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

63,061

$

18,743

Accounts receivable, net

4,519

11,209

Prepaid income taxes

931

989

Deposits

137

105

Prepaid expenses and other

1,166

2,288

Assets from discontinued operations

230

3,961

Total current assets

70,044

37,295

Deposits and other

745

572

Deferred tax assets

5,067

2,051

Restricted cash

1,178

1,135

Investment in WeGo

2,484

Operating lease right-of-use assets

8,541

8,140

Property and equipment, net

1,347

2,861

Intangible assets, net

4,534

Goodwill

10,944

Total assets

$

102,400

$

54,538

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

6,996

$

6,382

Merchant payables

57,104

12,967

Accrued expenses and other

8,649

6,281

Deferred revenue

2,688

786

Operating lease liabilities

3,587

4,847

PPP notes payable (current portion)

2,849

Income tax payable

326

914

Liabilities from discontinued operations

671

3,135

Total current liabilities

82,870

35,312

PPP notes payable

814

Deferred tax liabilities

357

Long-term operating lease liabilities

10,774

7,920

Other long-term liabilities

1,085

443

Total liabilities

95,900

43,675

Non-controlling interest

4,608

Common stock

114

115

Additional paid-in capital

6,240

Retained earnings (accumulated deficit)

(406

)

14,200

Accumulated other comprehensive loss

(4,056

)

(3,452

)

Total stockholders’ equity

1,892

10,863

Total liabilities and stockholders’ equity

$

102,400

$

54,538


Travelzoo
Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three months ended

Twelve months ended

(In thousands)

December 31,

December 31,

2020

2019

2020

2019

Cash flows from operating activities:

Net income (loss)

$

702

$

(599

)

$

(14,570

)

$

4,155

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

Depreciation and amortization

508

319

2,314

1,318

Stock-based compensation

958

117

6,201

993

Deferred income tax

(813

)

(173

)

(2,560

)

258

Impairment of intangible assets and goodwill

2,920

Gain on notes payable settlement

(1,500

)

Net gain on disposal of long-lived assets

(822

)

(385

)

Loss on equity investment in WeGo

210

474

821

Gain on sale of equity investment in WeGo

(468

)

(468

)

Net foreign currency effects

(143

)

21

(685

)

80

Provision of loss on accounts receivable and other

1,452

193

5,375

325

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(50

)

(601

)

6,196

(728

)

Income tax receivable

(610

)

(59

)

75

(600

)

Prepaid expenses and other

(443

)

(623

)

1,183

(626

)

Accounts payable

(5,234

)

410

(748

)

1,104

Merchant payables

15,381

6,622

44,136

1,957

Accrued expenses and other

(931

)

200

(2,312

)

(242

)

Income tax payable

(61

)

409

(540

)

373

Other liabilities

(193

)

2,864

1,711

2,048

Net cash provided by operating activities

9,233

9,310

46,817

11,236

Cash flows from investing activities:

Acquisition of business, net of cash acquired

(679

)

(673

)

Other investment

(430

)

Proceeds from sale of investment in WeGo

2,607

2,607

Purchases of property and equipment

(1

)

(124

)

(253

)

(474

)

Proceeds from sale of fixed assets

822

822

Net cash provided by (used in) investing activities

2,606

(124

)

1,245

(1,147

)

Cash flows from financing activities:

Repurchase of common stock

(2,048

)

(1,205

)

(10,816

)

Payment of promissory notes

(1,700

)

(9,500

)

Proceeds from notes payable

3,663

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

262

262

1,710

Net cash used in financing activities

(1,438

)

(2,048

)

(6,780

)

(9,106

)

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

1,178

659

1,571

266

Net increase in cash, cash equivalents and restricted cash

12,401

7,797

43,675

1,249

Cash, cash equivalents and restricted cash at beginning of period

51,984

12,913

20,710

19,461

Cash, cash equivalents and restricted cash at end of period

64,385

20,710

64,385

20,710


Travelzoo
Segment Information from Continuing Operations
(Unaudited)
(In thousands)

Three months ended
December 31, 2020

Travelzoo North
America

Travelzoo Europe

Jack's Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

8,858

$

2,703

$

922

$

$

12,483

Intersegment revenue

12

(12

)

Total net revenues

8,870

2,691

922

12,483

Operating income (loss)

$

1,318

$

(2,414

)

$

199

$

$

(897

)

Three months ended
December 31, 2019

Travelzoo North
America

Travelzoo Europe

Jack's Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

15,381

$

9,937

$

$

8

$

25,326

Intersegment revenue

796

(788

)

(8

)

Total net revenues

16,177

9,149

25,326

Operating income

$

1,993

$

925

$

$

8

$

2,926


Twelve months ended
December 31, 2020

Travelzoo North
America

Travelzoo Europe

Jack's Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

34,663

$

15,409

$

3,537

$

(8

)

$

53,601

Intersegment revenue

249

(257

)

8

Total net revenues

34,912

15,152

3,537

53,601

Operating loss

$

(5,056

)

$

(6,195

)

$

(2,814

)

$

(8

)

$

(14,073

)

Twelve months ended
December 31, 2019

Travelzoo North
America

Travelzoo Europe

Jack's Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

65,455

$

39,556

$

$

(86

)

$

104,925

Intersegment revenue

2,572

(2,658

)

86

Total net revenues

68,027

36,898

104,925

Operating income

$

12,666

$

4,461

$

$

(86

)

$

17,041


Travelzoo
Reconciliation of GAAP to Non-GAAP Information
(Unaudited)
(In thousands, except per share amounts)

Three months ended

Twelve months ended

December 31,

December 31,

2020

2019

2020

2019

GAAP operating expense

$

10,585

$

19,354

$

57,111

$

76,449

Non-GAAP adjustments:

Impairment of intangible and goodwill (A)

2,920

Amortization of intangibles (B)

333

1,277

Stock option expenses (C)

958

117

6,201

993

Severance-related expenses (D)

153

63

1,292

148

Non-GAAP operating expense

9,141

19,174

45,421

75,308

GAAP operating income (loss)

(897

)

2,926

(14,073

)

17,041

Non-GAAP adjustments (A through D)

1,444

180

11,690

1,141

Non-GAAP operating income (loss)

547

3,106

(2,383

)

18,182

Investor Relations:
Almira Pusch
ir@travelzoo.com