TRAVELZOO

Previous wording

We also license Travelzoo products, services and intellectual property to licenses in (a) Australia, New Zealand, and Singapore and (b) Japan and South Korea, in each case, where the Company is entitled to a quarterly royalty payment based on a percentage of net revenue. Under the licensing agreements, existing Travelzoo members in the applicable territories continue to be owned by the Company.

Current wording

We also license Travelzoo products, services and intellectual property to licensees in (a) Australia, New Zealand, and Singapore and (b) Japan and South Korea, in each case, where the Company is entitled to a quarterly royalty payment based on a percentage of net revenue. Under the licensing agreements, existing Travelzoo members in the applicable territories continue to be owned by the Company.

Previous wording

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. We typically recognize advertising revenues upon delivery of emails orclicks, as tracked by our internal platform or third-party platforms, in the period of the applicable insertion orders, which are typically for periods between one month and twelve months and are not automatically renewed. For Getaways vouchers, we recognize a percentage of the face value of vouchers upon sale as commission, net of an allowance for future refunds. Merchant agreements for Getaways advertisers are typically for periods between twelve and twenty-four months and are not automatically renewed. Revenues generated from local business offers are based upon a percentage of the face value of the vouchers sold, commission on actual sales or a listing fee based on audience reach. We recognize revenue upon the sale of vouchers, upon notification of the amount of direct bookings or upon delivery of emails. For Local Deals vouchers, we recognize a percentage of the face value of vouchers upon the sale of the vouchers, net of an allowance for refunds. Insertion orders and merchant agreements for Local Dealsare typically for periods between one and twelve months and are not automatically renewed.

Current wording

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. We typically recognize advertising revenues upon delivery of emails orclicks, as tracked by our internal platform or third-party platforms, in the period of the applicable insertion orders, which are typically for periods between one month and twelve months and are not automatically renewed. For Getaways vouchers, we recognize a percentage of the face value of vouchers upon sale as commission, net of an allowance for future refunds. Merchant agreements for Getaways advertisers are typically for periods between twelve and twenty-four months and are not automatically renewed. Revenues generated from local business offers are based upon a percentage of the face value of the vouchers sold, commission on actual sales or a listing fee based on audience reach. We recognize revenue upon the sale of vouchers, upon notification of the number of direct bookings or upon delivery of emails. For Local Deals vouchers, we recognize a percentage of the face value of vouchers upon the sale of the vouchers, net of an allowance for refunds. Insertion orders and merchant agreements for Local Dealsare typically for periods between one and twelve months and are not automatically renewed.

Previous wording

As of March 31, 2026 and December 31, 2025, the Company had approximately $3.4 million and$2.9 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 $283,000 and$188,000 as of March 31, 2026 and December 31, 2025, 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.

Current wording

As of June 30, 2026 and December 31, 2025, the Company had approximately $2.7 million and$2.9 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 $118,000 and$188,000 as of June 30, 2026 and December 31, 2025, 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.

Previous wording

Merchant payables of $13.5 million as of March 31, 2026 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. With these contracts, the Company estimates the value of vouchers that will ultimately not be redeemed and records the estimate as revenues in the same period.

Current wording

Merchant payables of $10.7 million as of June 30, 2026 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. With these contracts, the Company estimates the value of vouchers that will ultimately not be redeemed and records the estimate as revenues in the same period.

Previous wording

In addition to the type of membership offered, we believe the average cost per acquisition depends mainly on the advertising rates we pay for media buys, the quality of the members we acquire (based on both clicks and purchases through Travelzoo), our ability to manage our member acquisition efforts successfully, the regions we target to acquire new members and the relative costs for that region, and the degree of competition in our industry.

Current wording

In addition to the type of membership offered, we believe the average cost per acquisition depends mainly on the advertising rates we pay for media buys, the quality of the members we acquire (based on both clicks and purchases through Travelzoo), our ability to manage our member acquisition efforts successfully, the regions we target to acquire new members and the relative costs for those regions, and the degree of competition in our industry.

Previous wording

Advertising and Commerce revenue decreased by $992,000 for the three months ended March 31, 2026 from the three months ended March 31, 2025. This decrease was primarily driven by selling less advertising insertion orders, as the Company prioritized the sale of memberships.

Current wording

Advertising and Commerce revenue decreased by $2.7 million for the three months ended June 30, 2026 from the three months ended June 30, 2025. This decrease was primarily driven by selling less advertising insertion orders, as the Company prioritized the sale of memberships.

