TRAVELZOO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - November 3, 2015

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Exhibit 99.1

Travelzoo Inc.
590 Madison Avenue
37th Floor
New York, NY 10022

Investor Relations Contact:
Glen Ceremony
Chief Financial Officer Travelzoo Inc.
(212) 484-4998
ir@travelzoo.com 


FOR IMMEDIATE RELEASE

Travelzoo Reports Third Quarter 2015 Results

NEW YORK, November 3, 2015 — Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $33.7 million, down 2% in constant currencies
•
Revenue up 8% in Europe and up 7% in Asia Pacific in constant currencies
•
Non-GAAP earnings per share of $0.03, compared to loss per share of $0.03 in the prior-year period
•
Operating profit of $860,000

Travelzoo Inc., a global media commerce company, today announced financial results for the third quarter ended September 30, 2015, with revenue of $33.7 million. In nominal terms, revenue decreased by 7% year-over-year. In constant currencies, revenue decreased by 2% year-over-year. GAAP net income was $8.9 million, with earnings per share of $0.60. Non-GAAP net income was $444,000, with non-GAAP earnings per share of $0.03. Non-GAAP net income and earnings per share excluded an $8.4 million release of a tax reserve related to the unexchanged promotional shares.

"In the third quarter of 2015, the number of Travelzoo members increased substantially to over 28 million worldwide, mainly driven by our investment in Asia Pacific,” said Chris Loughlin, chief executive officer. “In constant currencies we saw revenue growth in almost all countries that we operate in.”




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North America
North America business segment revenue decreased 10% year-over-year to $20.7 million. Operating income for the third quarter was $687,000, or 3% of revenue, up from $265,000, or 1% of revenue, in the prior-year period.

Europe
Europe business segment revenue decreased 3% year-over-year to $10.3 million. In constant currencies, revenue increased 8% year-over-year. Operating income for the third quarter was $587,000, or 6% of revenue, up from $195,000, or 2% of revenue in the prior-year period.

Asia Pacific
On August 20, 2015, Travelzoo Inc. acquired the Travelzoo Asia Pacific business (“Asia Pacific”), which includes the Travelzoo businesses in Australia, China, Hong Kong, Japan, Taiwan, and Southeast Asia. This business was independently operated by Azzurro Capital Inc. under a licensing agreement with Travelzoo Inc.

Asia Pacific business segment revenue decreased 3% year-over-year to $2.7 million. In constant currencies, revenue increased 7% year-over-year. Operating loss for the third quarter was $414,000, or 15% of revenue, down from $864,000, or 31% of revenue in the prior-year period.

Members
As of September 30, 2015, Travelzoo had a worldwide unduplicated number of members of 28.3 million, which includes 3.4 million members in Asia Pacific. In North America, unduplicated number of members was 17.2 million as of September 30, 2015, up 2% from September 30, 2014. In Europe, unduplicated number of members was 7.8 million as of September 30, 2015, up 7% from September 30, 2014. In Asia Pacific, unduplicated number of members was 3.4 million as of September 30, 2015, down 4% from September 30, 2014.

Income Taxes
Income tax benefit was $8.2 million, compared to $158,000 income tax expense in the prior-year period. Non-GAAP income tax expense of $214,000 excludes an $8.4 million release of a tax reserve related to the unexchanged promotional shares.

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Asset Management
During the third quarter of 2015, Travelzoo used $813,000 of cash in operating activities. Accounts receivable increased by $582,000 over the prior-year period to $17.8 million. Accounts payable decreased by $2.4 million over the prior-year period to $23.0 million. Capital expenditures were $132,000, down from $1.6 million in the prior-year period. As of September 30, 2015, cash and cash equivalents were $34.6 million.

