What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-08-14 · 113 added, 113 removed, 281 unchanged (45% of the section changed)

17 unchanged sentences

Our Travelzoo website includes Local Deals and Getaways listings that allow our members to purchase vouchers for deals from local businesses such as spas, hotels and restaurants.

In January and July 2022, the Company’s German branch of Travelzoo (Europe) Limited received the payment for approximately $1.2 million and $494,000, respectively, from German federal government for companies suffered Corona-related slump.

The Company recorded $1.2 million and $494,000 gain in Other income, net in the first quarter and third quarter of 2022.

The Company also received other government fundings for the three and nine months ended September 30, 2022 and 2021.

Job retention related funding from Canada was approximately $10,000 and $64,000 for the three months ended September 30, 2022 and 2021, respectively, and was approximately $164,000 and $381,000 for the nine months ended September 30, 2022 and 2021, respectively.

Job retention related funding from European locations was $0 and $31,000 for the three and nine months ended September 30, 2021, respectively.

These other government fundings were recorded against salary and related expenses.

The Company did not receive any job retention related funding from European locations for the three and nine months ended September 30, 2022.

In December 2020, the Company sold all of its shares in WeGo to trivago for a total purchase price of approximately $2.9 million, of which $196,000 was placed in escrow for one year.

The Company received the full escrow payment in January 2022 and recorded the gain in Other income, net for the first quarter of 2022.

In January 2022, the Company’s German branch of Travelzoo (Europe) Limited received the payment for approximately $1.2 million from German federal government for companies suffered Corona-related slump.

The Company recorded $1.2 million gain in Other income, net in the first quarter of 2022.

The Company also received other government fundings for the three months ended June 30, 2022 and 2021.

Job retention related funding from Canada was approximately $85,000 and $149,000 for the three months ended June 30, 2022 and 2021, respectively, and was approximately $153,000 and $317,000 for the six months ended June 30, 2022 and 2021, respectively.

Job retention related funding from European locations was $10,000 and $31,000 for the three and six months ended June 30, 2021, respectively.

These fundings were recorded against salary and related expenses.

The Company did not receive any job retention related funding from European locations for the three and six months ended June 30, 2022.

The Company sold all of its shares in WeGo to trivago for a total purchase price of approximately $2.9 million, of which $196,000 was placed in escrow for one year.

The Company received the full escrow payment in January 2022 and recorded the gain in Other income (loss), net for the first quarter of 2022.

Historically, the Company managed its business geographically and operated in three reportable segments including Asia Pacific, Europe and North America.

18 unchanged sentences

The Company now offers full refunds for vouchers that have not been redeemed or expired .

The expiration dates of vouchers range between October 2022 through December 2025 with the majority of vouchers expiring during 2023;

The expiration dates of vouchers range between July 2022 through December 2025 with the majority of vouchers expiring in 2022 and the remaining primarily expiring in 2023;

provided, that these expiration dates may sometimes be extended on a case-by-case basis.

2 unchanged sentences

The Company estimated the refund reserve by using historical and current refund rates by product and by merchant location to calculate the estimated future refunds.

As of September 30, 2022, the Company had approximately $9.6 million of unredeemed vouchers that had been sold through September 30, 2022 representing the Company’s commission earned from the sale.

The Company had estimated a refund liability of $1.9 million for these unredeemed vouchers as of September 30, 2022 which is recorded as a reduction of revenues and is reflected as a current liability in Accrued expenses and other on the consolidated balance sheet.

The Company has recorded Merchant Payables of $38.2 million as of September 30, 2022 related to unredeemed vouchers.

As of June 30, 2022, the Company had approximately $12.0 million of unredeemed vouchers that had been sold through June 30, 2022 representing the Company’s commission earned from the sale.

The Company had estimated a refund liability of $2.9 million for these unredeemed vouchers as of June 30, 2022 which is recorded as a reduction of revenues and is reflected as a current liability in Accrued expenses and other on the consolidated balance sheet.

The Company has recorded Merchant Payables of $47.9 million as of June 30, 2022 related to unredeemed vouchers.

Certain merchant contracts allow the Company to retain the proceeds from unredeemed vouchers.

74 unchanged sentences

Some of the fluctuations may be significant and have a material impact on our results of operations.

With the impact to revenues caused by the global pandemic, spending by the Company in many areas within the business was slowed or stopped, including but not limited to, marketing, technology and human resources.

With the impact to revenues caused by the global pandemic, spending by the Company in many areas within the business has been slowed or stopped, including but not limited to, marketing, technology and human resources.