Previous wording

Revenues from Membership fees increased $2.1 million for the three months ended March 31, 2026 from the three months ended March 31, 2025 due to the increase in paying members.

Current wording

Revenues from Membership Fees increased $2.0 million for the three months ended June 30, 2026 from the three months ended June 30, 2025 due to the increase in paying members.

Previous wording

Revenues from Other remained flat for the three months ended March 31, 2026 from the three months ended March 31, 2025.

Current wording

Revenues from Other remained flat for the three and six months ended June 30, 2026 and 2025.

Previous wording

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, and fees to payment processors. Cost of revenues was $5.2 million and $4.2 million, respectively, for the three months ended March 31, 2026 and 2025.

Current wording

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, and fees to payment processors. Cost of revenues was $7.1 million and $5.2 million, respectively, for the three months ended June 30, 2026 and 2025. Cost of revenues was $12.3 million and $9.3 million, respectively, for the six months ended June 30, 2026 and 2025.

Previous wording

Cost of revenues increased $1.0 million for the three months ended March 31, 2026 from the three months ended March 31, 2025 primarily due to the increase in costs recognized upon the sale of pre-purchased vouchers.

Current wording

Cost of revenues increased $1.9 million for the three months ended June 30, 2026 from the three months ended June 30, 2025 primarily due to the increase in costs recognized upon the sale of pre-purchased vouchers.

Previous wording

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 $11.1 million and $10.2 million for the three months ended March 31, 2026 and 2025, respectively. Advertising expenses consist primarily of online advertising which we refer to as traffic acquisition cost and member acquisition costs. For the three months ended March 31, 2026 and 2025, advertising expenses accounted for 22% 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 platforms.

Current wording

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 $13.7 million and $11.5 million for the three months ended June 30, 2026 and 2025, respectively. Sales and marketing expenses were $24.9 million and $21.7 million for the six months ended June 30, 2026 and 2025, respectively. Advertising expenses consist primarily of online advertising which we refer to as traffic acquisition costs and member acquisition costs. For the three months ended June 30, 2026 and 2025, advertising expenses accounted for 40% and 25%, respectively, of the total sales and marketing expenses. For the six months ended June 30, 2026 and 2025, advertising expenses accounted for 32% and 20%, 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 platforms.

Previous wording

Sales and marketing expenses increased$0.9 million for the three months ended March 31, 2026 from the three months ended March 31, 2025. The increase was primarily due to the increase in member acquisition costs as a result of management's strategic plan.

Current wording

Sales and marketing expenses increased$2.2 million for the three months ended June 30, 2026 from the three months ended June 30, 2025. The increase was primarily due to the increase in member acquisition costs as a result of management's strategic plan.

Previous wording

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 $664,000 and $634,000 for the three months ended March 31, 2026 and 2025, respectively.

Current wording

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 $602,000 and $698,000 for the three months ended June 30, 2026 and 2025, respectively. Product development expenses were $1.3 million for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Product development expenses increased $30,000 for thethree months ended March 31, 2026 from thethree months ended March 31, 2025 primarily due to the increase insalary expense.

Current wording

Product development expenses decreased $96,000 for thethree months ended June 30, 2026 from thethree months ended June 30, 2025 primarily due to the decrease in professional services costs.

Previous wording

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 $3.8 million and $4.3 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

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 $4.5 million for the three months ended June 30, 2026 and 2025, respectively. General and administrative expenses were $8.3 million and $8.8 million for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

General and administrative expenses decreased $493,000 for the three months ended March 31, 2026 from the three months ended March 31, 2025 primarily due to a $305,000 decrease in stock compensation expenses and a $210,000 decrease in bad debt.

Current wording

General and administrative expenses decreased $464,000 for the six months ended June 30, 2026 from the six months ended June 30, 2025 primarily due to a $251,000 decrease in payroll expenses and a $248,000 decrease in bad debt.

Previous wording

Other income, net consisted primarily of foreign exchange transaction gains and losses, sublease income, German federal government funding for COVID-related pandemic relief, interest income and interest expense. Other income (loss), net was ($5,000) and $629,000, respectively, for the three months ended March 31, 2026 and 2025.

