falsedesktopTZOO2020-09-30000113331120000050{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t¨\tAccelerated filer\t☒\nNon-accelerated filer\t¨ (Do not check if a smaller reporting company)\tSmaller reporting company\t☒\n\t\tEmerging growth company\t☐\nIf an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisited financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.\t\t\t¨\n", "q10k_tbl_1": "PART I-FINANCIAL INFORMATION\tPage\nItem 1. Financial Statements (Unaudited)\t3\nCondensed Consolidated Balance Sheets as of September 30 2020 and December 31 2019\t4\nCondensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30 2020 and 2019\t5\nCondensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30 2020 and 2019\t6\nCondensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30 2020 and 2019\t7\nCondensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30 2020 and 2019\t8\nNotes to Condensed Consolidated Financial Statements\t9\nItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations\t28\nItem 3. Quantitative and Qualitative Disclosures About Market Risk\t41\nItem 4. Controls and Procedures\t42\nPART II-OTHER INFORMATION\t\nItem 1. Legal Proceedings\t43\nItem 1A. Risk Factors\t43\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\t43\nItem 6. Exhibits\t44\nSignature\t45\n", "q10k_tbl_2": "\tSeptember 30 2020\tDecember 31 2019\nASSETS\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t50528\t18743\nAccounts receivable less allowance for doubtful accounts of $2841 and $1106 as of September 30 2020 and December 31 2019 respectively\t4195\t11209\nPrepaid income taxes\t304\t989\nDeposits\t98\t105\nPrepaid expenses and other\t990\t2288\nAssets from discontinued operations\t454\t3961\nTotal current assets\t56569\t37295\nDeposits and other\t806\t572\nDeferred tax assets\t4415\t2051\nRestricted cash\t1155\t1135\nInvestment in WeGo\t2101\t2484\nOperating lease right-of-use assets\t9076\t8140\nProperty and equipment net\t1499\t2861\nIntangible assets net\t4867\t0\nGoodwill\t10944\t0\nTotal assets\t91432\t54538\nLIABILITIES AND STOCKHOLDERS' EQUITY\t\t\nCurrent liabilities:\t\t\nAccounts payable\t11296\t6382\nMerchant payable\t41722\t12967\nAccrued expenses and other\t6953\t6281\nDeferred revenue\t2777\t786\nOperating lease liabilities\t3988\t4847\nPromissory notes payable\t1700\t0\nIncome tax payable\t373\t914\nLiabilities from discontinued operations\t1509\t3135\nTotal current liabilities\t70318\t35312\nPPP notes payable\t3663\t0\nDeferred tax liabilities\t851\t0\nLong-term operating lease liabilities\t11425\t7920\nOther long-term liabilities\t473\t443\nTotal liabilities\t86730\t43675\nCommitments and contingencies\t\t\nNon-controlling interest\t4633\t0\nStockholders' equity:\t\t\nCommon stock $0.01 par value (20000 shares authorized; 11310 and 11479 shares issued and outstanding as of September 30 2020 and December 31 2019)\t113\t115\nAdditional paid in capital\t5220\t0\nRetained earnings (accumulated deficit)\t(1130)\t14200\nAccumulated other comprehensive loss\t(4134)\t(3452)\nTotal stockholders' equity\t69\t10863\nTotal liabilities and stockholders' equity\t91432\t54538\n", "q10k_tbl_3": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nRevenues\t13787\t23833\t41118\t79599\t\t\t\t\t\t\nCost of revenues\t2924\t2852\t7768\t8389\t\t\t\t\t\t\nGross profit\t10863\t20981\t33350\t71210\t\t\t\t\t\t\nOperating expenses:\t\t\t\t\t\t\t\t\t\t\nSales and marketing\t6929\t11967\t24311\t38605\t\t\t\t\t\t\nProduct development\t592\t1434\t2586\t4856\t\t\t\t\t\t\nGeneral and administrative\t4545\t4188\t16709\t13634\t\t\t\t\t\t\nImpairment of intangible assets and goodwill\t0\t0\t2920\t0\t\t\t\t\t\t\nTotal operating expenses\t12066\t17589\t46526\t57095\t\t\t\t\t\t\nOperating income (loss)\t(1203)\t3392\t(13176)\t14115\t\t\t\t\t\t\nOther income (loss) net\t(37)\t32\t(222)\t48\t\t\t\t\t\t\nIncome (loss) from continuing operations before income taxes\t(1240)\t3424\t(13398)\t14163\t\t\t\t\t\t\nIncome tax expense (benefit)\t(244)\t860\t(2070)\t3596\t\t\t\t\t\t\nIncome (loss) from continuing operations\t(996)\t2564\t(11328)\t10567\t\t\t\t\t\t\nIncome (loss) from discontinued operations net of taxes\t(230)\t(2258)\t(3944)\t(5813)\t\t\t\t\t\t\nNet income (loss)\t(1226)\t306\t(15272)\t4754\t\t\t\t\t\t\nNet income (loss) attributable to non-controlling interest\t125\t0\t(1122)\t0\t\t\t\t\t\t\nNet income (loss) attributable to Travelzoo\t(1351)\t306\t(14150)\t4754\t\t\t\t\t\t\nNet income (loss) attributable to Travelzoo-continuing operations\t(1121)\t2564\t(10206)\t10567\t\t\t\t\t\t\nNet income (loss) attributable to Travelzoo-discontinued operations\t(230)\t(2258)\t(3944)\t(5813)\t\t\t\t\t\t\nIncome (loss) per share-basic\t\t\t\t\t\t\t\t\t\t\nContinuing operations\t(0.10)\t0.22\t(0.90)\t0.89\t\t\t\t\t\t\nDiscontinued operations\t(0.02)\t(0.19)\t(0.35)\t(0.49)\t\t\t\t\t\t\nNet income (loss) per share -basic\t(0.12)\t0.03\t(1.25)\t0.40\t\t\t\t\t\t\nIncome (loss) per share-diluted\t\t\t\t\t\t\t\t\t\t\nContinuing operations\t(0.10)\t0.21\t(0.90)\t0.87\t\t\t\t\t\t\nDiscontinued operations\t(0.02)\t(0.19)\t(0.35)\t(0.49)\t\t\t\t\t\t\nNet income (loss) per share-diluted\t(0.12)\t0.03\t(1.25)\t0.39\t\t\t\t\t\t\nShares used in per share calculation from continuing operations-basic\t11310\t11767\t11353\t11894\t\t\t\t\t\t\nShares used in per share calculation from discontinued operations-basic\t11310\t11767\t11353\t11894\t\t\t\t\t\t\nShares used in per share calculation from continuing operations-diluted\t11310\t11956\t11353\t12152\t\t\t\t\t\t\nShares used in per share calculation from discontinued operations-diluted\t11310\t11767\t11353\t11894\t\t\t\t\t\t\n", "q10k_tbl_4": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nNet income (loss)\t(1226)\t306\t(15272)\t4754\t\t\t\t\t\t\nOther comprehensive income (loss):\t\t\t\t\t\t\t\t\t\t\nForeign currency translation adjustment\t532\t(221)\t(682)\t(236)\t\t\t\t\t\t\nTotal comprehensive income (loss)\t(694)\t85\t(15954)\t4518\t\t\t\t\t\t\n", "q10k_tbl_5": "\tNine Months Ended\t\n\tSeptember 30\t\n\t2020\t2019\nCash flows from operating activities:\t\t\nNet income (loss)\t(15272)\t4754\nAdjustments to reconcile net income (loss) to net cash provided by operating activities:\t\t\nDepreciation and amortization\t1806\t999\nStock-based compensation\t5243\t876\nDeferred income tax\t(1747)\t431\nImpairment of intangible assets and goodwill\t2920\t0\nLoss on