For example, in 2020, the Company ceased operations in Asia Pacific, conducted employee furloughs and restructured its employees significantly.

The Company also renegotiated many of its outstanding contractual obligations with vendors and closed some ancillary office locations in order to reduce capital expenditures.

We do not anticipate that any additional cost-cutting measures will be necessary at this time, but the Board and management of the Company are continually evaluating Company spending.

While the Company has already implemented a policy governing employees returning to the office voluntarily (in jurisdictions where they are permitted to do so), which includes health, safety and cleaning protocols, the Board and management are continually evaluating the best timeframe for employees’ official return to the offices, including implementing a phased return and ongoing flexible working arrangements.

We do not anticipate that any additional cost-cutting measures will be necessary at this time, but the Board and management of the Company are continually evaluating.

The key elements of our growth strategy include building a travel and lifestyle brand with a large, high-quality user base and offering our users products that keep pace with consumer preference and technology, such as the trend toward mobile usage by consumers and toward fully refundable travel deals given the uncertainty of the global pandemic.

8 unchanged sentences

The following table sets forth, as a percentage of total revenues, the results from our operations for the periods indicated.

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

7 unchanged sentences

Total operating expenses 77.7 68.6 76.0 75.3

Operating income (loss) 1.7 (1.7) 7.7 5.0

Operating income 10.1 18.2 10.2 8.1

Other income, net 1.1 3.6 4.5 1.5

2 unchanged sentences

Income from continuing operations 6.0 15.8 9.5 4.0

Income (loss) from discontinued operations, net of taxes — (0.1) — —

Income from discontinued operations, net of taxes — 0.2 — —

Net income 6.0 16.0 9.5 4.0

4 unchanged sentences

Three Months Ended

September 30,

North America

3 unchanged sentences

Revenue per employee (3) $ 408,000 $ 397,000

Mobile application downloads 4,014,000 2,818,000

Social media followers 3,255,000 3,251,000

3 unchanged sentences

Revenue per employee (3) $ 213,000 $ 159,000

Mobile application downloads 2,261,000 2,163,000

Social media followers 898,000 898,000

5 unchanged sentences

Revenue per employee (3) $ 320,000 $ 298,000

Mobile application downloads 7,181,000 6,831,000

Social media followers 4,153,000 4,149,000

5 unchanged sentences

Local revenue includes Local Deals vouchers and entertainment offers (vouchers and direct bookings).

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

13 unchanged sentences

Travelzoo North America

North America revenues increased $835,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021.

This increase was primarily due to $590,000 increase in Travel revenues and $245,000 increase in Local revenues.

The increase in Travel revenue of $590,000 was primarily due to $2.2 million increase as a result of higher revenues from Top 20 and Newsflash, offset partially by $1.5 million decrease in Getaways revenue due to a decrease in number of vouchers sold .

The increase in Local revenues of $245,000 was primarily due to the increase in number of Local Deals vouchers sold.

North America revenues increased $1.1 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021.

This increase was primarily due to $1.0 million increase in Travel revenues and $84,000 increase in Local revenues.

The increase in Travel revenue of $1.0 million was primarily due to $9.0 million increase as a result of higher revenues from Top 20 and Newsflash , offset partially by $8.1 million decrease in Getaways revenue due to a decrease in number of vouchers sold.

North America revenues decreased $1.6 million for the three months ended June 30, 2022 from the three months ended June 30, 2021.

This decrease was primarily due to $1.6 million decrease in Travel revenues offset partially by $22,000 increase in Local revenues.

The decrease in Travel revenue of $1.6 million was primarily due to $3.5 million decrease in Getaways revenue due to decrease in number of vouchers sold, offset partially by $2.1 million increase as a result of higher revenues from Top 20 and Newsflash.

The increase in Local revenues of $22,000 was primarily due to the increase in number of Local Deals vouchers sold.

North America revenues increased $275,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021.

This increase was primarily due to $436,000 increase in Travel revenues offset by $161,000 decrease in Local revenues.

The increase in Travel revenue of $436,000 was primarily due to $6.8 million increase as a result of higher revenues from Top 20 and Newsflash , offset partially by $6.6 million decrease in Getaways revenue due to decrease in number of vouchers sold.

The decrease in Local revenues of $161,000 was primarily due to the decrease in number of Local Deals vouchers sold.

Travelzoo Europe

Europe revenues decreased $725,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 .

