8-K
TRAVELZOO (TZOO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________________________________________
FORM 8-K
____________________________________________________
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 2021
____________________________________________________
(Exact name of registrant as specified in its charter)
____________________________________________________
| Delaware | 000-50171 | 36-4415727 |
|---|---|---|
| (State or Other<br><br>Jurisdiction of<br><br>Incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification No.) |
| 590 Madison Avenue, 35th Floor<br><br>New York, New York | 10022 | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code (212) 484-4900 | ||
| (Former Name or Former Address, if Changed Since Last Report) |
____________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | TZOO | The NASDAQ Stock Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Item 2.02. Results of Operations and Financial Condition.
On October 29, 2021, Travelzoo (the "Company") reported its third quarter 2021 financial results. A copy of the Company’s press release containing this information is being furnished as Exhibit 99.1 to this report on Form 8-K and is incorporated herein by reference.
The information furnished pursuant to Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. See Exhibit Index
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TRAVELZOO | |||
|---|---|---|---|
| Date: | November 1, 2021 | By: | /s/ Lisa Su |
| Lisa Su<br><br>Chief Accounting Officer |
EXHIBIT INDEX
| Exhibit | Description |
|---|---|
| 99.1 | Press Release, dated October 29, 2021. |
Document
Exhibit 99.1
| Travelzoo<br><br>590 Madison Avenue<br><br>35th Floor<br><br>New York, NY 10022<br><br><br><br>Investor Relations:<br><br>Almira Pusch<br><br>ir@travelzoo.com |
|---|
FOR IMMEDIATE RELEASE
Travelzoo Reports Third Quarter 2021 Results
NEW YORK, October 29, 2021 — Travelzoo® (NASDAQ: TZOO):
•Consolidated revenue of $15.7 million, up 14% year-over-year
•Non-GAAP consolidated operating profit of $1.1 million
•Earnings per share (EPS) of $0.22 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, 2021.
Consolidated revenue was $15.7 million, up 14% from $13.8 million year-over-year and down 18% from 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 $2.8 million for Q3 2021. At the consolidated level, including minority interests, the reported net income from continuing operations was $2.9 million. EPS from continuing operations was $0.22, compared to a loss per share of ($0.10) in the prior-year period. GAAP operating loss was $261,000.
Non-GAAP operating profit was $1.1 million. The calculation of non-GAAP operating profit excludes amortization of intangibles ($0.3 million), stock option expenses ($1.0 million), and severance-related expenses ($0.1 million). See section “Non-GAAP Financial Measures” below.
1/10
“We saw robust growth in our revenue and operating profit from Travelzoo in Europe,” said Holger Bartel, Global CEO. “Unfortunately, revenue from Travelzoo in North America was negatively impacted by press coverage about the COVID-19 Delta variant and Do Not Travel advisories for nearly 100 countries. We believe this to be a short-term effect. We see strong pent-up demand from Travelzoo members to get away as soon as possible.”
Cash Position
As of September 30, 2021, consolidated cash, cash equivalents and restricted cash were $66.4 million. Net cash used in operations was $12.7 million. Cash was used primarily in connection with the switch to a more efficient merchant payment processing solution. There were no significant capital expenditures.
Reserve
Reported revenues include a reserve of $3.1 million related to commissions to be earned from refundable vouchers sold. The reserve is booked as contra revenue.
Travelzoo North America
North America business segment revenue increased 6% year-over-year to $9.7 million. Operating loss for Q3 2021 was $918,000, compared to an operating loss of $696,000 in the prior-year period.
Travelzoo Europe
Europe business segment revenue increased 43% year-over-year to $5.2 million. Operating profit for Q3 2021 was $600,000, or 11% of revenue, compared to an operating loss of $757,000 in the prior-year period.
Jack’s Flight Club
On January 13, 2020, Travelzoo acquired 60% of Jack’s Flight Club, a membership subscription service. Jack’s Flight Club revenue decreased 19% year-over-year to $796,000. Operating income for Q3 2021 was $57,000, compared to an operating income of $250,000 in the prior-year period. After consolidation with Travelzoo, Jack’s Flight Club's net income was $20,000 with $12,000 attributable to Travelzoo as a result of recording $274,000 of amortization of intangible assets related to the acquisition.
2/10
Licensing
In June of 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 $2,000 in licensing revenue from the licensee in Australia, New Zealand and Singapore in Q3 2021. Licensing revenue is expected to increase as the licensees develop their business and effects of the pandemic subside.
