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Travelzoo Reports Third Quarter 2019 Results

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NEW YORK, Oct. 23, 2019 (GLOBE NEWSWIRE) -- Travelzoo® (TZOO):

  • Revenue of $25.5 million; up 2% year-over-year in constant currencies

  • Operating profit of $1.2 million, up 70% year-over-year

  • Earnings per share (EPS) of $0.03

Travelzoo, a global publisher of exclusive offers and experiences for members, today announced financial results for the third quarter ended September 30, 2019, with revenue of $25.5 million, an increase of $204,000 year-over-year, and an operating profit of $1.2 million. In constant currencies, revenue increased by 2% 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. Net income was $306,000. EPS was $0.03, up from $0.01 in the prior-year period.

"Our attractive core business in North America and Europe generated an operating profit of $3.3 million, with an operating margin of 14%, of which $2.1 million was re-invested in our Asia Pacific business with a focus on China where we see, after completing a rigorous review of the market and Travelzoo’s current position, a very substantial opportunity for revenue growth," said Holger Bartel, Global CEO of Travelzoo.

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

Q3 2019 Operating profit/loss

+$3.3 million

-$2.1 million

Q3 2019 Operating margin

14%

N/A

Contribution to Q3 2019 EPS

+$0.21

-$0.18

Contribution to twelve months EPS

+$1.12

-$0.59

Europe
Europe business segment revenue increased 1% year-over-year to $8.5 million. In constant currencies, revenue increased 6% year-over-year. Operating profit for the third quarter was $815,000, or 10% of revenue, compared to an operating profit of $940,000, or 11% of revenue in the prior-year period.

North America
North America business segment revenue increased 3% year-over-year to $15.3 million. Operating profit for the third quarter was $2.5 million, or 16% of revenue, compared to an operating profit of $1.4 million, or 9% of revenue in the prior-year period.

Asia Pacific
In Asia Pacific, we worked with a top management consulting firm in China and developed together a strategy for a significant presence of Travelzoo in social media and mobile channels. The execution began in mid September. During the third quarter, our Asia Pacific segment still saw a decrease in revenue of 16% year-over-year to $1.7 million. We do not see this as a trend. We expect revenue from China to grow in the fourth quarter. The operating loss for the third quarter was $2.1 million, compared to an operating loss of $1.6 million in the prior-year period. The reported operating loss was impacted by costs of the strategy consulting project. All costs of the project were expensed.

Members
As of September 30, 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 September 30, 2019, consistent with September 30, 2018. In Europe, unduplicated number of members was 9.1 million as of September 30, 2019, up 4% from September 30, 2018. In North America, unduplicated number of members was 17.6 million as of September 30, 2019, up 1% from September 30, 2018.

Income Taxes
Income tax expense was $770,000, compared to a $505,000 income tax expense in the prior-year period. Operating losses from the Development Business were not used to offset operating income from the Core Business.

Asset Management
During the third quarter of 2019, Travelzoo generated $326,000 of cash in operating activities. Accounts receivable decreased by $2.7 million to $12.3 million, and accounts payable decreased by $1.2 million to $13.0 million in the third quarter of 2019. Cash used in investing activities was $149,000. Cash used in financing activities was $2.3 million. Cash was used primarily for the share repurchase program described below. As of September 30, 2019, cash and cash equivalents were $11.6 million.

Share Repurchase Program
During the third quarter of 2019, Travelzoo repurchased 186,369 shares of its common stock. In May 2019, Travelzoo's board of directors had authorized the repurchase of up to 1,000,000 shares of its outstanding common stock. 563,631 shares of common stock remain to be repurchased.

Conference Call
Travelzoo will host a conference call to discuss third 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 28 million members insider deals and one-of-a-kind experiences personally reviewed by one of our deal experts around the globe. With more than 25 offices worldwide, we have our finger on the pulse of outstanding travel, entertainment, and lifestyle experiences. For over 15 years we have worked in partnership with more than 2,000 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

Nine months ended

September 30,

September 30,

2019

2018

2019

2018

Revenues

$

25,505

$

25,301

$

84,514

$

84,260

Cost of revenues

2,980

2,987

8,683

9,388

Gross profit

22,525

22,314

75,831

74,872

Operating expenses:

Sales and marketing

14,233

13,375

45,196

44,545

Product development

1,478

2,297

4,980

7,194

General and administrative

5,600

5,928

17,046

17,684

Total operating expenses

21,311

21,600

67,222

69,423

Income from operations

1,214

714

8,609

5,449

Other income (loss), net

(138

)

(91

)

(380

)

100

Income before income taxes

1,076

623

8,229

5,549

Income tax expense

770

505

3,475

2,452

Net income

$

306

$

118

$

4,754

$

3,097

Basic income per share

$

0.03

$

0.01

$

0.40

$

0.25

Diluted income per share

$

0.03

$

0.01

0.39

0.25

Weighted average shares:

Basic

11,767

12,314

11,894

12,412

Diluted

11,956

12,663

12,152

12,630


Travelzoo

Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

September 30,
2019

December 31,
2018

Assets

Current assets:

