Travelzoo(US:TZOO)2021-05-07 20:42PART I—FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q1 2021 financial statements show decreased revenues and a net loss, with improved operating cash flow and increased total assets Condensed Consolidated Balance Sheets Total assets increased to $114.8 million as of March 31, 2021, driven by cash and merchant payables, leading to a stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $70,862 | $63,061 | | Total current assets | $83,097 | $70,044 | | Total assets | $114,825 | $102,400 | | Liabilities & Equity | | | | Merchant payable | $70,094 | $57,104 | | Total current liabilities | $100,123 | $82,870 | | Total liabilities | $113,147 | $95,900 | | Total stockholders' equity (deficit) | $(2,883) | $1,891 | Condensed Consolidated Statements of Operations Q1 2021 revenues decreased to $14.3 million, but operating loss significantly narrowed to $0.8 million due to the absence of prior-year impairment charges Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Revenues | $14,284 | $20,327 | | Gross Profit | $11,266 | $17,624 | | Total operating expenses | $12,033 | $22,964 | | Impairment of intangible assets and goodwill | $0 | $2,920 | | Operating loss | $(767) | $(5,340) | | Net loss attributable to Travelzoo | $(1,642) | $(6,609) | | Loss per share—basic & diluted | $(0.14) | $(0.58) | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $9.1 million in Q1 2021, primarily due to increased merchant payables Summary of Cash Flows (in thousands) | Cash Flow Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $9,064 | $(3,056) | | Net cash used in investing activities | $(7) | $(810) | | Net cash used in financing activities | $(1,583) | $(2,205) | | Net increase (decrease) in cash | $7,744 | $(6,343) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, the Jack's Flight Club acquisition, Asia Pacific business discontinuation, PPP loans, and related party transactions - In March 2020, Travelzoo exited its loss-making Asia Pacific (APAC) business, classified as discontinued operations, with Japan and Singapore units subsequently sold under licensing agreements272829 - In January 2020, Travelzoo acquired a 60% stake in Jack's Flight Club for $12.0 million, establishing a new reporting segment3772 - Due to COVID-19, the company recorded a goodwill impairment of $2.1 million and an intangible asset impairment of $810,000 related to the Jack's Flight Club acquisition in Q1 20206377 - The company received $3.7 million in Paycheck Protection Program (PPP) loans in April and May 2020, with forgiveness applications pending as of March 31, 2021130 - In March 2021, a license agreement with Azzurro Brands Inc. was established for a $413,000 quarterly fee to access a 2.2 million subscriber database131 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the COVID-19 pandemic's impact, leading to a 30% revenue decline, cost-cutting, narrowed operating loss, and sufficient liquidity despite negative working capital - The company's revenue model, based on advertising fees, was significantly impacted by the pandemic, though sales of fully refundable Getaways hotel vouchers show a slight reversal141142149 - Significant cost-cutting measures were implemented in response to the pandemic, including ceasing Asia Pacific operations, employee furloughs, and renegotiating vendor contracts158 - As of March 31, 2021, the company held $70.9 million in cash, deemed sufficient for the next twelve months despite $17.0 million negative working capital from high merchant payables187188 Results of Operations Q1 2021 revenues decreased 30% to $14.3 million across segments, while operating expenses were nearly halved, significantly narrowing the operating loss Consolidated Revenue by Segment (in thousands) | Segment | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Travelzoo North America | $9,819 | $12,697 | | Travelzoo Europe | $3,578 | $6,947 | | Jack's Flight Club | $887 | $683 | | Total revenues | $14,284 | $20,327 | - North America revenue decreased by $2.9 million, primarily from lower Top 20/Newsflash and hotel commission revenues, partially offset by a $3.4 million increase in Getaways voucher sales169 - Europe revenue decreased by $3.4 million, driven by declines in travel advertising, partially offset by a $1.9 million increase in Getaways voucher sales170 - Sales and marketing expenses nearly halved to $6.8 million from $13.1 million, primarily due to $1.7 million lower headcount costs and $1.5 million cut in member acquisition174175 - General and administrative expenses decreased to $4.6 million from $5.5 million, mainly due to a $1.3 million reduction in bad debt expense, partially offset by an $845,000 increase in stock-based compensation177178 Liquidity and Capital Resources The company held $70.9 million in cash as of March 31, 2021, with a $7.8 million increase from operations, despite $17.0 million negative working capital Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $9,064 | $(3,056) | | Net cash used in investing activities | $(7) | $(810) | | Net cash used in financing activities | $(1,583) | $(2,205) | | Net increase (decrease) in cash | $7,744 | $(6,343) | - The company has negative working capital of $17.0 million as of March 31, 2021, primarily due to a large increase in merchant payables from voucher sales188 - Cash used in financing activities of $1.6 million in Q1 2021 was for the repurchase of common stock194 Quantitative and Qualitative Disclosures About Market Risk Disclosure about market risk is not required as the company qualifies as a smaller reporting company - Disclosure about market risk is not required as Travelzoo qualifies as a smaller reporting company207 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2021208 - No material changes to internal control over financial reporting were identified during the quarter ended March 31, 2021209 PART II—OTHER INFORMATION Legal Proceedings The company is subject to various legal proceedings, with management assessing the likelihood of material liability as remote, as detailed in Note 4 - The company incorporates by reference information on legal proceedings from 'Note 4—Commitments and Contingencies'212 Risk Factors This section incorporates by reference the risk factors detailed in the company's Annual Report on Form 10-K for fiscal year 2020 - The company refers to the risk factors detailed in its Form 10-K for the year ended December 31, 2020213 Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2021, the company repurchased 100,000 shares from its CEO for $1.6 million, separate from the existing stock repurchase program with 395,029 shares remaining - In March 2021, the company repurchased 100,000 shares from CEO Holger Bartel at an average price of $15.83 per share214215 - As of March 31, 2021, 395,029 shares remained available for repurchase under the May 2019 stock repurchase program215 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications