What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-11 compared with 2025-03-19 · 65 added, 77 removed, 238 unchanged (37% of the section changed)

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Travelzoo undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other circumstances occur in the future.

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

Travelzoo (including its subsidiaries and affiliates, the “Company” or “we”) is a global Internet media company.

We operate Travelzoo®, the club for travel enthusiasts, Jack’s Flight Club®, and Travelzoo META.

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® .

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

Jack's Flight Club is a subscription service that provides members with information about exceptional airfares.

Club Members, who pay a membership fee, receive Club Offers negotiated and rigorously vetted by our deal experts around the globe.

Our relationships with thousands of top travel suppliers—give us access to irresistible deals.

Our club and its benefits are built around the lifestyle of a travel enthusiast.

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

On January 1, 2026, we increased the annual membership fee to $50 in the United States for new members, For existing members, the new pricing will apply from the next renewal of their membership after February 1, 2026.

For any subscription revenue derived from the paid membership, we recognize revenue monthly pro rata over the subscription period.

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Under the licensing agreements, Travelzoo's existing members in the applicable territories continue to be owned by the Company.

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.

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.

Through Travelzoo META, we plan to include Metaverse travel experiences as a benefit of Travelzoo club membership in 2026, allowing us to utilize and leverage all we have learned and developed over the past few years for Travelzoo META for the benefit of our Club Members.

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

APAC Exit and Pivot to Licensing Model

In March 2020, Travelzoo exited its loss-making Asia Pacific business and pivoted to a licensing model.

The Company’s Asia Pacific business was classified as discontinued operations at March 31, 2020.

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

The license agreement for Australia, New Zealand and Singapore provides the licensee exclusive rights to use the Travelzoo products, services and intellectual property in Australia, New Zealand and Singapore in exchange for quarterly royalty payments based upon net revenue over a 5 year term, with an option to renew.

The Company recognized royalties of $41,000 and $35,000 from the licensee for the years ended December 31, 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 5 year term, with an option to renew.

The Company recognized royalties of $ 30,000 and $36,000 from the licensee for the years ended December 31, 2024 and 2023, respectively.

Reportable Segments

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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 and Commerce, Membership Fees, and Other.

The "Advertising and Commerce" category consists primarily 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.

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

In certain scenarios, the Company will pre-purchase vouchers or hotel inventory (in the form of credit amounts, vouchers

or gift cards) in bulk from clients and partners (e.g.

hotel or spa partners).

In those scenarios, the Company is not acting as the

agent, but rather as the principal.

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.

On January 1, 2026, we increased the annual membership fee to $50 for new members in the United States only.

For existing members, the new pricing will apply from the next renewal of their membership after February 1, 2026.

We recognize subscription revenues ratably over the respective subscription periods.

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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.

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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.

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 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 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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Factors relating to competitors include the willingness of certain competitors to grow their business unprofitably.

Factors relating to the travel industry include lingering effects of the global pandemic, geopolitical tensions affecting consumer travel to certain regions, 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 members will utilize and advertisers will adopt, and hiring and relying on key employees for the continued maintenance and growth of our business.

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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.

With the introduction of membership fees in 2024, our former user acquisition strategies and marketing tactics are no longer applicable for the Travelzoo membership base, and we are developing new user acquisition strategies whose timeframes to become effective are inherently uncertain.

With the introduction of membership fees in 2024, our former user acquisition strategies and marketing tactics are no longer applicable for the Travelzoo membership base, and we are developing new member acquisition strategies whose timeframes to become effective are inherently uncertain.

While we are initially reducing our expenditures on acquiring traffic as we test new strategies for efficacy, in time we may need to increase these expenditures to maintain or grow our audience and reach of our publications.

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 increased marketing on social media channels.

We continue to see a shift in members accessing our services through mobile devices and social media and, therefore, anticipate continuing to address this growing channel through increased marketing on social media channels.

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.

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Changes in the average cost per acquisition of new members impacts our advertising expenses and sales and marketing expenses as a percentage of revenue, and are not readily predictable.

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.

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

However, as we test new strategies and gain more learnings as to acquiring paying members, our expenditures may increase significantly.

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

In 2025, advertising expenditures increased significantly as we implemented new strategies to acquire Club Members.

However, as we test new strategies and gain more learnings as to acquiring paying members, our expenditures may fluctuate.

In addition, there may be a significant number of members that cancel or we may cancel their subscriptions 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, 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.

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.

We do 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

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Other income, net 0.8 0.7

Income from continuing operations before income taxes 22.7 20.2

Income from operations before income taxes 8.3 22.7

Income tax expense 2.9 6.4

Income from continuing operations 16.3 14.2

Income from discontinued operations, net of tax — 0.5

Income from operations 5.4 16.3

Net income 5.4 16.3

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Net income attributable to Travelzoo 5.1 % 16.2 %

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

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

Net income attributable to Travelzoo operations 5.1 % 16.2 %

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.

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

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

Year Ended December 31,

Advertising $ 78,396 $ 80,128

Advertising and Commerce $ 78,446 $ 78,396

Membership Fees 13,193 5,399

Other 107 204

Total revenues $ 91,719 $ 83,902

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.

Advertising and Commerce

Advertising and Commerce revenue remained flat year over year.

Membership Fees

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Cost of Revenues

Cost of revenues consists primarily of network expenses, including fees 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 license expenses, merchant processing fees, certain estimated refunds for member purchases of vouchers, customer service costs and salary expenses associated with network operations and customer service employees.

Cost of revenues consists primarily of network expenses related to powering the Company's websites, database services, sending e-mails, amortization of capitalized website development costs, software and license expenses, publishing fees to partners of the Travelzoo Network , costs incurred upon the sale of pre-purchased vouchers and other products, including directly attributable member services (call center), cost of certain membership benefits that are considered integral to the contractual obligation to Club Members, fees to payment processors.

