What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-19 compared with 2024-03-22 · 75 added, 146 removed, 240 unchanged (48% of the section changed)

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Travelzoo, the club for travel enthusiasts, is a global Internet media company.

Travelzoo® provides its 30 million members with exclusive offers and one-of-a-kind experiences personally reviewed by our deal experts around the globe.

We have our finger on the pulse of outstanding travel, entertainment and local experiences.

We work in partnership with more tha n 5,000 top travel suppliers—our long-standing relationships give Travelzoo members access to irresistible offers.

We reach 30 million travelers.

Club Members receive Club Offers personally reviewed by our deal experts around the globe.

We work in partnership with thousands of top travel suppliers—our long-standing relationships give us access to irresistible deals.

Our most important products and services are the Travelzoo website (travelzoo.com), the Travelzoo iOS and Android apps, the Top 20® email newsletter, Standalone email newsletters, the Travelzoo Network , and Jack's Flight Club® .

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In March 2022 we announced the development of, and in May 2023 we launched Travelzoo META, to extend the range of experiences we offer consumers to the emerging metaverse.

This paid membership service currently provides founding members with a limited edition “Travel Companion” non-fungible token (“NFT”) and future access to beta version metaverse travel experiences, as developed.

On December 30, 2022, we acquired Metaverse Travel Experiences, Inc., now Metaverse Travel Experiences, LLC (“MTE”), to support Travelzoo META in sourcing prospective travel experiences.

MTE also continues to operate its legacy business in retail and fashion, which is included in but not material to the Company’s consolidated results.

See Note 3– Acquisitions to the accompanying consolidated financial statements included in Part II, Item 8 of this report, which is incorporated herein by refer ence for further information regarding the acquisition of MTE.

APAC Exit and Pivot to Licensing Model

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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 5 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 of $ 30,000 and $36,000 from the licensee for the years ended December 31, 2024 and 2023, respectively.

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How We Generate Revenues

Revenues from the Travelzoo brand and business are generated primarily from advertising fees from two categories of revenue:

Travel and Local.

The “Travel” category consists primarily of (a) advertising fees paid by travel companies for the publishing of their offers on Travelzoo’s media properties and (b) commission generated from the sale of Getaways vouchers.

Revenues from the Travelzoo brand and business are generated primarily from three categories:

Advertising, Membership Fees, and Other.

The "Advertising" category consists primarily of (a) advertising fees paid by travel companies for the publishing of their offers on Travelzoo’s media properties, (b) commission generated from the sale of Getaways vouchers and bookings on our hotel platform, and (c) publishing fees from high-quality local businesses, sale of Local Deals vouchers and entertainment offers.

Advertising fees may be based on audience reach, placement in email newsletters or on media properties, number of listings, number of clicks, and/or actual sales.

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Merchant agreements for Getaways advertisers are typically for periods between twelve and twenty-four months and are not automatically renewed.

In the second quarter of 2020, due to the pandemic and various stay-at-home protocols, the Company expanded its voucher refund policy to fully refundable until the voucher expires or is redeemed by the customer.

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 January 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 December 31, 2023 and 2022, the Company had approximately $5.2 million and $8.1 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 $268,000 and $1.3 million as of December 31, 2023 and 2022for 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 $20.6 million as of December 31, 2023 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.

With these contracts, the Company estimates the value of vouchers that will ultimately not be redeemed and records the estimate as revenues in the same period.

The "Local" category consists of publishing revenue for negotiated high-quality offers from local businesses, such as restaurants, spas, shows, and other activities and includes Local Deals vouchers and entertainment offers (vouchers and direct bookings).

Revenues generated from these products are based upon a percentage of the face value of the vouchers sold, commission on actual sales or a listing fee based on audience reach.

Revenues generated from local business offers are based upon a percentage of the face value of the vouchers sold, commission on actual sales or a listing fee based on audience reach.

We recognize revenue upon the sale of vouchers, upon notification of the amount of direct bookings or upon delivery of emails.

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Insertion orders and merchant agreements for Local Deals are typically for periods between one and twelve months and are not automatically renewed.

