Travelzoo(TZOO) - 2021 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Travelzoo's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, for the periods ended June 30, 2021, and 2020 Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2021, shows total assets increased to $126.8 million, driven by cash, while total liabilities rose to $121.2 million due to merchant payables, leading to a decrease in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $80,962 | $63,061 | | Accounts receivable, net | $9,905 | $4,519 | | Total current assets | $95,925 | $70,044 | | Total assets | $126,800 | $102,400 | | Liabilities & Equity | | | | Accounts payable | $8,503 | $6,996 | | Merchant payables | $82,236 | $57,104 | | Total current liabilities | $105,505 | $82,870 | | Total liabilities | $121,198 | $95,900 | | Total stockholders' equity | $1,002 | $1,891 | Condensed Consolidated Statements of Operations For Q2 2021, Travelzoo reported a significant turnaround, with revenues increasing to $19.1 million and achieving a net income of $3.0 million, a substantial improvement from a net loss in the prior-year period Q2 2021 vs Q2 2020 Performance (in thousands, except per share) | Metric | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Revenues | $19,079 | $7,004 | | Gross Profit | $16,557 | $4,863 | | Operating Income (Loss) | $3,476 | $(6,633) | | Net Income (Loss) attributable to Travelzoo | $3,014 | $(6,190) | | Diluted EPS | $0.22 | $(0.55) | Six Months Ended June 30 Performance (in thousands, except per share) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Revenues | $33,363 | $27,331 | | Gross Profit | $27,823 | $22,487 | | Operating Income (Loss) | $2,709 | $(11,973) | | Net Income (Loss) attributable to Travelzoo | $1,372 | $(12,799) | | Diluted EPS | $0.10 | $(1.13) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2021, net cash provided by operating activities significantly increased to $22.0 million, primarily due to higher merchant payables, resulting in a $17.8 million net increase in cash and equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $21,950 | $13,423 | | Net cash used in investing activities | $(84) | $(1,312) | | Net cash used in financing activities | $(4,760) | $(5,342) | | Net increase in cash, cash equivalents and restricted cash | $17,803 | $6,258 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies and financial results, including the exit from APAC business, impairment charges from the Jack's Flight Club acquisition, segment reporting, stock-based compensation, and PPP loan forgiveness - The company exited its loss-making Asia Pacific (APAC) business in March 2020, which is now classified as a discontinued operation. The Japan and Singapore units were sold, and the company entered into licensing agreements for use of its intellectual property in the region[28][29][30] - In January 2020, Travelzoo acquired a 60% stake in Jack's Flight Club. Due to the COVID-19 pandemic's impact, the company recorded a $2.1 million goodwill impairment and an $810,000 intangible asset impairment related to this acquisition in Q1 2020[38][64][78] - The company received $3.6 million in Paycheck Protection Program (PPP) loans in 2020. In Q2 2021, a $535,000 PPP loan was settled, with $429,000 forgiven. The remaining $3.1 million loan was forgiven subsequent to the quarter end on July 1, 2021[132] - In March 2021, the company entered into a one-year license agreement with Azzurro Brands Inc., its largest shareholder, to use a database of 2.2 million subscribers for a quarterly fee of $413,000[133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting revenue recovery, segment-specific growth, and liquidity, noting a negative working capital position offset by sufficient cash on hand - The company's business is showing continued improvement and a trend of revenue recovery from the global pandemic in 2020[172] - As of June 30, 2021, the company had negative working capital of $12.7 million, primarily due to an $82.2 million liability in merchant payables from voucher sales. Management believes cash on hand is sufficient for working capital needs for at least the next twelve months[68][203] Consolidated Revenue by Segment (in thousands) | Segment | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Travelzoo North America | $13,985 | $4,202 | $23,804 | $16,899 | | Travelzoo Europe | $4,234 | $1,857 | $7,812 | $8,804 | | Jack's Flight Club | $860 | $945 | $1,747 | $1,628 | | Total Revenues | $19,079 | $7,004 | $33,363 | $27,331 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies, and consequently, no information is provided regarding market risk disclosures - Disclosure about market risk is not required as Travelzoo qualifies as a smaller reporting company[220] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting identified during the quarter - The company's CEO and CAO concluded that disclosure controls and procedures were effective as of June 30, 2021[221] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal controls[222] PART II—OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 4 of the financial statements, indicating that the company believes the likelihood of any material liability from pending legal claims is remote - The company believes that the likelihood of any material liability from pending legal claims is remote[88] Item 1A. Risk Factors This section incorporates by reference the risk factors from the Annual Report on Form 10-K for December 31, 2020, with no new or updated risk factors presented in this report - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, without providing updates[226] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase equity securities during Q2 2021, with 395,029 shares remaining available under the May 2019 program, following a separate private repurchase in Q1 2021 - No equity securities were repurchased during the three months ended June 30, 2021[227] - As of June 30, 2021, 395,029 shares remained authorized for repurchase under the May 2019 program[228] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CAO certifications and XBRL data files - The exhibits filed with this report include CEO and CAO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[230]