Travelzoo Reports Fourth Quarter 2011 Results

NEW YORK--([ BUSINESS WIRE ])--Travelzoo Inc. (NASDAQ: TZOO):

"In a typically slower period for travel advertising, Q4 revenues grew faster year-over-year than in any such quarter in the past four years"

Fourth Quarter 2011 Financial Highlights:

Revenue of $35.2 million, up 23% year-over-year
Operating income of $8.2 million, up 22% year-over-year
Net income of $6.4 million, up 70% year-over-year
Earnings per share of $0.40, compared to $0.23 in the prior-year period

Travelzoo Inc., a global Internet media company, today announced financial results for the fourth quarter ended December 31, 2011, with revenue of $35.2 million, an increase of 23% year-over-year. Operating income was $8.2 million, up 22% year-over-year. Net income was $6.4 million, with diluted earnings per share (EPS) of $0.40, up from $0.23 in the prior-year period.

"In a typically slower period for travel advertising, Q4 revenues grew faster year-over-year than in any such quarter in the past four years," said Chris Loughlin, chief executive officer of Travelzoo. "We remain positive about our Local Deals business, in which we differentiate from others by focusing on higher quality deals, as well as our ability to run and grow this business profitably. In the past two quarters, we have focused on putting the systems and teams in place that we intend to use in 2012 to continue to scale the business with attractive profitability."

North America

North America business segment revenue for the fourth quarter grew 16% year-over-year to $25.6 million. Operating profit for the fourth quarter was $6.5 million, or 25% of revenue, down from $6.7 million, or 30% of revenue, in the prior-year period.

Europe

Europe business segment revenue for the fourth quarter grew 48% year-over-year to $9.7 million. In local currency terms, revenue for the fourth quarter grew 49% year-over-year. Operating profit for the fourth quarter was $1.7 million, compared to an operating profit of $22,000 in the prior-year period.

Subscribers

Travelzoo had a total unduplicated number of newsletter subscribers in North America and Europe of 21.5 million as of December 31, 2011, up 14% from December 31, 2010. In North America, total unduplicated number of subscribers was 15.7 million as of December 31, 2011, up 10% from December 31, 2010. In Europe, total unduplicated number of subscribers was 5.8 million as of December 31, 2011, up 26% from December 31.

Income Taxes

Income tax expense was $1.9 million, compared to $3.0 million in the prior-year period. The effective income tax rate was 23%, down from 44% in the prior-year period.

Asset Management

During the fourth quarter 2011, Travelzoo generated $7.1 million of cash from operating activities. Accounts receivable remained unchanged at $13.3 million compared to prior-year period. Accounts payable increased by $11.8 million over the prior-year period to $21.7 million. Capital expenditures were $558,000, up from $138,000 in the prior-year period. Travelzoo exited the fourth quarter with $38.7 million in cash and cash equivalents.

Conference Call

Travelzoo will host a conference call to discuss fourth 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 24 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. Travelzooas 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 aexpect,a apredict,a aproject,a aanticipate,a abelieve,a aestimate,a aintend,a aplan,a aseeka 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				Twelve months ended
	December 31,				December 31,
		2010		2011		2010		2011

Revenues	$	28,468	$	35,156	$	112,784	$	148,342
Cost of revenues		2,241		3,680		7,253		13,283
Gross profit		26,227		31,476		105,531		135,059

Operating expenses:
Sales and marketing		11,783		13,921		54,454		65,490
General and administrative		7,732		9,380		27,565		34,547
Settlement with State of Delaware		-		-		-		20,000
Total operating expenses		19,515		23,301		82,019		120,037

Operating income		6,712		8,175		23,512		15,022

Other income and expense:
Interest income and other income		34		255		166		383
Loss on foreign currency		(8)		(58)		(197)		(81)
Income before income taxes		6,738		8,372		23,481		15,324

Income taxes		2,951		1,944		10,324		12,005

Net income	$	3,787	$	6,428	$	13,157	$	3,319

Net income per share:
Basic	$	0.23	$	0.40	$	0.80	$	0.20
Diluted	$	0.23	$	0.40	$	0.80	$	0.20

Weighted Average Shares:
Basic		16,444		15,962		16,444		16,315
Diluted		16,518		16,026		16,453		16,414


Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)