Members and Subscribers
As of September 30, 2021, we had 30.7 million members worldwide. In North America, the unduplicated number of Travelzoo members was 17.2 million as of September 30, 2021, up 5% from September 30, 2020. In Europe, the unduplicated number of Travelzoo members was 8.4 million as of September 30, 2021, down 5% from September 30, 2020. Jack’s Flight Club had 1.7 million subscribers as of September 30, 2021, consistent with 1.7 million subscribers as of September 30, 2020.
Discontinued Operations
As 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 Taxes
Income tax expense was $233,000 in Q3 2021, compared to an income tax benefit of $244,000 in the prior-year period.
3/10
Non-GAAP Financial Measures
Management 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 Ahead
We currently expect to achieve profitability in Q4 2021. We continue to see a trend of recovery of our revenue. However, there could be unexpected fluctuations in the short-term. 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 Call
Travelzoo 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.
4/10
About Travelzoo
Travelzoo® provides its 30 million members 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.
5/10
Travelzoo
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| Revenues | $ | 15,688 | $ | 13,787 | $ | 49,051 | $ | 41,118 |
| Cost of revenues | 2,992 | 2,924 | 8,532 | 7,768 | ||||
| Gross profit | 12,696 | 10,863 | 40,519 | 33,350 | ||||
| Operating expenses: | ||||||||
| Sales and marketing | 7,709 | 6,929 | 21,839 | 24,311 | ||||
| Product development | 684 | 592 | 2,052 | 2,586 | ||||
| General and administrative | 4,564 | 4,545 | 14,180 | 16,709 | ||||
| Impairment of intangible asset and goodwill | — | — | — | 2,920 | ||||
| Total operating expenses | 12,957 | 12,066 | 38,071 | 46,526 | ||||
| Operating income (loss) | (261) | (1,203) | 2,448 | (13,176) | ||||
| Other income (loss), net | 3,344 | (37) | 3,862 | (222) | ||||
| Income (loss) from continuing operations before income taxes | 3,083 | (1,240) | 6,310 | (13,398) | ||||
| Income tax expense (benefit) | 233 | (244) | 2,111 | (2,070) | ||||
| Income (loss) from continuing operations | 2,850 | (996) | 4,199 | (11,328) | ||||
| Income (loss) from discontinued operations, net of tax | (19) | (230) | (5) | (3,944) | ||||
| Net income (loss) | 2,831 | (1,226) | 4,194 | (15,272) | ||||
| Net income (loss) attributable to non-controlling interest | 8 | 125 | (1) | (1,122) | ||||
| Net income (loss) attributable to Travelzoo | $ | 2,823 | $ | (1,351) | $ | 4,195 | $ | (14,150) |
| Net income (loss) attributable to Travelzoo—continuing operations | $ | 2,842 | $ | (1,121) | $ | 4,200 | $ | (10,206) |
| Net income (loss) attributable to Travelzoo—discontinued operations | $ | (19) | $ | (230) | $ | (5) | $ | (3,944) |
| Income (Loss) per share—basic | ||||||||
| Continuing operations | $ | 0.24 | $ | (0.10) | $ | 0.36 | $ | (0.90) |
| Discontinued operations | $ | — | $ | (0.02) | $ | — | $ | (0.35) |
| Net income (loss) per share —basic | $ | 0.24 | $ | (0.12) | $ | 0.36 | $ | (1.25) |
| Income (Loss) per share—diluted | ||||||||
| Continuing operations | $ | 0.22 | $ | (0.10) | $ | 0.32 | $ | (0.90) |
| Discontinued operations | $ | — | $ | (0.02) | $ | — | $ | (0.35) |
| Net income (loss) per share—diluted | $ | 0.22 | $ | (0.12) | $ | 0.32 | $ | (1.25) |
| Shares used in per share calculation from continuing operations—basic | 11,648 | 11,310 | 11,510 | 11,353 | ||||
| Shares used in per share calculation from discontinued operations—basic | 11,648 | 11,310 | 11,510 | 11,353 | ||||
| Shares used in per share calculation from continuing operations—diluted | 12,904 | 11,310 | 13,132 | 11,353 | ||||
| Shares used in per share calculation from discontinued operations—diluted | 11,648 | 11,310 | 11,510 | 11,353 |
