What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-12 compared with 2025-05-13 · 126 added, 115 removed, 184 unchanged (57% of the section changed)

11 unchanged sentences

It operates Travelzoo®, the club for travel enthusiasts, and Jack’s Flight Club®, a subscription service that provides information about exceptional airfares.

Travelzoo reaches 30 million travelers.

Travelzoo reaches 30 million travelers around the globe, including the United States, Canada, United Kingdom, Germany, France and Spain and through licensing arrangements covering Australia, Japan, New Zealand, Singapore and South Korea.

Through its websites, e-mails newsletters, iOS and Android apps, and social media channels, Travelzoo provides members information and access to exclusive discounted travel, entertainment, and local offers and experiences.

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

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

The Company generates revenues from advertising and commerce, 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.

We also license Travelzoo products, services and intellectual property to licenses in Australia, Japan, New Zealand, Singapore, and South Korea.

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

The Company recognized $17,000 in royalties in each of the three months ended March 31, 2025 and 2024.

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

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

In December 2022, we acquired Metaverse Travel Experiences, Inc., now Metaverse Travel Experiences, LLC (“MTE”), to support Travelzoo META in sourcing prospective metaverse 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 condensed consolidated financial statements included in this report for further information regarding the acquisition of MTE.

APAC Licensing

Travelzoo currently has license agreements covering Australia, Japan, New Zealand, Singapore, and South Korea.

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 $10,000 from the licensee for each of the three months ended March 31, 2025 and 2024, 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.

The Company recognized royalties o f $7,000 from the licensee for each of the three months ended March 31, 2025 and 2024, respectively.

Reportable Segments

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The Company currently has four reportable operating segments:

Travelzoo North America,

Travelzoo Europe, Jack’s Flight Club and New Initiatives.

Travelzoo North America, Travelzoo Europe, Jack’s Flight Club and New Initiatives.

Travelzoo North America consists of the Company’s operations in the U.S.

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How We Generate Revenues

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.

Revenues are generated primarily from three categories:

Advertising and Commerce, Membership Fees, and Other.

The "Advertising and Commerce" category consists of (a) advertising fees paid by travel companies for the publishing of their offers on Travelzoo’s media properties, (b) commissions and revenues 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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Insertion orders and merchant agreements for Local Deals are typically for periods between one and twelve months and are not automatically renewed.

As of March 31, 2025 and December 31, 2024, the Company had approximately $3.7 million and $4.1 million of unredeemed vouchers that had been sold, respectively, representing the Company’s commission.

As of June 30, 2025 and December 31, 2024, the Company had approximately $3.1 million and $4.1 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 $214,000 and $139,000 as of March 31, 2025 and December 31, 2024, 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 $14.8 million as of March 31, 2025 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 $215,000 and $144,000 as of June 30, 2025 and December 31, 2024, respectively, for these unredeemed vouchers which is recorded as a reduction of revenues on the condensed consolidated statements of operations, and accrued expense and other on the condensed consolidated balance sheet.

Merchant payables of $12.4 million as of June 30, 2025 related to unredeemed vouchers is recorded on the condensed 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.

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The pre-purchased vouchers are recorded as inventory, within prepaid expenses and other on the condensed consolidated balance sheet until sold to and purchased by Travelzoo members, at which point, the amount for which the vouchers were sold to Travelzoo members is recognized fully as revenue and the amount for which the vouchers were purchased from the hotel or spa partners is recognized as cost of revenues.

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

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

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

We recognize subscription revenues ratably over the respective subscription periods.

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.

The "Other" category consists of licensing fees from license agreements, and revenue generated from MTE, including but not limited to sales from 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.

Factors relating to advertisers include our ability to sell more advertising to existing and new advertisers, our ability to enhance our audience reach, engagement and advertising rates (particularly as we transition to a paid membership model) and spending controls by travel intermediaries to focus on improving profitability.

As we build out our offering of Club Offers (offers available only to Club Members, or members who have paid the membership fee), we must balance maintaining the advertising business while working with our advertisers to also provide us these offers exclusively for paying members.

Factors relating to competitors include the willingness of certain competitors to grow their business unprofitably and willingness to utilize new technologies such as artificial intelligence (“AI”) to provide lower quality content at greater volumes.

