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Travelzoo Reports Third Quarter 2020 Results

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·12 min read
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NEW YORK, Oct. 21, 2020 (GLOBE NEWSWIRE) -- Travelzoo® (NASDAQ: TZOO):

  • Consolidated revenue of $13.8 million, down 42% from $23.8 million year-over-year

  • Net loss of $1.2 million

  • Non-GAAP consolidated operating profit of $1.2 million

  • Earnings per share (EPS) of ($0.10) 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 third quarter ended September 30, 2020. Consolidated revenue was $13.8 million, down 42% from $23.8 million year-over-year. Revenue increased by 97% from $7.0 million in Q2 2020. 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 loss attributable to Travelzoo from continuing operations was $1.1 million for Q3 2020. At the consolidated level, including minority interests, the reported net loss from continuing operations was $1.2 million. EPS from continuing operations was ($0.10), down from $0.21 in the prior-year period.

Non-GAAP operating profit was $1.2 million. The calculation of non-GAAP operating profit excludes amortization of intangibles ($0.3 million), stock option expenses ($1.2 million), and severance-related expenses ($0.9 million). See section “Non-GAAP Financial Measures” below.

“A strong improvement in our business is evident compared to Q2. We are seeing irresistibly priced deals coming to the market, and Travelzoo, as the most trusted media brand publishing and recommending travel deals, is telling its members about the very best deals," said Holger Bartel, Global CEO.

Cash Position
As of September 30, 2020, consolidated cash, cash equivalents and restricted cash were $51.7 million. In April 2020 and May 2020, Travelzoo received low-interest government loans under the Paycheck Protection Program (PPP) 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.

Travelzoo North America
North America business segment revenue decreased 40% year-over-year to $9.1 million. North America business segment revenue increased by 118% from $4.2 million in Q2 2020. Operating loss for Q3 was $696,000, or (8%) of revenue, compared to an operating profit of $2.6 million, or 17% of revenue in the prior-year period.

Travelzoo Europe
Europe business segment revenue decreased 57% year-over-year to $3.7 million. In constant currencies, revenue decreased 62% year-over-year. Europe business segment revenue increased by 97% from $1.9 million in Q2 2020. Operating loss for Q3 was $757,000, or (21%) of revenue, compared to an operating profit of $815,000, 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 subscription service. In Q3 2020, the Jack's Flight Club business segment generated $1.1 million in revenue from subscriptions with operating profit of $731,000. After consolidation with Travelzoo, Jack’s Flight Club's net income was $312,000, with $187,000 attributable to Travelzoo as a result of recording $333,000 of amortization of intangible assets related to the acquisition and a haircut of revenue (derived from deferred revenue sold prior to acquisition) of $148,000 due to purchase accounting in accordance with U.S. GAAP.

Members and Subscribers
As of September 30, 2020, we had 30.5 million members worldwide. In Europe, the unduplicated number of Travelzoo members was 8.9 million as of September 30, 2020, down 3% from September 30, 2019. In North America, the unduplicated number of Travelzoo members was 16.5 million as of September 30, 2020, down 7% from September 30, 2019. Jack’s Flight Club had 1.7 million subscribers as of September 30, 2020, up 9% from September 30, 2019. 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.

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 $244,000 in Q3 2020, compared to an income tax expense of $860,000 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 Q4 a result close to break-even or a profit.

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; 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)

(In thousands, except per share amounts)

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Revenues

$

13,787

$

23,833

$

41,118

$

79,599

Cost of revenues

2,924

2,852

7,768

8,389

Gross profit

10,863

20,981

33,350

71,210

Operating expenses:

Sales and marketing

6,929

11,967

24,311

38,605

Product development

592

1,434

2,586

4,856

General and administrative

4,545

4,188

16,709

13,634

Impairment of intangible asset and goodwill

2,920

Total operating expenses

12,066

17,589

46,526

57,095

Operating income (loss)

(1,203

)

3,392

(13,176

)

14,115

Other income (loss), net

(37

)

32

(222

)

48

Income (loss) from continuing operations before income taxes

(1,240

)

3,424

(13,398

)

14,163

Income tax expense (benefit)

(244

)

860

(2,070

)

3,596

Income (loss) from continuing operations

(996

)

2,564

(11,328

)

10,567

Loss from discontinued operations, net of tax

(230

)

(2,258

)

(3,944

)

(5,813

)

Net income (loss)

(1,226

)

306

(15,272

)

4,754

Net income (loss) attributable to non-controlling interest

125

(1,122

)

Net income (loss) attributable to Travelzoo

$

(1,351

)

$

306

$

(14,150

)

$

4,754

Net income (loss) attributable to Travelzoo—continuing operations

$

(1,121

)

$

2,564

$

(10,206

)

$

10,567

Net income (loss) attributable to Travelzoo—discontinued operations

$

(230

)

$

(2,258

)

$

(3,944

)

$

(5,813

)

Income (loss) per share—basic

Continuing operations

$

(0.10

)

$

0.22

$

(0.90

)