Jack's Flight Club

Jack’s Flight Club generates revenues from paid subscriptions by members.

Subscription options are quarterly, semi-annually, and annually.

We recognize subscription revenues monthly pro rata over the respective subscription periods.

The "Membership Fees" category consists of subscription fees paid by Travelzoo, Jack's Flight Club, and Travelzoo META members.

Travelzoo® membership has historically been free, however, on January 1, 2024, Travelzoo introduced an annual membership fee of $40 (or local equivalent) for new members in the United States, Canada, United Kingdom and Germany, with the 2024 annual fee waived for existing members as of December 31, 2023.

We recognize subscription revenues ratably over the respective subscription periods.

Jack’s Flight Club subscription options are quarterly, semi-annually, and annually.

We recognize subscription revenues ratably over the respective subscription periods.

For Travelzoo META, a founding membership was launched in 2022 following a test-and-learn strategy.

The "Other" category consists of licensing fees from license agreements, as well as the retail business originally operated by MTE and acquired and maintained by the Company following the acquisition of MTE.

Trends in Our Business

Our ability to generate revenues in the future depends on numerous factors, including those relating to members, advertisers, competitors, the travel industry, the online advertising business, internal factors and external factors.

Factors relating to members include their willingness to purchase the deals we advertise, their demand for vouchers as a promotional format, and with the introduction of membership fees for new members in 2024 and existing members in 2025, our ability to enroll new paying members and transition existing members to paid membership, without adversely affecting our membership base and existing advertising revenue streams.

ability to enroll new paying members and transition existing members to paid membership, without adversely affecting our membership base and existing advertising revenue streams.

Factors relating to advertisers include our ability to sell more advertising to existing and new advertisers, our ability to enhance our audience reach and advertising rates, spending controls by travel intermediaries to focus on improving profitability, and advertiser shifts from one advertising service (e.g.

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External factors include the introduction of new methods of advertising, the relative condition of the economy, cybersecurity risks due to increased dependence on digital technologies, and climate change and related legislation, to the extent such legislation impacts the businesses of our advertisers such as airlines and cruise ship operators, which have come under increasing scrutiny for their carbon footprints.

Local revenues have been and may continue to decline over time due to market conditions driven by competition and declines in consumer demand.

In the last several years, we have seen a decline in the number of vouchers sold and a decrease in the average commission rate earned by us from the merchants for vouchers sold.

However, during the global pandemic, we saw an increase in demand by consumers for fully refundable travel options, which led to a slight reversal of this trend and an increase in the sale of Getaways hotel vouchers (although demand for restaurants and spas continued to be low).

With the ending of the pandemic, the importance of fully refundable travel options has decreased (and we also shifted to offering a surcharge for full refundability), and the trend is therefore returning to pre-pandemic patterns.

Our ability to continue generating revenues through advertising, commissions and subscriptions depends heavily upon our ability to maintain and grow an attractive audience for our publications.

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We believe that an important factor for our advertising rates is the reach of our publications, however, we also believe that there are other important factors, such as the engagement of our membership base with our content.

We do not know if we will be able to increase the reach of our publications, particularly with the introduction of membership fees in 2024.

We do not know if by increasing the reach of our publications, we will also be able to increase engagement and other key metrics of importance to our advertisers.

If we are able to increase the reach of our publications, we still may not be able to or want to increase rates given market conditions, including intense competition in our industry.

With the introduction of a membership fee in 2024, the main way in which we will increase our reach and our engagement is by acquiring new Club Members, or paying members.

We do not know if we will be able to efficiently or effectively acquire Club Members at sufficient volumes.

We therefore also do not know if we will be able to increase the reach of our engagement with our publications.

Even if we are able to increase the reach of our publications, we still may not be able to or want to increase rates given market conditions, including intense competition in our industry.

Even if we increase our rates, the increased price may reduce the number of advertisers willing to advertise with us and could, therefore, decrease our revenue.

We may need to decrease our rates based on competitive market conditions and the performance of our audience in order to maintain or grow our revenue.

