8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event

reported):  October 28, 2009

Travelzoo Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware (State or Other Jurisdiction of Incorporation) 000-50171 (Commission File Number) 36-4415727 (I.R.S. Employer Identification Number)

590 Madison Avenue, 37^th Floor, New York, New York 10022

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (212) 484-4900

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.    Results of Operations and Financial Condition.

On October 28, 2009, the Registrant reported its third quarter 2009 financial results. A copy of the Registrant’s press release containing this information is being furnished as Exhibit 99.1 to this report on Form 8-K and is incorporated herein by reference.

The information furnished pursuant to Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Exchange Act.

Item 9.01.    Financial Statements and Exhibits.

(d)     Exhibits. See Exhibit Index.

SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TRAVELZOO INC. (Registrant)
Date:   October 28, 2009	By:	/s/ Wayne Lee
		Wayne Lee Chief Financial Officer

Exhibit Index

Exhibit Description

99.1	Press Release dated October 28, 2009.
99.2	Investor Presentation dated October 28, 2009.

EX-99.1

Exhibit 99.1

Travelzoo
590 Madison Avenue 37th Floor
New York, NY 10022


Media Contact: Mindy Joyce (212) 521-4218
mjoyce@travelzoo.com  

FOR IMMEDIATE RELEASE

Travelzoo Reports Third Quarter 2009 Results

NEW YORK, October 28, 2009 -- Travelzoo Inc. (NASDAQ: TZOO):

• Revenue of $23.6 million, up 27% year-over-year

• Operating profit from continuing operations of $2.3 million, up 15% year-over-year

• Income from continuing operations of $0.08 per share, up from $0.03 in the prior-year period

• Net loss per share of ($0.02) compared to ($0.11) in the prior-year period

• Income tax rate of 50%

Travelzoo Inc., a global Internet media company, today announced financial results for the third quarter ended September 30, 2009, with revenue of $23.6 million, an increase of 27% year-over-year. Operating profit from continuing operations was $2.3 million. Income from continuing operations was $1.3 million, with diluted income per share from continuing operations of $0.08, up from diluted income per share from continuing operations of $0.03 in the prior-year period. Revenue, operating profit and income from continuing operations for all periods exclude the results of Travelzoo’s Asia Pacific business segment which are reported as discontinued operations. Including discontinued operations, diluted net loss per share was ($0.02), down from diluted net loss per share of ($0.11) in the prior-year period.

“We are pleased to report a 27% revenue growth year-over-year. Growth was particularly strong in Europe. North America revenue saw the strongest year-over-year growth in over two years,” said Holger Bartel, CEO of Travelzoo. “We also increased operating profits in spite of record

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investments into subscriber acquisition and expenses related to the launch of Fly.com earlier this year.”

North America

North America business segment revenue grew 18% year-over-year to $18.9 million. Operating profit was $3.6 million, or 19.2% of revenue, down from an operating profit of $4.2 million, or 26.4% of revenue, in the prior-year period.

Europe

Europe business segment revenue grew 82% year-over-year to $4.8 million. In local currency terms, revenue grew 110% year-over-year. Operating loss was $1.3 million, compared to an operating loss of $2.2 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 weekly Top 20^® list in Spain, after having operated a sales office in Barcelona since November 2006.

Subscribers

Travelzoo had a total unduplicated number of newsletter subscribers in North America and Europe of 16.3 million as of September 30, 2009, up 3.0 million, or 23%, from September 30, 2008, and up 1.1 million, or 7%, from June 30, 2009. In North America, total unduplicated number of subscribers was 13.0 million as of September 30, 2009, up 1.9 million, or 17%, from September 30, 2008 and up 658,000, or 5%, from June 30, 2009. In Europe, total unduplicated number of subscribers was 3.3 million as of September 30, 2009, up 1.2 million, or 55%, from September 30, 2008 and up 442,000, or 16%, from June 30, 2009.

Income Taxes

Income tax expense was $1.3 million, compared to $1.5 million in the prior-year period for continuing operations. The effective income tax rate was 50%, down from 74% in the prior-year period. Operating losses from our Europe business segment and our discontinued Asia Pacific business segment were treated as having no recognizable tax benefit.