Factors relating to the travel industry include geopolitical tensions affecting consumer travel to certain regions, the imposition or threat of tariffs, immigration issues, and risk of future unforeseeable macro events that impact travel, while factors relating to the online advertising business include shifts in consumer use of different digital media formats such as from desktop to mobile, from mobile web to mobile app, and from email to push notifications and SMS text messaging.

Internal factors include risks relating to our ability to continue to service members without interruption, our ability to develop and launch new products that members will utilize and advertisers will adopt (such as Club Offers), and hiring and relying on key employees for the continued maintenance and growth of our business.

External factors include the introduction of new methods of advertising, the relative condition of the economy (including risks of recession), 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.

Revenues from local business have been and may continue to decline over time due to market conditions driven by competition and declines in consumer demand.

Revenues from local businesses 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.

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We monitor our membership base to assess our efforts to maintain and grow our audience reach.

We obtain additional members and activity on our websites by acquiring traffic from Internet search and social media companies.

We obtain additional members and increase activity on our websites by acquiring traffic from Internet search and social media companies.

The costs to grow our audience have had, and we expect will continue to have, a significant impact on our financial results and can vary from period to period.

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We do not know if we will be able to continue efficiently growing through member acquisition.

We continue to see a shift in users accessing our services through mobile devices and social media and, therefore, anticipate continuing to address this growing channel through additional investments in mobile app development and mobile friendly acquisition channels.

We continue to see a

shift in users accessing our services through mobile devices and social media and, therefore, anticipate continuing to address this growing channel through additional investments in mobile app development and mobile friendly acquisition channels.

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

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As we make this transition, we may need to decrease our rates based on competitive market conditions and the performance of our audience.

However, as we

increase member acquisition, we expect that a greater proportion of our revenue will be driven by membership revenue, as opposed to advertising revenue.

However, as we increase member acquisition, we expect that a greater proportion of our revenue will be driven by membership revenue, as opposed to advertising revenue.

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

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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.

We have found efficiencies in member acquisition gained through careful testing and optimizing throughout 2024 and we hope that we will be able to continue to scale.

We have found efficiencies in member acquisition gained through careful testing and optimizing throughout 2024 and the beginning of 2025 and we hope that we will be able to continue to scale.

However, in the future, there may be a significant number of members that cancel or we may cancel their memberships for various reasons, which may prompt us to spend more on member acquisition in order to replace lost members.

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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.

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

We expect to continue our efforts to grow;

however, we may not grow or we may experience slower growth.

We believe that we can sell more advertising if the market for online advertising continues to grow and if we can maintain or increase our market share.

We believe the market for advertising continues to shift from offline to online.

not know if we will be able to maintain or increase our market share.

We do not know if we will be able to increase the number of our advertisers in the future.

We do not know if we will have market acceptance of our new products or whether the market will continue to accept our existing products.

Results of Operations

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2024 2025 2024

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

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Net income attributable to Travelzoo 5.9 % 13.8 % 9.7 % 16.6 %

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

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

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

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

Three Months Ended

Advertising $ 20,680 $ 20,850

Three Months Ended Six Months Ended

June 30, June 30,

2025 2024 2025 2024

Advertising and Commerce $ 20,874 $ 19,957 $ 41,554 $ 40,807

Membership Fees 3,013 1,161 5,456 2,265

Other 19 23 36 54

Total revenues $ 23,906 $ 21,141 $ 47,046 $ 43,126

Advertising revenue decreased by $170,000 for the three months ended March 31, 2025 from the three months ended March 31, 2024 .

This decrease was primarily driven by $603,000 decrease in revenues from Travelzoo website (CPC) and $277,000 decrease in revenues from our hotel platform.

These decreases were partially offset by a $729,000 increase in Standalone email newsletter revenue.

Advertising and Commerce

Advertising and Commerce revenue increased by $917,000 for the three months ended June 30, 2025 from the three months ended June 30, 2024 .

This increase was primarily driven by $1.6 million increase in revenues from Getaways vouchers purchases which was partially offset by a $603,000 decrease in hotel platform and other commission revenue.

Advertising and Commerce revenue increased by $747,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024 .

This increase was primarily driven by $2.1 million increase in revenues from Getaways vouchers purchases which was partially offset by a $1.2 million decrease in hotel platform and other commission revenue.

