Travelzoo(TZOO) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Presents the unaudited financial statements and management's analysis of Travelzoo's financial condition and operations Item 1. Financial Statements (Unaudited) Travelzoo's unaudited financial statements show revenue growth but declining net income and diluted EPS, with negative net working capital Condensed Consolidated Balance Sheets Provides a snapshot of Travelzoo's financial position, highlighting changes in assets, liabilities, and equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | Percentage Change | | :-------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------------------ | | Cash and cash equivalents | $10,441 | $17,064 | $(6,623) | -38.8% | | Total current assets | $24,160 | $31,773 | $(7,613) | -23.9% | | Total assets | $46,735 | $54,722 | $(7,987) | -14.6% | | Total current liabilities | $35,168 | $36,496 | $(1,328) | -3.6% | | Total liabilities | $48,816 | $50,369 | $(1,553) | -3.1% | | Total stockholders' equity (deficit) | $(2,081) | $4,353 | $(6,434) | -147.8% | - The company's total stockholders' equity shifted from a positive balance of $4,353 thousand at December 31, 2024, to a deficit of $(2,081) thousand at June 30, 2025, indicating a significant decline in shareholder value[12] Condensed Consolidated Statements of Operations Details Travelzoo's revenues, expenses, and profitability for the reporting periods, showing key performance trends Key Financial Highlights (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | YoY Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenues | $23,906 | $21,141 | $2,765 | 13.1% | | Cost of revenues | $5,163 | $2,520 | $2,643 | 104.9% | | Gross profit | $18,743 | $18,621 | $122 | 0.7% | | Operating income | $2,060 | $4,011 | $(1,951) | -48.6% | | Net income attributable to Travelzoo | $1,402 | $2,927 | $(1,525) | -52.1% | | Net income per share—diluted | $0.12 | $0.23 | $(0.11) | -47.8% | Key Financial Highlights (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | YoY Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenues | $47,046 | $43,126 | $3,920 | 9.1% | | Cost of revenues | $9,335 | $5,160 | $4,175 | 80.9% | | Gross profit | $37,711 | $37,966 | $(255) | -0.7% | | Operating income | $5,864 | $9,602 | $(3,738) | -38.9% | | Net income attributable to Travelzoo | $4,570 | $7,163 | $(2,593) | -36.2% | | Net income per share—diluted | $0.38 | $0.54 | $(0.16) | -29.6% | Condensed Consolidated Statements of Comprehensive Income Presents Travelzoo's total comprehensive income, including net income and other comprehensive income components like currency adjustments Total Comprehensive Income (in thousands) | Period | 2025 | 2024 | YoY Change | | :-------------------- | :----- | :----- | :--------- | | Three Months Ended June 30 | $1,352 | $2,830 | -52.2% | | Six Months Ended June 30 | $4,493 | $6,801 | -33.9% | - Foreign currency translation adjustments contributed to other comprehensive loss, with a $(129) thousand impact for the three months ended June 30, 2025, and a $(249) thousand impact for the six months ended June 30, 2025[16] Condensed Consolidated Statements of Cash Flows Summarizes Travelzoo's cash inflows and outflows from operating, investing, and financing activities for the period Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :------------------------------------------------- | :----- | :----- | :------- | | Net cash provided by operating activities | $4,582 | $7,927 | $(3,345) | | Net cash used in investing activities | $(34) | $(83) | $49 | | Net cash used in financing activities | $(11,522) | $(10,679) | $(843) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $432 | $(311) | $743 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(6,542) | $(3,146) | $(3,396) | - The significant decrease in cash, cash equivalents, and restricted cash was primarily driven by $11.4 million used for common stock repurchases during the six months ended June 30, 2025[19][193][199] Condensed Consolidated Statements of Stockholders' Equity (Deficit) Outlines changes in Travelzoo's stockholders' equity, including common stock, retained earnings, and comprehensive loss Stockholders' Equity (Deficit) Changes (June 30, 2025 vs. December 31, 2024, in thousands) | Item | December 31, 2024 | June 30, 2025 | Change | | :-------------------------------- | :---------------- | :------------ | :----- | | Common Stock (Amount) | $118 | $111 | $(7) | | Retained Earnings | $14,284 | $7,934 | $(6,350) | | Accumulated Other Comprehensive Loss | $(5,327) | $(5,576) | $(249) | | Total Travelzoo Stockholders' Equity (Deficit) | $(462) | $(7,068) | $(6,606) | | Total Stockholders' Equity (Deficit) | $4,353 | $(2,081) | $(6,434) | - The company repurchased 763,000 shares of common