Non-GAAP Information and Other
To give an enhanced view of Travelzoo's operating performance, management has calculated non-GAAP operating expense, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP income tax expense, non-GAAP effective tax rate, non-GAAP net income (loss) and non-GAAP earnings (loss) per share by excluding the release of a tax reserve related to the unexchanged promotional shares in the current period and excluding the release of reserves related to the unexchanged promotional shares in prior-year periods. The company believes these metrics assist investors to assess certain business trends in the same way that these trends are analyzed by management. The discussion of these non-GAAP metrics are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Non-GAAP metrics are merely a supplement to, and not a replacement for, GAAP financial information. As the only difference between GAAP and non-GAAP information is the release of a tax reserve related to the unexchanged promotional shares in the current period and the release of reserves related to the unexchanged promotional shares in prior-year periods, today’s reporting should not be viewed as Travelzoo’s intention to report non-GAAP information in future periods. Refer to the “Reconciliation of GAAP to Non-GAAP Information” section of this press release for important information.

Travelzoo Inc.'s financial results have been adjusted to include the financial results of Asia Pacific for the current and prior periods. In addition, certain prior period statement of operations amounts have been reclassified to conform to current period presentation primarily due to the allocation of facilities costs and separate disclosure of product development costs.


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Conference Call
Travelzoo will host a conference call to discuss third quarter results at 11:00 a.m. ET today. Please visit http://www.travelzoo.com/earnings to
•
download the management presentation (PDF format) to be discussed in the conference call;
•
access the webcast.

About Travelzoo
Travelzoo is a global media commerce company. With more than 28 million members in North America, Europe, and Asia Pacific and 26 offices worldwide, Travelzoo® publishes offers from more than 2,000 travel, entertainment and local companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value.

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. All other names are trademarks and/or registered trademarks of their respective owners.
###





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Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended
 
Nine months ended
 
 September 30,
 
 September 30,
 
2015
 
2014
 
2015
 
2014
Revenues
$
33,728

 
$
36,307

 
$
109,665

 
$
118,949

Cost of revenues
4,742

 
4,813

 
14,496

 
14,534

Gross profit
28,986

 
31,494

 
95,169

 
104,415

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
19,089

 
21,570

 
61,881

 
62,782

Product development
2,917

 
3,108

 
9,212

 
8,370

General and administrative
6,120

 
7,220

 
17,906

 
21,399

Unexchanged promotional shares
—

 
(2,250
)
 
—

 
(5,750
)
Total operating expenses
28,126

 
29,648

 
88,999

 
86,801

Income from operations
860

 
1,846

 
6,170

 
17,614

Other income (loss)
(202
)
 
95

 
(866
)
 
439

Income before income taxes
658

 
1,941

 
5,304

 
18,053

Income taxes
(8,199
)
 
158

 
(5,125
)
 
4,905

Net income
$
8,857

 
$
1,783

 
$
10,429

 
$
13,148

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.60

 
$
0.12

 
$
0.71

 
$
0.89

Diluted
$
0.60

 
$
0.12

 
$
0.71

 
$
0.88

Weighted average shares:
 
 
 
 
 
 
 
Basic
14,730

 
14,730

 
14,730

 
14,781

Diluted
14,730

 
14,771

 
14,730

 
14,923



5/9



Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
September 30,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
34,570

 
$
55,417

Accounts receivable, net
17,822

 
16,124

Income taxes receivable
1,745

 
3,756

Deposits
717

 
86

Prepaid expenses and other
2,639

 
2,802

Deferred tax assets
1,214

 
1,311

Total current assets
58,707

 
79,496

Deposits
607

 
1,436

Deferred tax assets
1,935

 
1,432

Restricted cash
1,346

 
1,393

Property and equipment, net
8,361

 
9,498

Intangible assets, net
15

 
178

Total assets
$
70,971

 
$
93,433

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
23,031

 
$
27,984

Accrued expenses and other
11,654

 
11,814

Deferred revenue
1,268

 
1,472

Income tax payable
857

 
574

Reserve for unexchanged promotional shares
—

 
1,393

Total current liabilities
36,810

 
43,237

Note payable to related party
5,658

 
—

Long-term tax liabilities
3,087

 
10,936

Long-term deferred rent and other
3,030

 
3,433

Total liabilities
48,585

 
57,606

Common stock
163

 
163

Treasury stock
(21,517
)
 
(21,517
)
Additional paid-in capital
30,732

 
30,586

Accumulated other comprehensive loss
(3,884
)
 
(2,602
)
Retained earnings
16,892

 
29,197

Total stockholders’ equity
22,386

 
35,827

Total liabilities and stockholders’ equity
$
70,971

 
$
93,433



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Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) 
 
