GlobeNewswire Inc | Oct 21, 2020 08:32AM EDT

October 21, 2020

NEW YORK, Oct. 21, 2020 (GLOBE NEWSWIRE) -- Travelzoo (NASDAQ: TZOO):

-- Consolidated revenue of $13.8 million, down 42% from $23.8 million year-over-year -- Net loss of $1.2 million -- Non-GAAP consolidated operating profit of $1.2 million -- Earnings per share (EPS) of ($0.10) attributable to Travelzoo from continuing operations

Travelzoo, a global Internet media company that publishes exclusive offers and experiences for members, today announced financial results for the third quarter ended September 30, 2020. Consolidated revenue was $13.8 million, down 42% from $23.8 million year-over-year. Revenue increased by 97% from $7.0 million in Q2 2020. Reported revenue excludes revenue from discontinued operations in Asia Pacific. Travelzoo's reported revenue consists of advertising revenues and commissions, derived from and generated in connection with purchases made by Travelzoo members.

The reported net loss attributable to Travelzoo from continuing operations was $1.1 million for Q3 2020. At the consolidated level, including minority interests, the reported net loss from continuing operations was $1.2 million. EPS from continuing operations was ($0.10), down from $0.21 in the prior-year period.

Non-GAAP operating profit was $1.2 million. The calculation of non-GAAP operating profit excludes amortization of intangibles ($0.3 million), stock option expenses ($1.2 million), and severance-related expenses ($0.9 million). See section Non-GAAP Financial Measures below.

A strong improvement in our business is evident compared to Q2. We are seeing irresistibly priced deals coming to the market, and Travelzoo, as the most trusted media brand publishing and recommending travel deals, is telling its members about the very best deals," said Holger Bartel, Global CEO.

Cash PositionAs of September 30, 2020, consolidated cash, cash equivalents and restricted cash were $51.7 million. In April 2020 and May 2020, Travelzoo received low-interest government loans under the Paycheck Protection Program (PPP) of $3.1 million and $535,000, respectively. No further applications for loans have been made since then and the company does not anticipate requiring any further loans.

Travelzoo North AmericaNorth America business segment revenue decreased 40% year-over-year to $9.1 million. North America business segment revenue increased by 118% from $4.2 million in Q2 2020. Operating loss for Q3 was $696,000, or (8%) of revenue, compared to an operating profit of $2.6 million, or 17% of revenue in the prior-year period.

Travelzoo EuropeEurope business segment revenue decreased 57% year-over-year to $3.7 million. In constant currencies, revenue decreased 62% year-over-year. Europe business segment revenue increased by 97% from $1.9 million in Q2 2020. Operating loss for Q3 was $757,000, or (21%) of revenue, compared to an operating profit of $815,000, or 10% of revenue in the prior-year period.

Jacks Flight Club On January 13, 2020, Travelzoo acquired 60% of Jacks Flight Club, a subscription service. In Q3 2020, the Jack's Flight Club business segment generated $1.1 million in revenue from subscriptions with operating profit of $731,000. After consolidation with Travelzoo, Jacks Flight Club's net income was $312,000, with $187,000 attributable to Travelzoo as a result of recording $333,000 of amortization of intangible assets related to the acquisition and a haircut of revenue (derived from deferred revenue sold prior to acquisition) of $148,000 due to purchase accounting in accordance with U.S. GAAP.

Members and Subscribers As of September 30, 2020, we had 30.5 million members worldwide. In Europe, the unduplicated number of Travelzoo members was 8.9 million as of September 30, 2020, down 3% from September 30, 2019. In North America, the unduplicated number of Travelzoo members was 16.5 million as of September 30, 2020, down 7% from September 30, 2019. Jacks Flight Club had 1.7 million subscribers as of September 30, 2020, up 9% from September 30, 2019. In June 2020, Travelzoo sold its subsidiary in Japan, Travelzoo Japan K.K., to Mr. Hajime Suzuki. In connection with the sale, Travelzoo and Travelzoo Japan K.K. entered into a royalty-bearing licensing agreement for the exclusive use of Travelzoo members in Japan. In August 2020, Travelzoo sold its Singapore subsidiary to Mr. Julian Rembrandt and entered into a royalty-bearing licensing agreement for, among other things, the exclusive use of Travelzoo's members in Australia, New Zealand and Singapore. Under the licensing agreements, Travelzoos existing members in Australia, Japan, New Zealand, and Singapore will continue to be owned by Travelzoo as the licensor.

