Friday, February 3rd, 2006
Travelzoo (TZOO) reported Q4 results yesterday morning, and the stock fell almost 14% in subsequent trading. Excerpt from Stifel Nicholaus analyst Scott Devitt’s note to clients:
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Reports 4Q Results Below Expectations
• We assess Travelzoo’s fair value to be around current levels or $15-$18 per share in twelve months. We do not believe the business currently justifies a market cap above that level, as the sustainability of its market share is jeopardized by increasing competition stemming from low barriers to entry into the travel advertising space.
• Travelzoo exhibited a weaker than expected quarter, missing our EPS estimate of $0.14 by $0.04. The miss reflects a $584,000 loss relating to its UK subsidiary and the impact of the bankruptcy filings of two airline advertisers.
• Revenues for the quarter were up 32% year/year to $13.90 million, slightly below our estimate of $13.98 million. The U.K. business generated $380,000 in revenue during the quarter. Cash flow from operations were $2.0 million.
• For full year 2005, Travelzoo reported revenues of $50.8 million, income from operations of $14.9 million and diluted EPS of $0.45.
• One advertiser accounted for 14% of revenues in 4Q, and no other advertiser accounted for more than 10%. Travelzoo now reaches 9.7 million subscribers in the U.S. and U.K, adding about 904,000 new subscribers in the quarter.
• For 2006, we are lowering our EPS estimate from $0.70 to $0.65. For 2007, we now estimate EPS of $0.82, down from our prior estimate of $0.86. We rate shares of TZOO Hold.
Sabre (TSG), one of the largest players in the online travel market through its ownership of Travelocity and other properties, reported Q4 results yesterday. Excerpt from Stifel Nicholaus analyst Scott Devitt’s note to clients:
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Reports 4Q Results; Maintain Hold
• Sabre reported 4Q revenue of $620 million and adjusted EPS of $0.22 versus our estimates of $630 million in revenue and $0.18 adjusted EPS. The upside was driven by a tax credit in the quarter.
• Travelocity gross bookings totaled $2 billion for the quarter, up 67% versus 4Q04 results. Revenue was up 86% from the year-ago quarter to $235 million.
• We are lowering our full-year 2006 adjusted EPS estimate from $1.76 to $1.70, and lowering our revenue estimate from $3.0 billion to $2.9 billion. Our 2007 EPS estimate has been decreased from $1.93 to $1.86.
• We are maintaining our $25 fair value estimate, at the high end of the range of our sum-of-the-parts valuation analysis. Sabre shares are rated Hold.
Sabre announced 4Q05 results of adjusted EPS of $0.22 and GAAP EPS of $0.09.
Among the highlights during the quarter:
• Announced that US Airways signed a 5-year full content deal with Sabre Travel Network and Travelocity
• Signed a 5-year full content agreement with Northwest Airlines to distribute all of Northwest’s published fares and inventory, including Web fares, through the Sabre GDS
• Announced that Travelocity acquired complete ownership of ZUJI, the leading online travel company in the Asia-Pacific region
• Increased the quarterly cash dividend by 11 percent to $0.10 per share payable on Feb. 28, 2006, to shareholders of record at the close of regular trading on the New York Stock Exchange on Feb. 10, 2006
Travelocity gross bookings totaled $2 billion for the quarter, up 67% versus 4Q04 results. Revenue was up 86% from the year-ago quarter to $235 million. North American bookings accounted for about 75% of total bookings. The GAAP operating loss at Travelocity was $24 million. Fourth quarter adjusted operating income was $11 million with an operating margin of 7%, and on a GAAP basis was $9 million with an operating margin of 6%.
North America revenue was $156 million, growth of 28%. Revenue from European operations was $79 million.
The segment’s 4Q air transaction revenue grew 45%, while non-air transaction revenue recorded growth of 126% year-over-year, with year-over-year growth of 90% in hotel room nights. Packaging revenues grew 93% year/year and accounted for 24% of revenue.
For full-year 2005, Travelocity saw gross bookings of $7.446 billion, up 51% year/year (including results from both lastminute.com and ZUJI). With 83% of bookings coming from North America. Total revenue was $830 million, showing growth of 65% year/year, with $633 million from North American sales. Adjusted EBITDA was $48 million. North America saw $75 million in EBITDA, though offset by a negative $27 million in European operations. Travelocity more than doubled operating income to $27 million with a 3% operating margin on an adjusted basis. Breaking that down regionally North America grew operating income over 50% to $59 million with an operating margin of over 9% on an adjusted basis and $52 million with an 8% operating margin on a GAAP basis.
For full-year 2005, hotel room nights sold were 12.9 million, up 67% year/year, with total non-air transactions revenue growing 97% year/year. Total packaging revenues were up 98% over 2004, and accounted for 26% of total transaction revenue.
Thursday, February 2nd, 2006
Citigroup analyst Mark Mahaney on Monster’s Q4 earnings results:
• MNST reported a Beat & Raise December quarter — $267MM rev and $0.28 vs. Street at $264MM and $0.28, with 1x restructuring charges totaling $0.01. ‘06 guidance was cleanly above Street.
• Fundamentals strengthened — organic rev growth at Monster Division was 29% Y/Y vs. 30% in Sept., while EBITDA margin expanded 450 bps Y/Y to a record high 24%. Also key, Y/Y deferred rev. growth accelerated to 42% Y/Y, while Monster Division International margins hit 7.5% (12% excluding charges). The catalyst of profitability ramp in the European segment has arrived.
• We are more positive on MNST. Our estimates increase (’06 EPS goes from $1.22 to $1.24 or $1.29 excluding $0.05 new stock comp charge) and our PT rises accordingly to $51 (30X our 2007 proforma EPS of $1.69).
• We reiterate our Hold. We like the fundamentals here, but we don’t see material valuation upside from these levels (~$50 intra-day).
Did Monster’s fundamentals improve? Yes, largely. Organic Monster division revenuegrowth of 29% was modestly lower than the 30% Y/Y growth in the September quarter. Butthe EBITDA margin expanded 450 bps Y/Y to 24.0%, the highest level ever. After adjustingfor the $4MM in restructuring charges, EBITDA margins were 25.2%. Incremental marginwas also a strong 42.9%, the highest since June 2004 (47% after adjustments).
Were fundamentals better than the Street expected? Yes. Revenue of $267MM washigher than the Street’s $264MM and, although GAAP EPS from Continuing Ops. of $0.28was in-line with Street expectations, EPS would’ve been $0.01 higher without therestructuring charges.
Did the company raise guidance relative to the Street? Yes. Midpoint revenue guidancefor March is $282MM, which is above the Street’s $279MM. MNST’s EPS guidance rangeis $0.26-$0.27 vs. the Street at $0.27, but after adjusting for the $0.01 impact of stockcompensation we’ll call that a modest raise. For the full year, midpoint revenue guidance is$1,190MM and the EPS range is $1.21-$1.26 ($1.26-$1.31 ex stock compensation) vs. Streetrevenue of $1,178MM and EPS of $1.23. That’s a material EPS raise.
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