Jefferies 2013 Global Technology, Media and Telecom Conference

Transcription

1 Jefferies 2013 Global Technology, Media and Telecom Conference May 9, 2013

2 Important Notice Please read this management presentation together with the Company s press release issued earlier announcing the Company s first quarter 2013 financial results and in conjunction with the Company s recent Annual Report and Quarterly Results as filed with the Securities and Exchange Commission (SEC). 1

3 Certain statements contained in this presentation that are not historical facts may be forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. 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 presentation that are not historical facts. When used in this presentation, 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 Inc. undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this presentation. 2

4 Part 1: Travelzoo Business Part 2: Financial Performance Part 3: Growth Strategy Overview

5 Our vision for Travelzoo To inspire millions of people every day to jump off the sofa and explore the world. by consuming unused capacity 4

6 That vision translated into our mission To be the world s most trusted publisher of quality travel, entertainment and local deals. 5

7 Since 1998, we have established an audience of 26 million subscribers and a leadership position within travel and leisure deals publishing. Travelzoo is a global brand Demographics of Travelzoo audience* (U.S. example) 14.5 million subscribers Average household income $85,771 p.a.; 38% with incomes over $100,000 Frequent leisure travelers: 73% took over 3 leisure trips last year $98.6 billion in annual leisure trip purchases Subscribers Travelzoo Office 86% have passports 35% of all traffic is mobile * Travelzoo Asia Pacific Limited operates as a licensee of Travelzoo Inc. in Australia, China, Hong Kong, Japan and Taiwan Source: Subscriber counts, internal reporting, website metrics, Google Analytics 2012 average 6

8 Travelzoo is considered the gold standard in deals publishing thanks to our dedication to quality and a philosophy that if we would not buy it, we will not publish it. The Travelzoo Difference Travelzoo Deal Experts located across North America, Europe and Asia bring our subscribers the most competitive deals in the marketplace and bring our advertisers high-quality, high-income active travelers. Research Local experts around the world thoroughly research the quality and competitiveness of each offer. Evaluate Editorial evaluates the allure of an offer and endorses as outstanding. Test The Test Booking Center testbooks each offer to ensure a smooth user experience and strives for most desirable results for advertiser. Producers spend more than 1,000 hours researching, checking & validating deals each week!

9 Every week, millions of people around the world are using Travelzoo like Heather in Dallas 8

10 Part 1: Travelzoo Business Part 2: Financial Performance Part 3: Growth Strategy Overview

11 Financial Performance Full Year

12 Strong financial track record over time with investments for future growth Revenue by Type $ million year CAGR 17.2% Local Search Travel Revenue by Segment $ million year CAGR EU 37.6% 3-year CAGR NA 11.9% EU NA Subscribers Million year CAGR 10.1% EU NA Full year 3 months Full year 3 months Full year 3 months Non-GAAP* Operating Income $ million year CAGR 27.6% Non-GAAP* EPS $ $1.42 $1.33 $ year CAGR 50.5% $0.42 $ Full year 3 months Full year 3 months * Non-GAAP income and Non-GAAP EPS exclude charges related to unexchanged merger shares of $20 million (EPS impact of $1.22) and $3 million (EPS impact of $0.19) for the three months ended March 31, 2011 and 2012, respectively. 11

13 Financial Performance First Quarter 2013

14 Quarterly revenues grew to the highest level ever, but continued investments to spur long-term growth impacted earnings versus previous years. Q Financial Performance Revenue $ millions Non-GAAP EPS* $ per share Subscribers Millions $0.37 $0.42 $ Q Q Q Q Q Q Q Q Q * Non-GAAP EPS excludes charge in prior-year period related to unexchanged promotional merger shares. See appendix for GAAP to Non-GAAP reconciliation. 13

15 Revenue growth accelerated in both North America and Europe. Quarterly Revenue by Segment North America $ millions Europe $ millions Europe (local currency) millions Q % % % Q % % % Q % % % Q % % % Q % % % 14

16 North America revenue year-over-year growth was driven by Travel. North America Revenue by Type $ millions Q Q Q Y/Y $ Change Q/Q $ Change Highlights Travel Q/Q 26% seasonal increase, Y/Y 13% increase driven by certain vacation packagers and Getaways for hotels. Search Q/Q 6% decrease, Y/Y 5% decrease due to less favorable market pricing than prior period. Local Q/Q 5% and Y/Y 4% decrease driven by Y/Y declines in vouchers sold per deal and take rate; Q/Q seasonality. Local Search Travel 15