Current wording

Other income, net consisted primarily of foreign exchange transaction gains and losses, sublease income, German federal government funding for COVID-related pandemic relief, interest income and interest expense. Other income, net was $274,000 and $161,000, for the three months ended June 30, 2026 and 2025, respectively. Other income, net was $270,000 and $790,000, for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Other income (loss), net decreased $634,000 for the three months ended March 31, 2026 from the three months ended March 31, 2025 primarily due to the foreign exchange transaction loss.

Current wording

Other income, net increased $113,000 for the three months ended June 30, 2026 from the three months ended June 30, 2025 primarily due to $258,000 in write-offs from previously collected but unapplied media fees from clients, partially offset by a $164,000 decrease in foreign exchange transaction loss.

Previous wording

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 $0.9 million and $1.2 million, respectively, for the three months ended March 31, 2026 and 2025. Our effective tax rate from continuing operations was 27% and 26%, respectively, for the three months ended March 31, 2026 and 2025. The Company’s effective tax rate for the three months ended March 31, 2026 changed from the three months ended March 31, 2025 primarilydue to a decrease in operating profitin the three months ended March 31, 2026.

Current wording

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 (benefit) was $(382,000) and $740,000, respectively, for the three months ended June 30, 2026 and 2025. Our effective tax rate from continuing operations was 15% and 33%, respectively, for the three months ended June 30, 2026 and 2025. The Company’s effective tax rate for the three months ended June 30, 2026 changed from the three months ended June 30, 2025 primarily due to the decrease in operating profit and an increase to interest expense for the uncertain tax position in the three months ended June 30, 2026. Income tax expense was $0.6 million and $1.9 million, respectively, for the six months ended June 30, 2026 and 2025. Our effective tax rate from continuing operations was 59% and 29%, respectively, for the six months ended June 30, 2026 and 2025. The Company’s effective tax rate for the six months ended June 30, 2026 changed from the six months ended June 30, 2025 primarily due to a decrease in operating profit in the six months ended June 30, 2026 and an increase in interest expense associated with uncertain tax positions.

Previous wording

North America revenues increased by $539,000 for the three months ended March 31, 2026 from the three months ended March 31, 2025. This increase was primarily due to the increase in paid membership fees and Getaways vouchers. North America expenses increased by $0.9 million for the three months ended March 31, 2026 from the three months ended March 31, 2025. The increase was primarily due to a $932,000 increase in cost of revenue related to purchase of vouchers and gift cards which were sold during the three months ended March 31, 2026.

Current wording

North America revenues decreased by $453,000 for the three months ended June 30, 2026 from the three months ended June 30, 2025. This decrease was primarily due to the decrease in advertising email revenue partially offset by the increase in paid Membership Fees and Getaways vouchers. North America expenses increased by $3.9 million for the three months ended June 30, 2026 from the three months ended June 30, 2025. The increase was 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 three months ended June 30, 2026 and a $1.8 million increase in member acquisition costs.

Previous wording

Europe revenues increased by $565,000 for the three months ended March 31, 2026 from the three months ended March 31, 2025. The increase was primarily due tothe increase in paid membership fees and Getaway vouchers. Europe expenses increased by $514,000 for the three months ended March 31, 2026 from the three months ended March 31, 2025 primarily due to a $408,000 increase in member acquisition costs and a $260,000 increase in cost of revenue related to the purchase of vouchers and gift cards which were sold during the three months ended March 31, 2026.

Current wording

Europe revenues increased by $416,000 for the six months ended June 30, 2026 from the six months ended June 30, 2025. The increase was primarily due to the increase in paid Membership Fees and Getaway vouchers. Europe expenses increased by $681,000 for the six months ended June 30, 2026 from the six months ended June 30, 2025 primarily due to a $738,000 increase in member acquisition costs, offset by a $269,000 decrease in salary and related expenses.

Previous wording

Foreign currency movements relative to the U.S. dollar positively impacted our local currency income from our operations in Europe by approximately $2,000 and $11,000 for thethree months ended March 31, 2026 and 2025, respectively.

Current wording

Foreign currency movements relative to the U.S. dollar negatively impacted our local currency income from our operations in Europe by approximately$22,000 and$42,000 for thethree months ended June 30, 2026 and 2025, respectively. Foreign currency movements relative to the U.S. dollar negatively impacted our local currency income from our operations in Europe by approximately$68,000 and$11,000 for thesix months ended June 30, 2026 and 2025, respectively.

