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Travelzoo Reports Third Quarter 2019 Results

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