17 Europe revenue growth was driven by a 26% increase in Travel revenues. Europe Revenue by Type $ millions Local Search Q Q Q Y/Y $ Change Q/Q $ Change Highlights Travel Q/Q 23% increase. Y/Y 26% growth driven by certain vacation packagers, cruises advertisers and Getaways for hotels; despite tough economy. Search Q/Q 6% increase and Y/Y 33% decrease due to reduced spend on traffic acquisition. We strategically pulled back on spend to improve profitability in this uncertain Europe economy. Local Q/Q 8% decrease due to seasonality and Y/Y flat driven by reduced number of vouchers sold per deal and decline in take rate. Travel 16

18 Europe is now contributing one third of Travelzoo s operating income. Net income enjoyed a $250,000 favorable tax benefit this quarter. Year-over-Year Comparisons of Q1 Income Q ($ millions) (2.5) 5.6 Comparison: Q ($ millions) Operating income North America Operating income Europe Non-GAAP operating income** 0.1 (2.9) 6.7 Other income (expense) Income Taxes* Non-GAAP net income** * Includes a favorable tax benefit of ~$250,000 (EPS benefit of ~$0.02). ** Non-GAAP income excludes a charge in prior-year period related to unexchanged promotional merger shares. See appendix for GAAP to Non-GAAP reconciliation. 17

19 Operating margins increased over the previous quarter, but were still impacted by continued investments. Cost of Revenue as percentage of revenue Non-GAAP Operating Margin* as percentage of revenue 10.3% 11.0% 9.4% Subscriber refunds Customer service Credit card processing Local 24.3% 11.8% 19.1% Other Q Q Q Q Q Q * Non-GAAP operating margin a charge in prior-year period related to unexchanged promotional merger shares. See appendix for GAAP to Non-GAAP reconciliation. 18

20 The declining operating margin year-over-year stems from our near-term investments into headcount, audience, and products, particularly in North America. Operating Expenses* $ millions and as percentage of revenue General & Administrative 62% 24% % 25% 73% 24% % 26% Sales & Marketing 38% % 49% % Q Head- Incremental Q count- subscriber, related search & other Q Q North America business segment Europe business segment * Segment operating expenses excludes a charge in prior-year period related to unexchanged promotional merger shares. See appendix for GAAP to Non-GAAP reconciliation. 19

21 Hiring continues in order to spur and support growth. Headcount and Average Annualized Revenue per Employee Headcount Europe North America 187 Q Q Q Q Q Q Q Q Q Average annualized revenue per employee ($ thousands) $499 $438 $433 $402 $437 $420 $348 $356 $397 20

22 Solid collections and continued positive cash flows further strengthened our financial position. DSO and Cash Balances DSO (Days Sales Outstanding) # of days Cash Balance at End of Quarter* $ millions Q Q Q Q Q Q * Includes cash and cash equivalents 21

23 First Quarter 2013 Performance Summary Record revenue in both North America and Europe. Investments in sales force, audience growth and hotel booking capability result in year-over-year lower operating margin yet we expect payback over long-term. Solid cash position and positive cash flow. 22

24 Part 1: Travelzoo Business Part 2: Financial Performance Part 3: Growth Strategy Overview

25 We remain confident in our business model and long term opportunity, as we are making investments to drive future growth. Long-term growth in our business is driven by people, our audience, and products. Annual revenue per subscriber* US$ per subscriber Strategic Elements: $7.51 Travelzoo Q million Number of subscribers** 1. People: Grow sales force to increase the number of businesses from which we publish deals. 2. Audience: Grow subscribers, but also mobile users, Facebook fans, and Twitter followers. 3. Products: Develop booking platform for hotels and other deals; increased focus on mobile products. * Defined as annualized year to date revenue divided by the number of subscribers at beginning of year. ** North America and Europe only. Asia Pacific operated under license. 24

26 Strategic Element 1: Continue to expand sales force in Hotels and Local Deals. Sales force is a driver of future revenues, and we continued hiring, net of attrition and this investment is slowly starting to pay off. Europe North America 171 Number of Deals Published North America Europe Getaways Local Deals % % Q Q Q Q Revenues for Getaways (hotel voucher sales) +48% Europe North America Q Q Near-term hiring target Affecting Y/Y operating expenses and EPS short-term Q Q

