Second Quarter 2015 Performance and Growth Strategy Overview

Transcription

1 The Deal Experts. Over 27 Million Members Worldwide. Second Quarter 2015 Performance and Growth Strategy Overview July 16, 2015

2 Important Notice Please read this management presentation together with the Company s press release issued earlier today announcing the Company s second quarter 2015 financial results and in conjunction with the Company s recent Annual Report and Quarterly Results as filed with the Securities and Exchange Commission (SEC). 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, expected future financial guidance 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. 1

3 Part 1: Second Quarter 2015 Performance Part 2: Growth Strategy Overview 2

4 Increased investments in our products as well as member acquisition impacted the quarter s financial results. Q Financial Performance Revenue $ millions Non-GAAP EPS* $ per share Members Millions $ $0.09 Q Q Q Q Q Q * Non-GAAP excludes a $3.5 million release of reserve in the prior period related to unexchanged promotional shares. See appendix for GAAP to Non-GAAP reconciliation. 3

5 Revenue declines flattened in North America, and Europe was impacted by unfavorable F/X trends, which will likely continue in Q3. Quarterly Revenue by Segment North America $ millions Europe $ millions Europe (in GBP) millions Q % % % Q % % % Q % % % Q % % % Q % % %* * Excluding the change in Euro to GBP, the year-over-year revenue grew by 1%. 4

6 North America revenue decreased with transition of Local Deals to pull deals, and hotel vouchers to the hotel platform. North America Revenue by Type $ millions Y/Y % Change (14%) (1%) (4%) Q/Q % Change 26% (16%) (8%) Highlights Travel Q/Q 8% seasonal decrease; Y/Y 4% decrease driven primarily by shift from vouchers to the hotel platform. Search Q/Q 16% decrease; Y/Y 1% decrease due to reduced traffic acquisition spend. Local Q/Q 26% increase; Y/Y 14% decrease driven by lower voucher sales from push promotions. Q Q Q Local Search Travel 5

7 Revenues in Europe increased in local currency, but unfavorable F/X trends impacted the amount reported in USD. Europe Revenue by Type $ millions Y/Y %** Change Q/Q %** Change (16%) (6%) 1% (11%) Highlights** Travel Q/Q 13% decrease due to seasonality. Y/Y 5% increase driven by airline and vacation packager revenue. Search Q/Q 11% decrease; Y/Y 1% increase % (13%) Local Q/Q 6% decrease; Y/Y 16% decrease due to lower voucher sales from push promotions. Q Q Q at current F/X* Local Search Travel * Revenue at Q foreign exchange rates for GBP and Euro ** Based on constant F/X rates 6

8 Investments in product and member acquisition for long-term growth increased by $3.5 million year-over year, resulting in lower operating income. Year-over-Year Comparison Q ($ millions) (1.3)** 1.3 Comparison: Q ($ millions) (2.3) 4.4 Operating income North America Operating income Europe Non-GAAP* Operating income Other income Income taxes Non- GAAP* Net income * Non-GAAP excludes a $3.5 million release of reserve in the prior period related to unexchanged promotional shares. See appendix for GAAP to Non-GAAP reconciliation. ** Includes a tax matter recorded during the current quarter of $0.2 million with an EPS impact of $

9 Higher cost of revenue as a percentage of revenue was driven by increased syndicated deals that have a related partner cost. Cost of Revenue as percentage of revenue Non-GAAP* Operating Margin as percentage of revenue 14.4% Member refunds 11.9% 11.6% Customer service Credit card processing Local & Hotel booking 18.0% 10.4% Other 7.6% Q Q Q Q Q Q * Non-GAAP excludes a $3.5 million release of reserve in the prior period related to unexchanged promotional shares. See appendix for GAAP to Non-GAAP reconciliation. 8

10 Total operating expenses decreased due to cost reductions made in order to fund investments in member acquisition, marketing and product development. Operating Expenses $ millions and as percentage of revenue 72% (2.1) % 0.3 (0.7) % General & Administrative 28% % 70% % 33% 3.8 Sales & Marketing 44% % 37% % Q Planned Planned Reduced Q increase increase costs/fx in member in product acquisition developand ment marketing North America business segment Q Planned Planned Reduced Q increase increase costs/fx in member in product acquisition developand ment marketing Europe business segment 9

11 Productivity slightly down due to seasonality, but continues to improve yearover-year. Headcount and Average Annualized Revenue per Employee 500 Headcount 450 Europe North America ,400 1,200 1, Q Q Q Q Q Q Q Q Q $372 $333 $344 $362 $339 $300 $288 $356 $ Average annualized 200 revenue per employee 0 ($ thousands) 10

12 DSO was impacted year-over-year by a longer collection cycle with our new partner in Search. Cash flow from operations helped to increase cash 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 11