Membership Fees

Revenues from Membership fees increased $1.3 million for the three months ended March 31, 2025 from the three months ended March 31, 2024 due to the increase of subscription fees paid by Travelzoo and Jack's Flight Club members.

Revenues from Other decreased $14,000 for the three months ended March 31, 2025 from the three months ended March 31, 2024 primarily due to the decrease revenue from the retail and fashion business.

Revenues from Membership fees increased $1.9 million for the three months ended June 30, 2025 from the three months ended June 30, 2024 due to the increase of subscription fees paid by Travelzoo and Jack's Flight Club members.

Revenues from Membership fees increased $3.2 million for the six months ended June 30, 2025 from the six months ended June 30, 2024 due to the increase of subscription fees paid by Travelzoo and Jack's Flight Club members.

Revenues from Other decreased $4,000 for the three months ended June 30, 2025 from the three months ended June 30, 2024 primarily due to the decrease revenue from the retail and fashion business.

Revenues from Other decreased $18,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024 primarily due to the decrease revenue from the retail and fashion business.

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, costs recognized upon the sale of pre-purchased vouchers and salary and related expenses associated with network operations and customer service employees.

Cost of revenues was $4.1 million and $2.6 million, respectively, for the three months ended March 31, 2025 and 2024.

Cost of revenues increased $1.5 million for the three months ended March 31, 2025 from the three months ended March 31, 2024 primarily due to the increase in costs recognized upon the sale of pre-purchased vouchers.

Cost of revenues was $5.2 million and $2.5 million, respectively, for the three months ended June 30, 2025 and 2024.

Cost of revenues was $9.3 million and $5.2 million, respectively, for the six months ended June 30, 2025 and 2024.

Cost of revenues increased $2.7 million for the three months ended June 30, 2025 from the three months ended June 30, 2024 primarily due to the increase in costs recognized upon the sale of pre-purchased vouchers.

Cost of revenues increased $4.1 million for the six months ended June 30, 2025 from the six months ended June 30, 2024 primarily due to the increase in costs recognized upon the sale of pre-purchased vouchers.

Operating Expenses

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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 $10.2 million and $8.6 million for the three months ended March 31, 2025 and 2024, respectively.

Sales and marketing expenses were $11.5 million and $9.4 million for the three months ended June 30, 2025 and 2024, respectively.

Sales and marketing expenses were $21.7 million and $18.0 million for the six months ended June 30, 2025 and 2024, 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 March 31, 2025 and 2024, advertising expenses accounted for 15% and 10%, respectively, of the total sales and marketing expenses.

For the three months ended June 30, 2025 and 2024, advertising expenses accounted for 25% and 19%, respectively, of the total sales and marketing expenses.

For the six months ended June 30, 2025 and 2024, advertising expenses accounted for 20% and 15%, 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 $1.6 million for the three months ended March 31, 2025 from the three months ended March 31, 2024.

Sales and marketing expenses increased $2.1 million for the three months ended June 30, 2025 from the three months ended June 30, 2024.

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

Sales and marketing expenses increased $3.7 million for the six months ended June 30, 2025 from the six months ended June 30, 2024 .

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

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 $634,000 and $566,000 for the three months ended March 31, 2025 and 2024, respectively.

Product development expenses increased $68,000 for the first months ended March 31, 2025 from the first months ended March 31, 2024 primarily due to the increase in salary and related expenses.

Product development expenses were $698,000 and $603,000 for the three months ended June 30, 2025 and 2024, respectively.

Product development expenses were $1.3 million and $1.2 million for the six months ended June 30, 2025 and 2024, respectively.

Product development expenses increased $95,000 for the three months ended June 30, 2025 from the three months ended June 30, 2024 primarily due to the increase in salary and professional services expenses.

Product development expenses increased $100,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024 primarily due to the increase in salary and professional services 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 $4.3 million and $4.5 million for the three months ended March 31, 2025 and 2024, respectively.

General and administrative expenses decreased $285,000 for the three months ended March 31, 2025 from the three months ended March 31, 2024 primarily due to $244,000 increase in stock compensation expense and $117,000 increase in bad debt expense, offset by a $224,000 decrease in legal expense and a $286,000 decrease in professional service expense.

General and administrative expenses were $4.5 million and $4.6 million for the three months ended June 30, 2025 and 2024, respectively.

General and administrative expenses were $8.8 million and $9.2 million for the six months ended June 30, 2025 and 2024, respectively.