long-lived assets\t437\t0\nLoss on equity investment in WeGo\t474\t611\nGain on promissory notes payable settlement\t(1500)\t0\nNet foreign currency effect\t(542)\t59\nProvision for loss on accounts receivable refund reserve and other\t3923\t132\nChanges in operating assets and liabilities net of acquisitions:\t\t\nAccounts receivable\t6246\t(127)\nPrepaid income taxes\t685\t(541)\nPrepaid expenses and other\t1626\t(3)\nAccounts payable and merchant payable\t33241\t(3971)\nAccrued expenses and other\t(1381)\t(442)\nDeferred revenue\t1228\t0\nIncome tax payable\t(479)\t(36)\nOther liabilities\t676\t(816)\nNet cash provided by operating activities\t37584\t1926\nCash flows from investing activities:\t\t\nAcquisition of business net of cash acquired\t(679)\t0\nOther investments\t(430)\t(673)\nPurchases of property and equipment\t(252)\t(350)\nNet cash used in investing activities\t(1361)\t(1023)\nCash flows from financing activities:\t\t\nRepurchase of common stock\t(1205)\t(8768)\nPayment of promissory notes payable\t(7800)\t0\nProceeds from PPP notes payable\t3663\t0\nProceeds from exercise of stock options net of taxes paid for net share settlement\t0\t1712\nNet cash used in financing activities\t(5342)\t(7056)\nEffect of exchange rate changes on cash cash equivalents and restricted cash\t393\t(395)\nNet increase (decrease) in cash cash equivalents and restricted cash\t31274\t(6548)\nCash cash equivalents and restricted cash at beginning of period\t20710\t19461\nCash cash equivalents and restricted cash at end of period\t51984\t12913\nSupplemental disclosure of cash flow information:\t\t\nCash paid for income taxes net\t1230\t3776\nRight-of-use assets obtained in exchange for lease obligations-operating leases\t3207\t7578\nCash paid for amounts included in the measurement of lease liabilities\t3063\t4084\nNon-cash investing and financing activities:\t\t\nIssuance of promissory notes to the sellers of Jack's Flight Club\t11000\t0\n", "q10k_tbl_6": "\tCommon Stock\t\tAdditional Paid-In Capital\tRetained Earnings (Accumulated Deficit)\tAccumulated Other Comprehensive Loss\tTotal Stockholders' Equity (Deficit)\n\tShares\tAmount\nBalances January 1 2020\t11479\t115\t0\t14200\t(3452)\t10863\nStock-based compensation expense\t0\t0\t23\t0\t0\t23\nRepurchase and retirement of common stock\t(169)\t(2)\t(23)\t(1180)\t0\t(1205)\nForeign currency translation adjustment\t0\t0\t0\t0\t(871)\t(871)\nNet loss-Travelzoo\t0\t0\t0\t(6609)\t0\t(6609)\nBalances March 31 2020\t11310\t113\t0\t6411\t(4323)\t2201\nStock-based compensation expense\t0\t0\t4031\t0\t0\t4031\nForeign currency translation adjustment\t0\t0\t0\t0\t(343)\t(343)\nNet loss-Travelzoo\t0\t0\t0\t(6190)\t0\t(6190)\nBalances June 30 2020\t11310\t113\t4031\t221\t(4666)\t(301)\nStock-based compensation expense\t0\t0\t1189\t0\t0\t1189\nForeign currency translation adjustment\t0\t0\t0\t0\t532\t532\nNet loss-Travelzoo\t0\t0\t0\t(1351)\t0\t(1351)\nBalances September 30 2020\t11310\t113\t5220\t(1130)\t(4134)\t69\n", "q10k_tbl_7": "\tCommon Stock\t\tAdditional Paid-In Capital\tRetained Earnings (Accumulated Deficit)\tAccumulated Other Comprehensive Loss\tTotal Stockholders' Equity\n\tShares\tAmount\nBalances January 1 2019\t11962\t120\t0\t18153\t(4214)\t14059\nStock-based compensation expense\t0\t0\t163\t0\t0\t163\nRepurchase and retirement of common stock\t(100)\t(1)\t(137)\t(1452)\t0\t(1590)\nTaxes paid for net share settlement of equity awards\t3\t0\t(26)\t0\t0\t(26)\nForeign currency translation adjustment\t0\t0\t0\t0\t(89)\t(89)\nNet income-Travelzoo\t0\t0\t0\t3120\t0\t3120\nBalances March 31 2019\t11865\t119\t0\t19821\t(4303)\t15637\nStock-based compensation expense\t0\t0\t319\t0\t0\t319\nRepurchase and retirement of common stock\t(250)\t(2)\t(2055)\t(2812)\t0\t(4869)\nExercise of stock options and taxes paid for net share settlement of equity awards\t250\t2\t1736\t0\t0\t1738\nForeign currency translation adjustment\t0\t0\t0\t0\t74\t74\nNet income-Travelzoo\t0\t0\t0\t1328\t0\t1328\nBalances June 30 2019\t11865\t119\t0\t18337\t(4229)\t14227\nStock-based compensation expense\t0\t0\t394\t0\t0\t394\nRepurchase and retirement of common stock\t(186)\t(2)\t(394)\t(1912)\t0\t(2308)\nForeign currency translation adjustment\t0\t0\t0\t0\t(221)\t(221)\nNet income-Travelzoo\t0\t0\t0\t306\t0\t306\nBalances September 30 2019\t11679\t117\t0\t16731\t(4450)\t12398\n", "q10k_tbl_8": "\tSeptember 30\tDecember 31\n\t2020\t2019\nCash and cash equivalents\t50528\t18743\nRestricted cash\t1155\t1135\nCash cash equivalents and restricted cash-discontinued operations\t301\t832\nTotal cash cash equivalents and restricted cash in the condensed consolidated statements of cash flows\t51984\t20710\n", "q10k_tbl_9": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nNumerator:\t\t\t\t\t\t\t\t\t\t\nNet income (loss) attributable to Travelzoo-continuing operations\t(1121)\t2564\t(10206)\t10567\t\t\t\t\t\t\nNet income (loss) attributable to Travelzoo-discontinued operations\t(230)\t(2258)\t(3944)\t(5813)\t\t\t\t\t\t\nDenominator:\t\t\t\t\t\t\t\t\t\t\nWeighted average common shares-basic\t11310\t11767\t11353\t11894\t\t\t\t\t\t\nEffect of dilutive securities: stock options\t0\t189\t0\t258\t\t\t\t\t\t\nWeighted average common shares-diluted\t11310\t11956\t11353\t12152\t\t\t\t\t\t\nIncome (loss) per share-basic\t\t\t\t\t\t\t\t\t\t\nContinuing operations\t(0.10)\t0.22\t(0.90)\t0.89\t\t\t\t\t\t\nDiscontinued operations\t(0.02)\t(0.19)\t(0.35)\t(0.49)\t\t\t\t\t\t\nNet income (loss) per share -basic\t(0.12)\t0.03\t(1.25)\t0.40\t\t\t\t\t\t\nIncome (loss) per share-diluted\t\t\t\t\t\t\t\t\t\t\nContinuing operations\t(0.10)\t0.21\t(0.90)\t0.87\t\t\t\t\t\t\nDiscontinued operations\t(0.02)\t(0.19)\t(0.35)\t(0.49)\t\t\t\t\t\t\nNet income (loss) per share-diluted\t(0.12)\t0.03\t(1.25)\t0.39\t\t\t\t\t\t\n", "q10k_tbl_10": "Purchase Price\tJack's Flight Club\nCash paid\t1000\nPromissory notes issued\t10931\nFair Value of Put/Call Option\t183\n\t12114\nAllocation\t\nGoodwill\t13054\nIntangible assets\t\nCustomer relationships\t3500\nTrade name\t2460\nNon-compete agreements\t660\nCurrent assets acquired including cash of $321\t324\nCurrent liabilities assumed\t(40)\nDeferred revenue\t(881)\nDeferred tax liabilities\t(1391)\nNon-controlling interest\t(5572)\n\t12114\n", "q10k_tbl_11": "Goodwill-January 1 2020\t0\nAcquisition\t13054\nImpairment-March 31 2020\t(2110)\nGoodwill-September 30 2020\t10944\n", "q10k_tbl_12": "\tFair