We'll always have Paris, Travelzoo (Nasdaq: TZOO ) .
The travel-deals publisher posted disappointing quarterly results this morning, even though strong growth in Europe is partly offsetting the sting of an uninspiring performance closer to home.
Revenue climbed a mere 6% to $39.3 million, short of the 14% top-line spurt that analysts were targeting. Adjusted earnings, on the other hand, clocked in at $0.42 a share -- ahead of both the $0.37 a share it served up a year earlier and the $0.41 a share in net income that Wall Street was projecting.
It's a story of two different continents here.
North American revenue climbed just 4%, and adjusted operating income fell from $9.3 million to $7.1 million. If it wasn't for Travelzoo's push for local deals, travel revenue actually would've slipped 4%. Things are looking far better in Europe where revenue climbed 17% and adjusted operating income more than tripled.
The problem is that North America accounts for 72% of the company's 21.8 million subscribers and for 73% of its revenue.
Add it all up and Travelzoo is not the same performer it was just three months ago when revenue climbed 23% in its holiday quarter and profitability grew even faster.
The softness could explain why sources were telling Reuters last week that the company was in the process of hiring a financial advisor to explore strategic alternatives, which may include a sale of the company.
"We provide no comment on this topic," was the company's response during the call. For those scoring at home, this is not a denial. The smart money has to be on the company putting itself up for sale sooner rather than later.
There is potential in Travelzoo's picky approach to following Groupon (Nasdaq: GRPN ) into selling pre-paid vouchers for discounted travel, dining, and spa experiences. Unlike Groupon and its fractured financials, Travelzoo is generating profitable revenue growth in this niche with operating margins of 24%.
Cracking the daily-deals code that continues to puzzle Groupon may be reason enough for Travelzoo to smoke out a buyer willing to pay a reasonable premium if it does indeed officially put itself into play. There's definitely a good argument for priceline.com (Nasdaq: PCLN ) -- after apparently failing to duplicate Travelzoo's success with its PriceBreakers missives -- making a play on Travelzoo. Another company to watch is Yahoo! (Nasdaq: YHOO ) . The cash-rich (but growth-poor) dot-com giant may have commented about cutting dozens of segments loose earlier this week, but it could try to overcome its failure in acquiring Groupon a couple of years ago by snapping up a company that is managing daily deals campaigns profitably.
Either way, Travelzoo's ho-hum quarter can be seen as an indication that it has hit the point where it needs a larger dot-com to take it to the next level.
Feed the bears
Travelzoo has been a disappointment since I recommended it to Rule Breakers newsletter subscribers until this morning's pop, so now may be a good time to discover the next Rule-Breaking multibagger. It's a free report. Want it? Get it.