Asset Management

During the third quarter, Travelzoo generated $664,000 of cash from operating activities. Accounts receivable decreased by $284,000 quarter-over-quarter and increased by $1.8 million over the prior-year period to $11.8 million. Accounts payable decreased by $233,000 quarter-over-

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quarter and increased by $1.5 million over the prior-year period to $7.4 million. Capital expenditures were $405,000, up from $320,000 in the prior quarter and down from $1.6 million in the prior-year period. Travelzoo exited the third quarter with $15.7 million in cash and cash equivalents.

Conference Call

Travelzoo will host a conference call to discuss third quarter results at 11:00 a.m. ET today. Please visit http://www.travelzoo.com/earnings to

• download the management presentation (PDF format) to be discussed in the conference call;

• access the Web cast.

About Travelzoo

Travelzoo is a global Internet media company. Travelzoo's media properties, which reach more than 18 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 around the world. 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.

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Travelzoo Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
Revenues	$	23,576		$	18,600		$	70,194		$	61,207
Cost of revenues		1,464			819			4,140			1,934
Gross profit		22,112			17,781			66,054			59,273
Operating expenses:
Sales and marketing		13,437			10,326			37,450			32,696
General and administrative		6,395			5,480			18,420			15,662
Total operating expenses		19,832			15,806			55,870			48,358
Operating income from continuing operations		2,280			1,975			10,184			10,915
Other income and expense:
Interest income		8			59			40			266
Gain (loss) on foreign currency		320			(69)			17			70
Income from continuing operations before income taxes		2,608			1,965			10,241			11,251
Income taxes		1,308			1,451			5,292			7,064
Income from continuing operations		1,300			514			4,949			4,187
Loss from discontinued operations, net of tax		(1,595	)		(2,303	)		(5,097	)		(8,175	)
Net loss	$	(295	)	$	(1,789	)	$	(148	)	$	(3,988	)
Basic net income (loss) per share from:
Continuing operations	$	0.08		$	0.04		$	0.30		$	0.29
Discontinued operations	$	(0.10	)	$	(0.17	)	$	(0.31	)	$	(0.57	)
Net loss	$	(0.02	)	$	(0.13	)	$	(0.01	)	$	(0.28	)
Diluted net income (loss) per share from:
Continuing operations	$	0.08		$	0.03		$	0.30		$	0.26
Discontinued operations	$	(0.10	)	$	(0.14	)	$	(0.31	)	$	(0.50	)
Net loss	$	(0.02	)	$	(0.11	)	$	(0.01	)	$	(0.25	)
Shares used in computing basic net income (loss) per share		16,444			14,285			16,396			14,268
Shares used in computing diluted net income (loss) per share		16,452			16,166			16,413			16,220

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Travelzoo Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

	September 30,			December 31,
	2009			2008
ASSETS
Cash and cash equivalents	$	15,694		$	14,179
Accounts receivable, net		11,772			11,397
Deposits		270			185
Prepaid expenses and other current assets		2,046			2,356
Deferred tax assets		1,089			1,089
Assets held for sale		1,050			831
Total current assets		31,921			30,037
Deposits, less current portion		302			292
Restricted cash		875			875
Property and equipment, net		4,167			4,100
Intangible assets, net		1,509			18
Total assets	$	38,774		$	35,322
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		7,408			6,434
Accrued expenses		4,089			3,913
Deferred revenue		836			666
Deferred rent		129			101
Liabilities related to assets held for sale		1,498			1,281
Total current liabilities		13,960			12,395
Deferred tax liabilities		465			465
Long-term tax liabilities		918			900
Deferred rent, less current portion		659			799
Common stock		164			143
Additional paid-in capital		2,322			185
Accumulated other comprehensive loss		(1,388	)		(1,388	)
Retained earnings		21,674			21,823
Total stockholders' equity		22,772			20,763
Total liabilities and
stockholders' equity	$	38,774		$	35,322

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Travelzoo Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

In thousands)

