What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-09 · 111 added, 104 removed, 284 unchanged (43% of the section changed)

15 unchanged sentences

Offers are sourced from more than 5,000 top travel and entertainment partners.

The Company generates revenues from advertising, membership fees, and other.

The Company generates revenues from advertising, membership fees, and other sources.

In March 2022, the Company began the development of Travelzoo META, a subscription service that is intended to provide Metaverse travel experiences.

1 unchanged sentence

In each case, the Company is entitled to a quarterly royalty payment based on a percentage of net revenue.

The Company recognized $18,000 and $13,000 in royalties in the three months ended June 30, 2024 and 2023, respectively.

The Company recognized $35,000 and $21,000 in royalties in the six months ended June 30, 2024 and 2023, respectively.

The Company recognized $18,000 in royalties in each of the three months ended September 30, 2024 and 2023.

The Company recognized $53,000 and $39,000 in royalties in the nine months ended September 30, 2024 and 2023, respectively.

Under the licensing agreements, Travelzoo's existing member list in the applicable territories continues to be owned by the Company.

9 unchanged sentences

The license agreement for Australia, New Zealand and Singapore provides the licensee exclusive rights to use Travelzoo products, services and intellectual property in each jurisdiction in exchange for quarterly royalty payments based upon net revenue over a five-year term, with an option to renew.

The Company recognized royalties o f $11,000 and $9,000 from the licensee for the three months ended June 30, 2024 and 2023, respectively.

The Company recognized royalties o f $21,000 and $17,000 from the licensee for the six months ended June 30, 2024 and 2023 , respectively.

The Company recognized royalties o f $11,000 and $9,000 from the licensee for the three months ended September 30, 2024 and 2023, respectively.

The Company recognized royalties o f $32,000 and $26,000 from the licensee for the nine months ended September 30, 2024 and 2023 , respectively.

The license agreement for Japan and South Korea provides the licensee exclusive rights to use Travelzoo products, services, and intellectual property in exchange for quarterly royalty payments based on net revenue over a five-year term, with an option to renew.

An interest free loan was provided to the licensee for JPY 46 million (approximately $430,000 ), of which $133,000 was repaid in 2021 and the remaining amount repaid in 2023.

The Company recognized royalties o f $7,000 and $4,000 from the licensee for the three months ended June 30, 2024 and 2023, respectively.

The Company recognized royalties o f $14,000 and $4,000 from the licensee for the six months ended June 30, 2024 and 2023 , respectively.

The Company recognized royalties o f $7,000 and $9,000 from the licensee for the three months ended September 30, 2024 and 2023, respectively.

The Company recognized royalties o f $21,000 and $13,000 from the licensee for the nine months ended September 30, 2024 and 2023 , respectively.

Reportable Segments

22 unchanged sentences

This refund policy was reverted in April 2022 to a 14-day refund period from date of purchase, with a newly introduced option to extend refund eligibility until voucher redemption or expiration, for a surcharge.

The expiration dates of vouchers range between July 2024 through December 2025;

The expiration dates of vouchers range between October 2024 through December 2025;

provided, that these expiration dates may sometimes be extended on a case-by-case basis and final payment to merchants upon expiration may not be due for up to a year later.

As of June 30, 2024 and December 31, 2023, the Company had approximately $4.2 million and $5.2 million of unredeemed vouchers that had been sold, respectively, representing the Company’s commission.

As of September 30, 2024 and December 31, 2023, the Company had approximately $4.3 million and $5.2 million of unredeemed vouchers that had been sold, respectively, representing the Company’s commission.

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

The Company estimated and recorded a refund reserve of $177,000 and $268,000 as of June 30, 2024 and December 31, 2023, respectively, for these unredeemed vouchers which is recorded as a reduction of revenues on the consolidated statements of operations, and accrued expense and other on the consolidated balance sheet.

Merchant payables of $16.7 million as of June 30, 2024 related to unredeemed vouchers is recorded on the consolidated balance sheet, representing amounts payable to merchants by the Company for vouchers sold but not redeemed.