The decrease was primarily due to $859,000 negative impact from foreign currency movements relative to the U.S.

dollar and $131,000 decrease in Local revenue, offset partially by $265,000 increase in Travel revenues.

The increase in Travel revenue of $265,000 was primarily due to $1.5 million increase as a result of higher revenues from Top 20 and Newsflash , offset partially by $1.4 million decrease in Getaways revenue due to a decrease in number of vouchers sold.

Europe revenues increased $120,000 for the three months ended June 30, 2022 from the three months ended June 30, 2021.

The increase was primarily due to $842,000 increase in Travel revenues, offset partially by $199,000 decrease in Local revenue and $523,000 negative impact from foreign currency movements relative to the U.S.

The increase in Travel revenue of $842,000 was primarily due to $1.4 million increase as a result of higher revenues from Top 20 and Newsflash and $234,000 increase in hotel commission, offset partially by $1.2 million decrease in Getaways revenue due to decrease in number of vouchers sold.

The decrease in Local revenues of $199,000 was primarily due to the decrease in number of Local Deals vouchers sold.

Europe revenues increased $1.8 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 .

The increase was primarily due to $3.7 million increase in Travel revenues, offset partially by $287,000 decrease in Local revenues and $1.7 million negative impact from foreign currency movements relative to the U.S.

The increase in Travel revenue of $3.7 million was primarily due to $3.9 million increase as a result of higher revenues from Top 20 and Newsflash, $1.6 million increase in hotel and entertainment commissions, revenue reserve adjustment of $1.0 million and $349,000 increase in our website advertisements, offset partially by $3.4 million decrease in Getaways revenue due to a decrease in number of vouchers sold.

Europe revenues increased $2.5 million for the six months ended June 30, 2022 from the six months ended June 30, 2021.

The increase was primarily due to $3.5 million increase in Travel revenues, offset partially by $156,000 decrease in Local revenues and $836,000 negative impact from foreign currency movements relative to the U.S.

The increase in Travel revenue of $3.5 million was primarily due to $2.8 million increase as a result of higher revenues from Top 20 and Newsflash and $501,000 increase in hotel commission, offset partially by $1.3 million decrease in Getaways revenue due to decrease in number of vouchers sold.

The decrease in Local revenues of $196,000 was primarily due to the decrease in number of Local Deals vouchers sold.

2 unchanged sentences

Jack’s Flight Club's premium members pay subscription fees quarterly, semi-annually or annually to receive emails or app notifications of flight deals.

Jack’s Flight Club’s revenue increased by $51,000 and $79,000, respectively, for three and nine months ended September 30, 2022 from the three and nine months ended September 30, 2021 due to the increase of premium members.

Jack’s Flight Club’s revenue increased by $92,000 and $28,000, respectively, for three and six months ended June 30, 2022 from the three and six months ended June 30, 2021 due to the increase of premium members.

Cost of Revenues

Cost of revenues consists primarily of network expenses, including fees we pay for co-location services and depreciation and maintenance of network equipment, payments made to third-party partners of the Travelzoo Network , amortization of capitalized website development costs, credit card fees, certain estimated refunds to members and customer service costs associated with vouchers we sell and hotel bookings, and salary and related expenses associated with network operations and customer service employees .

Cost of revenues was $2.3 million and $3.0 million, respectively, for the three months ended September 30, 2022 and 2021.

Cost of revenues was $7.3 million and $8.5 million, respectively, for the nine months ended September 30, 2022 and 2021.

Cost of revenues decreased $668,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 primarily due to $324,000 decrease in credit card fees as a result of decreased voucher sales, $256,000 decrease in software license expenses and $139,000 decrease in customer service costs associated with vouchers we sell and hotel bookings.

Cost of revenues decreased $1.2 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 primarily due to $999,000 decrease in credit card fees as a result of decreased voucher sales and $435,000 decrease in network expenses, offset partially by $299,000 increase in software license expenses.

Cost of revenues consists primarily of network expenses, including fees we pay for co-location services and depreciation and maintenance of network equipment, payments made to third-party partners of the Travelzoo Network , amortization of capitalized website development costs, credit card fees, certain estimated refunds to members and customer service costs associated with vouchers we sell and hotel bookings, and salary expenses associated with network operations and customer service staf f.

Cost of revenues was $2.2 million and $2.5 million, respectively for the three months ended June 30, 2022 and 2021.

Cost of revenues was $5.0 million and $5.5 million, respectively, for the six months ended June 30, 2022 and 2021.

