Travelzoo 2010 Annual Report Download - page 58

In North America, revenues increased $9.9 million or 13% in the year ended December 31, 2010 compared to
the year ended December 31, 2009 (see “Revenues” above). Income from operations for North America as a
percentage of revenue in the year ended December 31, 2010 increased by 3 percentage points compared to the prior
year. This was primarily due to a 4 percentage point decrease in sales and marketing expenses as a percentage of
revenue in the year ended December 31, 2010 compared to the prior year. Cost of revenues for North America
increased by $1.0 million to $6.1 million, or 7% of revenue for the year ended December 31, 2010 from
$5.1 million, or 7% of revenue. The $1.0 million increase was primarily due to a $522,000 increase in
payments made to third-party partners of the Travelzoo Network, a $262,000 increase in credit card fees, a
$217,000 increase in depreciation and maintenance costs, and a $205,000 increase in fees related to user searches on
Fly.com. Sales and marketing expenses increased to $37.0 million, or 42% of revenue for the year ended
December 31, 2010 from $35.7 million, or 46% of revenue for the year ended December 31, 2009. This
$1.2 million increase was primarily due to a $1.5 million increase in marketing expenses for Fly.com,a
$1.1 million increase in salary and employee related expenses offset by a $1.5 million decrease in advertising
to acquire new subscribers for our e-mail. General and administrative expenses for North America increased to
$19.8 million, or 23% of revenue for the year ended December 31, 2010 from $17.9 million, or 23% of revenue in
the prior year. This $1.8 million increase was primarily due to a $904,000 increase in salary and employee related
expenses, a $289,000 increase in professional services expenses, a $278,000 increase in rent, office and insurance
expense, and a $248,000 increase in bank and merchant account fees.
In North America, revenues increased $6.6 million or 9% in the year ended December 31, 2009 compared to
the year ended December 31, 2008 (see “Revenues” above). Income from operations for North America as a
percentage of revenue in the year ended December 31, 2009 decreased by 5 percentage points compared to the prior
year. This was primarily due to approximately 3 percentage point increase in cost of revenues as a percentage of
revenue in the year ended December 31, 2009 compared to the prior year. Cost of revenues for North America
increased by $2.5 million to $5.1 million for the year ended December 31, 2009 and was primarily due to a
$1.4 million increase in fees we paid related to user searches on Fly.com, an $825,000 increase in depreciation and
maintenance costs, and a $314,000 increase in payments made to third-party partners of the Travelzoo Network.
Sales and marketing expenses increased to $35.7 million for the year ended December 31, 2009 from $31.9 million
for the year ended December 31, 2008. This $3.8 million decrease was primarily due to a $2.0 million increase in
marketing expenses for Fly.com, a $1.3 million increase in advertising to acquire traffic to our websites, a
$1.3 million increase in salary and employee related expenses, and a $1.1 million increase in advertising to acquire
new subscribers for our e-mail products, offset by a $1.0 million decrease in brand marketing expense and a
$627,000 decrease in trade and other marketing expenses. General and administrative expenses for North America
increased to $17.9 million for the year ended December 31, 2009 from $15.7 million in the prior year. This
$2.2 million increase was primarily due to a $799,000 increase in salary and employee related expenses, a $645,000
increase in depreciation and amortization expense, and a $379,000 increase in professional services expenses.
Europe
2010 2009 2008
Year Ended December 31,
(In thousands)
Net revenues ......................................... $25,230 $16,339 $ 9,623
Loss from operations ................................... (1,489) (5,463) (7,809)
Loss from operations as % of revenues ...................... 6% 33% 81%
In Europe, revenues increased by $8.9 million or 54% in the year ended December 31, 2010 compared to the
year ended December 31, 2009 (see “Revenues” above). Our loss from operations in Europe was $1.5 million in the
year ended December 31, 2010 compared to $5.5 million in the year ended December 31, 2009. The $8.9 million
increase in revenues was offset by a $3.5 million increase in sales and marketing expenses, an $828,000 increase in
general and administrative expenses, and a $587,000 increase in cost of revenues. The $3.5 million increase in sales
and marketing expenses was due primarily to a $1.4 million increase in advertising to acquire traffic to our websites,
a $1.2 million increase in salary and employee related expenses, and a $625,000 increase in marketing expenses for
Fly.com. The $828,000 increase in general and administrative expenses was due primarily to a $468,000 increase in
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