The Company estimated and recorded a refund reserve of $142,000 and $268,000 as of September 30, 2024 and December 31, 2023, respectively, for these unredeemed vouchers which is recorded as a reduction of revenues on the consolidated statements of operations, and accrued expense and other on the consolidated balance sheet.

Merchant payables of $17.3 million as of September 30, 2024 related to unredeemed vouchers is recorded on the consolidated balance sheet, representing amounts payable to merchants by the Company for vouchers sold but not redeemed.

Certain merchant contracts, typically in foreign locations, allow the Company to retain the proceeds from unredeemed vouchers upon expiration.

81 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

19 unchanged sentences

Three Months Ended

September 30,

North America

27 unchanged sentences

Other includes licensing fees from license agreements and the retail business acquired with MTE.

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

3 unchanged sentences

Total revenues $ 20,098 $ 20,599 $ 63,224 $ 63,328

Advertising revenue decreased $63,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023.

This decrease was primarily due to $664,000 decrease in revenues from Top 20 and Standalone, offset partially by $267,000 increase in revenues from Travelzoo Network and $243,000 increase in Hotel commission.

Advertising revenue increased $142,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023.

This increase was primarily due to $989,000 increase in Hotel commission and $569,000 increase in revenues from Travelzoo Network, offset partially by $1.5 million decrease in revenues from Top 20 and Standalone.

Advertising revenue decreased $772,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023.

This decrease was primarily due to $447,000 decrease in revenues from Top 20 and Standalone and $221,000 decrease in revenues from the sale of Getaways vouchers.

Advertising revenue decreased $630,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023.

This decrease was primarily due to $1.9 million decrease in revenues from Top 20 and Standalone, offset partially by $1.1 million increase in Hotel commission.

Membership Fees

Revenues from Membership fees increased $66,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 due to the increase of subscription fees paid by Travelzoo and Jack's Flight Club members.

Revenues from Membership fees increased $222,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 due to the increase of subscription fees paid by Travelzoo and Jack's Flight Club members.

Revenues from Other increased $10,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to $5,000 revenue increase from retail and fashion business and $5,000 increase in licensing revenue.

Revenues from Other increased $33,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 primarily due to $19,000 revenue increase from retail and fashion business and $14,000 increase in licensing revenue.

Revenues from Membership fees increased $256,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 due to the increase of subscription fees paid by Travelzoo and Jack's Flight Club members.

Revenues from Membership fees increased $478,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 due to the increase of subscription fees paid by Travelzoo and Jack's Flight Club members.

Revenues from Other increased $15,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to the increase from the retail and fashion business.

Revenues from Other increased $48,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 primarily due to the increase in licensing revenue.

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, software and license expenses, 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 $2.5 million and $2.9 million, respectively, for the three months ended June 30, 2024 and 2023.

Cost of revenues was $5.2 million and $5.6 million, respectively, for the six months ended June 30, 2024 and 2023.

Cost of revenues decreased $360,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to the $178,000 decrease in software and license costs and $112 ,000 decrease in estimated refunds to members for customer retention.

Cost of revenues decreased $411,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 primarily due to the decrease in software and license costs.

Cost of revenues was $2.5 million and $2.7 million, respectively, for the three months ended September 30, 2024 and 2023.

Cost of revenues was $7.7 million and $8.2 million, respectively, for the nine months ended September 30, 2024 and 2023.

Cost of revenues decreased $117,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to the decrease in software and license costs.

Cost of revenues decreased $528,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 primarily due to the decrease in software and license costs.

Operating Expenses

1 unchanged sentence

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, marketing professional service costs, public relations expenses and facilities costs.

Sales and marketing expenses were $9.4 million and $10.1 million for the three months ended June 30, 2024 and 2023, respectively.

Sales and marketing expenses were $18.0 million and $19.4 million for the six months ended June 30, 2024 and 2023, respectively.

Sales and marketing expenses were $8.2 million and $9.8 million for the three months ended September 30, 2024 and 2023, respectively.

Sales and marketing expenses were $26.2 million and $29.3 million for the nine months ended September 30, 2024 and 2023, 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 June 30, 2024 and 2023, advertising expenses accounted for 19% and 28%, respectively, of the total sales and marketing expenses.

