Travelzoo Reports Fourth Quarter 2007 Results

NEW YORK--(Business Wire)--
Travelzoo Inc. (NASDAQ:TZOO):

-- Fourth quarter revenue of $19.1 million, up 8% year-over-year

-- Fourth quarter operating profit of $2.5 million

-- Fourth quarter earnings per share of $0.00, down from $0.26 in
the prior-year period

-- Fourth quarter income tax rate of 98.3%

Travelzoo Inc., a global Internet media company, today announced
financial results for the fourth quarter ended December 31, 2007, with
revenue of $19.1 million, an increase of 8% year-over-year. Net income
was $46,000, with diluted earnings per share (EPS) of $0.00, down from
$0.26 in the prior-year period.

"Travelzoo's latest results were impacted by non-tax deductible
losses from our foreign operations in Asia Pacific and Europe," said
Ralph Bartel, chairman and chief executive officer, Travelzoo. "As
announced frequently in our investor communications over the last
twelve months, our strategy of investing in Asia Pacific and Europe
affects our reported earnings. We believe that going global is an
opportunity to create attractive shareholder value in the future and
we want to seize this opportunity."

North America

North America business segment revenue grew 6% year-over-year to
$17.7 million. North America reported operating income of $6.4
million, or 36.3% of revenue, down from operating income of $8.0
million, or 47.9% of revenue, in the prior-year period.

Asia Pacific

The Asia Pacific business segment reported an operating loss of
$2.1 million, compared to an operating loss of $706,000 in the prior
quarter. 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.

Europe

Europe business segment revenue grew 52% year-over-year to $1.5
million. Europe reported an operating loss of $1.9 million, compared
to an operating loss of $356,000 in the prior-year period. The
increase in operating loss was primarily attributable to increased
spending on subscriber acquisition and increased salary expense and
office expense associated with the start up of operations in Germany
and France. Travelzoo began operations in the U.K. in May 2005, in
Germany in September 2006, and in France in March 2007.

Income Taxes

Travelzoo's effective income tax rate was 98.3%, up from 46.3% in
the prior-year period. The effective tax rate was impacted by
operating losses from our Asia Pacific business segment and Europe
business segment. These operating losses were treated as having no
recognizable tax benefit.

Full Year 2007

Revenue for the year ended December 31, 2007 was $78.9 million, an
increase of 14% from the prior year. Operating profit for the year was
$20.6 million, or 26.1% of revenue, down from $29.8 million, or 42.8%
of revenue, in the prior year. Net income for the year was $9.1
million, compared to $16.8 million in the prior year. Diluted EPS for
the year was $0.57, down from $1.01 in the prior year.

Asset Management

Travelzoo used $129,000 of cash for operating activities. Accounts
receivable increased $561,000 sequentially and increased $2.7 million
over the prior-year period to $10.0 million. Accounts payable
decreased $790,000 sequentially and increased $2.1 million over the
prior-year period to $5.0 million. Travelzoo exited the quarter with
$22.6 million in cash and cash equivalents.

Product Update

Travelzoo's focus in 2008 will be on further developing its Web
sites and expanding the Travelzoo Network(TM), an affiliate network of
Web sites that list travel deals published by Travelzoo. Further,
Travelzoo plans to expand its Shows & Events section and plans to
continue testing the publishing of non-travel deals. Travelzoo plans
to launch the next generation of SuperSearch(TM).

Conference Call

Travelzoo will host a conference call to discuss fourth quarter
results at 5:00 p.m. ET today. A live Web cast can be accessed through
the company'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 12 million travel enthusiasts in the
U.S., Canada, China, France, Germany, Hong Kong, Japan, Taiwan and the
U.K., include the Travelzoo(R) Web site (www.travelzoo.com), the Top
20(R) list, the Newsflash(TM) e-mail alert service, the Travelzoo
Network(TM) and SuperSearch(TM), a travel search engine. Travelzoo
publishes offers from more than 900 advertisers. Travelzoo's deal
experts review each offer to find the best travel deals and confirm
their true value. Travelzoo is headquartered 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.

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

Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
-------- --------- ------- --------
Revenues $ 19,114 $ 17,652 $78,911 $ 69,525
Cost of revenues 738 256 2,097 1,038
-------- --------- ------- --------
Gross profit 18,376 17,396 76,814 68,487
Operating expenses:
Sales and marketing 10,425 7,331 41,440 29,378
General and administrative 5,496 2,394 14,750 9,356
-------- --------- ------- --------
Total operating expenses 15,921 9,725 56,190 38,734
-------- --------- ------- --------
Income from operations 2,455 7,671 20,624 29,753
Other income and expense:
Interest income 205 323 1,309 1,249
Gain (loss) on foreign currency 76 (10) 178 3
-------- --------- ------- --------
Income before income taxes 2,736 7,984 22,111 31,005
Income taxes 2,690 3,699 13,002 14,202
-------- --------- ------- --------
Net income $ 46 $ 4,285 $ 9,109 $ 16,803
======== ========= ======= ========

Basic net income per share $ 0.00 $ 0.28 $ 0.61 $ 1.08
Diluted net income per share 0.00 0.26 0.57 1.01

Shares used in computing basic net
income per share 14,250 15,250 14,847 15,503
Shares used in computing diluted
net income per share 15,484 16,459 16,074 16,712
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Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

