UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20222023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-39943
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| MONDEE HOLDINGS, INC. |
| (Exact name of registrant as specified in its charter) |
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| Delaware | | 88-3292448 |
State or other jurisdiction of incorporation or organization | | (I.R.S. Employer Identification No.) |
10800 Pecan Park Blvd.
Suite 315400
Austin, Texas 78750
(Address of principal executive offices)
(650) 646-3320
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | | Trading
Symbol(s) | | Name of each exchange on
which registered |
| Class A common stock, $0.0001 par value per share | | MOND | | The Nasdaq Stock Market LLC |
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ☐ | Accelerated filer | ☐☒
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| Non-accelerated filer | ☒☐
| Smaller reporting company | ☒ |
| | | Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2022,2023, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $242,625,600.$422,318,559. Solely for purposes of this disclosure, shares of voting and non-voting common equity held by executive officers and directors of the registrant as of such date have been excluded, because such persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not necessarily a conclusive determination for any other purposes.
As of March 31, 2023,18, 2024, there were 82,266,16083,551,705 shares of Class A common stock, par value $0.0001$0.0001 per share, issued and outstanding.
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| Documents Incorporated by Reference: | Parts Into Which Incorporated |
Portions of the registrant’s definitive Proxy Statement relating to its 20232024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. | Part III |
MONDEE HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-K FOR THE YEARS ENDED DECEMBER 31, 2022, AND 2021
TABLE OF CONTENTS
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| Item 1C. | Cybersecurity | |
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CERTAIN DEFINED TERMS
Unless otherwise stated or unless the context otherwise requires, the terms “” “we,” “us,” “our” or “our Company” refer to Mondee Holdings, Inc., a Delaware corporation (formerly known as ITHAX Acquisition Corp., a Cayman Islands exempted company), and its consolidated subsidiaries.
In this Annual Report on Form 10-K for this fiscal year ended December 31, 2022,2023, unless the context otherwise requires, referencesreference to:
•“Amended and Restated Warrant Agreement” areis to that certain Amended and Restated Warrant Agreement, by and between Continental and our Company, dated as of July 18, 2022, as amended from time to time;
•“Board” areis to our board of directors;
•“Business Combination” areis to the Domestication, the Mergers and other transactions contemplated by the Business Combination Agreement, collectively, including the PIPE Financing;
•“Business Combination Agreement” areis to that certain Business Combination Agreement, dated December 20, 2021, by and among ITHAX, ITHAX Merger Sub I, LLC, ITHAX Merger Sub II, LLC and Mondee, and as may be amended, supplemented or otherwise modified from time to time;
•“Bylaws” areis to the bylaws of our Company that became effective at the First Effective Time;Time, as amended and restated on July 13, 2023;
•“Cantor” areis to Cantor, Fitzgerald & Co., the representative of the several underwriters in ITHAX’s initial public offering;
•“Certificate of Incorporation” areis to our amended and restated certificate of incorporation, dated July 18, 2022, that became effective at closing of the Business Combination;
•“Class A ordinary shares” areis to the Class A ordinary shares, par value $0.001 per share, of ITHAX that were sold as part of the Units in the ITHAX initial public offering for $10.00 per unit, which automatically converted, on a one-for-one basis, into shares of our Common Stock in connection with the Domestication;
•“Class B ordinary shares” areis to the 6,037,500 Class B ordinary shares, par value $0.001 per share, of ITHAX that were initially issued to the Sponsor in a private placement prior to ITHAX’s initial public offering for approximately $0.005 per share and of which 10,000 were transferred to each of the ITHAX independent directors in October 2020, and, in connection with the Domestication, were converted into one share of Class B Common Stock, par value $0.001 per share, of our Company and, upon the First Effective Time, each issued and outstanding share of Class B Common Stock was converted into one share of our Common Stock;
•“Class B Common Stock” areis to the shares of Class B common stock, par value $0.001 per share, of our Company that were outstanding after the Domestication, but prior to the First Effective Time;
•“Closing” areis to the closing of the Transactions;
•“Closing Date” areis to July 18, 2022, the date the Closing actually occurred;
•“Common Stock” areis to our shares of Class A common stock, par value $0.0001 per share;
•“Consent Solicitation” is to the solicitation of consents commenced on September 16, 2022, by us from holders of the outstanding warrants to amend the Amended and Restated Warrant Agreement;
•“Continental” areis to Continental Stock Transfer & Trust Company, our transfer agent, warrant agent and trustee of the trust account;
•“COVID-19” areis to the coronavirus and related pandemic;
•“Domestication” areis to the transfer by way of continuation and deregistration of ITHAX from the Cayman Islands and the continuation and domestication of ITHAX as a corporation incorporated in the State of Delaware, which was effectuatedeffective on July 18, 2022;
•“Earn-Out Agreement” areis to that certain Earn-Out Agreement, dated as of December 20, 2021, by and between ITHAX, Mondee, and certain signatories thereto, pursuant to which we may issue up to 9,000,000 shares of our Common Stock that vest upon achievement of certain milestones;
•“Earn-Out Shares” areis to 9,000,000 shares of our Common Stock issuable to in connection with the Business Combination pursuant to the Earn-Out Agreement,Agreement. 7,400,000 of such Earn-Out Shares have already been issued, 200,0001,533,000 of such Earn-Out Shares have been allocated for issuance but remain unissued, and 1,400,00066,667 of such Earn-Out Shares are unallocated as of the date of this Report;
•“Exchange Act” areis to the Securities Exchange Act of 1934, as amended;
•“First Effective Time” areis to the time at which the First Merger became effective;
•“First Merger” areis to the time at which the First Merger Sub merged with and into Mondee, with Mondee being the surviving entity in the merger;
•“First Merger Sub” areis to ITHAX Merger Sub I, LLC, a Delaware limited liability company;
•“GAAP” areis to generally accepted accounting principles in the United States, as applied on a consistent basis;
•“GDS” is to global distribution systems;
•“initial public offering” areis to ITHAX’s initial public offering that was consummated on February 1, 2021;
•“ITHAX” areis to ITHAX Acquisition Corp., a Cayman Islands exempted company, prior to the consummation of the Business Combination;
•“Legacy Mondee” is to Mondee Holdings II, Inc., a Delaware corporation, which was acquired by ITHAX along with the consumption of the Business Combination;
•“Legacy Mondee Stockholder” is to Mondee Holdings, LLC, a Delaware limited liability company and the sole holder of capital stock of Mondee prior to the consummation of the Business Combination;
•“Mergers” areis to the merger of First Merger Sub with and into Legacy Mondee pursuant to the Business Combination Agreement, with Mondee as the surviving company in the First Merger and the merger of Mondee with and into Second Merger Sub, with Second Merger Sub being the surviving entity in the Second Merger;
•“Mondee” areis to Mondee Holdings, II, Inc., a Delaware corporation, and its consolidated subsidiaries;
•“Mondee Stockholder” meanssubsidiaries. It was renamed from ITHAX to Mondee Holdings, LLC, a Delaware limited liability company and the sole holder of capital stock of Mondee prior toInc. at the consummation of the Business Combination;
•“Nasdaq” areis to the Nasdaq Global Market;
•“Offer to Purchase” is to the offer that commenced on September 16, 2022 and expired on October 17, 2022, by our Company to each holder of our private placement warrants and public warrants to receive $0.65 in cash, without interest, for each outstanding warrant tendered by the holder pursuant to the offer;
•“our Board” are to the members of the board of directors of our Company;
•“Outstanding Warrants” areis to our Preferred Financing Warrants and private placement warrants;
•“PIPE Financing” areis to the transactions contemplated by the Subscription Agreements, pursuant to which the PIPE Investors have collectively subscribed for an aggregate of 7,000,000 shares of our Common Stock for an aggregate purchase price of $70,000,000, which was consummated immediately prior to the First Effective Time;
•“PIPE Investors” areis to the certain “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) and accredited investors who are party to the PIPE Financing;
•“PIPE Shares” areis to those 7,000,000 shares of our Common Stock issued at a price of $10.00 per share pursuant to the PIPE Financing;
•“Preferred Financing Transaction” is to the private placement of Series A Preferred Stock and Preferred Financing Warrants to purchase shares of our Common Stock;
•“Preferred Financing Warrant Agreement” areis to that certain Warrant Agreement, dated as of September 29, 2022, by and between our Company and Continental Stock Transfer & Trust Company;Company, as amended on December 14, 2023;
•“Preferred Financing Warrants” areis to the outstanding 1,275,0001,444,500 redeemable warrants to purchase our Common Stock that we issued in connection with the Preferred Financing Transaction;
•"“Preferred Stock" Stockare” is to our shares of preferred stock, par value$0.0001value $0.0001 per share.
•“Preferred Subscribers” areis to the certain “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) and accredited investors who are party to the Preferred Financing Transaction;
•“Preferred Subscription Agreements” areis to the subscription agreements entered into by Mondee and each of the investors in connection with the Preferred Financing Transaction;
•“private placement warrants” areis to the outstanding 232,500 private placement warrants representing the right to purchase Class A ordinary shares that were issued by ITHAX in its initial public offering as part of the Units, which were automatically converted into the right to purchase one share of our Common Stock at an exercise price of $11.50 in connection with the Domestication;
•“private placement units” areis to the 675,000 units that were issued to the Sponsor and Cantor in a private placement concurrently with ITHAX’s initial public offering at a price of $10.00 per unit (with the Sponsor purchasing 465,000 and Cantor purchasing 210,000, respectively), which were, prior to the Domestication cancelled and exchanged to entitle the holder thereof to one share of our Common Stock and one-half of one public warrant;
•“public warrants” areis to the 12,075,000 redeemable warrants representing the right to purchase Class A ordinary shares that were issued by ITHAX in its initial public offering as part of the Units, which were automatically converted into the right to purchase one share of our Common Stock at an exercise price of $11.50 in connection with the Domestication, and subsequently purchased by our Company pursuant to the Offer to Purchase;
•“Rocketrip” areis to Rocketrip, Inc. a Delaware corporation and wholly-owned subsidiary of our Company;
•“SEC” areis to the Securities and Exchange Commission;
•“Second Merger” areis to the time at which Mondee merged with and into Second Merger Sub, with Second Merger Sub surviving such merger as a wholly owned subsidiary of our Company;
•“Second Merger Sub” areis to ITHAX Merger Sub II, LLC, a Delaware limited liability company;
•“Securities Act” are to the Securities Act of 1933, as amended;
•“Selling Securityholders” means the selling securityholders named in the each of the Registration Statement on Form S-1, as amended (File No. 333-266277), declared effective by the SEC on October 12, 2022, and the Registration Statement on Form S-1, as amended (File No. 333-268198) declared effective by the SEC on December 9, 2022;
•“Series A Preferred Stock” areis to the 85,00096,300 shares of our Preferred Stock, designated as Series AA-2 and A-3 Preferred Stock, par value $0.0001 per share, of our Company that were sold as part of the Preferred Financing Transaction for $1,000 per share;
•“Sponsor” areis to ITHAX Acquisition Sponsor LLC, a Delaware limited liability company that was dissolved on September 13, 2022;
•“Sponsor Support Agreement” areis to that certain Sponsor Agreement, dated as of December 20, 2021, by and among the Sponsor, ITHAX and Mondee, as amended and modified from time to time;
•“Subscription Agreements” areis to the subscription agreements, entered into by ITHAX and each of the PIPE Investors in connection with the PIPE Financing;
•“Transactions” areis to collectively, the Second Merger, the First Merger, and the other transactions contemplated by the Business Combination Agreement;
•“Term Loan” is to the financing agreement as amended from time to time, with TCW Asset Management Company LLC (“TCW”), and the lenders party to the agreement from time to time (“Lenders”), consisting of a $165 million multi-draw term loan in aggregate;
• “trust account” areis to the trust account established at the consummation of ITHAX’s initial public offering that holds the proceeds of the initial public offering and is maintained by Continental, acting as trustee;
•“Units” areis to the units of ITHAX, each unit representing one Class A ordinary share and one-half of one public warrant to acquire one Class A ordinary share, that were offered and sold by ITHAX in its initial public offering at a price of $10.00 per share and in its concurrent private placement of the private placement units; and
•“you” areis to the holders of our Common Stock.
INTRODUCTORY NOTE
On July 18, 2022 (the “Closing Date”“Closing Date”), Mondee Holdings II, Inc., a Delaware corporation (“Mondee”Legacy Mondee”), ITHAX Acquisition Corp., a Cayman Islands exempted company (“ITHAX”ITHAX”), Ithax Merger Sub I, LLC, a Delaware limited liability company and wholly owned subsidiary of ITHAX (“First Merger Sub”Sub”), and Ithax Merger Sub II, LLC a Delaware limited liability company and wholly owned subsidiary of ITHAX (“Second Merger Sub”Sub”), consummated the closing of the transactions contemplated by the Business Combination Agreement, dated December 20, 2021, by and among ITHAX, First Merger Sub, Second Merger Sub and Mondee (the “Business“Business Combination Agreement”Agreement”), following the approval at a special meeting of the shareholders of ITHAX held on July 15, 2022.
Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy Mondee and ITHAX was effected by the merger of First Merger Sub with and into Legacy Mondee (the “First Merger”“First Merger”), with Legacy Mondee surviving such merger as a wholly owned subsidiary of ITHAX, which had converted to “Mondee Holdings, Inc.”, a Delaware corporation (our “Company”(“Mondee”, or our “Company”). Immediately following the First Merger, Mondee merged with and into Second Merger Sub, with Second Merger Sub surviving such merger as a wholly owned subsidiary of Company (the “Second Merger”“Second Merger” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”“Business Combination”).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Unless the context indicates otherwise, references in this Annual Report on Form 10-K for the fiscal year ended December 31, 20222023 (this “Annual“Annual Report on Form 10-K”10-K”) to the “our Company,” “we,” “us,” “our” and similar terms refer to Mondee Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries. References to “ITHAX” refer to the predecessor company prior to the consummation of the Business Combination.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Investors are cautioned that statements that are not strictly historical statements of fact constitute forward-looking statements, including, without limitation, statements under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” and are identified by words like “believe,” “expect,” “may,” “will,” “should,” “seek,” “anticipate,” or “could” and similar expressions. Forward-looking statements in this Annual Report on Form 10-K may include, for example, statements about:
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•changes in domestic and foreign business, market, financial, political, regulatory and legal conditions;
•our ability to execute our business strategy, including monetization of our products;
•our ability to implement our strategic initiatives and continue to innovate our existing services;
•our projected financial information, growth rate and market opportunity;
•the ability to maintain the listing of the our Common Stock on the Nasdaq Global Market, and the potential liquidity and trading of such securities;
•the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, our ability of to grow, manage growth profitably, and retain our key employees;
•costs related to the Business Combination;
•changes in applicable laws or regulations;
•rising inflationary pressures and fluctuations in interest rates;
•our ability to raise financing in the future and ability to continue as a going concern;
•our success in retaining or recruiting, or changes required in, our officers, key employees or directors after the Business Combination;
•our ability to maintain relationships with customers and suppliers;
•our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business;
•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
•our financial performance;
•our ability to expand or maintain our existing customer base;
•our ability to remediate any material weaknesses and maintain an effective system of internal control over financial reporting;
•the outcome of any legal proceedings that may be instituted against us;
•unfavorable conditions in our industry, the global economy or global supply chain, including financial and credit market fluctuations, international trade relations, pandemics (such as the COVID-19 pandemic), political turmoil, natural catastrophes, warfare (such as the conflict involving Russia and Ukraine), and terrorist attacks; and
•other factors detailed under the section entitled “Risk Factors.”
Forward-looking statements are not assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those expressed or implied by forward-looking statements include those discussed elsewhere in this Annual Report on Form 10-K and in our future Quarterly Reports on Form 10-Q or other reports we file with the Securities and Exchange Commission (“SEC”SEC”).
Any forward-looking statement made by us in this Annual Report on Form 10-K is based only on information currently available to us and speaks only as of the date of this report. We undertake no obligation to publicly revise or update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. References to a fiscal year refer to our fiscal year ended December 31 of the specified year.
RISK FACTORS SUMMARY
Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors,” which represent the challenges that we face in connection with the successful implementation of our strategy and the growth of our business. In particular, the following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could materially and adversely affect our business, operations and financial results:
•We have experienced substantial growth over limited periods of time, which makes it difficult to forecast our future results of operations.
•If we are unable to manage our growth or execute our growth strategies effectively, our business and prospects may be materially and adversely affected.
•We invest considerable financial and human resources in our technology solutions to retain and expand our customer base in existing and emerging markets. We expect that the cost of maintaining and enhancing our technology solutions will continue to increase, and given the economic uncertainty and unpredictability around the ongoing travel industry recovery, decisions we make on investing in our technology solutions could be less effective and costlier than expected.
•We have incurred negative cash flows from operating activities and significant losses from operations in the past and if we are unable to either generate positive cash flows from operating activities or raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition could be adversely affected.
•Certain results and trends related to our business and the travel industry more generally are based on preliminary data and assumptions, and as a result, are subject to change and may differ materially from what we expect.
•We have pledged substantially all of the assets of our Company under our existing debt agreements. If the lenders accelerate the repayment of borrowings, we may not have sufficient assets to repay them and our financial condition and results of operations could be adversely affected.
•Adverse changes in general market conditions for travel services, including the effects of macroeconomic conditions, terrorist attacks, natural disasters, health concerns, civil or political unrest or other events outside our control could materially and adversely affect our business, liquidity, financial condition and operating resultsresults.
•We have incurred, and will continue to incur, increased costs as a result of operating as a public company and our management will continue to devote substantial time to compliance initiatives and corporate governance practices. In addition, key members of our management team have limited experience managing a public company.
•Our failure to maintain effectiveWe have identified material weaknesses in our internal controlscontrol over financial reporting which, if not corrected, could harm us.affect the reliability of our consolidated financial statements and have other adverse consequences.
•Our business depends on our relationships with airlines and GDS suppliers, travel agencies, travel management companies, and other travel businesses and third parties, and if we fail to maintain or establish new relationships with these third parties, our business, financial condition and results of operations could be materially and adversely affected.
•Our business and results of operations could be adversely affected if one or more of our major travel suppliers suffers a deterioration in its financial condition or restructures its operations or as a result of consolidation in the travel industry, loses bookings and revenue.
•Travel suppliers’ use of alternative distribution models, such as direct distribution models, could adversely affect our business.
•Our success depends in large part on our ability to attract and retain high quality management and operating personnel, and if we are unable to attract, retain, and motivate well-qualified employees, our business could be negatively impacted.
•Our success is subject to the development of new products and services over time.
•Any due diligence we conduct in connection with potential future acquisitions may not reveal all relevant considerations or liabilities of the target business, which could have a material adverse effect on our financial condition or results of operations.
•If we fail to either develop new and innovative technologies or enhance our existing technologies and grow our systems and infrastructure in response to changing client demands and rapid technological change, our business may suffer.
•Cybersecurity attacks or security breaches could adversely affect our ability to operate, could result in PI and our proprietary information being lost, stolen, made inaccessible, improperly disclosed or misappropriated or could cause us to be held liable or subject to regulatory penalties and sanctions and to litigation (including class action litigation), each of which could have a material adverse effect on our reputation and business. Privacy law obligations, and the costs of complying with them, are increasing globally and our failure to comply with these obligations could have a material adverse effect on our business.
•Our failure to adequately protect our intellectual property may negatively impact our ability to compete effectively against competitors in our industry.
•Any significant IT systems-related failures, interruptions or security breaches or any undetected errors or design faults in IT systems could result in limited capacity, reduced demand, processing delays, privacy risks and loss of customers, suppliers or marketplace merchants and a reduction of commercial activity.
•There are various risks associated with the facilitation of payments from consumers, including risks related to fraud, compliance with evolving rules and regulations and reliance on third parties.
•We may be unable to prevent unlawful or fraudulent activities in our operations, and we could be liable for such fraudulent or unlawful activities.
•The enactment of legislation implementing changes in taxation of domestic or international business activities, the adoption of other corporate tax reform policies, or changes in tax legislation or policies could materially affect our financial position and results of operations.
•Exchange rate fluctuations may negatively affect our results of operations.
•We are and, from time to time we may be, involved in legal proceedings and may experience unfavorable outcomes, which could affect our business and results of operations.
•We are no longer a “controlled company” under the corporate governance rules of Nasdaq. However, during the applicable phase-in periods, we may continue to rely on exemptions from certain corporate governance requirements, which may limit the presence of independent directors on our Board or committees of our Board.
•We may be unable to successfully integrate acquired businesses or combine internal businesses, which could adversely impact our financial condition and results of operations.
•Our Certificate of Incorporation designates the Delaware Court of Chancery or the United States federal district courts as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders, employees or agents.
•Our failure to meet Nasdaq’s continued listing requirements could result in a delisting of our Common Stock.
•An active trading market for our Common Stock may never develop or be sustained, which may cause shares of our Common Stock to trade at a discount to the price implied by the Business Combination and make it difficult to sell shares of our Common Stock.
•If our voting power continues to be highly concentrated, it may prevent minority stockholders from influencing significant corporate decisions and may result in conflicts of interest.
•The Series A Preferred Stock has rights, preferences and privileges that will not be held by, and will be preferential to, the rights of holders of our Common Stock, which could adversely affect the liquidity and financial condition of our Company, and may result in the interests of the holders of Series A Preferred Stock differing from those of the holders of our Common Stock.
•You may experience future dilution as a result of future equity offerings or if we issue shares subject to options, warrants, stock awards or other arrangements.
•We may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the share price of our securities, which could cause you to lose some or all of your investment.
•We have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements and have other adverse consequences.
•We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our Common Stock less attractive to investors.
PART I
ITEM 1. BUSINESS
General
Mondee Holdings, Inc. is(“Mondee” or the “Company”), a leading travel technology company, and marketplace with a portfoliofeatures an artificial intelligence (“AI”)-enabled transaction platform that powers its Marketplace for personalized travel experiences. This Marketplace has achieved near $3 billion of globally recognized technology solutionsannual gross bookings, primarily in the leisure travel market segment originating in North America with international destinations. In addition to its technology platform and corporatemarketplace, Mondee’s competitive moat includes: a Global Content Hub of negotiated rate content from airlines, hotels, cruise lines and other suppliers; a growing Distribution Network of 65,000 travel sectors. We provideexperts and intermediaries; Abhi, an industry leading AI-travel assistant user experience and process management application; a state-of-the artsuite of profitable Ancillary and FinTech solutions; and in-house multi-lingual 24/7 Support and Service Delivery centers. Mondee’s competitive cornerstones and continued growth are further complimented by a history of successfully acquiring and integrating nineteen travel companies with complementary content, distribution, and/or technology into the company’s technology-enabled ecosystem.
Mondee's key business drivers include:
1.AI Transaction Platform: A state-of-the-art transaction platform technologies, apps,supporting more than 50 million daily searches and delivering personalized travel experiences. This efficient operating systemssystem seamlessly facilitates traveler engagement from frontend AI application Abhi, through the a customer network of experts and technology-enabled services that seamlessly facilitatecurators, to virtually all available travel transactions to better serve travelers through travel affiliatescontent and numerous other emerging channels. Theseexperiences. The fully integrated artificial intelligence engines, large language models (“LLMs”) and proprietary probabilistic learning models (“PLMs”) ensure personalization and delivery of consumer experiences for “living in the moment”. The company’s technology solutions offer marketplace stakeholders (suppliers, travel experts, influencers, etc.) feature-rich tools and services for all aspects of consumer engagement, transaction processing and business development. Hallmarks of Mondee’s technology features include AI supported seamless connectivity across mobile devices, email, short message service (“SMS”) and chat, extending conversational commerce to the consumers portal of choice such as Facebook Messenger, WhatsApp, and Slack. At the same time, it offers reward wallets, sustainability options and traveler safety features.
2.Abhi 1.0: Mondee’s first generation of AI travel assistant user experience and process management application released in late 2023, provides an industry leading curation and personalization capability for travel experiences. Throughout the travel experience creation process this intuitive and engaging application provides the traveler with accessan omnichannel connection in real time to family, friends, coworkers and travel experts to imagine, visually experience, plan, shop, evaluate and select their own unique travel experience. The process culminates in creation of a fully configurable and customized itinerary which the traveler or their travel expert can select and send for final processing and purchase.
3.Mondee Marketplace: Mondee provides a globally recognized efficient marketplace which has produced over five million airline transactions annually as well as a growing number of transactions in hospitality, ground transport, cruises, activities and packages. Suppliers on the marketplace can capitalize on Abhi-enabled consumer engagement to connect and sell their unsold and empty airline seats, hotel room, cruise cabins, and other travel experiences in a targeted manner through closed groups that does not compete with their own sales efforts to closed user groups, in concert with and through the Mondee distribution network. The company’s traveler engaging AI technology solutions allow Mondee, travel product suppliers and travelers to extend their respective reach into emerging growth segments of the travel market.
4.Global Content Hub: Mondee has negotiated rates and private content on a global scale. This unique content is combined with all other available travel inventorycontent to create a leading Global Content Hub. The company’s extensive private fare content is maintained exclusively for its technology solutions and deployed efficiently to segment-specific markets through rules-based systems targeted to closed- and subscriber-user groups. This expanding set of travel supplier global content and extensive negotiated content now extends across air, hospitality, ground transport, cruises, activities and events, as well as packages and tours. Mondee’s negotiated content arrangements currently include over 500 airlines (representing nearly all global airlines), more than 1 million hospitality properties, almost all car rental companies, and over 20 cruise lines, and as well as leading theme park, activity and event aggregators. Mondee also offers a comprehensive set of ancillary products such as seat assignments, price lock guarantees, checked baggage and trip insurance to complement its travel bookings. In addition, Mondee’s content combinedhub provides access to a growing set of user generated content and experiences.
5.Distribution Network: Mondee’s business-to-business-to-consumer (“B2B2C”) model is comprised of an expanding network of 65,000 travel experts and other intermediaries, providing access to more than 125 million travelers. This includes a growing number of social media influencers, member organizations and small to medium enterprises. Mondee maintains strong partnerships with ourstakeholders at every stage in the chain of travel distribution. The company’s AI technology platform offers its distribution network, createto travelers a compelling modernmulti-channel marketing capability, supporting marketplace participants’ growth and business development with fully integrated marketing campaigns and CRM tools. The end result is a more comprehensive and cost-effective transaction process for travelers, travel experts, social media influencers and other channel partners, designed to make them more productive and competitive. Their growing reliance on Mondee’s solutions creates an economic moat around the company’s travel marketplace. Our modern marketplace provides
6.FinTech Solutions: Mondee’s platform incorporates a suite of online Fintech solutions including rewards wallets, an extensive selection of payment options, eWallet integrations, insurance and fraud protection options. These offerings and services are built directly into the increasingly discerning traveler with enhanced options on efficient consumer-friendly technology solutions while supporting our travel supplier partners in utilizing highly perishable travel inventory.booking path for easy selection and processing, enhancing Mondee’s take-rate and profitability of individual transactions.
7.24/7 Support & Service Delivery Centers: In addition to the rapid developmentself-service features of its platform, Mondee offers customers and enhancement of our moderntravelers 24/7 connectivity to multi-lingual support service centers through its global business network. As travel marketplace, we are increasingly focused on expanding our penetration ofarrangements often require changes for reasons ranging from weather events to personal circumstances, the "gig economy" segment of thecompany provides personal support before and during a trip for travelers, travel market. We believe our technology solutions are well suited to serve gig workers seeking more flexible, diverse contentexperts and other intermediaries, if and when they need it. The services include in-transit support and other travel services. The feature-rich technology solutions provide the necessary modern consumer engagementtransaction services such as conversational commerce, seamlessitinerary changes, irregular operations assistance, cancellations, rebooking and rewards application. These services are available through most connectivity channels such as online chat, messaging and 24/7 assistance,voice.
8.M&A: Mondee has a strong history of acquiring and integrating travel businesses, having acquired 19 companies since its inception. These accretive integrations are enabled successfully by connecting quickly through the Mondee transaction platform to become part of the Mondee Marketplace, facilitating the growth and cross utilization of content and distribution channels, as well as operating systems with modern financial technology, insuranceother marketing and marketing technology services.
We scaled our business rapidly by adding a large base of travel agent customers and extensive private fare content to our modern technology solutions through a series of acquisitions. Since our founding, we have acquired 15 accretive businesses, including four North and South American, EMEA and Asian market ticket consolidators. Our management team believes that ourcost synergies. The company’s ability to successfully integrate acquisitionsrapidly is underpinned by our highly efficient operating systems that modernize the process for leisure travel providers to engage consumers and quickly access, search, sell and distribute segment-specific inventory. We expandedcontent. Mondee targets acquisition candidates based on alignment with strategies for content growth, distribution footprint and geographic expansion.
9.Proven management team. The Mondee management team has 125+ years of combined experience in the travel content available onindustry, and the company’s Founder and Chief Executive Officer, Prasad Gundumogula, is a seasoned, serial entrepreneur with significant experience adding value to companies at the intersection of travel and technology. Under his leadership and that of our deep team, Mondee has grown quickly, both organically and through several successfully integrated acquisitions. We have also added a new Chief Financial Officer with significant experience in international business and public companies.
In summary, Mondee provides a state-of-the-art AI platform, technologies, apps, operating systems and services that seamlessly facilitate travel transactions as well as the creation of personalized experiences to better serve travelers through travel experts and numerous other emerging channels. Its AI-enabled technology solutions provide the necessary modern traveler engagement services such as collaborative conversational commerce, seamless connectivity and 24/7 assistance, as well as operating systems with modern financial technology, insurance and marketing technology services. These technology solutions access highly perishable global travel content and extensive negotiated travel content, combined with our distribution network, create a compelling travel marketplace. Mondee is increasingly focused on rapidly expanding the company’s global presence in, and penetration of, the broader travel market.
Our Business and History
Mondee was founded in 2011, to disrupt the North American Wholesale Airfare market which was operating on generally archaic technology with very inefficient processes. The Company started with the acquisition of seven businesses, including the largest US and Canadian air ticket consolidator companies serving primarily North and South America, EMEA and Asian markets. After developing and deploying a modern air consolidator transaction platform across these entities in 2015, Mondee grew profitably at a approximate 40% net revenue CAGR through 2019, adding almost 50,000 travel agents to its platform and creating the initial version of the Mondee Marketplace.
Although Mondee began as a marketplace for negotiated airfares and private content, from 2019 onward the company transformed quickly into a one-stop shop for a wide variety of travel supplier content with near real time access to substantially all globally available content. To enhance its offerings, Mondee developed its private fares technology solutions to allow negotiated rates and all other value-based supplier content to be provided efficiently through its global content hub to targeted markets. By early 2020, with its
rapid growth Mondee became the dominant North American airfare consolidator garnering approximately 5% of this $70 billion market, substantially larger than its next two competitors combined.
When the COVID-19 pandemic decimated the global travel industry in early 2020, Mondee embarked on a more expansive strategic path, led by the completion of an additional seven acquisitions to expand and reposition the company with new content, distribution, and markets. Mondee began diversifying its content hub beyond air, entering relationships with additional travel market suppliers including network airlines, low-cost carriers, hotel aggregators, and lodging properties, creating an even broader globalcar rental and cruise companies. Further, the company also diversified its distribution network beyond travel marketplace.agents to include other closed user groups, such as member organizations and small-to-medium businesses with access to millions of consumers.
We believe that our
Mondee began retooling its platform to empower the future of work and travel. This next iteration caters to the surging remote work and gig economy, as well as the social commerce wave driven by social media influencers. Building on its initial AI investments for collaborative travel experiences, Mondee has created the user-friendly Abhi interface and seamless AI support processes. Launched in 2023, this platform empowers emerging travel players - gig workers and travelers alike - to curate personalized experiences for discerning, value-conscious travelers.
With the expansion strategy solidly in place, in July 2022, Mondee began financing its next phase of rapid growth and market penetration organically and inorganically, it began trading on the NASDAQ under the symbol MOND.
Mondee believes the company’s AI technology-led business model and competitive moat positions us wellit to be a leading travel marketplace in the growing gig economy and recovering global travel market, by supplying modern operating systems for creating personalized travel experiences with segment-targeted travel search, AI-enabled curation, booking and service. We haveservice support. The company has leveraged ourits technology advantage and position in the traditional travel distribution ecosystem to create a marketplace that offers significant depth and breadth of content, a transaction platform and innovative technology to maximize value for travelers, travel affiliatesexperts, other intermediaries and suppliers. We believeMondee believes the three pillars of ourits business - technology, content and distribution - create a powerful competitive advantage that will protect ourthe company’s market leadership and propel ourits future growth into evolving traveler market segments.
Our Business
Our business is built around three areas, where our marketplace value is created: Technology, Content and Distribution.
Technology
Our technology solutions combine consumer-friendly applications and efficient operating systems with access to our global content across all current and emerging market segments. These technology solutions offer our marketplace stakeholders feature-rich tools and services for all aspects of consumer engagement, transaction processing and business development.
Our technology solutions are particularly well positioned to enable emerging stakeholders in the travel market - gig economy workers and travelers - to provide curated content and personalized travel experiences efficiently to discriminating value savvy consumers. Through a modern and intuitive user interface, these gig economy workers gain access to our global content as well as integrated marketing tools, conversational commerce, Fintech solutions, self-service booking and world class 24/7 support. Current hallmarks of our consumer engaging technology features include seamless connectivity across mobile devices, email, SMS and chat, extending conversational commerce to the consumers platform of choice such as Facebook Messenger, WhatsApp, and Slack, while offering reward wallets, sustainability options and traveler safety features.
Our technology solutions also incorporate tools and services that increase revenue and profitability when compared with legacy distribution systems. We are focused on continuously enhancing our technology solutions for gig workers with new and improved technologies, such as conversational commerce, and continue to bring innovation to an industry still largely reliant upon legacy distribution infrastructure, which is not as user-friendly or capable of handling more complex transaction components as our technology solutions. In addition to our market-leading search, booking and transaction tools and service support, our technology
solutions incorporate a Fintech solution with an extensive selection of payment options, eWallet integrations, insurance and fraud protection. Furthermore, our Company’s technology offers a multi-channel marketing platform, supporting marketplace participants’ growth and business development with fully integrated marketing campaigns and CRM tools. The end result is a more comprehensive, engaging and cost-effective transaction process for travel consumers, gig workers, travel experts, influencers, affiliated travel agencies, home-based agents and other affiliates, designed to make each of them more productive and competitive.
We have further extended our technology solutions to develop and provide more modern traveler direct applications focused on small and medium sized enterprises (“SME”), member organizations and affiliated consumer market segments. In most instances, we offer our applications through subscription-based models to members of closed user groups seeking feature-rich gig economy services such as curated value-based content and personalized experiences in our omni-channel engagement and delivery systems. To date, we have been able to provide access to this curated and discounted content to over 125 million users. We built these traveler engaging technology solutions to allow our Company, our customers and our suppliers to extend their respective reach into emerging growth segments of the travel market.
Content
We have negotiated rates and private content on a global scale, which we combine with access to all other available travel inventory to create one of the industry’s leading Global Content Hubs (“GCH”). Our GCH’s extensive private fare content is maintained exclusively for our technology solutions and deployed efficiently to segment-specific markets through rules-based systems targeted to closed- and subscriber-user groups.
Although we began as a marketplace for negotiated airfares and private content, we transformed quickly into a one-stop shop for a wide variety of travel supplier inventory with near real time access to substantially all globally available content. To enhance our offerings, we developed our private fares technology solutions to allow negotiated rates and all other value-based supplier inventory to be provided efficiently through the GCH to targeted market segments. Our GCH technology solutions was initially populated with negotiated fares from our acquisitions, featured direct relationships or access to over 500 airlines and over one million hotel and alternative hospitality accommodations. We expect to continue to add new rental car, cruise and tour offerings. Our GCH fuels our travel marketplace, providing global content that caters to a wide range of consumer travel needs and life-style choices. In addition, we offer individuals and SMEs full-service support when needed, with curated options and opportunities to save on travel bookings that fit the changing needs and life-style choices of the existing and emerging value-savvy travel segments.
Distribution
We maintain strong partnerships with stakeholders at every stage in the chain of travel distribution.
Our Company offers our technology solutions to the following target market segments: affiliate travel experts and agencies, distributor and affiliated consumers, corporations, SMEs and enterprise customers. The end travelers of the distributor and affiliated consumer segments are primarily leisure travelers and individual subscribers, whereas customers in the corporate and SME segments are primarily businesses and membership organizations that coordinate travel for their employees and other constituents.
Our distributor target segment is comprised of the fragmented population of gig workers, home-based agents, traditional travel agents and travel management customers who plan, manage or otherwise service travel experiences for leisure travelers. Through both organic growth and strategic acquisitions, we have created one of the industry’s leading distribution platform with an infrastructure designed to grow quickly and at scale. Today, travel professionals partner with us through our technology solutions for access to our extensive GCH and feature-rich operating systems to provide service to millions of end customers. We are well positioned to continue expanding our distribution presence rapidly in the emerging gig travel segment with our modern Mondee “Travel Solution in a Box,” offering the complete suite of conversational commerce customer tools, content access, integrated marketing tools, Fintech solutions, self-service booking and 24/7 support, all geared to building a gig travel community or business.
Our second target segment, affiliated consumers, is composed of discerning travelers focused on value-based offerings and personalized experiences. These influencers and consumers typically affiliate with various personal or recreational life-style pursuits and experience and often pay subscription fees to have the ability to view, create or participate in curated, travel-related experiences. Customers in this segment access our technology solutions generally with subscription-based applications (“apps”). Our technology solutions seamlessly integrates global travel content with curated solutions at value-based prices, backed by 24/7 support services, which appeals to consumers focused on value. Our technology solutions also provides travel suppliers with a targeted network of individuals willing to fill largely excess capacity of seats on flights and hotel rooms in order to optimize load factors, revenue and profitability.
Our enterprise customer, corporate and SME target segment is served on our Rocketrip traveler rewards and our other solutions. Larger businesses are connected with travel suppliers through Rocketrip, which was founded in 2013 and we acquired in 2020. Rocketrip is an enterprise travel platform with a shared-rewards, price-to-beat feature helping companies significantly reduce travel costs by empowering and rewarding employees to make cost-saving decisions. By contrast, Mondee’s comprehensive mobile app travel booking platform caters to SMEs, nonprofits and other membership organizations. Both products are backed by our 24/7 support platform and services and provide value-pricing, detailed reporting and other features that were traditionally reserved only for larger corporations.
All stakeholders in travel distribution benefit from our solutions as they efficiently connect sellers of travel accommodations and solutions with today’s travel consumers. More importantly, the growing reliance on our solutions and marketplace creates an economic moat around our travel marketplace that we believe is a significant competitive advantage for our stockholders.
All of our solutions are supported by seamless customer service. We provide end-to-end travel support service for travel experts, affiliates and travelers through our technology solutions, well-established processes and high efficiency operating tools. These services are currently deployed in our 24/7 contact centers and operations facilities in several countries, including the US, Canada, India, Thailand, and several other countries worldwide. With nearly 1,000 travel professionals as of December 31, 2022, assisting consumers to research, plan and book the best travel options, the service centers also offer in transit support and other travel transaction services including itinerary changes, irregular operations assistance, cancellations, rebooking and rewards application, along with conversational commerce.
Industry and Market Overview
Prior to the COVID-19 pandemic, travelTravel and tourism washas historically been one of the largest and fastest growing global economic sectors. We believe these sectors represented approximately 10%Global travel and tourism as a share of global gross domestic product (“GDP”) in 2019. We believe that global was estimated, per Statista and World Travel & Tourism Council, to be 9 to 10% for 2023. Through the end of 2023, per the International Travel & Health Insurance Journal, total international travel industry spending of approximately $1.9 trillion for 2019 was increasing at an annual rate of approximately 6% in the recent years prior to the outbreak of the COVID-19 pandemic. According to OAG, 2022 North American domestic air travel (measured by scheduled air seats)had recovered to approximately 91%90 to 95% of 2019pre-COVID-19 levels, while 2022 international scheduled air seats recoveredwith Asia Pacific and the Middle East projected to approximately 69% of 2019 levels.lead recovery headed into 2024.
The travel bookings segment can be subdivided into Self-Service Consumer Travel and Assisted and Affiliated Consumer Travel.
Self-Service Consumer Travel includes travel inventorycontent sold to travelers by airlines and hotel companies directly, as well as Online Travel Agencies and Metasearch companies. We doMondee does not focus on this market segment.
Assisted and Affiliated Consumer Travel, on the other hand, includes inventorycontent curated and sold to a traveler through affiliates and curatorsmultiple channels such as travel agents, travel experts and social media influencers, travel management companies, corporations, call centers, associations and other membership organizations. Through these third parties, end consumersdistributors and intermediaries, travelers gain access to airline and hotel reservations, car reservations, andcruises, other accommodations and travel related activities, which have beenare configured for specific trip or experience requirements and best-value priced. We focusMondee focuses on this segment of the travel bookings and personalized experiences market, which is growing rapidly and is increasing in choice and complexity. According to IBIS Global Tourism GL Industry Report of February 2023 and Global Travel Agency Services GL Industry Report of January 2023, the global travel market is expected to grow by 14.1% on average year on year for the period 2021 and 2025, whilst in the same four-year period the travel agency market is expected to grow by an aggregate 13.5%.
Many of the traditional travel stakeholders providing Assisted and Affiliated Consumer Travel are still largely dependent on legacy distribution networks and outdated operating systems that rely on traditional booking methods and fail to align with modern consumers’ booking preferences. These stakeholders often lack access to a transaction platform and operating system with current consumer engagement technologies and transaction services, thereby underservingunder serving the emerging consumertraveler groups. We believeMondee believes these stakeholders generally fail to reach or satisfy significant segments of the rapidly emerging gig economy and work-from-home travel market, includingsocial media influencers, as well as small andto medium sized enterprises (“SMEs”) and most member organizations, creating significant market opportunities. It is in this Assisted and Affiliated Consumer Travel segment that we providefor which Mondee provides comprehensive AI-enabled technology solutions and a modern marketplace for both leisure and business travelers.