For the six months ended June 30, 2024 and 2023, advertising expenses accounted for 15% and 27%, respectively, of the total sales and marketing expenses.

For the three months ended September 30, 2024 and 2023, advertising expenses accounted for 14% and 29%, respectively, of the total sales and marketing expenses.

For the nine months ended September 30, 2024 and 2023, advertising expenses accounted for 12% and 28%, 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 decreased $756,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023.

Sales and marketing expenses decreased $1.6 million for the three months ended September 30, 2024 from the three months ended September 30, 2023.

The decrease was primarily due to the decrease in member acquisition costs as a result of management's strategic plan.

Sales and marketing expenses decreased $1.5 million for the six months ended June 30, 2024 from the six months ended June 30, 2023 .

The decrease was primarily due to $2.3 million decrease in member acquisition costs as a result of management's strategic plan, offset partially by $461,000 increase in salary and related expenses and $306,000 increase in professional service costs.

Sales and marketing expenses decreased $3.0 million for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 .

The decrease was primarily due to $3.9 million decrease in member acquisition costs as a result of management's strategic plan, offset partially by $919,000 increase in salary and related 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 $603,000 and $518,000 for the three months ended June 30, 2024 and 2023, respectively.

Product development expenses were $1.2 million and $1.0 million for the six months ended June 30, 2024 and 2023, respectively.

Product development expenses increased $85,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to the increase in professional service expenses .

Product development expenses increased $161,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 primarily due to the increase in professional service expenses .

Product development expenses were $594,000 and $525,000 for the three months ended September 30, 2024 and 2023, respectively.

Product development expenses were $1.8 million and $1.5 million for the nine months ended September 30, 2024 and 2023, respectively.

Product development expenses increased $69,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to the increase in salary and related expenses.

Product development expenses increased $230,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 primarily due to the increase in salary and related expenses.

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 $4.6 million and $4.3 million for the three months ended June 30, 2024 and 2023, respectively.

General and administrative expenses were $9.2 million and $8.7 million for the six months ended June 30, 2024 and 2023, respectively.

General and administrative expenses increased $306,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to $202,000 increase in salary and related expenses and $170,000 increase in professional service expenses.

General and administrative expenses increased $483,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 primarily due to the increase in professional service expenses.

General and administrative expenses were $4.7 million and $4.5 million for the three months ended September 30, 2024 and 2023, respectively.

General and administrative expenses were $13.9 million and $13.2 million for the nine months ended September 30, 2024 and 2023, respectively.

General and administrative expenses increased $204,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to $433,000 increase in salary and related expenses, offset partially by $116,000 decrease in legal expenses and $80,000 decrease in professional service expenses.

General and administrative expenses increased $687,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 primarily due to $343,000 increase in salary and related expenses and $272,000 increase in professional service expenses.

Other Income, net

Other income, net consisted primarily of foreign exchange transactions gains and losses, sublease income, German federal government funding for COVID-19 pandemic relief, interest income earned on cash, cash equivalents and restricted cash as well as interest expense.

Other income, net was $176,000 and $479,000, respectively, for the three months ended June 30, 2024 and 2023.

Other income, net was $315,000 and $829,000, respectively, for the six months ended June 30, 2024 and 2023.

Other income, net decreased $303,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to $205,000 German federal government funding for COVID-19 pandemic relief the Company received in the three months ended June 30, 2023 and $90,000 decrease in sublease income as the result of the sublease term expiration in 2023.

Other income, net decreased $514,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 primarily due to $205,000 German federal government funding for COVID-19 pandemic relief the Company received in the six months ended June 30, 2023, $180,000 decrease in sublease income as the result of the sublease term expiration in 2023 and $145,000 decrease in interest income as the result of Azzurro's repayment of $3.0 million principal of its Notes Receivable in 2023.

Other income, net was $359,000 and $314,000, respectively, for the three months ended September 30, 2024 and 2023.

Other income, net was $674,000 and $1.1 million, respectively, for the nine months ended September 30, 2024 and 2023.

Other income, net increased $45,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to $249,000 increase in foreign exchange transactions gains and losses, offset partially by $120,000 decrease in interest income as the result of Azzurro's repayment of $3.0 million principal of its Notes Receivable in 2023 and $90,000 decrease in sublease income as the result of the sublease term expiration in 2023.