General and administrative expenses decreased $119,000 for the three months ended June 30, 2025 from the three months ended June 30, 2024 primarily due to $349,000 decrease in stock compensation expenses, offset by a $170,000 increased in bonus expense and a $68,000 increased in office expenses.

General and administrative expenses decreased $404,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024 primarily due to $225,000 decrease in professional services expenses and $266,000 decreased in legal expense, offset by a $100,000 increased in office expenses.

Other Income, net

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

Other income, net was $629,000 and $139,000, respectively, for the three months ended March 31, 2025 and 2024.

Other income, net increased $490,000 for the three months ended March 31, 2025 from the three months ended March 31, 2024 primarily due to a $210,000 release of JFC VAT liabilities after a four-years statute of limitations and a $179,000 German federal government funding for COVID-19 pandemic relief the Company received and the foreign exchange transactions gains.

Other income, net was $161,000 and $176,000, respectively, for the three months ended June 30, 2025 and 2024.

Other income, net was $790,000 and $315,000, respectively, for the six months ended June 30, 2025 and 2024.

Other income, net decreased $14,000 for the three months ended June 30, 2025 from the three months ended June 30, 2024 primarily due to the interest income and foreign exchange transactions loss.

Other income, net increased $475,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024 primarily due to a $210,000 release of JFC VAT liabilities after a four-years statute of limitations and a $179,000 German federal government funding for COVID-19 pandemic relief the Company received and the foreign exchange transactions gains.

Our income is generally 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 $1.2 million and $1.5 million, respectively, for the three months ended March 31, 2025 and 2024.

Our effective tax rate from continuing operations was 26% and 26%, respectively, for the three months ended March 31, 2025 and 2024.

The Company’s effective tax rate for the three months ended March 31, 2025 changed from the three months ended March 31, 2024 primarily due to a higher interest expense related to unrecognized tax positions in the three months ended March 31, 2025.

Income tax expense was $740,000 and $1.3 million, respectively, for the three months ended June 30, 2025 and 2024.

Our effective tax rate from continuing operations was 33% and 30%, respectively, for the three months ended June 30, 2025 and 2024.

The Company’s effective tax rate for the three months ended June 30, 2025 changed from the three months ended June 30, 2024 primarily due to a higher interest expense related to unrecognized tax positions in the three months ended June 30, 2025.

Income tax expense was $1.9 million and $2.8 million, respectively, for the six months ended June 30, 2025 and 2024.

The Company’s effective tax rate from continuing operations was 29% and 28% for the six months ended June 30, 2025 and 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.

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Travelzoo North America

Three Months Ended March 31,

(In thousands)

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

2025 2024 2025 2024

(In thousands) (In thousands)

Revenues $ 16,132 $ 14,134 $ 31,260 $ 28,362

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Operating profit as a % of revenue 17.5 % 26.3 % 20.5 % 28.8 %

North America revenues increased by $900,000 for the three months ended March 31, 2025 from the three months ended March 31, 2024.

This increase was primarily due to the increase in paid membership fees .

North America expenses increased by $1.7 million for the three months ended March 31, 2025 from the three months ended March 31, 2024.

The increase was primarily due to a $948,000 increase in pre-purchased vouchers and a $763,000 increase in member acquisition costs.

North America revenues increased by $2 million for the three months ended June 30, 2025 from the three months ended June 30, 2024.

This increase was primarily due to the increase in paid membership fees and Getaway vouchers .

North America expenses increased by $2.9 million for the three months ended June 30, 2025 from the three months ended June 30, 2024.

The increase was primarily due to a $1.7 million increase in cost of revenue related to purchase of vouchers and gift cards which were sold during the six months ended June 30, 2025, and a $811,000 increase in member acquisition costs.

North America revenues increased by $2.9 million for the six months ended June 30, 2025 from the six months ended June 30, 2024.

This increase was primarily due to the increase in paid membership fees and Getaway vouchers .

North America expenses increased by $4.6 million for the six months ended June 30, 2025 from the six months ended June 30, 2024.

The increase was primarily due to a $2.7 million increase in cost of revenue related to purchase of vouchers and gift cards which were sold during the six months ended June 30, 2025,and a $1.6 million increase in member acquisition costs.