Three months ended
 
Nine months ended
 
 September 30,
 
 September 30,
 
2015
 
2014
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
8,857

 
$
1,783

 
$
10,429

 
$
13,148

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
688

 
721

 
2,198

 
2,132

Impairment of software
—

 
—

 
—

 
249

Deferred income taxes
(164
)
 
400

 
(407
)
 
(108
)
Stock-based compensation
(150
)
 
44

 
146

 
834

Provision for losses on accounts receivable
(151
)
 
3

 
(99
)
 
(5
)
Net foreign currency effects
191

 
8

 
789

 
(316
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
824

 
804

 
(2,052
)
 
(1,656
)
Deposits
46

 
23

 
118

 
248

Income tax receivable
299

 
(1,502
)
 
1,980

 
(951
)
Prepaid expenses and other
(511
)
 
(336
)
 
123

 
742

Accounts payable
(1,739
)
 
(2,212
)
 
(2,706
)
 
(9,514
)
Accrued expenses and other
(642
)
 
2,093

 
(508
)
 
(463
)
Income tax payable
283

 
23

 
306

 
1,806

Reserve for unexchanged promotional shares
—

 
(2,457
)
 
(1,393
)
 
(7,184
)
Other non-current liabilities
(8,644
)
 
156

 
(7,849
)
 
381

Net cash provided by (used in) operating activities
(813
)
 
(449
)
 
1,075

 
(657
)
Cash flows from investing activities:
 
 
 
 
 
 
 
Release of restricted cash
8

 
14

 
66

 
202

Purchases of property and equipment
(132
)
 
(1,596
)
 
(885
)
 
(3,185
)
Net cash used in investing activities
(124
)
 
(1,582
)
 
(819
)
 
(2,983
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Payment for Asia Pacific business
(16,974
)
 
—

 
(16,974
)
 
—

Payment of loan to related party
(3,250
)
 
—

 
(3,250
)
 
—

Proceeds from loan from related party
—

 
—

 
2,224

 
—

Decrease in bank overdraft
(206
)
 
—

 
(341
)
 
—

Repurchase of common stock
—

 
—

 
—

 
(5,855
)
Reverse/forward stock split, including transaction costs
—

 
—

 
(102
)
 
(479
)
Net cash used in financing activities
(20,430
)
 
—

 
(18,443
)
 
(6,334
)
Effect of exchange rate on cash and cash equivalents
(540
)
 
(2,142
)
 
(2,660
)
 
(934
)
Net decrease in cash and cash equivalents
(21,907
)
 
(4,173
)
 
(20,847
)
 
(10,908
)
Cash and cash equivalents at beginning of period
56,477

 
61,933

 
55,417

 
68,668

Cash and cash equivalents at end of period
$
34,570

 
$
57,760

 
$
34,570

 
$
57,760

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid for income taxes, net
$
9

 
$
1,073

 
$
742

 
$
3,916

Note payable for Asia Pacific business
$
5,658

 
—

 
$
5,658

 
—


7/9



Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended September 30, 2015
North
America
 
Europe
 
Asia Pacific
 
Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
20,538

 
$
10,444

 
$
2,746

 
$
—

 
$
33,728

Intersegment revenue
155

 
(127
)
 
(28
)
 
—

 
—

Total net revenues
20,693

 
10,317

 
2,718

 
—

 
33,728

Operating income
$
687

 
$
587

 
$
(414
)
 
$
—

 
$
860

Three months ended September 30, 2014
North
America
 
Europe
 
Asia Pacific
 
Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
22,601

 
$
10,899

 
$
2,807

 
$
—

 
$
36,307

Intersegment revenue
321

 
(304
)
 
(17
)
 
—

 
—

Total net revenues
22,922

 
10,595

 
2,790

 
—

 
36,307

Operating income
$
265

 
$
195

 
$
(864
)
 
$
2,250

 
$
1,846

 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2015
North
America
 
Europe
 
Asia Pacific
 
Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
68,978

 
$
32,560

 
$
8,127

 
$
—

 
$
109,665

Intersegment revenue
470

 
(422
)
 
(48
)
 