The Effect of COVID-19
Since March 2020, the COVID-19 pandemic has restricted the level of economic activity around the world and continues to have some impact on the global travel industry. While a general recovery in travel demand began in 2021 and continued through 2022, the pace and scope of the recovery is proving volatile with the periodic surges of COVID-19.
To protect our business from the effects of COVID-19 we took action to reduce costs. In particular, we (a) renegotiated our loan structure with lenders to defer interest payments to manage cash; (b) raised additional capital through equity financing; (c) restructured accounts payable to accommodate a longer time horizon; and (d) invested in and developed technology solutions to increase operating efficiencies and to reduce labor expenses. In 2020 and 2021 we and certain of our U.S. subsidiaries also applied for and received loans from the U.S. Small Business Association Paycheck Protection Program (“PPP”), all of which have been forgiven. In 2021, our Canadian subsidiaries Skylink Travel Inc. and Leto Travel, Inc. (dba CTS Travel) applied for and received Canada Emergency Business Accounts (“CEBA”) loans equal to CAD$80,000 in the aggregate, and loans of CAD$250,000 in the aggregate under the Business Development Bank of Canada’s Highly Affected Sectors Credit Availability Program (“HASCAP”) in emergency assistance from the Canadian government. As of December 31, 2022, CAD$70,000 remains outstanding under the CEBA loans and CAD$243,000 remains outstanding under the HASCAP loan.
We believe that our swift management of expenses, together with our existing cash position, and the PPP, CEBA and HASCAP loans helped us to prudently and successfully manage our business through the COVID-19 pandemic during 2020 and 2021. In addition, while travel restrictions were at their tightest during the COVID-19 pandemic, we took measures to invest in modernizing our technology solutions to best position our Company for growth post-pandemic. For example, in 2021 we acquired Rocketrip and launched TripPlanet as a Mondee app to better serve gig travelers and distribution customers, as well as improve hotel inventory to grow our share of the hotel accommodations market. As a result of some of these actions, we have been able to market our technology solutions to additional closed-user channels, such as member organizations. As of December 31, 2022, over 125 million members of these closed-user channels have access to our technology solutions for their personal travel.
The COVID-19 pandemic also had a material impact on the expansion of the global gig economy and rise of the remote worker. Fundamental shifts have taken place in business practices globally with the significant adoption of remote and virtual work environments. This change, among other generational factors, rapidly increased the proliferation of the global gig economy, creating larger fragmented pools of remote, part-time and home-based gig workers. In many industries, and especially in travel, this shift has created significant market opportunity for remote and home-based business solutions that are comprehensive, seamless and technologically enabled. Our micro-services and self-service modern technology solutions and operating systems, combined with our affiliate and travel agent market segment focus, extensive high-value content access and consumer-friendly apps, give our Company an advantage in this market white space, which we believe will provide us with significant market growth and penetration opportunities.
The effects of COVID-19 have mostly subsided in relation to domestic travel within the United States. Demand for international travel, Mondee’s main business, is still, as of the end of 2022, 69% of the pre-pandemic peak.
Our Competitive Strengths
Based on our internal data, we believe that we account for approximately 5% of the $70 billion private airfare market in North America and have significant penetration in the travel agent segment. We believe the following strengths are key to our ability to obtain and maintain our position as a market leader:
•NextGen Travel Marketplace with unmatched access to extensive content and fares. Our distribution network connects over 55,000 travel affiliates and agents to more than 500 airlines and over one million hotel and alternative hospitality accommodations, and we continue to expand our rental car, cruise and tour content to match emerging consumer demand. We believe this distribution network enables our Company to provide segment-targeted traveler access broadly to its GCH inventory, setting us apart from our competitors. Our flagship user-friendly technology solutions then help travelers in target market segments take advantage of our GCH inventory appropriately and maximize value for all marketplace participants.
•Modern disruptive technology platform and interface. Our travel ecosystem disrupts incumbent solutions by modernizing an industry still reliant on legacy technology infrastructure. Our technology solutions increases the efficiency of transactions, provides great mobile accessibility, and incorporates modern marketing and Fintech tools. The resulting Mondee app is a leading gig economy and travel expert solution in the travel services market that empowers gig workers with the comprehensive infrastructure necessary to build a successful work-from-anywhere travel constituency or business.
•Significant barriers to entry and market leadership. Our Company’s market leadership is protected by a three-pronged moat of content, distribution and unique technology. Our technology solutions create efficiencies, which benefit our partners in the travel marketplace. As a result, both travel suppliers and affiliates rely on our technology solutions to fuel transaction volume.
•Proven management team. Our management team has 125+ years of combined experience in the travel industry, and our Founder and Chief Executive Officer, Prasad Gundumogula (“Gundumogula”), is a seasoned, serial entrepreneur with significant experience adding value to companies at the intersection of travel and technology. Under his leadership and that of
our deep team, we have grown quickly, both organically and through several successfully integrated acquisitions. In addition, our management team successfully navigated our Company through the COVID-19 pandemic and reallocated our resources to invest in further acquisitions and the development of our technology solutions, meaning that we are well-positioned to take advantage of the continued market recovery and emerging white-space growth opportunities that are already being realized due to the pent-up demand for travel globally.
•Significant organic and inorganic growth. Between 2015 and 2019, our compounded annual growth rate (“CAGR”) generated through organic growth was approximately forty percent (40%). When growth through our strategic acquisitions is included, our CAGR was approximately sixty percent (60%) during that same period. We believe the size of the private airfare market in 2019 was approximately $70 billion and that this growth led to a 2.4x expansion in our share of gross revenues from the private airfare market in North America between 2015 and 2019 including acquisitions. In 2022, our growth rate was seventy-one percent (71%) year-over-year organically, which illustrates our recovery from the impacts of the COVID-19 pandemic. In addition, with our acquisition of Orinter Tour & Travel, S.A., a Brazilian company (“Orinter”) in January 2023, we anticipate that fiscal year 2023 will also benefit from inorganic growth.
•Proven track record of building scale through acquisitions. We have successfully acquired and integrated 15 businesses, covering content, technology and distribution areas. This M&A activity has built scale and added capabilities to our technology solutions. Furthermore, we have demonstrated an ability to integrate those companies into our existing technology solutions to fundamentally improve the businesses we acquired.
Orinter Acquisition
We completed our first acquisition after the COVID-19 pandemic on January 31, 2023, of Orinter. Orinter is a disruptive growth company in a high-growth market, evidenced by its 2019-2022 net revenue CAGR of 38%, despite two full years of the COVID-19 pandemic. Orinter’s leading B2B position in the hotel, packages, and ground transport markets underpins a take rate of approximately 13% and post pandemic restored profitability of greater than 30% EBITDA margin, with 2022 EBITDA of $9.3 million. The consideration for the acquisition, valued at approximately $40.0 million, was comprised of cash and shares of our Common Stock, plus an additional future earn-out linked to increases in Orinter’s EBITDA.
As of the date of this Annual Report on Form 10-K, Orinter serves 4,800 travel companies whose integration through the Orinter acquisition expands our geographic footprint to include Brazil’s domestic and outbound travel market. Additionally, we believe Orinter’s direct relationships with Latin American hotels will provide valuable cross-sell opportunities for us. Furthermore, the acquisition will enable us to broaden our distribution of Orinter’s travel content through access to our 50,000 travel affiliates and access to 125 million closed group members. We also plan to leverage our proprietary technology solutions and deploy revenue enhancements such as fintech and ancillary solutions at Orinter, while optimizing expenses to achieve meaningful top-line and bottom-line synergies.
Our Business Strategy for Future Growth
WeMondee will continue to capitalize on ourits disruptive AI technology, extensive travel supply content and large, scalable distribution network to propel our future growth both organically and through acquisitions. We believeThe company believes this multi-pronged strategy best positions our CompanyMondee to take advantage ofcapitalize on the pent-upsocial media driven changes in consumer preferences and demand, changes and rapidas well as the continued growth of the overall travel market expected in the recovery from the COVID-19 economic slowdown.market.
Technology
Our technology solutions bring needed innovation to an industry that remains largely run on legacy distribution and transaction systems. We plan to continue innovating and further disrupt the travel market by prioritizing the following growth-oriented actions:
•Expand our Leading AI Travel Platform for the Gig EconomyBroader Distribution. We haveThe company has prioritized the implementation and ongoing expansion of Mondee’s “Travel Solutions in a Box” offering, whichsuite of AI technology tools focused on the evolving consumer preference for AI-supported expert assisted curation of personalized experiences, with social community engagement and seamless transaction processing. Mondee will require the continued building of infrastructure supporting the emerging gig travel economy. We intend to equip travel experts, and gig workers and other intermediaries with our full suite of business tools and efficiently provide them with fulluser-friendly access to our travel supply content.
•Extend our AI Platform to Serve SMEsMember Organizations and Small to Medium Enterprises (SMEs). We are using our technology to identify new customerMondee has identified growing segments among traveler, travel experts and other intermediaries, such as member organizations and small businesses.businesses that can benefit in several ways from the company’s technology capabilities and travel experience offerings. According to Statista, there were over 300 million SMEs globally in 20212022 and we estimate that millions of them book online and receive no special treatment. We believe ourThe company’s subscription-based service canis expected to help these small enterprises achieve savings on travel bookings, while also receiving superior customer service. Weproviding member or employee benefits when using Mondee’s app for personal travel. Mondee launched our directits subscription service to SMEs, membership organizations, and other affinity groups in the second half oflate 2021, and we have already experienced tremendous growth in this product, withcurrently has more than 125 million members havingand employees able to access as of December 31, 2022.our platform.
•Monetize New Features. We believe weMondee can maximizeenhance profits by implementing further add-on and ancillary booking features on ourits platform. For example, travelers booking through our customerstravel platform solutions may select an ancillary, such as premium seat selection, trip insurance or fraud protection, when booking a flight, hotel, or other travel products for additional costs. We believe addingAdding more of these lucrative features will expand ouris an ongoing expansion of its technology solutions.
Content
WeMondee already havehas an extensive high value inventorycontent of travel supply content for all travel segments, and we believe the following initiatives can help us to further expand the quality and depth of ourcompany’s travel content and curated experiences offerings:
•Expand Global Flight Content. To differentiate our Company from our competitors, we continueNo airline runs at 100% capacity on all routes and flights. Most airlines will negotiate rates and reduce prices on several routes through closed channels to expand our extensive flightminimize perishable content by working with all airlineslosses. Mondee’s technology backed airline content interface options, increasing curation and packaging capability, as they need to fill planes quicklywell as the impactits expanding global footprint and closed user group distribution networks facilitate continued enhancement of the COVID-19 pandemic wanes. Most airlines reduced flights and capacity to partially offsetcompany’s robust negotiated rates content. Atop priority for its vendor management team in 2024 is implementing the significant reduction in passenger traffic, rapid decrease in their load factors and steep increase in their losses. As the travel market recovery progresses and these airlines reopen their routes and reestablish capacity, they will need additional help to fill seats and increase load factors. We have anticipated this need and have prioritized implementation of our content expansion.company’s expansion strategy.
•Strengthen Hotel and other Non-Flight InventoryContent. We addedTravel packages, hotel, car rental, cruise and activity bookings to ourare now an integral part of Mondee’s technology solutions in 2020 and non-flightofferings. This type of content accounted for lessrepresents more than 20% of our bookings, asthe company’s bookings. With the addition of December 31, 2022. We continuea hospitality supply management team and recent acquisitions consummated in 2023, along with the company’s expanding packaging and tour capabilities, Mondee continues to focus on expanding our hotel content with targeted acquisitions and by buildingbuild mutually attractive relationships with additional hotels, and other alternative lodging suppliers. We also believe our subscription-based products will appeal to hoteliers hoping to fill last-minute room inventory. Lastly, we plan to leverage our strength in airfare content to increase hotel demand by featuring hotel bookings as an add-on and/or bundled offering to primarily air transactions.suppliers and ground services vendors.
•Add New Categories of Content. We have prioritizedMondee’s new consumer and social influencer engaging AI travel technology facilitates the additioncuration and consumption of personalized journeys and experiences by the company’s growing customer base. With the inclusion of collaborative social commerce coupled with AI-enabled parsing and qualification of the curated experiences, attractive new categoriesuser generated content is being continuously created and added to the Mondee content hub. In 2024, the company expects to provide an expanding set of travel content, such as cruises, travel packages, eventsdynamically created, localized and entertainment, organically and through acquisitions. For example, travel affiliates currently initiateconfigurable experiences for its customers.
Distribution
While Mondee already has a majority of cruise bookings through offline channels and specialty distributors, therefore, we can leverage our strong relationships withlarge distribution network, which includes more than 65,000 travel affiliates and our positioning with emerging gig workers globally to expand our cruise relationships and content. We have already implemented relationships and arrangements that will provide additional hotel, cruise, activities and event tickets and content to be released on our technology solutions duringagents, the first half of 2023.
Distribution
We maintain a distribution network that included over 55,000 travel experts and agents, enterprise corporate customers, and partners with direct channels to travelers as of December 31, 2022. While our distribution network is already large, we believecompany believes there is substantial room for growth in both the leisure and business travel sectors. We plan to take theThe following actions are expected to strengthen our worldwidecontinue strengthening its global travel distribution network:
•Increase International Market Share. We planMondee plans to expand ourcontinue expanding its presence globally, both organically and inorganically, to become a leading operating system for global travel experiences and accommodations. WeThe company’s strategic plan to makeis focused on continued international expansion a priority in 2023Latin America and inChina, as well as penetration into key new markets which include the future.India sub-continent, the Middle East and Europe.
•Facilitate the Growth of the Gig Travel Economy. We are expanding our “Travel Solutions in a Box” offering, whichMondee will continue deploying its social media-friendly AI travel technology and platform, Abhi, that is designed to enable travel experts, andinfluencers, gig workers and our affiliate network to become more competitive travel experience curators and providers. We expect that this new pool of gig workers willThis strategy is expected to exponentially increase the travel provider market and assisted-consumer engagement in the near future. Importantly, these travel experts, influencers, affiliates and gig workers will rely on ourMondee’s technology solutions to conduct this business, strengthening our competitive advantage vis-à-vis legacy providers that do not have this technology. We expect the new gig travel economy willproviders. These emerging channels are expected to also encourage travel suppliers that desire to sellposition their travel content through these new gig travel providers to use ourappropriately on the Mondee marketplace, which will further bolster ourbolstering the company’s content and distribution network. We have initiated a travel affiliate network program (“Affiliate Network Program”) to provide travel experts and intermediaries, who sign up to use our technology solutions exclusively, with more complete access to our technology solutions and content for better overall distribution economics and offerings. The current rollout of our Affiliate Network Program is expected to grow transaction volumes across our technology solutions in the short- to medium-term, while enabling more rapid adoption of our services by emerging travel experts and gig workers.
•Grow the Subscription-Based Affiliated Consumer Revenue Model. Our apps will be the members-only subscription-based technology solutions giving value-savvy leisure travelers access to appropriate segment-targeted rates on flights and hotels. The modest annual subscription fee will provide us with a recurring revenue stream and increase customer stickiness by supplying superior travel pricing combined with a loyalty rewards program and free ancillary packages. By targeting existing leisure travelers with various marketing and viral campaigns, we believe our apps will achieve rapid adoption and growth.
•Expand SME Travel Market Share. Traditionally, only large enterprises have had access to value pricing, better service and reporting, but with ourMondee’s technology solutions we provide these features efficiently to SMEs, nonprofits and other membership organizations. Our appsMondee’s AI technology platform already bringbrings a deep set of travel benefits and we planplans to grow this business by targeting more small businesses and non-business organizations, while further expanding offerings to include new leisure travel benefits to employees and members of enterprises.
Strategic and Accretive M&A
We haveMondee has historically built scale and added capabilities through merger and acquisition transactions. We haveThe company has demonstrated an ability to execute accretive and synergistic acquisitions as well as integrate and fundamentally improve ourthe acquired businesses. During 2023, we expectThe company expects to continue pursuing strategic opportunities that strengthen our technology solutions, expand the breadth and depth of our content, and enhancegrow our distribution infrastructure.network globally.
In particular, among a number of emerging growth options, we haveMondee has identified potential opportunities that willto grow our inventorycontent of hotel and lodging, cruise and tour offerings. With even greater content offerings, our Companythe company plans to expand ourits travel and experiences packaging capabilities and we are assessingthrough acquisition candidates with this expertise to enhance these functions on our technology solutions.expertise. Also, weopportunities have been identified opportunities to increase ourits international footprint by acquiring distributors, aggregators and platforms based inbeyond North America and Latin America, Europe and other international markets.
We will continue to actively monitor and evaluate these and future opportunities in our mergers and acquisitions pipeline in both the near- and mid-term.America.
Competition
The travel services industry is competitive. Travel suppliers, travel distributors and wholesalers, OTAs, travel agencies and corporate travel service providers all compete for a share of the overall travel market, and we competeMondee competes for our ownits share across multiple market segments. The following, however, are most relevant in the Assisted and Affiliated Customer Travel segment:
•Larger Travel Agencies and Managed Travel Companies. This segment consists primarily of a few traditional consolidators, regional wholesalers and some larger international travel agencies, such as Flight Centre Travel Group, Internovas’ Travel Leaders Group, and Corporate Travel Management. These companies generally provide travel agents with private fare inventorycontent generally utilizing primarilyversions of legacy distribution systems, which we believe do not compete favorably with our modern AI technology solutions. Most of these competitors are based outside the North American market with a specific area of geographic focus, whereas we haveMondee has comprehensive global content and supplier partnerships.
•Corporate Travel Service Providers. There are a number of travel service providers that offer discounted fares and customer service to large corporations, such as Navan (previously TripActions) and Egencia, that might compete directly with ourMondee’s services in certain market sub-segments, which currently comprise a small part of ourthe company’s revenues, since we are focusedfocus more on leisure notversus corporate travel. These corporate or otherwise managed travel companies, however, have neither historically extended offerings to SMEs, nonprofits, associations, and membership
organizations, nor provided competitive subscription-based services. We targetMondee targets these corporate and SME customer groups with the same level of benefits and services typically afforded only to large corporations.enterprises.
In the future, we may face increased competition through the emergence of new competitors or business models. Some of our competitors may have access to significant financial resources, greater name recognition and well-established client bases in their target customer segments, differentiated business models, technology and other capabilities, or a differentiated geographic coverage, which may make it more difficult for our Company to attract new customers. Nevertheless, we believe our extensive content, large, and scalable distribution and innovative technology establish a significant and competitive advantage for our diverse product offerings that sustainably distinguishes us from other market players.
Suppliers/Partners and Customers
Travel suppliers, such as airlines, hoteliers, rental car agencies, cruise companies, tour operators, insurance companies and all three major GDS service providers supply our Company with travel content and ancillary products. We have longstanding relationships with almost all global networks and most low-cost carriers representing over 500 airlines, most international hotel and hospitality companies representing over one million hotel and alternate hospitality accommodations, most international car rental companies, and several other travel inventory and ancillary travel product suppliers.
Our customers andThe company’s travel supply content consumersare primarily fall intodistributed to the ultimate travelers through three following categories:
•Gig Economy Workers, Travel Experts, Home Based Agents, and Travel Agencies, Gig Economy Workers and Social Media Influencers. WeMondee currently provideprovides technology, a transactional platform, negotiated travel inventorysupply content and other travel supply content to over 55,00065,000 travel affiliatesexperts and agents worldwide through our technology solutions and with the planned release of our platform’s new features, we will also createcompany is creating a network of gig travel workers, home-based agents and social medial influencers that use our technology solutions to deliver curated travel experiences to end consumers. Gig-economy workers in the ultimate traveler. All travel influencerexperts and services spaceinfluencers are able to partner with usMondee to develop, grow and monetize their existing and newly-acquiredor newly acquired traveler networks. They receive access to the latest AI technology travel platform, service support, financial technology solutions and value-priced content to drive significant growth. ExamplesFurther examples of these types of gig-economy workersthe new travel service intermediaries include: trip curators who create and publish trips and personalized experiences for use by travelers; social media influencers who build large followings by socializing their travel experiences and desire to expand from content to commerce by helping their followers experience the world differently; travel experts who are independent travel organizations that utilize our technology solutions and global travel content at competitive prices to deliver some of the broadest custom travel experiences; and content writers who publish travel blogs and influencer content that can be converted to vacation and personalized experience packages.
•SMEs and Other Organizations. Corporations and other organizations comprise another coretarget group of our customer base.the company’s travel supply content. Rocketrip works with large-scalelarger enterprise customers to motivate their employees with shared rewards to save costs on business travel by making more value-conscious travel choices. Our AI-enabled apps, on the other hand, provide comprehensive travel booking services, often on a subscription basis, to employees and members of SMEs, nonprofits, and other membership organizations. Our technology solutions’ customer base includes accessMondee is able to provide travel supply content to over 125 million members.travelers and travel experts.
.
•Travel ConsumersTravelers. GigIndividual travelers generally fall into an affiliated category where the traveler accesses the Mondee systems and affiliated consumers make upplatform through an affiliation with one of the third primary group of our customers. In addition to our current direct consumers supported by our call centers, we will sell travel inventory through subscription-based services to value-savvy consumers in life-style affiliated cohorts.two categories above.
Intellectual Property
OurMondee’s intellectual property is an important component of ourits business. We relyThe company relies on a combination of domain names, trademarks, copyright, know-how and trade secrets, as well as contractual provisions and restrictions, to protect our intellectual property. These include our proprietary technology solutions, software, customer lists, affiliate network lists, and other innovations. As of December 31, 2022, we have2023, the company had no active patents or patent applications, but we intendMondee intends to pursue patent protection to the extent weit believe it would be beneficial and cost effective.
As of MarchDecember 31, 2023, weMondee owned nine U.S. registered or pending trademarks and registered or pending trademarks in seven other jurisdictions. We also own several domain names including “mondee.com,” “trippro.com,” “rocketrip.com” and “tripplanet.com.”
We rely
Mondee relies on trade secrets and confidential information to develop and maintain our competitive advantage. We seekMondee seeks to protect ourthe company’s trade secrets and confidential information through a variety of methods, including confidentiality agreements with employees, third parties, and others who may have access to our proprietary information. WeMondee also requirerequires key employees to sign invention assignment agreements with respect to inventions arising from their employment, and restrict unauthorized access to our proprietary technology. In addition, we haveMondee has developed proprietary, artificial intelligence (“AI”AI”) -driven software that is protected through a combination of copyright and trade secrets.
Notwithstanding our efforts to protect our intellectual property, there can be no assurance that the measures taken will be effective or that our intellectual property will provide any competitive advantage. We can provide no assurance that any patents will be issued from our pending applications or any future applications or that any issued patents will adequately protect our proprietary technology. Our intellectual property rights may be invalidated, circumvented or challenged. Furthermore, the laws of certain countries do not protect intellectual property and proprietary rights to the same extent as the laws of the United States and, as a result, we may be unable to protect our intellectual property and other proprietary rights in certain jurisdictions. In addition, while we have confidence in the measures we take to protect and preserve our trade secrets, we cannot guarantee these measures will not be circumvented, or that all applicable parties have executed confidentiality or invention assignment agreements. In addition, such agreements can be breached, and may not have adequate remedies should any such breach occur. Accordingly, our trade secrets may otherwise become known or be independently discovered by competitors.
Sales and Marketing
At Mondee, our marketing strategy is all about capturing lifetime customers and expanding our market share in new and emerging regions. We achieve this by carefully allocating our marketing budget and focusing on the right time in the cycle. We prioritize
targeting both existing and prospective customers with specific net rates and incentives, such as offering them complimentary services for a certain number of bookings. This not only helps us retain our current customers but also attracts new customers who are likely to become loyal and valuable over time. As we expand into new regions, we tailor our marketing strategies to the local market by understanding their culture and preferences. This enables us to create targeted campaigns that resonate with potential customers and increase our chances of success. Our goal is to offer our customers travel-related technology solutions and experiences that will help us monetize them at a later point. By efficiently allocating our marketing budget and continuously analyzing the results, we can maximize our return on investment and drive sustainable growth for Mondee. We are committed to creating a loyal customer base that will not only generate revenue for us but also provide positive word-of-mouth and help us expand our business further.
In addition to capturing lifetime customers through incentives, our marketing strategy includes brand, performance and viral marketing, such as word of mouth, peer-to-peer, micro-networking and crowd sourcing, as well as nurture marketing. Brand marketing, which may also include our presence on social media platforms, increases awareness among potential customers, helping them to understand the benefits of using our technology solutions to book their travel experiences, including flights, hotels, cars, cruises and tours. We deploy performance marketing strategies through digital and offline channels to drive additional traffic and transactions from high-intent prospective customers. An example of these marketing campaigns is the use of online marketing companies for paid clicks and conversion results. To increase the efficiency of our performance marketing initiatives, we utilize a customer relationship management platform, which provides further opportunities to personalize marketing campaigns and target advertising to specific market segments. We complement our brand and performance marketing with nurture initiatives through email and outbound communications to ensure that we retain high-value customers, increase brand loyalty and drive recurring transactions.
Furthermore, we engage in affiliate performance marketing programs, traditional public relations and communications activities, such as trade show participation, to strengthen our brand and enable us to be less reliant on performance marketing, reducing our customer acquisition costs. Our communications team works across press and policy channels to share timely and important news about our Company. They also oversee the execution of a consumer, product, corporate, and policy communications plan that supports our brand strategy. Our sales and operating teams develop performance based affiliate marketing programs that reward our affiliates for successfully completing sales and travel transactions with travelers.
On December 1, 2022, we appointed Kymber Lowe as our Chief Marketing Officer. With two decades of senior executive experience, Ms. Lowe has led growing marketing, global brand, and content initiatives, partnerships, lifecycle marketing, and operations. She has driven measurable brand awareness programs, partner leads and enablement, new customer growth, and customer engagement. Prior to joining the Company, Ms. Lowe held various leadership roles at Microsoft from October 2020 to November 2022, at Amazon from January 2016 to August 2020, as well as at Lifelock and Visa. As our CMO, Ms. Lowe will help develop go-to-market programs for our existing and emerging markets. She is tasked with optimizing our go-to-market strategy, enhancing our leading next-gen travel marketing team, and further developing our brand positioning for the rapidly emerging gig economy in travel. Additionally, Ms. Lowe will collaborate with suppliers on customer marketing and sales programs.
Research and Development
We haveMondee has a research and development culture that rapidly and consistently delivers high-quality enhancements to the functionality, usability, and performance of our technology solutions. As of December 31, 2022, we have2023, the Company has assembled a team of more than 125130 highly skilled engineers, AI experts, designers, product managers, and data scientists whose expertise spans a broad range of technical areas. We embrace a “DevOps” culture and have structured our technology division as cross-functional, agile delivery teams, which integrate product management, engineering, data science, design, and system operations. We utilize a micro-services architecture that allows our teams to release updates rapidly and independently. We focus on creating rich customer experiences, while also architecting for massive scale. We believe our Company’sthe company’s mobile and web-based offerings are responsive mobile-enabled, and operating system-agnostic.
Regulatory Compliance
OurMondee’s overall business approach and strategy includes rigorous attention to regulatory compliance, as our operations are subject to regulations in the following principal areas, across a wide variety of jurisdictions.
Travel Licenses and Regulation
We maintain travel licenses or registrations in the jurisdictions in which they are required for us to conduct business. We are required to renew our licenses, typically on an annual basis, and to do so, must satisfy the licensee renewal requirements of each jurisdiction. Failure to satisfy any of the requirements to which our licensed entities are subject could result in a variety of regulatory actions ranging from fines, directives requiring remedial action, suspension of a license or, ultimately, revocation of a license.
In the United States, our businesses are subject to regulation by the Department of Transportation under the U.S. Transportation Code and state agencies under state travel laws and, in Ontario, the Travel Industry Council of Ontario, and we must comply with various rules and regulations governing the holding out, offering, sale and arrangement of travel products and services as a travel agency and, in the case of the Department of Transportation, air transportation as a ticket agent. Failure to comply with these rules and regulations could also result in a variety of regulatory actions, including investigations, fines, or directives requiring remedial action.
Our businesses also are subject to licensing requirements imposed by airline-established organizations, including agent accreditation requirements by the Airline Reporting Corporation (“ARC”ARC”) in the United States and, in other countries, the International Air Transport Association (“IATA”IATA”). Pursuant to such accreditations, our businesses are authorized to sell and issue tickets on behalf of various airlines, subject to agent rules set by the ARC and the IATA. If we fail to comply with such rules, it could result in the suspension or revocation of our authority to sell and issue tickets on behalf of one or more airlines.
As we continue to expand the reach of our technology solutions into other regions, we are increasingly subject to laws and regulations applicable to travel advisors or tour operators in those regions, including, in some countries, pricing display requirements, licensing and registration requirements, mandatory bonding and travel indemnity fund contributions, industry specific value-added tax regimes and laws regulating the provision of travel packages.
Privacy and Data Protection Regulation
In processing travel transactions and information about customers,travelers booking travel reservations through our platform, we receive and store a large volume of personal information (“PI”PI”), which is information from which an individual can be directly or indirectly identified and including household data in some jurisdictions. The collection, storage, processing, transfer, use, disclosure and protection of PI are increasingly subject to legislation and regulations in numerous jurisdictions around the world, such as the European Union’s General Data Protection Regulation (“GDPR”GDPR”) and variations and implementations of that regulation in the member states of the European Union, as well as privacy and data protection laws and regulations in various U.S. states and other jurisdictions, such as the California Consumer Privacy Act (“CCPA”CCPA”) (as amended by the California Privacy Rights Act (“CPRA”CPRA”)), the Virginia Consumer Data Protection Act, the Canadian PI Protection and Electronic Documents Act (“PIPEDA”PIPEDA”), and the UK General Data Protection Regulation and the UK Data Protection Act. Laws also exist already and are further developing in other parts of the world including Asia, India and South and Central America.
We incorporate a variety of technical and organizational security measures and other procedures and protocols to protect data within our technology solutions, including PI pertaining to guests and employees, and we are engaged in an ongoing process of evaluating and considering additional steps to maintain compliance with the CCPA, GDPR, PIPEDA, the UK General Data Protection Regulation, and the UK Data Protection Act.
Employment
We are also subject to laws governing our relationship with employees, including laws governing wages and hours, benefits, immigration and workplace safety and health.
Other Regulation
Our business is subject to various other laws and regulations, involving matters such as income tax and other taxes, consumer protection, online messaging, advertising and marketing, the U.S. Foreign Corrupt Practices Act and other laws governing bribery and other corrupt business activities, and regulations aimed at preventing money laundering or prohibiting business activities with specified countries or persons. As we expand into additional markets, we will be subject to additional laws and regulations.
Effect of Compliance
We believe that our operations are substantially in compliance with all applicable laws and regulations, however laws and government regulations are subject to change and interpretation.
Our costs of complying with various regulations, including federal, state, and local environmental laws, have not been material. Furthermore, compliance with these laws, rules, and regulations have not had, and are not expected to have, a material effect on our capital expenditures, results of operations, and competitive position as compared to prior periods.
The regulatory environment in each market is often complex, evolving and can be subject to significant change. Some relevant laws and regulations are inconsistent, ambiguous, and could be interpreted by regulators and courts in ways that could adversely affect our business, results of operations, and financial condition. Moreover, certain laws and regulations have not historically been applied to an innovative hospitality provider such our Company, which often makes their application to our business uncertain. For additional information regarding the laws and regulations that affect our business, see the section titled “Risk Factors” in this Annual Report on Form 10-K.
Employee and Human Capital Resources
We haveMondee has adopted a high-performance culture. By staying true to these values, we have created a business where talented people can do great work, be rewarded competitively and drive value for all stakeholders. These values guide our Companythe company in individual everyday tasks to high-level strategic planning and foster a culture of dialogue, collaboration, recognition, achievement and sense of family that contributes to our long-term success. As of December 31, 2022,2023, we had 9321,226 total employees, nearly all of whom are full-time.
Diversity, Equity and 927 full-time employees.Inclusion. DE&I is essential in our workforce. We are committed to diversity through hiring practices and employee training.
Learning and Development. We engage and empower our team with ongoing career, learning, and development opportunities, fostering a growth mindset and culture where all voices are heard and team members can build a strong bench of leaders for tomorrow’s business challenges. Continued growth and success will depend on the performance of our current and future employees, including our management team. Recruitment and retention of these individuals is vital to growing the business and meeting the objectives of our business plans. We espouse the principle that all team members can bring their whole selves to work and thrive.
Importantly, our
Culture. Our values and the culture they inspire extend to our relationships with each of our customer and corporate partners. We foster a long-term, personal rapport with each, which not only promotes high customer satisfaction, but also fulfills the mission to change the way travelers experience the world. After more than 10 years, we believe our culture is real, valued, deeply-ingrained, and sustained in part by robust and scalable training that helps create consistently positive customer interactions and experiences.
About Us
Mondee Holdings, Inc. (f/k/Environmental, Social, and Governance. We are planning to devise, implement, and scale a ITHAX Acquisition Corp.) was formed as a Cayman Islands exempted company on October 2, 2020. On July 18, 2022, we completed the Business Combination, which resulted in the acquisition of Mondee, and the redomiciliation of our Companystrategy to the State of Delaware. Further information on the Business Combination is incorporated herein by reference. On July 18, 2022, we began trading under the ticker symbol “MOND” on The Nasdaq Global Market.
Available Information
Our website address is www.mondee.com. We make available on our website, free of charge, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K, proxy statements, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website that contains reports, proxy and information statements and other
information regarding our filings at www.sec.gov. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. You should consider carefully all of the following risks and uncertainties described below, together with the other information contained in this Annual Report on Form 10-K, including our financial statements and related notes, before making a decision to invest in our securities. The risks described below are not the only ones facing us. If any of the following risks occur, or if additional risks and uncertainties not presently known to us or that we currently believe to be immaterial occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See Special Note Regarding Forward-Looking Statements in this Annual Report on Form 10-K.
Risks Related to Our Financial Condition and Status as an Early Stage Company
We have experienced substantial growth over limited periods of time, which makes it difficult to forecast our future results of operations.
Since 2015, we have experienced substantial growth in net revenue as a result of organic activities as well as through a series of acquisitions. During the period from 2015 to 2019, net revenues derived from business activity at the beginning of the period generated a CAGR of approximately 40%, and when including the contribution from businesses acquired during the period, a CAGR of approximately 60%. Subsequently, in 2022, our growth rate was seventy-one percent (71%) year-over-year organically, which illustrates our recovery from the impacts of the COVID-19 pandemic. In light of this substantial growth within limited periods, our historical results should not be considered indicative of our future performance. Furthermore, our ability to accurately forecast results of operations in the future is limited and subject to a number of uncertainties, including our ability to plan for and model future growth and our ability to develop new products and services. In future periods, our growth could slow or decline for a number of reasons, including but not limited to, slowing demand, increased competition, changes to technology, inability to scale up our technology, a decrease in the growth of the market, or our failure, for any reason, to continue to take advantage of growth opportunities.
We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If our assumptions regarding these risks and uncertainties and our future growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
If we are unable to manage our growth or execute our growth strategies effectively, our business and prospects may be materially and adversely affected.
We may be unable to scale our business quickly enough to meet customer and market demand, which could result in lower profitability or cause us to fail to execute on our business strategies. To grow our business, we will need to continue to evolve and scale our business and operations to meet customer and market demand. Evolving and scaling our business and operations places increased demands on our management as well as our financial and operational resources to:
•attract new customers and grow our customer base;
•maintain and increase the rates at which existing customers use our platform, sell additional products and services to travelers that book travel reservations on our existing customers,technology solutions, and reduce customertraveler churn;
•invest in our platform and product offerings;
•effectively manage organizational change;
•accelerate or refocus research and development activities;
•increase sales and marketing efforts;
•broaden customer-supporttraveler-support and services capabilities;
•maintain or increase operational efficiencies;
•implement appropriate operational and financial systems; and
•maintain effective financial disclosure, controls, and procedures.
In addition, we may experience significant fluctuations in our operating results and rates of growth. Even if the market in which we compete achieves forecasted growth, our business could fail to grow at similar rates, if at all. Our success will depend upon our ability to successfully expand our solutions and services, retain customers, bring in new customers and retain critical talent.
If we cannot evolve and scale our business and operations effectively, we may be unable to execute our business strategies in a cost-effective manner and our business, financial condition, profitability and results of operations could be adversely affected.
Our business depends on our marketing efficiency and the general effectiveness of our marketing efforts.
Our success relies on efficiently marketing our Company to corporate entities, travel agents, travel management companies, other travel distribution intermediaries and end consumers. Our business to businessbusiness-to-business marketing aims to drive activity and attract businesses to our technology solutions and websites, and our business to business-to-consumer (“B2C”)B2B2C marketing aims to drive engagement with these businesses and travelers and end users ofwho use our products.
We may be successful in attracting new customersconsumers or members in the form of corporations, travel agents, travel management companies or entities. However, there is a risk that these customers’their end consumersusers will not engage with or use our products at a rate at which we will see a significant revenue increase, from such customers, because we depend on their relationships with our corporate customers,partners, travel agents and travel management companies to help drive this engagement.
We invest considerable financial and human resources in our technology solutions to retain and expand our customerconsumer base in existing and emerging markets. We expect that the cost of maintaining and enhancing our technology solutions will continue to increase, and given the economic uncertainty and unpredictability around the ongoing travel industry recovery, decisions we make on investing in technology solutions could be less effective and costlier than expected.
We rely on the value of our technology solutions, and the costs of maintaining and enhancing our technology solutions are increasing. In recent years, certain online travel companies and metasearch websites expanded their offline and digital advertising campaigns globally, increasing competition, for share of voice, and we expect this activity to continue in the future. We are also pursuing, and expect to continue to pursue, long-term growth opportunities, particularly in emerging markets, which have had and may continue to have a negative impact on our overall marketing efficiency.
Our efforts to preserve and enhance customerconsumer awareness of our technology solutions may not be successful, and even if we are successful in our branding efforts, such efforts may not be cost-effective or as efficient as they have been historically, resulting in less direct traffic and increased customer acquisition costs. Moreover, branding efforts with respect to some brands within the our portfolio have in the past, and may in the future, result in marketing inefficiencies and may negatively impact growth rates of other brands within our portfolio. In addition, our decisions over allocation of resources and choosing to invest in branding efforts for certain brands in our portfolio at the expense of not investing in, or reducing our investments in, other brands in our portfolio could have an overall negative financial impact. If we are unable to maintain or enhance customer awareness of our technology solutions and generate demand in a cost-effective manner, it could have a material adverse effect on our business and financial performance.
Risks Related to Our Business and Industry
We have incurred negative cash flows from operating activities and significant losses from operations in the past and if we are unable to either generate positive cash flows from operating activities or raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition could be adversely affected.
We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $280.3$341.1 million as of the year ended December 31, 2022. We believe that current cash and cash equivalents, as well as the $15.0 million unused line of credit, will be sufficient to fund our operations for at least the next 12 months.2023. Our future capital requirements however, will depend on many factors, including the on-going effects of the COVID-19 pandemic,scaling our recent acquisitions optimally, consolidation of the travel industry, changes in the general market conditions for travel services, and future business combinations. In the future, we may enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. From time to time, we may seek to raise additional funds through equity and debt. If we are unable to either generate positive cash flows from operating activities or raise additional capital when desired and on terms acceptable to us, our business, results of operations, and financial condition could be adversely affected.
Adverse changes in general market conditions for travel services, including the effects of macroeconomic conditions, terrorist attacks, natural disasters, health concerns, civil or political unrest or other events outside our control could materially and adversely affect our business, liquidity, financial condition and operating results.
Our revenue is derived from the global travel industry and would be significantly impacted by declines in, or disruptions to, travel activity, particularly air travel. For example, the COVID-19 pandemic caused significant disruption in the travel industry and resulted in a material adverse impact on our business. Global factors over which we have no control but which could impact our clients’ willingness to travel and, depending on the scope and duration, cause a significant decline in travel volumes include, among other things:
•widespread health concerns, epidemics or pandemics, such as the COVID-19 pandemic, the Zika virus, H1N1 influenza, the Ebola virus, avian flu, SARS or any other serious contagious diseases;
•global security concerns caused by terrorist attacks, the threat of terrorist attacks, or the precautions taken in anticipation of such attacks, including elevated threat warnings or selective cancellation or redirection of travel;
•increasing costs, including due to inflation, and pressures due to declining economic conditions, including a potential recession;
•cyber-terrorism, political unrest, the outbreak of hostilities or escalation or worsening of existing hostilities or war;
•natural disasters or severe weather conditions, such as hurricanes, flooding and earthquakes;
•climate change-related impact to travel destinations, such as extreme weather, natural disasters, and disruptions, and actions taken by governments, businesses and supplier partners to combat climate change;
•the occurrence of travel-related accidents or the grounding of aircraft due to safety concerns;
•adverse changes in visa and immigration policies or the imposition of travel restrictions or more restrictive security procedures; and
•any decrease in demand for consumer or business travel could materially and adversely affect our business, financial condition and results of operations.
Our business and financial performance is affected by macroeconomic conditions. Travel expenditures are sensitive to personal and business-related discretionary spending levels and tend to decline or grow more slowly during economic downturns, including during periods of slow, slowing, or negative economic growth, higher unemployment or inflation rates, weakening currencies and concerns over government responses such as higher taxes or tariffs, increased interest rates and reduced government spending. Concerns over government responses to declining economic conditions, such as higher taxes and reduced government spending could impair consumer and business spending and adversely affect travel demand. In addition, our relative exposure to certain sectors versus the broader economy may mitigate or exacerbate the effect of macroeconomic conditions. The global travel industry, which historically has grown at a rate in excess of global GDP growth during economic expansions, has experienced cyclical downturns in the past in times of economic decline or uncertainty. Future adverse economic developments in areas such as employment levels, business conditions, interest rates, tax rates, environmental impacts, fuel and energy costs and other matters could reduce discretionary spending and cause the travel industry to contract. The uncertainty of macroeconomic factors and their impact on client behavior, which may differ across regions, makes it more difficult to forecast industry and client trends and the timing and degree of their impact on our markets and business, which in turn could adversely affect our ability to effectively manage our business and could materially and adversely affect our business, financial condition and results of operations.
