GlobeNewswire Inc | Jul 21, 2021 08:00AM EDT

July 21, 2021

NEW YORK, July 21, 2021 (GLOBE NEWSWIRE) -- Travelzoo (NASDAQ: TZOO):

-- Consolidated revenue of $19.1 million, up 172% year-over-year and up 34% quarter-over-quarter -- Non-GAAP consolidated operating profit of $4.9 million -- Earnings per share (EPS) of $0.22 attributable to Travelzoo from continuing operations -- Cash flow from operations of $12.8 million

Travelzoo, a global Internet media company that publishes exclusive offers and experiences for members, today announced financial results for the second quarter ended June30, 2021.Consolidated revenue was $19.1 million, up 172% from $7.0 million year-over-year and up 34% from $14.3 million in the prior quarter. 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 income attributable to Travelzoo from continuing operations was $3.0 million for Q2 2021. At the consolidated level, including minority interests, the reported net income from continuing operations was $3.0 million. EPS from continuing operations was $0.22, compared to a loss per share of ($0.48) in the prior-year period.

Non-GAAP operating profit was $4.9 million. The calculation of non-GAAP operating profit excludes amortization of intangibles ($0.3 million), stock option expenses ($0.9 million), and severance-related expenses ($0.2 million). See section Non-GAAP Financial Measures below.

We see continued improvement in our business. We seize the exceptional industry opportunities for providing 30 million Travelzoo members exclusive and irresistible travel, entertainment, and local offers and experiences. Travelzoo members are affluent, active, and open for new experiences. 75% say Travelzoo influences their travel destinations because they trust Travelzoo", said Holger Bartel, Global CEO.

Cash PositionAs of June30, 2021, consolidated cash, cash equivalents and restricted cash were $82.1 million. Cash flow from operations was $12.8 million. There were no significant capital expenditures.

ReserveReported revenues include a reserve of $3.7 million related to commissions to be earned from refundable vouchers sold. The reserve is booked as contra revenue. For Q2 2021, an adjustment to the reserve increased reported revenue by $286,000.

Travelzoo North AmericaNorth America business segment revenue increased 233% year-over-year to $14.0 million. Operating profit for Q2 2021 was $3.5 million, or 25% of revenue, compared to an operating loss of $4.7 million in the prior-year period.

Travelzoo EuropeEurope business segment revenue increased 128% year-over-year to $4.2 million. Operating loss for Q2 2021 was $227,000, compared to an operating loss of $1.7 million in the prior-year period.

Jacks Flight ClubOn January 13, 2020, Travelzoo acquired 60% of Jacks Flight Club, a membership subscription service. Jacks Flight Club revenue decreased 9% year-over-year to $860,000. Operating income for Q2 2021 was $170,000, compared to an operating loss of $248,000 in the prior-year period. After consolidation with Travelzoo, Jacks Flight Club's net income was $98,000, with $59,000 attributable to Travelzoo as a result of recording $275,000 of amortization of intangible assets related to the acquisition.

LicensingIn 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, Travelzoo's existing members in Australia, Japan, New Zealand, and Singapore will continue to be owned by Travelzoo as the licensor. Licensing revenue is booked with a lag of one quarter. Travelzoo did not record any licensing revenue from either subsidiary in Q2 2021.

Members and SubscribersAs of June30, 2021, we had 31.3 million members worldwide. In North America, the unduplicated number of Travelzoo members was 17.7 million as of June30, 2021, up 6% from June30, 2020. In Europe, the unduplicated number of Travelzoo members was 8.5 million as of June30, 2021, down 6% from June30, 2020. Jacks Flight Club had 1.7 million subscribers as of June30, 2021, consistent with 1.7 million subscribers as of June30, 2020.

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 has been classified as discontinued operations since 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 expense was $1.1 million in Q2 2021, compared to an income tax benefit of $1.3 million 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, and 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 AheadWe currently expect for Q3 2021 to report higher revenue and profitability. We see a trend of recovery of our revenue. We have been able to reduce our operating expenses, and we believe we can continue the trend of lower fixed costs in the foreseeable future.

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 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, Top 20, and Jack's Flight Club are registered trademarks of Travelzoo.

