TravelZoo Inc. (TZOO)

[TheFinalCD]

Second Quarter 2012 Financial Highlights:

• Revenue of $39.4 million, up 5% year-over-year
• Operating Income of $10.4 million, up 36% year-over-year
• Net income of $7.3 million, up 48% year-over-year
• Earnings per share of $0.45, compared to $0.30 in the prior-year period
• Cash flow from operations of $7.1 million

Travelzoo Inc., a global Internet media company, today announced financial results for the second quarter ended June 30, 2012, with revenue of $39.4 million, an increase of 5% year-over-year. Operating income was $10.4 million, up 36% year-over-year. Net income was $7.3 million, with earnings per share of $0.45, up from $0.30 in the prior-year period.

“Our strategy of publishing high-quality deals, combined with efficient execution, has led to record operating profits in Europe and North America and an overall operating margin of 26%, the highest since 2007,” said Chris Loughlin, chief executive officer of Travelzoo. “We now intend to reaccelerate growth by investing more significantly into growing our audience, expanding our mobile offerings, and continuing our sales force ramp.”

North America

North America business segment revenue grew 4% year-over-year to $28.7 million. Operating income for the second quarter was $7.8 million, or 27% of revenue, up from $6.5 million, or 24% of revenue, in the prior-year period.

Europe

Europe business segment revenue grew 7% year-over-year to $10.6 million. In local currency terms, revenue for the second quarter grew 10% year-over-year. Operating income for the second quarter was $2.5 million, compared to an operating profit of $1.1 million in the prior-year period.

Subscribers

Travelzoo had a total unduplicated number of subscribers in North America and Europe of 22.1 million as of June 30, 2012, up 6% from June 30, 2011. In North America, total unduplicated number of subscribers was 15.9 million as of June 30, 2012, up 4% from June 30, 2011. In Europe, total unduplicated number of subscribers was 6.1 million as of June 30, 2012, up 12% from June 30, 2011.

Income Taxes

Income tax expense was $3.1 million, compared to $2.8 million in the prior-year period. The effective income tax rate was 30%, down from 36% in the prior-year period.

Asset Management

During the second quarter 2012, Travelzoo generated $7.1 million of cash from operating activities. Accounts receivable decreased by $700,000 over the prior-year period to $15.2 million. Accounts payable increased by $6.5 million over the prior-year period to $22.1 million. Capital expenditures were $595,000, up from $356,000 in the prior-year period. Travelzoo exited the second quarter with $54.2 million in cash and cash equivalents.

Conference Call

Travelzoo will host a conference call to discuss first 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 Inc. is a global Internet media company. With more than 25 million subscribers in North America, Europe, and Asia Pacific and 25 offices worldwide, Travelzoo® publishes deals from more than 2,000 travel and entertainment companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value. In Asia Pacific, Travelzoo is independently owned and operated by Travelzoo (Asia) Ltd. and Travelzoo Japan K.K. under a license agreement with Travelzoo Inc.

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 Inc. All other company and product names mentioned are trademarks of their respective owners.






































Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

(In thousands, except per share amounts)


















































Three months ended





Six months ended















June 30,





June 30,















2012





2011





2012





2011





































Revenues











$ 39,360





$ 37,565





$ 78,693





$ 74,525



Cost of revenues











3,630





2,940





7,683





5,382



Gross profit











35,730





34,625





71,010





69,143





































Operating expenses:

































Sales and marketing











16,061





18,702





32,326






34,833



General and administrative











9,303





8,295





18,747





16,689



Unexchanged merger shares











-





-





3,000





20,000



Total operating expenses











25,364





26,997





54,073






71,522





































Operating income (loss)











10,366





7,628





16,937






(2,379)





































Other income (expense)











(16)





42





83





104



Income (loss) before income taxes











10,350





7,670





17,020






(2,275)





































Income taxes











3,090





2,752





6,012





6,762





































Net income (loss)











$ 7,260





$ 4,918





$ 11,008






$ (9,037)





































Net income (loss) per share:

































Basic











$ 0.45





$ 0.30





$ 0.69





$ (0.55)



Diluted











$ 0.45





$ 0.30





$ 0.69





$ (0.55)





































Weighted Average Shares:

































Basic











15,962





16,462





15,962





16,456



Diluted











16,006





16,585





16,012





16,456



























Travelzoo Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)






































June 30,
2012






December 31,
2011

















































Assets





















Current assets:





















Cash and cash equivalents











$











54,161





$

38,744



Accounts receivable, net























15,236







13,340



Income taxes receivable























2,493







3,625



Deposits























376







278



Prepaid expenses and other current assets























2,601







2,123



Deferred tax assets























1,755







1,754



Total current assets























76,622







59,864



Deposits, less current portion























1,038







776



Deferred tax assets, less current portion























344







344



Restricted cash























3,045







3,103



Property and equipment, net























3,711







3,557



Intangible assets, net























528







704



Total assets











$











85,288





$

68,348

























Liabilities and Stockholders' Equity





















Current liabilities:





