Cash and cash equivalents

$

11,605

$

18,017

Accounts receivable, net

12,317

12,646

Income taxes receivable

930

389

Deposits

141

167

Prepaid expenses and other

1,965

1,947

Total current assets

26,958

33,166

Deposits and other

669

685

Deferred tax assets

1,347

1,645

Restricted cash

1,308

1,444

Investment in WeekenGO

2,635

2,694

Operating lease right-of-use assets

17,523

Property and equipment, net

3,142

3,790

Total assets

$

53,582

$

43,424

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

13,007

$

17,129

Accrued expenses and other

6,866

7,853

Deferred revenue

1,119

1,339

Operating lease liabilities

7,028

Income tax payable

446

489

Total current liabilities

28,466

26,810

Long-term tax liabilities

343

418

Long-term operating lease liabilities

12,291

Other long-term liabilities

84

2,137

Total liabilities

41,184

29,365

Common stock

117

120

Additional paid-in capital

Accumulated other comprehensive loss

(4,450

)

(4,214

)

Retained earnings

16,731

18,153

Total stockholders’ equity

12,398

14,059

Total liabilities and stockholders’ equity

$

53,582

$

43,424


Travelzoo

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

Three months

Nine months ended

ended

ended

September 30,

September 30,

2019

2018

2019

2018

Cash flows from operating activities:

Net income

$

306

$

118

$

4,754

$

3,097

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

Depreciation and amortization

336

563

999

1,390

Stock-based compensation

393

241

875

763

Gain from sale of property and equipment

(143

)

(143

)

Deferred income tax

86

53

431

(96

)

Loss on equity investment in WeekenGO

214

85

611

85

Net foreign currency effects

85

59

59

(77

)

Other

106

120

132

77

Changes in operating assets and liabilities:

Accounts receivable

2,652

(189

)

(127

)

(1,086

)

Income tax receivable

(112

)

(73

)

(540

)

(350

)

Prepaid expenses and other

(242

)

2

(3

)

420

Accounts payable

(1,183

)

(400

)

(3,971

)

(3,600

)

Accrued expenses and other

(1,733

)

(973

)

(442

)

(248

)

Income tax payable

60

(234

)

(36

)

(65

)

Other liabilities

(642

)

27

(816

)

(131

)

Net cash provided by (used in) operating activities

326

(744

)

1,926

36

Cash flows from investing activities:

Proceeds from sale of property and equipment

150

150

Investment in WeekenGO

(673

)

(3,083

)

Purchases of property and equipment

(149

)

(159

)

(350

)

(666

)

Net cash used in investing activities

(149

)

(9

)

(1,023

)

(3,599

)

Cash flows from financing activities:

Repurchase of common stock

(2,308

)

(2,873

)

(8,768

)

(2,873

)

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

(2,308

)

(2,873

)

(7,056

)

(2,873

)

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

(400

)

(9

)

(395

)

(333

)

Net decrease in cash, cash equivalents and restricted cash

(2,531

)

(3,635

)

(6,548

)

(6,769

)

Cash, cash equivalents and restricted cash at beginning of period

15,444

20,867

19,461

24,001

Cash, cash equivalents and restricted cash at end of period

$

12,913

$

17,232

$

12,913

$

17,232

Supplemental disclosure of cash flow information:

Cash paid for income taxes, net

$

917

$

767

$

3,776

$

2,963


Travelzoo
Segment Information
(Unaudited)
(In thousands)

Three months ended September 30, 2019

Asia
Pacific

Europe

North
America

Consolidated

Revenue from unaffiliated customers

$

1,630

$

9,432

$

14,443

$

25,505

Intersegment revenue

43

(938

)

895

Total net revenues

1,673

8,494

15,338

25,505

Operating income (loss)

$

(2,051

)

$

815

$

2,450

$

1,214

Three months ended September 30, 2018

Asia
Pacific

Europe

North
America

Consolidated

Revenue from unaffiliated customers

$

1,977

$

8,396

$

14,928

$

25,301

Intersegment revenue

10

(18

)

8

Total net revenues

1,987

8,378

14,936

25,301

Operating income (loss)

$

(1,600

)

$

940

$

1,374

$

714


Nine months ended September 30, 2019

Asia
Pacific

Europe

North
America

Consolidated

Revenue from unaffiliated customers

$

4,822

$

29,619

$

50,073

$

84,514

Intersegment revenue

96

(1,870

)

1,774

Total net revenues

4,918

27,749

51,847

84,514

Operating income (loss)

$

(5,469

)

$

3,536

$

10,542

$

8,609

Nine months ended September 30, 2018

Asia
Pacific

Europe

North
America

Consolidated

Revenue from unaffiliated customers

$

6,092

$

27,255

$

50,913

$

84,260

Intersegment revenue

(19

)

(97

)

116

Total net revenues

6,073

27,158

51,029

84,260

Operating income (loss)

$

(4,812

)

$

3,347

$

6,914

$

5,449



Investor Relations:
Lijun Qi
ir@travelzoo.com