Value\nIntangible assets-January 1 2020\t0\nAcquisition\t6620\nImpairment of trade name\t(810)\nAmortization of intangible assets with definite lives\t(215)\nIntangible assets- March 31 2020\t5595\nAmortization of intangible assets with definite lives\t(395)\nIntangible assets- June 30 2020\t5200\nAmortization of intangible assets with definite lives\t(333)\nIntangible assets- September 30 2020\t4867\n", "q10k_tbl_13": "Years ending December 31\t\n2020 remainder\t333\n2021\t1108\n2022\t875\n2023\t641\n2024\t250\nThereafter\t10\n\t3217\n", "q10k_tbl_14": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\nRevenues\t13787\t27349\t41239\t81807\nNet income (loss)\t(1226)\t1231\t(15247)\t4626\n", "q10k_tbl_15": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nBeginning balance\t(4666)\t(4229)\t(3452)\t(4214)\t\t\t\t\t\t\nOther comprehensive income (loss) due to foreign currency translation net of tax\t349\t(221)\t(460)\t(236)\t\t\t\t\t\t\nReclassification of amounts to income relating to APAC discontinued operations net of tax\t183\t0\t(222)\t0\t\t\t\t\t\t\nEnding balance\t(4134)\t(4450)\t(4134)\t(4450)\t\t\t\t\t\t\n", "q10k_tbl_16": "Three Months Ended September 30 2020\tTravelzoo North America\tTravelzoo Europe\tJack's Flight Club\tElimination\tConsolidated\nRevenues from unaffiliated customers\t9002\t3798\t987\t0\t13787\nIntersegment revenues (expenses)\t141\t(141)\t0\t0\t0\nTotal net revenues\t9143\t3657\t987\t0\t13787\nOperating profit (loss)\t(696)\t(757)\t250\t0\t(1203)\n", "q10k_tbl_17": "Three Months Ended September 30 2019\tTravelzoo North America\tTravelzoo Europe\tJack's Flight Club\tElimination\tConsolidated\nRevenues from unaffiliated customers\t14444\t9432\t0\t(43)\t23833\nIntersegment revenues (expenses)\t895\t(938)\t0\t43\t0\nTotal net revenues\t15339\t8494\t0\t0\t23833\nOperating profit (loss)\t2620\t815\t0\t(43)\t3392\n", "q10k_tbl_18": "Nine Months Ended September 30 2020\tTravelzoo North America\tTravelzoo Europe\tJack's Flight Club\tElimination\tConsolidated\nRevenues from unaffiliated customers\t25805\t12706\t2615\t(8)\t41118\nIntersegment revenues (expenses)\t237\t(245)\t0\t8\t0\nTotal net revenues\t26042\t12461\t2615\t0\t41118\nOperating profit (loss)\t(6374)\t(3781)\t(3013)\t(8)\t(13176)\n", "q10k_tbl_19": "Nine Months Ended September 30 2019\tTravelzoo North America\tTravelzoo Europe\tJack's Flight Club\tElimination\tConsolidated\nRevenues from unaffiliated customers\t50074\t29619\t0\t(94)\t79599\nIntersegment revenues (expenses)\t1776\t(1870)\t0\t94\t0\nTotal net revenues\t51850\t27749\t0\t0\t79599\nOperating profit (loss)\t10673\t3536\t0\t(94)\t14115\n", "q10k_tbl_20": "As of September 30 2020\tTravelzoo North America\tTravelzoo Europe\tJack's Flight Club\tElimination\tConsolidated\nLong-lived assets\t1243\t256\t0\t0\t1499\nTotal assets excluding discontinued operations\t122067\t84361\t5797\t(121247)\t90978\n", "q10k_tbl_21": "As of December 31 2019\tTravelzoo North America\tTravelzoo Europe\tElimination\tConsolidated\nLong-lived assets\t2598\t263\t0\t2861\nTotal assets excluding discontinued operations\t66057\t74604\t(90084)\t50577\n", "q10k_tbl_22": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nTravelzoo North America\t\t\t\t\t\t\t\t\t\t\nTravel\t8706\t12899\t23772\t44470\t\t\t\t\t\t\nLocal\t437\t2440\t2270\t7380\t\t\t\t\t\t\nTotal Travelzoo North America revenues\t9143\t15339\t26042\t51850\t\t\t\t\t\t\nTravelzoo Europe\t\t\t\t\t\t\t\t\t\t\nTravel\t3449\t7727\t11442\t24804\t\t\t\t\t\t\nLocal\t208\t767\t1019\t2945\t\t\t\t\t\t\nTotal Travelzoo Europe revenues\t3657\t8494\t12461\t27749\t\t\t\t\t\t\nJack's Flight Club\t987\t0\t2615\t0\t\t\t\t\t\t\nConsolidated\t\t\t\t\t\t\t\t\t\t\nTravelzoo Travel\t12155\t20626\t35214\t69274\t\t\t\t\t\t\nTravelzoo Local\t645\t3207\t3289\t10325\t\t\t\t\t\t\nJack's Flight Club\t987\t0\t2615\t0\t\t\t\t\t\t\nTotal revenues\t13787\t23833\t41118\t79599\t\t\t\t\t\t\n", "q10k_tbl_23": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nRevenue\t\t\t\t\t\t\t\t\t\t\nUnited States\t8345\t13817\t23753\t47041\t\t\t\t\t\t\nUnited Kingdom\t3095\t4335\t10189\t14930\t\t\t\t\t\t\nGermany\t1386\t2830\t4148\t9262\t\t\t\t\t\t\nRest of the world\t961\t2851\t3028\t8366\t\t\t\t\t\t\nTotal revenues\t13787\t23833\t41118\t79599\t\t\t\t\t\t\n", "q10k_tbl_24": "\tSeptember 30\tDecember 31\n\t2020\t2019\nUnited States\t1025\t2359\nRest of the world\t474\t502\nTotal long-lived assets\t1499\t2861\n", "q10k_tbl_25": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\nRevenues\t0\t1672\t970\t4915\nCost of revenues\t0\t128\t6\t294\nGross profit\t0\t1544\t964\t4621\nOperating expenses:\t\t\t\t\nSales and marketing\t0\t2266\t1712\t6591\nProduct development\t0\t44\t0\t124\nGeneral and administrative\t69\t1412\t3413\t3412\nTotal operating expenses\t69\t3722\t5125\t10127\nLoss from operations\t(69)\t(2178)\t(4161)\t(5506)\nOther income (loss) net\t(161)\t(170)\t217\t(428)\nLoss before income taxes\t(230)\t(2348)\t(3944)\t(5934)\nIncome tax expense\t0\t(90)\t0\t(121)\nNet loss\t(230)\t(2258)\t(3944)\t(5813)\n", "q10k_tbl_26": "\tSeptember 30 2020\tDecember 31 2019\nASSETS\t\t\nCash cash equivalents and restricted cash\t301\t832\nAccounts receivable net\t115\t1797\nDeposits\t0\t9\nPrepaid expenses and other\t36\t208\nDeposits and other\t2\t248\nOperating lease right-of-use assets\t0\t746\nProperty and equipment net\t0\t121\nTotal assets from discontinued operations\t454\t3961\nLIABILITIES\t\t\nAccounts payable\t729\t1057\nAccrued expenses and other\t767\t1188\nDeferred revenue\t13\t118\nOperating lease right-of-use liabilities\t0\t772\nTotal liabilities from discontinued operations\t1509\t3135\n", "q10k_tbl_27": "\tNine Months Ended\t\n\tSeptember 30\t\n\t2020\t2019\nNet cash used in operating activities\t(1821)\t(5324)\nNet cash used in investing activities\t0\t(60)\n", "q10k_tbl_28": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\nOperating lease cost\t1011\t995\t3423\t3337\nShort-term lease cost\t6\t45\t19\t771\nVariable lease cost\t227\t329\t779\t925\nSublease income\t(84)\t(84)\t(252)\t(252)\nTotal lease cost\t1160\t1285\t3969\t4781\n", "q10k_tbl_29": "\t\tSeptember 30 2020\tDecember 31 2019\nAssets:\t\t\t\n\tOperating lease right-of-use assets\t9076\t8140\nLiabilities:\t\t\t\n\tOperating lease liabilities\t3988\t4847\n\tLong-term operating lease liabilities\t11425\t7920\n\tTotal operating lease liabilities\t15413\t12767\nWeighted