Cost of revenues decreased $359,000 for the three months ended June 30, 2022 from the three months ended June 30, 2021 was primarily due to $227,000 decrease in credit card fees as a result of decreased voucher sales and $133,000 decrease in network expense.

Cost of revenues decreased $545,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021 was primarily due to the decrease in credit card fees as a result of decreased voucher sales.

Operating Expenses

Sales and Marketing

Sales and marketing expenses consist primarily of advertising and promotional expenses, salary and related expenses associated with sales, marketing and production employees, expenses related to our participation in industry conferences, public relations expenses and facilities costs.

Sales and marketing expenses were $8.5 million and $7.7 million for the three months ended September 30, 2022 and 2021, respectively.

Sales and marketing expenses were $25.6 million and $21.8 million for the nine months ended September 30, 2022 and 2021, respectively.

Sales and marketing expenses consist primarily of advertising and promotional expenses, salary expenses associated with sales, marketing and production employees, expenses related to our participation in industry conferences, public relations expenses and facilities costs.

Sales and marketing expenses were $8.5 million and $7.3 million for the three months ended June 30, 2022 and 2021, respectively.

Sales and marketing expenses were $17.1 million and $14.1 million for the six months ended June 30, 2022 and 2021, respectively.

Advertising expenses consis t primarily of online advertising which we refer to as traffic acquisition cost and member acquisition costs.

For the three months ended September 30, 2022 and 2021, advertising expenses accounted for 25% and 17%, respectively, of the total sales and marketing expenses.

For the nine months ended September 30, 2022 and 2021, advertising expenses accounted for 22% and 11%, respectively, of the total sales and marketing expenses.

For the three months ended June 30, 2022 and 2021, advertising expenses accounted for 25% and 12%, respectively, of the total sales and marketing expenses.

For the six months ended June 30, 2022 and 2021, advertising expenses accounted for 21% and 8%, respectively, of the total sales and marketing expenses.

The goal of our advertising was to acquire new members to our email products, increase the traffic to our websites, increase brand awareness and increase our audience through mobile and social media channels.

Sales and marketing expenses increased $803,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021.

The increase was primarily due to $466,000 increase in marketing expenses and $409,000 increase in member acquisition costs.

Sales and marketing expenses increased $3.7 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021.

The increase was primarily due to $2.4 million increase in member acquisition costs and $1.3 million increase in marketing expenses.

Sales and marketing expenses increased $1.1 million for the three months ended June 30, 2022 from the three months ended June 30, 2021 The increase was primarily due to $910,000 increase in member acquisition costs and $159,000 increase in travel expenses.

Sales and marketing expenses increased $2.9 million for the six months ended June 30, 2022 from the six months ended June 30, 2021.

The increase was primarily due to $2.0 million increase in member acquisition costs, $506,000 increase in other marketing expenses and $389,000 increase in depreciation and amortization expenses.

Product Development

Product development expenses consist primarily of salary and related expenses associated with software development employees, fees for professional services, software maintenance, amortization, and facilities costs.

Product development expenses were $484,000 and $684,000 for the three months ended September 30, 2022 and 2021, respectively.

Product development expenses were $1.4 million and $2.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Product development expenses decreased $200,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 primarily due to a decrease in salary and headcount related expenses .

Product development expenses decreased $661,000 for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 primarily due to a $407 ,000 decrease in salary and headcount related expenses and a $151,000 decrease in facilities costs.

Product development expenses consist primarily of compensation for software development staff, fees for professional services, software maintenance, amortization, and facilities costs.

Product development expenses were $454,000 and $685,000 for the three months ended June 30, 2022 and 2021, respectively.

Product development expenses were $907,000 and $1.4 million for the six months ended June 30, 2022 and 2021, respectively.

Product development expenses decreased $231,000 for the three months ended June 30, 2022 from the three months ended June 30, 2021 primarily due to $109,000 decrease in payroll and payroll related expenses and $71,000 decrease in facilities costs.

Product development expenses decreased $461,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021 primarily due to $167,000 decrease in salary and related expenses and $161,000 decrease in facilities costs.

General and Administrative

General and administrative expenses consist primarily of salary and related expenses associated with administrative and executive employees, bad debt expense, professional service expenses, legal expenses, amortization of intangible assets, general office expense and facilities costs.

General and administrative expenses were $4.3 million and $4.6 million for the three months ended September 30, 2022 and 2021, respectively.

General and administrative expenses were $13.7 million and $14.2 million for the nine months ended September 30, 2022 and 2021, respectively.