27 Strategic Element 2: Re-accelerate audience growth & build deeper relationships with our subscribers. Travelzoo s past has shown that subscriber growth drives overall revenue growth Year Subscribers* Revenue per Subscriber Revenue million $6.23 $51 million million $7.19 $69 million million $7.25 $79 million million $6.56 $81million million $6.96 $94 million million $6.69 $113 million million $7.85 $148 million million $7.04 $151.2 million our investments in analytics, engagement & product will help improve revenue per subscriber over time. Increasing levels of engagement both sequentially and year-over-year Social audience (Facebook and Twitter) continues to grow with increasing visits Review of website and photos and organization of website to enhance the visitor experience Q million $7.51** $168.7 million** Future Opportunity 30 million $7.00 $210 million 35 million $7.00 $245 million * Beginning of year subscribers ** Annualized 26

28 Strategic Element 2: Grow our mobile and social audience to further engage with our audience. We are focusing on mobile and social. allowing us to further engage with our audience. +248% Mobile app downloads* Q Q Q Q Q % Facebook Fans* Q Q Q Q Q % Twitter Followers* * Cumulative totals Q Q Q Q Q

29 Strategic Element 3: Develop our hotel booking platform to enhance our mobile user experience. Today s user experience on mobile is not where we want it to be Mobile is now over 35% of our traffic. Currently no date or destination search function on mobile products. With direct deals, users are referred to 1,000+ different hotel websites to book, many hotel websites fail on mobile. With Getaways, users have to buy a voucher and then call the hotel to make their booking. Hotel booking platform will solve hotel search and mobile booking process Users will more easily find deals. Bookings can be completed right away, on our website or within our apps. Allows hotels to promote deals in a more flexible manner, e.g. promote last-minute weekends deals. 28

30 Strategic Element 3: Investing into a hotel booking platform affects earnings near-term, and will continue in Q Appointed senior hotel booking leader, Steven Rubin (Kimpton, Swissotel) Re-deployed acquired code & staff from Perfect Escapes Limited test bookings through Perfect Escapes website: $400,000 in gross bookings in Europe and North America* Completed business framework/ contracts/presentations etc. Completed set-up of customer service operations Q Begin hotel contracting Begin content development Continued testing under Perfect Escapes brand Develop web and mobile products Q3/Q Roll-out new platform across the board and all devices Aggressively ramp up: Number of hotels Number of deals Booking revenues, particularly from mobile usage Q1 impact on expenses was~$600,000 or ~$0.03 EPS impact with no significant revenue benefit Q2 impact on expenses expected to be ~$900,000 or ~$0.04 EPS impact with no significant revenue benefit * Revenues for hotel bookings will be recognized after the hotel stay occurs. 29

31 We continue to believe that deal quality drives subscriber loyalty and that our quality-leadership positions us well for long-term success. Outstanding Local Deals Zagat highly rated restaurants and luxe spas inside 5-star resorts, entertainment deals. Outstanding Travel Deals We feature deals at Travel + Leisure's World's Best 500 and Conde Nast Traveler's Gold List. Top 20 list This week's most outstanding travel, entertainment and local deals, researched and tested. 30

32 Management Focus for 2013 Maintain our quality leadership position by publishing high-quality deals and tightening brand control. Reaccelerate top-line long-term revenues by investing in: Sales force growth and productivity. Audience growth and engagement, across , social and mobile. Products that simplify and improve our business, particularly our online booking capability for hotels and our mobile products. Invest for future growth while remaining profitable. 31

