GlobeNewswire Inc | Jul 30, 2020 08:57AM EDT

July 30, 2020

NEW YORK, July 30, 2020 (GLOBE NEWSWIRE) -- Travelzoo (NASDAQ: TZOO):

-- Revenue of $7.0 million, down 73% from $26.6 million year-over-year -- Non-GAAP operating loss of $2.5 million (adjustment of GAAP operating loss by excluding $4.1 million in stock option compensation expense) -- GAAP operating loss of $6.6 million -- Earnings per share (EPS) of ($0.48) 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 second quarter ended June30, 2020. Revenue was $7.0 million, down 73% from $26.6 million year-over-year. 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 operating loss for Q2 was $6.4 million attributable to Travelzoo from continuing operations. At the consolidated level, including minority interests, the operating lossfrom continuing operations was$6.8 million. The losses were primarily caused by an unusually high stock option compensation expense of $4.1 million related to repricing of outstanding options, offset by a $1.1 million gain from the reduction of the purchase price for Jack's Flight Club. EPS from continuing operations was ($0.48), down from $0.25 in the prior-year period.

"After adjusting our cost structure quickly in Q2, we have turned our view to the future to regain profitability as soon as Q3. We are already seeing irresistibly priced travel deals coming to the market, which were unheard of previously. Airlines, hotels, destinations and entertainment companies want travelers to come back and will need to invest in advertising. Travelzoo, as the most trusted media company in publishing and recommending travel deals, will tell its members about the very best deals," said Holger Bartel, Global CEO.

Cash PositionAs of June 30, 2020, cash, cash equivalents and restricted cash were $27.0 million. In April 2020 and May 2020, Travelzoo received low-interest government loans under the Paycheck Protection Program 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.

North AmericaNorth America business segment revenue decreased 77% year-over-year to $4.2 million. GAAP operating loss for the second quarter was $4.7 million, or (112%) of revenue, compared to an operating profit of $3.6 million, or 20% of revenue in the prior-year period.

EuropeEurope business segment revenue decreased 79% year-over-year to $1.9 million. In constant currencies, revenue decreased 76% year-over-year. Operating loss for the second quarter was $1.7 million, or (91%) of revenue, compared to an operating profit of $584,000, or 5% 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 Q2 2020, the Jack's Flight Club business segment generated $1.2 million in revenue from subscriptions with operating profit of $914,000. After consolidation with Travelzoo, Jacks Flight Club's operating loss was $615,000, with $369,000 attributable to Travelzoo as a result of recording $462,000 for a one-time expense due to the revision of the purchase agreement with the sellers, $395,000 of amortization of intangible assets related to the acquisition and a haircut of revenue (derived from deferred revenue sold prior to acquisition) of $305,000 due to purchase accounting in accordance with U.S. GAAP.

Members and SubscribersAs of June 30, 2020, we had 31.0 million members worldwide. In Europe, the unduplicated number of Travelzoo members was 9.0 million as of June 30, 2020, consistent with June 30, 2019. In North America, the unduplicated number of Travelzoo members was 16.8 million as of June 30, 2020, down 5% from June 30, 2019. Jacks Flight Club had 1.7 million subscribers as of June 30, 2020, up 19% from June 30, 2019. On June 16, 2020, Travelzoo disclosed that it 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 licensing agreement. Under the licensing agreement, Travelzoos existing members in Japan 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 $1.3 million, compared to an income tax expense of $1.1 million in the prior-year period.

OutlookWe 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 expect to achieve a break-even or small profit in terms of non-GAAP operating income for Q3 and a non-GAAP operating profit for Q4 2020.

Conference CallTravelzoo will host a conference call to discuss second 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 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.