General and administrative expenses decreased $308,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 primarily due to $881,000 decrease in salary and headcount related expenses which mainly related to the decrease of stock-based compensation expense, offset partially by $590,000 increase in professional service expenses.

General and administrative expenses decreased $445,000 for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 primarily due to $1.4 million decrease in salary and headcount related expenses which mainly related to the decrease of stock-based compensation expense, offset partially by $741,000 increase in professional service expenses and $344,000 increase in bad debt expense.

General and administrative expenses consist primarily of compensation for administrative and executive staff, bad debt expense, professional service expenses for audit and tax preparation, legal expenses, amortization of intangible assets, general office expense and facilities costs.

General and administrative expenses were $4.8 million and $5.1 million for the three months ended June 30, 2022 and 2021, respectively.

General and administrative expenses were $9.5 million and $9.6 million for the six months ended June 30, 2022 and 2021, respectively.

General and administrative expenses decreased $245,000 for the three months ended June 30, 2022 from the three months ended June 30, 2021 primarily due to decrease in payroll and payroll related expenses.

General and administrative expenses decreased $137,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021 primarily due to decrease in depreciation and amortization expenses.

Other Income, net

Other income, net consisted primarily of foreign exchange transactions gains and losses, o ur share of investment gains and losses and amortization of basis differences, sublease income, gains from PPP loan forgiveness, German federal government funding for Corona-related pandemic relief, interest income earned on cash, cash equivalents and restric ted cash as well as interest expense.

Other income, net was $836,000 and $3.3 million, respectively, for the three months ended September 30, 2022 and 2021.

The decrease of $2.5 million for the three months ended September 30, 2022 from three months ended September 30, 2021 was due primarily to the $3.2 million gain recorded as the result of the PPP loan forgiveness in the three months ended September 30, 2021, offset partially by the $494,000 German federal government funding for COVID pandemic relief in the three months ended September 30, 2022.

Other income, net was $2.5 million and $3.9 million, respectively, for the nine months ended September 30, 2022 and 2021, respectively.

The decrease of $1.4 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 was due primarily to $3.6 million gain recorded as the result of PPP loan forgiveness in the nine months ended September 30, 2021, offset partially by the $1.7 million German federal government funding for COVID pandemic relief and the $196,000 escrow payment for WeGo sale the Company received in the nine months ended September 30, 2022.

Other income, net consisted primarily of foreign exchange transactions gains and losses, our share of investment gains and losses and amortization of basis differences, sublease income, gains on extinguishment of PPP loans, interest income earned on cash, cash equivalents and restricted cash as well as interest expense.

Other income, net was $195,000 and $648,000, respectively, for the three months ended June 30, 2022 and 2021.

The decrease of $489,000 for the three months ended June 30, 2022 from three months ended June 30, 2021 was due primarily to the $429,000 gain recorded in the second quarter of 2021 as the result of partial PPP loan forgiveness.

Other income, net was $1.6 million and $518,000, respectively, for the six months ended June 30, 2022 and 2021, respectively.

The increase of $1.1 million for the six months ended June 30, 2022 from the six months ended June 30, 2021 was due primarily to the $1.2 million German federal government funding for COVID pandemic relief and the $196,000 escrow payment for WeGo sale the Company received in the six months ended June 30, 2022, offset partially by the $429,000 gain recorded in the second quarter of 2021 as the result of partial PPP loan forgiveness.

Our income is general ly taxed in the U.S., Canada and U.K.

Our income tax provision reflects federal, state and country statutory rates applicable to our worldwide income.

Income tax expense was $317,000 and $233,000, respectively, for the three months ended September 30, 2022 and 2021.

Our effective tax rate was 29% and 8%, respectively, for the three months ended September 30, 2022 and 2021.

Our effective tax rate changed for the three months ended September 30, 2022 from three months ended September 30, 2021 primarily due to other income recorded for PPP loan forgiveness in the three months ended September 30, 2021 that is exempt from tax.

Income tax expense was $2.2 million and $2.1 million, respectively, for each of the nine months ended September 30, 2022 and 2021.

Our effective tax rate was 34% and 33%, respectively, for the nine months ended September 30, 2022 and 2021.

Our effective tax rate changed for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 primarily due to changes in deferred tax assets from limitations on deductible stock-based compensation, offset by PPP loan forgiveness income exempt from tax.

Income tax expense was $928,000 and $1.1 million, respectively, for the three months ended June 30, 2022 and 2021.