While we will have membership revenue to offset any reductions in advertising revenue or add incrementally to advertising revenue so that we can continue to grow total revenue, we are unsure of the volumes in which we will be able to convert to membership from either our existing database or through new member acquisition.

We do not know what our cost of revenues as a percentage of revenues will be in future periods.

Our cost of revenues may change in relation to volume and terms with third-party partners of the Travelzoo network, the incurrence of merchant processing fees from the sale of vouchers for Local Deals and Getaways and payment of membership fees, changes in refund request trends and provisioning of customer service.

Our cost of revenues may change in relation to volume and terms with third-party partners of the Travelzoo network, incurring merchant processing fees from the sale of vouchers for Local Deals and Getaways and payment of membership fees, changes in refund request trends and provisioning of customer service.

We expect fluctuations in cost of revenues as a percentage of revenues from quarter to quarter.

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With the introduction of membership fees in 2024, we expect the cost of acquiring new paying members to increase significantly, as compared with the cost of acquiring non-paying members prior to 2024.

Initially, we are reducing our advertising expenditures, as we are no longer offering free memberships for new members and, accordingly, prior user acquisition strategies are not in use.

Initially, we are reducing our advertising expenditures, as we are no longer offering free memberships for new members

and, accordingly, prior user acquisition strategies are not in use.

Further, we are early in the development of new strategies to acquire paying members, so our test budgets have not yet fully scaled.

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We expect fluctuations in our income taxes from year to year and from quarter to quarter, which may be significant and have a material impact on our results of operations.

Due to the adverse effects of the global pandemic, the Company reduced expenditures in many areas, 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 operations significantly.

The Company also renegotiated many of its outstanding contractual obligations with vendors and closed some ancillary office locations.

We do not currently anticipate that additional cost-cutting measures will be necessary.

We anticipate incurring limited growth in fixed costs for our existing business, while investing in new initiatives where we see opportunities to expand our business, in aggregate, in-line with the trend of our revenues.

The key elements of our growth strategy include building our trusted travel, entertainment and local brands, increasing the value and engagement of our membership base, sourcing more exclusive and compelling offers from advertisers, and innovating with new experiences and revenue streams.

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Income from continuing operations 16.3 14.2

Income (loss) from discontinued operations, net of tax 0.5 (0.1)

Income from discontinued operations, net of tax — 0.5

Net income 16.3 14.7

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Net income attributable to Travelzoo—continuing operations 16.2 % 14.1 %

Net income (loss) attributable to Travelzoo—discontinued operations 0.5 % (0.1) %

Operating Metrics

The following table sets forth operating metrics in Travelzoo North America, Travelzoo Europe, and Jack's Flight Club:

Years Ended December 31,

Travelzoo North America

Total members (1) 16,238,000 16,251,000

Average cost per acquisition of a new member $ 2.81 $ 2.81

Revenue per member (2) $ 3.45 $ 2.82

Revenue per employee (3) $ 456 $ 381

Mobile application downloads 4,158,000 4,126,000

Social media followers 3,300,000 3,185,000

Travelzoo Europe

Total members (1) 9,225,000 9,029,000

Average cost per acquisition of a new member $ 3.32 $ 2.08

Revenue per member (2) $ 2.66 $ 2.32

Revenue per employee (3) $ 240 $ 193

Mobile application downloads 2,356,000 2,335,000

Social media followers 981,000 938,000

Jack's Flight Club

Total members 2,407,000 1,905,000

Total members (1) 31,097,000 30,404,000

Average cost per acquisition of a new member $ 3.02 $ 2.36

Revenue per member (2) $ 2.78 $ 2.32

Revenue per employee (3) $ 359 $ 297

Mobile application downloads 7,524,000 6,461,000

Social media followers 4,499,000 4,123,000

(1) Members represent individuals who are signed up to receive one or more of our email publications that present our travel, entertainment and local deals.

Consolidated includes retained APAC members.

(2) Annual revenue divided by number of members at the beginning of the year.

(3) Annual revenue divided by number of employees at the end of the year (in thousands).

