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Travelzoo Reports Second Quarter 2020 Results

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NEW YORK, July 30, 2020 (GLOBE NEWSWIRE) -- Travelzoo® (NASDAQ: TZOO):

  • Revenue of $7.0 million, down 73% from $26.6 million year-over-year

  • Non-GAAP operating loss of $2.5 million (adjustment of GAAP operating loss by excluding $4.1 million in stock option compensation expense)

  • GAAP operating loss of $6.6 million

  • Earnings per share (EPS) of ($0.48) attributable to Travelzoo from continuing operations

Travelzoo, a global Internet media company that publishes exclusive offers and experiences for members, today announced financial results for the second quarter ended June 30, 2020. Revenue was $7.0 million, down 73% from $26.6 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 operating loss for Q2 was $6.4 million attributable to Travelzoo from continuing operations. At the consolidated level, including minority interests, the operating loss from continuing operations was $6.8 million. The losses were primarily caused by an unusually high stock option compensation expense of $4.1 million related to repricing of outstanding options, offset by a $1.1 million gain from the reduction of the purchase price for Jack's Flight Club®. EPS from continuing operations was ($0.48), down from $0.25 in the prior-year period.

"After adjusting our cost structure quickly in Q2, we have turned our view to the future to regain profitability as soon as Q3. We are already seeing irresistibly priced travel deals coming to the market, which were unheard of previously. Airlines, hotels, destinations and entertainment companies want travelers to come back and will need to invest in advertising. Travelzoo, as the most trusted media company in publishing and recommending travel deals, will tell its members about the very best deals," said Holger Bartel, Global CEO.

Cash Position
As of June 30, 2020, cash, cash equivalents and restricted cash were $27.0 million. In April 2020 and May 2020, Travelzoo received low-interest government loans under the Paycheck Protection Program of $3.1 million and $535,000, respectively. No further applications for loans have been made since then and the company does not anticipate requiring any further loans.

North America
North America business segment revenue decreased 77% year-over-year to $4.2 million. GAAP operating loss for the second quarter was $4.7 million, or (112%) of revenue, compared to an operating profit of $3.6 million, or 20% of revenue in the prior-year period.

Europe
Europe business segment revenue decreased 79% year-over-year to $1.9 million. In constant currencies, revenue decreased 76% year-over-year. Operating loss for the second quarter was $1.7 million, or (91%) of revenue, compared to an operating profit of $584,000, or 5% of revenue in the prior-year period.

Jack’s Flight Club
On January 13, 2020, Travelzoo acquired 60% of Jack’s Flight Club, a subscription service. In Q2 2020, the Jack's Flight Club business segment generated $1.2 million in revenue from subscriptions with operating profit of $914,000. After consolidation with Travelzoo, Jack’s Flight Club's operating loss was $615,000, with $369,000 attributable to Travelzoo as a result of recording $462,000 for a one-time expense due to the revision of the purchase agreement with the sellers, $395,000 of amortization of intangible assets related to the acquisition and a haircut of revenue (derived from deferred revenue sold prior to acquisition) of $305,000 due to purchase accounting in accordance with U.S. GAAP.

Members and Subscribers
As of June 30, 2020, we had 31.0 million members worldwide. In Europe, the unduplicated number of Travelzoo members was 9.0 million as of June 30, 2020, consistent with June 30, 2019. In North America, the unduplicated number of Travelzoo members was 16.8 million as of June 30, 2020, down 5% from June 30, 2019. Jack’s Flight Club had 1.7 million subscribers as of June 30, 2020, up 19% from June 30, 2019. On June 16, 2020, Travelzoo disclosed that it 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 licensing agreement. Under the licensing agreement, Travelzoo’s existing members in Japan will continue to be owned by Travelzoo as the licensor.

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 $1.3 million, compared to an income tax expense of $1.1 million in the prior-year period.

Outlook
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 expect to achieve a break-even or small profit in terms of non-GAAP operating income for Q3 and a non-GAAP operating profit for Q4 2020.

