TRAVELZOO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 09.30.2016 - October 27, 2016

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Exhibit 99.1
 
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Travelzoo
590 Madison Avenue
37th Floor
New York, NY 10022

Investor Relations:
Molly Yu
ir@travelzoo.com 


FOR IMMEDIATE RELEASE

Travelzoo Reports Third Quarter 2016 Results

NEW YORK, October 27, 2016 — Travelzoo Inc. (NASDAQ: TZOO):

•
Revenue of $30.4 million, down 7% year-over-year in constant currencies
•
Operating profit of $2.2 million, compared to $860,000 in prior-year period
•
Earnings per share (EPS) of $0.12

Travelzoo, a global media commerce company, today announced financial results for the third quarter ended September 30, 2016, with revenue of $30.4 million and operating income of $2.2 million. In nominal terms, revenue decreased by 10% year-over-year. In constant currencies, revenue decreased by 7% year-over-year. GAAP net income was $1.6 million, with earnings per share of $0.12. Non-GAAP earnings per share were $0.12, up from $0.03 in the prior-year period.

"The launch of a new Travelzoo® site in October was well received by our members," said Holger Bartel, Chairman and Global CEO. "The new responsive site makes it easy to search by date for outstanding travel and entertainment offers researched by our global staff, many of which Travelzoo has negotiated exclusively for its members. We intend to leverage Travelzoo's global reach and trusted brand to grow revenue and increase profitability in future periods.”






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Asia Pacific
Asia Pacific business segment revenue decreased 6% year-over-year to $2.6 million. In constant currencies, revenue decreased 10% year-over-year. Operating loss for the third quarter was $790,000, compared to an operating loss of $414,000 in the prior-year period.

Europe
Europe business segment revenue decreased 15% year-over-year to $8.8 million. In constant currencies, revenue decreased 5% year-over-year. Operating profit for the third quarter was $1.6 million, or 18% of revenue, up from $587,000, or 6% of revenue in the prior-year period.

North America
North America business segment revenue decreased 8% year-over-year to $19.1 million. Operating profit for the third quarter was $1.4 million, or 7% of revenue, up from $687,000 or 3% of revenue in the prior-year period.

Members
As of September 30, 2016, Travelzoo had a worldwide unduplicated number of members of 29.1 million. In Asia Pacific, unduplicated number of members was 3.6 million as of September 30, 2016, up 3% from September 30, 2015. In Europe, unduplicated number of members was 8.2 million as of September 30, 2016, up 5% from September 30, 2015. In North America, unduplicated number of members was 17.4 million as of September 30, 2016, up 1% from September 30, 2015.

Income Taxes
Income tax expense was $837,000, compared to a $8.2 million income tax benefit in the prior-year period. Prior year non-GAAP income tax expense of $214,000 excludes an $8.4 million release of a tax reserve related to the unexchanged promotional shares.

Asset Management
During the third quarter of 2016, Travelzoo used $1.5 million cash in operating activities. Accounts receivable decreased by $1.1 million over the prior-year period to $16.7 million. Accounts payable decreased by $4.4 million over the prior-year period to $18.6 million. Capital expenditures were $155,000, up from $132,000 in the prior-year period. As of September 30, 2016, cash and cash equivalents were $24.8 million.


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Non-GAAP Information
To give an enhanced view of Travelzoo's operating performance, management has calculated non-GAAP income tax expense, non-GAAP effective tax rate, non-GAAP net income and non-GAAP earnings per share by excluding the release of a tax reserve related to the unexchanged promotional shares in the prior period. 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 prior-year period, 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. Management presents year-over-year revenue percentage rates of change in constant currencies, calculated using prior-year period foreign currency rates on current-year period non-US revenue, as it believes this is a useful metric that facilitates comparison to historical performance.