TravelzooCondensed Consolidated Statements of Operations

(In thousands, except Three months ended Six months endedper share amounts)(Unaudited) June 30, June 30, 2020 2019 2020 2019Revenues $ 7,004 $ 26,606 $ 27,331 $ 55,766 Cost of revenues 2,141 2,672 4,844 5,537 Gross profit 4,863 23,934 22,487 50,229 Operating expenses: Sales and marketing 4,288 13,104 17,382 26,638 Product development 566 1,763 1,994 3,422 General and 6,642 4,914 12,164 9,446 administrativeImpairment of intangible ? ? 2,920 ? assets and goodwill Total operating 11,496 19,781 34,460 39,506 expensesOperating income (loss) (6,633) 4,153 (11,973) 10,723 Other income (loss), net (179) (29) (185) 16 Income (loss) fromcontinuing operations (6,812) 4,124 (12,158) 10,739 before income taxesIncome tax expense (1,309) 1,066 (1,826) 2,736 (benefit)Income (loss) from (5,503) 3,058 (10,332) 8,003 continuing operationsLoss from discontinued (795) (1,730) (3,714) (3,555) operations, net of taxNet income (loss) (6,298) 1,328 (14,046) 4,448 Net loss attributable to (108) ? (1,247) ? non-controlling interestNet income (loss)attributable to $ (6,190) $ 1,328 $ (12,799) $ 4,448 Travelzoo Net income (loss)attributable to $ (5,395) $ 3,058 $ (9,085) $ 8,003 Travelzoo?continuingoperationsNet income (loss)attributable to $ (795) $ (1,730) $ (3,714) $ (3,555) Travelzoo?discontinuedoperations Income (loss) per share?basicContinuing operations $ (0.48) $ 0.25 $ (0.80) $ 0.67 Discontinued operations $ (0.07) $ (0.14) $ (0.33) $ (0.30) Net income (loss) per $ (0.55) $ 0.11 $ (1.13) $ 0.37 share ?basic Income (loss) per share?dilutedContinuing operations $ (0.48) $ 0.25 $ (0.80) $ 0.66 Discontinued operations $ (0.07) $ (0.14) $ (0.33) $ (0.30) Net income (loss) per $ (0.55) $ 0.11 $ (1.13) $ 0.36 share?dilutedShares used in per sharecalculation from 11,310 12,003 11,375 11,959 continuingoperations?basicShares used in per sharecalculation from 11,310 12,003 11,375 11,959 discontinuedoperations?basicShares used in per sharecalculation from 11,310 12,278 11,375 12,251 continuingoperations?dilutedShares used in per sharecalculation from 11,310 12,003 11,375 11,959 discontinuedoperations?diluted

TravelzooCondensed Consolidated Balance Sheets

(In thousands) June 30, December 31,(Unaudited) 2020 2019Assets Current assets: Cash and cash equivalents $ 25,563 $ 18,743 Accounts receivable, net 4,031 11,209 Prepaid income taxes ? 989 Deposits 112 105 Prepaid expenses and other 1,173 2,288 Assets from discontinued operations 590 3,961 Total current assets 31,469 37,295 Deposits and other 829 572 Deferred tax assets 4,341 2,051 Restricted cash 1,138 1,135 Investments in WeekenGO and other 2,152 2,484 Operating lease right-of-use assets 9,929 8,140 Property and equipment, net 1,689 2,861 Intangible assets, net 5,200 ? Goodwill 10,944 ? Total assets $ 67,691 $ 54,538 Liabilities and Stockholders? Equity (Deficit) Current liabilities: Accounts payable $ 29,674 $ 19,349 Accrued expenses and other 5,436 6,281 Deferred revenue 2,779 786 Operating lease liabilities 4,440 4,847 Promissory notes payable 1,700 ? Income tax payable 773 914 Liabilities from discontinued operations 1,456 3,135 Total current liabilities 46,258 35,312 Notes payable 3,663 ? Deferred tax liabilities 1,044 ? Long-term operating lease liabilities 12,062 7,920 Other long-term liabilities 457 443 Total liabilities 63,484 43,675 Non-controlling interest 4,508 ? Common stock 113 115 Additional paid-in capital 4,031 ? Retained earnings 221 14,200 Accumulated other comprehensive loss (4,666) (3,452) Total stockholders? equity (deficit) (301) 10,863 Total liabilities and stockholders? equity (deficit) $ 67,691 $ 54,538