Conference Call
Travelzoo will host a conference call to discuss second 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

(In thousands, except per share amounts)

Three months ended

Six months ended

(Unaudited)

June 30,

June 30,

2020

2019

2020

2019

Revenues

$

7,004

$

26,606

$

27,331

$

55,766

Cost of revenues

2,141

2,672

4,844

5,537

Gross profit

4,863

23,934

22,487

50,229

Operating expenses:

Sales and marketing

4,288

13,104

17,382

26,638

Product development

566

1,763

1,994

3,422

General and administrative

6,642

4,914

12,164

9,446

Impairment of intangible assets and goodwill

2,920

Total operating expenses

11,496

19,781

34,460

39,506

Operating income (loss)

(6,633)

4,153

(11,973)

10,723

Other income (loss), net

(179)

(29)

(185)

16

Income (loss) from continuing operations before income taxes

(6,812)

4,124

(12,158)

10,739

Income tax expense (benefit)

(1,309)

1,066

(1,826)

2,736

Income (loss) from continuing operations

(5,503)

3,058

(10,332)

8,003

Loss from discontinued operations, net of tax

(795)

(1,730)

(3,714)

(3,555)

Net income (loss)

(6,298)

1,328

(14,046)

4,448

Net loss attributable to non-controlling interest

(108)

(1,247)

Net income (loss) attributable to Travelzoo

$

(6,190)

$

1,328

$

(12,799)

$

4,448

Net income (loss) attributable to Travelzoo—continuing operations

$

(5,395)

$

3,058

$

(9,085)

$

8,003

Net income (loss) attributable to Travelzoo—discontinued operations

$

(795)

$

(1,730)

$

(3,714)

$

(3,555)

Income (loss) per share—basic

Continuing operations

$

(0.48)

$

0.25

$

(0.80)

$

0.67

Discontinued operations

$

(0.07)

$

(0.14)

$

(0.33)

$

(0.30)

Net income (loss) per share —basic

$

(0.55)

$

0.11

$

(1.13)

$

0.37

Income (loss) per share—diluted

Continuing operations

$

(0.48)

$

0.25

$

(0.80)

$

0.66

Discontinued operations

$

(0.07)

$

(0.14)

$

(0.33)

$

(0.30)

Net income (loss) per share—diluted

$

(0.55)

$

0.11

$

(1.13)

$

0.36

Shares used in per share calculation from continuing operations—basic

11,310

12,003

11,375

11,959

Shares used in per share calculation from discontinued operations—basic

11,310

12,003

11,375

11,959

Shares used in per share calculation from continuing operations—diluted

11,310

12,278

11,375

12,251

Shares used in per share calculation from discontinued operations—diluted

11,310

12,003

11,375

11,959


Travelzoo
Condensed Consolidated Balance Sheets

(In thousands)
(Unaudited)

June 30,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

25,563

$

18,743

Accounts receivable, net

4,031

11,209

Prepaid income taxes

989

Deposits

112

105

Prepaid expenses and other

1,173

2,288

Assets from discontinued operations

590

3,961

Total current assets

31,469

37,295

Deposits and other

829

572

Deferred tax assets

4,341

2,051

Restricted cash

1,138

1,135

Investments in WeekenGO and other

2,152

2,484

Operating lease right-of-use assets

9,929

8,140

Property and equipment, net

1,689

2,861

Intangible assets, net

5,200

Goodwill

10,944

Total assets

$

67,691

$

54,538

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:

Accounts payable

$

29,674

$

19,349

Accrued expenses and other

5,436

6,281

Deferred revenue

2,779

786

Operating lease liabilities

4,440

4,847

Promissory notes payable

1,700

Income tax payable

773

914

Liabilities from discontinued operations

1,456

3,135

Total current liabilities

46,258

35,312

Notes payable

3,663

Deferred tax liabilities

1,044

Long-term operating lease liabilities

12,062

7,920

Other long-term liabilities

457

443

Total liabilities

63,484

43,675

Non-controlling interest

4,508

Common stock

113

115

Additional paid-in capital

4,031

Retained earnings

221

14,200

Accumulated other comprehensive loss

(4,666)

