Travelzoo Inc., a global Internet media company, today announced financial results for the fourth quarter ended December 31, 2008, with revenue of $19.9 million, an increase of 4% year-over-year. Net loss was $129,000 with diluted loss per share of $(0.01), down from net income of $46,000 and diluted earnings per share of $0.00 in the prior-year period.

“Travelzoo performed well in Europe and in North America in the fourth quarter, despite an increasingly difficult economic environment,” said Holger Bartel, CEO of Travelzoo. “In Asia Pacific, we have a lot more work to do, but I am excited by Travelzoo’s opportunities.”

North America business segment revenue decreased 2% year-over-year and grew 8% quarter-over-quarter to $17.2 million. North America reported an operating profit of $3.7 million, or 21.5% of revenue, down from an operating profit of $6.4 million, or 36.3% of revenue, in the prior-year period.

Europe business segment revenue grew 65% year-over-year to $2.4 million. Revenue decreased 8% quarter-over-quarter due to currency translations. In local currency terms, revenue grew 114% year-over-year and 11% quarter-over-quarter. Europe reported an operating loss of $1.3 million, compared to an operating loss of $1.9 million in the prior-year period. Travelzoo began operations in the U.K. in May 2005, in Germany in September 2006, and in France in March 2007. In May 2008, Travelzoo began publishing its Web site and its weekly Top 20^® list in Spain, after having operated a sales office in Barcelona since November 2006.

Asia Pacific business segment revenue was $269,000, up from $207,000 in the prior quarter and up from $8,000 in the prior-year period. Asia Pacific reported an operating loss of $1.9 million, compared to an operating loss of $2.3 million in the prior quarter and an operating loss of $2.1 million in the prior-year period. Travelzoo began operations in Hong Kong in April 2007, in Japan in September 2007, in China in October 2007 and in Australia and Taiwan in December 2007.

Travelzoo had a total unduplicated number of newsletter subscribers of 14.6 million as of December 31, 2008, up 2.0 million, or 16% from December 31, 2007. In North America, subscribers grew year-over-year from 10,996,000 to 11,283,000, or 3%. In Europe, subscribers grew year-over-year from 1,381,000 to 2,223,000, or 61%. In Asia Pacific, subscribers grew from 214,000 to 1,108,000, or 418%.

Income tax expense was $1.1 million compared to $2.7 million in the prior-year period. The effective income tax rate was 113%, up from 98% in the prior-year period. The operating losses from the Asia Pacific business segment, the Europe business segment and the operations in Canada were treated as having no recognizable tax benefit.

Travelzoo used $441,000 of cash for operating activities. Accounts receivable increased $1.5 million sequentially and increased $1.6 million over the prior-year period to $11.6 million. Accounts payable increased $436,000 sequentially and increased $1.6 million over the prior-year period to $6.6 million. Capital expenditures were $916,000, up from $292,000 in the prior year period. Travelzoo exited the quarter with $14.2 million in cash and cash equivalents.

Travelzoo will host a conference call to discuss fourth quarter results at 5:00 p.m. ET today. A live Webcast can be accessed through Travelzoo’s investor relations Web site at www.travelzoo.com/ir.

Travelzoo is a global Internet media company. Travelzoo’s media properties, which reach more than 14 million travel enthusiasts in the U.S., Australia, Canada, China, France, Germany, Hong Kong, Japan, Spain, Taiwan and the U.K., include the Travelzoo^®Web site (www.travelzoo.com), the Top 20^® list, the Newsflash™ e-mail alert service, the Travelzoo Network™, the SuperSearch™ search tool, and the Fly.com™ search engine. Travelzoo publishes offers from more than 1,000 advertisers. Travelzoo’s deal experts review offers to find the best travel deals and confirm their true value. Travelzoo’s global headquarters is in New York City.

Certain statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. 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 press release that are not historical facts. When used in this press release, 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 undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release. Travelzoo and Top 20 are registered trademarks of Travelzoo Inc. All other company and product names mentioned are trademarks of their respective owners.

	Three months ended December 31,					Year ended December 31,
	2008			2007		2008			2007
Revenues	$	19,879		$	19,114	$	81,404		$	78,911
Cost of revenues		963			288		2,996			957
Gross profit		18,916			18,826		78,408			77,954
Operating expenses:
Sales and marketing		11,638			10,425		49,135			41,440
General and administrative		6,769			5,946		26,162			15,890
Total operating expenses		18,407			16,371		75,297			57,330

Income from operations		509			2,455		3,111			20,624
Other income and expense:
Interest income		21			205		298			1,309
Gain on foreign currency		432			76		500			178
Income before income taxes		962			2,736		3,909			22,111
Income taxes		1,091			2,690		8,025			13,002
Net income (loss)	$	(129	)	$	46	$	(4,116	)	$	9,109

Basic net income (loss) per share	$	(0.01	)	$	0.00	$	(0.29	)	$	0.61
Diluted net income (loss) per share		(0.01	)		0.00		(0.29	)		0.57