stock, leading to a $7 thousand reduction in common stock amount and a significant decrease in retained earnings and total stockholders' equity[23] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1: Summary of Significant Accounting Policies Details Travelzoo's business, revenue recognition, key accounting policies, and liquidity, noting negative net working capital - Travelzoo operates as a global Internet media company, offering travel, entertainment, and lifestyle experiences through Travelzoo® and exceptional airfares via Jack's Flight Club®[28][130] - The company's revenue is derived from advertising and commerce, membership fees (including a new $40 annual fee for new Travelzoo members since January 1, 2024), and other sources like licensing and Metaverse Travel Experiences (MTE)[30][41][52][53][141][142] - As of June 30, 2025, deferred revenue was $8.5 million, with $2.4 million for Jack's Flight Club and $6 million for Travelzoo North America and Travelzoo Europe[54] - The company had a refund reserve of $215,000 for $3.1 million of unredeemed vouchers as of June 30, 2025[56][138] - Travelzoo reported negative net working capital of $11.0 million as of June 30, 2025, primarily due to classifying $12.4 million in merchant payables as current liabilities, but management projects sufficient cash on hand for working capital needs for at least the next twelve months[65][194] Cash, Cash Equivalents and Restricted Cash (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------------------------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $10,441 | $17,064 | | Restricted cash | $757 | $676 | | Total cash, cash equivalents and restricted cash (Statements of Cash Flows) | $11,198 | $17,740 | Note 2: Net Income Per Share Net income per share, both basic and diluted, decreased significantly for the three and six months ended June 30, 2025, compared to the same periods in 2024, reflecting the overall decline in net income attributable to Travelzoo Net Income Per Share (Three Months Ended June 30) | Metric | 2025 | 2024 | YoY Change | | :-------------------------- | :--- | :--- | :--------- | | Net income per share—basic | $0.13 | $0.23 | -43.5% | | Net income per share—diluted | $0.12 | $0.23 | -47.8% | Net Income Per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | YoY Change | | :-------------------------- | :--- | :--- | :--------- | | Net income per share—basic | $0.39 | $0.54 | -27.8% | | Net income per share—diluted | $0.38 | $0.54 | -29.6% | - Options to purchase 25,000 shares of common stock for the three months ended June 30, 2025, were anti-dilutive and thus excluded from diluted EPS calculation, a significant decrease from 850,000 anti-dilutive options in the prior year period[70] Note 3: Acquisitions This note discusses the MTE acquisition, identifiable intangible assets, and goodwill, noting no impairment during the period - The acquisition of Metaverse Travel Experiences, LLC (MTE) in December 2022 involved a private placement of 3.4 million shares to Azzurro Capital Inc., the company's largest shareholder[71][126] Intangible Assets from Acquisitions (in thousands) | Asset Category | Fair Value | Estimated Life (Years) | | :-------------------------------- | :--------- | :--------------------- | | Customer relationships (Jack's Flight Club) | $3,500 | 5.0 | | Trade name (Jack's Flight Club) | $2,460 | indefinite | | Secret Escapes Spain member database | $445 | 3.0 | - Goodwill remained at $10,944 thousand, with no impairment charge identified during the annual impairment test as of October 31, 2024, or for the six months ended June 30, 2025[12][60][76] Amortization Expense of Acquired Intangible Assets (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | $16 | $87 | Note 4: Commitments and Contingencies The company faces various claims and legal proceedings in the ordinary course of business, for which accruals were not material. It also has operating leases for office space in multiple countries and purchase commitments totaling $1.0 million as of June 30, 2025 - Accruals for legal contingencies were not material as of June 30, 2025, and December 31, 2024, with management believing the likelihood of a material adverse impact from pending claims is remote[80] Rent Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | $734 | $686 | - The company had purchase commitments aggregating approximately $1.0 million as of June 30, 2025, representing minimum obligations under agreements with third-party service providers[83] Note 5: Income Taxes Travelzoo's effective income tax rate increased for both the three and six months ended June 30, 2025, primarily due to higher interest expense related to uncertain tax positions. The company maintains a significant reserve for unrecognized tax