$

0.89

Discontinued operations

$

(0.02

)

$

(0.19

)

$

(0.35

)

$

(0.49

)

Net income (loss) per share —basic

$

(0.12

)

$

0.03

$

(1.25

)

$

0.40

Income (loss) per share—diluted

Continuing operations

$

(0.10

)

$

0.21

$

(0.90

)

$

0.87

Discontinued operations

$

(0.02

)

$

(0.19

)

$

(0.35

)

$

(0.49

)

Net income (loss) per share—diluted

$

(0.12

)

$

0.03

$

(1.25

)

$

0.39

Shares used in per share calculation from continuing operations—basic

11,310

11,767

11,353

11,894

Shares used in per share calculation from discontinued operations—basic

11,310

11,767

11,353

11,894

Shares used in per share calculation from continuing operations—diluted

11,310

11,956

11,353

12,152

Shares used in per share calculation from discontinued operations—diluted

11,310

11,767

11,353

11,894



Travelzoo
Condensed Consolidated Balance Sheets
(Unaudited)

(In thousands)

September 30,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

50,528

$

18,743

Accounts receivable, net

4,195

11,209

Prepaid income taxes

304

989

Deposits

98

105

Prepaid expenses and other

990

2,288

Assets from discontinued operations

454

3,961

Total current assets

56,569

37,295

Deposits and other

806

572

Deferred tax assets

4,415

2,051

Restricted cash

1,155

1,135

Investment in WeGo

2,101

2,484

Operating lease right-of-use assets

9,076

8,140

Property and equipment, net

1,499

2,861

Intangible assets, net

4,867

Goodwill

10,944

Total assets

$

91,432

$

54,538

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

53,018

$

19,349

Accrued expenses and other

6,953

6,281

Deferred revenue

2,777

786

Operating lease liabilities

3,988

4,847

Promissory notes payable

1,700

Income tax payable

373

914

Liabilities from discontinued operations

1,509

3,135

Total current liabilities

70,318

35,312

PPP notes payable

3,663

Deferred tax liabilities

851

Long-term operating lease liabilities

11,425

7,920

Other long-term liabilities

473

443

Total liabilities

86,730

43,675

Non-controlling interest

4,633

Common stock

113

115

Additional paid-in capital

5,220

Retained earnings (accumulated deficit)

(1,130

)

14,200

Accumulated other comprehensive loss

(4,134

)

(3,452

)

Total stockholders’ equity

69

10,863

Total liabilities and stockholders’ equity

$

91,432

$

54,538

Travelzoo
Segment Information from Continuing Operations
(Unaudited)

(In thousands)

Three months ended September 30, 2020

Travelzoo
North

America

Travelzoo
Europe

Jack's
Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

9,002

$

3,798

$

987

$

$

13,787

Intersegment revenue

141

(141

)

Total net revenues

9,143

3,657

987

13,787

Operating income (loss)

$

(696

)

$

(757

)

$

250

$

$

(1,203

)

Three months ended September 30, 2019

Travelzoo
North

America

Travelzoo
Europe

Jack's
Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

14,444

$

9,432

$

$

(43

)

$

23,833

Intersegment revenue

895

(938

)

43

Total net revenues

15,339

8,494

23,833

Operating income (loss)

$

2,620

$

815

$

$

(43

)

$

3,392


Nine months ended September 30, 2020

Travelzoo
North

America

Travelzoo
Europe

Jack's
Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

25,805

$

12,706

$

2,615

$

(8

)

$

41,118

Intersegment revenue

237

(245

)

8

Total net revenues

26,042

12,461

2,615

41,118

Operating loss

$

(6,374

)

$

(3,781

)

$

(3,013

)

$

(8

)

$

(13,176

)

Nine months ended September 30, 2019

Travelzoo
North

America

Travelzoo
Europe

Jack's
Flight Club

Elimination

Consolidated

Revenue from unaffiliated customers

$

50,074

$

29,619

$

$

(94

)

$

79,599

Intersegment revenue

1,776

(1,870

)

94

Total net revenues

51,850

27,749

0

79,599

Operating income (loss)

$

10,673

$

3,536

$

$

(94

)

$

14,115


Travelzoo

Reconciliation of GAAP to Non-GAAP Information
(Unaudited)

(In thousands, except per share amounts)

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

GAAP operating expense

$

12,066

$

17,589

$

46,526

$

57,095

Non-GAAP adjustments:

Impairment of intangible and goodwill (A)

2,920

Amortization of intangibles (B)

333

944

Stock option expenses (C)

1,189

394

5,243

876

Severance-related expenses (D)

855

35

1,139

85

Non-GAAP operating expense

9,689

17,160

36,280

56,134

GAAP operating income (loss)

(1,203

)

3,392

(13,176

)

14,115

Non-GAAP adjustments (A through D)

2,377

429

10,246

961

Non-GAAP operating income (loss)

1,174

3,821

(2,930

)

15,076

Investor Relations:
Almira Pusch
ir@travelzoo.com