Travelzoo
03/11/2026 | Press release | Distributed by Public on 03/11/2026 13:45
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The information in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations, assumptions, estimates and projections about Travelzoo and our industry. These forward-looking statements are subject to the many risks and uncertainties that exist in our operations and business environment that may cause actual results, performance or achievements of Travelzoo to be different from those expected or anticipated in the forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may", "will", "should", "estimates", "predicts", "potential", "continue", "strategy", "believes", "anticipates", "plans", "expects", "intends", and similar expressions are intended to identify forward-looking statements. Travelzoo's actual results and the timing of certain events could differ significantly from those anticipated in such forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those discussed elsewhere in this report in the section entitled "Risk Factors" and the risks discussed in our other SEC filings. The forward-looking statements included in this report reflect the beliefs of our management on the date of this report. 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.
Overview
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, 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.
We also license Travelzooproducts, 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. The Company recognized $68,000 and $71,000 in royalties in 2025 and 2024, respectively. Under the licensing agreements, Travelzoo's existing members in the applicable territories continue to be owned by the Company.
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
Reportable Segments
The Company determines its reportable segments based upon the Company's chief operating decision maker managing the performance of the business. The Company currently has four reportable operating segments: Travelzoo North America, Travelzoo Europe, Jack's Flight Club and New Initiatives. Travelzoo North America consists of the Company's operations in the U.S. and Canada. Travelzoo Europe consists of the Company's operations in France, Germany, Spain and the U.K. Jack's Flight Club consists of subscription revenues from premium members to access and receive flight deals from Jack's Flight Club via email or mobile applications. New Initiatives consists of Travelzoo's licensing business, the Travelzoo META subscription service and MTE. For the year ended December 31, 2025, Travelzoo North America operations comprised 66% of revenues, Travelzoo Europe operations comprised 28% of revenues and Jack's Flight Club comprised 6% of revenues. Financial information with respect to our business segments and certain financial information about geographic areas appears in Note 11-Segment Reporting and Significant Customer Informationto the accompanying consolidated financial statements included in Part II, Item 8 of this report is incorporated herein.
When evaluating the financial condition and operating performance of the Company, management focuses on financial and non-financial indicators such as growth in the number of members to the Company's newsletters, operating margin, growth in revenues in the absolute and relative to the growth in reach of the Company's publications measured as revenue per member and revenue per employee as a measure of productivity.
How We Generate Revenues
Revenues from the Travelzoo brand and business are generated primarily from three categories: 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 Getawaysvouchers and bookings on our hotel platform, and (c) publishing fees from high-quality local businesses, sale of Local Dealsvouchers 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 or clicks, 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 Getawaysvouchers, 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 Dealsvouchers, 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 Deals are typically for periods between one and twelve months and are not automatically renewed.
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. Jack's Flight Club subscription options are quarterly, semi-annually, and annually. We recognize subscription revenues ratably over the respective subscription periods.
The "Other" category consists of licensing fees from license agreements, as well as the retail business originally operated by MTE and acquired and maintained by the Company following the acquisition of MTE.
Trends in Our Business
Our ability to generate revenues in the future depends on numerous factors, including those relating to members, advertisers, competitors, the travel industry, the online advertising business, internal factors and external factors.
Factors relating to members include their willingness to purchase the deals we advertise, their demand for vouchers as a promotional format, and with the introduction of membership fees for new members in 2024 and existing members in 2025, our ability to enroll new paying members and transition existing members to paid membership, without adversely affecting our membership base and existing advertising revenue streams.
Factors relating to advertisers include our ability to sell more advertising to existing and new advertisers, our ability to enhance our audience reach and advertising rates, spending controls by travel intermediaries to focus on improving profitability, and advertiser shifts from one advertising service (e.g. Top 20) to another (e.g. Local Dealsand Getaways). Advertiser shifts between advertising services could result in no incremental revenue or less revenue than in previous periods, depending on amounts purchased, and in particular withLocal Deals and Getaways, depending on how many vouchers are purchased by members.
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 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.
External factors include the introduction of new methods of advertising, the relative condition of the economy, cybersecurity risks due to increased dependence on digital technologies, and climate change and related legislation, to the extent such legislation impacts the businesses of our advertisers such as airlines and cruise ship operators, which have come under increasing scrutiny for their carbon footprints.