Our effective tax rate was 47% and 27%, respectively, for the three months ended June 30, 2022 and 2021.

Our effective tax rate changed for the three months ended June 30, 2022 from three months ended June 30, 2021 prim arily due to other income recorded for PPP Loan forgiveness in the three months ended June 30, 2021 that is exempt from tax and changes in deferred tax assets from limitations on deductible stock-based compensation.

Income tax expense was $1.9 million for each of the six months ended June 30, 2022 and 2021.

Our effective tax rate was 36% and 58%, respectively, for the six months ended June 30, 2022 and 2021.

Our effective tax rate changed for the six months ended June 30, 2022 from the six months ended June 30, 2021 primarily due to a decrease in non-tax deductible stock compensation in the six months ended June 30, 2022.

We expect our effective tax rate to fluctuate in future periods depending on the geo graphic mix of our worldwide income or losses mainly incurred by our operations, statutory tax rate changes that may occur, existing or new uncertain tax matters that may arise and require changes in tax reserves, the use of accumulated losses to offset current taxable income and the need for valuation allowances on certain tax assets, if any.

1 unchanged sentence

Travelzoo North America

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

1 unchanged sentence

Revenue $ 12,383 $ 13,985 $ 24,079 $ 23,804

Operating profit (loss) $ 812 $ (918) $ 5,622 $ 2,654

Operating profit (loss) as a % of revenue 7.7 % (9.5) % 16.3 % 7.9 %

North America revenues increased by $835,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 (see “Revenues” above).

North America expenses decrease by $895,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021.

The decrease was primarily due to $344,000 decrease in salary and headcount related expenses, $307,000 decrease in facilities costs, $262,000 decrease in credit card fee as a result of decreased voucher sales, $200,000 decrease in software license expenses, $142,000 decrease in customer service costs associated with vouchers we sell and hotel bookings, offset partially by $384,000 increase in professional service expenses.

North America revenues in creased by $1.1 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 (see “Revenues” above).

North America expenses decreased by $1.9 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021.

The decrease was primarily due to $891,000 decrease in credit card fee as a result of decreased voucher sales, $872,000 decrease in facilities costs, $825,000 decrease in salary and headcount related expenses, offset partially by $398,000 increase in depreciation and amortization expenses and $272,000 increase in professional service expenses.

Operating profit $ 3,092 $ 3,533 $ 4,810 $ 3,572

Operating profit as a % of revenue 25.0 % 25.3 % 20.0 % 15.0 %

North America revenues decreased by $1.6 million for the three months ended June 30, 2022 from the three months ended June 30, 2021 (see “Revenues” above).

North America expenses decrease by $1.2 million for the three months ended

June 30, 2022 from the three months ended June 30, 2021.

The decrease was primarily due to $458,000 decrease in facilities costs, $313,000 decrease in payroll and payroll related expenses, $153,000 decrease in expenses from third-party partners of the Travelzoo Network, $152,000 decrease in credit card fee as a result of decreased voucher sales and $136,000 decrease in network expenses .

North America revenues i ncreased by $275,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021 (see “Revenues” above).

North America expenses decreased by $963,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021.

The decrease was primarily due to $629,000 decrease in credit card fee as a result of decreased voucher sales, $567,000 decrease in facilities costs and $482,000 decrease in payroll and payroll related expenses, offset partially by $555,000 increase in depreciation and amortization expenses.

Travelzoo Europe

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

3 unchanged sentences

Operating profit (loss) as a % of revenue (33.8) % (5.4) % (12.6) % (11.8) %

Europe revenues decreased by $725,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 (see “Revenues” above).

Europe expenses increased by $426,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 primarily due to $296,000 increase in member acquisition costs and $287,000 increase in marketing expenses.

Europe revenues increased by $1.8 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 (see “Revenues” above).

Europe expenses increased by $3.3 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 primarily due to $2.1 million increase in member acquisition costs, $518,000 increase in marketing expenses, $291,000 increase in professional service expenses and $287,000 in bad debt expense.

Europe revenues increased by $120,000 for the three months ended June 30, 2022 from the three months ended June 30, 2021 (see “Revenues” above).

Europe expenses increased by $1.4 million for the three months ended June 30, 2022 from the three months ended June 30, 2021 primarily due to increase in member acquisition costs.

Europe revenues increased by $2.5 million for the six months ended June 30, 2022 from the six months ended June 30, 2021 (see “Revenues” above).