6/10
Travelzoo
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
| September 30,<br>2021 | December 31,<br>2020 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 65,204 | $ | 63,061 |
| Accounts receivable, net | 9,084 | 4,519 | ||
| Prepaid income taxes | 2,882 | 931 | ||
| Deposits | 104 | 137 | ||
| Prepaid expenses and other | 3,080 | 1,166 | ||
| Assets from discontinued operations | 63 | 230 | ||
| Total current assets | 80,417 | 70,044 | ||
| Deposits and other | 8,219 | 745 | ||
| Deferred tax assets | 3,637 | 5,067 | ||
| Restricted cash | 1,154 | 1,178 | ||
| Operating lease right-of-use assets | 8,005 | 8,541 | ||
| Property and equipment, net | 794 | 1,347 | ||
| Intangible assets, net | 3,700 | 4,534 | ||
| Goodwill | 10,944 | 10,944 | ||
| Total assets | $ | 116,870 | $ | 102,400 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 11,875 | $ | 6,996 |
| Merchant payables | 73,183 | 57,104 | ||
| Accrued expenses and other | 7,546 | 8,649 | ||
| Deferred revenue | 1,805 | 2,688 | ||
| Operating lease liabilities | 3,482 | 3,587 | ||
| PPP notes payable (current portion) | — | 2,849 | ||
| Income tax payable | 61 | 326 | ||
| Liabilities from discontinued operations | 469 | 671 | ||
| Total current liabilities | 98,421 | 82,870 | ||
| PPP notes payables | — | 814 | ||
| Deferred tax liabilities | — | 357 | ||
| Long-term operating lease liabilities | 9,721 | 10,774 | ||
| Other long-term liabilities | 2,249 | 1,085 | ||
| Total liabilities | 110,391 | 95,900 | ||
| Non-controlling interest | 4,608 | 4,609 | ||
| Common stock | 118 | 114 | ||
| Treasury stock (at cost) | (1,583) | — | ||
| Additional paid-in capital | 3,432 | 6,239 | ||
| Retained earnings (accumulated deficit) | 3,792 | (403) | ||
| Accumulated other comprehensive loss | (3,888) | (4,059) | ||
| Total stockholders’ equity | 1,871 | 1,891 | ||
| Total liabilities and stockholders’ equity | $ | 116,870 | $ | 102,400 |
7/10
Travelzoo
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 2,831 | $ | (1,226) | $ | 4,194 | $ | (15,272) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 448 | 588 | 1,408 | 1,806 | ||||
| Stock-based compensation | 971 | 1,189 | 2,788 | 5,243 | ||||
| Deferred income tax | (68) | 14 | 1,073 | (1,747) | ||||
| Impairment of intangible assets and goodwill | — | — | — | 2,920 | ||||
| Gain on notes payable settlement | — | — | — | (1,500) | ||||
| Loss on long-lived assets | — | — | — | 437 | ||||
| Loss on equity investment in WeGo | — | 138 | — | 474 | ||||
| Gain on PPP notes payable forgiveness | (3,159) | — | (3,588) | — | ||||
| Net foreign currency effects | (45) | (86) | (300) | (542) | ||||
| Provision (reversal) of loss on accounts receivable and other reserves | (854) | 1,496 | (1,725) | 3,923 | ||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | 933 | 63 | (3,848) | 6,246 | ||||
| Prepaid income taxes | (1,294) | (304) | (2,007) | 685 | ||||
| Prepaid expenses and other | (6,698) | 206 | (9,473) | 1,626 | ||||
| Accounts payable | 3,610 | 10,560 | 5,025 | 12,709 | ||||
| Merchant payables | (8,699) | 12,372 | 16,486 | 20,532 | ||||
| Accrued expenses and other | (132) | (1) | (452) | (1,381) | ||||
| Income tax payable | (35) | (412) | (263) | (479) | ||||
| Other liabilities | (476) | (436) | (34) | 1,904 | ||||
| Net cash provided by (used in) operating activities | (12,667) | 24,161 | 9,283 | 37,584 | ||||
| Cash flows from investing activities: | ||||||||
| Acquisition of business, net of cash acquired | — | — | — | (679) | ||||
| Other investment | — | — | — | (430) | ||||
| Purchases of property and equipment | 60 | (49) | (24) | (252) | ||||
| Net cash provided by (used in) investing activities | 60 | (49) | (24) | (1,361) | ||||