The following table sets forth the breakdown of revenues (in thousands) by category and segment.

Travel revenue includes travel publications ( Top 20, Standalone emails, Website, Travelzoo Network ), Getaways vouchers, and hotel platform and vacation package bookings.

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

Net income attributable to Travelzoo—discontinued operations — % 0.5 %

The following table sets forth the breakdown of revenues (in thousands) by category Advertising, Membership Fees, and Other.

Advertising includes travel publications ( Top 20 , Travelzoo website, Standalone email newsletters, Travelzoo Network ), Getaways vouchers, hotel platform, vacation packages, Local Deals vouchers and entertainment offers (vouchers and direct bookings).

Membership Fees includes subscription fees paid by Travelzoo, Jack’s Flight Club and Travelzoo META members.

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

Year Ended December 31,

Travelzoo North America

Travel $ 53,448 $ 44,446

Local 2,632 3,196

Total Travelzoo North America revenues 56,080 47,642

Travelzoo Europe

Travel 22,415 18,053

Local 1,606 1,402

Total Travelzoo Europe revenues 24,021 19,455

Jack's Flight Club 4,172 3,477

New Initiatives 204 25

Travel 75,863 62,499

Local 4,238 4,598

Jack's Flight Club 4,172 3,477

New Initiatives 204 25

Advertising $ 78,396 $ 80,128

Membership Fees 5,399 4,145

Other 107 204

Total revenues $ 83,902 $ 84,477

Travelzoo North America

North America revenues increa sed $8.4 million, or 17.7%, in 2023 as compared to 2022.

This increase was primarily due to a $9.0 million increase in Travel revenues, offset partially by a $564,000 decrease in Local revenues.

The increase in Travel revenue of $9.0 million was attributable to a $4.5 million increase in advertising fees from Top 20 and Standalone emails , a $2.4 million increase in hotel booking commissions and a $1.4 million increase in Getaways voucher commissions.

The decrease in Local revenues of $564,000 was primarily due to a reduction in Local Deals voucher commissions.

Travelzoo Europe

Europe revenues increased $4.6 million, or 23.5%, in 2023 as compared to 2022.

This increase was primarily due to a $4.1 million increase in Travel revenues, a $175,000 increase in Local revenues and a $343,000 positive impact from foreign currency movements relative to the U.S.

The increase in Travel revenues was primarily due to a $3.2 million increase in revenues from Top 20 and Standalone emails and a $709,000 increase in Hotel booking commissions.

The increase in Local revenues of $175,000 was primarily due to an increase in Local Deals voucher commissions.

Jack’s Flight Club

Jack’s Flight Club's premium members pay for quarterly, semi-annual or annual subscriptions to emails or app notifications of flight deals.

Jack’s Flight Club’s revenues increased $695,000, or 20.0%, in 2023 as compared to 2022, primarily due to an increase in premium members.

New Initiatives

New Initiatives’ revenues increased by $179,000 in 2023 as compared to 2022, due to a $46,000 increase in royalties from licensees operating in the territories of Japan, South Korea, Australia, New Zealand and Singapore, and $133,000 primarily attributable to activities of MTE, which was acquired on December 30, 2022, including a license fee, founding membership subscription fees to Travelzoo META, and various other items.

For 2023 and 2022, none of our customers accounted for 10% or more of our revenue.

Advertising revenue decreased $1.7 million, or 2%, from 2023 to 2024.

This decrease was primarily due to $2.1 million decrease in revenues from Top 20 and offset by increases in other revenue products.

Membership Fees

Revenues from Membership fees increased $1.3 million, or 30%, from 2023 to 2024 due to the increase of members paying subscription fees for both Travelzoo and Jack's Flight Club.

Revenues from Other decreased $97,000 due to decrease in activities attributable to MTE.

Cost of Revenues

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Cost of revenues was $10.5 million and $10.9 million for the years ended December 31, 2024 and 2023, respectively.

Cost of revenues increased $931,000 for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to a $532,000 increase in expenses from third-party partners of the Travelzoo Network and a $320,000 increase in salary related expenses .