	December 31,
	2010		2011

Assets
Current assets:
Cash and cash equivalents	$	41,184	$	38,744
Accounts receivable, net		13,290		13,340
Income taxes receivable		264		3,625
Deposits		129		278
Prepaid expenses and other current assets		1,489		2,123
Deferred tax assets		1,411		904
Total current assets		57,767		59,014
Deposits, less current portion		279		776
Deferred tax assets, less current portion		349		1,194
Restricted cash		3,124		3,103
Property and equipment, net		3,425		3,557
Intangible assets, net		1,058		704
Total assets	$	66,002	$	68,348
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	9,931	$	21,731
Accrued expenses		6,080		6,311
Deferred revenue		1,325		2,168
Deferred rent		218		114
Income tax payable		650		279
Total current liabilities		18,204		30,603
Long-term tax liabilities		1,449		2,225
Deferred rent, less current portion		460		761
Total liabilities		20,113		33,589
Common stock		164		160
Treasury stock		-		(15,119)
Additional paid-in capital		6,598		7,656
Accumulated other comprehensive loss		(1,038)		(1,422)
Retained earnings		40,165		43,484
Total stockholders' equity		45,889		34,759
Total liabilities and stockholders' equity	$	66,002	$	68,348


	Travelzoo Inc.
	Condensed Consolidated Statements of Cash Flows
	(Unaudited)
	(In thousands)

		Three months ended				Twelve months ended
		December 31,				December 31,
		2010		2011		2010		2011

Cash flows from operating activities:
Net income		$	3,787	$	6,428	$	13,157	$	3,319
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		623		671		2,389		2,725
	Deferred income taxes		(1,340)		(546)		(1,276)		(337)
	Stock-based compensation		188		187		750		750
	Provision for losses on accounts receivable		93		76		199		52
	Tax benefit of stock option exercises		-		-		-		(268)
	Net foreign currency effects		8		58		197		81
	Changes in operating assets and liabilities:
	Accounts receivable		659		576		(2,323)		(146)
	Deposits		129		(99)		20		(667)
	Income tax receivable		1,517		(1,061)		5,797		(3,093)
	Prepaid expenses and other current assets		(134)		188		(413)		(584)
	Accounts payable		2,638		4,620		3,232		12,074
	Accrued expenses		413		(4,737)		1,830		256
	Deferred revenue		150		585		498		853
	Deferred rent		(51)		30		(72)		209
	Income tax payable		134		(15)		630		(369)
	Other non-current liabilities		14		117		(690)		776
Net cash provided by operating activities			8,828		7,078		23,925		15,631

Cash flows from investing activities:
	Purchases of property and equipment		(138)		(558)		(1,279)		(2,460)
	Purchases of restricted cash		(2,248)		-		(2,248)		-
Net cash used in investing activities			(2,386)		(558)		(3,527)		(2,460)

Cash flows from financing activities:
	Proceeds from exercise of stock options		-		-		-		40
	Repurchase of common stock		-		-		-		(15,124)
	Tax benefit of stock option exercises		-		-		-		268
	Proceeds from sale of Asia Pacific business segment		-		-		1,073		-
Net cash provided by (used in) financing activities			-		-		1,073		(14,816)

Effect of exchange rate on cash and cash equivalents			25		(209)		(63)		(795)

Net increase (decrease) in cash and cash equivalents			6,467		6,311		21,408		(2,440)
Cash and cash equivalents at beginning of period			34,717		32,433		19,776		41,184
Cash and cash equivalents at end of period		$	41,184	$	38,744	$	41,184	$	38,744

Supplemental disclosure of cash flow information:
Cash paid for income taxes, net of refunds received			2,593		3,453		5,857		15,025


Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)


Three months ended December 31, 2011	North America		Europe		Elimination		Consolidated

Revenue from unaffiliated customers	$	25,500	$	9,656	$	-	$	35,156
Intersegment revenue		124		42		(166)		-
Total net revenues		25,624		9,698		(166)		35,156
Operating income	$	6,504	$	1,671	$	-	$	8,175


Three months ended December 31, 2010	North America		Europe		Elimination		Consolidated

Revenue from unaffiliated customers	$	21,945	$	6,523	$	-	$	28,468
Intersegment revenue		70		28		(98)		-
Total net revenues		22,015		6,551		(98)		28,468
Operating income	$	6,689	$	22	$	1	$	6,712


Twelve months ended December 31, 2011	North America		Europe		Elimination		Consolidated

Revenue from unaffiliated customers	$	108,548	$	39,793	$	-	$	148,341
Intersegment revenue		466		134		(600)		-
Total net revenues		109,014		39,927		(600)		148,341
Operating income (loss)	$	10,110	$	4,912	$	-	$	15,022


Twelve months ended December 31, 2010	North America		Europe		Elimination		Consolidated

Revenue from unaffiliated customers	$	87,661	$	25,123	$	-	$	112,784
Intersegment revenue		197		107		(304)		-
Total net revenues		87,858		25,230		(304)		112,784
Operating income	$	24,998	$	(1,489)	$	3	$	23,512

N@N

Travelzoo Reports Fourth Quarter 2011 Results