Our ability to continue generating revenues through advertising, commissions and subscriptions depends heavily upon our ability to maintain and grow an attractive audience for our publications. We monitor our membership base to assess our efforts to maintain and grow our audience reach. We obtain additional members and activity on our websites by acquiring traffic from Internet search companies. The costs to grow our audience have had, and we expect will continue to have, a significant impact on our financial results and can vary from period to period. 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 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. With the introduction of a membership fee in 2024, the main way in which we will increase our reach and our engagement is by acquiring new Club Members, or paying members. We do not know if we will be able to efficiently or effectively acquire Club Members at sufficient volumes. We therefore also do not know if we will be able to increase the reach of our engagement with our publications. Even if we are able to increase the reach of our publications, we still may not be able to or want to increase rates given market conditions, including intense competition in our industry. Even if we increase our rates, the increased price may reduce the number of advertisers willing to advertise with us and could, therefore, decrease our revenue. We may need to decrease our rates based on competitive market conditions and the performance of our audience in order to maintain or grow our revenue. While we will have membership revenue to offset any reductions in advertising revenue or add incrementally to advertising revenue so that we can continue to grow total revenue, we are unsure of the volumes in which we will be able to convert to membership from either our existing database or through new member acquisition.
We do not know what our cost of revenues as a percentage of revenues will be in future periods. Our cost of revenues may change in relation to volume and terms with third-party partners of the Travelzoo network, incurring merchant processing fees from the sale of vouchers for Local Dealsand Getawaysand payment of membership fees, changes in refund request trends and provisioning of customer service. We expect fluctuations in cost of revenues as a percentage of revenues from quarter to quarter. Some of the fluctuations may be significant and may have a material impact on our results of operations.
We do not know what our sales and marketing expenses as a percentage of revenue will be in future periods. 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 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.
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, 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. All else equal, increased competition may require us to increase advertising for our brand and advertisers' deals.
Beside member acquisition costs, we may see a unique opportunity for a brand marketing campaign, experience increases in the cost of retaining or sourcing new advertiser clients, or change the number of personnel or compensation structure for the Sales and marketing function, any of which would result in an increase in sales and marketing expenses. We expect fluctuations in sales and marketing expenses as a percentage of revenue from year to year and from quarter to quarter. Some of the fluctuations may be significant and have a material impact on our results of operations. We expect increased marketing expenses to spur continued growth in revenue in future periods; however, we cannot be assured of this due to the many factors that impact our growth. We expect to adjust the level of such incremental spending dynamically during any given quarter based upon market conditions, as well as our performance in each quarter.
We do not know what our product development expenses as a percentage of revenue will be in future periods. There may be fluctuations that have a material impact on our results of operations. Product development changes may lead to reductions of revenue based on changes in receptivity of our offerings to our member audience and advertiser clients. We expect our efforts in developing products and services will continue to be a focus in the future, which may lead to increased product development expenses. Increases in expense may result from costs related to third-party technology service providers and software licenses, headcount and the use of professional services.
We do not know what our general and administrative expenses as a percentage of revenue will be in future periods. There may be fluctuations that have a material impact on our results of operations.
We do not know what our income taxes will be in future periods. There may be fluctuations that have a material impact on our results of operations. Our income taxes are dependent on numerous factors such as the geographic mix of our taxable income, foreign, federal, state and local tax law and regulations and changes thereto. Our income taxes are also dependent on the determination of whether valuation allowances for certain tax assets are required or not, any audits of prior years' tax returns that result in adjustments, resolution of uncertain tax positions and different treatments for certain items for tax versus book purposes. 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.
Results of Operations
The following table sets forth, as a percentage of total revenues, the results from our operations for the periods indicated.
| 2025 | 2024 | ||||||||||
| Revenues | 100.0 | % | 100.0 | % | |||||||
| Cost of revenues | 19.7 | 12.5 | |||||||||
| Gross profit | 80.3 | 87.5 | |||||||||
| Operating expenses: | |||||||||||
| Sales and marketing | 49.4 | 41.1 | |||||||||
| Product development | 2.8 | 2.9 | |||||||||
| General and administrative | 20.6 | 21.5 | |||||||||
| Total operating expenses | 72.8 | 65.5 | |||||||||
| Operating income | 7.5 | 22.0 | |||||||||
| Other income, net | 0.8 | 0.7 | |||||||||
| Income from operations before income taxes | 8.3 | 22.7 | |||||||||
| Income tax expense | 2.9 | 6.4 | |||||||||
| Income from operations | 5.4 | 16.3 | |||||||||
| Net income | 5.4 | 16.3 | |||||||||
| Net income attributable to non-controlling interest | 0.3 | 0.1 | |||||||||
| Net income attributable to Travelzoo | 5.1 | % | 16.2 | % | |||||||
| Net income attributable to Travelzoo operations | 5.1 | % | 16.2 | % | |||||||
Revenues
The following table sets forth the breakdown of revenues (in thousands) by category Advertising, Membership Fees, and Other. Advertising includes travel publications (Top 20, Travelzoowebsite, Standaloneemail newsletters, Travelzoo Network), Getawaysvouchers, hotel platform, vacation packages, Local Deals vouchers and entertainment offers (vouchers and direct bookings). 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, | |||||||||||
| 2025 | 2024 | ||||||||||
| Advertising and Commerce | $ | 78,446 | $ | 78,396 | |||||||
| Membership Fees | 13,193 | 5,399 | |||||||||
| Other | 80 | 107 | |||||||||
| Total revenues | $ | 91,719 | $ | 83,902 | |||||||
Advertising and Commerce
Advertising and Commerce revenue remained flat year over year.