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(295)		$	(1,789	)	$	(148)		$	(3,988	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		531			177			1,457			409
Provision for losses on accounts receivable		(14	)		177			302			244
Tax benefit from exercise of stock options		–			–			–			(110	)
Net foreign currency effects		(320	)		–			(17	)		–
Changes in operating assets and liabilities:
Accounts receivable		217			1,084			(766	)		(573	)
Deposits		(50	)		(41	)		(75	)		1
Prepaid expenses and other current assets		(17	)		(708	)		1,618			(510	)
Accounts payable		(429	)		(1,703	)		1,600			628
Accrued expenses		268			(265	)		(101	)		363
Deferred revenue		49			(55	)		153			250
Deferred rent		(25	)		132			(127	)		846
Income tax payable		749			–			(1,196	)		–
Other non-current liabilities		–			(409)			19			(376)
Net cash provided by (used in) operating activities		664			(3,400)			2,719			(2,816)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(405	)		(1,594	)		(1,608	)		(2,961	)
Purchase of restricted cash		–			–			–			(875	)
Purchase of intangible asset		–			–			(1,760)			–
Net cash used in investing activities		(405)			(1,594)			(3,368)			(3,826)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		–			–			2,158			75
Tax benefit from exercise of stock options		–			–			–			110
Net cash provided by financing activities		–			–			2,158			185
Effect of exchange rate on cash and cash equivalents		(109)			(187)			6			(348)
Net increase (decrease) in cash and cash equivalents		150			(5,181	)		1,515			(6,805	)
Cash and cash equivalents at beginning of period		15,544			21,017			14,179			22,641
Cash and cash equivalents at end of period		15,694			15,836			15,694			15,836
Supplemental disclosure of cash flow information:
Cash paid for income taxes net of refunds received	$	553		$	2,325		$	4,732		$	7,343

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Travelzoo Inc.

Segment Information

(Unaudited)

(In thousands)

Three months ended September 30, 2009	North America		Europe		Elimination		Consolidated
Revenue from unaffiliated customers	$	18,830	$	4,746	$	-	$	23,576
Intersegment revenue		84		4		(88)		–
Total net revenues		18,914		4,750		(88)		23,576
Operating income (loss)		$ 3,630		$(1,317)		$ (33)		$ 2,280
Three months ended September 30, 2008		North America		Europe		Elimination		Consolidated
Revenue from unaffiliated customers	$	16,006	$	2,594	$	-	$	18,600
Intersegment revenue		13		9		(22)		–
Total net revenues		16,019		2,603		(22)		18,600
Operating income (loss)		$ 4,222		$ (2,248)		$ 1		$ 1,975
Nine months ended September 30, 2009		North America		Europe		Elimination		Consolidated
Revenue from unaffiliated customers	$	58,473	$	11,720	$	–	$	70,193
Intersegment revenue		208		30		(238)		–
Total net revenues		58,681		11,750		(238)		70,193
Operating income (loss)		$ 13,898		$ (3,661)		$ (53)		$ 10,184
Nine months ended September 30, 2008		North America		Europe		Elimination		Consolidated
Revenue from unaffiliated customers	$	54,025	$	7,183	$	–	$	61,208
Intersegment revenue		77		39		(116)		–
Total net revenues		54,102		7,222		(116)		61,208
Operating income (loss)		$ 17,415		$ (6,502)		$ 2		$ 10,915

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Travelzoo Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

	Quarters Ended
	Sept 30,			Jun 30,			Mar 31,			Dec 31,			Sept 30,			Jun 30,			Mar 31,
	2009			2009			2009			2008			2008			2008			2008
Revenues	$	23,576		$	23,638		$	22,980		$	19,610		$	18,600		$	21,680		$	20,928
Cost of revenues		1,464			1,458			1,218			909			819			599			516
Gross profit		22,112			22,180			21,762			18,701			17,781			21,081			20,412
Operating expenses:
Sales and marketing		13,437			12,599			11,414			10,601			10,326			10,625			11,745
General and administrative		6,395			6,211			5,814			5,704			5,480			5,540			4,643
Total operating expenses		19,832			18,810			17,228			16,305			15,806			16,165			16,388
Operating income from continuing operations		2,280			3,370			4,534			2,396			1,975			4,916			4,024
Other income and expense:
Interest income		8			13			19			18			59			74			133
Gain (loss) on foreign currency		320			(116	)		(187	)		424			(69	)		(2	)		141
Income from continuing operations before income taxes		2,608			3,267			4,366			2,838			1,965			4,988			4,298
Income taxes		1,308			1,659			2,325			1,113			1,451			2,993			2,619
Income from continuing operations		1,300			1,608			2,041			1,725			514			1,995			1,679
Loss from discontinued operations, net of tax		(1,595	)		(1,799	)		(1,703	)		(1,853	)		(2,303	)		(3,188	)		(2,685	)
Net loss	$	(295	)	$	(191	)	$	338		$	(128	)	$	(1,789	)	$	(1,193	)	$	(1,006	)
Basic net income (loss) per share from:
Continuing operations	$	0.08		$	0.10		$	0.13		$	0.12		$	0.04		$	0.14		$	0.12
Discontinued operations	$	(0.10	)	$	(0.11	)	$	(0.10	)	$	(0.13	)	$	(0.16	)	$	(0.22	)	$	(0.19	)
Net loss	$	(0.02	)	$	(0.01	)	$	0.02		$	(0.01	)	$	(0.13	)	$	(0.08	)	$	(0.07	)
Diluted net income (loss) per share from:
Continuing operations	$	0.08		$	0.10		$	0.13		$	0.11		$	0.03		$	0.12		$	0.10
Discontinued operations	$	(0.10	)	$	(0.11	)	$	(0.10	)	$	(0.12	)	$	(0.14	)	$	(0.20	)	$	(0.17	)
Net loss	$	(0.02	)	$	(0.01	)	$	0.02		$	(0.01	)	$	(0.11	)	$	(0.07	)	$	(0.06	)
Shares used in computing basic net income (loss) per share		16,444			16,444			16,300			14,285			14,285			14,269			14,250
Shares used in computing diluted net income (loss) per share		16,452			16,452			16,306			16,098			16,166			16,238			16,255

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EX-99.2

Exhibit 99.2

Travelzoo Inc.
Third Quarter 2009 Performance and
Growth Strategy Overview

October 28, 2009

Please read this management presentation together
with the Company’s press release issued earlier today
announcing the Company’s third quarter 2009 financial
results and in conjunction with the Company’s recent
Annual Report and Quarterly Results as filed with the
Securities and Exchange Commission (SEC).

IMPORTANT NOTICE

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 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.

Part 1:
Third Quarter 2009 Financial Performance

Part 2:
Growth Strategy Overview

Revenues
(continuing operations)

$ millions

In a challenging economy, Travelzoo was able to close Q3 2009
with significant growth across our most important metrics.

Q3 2009 FINANCIAL PERFORMANCE

Q3

2008

Q3

2009

Q3

2008

Q2

2009

Q3

2009

Q3

2008

Q3

2009

EPS

(continuing operations)

$ per share

Subscribers
(continuing operations)

Millions

18.6

23.6

13.2

15.2

16.3

+27%

+167%

+7%

+24%

$0.03

$0.08

With the pending sale of our Asia Pacific assets, the business segment
is now being treated as discontinued operations.

2008

2009

Sale of Asia Pacific
assets expected to close
on October 31.

Asia Pacific business
segment treated as
discontinued operations

2008 EPS from
continuing operations:
$0.37, compared to
previously reported loss
of $(0.29) per share

EPS FROM CONTINUING OPERATIONS
$ per share

Q1

Q2

Q3

Q4

0.10

0.13

0.03

0.11

0.13

0.10

0.08

N/A

Q1

2008

2009

2009

2008

2009

2008

North America

$ millions

18.9

20.0

19.2

19.7

18.9

16.0

Europe

$ millions

Europe
(local currency)

£ millions

+6%

Year-over-year revenue growth accelerated in both North America and
Europe.

QUARTERLY REVENUES BY SEGMENT

2.0

3.0

2.6

4.0

4.8

2.6

1.0

2.1

1.3

2.6

2.9

1.4

Q2

Q3

+3%

+18%

+45%

+57%

+82%

+100%

+100%

+110%

Operating income increased in spite of significantly higher spending on
subscriber acquisition and the launch of Fly.com.

Increased investment
levels in Q3 2009:

Subscriber acquisition
up by
$1.3 million
versus Q3 2008

Launch of Fly.com
added over
$1.6 million
in expenses, com-pared
to Q3 2008

Q3

2008

Q3

2009

2.0

2.3

Q3

2008

Q3

2009

4.2

3.6

Q3

2008

Q3

2009

(1.3)

Q3 OPERATING INCOME – 2009 VS. 2008
$ millions

Total*

North America

Europe

(2.2)

*  From continuing operations

The effective tax rate continues to be high, as we treat losses from
Europe as not having a recognizable tax benefit.