Shares used in computing basic net income (loss) per share		14,285			14,250		14,273			14,847
Shares used in computing diluted net income (loss) per share		14,285			15,484		14,273			16,074

	December 31, 2008			December 31, 2007
ASSETS
Cash and cash equivalents	$	14,179		$	22,641
Accounts receivable, net		11,582			9,969
Deposits		226			272
Prepaid expenses and other current assets		2,992			1,982
Deferred tax assets		1,089			1,393
Total current assets		30,068			36,257
Deposits, less current portion		341			349
Restricted cash		875			—
Property and equipment, net		4,259			622
Intangible assets, net		45			58
Total assets	$	35,588		$	37,286

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		6,605			4,960
Accrued expenses		4,962			4,608
Deferred revenue		703			450
Deferred rent		125			37
Total current liabilities		12,395			10,055

Other non-current liabilities		2,430			1,329

Common stock		143			143
Additional paid-in capital		185			—
Accumulated other comprehensive loss		(1,388	)		(180	)
Retained earnings		21,823			25,939
Total stockholders’ equity		20,763			25,902
Total liabilities and stockholders’ equity	$	35,588		$	37,286

	Three months ended December 31,						Year ended December 31,
	2008			2007			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(129	)	$	46		$	(4,116	)	$	9,109
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		258			62			667			193
Deferred income taxes		1,035			584			1,035			584
Provision for losses on accounts receivable		73			4			316			(48	)
Tax benefit from exercise of stock options		—			—			(110	)		—
Gain on foreign currency		(432	)		(76	)		(500	)		(178	)
Changes in operating assets and liabilities:
Accounts receivable		(1,869	)		(596	)		(2,443	)		(2,614	)
Deposits		24			(204	)		25			(300	)
Prepaid expenses and other current assets		(406	)		(894	)		(916	)		(1,465	)
Accounts payable		425			(771	)		1,054			2,110
Accrued expenses		514			1,511			877			2,404
Deferred revenue		64			(20	)		314			(302	)
Deferred rent		(18	)		38			828			109
Income tax payable		—			—			—			3
Other non-current liabilities		20			111			(356	)		111
Net cash provided by (used in) operating activities		(441	)		(205	)		(3,325	)		9,716

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(916	)		(292	)		(3,867	)		(627	)
Purchase of restricted cash		—			—			(875	)		—
Purchase of intangible assets		—			(31	)		—			(36	)
Net cash used in investing activities		(916	)		(323	)		(4,742	)		(663	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		—			—			75			—
Tax benefit from exercise of stock options		—			—			110			—
Repurchase of common stock		—			—			—			(19,822	)
Net cash provided by (used in) financing activities		—			—			185			(19,822	)
Effect of exchange rate on cash and cash equivalents		(300	)		(84	)		(580	)		(5	)

Net decrease in cash and cash equivalents		(1,657	)		(612	)		(8,462	)		(10,774	)
Cash and cash equivalents at beginning of period		15,836			23,253			22,641			33,415
Cash and cash equivalents at end of period		14,179			22,641			14,179			22,641

Supplemental disclosure of cash flow information:
Cash paid for income taxes net of refunds received	$	850		$	2,930		$	8,193		$	13,334

Three months ended December 31, 2008	North America		Europe			Asia Pacific			Elimination			Consolidated
Revenue from unaffiliated customers	$	17,220	$	2,390		$	269		$	—		$	19,879
Intersegment revenue		16		12			—			(28	)		—
Total net revenues		17,236		2,402			269			(28	)		19,879
Operating income (loss)	$	3,702	$	(1,307	)	$	(1,887	)	$	1		$	509


Three months ended December 31, 2007	North America		Europe			Asia Pacific			Elimination			Consolidated
Revenue from unaffiliated customers	$	17,656	$	1,450		$	8		$	—		$	19,114
Intersegment revenue		20		9			—			(29	)		—
Total net revenues		17,676		1,459			8			(29	)		19,114
Operating income (loss)	$	6,419	$	(1,906	)	$	(2,059	)	$	1		$	2,455



Year ended December 31, 2008	North America		Europe			Asia Pacific			Elimination			Consolidated
Revenue from unaffiliated customers	$	71,245	$	9,572		$	587		$	—		$	81,404
Intersegment revenue		94		51			—			(145	)		—
Total net revenues		71,339		9,623			587			(145	)		81,404
Operating income (loss)	$	21,118	$	(7,809	)	$	(10,201	)	$	3		$	3,111



Year ended December 31, 2007	North America		Europe			Asia Pacific			Elimination			Consolidated
Revenue from unaffiliated customers	$	73,061	$	5,842		$	8		$	—		$	78,911
Intersegment revenue		171		14			—			(185	)		—
Total net revenues		73,232		5,856			8			(185	)		78,911
Operating income (loss)	$	28,959	$	(5,172	)	$	(3,166	)	$	3		$	20,624