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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 29 million members in Asia Pacific, Europe, and North America and 25 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,
 
2016
 
2015
 
2016
 
2015
Revenues
$
30,440

 
$
33,728

 
$
99,290

 
$
109,665

Cost of revenues
3,361

 
4,742

 
10,982

 
14,496

Gross profit
27,079

 
28,986

 
88,308

 
95,169

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
17,184

 
19,089

 
55,278

 
61,881

Product development
2,317

 
2,917

 
7,281

 
9,212

General and administrative
5,373

 
6,120

 
16,620

 
17,906

Total operating expenses
24,874

 
28,126

 
79,179

 
88,999

Income from operations
2,205

 
860

 
9,129

 
6,170

Other income (loss)
251

 
(202
)
 
293

 
(866
)
Income before income taxes
2,456

 
658

 
9,422

 
5,304

Income taxes
837

 
(8,199
)
 
3,734

 
(5,125
)
Net income
$
1,619

 
$
8,857

 
$
5,688

 
$
10,429

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.12

 
$
0.60

 
$
0.40

 
$
0.71

Diluted
$
0.12

 
$
0.60

 
$
0.40

 
$
0.71

Weighted average shares:
 
 
 
 
 
 
 
Basic
13,839

 
14,730

 
14,109

 
14,730

Diluted
13,867

 
14,730

 
14,119

 
14,730



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Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 
September 30,
2016
 
December 31,
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
24,839

 
$
35,128

Accounts receivable, net
16,692

 
16,398

Income taxes receivable
1,657

 
1,356

Deposits
490

 
782

Prepaid expenses and other
2,472

 
1,928

Deferred tax assets
1,055

 
1,230

Total current assets
47,205

 
56,822

Deposits
693

 
501

Deferred tax assets
655

 
1,769

Restricted cash
1,177

 
1,328

Property and equipment, net
6,730

 
7,905

Other assets
—

 
15

Total assets
$
56,460

 
$
68,340

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
18,616

 
$
23,655

Accrued expenses and other
8,316

 
9,901

Deferred revenue
789

 
1,085

Income tax payable
2,029

 
477

Note payable to related party
—

 
5,658

Total current liabilities
29,750

 
40,776

Long-term tax liabilities
3,122

 
3,000

Long-term deferred rent and other
2,793

 
3,177

Total liabilities
35,665

 
46,953

Common stock
143

 
150

Additional paid-in capital
1,387

 
7,759

Accumulated other comprehensive loss
(3,809
)
 
(3,908
)
Retained earnings
23,074

 
17,386

Total stockholders’ equity
20,795

 
21,387

Total liabilities and stockholders’ equity
$
56,460

 
$
68,340



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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,
 
2016
 
2015
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
1,619

 
$
8,857

 
$
5,688

 
$
10,429

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
606

 
688

 
1,856

 
2,198

Deferred income taxes
(13
)
 
(164
)
 
(224
)
 
(407
)
Stock-based compensation
251

 
(150
)
 
692

 
146

Provision for losses on accounts receivable
(28
)
 
(151
)
 
17

 
(99
)
Net foreign currency effects
(71
)
 
182

 
(308
)
 
347

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
1,715

 
824

 
(547
)
 
(2,052
)
Deposits
13

 
46

 
51

 
118

Income tax receivable
(823
)
 
299

 
(299
)
 
1,980

Prepaid expenses and other
(551
)
 
(446
)
 
(438
)
 
78

Accounts payable
(2,177
)
 
(1,739
)
 
(4,391
)
 
(2,706
)
Accrued expenses and other
(2,628
)
 
(707
)
 
(2,074
)
 
(463
)
Income tax payable
504

 
283

 
1,772

 
306

Reserve for unexchanged promotional shares
—

 
—

 
—

 
(1,393
)
Other non-current liabilities
69

 
(8,644
)
 
121

 
(7,849
)
Net cash provided by (used in) operating activities
(1,514
)
 
(822
)
 
1,916

 
633

Cash flows from investing activities:
 
 
 
 
 
 
 
Release of restricted cash
—

 
8

 
—

 
66

Purchases of property and equipment
(155
)
 
(132
)
 
(802
)
 
(885
)
Net cash used in investing activities
(155
)
 
(124
)
 
(802
)
 
(819
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Payment for Asia Pacific business
—

 
(16,974
)
 
58

 
(16,974
)
Payment of loan to related party
—

 
(3,250
)
 
(5,658
)
 
(3,250
)
Proceeds from related party loan
—

 
—

 
—

 
2,224

Decrease in bank overdraft
—

 
(206
)
 
—

 
(341
)
Repurchase of common stock, net
(771
)
 
—

 
(5,727
)
 