Travelzoo Europe

Three Months Ended March 31,

(In thousands)

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

2025 2024 2025 2024

(In thousands) (In thousands)

Revenues $ 6,385 $ 5,951 $ 13,097 $ 12,613

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Operating profit as a % of revenue (13.8) % 8.6 % (5.0) % 15.0 %

Europe revenues increased by $50,000 for the three months ended March 31, 2025 from the three months ended March 31, 2024.

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 increased by $1.2 million for the three months ended March 31, 2025 from the three months ended March 31, 2024 primarily due to $496,000 in salary and related expenses, a $401,000 increase in pre-purchased vouchers and a $225,000 increase in member acquisition costs.

Europe revenues increased by $434,000 for the three months ended June 30, 2025 from the three months ended June 30, 2024.

The increase was primarily due to the increase in paid membership fees .

Eur ope expenses increased by $1.8 million for the three months ended June 30, 2025 from the three months ended June 30, 2024 primarily due to $631,000 in member acquisition costs, a $488,000 increase in pre-purchased vouchers and a $353,000 increase in salary and related expenses.

Europe revenues increased by $484,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024.

The increase was primarily due to the increase in paid membership fees .

Eur ope expenses increased by $3 million for the six months ended June 30, 2025 from the six months ended June 30, 2024 primarily due to $882,000 in member acquisition costs, a $857,000 increase in pre-purchased vouchers and a $866,000 increase in salary and related expenses.

Foreign currency movements relative to the U.S.

dollar positively impacted our local currency income from our operations in Europe by approximately $11,000 and $63,000 for the three months ended March 31, 2025 and 2024 respectively.

dollar negatively impacted our local currency income from our operations in Europe by approximately $42,000 and $5,000 for the three months ended June 30, 2025 and 2024 respectively.

Foreign currency movements relative to the U.S.

dollar negatively impacted our local currency income from our operations in Europe by approximately $11,000 and $21,000 for the six months ended June 30, 2025 and 2024 respectively.

Jack ’ s Flight Club

Three Months Ended March 31,

(In thousands)

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

2025 2024 2025 2024

(In thousands) (In thousands)

Revenues $ 1,370 $ 1,033 $ 2,653 $ 2,096

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Operating profit loss as a % of revenue 11.4 % (3.3) % 6.3 % (6.3) %

Jack ’ s Flight Club revenues increased by $220,000 for the first months ended March 31, 2025 from the first months ended March 31, 2024 due to the increase of subscription fees paid by the members.

Jack’s Flight Club expenses in creased by $152,000 for the first months ended March 31, 2025 from the first months ended March 31, 2024 primarily due to the increase in salary and related expenses.

Jack ’ s Flight Club revenues increased by $337,000 for the three months ended June 30, 2025 from the three months ended June 30, 2024 due to the increase of subscription fees paid by the members.

Jack’s Flight Club expenses in creased by $126,000 for the three months ended June 30, 2025 from the three months ended June 30, 2024 primarily due to the increase in advertising expenses.

Jack ’ s Flight Club revenues increased by $557,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024 due to the increase of subscription fees paid by the members.

Jack’s Flight Club expenses in creased by $256,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024 primarily due to the increase in advertising expenses.

New Initiatives

Three Months Ended March 31,

(In thousands)

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

2025 2024 2025 2024

(In thousands) (In thousands)

Revenues $ 19 $ 23 $ 36 $ 55

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

New Initiatives revenues decreased $15,000 for the three months ended March 31, 2025 from the three months ended March 31, 2024 primarily due to the decrease in the retail and fashion business.

New Initiatives revenues decreased $4000 for the three months ended June 30, 2025 from the three months ended June 30, 2024 primarily due to the decrease in the retail and fashion business.

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

New Initiatives revenues decreased $19,000 for the six months ended June 30, 2025 from the six months ended June 30, 2024 primarily due to the decrease in the retail and fashion business.

Liquidity and Capital Resources

As of March 31, 2025, we had $11.5 million in cash and cash equivalents, of which $8.3 million was held outside the U.S.

As of June 30, 2025, we had $10.4 million in cash and cash equivalents, of which $7.9 million was held outside the U.S.

in our foreign operations.

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

taxes in certain circumstances.

If this cash is distributed to the U.S., we may be subject to additional foreign withholdings taxes in certain circumstances.

We also had $757,000 in restricted cash held in the U.S.

as of March 31, 2025.