Cost of revenues was $18.1 million and $10.5 million for the years ended December 31, 2025 and 2024, respectively.

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.

Cost of revenues increased $7.6 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to an increase in costs recognized upon the sale of pre-purchased vouchers .

Cost of revenues as a percent of revenues increased from 12.5% in 2024 to 19.7% in 2025.

Operating Expenses

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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 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.

Sales and marketing expenses increased $10.8 million, or 31%, in 2025 as compared to 2024 , primarily due to increase in member acquisition.

Sales and marketing expenses as a percent of revenues increased from 41% in 2024 to 49.4% in 2025.

Product Development

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Product development expenses were $2.6 million and $2.4 million for each of the years ended December 31, 2025 and 2024, 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 increased by $144,000, or 6%, in 2025 as compared to 2024 , primarily due to increase in salary and related expenses.

Product development expenses as a percent of revenues were 2.8% and 2.9% in 2025 and 2024, respectively.

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General and administrative expenses were $18.9 million and $18.1 million for the years ended 2025 and 2024, respectively.

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

General and administrative expenses increased by $863,000, or 5%, in 2025 as compared to 2024 , primarily due to increase in a one-time expense related to a global company meeting.

General and administrative expenses as a percent of revenues were 20.6% and 21.5% in 2025 and 2024, respectively.

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 $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.

Other income was $753,000 and $588,000 for the years ended December 31, 2025 and 2024, respectively.

Other income increased $165,000, or 28%, in 2025 as compared to 2024, primarily due to a $210,000 release of JFC VAT liabilities after a four-years statute of limitations in 2025.

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

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Our effective tax rate was 35% and 28.3% for 2025 and 2024, respectively.

Our effective tax rate decreased for 2024 as compared to 2023, primarily due to a decrease in non-deductible stock compensation .

Our effective tax rate increased for 2025 as compared to 2024, primarily due to higher interest expense related to uncertain tax positions .

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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Income from operations as a % of revenues 15 % 29 %

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.

North America revenues increased $5.2 million, or 9%, in 2025 as compared to 2024.

This increase was primarily due to the increase in paid membership fees and sales of pre-purchased vouchers or hotel inventory.

North America cost of sales and operating expenses increased by $12 million in 2025 as compared to 2024, primarily due to a $5.7 million increase in cost of revenue related to purchase of vouchers and gift cards which were sold during the year ended December 31, 2025, and a $4.7 million increase in member acquisition costs.

Travelzoo Europe

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Income from operations as a % of revenues (9) % 13 %

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.

Europe revenues increased $1.9 million, or 8%, in 2025 as compared to 2024.

This increase was primarily due to the increase in paid membership fees and sales of pre-purchased vouchers or hotel inventory.

Europe cost of sales and operating expenses increased by $7.3 million in 2025 as compared to 2024, primarily due to a $1.9 million increase in cost of revenue related to purchase of vouchers and gift cards which were sold during the year ended December 31, 2025, a $2.5 million increase in member acquisition costs, and a $1 million increase in salary and related expenses.

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.

dollar impacted local currency income from our operations in Europe by approximately negatively $97,000 and positively $106,000 in 2025 and 2024, respectively.

Jack's Flight Club

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Income (Loss) from operations as a % of revenues 6 % 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.

Jack’s Flight Club revenues increased $739,000, or 16%, in 2025 as compared to 2024 due to increase of subscription fees paid by the members .

Jack’s Flight Club cost of sales and operating expenses increased $446,000 in 2025 as compared to 2024, primarily due to an increase in advertising and marketing expenses.

New Initiatives

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taxes in certain circumstances.

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.

Cash, cash equivalents and restricted cash decreased by $7.0 million to $10.8 million as of December 31, 2025 from $17.7 million as of December 31, 2024, primarily due to cash used to repurchase common stock, offset partially by cash provided by operating activities.

As of December 31, 2025 , we had m erchant payables of $11.7 million related to unredeemed vouchers.

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Net increase (decrease) in cash, cash equivalents and restricted cash $ (6,977) $ 1,351

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.

Net cash provided by operating activities for 2025 was $5.7 million, as compared to $21.1 million in 2024, consisting of net income of $5 million, $1.2 million of adjustments for non-cash items and $478,000 used in changes in operating assets and liabilities.

Adjustments for non-cash items primarily consist of $305,000 for depreciation and amortization and $1.4 million for stock-based compensation, offset partially by $558,000 of deferred income tax change.

Cash used in operating assets and liabilities was primarily due to a $5.2 million decrease in merchant payables, offset partially by a $2.4 million increase in accounts receivable and a $2 million increase in deferred revenue.

Net cash provided by operating activities for 2024 was $21 million, 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.

Adjustments for non-cash items primarily consist of $1.9 million for depreciation and amortization and $1.6 million for stock-based compensation, offset partially by a $1.0 million reversal of reserve for accounts receivable and refunds.

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.

Cash paid for income tax, net of refunds received, in 2025, was $3.8 million.

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

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

Net cash used in investing activities for 2025 was $65,000 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 2024 was $177,000 for purchases of property and equipment.

Net cash used in financing activities for 2025 was $13 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 used in financing activities for 2024 was $18.9 million primarily for the repurchase of common stock.

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.

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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.

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2029 1,454 — 1,454 — 1,454

Thereafter 1,674 — 1,674 — 1,674

2030 225 — 225 — 225

Total $ 6,459 $ 1,177 $ 7,636 $ 733 $ 8,369

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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-K

Item 7. Management’s Discussion and Analysis