Q3 2009 INCOME AND TAX EXPENSES*
$ millions

0.3

2.6

-1.3

1.3

-1.3

3.6

Operating
income
North
America

Operating
income
Europe

Non-
operating
income**

Income
from con-
tinuing
operations

before
income
taxes

Income
taxes

Income
from con-
tinuing
operations,
net of tax

Effective
tax income
rate 50%

* From continuing operations

** Interest income and foreign currency gain

Cash management during Q3 2009 improved slightly versus last year
and the previous quarter.

Q2

2009

Q3

2009

49

48

DSO
(Days Sales Outstanding)

# of days

Q3

2008

Q2

2009

15.8

15.5

Cash Balance
at End of Quarter*

$ millions

DSO AND CASH BALANCES

Q3

2008

52

Q3

2009

15.7

*  Includes cash and cash equivalents

While headcount has increased, productivity has remained relatively
stable.

HEADCOUNT AND AVERAGE ANNUALIZED REVENUE PER EMPLOYEE*

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2
2009

Q3
2009

140

147

156

163

168

174

185

Europe

North America

39

44

52

56

60

65

68

101

103

104

107

108

109

117

Headcount

Average
annualized
revenues per
employee
(in $ thousands)

$598

$590

$477

$481

$547

$543

$510

*  Continuing operations only

OPERATING EXPENSES – NORTH AMERICA DIVISION
$ millions and as percentage of revenues

Q3

2008

Q3

2009

3.8

4.7

7.3

9.2

Sales &
Marketing

General &
Administrative

24%

46%

25%

49%

Operating expenses in North America increased, driven primarily by
increased spend on subscriber acquisition, SuperSearch, and Fly.com.

11.1

13.9

70%

74%

Major reasons for Y/Y increase
in operating expenses

Impact

Increased subscriber
acquisition

$0.6 million

Launch of Fly.com

$1.0 million

Increased marketing
for SuperSearch

$0.8 million

OPERATING EXPENSES – EUROPE DIVISION
$ millions and as percentage of revenues

Q3

2008

Q3

2009

1.7

1.7

3.1

4.3

Sales &
Marketing

General &
Administrative

66%

117%

35%

90%

In Europe, operating expenses as a percentage of revenues
declined in spite of increased spend on subscriber acquisition.

4.8

6.0

183%

125%

Major reasons for Y/Y increase
in operating expenses

Impact

Increased subscriber
acquisition

$0.8 million

Larger sales force
and production team

$0.4 million

During Q3 2009 we further accelerated subscriber acquisition as we see
audience growth as investment into future revenues and profits.

Subscribers to Travelzoo publications
in North America & Europe

Millions

Quarter-over-quarter
comparison: Q3 09 vs. Q2 08

Millions

YE
2005

YE
2006

YE
2007

YE
2008

QE

Q3 2009

Total
sub-
scribers
at end of
Q2 2009

New
sub-
scribers

Sub-
scribers
removed

Total
sub-
scribers
at end of
Q3 2009

9.7

10.9

12.4

13.5

16.3

15.2

1.6

-0.5

16.3

Improved execution and lower media prices helped us drive down
acquisition costs for new subscribers significantly year-over-year.

Q3 2008

North
America

Europe

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q3 2008

1.3

Subscriber
acquisition expense

$ millions

1.3

1.6

1.9

1.9

1.1

0.5

0.9

1.9

1.1

3.73

Acquisition cost
per subscriber

$/subscriber

2.75

2.29

2.15

1.80

4.52

3.32

3.09

3.53

2.74

361

New subscribers
added

Thousands

488

720

885

1,076

254

160

297

542

408

+44%

-52%

+199%

+67%

-22%

+114%

Note: In Q3 2009 subscriber acquisition in Europe had  an increased focus on Germany, where acquisition costs are higher.

Part 1:
Third Quarter 2009 Financial Performance

Part 2:
Growth Strategy Overview

International Expansion
Multiply the Travelzoo business in attractive international
markets; build global brand and global content

Expand scope of Travelzoo® business
Expand Travelzoo product offerings and content into
entertainment (e.g., Broadway shows, sports events)

Fly.com
Meta-search identified as opportunity with attractive
economics and great synergies with Travelzoo business

TRAVELZOO’S GROWTH STRATEGY

Our growth strategy is built on three pillars that include both
geographical and product expansion.

In 2005, Travelzoo’s subscriber base resided almost exclusively in the U.S.  
We just started growing internationally.

TRAVELZOO SUBSCRIBERS BY COUNTRY AT END OF 2005Millions

U.K.