| Cash flows from financing activities: | ||||||||
| Repurchase of common stock | — | — | (1,583) | (1,205) | ||||
| Payment of promissory notes | — | — | (110) | (7,800) | ||||
| Proceeds from notes payable | — | — | — | 3,663 | ||||
| Exercise of stock options and taxes paid for net share settlement | (2,357) | — | (5,424) | — | ||||
| Net cash used in financing activities | (2,357) | — | (7,117) | (5,342) | ||||
| Effect of exchange rate on cash, cash equivalents and restricted cash | (823) | 904 | (126) | 393 | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (15,787) | 25,016 | 2,016 | 31,274 | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 82,188 | 26,968 | 64,385 | 20,710 | ||||
| Cash, cash equivalents and restricted cash at end of period | $ | 66,401 | $ | 51,984 | $ | 66,401 | $ | 51,984 |
8/10
Travelzoo
Segment Information from Continuing Operations
(Unaudited)
(In thousands)
| Three months ended September 30, 2021 | Travelzoo North<br>America | Travelzoo Europe | Jack's Flight Club | Elimination | Consolidated | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue from unaffiliated customers | $ | 9,527 | $ | 5,365 | $ | 796 | $ | — | $ | 15,688 | ||||||||||||
| Intersegment revenue | 136 | (136) | — | — | — | |||||||||||||||||
| Total net revenues | 9,663 | 5,229 | 796 | — | 15,688 | |||||||||||||||||
| Operating income (loss) | $ | (918) | $ | 600 | $ | 57 | $ | — | $ | (261) | ||||||||||||
| Three months ended September 30, 2020 | Travelzoo North<br>America | Travelzoo Europe | Jack's Flight Club | Elimination | Consolidated | |||||||||||||||||
| Revenue from unaffiliated customers | $ | 9,002 | $ | 3,798 | $ | 987 | $ | — | $ | 13,787 | ||||||||||||
| Intersegment revenue | 141 | (141) | — | — | — | |||||||||||||||||
| Total net revenues | 9,143 | 3,657 | 987 | — | 13,787 | |||||||||||||||||
| Operating loss | $ | (696) | $ | (757) | $ | 250 | $ | — | $ | (1,203) | Nine months ended September 30, 2021 | Travelzoo North<br>America | Travelzoo Europe | Jack's Flight Club | Elimination | Consolidated | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| Revenue from unaffiliated customers | $ | 33,005 | $ | 13,503 | $ | 2,543 | $ | — | $ | 49,051 | ||||||||||||
| Intersegment revenue | 462 | (462) | — | — | — | |||||||||||||||||
| Total net revenues | 33,467 | 13,041 | 2,543 | — | 49,051 | |||||||||||||||||
| Operating income (loss) | $ | 2,654 | $ | (323) | $ | 117 | $ | — | $ | 2,448 | ||||||||||||
| Nine months ended September 30, 2020 | Travelzoo North<br>America | Travelzoo Europe | Jack's Flight Club | Elimination | Consolidated | |||||||||||||||||
| Revenue from unaffiliated customers | $ | 25,805 | $ | 12,706 | $ | 2,615 | $ | (8) | $ | 41,118 | ||||||||||||
| Intersegment revenue | 237 | (245) | — | 8 | — | |||||||||||||||||
| Total net revenues | 26,042 | 12,461 | 2,615 | — | 41,118 | |||||||||||||||||
| Operating loss | $ | (6,374) | $ | (3,781) | $ | (3,013) | $ | (8) | $ | (13,176) |
9/10
Travelzoo
Reconciliation of GAAP to Non-GAAP Information
(Unaudited)
(In thousands, except per share amounts)
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| GAAP operating expense | $ | 12,957 | $ | 12,066 | $ | 38,071 | $ | 46,526 |
| Non-GAAP adjustments: | ||||||||
| Impairment of intangible and goodwill (A) | — | — | — | 2,920 | ||||
| Amortization of intangibles (B) | 274 | 333 | 833 | 944 | ||||
| Stock option expenses (C) | 971 | 1,189 | 2,788 | 5,243 | ||||
| Severance-related expenses (D) | 95 | 855 | 493 | 1,139 | ||||
| Non-GAAP operating expense | 11,617 | 9,689 | 33,957 | 36,280 | ||||
| GAAP operating income (loss) | (261) | (1,203) | 2,448 | (13,176) | ||||
| Non-GAAP adjustments (A through D) | 1,340 | 2,377 | 4,114 | 10,246 | ||||
| Non-GAAP operating income (loss) | 1,079 | 1,174 | 6,562 | (2,930) |
10/10