Cost of revenues decreased $465,000 for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decrease in software and license costs .

Cost of revenues as a percent of revenues declined from 12.9% in 2023 to 12.5% in 2024.

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The goal of our advertising is to acquire new members, increase our audience through mobile and social media channels, drive traffic to our websites and increase brand awareness.

Sales and marketing expenses increased $4.7 million, or 14.2%, in 2023 as compared to 2022, primarily due to a $1.8 million increase in member acquisition costs, a $1.8 million increase in salary and related expenses, and a $1.2 million increase in trade and brand marketing expenses.

Sales and marketing expenses decreased $3.3 million, or 9%, in 2024 as compared to 2023, primarily due to decrease in member acquisition.

Sales and marketing expenses as a percent of revenues declined from 44.7% in 2023 to 41.1% in 2024.

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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 $2.1 million for each of the years ended December 31, 2023 and 2022, respectively.

Product development expenses increased modestly by $49,000, or 2.4%, in 2023 as compared to 2022, primarily due to increased salary and related expenses.

Product development expenses as a percent of revenues declined from 2.9% in 2022 to 2.4% in 2023.

Product development expenses were $2.4 million and $2.1 million for each of the years ended December 31, 2024 and 2023, respectively.

Product development expenses increased by $300,000, or 14%, in 2024 as compared to 2023, primarily due to increased salary and related expenses.

Product development expenses as a percent of revenues were 2.9% and 2.5% in 2024 and 2023, respectively.

General and Administrative

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General and administrative expenses were $18.1 million and $18.1 million for the years ended 2024 and 2023, respectively.

General and administrative expenses increased modestly by $181,000, or 1.1%, in 2023 as compared to 2022 , primarily due to a $942,000 increase in travel-related expenses, largely offset by a $808,000 decrease in stock-based compensation expense.

General and administrative expenses remained flat year-over-year.

Other Income, net

Other income, net consisted primarily of foreign exchange transactions gains and losses, sublease income, German federal government funding for Corona-related pandemic relief, interest income and interest expense.

Other income was $1.5 million and $2.4 million for the years ended December 31, 2023 and 2022, respectively.

Other income decreased $860,000, or 35.8%, in 2023 as compared to 2022, primarily due to a $1.5 million reduction in German federal government funding for COVID pandemic relief, offset partially by $604,000 interest income on note receivable from stockholder.

Other income was $588,000 and $1.5 million for the years ended December 31, 2024 and 2023, respectively.

Other income decreased $953,000, or 62%, in 2024 as compared to 2023, primarily due to a $205,000 German federal government funding for COVID-19 pandemic relief the Company received in 2023, $348,000 decrease in sublease income as a result of the sublease term expiration in 2023, and $375,000 decrease in interest income as the result of Azzurro's repayment of $3.0 million principal of its Notes Receivable in 2023.

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

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Income from operations as a % of revenues 29 % 27 %

North America revenues increased $8.4 million, or 17.7%, in 2023 as compared to 2022 (see “Revenues” above).

North America cost of sales and operating expenses increased by $3.5 million in 2023 as compared to 2022, primarily due to a $1.5 million increase in member acquisition costs, $1.2 million increase in salary and related expenses and $943,000 increase in member acquisition costs.

North America revenues decreased $988,000, or 1.8%, in 2024 as compared to 2023.

This decrease was primarily due to the decrease in revenues from hotel platform and Local Deals .

North America cost of sales and operating expenses decreased by $1.9 million in 2024 as compared to 2023, primarily due to a $2.5 million decrease in member acquisition costs and $631K decrease in software expenses, offset by various increases including $811K in salary costs.

Travelzoo Europe

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Revenues $ 24,071 $ 24,021

Income (loss) from operations $ 1,317 $ (1,803)

Income (loss) from operations as a % of revenues 5 % (9) %

Europe revenues increased $4.6 million, or 23.5%, in 2023 as compared to 2022.

Europe cost of sales and operating expenses increased $1.4 million in 2023 as compared to 2022, primarily due to $403,000 increase in travel-related expenses, $242,000 increase in professional service expenses, $233,000 increase in member acquisition costs and $175,000 increase in bad debt expense.