Cash, cash equivalents and restricted cash decreased $5.5 million from $17.7 million as of December 31, 2024 to $12.2 million as of March 31, 2025 primarily due to $8.9 million cash used to repurchase common stock, offset partially by $3.3 million cash provided by operating activities.

As of March 31, 2025 , we had merchant payables of $14.8 million related to unredeemed vouchers.

as of June 30, 2025.

Cash, cash equivalents and restricted cash decreased $6.5 million from $17.7 million as of December 31, 2024 to $11.2 million as of June 30, 2025 primarily due to $11.4 million cash used to repurchase common stock, offset partially by $4.6 million cash provided by operating activities.

As of June 30, 2025 , we had merchant payables of $12.4 million related to unredeemed vouchers.

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

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Payables to merchants are generally due upon redemption of vouchers.

As of March 31, 2025, unredeemed vouchers have maturities through March 2026;

As of June 30, 2025, unredeemed vouchers have maturities through March 2026;

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

Based on current projections of redemption activity, we expect that cash on hand as of March 31, 2025 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, 2025 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:

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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

Net cash provided by operating activities for the three months ended March 31, 2025 was $3.3 million, which primarily consisted of net income of $3.3 million, $549,000 increase in non-cash items and $525,000 decrease in cash from changes in operating assets and liabilities.

Adjustments for non-cash items primarily consisted of $369,000 for stock-based compensation and $206,000 for Provision of loss (net recoveries) on accounts receivable and refund reserve.

The decrease in cash from changes in operating assets and liabilities was primarily due to $1.7 million decrease in merchant payables, offset partially by $1.2 million increase in deferred revenue

Cash paid for income tax, net of refunds received, during the three months ended March 31, 2025 and 2024 was $1.5 million and $548,000, respectively.

Net cash used in investing activities for the three months ended March 31, 2025 and 2024 was $21,000 and $35,000, respectively.

The cash used in investing activities for the three months ended March 31, 2025 was consisted of purchases of property and equipment.

Net cash used for financing activities for the three months ended March 31, 2025 was $8.9 million which primarily consisted of the repurchase of common stock of $8.9 million.

Net cash used for financing activities for the three months ended March 31, 2024 was $3.9 million which primarily consisted of the repurchase of common stock.

Net cash provided by operating activities for the six months ended June 30, 2025 was $4.6 million, which primarily consisted of net income of $4.7 million, $724,000 increase in non-cash items and $884,000 decrease in cash from changes in operating assets and liabilities.

Adjustments for non-cash items primarily consisted of $708,000 for stock-based compensation and $182,000 for depreciation and amortization.

The decrease in cash from changes in operating assets and liabilities was primarily due to $4.4 million decrease in merchant payables, offset partially by $1.7 million increase in deferred revenue and $1.8 million increase in accrued expenses and others.

Net cash provided by operating activities 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.

Cash paid for income tax, net of refunds received, during the six months ended June 30, 2025 and 2024 was $2.7 million and $1.2 million, respectively.

Net cash used in investing activities for the six months ended June 30, 2025 and 2024 was $34,000 and $83,000, respectively.

The cash used in investing activities for the six months ended June 30, 2025 was consisted of purchases of property and equipment.

Net cash used for financing activities for the six months ended June 30, 2025 was $11.5 million which primarily consisted of the repurchase of common stock of $11.4 million.

Net cash used for financing activities for the six months ended June 30, 2024 was $10.4 million which primarily consisted of the repurchase of common stock.

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 $23.9 million as of March 31, 2025.

We also have contingencies related to net unrecognized tax benefits, including interest and penalties, of approximately $23.9 million as of June 30, 2025.

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

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that we believe are important in the preparation of our consolidated financial statements because they require that we use judgment and estimates in applying those policies.

Preparation of the consolidated financial statements and accompanying notes requires that we make estimates and assumptions that affect the

reported amounts and classifications of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as revenue and expenses during the periods reported.

Critical accounting policies and estimates are those that we believe are important in the preparation of our condensed consolidated financial statements because they require that we use judgment and estimates in applying those policies.

Preparation of the condensed consolidated financial statements and accompanying notes requires that we make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities and the disclosure of contingent assets

and liabilities as of the date of the condensed consolidated financial statements as well as revenue and expenses during the periods reported.

We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances.

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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