average remaining lease term (years)\t\t7.21\t4.50\nWeighted average discount rate\t\t3.7%\t3.4%\n", "q10k_tbl_30": "Years ending December 31\t\n2020 (excluding the nine months ended September 30 2020)\t1216\n2021\t3642\n2022\t2282\n2023\t1875\n2024\t1423\nThereafter\t6975\nTotal lease payments\t17413\nLess interest\t(2000)\nPresent value of operating lease liabilities\t15413\n", "q10k_tbl_31": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nRevenues\t100.0%\t100.0%\t100.0%\t100.0%\t\t\t\t\t\t\nCost of revenues\t21.2\t12.0\t18.9\t10.6\t\t\t\t\t\t\nGross profit\t78.8\t88.0\t81.1\t89.4\t\t\t\t\t\t\nOperating expenses:\t\t\t\t\t\t\t\t\t\t\nSales and marketing\t50.2\t50.2\t59.1\t48.5\t\t\t\t\t\t\nProduct development\t4.3\t6.0\t6.3\t6.1\t\t\t\t\t\t\nGeneral and administrative\t33.0\t17.6\t40.6\t17.1\t\t\t\t\t\t\nImpairment of intangible assets and goodwill\t0\t0\t7.1\t\t\t\t\t\t\t\nTotal operating expenses\t87.5\t73.8\t113.1\t71.7\t\t\t\t\t\t\nOperating income (loss)\t(8.7)\t14.2\t(32.0)\t17.7\t\t\t\t\t\t\nOther income (expense) net\t(0.3)\t0.2\t(0.5)\t0.1\t\t\t\t\t\t\nIncome (loss) from continuing operations before income taxes\t(9.0)\t14.4\t(32.5)\t17.8\t\t\t\t\t\t\nIncome tax expense (benefit)\t(1.8)\t3.6\t(5.0)\t4.5\t\t\t\t\t\t\nIncome (loss) from continuing operations\t(7.2)\t10.8\t(27.5)\t13.3\t\t\t\t\t\t\nIncome (loss) from discontinued operations net of taxes\t(1.7)\t(9.5)\t(9.6)\t(7.3)\t\t\t\t\t\t\nNet income (loss)\t(8.9)\t1.3\t(37.1)\t6.0\t\t\t\t\t\t\nNet income (loss) attributable to non-controlling interest\t0.9\t0\t(2.7)\t0\t\t\t\t\t\t\nNet income (loss) attributable to Travelzoo\t(9.8)%\t1.3%\t(34.4)%\t6.0%\t\t\t\t\t\t\n", "q10k_tbl_32": "\tThree Months Ended\t\n\tSeptember 30\t\n\t2020\t2019\nNorth America\t\t\nTotal members (1)\t16480000\t17630000\nAverage cost per acquisition of a new member\tN/A\t2.20\nRevenue per member (2)\t1.16\t3.96\nRevenue per employee (3)\t169000\t368000\nMobile application downloads\t3771000\t3636000\nSocial media followers\t3267000\t3232000\nEurope\t\t\nTotal members (1)\t8865000\t9121000\nAverage cost per acquisition of a new member\tN/A\t2.19\nRevenue per member (2)\t1.25\t4.22\nRevenue per employee (3)\t120000\t249000\nMobile application downloads\t2134000\t2033000\nSocial media followers\t900000\t889000\nJack's Flight Club\t\t\nTotal members\t1691000\t0\nConsolidated\t\t\nTotal members (1)\t30518000\t30273000\nAverage cost per acquisition of a new member\tN/A\t2.33\nRevenue per member (2)\t1.05\t3.79\nRevenue per employee (3)\t147000\t272000\nMobile application downloads\t6748000\t6487000\nSocial media followers\t4167000\t4729000\n", "q10k_tbl_33": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nTravelzoo North America\t\t\t\t\t\t\t\t\t\t\nTravel\t8706\t12899\t23772\t44470\t\t\t\t\t\t\nLocal\t437\t2440\t2270\t7380\t\t\t\t\t\t\nTotal Travelzoo North America revenues\t9143\t15339\t26042\t51850\t\t\t\t\t\t\nTravelzoo Europe\t\t\t\t\t\t\t\t\t\t\nTravel\t3449\t7727\t11442\t24804\t\t\t\t\t\t\nLocal\t208\t767\t1019\t2945\t\t\t\t\t\t\nTotal Travelzoo Europe revenues\t3657\t8494\t12461\t27749\t\t\t\t\t\t\nJack's Flight Club\t987\t0\t2615\t0\t\t\t\t\t\t\nConsolidated\t\t\t\t\t\t\t\t\t\t\nTravelzoo Travel\t12155\t20626\t35214\t69274\t\t\t\t\t\t\nTravelzoo Local\t645\t3207\t3289\t10325\t\t\t\t\t\t\nJack's Flight Club\t987\t0\t2615\t0\t\t\t\t\t\t\nTotal revenues\t13787\t23833\t41118\t79599\t\t\t\t\t\t\n", "q10k_tbl_34": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\n\t(In thousands)\t\t(In thousands)\t\t\t\t\t\t\t\nRevenue\t9143\t15339\t26042\t51850\t\t\t\t\t\t\nOperating profit (loss)\t(696)\t2620\t(6374)\t10673\t\t\t\t\t\t\nOperating profit (loss) as a % of revenue\t(7.6)%\t17.1%\t(24.5)%\t20.6%\t\t\t\t\t\t\n", "q10k_tbl_35": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\n\t(In thousands)\t\t(In thousands)\t\nRevenue\t3657\t8494\t12461\t27749\t\t\t\t\t\t\nOperating profit (loss)\t(757)\t815\t(3781)\t3536\t\t\t\t\t\t\nOperating profit (loss) as a % of revenue\t(20.7)%\t9.6%\t(30.3)%\t12.7%\t\t\t\t\t\t\n", "q10k_tbl_36": "\tNine Months Ended September 30\t\n\t2020\t2019\n\t(In thousands)\t\nNet cash provided by operating activities\t37584\t1926\nNet cash used in investing activities\t(1361)\t(1023)\nNet cash used in financing activities\t(5342)\t(7056)\nEffect of exchange rate changes on cash cash equivalents and restricted cash\t393\t(395)\nNet increase (decrease) in cash cash equivalents and restricted cash\t31274\t(6548)\n", "q10k_tbl_37": "Exhibit Number\tDescription\t\n3.1\t0\tCertificate of Incorporation of Travelzoo (Incorporated by reference to our Pre-Effective Amendment No. 6 to our Registration Statement on Form S-4 (File No. 333-55026) filed February 14 2002)\n3.2\t0\tCertificate of Amendment of Certificate Incorporation of Travelzoo (File No. 000-50171) filed May 10 2017)\n3.3\t0\tTravelzoo's Certificate of Incorporation to Authorize a Reduction of the Authorized Number of Shares of Our Common Stock from 40000000 to 20000000 Shares\n3.4\t0\tBy-laws of Travelzoo (Incorporated by reference to our Pre-Effective Amendment No. 6 to our Registration Statement on Form S-4 (File No. 333-55026) filed February 14 2002).\n10.1\t0\tForm of Director and Officer Indemnification Agreement (Incorporated by reference to Exhibit 10.1 on Form 10-Q (File No. 000-50171) filed November 9 2007)\n31.1‡\t0\tCertification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\n31.2‡\t0\tCertification of Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\n32.1†\t0\tCertification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\n32.2†\t0\tCertification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\n101.INS†\t\tXBRL Instance Document\n101.SCH†\t\tXBRL Taxonomy Extension Schema Document\n101.CAL†\t\tXBRL Taxonomy Extension Calculation Linkbase Document\n101.DEF†\t\tXBRL Taxonomy Extension Definition Linkbase Document\n101.LAB†\t\tXBRL Taxonomy Extension Label Linkbase Document\n101.PRE†\t\tXBRL Taxonomy Extension Presentation Linkbase Document\n"}{"bs": "q10k_tbl_2", "is": "q10k_tbl_3", "cf": "q10k_tbl_5"}None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yesx No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
☒
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisited financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The number of shares of Travelzoo common stock outstanding as of November 5, 2020 was 11,310,431 shares.