benefits and is assessing the impact of new U.S. federal tax legislation Effective Income Tax Rate | Period | 2025 | 2024 | Change | | :-------------------------- | :--- | :--- | :----- | | Three Months Ended June 30 | 33% | 30% | +3% | | Six Months Ended June 30 | 29% | 28% | +1% | - The increase in the effective tax rate for the three months ended June 30, 2025, was primarily due to a provision for higher interest expense related to uncertain tax positions[85][179] - As of June 30, 2025, the company had approximately $23.9 million in total unrecognized tax benefits, of which up to $16.6 million would favorably affect reported income if recognized[87][205] - Accrued interest related to uncertain tax positions increased to $1.3 million as of June 30, 2025, from $1.1 million as of December 31, 2024[88] - The company is assessing the impact of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, with expected reflection in the financial statements for the three months ended September 30, 2025[90][92] Note 6: Accumulated Other Comprehensive Loss The accumulated other comprehensive loss increased for both the three and six months ended June 30, 2025, primarily due to negative foreign currency translation adjustments Accumulated Other Comprehensive Loss (in thousands) | Period | Beginning Balance (2025) | Ending Balance (2025) | Foreign Currency Translation Adjustment (2025) | | :-------------------------- | :----------------------- | :-------------------- | :--------------------------------------------- | | Three Months Ended June 30 | $(5,447) | $(5,576) | $(129) | | Six Months Ended June 30 | $(5,327) | $(5,576) | $(249) | - The accumulated other comprehensive loss primarily consists of foreign currency translation adjustments[93] Note 7: Stock-Based Compensation and Stock Options Stock-based compensation expense decreased for the three months ended June 30, 2025, compared to 2024, as some prior grants were fully expensed. However, significant unrecognized compensation expense remains for outstanding options, expected to be recognized over the next 0.3 to 1.5 years - Total stock-based compensation related to the March 2024 CEO option grant was $305,000 for the three months ended June 30, 2025, compared to $609,000 in the prior year, with $609,000 of unrecognized expense remaining as of June 30, 2025, to be recognized over 0.5 years[99] - For the June 2022 employee option grant, $60,000 of unrecognized stock-based compensation expense remains, expected to be recognized over 0.3 years[97] - For the March 2023 General Counsel option grant, $209,000 of unrecognized stock-based compensation expense remains, expected to be recognized over 1.5 years[98] Note 8: Stock Repurchase Program Travelzoo continued its stock repurchase program, buying back 172,088 shares for $2.5 million during the three months ended June 30, 2025. As of that date, 148,602 shares remained authorized for repurchase under the current program Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Shares Purchased | Average Price Paid per Share | | :-------------------------- | :--------------- | :--------------------------- | | April 1, 2025 – April 30, 2025 | 54,620 | $15.09 | | May 1, 2025 – May 31, 2025 | 117,468 | $14.26 | | June 1, 2025 – June 30, 2025 | — | — | | Total | 172,088 | | - The company repurchased 172,088 shares of common stock for an aggregate purchase price of $2.5 million during the three months ended June 30, 2025[105][218] - As of June 30, 2025, 148,602 shares remained to be repurchased under the program authorized on October 23, 2024[105][218] Note 9: Segment Reporting and Significant Customer Information Travelzoo operates through four reportable segments: Travelzoo North America, Travelzoo Europe, Jack's Flight Club, and New Initiatives. North America remains the largest revenue contributor, while Europe shifted to an operating loss. Membership fees showed significant growth across segments, indicating a successful transition to a paid membership model - The company's four reportable operating segments are Travelzoo North America, Travelzoo Europe, Jack's Flight Club, and New Initiatives[106][133] Revenues by Segment (Three Months Ended June 30, 2025, in thousands) | Segment | Revenues from unaffiliated customers | Percentage of Total Revenues | | :-------------------- | :--------------------------------- | :--------------------------- | | Travelzoo North America | $15,737 | 67% | | Travelzoo Europe | $6,740 | 27% | | Jack's Flight Club | $1,410 | 6% | | New Initiatives | $19 | <1% | | Consolidated | $23,906 | 100% | Operating Profit (Loss) by Segment (Three Months Ended June 30, 2025, in thousands) | Segment | Operating Profit (Loss) | | :-------------------- | :---------------------- | | Travelzoo North America | $2,818 | | Travelzoo Europe | $(883) | | Jack's Flight Club | $156 | | New Initiatives | $(31) | | Consolidated | $2,060 | Revenues by Category (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 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 | Revenues by Country (in thousands) | Country | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $15,129 | $13,577 | $29,455 | $27,178 | | United Kingdom | $4,875 | $4,076 | $9,726 | $8,761 | | Rest of the world | $3,902 | $3,488 | $7,865 | $7,187 | | Total revenues | $23,906 | $21,141 | $47,046 | $43,126 | Note 10: Leases The company maintains operating leases for office space and equipment across several countries. Total lease costs increased for both the three and six months ended June 30, 2025, with a weighted average remaining lease term of 3.97 years Lease Expense (in thousands) | Lease Cost Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $577 | $529 | $1,130 | $1,061 | | Short-term lease cost | $138 | $134 | $278 | $271 | | Variable lease cost | $116 | $96 | $230 | $216 | | Total lease cost | $831 | $759 | $1,638 | $1,548 | Operating Lease Balances (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $5,204 | $5,655 | | Total operating lease liabilities | $7,420 | $8,118 | | Weighted average remaining lease term (years) | 3.97 | 4.43 | | Weighted average discount rate | 4.7% | 4.8% | Note 11: Non-Controlling Interest The non-controlling interest, primarily related to the 40% equity in Jack's Flight Club not owned by Travelzoo, increased to $4,987 thousand as of June 30, 2025, reflecting the attributable net income - Travelzoo owns 60% of Jack's Flight Club, with the remaining 40% representing the non-controlling interest[124] Non-Controlling Interest (in thousands) | Period | Balance | | :-------------------------- | :------ | | December 31, 2024 | $4,815 | | Net income attributable to non-controlling interest (3M ended June 30, 2025) | $79 | | June 30, 2025 | $4,987 | Note 12: Related Party Transactions Related party transactions include Azzurro Capital Inc. as the largest shareholder, a stock repurchase agreement with the Global CEO, and a consulting agreement with founder Ralph Bartel for strategic advisory services, particularly for Travelzoo META - Azzurro Capital Inc., controlled by Travelzoo founder Ralph Bartel, is the company's largest shareholder, holding approximately 36.7% of outstanding shares as of June 30, 2025[31][126][128] - In June 2024, the company repurchased 200,000 shares of common stock from its Global Chief Executive Officer, Holger Bartel, for $1.5 million[103][127] - Ralph Bartel provides strategic advisory services for Travelzoo META, talent search, IT, brand strategy, and public relations under a consulting agreement, with fees totaling $73,000 for the three months ended June 30, 2025[128] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Travelzoo's financial condition, revenue drivers, cost impacts, business trends, and liquidity, noting negative net working capital Overview Provides a high-level summary of Travelzoo's business, its global operations, and new initiatives like Travelzoo META - Travelzoo is a global Internet media company operating Travelzoo® and Jack's Flight Club®, reaching 30 million travelers worldwide[130] - The company is actively developing Travelzoo META, a subscription service for Metaverse travel experiences[132] - Revenues are generated from advertising and commerce, membership fees, and other sources[132] Reportable Segments Outlines Travelzoo's four operating segments and the key metrics used by management to evaluate their performance - Travelzoo has four reportable operating segments: Travelzoo North America, Travelzoo Europe, Jack's Flight Club, and New Initiatives[133] - Management evaluates segment performance primarily using operating income (loss) and focuses on indicators like member growth, operating margin, and revenue per member/employee[107][134] How We Generate Revenues Explains Travelzoo's diverse revenue streams, including advertising, commerce, and various membership fees - Advertising and Commerce revenue includes fees for publishing offers, commissions from Getaways vouchers and hotel bookings, and fees from local businesses and entertainment offers[135][137] - Membership Fees are generated from subscriptions for Travelzoo Club Members (with a new $40 annual fee for new members since January 1, 2024) and Jack's Flight Club Premium members[141] - Other revenue sources include licensing fees and sales from the retail business acquired with MTE[142] Trends in Our Business Discusses key business trends, including declining local revenues, evolving member acquisition strategies, and cost fluctuations - Revenues from local businesses are expected to continue declining due to market