Previous wording

Jack’s Flight Club revenues increased by$29,000 for thethree months ended March 31, 2026 from the three months ended March 31, 2025 due to the increase in subscription fees paid by the members. Jack’s Flight Club expenses increased by $89,000 for the three months ended March 31, 2026 from the three months ended March 31, 2025 primarily due to the increase in advertising expenses.

Current wording

Jack’s Flight Club revenues decreased by$95,000 for thethree months ended June 30, 2026 from the three months ended June 30, 2025 due to the decrease in subscription fees paid by the members. Jack’s Flight Club expenses increased by $95,000 for the three months ended June 30, 2026 from the three months ended June 30, 2025 primarily due to the increase in employee and contractor costs.

Previous wording

As of March 31, 2026, we had $10.6 million in cash and cash equivalents, of which $7.4 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 foreign withholding taxes in certain circumstances. We also had $754,000 in restricted cash held in the U.S. and U.K. as of March 31, 2026.

Current wording

As of June 30, 2026, we had $6.8 million in cash and cash equivalents, of which $5.4 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 foreign withholding taxes in certain circumstances. We also had $754,000 in restricted cash held in the U.S. and U.K. as of June 30, 2026.

Previous wording

Cash, cash equivalents and restricted cash increased $562,000 from $10.8 million as of December 31, 2025 to $11.3 million as of March 31, 2026, primarily due to $3.9 million cash provided by operating activities, partially offset by $3.3 million cash used to repurchase common stock.

Current wording

Cash, cash equivalents and restricted cash decreased $3.2 million from $10.8 million as of December 31, 2025 to $7.6 million as of June 30, 2026, primarily due to $5.2 million cash used to repurchase common stock, partially offset by $2.2 million cash provided by operating activities.

Previous wording

As of March 31, 2026, we had merchant payables of $13.5 million related to unredeemed vouchers. In the Company’s financial statements presented in this 10-Q report, following U.S. generally accepted accounting principles (“GAAP”), we classified all merchant payables as current. When all merchant payables are classified as current, there is negative net working capital (which is defined as current assets minus current liabilities) of$10.8 million. Payables to merchants are generally due upon redemption of vouchers. As of March 31, 2026, 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, 2026 will be sufficient to provide for working capital needs for at least the next twelve months.

Current wording

As of June 30, 2026, we had merchant payables of $10.7 million related to unredeemed vouchers. In the Company’s financial statements presented in this 10-Q report, following U.S. generally accepted accounting principles (“GAAP”), we classified all merchant payables as current. When all merchant payables are classified as current, there is negative net working capital (which is defined as current assets minus current liabilities) of$14.3 million. Payables to merchants are generally due upon redemption of vouchers. As of June 30, 2026, unredeemed vouchers have maturities through June 2027; 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 June 30, 2026 will be sufficient to provide for working capital needs for at least the next twelve months.

Previous wording

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, 2026 was $3.9 million, which primarily consisted of net income of $2.5 million, $154,000 increase in non-cash items and a $1.2 million increase in cash from changes in operating assets and liabilities. Adjustments for non-cash items primarily consisted of $77,000 for net foreign currency effect and $56,000 for depreciation and amortization. The increase in cash from changes in operating assets and liabilities was primarily due to $2.8 million decrease in accounts receivable, offset partially by $2 million increase in deferred revenue and $1.9 million increase in merchant payables.

Current wording

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, 2026 was $2.2 million, which primarily consisted of net income of $392,000, a $18,000 decrease in non-cash items and a $1.8 million increase in cash from changes in operating assets and liabilities. Adjustments for non-cash items primarily consisted of $753,000 decrease in deferred income tax offset partially by a $719,000 for stock based compensation expenses. The increase in cash from changes in operating assets and liabilities was primarily due to a $4.1 million increase in deferred revenue and $1.7 million increase in accrued expenses, offset partially by a $3.9 million decrease in accounts receivable.

Previous wording

Cash paid for income tax, net of refunds received, during the three months ended March 31, 2026 and 2025 was $290,000 and $1.5 million, respectively.

Current wording

Cash paid for income tax, net of refunds received, during the six months ended June 30, 2026 and 2025 was $560,000 and $2.7 million, respectively.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was $8,000 and $21,000, respectively. The cash used in investing activities for the three months ended March 31, 2026 consisted of purchases of property and equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2026 and 2025 was $14,000 and $34,000, respectively. The cash used in investing activities for the six months ended June 30, 2026 consisted of purchases of property and equipment.