Accounts receivable, less allowance for doubtful accounts of $2,841 and $1,106 as of September 30, 2020 and December 31, 2019, respectively
4,195
11,209
Prepaid income taxes
304
989
Deposits
98
105
Prepaid expenses and other
990
2,288
Assets from discontinued operations
454
3,961
Total current assets
56,569
37,295
Deposits and other
806
572
Deferred tax assets
4,415
2,051
Restricted cash
1,155
1,135
Investment in WeGo
2,101
2,484
Operating lease right-of-use assets
9,076
8,140
Property and equipment, net
1,499
2,861
Intangible assets, net
4,867
—
Goodwill
10,944
—
Total assets
$
91,432
$
54,538
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
11,296
$
6,382
Merchant payable
41,722
12,967
Accrued expenses and other
6,953
6,281
Deferred revenue
2,777
786
Operating lease liabilities
3,988
4,847
Promissory notes payable
1,700
—
Income tax payable
373
914
Liabilities from discontinued operations
1,509
3,135
Total current liabilities
70,318
35,312
PPP notes payable
3,663
—
Deferred tax liabilities
851
—
Long-term operating lease liabilities
11,425
7,920
Other long-term liabilities
473
443
Total liabilities
86,730
43,675
Commitments and contingencies
Non-controlling interest
4,633
—
Stockholders’ equity:
Common stock, $0.01 par value (20,000 shares authorized; 11,310 and 11,479 shares issued and outstanding as of September 30, 2020 and December 31, 2019)
113
115
Additional paid in capital
5,220
—
Retained earnings (accumulated deficit)
(1,130)
14,200
Accumulated other comprehensive loss
(4,134)
(3,452)
Total stockholders’ equity
69
10,863
Total liabilities and stockholders’ equity
$
91,432
$
54,538
See accompanying notes to unaudited condensed consolidated financial statements.
4
TRAVELZOO
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Revenues
$
13,787
$
23,833
$
41,118
$
79,599
Cost of revenues
2,924
2,852
7,768
8,389
Gross profit
10,863
20,981
33,350
71,210
Operating expenses:
Sales and marketing
6,929
11,967
24,311
38,605
Product development
592
1,434
2,586
4,856
General and administrative
4,545
4,188
16,709
13,634
Impairment of intangible assets and goodwill
—
—
2,920
—
Total operating expenses
12,066
17,589
46,526
57,095
Operating income (loss)
(1,203)
3,392
(13,176)
14,115
Other income (loss), net
(37)
32
(222)
48
Income (loss) from continuing operations before income taxes
(1,240)
3,424
(13,398)
14,163
Income tax expense (benefit)
(244)
860
(2,070)
3,596
Income (loss) from continuing operations
(996)
2,564
(11,328)
10,567
Income (loss) from discontinued operations, net of taxes
(230)
(2,258)
(3,944)
(5,813)
Net income (loss)
(1,226)
306
(15,272)
4,754
Net income (loss) attributable to non-controlling interest
125
—
(1,122)
—
Net income (loss) attributable to Travelzoo
$
(1,351)
$
306
$
(14,150)
$
4,754
Net income (loss) attributable to Travelzoo—continuing operations
$
(1,121)
$
2,564
$
(10,206)
$
10,567
Net income (loss) attributable to Travelzoo—discontinued operations
$
(230)
$
(2,258)
$
(3,944)
$
(5,813)
Income (loss) per share—basic
Continuing operations
$
(0.10)
$
0.22
$
(0.90)
$
0.89
Discontinued operations
$
(0.02)
$
(0.19)
$
(0.35)
$
(0.49)
Net income (loss) per share —basic
$
(0.12)
$
0.03
$
(1.25)
$
0.40
Income (loss) per share—diluted
Continuing operations
$
(0.10)
$
0.21
$
(0.90)
$
0.87
Discontinued operations
$
(0.02)
$
(0.19)
$
(0.35)
$
(0.49)
Net income (loss) per share—diluted
$
(0.12)
$
0.03
$
(1.25)
$
0.39
Shares used in per share calculation from continuing operations—basic
11,310
11,767
11,353
11,894
Shares used in per share calculation from discontinued operations—basic
11,310
11,767
11,353
11,894
Shares used in per share calculation from continuing operations—diluted
11,310
11,956
11,353
12,152
Shares used in per share calculation from discontinued operations—diluted
11,310
11,767
11,353
11,894
See accompanying notes to unaudited condensed consolidated financial statements.
5
TRAVELZOO
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Net income (loss)
$
(1,226)
$
306
$
(15,272)
$
4,754
Other comprehensive income (loss):
Foreign currency translation adjustment
532
(221)
(682)
(236)
Total comprehensive income (loss)
$
(694)
$
85
$
(15,954)
$
4,518
See accompanying notes to unaudited condensed consolidated financial statements.
6
TRAVELZOO
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2020
2019
Cash flows from operating activities:
Net income (loss)
$
(15,272)
$
4,754
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
1,806
999
Stock-based compensation
5,243
876
Deferred income tax
(1,747)
431
Impairment of intangible assets and goodwill
2,920
—
Loss on long-lived assets
437
—
Loss on equity investment in WeGo
474
611
Gain on promissory notes payable settlement
(1,500)
—
Net foreign currency effect
(542)
59
Provision for loss on accounts receivable, refund reserve and other
3,923
132
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
6,246
(127)
Prepaid income taxes
685
(541)
Prepaid expenses and other
1,626
(3)
Accounts payable and merchant payable
33,241
(3,971)
Accrued expenses and other
(1,381)
(442)
Deferred revenue
1,228
—
Income tax payable
(479)
(36)
Other liabilities
676
(816)
Net cash provided by operating activities
37,584
1,926
Cash flows from investing activities:
Acquisition of business, net of cash acquired
(679)
—
Other investments
(430)
(673)
Purchases of property and equipment
(252)
(350)
Net cash used in investing activities
(1,361)
(1,023)
Cash flows from financing activities:
Repurchase of common stock
(1,205)
(8,768)
Payment of promissory notes payable
(7,800)
—
Proceeds from PPP notes payable
3,663
—
Proceeds from exercise of stock options, net of taxes paid for net share settlement
—
1,712
Net cash used in financing activities
(5,342)
(7,056)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
393
(395)
Net increase (decrease) in cash, cash equivalents and restricted cash
31,274
(6,548)
Cash, cash equivalents and restricted cash at beginning of period
20,710
19,461
Cash, cash equivalents and restricted cash at end of period
$
51,984
$
12,913
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net
$
1,230
$
3,776
Right-of-use assets obtained in exchange for lease obligations—operating leases
$
3,207
$
7,578
Cash paid for amounts included in the measurement of lease liabilities
$
3,063
$
4,084
Non-cash investing and financing activities:
Issuance of promissory notes to the sellers of Jack's Flight Club
$
11,000
$
—
See accompanying notes to unaudited condensed consolidated financial statements.