Other income, net decreased $469,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 primarily due to $205,000 German federal government funding for COVID-19 pandemic relief the Company received in the nine months ended September 30, 2023, $270,000 decrease in sublease income as the result of the sublease term expiration in 2023 and $265,000 decrease in interest income as the result of Azzurro's repayment of $3.0 million principal of its Notes Receivable in 2023, offset partially by $267,000 increase in foreign exchange transactions gains and losses for the nine months ended September 30, 2024.

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 $1.3 million and $1.1 million, respectively, for the three months ended June 30, 2024 and 2023.

Our effective tax rate from continuing operations was 30% and 29%, respectively, for the three months ended June 30, 2024 and 2023.

The Company’s effective tax rate for the three months ended June 30, 2024 changed from the three months ended June 30, 2023 primarily due to an increase in certain non-deductible expenses in the three months ended June 30, 2024.

Income tax expense was $2.8 million and $2.5 million, respectively, for the six months ended June 30, 2024 and 2023.

Our effective tax rate from continuing operations was 28% for each the six months ended June 30, 2024 and 2023 .

Income tax expense was $1.1 million and $1.0 million, respectively, for the three months ended September 30, 2024 and 2023.

Our effective tax rate from continuing operations was 26% and 30%, respectively, for the three months ended September 30, 2024 and 2023.

The Company’s effective tax rate for the three months ended September 30, 2024 changed from the three months ended September 30, 2023 primarily due to a decrease of non-deductible expenses in certain jurisdictions in the three months ended September 30, 2024.

Income tax expense was $3.9 million and $3.5 million, respectively, for the nine months ended September 30, 2024 and 2023.

Our effective tax rate from continuing operations was 27% and 28% for the nine months ended September 30, 2024 and 2023, respectively.

The Company’s effective tax rate for the nine months ended September 30, 2024 changed from the nine months ended September 30, 2023 primarily due to a decrease of non-deductible expenses in certain jurisdictions in the nine months ended September 30, 2024.

We expect our effective tax rate to fluctuate in future periods depending on the geographic 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 and the need for valuation allowances on certain tax assets, if any.

6 unchanged sentences

Travelzoo North America

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

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

2024 2023 2024 2023

3 unchanged sentences

Operating profit as a % of revenue 24.6 % 22.5 % 27.4 % 26.7 %

North America revenues increased by $1,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023.

This increase was primarily due to $267,000 increase in revenues from Travelzoo Network, $243,000 increase in Hotel commission and $233,000 increase in sale of Getaway Vouchers, offset partially by $664,000 decrease in revenues from Top 20 and Standalone.

North America expenses increased by $37,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023.

The increase was primarily due to $555,000 increase in salary and related expenses, offset partially by $504,000 decrease in member acquisition costs.

North America revenues decreased by $529,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023.

This decrease was primarily due to $1.5 million decrease in revenues from Top 20 and Standalone, offset partially by $989,000 increase in hotel commission.

North America expenses decreased by $415,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023.

The decrease was primarily due to $1.4 million decrease in member acquisition costs, offset partially by $967,000 increase in professional service expenses.

North America revenues decreased by $586,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023.

This decrease was primarily due to the decrease in revenues from Top 20 and Standalone.

North America expenses decreased by $721,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023.

The decrease was primarily due to the decrease in member acquisition costs.

North America revenues decreased by $1.1 million for the nine months ended September 30, 2024 from the nine months ended September 30, 2023.

This decrease was primarily due to $2.4 million decrease in revenues from Top 20 and Standalone, offset partially by $807,000 increase in hotel commission and $599,000 increase in revenues from Travelzoo Network .

North America expenses decreased by $1.1 million for the nine months ended September 30, 2024 from the nine months ended September 30, 2023.

The decrease was primarily due to $2.3 million decrease in member acquisition costs, offset partially by $864,000 increase in salary and related expenses and $560,000 increase in professional service expenses.

