Travelzoo Dives After Horrible Earnings

Travelzoo

is taking a serious hit today after posting horrible earnings this morning. The company reported earnings of $0.30 – considerably worse than the reported $0.39 estimate. Investors are taking action, sending the stock tumbling nearly 30%, despite encouraging words from Chris Loughlin, Travelzoo's CEO. “We achieved record revenues and our fastest growth rate in 4 years,” he said. “We accelerated our investment in future growth, adding 27 new Local Deals markets, 800,000 new subscribers and we grew our headcount faster than in any prior quarter. We also ran a television advertising test, which negatively impacted earnings per share by approximately $0.07. We are pleased with our accelerated growth rate and confident that our investments will fuel future growth.” In North America, the company's business segment revenue grew 25% year-over-year to $27.7 million. Operating profit was $6.5 million, or 24% of revenue, down from $6.7 million, or 30% of revenue, in the prior-year period. In Europe, Travelzoo's business segment revenue grew 67% year-over-year to $10.0 million. In local currency terms, revenue grew 53% year-over-year. Operating profit was $1.1 million, compared to an operating loss of $808,000 in the prior-year period. Travelzoo had a total unduplicated number of newsletter subscribers in North America and Europe of 20.7 million as of June 30, 2011, up 13% from June 30, 2010, and up 4% from March 31, 2011. In North America, total unduplicated number of subscribers was 15.3 million as of June 30, 2011, up 9% from June 30, 2010 and up 3% from March 31, 2011. In Europe, total unduplicated number of subscribers was 5.5 million as of June 30, 2011, up 29% from June 30, 2010 and up 7% from March 31, 2011. During the second quarter, Travelzoo used $11.2 million of cash for operating activities. Accounts receivable decreased by $473,000 quarter-over-quarter and increased by $2.4 million over the prior-year period to $15.9 million. Accounts payable increased by $2.1 million quarter-over-quarter and increased by $9.3 million over the prior-year period to $15.7 million. Capital expenditures were $356,000, down from $699,000 in the prior quarter and up from $355,000 in the prior-year period. Travelzoo exited the second quarter with $40.1 million in cash and cash equivalents.