7
TRAVELZOO
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands)
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Accumulated Other Comprehensive Loss
Total Stockholders’ Equity (Deficit)
Shares
Amount
Balances, January 1, 2020
11,479
$
115
$
—
$
14,200
$
(3,452)
$
10,863
Stock-based compensation expense
—
—
23
—
—
23
Repurchase and retirement of common stock
(169)
(2)
(23)
(1,180)
—
(1,205)
Foreign currency translation adjustment
—
—
—
—
(871)
(871)
Net loss–Travelzoo
—
—
—
(6,609)
—
(6,609)
Balances, March 31, 2020
11,310
113
—
6,411
(4,323)
2,201
Stock-based compensation expense
—
—
4,031
—
—
4,031
Foreign currency translation adjustment
—
—
—
—
(343)
(343)
Net loss—Travelzoo
—
—
—
(6,190)
—
(6,190)
Balances, June 30, 2020
11,310
113
4,031
221
(4,666)
(301)
Stock-based compensation expense
—
—
1,189
—
—
1,189
Foreign currency translation adjustment
—
—
—
—
532
532
Net loss—Travelzoo
—
—
—
(1,351)
—
(1,351)
Balances, September 30, 2020
11,310
$
113
$
5,220
$
(1,130)
$
(4,134)
$
69
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Accumulated Other Comprehensive Loss
Total Stockholders’ Equity
Shares
Amount
Balances, January 1, 2019
11,962
$
120
$
—
$
18,153
$
(4,214)
$
14,059
Stock-based compensation expense
—
—
163
—
—
163
Repurchase and retirement of common stock
(100)
(1)
(137)
(1,452)
—
(1,590)
Taxes paid for net share settlement of equity awards
3
—
(26)
—
—
(26)
Foreign currency translation adjustment
—
—
—
—
(89)
(89)
Net income—Travelzoo
—
—
—
3,120
—
3,120
Balances, March 31, 2019
11,865
119
—
19,821
(4,303)
15,637
Stock-based compensation expense
—
—
319
—
—
319
Repurchase and retirement of common stock
(250)
(2)
(2,055)
(2,812)
—
(4,869)
Exercise of stock options and taxes paid for net share settlement of equity awards
250
2
1,736
—
—
1,738
Foreign currency translation adjustment
—
—
—
—
74
74
Net income—Travelzoo
—
—
—
1,328
—
1,328
Balances, June 30, 2019
11,865
119
—
18,337
(4,229)
14,227
Stock-based compensation expense
—
—
394
—
—
394
Repurchase and retirement of common stock
(186)
(2)
(394)
(1,912)
—
(2,308)
Foreign currency translation adjustment
—
—
—
—
(221)
(221)
Net income—Travelzoo
—
—
—
306
—
306
Balances, September 30, 2019
11,679
$
117
$
—
$
16,731
$
(4,450)
$
12,398
See accompanying notes to unaudited condensed consolidated financial statements.
8
TRAVELZOO
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Summary of Significant Accounting Policies
(a) The Company and Basis of Presentation
Travelzoo® is a global Internet media company. We provide our 30 million members insider deals and one-of-a-kind experiences personally reviewed by one of our deal experts around the globe. We have our finger on the pulse of outstanding travel, entertainment, and lifestyle experiences. For over 20 years we have worked in partnership with more than 5,000 top travel suppliers—our long-standing relationships give Travelzoo members access to irresistible deals. Travelzoo's revenues are generated primarily from advertising fees.
Our publications and products include the Travelzoo website, the Travelzoo iPhone and Android apps, the Travelzoo Top 20® email newsletter, the Newsflashemail alert service, and the Travelzoo Network, a network of third-party websites that list travel deals published by Travelzoo (“Travelzoo” or the "Company"). Our Travelzoo website includes Local Deals and Getaways listings that allow our members to purchase vouchers for deals from local businesses such as spas, hotels and restaurants. We receive a percentage of the face value of the voucher from the local businesses.
APAC Exit
In March 2020, Travelzoo exited its loss-making Asia Pacific business. The Company’s Asia Pacific business was classified as discontinued operations at March 31, 2020. Prior periods have been reclassified to conform with the current presentation.
On June 16, 2020, in connection with its Asia Pacific exit plan, the Company completed a sale of 100% of the outstanding capital stock of Travelzoo Japan K.K, a stock company organized under the laws of Japan (“Travelzoo Japan”), to Mr. Hajime Suzuki, the former General Manager of Japan (the "Japan Buyer") for consideration of 1 Japanese Yen. The Company recorded approximately $128,000 loss upon disposal of Japan in the Condensed Consolidated Financial Statements during the nine months ended September 30, 2020. The parties also entered into a License Agreement, whereby the Travelzoo Japan obtained a license to use the intellectual property of Travelzoo exclusively in Japan in exchange for quarterly royalty payments based on net revenue over a 5 year term, with an option to renew. An interest free loan was provided to the Japan Buyer for JPY 46 million (approximately $430,000) to be repaid over 3 years which the Company recorded as other assets on the unaudited condensed consolidated balance sheet as of September 30, 2020.
Additionally, on August 24, 2020, the Company completed a sale of 100% of the outstanding capital stock of Travelzoo (Singapore) Pty Ltd, a limited company organized under the laws of Singapore (“Travelzoo Singapore”), to an unaffiliated entity, Finest Hotels Pty Ltd, a limited company organized under the laws of Australia (“AUS Buyer”), which is fully owned by Mr. Julian Rembrandt, the former General Manager of South East Asia and Australia of the Company for consideration of 1 Singapore Dollar. The parties also entered into a License Agreement, whereby the AUS Buyer obtained a license to use the intellectual property of Travelzoo exclusively in Australia, New Zealand and Singapore and non-exclusively in China and Hong Kong for quarterly royalty payments based upon net revenue over a 5 year term, with an option to renew. There was no gain or loss from the sale of Travelzoo Singapore.
WeGo Investment
The Company has a minority investment in weekengo GmbH ("WeGo"). WeGo is a technology company which provides an app and a search engine for spontaneous travelers looking for short getaways. The Company accounts for this private company investment using the equity method of accounting by recording its share of the results of WeGo in “Other income (expense)”, net on a one-quarter lag basis. In accounting for the initial investment, the Company allocated $1.0 million of its purchase price to tangible assets and allocated approximately $485,000 of the purchase price to technology-related intangible assets to be amortized over a 3-year life. The remaining $1.5 million of the purchase price was allocated to goodwill.
In February 2020, Travelzoo signed an amended investment agreement (the “Investment Agreement”) with WeGo and agreed to invest an additional $1.7 million when WeGo meets certain performance targets. The original investment agreement with WeGo was executed in April 2018 (the “Original Investment Agreement”). At that time, Travelzoo invested $3.0 million in WeGo for a 25% ownership interest. In April 2019, the Company invested an additional $673,000 in WeGo and increased the Company's ownership interest to 26.6%.
9
As of September 30, 2020, WeGo has not met the performance targets set forth in the Investment Agreement and no additional investment has been made by the Company. In connection with the Original Investment Agreement, WeGo signed an insertion order for $2.1 million in advertising services with Travelzoo in April 2018. The Company's advertising services provided to WeGo in the three months ended September 30, 2020 and 2019 were $23,000 and $130,000, respectively. The Company's advertising services provided to WeGo in the nine months ended September 30, 2020 and 2019 were $383,000 and $924,000, respectively.
During the three and nine months ended September 30, 2020, the Company recorded $51,000 and $384,000 for its share of WeGo losses, amortization of basis differences and currency translation adjustment. During the three and nine months ended September 30, 2019, the Company recorded $323,000 and $732,000 for its share of WeGo losses, amortization of basis differences and currency translation adjustment. This equity method investment is reported as a long-term investment on the Company's condensed consolidated balance sheets.
Jack’s Flight Club
In January 2020, Travelzoo acquired JFC Travel Group Co. (“Jack’s Flight Club”), which operates Jack’s Flight Club, a subscription service that provides members with information about exceptional airfares. As of September 30, 2020, Jack’s Flight Club had 1.7 million subscribers. Jack’s Flight Club’s revenues are generated by subscription fees paid by members. In June 2020, the Company renegotiated certain aspects of that certain Stock Purchase Agreement, dated as of January 13, 2020 (the “SPA”), by and among Travelzoo, Jack’s Flight Club and the sellers party thereto (the “Sellers”) with the Sellers and reached a settlement for the outstanding Promissory Notes, dated as of January 13, 2020, by and between Travelzoo and each Seller (the “Promissory Notes”). See Note 3 to the unaudited condensed consolidated financial statements for further information.
PPP Loans
On April 24, 2020 and May 5, 2020, the Company received $3.1 million and $535,000, respectively, pursuant to loans under the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the Small Business Association. The loans have a maturity of two (2) years from the disbursement of the funds and an annual interest rate of 1%. The PPP loan was recorded as long-term PPP notes payable on the unaudited condensed consolidated balance sheet as of September 30, 2020. Interest expense for the PPP notes payable of $9,000 and $16,000 for the three and nine months ended September 30, 2020, respectively, was recorded in Other income (loss), net. The Company intends to use the funds from these loan only for the purposes included in the PPP, including payroll, employee benefits, and rent, and to apply for forgiveness of a portion of the loans in compliance with the CARES Act.
Ownership
Ralph Bartel, who founded the Company and who is a Director of the Company is the sole beneficiary of the Ralph Bartel 2005 Trust, which is the controlling shareholder of Azzurro Capital Inc. (“Azzurro”). As of September 30, 2020, Azzurro is the Company's largest shareholder, holding approximately 39.5% of the Company's outstanding shares. As of September 30, 2020, Azzurro holds a proxy given to it by Holger Bartel that provides it with a total of 39.9% of the voting power.
Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial position of the Company and its results of operations and cash flows. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the year ended December 31, 2019, included in the Company’s Form 10-K filed with the SEC on March 20, 2020.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The financial results of Jack’s Flight Club have been included in our consolidated financial statements from the date of acquisition. Investments in entities where the Company does not have control, but does have significant influence, are accounted for as equity method investments.
The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other future period, and the Company makes no representations related thereto.
10
(b) Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which provides new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable. The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. This update is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For Smaller Reporting Companies (as such term is defined by the SEC), such as Travelzoo, the standard will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Entities are required to apply this update on a modified retrospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact on its financial position and results of operations.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment.” ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating the Step 2 requirement to calculate the implied fair value of goodwill. As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units' fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The ASU is effective for fiscal years beginning after December 15, 2022 for Smaller Reporting Companies, including interim periods within those fiscal years, with early adoption permitted. The Company early adopted ASU 2017-04 as of January 1, 2020 and the adoption did not have a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The guidance is effective for calendar-year public business entities in 2020. Early adoption is permitted. The adoption did not have a material impact on the Company’s financial position, results of operations and cash flows.
(c) Significant Accounting Policies
Below are a summary of the Company's significant accounting policies. For a comprehensive description of our accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2019.
Business Combinations
The purchase price of an acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is allocated to goodwill. The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The Company records the net assets and results of operations of an acquired entity from the acquisition date and adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more information as to facts and circumstances existing at the acquisition date impacting asset valuations and liabilities assumed. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.
Identifiable intangible assets
Upon acquisition, identifiable intangible assets are recorded at fair value and are carried at cost less accumulated amortization. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. The carrying values of all intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The Company evaluated intangible assets in the first quarter of 2020 due to the coronavirus (COVID-19) pandemic and recorded an impairment expense of $810,000. The Company did not identify any indicators of impairment during the second and third quarters of 2020.
11
Goodwill
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. Goodwill is evaluated for impairment annually, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. In testing goodwill for impairment, the Company first uses a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company performs an impairment test by comparing the book value of net assets to the fair value of the reporting units. The Company evaluated goodwill in the first quarter of 2020 due to the COVID-19 pandemic and recorded an impairment expense of $2.1 million. The Company did not identify any indicators of impairment during the second and third quarters of 2020.
Leases
The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The lease payments used to determine the operating lease assets may include lease incentives and stated rent increases. The Company does not include options to extend or terminate until it is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate. The Company elected not to recognize leases with an initial term of 12 months or less on its unaudited condensed consolidated balance sheets.
The Company’s leases are reflected in operating lease ROU assets, operating lease liabilities and long-term operating lease liabilities in our unaudited condensed consolidated balance sheets. The lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company also has a real estate lease agreement which is subleased to a third party. The Company recognizes sublease income in “Other income (expense), net”, on a straight-line basis over the lease term in its condensed consolidated statements of income.
Certain Risks and Uncertainties
The Company’s business is subject to risks associated with its ability to attract and retain advertisers and offer products or services on compelling terms to our members. The global outbreak of COVID-19 is having an unprecedented impact on the global travel and hospitality industries. Governmental authorities have implemented numerous measures to try to contain the virus, including restrictions on travel, quarantines, shelter-in-place orders, business restrictions and complete shut-downs. The measures implemented to contain COVID-19 have had, and are expected to continue to have, a significant negative effect on our business, financial condition, results of operations and cash flows.
The Company’s cash, cash equivalents and accounts receivable are potentially subject to concentration of credit risk. Cash and cash equivalents are placed with financial institutions that the management believes are of high credit quality. The accounts receivables are derived from revenue earned from customers located in the U.S. and internationally. During the nine months ended September 30, 2020, the Company experienced the adverse impact of COVID-19. Many of the Company's advertising partners paused, canceled, and stopped advertising with the Company. Additionally, there has been a significant level of cancellations for the Company's hotel partners and travel package partners as well as refund requests for our vouchers with the Company’s restaurant and spa partners. The Company has modified its policies and will continue to adopt new policies as the situation evolves. However, the uncertainties of the pandemic, such as its duration and severity, will likely negatively impact and continue to negatively impact our partners and customers. As of September 30, 2020, we had negative working capital of $13.7 million primarily due to an increase in accounts payable related to merchants from the sale of vouchers. The payable to merchants is generally due upon redemption of the vouchers. The vouchers have maturities that begin in 2020 through December 2022, and we believe that redemption patterns may be delayed for international vouchers under the current environment. Based on current projections of redemption activity, we expect that cash on hand as of September 30, 2020 will be sufficient to provide for working capital needs for at least the next twelve months. However, if redemption activity is more accelerated, or if we are not able to reduce our operating losses, we may need to obtain additional financing to meet our working capital needs in the future. We believe that we could obtain additional financing if needed, but there can be no assurance that financing will be available on terms that are acceptable to us, if at all. As of September 30, 2020 and December 31, 2019, the Company did not have any customers that accounted for 10% or more of accounts receivable.
Cash, Cash Equivalents and Restricted Cash
Restricted cash includes cash and cash equivalents that is restricted through legal contracts, regulations or our intention to use the cash for a specific purpose. Our restricted cash primarily relates to cash held for letters of credit for real estate leases.