—

Reverse/forward stock split, including transaction costs
—

 
—

 
—

 
(102
)
Net cash used in financing activities
(771
)
 
(20,430
)
 
(11,327
)
 
(18,443
)
Effect of exchange rate on cash and cash equivalents
(281
)
 
(531
)
 
(76
)
 
(2,218
)
Net decrease in cash and cash equivalents
(2,721
)
 
(21,907
)
 
(10,289
)
 
(20,847
)
Cash and cash equivalents at beginning of period
27,560

 
56,477

 
35,128

 
55,417

Cash and cash equivalents at end of period
$
24,839

 
$
34,570

 
$
24,839

 
$
34,570

Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid for income taxes, net
$
1,126

 
$
9

 
$
2,198

 
$
742

Cash paid for interest on related party loan
$
—

 
$
—

 
$
110

 
$
—

Note payable for Asia Pacific business
$
—

 
$
5,658

 
$
—

 
$
5,658


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Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
 
Three months ended September 30, 2016
Asia Pacific
 
Europe
 
North
America
 
Consolidated
Revenue from unaffiliated customers
$
2,531

 
$
9,003

 
$
18,906

 
$
30,440

Intersegment revenue
35

 
(188
)
 
153

 
—

Total net revenues
2,566

 
8,815

 
19,059

 
30,440

Operating income (loss)
$
(790
)
 
$
1,626

 
$
1,369

 
$
2,205

Three months ended September 30, 2015
Asia Pacific
 
Europe
 
North
America
 
Consolidated
Revenue from unaffiliated customers
2,746

 
10,444

 
20,538

 
33,728

Intersegment revenue
(28
)
 
(127
)
 
155

 
—

Total net revenues
2,718

 
10,317

 
20,693

 
33,728

Operating income (loss)
$
(414
)
 
$
587

 
$
687

 
$
860

 
 
 
 
 
 
 
 
Nine months ended September 30, 2016
Asia Pacific
 
Europe
 
North
America
 
Consolidated
Revenue from unaffiliated customers
$
7,202

 
$
29,915

 
$
62,173

 
$
99,290

Intersegment revenue
71

 
(509
)
 
438

 
—

Total net revenues
7,273

 
29,406

 
62,611

 
99,290

Operating income (loss)
$
(3,058
)
 
$
5,511

 
$
6,676

 
$
9,129

Nine months ended September 30, 2015
Asia Pacific
 
Europe
 
North
America
 
Consolidated
Revenue from unaffiliated customers
$
8,127

 
$
32,560

 
$
68,978

 
$
109,665

Intersegment revenue
(48
)
 
(422
)
 
470

 
—

Total net revenues
8,079

 
32,138

 
69,448

 
109,665

Operating income (loss)
$
(1,515
)
 
$
2,363

 
$
5,322

 
$
6,170

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


                                                                   

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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,
 
2016
 
2015
 
2016
 
2015
GAAP income tax expense (benefit)
$
837

 
$
(8,199
)
 
$
3,734

 
$
(5,125
)
Non-GAAP adjustments (a)
—

 
8,413

 
—

 
8,413

Non-GAAP income tax expense
$
837

 
$
214

 
$
3,734

 
$
3,288

 
 
 
 
 
 
 
 
GAAP effective tax rate
34.1
%
 
(1,246.0)
 %
 
39.6
%
 
(96.6)
 %
Non-GAAP adjustments (a)
—
%
 
1,278.5
 %
 
—
%
 
158.6
 %
Non-GAAP effective tax rate
34.1
%
 
32.5
 %
 
39.6
%
 
62.0
 %
 
 
 
 
 
 
 
 
GAAP net income
$
1,619

 
$
8,857

 
$
5,688

 
$
10,429

Non-GAAP adjustments (a)
—

 
(8,413
)
 
—

 
(8,413
)
Non-GAAP net income
$
1,619

 
$
444

 
$
5,688

 
$
2,016

 
 
 
 
 
 
 
 
GAAP diluted earnings per share
$
0.12

 
$
0.60

 
$
0.40

 
$
0.71

Non-GAAP adjustments (a)
—

 
(0.57
)
 
—

 
(0.57
)
Non-GAAP earnings per share
$
0.12

 
$
0.03

 
$
0.40

 
$
0.14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(a)
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.




###




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