(3,452)

Total stockholders’ equity (deficit)

(301)

10,863

Total liabilities and stockholders’ equity (deficit)

$

67,691

$

54,538


Travelzoo
Condensed Consolidated Statements of Cash Flows

(In thousands)

Three months ended

Six months ended

(Unaudited)

June 30,

June 30,

2020

2019

2020

2019

Cash flows from operating activities:

Net income (loss)

$

(6,298)

$

1,328

$

(14,046)

$

4,448

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

Depreciation and amortization

667

333

1,218

663

Stock-based compensation

4,122

319

4,145

482

Deferred income tax

(1,152)

4

(1,761)

345

Impairment of intangible assets and goodwill

2,920

Loss on long-lived assets

437

Loss on equity investment in WeekenGO

141

238

336

397

Gain on notes payable settlement

(1,500)

(1,500)

Net foreign currency effects

225

(5)

(456)

(26)

Provision of loss on accounts receivable and other

986

(51)

2,427

26

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

3,674

201

6,183

(2,779)

Income tax receivable

(817)

989

(428)

Prepaid expenses and other

558

(186)

1,420

239

Accounts payable

16,702

(1,687)

10,309

(2,788)

Accrued expenses and other

(2,084)

(442)

(1,380)

1291

Deferred revenue

360

146

1,249

Income tax payable

266

(1,084)

(67)

(96)

Other liabilities

(97)

(103)

1,091

(174)

Net cash provided by (used in) operating activities

16,570

(1,806)

13,514

1,600

Cash flows from investing activities:

Acquisition of business, net of cash acquired

(673)

(679)

(673)

Other investment

(430)

(430)

Purchases of property and equipment

(72)

(70)

(203)

(201)

Net cash used in investing activities

(502)

(743)

(1,312)

(874)

Cash flows from financing activities:

Repurchase of common stock

(4,869)

(1,205)

(6,460)

Payment of promissory notes

(6,800)

(7,800)

0

Proceeds from notes payable

3,663

3,663

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

1,738

1,712

Net cash used in financing activities

(3,137)

(3,131)

(5,342)

(4,748)

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

(330)

(147)

(602)

5

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

12,601

(5,827)

6,258

(4,017)

Cash, cash equivalents and restricted cash at beginning of period

14,367

21,271

20,710

19,461

Cash, cash equivalents and restricted cash at end of period

$

26,968

$

15,444

$

26,968

$

15,444

Supplemental disclosure of cash flow information:

Cash paid (refunded) for income taxes, net

$

(60)

$

2,919

$

482

$

2,859


Travelzoo
Segment Information
(Unaudited)
(In thousands)

Three months ended June 30, 2020

North
America

Europe

Jack's
Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

4,254

$

1,805

$

945

$

$

7,004

Intersegment revenue

(52)

52

Total net revenues

4,202

1,857

945

7,004

Operating loss

$

(4,702)

$

(1,683)

$

(248)

$

$

(6,633)

Three months ended June 30, 2019

North
America

Europe

Jack's
Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

17,494

$

9,133

$

$

(21)

$

26,606

Intersegment revenue

430

(451)

21

Total net revenues

17,924

8,682

26,606

Operating income (loss)

$

3,590

$

584

$

$

(21)

$

4,153


Six months ended June 30, 2020

North
America

Europe

Jack's
Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

16,803

$

8,908

$

1,628

$

(8)

$

27,331

Intersegment revenue

96

(104)

8

Total net revenues

16,899

8,804

1,628

27,331

Operating loss

$

(5,678)

$

(3,024)

$

(3,263)

$

(8)

$

(11,973)

Six months ended June 30, 2019

North
America

Europe

Jack's
Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

35,630

$

20,187

$

$

(51)

$

55,766

Intersegment revenue

881

(932)

51

Total net revenues

36,511

19,255

0

55,766

Operating income (loss)

$

8,053

$

2,721

$

$

(51)

$

10,723

Investor Relations:
Almira Pusch
ir@travelzoo.com