TravelzooCondensed Consolidated Statements of Operations(Unaudited)(In thousands, except per share amounts)

Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020Revenues $ 19,079 $ 7,004 $ 33,363 $ 27,331 Cost of revenues 2,522 2,141 5,540 4,844 Gross profit 16,557 4,863 27,823 22,487 Operating expenses: Sales and marketing 7,340 4,288 14,130 17,382 Product development 685 566 1,368 1,994 General and administrative 5,056 6,642 9,616 12,164 Impairment of intangible ? ? ? 2,920 asset and goodwillTotal operating expenses 13,081 11,496 25,114 34,460 Operating income (loss) 3,476 (6,633 ) 2,709 (11,973 )Other income (loss), net 684 (179 ) 518 (185 )Income (loss) fromcontinuing operations before 4,160 (6,812 ) 3,227 (12,158 )income taxesIncome tax expense (benefit) 1,136 (1,309 ) 1,878 (1,826 )Income (loss) from 3,024 (5,503 ) 1,349 (10,332 )continuing operationsIncome (loss) fromdiscontinued operations, 29 (795 ) 14 (3,714 )net of taxNet income (loss) 3,053 (6,298 ) 1,363 (14,046 )Net income (loss)attributable to 39 (108 ) (9 ) (1,247 )non-controlling interestNet income (loss) $ 3,014 $ (6,190 ) $ 1,372 $ (12,799 )attributable to Travelzoo Net income (loss)attributable to $ 2,985 $ (5,395 ) $ 1,358 $ (9,085 )Travelzoo?continuingoperationsNet income (loss)attributable to $ 29 $ (795 ) $ 14 $ (3,714 )Travelzoo?discontinuedoperations Income (Loss) per share?basicContinuing operations $ 0.26 $ (0.48 ) $ 0.12 $ (0.80 )Discontinued operations $ ? $ (0.07 ) $ ? $ (0.33 )Net income (loss) per share $ 0.26 $ (0.55 ) $ 0.12 $ (1.13 )?basic Income (Loss) per share?dilutedContinuing operations $ 0.22 $ (0.48 ) $ 0.10 $ (0.80 )Discontinued operations $ ? $ (0.07 ) $ ? $ (0.33 )Net income (loss) per $ 0.22 $ (0.55 ) $ 0.10 $ (1.13 )share?dilutedShares used in per sharecalculation from continuing 11,488 11,310 11,440 11,375 operations?basicShares used in per sharecalculation from 11,488 11,310 11,440 11,375 discontinuedoperations?basicShares used in per sharecalculation from continuing 13,408 11,310 13,248 11,375 operations?dilutedShares used in per sharecalculation from 13,408 11,310 13,248 11,375 discontinuedoperations?diluted

TravelzooCondensed Consolidated Balance Sheets(Unaudited)(In thousands)

June 30, December 31, 2021 2020Assets Current assets: Cash and cash equivalents $ 80,962 $ 63,061 Accounts receivable, net 9,905 4,519 Prepaid income taxes 1,616 931 Deposits 105 137 Prepaid expenses and other 3,253 1,166 Assets from discontinued operations 84 230 Total current assets 95,925 70,044 Deposits and other 1,552 745 Deferred tax assets 3,647 5,067 Restricted cash 1,164 1,178 Operating lease right-of-use assets 8,559 8,541 Property and equipment, net 1,034 1,347 Intangible assets, net 3,975 4,534 Goodwill 10,944 10,944 Total assets $ 126,800 $ 102,400 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 8,503 $ 6,996 Merchant payables 82,236 57,104 Accrued expenses and other 8,222 8,649 Deferred revenue 2,213 2,688 Operating lease liabilities 3,751 3,587 PPP notes payable (current portion) 3,156 2,849 Income tax payable 98 326 Liabilities from discontinued operations 482 671 Total current liabilities 108,661 82,870 PPP notes payables ? 814 Deferred tax liabilities 38 357 Long-term operating lease liabilities 10,353 10,774 Other long-term liabilities 2,146 1,085 Total liabilities 121,198 95,900 Non-controlling interest 4,600 4,609 Common stock 115 114 Treasury stock (at cost) (1,583 ) ? Additional paid-in capital 4,988 6,239 Retained earnings (accumulated deficit) 969 (403 )Accumulated other comprehensive loss (3,487 ) (4,059 )Total stockholders? equity 1,002 1,891 Total liabilities and stockholders? equity $ 126,800 $ 102,400

TravelzooCondensed Consolidated Statements of Cash Flows(Unaudited)(In thousands)

Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020Cash flows from operating activities:Net income (loss) $ 3,053 $ (6,298 ) $ 1,363 $ (14,046 )Adjustments to reconcile netincome (loss) to net cash provided by (used in)operating activities:Depreciation and 476 667 960 1,218 amortizationStock-based compensation 934 4,031 1,816 4,054 Deferred income tax 599 (1,152 ) 1,140 (1,761 )Impairment of intangible ? ? ? 2,920 assets and goodwillGain on notes payable ? (1,500 ) ? (1,500 )settlementLoss on long-lived assets ? ? ? 437 Loss on equity investment in ? 141 ? 336 WeGoGain on PPP notes payable (429 ) ? (429 ) ? forgivenessNet foreign currency effects (103 ) 225 (255 ) (456 )Provision (reversal) of losson accounts receivable and (417 ) 986 (871 ) 2,427 other reservesChanges in operating assetsand liabilities, net of acquisitions:Accounts receivable (2,552 ) 3,674 (4,781 ) 6,183 Prepaid income taxes (168 ) ? (713 ) 989 Prepaid expenses and other (418 ) 558 (2,775 ) 1,420 Accounts payable (312 ) 1,602 1,415 2,149 Merchant payables 11,973 15,100 25,185 8,160 Accrued expenses and other 321 (2,084 ) (320 ) (1,380 )Income tax payable (102 ) 266 (228 ) (67 )Other liabilities (80 ) 263 332 2,340 Net cash provided by 12,775 16,479 21,839 13,423 operating activitiesCash flows from investing activities:Acquisition of business, net ? ? ? (679 )of cash acquiredOther investment ? (430 ) ? (430 )Purchases of property and (77 ) (72 ) (84 ) (203 )equipmentNet cash used in investing (77 ) (502 ) (84 ) (1,312 )activitiesCash flows from financing activities:Repurchase of common stock ? ? (1,583 ) (1,205 )Payment of promissory notes ? (6,800 ) ? (7,800 )Proceeds from notes payable ? 3,663 ? 3,663 Exercise of stock optionsand taxes paid for net share (3,066 ) ? (3,066 ) ? settlementNet cash used in financing (3,066 ) (3,137 ) (4,649 ) (5,342 )activitiesEffect of exchange rate oncash, cash equivalents and 427 (239 ) 697 (511 )restricted cashNet increase in cash, cashequivalents and restricted 10,059 12,601 17,803 6,258 cashCash, cash equivalents andrestricted cash at beginning 72,129 14,367 64,385 20,710 of periodCash, cash equivalents andrestricted cash at end of $ 82,188 $ 26,968 $ 82,188 $ 26,968 period

TravelzooSegment Information from Continuing Operations(Unaudited)(In thousands)

Three months Travelzoo Travelzoo Jack'sended June 30, North Europe Flight Elimination Consolidated2021 America ClubRevenue fromunaffiliated $ 13,650 $ 4,569 $ 860 $ ? $ 19,079 customersIntersegment 335 (335 ) ? ? ? revenueTotal net 13,985 4,234 860 ? 19,079 revenuesOperating $ 3,533 $ (227 ) $ 170 $ ? $ 3,476 income (loss) Three months Travelzoo Travelzoo Jack'sended June 30, North Europe Flight Elimination Consolidated2020 America ClubRevenue fromunaffiliated $ 4,254 $ 1,805 $ 945 $ ? $ 7,004 customersIntersegment (52 ) 52 ? ? ? revenueTotal net 4,202 1,857 945 ? 7,004 revenuesOperating loss $ (4,702 ) $ (1,683 ) $ (248 ) $ ? $ (6,633 )

Six months Travelzoo Travelzoo Jack'sended North Europe Flight Elimination ConsolidatedJune 30, 2021 America ClubRevenue fromunaffiliated $ 23,478 $ 8,138 $ 1,747 $ ? $ 33,363 customersIntersegment 326 (326 ) ? ? ? revenueTotal net 23,804 7,812 1,747 ? 33,363 revenuesOperating $ 3,572 $ (923 ) $ 60 $ ? $ 2,709 income (loss) Six months Travelzoo Travelzoo Jack'sended North Europe Flight Elimination ConsolidatedJune 30, 2020 America ClubRevenue 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

TravelzooReconciliation of GAAP to Non-GAAP Information(Unaudited)(In thousands, except per share amounts)

Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020GAAP operating expense $ 13,081 $ 11,496 $ 25,114 $ 34,460 Non-GAAP adjustments: Impairment of intangible and ? ? ? 2,920 goodwill (A)Amortization of intangibles (B) 275 396 559 611 Stock option expenses (C) 934 4,031 1,816 4,054 Severance-related expenses (D) 175 67 398 284 Non-GAAP operating expense 11,697 7,002 22,341 26,591 GAAP operating income (loss) 3,476 (6,633 ) 2,709 (11,973 )Non-GAAP adjustments (A through 1,384 4,494 2,773 7,869 D)Non-GAAP operating income (loss) 4,861 (2,139 ) 5,482 (4,104 )

Investor Relations:Almira Puschir@travelzoo.com