Foreign currency movement s relative to the U.S.

dollar negatively impacted local currency income from our operations in Europe by approximately $40,000 and $246,000 in 2023 and 2022, respectively.

Income from operations $ 3,081 $ 1,317

Income from operations as a % of revenues 13 % 5 %

Europe revenues increased $50,000, or 0.2%, in 2024 as compared to 2023.

Europe cost of sales and operating expenses decreased $2.9 million in 2024 as compared to 2023, primarily due to decreased member acquisition costs.

Foreign currency movements relative to the U.S.

dollar impacted local currency income from our operations in Europe by approximately $106,000 and negatively $40,000 in 2024 and 2023, respectively.

Jack's Flight Club

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Revenues 4,632 $ 4,172

Loss from operations $ (23) $ —

Loss from operations as a % of revenues (1) % — %

Jack’s Flight Club revenues in creased $695,000, or 20.0%, in 2023 as compared to 2022 .

Jack’s Flight Club cost of sales and operating expenses increased $718,000 in 2023 as compared to 2022, primarily due to an increase in advertising and marketing expenses.

Income (Loss) from operations $ 44 $ (23)

Income (Loss) from operations as a % of revenues 1 % (1) %

Jack’s Flight Club revenues increased $460,000, or 11%, in 2024 as compared to 2023 due to increase of subscription fees and increase of premium members.

Jack’s Flight Club cost of sales and operating expenses increased $690,000 in 2024 as compared to 2023, primarily due to an increase in headcount to support Canadian expansion and advertising and marketing expenses.

New Initiatives

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Revenues $ 107 $ 204

Income from operations $ (976) $ (988)

New Initiatives revenues increased $179,000 in 2023 as compared to 2022 .

New Initiatives cost of sales and operating expenses increased $167,000 in 2023 as compared to 2022, primarily due to increased product advertising and marketing expenses.

Loss from operations $ (510) $ (976)

New Initiatives revenues decreased $97,000 in 2024 as compared to 2023.

New Initiatives cost of sales and operating expenses decreased $604,000 in 2024 as compared to 2023, primarily due to decreases in sales and marketing and headcount.

Liquidity and Capital Resources

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taxes in certain circumstances.

Cash, cash equivalents and restricted cash decreased by $3.0 million to $16.4 million as of December 31, 2023 from $19.4 million as of December 31, 2022, primarily due to $16.8 million of cash used to repurchase common stock, offset partially by $10.7 million of cash provided by operating activities and $3.0 million payment of promissory notes.

Cash, cash equivalents and restricted cash increased by $1.3 million to $17.7 million as of December 31, 2024 from $16.4 million as of December 31, 2023, primarily due to cash provided by operating activities, offset partially by cash used to repurchase common stock.

As of December 31, 2024 , we had m erchant payables of $16.3 million related to unredeemed vouchers.

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Payables to merchants are generally due upon redemption of vouchers.

The vouchers expire between January 2024 through December 2025;

The vouchers expire 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.

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(In thousands)

Net cash provided by (used in) operating activities $ 10,675 $ (23,121)

Net cash provided by operating activities $ 21,100 $ 10,675

Net cash used in investing activities (177) (39)

Net cash provided by (used in) financing activities (14,150) 1,282

Net cash used in financing activities (18,973) (14,150)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (599) 525

Net decrease in cash, cash equivalents and restricted cash $ (2,989) $ (25,611)

Net increase (decrease) in cash, cash equivalents and restricted cash $ 1,351 $ (2,989)

Net cash provided by operating activities for 2024 was $21 million, as compared to $10.7 million in 2023, consisting of net income of $13.7 million, $2 million of adjustments for non-cash items and $5.4 million used in changes in operating assets and liabilities.

Adjustments for non-cash items primarily consist of $907,000 for depreciation and amortization and $1.6 million for stock-based compensation, offset partially by $518,000 of deferred income tax change.