Discontinued OperationsAs announced in a press release on March 10, 2020, Travelzoo decided to exit its Asia Pacific business which in 2019 reduced EPS by $0.60. The Asia Pacific business was classified as discontinued operations at March 31, 2020. Prior periods have been reclassified to conform with the current presentation. Certain reclassifications have been made for current and prior periods between the continued operations and the discontinued operations in accordance with U.S. GAAP.

Income TaxesIncome tax benefit was $244,000 in Q3 2020, compared to an income tax expense of $860,000 in the prior-year period.

Non-GAAP Financial MeasuresManagement calculates non-GAAP operating income when evaluating the financial performance of the business. Travelzoos calculation of non-GAAP operating income, also called non-GAAP operating profit in this press release and todays earnings conference call, excludes the following items: impairment of intangibles and goodwill, amortization of intangibles, stock option expenses, severance-related expenses. This press release includes a table which reconciles GAAP operating income to the calculation of non-GAAP operating income. Non-GAAP operating income is not required by, or presented in accordance with, generally accepted accounting principles in the United States of America ("GAAP"). This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures reported by other companies.

Looking Ahead We currently see a trend of recovery of our revenue. We have been able to reduce our operating expenses significantly. As a result of recovery of revenue and substantially lower operating expenses, we currently expect to achieve for Q4 a result close to break-even or a profit.

Conference CallTravelzoo 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; and -- access the webcast.

About TravelzooTravelzoo provides our 30 million members insider deals and one-of-a-kind experiences personally reviewed by one of our deal experts around the globe. We have our finger on the pulse of outstanding travel, entertainment, and lifestyle experiences. For over 20 years we have worked in partnership with more than 5,000 top travel suppliersour 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.

TravelzooCondensed Consolidated Statements of Operations(Unaudited)

(In thousands, except Three months ended Nine months endedper share amounts) September 30, September 30, 2020 2019 2020 2019Revenues $ 13,787 $ 23,833 $ 41,118 $ 79,599 Cost of revenues 2,924 2,852 7,768 8,389 Gross profit 10,863 20,981 33,350 71,210 Operating expenses: Sales and marketing 6,929 11,967 24,311 38,605 Product development 592 1,434 2,586 4,856 General and 4,545 4,188 16,709 13,634 administrativeImpairment ofintangible asset and ? ? 2,920 ? goodwillTotal operating 12,066 17,589 46,526 57,095 expensesOperating income (1,203 ) 3,392 (13,176 ) 14,115 (loss)Other income (loss), (37 ) 32 (222 ) 48 netIncome (loss) fromcontinuing operations (1,240 ) 3,424 (13,398 ) 14,163 before income taxesIncome tax expense (244 ) 860 (2,070 ) 3,596 (benefit)Income (loss) from (996 ) 2,564 (11,328 ) 10,567 continuing operationsLoss from discontinued (230 ) (2,258 ) (3,944 ) (5,813 ) operations, net of taxNet income (loss) (1,226 ) 306 (15,272 ) 4,754 Net income (loss)attributable to 125 ? (1,122 ) ? non-controllinginterestNet income (loss)attributable to $ (1,351 ) $ 306 $ (14,150 ) $ 4,754 Travelzoo Net income (loss)attributable to $ (1,121 ) $ 2,564 $ (10,206 ) $ 10,567 Travelzoo?continuingoperationsNet income (loss)attributable to $ (230 ) $ (2,258 ) $ (3,944 ) $ (5,813 ) Travelzoo?discontinuedoperations Income (loss) per share?basicContinuing operations $ (0.10 ) $ 0.22 $ (0.90 ) $ 0.89 Discontinued $ (0.02 ) $ (0.19 ) $ (0.35 ) $ (0.49 ) operationsNet income (loss) per $ (0.12 ) $ 0.03 $ (1.25 ) $ 0.40 share ?basic Income (loss) per share?dilutedContinuing operations $ (0.10 ) $ 0.21 $ (0.90 ) $ 0.87 Discontinued $ (0.02 ) $ (0.19 ) $ (0.35 ) $ (0.49 ) operationsNet income (loss) per $ (0.12 ) $ 0.03 $ (1.25 ) $ 0.39 share?dilutedShares used in pershare calculation from 11,310 11,767 11,353 11,894 continuingoperations?basicShares used in pershare calculation from 11,310 11,767 11,353 11,894 discontinuedoperations?basicShares used in pershare calculation from 11,310 11,956 11,353 12,152 continuingoperations?dilutedShares used in pershare calculation from 11,310 11,767 11,353 11,894 discontinuedoperations?diluted