Europe expenses increased by $2.8 million for the six months ended June 30, 2022 from the six months ended June 30, 2021 primarily due to increase in member acquisition costs.

Foreign currency movements relative to the U.S.

dollar positively impacted our local currency income from our operations in Europe by approximately $87,000 and $267,000 for the three and nine months ended September 30, 2022, respectively.

dollar positively impacted our local currency income from our operations in Europe by approximately $200,000 and $165,000 for the three and six months ended June 30, 2022, respectively.

Foreign currency movements relative to the U.S.

dollar positively impacted our local currency income from our operations in Europe by approximately $64,000 and $4,000 for the three months ended September 30, 2021, respectively.

dollar negatively impacted our local currency income from our operations in Europe by approximately $20,000 and $79,000 for the three months ended June 30, 2021, respectively.

Jack ’ s Flight Club

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

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Operating profit as a % of revenue 16.9 % 19.8 % 10.4 % 3.4 %

Jack ’ s Flight Club revenues increased by $51,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 (see “Revenues” above).

Jack ’ s Flight Club expenses in creased by $101,000 for the three months ended September 30, 2022 from the three months ended September 30, 2021 primarily due to an increase in advertising and marketing expenses.

Jack ’ s Flight Club revenues increased by $79,000 for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 (see “Revenues” above).

Jack ’ s Flight Club expenses remained consistent for the nine months ended September 30, 2022 from the nine months ended September 30, 2021, an increase in advertising and marketing expenses during the nine months ended September 30, 2022 was offset by an estimate of indirect tax expenses the Company recorded during the nine months ended September 30, 2021.

Jack ’ s Flight Club revenues increased by $92,000 for the three months ended June 30, 2022 from the three months ended June 30, 2021 (see “Revenues” above).

Jack ’ s Flight Club expenses in creased by $101,000 for the three months ended June 30, 2022 from the three months ended June 30, 2021 primarily due to an increase in marketing expenses.

Jack ’ s Flight Club revenues increased by $28,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021 (see “Revenues” above).

Jack ’ s Flight Club expenses de creased by $96,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021 primarily due to an estimate for indirect tax expenses the Company recorded during the six months ended June 30, 2021.

Liquidity and Capital Resources

As of September 30, 2022, we had $19.5 million in cash and cash equivalents, of which $9.9 million was held outside the U.S.

As of June 30, 2022, we had $25.6 million in cash and cash equivalents, of which $16.7 million was held outside the U.S.

in our foreign operations.

We also had $1.1 million in restricted cash, of which $360,000 was held outside the U.S.

in our foreign operations as of September 30, 2022.

in our foreign operations as of June 30, 2022.

If this cash is distributed to the U.S., we may be subject to additional U.S.

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Cash, cash equivalents and restricted cash decreased $18.3 million from $45.0 million as of December 31, 2021 primarily due to $17.0 million cash used in operating activities.

As of September 30, 2022 , the Company had merchant payables of $38.2 million related to unredeemed vouchers.

As of June 30, 2022 , the Company had merchant payables of $47.9 million related to unredeemed vouchers.

In the Company’s financial statements presented in this 10-Q report, following GAAP accounting principles, we classified all merchant payables as current.

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Payables to merchants are generally due upon redemption of vouchers.

The vouchers expire between October 2022 through December 2025 with the majority of vouchers expiring during 2023;

The vouchers have maturities from July 2022 through December 2025 with the majority of vouchers expiring by the end of 2022 and the remaining primarily expiring in 2023;

provided, that these expiration dates may sometimes be extended on a case-by-case basis.

Management believes that redemptions may be delayed for international vouchers in the current environment.

Based on current projections of redemption activity, we expect that cash on hand as of September 30, 2022 will be sufficient to provide for working capital needs for at least the next twelve months.

Based on current projections of redemption activity, we expect that cash on hand as of June 30, 2022 will be sufficient to provide for working capital needs for at least the next twelve months.

However, if redemption activity is more accelerated, if our business is not profitable, or if our planned targets for cash flows from operations are not met, we may need to obtain additional financing to meet our working capital needs in the future.

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The following table provides a summary of our cash flows from operating, investing and financing activities:

Nine Months Ended September 30,

Six Months Ended June 30,

(In thousands)

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Net cash provided by (used in) operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities.

Net cash used in operating activities for the nine months ended September 30, 2022 was $20.8 million, which primarily consisted of $25.4 million decrease in cash from changes in operating assets and liabilities, offset partially by net income of $4.2 million and $283,000 increase in non-cash items.

