Travelzoo Reports Fourth Quarter, Year-End 2004 Financial Results

Travelzoo Reports Fourth Quarter, Year-End 2004 Financial Results

    Publishing Writers/Advertising Writers/Business Editors/High-Tech
    Writers/Travel Writers

    NEW YORK--(BUSINESS WIRE)--Jan. 24, 2005--Travelzoo Inc. (NASDAQ: TZOO), the Internet's largest publisher of outstanding travel offers available directly from hundreds of travel companies, today reported record revenues and record pre-tax profit for the fourth quarter and year ended December 31, 2004. Earnings per share for the fourth quarter ended December 31, 2004 were $0.11 per basic share and $0.09 per diluted share.

    Fourth Quarter 2004 Financial Highlights:

--	Revenues increased by 102% from same period last year
--	Net income increased by 281% from same period last year
--	Pre-tax profit margin of 36.5%

    Travelzoo Inc. reported revenues of $10.5 million for the fourth quarter ended December 31, 2004, an increase of 102% over revenues of $5.2 million for the same period in 2003, and a quarterly sequential increase of 11% over revenues of approximately $9.5 million for the quarter ended September 30, 2004. All revenues were generated from the sale of online advertising.
    Income before income taxes for the fourth quarter ended December 31, 2004 was approximately $3.8 million or 36% of revenues, up from approximately $1.0 million, or 20% of revenues, in the same period in 2003.
    The company reported net income of approximately $1.7 million for the fourth quarter of 2004 compared to net income of $453,000 for the same period in 2003.
    Reported net income in the fourth quarter of 2004 included a charge of approximately $977,000 related to a program under which the company makes cash payments to persons who establish that they were former stockholders of Travelzoo.com Corporation, and who failed to submit requests for shares in Travelzoo Inc. within the required time period. These expenses were included in general and administrative expense and were treated as having no recognizable tax benefit. This resulted in an increase to the effective income tax rate for the company. The effective income tax rate for the fourth quarter ended December 31, 2004 was 55%. The company expects expenses related to the program to decrease in future periods.
    Revenues for the year ended December 31, 2004 were $33.7 million compared to $18.0 million for 2003, an 87% increase.
    Net income for 2004 was $6.0 million, a 194% increase over net income of $2.1 million for 2003. Diluted net income per share was $0.33 in 2004 compared to $0.10 in 2003.
    Income before income taxes for 2004 was approximately $11.2 million, or 33% of revenues, compared to approximately $3.8 million, or 21% of revenues, for 2003.

    About Travelzoo

    Travelzoo Inc. (NASDAQ: TZOO) is the Internet's largest publisher of outstanding travel offers available directly from hundreds of travel companies. Travelzoo's media properties include the Travelzoo(R) Web site (www.travelzoo.com), the Top 20(R) e-mail newsletter, the Newsflash(TM) e-mail alert service and SuperSearch(TM), a pay-per-click search engine. With more than 8 million subscribers, Travelzoo lists offers from more than 300 advertisers, including American Airlines, Carnival Cruise Lines, Fairmont Hotels & Resorts, Hertz, JetBlue Airways, Kimpton Hotels, Liberty Travel, The Mark Travel Corporation, Marriott, Orbitz, Royal Caribbean Cruises, Singapore Airlines, Spirit Airlines, The Venetian, Travelocity, United Airlines and Virgin Vacations.

    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 Inc. All other company and product names mentioned are trademarks of their respective owners.

Travelzoo Inc. Condensed Consolidated Statements of Operations (unaudited, in thousands, except per share amounts)

Three Months Ended Year Ended December 31, December 31, 2004 2003 2004 2003 ---- ---- ---- ---- Revenues $10,509 $5,201 $33,679 $17,991

Cost of revenues 166 141 695 399 --------- --------- --------- --------- Gross profit 10,343 5,060 32,984 17,592 Operating expenses: Sales and marketing 4,268 2,821 15,731 9,564 General and administrative 2,348 1,214 6,220 4,289 --------- --------- --------- --------- Total operating expenses 6,616 4,035 21,951 13,853 --------- --------- --------- --------- Income from operations 3,727 1,025 11,033 3,739 Interest income 106 5 127 13 --------- --------- --------- --------- Income before income taxes 3,833 1,030 11,160 3,752 --------- --------- --------- --------- Income taxes 2,104 577 5,122 1,702 --------- --------- --------- --------- Net income $1,729 $453 $6,037 $2,050 ========= ========= ========= =========

Basic net income per share $0.11 $0.02 $0.36 $0.11 Diluted net income per share 0.09 0.02 0.33 0.10

Shares used in computing basic net income per share 16,222 19,425 16,879 19,425 Shares used in computing diluted net income per share 18,252 20,584 18,475 20,527

Travelzoo Inc. Condensed Consolidated Balance Sheets (unaudited, in thousands)

December 31, December 31, 2004 2003 ---- ---- Cash $26,435 $3,522 Short term investments 10,032 - Accounts receivable, net 5,327 2,370 Deposits 163 97 Other current assets 674 132 Deferred income taxes 391 225 ------------- ------------- Total current assets 43,022 6,346 ------------- ------------- Deposits - 43 Deferred income taxes 43 27 Property and equipment, net 108 164 Intangible assets, net 84 147 ------------- ------------- Total assets $43,257 $6,726 ============= ============= Accounts payable 440 224 Accrued expenses 2,464 1,328 Deferred revenue 91 22 Income tax payable - 1,311 ------------- ------------- Total liabilities 2,995 2,885 ------------- ------------- Common stock 162 194 Additional paid-in capital 30,300 (116) Retained earnings 9,800 3,763 ------------- ------------- Total stockholders' equity 40,262 3,841 ------------- ------------- Total liabilities and Stockholders' equity $43,257 $6,726 ============= =============

Travelzoo Inc. Condensed Consolidated Statements of Cash Flows (unaudited, in thousands)

Year Ended December 31, 2004 2003 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $6,037 $2,050 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 161 163 Deferred income taxes (181) (139) Provision for losses on accounts receivable 121 16 Loss on disposal of property and equipment - 1 Tax benefit of stock option exercises 1,932 - Accrued income on short-term investments (30) - Changes in operating assets and liabilities: Accounts receivable (3,078) (1,074) Deposits (23) (52) Prepaid expenses and other current assets (543) (17) Accounts payable 216 (219) Accrued expenses 1,136 781 Deferred revenue 69 3 Income tax payable (1,312) 871 -------- -------- Net cash provided by operating activities 4,505 2,384 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (40) (120) Purchases of short-term investments (10,002) - Purchases of intangible assets (2) - -------- -------- Net cash used in investing activities (10,044) (120) -------- --------

CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 28,047 - Proceeds from stock option exercises 371 Recovery of profit from purchase and sale of stock by employees 34 - -------- -------- Net cash provided by financing activities 28,452 - -------- -------- Net increase in cash and cash equivalents 22,913 2,264 Cash and cash equivalents at beginning of period 3,522 1,258 -------- -------- Cash and cash equivalents at end of period $26,435 $3,522 -------- -------- Supplemental disclosure of cash flow information: Cash paid for income taxes $4,683 $970

--30--SM/ny*

CONTACT: Travelzoo Inc., New York Media: Christie Ly, 212-521-4218 cly@travelzoo-inc.com

KEYWORD: NEW YORK INDUSTRY KEYWORD: PUBLISHING TRANSPORTATION TRAVEL INTERNET E-COMMERCE EARNINGS SOURCE: Travelzoo Inc.

Copyright Business Wire 2005