0.3

Worldwide:

9.7 million subscribers

U.S.
9.4

Germany

0.4

From 2005 through 2008, we expanded primarily in Europe and launched
operations in Asia Pacific.

TRAVELZOO SUBSCRIBERS BY COUNTRY AT END OF 2008Millions

Canada
0.9

U.K.

1.1

Spain

0.1

France

0.6

Greater
China*

0.7

Japan

0.3

Australia

0.1

U.S.
10.4

U.S.
10.4

*  Includes Hong Kong, China, and Taiwan

Worldwide:

14.6 million subscribers

During 2009, we have begun re-igniting growth in North America, and
accelerated our expansion in Europe.

TRAVELZOO SUBSCRIBERS BY COUNTRY (AS OF Q3 2009)Millions

Canada
1.1

U.K.

1.5

Germany

0.7

Spain

0.4

France

0.8

Greater
China*

0.9

Japan

0.6

Australia

0.3

U.S.
12.0

*  Includes Hong Kong, Mainland China, and Taiwan

Worldwide:

18.2 million subscribers

The international expansion comes at a cost:  Subscriber acquisition as
well as losses that have no immediate tax benefit, are dragging EPS down.

OPERATING INCOME AND NET INCOME ON PER-SHARE BASIS
$ per share

0.39

(0.12)

(0.11)

0.16

0.03

0.34

0.02

(0.08)

-0.02

(0.10)

Europe

Interest &
FX gains

Europe

Taxes

Loss from
discon-
tinued
operations

EPS
net loss
per share

Operating income
excluding subscriber acquisition

Subscriber acquisition
expenses

Q3 2009 EXAMPLE

North
America

North
America

Operating
income
before
taxes

As a result of our aggressive global expansion, EPS is impacted by
increased investments in subscriber acquisition.

EARNINGS FROM CONTINUING OPERATIONS,
INCLUDING AND EXCLUDING SUBSCRIBER ACQUISITION

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Operating income excluding
subscriber acquisition expense

$0.27

$0.27

$0.44

$0.38

$0.37

- Subscriber acquisition expense

$0.15

$0.12

$0.16

$0.18

$0.23

Operating income

$0.12

$0.15

$0.28

$0.20

$0.14

+ Currency gain and interest income

-

$0.03

($0.01)

-

$0.02

Income taxes

($0.09)

($0.07)

($0.14)

($0.10)

($0.08)

Income from continuing operations,
net of tax

$0.03

$0.11

$0.13

$0.10

$0.08

Over time, audience and revenue growth appear to drive profitability.

U.K. EXAMPLE: SUBSCRIBERS, REVENUES AND OPERATING
INCOME/LOSS

Millions, and £ millions

0.3

Subscribers at Year-End*

0.6

0.8

1.1

1.5*

0.4

1.7

2.8

4.2

4.9**

(0.6)

(0.6)

(0.5)

(0.2)

0.3**

Revenues

Operating income/loss

2005

2006

2007

2008

2009*

2005

2006

2007

2008

2009**

2005

2006

2007

2008

2009**

* Subscribers at end of Q3 2009
** Q1 through Q3 only

In our international markets revenues are growing faster than expenses,
bringing us closer to our goal of profitability in each country.

COMPARISON OF REVENUE GROWTH, EXPENSES AND
OPERATING MARGINS BY COUNTRY
Percent*

U.K.

Canada

Germany

France

Spain

Year launched

2005

2006

2006

2007

2008

Revenue growth*
Q3 2009 over Q3 2008

40%

86%

240%

228%

> 1000%

Growth in expenses*

Q3 2009 over Q3 2008

25%

(8%)

33%

13%

24%

Operating margin

Q3 2007

(10%)

(22%)

> (1,000%)

n/a

n/a

Q3 2008

(6%)

(25%)

(330%)

(371%)

n/a

Q3 2009

5%

38%

(69%)

(62%)

(256%)

* Growth rates calculated based on revenues and expenses in US-dollars

Close sale of Asia Pacific assets
(Keeping option to purchase back Asia Pacific
business in the future)

Continue to grow audience in Europe, while moving
operations closer to positive income/contribution

Monetize the increased audience in North America

Aggressively sell global audience; produce global
content

Continue expansion into entertainment

Grow Fly.com audience and revenues

MANAGEMENT FOCUS Q4 2009 AND 2010