The decrease in cash from changes in operating assets and liabilities was primarily due to $28.9 million decrease in merchant payables, offset partially by $2.5 million decrease in accounts receivables.

Net cash used in operating activities for the six months ended June 30, 2022 was $17.0 million, which primarily consisted of $21.0 million decrease in cash from changes in operating assets and liabilities, offset partially by net income of $3.4 million and $609,000 increase in non-cash items.

The decrease in cash from changes in operating assets and liabilities was primarily due to $19.8 million decrease in merchant payables and $2.1 million decrease in accounts payables.

Adjustments for non-cash items primarily consisted of $1.1 million for depreciation and amortization, $1.1 million for stock-based compensation and $550,000 for deferred income tax, offset partially by $2.2 million reversal of reserves from accounts receivable and other reserves.

Net cash provided by operating activities for the nine months ended September 30, 2021 was $9.3 million, which primarily consisted of $5.4 million increase in cash from changes in operating assets and liabilities, net income of $4.2 million and $344,000 decrease in non-cash items.

The increase in cash from changes in operating assets and liabilities primarily consisted of $16.5 million increase in merchant payables and $5.0 million increase in accounts payable, offset partially by $9.5 million increase in prepaid expenses and other, $3.8 million increase in accounts receivable and $2.0 million increase in prepaid income taxes.

Adjustments for non-cash items primarily consisted of $3.6 million gain on PPP loan forgiveness and $2.8 million of stock-based compensation

Cash paid for income tax, net of refunds received, during the nine months ended September 30, 2022 and 2021 was $1.2 million and $3.0 million, respectively.

Net cash used in investing activities for the nine months ended September 30, 2022 and 2021 was $1.1 million and $24,000, respectively.

The cash used in investing activities for the nine months ended September 30, 2022 was primarily consisted of the $1.0 million for purchases of intangible assets.

The cash used in investing activities for the nine months ended September 30, 2021 was due to the $24,000 for purchases of property and equipment.

Net cash provided by financing activities for the nine months ended September 30, 2022 was $761,000.

The cash provided by financing activities for the nine months ended September 30, 2022 was primarily consisted of $1.9 million proceeds from the exercise of stock options, offset partially by $1.2 million for the repurchase of common stock .

Net cash used in financing activities for the nine months ended September 30, 2021 was $7.1 million which primarily consisted of $5.4 million in taxes paid for net settlement of stock options exercise and $1.6 million paid for the repurchase of common stock.

Net cash provided by operating activities for the six months ended June 30, 2021 was $22.0 million, which consisted of $18.2 million increase in cash from changes in operating assets and liabilities, $2.4 million in non-cash items and net income of $1.4 million.

The increase in cash from changes in operating assets and liabilities primarily consisted of $25.2 million increase in merchant payables, offset partially by $4.8 million increase in accounts receivable and $2.8 million increase in prepaid expenses and other.

Adjustments for non-cash items primarily consisted of $1.8 million of stock-based compensation.

Cash paid for income tax, net of refunds received, during the six months ended June 30, 2022 and 2021 was $771,000 and $1.4 million, respectively.

Net cash used in investing activities for the six months ended June 30, 2022 and 2021 was $1.0 million and $84,000, respectively.

The cash used in investing activities for the six months ended June 30, 2022 was primarily consisted of the $1.0 million for purchases of intangible assets.

The cash used in investing activities for the six months ended June 30, 2021 was due to the $84,000 for purchases of property and equipment.

Net cash provided by financing activities for the six months ended June 30, 2022 was $1.9 million due to proceeds from exercise of stock options.

Net cash used in financing activities for the six months ended June 30, 2021 was $4.8 million which primarily consisted of $3.1 million in taxes paid for net settlement of stock options exercise and $1.6 million paid for common stock repurchase.

Although we have settled the states unclaimed property claims with all states, we may still receive inquiries from certain potential Netsurfers promotional shareholders that had not provided their state of residence to us by April 25, 2004.

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Litigation and claims against the Company may result in legal defense costs, settlements or judgments that could have a material impact on our financial condition.

We also have contingencies related to net unrecognized tax benefits, including interest, of approximately $1.5 million as of September 30, 2022.

We also have contingencies related to net unrecognized tax benefits, including interest, of approximately $1.5 million as of June 30, 2022.

Income Taxes” to the accompanying unaudited condensed consolidated financial statements for further information.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q/A

Item 2. Management’s Discussion and Analysis