Our international business exposes us to geopolitical and economic risks associated with doing business in foreign countries. We have operations in the U.S., Brazil, Canada, Mexico, India, Thailand, and several other countries worldwide, and we indirectly provide services to travelers worldwide through our partners and affiliates. Our international operations could pose complex management, compliance, foreign currency, legal, tax, labor, data privacy and economic risks that we may not adequately address, including changes in the priorities and budgets of international travelers and geopolitical uncertainties, which may be driven by changes in threat environments and potentially volatile worldwide economic conditions, various regional and local economic and political factors, risks and uncertainties, as well as U.S. foreign policy. We are also subject to a number of other risks with respect to our international operations, including:
•the absence in some jurisdictions of effective laws to protect our intellectual property rights;
•multiple and possibly overlapping and conflicting tax laws;
•duties, taxes or government royalties, including the imposition or increase of withholding and other taxes on the activities of, and remittances and other payments by, our non-U.S. subsidiaries;
•restrictions on movement of cash;
•the burden of complying with a variety of national and local laws;
•political instability;
•currency fluctuations;
•longer payment cycles;
•price controls or restrictions on exchange of foreign currencies;
•trade barriers; and
•potential travel restrictions.
The existence of any one of these risks could harm our international business and, consequently, our operating results. Additionally, operating in international markets requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required to operate in other countries will produce desired levels of revenue or net income.
Certain results and trends related to our business and the travel industry more generally are based on preliminary data and assumptions, and as a result, are subject to change and may differ materially from what we expect.
We present certain results and trends in this Annual Report on Form 10-K related to our business and the travel industry more generally, which are based on an analysis of then available or preliminary data, and the results, related findings or conclusions are subject to change. No assurances can be given that these results and trends, or that our expectations surrounding our business or the travel industry, will be accurate. These risks are heightened by the uncertainty of the final recovery from the COVID-19 pandemic, Russia’s invasion of Ukraine, macroeconomic conditions and the impact of these and other similar events on the travel industry and our business. Further, unanticipated events and circumstances may occur and change the outlook surrounding our business and the travel industry in material ways. Accordingly, certain of our expectations related to our business and the travel industry more generally may not occur as expected, if at all, and actual results or trends presented may differ materially from what we expect.
Our liquidity and ongoing access to capital could be materially and negatively affected by increased volatility in the financial and securities markets.
Our continued access to sources of liquidity depends on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing and our operating performance. There has been increased volatility in the financial and securities markets, as well as increased inflationinterest rates and interest rates,inflation, which have generally made access to capital less certain and has increased the cost of obtaining new capital. We utilized a portion of the proceeds of the Business Combination to repay $40 million of our current outstanding indebtedness. Additionally, we raised $85$96.3 million in proceeds from the sale of our Series A Preferred Stock to help fund growth and operations. However, we may need to obtain equity, equity-linked, or debt financing in the future to fund our operations, and there is no guarantee that such debt financing will be available in the future, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding. In addition, the terms of our existing and any future debt agreements could include restrictive covenants, which could restrict our business operations.
Major bank failure or sustained financial market illiquidity, could adversely affect our business, financial condition and results of operations.
We face certain risks in the event of a sustained deterioration of domestic or international financial market liquidity. In particular:
•We may be unable to access funds in our deposit accounts on a timely basis. Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs.
•In the event of a major bank failure, we could face major risks to the recovery of our bank deposits. A substantial portion of our cash and cash equivalents are either held at banks that are not subject to insurance protection against loss or exceed the deposit insurance limit.
•We may be unable to borrow from financial institutions or institutional investors on favorable terms, or at all, which could adversely impact our ability to pursue our growth strategy and fund key strategic initiatives.
While Mondee is not currently aware of any liquidity issues directly impacting the financial institutions where Mondee holds cash deposits or securities, if financial liquidity deteriorates, there can be no assurance we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.
The COVID-19 pandemic and the measures taken to contain it have and will continue to have an adverse impact on our financial condition and results of operations, and if measures taken by management to ameliorate the impact of these COVID-19 related uncertainties are unsuccessful or insufficient, we may be unable to continue to fund our operations, develop our platform, or discharge our liabilities in the normal course of business.
Our negative cash flows from operating activities and significant losses from operations during the COVID-19 pandemic, as well as our growth plans, create the need for additional capital. There are uncertainties surrounding our ability to raise such capital, and our financial condition could be adversely affected. The continued COVID-19 pandemic and measures taken to contain it, including, but not limited to, voluntary and mandatory quarantines, stay-at-home orders, travel restrictions and advisories, limitations on gatherings of people and reduced operations and extended closures of businesses have and may continue to have an adverse impact on travel transaction volumes resulting in a material decline in net revenues, net income, cash flow from operations and Adjusted EBITDA, as compared to pre-COVID-19 pandemic results. To address the adverse impact of the COVID-19 pandemic, our management has taken specific actions including, renegotiating certain terms and conditions of our loans with our lenders to defer interest payments and thereby manage our cash; raising additional capital through external borrowings; restructuring accounts payable to accommodate a longer time horizon for payment; as well as investing in and developing our platform to increase operating efficiencies and to reduce labor expenses.
While there is current evidence of the travel market transactions recovering, management will continue to monitor impacts on travel transaction volumes of the COVID-19 virus and future variants on a real-time basis and will update and immediately enact initiatives to scale our business infrastructure and operating expenses up or down as appropriate to ensure optimal earnings and cash flows in future periods. In addition, management will continue to coordinate with suppliers, operating partners, and our financial partners to attempt to arrange adequate capital to withstand potential COVID-19 induced volume variability. If we are unable to raise additional capital, increase operating efficiencies or reduce expenses we may be unable to continue to fund our operations, develop our platform, or discharge our liabilities in the normal course of business.
We have pledged substantially all of the assets of our Company under our existing debt agreements. If the lenders accelerate the repayment of borrowings, we may not have sufficient assets to repay them and our financial condition and results of operations could be adversely affected.
On December 23, 2019, we entered into a financing agreement (as amended from time to time, the “TCW Agreement”) with TCW Asset Management Company LLC (“TCW”TCW”), and the lenders party to the agreement from time to time (“Lenders”Lenders”), consisting of a $150 million multi-draw term loan in aggregate, (the “Term Loan”), of which the first draw was for a principal amount of $95 million.million (the “Term Loan”). On February 6, 2020,, we entered into a first amendment to the TCW AgreementTerm Loan and an incremental joinder with TCW for an aggregate principal amount of $55 million.$55 million. On January 11, 2023, we entered into a ninth amendment to the TCW AgreementTerm Loan for an aggregate principal amount of $15 million and to provide that we may request a term loanadditional borrowings of an additional $20 million, which request may be accepted or rejected by the Lenders. On March 11, 2024, we entered into a thirteenth amendment to the Term Loan that provided for the deferral of certain future principal and interest payments and the extension of our maturity date to March 31, 2025. These facilities are guaranteed by our Company and are secured by substantially all of our assets. To date, we have entered into a number of amendments to the TCW Agreement,Term Loan, including amendments that changed the repayment terms. However, if for whatever reason we are unable to make scheduled payments when due or to repay such indebtedness by the schedule maturity date, we would seek the further consent of our Lenders to modify such terms. Although our
Lenders have previously agreed to 1013 prior modifications of the TCW AgreementTerm Loan and the waiver of past payment defaults, there is no assurance that the Lenders will agree to any such modification in the future and could then declare an event of default. Upon the occurrence of an event of default under the TCW Agreement,Term Loan, the Lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable. We have pledged substantially all of the assets of our Company under the TCW Agreement.Term Loan. If the Lenders accelerate the repayment of borrowings, we may have insufficient assets to repay the Lenders pursuant to the terms of the TCW AgreementTerm Loan and we could experience a material adverse effect on our financial condition and results of operations.
Consolidation in the travel industry may result in lost bookings and reduced revenue.
Consolidation among travel providers, including airline mergers and alliances, may increase competition from distribution channels related to those travel providers and place more negotiating leverage in the hands of those travel providers to attempt to lower booking fees further and to lower commissions. Such increased competition could have a material adverse impact on our financial condition and results of operations.
Examples include the merger of United and Continental Airlines, the merger of American Airlines and US Airways, the acquisition of AirTran Airways by Southwest Airlines, the merger of British Airways and Iberia and subsequent acquisitions of Aer Lingus and Vueling and the acquisition of Virgin America by Alaska Air Group. In addition, cooperation has increased within the oneworld,one World, SkyTeam and Star Alliance. Changes in ownership of travel providers may also cause them to direct less business towards us. If we are unable to compete effectively, our suppliers could limit our access to their content, including exclusive content, and favorable fares and rates and other incentives, which could adversely affect our results of operations. Mergers and acquisitions of airlines may also result in a reduction in total flights and overall passenger capacity and higher fares, which may adversely affect the ability of our business to generate revenue.
Consolidation among travel agencies and competition for clients may also adversely affect our results of operations, since we compete to attract and retain clients. In addition, decisions by airlines to surcharge the channel represented by travel management companies and travel agencies, for example, by surcharging fares booked through or passing on charges to travel management companies and travel agencies, or introduction of such surcharges to fares booked through GDS service providers, through which a material share of our content is sourced, could have an adverse impact on our business, particularly in regions in which GDS service providers are a significant source of bookings for an airline choosing to impose such surcharges.
To compete effectively, we may need to increase incentives, pre-pay incentives, discount or waive product or service fees or increase spending on marketing or product development. Further, as consolidation among travel providers increases, the potential adverse effect of a decision by any particular significant travel provider (such as an airline) to withdraw from or reduce its participation in our services also increases. The COVID-19 pandemic has increased the risk that the third parties we work with may voluntarily or involuntarily declare bankruptcy or otherwise cease or limit their operations, which could harm our business and results of operations. In particular, the potential harm to our business and results of operations is greater if there are bankruptcies or closures of larger partners, such as airlines.
Complaints from travelers or negative publicity about our services can diminish client confidence and adversely affect our business.
ClientTraveler complaints or negative word-of-mouth or publicity about our services or operations could severely diminish client confidence in and use of our services. To maintain good client relations, we must ensure that our travel advisors and partners and affiliates provide prompt, accurate and differentiated client service. Effective client service requires significant personnel expense and investment in developing programs and technology infrastructure to help our travel advisors, partners, and affiliates carry out their functions. These expenses, if not managed properly, could significantly impact our profitability. Failure to properly manage our travel advisors, partners, and affiliates could compromise our ability to handle clienttraveler complaints effectively. If we do not handle clienttraveler complaints effectively, our reputation and brand may suffer, and we may lose our customers’traveler confidence, which could reduce revenues and profitability.
Our indebtedness and outstanding Series A Preferred Stock could adversely affect our business and growth prospects.
We have existing indebtedness under the TCW Agreement,Term Loan, and outstanding Series A Preferred Stock and we may be able to incur additional debt or issue additional Preferred Stock from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. Although the TCW AgreementTerm Loan contains restrictions on incurring additional indebtedness and liens, these restrictions are subject to several significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that we could incur in compliance with these restrictions could be substantial. If we do incur additional indebtedness, the risks related to our high level of debt could increase.
Specifically, our high level of debt and the terms of our outstanding Series A Preferred Stock could have important consequences, including the following:
•it may be difficult for us to satisfy our obligations, including debt service requirements under the TCW AgreementTerm Loan or other indebtedness agreements or those under the terms of our outstanding Series A Preferred Stock or the terms of our Preferred Stock that we may issue in the future;
•our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or other general corporate purposes may be impaired;
•we would be required to dedicate a substantial portion of cash flow from operations to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities, and other purposes;
•we could be more vulnerable to economic or business downturns, adverse industry conditions, and other factors affecting our operations, and our flexibility to plan for, or react to, changes in our business or industry could be more limited;
•our ability to capitalize on business opportunities and to react to market pressures, as compared to our competitors, may be compromised due to our high level of debt, the terms of our outstanding Series A Preferred Stock, the restrictive covenants in the TCW Agreement,Term Loan, future indebtedness agreements, or the terms of our Preferred Stock that we may issue in the future;
•our ability to receive distributions from our subsidiaries and to pay taxes, expenses and dividends may be adversely affected by the terms of our debt or our Preferred Stock;
•increases in interest rates would increase the cost of servicing our debt; and
•our ability to borrow additional funds, issue Preferred Stock in the future, or to refinance debt may be limited.
Moreover, in the event of a default under our TCW Agreement,the Term Loan, the Lenders could elect to declare such indebtedness be due and payable or elect to exercise other rights, any of which could have a material adverse effect on our liquidity and our business, financial condition and results of operations.
We rely on internet search engines and application marketplaces to drive traffic to our platform, certain providers of which offer products and services that compete directly with ours. If links to our websites and apps are not displayed prominently, traffic to our platform could decline and our business would be negatively affected.
The number of consumers we attract to our platform is due in large part to how and where information from, and links to, our websites are displayed on search engine results pages, or (“SERPs”). The display, including rankings, of search results can be affected by a number of factors, many of which are not in our control. Search engines frequently change the logic that determines the placement and display of the results of a user’s search, such that the purchased or algorithmic placement of links to our websites can be negatively affected. A search engine could alter its search algorithms or results causing our websites to place lower in search query results. For example, Google, a significant source of traffic to our websites, frequently promotes its own competing products in its search results, which has negatively impacted placement of references to our Company and our websites on the SERP. If a major search engine changes its algorithms in a manner that negatively affects the search engine ranking of our websites or those of our travel partners, or if competitive dynamics impact the cost or effectiveness of search engine optimization (“SEO”) or search engine marketing (“SEM”) in a negative manner, our business and financial performance would be adversely affected. Furthermore, our failure to successfully manage our SEO and SEM strategies or other traffic acquisition strategies could result in a substantial decrease in traffic to our websites, as well as increased costs to the extent we replace free traffic with paid traffic.
We also rely on app marketplaces or app stores, such as Apple’s App Store and Google’s Play, to drive downloads of our apps. In the future, Apple, Google, or other marketplace operators may make changes that make access to our products more difficult or may limit our access to information that would restrict our ability to provide the best user experience. For example, Google has entered various aspects of the online travel market, including by establishing a flight metasearch product and hotel metasearch product as well as reservation functionality. Our apps may receive unfavorable treatment compared to the promotion and placement of competing apps, such as the order in which they appear within marketplaces. In addition, Apple has announced new features that limit which parties have access to consumer data, including location information. Similarly, if problems arise in our relationships with providers of app marketplaces, traffic to our website and our user growth could be harmed.
The widespread adoption of teleconference and virtual meeting technologies could reduce the number of in-person business meetings and demand for travel and our services, which could adversely affect our business, financial condition and results of operations.
Our business and growth strategies rely in part upon our clients’ continued need for in-person meetings and conferences. Due to the COVID-19 pandemic, teleconferenceTeleconference and virtual meeting technologies have become significantly more popular and many businesses have substituted these technologies for part or all of their in-person meetings and conferences. Even if and when the spread of COVID-19 is contained and travel and other restrictions are lifted, weWe cannot predict whether businesses will continue to choose to substitute these technologies for part or all of their in-person meetings and conferences and whether employer and employee attitudes toward business travel will change in a lasting way. Should businesses choose to continue to substitute these technologies for part or all of their in-person meetings and conferences and the preferences of our clients shift away from in-person meetings and conferences, it would adversely affect our business, financial condition and results of operations.
We operate in an increasingly competitive global environment and could fail to gain, or could lose, market share if we are unable to compete effectively with our current or future competitors.
The travel industry and the business travel services industry are highly competitive, and if we cannot compete effectively against the number and type of sellers of travel-related services, we may lose sales to our competitors, which may adversely affect our financial results and performance. We currently compete, and will continue to compete, with a variety of travel and travel-related companies, including other corporate travel management service providers, consumer travel agencies and emerging and established online travel agencies. We also compete with travel suppliers, such as airlines and hotels, where they market their products and services directly to travelers through platforms directly used by consumerstravelers to book and fulfill travel, including by offering more favorable rates, exclusive products/services and loyalty points to travelers who purchase directly from such travel suppliers through B2C channels. B2C may include business travelers who purchase travel outside of a company-sponsored and managed channel, or whose companies do not have such a channel. We compete, to a lesser extent, with credit card loyalty programs, online travel search and price comparison services, facilitators of alternative accommodations such as short-term home or condominium rentals and social media and e-commerce websites.
Some of our competitors may have access to more financial resources, greater name recognition and well-established client bases in their target client segments, differentiated business models, technology, and other capabilities or a differentiated geographic coverage, which may make it difficult for us to retain or attract new clients.
We cannot assure you that we will be able to compete successfully against any current, emerging, and future competitors or provide sufficiently differentiated products and services to our client and traveler base. Increasing competition from current and emerging competitors, consolidation of our competitors, the introduction of new technologies and the continued expansion of existing technologies may force us to make changes to our business models, which could materially and adversely affect our business, prospects, financial condition, and results of operations. If we cannot compete effectively against the number and type of sellers of travel-related services, we may lose sales to our competitors, which may adversely affect our financial results and performance.
Our failure to quickly identify and adapt to changing industry conditions, trends or technological developments may have a material and adverse effect on us.
Certain results and trends related to our business and the travel industry more generally are based on preliminary data and assumptions, and as a result, are subject to change and may differ materially from what we expect. We present certain results and trends in this Annual Report on Form 10-K related to our business and the travel industry more generally, which are based on an analysis of then-available or preliminary data, and our results, related findings or conclusions are subject to change. No assurance can be given that these results and trends, or that our expectations surrounding our business or the travel industry, will be accurate. These risks are heightened by the uncertainty of the COVID-19 pandemic and its impact on the travel industry and our business. Further, unanticipated events and circumstances may occur and change the outlook surrounding our business and the travel industry in material ways. Accordingly, certain of our expectations related to our business and the travel industry more generally may not occur as expected, if at all, and actual results or trends presented may differ materially from what we expect.
We have incurred, and will continue to incur, increased costs as a result of operating as a public company and our management will continue to devote substantial time to compliance initiatives and corporate governance practices. In addition, key members of our management team have limited experience managing a public company.
As a public company, we face increased legal, accounting, administrative and other costs and expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board (“PCAOB”PCAOB”) and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements has increased our costs and made certain activities more time-consuming. A number of these requirements require us to carry out activities we have not done previously. For example, we have created new board committees and adopted new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements have been and will continue to be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, see the Risk Factor below titled “We have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements and have other adverse consequences”), we could incur additional costs to rectify those issues, and the existence of those issues could harm our reputation or investor perceptions of us. In addition, it may also be more expensive to obtain directors’ and officers’ liability insurance due to these risks.
Risks associated with our status as a public company may also make it more difficult to attract and retain qualified persons to serve on our Board or as our executive officers. The additional reporting and other obligations imposed by these rules and regulations has increased and may continue to increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs. In addition, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management, and impact the manner in which we operate our business in ways that we cannot currently anticipate. As a result of disclosure of information in this Annual Report on Form 10-K and in filings required of a public company, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors.
Furthermore, our executive officers have limited experience in the management of a publicly-traded company. Our management team may not successfully or effectively manage our transition to operating as a public company, which is subject to significant regulatory oversight and reporting obligations under federal securities laws. Our management team’s limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage, because it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of our Company.
In addition, we may have inadequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the U.S. The development and
implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
Our failure to maintain effective internal controls over financial reporting could harm us.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Under standards established by the PCAOB, a deficiency in internal controls over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis. The PCAOB defines a significant deficiency as a deficiency, or a combination of deficiencies, in internal controls over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of a registrant’s financial reporting. We cannot assure you thatAs detailed under Item 9A. Controls and Procedures, we concluded internal control over financial reporting was not effective as of December 31, 2023, due to material weaknesses identified. The Company did not maintain controls to execute the criteria established in the COSO Framework for the control environment, risk assessment, control activities, information and communication, and monitoring components, which resulted in control deficiencies will not be discoveredthat constitute material weaknesses, either individually or in the future.aggregate, within each component of the COSO Framework. Our failure to maintain effective disclosure controls and internal controls over financial reporting could have an adverse effect on our business and could cause investors to lose confidence in our financial statements, which could cause a decline in the price of the our Common Stock, and we may be unable to maintain compliance with the Nasdaq listing standards. If we fail to maintain an effective system of internal controls, the accuracy and timing of our financial reporting may be adversely affected, and our liquidity and access to capital markets may be adversely affected, and we may be subject to regulatory investigations and penalties.
Risks Related to Our Dependence on Third Parties
Our business depends on our relationships with travel agencies, travel management companies, and other travel businesses and third parties, and if we fail to maintain or establish new relationships with these third parties, our business, financial condition and results of operations could be materially and adversely affected.
If we are unable to maintain existing, and establish new arrangements with travel suppliers, or if our travel suppliers and partners reduce or eliminate the commission and other compensation they pay us, our business and results of operations would be negatively impacted. Our business is dependent on our ability to maintain our relationships and arrangements with existing travel suppliers, such as airlines, hotels, car rentals,rental suppliers, hotel consolidators, destination services companies, and GDS service providers, as well as our ability to establish and maintain relationships with new travel suppliers. Adverse changes in key arrangements with our travel suppliers, including an inability of any key travel supplier to fulfill its payment obligation to us in a timely manner, increasing industry consolidation, changes in travel suppliers’ booking practices regarding groups, or our inability to enter into or renew arrangements with these parties on favorable terms, if at all, could reduce the amount, quality, pricing, and breadth of the travel services and products that we are able to offer, which could materially and adversely affect our business, financial condition, and results of operations. In addition, while we are not aware of any relevant regulatory developments, if the IATA or other regulatory bodies with jurisdiction over us or our business partners, including airlines and other travel suppliers, enact regulations or initiate oversight on private fares, including those provided to us, such developments could materially and adversely impact our existing arrangements and our business, financial condition, and results of operations.
We generate a significant portion of our revenue from commissions and incentive payments from travel suppliers, especially airline suppliers, and GDS service providers. If, as a result of a reduction in volumes from airlines shifting volume away from GDS service providers to the IATA’s New Distribution Capacity, or any other reason, travel suppliers or GDS service providers reduce or eliminate the commissions, incentive payments or other compensation they pay to us, our revenue may decline, unless we are able to adequately mitigate such reduction by increasing the service fee we charge to our travelers or increasing our transaction volume in a sustainable manner. However, an increase in service fees may also result in a loss of potential travelers. Additionally, we have commercial commitments arising in the normal course of business of the industry in which we operate. Under the terms of such contracts, we receive cash in advance for production goals over a period of several years. In the event of under-performance or termination of the applicable contract, we may be obligated to repay amounts still to be earned.
Although we generallyWe maintain formal contractual relationships with our travel suppliers. Under the master contractual framework with our travel suppliers, we do currently,the contract duration may be terminated at convenience and pricing terms are frequently subject to modifications or amendments. Our pricing terms, especially the commission and incentive rates for specific incentive periods and specific travel
segments of the underlying travel products processed through our travel platform may continuebe modified over time by the travel suppliers and subject to maintain more informal arrangementsrenegotiation. Our Travel Transaction revenues, including mark-up fees, commissions and incentives earned could be negatively impacted if the renegotiated rates for us are less competitive. The contract durations with certain travel suppliers, such as airlines, GDS service providers, hotels and other travel product companies, which cansuch as local tour service providers, may be terminated withunexpectedly, or without notice and may create uncertainty with respectthere could be a negative impact to the agreed terms including pricing. If these arrangements are terminated unexpectedly,our financial results or operations if there is disagreement regarding the terms of the agreement with such travel supplier, our financial results or operations could be negatively impacted.
supplier. We cannot assure you that our agreements or arrangements with our travel suppliers or travel-related service providers will continue or that our travel suppliers or travel-related service providers will not reduce commissions, terminate their contracts, make their products or services unavailable to us, or default on or dispute their payment or other obligations with us, any of which could reduce our revenue and margins or may require us to initiate legal or arbitration proceedings to enforce contractual payment obligations, which may materially and adversely affect our business, financial condition and results of operations.
Our business and results of operations could be adversely affected if one or more of our major travel suppliers suffers a deterioration in its financial condition or restructures its operations or as a result of consolidation in the travel industry, loses bookings and revenue.
A substantial portion of our revenue is affected by the prices charged by our travel suppliers, including airlines, GDS service providers, hotels, destination service providers and car rental suppliers, and the volume of products offered by our travel suppliers. As a result, if one or more of our major suppliers suffers a deterioration in their financial condition or restructures their operations, it could adversely affect our business, financial condition and results of operations.
In particular, as a substantial portion of our revenue depends on our sale of airline flights, we could be adversely affected by changes in the airline industry, including consolidations or bankruptcies and liquidations, and in many cases, we have no control over such changes. Consolidation among travel suppliers, including airline mergers and alliances, may increase competition from direct distribution channels related to those travel suppliers and place more negotiating leverage in the hands of those travel suppliers to attempt to lower booking fees and to lower commissions. Changes in ownership of travel suppliers may also cause them to direct less business towards us. If we are unable to compete effectively, our suppliers could limit our access to their content, including exclusive content, and favorable fares and rates and other incentives, which could adversely affect our results of operations. Mergers and acquisitions of airlines may also result in adjustments to routes, a reduction in total flights and overall passenger capacity and changes in fares, which may adversely affect the ability of our business to generate revenue.
Travel suppliers’ use of alternative distribution models, such as direct distribution models, could adversely affect our business.
Some of our travel suppliers, including some of our largest airline clients, have sought to increase usage of direct distribution channels. For example, these travel suppliers are trying to move more client traffic to their proprietary websites. This direct distribution trend enables them to apply pricing pressure on intermediaries and negotiate travel distribution arrangements that are less favorable to intermediaries. With travel suppliers’ adoption of certain technology solutions over the last decade, air travel suppliers have increased the proportion of direct bookings relative to indirect bookings. In the future, airlines may increase their use of direct distribution, which may cause a material decrease in their use of our services. Travel suppliers may also offer travelers advantages through their websites such as special fares and bonus miles, which could make their offerings more attractive than those available from us.
In addition, with respect to ancillary products, travel suppliers may choose not to comply with the technical standards that would allow ancillary products to be immediately distributed via intermediaries, thus resulting in a delay before these products become available through us relative to availability through direct distribution. In addition, if enough travel suppliers choose not to develop ancillary products in a standardized way with respect to technical standards our investment in adapting our various systems to enable the sale of ancillary products may not be successful.
Companies with close relationships with end consumers, like Facebook,Meta (Facebook), as well as new entrants introducing new paradigms into the travel industry, such as metasearch engines, like Google, may promote alternative distribution channels by diverting client traffic away from intermediaries and travel agents, which may adversely affect our business.
Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business
Our success depends in large part on our ability to attract and retain high quality management and operating personnel, and if we are unable to attract, retain, and motivate well-qualified employees, our business could be negatively impacted.
Our ability to identify, hire and retain senior management and other qualified personnel is critical to our results of operations and future growth. Much of our future success depends on the continued service, availability and performance of our senior management
and other qualified personnel, particularly our professionals with experience in the travel industry. Any of these individuals may choose to terminate their employment with us at any time. The loss of any of these individuals could harm our business and reputation, especially if we have been unsuccessful in developing adequate succession plans. Our business is also dependent on our ability to retain, hire and motivate talented, highly-skilled personnel across all levels of our organization. We may experience higher compensation costs to retain senior management and qualified personnel that may not be offset by improved productivity or increased sales. If we are unable to continue to successfully attract and retain key personnel, our business may be harmed.
As we continue to grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to hire, integrate, train, retain and motivate personnel who are essential to our future success.
We may be unable to accurately predict our future capital needs, and we may be unable to obtain additional financing to fund our operations on the terms and in the manner previously obtained.
We may need to raise additional funds in the future. Any required additional financing may not be available on terms acceptable to us, or at all. If we raise additional funds by issuing equity securities or convertible debt, investors may experience significant dilution of their ownership interest, and the newly issued securities may have rights senior to those of the holders of the our Common Stock. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur interest expense. Higher interest rates could increase debt service requirements on our current variable rate indebtedness and Series A Preferred Stock, and on any debt we subsequently incur or Preferred Stock we issue, and could reduce funds available for operations, future business opportunities or other purposes. If we need to repay debt during periods of rising interest rates, we could be required to refinance our then-existing debt on unfavorable terms or liquidate one or more of our assets to repay such debt at times which may not permit realization of the maximum return on such assets and could result in a loss. The occurrence of either or both of such events could materially and adversely affect our profitability, cash flows and results of operations. If additional financing is not available when required or is not available on acceptable terms, we may have to scale back our operations, and we may not be able to expand our business, take advantage of business opportunities or respond to competitive pressures, which could negatively impact our revenue and the competitiveness of our services.
Our success is subject to the development of new products and services over time.
Our growth occurs organically and through mergers and acquisitions. Although we develop products in-house by adding new features and improving upon existing technology, we heavily rely on mergers and acquisitions to expand our customerend user traveler base.
We pursue growth opportunities by acquiring complementary businesses, solutions or technologies through strategic transactions, investments or partnerships. The identification of a suitable acquisition, strategic investment or strategic partnership candidate can be costly and time consuming and can distract members of our management team from day-to-day operations. If such strategic transactions require us to seek additional debt or equity financing, we may be unable to obtain such financing on terms favorable to our Company or at all, and such transactions may adversely affect our liquidity and capital structure. Moreover, any strategic transaction may not strengthen our competitive position as we anticipated, may increase risk more than we expected, and may be viewed negatively by our customers,suppliers, partners or investors.
Even if we successfully complete a strategic transaction, we may be unable to effectively integrate the acquired business, technology, systems, control environment, solutions, personnel or operations into our business. We may experience unexpected changes in how we are required to account for strategic transactions pursuant to GAAP and may not achieve the anticipated benefits of any strategic transaction. We may sustain unexpected costs, claims or liabilities that we incur during the strategic transaction or that we assume from the acquired company, or we may discover adverse conditions post acquisition for which we have limited or no recourse.
We may be unable to successfully close potential acquisitions, or successfully integrate the operations of such target businesses, if acquired, which could have a material and adverse impact on our business.
Acquisitions have been and are expected to continue to be a critical part of our growth strategy. The travel service industry is highly competitive, and we face competition for acquisition opportunities from many other entities, including financial investors, some of which are significantly larger than us, have greater resources than us, have lower costs of capital than us, are better established than we are, and have more experience in identifying and completing acquisitions than we do. This competitive market for a small number of business opportunities may make it more challenging for us to identify and successfully capitalize on acquisition opportunities that meet our investment objectives. Identifying suitable acquisition candidates can be difficult, time-consuming and costly, and we may not complete acquisitions successfully that we target in the future. Our business is subject to regulation in the U.S. and the other jurisdictions in which we operate, and any failure to comply with such regulations or any changes in such regulations could adversely affect us. If we cannot identify and purchase a sufficient quantity of profitable businesses at favorable prices, or if we are unable to finance acquisition opportunities on commercially favorable terms, our business, financial condition or results of operations could be materially adversely affected.
Acquisition activity presents certain risks to our business, operations and financial condition, and we may not realize the financial and strategic goals contemplated at the time of a transaction. Our ability to successfully implement our acquisition strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions, and, if necessary, to obtain satisfactory debt or equity financing to fund those acquisitions.
Mergers and acquisitions are inherently risky, and any mergers and acquisitions that we complete may be unsuccessful. The process of integrating an acquired company’s business into our operations and investing in new technologies is challenging and may result in expected or unexpected operating or compliance challenges, which may require significant expenditures and a significant amount of our management’s attention that would otherwise be focused on the ongoing operation of our business. The potential difficulties or risks of integrating an acquired company’s business include the following, among others, which risks can be magnified when one or more integrations are occurring simultaneously or within a small period of time:
•effects of an acquisition on our financial and strategic positions and our reputation;
•risk that we are unable to obtain the anticipated benefits of an acquisition, including synergies, economies of scale, revenues and cash flow;
•retention risk with respect to key clients, service providers and travel advisors, and challenges in retaining, assimilating and training new employees;
•potential increased expenditure on human resources and related costs;
•retention risk with respect to an acquired company’s key executives and personnel;
•potential disruption to our ongoing business;
•especially high degree of risk for investments in immature businesses with unproven track records and technologies, with the possibility that we may lose the value of our entire investments or incur additional unexpected liabilities;
•risk of entering new jurisdictions and becoming subject to foreign laws and regulations not previously applicable to us;
•potential diversion of cash for an acquisition, ongoing operations or integration activities that would limit other potential uses for cash including IT, infrastructure, marketing and other investments;
•the assumption of known and unknown debt and other liabilities and obligations of the acquired company;
•potential integration risks related to acquisition targets that do not maintain internal controls and policies and procedures over financial reporting as would be required of a public company, which may amplify our risks and liabilities with respect to our ability to maintain appropriate internal controls and procedures;
•inadequacy or ineffectiveness of an acquired company’s disclosure controls and procedures and/or environmental, health and safety, anti-corruption, human resources or other policies and practices;
•challenges in reconciling accounting issues, especially if an acquired company utilizes accounting principles different from those that we use; and
•challenges in complying with newly applicable laws and regulations, including obtaining or retaining required approvals, licenses and permits.
We also have exposure to risk that sellers of businesses we have acquired may not indemnify us as agreed to.
We anticipate that any future acquisitions we may pursue as part of our business strategy may be partially financed through additional debt, equity or equity-linked securities. If new debt is added to current debt levels, or if we incur other liabilities, including contingent liabilities, in connection with an acquisition, the debt or liabilities could impose additional constraints and requirements on our business and operations, which could materially adversely affect our financial condition and results of operations. If we are unable to obtain such necessary financing, it could have an impact on our ability to consummate a substantial acquisition and execute our growth strategy. In addition, any equity or equity-linked securities issued in connection with a merger or acquisition could result in dilution to our existing stockholders.
Any due diligence we conduct in connection with potential future acquisitions may not reveal all relevant considerations or liabilities of the target business, which could have a material adverse effect on our financial condition or results of operations.
We intend to conduct due diligence for any potential acquisition as we deem reasonably practicable and appropriate based on the applicable facts and circumstances. The objective of our due diligence process will be to identify material issues that may affect our decision to proceed with any one particular acquisition target or the consideration payable for an acquisition. We also intend to use information revealed during the due diligence process to formulate our business and operational planning for, our valuation of and integration planning for, any target company or business. While conducting due diligence and assessing a potential acquisition, we may rely on publicly available information, if any, information provided by the relevant target company to the extent such target is willing or able to provide such information and, in some circumstances, third-party investigations. We cannot assure you that the due diligence we undertake with respect to any potential acquisition will reveal all relevant facts that may be necessary to evaluate such acquisition or to formulate a business strategy. Furthermore, the information provided during the due diligence process may be incomplete, inadequate or inaccurate. As part of the due diligence process, we will also make subjective judgments regarding the results of operations, financial condition and prospects of a potential target. If the due diligence investigation fails to correctly identify material issues and liabilities that may be present in a target company or business, or if we consider such material risks to be commercially acceptable relative to the opportunity, and we proceed with an acquisition, we may subsequently incur substantial impairment charges or other losses.
We cannot guarantee that our previously-announced restructuring program will achieve its intended result.
As part of our restructuring plans, we conducted a reduction in workforce (“RIF”) of over 300 employees from July 2022 to October 2022, including involuntary and voluntary positions that were not backfilled. We have closed our Mohali and Dehradun, India, offices and plan to exit or sublease these premises. This right-sizing program resulted in the reduction of front-end sales positions; mid-office quality control, ticketing and related positions; back-office accounting and fraud protection positions; and the vacating of the Mohali and Dehradun facilities. All functional areas are now covered in the remaining Delhi and Hyderabad facilities with existing staff. We recorded, in the aggregate, approximately $2.5 million in restructuring and related charges associated with this restructuring program. We cannot guarantee that the restructuring program will achieve or sustain the targeted benefits, or that the benefits, even if achieved, will be adequate to meet our long-term profitability expectations. Risks associated with the restructuring program also include additional unexpected costs, negative impacts on our cash flows from operations and liquidity, employee attrition and adverse effects
on employee morale and our potential failure to meet operational and growth targets due to the loss of employees, any of which may impair our ability to achieve anticipated results from our operations or otherwise adversely affect our business.
Risks Related to Intellectual Property, Information Technology, Data Security, and Privacy
If we fail to either develop new and innovative technologies or enhance our existing technologies and grow our systems and infrastructure in response to changing client demands and rapid technological change, our business may suffer.
The travel industry is subject to changing client preferences and demands relating to travel and travel-related services, including in response to constant and rapid technological change. These characteristics are changing at an even greater pace as travel providers seek to address client needs and preferences resulting from the COVID-19 pandemic.preferences. If we are unable to develop or enhance technology in response to such changes, products or technologies offered or developed by our competitors, our travelers may find our services less attractive.
Our ability to provide best-in-class service to our travelers depends upon the use of sophisticated information technologies and systems, including technologies and systems used for reservation systems, communications, procurement and administrative systems. As our operations grow in both size and scope, we continuously need to improve and upgrade our systems and infrastructure to offer and provide support for an increasing number of travelers and travel providers enhanced products, services, features and functionality, while maintaining the reliability and integrity of our systems and infrastructure. We may fail to effectively scale and grow our systems and infrastructure to accommodate these increased demands. Further, our systems and infrastructure may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business, or could contain errors, bugs or vulnerabilities.
Our future success also depends on our ability to understand, adapt and respond to rapidly changing technologies in the travel industry that will allow us to address evolving industry standards and to improve the breadth, diversity and reliability of our services. For example, technology solutions that include the use of AI to analyze known traveler data and preferences to develop a tailored travel plan are being developed. As they are in the early stages, we must understand and respond to the potential impacts of such technology. We may be unsuccessful, or may be less successful than our current or new competitors, in developing such technology, which would negatively impact our business and financial performance.
If we are unable to maintain existing systems, obtain new technologies and systems, or replace or introduce new technologies and systems as quickly as our competitors or in a cost-effective manner, our business and operations could be materially adversely affected. Also, we may not achieve the benefits anticipated from any new technology or system or be able to devote financial resources to new technologies and systems in the future.
Cybersecurity attacks or security breaches could adversely affect our ability to operate, could result in PI and our proprietary information being lost, stolen, made inaccessible, improperly disclosed or misappropriated or could cause us to be held liable or subject to regulatory penalties and sanctions and to litigation (including class action litigation), each of which could have a material adverse effect on our reputation and business. Privacy law obligations, and the costs of complying with them, are increasing globally and our failure to comply with these obligations could have a material adverse effect on our business.
We, and our travel suppliers and third-party service providers on our behalf, collect, use and transmit a large volume of PI, which poses a tempting target for malicious actors who may seek to carry out cyber-attacks (or other forms of attempts to obtain PI) against us or our suppliers or third-party service providers. The secure transmission of client information over the internet as encryption and other controls in relation to PI at rest and in transit is essential in maintaining the confidence of travel suppliers and travelers. Substantial or ongoing data security breaches or cyber-attacks, whether instigated internally or externally on our systems or other internet-based systems or otherwise, could result in: (i) exposure to a significant risk of loss, theft, the rendering inaccessible, improper disclosure or misappropriation of PI, resulting in regulatory actions, litigation (including class action litigation) and potential liability, damages and regulatory fines and penalties and other related costs (including in connection with our investigation, notification and remediation efforts); (ii) severe damage to our IT infrastructure, including damage that could impair our ability to offer our services; (iii) negative publicity; (iv) damage to our reputation or brand; (v) damage to our reputation or brand; (vi) diversion of our management’s time and attention away from daily operations; (vii) regulatory penalties and sanctions, which could lead to further enhanced regulatory oversight; and (viii) travelers and potential travel suppliers losing confidence in our cybersecurity and choosing to use our competitors’ services, any of which could have a material adverse effect on our technology solutions, market share, results of operations and financial condition. Furthermore, some of our third-party service providers, travel suppliers and other third parties may receive or store information, including our clients’ information provided by us. For example, our travel suppliers currently require most travelers to pay for their transactions with their credit cards, especially in the U.S., and such suppliers receive
our clients’ PI to process the transactions and we can carry some liability in relation to the suppliers we use and ensuring that they have appropriate technical and organizational security procedures in place to protect PI. Increasingly sophisticated technological capabilities pose greater cybersecurity threats and could result in a cyber-attack or a compromise or breach of the technology that we use to protect client transaction data. Outside of cybersecurity, there remain similar risks for PI in relation to other forms of data breach including through social engineering or human error.
We incur material expense to protect against cyber-attacks and security breaches and their consequences, and we may need to increase our security-related expenditures to maintain or increase our systems’ security in the future. However, despite these efforts, our security measures may not prevent cyber-attacks or data security breaches from occurring, and we may ultimately fail to detect, or accurately assess the severity of, a cyber-attack or other form of security breach or not respond quickly enough. In addition, to the extent we experience a cyber-attack or security breach, we may be unsuccessful in implementing remediation plans to address exposure and future harms. It is possible that computer circumvention capabilities, new discoveries or advances or other developments, which change frequently and often are not recognized until launched against a target, could result in a compromise or breach of client data, even if we take all reasonable precautions, including to the extent required by law. These risks are likely to increase as we expand our offerings, expand internationally, integrate our products and services, and store and process more data, including PI and other sensitive data. Further, if any of our third-party service providers, travel suppliers or other third parties with whom we share client data fail to implement adequate data-security practices or comply with our terms and policies or otherwise suffer a network or other security breach, our clients’ information may be improperly accessed, used or disclosed. We maintain a comprehensive portfolio of insurance policies to both meet our legal obligations and cover perceived risks within our business, including those related to cybersecurity. We believe that our coverage and the deductibles under these policies are adequate for the risks that we face.