33 APPENDIX

34 Travelzoo Inc. Revenue by Segment and Type - Quarterly and Annual (in thousands except for percentages) North America Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q Travel 16,160 14,144 13,150 14,341 15,546 14,591 12,606 13,894 17,491 57,795 56,636 Q/Q growth rate 26% -12% -7% 9% 8% -6% -14% 10% 26% Y/Y growth rate 10% 3% 6% 12% -4% 3% -4% -3% 13% 8% -2% Search 5,950 6,360 7,013 4,657 6,005 5,985 5,737 5,374 5,703 23,980 23,101 Q/Q growth rate 14% 7% 10% -34% 29% 0% -4% -6% 6% Y/Y growth rate -4% -3% 1% -10% 1% -6% -18% 15% -5% -4% -4% Local 5,408 7,084 7,780 6,502 7,005 8,136 6,804 7,105 6,718 26,774 29,050 Q/Q growth rate 39% 31% 10% -16% 8% 16% -16% 4% -5% Y/Y growth rate 271% 281% 323% 67% 30% 15% -13% 9% -4% 196% 9% Total North America Revenues 27,518 27,588 27,943 25,500 28,556 28,712 25,147 26,373 29, , ,788 Q/Q growth rate 25% 0% 1% -9% 12% 1% -12% 5% 13% Y/Y growth rate 23% 25% 32% 16% 4% 4% -10% 3% 5% 24% 0% Europe Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q Travel 7,332 7,000 6,952 6,150 7,393 7,543 7,368 7,540 9,292 27,434 29,844 Q/Q growth rate 36% -5% -1% -12% 20% 2% -2% 2% 23% Y/Y growth rate 33% 32% 24% 14% 1% 8% 6% 23% 26% 26% 9% Search 958 1,338 1,652 1,141 1,290 1,012 1, ,089 4,149 Q/Q growth rate 32% 40% 23% -31% 13% -22% 1% -20% 6% Y/Y growth rate 84% 180% 143% 57% 35% -24% -38% -28% -33% 112% -18% Local 1,152 1,639 2,114 2,365 2,094 2,093 1,906 2,295 2,104 7,270 8,388 Q/Q growth rate 189% 42% 29% 12% -11% 0% -9% 20% -8% Y/Y growth rate 885% 776% 819% 493% 82% 28% -10% -3% 0% 679% 15% Total Europe Revenues 9,442 9,977 10,718 9,656 10,777 10,648 10,300 10,655 12,266 39,793 42,381 Q/Q growth rate 45% 6% 7% -10% 12% -1% -3% 3% 15% Y/Y growth rate 54% 68% 65% 48% 14% 7% -4% 10% 14% 58% 7% Total Consolidated Revenues 36,960 37,565 38,661 35,156 39,333 39,360 35,447 37,028 42, , ,168 Q/Q growth rate 30% 2% 3% -9% 12% 0% -10% 4% 14% Y/Y growth rate 30% 34% 40% 23% 6% 5% -8% 5% 7% 32% 2% Consolidated Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q Current Forecast 23,492 21,144 20,102 20,491 22,939 22,134 19,974 21,433 26,783 85,229 86,480 Q/Q growth rate 29% -10% -5% 2% 12% -4% -10% 7% 25% Y/Y growth rate 16% 11% 11% 12% -2% 5% -1% 5% 17% 13% 1% Search 6,908 7,698 8,665 5,798 7,295 6,997 6,763 6,195 6,573 29,069 27,250 Q/Q growth rate 17% 11% 13% -33% 26% -4% -3% -8% 6% Y/Y growth rate 2% 9% 14% -2% 6% -9% -22% 7% -10% 6% -6% Local 6,560 8,723 9,894 8,867 9,099 10,230 8,710 9,400 8,822 34,044 37,438 Q/Q growth rate 53% 33% 13% -10% 3% 12% -15% 8% -6% Y/Y growth rate 317% 326% 378% 106% 39% 17% -12% 6% -3% 241% 10% Total Consolidated Revenues 36,960 37,565 38,661 35,156 39,333 39,360 35,447 37,028 42, , ,168 Q/Q growth rate 30% 2% 3% -9% 12% 0% -10% 4% 14% Y/Y growth rate 30% 34% 40% 23% 6% 5% -8% 5% 7% 32% 2% (1) Travel includes travel publications (Top 20, Website, Newsflash, Network) and Getaway vouchers (2) Search includes SuperSearch and Fly.com (3) Local includes Local Deals vouchers and Entertainment non-vouchers 33

35 Travelzoo Inc. Reconciliation of GAAP to Non-GAAP Measures (Unaudited) (In thousands, except per share and percentage amounts) Three months ended March 31, GAAP operating income $ 8,036 $ 6,570 Unexchanged promotional merger shares (a) 3,000 Non-GAAP operating income $ 8,036 $ 9,570 GAAP net income $ 5,595 $ 3,747 Unexchanged promotional merger shares (a) 3,000 Non-GAAP net income $ 5,595 $ 6,747 Diluted net income per share $ 0.36 $ 0.23 Unexchanged promotional merger shares (a) 0.19 Non-GAAP diluted net income per share $ 0.36 $ 0.42 GAAP operating margin 19.1% 16.7 % Unexchanged merger shares (a) 7.6 % Non-GAAP operating margin 19.1% 24.3 % GAAP effective tax rate 30.6% 43.8 % Unexchanged merger shares (a) -13.6% Non-GAAP effective tax rate 30.6% 30.2 % (a) Includes a charge related to unexchanged promotional merger shares of $3.0 million for the three months ended March 31,