Travelzoo Reports First Quarter 2009 Results

Travelzoo Inc. (NASDAQ:TZOO):

• Revenue of $23.4 million, up 12% year-over-year
• Operating profit of $2.8 million
• Earnings per share of $0.02, up from loss per share of $(0.07) in the prior-year period
• Income tax rate of 87%

Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March 31, 2009, with revenue of $23.4 million, an increase of 12% year-over-year. Operating profit was $2.8 million. Net income was $338,000, with diluted earnings per share (EPS) of $0.02, up from diluted loss per share of $(0.07) in the prior-year period.

"Travelzoo reports record revenue. The number of subscribers to our publications grew during the first quarter by 866,000, or 6%, to 15.5 million. This is the fastest quarter-over-quarter growth rate in subscribers that we have seen since 2005,” said Holger Bartel, CEO of Travelzoo. "Our mission remains to provide our subscribers with the highest quality information on outstanding deals in travel and entertainment. Travelzoo’s unique global team of editors and producers researches and tests thousands of deals every day, allowing us to make the strictest selections in the industry to keep our users abreast of truly outstanding deals.”

North America

North America business segment revenue grew 6% year-over-year and grew 16% quarter-over-quarter to $20.0 million. Operating profit was $5.8 million, or 29.0% of revenue, down from an operating profit of $6.3 million, or 33.1% of revenue, in the prior-year period.

Europe

Europe business segment revenue grew 45% year-over-year to $3.0 million. In local currency terms, revenue grew 100% year-over-year and 35% quarter-over-quarter. Operating loss was $1.3 million, compared to an operating loss of $2.2 million in the prior-year period. Travelzoo began operations in the U.K. in May 2005, in Germany in September 2006, and in France in March 2007. In May 2008, Travelzoo began publishing its Web site and its weekly Top 20^® list in Spain, after having operated a sales office in Barcelona since November 2006.

Asia Pacific

Asia Pacific business segment revenue was $388,000, up from $269,000 in the prior quarter and up from $20,000 in the prior-year period. Operating loss was $1.7 million, compared to an operating loss of $1.9 million in the prior quarter and an operating loss of $2.7 million in the prior-year period. Travelzoo began operations in Hong Kong in April 2007, in Japan in September 2007, in China in October 2007, and in Australia and Taiwan in December 2007.

Subscribers

Travelzoo had a total unduplicated number of newsletter subscribers of 15.5 million as of March 31, 2009, up 2.2 million, or 16%, from March 31, 2008, and up 866,000, or 6%, from December 31, 2008. In North America, total unduplicated number of subscribers was 11,744,000 as of March 31, 2009, up 722,000, or 7%, from March 31, 2008 and up 461,000, or 4%, from December 31, 2008. In Europe, total unduplicated number of subscribers was 2,478,000 as of March 31, 2009, up 779,000, or 46%, from March 31, 2008 and up 255,000, or 11%, from December 31, 2008. In Asia Pacific, total unduplicated number of subscribers was 1,258,000 as of March 31, 2009, up 676,000, or 116%, from March 31, 2008 and up 150,000, or 14%, from December 31, 2008.

Income Taxes

Income tax expense was $2.3 million, compared to $2.6 million in the prior-year period. The effective income tax rate was 87%, down from 164% in the prior-year period. Operating losses from the Asia Pacific business segment and the Europe business segment were treated as having no recognizable tax benefit.

Asset Management

Travelzoo generated $2.1 million of cash from operating activities. Accounts receivable increased $658,000 quarter-over-quarter and increased $1.4 million over the prior-year period to $12.2 million. Accounts payable decreased $444,000 quarter-over-quarter and decreased $1.1 million over the prior-year period to $6.2 million. Capital expenditures were $884,000, up from $842,000 in the prior year period. During the quarter, Travelzoo purchased the fly.com domain name for $1.8 million. Travelzoo exited the first quarter with $15.6 million in cash and cash equivalents.

Conference Call

Travelzoo will host a conference call to discuss first quarter results at 11:00 a.m. ET today. A live Webcast can be accessed through Travelzoo's investor relations Web site at www.travelzoo.com/ir.

About Travelzoo

Travelzoo is a global Internet media company. Travelzoo's media properties, which reach more than 15 million travel enthusiasts in the U.S., Australia, Canada, China, France, Germany, Hong Kong, Japan, Spain, Taiwan and the U.K., include the Travelzoo^® Web site (www.travelzoo.com), the Top 20^® list, the Newsflash™ e-mail alert service, the Travelzoo Network™, the SuperSearch™ search tool, and the Fly.com™ search engine. Travelzoo publishes offers from more than 1,000 advertisers. Travelzoo's deal experts review offers to find the best travel deals and confirm their true value. Travelzoo’s global headquarters is in New York City.

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.