If a party (whether internal, external, an affiliate or unrelated third party) either is able to circumvent our data security systems or those of the third parties with whom we share client information, or engages in cyber-attacks, such data breaches or cyber-attacks could result in such bad actor obtaining our proprietary information, the loss, theft or inaccessibility of, unauthorized access to, or improper use or disclosure of, our clients’ data or a significant interruption in our operations. Our business continuity and disaster recovery plans may not be effective, particularly if catastrophic events occur where large numbers of our people are located, or simultaneously affect our people in multiple locations around the world. If these disruptions prevent us from effectively serving our clients, our results of operations could be significantly adversely affected.
Privacy laws are constantly evolving and new legal obligations and liabilities in relation to these are appearing around the world, each of which demand increased compliance resources, including personnel and financing resources.
Existing and evolving compliance obligations in respect of privacy rules relating to marketing and the use of cookies and related advertising technology may also have an impact on the business such as by reducing the use of databases and advertising techniques in
order to conduct marketing activities. Compliance failures in this area can result in potential rulings to delete or stop using marketing databases, fines, penalties and claims from individuals.
Third parties may claim that the operation of our business infringes on their intellectual proprietary rights. These claims could be costly to defend, result in injunctions and significant damage awards and limit our ability to use key technologies in the future (or require us to implement workarounds), which may cause us to incur significant costs, prevent us from commercializing our products and services or otherwise have a material adverse effect on our business.
In recent years, in the markets in which we operate, there has been considerable patent, copyright, trademark, domain name, trade secret and other intellectual property development activity, as well as litigation, based on allegations of infringement, misappropriation or other violations of intellectual property. Furthermore, individuals and groups can purchase patents and other intellectual property assets for the purpose of making claims of infringement to extract settlements from companies like ours. We may be subject to claims of alleged infringement, misappropriation or other violation of the intellectual property rights of our competitors or other third parties in the operation of our businesses, including for our use of third-party intellectual property rights or our internally developed or acquired intellectual property, technologies and content. We cannot guarantee we have not, do not or will not infringe, misappropriate or otherwise violate the intellectual property rights of others. If we were to discover that our products or services infringe, misappropriate or otherwise violate the intellectual property rights of others, we may need to obtain licenses or implement workarounds that could be costly. We may be unable to obtain the necessary licenses on acceptable terms, or at all, or be unable to implement workarounds successfully. Moreover, if we are sued for infringement, misappropriation or other violation of a third party’s intellectual property rights and such claims are successfully asserted against us, we could be required to pay substantial damages or ongoing royalty payments or to indemnify our licensees, or we could be enjoined from offering our products or services or using certain technologies or otherwise be subject to other unfavorable circumstances. Accordingly, our exposure to damages resulting from such claims could increase and this could further exhaust our financial and management resources. Further, during the course of any
litigation, we may make announcements regarding the results of hearings and motions, and other interim developments. If securities analysts and investors regard these announcements as negative, the market price of our Common Stock may decline. Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims (regardless of their merit) and the time and resources necessary to resolve them, could divert the resources of our management and require significant expenditures. Any of the foregoing could prevent us from competing effectively and could have an adverse effect on our business, operating results, and financial condition.
Our failure to adequately protect our intellectual property may negatively impact our ability to compete effectively against competitors in our industry.
Our success and ability to compete depend,depends, in part, upon our intellectual property, including our technology solutions and database. In the U.S. and other jurisdictions, we rely on a combination of copyright, trademark, patent, and trade secret laws, as well as license and confidentiality agreements and internal policies and procedures to protect our intellectual property. Even with these precautions, however, it may be possible for another party to infringe, copy or otherwise obtain and use our owned or licensed intellectual property without our authorization or to develop similar intellectual property independently, particularly in those countries where effective trademark, domain name, copyright, patent and trade secret protection may not be available. Even where effective protection is available, policing unauthorized use of our intellectual property is difficult and expensive. If it becomes necessary for us to litigate to protect these rights, any proceedings could be burdensome and costly, could result in counterclaims challenging our ownership of intellectual property or its validity or enforceability or accusing us of infringement, and we may not prevail. We cannot be certain that the steps that we have taken or will take in the future will prevent misappropriation or infringement of intellectual property used in our business. Unauthorized use and misuse of our intellectual property or intellectual property we otherwise have the rights to use could reduce or eliminate any competitive advantage we have developed, potentially causing us to lose sales or actual or potential clients, or otherwise harm our business, resulting in a material adverse effect on our business, financial condition or results of operations, and we cannot assure you that legal remedies would adequately compensate us for the damage caused by unauthorized use.
Any significant IT systems-related failures, interruptions or security breaches or any undetected errors or design faults in IT systems could result in limited capacity, reduced demand, processing delays, privacy risks and loss of customers, suppliers or marketplace merchants and a reduction of commercial activity.
We rely on IT systems to service our clients and enable transactions to be processed on our technology solutions.
If we are unable to maintain or improve our IT systems and infrastructure, we may experience system interruptions, defects and slowdowns. In the event of system interruptions or slow delivery times, prolonged or frequent service outages or insufficient capacity that impedes us from efficiently providing services to travelers, we may lose travelers and revenue or incur liabilities. Furthermore, errors, bugs, vulnerabilities, design defects, or technical limitations within our IT systems may lead to negative experiences for our
clients, our compromised ability to perform services in a manner consistent with our terms, contracts, or policies, delayed product introductions or enhancements, our compromised ability to protect the data of our users, other clients, employees and business partners or our intellectual property or other data, or reductions in our ability to provide some or all of our services. Our IT systems are vulnerable to damage, interruption or fraudulent activity from various sources, any of which could have a material adverse impact on our business, financial condition or results from operations including:
•power losses, internet and telecommunications or data network failures, computer systems defects or failures, and other similar events;
•errors, bugs or vulnerabilities, computer viruses and other contaminants, losses and corruption of data and similar events;
•operator errors, penetration by bad actors seeking to disrupt operations, misappropriate information or perpetrate fraudulent activity and other physical or electronic breaches of security;
•the failure of third-party software, systems or services that we rely upon to maintain our operations;
•lack of cloud computing capabilities and other technical limitations; and
•natural disasters, fires, pandemics, wars and acts of terrorism.
In addition, we are dependent upon software, equipment and services provided or managed by third parties in the operation of our business. We currently rely on a variety of third-party systems, service providers and software companies, including GDS service providers and other electronic central reservation systems used by airlines, various channel managing systems and reservation systems used by other travel suppliers, as well as other technologies used by payment gateway providers. In particular, we rely on third parties to:
•host our websites;
•host websites of our travel suppliers, which we may rely on;
•provide certain software underlying our technology platform;
•issue transportation tickets and travel assistance products, confirmations and deliveries;
•assist in conducting searches for airfares and to process air ticket bookings;
•process hotel reservations for hotels not connected to our management systems;
•process credit card, debit card and net banking payments;
•provide computer infrastructure critical to our business;
•provide after hours travel management services; and
•provide client relationship management services.
Any disruption or failure in the software, equipment and services provided or managed by these third parties, or errors, bugs or vulnerabilities, could result in performance delays, outages or security breaches that could be harmful to our business. Generally, our third-party IT service providers have disaster recovery and business continuity plans relating to the services they provide to us. However, if certain IT system failures occur, we may be unable to switch to back-up systems immediately, and the time to fully recover could be prolonged.
In the event that the performance of such software, equipment or services provided or managed by third parties deteriorates or our arrangements with any of these third parties related to the provision or management of software, equipment or services are terminated, we may be unable to find alternative services, equipment or software on a timely basis, on commercially reasonable terms, or at all. Even if we are able to find alternative services, equipment or software, we may be unable to do so without significant cost or disruptions to our business, and our relationships with our travelers may be adversely impacted. Our failure to secure agreements with such third parties, or the failure of such third parties to perform under such agreements, may have a material adverse effect on our business, financial condition or results of operations.
We may have inadequate insurance coverage or insurance limits to compensate for losses from a major interruption, and remediation may be costly and have a material adverse effect on our operating results and financial condition. Any extended interruption or degradation in our technologies or systems could significantly curtail our ability to conduct our business and generate revenue. We believe that our coverage and the deductibles under our cybersecurity insurance policies are adequate for the risks that we face.
There are various risks associated with the facilitation of payments from consumers, including risks related to fraud, compliance with evolving rules and regulations and reliance on third parties.
Our results have been, and will likely continue to be, negatively impacted by consumer purchases made using fraudulent credit cards, claims the consumer did not authorize the purchase or consumers who have closed bank accounts or have insufficient funds in their bank accounts to satisfy payments. We may be held liable for accepting fraudulent credit cards on our technology solutions or in connection with other fraudulent transactions on our technology solutions, as well as other payment disputes with consumers. Accordingly, we calculate and record an allowance for the resulting chargebacks. We must also continually implement and evolve measures to detect and reduce the risk of fraud, specifically because these methods become increasingly sophisticated. If we are unable to successfully combat the use of fraudulent credit cards on our technology solutions, our business, profit margins, results of operations and financial condition could be materially adversely affected.
We believe that an important component of our future success will be our ability to offer consumers their preferred method of payment in the most efficient manner on all our technology solutions, and as a result, we are processing more of our transactions on a merchant basis where we facilitate payments from travelers through the use of credit cards and other payment methods (such as PayPal, Alipay, Paytm and WeChat Pay, among others). While processing transactions on a merchant basis allows us to process transactions for properties that do not otherwise accept credit cards and to increase our ability to offer a variety of payment methods and flexible transaction terms to consumers, we incur additional payment processing costs (which are typically higher for foreign currency transactions) and other costs related to these transactions, such as costs related to fraudulent payments and transactions and fraud detection. As we expand our payments services to consumers and business partners, in addition to the revenues from these transactions, we may experience a significant increase in these costs, and our results of operations and profit margins could be materially adversely affected, in particular if we experience a significant increase in non-variable costs related to fraudulent payments and transactions.
As a greater percentage of our transactions involve us processing payments, our global systems and processes must be managed on a larger scale, which adds complexity, administrative burdens and costs, and increases the demands on our systems and controls, which could adversely affect our results of operations. In addition, as our payment processing activities continue to develop, we expect to be subject to additional regulations, including financial services regulations, which we expect to result in increased compliance costs and complexities, including those associated with the implementation of new or advanced internal controls. For example, the European Union’s (“EU”EU”) Payment Services Directive 2 has further complicated the authentication process for accepting credit cards. As a result of this directive, payments made on our technology solutions by consumers in the European Economic Area are subject to Strong Customer Authentication, which requires the consumer to engage in additional steps to authenticate their transaction. This new requirement could cause consumer transactions to take longer to process or otherwise inconvenience the consumer, which could result in consumers choosing not to utilize our technology solutions as often or at all. The implementation of this process has resulted and may continue to result in increased compliance costs and administrative burdens for us.
Other new or expanded regulations that could apply to us as our payments activities evolve include those relating to money transmission licenses, anti-money laundering, card scheme associations, sanctions, banking, privacy and security of our processes, among others. Compliance with this changing regulatory environment creates significant additional compliance costs and burdens, and it could lead us to modify our business plans or operations, any of which could negatively impact our business, results of operations and profit margins.
We are also subject to payment card association rules and obligations under our contracts with the card schemes and our payment card processors, including the Payment Card Industry Data Security Standard (the “PCI-DSS”“PCI-DSS”). Under the PCI-DSS and these association rules and obligations, if information is compromised, we could be liable to payment card issuers for associated expenses and penalties, and in some cases, we could be restricted in our ability to accept payment cards. Under certain circumstances in our agreements with the card schemes and in relation to the PCI-DSS, we are also subject to periodic audits, self-assessments and other assessments of our compliance with the rules and obligations of the payment card associations and the PCI-DSS, which could result in additional expenses and administrative burdens. In addition, if we fail to follow payment card industry security standards, even if no consumer information is compromised, we could incur significant fines or experience a significant increase in payment card transaction costs. Additionally, compliance with the PCI-DSS may not prevent all security incidents. If we are fined or required to pay additional processing fees, or if our ability to accept payment cards is restricted in any way as a result of our failure to comply with these payment card industry rules, or otherwise, it could adversely impact our business, results of operations and profit margins.
We rely on banks, card schemes and other payment processors to execute certain components of the payments process. We generally pay interchange fees and other processing and gateway fees to these third parties to help facilitate payments from consumers to travel service providers. As a result, if we are unable to maintain our relationships with these third parties on favorable terms, or if these fees are increased for any reason, our profit margin, business and results of operations could be harmed. Additionally, if these third parties
experience service disruptions or if they cease operations, (whether as a result of the COVID-19 pandemic, another epidemic or pandemic or otherwise), consumers and travel service providers could have difficulty making or receiving payments, which could adversely impact our reputation, business and results of operations.
In addition, in the event that one of our major travel service providers voluntarily or involuntarily declares bankruptcy or otherwise ceases or limits operations, we could experience an increase in chargebacks resulting from customers withtravelers booking travel reservations through us with such travel service provider, and we could experience financial loss from certain prepayments made to such travel service provider if we are not able to recover the prepayment. As a result, if one of our major travel service providers declares bankruptcy or ceases or limits operations, or if many travel service providers declare bankruptcy or cease or limit operations, it could adversely impact our business and results of operations.
Our use of “open source” software could adversely affect our ability to protect our proprietary software and subject us to possible litigation.
We use open source software in connection with our software development. From time to time, companies that use open source software have faced claims challenging the use of open source software or demanding compliance with open source license terms. We could be subject to suits by parties claiming ownership of what we believe to be open source software, or claiming non-compliance with open source licensing terms. Some open source licenses require licensees who distribute software containing, linking to or derived from open source software to make publicly available the source code of such distributed software, which in some circumstances could be valuable proprietary code, or could require us to license our software for free or permit others to make derivative works based on such software. While we have implemented policies to ensure that no open source software is used in a manner that would require us to disclose our proprietary source code, license our software for free or permit others to make derivative works based on it, there can be no guarantee that such use could not inadvertently occur. Any requirement to disclose our proprietary
source code, license it for free or license it for purposes of making derivative works, and any requirement to pay damages for breach of contract and/or intellectual property infringement may have a material adverse effect on our business, results of operations or financial condition, and could help our competitors develop services that are similar to or better than ours.
Our processing, storage, use and disclosure of personal data, including of travelers and our employees, exposes us to risks stemming from possible failure to comply with governmental law and regulation and other legal obligations.
In our processing of travel transactions, we or our travel suppliers and third-party service providers collect, use, analyze and transmit a large volume of PI. There are numerous laws with a significant impact on our operations regarding privacy, cyber security and the storage, sharing, use, analysis, processing, transfer, disclosure and protection of PI and consumer data, the scope of which are changing, subject to differing interpretations, and may be inconsistent between states within a country or between countries. For example, the EU’s GDPR, became effective on May 25, 2018, and continues to result in significantly greater compliance burdens and costs for companies with users and operations in the EU. The GDPR imposes numerous technical and operational obligations on processors and controllers of personal data and provides numerous protections for individuals in the European Economic Area (“EEA”EEA”), including, but not limited to, notification requirements for data breaches, the right to access PI and the right to delete PI. The GDPR provides data protection authorities with enforcement powers which include the ability to restrict processing activities and impose fines of up to 20 million Euros or up to 4% of the annual global turnover of the infringer, whichever is greater. In addition, the GDPR imposes strict rules on the transfer of personal data out of the EFTA to a “third country,” including the U.S. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices.
Following the UK’s exit from the EU (“Brexit”Brexit”), the UK Data Protection Act contains provisions, including its own derogations,derogation, for how the GDPR is applied in the UK (“UKGDPR” GDPR”). The UK Data Protection Act has been enacted alongside the UK GDPR. From the beginning of 2021 (when the transitional period following Brexit expired), we have been required to continue to comply with GDPR and also the UK Data Protection Act and the UK GDPR, under which our applicable entities may be subject to fines for non-compliance that are of the same amount as provided for in the GDPR. At the current time, the European Commission has issued the UK with an “adequacy” decision and the EEA and the UK allow reciprocal sharing meaning that it is possible to transfer PI freely between the EEA and UK. The UK GDPR is currently under review in the UK and there may be further changes made to it over the next few years which could result in further compliance obligations. There have been some concerns that there could be a risk to such adequacy decision depending on the nature of the changes made by the UK.
Transfers of data continues to be an area of considerable focus by data protection regulators around the world and we are subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process or receive personal data. For example, in July 2020, the Court of Justice of the European Union invalidated the “EU-US Privacy Shield,” a framework for transfers of personal data from the European Economic Area to the United States. Subsequent to this, new standard contractual clauses have been adopted by the EU and the UK and we are required to use such new contract clauses where appropriate and to carry out
additional transfer impact assessments. Given that this is such an area of compliance focus by regulators, there remains a risk that transfers of PI to some jurisdictions could be considered to be unlawful.
In the U.S., the CCPA became effective on January 1, 2020, and limits how we may collect and use PI, including by requiring companies that process information relating to California residents to make disclosures to consumers about their data collection, use and sharing practices, provide consumers with rights to know and delete PI and allow consumers to opt out of certain data sharing with third parties. The CCPA also creates an expanded definition of PI, imposes special rules on the collection of consumer data from minors, and provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase the likelihood and cost of data breach litigation. The potential effects of this legislation are far-reaching and may require us to modify our data processing practices and policies and incur substantial costs and expenses in compliance and potential ligation efforts. Further, CPRA, which went into effect January 1, 2023, creates certain additional rights for California residents. For example, the CPRA creates the new category of “sensitive PI,” which covers data types such as precise geolocation information, biometric information, race and ethnicity, and information regarding sex life or sexual orientation. The CPRA also creates new rights for California residents to direct a business to limit the use and disclosure of such information to that which is necessary to perform the services reasonably expected by the consumer and to request that a company correct inaccurate PI that is retained by us. The Virginia Consumer Data Protection Act, which became effective on January 1, 2023, gives new data protection rights to Virginia residents and imposes additional obligations on controllers and processors of consumer data similar to the CCPA and CPRA. In addition, other states have signed into law (including Colorado and Connecticut, which laws will become effective July 1, 2023, and Utah, which law will become effective December 31, 2023) or are considering legislation governing the handling of personal data, indicating a trend toward more stringent privacy legislation in the U.S. In addition to the existing framework of data privacy laws and regulations, the U.S. Congress, U.S. state legislatures and many states and countries outside the U.S. are considering new privacy and security requirements that would apply to our business. Compliance with current or future privacy, cyber security, data protection, data
governance, account access and information and cyber security laws requires ongoing investment in systems, policies and personnel and will continue to impact our business in the future by increasing our legal, operational and compliance costs and could significantly curtail our collection, use, analysis, sharing, retention and safeguarding of PI and restrict our ability to fully maximize our closed-loop capability, deploy data analytics or AI technology or provide certain products and services, which could materially and adversely affect our profitability. We or our third-party service providers could be adversely affected if legislation or regulations are expanded to require changes in our or our third-party service providers’ business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our or our third party service providers’ business, results of operations or financial condition.
We are subject to payment-related risks.
As a merchant that processes and accepts cards for payment, we have adopted and implemented internal controls over the use, storage and security of card data pursuant to PCI-DSS. We assess our compliance with the PCI DSS rules on a periodic basis and make necessary improvements to our internal controls. If we fail to comply with these rules or requirements, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our clients, or facilitate other types of online payments, and our business and operating results could be adversely affected. For existing and future payment options we offer to both our corporate clients and travel suppliers, we may become subject to additional regulations and compliance requirements, including obligations to implement enhanced authentication processes, which could result in significant costs to us and our travel suppliers and reduce the ease of use of our payments options.
While we have taken steps to comply with privacy, cyber security, data protection, data governance, account access and information and cyber security laws and PCI-DSS, any failure or perceived failure by us, our third-party service providers, our independent travel advisors or our partners or affiliates to comply with the privacy policies, privacy- or cyber security-related obligations to travelers or other third parties, or privacy- or cybersecurity-related legal obligations could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions, monetary penalties and damages, ongoing regulatory monitoring and increased regulatory scrutiny, client attrition, diversion of our management’s time and attention, decreases in the use or acceptance of our cards and damage to our reputation and our brand, all of which could have a material adverse effect on our business and financial performance. In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection and information and cyber security in the U.S., the EU and various other countries in which we operate.
Risks Related to Government Regulation, Tax, and Litigation Matters
We may be unable to prevent unlawful or fraudulent activities in our operations, and we could be liable for such fraudulent or unlawful activities.
We are operating in a transitional period in which we are going from a private to public company, and we are learning how to meetstrengthening internal control needscontrols at the samethis time. As a newly public company, there is a risk that our internal controls over fraudulent or unlawful activities may not be wholly sufficient.
We also may acquire companies where fraud may have taken place, which could make us liable for such activities. For example, in 2017, the then-CFO of Rocketrip committed fraud by embezzling approximately $110,000 from Rocketrip by making paymentsRefer to a fake vendor prior to our acquisition of Rocketrip. Also, the former CFO of HariWorld Travel personally collected certain accounts receivable and did not return such collections to our Company.
Please see the Risk Factor titled “Any due diligence we conduct in connection with potential future acquisitions may not reveal all relevant considerations or liabilities of the target business, which could have a material adverse effect on our financial condition or results of operations” for further information.
Increases in interest rates would increase the cost of servicing our debt and could reduce our profitability and limit our cash available to fund our growth strategy.
The TCW AgreementTerm Loan has, and any additional debt we subsequently incur may have, a variable rate of interest. Higher interest rates could increase debt service requirements on our current variable rate indebtedness (even though the amount borrowed remains the same) and on any debt we subsequently incur, and could reduce funds available for operations, future business opportunities or other purposes. If we need to repay debt during periods of rising interest rates, we could be required to refinance our then-existing debt, including the TCW Agreement,Term Loan, on unfavorable terms or liquidate one or more of our assets to repay such debt at times that may not permit realization of the maximum return on such assets and could result in a loss. The occurrence of either or both of such events could materially and adversely affect our profitability, cash flows and results of operations.
In addition, a transition away from London Interbank Offered Rate (“LIBOR”LIBOR”) as a benchmark for establishing the applicable interest rate may affect the cost of servicing our debt under the TCW Agreement.Term Loan. The Financial Conduct Authority of the UK (the “FCA”“FCA”) (the authority that regulates LIBOR) has announced that it plans to phase out LIBOR by June 30, 2023. The United States Federal Reserve (the “Federal Reserve”“Federal Reserve”) has also advised banks to cease entering into new contracts that use USD LIBOR as a reference rate. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate (“SOFR”SOFR”), a new index calculated by short-term repurchase agreements that is backed by United States Treasury securities, as its preferred alternative rate for LIBOR.
On October 24, 2022, we and TCW entered into the Eighth Amendment to the TCW Agreement.Term Loan. Among other changes, the Eighth Amendment (i) implements the transition from a LIBOR-based interest rate to a SOFR-based interest rate and (ii) provides for a transition to a future benchmark rate in the event that SOFR is no longer available.
At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates following the anticipated transition away from the LIBOR benchmarks over the coming years. Accordingly, the outcome of these reforms is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to the phase-out of LIBOR could cause LIBOR to perform differently than in the past or cease to exist. The consequences of these developments and the phase-out of LIBOR cannot be entirely predicted, but could include an increase in the cost of borrowings under the TCW Agreement.Term Loan.
In addition, we may hedge against certain interest rate risks by using hedging instruments such as swaps, caps, options, forwards, futures or other similar products. During the year ended December 31, 2022,2023, we did not engage in interest rate hedging activities. Although hedging instruments may be used to selectively manage risks, such instruments may not fully mitigate our interest rate risk, may prove disadvantageous or may create additional risks, including in connection with the phase-out of LIBOR.
We are subject to taxes in many jurisdictions globally.
We are subject to a variety of taxes in many jurisdictions globally, including the United States, India, Thailand, Brazil, Mexico and Canada. We are also subject to income and non-income taxes in the United States at the federal, state and local levels, and in many other countries. Significant judgment is required in determining its worldwide provision for taxes.
In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We operate in numerous countries where our tax returns are subject to audit and adjustment by local tax authorities. Because we operate globally, the nature of the uncertain tax positions is often very complex and subject to change, and the amounts at issue can be substantial. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various possible outcomes. We re-evaluate uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Although we believe our tax estimates are reasonable, the final determination of tax audits could be materially different from our
historical tax provisions and accruals. Our effective tax rate may change from year to year based on changes in the mix of activities and income allocated or earned among various jurisdictions, tax laws in these jurisdictions, tax treaties between countries, our eligibility for benefits under those tax treaties, and the estimated values of deferred tax assets and liabilities. Such changes could result in an increase in the effective tax rate applicable to all or a portion of our income, which would reduce our profitability.
We establish reserves for our potential liability for U.S. and non-U.S. taxes, including sales, occupancy and value-added taxes, consistent with applicable accounting principles and in light of all facts and circumstances. These reserves represent our best estimate of our contingent liability for taxes. The interpretation of tax laws and the determination of any potential liability under those laws are complex, and the amount of our liability may exceed our established reserves.
New tax laws, statutes, rules, regulations or ordinances could be enacted at any time and existing tax laws, statutes, rules, regulations and ordinances could be interpreted, changed, modified or applied adversely to us. These events could require us to pay additional tax amounts on a prospective or retroactive basis, as well as require us to pay fees, penalties or interest for past amounts deemed to be due. New, changed, modified or newly interpreted or applied laws could also increase its compliance, operating and other costs, as well as the costs of our products and services. For example, on August 16, 2022, the United States enacted the Inflation Reduction Act of 2022, which contains significant changes to U.S. tax law, including, but not limited to, a 15% corporate book minimum tax for taxpayers with adjusted financial statement income in excess of $1 billion and a 1% excise tax on certain stock repurchases made after December 31, 2022.2023. It is possible that U.S. tax law will be further modified by the Biden administration by increasing corporate tax rates, eliminating or modifying some of the provisions enacted in the Tax Cuts and Jobs Act or other changes that could have an adverse effect on our operations, cash flows and results of operations and contribute to overall market volatility.
Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities.
The application of domestic and international income and non-income tax laws, rules and regulations to our historical and new products and services is subject to interpretation by the relevant taxing authorities. Given a focus on revenue generation, taxing authorities have become more aggressive in their enforcement of such laws, rules and regulations, resulting in increased audit activity and audit assessments and legislation, including new taxes on our technology platform and digital services. As such, potential tax liabilities may exceed our current tax reserves or may require us to modify its business practices and incur additional cost to comply, any of which may have a material adverse effect on our business.
The enactment of legislation implementing changes in taxation of domestic or international business activities, the adoption of other corporate tax reform policies, or changes in tax legislation or policies could materially affect our financial position and results of operations.
Many of the statutory laws, rules, and regulations imposing taxes and other obligations were enacted before the growth of the digital economy. Certain jurisdictions have enacted new tax laws, rules, and regulations directed at taxing the digital economy and multi-national businesses. If existing tax laws, rules, or regulations change, by amendment or new legislation, with respect to occupancy tax, sales tax, value-added taxes, goods and services tax, digital services tax, withholding taxes, revenue based taxes, unclaimed property, or other tax laws applicable to the digital economy or multi-national businesses, the result of these changes could increase our tax liabilities. Potential outcomes include, prospectively or retrospectively, additional responsibility to collect and remit indirect taxes, including on behalf of travel suppliers, imposition of interest and penalties, multiple levels of taxation, and an obligation to comply with information reporting laws or regulations requiring us to provide information about travel suppliers, customers, and transactions on our technology platform. The outcome of these changes may have an adverse effect on our business or financial performance. Demand for our products and services may decrease if we pass on such costs to the consumer; tax reporting and compliance obligations may result in increased costs to update or expand our technical or administrative infrastructure, or effectively limit the scope of our business activities if we decide not to conduct business in particular jurisdictions.
Taxing authorities have focused legislative efforts on tax reform, transparency, and base erosion prevention. As a result, policies regarding corporate income and other taxes in various jurisdictions are under heightened scrutiny, and tax reform legislation is being proposed or enacted in several jurisdictions. In general, changes in tax laws may affect our effective tax rate, increase our tax liabilities and impact the value of deferred tax balances. In October of 2021, the Organization for Economic Co-operation and Development (“OECD”OECD”) announced that its members had agreed on a two pillar approach to address corporate tax challenges of the digital economy. “Pillar One” focuses on nexus and profit allocation, and “Pillar Two” focuses on a global minimum tax. On December 15, 2022, the EU Council confirmed its adoption of the Pillar Two 15% global minimum tax, which is to be implemented in the domestic lawsand a majority of the EU member states by the end of 2023. As the OECD proposals were being evaluated, several jurisdictions have enacted orthe directive into domestic law as of December 31, 2023. Other countries are taking similar actions and have proposed measures to impose new digital services taxes on companies. TheseIf enacted and applicable to our Company, these taxes arecould be incremental to taxes we have historically incurred by our Company and might result in taxation of the same revenue in multiple countries. The enacted and proposed measures may have an adverse effect on our business or financial performance.
Our tax liabilities in the future may also be adversely affected by changes to our operating structure, changes in the mix of revenue and earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax balances or the discontinuance of beneficial tax arrangements in certain jurisdictions. We continue to work with relevant governmental authorities and legislators, as appropriate, to clarify our obligations under existing, new and emerging tax laws, rules and regulations. However, due to the increasing pace of legislative changes and the scale of our business activities, any substantial changes in tax policies, enforcement activities or legislative initiatives may materially and adversely affect our business, the taxes we are required to pay, our financial position and results of operations.
Our business is subject to regulation in the U.S. and the other jurisdictions in which we operate, and any failure to comply with such regulations or any changes in such regulations could adversely affect us.
We are subject to various regulations in the U.S. and the international jurisdictions in which we operate. In addition, we maintain travel licenses or registrations in the jurisdictions that require them. We are required to renew our licenses, typically on an annual basis, and to do so, we must satisfy the licensee renewal requirements of each jurisdiction. Failure to satisfy any of the requirements to which our licensed entities are subject could result in a variety of regulatory actions ranging from a fine, a directive requiring remedial action, suspension of a license or, ultimately, revocation of a license.
We are subject to other laws and regulations on matters as diverse as anti-bribery and anti-corruption laws, internal controls over financial reporting, regulation by the U.S. Department of Transportation regarding the provision of air transportation, data privacy and protection, taxation, environmental protection, anti-trust, wage-and-hour standards, headcount reductions and employment and labor
relations. In addition, certain of our clients have government contracts that subject them and us to governmental reporting requirements.
Supervision efforts and the enforcement of existing laws and regulations impact the scope and profitability of our existing business activities, limit our ability to pursue certain business opportunities and adopt new technologies, compromise our competitive position, and affect our relationships with partners, merchants, vendors and other third parties. Moreover, regulatory authorities have relatively broad discretion to grant, renew and revoke licenses and approvals and to implement regulations. Accordingly, such regulatory authorities could prevent or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us if our practices were found not to comply with the then current regulatory or licensing requirements or any interpretation of such requirements by the regulatory authority. New laws or regulations could similarly affect our business, increase our costs of doing business, require us to change certain of our business practices, or invest significant management attention and resources, all of which could adversely affect our results of operations and financial condition.
If we fail to satisfy regulatory requirements, our financial condition and results of operations could be adversely affected, and we may be restricted in our ability to take certain actions (such as declaring dividends or repurchasing outstanding shares) or engage in certain business activities or acquisitions, which could compromise our competitive position.
Our international operations are also subject to local government laws, regulations and procurement policies and practices that may differ from U.S. government regulations. For example, in Europe, computerized reservation systems regulations or interpretations of regulations may:
•increase our cost of doing business or lower our revenue;
•limit our ability to sell marketing data;
•impact relationships with travel agencies, airlines, rail companies, or others, impair the enforceability of existing agreements with travel agencies and other users of our system;
•prohibit or limit us from offering services or products; or
•limit our ability to establish or change fees.
Our business and financial performance could be adversely affected by unfavorable changes in or interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to us and our businesses, including those relating to travel, the provision of travel packages, the internet and online commerce, internet advertising and price display, consumer protection, licensing and regulations relating to the offer of travel insurance and related products, anti-corruption, anti-trust and competition, economic and trade sanctions, tax, banking, data security, the provision of payment services and privacy. For example, there are, and will likely continue to be, an increasing number of laws and regulations pertaining to the internet and online commerce
that may relate to liability for information retrieved from or transmitted over the internet, display of certain taxes and fees, online editorial and user-generated content, user privacy, behavioral targeting and online advertising, taxation, liability for third-party activities and the quality of products and services. Additionally, certain foreign jurisdictions are considering regulations intended to address the issue of “overtourism,” including by restricting access to city centers or popular tourist destinations or limiting accommodation offerings in surrounding areas, such as by restricting the construction of new hotels or the renting of homes or apartments. Such regulations could adversely affect travel to, or our ability to offer accommodations in, such markets, which could negatively impact our business, growth and results of operations. Also, compliance with the European Economic Community (“EEC”EEC”) Council Directive on Package Travel, Package Holidays and Package Tours could be costly and complex, and could adversely impact our ability to offer certain packages in the EEC in the future.
Similarly, companies we acquired may not have been subject to U.S. laws until we acquired them. Until we are able to fully integrate our compliance processes into the operations of such acquired companies, we are at risk of an acquired company’s failure to comply with U.S. laws, rules and regulations. Failure by us and our subsidiaries to comply with these laws could subject us to government investigations, civil and criminal penalties and reputational harm, which could have a material adverse effect on our consolidated operating results and financial position. Further, we rely on third parties that we do not control, including travel suppliers, strategic partners, third-party service providers and affiliates. If these third parties fail to meet our requirements or standards or the requirements or standards of applicable laws or governmental regulations, it could damage our reputation, make it difficult for us to operate some aspects of our business, or expose us to liability for their actions which could have an adverse impact on our business and financial performance.
We may incur substantial costs and receive adverse outcomes in litigation, regulatory investigations, and other legal matters in connection with alleged violations of securities laws and regulations.
Our business, financial condition, and results of operations could be materially adversely affected by unfavorable results in pending or future litigations, regulatory investigations, and other legal matters related to violations or perceived violations of applicable securities laws and regulations by the Company or its affiliates. See Part I - item 3 - Legal Proceedings below and in our subsequent filings with the SEC for additional information.
The ultimate resolution of such litigation, regulatory investigations, and other legal matters cannot be predicted, and the claims raised in these litigation, regulatory investigations, and other legal matters may result in further legal matters or actions against us, including, but not limited to, government enforcement actions or additional private litigation. We cannot predict either the outcome of any pending or future litigation, regulatory investigation, or other legal matter, or whether any such litigation, regulatory investigation, or other legal matter will be resolved favorably or ultimately result in charges or material damages, fines or other penalties, enforcement actions, or civil or criminal proceedings against us or members of our senior management.
Litigation matters and regulatory investigations, regardless of their merits or their ultimate outcomes, are costly, divert management’s attention from the business, and may materially adversely affect our reputation and demand for our products and services. We cannot predict with certainty the eventual outcome of any pending or future litigation, regulatory investigations, or other legal matters. An adverse outcome could result in us being responsible for significant damages. Any of these negative effects resulting from litigation, regulatory investigations, and other legal matters could materially adversely affect our business, financial condition, and results of operations.
We are subject to anti-corruption, anti-money laundering, and economic sanctions laws and regulations in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (“FCPA”) and regulations administered and enforced by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). Failure to comply with these laws and regulations could negatively impact our business, results of operations and financial condition.
Civil and criminal penalties may be imposed for violations of the FCPA, anti-money laundering laws and regulations, and regulations administered and enforced by OFAC and similar laws and regulations. Although we have policies in place with respect to compliance with the FCPA and similar laws, anti-money laundering laws and economic sanctions laws and regulations, we cannot assure you that our directors, officers, employees and agents will comply with those laws and our policies, and we may be held responsible for any such non-compliance. If we or our directors or officers violate such laws or other similar laws governing the conduct of our business (including local laws), we or our directors may be subject to criminal and civil penalties or other remedial measures, which could harm our reputation and have a material adverse impact on our business, financial condition and results of operations. Any investigation of any actual or alleged violations of such laws could harm our reputation or have an adverse impact on our business, financial condition and results of operations. The SEC, U.S. Department of Justice and OFAC, as well as foreign regulatory authorities, have continued to increase the enforcement of economic sanctions and trade regulations, anti-money laundering, and anti-corruption laws, across industries. As regulations continue to evolve and regulatory oversight continues to increase, we cannot guarantee that our programs and policies will be deemed compliant by all applicable regulatory authorities.
Economic sanctions and embargo laws and regulations, such as those administered and enforced by OFAC, vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. We cannot assure you that we will be in compliance with such laws, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations.
We may engage with partners and third-party intermediaries to market our services and to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, and of its employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. We cannot provide any assurance that all of our employees and agents will not take actions in violation of its policies and applicable law, for which we may be ultimately held responsible.
In the future, we may acquire companies with business operations outside of the U.S., some of which may not have previously been subject to certain U.S. laws and regulations, including the FCPA, OFAC, or other anti-corruption, anti-money laundering and economic sanctions laws applicable to us. We may be held responsible for any violations of such laws by an acquired company that occurred prior to our acquisition, or subsequent to the acquisition but before we are able to institute our compliance procedures. The process of integrating an acquired company’s business into our operations is challenging, and we may have difficulty in implementing compliance procedures for newly applicable anti-corruption and economic sanctions laws.
Exchange rate fluctuations may negatively affect our results of operations.
Our functional and presentationalreporting currency is U.S. dollars and as a result, our consolidated financial statements are reported in U.S. dollars. We have acquired, and may in the future acquire, businesses that denominate their financial information in a currency other than the U.S. dollar or conduct operations or make sales in currencies other than U.S. dollars. When consolidating a business that has functional currency other than U.S. dollars, we will be required to translate the balance sheet and operational results of such business into U.S. dollars. Due to the foregoing, changes in exchange rates between U.S. dollars and other currencies could lead to significant changes in our reported financial results from period to period. Among the factors that may affect currency values are trade balances, levels of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political or regulatory developments. We currently do not engage in foreign currency hedging activities and although we may seek to manage our foreign exchange exposure, including by active use of hedging and derivative instruments, we cannot assure you that such arrangements will be entered into or available at all times when we wish to use them or that they will be sufficient to cover the risk.
We are and, from time to time we may be, involved in legal proceedings and may experience unfavorable outcomes, which could affect our business and results of operations.
We are, and in the future, may be, subject to material legal proceedings in the course of our business, including, but not limited to, actions relating to contract disputes, business practices, intellectual property and other commercial and tax matters. Such legal proceedings may involve claims for substantial amounts of money or for other relief or might necessitate changes to our business or operations, and the defense of such actions may be both time consuming and expensive. Further, if any such proceedings were to
result in an unfavorable outcome, it could result in reputational damage and have a material adverse effect on our business, financial position and results of operations. Insurance may not cover such claims, may not provide sufficient payments to cover all of the costs to resolve one or more such claims and may not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby leading analysts or potential investors to reduce their expectations of our performance, which could reduce the market price of the our Common Stock.
Our reported results of operations may be adversely affected by changes in accounting principles generally accepted in the U.S.
Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. Although we are not aware of any recently issued and not yet effective, or pending accounting standards that may impact us, a change in these principles or interpretations could have a significant effect on our reported results of operations, and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. See Note 2 to our consolidated financial statements for the years ended December 31, 20222023 and December 31, 20212022 included in Part II, Item 8 of this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K.
Investments in us may be subject to foreign investment screening regulations that may impose conditions or limitations on certain investors.
Many jurisdictions continue to strengthen their foreign direct investment (“FDI”FDI”) screening regimes, and investments and transactions may be subject to review by FDI regulators if such investments are perceived to implicate national security policy priorities. Any review and approval of an investment or transaction by an FDI regulator may have outsized impacts on transaction certainty, timing, feasibility, and cost, among other things. FDI regulatory policies and practices are rapidly evolving, and in the event that anevolving. A FDI regulator reviews the Business Combination, there can be no assurances that the Business Combination will be able to proceed on the terms currently proposed. An FDI regulator may seek to prevent the Business Combination, require the divestiture of some or all of our business operations, impose requirements on the management, control and conduct of our business, or impose limitations or restrictions on, or prohibit, investments by certain investors.
We are subject to changing laws and regulations regarding regulatory matters, corporate governance and public disclosure that have increased our costs and the risk of non-compliance.
We will be subject to rules and regulations by various governing bodies, including, for example, the SEC, which are charged with the protection of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in and will likely continue to result in, increased general and administrative expenses.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.
Risks Related to Our Organization and Structure
We are no longer a “controlled company” under the corporate governance rules of Nasdaq. However, during the applicable phase-in periods, we may continue to rely on exemptions from certain corporate governance requirements, which may limit the presence of independent directors on our Board or committees of our Board.
Previously, the Legacy Mondee Stockholder beneficially owned, in the aggregate more than 50% of the combined voting power for the election of our Board. However, on March 10, 2023, the Legacy Mondee Stockholder effected the pro rata distribution of the 60,800,000 shares of our Common Stock it held to its equity holders in accordance with the amended and restated limited liability company agreement of the Legacy Mondee Stockholder (the “Pro“Pro Rata Distribution”Distribution”). Upon the consummation of the Pro Rata Distribution, the Legacy Mondee Stockholder no longer controlled a majority of the voting power of our outstanding voting stock, and as a result, we ceased to be a "controlled company" within the meaning of Nasdaq’s corporate governance standards. As a result, we are subject to additional corporate governance requirements, including the requirements that:
•a majority of our board be independent directors;
•our nominating and corporate governance committee must have a formal written charter and be composed entirely of independent directors; and
•our compensation committee must have a formal written charter and be composed of entirely independent directors
Nasdaq’s rules provide for phase-in periods for these requirements (including that each such committee consist of a majority of independent directors within 90 days of no longer being a “controlled company”), but we must be fully compliant with the requirements within one year of the date on which we cease to be a “controlled company.”