December 31, December 31,
2007 2006
------------ ------------
ASSETS
Cash and cash equivalents $ 22,641 $ 33,415
Accounts receivable, net 9,969 7,274
Deposits 272 177
Prepaid expenses and other current assets 1,982 506
Deferred tax assets 1,393 1,980
------------ ------------
Total current assets 36,257 43,352
------------ ------------
Deposits, less current portion 349 142
Property and equipment, net 622 172
Intangible assets, net 58 34
------------ ------------
Total Assets $ 37,286 $ 43,700
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 4,960 2,839
Accrued expenses 4,608 2,149
Deferred revenue 450 750
Deferred rent 37 -
Income tax payable - 1,142
------------ ------------
Total current liabilities 10,055 6,880
------------ ------------
Other non-current liabilities 1,329 3

Common stock 143 153
Additional paid-in capital - 2,076
Accumulated other comprehensive income
(loss) (180) 22
Retained earnings 25,939 34,566
------------ ------------
Total Stockholders' Equity 25,902 36,817
------------ ------------
Total Liabilities and Stockholders'
Equity $ 37,286 $ 43,700
============ ============
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Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
--------- -------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 46 $ 4,285 $ 9,109 $ 16,803
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and amortization 62 28 193 131
Deferred income taxes 584 (932) 584 (929)
Provision for losses on
accounts receivable 4 75 (48) 304
Accrued income on short-term
investments - - - (449)
Changes in operating assets
and liabilities:
Accounts receivable (596) 1,508 (2,614) 1,511
Deposits (204) (3) (300) (95)
Prepaid expenses and other
current assets (894) 73 (1,465) 136
Accounts payable (771) 340 2,110 440
Accrued expenses 1,511 (1,007) 2,404 (1,278)
Deferred revenue (20) 168 (302) 449
Deferred rent 38 - 109 -
Income tax payable - 937 3 285
Other non-current
liabilities 111 - 111 -
--------- -------- --------- ---------
Net cash provided by (used
in) operating activities (129) 5,472 9,894 17,308
--------- -------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (292) (23) (627) (119)
Purchase of short-term
investments - - - (14,663)
Sale of short-term investments - - - 35,000
Purchase of intangible assets (31) (34) (36) (34)
--------- -------- --------- ---------
Net cash provided by (used
in) investing activities (323) (57) (663) 20,184
--------- -------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repurchase of common stock - - (19,823) (28,579)
--------- -------- --------- ---------
Net cash used in financing
activities - - (19,823) (28,579)
--------- -------- --------- ---------
Effect of exchange rate on cash
and cash equivalents (160) 23 (182) 33
--------- -------- --------- ---------
Net increase (decrease) in cash
and cash equivalents (612) 5,438 (10,774) 8,946
Cash and cash equivalents at
beginning of period 23,253 27,977 33,415 24,469
--------- -------- --------- ---------
Cash and cash equivalents at
end of period 22,641 33,415 22,641 33,415
========= ======== ========= =========
Supplemental disclosure of cash
flow information:
Cash paid for income taxes
net of refunds received $ 2,930 $ 3,694 $ 13,334 $ 14,845
--------- -------- --------- ---------
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Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)

Three months ended North Asia
December 31, 2007 America Europe Pacific Elimination Consolidated
-------- -------- -------- ----------- ------------
Revenue from
unaffiliated
customers $ 17,656 $ 1,450 $ 8 $ - $ 19,114
Intersegment
revenue 20 9 - (29) -
-------- -------- -------- ----------- ------------
Total net revenues 17,676 1,459 8 (29) 19,114
-------- -------- -------- ----------- ------------
Operating income
(loss) $ 6,420 $(1,906) $(2,060) $ 1 $ 2,455
-------- -------- -------- ----------- ------------

Three months ended North Asia
December 31, 2006 America Europe Pacific Elimination Consolidated
-------- -------- -------- ----------- ------------
Revenue from
unaffiliated
customers $ 16,695 $ 957 $ - $ - $ 17,652
Intersegment
revenue 56 4 - (60) -
-------- -------- -------- ----------- ------------
Total net revenues 16,751 961 - (60) 17,652
-------- -------- -------- ----------- ------------
Operating income
(loss) $ 8,026 $ (356) $ - $ 1 $ 7,671
-------- -------- -------- ----------- ------------

Year ended North Asia
December 31, 2007 America Europe Pacific Elimination Consolidated
-------- -------- -------- ----------- ------------
Revenue from
unaffiliated
customers $ 73,061 $ 5,842 $ 8 $ - $ 78,911
Intersegment
revenue 171 14 - (185) -
-------- -------- -------- ----------- ------------
Total net revenues 73,232 5,856 8 (185) 78,911
-------- -------- -------- ----------- ------------
Operating income
(loss) $ 28,959 $(5,171) $(3,167) $ 3 $ 20,624
-------- -------- -------- ----------- ------------

Year ended North Asia
December 31, 2006 America Europe Pacific Elimination Consolidated
-------- -------- -------- ----------- ------------
Revenue from
unaffiliated
customers $ 66,303 $ 3,222 $ - $ - $ 69,525
Intersegment
revenue 206 10 - (216) -
-------- -------- -------- ----------- ------------
Total net revenues 66,509 3,232 - (216) 69,525
-------- -------- -------- ----------- ------------
Operating income
(loss) $ 31,337 $(1,586) $ - $ 2 $ 29,753
-------- -------- -------- ----------- ------------
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Travelzoo
Mindy Joyce, 212-521-4218 (Media)
mjoyce@travelzoo.com

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