conditions and decreased consumer demand, returning to pre-pandemic patterns[143] - The company is adjusting member acquisition strategies and increasing expenditures to grow its paid membership and engagement, expecting a greater proportion of revenue to be driven by membership fees[144][145][147] - Cost of revenues and sales and marketing expenses are expected to fluctuate significantly due to factors like third-party partner terms, refund trends, member acquisition costs, and increased spending for new paying members[148][149][151] - Increased investment in product development is anticipated to build and refine the Travelzoo membership value proposition, potentially leading to higher expenses[152] Results of Operations Presents a detailed analysis of Travelzoo's consolidated financial performance, highlighting revenue and expense changes Consolidated Results as Percentage of Total Revenues | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | 100.0% | 100.0% | 100.0% | 100.0% | | Cost of revenues | 21.6% | 11.9% | 19.8% | 12.0% | | Gross profit | 78.4% | 88.1% | 80.2% | 88.0% | | Sales and marketing | 48.1% | 44.4% | 46.1% | 41.7% | | Operating income | 8.6% | 19.0% | 12.5% | 22.3% | | Net income attributable to Travelzoo | 5.9% | 13.8% | 9.7% | 16.6% | - Advertising and Commerce revenue increased by $917,000 (3M YoY) and $747,000 (6M YoY), primarily driven by Getaways vouchers, partially offset by a decrease in hotel platform and other commission revenue[160][161] - Membership Fees revenue significantly increased by $1.9 million (3M YoY) and $3.2 million (6M YoY) due to higher subscription fees from Travelzoo and Jack's Flight Club members[162][164] - Cost of revenues increased by $2.7 million (3M YoY) and $4.1 million (6M YoY), mainly due to increased costs recognized upon the sale of pre-purchased vouchers[167] - Sales and marketing expenses rose by $2.1 million (3M YoY) and $3.7 million (6M YoY), primarily due to increased member acquisition costs[169] - General and administrative expenses decreased by $119,000 (3M YoY) and $404,000 (6M YoY), mainly due to lower stock compensation and professional services expenses, respectively[174][175] - Other income, net, increased by $475,000 (6M YoY) due to the release of Jack's Flight Club VAT liabilities and German federal government funding for COVID-19 pandemic relief[178] Segment Results Provides a detailed breakdown of financial performance for each of Travelzoo's reportable operating segments Travelzoo North America Performance (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $16,132 | $14,134 | $31,260 | $28,362 | | Operating profit | $2,818 | $3,717 | $6,412 | $8,155 | | Operating profit as a % of revenue | 17.5% | 26.3% | 20.5% | 28.8% | - Travelzoo North America revenues increased by $2.0 million (3M YoY) and $2.9 million (6M YoY), driven by paid membership fees and Getaway vouchers, but operating profit declined due to increased cost of revenue and member acquisition costs[182][183] Travelzoo Europe Performance (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $6,385 | $5,951 | $13,097 | $12,613 | | Operating profit (loss) | $(883) | $512 | $(655) | $1,894 | | Operating profit (loss) as a % of revenue | (13.8)% | 8.6% | (5.0)% | 15.0% | - Travelzoo Europe revenues increased by $434,000 (3M YoY) and $484,000 (6M YoY) due to paid membership fees, but the segment shifted to an operating loss due to increased member acquisition costs, pre-purchased vouchers, and salary expenses[184][185] Jack's Flight Club Performance (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $1,370 | $1,033 | $2,653 | $2,096 | | Operating profit (loss) | $156 | $(34) | $168 | $(133) | | Operating profit (loss) as a % of revenue | 11.4% | (3.3)% | 6.3% | (6.3)% | - Jack's Flight Club revenues increased by $337,000 (3M YoY) and $557,000 (6M YoY) due to higher subscription fees, leading to a shift from an operating loss to a profit[188][189] New Initiatives Performance (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $19 | $23 | $36 | $55 | | Operating loss | $(31) | $(184) | $(61) | $(314) | - New Initiatives revenues decreased by $4,000 (3M YoY) and $19,000 (6M YoY) due to a decline in the retail and fashion business, but the operating loss significantly narrowed[190][191] Liquidity and Capital Resources Assesses Travelzoo's cash position, cash flow activities, and working capital, affirming sufficient liquidity for the near term - As of June 30, 2025, Travelzoo had $10.4 million in cash and cash equivalents, with $7.9 million held outside the U.S[192] - Cash, cash equivalents, and restricted cash decreased by $6.5 million from December 31, 2024, to June 30, 2025, primarily due to $11.4 million used for common stock repurchases, partially offset by $4.6 million