As of the date of this Annual Report on Form 10-K, a majority of the directors on our Board are independent, and each of the directors serving on our audit, nominating and corporate governance and compensation committees are independent. We also adopted formal written charters for each of our audit, nominating and corporate governance, and our compensation committees at the closing of the Business Combination. While as of the date of this Annual Report on Form 10-K, we are in compliance with the additional Nasdaq corporate governance requirements listed above, we may be unable to retain the number of independent directors needed to comply with such rules during the transition period. Moreover, until we are fully subject to these requirements, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.
Investment in new business strategies and acquisitions could disrupt our ongoing business and present risks we did not originally contemplate.
Our strategy involves evaluating and potentially entering complementary businesses. We have invested, and in the future may invest, in new business strategies and acquisitions. For example, we acquired Rocketrip in 2020 to increase our access to large corporate customers through an incentive platform that reduces corporate travel spending and we acquired Orinter in 2023 to expand our geographic markets to Brazil. We also have acquired, and in the future may acquire, businesses similar to those we already operate in an effort to expand our geographic markets, acquire technology or products or to otherwise improve or grow our business. Such endeavors may involve significant risks and uncertainties, including diversion of management’s attention from current operations, greater than expected liabilities and expenses, inadequate return on capital, new risks with which we are not familiar, legal compliance obligations that previously did not apply to us, integration risks and difficulties and unidentified issues not discovered in our investigations and evaluations of those strategies and acquisitions. As a result, entering new businesses involves risks and costs that could, if realized, have an adverse effect on our business, reputation, results of operations, profit margins, cash flows or financial condition, as well as on our ability to achieve the expected benefits of any such investments or acquisitions.
We may decide to make minority investments, including through joint ventures, in which we have limited or no management or operational control. The controlling person in such a case may have business interests, strategies or goals that are inconsistent with ours, and decisions of the entity or venture in which we invested may result in harm to our reputation or business or adversely affect the value of our investment. A substantial portion of our goodwill and intangible assets were acquired in acquisitions. If we determine that any of our goodwill and intangible assets, or any goodwill or intangible assets acquired in future transactions, experiences a decline in value, we may be required to record an impairment that could materially, adversely affect our results of operations. Further, we may issue shares of our Common Stock in these transactions, which could result in dilution to our stockholders.
We may be unable to successfully integrate acquired businesses or combine internal businesses, which could adversely impact our financial condition and results of operations.
The integration of acquired businesses requires significant time and resources, and we may not manage these processes successfully. . These integrations may be of varying degree, depending on many factors such as business compatibility, strategic goals or geographic location, among others. Integrations are complex, often involve additional or unexpected costs and create a variety of issues and risks, including:
•disruption or harm to the businesses involved;
•disruption to our other businesses, including as a result of the need for management to spend time and attention on the integration;
•difficulty combining different company cultures, systems, reporting structures, titles and job descriptions and compensation schemes;
•problems retaining key personnel, in particular at the acquired or integrated company;
•loss of travel service providers or partners of the acquired business; and
•difficulty implementing and maintaining effective controls, procedures and policies.
We may unsuccessfully integrate companies or achieve the strategic, financial or operating objectives of the acquisition or integration, any of which could adversely affect our business, results of operations or the value of our acquisitions.
Delaware law and our Certificate of Incorporation and Bylaws contain certain provisions, including anti- takeover provisions, which limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our Certificate of Incorporation, our Bylaws, and the Delaware General Corporation Law (“DGCL”DGCL”), contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the our Board and therefore depress the trading price of our Common Stock. These provisions could also make it difficult for our stockholders to take certain actions, including electing directors to our Board who are not nominated by the current members of our Board or taking other corporate actions, including effecting changes in our management. Among other things, the Certificate of Incorporation and the Bylaws include provisions regarding:
•the ability of our Board to issue shares of our Preferred Stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•the limitation of the liability of, and the indemnification of, our directors and officers;
•removal of the ability of our stockholders to take action by written consent in lieu of a meeting;
•the requirement that a special meeting of stockholders may be called only by a majority of our Board, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of members of our Board;
•controlling the procedures for the conduct and scheduling of our Board and stockholder meetings;
•the ability of our Board to amend our Bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our Bylaws to facilitate an unsolicited takeover attempt; and
•advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board or management.
Our Certificate of Incorporation designates the Delaware Court of Chancery or the United States federal district courts as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders, employees or agents.
Our Certificate of Incorporation, provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, employees, agents or stockholders to us or our stockholders, or any claim for aiding or abetting such an alleged breach; (iii) any action asserting a claim arising pursuant to any provision of the DGCL or the Certificate of Incorporation or the Bylaws, or to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws; (iv) any action asserting a claim against us or any current or former director, officer, employee, agent or stockholder, whether arising under the DGCL, the Certificate of Incorporation or the Bylaws, or such actions as to which the DGCL confer jurisdiction on the Delaware Court of Chancery; or (v) any action asserting a claim against us or any of our current or former directors, officers, employees, agents or stockholders governed by the internal affairs doctrine. The foregoing provisions will not apply to any claims as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of such court, which is rested in the exclusive jurisdiction of a court or forum other than such court (including claims arising under the Exchange Act), or for which such court does not have subject matter jurisdiction, or to any claims arising under the Securities Act and, unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Delaware will be the sole and exclusive forum for resolving any action asserting a claim arising under the Securities Act.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules or regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such Securities Act claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, United States District Court for the District of Delaware shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. There is uncertainty as to whether a court would enforce the forum provision with respect to claims under the federal securities laws.
This choice of forum provision in our Certificate of Incorporation may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition. Furthermore, investors cannot waive compliance with the federal securities laws and rules and regulations thereunder.
Risks Related to Ownership of Our Securities
Our failure to meet Nasdaq’s continued listing requirements could result in a delisting of our Common Stock.
If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our Common Stock. Such a delisting would likely have a negative effect on the price of our Common Stock and would impair our stockholders’ ability to sell or purchase our Common Stock when they wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with the listing requirements would allow our Common Stock to become listed again, stabilize the market price or improve the liquidity of our Common Stock, or prevent future non-compliance with the continued listing requirements of Nasdaq.
An active trading market for our Common Stock may never develop or be sustained, which may cause shares of our Common Stock to trade at a discount to the price implied by the Business Combination and make it difficult to sell shares of our Common Stock.
Our Common Stock is listed under the symbol “MOND” on the Nasdaq. However, we cannot assure you that an active trading market for our Common Stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for the our Common Stock will develop or be maintained, the liquidity of any trading market, your ability to sell your shares of our Common Stock when desired or the prices that you may obtain for your shares of our Common Stock. We cannot predict the prices at which our Common Stock will trade.
Certain existing stockholders purchased our securities at a price below the currenthighest trading price of such securities in their trading history, and may experience a positive rate of return based on the current trading price of our Common Stock.return. Future investors in our securities may not experience a similar rate of return.
Certain of our stockholders, including certain of the Selling Securityholders, acquired shares of our Common Stock or our private placement warrants at prices below the current trading price of our Common Stock, and may experience a positive rate of return based on the current trading price.
Prior to the Business Combination, equity holders in the Legacy Mondee Stockholder subscribed for an aggregate of 60,800,000 shares of our Common Stock at purchase prices ranging between approximately $3.99 per share and $9.91 per share. In addition, following the consummation of the Business Combination, each Class A ordinary share and Class B ordinary shares issued and outstanding immediately prior to the Business Combination was automatically canceled and converted into newly issued shares in our Common Stock in accordance with the terms of the Business Combination Agreement. On March 10, 2023, the Legacy Mondee Stockholder effected the Pro Rata Distribution.
The Sponsor paid an aggregate of $25,000 for the 6,037,500 Class B ordinary shares, of which the Sponsor subsequently transferred certain of those shares to directors of ITHAX and certain affiliates of the Sponsor. In connection with the Business Combination, each of those Class B ordinary shares was converted on a one-for-one basis to shares of our Common Stock, and the Sponsor forfeited 603,750 shares of our Common Stock, resulting in the Sponsor holding 5,197,200 shares of our Common Stock. The Sponsor and Cantor paid $6,750,000 in the aggregate to purchase an aggregate of 675,000 private placement units. In connection with the Business
Combination, the 337,500 private placement warrants underlying the private placement units were exchanged for 337,500 warrants of our Company with an exercise price of $11.50 per share. On September 13, 2022, the Sponsor dissolved and distributed its shares of our Common Stock and the 232,500 private placement warrants it held to members of the Sponsor on a pro rata basis. In connection with the PIPE Financing, the PIPE Investors paid $70,000,000 to purchase an aggregate of 7,000,000 shares of our Common Stock for $10.00
$10.00 per share. For more details on the foregoing transactions, see “Certain Relationships and Related Person Transactions.” On March 31, 2023, the last reported sale price of shares of our Common Stock as reported on Nasdaq was $12.96 per share of Common Stock. Holders of our Outstanding Warrants are less likely to exercise their respective Outstanding Warrants to the extent that the exercise prices of their Outstanding Warrants exceed the market price of our Common Stock. There is no guarantee that the Outstanding Warrants will be in the money prior to their expiration, and as such, the Outstanding Warrants may expire worthless. As such, any cash proceeds that we may receive in relation to the exercise of the Outstanding Warrants overlying shares of Common Stock will be dependent on the trading price of our Common Stock.
Given the relatively lower purchase prices that some of our stockholders paid to acquire shares of our Common Stock, these stockholders, some of whom are our Selling Securityholders, in some instances will earn a positive rate of return on their investments, which may be a significant positive rate of return, depending on the market price of our shares of Common Stock at the time that such stockholders choose to sell their shares of our Common Stock. Investors who purchase shares of our Common Stock on the Nasdaq may not experience a similar rate of return on the shares of our Common Stock that they purchase due to differences in the purchase prices and the current trading price. For example, based on the last reported sale price of our Common Stock referenced above and their respective purchase prices, equity holders in the Mondee Stockholder may experience potential profit of up to $8.97 per share.
If our voting power continues to be highly concentrated, it may prevent minority stockholders from influencing significant corporate decisions and may result in conflicts of interest.
As of the date of this Annual Report on Form 10-K, our executive officers and directors, excluding Prasad Gundumogula, who serves as our Chief Executive Officer, and their respective affiliates beneficially own, in the aggregate, approximately 5% of outstanding our Common Stock. Mr. Gundumogula beneficially owns more than 39%30% of the outstanding shares of our Common Stock, which includes (i) shares he owns directly, (ii) the 6,000,000 Earn-Out Shares that he received upon the closing of the Business Combination, and (iii) shares he is deemed to beneficially own through both (a) his control of the Mondee Group LLC, a Delaware limited liability company (“MondeeGroup” Group”), and (b) through his spouse, Madhuri Pasam (“Pasam”Pasam”).
In addition, the pre-Business Combination equity holders of the Legacy Mondee Stockholder and their affiliates (the “Legacy“Legacy Mondee Equityholders”Equityholders”) control a majority of our voting power as a result of their ownership of our Common Stock after the consummation of the Pro Rata Distribution. Even when the Legacy Mondee Equityholders cease to own shares of our Common Stock representing a majority of the voting power, for so long as the Legacy Mondee Equityholders, including Mr. Gundumogula, continue to own a significant percentage of our Common Stock, the Legacy Mondee Equityholders will still be able to significantly influence the composition of our Board and the approval of actions requiring approval of our stockholders through their combined voting power. Accordingly, the Legacy Mondee Equityholders, indulging Mr. Gundumogula, have significant influence with respect to our management, significant operational and strategic decisions, business plans and policies through their voting power. Furthermore, the Legacy Mondee Equityholders, through their combined voting power, may be able to cause or prevent a change of control of our Company or a change in the composition of our Board and could preclude any unsolicited acquisition of us.
This significant concentration of ownership may have a negative impact on the trading price for our Common Stock, because investors often perceive disadvantages in owning stock in companies where there is a concentration of ownership in a small number of stockholders. Moreover, the concentration of voting power could deprive you of an opportunity to receive a premium for your shares of Common Stock as part of a sale of our Company and ultimately may negatively affect the market price of the Common Stock.
The market price of our Common Stock may be volatile and fluctuate substantially, which could cause the value of your investment to decline.
The trading price of our Common Stock is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our Common Stock. Factors that could cause fluctuations in the trading price of our Common Stock include the following:
•price and volume fluctuations in the overall stock market from time to time;
•volatility in the trading prices and trading volumes of travel industry stocks;
•changes in operating performance and stock market valuations of other travel companies generally, or those in our industry in particular;
•sales of shares of our Common Stock by stockholders or by us;
•failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our Company or our failure to meet these estimates or the expectations of investors;
•the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;
•announcements by us or our competitors of new offerings or platform features;
•the public’s reaction to our press releases, other public announcements and filings with the SEC;
•rumors and market speculation involving us or other companies in our industry;
•actual or anticipated changes in our results of operations or fluctuations in our results of operations;
•the COVID-19 pandemic and its impact on the travel industry;
•actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
•litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;
•developments or disputes concerning our intellectual property or other proprietary rights;
•announced or completed acquisitions of businesses, services or technologies by us or our competitors;
•new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
•changes in accounting standards, policies, guidelines, interpretations or principles;
•any significant change in our management;
•general economic conditions and slow or negative growth of our markets; and
•other factors described in this “Risk Factors” section.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our Common Stock, the market price and trading volume of the our Common Stock could decline.
The trading market for our Common Stock will rely, in part, on the research and reports that industry or financial analysts publish about us or our business. We do not currently have, and may never obtain, research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our Common Stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our Common Stock, the price of the our Common Stock could decline. If one or more of these analysts cease to cover our Common Stock, we could lose visibility in the market for our Common Stock, which in turn could cause the price of our Common Stock to decline.
Our Outstanding Warrants are exercisable for our Common Stock, which will increase the number of shares of Common Stock eligible for future resale in the public market and result in dilution to our stockholders.
Upon the Closing of the Business Combination, we had 12,075,000 outstanding public warrants to purchase an aggregate of 12,075,000 shares of our Common Stock and 337,500 outstanding private placement warrants to purchase 337,500 shares of our Common Stock.
However, as a result of the consummation of the Offer to Purchase and Consent Solicitation and subsequent redemption of public warrants that were not tendered in the Offer to Purchase, there are no public warrants outstanding, but we have outstanding 232,500 private placement warrants to purchase an aggregate of 232,500 shares of our Common Stock, exercisable in accordance with the terms of the Amended and Restated Warrant Agreement. These private placement warrants are exercisable at any time before July 18, 2027 (i.e., the fifth anniversary of the completion of the Business Combination), subject to certain limitations and exceptions.
In addition, as a result of the Preferred Financing Transaction from September 2022, October 2023 and December 2023, we have outstanding 1,275,0001,444,500 Preferred Financing Warrants to purchase an aggregate of 1,275,0001,444,500 shares of our Common Stock, exercisable in accordance with the terms of the Preferred Financing
Warrant Agreement. These Preferred Financing Warrants are exercisable at any time before September 29, 2027 (i.e., the fifth anniversary of the completion of the Preferred Financing Transaction), subject to certain limitations and exceptions.
The exercise priceprices for both our private placement warrants and our Preferred Financing Warrants (the “Outstanding Warrants”“Outstanding Warrants”) isare $11.50 and $7.50 per share, respectively, of Common Stock, which was below the market price of our Common Stock, which was $12.96 per share based on the closing price of our Common Stock on the Nasdaq on March 31, 2023.Stock. The likelihood that the holders of our Outstanding Warrants will exercise their Outstanding Warrants, and the amount of any cash proceeds that we would receive upon such exercise is dependent upon the market price of our Common Stock. If the market price for our Common Stock is less than $11.50$7.50 per share, we believe that no holders of our Outstanding Warrants will be likely to exercise their Outstanding Warrants.
To the extent that our Outstanding Warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the holders of our Common Stock and increase the number of shares of our Common Stock eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such Outstanding Warrants may be exercised could adversely affect the market price of our Common Stock. However, there is no guarantee that our Outstanding Warrants will be in the money prior to their respective expirations, and as such, they may expire worthless.
The terms of our Outstanding Warrants may be amended in a manner adverse to a holder of our Outstanding Warrants, if holders of at least 50% of the then-outstanding private placement warrants or Preferred Financing Warrants, as applicable, approve of such amendment.
Both the private placement warrants and the Preferred Financing Warrants were issued in registered form under the Amended and Restated Warrant Agreement and the Preferred Financing Warrant Agreement, respectively (such agreements, collectively, the “Outstanding“Outstanding Warrant Agreements”Agreements”).
The Outstanding Warrant Agreements provide that the terms of the applicable Outstanding Warrants may be amended without the consent of any holder of the applicable Outstanding Warrants to cure any ambiguity or correct any defective provision or correct any mistake and to provide for the delivery of Alternative Issuance (as defined therein) pursuant to Section 4.4 of the applicable Outstanding Warrant Agreement, but otherwise requires the approval by the holders of at least a majority of the then-Outstanding Warrants, as applicable, to make any other amendments.
Accordingly, we may amend the terms of the Outstanding Warrant Agreements in a manner adverse to a holder of our Outstanding Warrants, if the holders of at least a majority of the then-Outstanding Warrants, as applicable, approve of such amendment. Although our ability to amend the terms of the Outstanding Warrants with the consent of at least a majority of the then-Outstanding Warrants, as applicable, is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the applicable Outstanding Warrant Agreement, convert the applicable Outstanding Warrants into cash, shorten the exercise period for the applicable Outstanding Warrants or decrease the number of shares of our Common Stock purchasable upon exercise of the applicable Outstanding Warrants.
The Series A Preferred Stock has rights, preferences and privileges that will not be held by, and will be preferential to, the rights of holders of our Common Stock, which could adversely affect the liquidity and financial condition of our Company, and may result in the interests of the holders of Series A Preferred Stock differing from those of the holders of our Common Stock.
The 85,00096,300 shares of our Series A Preferred Stock that were sold in September 2022, October 2023 and December 2023 as part of the Preferred Financing Transaction for $1,000 per share rank senior to shares of our Common Stock with respect to liquidation preferences. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of shares of our Series A Preferred Stock will be entitled to receive distributions out of our assets in an amount per share equal to $1,000 plus all accrued and unpaid dividends before any distributions shall be made on any shares of our Common Stock.
In addition, holders of shares of our Series A Preferred Stock will be entitled to dividends at a rate equal to the SOFR plus 7.00%8.50% per annum (which rate increases to SOFR plus 10.50%12.00% per annum beginning on the second anniversary of the consummation of the Preferred Financing Transaction).
The preferential rights described above could result in divergent interests between the holders of shares of our Series A Preferred Stock and the holders of our Common Stock.
You may experience future dilution as a result of future equity offerings or if we issue shares subject to options, warrants, stock awards or other arrangements.
In order to raise additional capital, we may, in the future, offer additional shares of our Common Stock or other securities convertible into or exchangeable for our Common Stock, including in connection with mergers and acquisitions. We may sell shares of our Common Stock or other securities in any other offering at a price per share that is less than the current market price of our Common Stock, and investors purchasing shares of our Common Stock or other securities in the future could have rights superior to existing stockholders. The sale of additional shares of our Common Stock or other securities convertible into or exchangeable for our Common Stock would dilute all of our stockholders, and if such sales of convertible securities into or exchangeable into our Common Stock occur at a deemed issuance price that is lower than the current exercise price of our Outstanding Warrants the exercise price for those Outstanding Warrants would adjust downward to the deemed issuance price pursuant to price adjustment protection contained in the Outstanding Warrant Agreements.
We may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the share price of our securities, which could cause you to lose some or all of your investment.
We cannot assure you that the due diligence conducted in relation to the Business Combination has identified all material issues or risks associated our Company, our business or the industry in which we compete. As a result of these factors, we may incur additional costs and expenses and we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if the due diligence identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the risk analysis completed prior to the Business Combination. If any of these risks materialize, they could have a material adverse effect on our financial condition and results of operations and could contribute to negative market perceptions about our securities or our Company. Accordingly, any of our stockholders could suffer a reduction in the value of their shares of our Common Stock. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to claim successfully that the reduction was due to the breach by our current or former officers or directors of a fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the registration statement or prospectus relating to the Business Combination contained an actionable material misstatement or material omission.
Our outstanding private placement warrants are accounted for as liabilities and changes in value of such warrants could impact our financial results.
We classify our private placement warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings. As a result, our consolidated balance sheets in this Annual Report on Form 10-K include derivative liabilities that relate to embedded features contained within our private placement warrants. Accounting Standards Codification 815, Derivatives and Hedging, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors that are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our private placement warrants each reporting period, although we do not anticipate that the amount of such gains or losses would be
material. Furthermore, the impact of changes in fair value on earnings may have an adverse effect on the market price of our securities, although we do not anticipate that such effect would be material. As of MarchDecember 31, 2023, there are 232,500 private placement warrants outstanding.
We have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements and have other adverse consequences.
We have identified material weaknesses in our internal control over financial reporting that we are currently working to remediate, which relate to improper segregation of duties, inadequate design, implementation, and maintenance of adequate information systems controls, including access and change management controls and timely recording of material transactions. In addition, prior to the Business Combination, ITHAX identified a material weakness in internal control over financial reporting related to complex financial instruments.
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. These deficiencies could result in additional material misstatements to our consolidated financial statements that could not be prevented or detected on a timely basis.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls.
Our management has concluded that these material weaknesses in our internal control over financial reporting are due to the fact that we were a private company with limited resources. We did not have the necessary business processes and related internal controls formally designed and implemented, coupled with the appropriate resources with the appropriate level of experience and technical expertise to oversee our business processes and controls in a manner that is consistent with the expectations of a public company. We have taken a number of measures to remediate such material weaknesses, however, our management has determined that such material weakness around improper segregation of duties, inadequate design, implementation, and maintenance of adequate information systems controls, including access and change management controls and timely recording of material transactions prior to being a public company continued to exist as of December 31, 2022. The material weaknesses will be considered remediated when management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. Management will monitor the effectiveness of our remediation plans and will make changes management determines to be appropriate. Management believes we are on target for completion in 2023.
If not remediated, these material weaknesses could result in material misstatements to our annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our Independent Registered Public Accounting Firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of the Common Stock could be adversely affected and we could become subject to litigation or investigations by Nasdaq, the SEC, or other regulatory authorities, which could require additional financial and management resources.
As a result of the material weaknesses described above, we may face litigation or other disputes that may include, among others, claims under federal and state securities laws, contractual claims or other claims arising from the material weakness in our internal control over financial reporting. As of the date of this Annual Report on Form 10-K, we have no knowledge of any such litigation or dispute.
We can give no assurance as to our ability to timely remediate the material weaknesses identified, if at all; that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls; or that any litigation or dispute will not arise in the future.
We are an “emerging growth company” and a “smaller reporting company” and the reduced disclosure requirements applicable to both emerging growth companies and smaller reporting companies may make our Common Stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”Act”). For as long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; the auditor not being required to comply with anythe requirement that may be adopted byin Public Company Accounting Oversight Board Auditing Standard 3101, The Auditor’s Report on an Audit of Financial Statements When the PCAOB regarding mandatoryAuditor Expresses an Unqualified Opinion, to communicate critical audit firm rotation or a supplement tomatters in the auditor’s report providing additional information about the audit and the financial statements;report; reduced disclosure obligations regarding executive compensation; and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information we provide stockholders will be different than the information that is available with respect to some other public companies. We have not included in this Annual Report on Form 10-K all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find shares of our Common Stock less attractive if we rely on these exemptions. If some investors find shares of our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock, and the price of our Common Stock may be more volatile.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt
out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of ITHAX’s initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means, among other things, the market value of our common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
We are also a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30th.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
The Company’s risk management program includes governance through the Board of Directors and regular reporting by management to the Board. Our Chief Technology Officer is tasked with integrating any cybersecurity risk considerations into overall risk management strategy. Risk management includes regular risk assessments to identify internal and external risks and to evaluate the magnitude of harm that could arise out of such risks. Further, risk management may utilize third party service providers where complementary and supplementary to the Company’s overall business strategy. Lastly, risk management includes training and education over the continuously evolving landscape of cybersecurity threats.
We engage external parties, including consultants, independent privacy assessors, computer security firms and risk management and governance experts, to enhance our cybersecurity oversight. For example, we have engaged an outside consulting firm with expertise in the field to help us assess our systems, monitor risk and implement best practices and to support the internal audit of our cyber security programs and we regularly consult with industry groups on emerging industry trends. In addition, as part of our overall risk mitigation strategy, we also maintain cyber insurance coverage. Our cybersecurity policies, standards and procedures include cyber and data breach response plans, which are periodically assessed against the National Institute of Standards and Technology Cybersecurity Framework.
Material Effects of Cybersecurity Threats
Although cybersecurity risks have the potential to affect the business, financial condition, and results of operations, the Company does not believe that risks from attacks, including results from any previous cybersecurity incidents or threats, have materially affected or reasonably likely to materially affect the Company’s strategy, operations or financial condition. However, no matter how well controls or designed or how well cybersecurity risk management procedures are implement, there can be no full assurance given that risk remains of an incident that could cause material harm to the business. See “Any significant IT systems-related failures, interruptions or security breaches or any undetected errors or design faults in IT systems could result in limited capacity, reduced demand, processing delays, privacy risks and loss of customers, suppliers or marketplace merchants and a reduction of commercial activity” in Item 1A, Risk Factors in this Annual Report on Form 10-K.
Governance and Management
The Audit Committee assesses cybersecurity risk management as part of its oversight functions. Cybersecurity risk management processes are devised, implemented and assessed quarterly by our Chief Technology Officer. Our Chief Technology Officer has more than 20 years of experience in cybersecurity and information technology, and based on his career, has a deep understanding of our information technology and business needs. Our Chief Technology Officer reports to the Audit Committee quarterly in regard to emerging risks and the overall cybersecurity environment and immediately if and when a cybersecurity incident occurs. Our Chief Technology Officer closely monitors cybersecurity risk, including our practices and procedures against the cybersecurity environment, including the operation of our incident response plan.
Our cybersecurity program is designed to ensure the confidentiality, integrity, and availability of data and systems as well as to ensure timely identification of and response to any incidents. This design is geared toward supporting our business objectives and the needs of our valued customers, employees, and other stakeholders. We firmly believe that cybersecurity is a collective responsibility that extends to every employee, and we prioritize it as an ongoing objective. To increase our employees’ awareness of cyber threats, we provide education and share best practices through a security awareness training program. This includes receiving quarterly exercises, cyber-event simulations, training programs and an annual attestation to our Technology Acceptable Use Policy.
ITEM 2. PROPERTIES
Our corporate headquarters areis located in Austin, Texas. Our other domestic operations are located in California, Michigan, New York, and elsewhere in the United States. We also maintain international offices in Brazil, Mexico, Canada, India, and Thailand, and have employees who work remotely and are based in several other locations across the world.
We continue to seek ways to reduce our global footprint in response to the COVID-19 pandemic while maintaining world class customer service. The COVID-19 pandemic has highlighted the ability to maintain most central business operations outside of traditional office space. We believe our facilities are adequate and suitable for current business needs and we expectsexpect to continue to reduce reliance on fixed office space in the future.
ITEM 3. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, see Note 1314 — Commitments and Contingencies, to our consolidated financial statements for the years ended December 31, 20222023 and December 31, 20212022 included in Part II, Item 8 of this Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our shares of Common Stock began trading on the Nasdaq Global Market on July 18, 2022, under the symbol “MOND”. There is no public market for our private placement warrants or shares of Series A Preferred Stock.
Prior to the Business Combination, our Units, Class A ordinary shares, and public warrants traded on the Nasdaq Capital Market under the symbols “ITHXU”, “ITHAX”, and “ITHXW,” respectively. Our Units began trading on January 28, 2021, and our Class A ordinary shares and public warrants began separate public trading on March 19, 2021. Our Class B ordinary shares were not listed on any exchange. Prior to January 28, 2021, there was no public market for any of our securities.
Holders of Record
As of March 31, 2023,18, 2024, there were 196173 holders of record of our shares of Common Stock. CertainThe actual number of holders is substantially larger than this, as the actual number includes holders who are beneficial owners but whose shares are held in “street” nameby brokers, financial institutions and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. nominees.
Dividends
We currently do not pay dividends on our Common Stock, and we do not anticipate paying cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our Board and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans
Information about our equity compensation plans is incorporated herein by reference to Part III, Item 12 of this Annual Report on Form 10-K.
Recent Sales of Unregistered Securities
Orinter Acquisition
On January 31, 2023 (the “Orinter Closing Date”), our Company and its wholly-owned subsidiary, Mondee Brazil LLC, a Delaware limited liability company (together with our Company, “Buyer”), entered into that certain Share Purchase and Sale Agreement, dated January 31, 2023 (the “Purchase Agreement”), with OTT Holding LTDA, a Brazilian limited liability company (the “Seller”), and Orinter Tour & Travel, S.A., a Brazilian corporation (“Orinter”), along with other parties thereto (the “Intervening Parties”), as described in the Purchase Agreement. Pursuant to the Purchase Agreement, the Seller sold to Buyer, and Buyer purchased from Seller, all of the issued and outstanding shares of the Orinter, in exchange for total consideration of $40.2 million (the “Consideration”) (such transactions contemplated by the Purchase Agreement, the “Orinter Acquisition”). The Consideration was comprised of: (i) a cash component equal to $21.1 million; (ii) a stock component equal to $16.0 million, in the form of 1,726,405 shares of our Common Stock (the “Escrow Shares”). The release of the shares are as follows: (a) 903,202 after a period of 12 months from the Orinter Closing Date, and (b) 823,203 shares after a period of 24 months from the Orinter Closing Date; and (iii) an earn-out obligation of $10.0 million (paid in equal installments over 3 years) contingent on Orinter meeting certain EBITDA targets over the years ended December 31, 2024, 2025 and 2026, respectively.
Interep Acquisition
On May 12, 2023 (the “Interep Closing Date”), we executed the Share Purchase and Sale Agreement (the "Interep Purchase Agreement") to purchase all of the outstanding shares of Interep Representações Viagens E Turismo S.A. (“Interep”) (such transactions contemplated by the Interep Purchase Agreement, the “Interep Acquisition”). Interep is a Brazilian travel operator specializing in national and international land travel with service aimed exclusively at travel agents. Through this acquisition, our Company continues to expand its geographic footprint in Brazil's domestic and outbound travel market.
In connection with the acquisition, we agreed to pay total consideration of (i) $4.0 million on the Interep Closing Date, with an adjustment for working capital, (ii) a deferred payment of $0.7 million paid in 36 installments, (iii) 411,000 shares of our Class A Common Stock, (iv) $50,000 in travel credits, and (v) an earn-out component up to an aggregate of $3.0 million contingent on Interep meeting certain adjusted EBITDA targets by the end of fiscal year 2025.
Consolid Acquisition
On May 12, 2023 (the “Consolid Closing Date”), we executed the Share Purchase and Sale Agreement (the "Consolid Purchase Agreement") to acquire all of the outstanding equity interests in Consolid Mexico Holding, S.A. P.I. de C.V. ("Consolid") (such transactions contemplated by the Consolid Purchase Agreement, the “Consolid Acquisition”). Consolid is a Mexican corporation and leader in the travel market with the main objective of generating higher income for travel agencies in Mexico and around the world through first-class technological tools with products and services that satisfy travelers. Through this acquisition, the Company expands its geographic footprint in Mexico's domestic and outbound travel market, as well as in other areas of Latin America. In connection with the acquisition, we agreed to pay total consideration of (i) $4.0 million on the Consolid Closing Date, with an adjustment for working capital, and (ii) an earn-out component up to an aggregate of $1.0 million and 400,000 shares of our Class A Common Stock contingent on Consolid meeting certain adjusted EBITDA targets for the trailing 12 months ending May 12, 2024 and the year ended December 31, 2024.
Skypass Acquisition
On August 12, 2023 (the “Skypass Closing Date”), we executed the Share Purchase Agreement to purchase all of the outstanding shares of Skypass Travel Inc., Skypass Travel de Mexico Sa de CV, Skypass Travel Private Limited and Skypass Holidays, LLC (collectively, "Skypass") (such transaction referred to as the "Skypass Acquisition”). Skypass is an international travel operator specializing in national and international air travel and hotel bookings primarily for travelers and employees associated with international corporations. The Skypass Acquisition allows the Company to expand its reach in the cruise and holiday packages travel sectors.
In connection with the acquisition, we agreed to pay total consideration of (i) $3.0 million on the Skypass Closing Date, with an adjustment for working capital, (ii) 900,000 shares of Company Class A Common Stock on the Skypass Closing Date, (iii) 100,000 shares of Company Class A Common Stock within 60 days after each of the first, second and third anniversaries of the Skypass Closing Date, and (iv) an earn-out component up to an aggregate of 1,800,000 shares of our Class A Common Stock over a four year period contingent on Skypass meeting certain adjusted EBITDA growth targets. In the event the EBITDA target is exceeded, the Company is required to pay additional shares of 2.5% on excess of the EBITDA target.
Purple Grids Acquisition
On November 13, 2023 (the “Purple Grids Closing Date”), we executed a stock purchase agreement to purchase all of the outstanding shares of Purple Grids, Inc. (“Purple Grids”) Purple Grids combines open AI with business intelligence and Robotic Process Automation (“RPA”) to automate customer experiences. In connection with the acquisition, we agreed to pay total consideration of approximately 1,900,000 shares with an adjustment for net working capital, including approximately i) 700,000 shares at closing with no lock-up; ii) 200,000 shares with a six month lock-up after closing and iii) 1,000,000 shares with a one year lock-up after closing. There is also a earn-out component of up to 1,000,000 of our Class A Common Stock that can be earned over a two-year period upon the achievement of certain revenue targets. Additionally, sellers may receive up to 1,542,857 shares depending on the price of the Company's stock on the first anniversary of the Purple Grids Closing Date.
Preferred Stock Financing
In the fourth quarter of 2023, the Company completed private placements of the Company’s Series A-3 Preferred Stock and issued 11,300 shares for gross proceeds of $11.3 million. In conjunction with the preferred stock financings, the Company issued warrants to purchase 1,444,500 shares of the Company’s Class A Common Stock to the participating investors.
Issue Purchases of Equity Securities
Tender Offer
On September 16, 2022, we commenced our offerIn 2023, the Board authorized a share repurchase program to each holderpurchase up to $40.0 million of ourthe Company’s outstanding public warrantsshares of Class A Common Stock. The amount and private placement warrantstiming of repurchases is determined at the Company’s discretion, depending on market and business conditions, and prevailing stock prices among other factors, and is subject to receive $0.65 in cash (the “Offer Purchase Price”), without interest, for each outstanding public warrantcontinued consent by its lenders. The timing and amount of repurchases will depend on various factors and may be increased or private placement warrant tenderedlimited by the holder pursuantBoard of Directors or lenders to the offer (the “Offer to Purchase”).
In connection with the Offer to Purchase, we solicited consents (the “Consent Solicitation”) from holders of the outstanding public warrants and private placement warrants to amend the Amended and Restated Warrant Agreement, (such amendment, the “Warrant Amendment”), to permit our Company to redeem each outstanding public warrant and private placement warrant for $0.01 in cash, without interest (the “Redemption Price”), which Redemption Price is 98% lessan amount lower than the purchase price to be received in connection with the Offer to Purchase. The execution and deliverycurrent Board of the Letter of Transmittal and Consent in connection with the exchange of the public warrants and private placement warrants in connection with the Offer to Purchase constituted a holder’s consent to the Warrant Amendment.
The Offer to Purchase and the Consent Solicitation expired one minute after 11:59 P.M., Eastern Time, on October 17, 2022, in accordance with their terms. Continental, the depository for the Offer to Purchase, indicated that (i) 10,741,390 outstanding public warrants,Directors authorized level, modified, suspended, or approximately 89.1% of the outstanding public warrants, were validly tendered in and not withdrawnterminated at any time without prior to the expiration of the Offer to Purchase, and therefore such public warrants consented to the Warrant Amendment and (ii) none of the outstanding private placement warrants were validly tendered in and not withdrawn prior to the expiration of the Offer to Purchase,
notice. Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including insider trading laws. The program is not subject to any self-imposed Company trading restrictions or blackout periods and therefore none of the private placement warrants consented to the Warrant Amendment. We accepted all validly tendered public warrants for purchase and settlement on or before October 21, 2022, paid an aggregate of $6,981,904 in cash in exchange for such public warrants. Because consents were received from holders of more than 50% of our public warrants, the Warrant Amendment was approved as it related to the public warrants. Becausehas no consents were received from any holder of our private placement warrants, the Warrant Amendment was not approved as it related to the private placement warrants.expiration date.
Accordingly,During the year ended December 31, 2023, the Company repurchased 2,389,954 shares of its Class A Common Stock for a total of $10.0 million. The repurchase was at a weighted-average price of $4.16 per share when excluding commissions, and are recorded to treasury stock on October 18, 2022, wethe Company’s consolidated balance sheets. As of December 31, 2023, $30.0 million remained available under the Share Repurchase Program.
| | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in thousands, except price per share data) | Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs |
Stock Repurchases1 | | | | | | | |
| Quarter Ended December 31, 2023 | | | | | | | |
| October 1 to October 31 | 1,650,961 | | $4.42 | | 1,650,961 | | $31,929 |
| November 1 to November 30 | 523,643 | | $3.63 | | 523,643 | | $30,030 |
| December 1 to December 31 | — | | $— | | — | | $30,030 |
| For the three months ended December 31 | 2,174,604 | | $4.23 | | 2,174,604 | | $30,030 |
| | | | | | | |
Stocks Retained in Net Settlement2 | | | | | | | |
| October 1 to October 31 | 29,131 | | | | | | | |
| November 1 to November 30 | 8,529 | | | | | | | |
| December 1 to December 31 | 6,386 | | | | | | | |
| For the three months ended December 31 | 44,046 | | | | | | | |
1 On September 21, 2023, the Board authorized, and Continental, as warrant agent, entered into the Warrant Amendment, which permitted uslater approved an upsize, a share repurchase program to redeem each public warrant that remained outstanding upon the closingpurchase up to $40 million of the OfferCompany’s Class A Common Stock (the “Share Repurchase Program”). The Share Repurchase Program has no expiration date.
2 The Company’s Stock Plan permits net settlement of stock issuances relating to Purchaseequity awards for purposes of settling a grantee’s tax withholding obligations. Stock Retained in Net Settlement was at the Redemption Price, which is approximately 98% less than the Offer Purchase Price. Pursuant to the Warrant Amendment, we had the right to redeem not less than allvesting price of the public warrants at any time while such public warrants were exercisable and prior to their expiration, at the office of Continental, upon notice to the registered holders of the outstanding public warrants at least five days prior to the date of redemption fixed by us. We exercised our right to redeem all remaining outstanding public warrants in accordance with the terms of the Warrant Amendment, with October 27, 2022 fixed as the redemption date. The following table provides information relating to the repurchase of our public warrants during the referenced periods:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Warrants Purchased | | Average Price Paid Per Warrant | | Total Number of Warrants Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Warrants That May Yet Be Purchased Under the Plans or Programs |
| October 2022 | | 12,059,985 | | $0.58 $— | | 12,059,985 | | — |
| November 2022 | | — | | — | | — | | — |
| December 2022 | | — | | — | | — | | — |
| Total | | 12,059,985 | | | | | 12,059,985 | | |
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and the accompanying notes for the years ended December 31, 20222023 and December 31, 20212022 included in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements, including statements regarding our intentions, plans, objections, and expectations for our business. Forward-looking statements are based upon our current beliefs, plans, and expectations related to future events and our future financial performance and are subject to risks, uncertainties, and assumptions forward-looking statements, including statements regarding our intentions, plans, objections, and expectations for our business. Forward-looking statements are based upon our current beliefs, plans, and expectations related to future events and our future financial performance and are subject to risks, uncertainties, and assumptions. Our actual results and the timing of certain events could differ materially from those described in or implied by these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section of this Annual Report on Form 10-K. See also the “Special Note Regarding Forward-Looking Statements” section of this Annual Report on Form 10-K.
This section includes a discussion of 2022 and 2021 items and a comparison of the fiscal years ended 2022 and 2021.
Overview
We are a leading travel technology company and marketplace with a portfolio of globally recognized technology solutions in the leisure, retail and corporate travel sectors.
We provide state-of-the art technologies, operating systems and technology-enabled services that seamlessly facilitate travel market transactions to better serve travelers through travel affiliates and numerous other emerging channels. These technology solutions with access to global travel inventorycontent and extensive negotiated travel content, combined with our distribution network, create a modern travel marketplace. Our modern marketplace provides the increasingly discerning traveler with enhanced options on efficient consumer-friendly distribution platforms, while supporting our travel supplier partners in utilizing highly-perishable travel inventory.content.
In addition to the rapid development and enhancement of our modern travel marketplace, we are increasingly focused on expanding our penetration of the "gig economy"“gig economy” segment of the travel market. We believe our technology solutions are well-suited to serve gig workers seeking more flexible, diverse content and travel services.
From its founding, our Company began building a leading international wholesale travel business through acquisitions and deployment of our technology platform. We have continued to enhance our technology, expand our market reach and increase our travel market penetration with a combination of organic and inorganic initiatives and transactions. Most recently, we have acquired companies with subscription products, expanded hotel and retail consumer services and added more global content.
We believe the successful execution of our combined organic and inorganic acquisition business strategy has enhanced our modern travel marketplace and positioned us well for emerging travel business opportunities.
We generate revenue primarily from travel-related activity, which is presented as travel marketplace segment revenue on the disaggregated revenue disclosure within Note 11 — Revenue, of our consolidated financial statements. The travel marketplace segment includes revenue earned from:
•Commissions revenue, including mark-up fees and commissions on airline ticket sales and to a lesser extent, for hotel accommodations and booking of airline ticketscar rentals, and other travel products and have begun adding subscription fees with some services. Primarily all of our revenue today is generated by providing omni-channel travel services that result in airline ticket and ancillary sales. Revenue is received in the forms of ticket markups, supplier commission, or ticketing or ancillary fees, fintechservices;
•Incentive revenues as well as incentive paymentsearned from airlines, GDS service providers and banksairline companies for airline reservations, as well as from our fintech payment programs based on the aggregate gross booking amounts processed by us; and financial institutions, which we leverage in our payment processing
•Other travel products and settlement platform. We also fulfill and settle the reservations booked through affiliated travel agents or directly by travelers.services.