TravelzooCondensed Consolidated Statements of Cash Flows

(In thousands) Three months ended Six months ended(Unaudited) June 30, June 30, 2020 2019 2020 2019Cash flows from operating activities:Net income (loss) $ (6,298) $ 1,328 $ (14,046) $ 4,448 Adjustments toreconcile net income(loss) to net cash provided by (used in)operating activities:Depreciation and 667 333 1,218 663 amortizationStock-based 4,122 319 4,145 482 compensationDeferred income tax (1,152) 4 (1,761) 345 Impairment ofintangible assets and ? ? 2,920 ? goodwillLoss on long-lived ? ? 437 ? assetsLoss on equity 141 238 336 397 investment in WeekenGOGain on notes payable (1,500) ? (1,500) ? settlementNet foreign currency 225 (5) (456) (26) effectsProvision of loss onaccounts receivable and 986 (51) 2,427 26 otherChanges in operatingassets and liabilities, net of acquisitions:Accounts receivable 3,674 201 6,183 (2,779) Income tax receivable ? (817) 989 (428) Prepaid expenses and 558 (186) 1,420 239 otherAccounts payable 16,702 (1,687) 10,309 (2,788) Accrued expenses and (2,084) (442) (1,380) 1291 otherDeferred revenue 360 146 1,249 ? Income tax payable 266 (1,084) (67) (96) Other liabilities (97) (103) 1,091 (174) Net cash provided by(used in) operating 16,570 (1,806) 13,514 1,600 activitiesCash flows from investing activities:Acquisition ofbusiness, net of cash ? (673) (679) (673) acquiredOther investment (430) ? (430) ? Purchases of property (72) (70) (203) (201) and equipmentNet cash used in (502) (743) (1,312) (874) investing activitiesCash flows from financing activities:Repurchase of common ? (4,869) (1,205) (6,460) stockPayment of promissory (6,800) ? (7,800) 0 notesProceeds from notes 3,663 ? 3,663 ? payableProceeds from exerciseof stock options, netof taxes paid for net ? 1,738 ? 1,712 share settlement ofequity awardsNet cash used in (3,137) (3,131) (5,342) (4,748) financing activitiesEffect of exchange rateon cash, cash (330) (147) (602) 5 equivalents andrestricted cashNet increase (decrease)in cash, cash 12,601 (5,827) 6,258 (4,017) equivalents andrestricted cashCash, cash equivalentsand restricted cash at 14,367 21,271 20,710 19,461 beginning of periodCash, cash equivalentsand restricted cash at $ 26,968 $ 15,444 $ 26,968 $ 15,444 end of periodSupplemental disclosureof cash flow information:Cash paid (refunded) $ (60) $ 2,919 $ 482 $ 2,859 for income taxes, net

TravelzooSegment Information(Unaudited)(In thousands)

Three months North Jack'sended June America Europe Flight Elimination Consolidated30, 2020 ClubRevenue fromunaffiliated $ 4,254 $ 1,805 $ 945 $ ? $ 7,004 customersIntersegment (52) 52 ? ? ? revenueTotal net 4,202 1,857 945 ? 7,004 revenuesOperating $ (4,702) $ (1,683) $ (248) $ ? $ (6,633) loss Three months North Jack'sended June America Europe Flight Elimination Consolidated30, 2019 ClubRevenue fromunaffiliated $ 17,494 $ 9,133 $ ? $ (21) $ 26,606 customersIntersegment 430 (451) ? 21 ? revenueTotal net 17,924 8,682 ? 26,606 revenuesOperatingincome $ 3,590 $ 584 $ ? $ (21) $ 4,153 (loss)

Six months North Jack'sended June America Europe Flight Club Elimination Consolidated30, 2020Revenue fromunaffiliated $ 16,803 $ 8,908 $ 1,628 $ (8) $ 27,331 customersIntersegment 96 (104) ? 8 ? revenueTotal net 16,899 8,804 1,628 ? 27,331 revenuesOperating $ (5,678) $ (3,024) $ (3,263) $ (8) $ (11,973) loss Six months North Jack'sended June America Europe Flight Club Elimination Consolidated30, 2019Revenue fromunaffiliated $ 35,630 $ 20,187 $ ? $ (51) $ 55,766 customersIntersegment 881 (932) ? 51 ? revenueTotal net 36,511 19,255 ? 0 55,766 revenuesOperatingincome $ 8,053 $ 2,721 $ ? $ (51) $ 10,723 (loss)

Investor Relations:Almira Puschir@travelzoo.com