Membership Fees
Revenues from Membership fees increased $7.8 million, or 144%, from 2024 to 2025 due to the increase of members paying subscription fees for both Travelzoo and Jack's Flight Club.
Other
Revenues from Other decreased $27,000 due to decrease in activities attributable to MTE.
Cost of Revenues
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 increased $7.6 millionfor the year ended December 31, 2025compared to the year ended December 31, 2024primarily 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
Sales and Marketing
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 participation in industry conferences, public relations expenses and facilities costs. Sales and marketing expenses were $45.3 million and $34.5 million for the years ended December 31, 2025 and 2024, respectively. Advertising expenses consist primarily of online advertising, which we refer to as user acquisition costs and member acquisition costs. For the years ended December 31, 2025 and 2024, advertising expenses accounted for 26% and 11%, respectively, of total sales and marketing expenses. The goal of our advertising is to acquire new members, increase our audience through mobile and social media channels, drive traffic to our websites and increase brand awareness.
Sales and marketing expenses increased $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
Product development expenses consist primarily of salary and related expenses associated with software development employees, fees for professional services, software maintenance, amortization and facilities costs. Product development expenses were $2.6 million and $2.4 million for each of the years ended December 31, 2025 and 2024, respectively.
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.
General and Administrative
General and administrative expenses consist primarily of salary and related expenses associated with administrative and executive employees, professional service expenses, legal expenses, amortization of intangible assets, general office expense, facilities costs and bad debt expense. General and administrative expenses were $18.9 million and $18.1 million for the years ended 2025 and 2024, respectively.
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 $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.
Income Taxes
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, adjusted to take into account expenses that are treated as having no recognizable tax benefit. Income tax expense was $2.7 million and $5.4 million, respectively, for the years ended December 31, 2025 and 2024. Our effective tax rate was 35% and 28.3% for 2025 and 2024, respectively.
Our effective tax rate increased for 2025as 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. See Note 6-Income Taxes to the accompanying consolidated financial statements included in Part II, Item 8 of this report which is incorporated herein by reference.
Segment Information
Travelzoo North America
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Revenues | $ | 60,292 | $ | 55,092 | |||||||
| Income from operations | $ | 8,996 | $ | 15,883 | |||||||
| Income from operations as a % of revenues | 15 | % | 29 | % | |||||||
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
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Revenues | 25,976 | $ | 24,071 | ||||||||
| Income from operations | $ | (2,315) | $ | 3,081 | |||||||
| Income from operations as a % of revenues | (9) | % | 13 | % | |||||||
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 negatively $97,000 and positively $106,000 in 2025 and 2024, respectively.
Jack's Flight Club
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Revenues | 5,371 | $ | 4,632 | ||||||||
| Income (Loss) from operations | $ | 338 | $ | 44 | |||||||
| Income (Loss) from operations as a % of revenues | 6 | % | 1 | % | |||||||
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
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Revenues | 80 | $ | 107 | ||||||||
| Loss from operations | $ | (115) | $ | (510) | |||||||
New Initiatives revenues decreased $27,000 in 2025 as compared to 2024. New Initiatives cost of sales and operating expenses decreased $422,000 in 2025 as compared to 2024, primarily due to decreases in sales and marketing and headcount.
Liquidity and Capital Resources
As of December 31, 2025, we had $10million ofcash and cash equivalents, of which $7.8 million was held outside the U.S., and we had $756,000 in restricted cash held in the U.S. If our cash and cash equivalents held outside the U.S. were distributed to the U.S., we may be subject to additional U.S. taxes in certain circumstances.
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 merchant payables of $11.7 million related to unredeemed vouchers. In the Company's financial statements presented in this 10-K 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. The vouchers expire through December 2026; however these expiration dates may sometimes be extended on a case-by-case basis and final payment upon expiration may not be due for up to a year after expiration. Based on current projections of redemption activity, we expect that cash and cash equivalents on hand as of December 31, 2025 will be sufficient to provide for working capital needs for at least the next twelve months.
The following table provides a summary of our cash flows from operating, investing and financing activities:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Net cash provided by operating activities | $ | 5,661 | $ | 21,100 | |||||||
| Net cash used in investing activities | (65) | (177) | |||||||||
| Net cash used in financing activities | (13,068) | (18,973) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 495 | (599) | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (6,977) | $ | 1,351 | |||||||
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.
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 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 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 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. We believe cash on hand will be sufficient to pay such costs for at least the next twelve months. In addition, we will continue to evaluate possible investments in businesses and products and technologies, the consummation of any of which would increase our capital requirements.
Although we currently believe we have sufficient capital resources to meet our anticipated working capital and capital expenditure requirements for at least the next twelve months, unanticipated events and opportunities or a less favorable than expected development of our business with one or more advertising formats may require us to sell additional equity or debt securities or establish credit facilities to raise capital in order to meet our capital requirements.
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. We cannot be sure that any such financing will be available in amounts or on terms acceptable to us.
If the development of our business is less favorable than expected, we may decide to significantly reduce the size of our operations and marketing expenses in certain markets with the objective of reducing cash outflows.
The information set forth under "Note 5-Commitments and Contingencies" and "Note 14-Leases" to the accompanying consolidated financial statements included in Part II, Item 8 of this report is incorporated herein by reference. Litigation and claims against the Company may result in legal defense costs, settlements or judgments that could have a material impact on our financial condition.
The following summarizes our principal contractual commitments as of December 31, 2025 (in thousands):
| Operating Lease Commitments Long-term | Operating Lease Commitments Short-term | Total Operating Lease Commitments | Purchase Obligations | Total Commitments | |||||||||||||||||||||||||
| 2026 | $ | 1,852 | $ | 1,132 | $ | 2,984 | $ | 592 | $ | 3,576 | |||||||||||||||||||
| 2027 | 1,464 | 45 | 1,509 | 141 | 1,650 | ||||||||||||||||||||||||
| 2028 | 1,464 | - | 1,464 | - | 1,464 | ||||||||||||||||||||||||
| 2029 | 1,454 | - | 1,454 | - | 1,454 | ||||||||||||||||||||||||
| 2030 | 225 | - | 225 | - | 225 | ||||||||||||||||||||||||
| Total | $ | 6,459 | $ | 1,177 | $ | 7,636 | $ | 733 | $ | 8,369 | |||||||||||||||||||
We also have contingencies related to net unrecognized tax benefits, including interest, of approximately $23.9 million as of December 31, 2025. See Note 6-Income Taxesto the accompanying consolidated financial statements included in Part II, Item 8 of this report which is incorporated herein by referencefor further information.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements and accompanying notes in accordance with GAAP. Preparation of the consolidated financial statements and accompanying notes requires management to make estimates and assumptions that affect the amounts of assets and liabilities at the date of the consolidated financial statements and amounts of revenue and expenses reported during the period.We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ significantly from those estimates under different assumptions and conditions and may be material. Refer to Note 1-Basis of Presentation and Summary of Significant Accounting Policiesof the notes to consolidated financial statements in Part II Item 8 of this Annual Report on Form 10-K for an overview of our significant accounting policies.
There are certain critical estimates employed in the preparation of our consolidated financial statements that we believe require management to use significant judgment. We consider an accounting estimate to be critical if:
•It requires us to make an assumption because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and/or
•Changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.
A discussion of information about the nature and rationale for our critical accounting estimates is below:
Income Taxes
We utilize the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are recognized for deductible temporary differences, along with net operating loss carryforwards and credit carryforwards, if it is more likely than not that the tax benefits will be realized. To the extent a deferred tax asset cannot be recognized under the preceding criteria, valuation allowances are established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.
Significant judgment is required in evaluating the Company's uncertain tax positions and determining the Company's provision for income taxes. We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that we expect to take in a future tax return. Although the Company believes it has adequately reserved for its uncertain tax positions, no assurance can be given that the final outcomes of these matters will not be different. The Company adjusts its reserves in light of changing facts and circumstances, such as the progress or closing of a tax audit or the refinement of an estimate. To the extent the final tax outcomes of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as related net interest.
Recent Accounting Pronouncements
For a discussion of the recent accounting pronouncements, see Note 1-Basis of Presentation and Summary of Significant Accounting Policies of the notes to consolidated financial statements in Part II Item 8 of this Annual Report on Form 10-K.
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