Travelzoo Europe

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

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

2024 2023 2024 2023

3 unchanged sentences

Operating profit as a % of revenue 17.1 % 4.5 % 15.7 % 2.7 %

Europe revenues increased by $64,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023.

The increase was primarily due to $24,000 increase in Advertising revenues and $40,000 positive impact from foreign currency movements relative to the U.S.

The increase in Advertising revenue of $24,000 was primarily due to $112,000 increase in Hotel commission and $90,000 increase in sale of Getaway Vouchers, offset partially by $150,000 decrease in revenues from Top 20 and Standalone.

Eur ope expenses decreased by $687,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to $304,000 decrease in member acquisition costs, $174,000 decrease in trade and brand marketing expenses and $101,000 decrease in salary and related expenses.

Europe revenues increased by $839,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023.

The increase was primarily due to $572,000 increase in Advertising revenues and $267,000 positive impact from foreign currency movements relative to the U.S.

The increase in Advertising revenue of $572,000 was primarily due to the increase in Hotel commission.

Eur ope expenses decreased by $837,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 primarily due to the decrease in member acquisition costs.

Europe revenues increased by $35,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023.

The increase was primarily due to $100,000 positive impact from foreign currency movements relative to the U.S.

dollar, offset partially by $65,000 decrease in revenues.

The decrease in revenue of $65,000 was primarily due to the de crease in sale of Getaway Vouchers.

Eur ope expenses decreased by $726,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to the decrease in member acquisition costs.

Europe revenues increased by $874,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023.

The increase was primarily due to $506,000 increase in revenues and $368,000 positive impact from foreign currency movements relative to the U.S.

The increase in revenue of $506,000 was primarily due to the increase in Hotel commission.

Eur ope expenses decreased by $1.6 million for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 primarily due to the decrease 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 $5,000 and $53,000 for the three and six months ended June 30, 2024, respectively.

dollar positively impacted our local currency income from our operations in Europe by approximately $31,000 and $13,000 for the three months ended September 30, 2024 and 2023 respectively.

Foreign currency movements relative to the U.S.

dollar negatively impacted our local currency income from our operations in Europe by approximately $21,000 and $79,000 for the three and six months ended June 30, 2023, respectively.

dollar positively impacted our local currency income from our operations in Europe by approximately $84,000 for the nine months ended September 30, 2024.

Foreign currency movements relative to the U.S.

dollar negatively impacted our local currency income from our operations in Europe by approximately $66,000 for the nine months ended September 30, 2023.

Jack ’ s Flight Club

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

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

2024 2023 2024 2023

3 unchanged sentences

Operating profit (loss) as a % of revenue 2.2 % 12.2 % (3.2) % 6.1 %

Jack ’ s Flight Club revenues decreased by $62,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 due to the decrease of subscription fees paid by the members.

Jack’s Flight Club expenses in creased by $69,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to the increase in salary and related expenses.

Jack ’ s Flight Club revenues increased by $53,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 due to the increase of premium members.

Jack’s Flight Club expenses in creased by $238,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 primarily due to $146,000 increase in salary and related expenses and $109,000 increase in software expenses.

Jack ’ s Flight Club revenues increased by $45,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 due to the increase of subscription fees paid by the members.

Jack’s Flight Club expenses in creased by $162,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to the increase in salary and related expenses.

Jack ’ s Flight Club revenues increased by $98,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 due to the increase of premium members.

Jack’s Flight Club expenses in creased by $400,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 primarily due to the increase in salary and related expenses .

New Initiatives

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

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

2024 2023 2024 2023

3 unchanged sentences

New Initiatives segment primarily consists of Travelzoo licensing business, Travelzoo META subscription service, Metaverse experience scouting and development business and retail and fashion business acquired with MTE.

New Initiatives revenues increased $10,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to $5,000 revenue increase from retail and fashion business and $5,000 increase in licensing revenue.

New Initiatives segment expenses decreased by $144,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to decrease in salary and related expenses.

New Initiatives revenues increased $34,000 for the six months ended June 30, 2024 from the six months ended June 30, 2023 primarily due to $19,000 revenue increase from retail and fashion business and $14,000 increase in licensing revenue.

New Initiatives segment expenses decreased by $207,000 for the three months ended June 30, 2024 from the three months ended June 30, 2023 primarily due to decrease in salary and related expenses.