—

 
—

Total net revenues
69,448

 
32,138

 
8,079

 
—

 
109,665

Operating income
$
5,322

 
$
2,363

 
$
(1,515
)
 
$
—

 
$
6,170

Nine months ended September 30, 2014
North
America
 
Europe
 
Asia Pacific
 
Other (a)
 
Consolidated
Revenue from unaffiliated customers
$
74,130

 
$
36,451

 
$
8,368

 
$
—

 
$
118,949

Intersegment revenue
777

 
(706
)
 
(71
)
 
—

 
—

Total net revenues
74,907

 
35,745

 
8,297

 
—

 
118,949

Operating income
$
8,718

 
$
5,470

 
$
(2,324
)
 
$
5,750

 
$
17,614

 
 
 
 
 
 
 
 
 
 
(a)
Includes a $2.3 million and a $5.8 million release of reserve for the three and nine months ended September 30, 2014, respectively, related to settlement agreements in connection with a dispute over unclaimed property audits.


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Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Information
(Unaudited)
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
 September 30,
 
 September 30,
 
2015
 
2014
 
2015
 
2014
GAAP operating expense
$
28,126

 
$
29,648

 
$
88,999

 
$
86,801

Non-GAAP adjustments (a)
—

 
2,250

 
—

 
5,750

Non-GAAP operating expense
$
28,126

 
$
31,898

 
$
88,999

 
$
92,551

 
 
 
 
 
 
 
 
GAAP operating income
$
860

 
$
1,846

 
$
6,170

 
$
17,614

Non-GAAP adjustments (a)
—

 
(2,250
)
 
—

 
(5,750
)
Non-GAAP operating income (loss)
$
860

 
$
(404
)
 
$
6,170

 
$
11,864

 
 
 
 
 
 
 
 
GAAP operating margin
2.5
 %
 
5.1
 %
 
5.6
 %
 
14.8
 %
Non-GAAP adjustments (a)
—
 %
 
(6.2
)%
 
—
 %
 
(4.8
)%
Non-GAAP operating margin
2.5
 %
 
(1.1
)%
 
5.6
 %
 
10.0
 %
 
 
 
 
 
 
 
 
GAAP income tax expense (benefit)
$
(8,199
)
 
$
158

 
$
(5,125
)
 
$
4,905

Non-GAAP adjustments (b)
8,413

 
—

 
8,413

 
—

Non-GAAP income tax expense
$
214

 
$
158

 
$
3,288

 
$
4,905

 
 
 
 
 
 
 
 
GAAP effective tax rate
(1,246.0)
 %
 
8.1
 %
 
(96.6)
 %
 
27.2
 %
Non-GAAP adjustments (a) (b)
1,278.5
 %
 
(59.2)
 %
 
158.6
 %
 
12.7
 %
Non-GAAP effective tax rate
32.5
 %
 
(51.1
)%
 
62.0
 %
 
39.9
 %
 
 
 
 
 
 
 
 
GAAP net income
$
8,857

 
$
1,783

 
$
10,429

 
$
13,148

Non-GAAP adjustments (a) (b)
(8,413
)
 
(2,250
)
 
(8,413
)
 
(5,750
)
Non-GAAP net income (loss)
$
444

 
$
(467
)
 
$
2,016

 
$
7,398

 
 
 
 
 
 
 
 
GAAP diluted earnings per share
$
0.60

 
$
0.12

 
$
0.71

 
$
0.88

Non-GAAP adjustments (a) (b) (c)
(0.57
)
 
(0.15
)
 
(0.57
)
 
(0.38
)
Non-GAAP earnings (loss) per share
$
0.03

 
$
(0.03
)
 
$
0.14

 
$
0.50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Includes a $2.3 million and a $5.8 million release of reserve for the three and nine months ended September 30, 2014, respectively, related to settlement agreements in connection with a dispute over unclaimed property audits.
(b)
Includes an $8.4 million release of a tax reserve for the three and nine months ended September 30, 2015, related to the unexchanged promotional shares.
(c)
Shares used to calculate non-GAAP loss per share for the three months ended September 30, 2014 were 14,730,454, which were different than the shares used in GAAP earnings per share calculation due to the anti-dilutive effect on the non-GAAP loss per share.

9/9

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