13 Second Quarter 2015 Performance Summary Revenue declined as expected, primarily due to Local Deals and Getaways and negative F/X. Significant increase in member acquisition and product development lowered profitability. Cash flow from operations helped to increase cash position. 12

14 Part 1: Second Quarter 2015 Performance Part 2: Growth Strategy Overview 13

15 Our growth strategy continues to build on enhancing our products and growing our audience. Annual revenue per member* US$ per member Long-term growth in our business is driven by our audience, people, and products. Product Enhancements Strategic Elements 1. Audience: Grow members, but also mobile users, Facebook fans, and Twitter followers. $5.83* Travelzoo Audience Growth 2. Products: Enhance our products to enable users to search what, where and when, particularly on mobile and for hotels million Number of members** * Defined as year to date annualized revenue divided by the number of members at beginning of year. ** North America and Europe only. Asia Pacific operated by a licensee. 14

16 Audience strategy: We are looking to grow our member base more rapidly than in the past 2 years via expanded marketing and by leveraging loyal members. Large number of loyal Travelzoo members MELANIE Member since 2008 Increase in online advertising to reach new members We will be exploring new ways to acquire high-quality members, both online and offline With Travelzoo, I find hotels, restaurants, and adventures you don t typically find in a guidebook. JIM Member since 2003 Travelzoo prompts us to visit places we haven t been before. ALIZA Member since 2004 Travelzoo knows what I want before I know that I want it. We will explore and test new ways to leverage existing member base Given our base of loyal members, referrals are a large opportunity to expand the audience cost-efficiently Our network expands partnerships with top quality publishers to reach more people (examples: Yahoo! Travel, Los Angeles Times, Frommers) 15

17 We will continue to ramp up new member acquisition year-over-year to drive near-term and future growth. Past Moderate investments in member growth in 2012 and Historically, LTV to CPA ration of 4:1 provided great rational for investments. We increased Q member acquisition and related marketing spend by approx. $3 million with main focus on Europe. Current/Future We plan to continue our increased level of quarterly spend. Focus on Europe will continue in Q3, and testing of offline campaigns. Spend would result in a quarterly reduction in EPS of $0.10-$0.15; investments subject to meeting internal revenue and profit expectations. One of the largest increases in newly added members since Q New members added during the quarter Q Q Q Q Q Q Planned increase in member acquisition and related marketing Q Q $3.1 million vs. Q

18 Product strategy: We have been successful inspiring people to take trips they had not planned, but offer little help when they need something. PUSH We inspire our users with top deals at quality places PULL have not offered products that are easy to search and browse for specific needs You have a hotel deal in New York next weekend? Just arrived in Las Vegas. Any show deals for tonight? I d like to take the kids to Disneyland in late August. Can you help with a great deal? 17

19 In Travel, we are looking to make our website, mobile site and apps easier to search and more simple to buy or book deals. Implications Product strategy for Travel Make website and mobile site search-friendly. Enable users to quickly find what, where and when. Product and product development expenses % revenue 6.9% 8.8% Other product development costs Hotel Platform Create easy-to-use apps that help users find deals wherever they are at home or on the road. Our current focus is on a hotel platform that makes it easy for user to find deals anytime and to book on any device. Everyday hotel booking capability re-launched in March 2015 with content focus on six key destinations. Q Q Revenue from hotel platform Recognized revenue +26% Q Q % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% U.S. hotel revenue Current quarter recognized Q Q Q Q Shifts to future periods Q Q Q

20 In Local, consumers are increasingly buying deals when they need them, rather then in advance. We are working to better meet this need. Percentage of mobile and pull purchases of Local deals* Product strategy for Local Continue to inspire our members with great ideas for restaurant, spas, shows and fun activities. Make Local content more relevant via personalization and alerts. Build an increasing offering of deals that are live for a longer period of time. Develop products, in particular on mobile, that make it easy to find deals anywhere you are, at home or when you travel. Mobile purchases as percentage of total 18% 12% Q Q Pull purchases as percentage of total 40% 41% Experiment with alternatives to the voucher model. Q Q * Average number of live Local Deals in top U.S. markets throughout the quarter 19

21 We continue to believe that deal quality drives member loyalty and positions us well for long-term success. High-Quality Local Deals Highly rated restaurants, luxe spas, top shows and exciting local adventures. 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. 20

22 Management Focus Maintain our quality leadership position by publishing high-quality deals and tightening brand control. Resume top-line revenue growth by investing in: Products that make it easier for members and users to find deals when and where they need them, particularly on mobile and for hotels. Audience growth and engagement, across , web, social and mobile. Invest for future growth while remaining profitable. 21