from operating activities[193] - The company reported negative net working capital of $11.0 million as of June 30, 2025, due to $12.4 million in current merchant payables, but expects sufficient cash for working capital needs for at least the next twelve months[194] Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :------------------------------------------------- | :----- | :----- | :------- | | Net cash provided by operating activities | $4,582 | $7,927 | $(3,345) | | Net cash used in investing activities | $(34) | $(83) | $49 | | Net cash used in financing activities | $(11,522) | $(10,679) | $(843) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $432 | $(311) | $743 | | Net decrease in cash, cash equivalents and restricted cash | $(6,542) | $(3,146) | $(3,396) | Critical Accounting Policies and Estimates Highlights the significant judgments and estimates involved in preparing Travelzoo's financial statements - The preparation of financial statements requires significant judgment and estimates, particularly concerning income taxes, revenue recognition, refund liability, and stock-based compensation[34][206][208] Recent Accounting Pronouncements Discusses the potential impact of recently issued accounting standards on Travelzoo's financial reporting - The company is evaluating the impact of ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for fiscal years beginning after December 15, 2024, and ASU 2024-03, 'Disaggregation of Income Statement Expenses,' effective for annual reporting periods beginning after December 15, 2026[35][36][37][38] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Travelzoo is not required to provide quantitative and qualitative disclosures about market risk - Travelzoo is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[210] Item 4. Controls and Procedures Management concluded that Travelzoo's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate financial reporting. No material changes to internal control over financial reporting occurred during the quarter - Management assessed the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they are effective[211] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[212] PART II—OTHER INFORMATION Contains additional information not included in the financial statements, such as legal proceedings and risk factors Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 4 of the condensed consolidated financial statements, indicating that accruals for legal contingencies were not material - Information on legal proceedings is incorporated by reference from Note 4, which states that accruals for legal contingencies were not material as of June 30, 2025, and December 31, 2024[80][215] Item 1A. Risk Factors The company refers readers to its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, for a comprehensive discussion of risk factors that could materially affect its business - Readers should consider risk factors discussed in the Annual Report on Form 10-K for FY2024 and the Quarterly Report on Form 10-Q for Q1 2025, which are incorporated by reference[216] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Travelzoo repurchased 172,088 shares of common stock for $2.5 million during the three months ended June 30, 2025, as part of its publicly announced program. As of the end of the period, 148,602 shares remained authorized for repurchase Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Shares Purchased | Average Price Paid per Share | | :-------------------------- | :--------------- | :--------------------------- | | April 1, 2025 – April 30, 2025 | 54,620 | $15.09 | | May 1, 2025 – May 31, 2025 | 117,468 | $14.26 | | June 1, 2025 – June 30, 2025 | — | — | | Total | 172,088 | | - The company repurchased 172,088 shares of common stock for an aggregate purchase price of $2.5 million during the three months ended June 30, 2025[217][218] - As of June 30, 2025, 148,602 shares remained authorized for repurchase under the program announced on October 23, 2024[218] Item 3. Defaults Upon Senior Securities Travelzoo reported no defaults upon senior securities during the period - There were no defaults upon senior securities[219] Item 4. Mine Safety Disclosures Travelzoo reported no mine safety disclosures - There were no mine safety disclosures[219] Item 5. Other Information Travelzoo reported no other information required to be disclosed under this item - No other information was reported[220] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, indemnification agreements, and certifications required by the Sarbanes-Oxley Act - The exhibits include the Certificate of Incorporation, Amended and Restated By-laws, Director and Officer Indemnification Agreement, and certifications from the CEO and Principal Financial Officer[221]