New Initiatives revenues increased $5,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to the increase from the retail and fashion business.

New Initiatives segment expenses decreased by $152,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to the decrease in salary and related expenses .

New Initiatives revenues increased $39,000 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 primarily due to the increase in licensing revenue.

New Initiatives segment expenses decreased by $359,000 for the three months ended September 30, 2024 from the three months ended September 30, 2023 primarily due to the decrease in salary and related expenses .

Liquidity and Capital Resources

As of June 30, 2024, we had $12.6 million in cash and cash equivalents, of which $8.0 million was held outside the U.S.

As of September 30, 2024, we had $11.4 million in cash and cash equivalents, of which $7.5 million was held outside the U.S.

in our foreign operations.

2 unchanged sentences

We also had $675,000 in restricted cash held in the U.S.

as of June 30, 2024.

Cash, cash equivalents and restricted cash decreased $3.1 million from $16.4 million as of December 31, 2023 to $13.2 million as of June 30, 2024 primarily due to $10.4 million cash used to repurchase common stock, offset partially by $7.7 million cash provided by operating activities.

As of June 30, 2024 , we had merchant payables of $16.7 million related to unredeemed vouchers.

as of September 30, 2024.

Cash, cash equivalents and restricted cash decreased $4.3 million from $16.4 million as of December 31, 2023 to $12.1 million as of September 30, 2024 primarily due to $16.6 million cash used to repurchase common stock, offset partially by $13.3 million cash provided by operating activities.

As of September 30, 2024 , we had merchant payables of $17.3 million related to unredeemed vouchers.

In the Company’s financial statements presented in this 10-Q report, following U.S.

2 unchanged sentences

Payables to merchants are generally due upon redemption of vouchers.

The vouchers expire between July 2024 through December 2025;

The vouchers expire between October 2024 through December 2025;

however, these expiration dates may sometimes be extended on a case-by-case basis and final payment upon expiration may not be due for up to a year after expiration.

Based on current projections of redemption activity, we expect that cash on hand as of June 30, 2024 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 September 30, 2024 will be sufficient to provide for working capital needs for at least the next twelve months.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

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Effect of exchange rate changes on cash, cash equivalents and restricted cash (214) 80

Net increase (decrease) in cash, cash equivalents and restricted cash $ (3,146) $ 819

Net decrease in cash, cash equivalents and restricted cash $ (4,283) $ (2,796)

Net cash provided by operating ac tivities is net income adjusted for certain non-cash items and changes in assets and liabilities.

Net cash provided by operating activities for the six months ended June 30, 2024 was $7.9 million, which primarily consisted of net income of $7.1 million and $1.3 million increase in non-cash items, offset partially by $514,000 decrease in cash from changes in operating assets and liabilities.

Adjustments for non-cash items primarily consisted of $783,000 for stock-based compensation and $558,000 for depreciation and amortization.

The decrease in cash from changes in operating assets and liabilities was primarily due to $3.8 million decrease in merchant payables, offset partially by $1.2 million increase in deferred revenue, $1.2 million increase in accounts payable and accrued expenses and other, and $753,00 increase in other non-current liabilities.

Net cash provided by operating activities for the six months ended June 30, 2023 was $5.6 million, which primarily consisted of net income of $6.3 million, $882,000 increase in non-cash items and $1.6 million decrease in cash from changes in operating assets and liabilities.

Adjustments for non-cash items primarily consisted of $945,000 for depreciation and amortization and $827,000 for stock-based compensation, offset partially by $829,000 reversal of reserves from accounts receivable and other.

The decrease in cash from changes in operating assets and liabilities was primarily due to $8.6 million decrease in merchant payables and $2.4 million decrease in accounts payable, offset partially by $3.9 million increase in accounts receivable and 2.6 million increase in accrued expenses and other.

Cash paid for income tax, net of refunds received, during the six months ended June 30, 2024 was $1.2 million.

Cash refunds for income tax, net of payment made, during the six months ended June 30, 2023 was $494,000.

Net cash used in investing activities for the six months ended June 30, 2024 and 2023 was $83,000 and $44,000, respectively.