23 APPENDIX

24 Travelzoo Inc. Revenue by Segment and Type - Quarterly and Annual (in thousands except for percentages) North America Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 YTD 2013 YTD 2014 YTD 2015 Travel 17,491 16,463 14,939 14,919 17,229 15,229 13,945 12,783 16,008 14,658 33,953 32,459 30,666 Q/Q growth rate 26% -6% -9% 0% 15% -12% -8% -8% 25% -8% Y/Y growth rate 13% 13% 19% 7% -1% -7% -7% -14% -7% -4% 13% -4% -6% Search 5,703 5,980 5,173 3,849 3,854 3,875 3,895 3,427 4,548 3,840 11,683 7,729 8,387 Q/Q growth rate 6% 5% -14% -26% 0% 1% 1% -12% 33% -16% Y/Y growth rate -5% 0% -10% -28% -32% -35% -25% -11% 18% -1% -3% -34% 9% Local 6,718 7,806 6,096 6,818 5,270 6,070 4,761 5,064 4,158 5,229 14,524 11,340 9,387 Q/Q growth rate -5% 16% -22% 12% -23% 15% -22% 6% -18% 26% Y/Y growth rate -4% -4% -10% -4% -22% -22% -22% -26% -21% -14% -4% -22% -17% Total North America Revenues 29,911 30,249 26,208 25,586 26,353 25,175 22,601 21,274 24,714 23,727 60,160 51,528 48,441 Q/Q growth rate 13% 1% -13% -2% 3% -4% -10% -6% 16% -4% Y/Y growth rate 5% 5% 4% -3% -12% -17% -14% -17% -6% -6% 5% -14% -6% Europe Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 YTD 2013 YTD 2014 YTD 2015 Travel 9,292 8,182 8,298 8,863 11,193 9,270 8,763 7,895 9,736 8,433 17,474 20,463 18,170 Q/Q growth rate 23% -12% 1% 7% 26% -17% -5% -10% 23% -13% Y/Y growth rate 26% 8% 13% 18% 20% 13% 6% -11% -13% -9% 17% 17% -11% Search ,711 1,530 1,061 Q/Q growth rate 6% -3% -1% -12% 35% -44% -15% -12% 35% -10% Y/Y growth rate -33% -17% -19% -12% 12% -34% -43% -43% -43% -9% -26% -11% -31% Local 2,104 2,055 1,921 2,300 1,670 1,888 1,668 1,916 1,483 1,402 4,159 3,557 2,885 Q/Q growth rate -8% -2% -7% 20% -27% 13% -12% 15% -23% -5% Y/Y growth rate 0% -2% 1% 0% -21% -8% -13% -17% -11% -26% -1% -14% -19% Total Europe Revenues 12,266 11,078 11,047 11,889 13,842 11,709 10,899 10,224 11,779 10,337 23,343 25,550 22,116 Q/Q growth rate 15% -10% 0% 8% 16% -15% -7% -6% 15% -12% Y/Y growth rate 14% 4% 7% 12% 13% 6% -1% -14% -15% -12% 9% 9% -13% Total Consolidated Revenues 42,177 41,327 37,256 37,475 40,195 36,883 33,500 31,498 36,492 34,064 83,504 77,078 70,556 Q/Q growth rate 14% -2% -10% 1% 7% -8% -9% -6% 16% -7% Y/Y growth rate 7% 5% 5% 1% -5% -11% -10% -16% -9% -8% 6% -8% -8% Consolidated Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 YTD 2013 YTD 2014 YTD 2015 Travel 26,783 24,645 23,238 23,782 28,423 24,499 22,708 20,678 25,744 23,091 51,427 52,922 48,836 Q/Q growth rate 25% -8% -6% 2% 20% -14% -7% -9% 25% -10% Y/Y growth rate 17% 11% 16% 11% 6% -1% -2% -13% -9% -6% 14% 3% -8% Search 6,573 6,821 6,001 4,574 4,833 4,426 4,363 3,841 5,107 4,341 13,394 9,259 9,448 Q/Q growth rate 6% 4% -12% -24% 6% -8% -1% -12% 33% -15% Y/Y growth rate -10% -3% -11% -26% -26% -35% -27% -16% 6% -2% -6% -31% 2% Local 8,822 9,861 8,017 9,119 6,940 7,958 6,429 6,980 5,641 6,631 18,683 14,898 12,272 Q/Q growth rate -6% 12% -19% 14% -24% 15% -19% 9% -19% 18% Y/Y growth rate -3% -4% -8% -3% -21% -19% -20% -23% -19% -17% -3% -20% -18% Total Consolidated Revenues 42,177 41,327 37,256 37,475 40,195 36,883 33,500 31,498 36,492 34,064 83,504 77,078 70,556 Q/Q growth rate 14% -2% -10% 1% 7% -8% -9% -6% 16% -7% Y/Y growth rate 7% 5% 5% 1% -5% -11% -10% -16% -9% -8% 6% -8% -8% (1) Travel includes travel publications (Top 20, Website, Newsflash, Network), Getaway vouchers and Hotel Booking (2) Search includes SuperSearch and Fly.com (3) Local includes Local Deals vouchers and Entertainment non-vouchers 23

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