As a resultThe remainder of our Business Combination with ITHAX, we obtained further financing duringrevenues are generated from subscription contracts for access to our travel management software-as-a service ("SaaS") platforms. Our SaaS platform revenues are recognized over the year ended December 31, 2022. Asterm of the periods presented, through financing activities we have raised an aggregate of $163.5 million and $3.8 million for the years ended December 31, 2022 and 2021, respectively. The increase in cash from financing activities is primarily due to the $83.6 million, net of issuance costs of $1.4 million, raised in connection with the issuance of our Series A Preferred Stock during the period. Additionally, in July 2022, as partduration of the Business Combination, we raised net proceeds of $54.8 million consisting of $78.5 million through the PIPE Financing, net of expenses of $23.7 million. We incurred a net loss of $90.2 million and our operations used $10.6 million in cash for the year ended December 31, 2022, which included $62.0 million of stock-based compensation. We incurred a net loss of $38.9 million, including the impacts of COVID-19, and used $15.7 million in cash from operating activities for the year ended December 31, 2021.contract.
Impact of COVID-19 and War in Ukraine
The global pandemic of COVID-19 has resulted, and could continue to result in, significant disruptions to the global economy, as well as businesses and capital markets around the world. In response to the pandemic, governments, healthcare and other organizations around the world have imposed, and may impose in the future, various measures, including but not limited to, voluntary and mandatory quarantines, stay-at-home orders, travel restrictions and advisories, limitations on gatherings of people, reduced operations and extended closures of businesses.
With respect to our Company, since our business and prospects are largely dependent on travel transaction volumes, that have and will continue to be adversely affected by these and other measures to mitigate risk associated with COVID-19, our financial results for the year ended December 31, 2020 were significantly and negatively impacted, with a material decline in total revenues, net income, cash flow from operations and Adjusted EBITDA (as defined below). We withstood these unprecedented impacts in the form of airline and traveler cancellations, customer chargebacks, and refunds. However, we took measures to mitigate or control risks associated with COVID-19 and reduced costs and managed cash flow. In particular, we: (a) renegotiated certain terms and conditions of our loans with our lenders to defer interest payments and thereby managed our cash; (b) raised additional capital through external borrowings; (c) restructured accounts payable to accommodate a longer time horizon for payment; and (d) invested in and developed our platform to increase operating efficiencies and to reduce labor expenses. Our financial results for the year ended December 31, 2022 improved from the negatively impacted fiscal 2020 as the travel industry continued to rebound. Revenues for the year ended December 31, 2022 were $66.3 million higher than the year ended December 31, 2021 as vaccination rates increased and COVID-19 travel restrictions began to lift around the world.
During 2020, Mondee also applied for and received a loan of $4.3 million from the PPP, all of which was forgiven in August 2021. Mondee and Rocketrip, each applied for second tranches of the PPP in January 2021 and received, in aggregate $3.6 million. In November 2021, Rocketrip’s second tranche of $1.6 million was forgiven. In May 2022, Mondee’s second tranche of $2.0 million was forgiven.
A global travel recovery has generally continued during 2022, based somewhat on the development, rapid approval and more widespread use of many COVID-19 vaccines. Nevertheless, notwithstanding widespread vaccine distribution across the world, new variants of COVID-19, such as the Delta and Omicron variants identified in the second half of 2021 and early 2022, have impacted the pace of the recovery. Additionally, the war between Russia and the Ukraine, and the global travel sanctions associated with them, have had a material adverse impact on this travel recovery. Accordingly, there remains uncertainty and volatility around the path to full economic and travel recovery from the COVID-19 pandemic due to deployment and adoption of vaccines globally, changing travel restrictions, continued war between Russia and Ukraine, as well as the potential impact of the new variants of COVID-19 in early 2023. As a result, we are unable to predict accurately the impact that the COVID-19 pandemic will have on the pace of recovery of our business going forward.
See “Risk Factors” for further discussion of the possible impact of COVID-19 on our business.
Recent Developments
Share Pledge Agreement in Connection with the Orinter Acquisition
On January 31, 2023, our Company and its wholly-owned subsidiary, Mondee Brazil (“Mondee Brazil”), entered into the Share Purchase and Sale Agreement, with OTT Holding (“OTT”) and Orinter Viagens E Turismo S.A., a corporation organized under the laws of Brazil (“Orinter”), along with other parties thereto (the “Orinter Purchase Agreement”). Pursuant to the Orinter Purchase Agreement, OTT sold all of the issued and outstanding shares of the Orinter to our Company and Mondee Brazil, in exchange for total consideration of $40.2 million (such transactions contemplated by the Orinter Purchase Agreement, the “Orinter Acquisition”).
On April 14, 2023, and in connection with the Orinter Acquisition, Mondee Brazil and Mondee, Inc., a Delaware corporation (“Mondee, Inc.”, together with Mondee Brazil, the “Pledgors” both subsidiaries of our Company), TCW Asset Management Company, a Delaware limited liability company (the “Administrative Agent”), the lenders from time to time (the “Lenders”) party to the Term Loan and Orinter, executed that certain share pledge agreement, effective as of March 28, 2023 (the “Share Pledge Agreement”), pursuant to that certain Amendment No. 10, dated as of January 31, 2023 (the “Tenth Amendment”) to the Term Loan dated as of December 23, 2019, by and among our Company, the Administrative Agent and the other parties.
The Share Pledge Agreement sets forth the terms on which: (i) Mondee, Inc., the sole equity owner of Mondee Brazil and minority equity owner of Orinter, pledges 100% of the equity interests of Mondee Brazil, which is the majority equity owner of Orinter, pursuant to the Tenth Amendment; and (ii) the Pledgors pledge 100% of the equity interests of Orinter, pursuant to the Tenth Amendment. The Share Pledge Agreement shall terminate on the termination date of the Term Loan.
TCW Debt Amendments
On January 11, 2023, wethe Company executed a ninth amendmentthe Ninth Amendment to the TCW Agreement (the “Ninth Amendment”),Term Loan, wherein Wingspire Capital LLC (“Wingspire”) became a party to the TCW Agreement,Term Loan, among other changes. Wingspire also funded an additional $15.0 million of term loan commitment on top ofto the already outstanding Term Loan. Additionally, the Ninth Amendment split the Term Loan with TCW into two loans. Term Loan A will be represented by Wingspire with an outstanding principal balance of $30.0 million and Term Loan B will be represented by TCW with an outstanding principal balance of $137.8 million.
Additionally, pursuant to the Ninth Amendment, Wingspire consented to take over the TCW LOC for a principal amount not to exceed $15.0 million. Until January 11, 2024, we have the option to increase Term Loan A by $20.0 million under two conditions: (i) our Company must have a trailing 12-month EBITDA of at least $25.0 million; and (ii) our Company must draw in increments of at least $5.0 million.
On January 31, 2023, wethe Company executed a tenth amendmentthe Tenth Amendment to the TCW Agreement (the “Tenth Amendment”).Term Loan. The Tenth Amendment (1) set forth the terms on which wethe Company could acquire Orinter, pursuant to that certain Sharethe Orinter Purchase and Sale Agreement, dated as of January 31, 2023, among us, Mondee Brazil, LLC, a Delaware limited liability company (“Mondee Brazil”), OTT Holdings Ltda. (“OTT Holdings”), Orinter, and the other parties named therein (the “OrinterPurchase Agreement”);Agreement; (2) set forth the terms on which wethe Company could pay the earn-out payment contemplated to be paid to OTT Holdings and certain key executives of OTT
Holdings pursuant to the Orinter Purchase Agreement; (3) required that Mondee Brazil join as a party to the TCW AgreementTerm Loan and the Security Agreement (as defined in the TCW Agreement);Agreement; (4) required that Mondee, Inc. pledge 100% of the equity interests of Mondee Brazil; and (5) required that Mondee Brazil and Mondee Inc. pledge 100% of the equity interests of Orinter.
Orinter AcquisitionOn October 13, 2023, the Company executed an eleventh amendment to the Term Loan (the “Eleventh Amendment”). The Eleventh Amendment (1) provided consent to the Company’s acquisitions of Interep, Consolid and Skypass; (2) required that the Company pledge 100% of the equity interests of Interep, Consolid and Skypass, and certain other subsidiaries; (3) specifies that certain leverage ratios, minimum unadjusted EBITDA and fixed charge coverage ratio covenants shall not be measured through the term of the Term Loan; (4) sets forth certain qualified cash requirements; (5) adds as an event of default the failure of the Company to achieve certain refinancing milestones; (6) provides that the revolving credit commitment shall be uncommitted and discretionary in nature; and (7) provides for the payment of certain fees. On November 2, 2023, the Company entered into a waiver with TCW Asset Management Company and Wingspire Capital LLC regarding the Term Loan which waived certain mandatory prepayment obligations of the Company.
On January 17, 2024, the Company executed a twelfth amendment to the Term Loan (the “Twelfth Amendment”). The Twelfth Amendment (1) provided consent to the Company’s acquisition of Purple Grids; (2) required that the Company pledge 100% of the equity interests of Purple Grids; (3) defers a portion of the principal and interest payments due in December 2023 to the termination of the Term Loan; (4) defers certain refinancing milestones and modifies certain liquidity requirements; (5) modifies the payment of certain administrative fees to quarterly rather than annually; and (7) provides for the payment of certain fees.
On March 11, 2024, the Company executed a thirteenth amendment to the Terms Loans (the “Thirteenth Amendment”). The Thirteenth Amendment (1) provided an extension of the maturity on the Term Loans to March 31, 2025 while the Company works to finalize a long-term facility; (2) no event of default for any refinancing milestone; (iii) extends the date on which arefinancing fee is potentially payable to April 30, 2024; (iv) defers a portion of the principal amortization due in March 2024 to the earlier of the date of the refinancing of the credit facility or June 30, 2024, and capitalizes a part of interest due in March 2024; (v) waives any events of default that may have occurred prior to the Amendment; and (vi) provides for a fee of $0.4 million “paid in kind” and added to the outstanding principal of the Term Loan.
Pro Rata Distribution and Settlement of Mondee Group Note
In connection with the business combination between ITHAX Acquisition Corp., a Cayman Islands exempted company, and Mondee Holdings II, Inc., a Delaware company, (the “Business Combination”), Mondee Holdings, LLC, a Delaware limited liability company, (the “Mondee Stockholder”) received 60,800,000 shares of our Class A Common Stock. Mondee Holdings, LLC shall distribute the 60,800,000 shares of our Class A Common Stock on a pro rata basis to the members of Mondee Holdings LLC (the “Pro Rata Distribution”).
Upon the completion of the Pro Rata Distribution, Mondee Holdings LLC ceased to hold any shares of our Class A Common Stock, with the exception of the 2,033,578 shares that Mondee Group transferred to Mondee Holdings LLC in order to settle the $19.3 million note entered between Mondee Group and Mondee, Inc on March 25, 2016 (“Mondee Group Note”).
Preferred Stock Financing
In the fourth quarter of 2023, the Company completed private placements of the Company’s Series A-3 Preferred Stock and issued 11,300 shares for gross proceeds of $11.3 million. In conjunction with the preferred stock financings, the Company issued warrants to purchase 1,444,500 shares of the Company’s Class A Common Stock to the participating investors.
LBF US Divestiture
In July 2023, the Company entered into a letter of intent with a related party buyer to sell LBF Travel Inc, LBF Travel Holdings LLC, Avia Travel and Tours Inc, and Star Advantage Limited ("LBF US" collectively) for net proceeds of 200,000 shares of our Class A Common Stock returned from the buyer. The divestiture of LBF US closed in September 2023. In connection with the sale, the Company recognized a gain of $1.3 million, net of transaction costs, which was recorded in other income (expense), net. Additionally, the Company agreed to provide certain short-term transition services to support the divested business through October 2023, which was subsequently amended to extend through January 2024. Cost of the transition services of $10.4 million was recorded in other income (expense), net. The results of the divested business through date of sale and the transition services provided to the LBF US post the sale were reflected within the travel marketplace segment. LBF US had been accumulating losses, as it relied heavily on labor costs, and was no longer in alignment with Mondee's high-tech approach to markets.
Acquisitions
From time to time, we undertake acquisitions or similar transactions consistent with our operating and growth strategies. We completed four business acquisitions and one asset acquisition as defined by GAAP in the year ended December 31, 2023.
Orinter Acquisition
On January 31, 2023 (the “acquisition date”“Orinter Closing Date”), our Company and its wholly-owned subsidiary, Mondee Brazil LLC, a Delaware limited liability company (together with our Company, “Buyer”), entered into that certain Share Purchase and Sale Agreement, dated January 31, 2023 (the “Purchase Agreement”), with OTT Holding LTDA, a Brazilian limited liability company (the “Seller”), and Orinter Tour & Travel, S.A., a Brazilian corporation (the “Orinter”), along with other parties thereto (the “Intervening Parties”), as described in the CompanyPurchase Agreement. Pursuant to the Purchase Agreement, the Seller sold to Buyer, and Buyer purchased from Seller, all of the issued and outstanding shares of the Orinter, in exchange for total consideration of $40.2 million (the “Consideration”) (such transactions contemplated by the Purchase Agreement, the “Orinter Acquisition”). The Consideration was comprised of: (i) a cash component equal to $21.1 million; (ii) a stock component equal to $16.0 million, in the form of 1,726,405 shares of our Common Stock (the “Escrow Shares”). The release of the shares are as follows: (a) 903,202 after a period of 12 months from the Orinter Closing Date, and (b) 823,203 shares after a period of 24 months from the Orinter Closing Date; and (iii) an earn-out obligation of $10.0 million (paid in equal installments over 3 years) contingent on Orinter meeting certain EBITDA targets over the next three years.
Interep Acquisition
On May 12, 2023 (the “Interep Closing Date”), we executed the Share Purchase and Sale Agreement (the "Interep Purchase Agreement") to purchase all of the outstanding shares of Interep Representações Viagens E Turismo S.A. (“Interep”) (such transactions contemplated by the Interep Purchase Agreement, the “Interep Acquisition”). Interep is a Brazilian travel operator specializing in national and international land travel with service aimed exclusively at travel agents. Through this acquisition, our Company continues to expand its geographic footprint in Brazil's domestic and outbound travel market.
In connection with the acquisition, we agreed to pay total consideration of (i) $4.0 million on the Interep Closing Date, with an adjustment for working capital, (ii) a deferred payment of $0.7 million paid in 36 installments, (iii) 411,000 shares of our Class A Common Stock, (iv) $50 thousand in travel credits, and (v) an earn-out component up to an aggregate of $3.0 million contingent on Interep meeting certain adjusted EBITDA targets.
Consolid Acquisition
On May 12, 2023 (the “Consolid Closing Date”), we executed the Share Purchase and Sale Agreement (the "Consolid Purchase Agreement") to acquire all of the outstanding equity interests in Orinter from OTTConsolid Mexico Holding, Ltd (the “Sellers”S.A. P.I. de C.V. ("Consolid") (such transactions contemplated by the Consolid Purchase Agreement, the “Consolid Acquisition”). OrinterConsolid is a high-growthMexican corporation and leadingleader in the travel providermarket with a strong presencethe main objective of generating higher income for travel agencies in BrazilMexico and Latin America. Orinter currently serves 4,800 travel companies whose integrationaround the world through first-class technological tools with products and services that satisfy travelers. Through this acquisition, the Company expands the Company’sits geographic footprint to include Brazil’sin Mexico's domestic and outbound travel market. Additionally, Orinter’s direct relationships withmarket, as well as in other areas of Latin American hotels will provide valuable cross-sell opportunities for the Company.
As part of the acquisition, the Company paid $20.5 million in cash and $17.3 million in shares of the Company Common Stock shares (1.7 million shares of the Company Common Stock at $10 each). 903,202 of the Common Stock shares will be maintained in an escrow for one year and the remainder will also be maintained in an escrow for two years. Additionally, there is an earn-out obligation of $10.0 million (paid in 3 equal installments over 3 years) that may be owed to OTT Holdings. The earn-out payments are contingent on Orinter meeting EBITDA targets of $10.5 million, $11.5 million, and $12.5 million, in each of the three years, respectively.
Pro Rata DistributionAmerica.
In connection with the Business Combination as described further below,acquisition, we agreed to pay total consideration of (i) $4.0 million on the Mondee Stockholder received 60,800,000Consolid Closing Date, with an adjustment for working capital, and (ii) an earn-out component up to an aggregate of $1.0 million and 400,000 shares of our Class A Common Stock. In MarchStock contingent on Consolid meeting certain adjusted EBITDA targets.
Skypass Acquisition
On August 12, 2023 (the “Skypass Closing Date”), we executed the Mondee Stockholder effected the Pro Rata Distribution. Upon the consummationShare Purchase Agreement to purchase all of the Pro Rata Distribution, the Mondee Stockholder ceased to hold anyoutstanding shares of our Common Stock.
Business Combination
On the Closing Date, we consummated the Business Combination with Mondee, whereby First Merger Sub merged withSkypass Travel Inc., Skypass Travel de Mexico Sa de CV, Skypass Travel Private Limited and into Mondee, with Mondee surviving such merger as a wholly owned subsidiary of our Company, and immediately following the First Merger, Mondee merged with and into Second Merger Sub, with Second Merger Sub surviving such merger as a wholly owned subsidiary of our Company.
The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, we were treatedSkypass Holidays, LLC (collectively, "Skypass") (such transaction referred to as the acquired company"Skypass Acquisition”). Skypass is an international travel operator specializing in national and international air travel and hotel bookings primarily for financial statement reporting purposes. Upon consummation oftravelers and employees associated with international corporations. The Skypass Acquisition allows the First Merger, Second Merger,Company to expand its reach in the cruise and the PIPE Financing, the most significant change in our reported financial position and results was an increase in cash of $54.8 million for the year ended December 31, 2022, as compared to the same period in 2021.holiday packages travel sectors.
In connection with the Closing:
•All issued and outstandingacquisition, we agreed to pay total consideration of (i) $3.0 million on the Skypass Closing Date, with an adjustment for working capital, (ii) 900,000 shares of Mondee, including any unvested incentive stock units of the Mondee Stockholder were converted into the right to receive an aggregate of 60,800,000 shares of our Common Stock;
•Pursuant to the Earn-Out Agreement, we issued 6,500,000 Earn-Out Shares;
•All outstanding Class A ordinary shares (after redemptions) and Class B ordinary shares were cancelled and converted into shares of our Common Stock;
•We entered into a seventh amendment to the TCW Agreement with TCW and the other Lenders thereto reflecting a debt modification, which resulted in the issuance of 3,000,000 Class G units of the Mondee Stockholder and a prepayment of the principal and fee of $41.2 million; and
•We issued an aggregate of 7,000,000 PIPE Shares at a price of $10.00 per share, for an aggregate of $70.0 million, to the PIPE pursuant to the PIPE Subscription Agreements entered into effective as of December 20, 2021, as amended, and as of April 21, 2022.
Our Common Stock is currently listed on The Nasdaq Global Market (“Nasdaq”) under the symbol “MOND”. See Notes 1 and 3 to our consolidated financial statements for the years endedDecember 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Metaminds Acquisition
On July 18, 2022, Mondee, Inc., a subsidiary of our Company (“Mondee, Inc.”), entered into an Asset Purchase Agreement (the “MetamindsAgreement”) with Metaminds Technologies Pvt. Ltd., (“Metaminds”), Gundumogula, Pasam, and Mondee Group to acquire substantially all of the assets and associated liabilities of Metaminds in exchange for $2.0 million. Gundumogula owns all of the equity interests of Mondee Group, while Gundumogula and Pasam, who are married to one another, both own Metaminds. Metaminds provided Mondee, Inc. with a dedicated offshore team that supplemented and supported our internal technology development group. Metaminds offshore team offers technology consulting, technology support and application development, which supported our revenue management process as well our IT support. Metaminds was directly involved with writing code for our internally developed technology as well as provided maintenance service when issues arise. These services are consistent with the Amended and Restated Services Agreement dated September 26, 2011, by and between Mondee, Inc. and Metaminds, and made effective as of April 16, 2010. During the years ended December 31, 2021 and 2020, transaction cost with Metaminds amounted to $1.1 million and $0.6 million, respectively. Gundumogula is our Chief Executive Officer and a material shareholder of our Company. Gundumogula serves on the board of directors of Mondee, Inc. and certain of its subsidiaries. Gundumogula and Pasam collectively own all the issued and outstanding shares of the capital stock of Metaminds, while Gundumogula is the sole owner of all of the issued and oustanding equity interests of Mondee Group. After the consummation of the Business Combination, Gundumogula controlled 83% of the shares of our Common Stock. Based on Gundumogula’s ownership of us and Metaminds at that time, we considered the Metaminds Agreement to be a related party transaction.
The net assets carrying value converted on July 18, 2022 was immaterial. Per the Metaminds Agreement, the purchase price of $2.0 million was be settled against the loan receivable from the Mondee Group Note (as defined below) with an original principal balance of $19.3 million and accumulated interest of $3.1 million as of July 18, 2022.
Prior to the close of the transaction, Mondee, Inc. hired 100% of Metaminds employees in April 2022. The hiring of Metaminds employees was in line with the terms of the Metaminds Agreement. The Metaminds Agreement states that Metaminds will terminate the employment of all transferring employees immediately prior to the effective date of their employment with Mondee, Inc. Metaminds will then support Mondee, Inc. by using its best efforts to secure satisfactory employment arrangements with those employees of Metaminds to whom Mondee, Inc. makes offers of employment.
Settlement of Mondee Group Note and Shareholder Receivable
On March 25, 2016 Mondee, Inc. extended a loan in the original amount of $19.3 million to Mondee Group (the "Mondee Group Note"). Mondee Group is owned by Gundumogula.
On the Closing Date, Mondee, Inc. entered into a second amendment to the Mondee Group Note. Mondee, Inc. agreed to settle $2.0 million of the outstanding balance of the Mondee Group Note through the acquisition of Metaminds pursuant to the Metaminds Agreement. As payment of the $2.0 million under the Metaminds Agreement the outstanding balance of the loan receivable will be reduced to $20.3 million (the “RemainingBalance”).
Additionally on the Closing Date, we and Mondee Group entered into a note repayment agreement that finalized how the Remaining Balance was settled. Consistent with SAB Topic 4E, the Company recorded such right to receive the Company Class A Common Stock ason the Skypass Closing Date, (iii) 100,000 shares of Company Class A Common Stock within 60 days after each of the first, second and third anniversaries of the Skypass Closing Date, and (iv) an earn-out component up to an aggregate of 1,800,000 shares of our Class A Common Stock over a deduction from shareholders' deficit.four year period contingent on Skypass meeting certain adjusted EBITDA growth targets. In the event the EBITDA target is exceeded, the Company is required to pay additional shares of 2.5% on excess of the EBITDA target.
Purple Grids Acquisition
On November 13, 2023 (the “Purple Grids Closing Date”), we executed a stock purchase agreement to purchase all of the outstanding shares of Purple Grids, Inc. Purple Grids combines open AI with business intelligence and RPA (Robotic Process Automation) to automate customer experiences. In connection with the Business Combination, the Mondee Stockholder received our Common Stock, which was distributedacquisition, we agreed to Mondee Group on March 10, 2023, pursuantpay total consideration of approximately 1,900,000 shares with an adjustment for net working capital, including approximately i) 700,000 shares at closing with no lock-up; ii) 200,000 shares with a six month lock-up after closing and iii) 1,000,000 shares with a one year lock-up after closing. There is also a earn-out component of up to the Pro Rata Distribution. Mondee Group assigned the right to receive 2,033,578 shares1,000,000 of our Common Stock to Mondee, Inc., in settlement of the Remaining Balance. The shares of our Common Stock were valued at $10.00 each, which resulted in 2,033,578 shares being issued to Gundumogula by our Company. The Remaining Balance was reflected as treasury stock since the settlement of the Remaining Balance was a result of Gundumogula transferring our Common Stock to us.
Preferred Stock Issuance
On September 29, 2022, we entered into the Preferred Subscription Agreements to issue 85,000 shares of Series A Preferred Stock with a purchase price of $1,000.00 per share, resulting in gross proceeds of $85 million.
Issuance of Warrants
As an inducement and concurrently with our entry into the Preferred Subscription Agreements, we issued the Preferred Financing Warrants, that upon exercise convert into the Company’s Class A Common Stock. The Preferred Financing Warrants hadStock that can be earned over a grant-date fair valuetwo-year period upon the achievement of $3.07 at issuance and are fully vested. The Preferred Financing Warrants are exercisable until September 29, 2027. Refercertain revenue targets. Additionally, sellers may receive up to Note 4 to1,542,857 shares depending on theconsolidated financial statements for the year endedDecember 31, 2022included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Tender Offer for Warrants
On September 16, 2022, we commenced our a tender offer agreement to tender public warrants at a price of $0.65 per warrant in cash, for up to 12,293,543 of our outstanding public warrants and private placement warrants to purchase the shares of our Common Stock. Our Offer to PurchaseCompany's stock on the public warrants and private placement warrants was not conditioned on any minimum number of warrants being tendered and expired on October 17, 2022 with 10,741,390 public warrants and no private placement warrants being tendered. The remaining 1,319,653 public warrants were redeemed at a price of $0.01 per public warrant, in cash. The gross cash paid in exchange for the public warrants was approximately $7.5 million. As of December 31, 2022, there were no public warrants outstanding and 232,500 private placement warrants outstanding.
Restructuring
As part of our restructuring plans, we conducted the RIF of 368 employees from July 2022 to October 2022, including involuntary and voluntary positions that were not backfilled. We generally provided involuntary termination benefits in the amount of one month of compensation as a severance payment. We have closed our Mohali and Dehradun, India offices and plan to exit or sublease these premises.
In 2020-2021, during the heightfirst anniversary of the COVID-19 pandemic, we recognized the dual needs of: i) driving material operating efficiencies and, ii) positioningPurple Grids Closing date. The Purple Grids Acquisition is accounted for a more fragmented and permanently changed travel intermediary customer and end traveler.
Operational streamlining and efficiencies, as well as moving certain onboarding and sales functions to new self-service tools, and the sun-settingan acquisition of certain acquired and disparate systems, created one time staff redundancy in several functional areas. Reflective of these operational efficiencies, as well as the changes in customer buying patterns and cycles, we assessed our operating model and staffing requirements to meet current and growing business demand.
As a result of the assessment, we determined there was the need and opportunity for a permanent reduction in staffing levels across a variety of functional areas from call center sales staff to mid and back-office servicing staff and facilities. We began implementing this plan during the three months ended September 30, 2022, with most of the staff reductions, facility redundancy and process changes completed within the quarter. The balance of those changes were made in the three months ended December 31, 2022.
This right-sizing program resulted in the reduction of front-end sales positions; mid-office quality control, ticketing and related positions; back-office accounting and fraud protection positions; and the vacating of the Mohali and Dehradun facilities. All functional areas are now covered in the remaining Delhi and Hyderabad facilities with existing staff.
During the three months ended March 31, 2023, the Company announced additional reductions to employees at the Delhi, India office location. The purpose of this actions is to pursue greater cost efficiencies and to realign our business and strategic priorities
Factors Affecting Our Performance
The COVID-19 pandemic has had, and may continue to have, a material impact on the expansion of the global gig economy and remote worker populations, which could provide a material business leverage opportunity for our Company with commensurate operating and revenue performance results.
The COVID-19 pandemic caused a fundamental, and potentially permanent, shift of business practices globally to the adoption of remote and virtual work environments. This change, among other generational factors, rapidly increased the proliferation of the global gig economy, creating larger fragmented pools of remote, part-time and home-based gig workers. In many industries, and especially in the travel industry, this shift has created a significant market white space for remote and home-based business solutions that are largely technology enabled. We believe our micro-services and self-service modern technology solutions, combined with our affiliate and travel agent market segment focus, extensive high-value content access and consumer-friendly apps, give us a material early-to-market advantage in this market white space. In addition, this advantage may provide us with significant market growth and penetration opportunities for an unpredictable period of time, which could result in a potentially material increase in transactions. Since our financial results and prospects are largely dependent on these transaction volumes, we may see a commensurate positive impact on our operating and financial performance.
The COVID-19 pandemic has had, and may continue to have, a material adverse impact on the travel industry, which could materially affect our business, liquidity, financial condition and operating results.
The COVID-19 pandemic and the resulting economic conditions and government orders forced many of our travel suppliers, including airlines and hotels, to curtail drastically their service offerings, pursue cost reduction measures and seek financing, including government financing and support, so they could reduce financial distress and continue operating. In addition, the COVID-19 pandemic resulted in a material decrease in business and consumer spending and an unprecedented decline in transaction volumes in the global travel industry. Our financial results are largely dependent on these transaction volumes. As a result, our financial results for the years ended December 31, 2022, 2021, and 2020 were impacted in total revenues, net income, cash flow from operations and Adjusted EBITDA, as compared to 2019. Financial results began to improve in 2021 and continued to trend upward through 2022.
Our liquidity and ongoing access to capital could be materially and negatively affected by the impacts of the COVID-19 pandemic.
We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $190.0 million and $280.3 million as of December 31, 2021 and December 31, 2022, respectively. We believe that our cash on hand, cash generated from operating activities, available line of credit, additional investments obtained through the Business Combination, including the $70.0 million PIPE Financing, cash held by ITHAX of $0.2 million and $8.4 million net of redemptions, as well as the $85.0 million in proceeds from the Preferred Financing Transaction will satisfy our working capital and capital requirements for at least the next 12 months. Our future capital requirements, however, will depend on many factors, including on-going effects of the COVID-19 pandemic, consolidation of the travel industry, changes in the general market conditions for travel services, and future business combinations. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. From time to time, we may seek to raise additional funds through the sale of equity and debt. If we are unable to raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition could be adversely affected.
Our continued access to sources of liquidity depends on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing and our operating performance. Since the COVID-19 pandemic, there has been increased volatility in the financial and securities markets, which has generally made access to capital less certain and has increased the cost of obtaining new capital. However, there is no guarantee that we will not need to obtain debt financing in the future to fund our operations, or that such debt financing will be available in the future, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding.
Adverse changes in general market conditions for travel services, including the effects of macroeconomic conditions, terrorist attacks, natural disasters, health concerns, civil or political unrest or other events outside our control could materially affect our business, liquidity, financial condition and operating results.
Our revenue is derived from the global travel industry and would be significantly impacted by declines in, or disruptions to, travel activity, particularly air travel. Global factors over which we have no control, but which could impact our clients’ willingness to travel and, depending on the scope and duration, cause a significant decline in travel volumes include, among other things:
•widespread health concerns, epidemics or pandemics, such as the COVID-19 pandemic, the Zika virus, H1N1 influenza, the Ebola virus, avian flu, SARS or any other serious contagious diseases;pandemics;
•global security concerns caused by terrorist attacks, the threat of terrorist attacks, or the precautions taken in anticipation of such attacks, including elevated threat warnings or selective cancellation or redirection of travel;
•cyber-terrorism, political unrest, the outbreak of hostilities or escalation or worsening of existing hostilities or war;
•natural disasters or severe weather conditions, such as hurricanes, flooding and earthquakes;
•climate change-related impact to travel destinations, such as extreme weather, natural disasters and disruptions, and actions taken by governments, businesses and supplier partners to combat climate change;
•the occurrence of travel-related accidents or the grounding of aircraft due to safety concerns;
•adverse changes in visa and immigration policies or the imposition of travel restrictions or more restrictive security procedures; and
•any decrease in demand for consumer or business travel could materially and adversely affect our business, financial condition and results of operations.
Our operating results are impacted by our ability to manage costs and expenses, while achieving a balance between making appropriate investments to grow revenue and increase profitability.
Cost and expense management will have a direct impact on our financial performance. We may look to drive revenue growth through investments in marketing, technology, and acquisitions to increase our net revenue, product offerings, revenue per transaction, and ultimately market share. These investments will need to be weighed against creating a more cost-efficient business to reduce operating expenses as a percentage of revenue.
To address the adverse impact of the COVID-19 pandemic, our management has taken specific actions including: renegotiating certain terms and conditions of our loans with our lenders to defer interest payments and thereby manage our cash; raising additional capital through external borrowings; restructuring accounts payable to accommodate a longer time horizon for payment; and investing in and developing our platform to increase operating efficiencies and reduce labor expenses.
While it appears that travel market transactions are recovering, our management will continue to monitor our travel transaction volumes for the impacts due to the COVID-19 virus and future variants. In response to any changes in our travel transaction volumes, our management intends to update and immediately enact initiatives to scale the business infrastructure and operating expenses up or down as appropriate to ensure optimal earnings and cash flows in future periods. In addition, our management will coordinate with suppliers, operating partners and our financial partners to attempt to arrange adequate capital to withstand any future potential COVID-19 induced volume variability.
UseOperating Metrics
Our financial results are driven by certain operating metrics that encompass the business activity generated by our travel-related services. Transactions represent the number of Transaction Volumes
Transaction volume representstravel reservations that were processed on Mondee’s platform during the grossperiod. Gross bookings are defined as the total dollar value, generally inclusive of transactions handled bytaxes and fees, of all travel reservations through our platform between a third partythird-party seller or service provider and the ultimate customer. We generate revenue from service fees earnedtraveler booking on these transactions and, accordingly our revenue increases or decreases based on the increase or decrease in either or both the number or valueplatform, net of transactions we process. cancellations. Revenue will increase as a result of an increase in the number of customers usingtravelers booking on our platform or as a result of an increase in service fees from higher value services offered on the platform. Take rate is defined as revenues as a percentage of gross bookings.
Management considers these operating metrics to have a correlation to our commission revenues and incentive revenues recognized, and are therefore, useful units of measurement for investors. Management also uses these operating metrics as part of its overall assessment of the Company’s operational performance and for its preparation of operating budget and forecasts.
Transactions, gross bookings and take rate for the years ended December 31, 2023 and 2022, respectively, were as follows (gross bookings are disclosed in thousands):
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2023 | | 2022 |
| |
| Transactions | | 2,912,029 | | | 2,137,530 | |
| Gross bookings | | $ | 2,577,194 | | | $ | 2,148,801 | |
| Take rate | | 8.7 | % | | | 7.2 | % | |
Basis of Presentation
We currently conduct our business through two operating segments, namely our travel marketplace, which is our transactional business serving travelers directly or through travel affiliates, and our software-as-a service (“SaaS”) platform. See Notes 2 and 18 to the accompanying consolidated financial statements for the years endedDecember 31, 2023 and 2022 included in Part II, Item 8 of this Annual Report on Form 10-K for more information on basis of presentation and operating segments, respectively.
Components of Results of Operation
Revenues, Net
We generate commissions revenue by providing online travel reservation services, primarily for airline ticket sales, and to a lesser extent, for reservation of hotel accommodations, booking of car rentals, and other travel services. We also earn incentives from (1) airlines and GDS service providers for achieving volume targets and (2) on transacted amounts from fintech programs held with banks and financial institutions, which we leverage in our payment processing and settlement platform. Our fintech programs include a wide array of payment options, such as credit cards, wallets, alternate payment methods, and next generation fraud protection tools. We primarily facilitate travel bookings and act as the agent in the transaction as the travel supplier is responsible for providing the travel services, and we do not control the travel services provided to the traveler. At the point in time when a travel booking service is performed and the Company’s single performance obligation has been fulfilled, the Company makes an estimate for variable consideration based on cumulative bookings, which is calculated per applicable pricing tier. Additionally, when the same travel booking is processed, the Company makes an estimate for variable consideration for the traveler taking the trip, to the extent that there is a risk of significant reversal constraining the variable consideration, until the trip is taken, since the occurrence of the trip is influenced by outside factors, such as the actions of travelers and weather conditions. We also generate revenue by providing subscription-based platform access that offers businesses and consumers the ability to purchase travel services directly on the platform.
Sales and Marketing Expenses
Sales and marketing expenses are generally variable in nature and consist primarily of: (1) credit cards and other payment processing fees associated with merchant transactions; (2) advertising and affiliate marketing costs; (3) fees paid to third parties that provide call center, website content translations, fraud protection services and other services; (4) customer relations costs; and (5) customer chargeback provisions.
We rely on marketing channels to generate a significant amount of traffic to our websites. Marketing expenses consist primarily of the costs of (1) advertising, including digital and physical advertising and (2) affiliate marketing programs. We intend to continue making significant investments in marketing to drive additional revenue, increase our market share, and expand our global customer base. As an examplea result, we expect our marketing expenses to increase in absolute dollars as we expect to invest in growing and training our sales force and broadening our brand awareness.
General and Administrative
General and administrative expenses consist primarily of: (1) occupancy and office expenses; (2) fees for outside professionals, including legal and accounting services; (3) audit and tax fees; and (4) other miscellaneous expenses, including changes in the fair value of one of these two factors, while transaction volume was flat from 2020acquisition earnouts. We expect to 2021, our revenue increased from $65.8 million to $93.2 million during that same periodincur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing standards, additional insurance expenses (including directors’ and officers’ insurance), investor relations activities and other administrative and professional services. We also expect to increase the size of our general and administrative functions to support the growth of our business. However, we anticipate general and administrative expenses to decrease as a percentage of revenue over the long term.
Personnel Expenses
Personnel expenses consist of compensation to our personnel, including salaries, bonuses, payroll taxes, and employee health and other benefits, as well as stock-based compensation expense. We expect to incur additional personnel expenses as a result of operating as a public company, including expanding head count through organic growth as well as increasing headcount through mergers and acquisitions. However, we anticipate personnel expenses to decrease as a percentage of revenue over the long term.
IT Expenses
IT expenses consist primarily of: (1) software license and system maintenance fees; (2) outsourced data center and web hosting costs; (3) payments to contractors; and (4) data communications and other expenses associated with operating our services. We expect to incur additional IT expenses as a result of operating as a public company, including expanding our operations through growth of our online booking platform and hosting fees. We also expect an increase in transaction value, driven byIT expenses to support the growth of our developmentbusiness. However, we anticipate IT expenses to decrease as a percentage of new revenue streams suchover the long term.
Depreciation and Amortization
Depreciation and amortization expenses consist of: (1) amortization of intangible assets with determinable lives; (2) depreciation of computer equipment; (3) amortization of internally developed and purchased software; and (4) depreciation of furniture and office equipment. We expect to incur additional depreciation and amortization expenses as fintech revenuea result of operating as a public company, including expanding our operations through capital expenditures and purchases of long-lived assets, as well as potential impacts of our continued mergers and acquisitions strategy. However, we anticipate depreciation and amortization expenses to decrease as a percentage of revenue over the additionlong term.
Other Income (Expense)
Other income (expense) consists primarily of: (1) interest income; (2) interest expense; (3) other income and expense, (4) changes in the fair value of subscription basedour private warrant liability and (5) net expenses incurred on the LBF US divestiture and LBF US transition services. Interest expense relates to interest on loans, amortization of debt issuance costs, and interest associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions. Interest income was recorded from the Mondee Group Note for our related party loan settled upon the consummation the Business Combination. Other expenses include realized gains and losses on foreign currency exchange.
Benefit from (Provision for) Income Taxes
We are subject to payment of federal and state income taxes in the U.S. and other ancillary revenues. Our management believesforms of income taxes in other jurisdictions. Consequently, we determine our consolidated provision for income taxes based on tax obligations incurred using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statements and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The deferred tax assets are recorded net of a valuation allowance when, based on the weight of available evidence, we believe it is more likely than not that transaction volume hassome portion or all of the recorded deferred tax assets will not be realized in future periods.
We evaluate uncertain tax positions to determine if it is more likely than not that such tax positions would be sustained upon examination. We record a strong correlationliability when such uncertainties fail to meet the opportunitymore likely than not threshold.
A U.S. shareholder is subject to realize revenuecurrent tax on “global intangible low-taxed income” (“GILTI”) of its controlled foreign corporations (“CFCs”). We are subject to tax under GILTI provisions and is therefore a useful unit of measurement forinclude our investors.CFCs’ income in our U.S. income tax provision in the period that the CFCs earn the income.