The cash used in investing activities for the six months ended June 30, 2024 was consisted of purchases of property and equipment.

The cash used in investing activities for the six months ended June 30, 2023 was primarily consisted of the $157,000 purchases of property and equipment, offset partially by $113,000 proceeds from repayment of the Japan loan.

Net cash used for financing activities for the six months ended June 30, 2024 was $10.7 million which primarily consisted of repurchase of common stock of $10.4 million and taxes paid for net share settlement of $257,000.

Net cash used for financing activities for the six months ended June 30, 2023 was $5.2 million which primarily consisted of repurchase of common stock of $4.9 million and taxes paid for net share settlement of $299,000.

Net cash provided by operating activities for the nine months ended September 30, 2024 was $13.3 million, which primarily consisted of net income of $10.4 million, $1.9 million increase in non-cash items and $963,000 increase in cash from changes in operating assets and liabilities.

Adjustments for non-cash items primarily consisted of $1.2 million for stock-based compensation and $737,000 for depreciation and amortization.

The increase in cash from changes in operating assets and liabilities was primarily due to $1.8 million increase in deferred revenue, $1.4 million increase in other non-current liabilities and $802,000 increase in accounts payable and accrued expenses, offset partially by $3.3 million decrease in merchant payables.

Net cash provided by operating activities for the nine months ended September 30, 2023 was $9.3 million, which primarily consisted of net income of $8.7 million and $1.6 million increase in non-cash items, offset partially by $1.1 million decrease in cash from changes in operating assets and liabilities.

Adjustments for non-cash items primarily consisted of $1.4 million for depreciation and amortization and $1.2 million for stock-based compensation, offset partially by $944,000 reversal of reserves from accounts receivable and other.

The decrease in cash from changes in operating assets and liabilities was primarily due to $8.8 million decrease in merchant payables and $1.7 million decrease in accounts payable, offset partially by $3.3 million decrease in accounts receivable, $2.3 million decrease in prepaid expenses and other, $1.9 million increase in other liabilities and $1.1 million decrease in prepaid income taxes.

Cash paid for income tax, net of refunds received, during the nine months ended September 30, 2024 was $1.5 million.

Cash refunds for income tax, net of payment made, during the nine months ended September 30, 2023 was $228,000.

Net cash used in investing activities for the nine months ended September 30, 2024 and 2023 was $129,000 and $104,000, respectively.

The cash used in investing activities for the nine months ended September 30, 2024 was consisted of purchases of property and equipment.

The cash used in investing activities for the nine months ended September 30, 2023 was primarily consisted of the $217,000 purchases of property and equipment, offset partially by $113,000 proceeds from repayment of the Japan loan.

Net cash used for financing activities for the nine months ended September 30, 2024 was $17.2 million which primarily consisted of the repurchase of common stock of $16.6 million and taxes paid for net share settlement of $592,000.

Net cash used for financing activities for the nine months ended September 30, 2023 was $12.1 million which primarily consisted of the repurchase of common stock of $11.8 million and taxes paid for net share settlement of $299,000.

Consistent with our growth, we experienced fluctuations in our cost of revenues, sales and marketing expenses, product development expenses and general and administrative expenses, and we anticipate that these increases will continue for the foreseeable future.

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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 and penalties, of approximately $24.8 million as of June 30, 2024.

We also have contingencies related to net unrecognized tax benefits, including interest and penalties, of approximately $24.9 million as of September 30, 2024.

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

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Our critical accounting policies include income taxes.

For additional information about our critical accounting policies and estimates, see the disclosure included in our Annual Report on Form 10-K for the year ended December 31, 2023 as well as updates in the current fiscal year provided in “Note 1 Summary of Significant Accounting Policies” in the notes to the condensed consolidated financial statements.

For additional information about our critical accounting policies and estimates, see the disclosure included in our Annual

Report on Form 10-K for the year ended December 31, 2023 as well as updates in the current fiscal year provided in “Note 1 Summary of Significant Accounting Policies” in the notes to the condensed consolidated financial statements.

Recent Accounting Pronouncements

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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

Item 2. Management’s Discussion and Analysis