TZOO - Travelzoo Reports Third Quarter 2019 Results

October, 23 2019 07:00 AM Travelzoo

NEW YORK, Oct. 23, 2019 (GLOBE NEWSWIRE) -- Travelzoo® (NASDAQ: 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

Company Name:	Travelzoo
Stock Symbol:	TZOO
Market:	NASDAQ
Website:	travelzoo.com

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