ComparabilityResults of Financial InformationOperations
OurComparison of Years Ended December 31, 2023 and 2022
We have derived this data from our audited consolidated financial statements for the years endedDecember 31, 2023 and 2022 included in Part II, Item 8 of this Annual Report on Form 10-K, and this information should be read in conjunction therewith. The results of historical periods are not necessarily indicative of our results of operations for any future period. The following tables set forth our audited consolidated statement of operations as well as other financial data that our management considers meaningful for 2023and statements of assets and liabilities may not be comparable between2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended
December 31, | | | | |
| | | | | | | | | 2023 | | 2022 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Revenues, net | | | | | | | | | $ | 223,325 | | | $ | 159,484 | | | $ | 63,841 | | | 40 | % |
| Operating expenses | | | | | | | | | | | | | | | |
| Sales and marketing expenses | | | | | | | | | 153,708 | | | 114,111 | | | 39,597 | | | 35 | % |
| Personnel expenses | | | | | | | | | 43,280 | | | 82,057 | | | (38,777) | | | (47) | % |
| General and administrative expenses | | | | | | | | | 23,191 | | | 9,662 | | | 13,529 | | | 140 | % |
| Information technology expenses | | | | | | | | | 4,820 | | | 5,333 | | | (513) | | | (10) | % |
| Provision for credit losses, net | | | | | | | | | 393 | | | 312 | | | 81 | | | 26 | % |
| Depreciation and amortization | | | | | | | | | 16,068 | | | 11,770 | | | 4,298 | | | 37 | % |
| Restructuring expense, net | | | | | | | | | 2,371 | | | 2,542 | | | (171) | | | (7) | % |
| Total operating expenses | | | | | | | | | 243,831 | | | 225,787 | | | 18,044 | | | 8 | % |
| Loss from operations | | | | | | | | | (20,506) | | | (66,303) | | | 45,797 | | | (69) | % |
| Other income (expense) | | | | | | | | | | | | | | | |
| Interest income | | | | | | | | | 1,053 | | | 637 | | | 416 | | | 65 | % |
| Interest expense | | | | | | | | | (35,374) | | | (26,654) | | | (8,720) | | | 33 | % |
| Gain on extinguishment of PPP loan | | | | | | | | | — | | | 2,009 | | | (2,009) | | | (100) | % |
| Changes in fair value of warrant liability | | | | | | | | | 1,156 | | | (108) | | | 1,264 | | | (1170) | % |
| Other income (expense), net | | | | | | | | | (9,677) | | | 308 | | | (9,985) | | | (3242) | % |
| Total other expense, net | | | | | | | | | (42,842) | | | (23,808) | | | (19,034) | | | 80 | % |
| Loss before income taxes | | | | | | | | | (63,348) | | | (90,111) | | | 26,763 | | | (30) | % |
| Benefit from (provision for) income taxes | | | | | | | | | 2,531 | | | (127) | | | 2,658 | | | (2093) | % |
| Net loss | | | | | | | | | $ | (60,817) | | | $ | (90,238) | | | $ | 29,421 | | | (33) | % |
Revenues, net
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended December 31, | | | | |
| | | | | | | | | 2023 | | 2022 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Revenue from travel marketplace | | | | | | | | | $ | 222,075 | | | $ | 157,473 | | | 64,602 | | | 41 | % |
| Revenue from SaaS Platform | | | | | | | | | 1,250 | | | 2,011 | | | (761) | | | (38) | % |
| Revenues, net | | | | | | | | | 223,325 | | | 159,484 | | | 63,841 | | | 40 | % |
Revenues, net for the year ended December 31, 20222023 increased by $63.8 million, or 40%, compared to the same period in 2022. The increase was primarily driven by the additional revenues associated with the acquisitions of Orinter, Interep, Consolid and Skypass during 2023 on the Company's integrated technology platform. The Company merged customers and supplier relationships from the business acquisitions into consolidated operations, as such, separating revenues specifically from these acquired entities in future periods becomes impractical.
The revenues, net increase is primarily contributed by our travel marketplace segment. Revenues from our travel marketplace segment for the year ended December 31, 20212023 increased by $64.6 million, or 41%, compared to the same period in 2022. Specifically, for the year ended December 31, 2023 we saw an increase of $60.9 million or 55%, for commission revenues earned on airline ticket sales, hotel accommodations, car rental bookings, and other travel services. For the year ended December 31, 2023, we saw an increase of $2.8 million or 8%, from incentive revenues earned from GDS service providers and airline suppliers. For the year ended December 31, 2023 we saw an increase of $0.9 million or 7% in revenues from incentives earned from our Fintech program partners based on the payment settlements processed on our platform.
The revenue growth in our travel marketplace segment in 2023 was primarily contributed by a 20% increase in the value of gross bookings and a 36% increase in the number of transactions processed in our travel marketplace, during the year ended December 31, 2023, as compared to 2022. Refer to our Operating Metrics for further details.
Sales and Marketing Expenses
Sales and marketing expenses for the year ended December 31, 2023 increased by $39.6 million, or 35%, compared to the same period in 2022. The increase was primarily driven by an increase in affiliate marketing of $46.5 million, credit card fees of $3.4 million associated with merchant transactions and general marketing expense of $2.0 million, which grew by 58% in aggregate over the prior period, consistent with the increase in net revenue growth. These increases were partially offset by a decrease in web advertising expense of $13.1 million for the year ended December 31, 2023 compared to the same period in 2022.
Personnel Expenses
Personnel expenses for the year ended December 31, 2023 decreased by $38.8 million, or 47%, compared to the same period in 2022. The decrease was primarily attributable to the net decrease in stock-based compensation of $48.2 million and the increase in payroll expense due to headcount growth of $10.2 million along with business combinations during 2023. The net decrease in stock-based compensation was due to the Earn-Out Shares and restricted stock units issued as a result of the Business Combination.Combination in 2022 of $60.2 million partially offset by equity awards issued in 2023.
Lastly, our 2020General and 2021 annualAdministrative Expenses
General and administrative expenses for the year ended December 31, 2023 increased by $13.5 million, or 140%, compared to the same period in 2022. The growth year-over-year resulted from expansion of the business through acquisitions, which included added costs of $4.7 million from newly acquired companies, an increase of $1.9 million in legal fees related to acquisitions, an increase of $1.2 million in other acquisition related costs, $1.0 million in transaction filing fees and related expenses that occur as a public company engaged in such transactions, and another $2.7 million for change in fair value of earn-outs relating to the acquisitions. The payout of the earn-outs is dependent on operating financial results were more severely impacted by the COVID-19 pandemic, an event that occurred out of the ordinary coursenewly acquired companies where an assessment of business,the payout is remeasured quarterly.
IT Expenses
IT expenses for the year ended December 31, 2023 decreased by $0.5 million, or 10%, compared to the same period in comparison with the financial results during 2022. The travel industry begandecrease was primarily due to recovera decrease in web hosting and software costs and expenses.
Provision for Credit Losses
Provision for credit losses for the year ended December 31, 2023 increased by $0.1 million, or 26%, compared to the same period in 2022, consistent directionally with increased revenues.
Depreciation and Amortization
Depreciation and amortization expenses for the year ended December 31, 2023 increased by $4.3 million, or 37%, compared to the same period in 2022. The increase was primarily due to the Company’s 2023 acquisitions resulting in additional intangible assets for customer relationships and trade names.
Restructuring Expense, Net
Restructuring expense, net for the year ended December 31, 2023 decreased by $0.2 million, or 7% compared to the same period in 2022. In 2022 restructuring activities took place at offshore office locations to reduce the size of the workforce to optimize efficiency and reduce costs. In 2023 other changes to right-size headcount were performed in alignment with business strategy.
Interest Income
Interest income for the year ended December 31, 2023 increased by $0.4 million, or 65%, compared to the same period in 2022. The increase was a function of higher interest rates paid on balances outstanding on which interest was earned.
Interest Expense
Interest expense for the year ended December 31, 2023 increased by $8.7 million, or 33%, compared to the same period in 2022. The increase was primarily due to $5.4 million of increase in our outstanding Term Loan balance as well as market increases in the SOFR benchmark, which impacts our stated interest on the Term Loan, and $3.4 million of interest associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions in Brazil.
Gain on Extinguishment of PPP Loan
There was a decrease year-over-year as resolution in 2022 on PPP loans was a one-time event.
Changes in Fair Value of Warrant Liability
Changes in fair value of warrant liability for the year ended December 31, 2023 resulted in a gain of $1.3 million, or 1170%, compared to the same period in 2022. The increase was primarily due to the decrease in fair value of the Company’s private placement warrants during 2021the year ended December 31, 2023 from the decline of the Company’s stock price.
Other (Income) Expense
Other income for the year ended December 31, 2023 decreased by $10.0 million, or 3,242%, compared to the same period in 2022. The decrease was primarily due to net expenses incurred on LBF US transition services.
Income Taxes
The provision for income taxes for the year ended December 31, 2023 decreased by $2.7 million, or 2,093%, compared to the provision for income tax for year ended December 31, 2022, mainly driven the release of valuation allowance as vaccination rates increased, infection rates decreased,a result of acquisitions that created deferred tax liabilities that can be considered as a future source of taxable income. Additionally, the Company has a temporary income tax rate holiday of zero percent in Brazil, which applies to the Orinter and restrictions began to lift, and continues to trend upwards towards pre-pandemic travel activity during 2022.Interep acquisitions.
Non-GAAP Financial MeasuresComponents of Results of Operation
Revenues, Net
In additionWe generate commissions revenue by providing online travel reservation services, primarily for airline ticket sales, and to oura lesser extent, for reservation of hotel accommodations, booking of car rentals, and other travel services. We also earn incentives from (1) airlines and GDS service providers for achieving volume targets and (2) on transacted amounts from fintech programs held with banks and financial results determined in accordance with GAAP,institutions, which we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the term “Adjusted EBITDA” to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We use the term “Unlevered Free Cash Flow” to measure cash generated internally that is available to service debt and fund inorganic growth or acquisitions.
We consider both Adjusted EBITDA and Unlevered Free Cash Flow to be important non-GAAP financial measures, because they illustrate underlying trendsleverage in our businesspayment processing and our historical operating performance onsettlement platform. Our fintech programs include a more consistent basis.wide array of payment options, such as credit cards, wallets, alternate payment methods, and next generation fraud protection tools. We believe thatprimarily facilitate travel bookings and act as the use of both Adjusted EBITDAagent in the transaction as the travel supplier is responsible for providing the travel services, and Unlevered Free Cash Flow is helpful to our investors in assessing the health of our business and our operating performance.
Non-GAAP financial information, which is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Adjusted EBITDA and Unlevered Free Cash Flow
Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance, and our management believes Unlevered Free Cash Flow is relevant to investors because it provides a measure of cash generated internally that is available both to service debt and to fund inorganic growth or acquisitions. Our management believes that these measures provide useful information to investors regarding our operating performance. We believe that these measures are used by many investors, analysts and rating agencies as a measure of performance. By reporting these measures, we provide a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believecontrol the travel services provided to the traveler. At the point in time when a travel booking service is performed and the Company’s single performance obligation has been fulfilled, the Company makes an estimate for variable consideration based on cumulative bookings, which is calculated per applicable pricing tier. Additionally, when the same travel booking is processed, the Company makes an estimate for variable consideration for the traveler taking the trip, to the extent that there is a risk of significant reversal constraining the variable consideration, until the trip is taken, since the occurrence of the trip is influenced by outside factors, such as the actions of travelers and weather conditions. We also generate revenue by providing subscription-based platform access that offers businesses and consumers the ability to purchase travel services directly on the platform.
Sales and Marketing Expenses
Sales and marketing expenses are indicative of our core operating performance.generally variable in nature and consist primarily of: (1) credit cards and other payment processing fees associated with merchant transactions; (2) advertising and affiliate marketing costs; (3) fees paid to third parties that provide call center, website content translations, fraud protection services and other services; (4) customer relations costs; and (5) customer chargeback provisions.
Financial measures that are non-GAAP should not be considered as alternatives to operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance, or cash flows as measures of liquidity. These measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
Because Adjusted EBITDA facilitates internal comparisonsWe rely on marketing channels to generate a significant amount of traffic to our websites. Marketing expenses consist primarily of the costs of (1) advertising, including digital and physical advertising and (2) affiliate marketing programs. We intend to continue making significant investments in marketing to drive additional revenue, increase our market share, and expand our global customer base. As a result, we expect our marketing expenses to increase in absolute dollars as we expect to invest in growing and training our sales force and broadening our brand awareness.
General and Administrative
General and administrative expenses consist primarily of: (1) occupancy and office expenses; (2) fees for outside professionals, including legal and accounting services; (3) audit and tax fees; and (4) other miscellaneous expenses, including changes in the fair value of acquisition earnouts. We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing standards, additional insurance expenses (including directors’ and officers’ insurance), investor relations activities and other administrative and professional services. We also expect to increase the size of our historicalgeneral and administrative functions to support the growth of our business. However, we anticipate general and administrative expenses to decrease as a percentage of revenue over the long term.
Personnel Expenses
Personnel expenses consist of compensation to our personnel, including salaries, bonuses, payroll taxes, and employee health and other benefits, as well as stock-based compensation expense. We expect to incur additional personnel expenses as a result of operating performance onas a more consistent basis,public company, including expanding head count through organic growth as well as increasing headcount through mergers and acquisitions. However, we use this measure for business planning purposes.anticipate personnel expenses to decrease as a percentage of revenue over the long term.
IT Expenses
IT expenses consist primarily of: (1) software license and system maintenance fees; (2) outsourced data center and web hosting costs; (3) payments to contractors; and (4) data communications and other expenses associated with operating our services. We define Adjusted EBITDAexpect to incur additional IT expenses as net loss beforea result of operating as a public company, including expanding our operations through growth of our online booking platform and hosting fees. We also expect an increase in IT expenses to support the growth of our business. However, we anticipate IT expenses to decrease as a percentage of revenue over the long term.
Depreciation and Amortization
Depreciation and amortization expenses consist of: (1) amortization of intangible assets with determinable lives; (2) depreciation of computer equipment; (3) amortization of internally developed and purchased software; and (4) depreciation of furniture and office equipment. We expect to incur additional depreciation and amortization;amortization expenses as a result of operating as a public company, including expanding our operations through capital expenditures and purchases of long-lived assets, as well as potential impacts of our continued mergers and acquisitions strategy. However, we anticipate depreciation and amortization expenses to decrease as a percentage of revenue over the long term.
Other Income (Expense)
Other income (expense) consists primarily of: (1) interest income; (2) interest expense; (3) other income and expense, (4) changes in the fair value of our private warrant liability and (5) net expenses incurred on the LBF US divestiture and LBF US transition services. Interest expense relates to interest on loans, amortization of debt issuance costs, and interest associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions. Interest income was recorded from the Mondee Group Note for our related party loan settled upon the consummation the Business Combination. Other expenses include realized gains and losses on foreign currency exchange.
Benefit from (Provision for) Income Taxes
We are subject to payment of federal and state income taxes in the U.S. and other forms of income taxes in other jurisdictions. Consequently, we determine our consolidated provision for income taxes; (3) interest expense (net); (4) othertaxes based on tax obligations incurred using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statements and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The deferred tax assets are recorded net excluding sales of export incentives whicha valuation allowance when, based on the weight of available evidence, we believe it is income from the sale of government assistance pertaining to export incentives received under the Service Exports from India Scheme (“SEIS”); (5) stock-based compensation; (6) restructuring and related costs; (7) warrant transaction expenses associated with transaction costs incurred from the SPAC Business Combination related with the acquisition of private warrants from ITHAX; (8) legal costs pertaining to acquisition, and other filings which aremore likely than not ordinary and outside the course of our business; (9) changes in fair value attributable to warrants classified as liability; (10) gain on forgiveness of PPP loans, which represents a non-cash gain.
The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature,that some portion or because the amount and timing of these items is unpredictable, not driven by core results of operations, and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance.
Unlevered Free Cash Flow is defined as cash used in operating activities, less capital expenditures, plus cash paid for interest.
The following table reconciles net loss to Adjusted EBITDA for the years ended December 31, 2022 and 2021, respectively:
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| | | | | | | | | | | | Year Ended December 31, | |
| | | | | | | | | | | | | | | | 2022 | 2021 | $ Change | % Change |
| | | | | | | | | | | | | | | | ($ in thousands) |
| Net loss | | | | | | | | | | | | | | | | $ | (90,238) | | $ | (38,905) | | $ | (51,333) | | 132 | % |
| Interest expense, (net) | | | | | | | | | | | | | | | | $ | 26,017 | | $ | 23,178 | | $ | 2,839 | | 12 | % |
| Stock-based compensation expense | | | | | | | | | | | | | | | | $ | 62,042 | | $ | 3,936 | | $ | 58,106 | | 1476 | % |
| Depreciation and amortization | | | | | | | | | | | | | | | | $ | 11,770 | | $ | 12,861 | | $ | (1,091) | | (8) | % |
| Restructuring and related costs | | | | | | | | | | | | | | | | $ | 2,542 | | $ | — | | $ | 2,542 | | — | % |
| Provision for income taxes | | | | | | | | | | | | | | | | $ | 127 | | $ | 323 | | $ | (196) | | (61) | % |
| Extinguishment of PPP Loan | | | | | | | | | | | | | | | | $ | (2,009) | | $ | (5,868) | | $ | 3,859 | | (66) | % |
| Changes in fair value of warrant liability | | | | | | | | | | | | | | | | $ | 108 | | $ | — | | $ | 108 | | — | % |
| Legal expense | | | | | | | | | | | | | | | | $ | 744 | | $ | — | | $ | 744 | | — | % |
| Warrant transaction expense | | | | | | | | | | | | | | | | $ | 326 | | $ | — | | $ | 326 | | — | % |
| Other expense (income), net | | | | | | | | | | | | | | | | $ | (308) | | $ | (980) | | $ | 672 | | (69) | % |
| Sale of export incentives | | | | | | | | | | | | | | | | $ | 760 | | $ | — | | $ | 760 | | — | % |
| Adjusted EBITDA | | | | | | | | | | | | | | | | $ | 11,881 | | $ | (5,455) | | $ | 17,336 | | (318) | % |
Someall of the limitations of Adjusted EBITDA are as follows: (i) Adjusted EBITDA doesrecorded deferred tax assets will not properly reflect capital commitments to be paidrealized in the future; and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, our investors should be aware that in the future we may not incur expenses similar to the adjustments in this presentation. Lastly, Adjusted EBITDA can obfuscate the one-time impacts of events that happen out of the ordinary course of business, such as the impact of COVID-19 on our Adjusted EBITDA in 2021.
We believe the presentation of Unlevered Free Cash Flow is relevant and useful for investors because it facilitates the comparison of our results with the results of other companies that have different financing and capital structures. Unlevered Free Cash Flow is the gross free cash flow from operations after payment of capital expenditures and debt service obligations that we can use to expand operations or pay dividends on preferred equity and other stakeholders.
Unlevered Free Cash Flow has the same limitations as Adjusted EBITDA, in that it does not consider the capital structure of our Company.
The following table reconciles net cash used in operating activities to Unlevered Free Cash Flows for the years ended December 31, 2022, and 2021, respectively:periods.
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| | | | | | | Year Ended December 31, | | | | |
| | | | | | | | | 2022 | | 2021 | | $ Change | | % Change |
| | | | | | | | ($ in thousands) |
| Net cash provided by (used in) operating activities | | | | | | | | | $ | (10,612) | | | $ | (15,673) | | | $ | 5,061 | | | (32) | % |
| Capital expenditures | | | | | | | | | $ | (7,267) | | | $ | (4,022) | | | $ | (3,245) | | | 81 | % |
| Cash paid for interest | | | | | | | | | $ | 10,820 | | | $ | 6,740 | | | $ | 4,080 | | | 61 | % |
| Unlevered free cash flow | | | | | | | | | $ | (7,059) | | | $ | (12,955) | | | $ | 5,896 | | | (46) | % |
We evaluate uncertain tax positions to determine if it is more likely than not that such tax positions would be sustained upon examination. We record a liability when such uncertainties fail to meet the more likely than not threshold.
A U.S. shareholder is subject to current tax on “global intangible low-taxed income” (“GILTI”) of its controlled foreign corporations (“CFCs”). We are subject to tax under GILTI provisions and include our CFCs’ income in our U.S. income tax provision in the period that the CFCs earn the income.
BasisResults of PresentationOperations
Comparison of Years Ended December 31, 2023 and 2022
We currently conducthave derived this data from our business through two operating segments, namely our travel marketplace, which is our transactional business serving the end travelers directly or through travel affiliates, and our software-as-a service (“SaaS”) platform. Substantially, all of our long-lived assets are maintained in, and all of our losses are attributable to, the United States of America. See Notes 1 and 17 to the accompanying consolidatedaudited consolidated financial statements for the years ended December 31, 20222023 and December 31, 2021 2022included in Part II, Item 8 of this Annual Report on Form 10-K, and this information should be read in conjunction therewith. The results of historical periods are not necessarily indicative of our results of operations for any future period. The following tables set forth our audited consolidated statement of operations as well as other financial data that our management considers meaningful for for more information on basis of presentation2023 and operating segments, respectively.2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended
December 31, | | | | |
| | | | | | | | | 2023 | | 2022 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Revenues, net | | | | | | | | | $ | 223,325 | | | $ | 159,484 | | | $ | 63,841 | | | 40 | % |
| Operating expenses | | | | | | | | | | | | | | | |
| Sales and marketing expenses | | | | | | | | | 153,708 | | | 114,111 | | | 39,597 | | | 35 | % |
| Personnel expenses | | | | | | | | | 43,280 | | | 82,057 | | | (38,777) | | | (47) | % |
| General and administrative expenses | | | | | | | | | 23,191 | | | 9,662 | | | 13,529 | | | 140 | % |
| Information technology expenses | | | | | | | | | 4,820 | | | 5,333 | | | (513) | | | (10) | % |
| Provision for credit losses, net | | | | | | | | | 393 | | | 312 | | | 81 | | | 26 | % |
| Depreciation and amortization | | | | | | | | | 16,068 | | | 11,770 | | | 4,298 | | | 37 | % |
| Restructuring expense, net | | | | | | | | | 2,371 | | | 2,542 | | | (171) | | | (7) | % |
| Total operating expenses | | | | | | | | | 243,831 | | | 225,787 | | | 18,044 | | | 8 | % |
| Loss from operations | | | | | | | | | (20,506) | | | (66,303) | | | 45,797 | | | (69) | % |
| Other income (expense) | | | | | | | | | | | | | | | |
| Interest income | | | | | | | | | 1,053 | | | 637 | | | 416 | | | 65 | % |
| Interest expense | | | | | | | | | (35,374) | | | (26,654) | | | (8,720) | | | 33 | % |
| Gain on extinguishment of PPP loan | | | | | | | | | — | | | 2,009 | | | (2,009) | | | (100) | % |
| Changes in fair value of warrant liability | | | | | | | | | 1,156 | | | (108) | | | 1,264 | | | (1170) | % |
| Other income (expense), net | | | | | | | | | (9,677) | | | 308 | | | (9,985) | | | (3242) | % |
| Total other expense, net | | | | | | | | | (42,842) | | | (23,808) | | | (19,034) | | | 80 | % |
| Loss before income taxes | | | | | | | | | (63,348) | | | (90,111) | | | 26,763 | | | (30) | % |
| Benefit from (provision for) income taxes | | | | | | | | | 2,531 | | | (127) | | | 2,658 | | | (2093) | % |
| Net loss | | | | | | | | | $ | (60,817) | | | $ | (90,238) | | | $ | 29,421 | | | (33) | % |
Revenues, net
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended December 31, | | | | |
| | | | | | | | | 2023 | | 2022 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Revenue from travel marketplace | | | | | | | | | $ | 222,075 | | | $ | 157,473 | | | 64,602 | | | 41 | % |
| Revenue from SaaS Platform | | | | | | | | | 1,250 | | | 2,011 | | | (761) | | | (38) | % |
| Revenues, net | | | | | | | | | 223,325 | | | 159,484 | | | 63,841 | | | 40 | % |
Revenues, net for the year ended December 31, 2023 increased by $63.8 million, or 40%, compared to the same period in 2022. The increase was primarily driven by the additional revenues associated with the acquisitions of Orinter, Interep, Consolid and Skypass during 2023 on the Company's integrated technology platform. The Company merged customers and supplier relationships from the business acquisitions into consolidated operations, as such, separating revenues specifically from these acquired entities in future periods becomes impractical.
The revenues, net increase is primarily contributed by our travel marketplace segment. Revenues from our travel marketplace segment for the year ended December 31, 2023 increased by $64.6 million, or 41%, compared to the same period in 2022. Specifically, for the year ended December 31, 2023 we saw an increase of $60.9 million or 55%, for commission revenues earned on airline ticket sales, hotel accommodations, car rental bookings, and other travel services. For the year ended December 31, 2023, we saw an increase of $2.8 million or 8%, from incentive revenues earned from GDS service providers and airline suppliers. For the year ended December 31, 2023 we saw an increase of $0.9 million or 7% in revenues from incentives earned from our Fintech program partners based on the payment settlements processed on our platform.
The revenue growth in our travel marketplace segment in 2023 was primarily contributed by a 20% increase in the value of gross bookings and a 36% increase in the number of transactions processed in our travel marketplace, during the year ended December 31, 2023, as compared to 2022. Refer to our Operating Metrics for further details.
Sales and Marketing Expenses
Sales and marketing expenses for the year ended December 31, 2023 increased by $39.6 million, or 35%, compared to the same period in 2022. The increase was primarily driven by an increase in affiliate marketing of $46.5 million, credit card fees of $3.4 million associated with merchant transactions and general marketing expense of $2.0 million, which grew by 58% in aggregate over the prior period, consistent with the increase in net revenue growth. These increases were partially offset by a decrease in web advertising expense of $13.1 million for the year ended December 31, 2023 compared to the same period in 2022.
Personnel Expenses
Personnel expenses for the year ended December 31, 2023 decreased by $38.8 million, or 47%, compared to the same period in 2022. The decrease was primarily attributable to the net decrease in stock-based compensation of $48.2 million and the increase in payroll expense due to headcount growth of $10.2 million along with business combinations during 2023. The net decrease in stock-based compensation was due to the Earn-Out Shares and restricted stock units issued as a result of the Business Combination in 2022 of $60.2 million partially offset by equity awards issued in 2023.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2023 increased by $13.5 million, or 140%, compared to the same period in 2022. The growth year-over-year resulted from expansion of the business through acquisitions, which included added costs of $4.7 million from newly acquired companies, an increase of $1.9 million in legal fees related to acquisitions, an increase of $1.2 million in other acquisition related costs, $1.0 million in transaction filing fees and related expenses that occur as a public company engaged in such transactions, and another $2.7 million for change in fair value of earn-outs relating to the acquisitions. The payout of the earn-outs is dependent on operating financial results of the newly acquired companies where an assessment of the payout is remeasured quarterly.
IT Expenses
IT expenses for the year ended December 31, 2023 decreased by $0.5 million, or 10%, compared to the same period in 2022. The decrease was primarily due to a decrease in web hosting and software costs and expenses.
Provision for Credit Losses
Provision for credit losses for the year ended December 31, 2023 increased by $0.1 million, or 26%, compared to the same period in 2022, consistent directionally with increased revenues.
Depreciation and Amortization
Depreciation and amortization expenses for the year ended December 31, 2023 increased by $4.3 million, or 37%, compared to the same period in 2022. The increase was primarily due to the Company’s 2023 acquisitions resulting in additional intangible assets for customer relationships and trade names.
Restructuring Expense, Net
Restructuring expense, net for the year ended December 31, 2023 decreased by $0.2 million, or 7% compared to the same period in 2022. In 2022 restructuring activities took place at offshore office locations to reduce the size of the workforce to optimize efficiency and reduce costs. In 2023 other changes to right-size headcount were performed in alignment with business strategy.
Interest Income
Interest income for the year ended December 31, 2023 increased by $0.4 million, or 65%, compared to the same period in 2022. The increase was a function of higher interest rates paid on balances outstanding on which interest was earned.
Interest Expense
Interest expense for the year ended December 31, 2023 increased by $8.7 million, or 33%, compared to the same period in 2022. The increase was primarily due to $5.4 million of increase in our outstanding Term Loan balance as well as market increases in the SOFR benchmark, which impacts our stated interest on the Term Loan, and $3.4 million of interest associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions in Brazil.
Gain on Extinguishment of PPP Loan
There was a decrease year-over-year as resolution in 2022 on PPP loans was a one-time event.
Changes in Fair Value of Warrant Liability
Changes in fair value of warrant liability for the year ended December 31, 2023 resulted in a gain of $1.3 million, or 1170%, compared to the same period in 2022. The increase was primarily due to the decrease in fair value of the Company’s private placement warrants during the year ended December 31, 2023 from the decline of the Company’s stock price.
Other (Income) Expense
Other income for the year ended December 31, 2023 decreased by $10.0 million, or 3,242%, compared to the same period in 2022. The decrease was primarily due to net expenses incurred on LBF US transition services.
Income Taxes
The provision for income taxes for the year ended December 31, 2023 decreased by $2.7 million, or 2,093%, compared to the provision for income tax for year ended December 31, 2022, mainly driven the release of valuation allowance as a result of acquisitions that created deferred tax liabilities that can be considered as a future source of taxable income. Additionally, the Company has a temporary income tax rate holiday of zero percent in Brazil, which applies to the Orinter and Interep acquisitions.
Components of Results of Operation
Revenues, Net
We have four material revenue streams: transactional revenue, incentive revenue, fintech program revenue, and subscription services revenue.
We generate transactionalcommissions revenue by providing online travel reservation services, primarily byfor airline ticket sales, which include mark-up fees as well as commissions from the saleand to a lesser extent, for reservation of ancillary products such ashotel accommodations, booking of car rentals, and other travel insurance, seats, and bags.services. We also derive transactional revenue from hotel and rental car commission. We generate backendearn incentives from (1) airlines and GDS service providers for achieving volume targets. We also generate booking incentives from the three separate GDS service providerstargets and supplier direct systems, which host the airlines’ inventory that we use to sell in our marketplace. We earn incentives(2) on transacted amounts from fintech programs held with banks and financial institutions, which we leverage in our payment processing and settlement platform. Our fintech programs include a wide array of payment options, such as credit cards, wallets, and alternate payment methods, and next generation fraud protection tools. In most cases, revenueWe primarily facilitate travel bookings and act as the agent in the transaction as the travel supplier is recognized at the time of booking, when we are in an agent position, and thus not responsible for providing the deliverytravel services, and we do not control the travel services provided to the traveler. At the point in time when a travel booking service is performed and the Company’s single performance obligation has been fulfilled, the Company makes an estimate for variable consideration based on cumulative bookings, which is calculated per applicable pricing tier. Additionally, when the same travel booking is processed, the Company makes an estimate for variable consideration for the traveler taking the trip, to the extent that there is a risk of travel and have no significant obligations followingreversal constraining the processingvariable consideration, until the trip is taken, since the occurrence of the transaction.
| | | | | | | | | | | | | | |
| | Year Ended
December 31, |
| | 2022 | | 2021 |
| Revenue from Travel Marketplace | | $ | 157,473 | | | $ | 92,038 | |
| Revenue from SAAS Platform | | $ | 2,011 | | | $ | 1,156 | |
| | $ | 159,484 | | | $ | 93,194 | |
Sales and Marketing Expenses
The Company changed the presentation of “SalesSales and other Expense” and “Marketing Expense” within the Consolidated Statement of Operations. The Company changed the presentation by combining “Sales and other Expense” and “Marketing Expense” into “Sales and Marketing Expense”. The change is a result of an increased overlap between the nature and purpose of expenses that fall within these groups.
Salesmarketing expenses are generally variable in nature and consist primarily of: (1) credit cards and other payment processing fees associated with merchant transactions; (2) advertising and affiliate marketing costs; (3) fees paid to third parties that provide call center, website content translations, fraud protection services and other services; (3) offshore(4) customer support;relations costs; and (4)(5) customer chargeback provisions.
We rely on marketing channels to generate a significant amount of traffic to our websites. Marketing expenses consist primarily of the costs of (1) advertising, including digital and physical advertising and (2) affiliate marketing programs. We intend to continue making significant investments in marketing to drive additional revenue, increase our market share, and expand our global customer
base. As a result, we expect our marketing expenses to increase in absolute dollars as we expect to invest in growing and training our sales force and broadening our brand awareness.
General and Administrative
General and administrative expenses consist primarily of: (1) occupancy and office expenses; (2) fees for outside professionals, including legal and accounting services; (3) audit and tax fees; and (4) other miscellaneous expenses.expenses, including changes in the fair value of acquisition earnouts. We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing standards, additional insurance expenses (including directors’ and officers’ insurance), investor relations activities and other administrative and professional services. We also expect to increase the size of our general and administrative functions to support the growth of our business. However, we anticipate general and administrative expenses to decrease as a percentage of revenue over the long term.
Personnel Expenses
Personnel expenses consist of compensation to our personnel, including salaries, bonuses, payroll taxes, and employee health and other benefits, as well as stock basedstock-based compensation expense. We expect to incur additional personnel expenses as a result of operating as a public company, including expanding head count through organic growth as well as increasing headcount through mergers and acquisitions. However, we anticipate personnel expenses to decrease as a percentage of revenue over the long term.
IT Expenses
IT expenses consist primarily of: (1) software license and system maintenance fees; (2) outsourced data center and web hosting costs; (3) payments to contractors; and (4) data communications and other expenses associated with operating our services. We expect to incur additional IT expenses as a result of operating as a public company, including expanding our operations through growth of our online booking platform and hosting fees. We also expect toan increase the size ofin IT expenses to support the growth of our business. However, we anticipate IT expenses to decrease as a percentage of revenue over the long term.
Depreciation and Amortization
Depreciation and amortization expenses consist of: (1) amortization of intangible assets with determinable lives; (2) depreciation of computer equipment; (3) amortization of internally developed and purchased software; and (4) depreciation of furniture and office equipment. We expect to incur additional depreciation and amortization expenses as a result of operating as a public company, including expanding our operations through capital expenditures and purchases of long-lived assets, as well as potential impacts of our continued mergers and acquisitions strategy. However, we anticipate depreciation and amortization expenses to decrease as a percentage of revenue over the long term.
Other Income (Expense)
Other income (expense) consists primarily of: (1) interest income; (2) interest expense; (3) other interestincome and expense, (4) changes in the fair value of our private warrant liability and (4) government assistance.(5) net expenses incurred on the LBF US divestiture and LBF US transition services. Interest expense relates to interest on loans, and amortization of debt issuance costs.costs, and interest associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions. Interest income was recorded from the Mondee Group Note for our related party loan settled upon the consummation of the Business Combination. Other expenses include realized gains and losses on foreign currency exchange. Government assistance relates to amounts received under the Service Exports from India Scheme
Benefit from (Provision for) Income Taxes
We are subject to payment of federal and state income taxes in the U.S. and other forms of income taxes in other jurisdictions. Consequently, we determine our consolidated provision for income taxes based on tax obligations incurred using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statements and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The deferred tax assets are recorded net of a valuation allowance when, based on the weight of available evidence, we believe it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.
We evaluate uncertain tax positions to determine if it is more likely than not that such tax positions would be sustained upon examination. We record a liability when such uncertainties fail to meet the more likely than not threshold.
A U.S. shareholder is subject to current tax on “global intangible low-taxed income” (“GILTI”GILTI”) of its controlled foreign corporations (“CFCs”CFCs”). We are subject to tax under GILTI provisions and include our CFCs’ income in our U.S. income tax provision in the period that the CFCs earn the income.
ResultsPersonnel Expenses
Personnel expenses consist of Operationscompensation to our personnel, including salaries, bonuses, payroll taxes, and employee health and other benefits, as well as stock-based compensation expense. We expect to incur additional personnel expenses as a result of operating as a public company, including expanding head count through organic growth as well as increasing headcount through mergers and acquisitions. However, we anticipate personnel expenses to decrease as a percentage of revenue over the long term.
ComparisonIT Expenses
IT expenses consist primarily of: (1) software license and system maintenance fees; (2) outsourced data center and web hosting costs; (3) payments to contractors; and (4) data communications and other expenses associated with operating our services. We expect to incur additional IT expenses as a result of Years Ended December 31, 2022operating as a public company, including expanding our operations through growth of our online booking platform and 2021hosting fees. We also expect an increase in IT expenses to support the growth of our business. However, we anticipate IT expenses to decrease as a percentage of revenue over the long term.
Depreciation and Amortization
Depreciation and amortization expenses consist of: (1) amortization of intangible assets with determinable lives; (2) depreciation of computer equipment; (3) amortization of internally developed and purchased software; and (4) depreciation of furniture and office equipment. We have derivedexpect to incur additional depreciation and amortization expenses as a result of operating as a public company, including expanding our operations through capital expenditures and purchases of long-lived assets, as well as potential impacts of our continued mergers and acquisitions strategy. However, we anticipate depreciation and amortization expenses to decrease as a percentage of revenue over the long term.
Other Income (Expense)
Other income (expense) consists primarily of: (1) interest income; (2) interest expense; (3) other income and expense, (4) changes in the fair value of our private warrant liability and (5) net expenses incurred on the LBF US divestiture and LBF US transition services. Interest expense relates to interest on loans, amortization of debt issuance costs, and interest associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions. Interest income was recorded from the Mondee Group Note for our related party loan settled upon the consummation the Business Combination. Other expenses include realized gains and losses on foreign currency exchange.
Benefit from (Provision for) Income Taxes
We are subject to payment of federal and state income taxes in the U.S. and other forms of income taxes in other jurisdictions. Consequently, we determine our consolidated provision for income taxes based on tax obligations incurred using the asset and liability method. Under this data from our auditedmethod, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statements for the years endedDecember 31, 2022 and December 31, 2021 includedincome tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in Part II, Item 8 of this Annual Report on Form 10-K, and this information should be read in conjunction therewith. The results of historical periods are not necessarily indicative of our results of operations for any future period. The following tables set forth our audited consolidated statement of operations as well as other financial data that our management considers meaningful for 2022 and 2021:
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| | | | | | | Year Ended
December 31, | | | | |
| | | | | | | | | 2022 | | 2021 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Revenues, net | | | | | | | | | $ | 159,484 | | | $ | 93,194 | | | $ | 66,290 | | | 71 | % |
| Operating expenses: | | | | | | | | | | | | | | | |
| Sales and marketing expenses | | | | | | | | | $ | 114,111 | | | $ | 65,776 | | | $ | 48,335 | | | 73 | % |
| Personnel expense | | | | | | | | | $ | 82,057 | | | $ | 23,422 | | | $ | 58,635 | | | 250 | % |
| General and administrative expense | | | | | | | | | $ | 9,662 | | | $ | 7,455 | | | $ | 2,207 | | | 30 | % |
| Information technology expense | | | | | | | | | $ | 5,333 | | | $ | 4,058 | | | $ | 1,275 | | | 31 | % |
| Provision for doubtful accounts receivable and contract assets | | | | | | | | | $ | 312 | | | $ | 1,874 | | | $ | (1,562) | | | (83) | % |
| Depreciation and amortization | | | | | | | | | $ | 11,770 | | | $ | 12,861 | | | $ | (1,091) | | | (8) | % |
| Restructuring and related costs | | | | | | | | | $ | 2,542 | | | $ | — | | | $ | 2,542 | | | — | % |
| Total Operating Expenses | | | | | | | | | $ | 225,787 | | | $ | 115,446 | | | $ | 110,341 | | | 96 | % |
| Net (loss) Income from operations | | | | | | | | | $ | (66,303) | | | $ | (22,252) | | | $ | (44,051) | | | 198 | % |
| Other income (expense): | | | | | | | | | | | | | | | |
| Interest income | | | | | | | | | $ | 637 | | | $ | 505 | | | $ | 132 | | | 26 | % |
| Interest expense | | | | | | | | | $ | (26,654) | | | $ | (23,683) | | | $ | (2,971) | | | 13 | % |
| Gain on extinguishment of PPP loan | | | | | | | | | $ | 2,009 | | | $ | 5,868 | | | $ | (3,859) | | | (66) | % |
| Changes in fair value of warrant liability | | | | | | | | | (108) | | | — | | | $ | (108) | | | — | % |
| Other (expense) income, net | | | | | | | | | $ | 308 | | | $ | 980 | | | $ | (672) | | | (69) | % |
| Total other expense | | | | | | | | | $ | (23,808) | | | $ | (16,330) | | | $ | (7,478) | | | 46 | % |
| Net loss before income taxes | | | | | | | | | $ | (90,111) | | | $ | (38,582) | | | $ | (51,529) | | | 134 | % |
| Benefit from (provision for) income taxes | | | | | | | | | $ | (127) | | | $ | (323) | | | $ | 196 | | | (61) | % |
| Net loss | | | | | | | | | $ | (90,238) | | | $ | (38,905) | | | $ | (51,333) | | | 132 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended December 31, | | | | |
| | | | | | | | | 2022 | | 2021 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Revenues, net | | | | | | | | | $ | 159,484 | | | $ | 93,194 | | | 66,290 | | | 71 | % |
Revenues, net for the year ended December 31, 2022 increased by $66.3 million,in which those temporary differences are expected to be recovered or 71%, compared tosettled. The deferred tax assets are recorded net of a valuation allowance when, based on the same periodweight of available evidence, we believe it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in 2021. The increase was primarily driven by significant improvement in travel demand trends in fiscal year 2022, as the COVID-19 pandemic recovery continued to improve. Specifically, transactional revenues increased by $44.0 million during the year ended December 31, 2022, compared to the same period in 2021. GDS service provider incentives and other service revenues increased by $10.5 million during the year ended December 31, 2022, compared to the same period in 2021. Further, airline incentive revenues increased by $11.8 million during the year ended December 31, 2022, compared to the same period in 2021.future periods.
Operating Expenses
We evaluate uncertain tax positions to determine if it is more likely than not that such tax positions would be sustained upon examination. We record a liability when such uncertainties fail to meet the more likely than not threshold.
A U.S. shareholder is subject to current tax on “global intangible low-taxed income” (“GILTI”) of its controlled foreign corporations (“CFCs”). We are subject to tax under GILTI provisions and Other (Income) Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended December 31, | | | | |
| | | | | | | | | 2022 | | 2021 | | $Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Sales and marketing expenses | | | | | | | | | 114,111 | | | 65,776 | | | 48,335 | | | 73 | % |
| Personnel expense | | | | | | | | | 82,057 | | | 23,422 | | | 58,635 | | | 250 | % |
| General and administrative expense | | | | | | | | | 9,662 | | | 7,455 | | | 2,207 | | | 30 | % |
| Information technology expense | | | | | | | | | 5,333 | | | 4,058 | | | 1,275 | | | 31 | % |
| Provision for doubtful accounts receivable and contract assets | | | | | | | | | 312 | | | 1,874 | | | (1,562) | | | (83) | % |
| Depreciation and amortization | | | | | | | | | 11,770 | | | 12,861 | | | (1,091) | | | (8) | % |
| Restructuring and related costs | | | | | | | | | 2,542 | | | — | | | 2,542 | | | — | % |
| Interest income | | | | | | | | | (637) | | | (505) | | | (132) | | | 26 | % |
| Interest expense | | | | | | | | | 26,654 | | | 23,683 | | | 2,971 | | | 13 | % |
| Gain on extinguishment of PPP loan | | | | | | | | | (2,009) | | | (5,868) | | | 3,859 | | | (66) | % |
| Changes in fair value of warrant liability | | | | | | | | | 108 | | | — | | | 108 | | | — | % |
| Other (income) expense, net | | | | | | | | | (308) | | | (980) | | | 672 | | | (69) | % |
| | | | | | | | | $ | 249,595 | | | $ | 131,776 | | | $ | 117,819 | | | 89 | % |
Sales and Marketing Expenses
Sales and marketing expenses for the year ended December 31, 2022 increased by $48.3 million, or 73%, compared to the same periodinclude our CFCs’ income in 2021. The increase was primarily driven by an increaseour U.S. income tax provision in affiliate marketing and web advertising spend as travel demand increased during the period due tothat the travel industry’s continued recovery fromCFCs earn the COVID-19 pandemic. The increase was also driven by credit card fees associated with merchant transactions, which grew by 121% over the prior period, consistent with the increase in net revenue growth. Credit card fees are correlated with the volume of B2C sales. Additionally, chargebacks decreased by $1.4 million for the year ended December 31, 2022 compared to the same period in 2021 due to the decrease in uncertainty related to travel as the COVID-19 pandemic stabilized.income.