Cash used in operating assets and liabilities was primarily due to a $4.1 million decrease in merchant payables, offset partially by a $950,000 decrease in prepaid expenses and other and $1.9 million increase in other liabilities.

Net cash provided by operating activities for 2023 was $10.7 million, consisting of net income of $12.5 million and $2.4 million adjustments for non-cash items, offset partially by $4.2 million used in changes in operating assets and liabilities.

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Cash used in operating assets and liabilities was primarily due to a $12.1 million decrease in merchant payables, offset partially by a $3.8 million decrease in prepaid expenses and other, $2.4 million increase in other liabilities and $1.2 million decrease in prepaid income taxes.

Net cash used in operating activities for 2022 was $23.1 million, which consisted of $30.4 million decrease in cash from changes in operating assets and liabilities, offset partially by net income of $6.6 million and $684,000 increase in non-cash

The decrease in cash from changes in operating assets and liabilities was primarily due to $35.2 million decrease in merchant payables, offset partially by $1.6 million decrease in prepaid expenses and other, $1.5 million decrease in prepaid income tax and $1.3 million decrease in accounts receivables.

Adjustments for non-cash items primarily consisted of $2.2 million for depreciation and amortization, $1.8 million for stock-based compensation and $774,000 for deferred income tax, offset partially by $4.4 million reversal of reserves from accounts receivable and other reserves.

Cash refunds received for income tax, net of payment made, in 2023 was $1,000.

Cash paid for income tax, net of refunds received, in 2024, was $1.9 million.

Cash received for income tax refunds, net of payments in 2023, was $1,000.

Net cash used in investing activities for 2024 was $177,000 for purchases of property and equipment.

Net cash used in investing activities for 2023 was $39,000 which consisted of $255,000 for purchases of property and equipment and $216,000 proceeds from repayment of note receivable from a licensee.

Net cash used in investing activities for 2022 was $1.3 million, which consisted of $1.0 million for purchases of intangible assets and $462,000 for purchases of property and equipment.

Net cash used in financing activities for 2024 was $19 million primarily for the repurchase of common stock.

Net cash used in financing activities for 2023 was $14.2 million, which primarily consisted of $16.8 million for the repurchase of common stock and $3.0 million payment of promissory notes.

Net cash provided by financing activities for 2022 was $1.3 million, which primarily consisted of $1.9 million proceeds from the exercise of stock options and $1.0 million proceeds from the issuance of common stock in a private placement, offset partially by $1.6 million for the repurchase of common stock.

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

Therefore, we are continuing our voluntary program under which we make cash payments related to promotional shares held by individuals whose residence was unknown by us and who establish that they satisfied the conditions to receive shares of Netsurfers, and who failed to submit requests to convert their shares into shares of Travelzoo within the required time period.

This voluntary program is not available for individuals whose promotional shares have been escheated to a state by us.

Our capital requirements depend on a number of factors, including market acceptance of our products and services, the amount of resources we devote to the development of new products, cash payments related to former shareholders of Netsurfers, expansion of our operations, and the amount of resources we devote to promoting awareness of the Travelzoo brand.

Since the inception of the voluntary program under which we make cash payments to people who establish they are qualifying former shareholders of Netsurfers, we have incurred expenses of $2.9 million.

While future payments for this program are expected to decrease, the total cost of this voluntary program is still undeterminable because it is dependent on our stock price and on the number of valid requests ultimately received.

Consistent with our growth, we have 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.

3 unchanged sentences

If we sell additional equity or convertible debt securities, such sale could dilute the ownership of our existing stockholders.

If we issue debt securities or establish a new credit facility, our fixed obligations could increase and we may be required to agree to operating covenants that would restrict our operations.

If we issue debt securities or establish a new credit facility, our fixed obligations could increase and we may be

required to agree to operating covenants that would restrict our operations.

We cannot be sure that any such financing will be available in amounts or on terms acceptable to us.

8 unchanged sentences

2028 1,458 — 1,458 — 1,458

2028 1,350 — 1,350 — 1,350

Thereafter 1,674 — 1,674 — 1,674

29 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis