Financial

Travelzoo Reports Fourth Quarter, Year-End 2004 Financial Results

Travelzoo Inc. (NASDAQ: TZOO) reported record revenues and record pre-tax profit for the fourth quarter and year ended December 31, 2004.

Travelzoo Earnings per share for the fourth quarter ended December 31, 2004 were $0.11 per basic share and $0.09 per diluted share.


Fourth Quarter 2004 Financial Highlights:

-- Revenues increased by 102% from same period last year

-- Net income increased by 281% from same period last year

-- Pre-tax profit margin of 36.5%

Travelzoo Inc. reported revenues of $10.5 million for the fourth quarter ended December 31, 2004, an increase of 102% over revenues of $5.2 million for the same period in 2003, and a quarterly sequential increase of 11% over revenues of approximately $9.5 million for the quarter ended September 30, 2004. All revenues were generated from the sale of online advertising.

Income before income taxes for the fourth quarter ended December 31, 2004 was approximately $3.8 million or 36% of revenues, up from approximately $1.0 million, or 20% of revenues, in the same period in 2003.

The company reported net income of approximately $1.7 million for the fourth quarter of 2004 compared to net income of $453,000 for the same period in 2003.

Reported net income in the fourth quarter of 2004 included a charge of approximately $977,000 related to a program under which the company makes cash payments to persons who establish that they were former stockholders of Travelzoo.com Corporation, and who failed to submit requests for shares in Travelzoo Inc. within the required time period. These expenses were included in general and administrative expense and were treated as having no recognizable tax benefit. This resulted in an increase to the effective income tax rate for the company. The effective income tax rate for the fourth quarter ended December 31, 2004 was 55%. The company expects expenses related to the program to decrease in future periods.

Revenues for the year ended December 31, 2004 were $33.7 million compared to $18.0 million for 2003, an 87% increase.

Net income for 2004 was $6.0 million, a 194% increase over net income of $2.1 million for 2003. Diluted net income per share was $0.33 in 2004 compared to $0.10 in 2003.

Income before income taxes for 2004 was approximately $11.2 million, or 33% of revenues, compared to approximately $3.8 million, or 21% of revenues, for 2003.



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