TZOO: Travelzoo Disappoints

From William Trent, CFA of Stock Market Beat

Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March 31, 2007, with revenue of $19.7 million, an increase of 17% year-overyear. Net income was $4.1 million, with diluted earnings per share (EPS) of $0.25, up from $0.24 in the prior year period.

Analysts were expecting the company to earn $0.32 on $20 million in sales. The reason for the miss, as explained on the conference call, was increased sales and marketing expense:

Total sales and marketing expenses were $7.9 million, up from $6.5 million in both Q1 2006 and Q4 2006. Sales and marketing expenses as a percentage of revenue increased to 42.5% in Q1 2007, from 39.3% in Q1 2006.

The increase from Q1 2006 was primarily due to increased salary expenses associated with sales and marketing staff, increased spending on marketing for Super Search, and increased spending on brand marketing campaigns.

The shares were trading down 16% in after-hours trading.

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