Travelzoo Reports Third Quarter 2022 Results

NEW YORK, Oct. 26, 2022 /PRNewswire/ -- Travelzoo® (NASDAQ: TZOO):

• Revenue of $15.8 million, up 1% year-over-year
• In constant currencies, revenue was $16.7 million, up 6% year-over-year
• Non-GAAP consolidated operating profit of $1.1 million
• Earnings per share (EPS) of $0.06 attributable to Travelzoo from continuing operations

Travelzoo, a global Internet media company that provides exclusive offers and experiences for members, today announced financial results for the third quarter ended September 30, 2022. Consolidated revenue was $15.8 million, up 1% from $15.7 million year-over-year. In constant currencies, revenue was $16.7 million. 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 $790,000 for Q3 2022. At the consolidated level, including minority interests, the reported net income from continuing operations was $792,000. EPS from continuing operations was $0.06. A comparison with EPS of $0.22 in the prior-year period should consider that Q3 2021 EPS included the effect of $3.3 million other income.

Non-GAAP operating profit was $1.1 million. The calculation of non-GAAP operating profit excludes amortization of intangibles ($440,000), stock option expenses ($325,000) and severance-related expenses ($74,000). GAAP operating profit was $273,000 million. See section "Non-GAAP Financial Measures" below.

"In Q3, our revenue was lower than expected due to the unique travel situation in the summer of 2022. Demand jumped after the pandemic while suppliers were still rebuilding capacity. The demand curve temporarily shifted, while the supply curve remained inelastic in the short-term. This pushed up prices to levels where we did not want to recommend certain overpriced travel services to Travelzoo members", said Holger Bartel, Global CEO.

"While airlines, other travel suppliers, and online travel agencies (OTAs) benefited from overpriced travel services, our business remained flat. But we are seeing a rapid change in Q4: Demand is returning to normal levels. Suppliers continue to build up capacity. We have more and better offers for our members again, and revenues are accelerating."

Cash PositionAs of September 30, 2022, consolidated cash, cash equivalents and restricted cash were $20.5 million. Net cash used in operations was $3.9 million for the three months ended September 30, 2022. Cash was used primarily in connection with a decrease of merchant payables by $9.1 million.

ReserveReported revenues include a reserve of $1.9 million related to commissions to be earned from vouchers sold. The reserve is booked as contra revenue.

Travelzoo North AmericaNorth America business segment revenue increased 9% year-over-year to $10.5 million. Operating profit for Q3 2022 was $812.000, or 8% of revenue, compared to an operating loss of $918,000 in the prior-year period.

Travelzoo EuropeEurope business segment revenue decreased 14% year-over-year to $4.5 million. At constant currencies, Europe business segment revenue increased 2% year-over-year. Operating loss for Q3 2022 was $551,000, compared to an operating profit of $600,000 in the prior-year period.

Jack's Flight ClubOn January 13, 2020, Travelzoo acquired 60% of Jack's Flight Club, a membership subscription service. Jack's Flight Club revenue increased 6% year-over-year to $847,000. Non-GAAP operating profit for Q3 2022 was $228,000, compared to a non-GAAP operating profit of $331,000 in the prior-year period. After consolidation with Travelzoo, Jack's Flight Club's net income was $4,000, with $2,000 attributable to Travelzoo as a result of recording $216,000 of amortization of intangible assets related to the acquisition.

LicensingIn June 2020, Travelzoo entered into a royalty-bearing licensing agreement with a local licensee in Japan for the exclusive use of Travelzoo's brand, business model, and members in Japan. In August of 2020, Travelzoo entered into a royalty-bearing licensing agreement with a local licensee in Australia for the exclusive use of Travelzoo's brand, business models, and members in Australia, New Zealand, and Singapore. Under these arrangements, 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 recorded $8,000 in licensing revenue from the licensee in Australia, New Zealand, and Singapore in Q3 2022. Licensing revenue is expected to increase going forward.

Members and SubscribersAs of September 30, 2022, we had 30.5 million members worldwide. In North America, the unduplicated number of Travelzoo members was 16.4 million as of September 30, 2022, down 5% from September 30, 2021. In Europe, the unduplicated number of Travelzoo members was 9.1 million as of September 30, 2022, up 8% from September 30, 2021. Jack's Flight Club had 1.9 million subscribers as of September 30, 2022, up 10% from September 30, 2021.

Discontinued OperationsAs announced in a press release on March 10, 2020, Travelzoo decided to exit its Asia Pacific business and operate it as a licensing business going forward. Consequently, 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 $317,000 in Q3 2022, compared to an income tax expense of $233,000 in the prior-year period.

Non-GAAP Financial MeasuresManagement calculates non-GAAP operating income when evaluating the financial performance of the business. Travelzoo's calculation of non-GAAP operating income, also called "non-GAAP operating profit" in this press release and today's 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 AheadFor Q4 2022, we currently expect substantially higher revenue and profitability. We see the demand curve in the travel industry returning to a more normal situation. We believe this allows us to negotiate and recommend more and better offers, resulting in higher revenue. However, there could be unexpected fluctuations in the short term. During the pandemic, we have been able to lower our fixed costs. We believe we can keep our fixed costs relatively low in the foreseeable future.

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 its 30 million members with exclusive offers and one-of-a-kind experiences personally reviewed by our deal experts around the globe. We have our finger on the pulse of outstanding travel, entertainment, and lifestyle experiences. We work 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, Top 20, and Jack's Flight Club are registered trademarks of Travelzoo.

Investor Relations:ir@travelzoo.com 

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SOURCE Travelzoo