Accounts payable











$











22,129





$

21,731



Accrued expenses























11,606







6,311



Deferred revenue























2,108







2,168



Deferred rent























217







114



Income tax payable























-







279



Total current liabilities























36,060







30,603



Long-term tax liabilities























2,001







2,225



Deferred rent, less current portion























929







761



Total liabilities























38,990







33,589



Common stock























164







164



Treasury stock























-







(15,123)



Additional paid-in capital























8,249







7,656



Accumulated other comprehensive loss























(1,484)







(1,422)



Retained earnings























39,369







43,484



Total stockholders' equity























46,298







34,759



Total liabilities and stockholders' equity











$











85,288





$

68,348







































Travelzoo Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

















































Three months ended





Six months ended
















June 30,






June 30,















2012





2011





2012





2011



Cash flows from operating activities:

































Net income (loss)











$ 7,260





$ 4,918





$ 11,008





$ (9,037)




Adjustments to reconcile net income to net cash
provided by operating activities:

































Depreciation and amortization











599





666





1,225





1,309



Deferred income taxes











-





74





-





160



Stock-based compensation











307





187





593





375



Provision for losses on accounts receivable











91





24





199





43



Tax benefit from exercise of stock options











-





-





-





(268)



Net foreign currency effects











75





1





40





(29)



Changes in operating assets and liabilities:

































Accounts receivable











(851)





462





(2,122)





(2,456)



Deposits











(232)





(99)





(364)





(660)



Income tax receivable











285





(2,654)





1,130





(2,390)



Prepaid expenses and other current assets











215





(309)





(79)





(117)



Accounts payable











48





2,164





508





5,600



Accrued expenses











(317)





(16,248)





5,302





7,185



Deferred revenue











(194)





78





(60)





98



Deferred rent











41





82





(34)





95



Income tax payable











1





(607)





(283)





(519)



Other non-current liabilities











(276)





14





(224)





29



Net cash provided by (used in) operating activities











7,052





(11,247)





16,839





(582)





































Cash flows from investing activities:

































Purchases of property and equipment











(595)





(356)





(1,272)





(1,056)



Net cash used in investing activities











(595)





(356)





(1,272)





(1,056)





































Cash flows from financing activities:

































Proceeds from exercise of stock options











-





-





-





40



Tax benefit of stock option exercises











-





-





-





268



Net cash provided by financing activities











-





-





-





308





































Effect of exchange rate on cash and cash equivalents











(855)





(9)





(150)





232





































Net increase (decrease) in cash and cash equivalents











5,602





(11,612)





15,417





(1,098)



Cash and cash equivalents at beginning of period











48,559





51,698





38,744





41,184



Cash and cash equivalents at end of period











$ 54,161





$ 40,086





$ 54,161





$ 40,086





































Supplemental disclosure of cash flow information:

































Cash paid for income taxes, net











3,082





5,918





5,391





9,476







































Travelzoo Inc.

Segment Information

(Unaudited)

(In thousands)





































Three months ended June 30, 2012












North
America





Europe





Elimination





Consolidated





































Revenue from unaffiliated customers











$











28,712





$











10,648





$

-





$

39,360



Intersegment revenue























205

















21







(226)







-



Total net revenues























28,917

















10,669







(226)







39,360



Operating income











$











7,831





$











2,535





$

-





$

10,366







































































Three months ended June 30, 2011












North
America





Europe





Elimination





Consolidated





































Revenue from unaffiliated customers











$











27,588





$











9,977





$

-





$

37,565



Intersegment revenue























112

















57







(169)







-



Total net revenues























27,700

















10,034







(169)







37,565



Operating income











$











6,543





$











1,086





$

-





$

7,629







































































Six months ended June 30, 2012












North
America





Europe






Elimination
and Other (a)





Consolidated





































Revenue from unaffiliated customers











$











57,268





$











21,425





$

-





$

78,693



Intersegment revenue























470

















31







(501)







-



Total net revenues























57,738

















21,456







(501)







78,693



Operating income











$











14,972





$











4,965





$

(3,000)





$

16,937







































































Six months ended June 30, 2011












North
America





Europe






Elimination
and Other (a)





Consolidated





































Revenue from unaffiliated customers











$











55,105





$











19,420





$

-





$

74,525



Intersegment revenue























213

















61







(274)







-



Total net revenues























55,318

















19,481







(274)







74,525



Operating income (loss)












$












15,794





$











1,827





$

(20,000)






$


(2,379)








































































(a) Includes a charge related to unexchanged shares for the six months ended June 30, 2012 and June 30, 2011.













.
.
Contact:.
.
Travelzoo
Media:
Christie McConnell, [phone]
[e-mail]