TravelzooCondensed Consolidated Balance Sheets(Unaudited)

September December 31,(In thousands) 30, 2019 2020Assets Current assets: Cash and cash equivalents $ 50,528 $ 18,743 Accounts receivable, net 4,195 11,209 Prepaid income taxes 304 989 Deposits 98 105 Prepaid expenses and other 990 2,288 Assets from discontinued operations 454 3,961 Total current assets 56,569 37,295 Deposits and other 806 572 Deferred tax assets 4,415 2,051 Restricted cash 1,155 1,135 Investment in WeGo 2,101 2,484 Operating lease right-of-use assets 9,076 8,140 Property and equipment, net 1,499 2,861 Intangible assets, net 4,867 ? Goodwill 10,944 ? Total assets $ 91,432 $ 54,538 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 53,018 $ 19,349 Accrued expenses and other 6,953 6,281 Deferred revenue 2,777 786 Operating lease liabilities 3,988 4,847 Promissory notes payable 1,700 ? Income tax payable 373 914 Liabilities from discontinued operations 1,509 3,135 Total current liabilities 70,318 35,312 PPP notes payable 3,663 ? Deferred tax liabilities 851 ? Long-term operating lease liabilities 11,425 7,920 Other long-term liabilities 473 443 Total liabilities 86,730 43,675 Non-controlling interest 4,633 ? Common stock 113 115 Additional paid-in capital 5,220 ? Retained earnings (accumulated deficit) (1,130 ) 14,200 Accumulated other comprehensive loss (4,134 ) (3,452 ) Total stockholders? equity 69 10,863 Total liabilities and stockholders? equity $ 91,432 $ 54,538

TravelzooSegment Information from Continuing Operations(Unaudited)

(In thousands)

Three months Travelzoo Jack'sended North Travelzoo Flight Elimination ConsolidatedSeptember America Europe Club30, 2020Revenue fromunaffiliated $ 9,002 $ 3,798 $ 987 $ ? $ 13,787 customersIntersegment 141 (141 ) ? ? ? revenueTotal net 9,143 3,657 987 ? 13,787 revenuesOperatingincome $ (696 ) $ (757 ) $ 250 $ ? $ (1,203 ) (loss) Three months Travelzoo Jack'sended North Travelzoo Flight Elimination ConsolidatedSeptember America Europe Club30, 2019Revenue fromunaffiliated $ 14,444 $ 9,432 $ ? $ (43 ) $ 23,833 customersIntersegment 895 (938 ) ? 43 ? revenueTotal net 15,339 8,494 ? 23,833 revenuesOperatingincome $ 2,620 $ 815 $ ? $ (43 ) $ 3,392 (loss)

Nine months Travelzooended North Travelzoo Jack's Elimination ConsolidatedSeptember America Europe Flight Club30, 2020Revenue fromunaffiliated $ 25,805 $ 12,706 $ 2,615 $ (8 ) $ 41,118 customersIntersegment 237 (245 ) ? 8 ? revenueTotal net 26,042 12,461 2,615 ? 41,118 revenuesOperating $ (6,374 ) $ (3,781 ) $ (3,013 ) $ (8 ) $ (13,176 ) loss Nine months Travelzooended North Travelzoo Jack's Elimination ConsolidatedSeptember America Europe Flight Club30, 2019Revenue fromunaffiliated $ 50,074 $ 29,619 $ ? $ (94 ) $ 79,599 customersIntersegment 1,776 (1,870 ) ? 94 ? revenueTotal net 51,850 27,749 ? 0 79,599 revenuesOperatingincome $ 10,673 $ 3,536 $ ? $ (94 ) $ 14,115 (loss)

TravelzooReconciliation of GAAP to Non-GAAP Information(Unaudited)

(In thousands, except per Three months ended Nine months endedshare amounts) September 30, September 30, 2020 2019 2020 2019GAAP operating expense $ 12,066 $ 17,589 $ 46,526 $ 57,095 Non-GAAP adjustments: Impairment of intangible and ? ? 2,920 ? goodwill (A)Amortization of intangibles 333 ? 944 ? (B)Stock option expenses (C) 1,189 394 5,243 876 Severance-related expenses (D) 855 35 1,139 85 Non-GAAP operating expense 9,689 17,160 36,280 56,134 GAAP operating income (loss) (1,203 ) 3,392 (13,176 ) 14,115 Non-GAAP adjustments (A 2,377 429 10,246 961 through D)Non-GAAP operating income 1,174 3,821 (2,930 ) 15,076 (loss)

Investor Relations:Almira Puschir@travelzoo.com