12
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets to the total amounts shown in the unaudited condensed consolidated statements of cash flows:
September 30,
December 31,
2020
2019
Cash and cash equivalents
$
50,528
$
18,743
Restricted cash
1,155
1,135
Cash, cash equivalents and restricted cash–discontinued operations
301
832
Total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows
$
51,984
$
20,710
The Company’s restricted cash was included in noncurrent assets as of September 30, 2020 and December 31, 2019.
Revenue Recognition
On January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" (Topic 606), using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The Company's revenues are primarily advertising fees generated from the publishing of travel and entertainment deals on the Travelzoo website, in the Top 20 email newsletter, in Newsflash and through the Travelzoo Network. The Company also generates transaction-based revenues from the sale of vouchers through our Local Deals and Getaways products and operation of a hotel booking platform and limited offerings of vacation packages. The Company's disaggregated revenues are included in “Note 9: Segment Reporting and Significant Customer Information”.
For fixed-fee website advertising, the Company recognizes revenues ratably over the contracted placement period.
For the Top 20 email newsletter and other email products, the Company recognizes revenues when the emails are delivered to its members.
The Company offers advertising on a cost-per-click basis, which means that an advertiser pays the Company only when a user clicks on an advertisement on Travelzoo properties or Travelzoo Network members’ properties. For these customers, the Company recognizes revenues each time a user clicks on the ad.
The Company also offers advertising on other bases, such as cost-per-impression, which means that an advertiser pays the Company based on the number of times their advertisement is displayed on Travelzoo properties, email advertisements, Travelzoo Network properties, or social media properties. For these customers, the Company recognizes revenues each time an advertisement is shown or email delivered.
For transaction based revenues, including products such as Local Deals, Getaways, hotel platform and vacation packages, the Company evaluates whether it is the principal (i.e., report revenue on a gross basis) versus an agent (i.e., report revenue on a net basis). The Company reports transaction revenue on a net basis because the supplier is primarily responsible for providing the underlying service, and we do not control the service provided by the supplier prior to its transfer to the customer.
For Local Deals and Getaways products, the Company earns a fee for acting as an agent for the sale of vouchers that can be redeemed for services with third-party merchants. Revenues are presented net of the amounts due to the third-party merchants for fulfilling the underlying services and an estimated amount for future refunds. Since the second quarter of 2020, the Company expanded its vouchers refund policy in order to entice customers given the current economic climate to fully refundable until the voucher expires or is redeemed by the customer. The Company now offers fully refundable refunds for vouchers that have not been redeemed or expired. The expiration dates of vouchers range between October 2020 through December 2022. The Company estimated the refund reserve by using historical and current refund rates by product and by merchant location to calculate the estimated future refunds. As of September 30, 2020, $2.3 million were reserved for vouchers sold which is recorded as a reduction of revenues and is reflected as a current liability in Accrued expenses and other on the condensed consolidated balance sheet. Certain merchant contracts allow the Company to retain the proceeds from unredeemed vouchers. With these contracts, the Company estimates the value of vouchers that will ultimately not be redeemed and records the estimate as revenues in the same period.
13
Jack’s Flight Club revenue is generated from paid subscriptions by members. Subscription options are quarterly, semi-annually, and annually. We recognize the revenue on a pro-rated basis based upon the subscription option.
Commission revenue related to hotel platform is recognized ratably over the period of guest stay, net of an allowance for cancellations based upon historical patterns. For arrangements for booking non-cancelable reservations where the Company’s performance obligation is deemed to be the successful booking of a hotel reservation, we record revenue for the commissions upon completion of the hotel booking.
The Company’s contracts with customers may include multiple performance obligations in which the Company allocates revenues to each performance obligation based upon its standalone selling price. The Company determines standalone selling price based on its overall pricing objectives, taking into consideration the type of services, geographical region of the customers, normal rate card pricing and customary discounts. Standalone selling price is generally determined based on the prices charged to customers when the product is sold separately.
The Company relies upon the following practical expedients and exemptions allowed for in the ASC 606. The Company expenses sales commissions when incurred because the amortization period would be one year or less. These costs are recorded in sales and marketing expenses. In addition, the Company does not disclose the value of unsatisfied performance obligations for (a) contracts with an original expected length of one year or less and (b) contracts for which it recognizes revenues at the amount to which it has the right to invoice for services performed.
Travelzoo deferred revenue primarily consists of customer prepayments and undelivered performance obligations related to the Company’s contracts with multiple performance obligations. At December 31, 2019, $786,000 was recorded as deferred revenue, of which $17,000 and $344,000was recognized as revenue during the three and nine months ended September 30, 2020, respectively.
Note 2: Net Income (Loss) Per Share
Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed by adjusting the weighted-average number of common shares outstanding for the effect of dilutive potential common shares outstanding during the period. Potential common shares included in the diluted calculation consist of incremental shares issuable upon the exercise of outstanding stock options calculated using the treasury stock method.
14
The following table sets forth the calculation of basic and diluted net income per share (in thousands, except per share amounts):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Numerator:
Net income (loss) attributable to Travelzoo—continuing operations
$
(1,121)
$
2,564
$
(10,206)
$
10,567
Net income (loss) attributable to Travelzoo—discontinued operations
$
(230)
$
(2,258)
$
(3,944)
$
(5,813)
Denominator:
Weighted average common shares—basic
11,310
11,767
11,353
11,894
Effect of dilutive securities: stock options
—
189
—
258
Weighted average common shares—diluted
11,310
11,956
11,353
12,152
Income (loss) per share—basic
Continuing operations
$
(0.10)
$
0.22
$
(0.90)
$
0.89
Discontinued operations
(0.02)
(0.19)
(0.35)
(0.49)
Net income (loss) per share —basic
$
(0.12)
$
0.03
$
(1.25)
$
0.40
Income (loss) per share—diluted
Continuing operations
$
(0.10)
$
0.21
$
(0.90)
$
0.87
Discontinued operations
(0.02)
(0.19)
(0.35)
(0.49)
Net income (loss) per share—diluted
$
(0.12)
$
0.03
$
(1.25)
$
0.39
For the three and nine months ended September 30, 2020, options to purchase 3.4 million shares of common stock were not included in the computation of diluted net income per share because of the net loss. For the three and nine months ended September 30, 2019, options to purchase 1.1 million shares of common stock were not included in the computation of diluted net income per share because the effect would have been anti-dilutive.
Note 3: Acquisition
On January 13, 2020, Travelzoo entered into the SPA with the shareholders of Jack’s Flight Club for the purchase of up to 100% of the outstanding capital stock of Jack’s Flight Club (the “Shares”). Pursuant to the SPA, on January 13, 2020, the Sellers sold 60% of the Shares to the Company for an aggregate purchase price of $12.0 million, $1.0 million of which was paid in cash and $11.0 million of which was paid in Promissory Notes. The Promissory Notes contain an interest rate of 1.6% per annum and a due date of January 31, 2020, with a one-time right to extend the maturity date up to April 30, 2020 with a principal payment of $1.0 million on January 31, 2020, which the Company exercised. The remaining 40% of the Shares are subject to a call/put option exercisable by the Company or the Sellers, as applicable, on or around January 1, 2021, subject to the terms and conditions set forth in the SPA.
On June 3, 2020, the Company renegotiated the SPA with the Sellers of Jack’s Flight Club and reached a negotiated settlement. The Company recorded adjustments accordingly, however, these adjustments are not considered measurement period adjustments to the purchase consideration since there is not a clear and direct link to the consideration transferred in the SPA entered into on January 13, 2020.
The strategic rationale for the Jack’s Flight Club acquisition was to expand Jack’s Flight Club’s membership to Travelzoo members worldwide, so the members from Travelzoo could also sign up to receive offers from Jack’s Flight Club.
The acquisition has been accounted for using the acquisition method in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill. The acquisition related costs were not significant and were expensed as incurred.
15
Purchase Price Allocation
The purchase price allocation is based on estimates, assumptions and third-party valuations. The aggregate purchase price and allocation was as follows (in thousands):