Personnel Expenses
Personnel expenses consist of compensation to our personnel, including salaries, bonuses, payroll taxes, and employee health and other benefits, as well as stock-based compensation expense. We expect to incur additional personnel expenses as a result of operating as a public company, including expanding head count through organic growth as well as increasing headcount through mergers and acquisitions. However, we anticipate personnel expenses to decrease as a percentage of revenue over the long term.
IT Expenses
IT expenses consist primarily of: (1) software license and system maintenance fees; (2) outsourced data center and web hosting costs; (3) payments to contractors; and (4) data communications and other expenses associated with operating our services. We expect to incur additional IT expenses as a result of operating as a public company, including expanding our operations through growth of our online booking platform and hosting fees. We also expect an increase in IT expenses to support the growth of our business. However, we anticipate IT expenses to decrease as a percentage of revenue over the long term.
Depreciation and Amortization
Depreciation and amortization expenses consist of: (1) amortization of intangible assets with determinable lives; (2) depreciation of computer equipment; (3) amortization of internally developed and purchased software; and (4) depreciation of furniture and office equipment. We expect to incur additional depreciation and amortization expenses as a result of operating as a public company, including expanding our operations through capital expenditures and purchases of long-lived assets, as well as potential impacts of our continued mergers and acquisitions strategy. However, we anticipate depreciation and amortization expenses to decrease as a percentage of revenue over the long term.
Other Income (Expense)
Other income (expense) consists primarily of: (1) interest income; (2) interest expense; (3) other income and expense, (4) changes in the fair value of our private warrant liability and (5) net expenses incurred on the LBF US divestiture and LBF US transition services. Interest expense relates to interest on loans, amortization of debt issuance costs, and interest associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions. Interest income was recorded from the Mondee Group Note for our related party loan settled upon the consummation the Business Combination. Other expenses include realized gains and losses on foreign currency exchange.
Benefit from (Provision for) Income Taxes
We are subject to payment of federal and state income taxes in the U.S. and other forms of income taxes in other jurisdictions. Consequently, we determine our consolidated provision for income taxes based on tax obligations incurred using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statements and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The deferred tax assets are recorded net of a valuation allowance when, based on the weight of available evidence, we believe it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.
We evaluate uncertain tax positions to determine if it is more likely than not that such tax positions would be sustained upon examination. We record a liability when such uncertainties fail to meet the more likely than not threshold.
A U.S. shareholder is subject to current tax on “global intangible low-taxed income” (“GILTI”) of its controlled foreign corporations (“CFCs”). We are subject to tax under GILTI provisions and include our CFCs’ income in our U.S. income tax provision in the period that the CFCs earn the income.
Results of Operations
Comparison of Years Ended December 31, 2023 and 2022
We have derived this data from our audited consolidated financial statements for the years endedDecember 31, 2023 and 2022 included in Part II, Item 8 of this Annual Report on Form 10-K, and this information should be read in conjunction therewith. The results of historical periods are not necessarily indicative of our results of operations for any future period. The following tables set forth our audited consolidated statement of operations as well as other financial data that our management considers meaningful for 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended
December 31, | | | | |
| | | | | | | | | 2023 | | 2022 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Revenues, net | | | | | | | | | $ | 223,325 | | | $ | 159,484 | | | $ | 63,841 | | | 40 | % |
| Operating expenses | | | | | | | | | | | | | | | |
| Sales and marketing expenses | | | | | | | | | 153,708 | | | 114,111 | | | 39,597 | | | 35 | % |
| Personnel expenses | | | | | | | | | 43,280 | | | 82,057 | | | (38,777) | | | (47) | % |
| General and administrative expenses | | | | | | | | | 23,191 | | | 9,662 | | | 13,529 | | | 140 | % |
| Information technology expenses | | | | | | | | | 4,820 | | | 5,333 | | | (513) | | | (10) | % |
| Provision for credit losses, net | | | | | | | | | 393 | | | 312 | | | 81 | | | 26 | % |
| Depreciation and amortization | | | | | | | | | 16,068 | | | 11,770 | | | 4,298 | | | 37 | % |
| Restructuring expense, net | | | | | | | | | 2,371 | | | 2,542 | | | (171) | | | (7) | % |
| Total operating expenses | | | | | | | | | 243,831 | | | 225,787 | | | 18,044 | | | 8 | % |
| Loss from operations | | | | | | | | | (20,506) | | | (66,303) | | | 45,797 | | | (69) | % |
| Other income (expense) | | | | | | | | | | | | | | | |
| Interest income | | | | | | | | | 1,053 | | | 637 | | | 416 | | | 65 | % |
| Interest expense | | | | | | | | | (35,374) | | | (26,654) | | | (8,720) | | | 33 | % |
| Gain on extinguishment of PPP loan | | | | | | | | | — | | | 2,009 | | | (2,009) | | | (100) | % |
| Changes in fair value of warrant liability | | | | | | | | | 1,156 | | | (108) | | | 1,264 | | | (1170) | % |
| Other income (expense), net | | | | | | | | | (9,677) | | | 308 | | | (9,985) | | | (3242) | % |
| Total other expense, net | | | | | | | | | (42,842) | | | (23,808) | | | (19,034) | | | 80 | % |
| Loss before income taxes | | | | | | | | | (63,348) | | | (90,111) | | | 26,763 | | | (30) | % |
| Benefit from (provision for) income taxes | | | | | | | | | 2,531 | | | (127) | | | 2,658 | | | (2093) | % |
| Net loss | | | | | | | | | $ | (60,817) | | | $ | (90,238) | | | $ | 29,421 | | | (33) | % |
Revenues, net
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended December 31, | | | | |
| | | | | | | | | 2023 | | 2022 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Revenue from travel marketplace | | | | | | | | | $ | 222,075 | | | $ | 157,473 | | | 64,602 | | | 41 | % |
| Revenue from SaaS Platform | | | | | | | | | 1,250 | | | 2,011 | | | (761) | | | (38) | % |
| Revenues, net | | | | | | | | | 223,325 | | | 159,484 | | | 63,841 | | | 40 | % |
Revenues, net for the year ended December 31, 2023 increased by $63.8 million, or 40%, compared to the same period in 2022. The increase was primarily driven by the additional revenues associated with the acquisitions of Orinter, Interep, Consolid and Skypass during 2023 on the Company's integrated technology platform. The Company merged customers and supplier relationships from the business acquisitions into consolidated operations, as such, separating revenues specifically from these acquired entities in future periods becomes impractical.
The revenues, net increase is primarily contributed by our travel marketplace segment. Revenues from our travel marketplace segment for the year ended December 31, 2023 increased by $64.6 million, or 41%, compared to the same period in 2022. Specifically, for the year ended December 31, 2023 we saw an increase of $60.9 million or 55%, for commission revenues earned on airline ticket sales, hotel accommodations, car rental bookings, and other travel services. For the year ended December 31, 2023, we saw an increase of $2.8 million or 8%, from incentive revenues earned from GDS service providers and airline suppliers. For the year ended December 31, 2023 we saw an increase of $0.9 million or 7% in revenues from incentives earned from our Fintech program partners based on the payment settlements processed on our platform.
The revenue growth in our travel marketplace segment in 2023 was primarily contributed by a 20% increase in the value of gross bookings and a 36% increase in the number of transactions processed in our travel marketplace, during the year ended December 31, 2023, as compared to 2022. Refer to our Operating Metrics for further details.
Sales and Marketing Expenses
Sales and marketing expenses for the year ended December 31, 2023 increased by $39.6 million, or 35%, compared to the same period in 2022. The increase was primarily driven by an increase in affiliate marketing of $46.5 million, credit card fees of $3.4 million associated with merchant transactions and general marketing expense of $2.0 million, which grew by 58% in aggregate over the prior period, consistent with the increase in net revenue growth. These increases were partially offset by a decrease in web advertising expense of $13.1 million for the year ended December 31, 2023 compared to the same period in 2022.
Personnel Expenses
Personnel expenses for the year ended December 31, 2022 increased2023 decreased by $58.6$38.8 million, or 250%47%, compared to the same period in 2021.2022. The increasedecrease was primarily attributable to anthe net decrease in stock-based compensation of $48.2 million and the increase in stock basedpayroll expense due to headcount growth of $10.2 million along with business combinations during 2023. The net decrease in stock-based compensation was due to the Earn-Out Shares and restricted stock units of $60.9 million. The remainderissued as a result of the change is drivenBusiness Combination in 2022 of $60.2 million partially offset by an decreaseequity awards issued in salaries, payroll taxes, and benefits of $0.9 million, due to the reduction in force for year ended December 31, 2022.2023.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 20222023 increased by $2.2$13.5 million, or 30%140%, compared to the same period in 2021.2022. The increase was primarily due togrowth year-over-year resulted from expansion of the business through acquisitions, which included added costs of $4.7 million from newly acquired companies, an increase of $1.9 million in legal fees related to acquisitions, an increase of $1.2 million in other acquisition related costs, $1.0 million in transaction filing fees and professional feesrelated expenses that occur as a public company engaged in such transactions, and another $2.7 million for change in fair value of $2.4 million which was attributedearn-outs relating to our preparation and filings with the SEC in connection withacquisitions. The payout of the Business Combination.earn-outs is dependent on operating financial results of the newly acquired companies where an assessment of the payout is remeasured quarterly.
IT Expenses
IT expenses for the year ended December 31, 2022 increased2023 decreased by $1.3$0.5 million, or 31%10%, compared to the same period in 2021.2022. The increasedecrease was primarily due to an increasea decrease in web hosting and software costs and expenses caused by an increase in transactions and website traffic.expenses.
Provision for Doubtful AccountsCredit Losses
Provision for doubtful accountscredit losses for the year ended December 31, 2022 decreased2023 increased by $1.6$0.1 million, or 83%26%, compared to the same period in 2021. The variances were mainly driven by changes in estimated recovery of accounts receivable as a result of gradual improvement in travel industry, which were previously severely impacted by the COVID-19 pandemic.2022, consistent directionally with increased revenues.
Depreciation and Amortization
Depreciation and amortization expenses for the year ended December 31, 2022 decreased2023 increased by $1.1$4.3 million, or 8%37%, compared to the same period in 2021.2022. The decreaseincrease was primarily due to certainthe Company’s 2023 acquisitions resulting in additional intangible assets for customer relationships and acquired technology intangible assets being fully amortized duringtrade names.
Restructuring Expense, Net
Restructuring expense, net for the year ended 2021. This was partially offsetDecember 31, 2023 decreased by an increase$0.2 million, or 7% compared to the same period in depreciation2022. In 2022 restructuring activities took place at offshore office locations to reduce the size of the workforce to optimize efficiency and reduce costs. In 2023 other changes to right-size headcount were performed in computer software as a result of additional capitalized software.alignment with business strategy.
Interest Income
Interest income for the year ended December 31, 20222023 increased by $0.1$0.4 million, or 26%65%, compared to the same period in 2021.2022. The increase was primarily due to an increase in non-casha function of higher interest income from the Mondee Group note.rates paid on balances outstanding on which interest was earned.
Interest Expense
Interest expense for the year ended December 31, 20222023 increased by $3.0$8.7 million, or 13%33%, compared to the same period in 2021.2022. The increase was driven by anprimarily due to $5.4 million of increase in our outstanding debtTerm Loan balance as Paymentwell as market increases in Kind ("PIK")the SOFR benchmark, which impacts our stated interest continues to accrue towardson the outstanding debt balance..Term Loan, and $3.4 million of interest associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions in Brazil.
Gain on Extinguishment of PPP Loan
GainThere was a decrease year-over-year as resolution in 2022 on extinguishmentPPP loans was a one-time event.
Changes in Fair Value of PPP loanWarrant Liability
Changes in fair value of warrant liability for the year ended December 31, 2022 decreased by $3.92023 resulted in a gain of $1.3 million, or 66%1170%, compared to the same period in 2021.2022. The increase was primarily due to the decrease was driven byin fair value of the size and number of PPP loans forgiven in 2021, totaling $5.9 million, whereas inCompany’s private placement warrants during the year ended December 31, 20222023 from the forgivenessdecline of our remaining PPP loan resulted in a $2.0 million gain upon extinguishment.the Company’s stock price.
Other (Income) Expense
Other income for the year ended December 31, 20222023 decreased by $0.7$10.0 million, or 69%3,242%, compared to the same period in 2021.2022. The decrease was primarily due to GDS shortfall penalty that were waived in 2021, and was partially offset by an increase in other income from the sale of government assistance received related to export incentives received under SEIS.net expenses incurred on LBF US transition services.
Income Taxes
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended December 31, | | | | |
| | | | | | | | | 2022 | | 2021 | | $ Change | | % Change |
| | | | | | | | | ($ in thousands) |
| Benefit from (provision for) income taxes | | | | | | | | | (127) | | | (323) | | | 196 | | | (61) | % |
The provision for income taxes for the year ended December 31, 20222023 decreased by $0.2$2.7 million, or 61%2,093%, compared to the provision for income tax for year ended December 31, 2021,2022, mainly driven by the impactrelease of change invaluation allowance as a result of acquisitions that created deferred tax liabilityliabilities that can be considered as a future source of taxable income. Additionally, the Company has a temporary income tax rate holiday of zero percent in Brazil, which applies to the Orinter and Interep acquisitions.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with U.S. GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the terms “Adjusted EBITDA”, “Adjusted Net Loss” and “Adjusted Net Loss Per Share” to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We consider Adjusted EBITDA, Adjusted Net Loss and Adjusted Net Loss Per Share to be important non-GAAP financial measures, because they illustrate underlying trends in our business and our historical operating performance on intangible assets.a more consistent basis. We believe that the use of Adjusted EBITDA, Adjusted Net Loss and Adjusted Net Loss Per Share are helpful to our investors in assessing the health of our business and our operating performance.
In addition, we believe the following non-GAAP measure, “Free Cash Flow”, is helpful in evaluating our liquidity. We use Free Cash Flow to measure cash generated internally that is available to service debt and fund inorganic growth or acquisitions and believe that this measure provides meaningful supplemental information regarding our liquidity. We consider Free Cash Flow to be an important non-GAAP financial measure because it illustrates underlying trends in our business and is helpful to our investors in assessing our liquidity.
Non-GAAP financial information, which is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with U.S. GAAP. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Financial measures that are non-GAAP should not be considered as alternatives to operating income, cash flows from operating activities or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance, or cash flows as measures of liquidity. These measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.
Adjusted EBITDA
Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance which provides useful information to investors, analysts and rating agencies. By reporting Adjusted EBITDA, we provide a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.
Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes. We define Adjusted EBITDA as net loss before (1) depreciation and amortization; (2) provision for income taxes; (3) interest expense, net; (4) other income (expense), net; (5) stock-based compensation and the related payroll tax expense; (6) restructuring and related costs; (7) acquisition-related costs (including bank fees, due diligence fees, etc.); (8) legal costs pertaining to acquisitions, and other filings which are not ordinary and outside the course of our business; (9) changes in fair value attributable to earn-out and warrant liabilities and (10) other non-recurring expenses and transactions. For the periods presented, non-recurring transactions includes gain on extinguishment of PPP loan.
The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core results of operations, and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance.
Some of the limitations of Adjusted EBITDA are as follows: (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future; and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, our investors should be aware that in the future we may not incur expenses similar to the adjustments in this presentation. Lastly, Adjusted EBITDA can obfuscate the one-time impacts of events that happen out of the ordinary course of business.
The following table reconciles net loss to Adjusted EBITDA for the years ended December 31, 2023 and 2022, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Year Ended December 31, |
| | | | | | | | | | | | | | | | 2023 | | 2022 | | $ Change | | % Change |
| | | | | | | | | | | | | | | | ($ in thousands) |
| Net loss | | | | | | | | | | | | | | | | $ | (60,817) | | | $ | (90,238) | | | $ | 29,421 | | | (33) | % |
| Interest expense, net | | | | | | | | | | | | | | | | 34,321 | | | 26,017 | | | 8,304 | | | 32 | % |
| Stock-based compensation expense | | | | | | | | | | | | | | | | 13,787 | | | 62,042 | | | (48,255) | | | (78) | % |
| Depreciation and amortization | | | | | | | | | | | | | | | | 16,068 | | | 11,770 | | | 4,298 | | | 37 | % |
| Provision for income taxes | | | | | | | | | | | | | | | | (2,531) | | | 127 | | | (2,658) | | | (2093) | % |
| LBF US divestiture and transition service expense | | | | | | | | | | | | | | | | 9,100 | | | — | | | 9,100 | | | — | % |
| Changes in fair value of earn-out liabilities | | | | | | | | | | | | | | | | 2,707 | | | — | | | 2,707 | | | — | % |
| Legal expenses pertaining to acquisitions | | | | | | | | | | | | | | | | 952 | | | 744 | | | 208 | | | 28 | % |
| Acquisition costs | | | | | | | | | | | | | | | | 1,238 | | | — | | | 1,238 | | | — | % |
| Transaction filing fees and related expenses | | | | | | | | | | | | | | | | 2,687 | | | — | | | 2,687 | | | — | % |
| Changes in fair value of warrant liability | | | | | | | | | | | | | | | | (1,156) | | | 108 | | | (1,264) | | | (1170) | % |
| Restructuring expense, net | | | | | | | | | | | | | | | | 2,371 | | | 2,542 | | | (171) | | | (7) | % |
| Other expense (income), net | | | | | | | | | | | | | | | | 577 | | | (308) | | | 885 | | | (287) | % |
| Payroll tax expense related to stock-based compensation | | | | | | | | | | | | | | | | 214 | | | — | | | 214 | | | — | % |
| Extinguishment of PPP Loan | | | | | | | | | | | | | | | | — | | | (2,009) | | | 2,009 | | | (100) | % |
| Warrant transaction expense | | | | | | | | | | | | | | | | — | | | 326 | | | (326) | | | (100) | % |
| Sale of export incentives | | | | | | | | | | | | | | | | — | | | 760 | | | (760) | | | (100) | % |
| Adjusted EBITDA | | | | | | | | | | | | | | | | $ | 19,518 | | | $ | 11,881 | | | $ | 7,637 | | | 64 | % |
Adjusted Net Loss and Adjusted Net Loss Per Share
Adjusted Net Loss and Adjusted Net Loss Per Share are key performance measures that our management uses to assess our operating performance which provides useful information to investors, analysts and rating agencies. By reporting Adjusted Net Loss and Adjusted Net Loss Per Share, we provide a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance
We define Adjusted Net Loss as net loss before (1) stock-based compensation expense; (2) amortization of intangibles; (3) provision for income taxes; (4) certain other operating expenses.
The following table reconciles net loss to Adjusted Net Loss for the years ended December 31, 2023 and 2022, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | | | |
| 2023 | | 2022 | | $ Change | | % Change |
| ($ in thousands) |
| Net loss | $ | (60,817) | | | $ | (90,238) | | | $ | 29,421 | | | (32.6) | % |
| Stock-based compensation expense | 13,787 | | | 62,042 | | | (48,255) | | | (77.8) | % |
| Amortization of intangibles | 9,539 | | | 6,338 | | | 3,201 | | | 50.5 | % |
| Income tax provision | (2,531) | | | 127 | | | (2,658) | | | (2092.9) | % |
Certain other operating expenses1 | 17,899 | | | 1,651 | | | 16,248 | | | 984.1 | % |
| Adjusted net loss | $ | (22,123) | | | $ | (20,080) | | | $ | (2,043) | | | 10.2 | % |
1Includes LBF US divestiture and transition service expense, changes in fair value of earn-out liabilities, legal expenses pertaining to acquisitions, restructuring expense, acquisition costs, transaction filing fees and related expenses, and changes in fair value of warrant liabilities, which are not ordinary and outside the course of our business.
We define Adjusted Net Loss Per Share as the per share earnings based on the Company’s Adjusted Net Loss attributable to common stockholders, which includes dividends accrued for preferred stockholders, in the respective periods presented. The following table reconciles net loss per share to Adjusted Net Loss per share for the years ended December 31, 2023 and 2022, respectively:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| ($ in thousands, except per share values) |
| Net loss | $ | (60,817) | | | $ | (90,238) | |
| Cumulative dividends allocated to preferred stockholders | (11,557) | | | — | |
| Net loss attributable to common stockholders, basic and diluted | $ | (72,374) | | | $ | (90,238) | |
| Weighted average shares outstanding, basic and diluted | 77,213,602 | | | 67,368,620 | |
| Basic and diluted net loss per share | $ | (0.94) | | | $ | (1.34) | |
| Adjusted net loss | $ | (22,123) | | | $ | (20,080) | |
| Cumulative dividends allocated to preferred stockholders | (11,557) | | | — | |
| Adjusted net loss attributable to common stockholders, basic and diluted | $ | (33,680) | | | $ | (20,080) | |
| Weighted average shares outstanding, basic and diluted | 77,213,602 | | | 67,368,620 | |
| Adjusted net loss per share | $ | (0.44) | | | $ | (0.30) | |
Free Cash Flow
Free Cash Flow is a key measure that is relevant to investors because it provides a measure of cash generated internally that is available both to service debt and to fund inorganic growth or acquisitions and provides useful information to investors regarding our liquidity. By reporting Free Cash Flow, we provide a basis for comparison of our cash generated internally between current, past and future periods. Free Cash Flow has the same limitations as Adjusted EBITDA, Adjusted Net Loss and Adjusted Net Loss Per Share in that it does not consider the capital structure of our Company.
Free Cash Flow, a non-GAAP liquidity measure, is defined as cash provided by or used in operating activities, less capital expenditures.
We believe the presentation of Free Cash Flow is relevant and useful for investors because it measures cash generated from operations after payment of capital expenditures that we can use to invest in our business and meet our current and future financing needs.
The following table reconciles net cash used in operating activities to Free Cash Flows for the years ended December 31, 2023, and 2022, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Year Ended December 31, | | | | |
| ($ in thousands) | | | | | | | | | 2023 | | 2022 | | $ Change | | % Change |
Net cash used in operating activities(1)(2) | | | | | | | | | $ | (21,879) | | | $ | (10,612) | | | $ | (11,267) | | | 106 | % |
| Capital expenditures | | | | | | | | | $ | (11,747) | | | $ | (7,267) | | | $ | (4,480) | | | 62 | % |
| Free cash flows | | | | | | | | | $ | (33,626) | | | $ | (17,879) | | | $ | (15,747) | | | 88 | % |
(1) Included cash paid for interest expenses on the Company’s Term Loan and Orinter shorter term loan, for the years ended December 31, 2023, and 2022 of $17.2 million and $10.8 million, respectively.
(2) Included cash paid for LBF US transition services for the year ended December 31, 2023 of $7.7 million. No cash was paid for LBF US transition services for the year ended December 31, 2022.
Liquidity and Capital Resources
Sources of Liquidity
As of December 31, 2022, we had cash and cash equivalents totaling $78.8 million, which were held for working capital purposes, as well as restricted short-term investments of $8.6 million and $15.0 million of our line of credit available. Our cash equivalents are comprised primarily of cash checking accounts. To date, our principal sources of liquidity have been payments received from our revenue arrangements and financing arrangements with banks and financial institutions.
TCW Agreement
On June 22, 2021, As of December 31, 2023, we entered into a fourth amendment to the TCW Agreement (the “Fourth Amendment”), which specifies that if we did not securehad $2536.0 million in financing,of cash, cash equivalents, restricted cash and short-term investments held for working capital purposes and a TCW LOC available for draw down of $15.0 million. $13.9 million of our cash balance was held by our foreign subsidiaries outside of the United States. The Company is compliant with its debt covenants for the Term Loan as of December 31, 2023.
During the fourth quarter 2023, we distributed approximately $6.0 million from Orinter. However, this distribution was not subject to Brazilian withholding taxes or enter into a changeincremental U.S. income tax. In the event that we repatriate additional funds from our foreign subsidiaries, we may need to accrue and pay additional withholding taxes payable to various countries. As of control agreement, by June 30, 2022, then the Mondee Stockholder must issue 3,600,000 Class G units to TCW. In connection with the Fourth Amendment and in consideration thereof, we incurred an amendment fee of $1.8 million, which was "paid-in-kind" (“PIK”) and added to the outstanding principal balance.December 31, 2023, our
intent is to reinvest these accumulated funds outside of the United States, unless such funds can be repatriated without material tax consequences.
On December 31, 2021,
Accordingly, no deferred taxes have been provided for withholding taxes, U.S. state income taxes or other taxes that would result upon repatriation of approximately $21.9 million of undistributed earnings from these foreign subsidiaries as those earnings and any excess of financial reporting over the tax basis of these foreign subsidiaries are indefinitely reinvested. It is not practicable to estimate income tax liabilities that might be incurred if such earnings were remitted to the United States due to the complexity of the underlying calculation. The majority of the undistributed earnings would have been previously-taxed for U.S. federal income taxes as a result of the 2017 U.S. Tax and Jobs Act. Although we entered into a fifth amendment with TCWhave no intention to increaserepatriate the Applicable Margin (as definedundistributed earnings of our foreign subsidiaries for the foreseeable future, if such funds are needed for operations in the TCW Agreement) by 1% and capitalize interest during the period of October 1, 2021 to March 31, 2022. Additionally, quarterly installments for loan repayment were deferred until June 30, 2022. This modification was only in effect through June 30, 2022, at which time the Applicable Margin revertedUnited States, to the original percentages.extent applicable and material, we will revise future filings to address the potential tax implications.
Beginning on April 1, 2021, 5% PIK interest has accrued on the outstanding principal balance by increasing the principal amount over the term of the TCW Agreement. On July 2, 2021, the PIK interest rate decreased to 4%. The PIK rate eventually increased to 12.25% beginning October 1, 2021. The effective, implied interest rate of the TCW Agreement forAlthough we have incurred net loss and accumulated deficit and net cash outflow from operations during the years ended December 31, 2022 and 2021 is 22.99% and 15.55%, respectively. This abnormal increase in the effective interest rate under the TCW Agreement for 2022 was due to certain one-time event-driven charges, prepayments penalties, and accrued interest, associated with the Closing of the Business Combination such as repayment of interest accrued from past periods, principal repayment of $40 million, and additional issuance cost of $11.0 million. The current interest rate applicable to the TCW Agreement is SOFR plus 8.50% per annum.
On April 15, 2022, we entered into a sixth amendment and waiver with TCW to request to have waived certain defaults and also to make certain revisions to the TCW Agreement. The revisions pertained to updating Unadjusted EBITDA, Leverage Ratio and Fixed Charge Coverage Ratio (each as defined in the TCW Agreement).
On July 8, 2022, we entered into a seventh amendment to the TCW Agreement (the “Seventh Amendment”), pursuant to which, among other things, (i) TCW consented to the Business Combination, the change of name our Company from “ITHAX Acquisition Corp.” to “Mondee Holdings, Inc.,” and a further extension of the loan repayment schedule, and (ii) the Mondee Stockholder agreed to execute joinders for our Company and Mondee II to become borrowers under the TCW Agreement. The Seventh Amendment extended the deadline for the quarterly repayment of interest and the quarterly principal repayment to September 30, 2022, and the Closing Date, respectively. Additionally, pursuant to the Seventh Amendment on the Closing Date, the Mondee Stockholder agreed to issue up to 3,000,000 Class G units to TCW, if our Company completed the Business Combination prior to July 31, 2022. On July 17, 2022, we entered into an amendment to the Seventh Amendment, pursuant to which, among other things, TCW consented to reduce the amount of the loans required to be prepaid at closing to $40 million. On July 18, 2022, based on the prepayment of $41.2 million aggregate amount of the loans, the Mondee Stockholder issued 3,000,000 Class G units to TCW.
On October 24, 2022, we and TCW entered into an eighth amendment to the TCW Agreement (the “Eighth Amendment”). The Eighth Amendment (i) implements the transition from a LIBOR based interest rate to SOFR based interest rate, (ii) provides for a transition to a future benchmark rate in the event that SOFR is no longer available, and (iii) permits us to make the cash payments necessary to consummate the repurchase of our outstanding public warrants pursuant to our Tender Offer, so long as prior to the later of January 20, 2023 and one business day after2022, in our opinion, our liquidity position provides sufficient capital resources to meet our foreseeable cash needs. There can be no assurance, however, that the consummationcost or availability of the sale and issuance of 25,000 additional shares of Preferred Stock, we repurchase from TCW and the other lenders party to the TCW Agreement, on a pro rata basis, not less than 50,000 shares of Common Stock, at a price per share of $10.00 (orfuture borrowings, including refinancing activities, if the Mondee Stockholder has not yet distributed to TCW and the other lenders party to the TCW Agreement such shares of Common Stock, then we will repurchase from TCW and the other lenders party to the TCW Agreement, on a pro rata basis, not less than 153,846.16 of the Class G units of the Mondee Stockholder at price per unit of $3.25) (the “Repurchase Condition”).
In addition, pursuant to the Eighth Amendment, TCW and the other lenders party to the TCW Agreement: (1) consented to the payment of a portion of the interest originally due on June 30, 2022 (the “June Interest Payment”) at a rate per annum of up to 2.5% by capitalizing such interest; (2) waived the failure by our Company to make a cash payment of (A) the June Interest Payment by September 30, 2022, and (B) the principal payment due on September 30, 2022 by September 30, 2022; (3) consented to the creation and issuance of up to an additional 35,000 shares of Preferred Stock and waived the mandatory prepayment obligations under the TCW Agreement with respect to such issuance; and (4) consented to the consummation of the Tender Offer, subject to the Repurchase Condition.
On January 11, 2023, we executed the Ninth Amendment, wherein Wingspire became a party to the TCW Agreement, among other changes. Wingspire funded an additional $15.0 million of term loan commitment on top of the already outstanding Term Loan. Additionally, the Ninth Amendment split the Term Loan with TCW into two loans. Term Loan Aany, will be represented by Wingspire with an outstanding principal balance of $30.0 million and Term Loan B will be represented by TCW with an outstanding principal balance of $137.8 million.available on terms acceptable to us.
Additionally, pursuant to the Ninth Amendment, Wingspire consented to take over the TCW LOC for a principal amount not to exceed $15.0 million. Until January 11, 2024,In addition, we have a shelf registration statement on file with the option to increase Term Loan A by $20.0 million under two conditions: (i) our Company must have a trailing 12-month EBITDA of at least $25.0 million; and (ii) our Company must draw in increments of at least $5.0 million.
On January 31, 2023, we executed the Tenth Amendment. The Tenth Amendment (1) set forthSEC. Specific information on the terms on which we could acquire Orinter, pursuant toof and the Orinter Purchase Agreement; (2) set forthsecurities being offered will be provided at the terms on which we could paytime of the earn-out payment
contemplatedapplicable offering. Proceeds from any future offerings are expected to be paidused for corporate purposes or other purposes to OTT Holdings and certain key executivesbe disclosed at the time of OTT Holdings pursuant to the Orinter Purchase Agreement; (3) required that Mondee Brazil join as a party to the TCW Agreement and the Security Agreement (as defined in the TCW Agreement); (4) required that Mondee, Inc. pledge 100% of the equity interests of Mondee Brazil; and (5) required that Mondee Brazil and Mondee Inc. pledge 100% of the equity interests of Orinter.offering.
PPP Loans
On April 13, 2020, JP Morgan Chase Bank granted Mondee, Inc. a loan in the aggregate amount of $4.3 million pursuant to the PPP under the Coronavirus Aid, Relief and Economic Security Act. In January 2021, our Company was granted a second draw PPP loan in the amount of $2.0 million. In February 2021, our Company was granted another second draw PPP loan in the amount of $1.6 million. As the legal form of the PPP loan is debt, our Company accounted for the loan as debt under ASC 470. Refer to the “Impact of COVID-19” section herein for further details.
Financial Position
We have prepared our consolidated financial statements for the years endedAs of December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K assuming that2023, we will continue as a going concern. We arewere required to make debt repayments, consisting of interest and principal, aggregating to $7.59$194.7 million in the next twelvefollowing 12 month. As of December 31, 2023, we had $28.0 million of unrestricted cash and cash equivalents, $8.0 million of restricted cash and short-term investments, and $15.0 million in the unused TCW LOC. Subsequent to December 31, 2023, the Thirteenth Amendment on the Term Loan was executed on March 11, 2024, and provided for an extension of the maturity date to March 31, 2025. The amended Term Loan and Orinter short-term loan provides for debt payments ranging from $26.0 million to $34.0 million due within 12 months from the date of issuance of the consolidated financial statements. The debt payments comprise of principal, interest, and debt amendment fees. We have the option to refinance our Term Loan prior to maturity, and if the Term Loan is not refinanced by April 2024, we are subject to refinancing fees payable on the Term Loan at 0.50% of the outstanding principal balance starting April 2024 and every month thereafter.
As of December 31, 2022, our current liabilities are $57.00 million and current assets are $119.68 million. Given that we have historically generated recurring net losses, we may be unable to make such specified debt repayments from operations when the balance is due. These conditions raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements for the years endedDecember 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K do not include any adjustments that might result from the outcome of this uncertainty.
As of December 31, 2022, we had $78.84 million of unrestricted cash and $15.00 million in unused line of credit. Upon completion of the Business Combination with ITHAX in July 2022, we raised net cash proceeds of $62.19 million, net of transaction costs and certain settlements of liability. The increase was offset by a modified debt facility with TCW, which entailed a prepayment of some of our obligations totaling $41.21 million in July 2022. On September 29, 2022, we issued the Preferred Stock and the Preferred Financing Warrants for an aggregate cash proceeds $83.58 million, net of issuance costs.
As of the date on which our consolidatedconsolidated financial statements forfor the yearsyear endedDecember 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K were available to be issued,2023, we believe that the cash on hand, cash generated from operating activities, available line of credit, and additional investments obtained through the Business Combinationaccess to funds under our LOC with TCW will satisfy our working capital and capital requirements for at least the nextsubsequent 12 months and accordingly, substantial doubt about our ability to continue as a going concern is alleviated.months.
Cash Flow Summary for the Years Ended December 31, 20222023 and 20212022
The following table summarizes our cash flows for the periods presented:
| | | | | | | | | | | |
| Year Ended
December 31, 2022 |
| 2022 | | 2021 |
| ($ in thousands) |
| Net cash (used in) Operating activities | (10,612) | | | (15,673) | |
| Net cash used in Investing activities | (7,422) | | | (3,112) | |
| Net cash provided by Financing activities | 81,734 | | | 3,077 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (365) | | | (311) | |
| Net increase/(decrease) in cash and cash equivalents | $ | 63,335 | | | $ | (16,019) | |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| ($ in thousands) |
| Net cash used in operating activities | $ | (21,879) | | | $ | (10,612) | |
| Net cash used in investing activities | (34,045) | | | (7,422) | |
| Net cash provided by financing activities | 5,369 | | | 81,734 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash and short-term investments | 17 | | | (365) | |
| Net (decrease)/increase in cash, cash equivalents and restricted cash and short-term investments | $ | (50,538) | | | $ | 63,335 | |
Cash Used in Operating Activities
During the year ended December 31, 2022,2023, cash used in operating activities was $10.6$21.9 million. The primary factors affecting our operating cash flows during this period were our net loss totaling $90.2$60.8 million, which was offset by non-cash charges of $86.8$45.8 million primarily consisting of stock-based compensation of $62.0$13.8 million, PIK interest expense of $9.0$9.4 million, and depreciation and amortization of $11.8 million. This reduction attributable to non-cash charges was offset by a $2.0 million gain on
forgivenessloan origination costs of our PPP loan.$8.8 million, depreciation and amortization of $16.1 million, non-cash lease expense and impairment charges of $1.0 million, and the change in the estimated fair value of earn-out consideration and warrants of $1.6 million, which were partially offset by deferred taxes of $3.4 million. Cash used from changes in our operating assets and liabilities was $7.2$6.9 million, primarily owing to $2.1 million increase in prepaid expenses and other current assets, $11.9$24.3 million increase in accounts receivable $1.9and $7.0 million increase in contract assets $0.3 million decrease in deferred revenue, and $0.7 million decrease in accrued expenses and other current liabilities. These changeswhich were partially offset by a $10.6$24.7 million increase in accounts payable. The increases in these net working capital accounts is primarily due to our acquisitions in 2023. The increase in our accounts payable was also due to the one-off LBF transition service expenses paid along with the LBF divestiture transaction in 2023.
During the year ended December 31, 2021,2022, cash used in operating activities was $15.7$10.6 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $38.9$90.2 million, offset by our non-cash charges of $30.2$86.8 million primarily consisting of PIK interest expense of $14.6$9.0 million, depreciation and depreciation, amortization of $12.9$11.8 million, and stock-based compensation expense of $3.9$62.0 million. This reduction attributable to non-cash charges was offset by a $2.0 million on forgiveness of our PPP loan. The cash used from changes in our operating assets and liabilities was $7.0$7.2 million, which was primarily due to a $6.7$11.9 million increase in accounts receivable, $2.7$2.1 million decreaseincrease in deferred revenue and a $0.9 million decrease in accruedprepaid expenses and other current liabilities,assets and a $1.9 million increase in contract assets, partially offset by a increase in other long term liabilities and a $2.1$10.6 million increase in accounts payable.
Cash Used in Investing Activities
During the year ended December 31, 2023, cash used in investing activities was $34.0 million, which was primarily due to cash paid for the acquisitions of Orinter, Interep, Consolid, and Skypass and the purchase of property, equipment and software.
During the year ended December 31, 2022, cash used in investing activities was $7.4 million, which was primarily due to the purchase of property, equipment and equipment.software.
Cash Provided by Financing Activities
During the year ended December 31, 20212023, cash used in investingprovided by financing activities was $3.1$5.4 million,, which was primarily due to the purchaseproceeds from additional borrowings of property$17.6 million and equipment.
Cash Providedthe preferred round of financing of $11.3 million. The cash provided by Financing Activitiesfinancing activities were partially offset by stock repurchases of $10.0 million, repayment of principal on our Term Loans of $6.6 million, and payment of offering costs of $4.5 million.
During the year ended December 31, 2022, cash provided by financing activities was $81.7 million, primarily due to the proceeds from the closing of the Business Combination and Preferred Financing Transaction.
During the year ended December 31, 2021, cash provided by financing activities was $3.1 million, primarily due to proceeds from our PPP loan.
Contractual Obligations and Commitments
Our material cash requirements as of December 31, 20222023 include the following contractual obligations and commitments:following:
•TCW Term Loan — Principal and interest payments related to the TCWour outstanding Term Loan. As of December 31, 2022,2023, we had an outstanding balancea carrying book value of $134.4 million, with $7.5 million payable within 12 months. As of December 31, 2021, we had an outstanding balance of $172.9 million, with $10.8 million payable within 12 months.$161.5 million. See Note 910 to our consolidated financial statements for the years endedDecember 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
•ObligationSubsequent to GDS Service Provider— Principal and interest payments related to the obligation with a GDS service provider. Our outstanding balance of the GDS obligation was $0.0 million as of December 31, 2022. Our outstanding balance of the GDS obligation was $0.3 million as of December 31, 2021, with $0.3 million payable within 12 months. See Note 9 to our consolidated financial statements for the years ended December 31, 20222023, the Thirteenth Amendment on the Term Loan was executed on March 11, 2024, and Decemberprovided for an extension of the maturity date to March 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K.
•PPP and Other Governmental Loans — Principal and interest payments related to the PPP, CEBA and HASCAP loans. Our outstanding balance related to the PPP loan was $0.0 million as of December 31, 2022. Our outstanding balance related to the PPP loan was $2.0 million as of December 31, 2021, with $0.3 million payable within 12 months. As of December 31, 2022, our outstanding balance related to the CEBA and HASCAP loans was $0.2 million, with 0.1 million payable within 12 months. As of December 31, 2021, our outstanding balance related to the CEBA and HASCAP loans was $0.3 million, with $0.04 million payable within 12 months. See Note 9 to our consolidated financial statements for the years endedDecember 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K.2025.
•Operating Lease Obligations — Fixed lease payments related to our operating leases. As of December 31, 2022,2023, we had outstanding operating lease obligations of $2.4$3.7 million, with $0.8$1.6 million payable within 12 months. See Note 1415 to our consolidated financial statements for the years endedDecember 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
See Note 13Commercial Commitments — The Company has commercial commitments arising in the normal course of business of the industry in which it operates. Under the terms of such contracts, the Company receives cash in advance for production goals over a period of several years. In the event of under-performance or termination of the applicable contract, the Company may be obligated to our consolidated financial statements for the years endedrepay amounts still to be earned. At December 31, 2022 and December 31, 2021 included2023, the Company had an unearned balance of $15.6 million in Part II, Item 8 of this Annual Reportthe aggregate on Form 10-Ksuch contracts. for further information related to our letters of credit and outstanding legal claims.
Off- Balance Sheet Arrangements
We had the following Off-Balance Sheet Arrangements as of December 31, 2022 and December 31, 2021:
| | | | | | | | | | | |
| December 31, | | December 31, |
| (In millions) | 2022 | | 2021 |
| Letters of credit | 7.4 | | 7.3 | |
No amount on the TCW LOC was drawn down as of December 31, 2022 and December 31, 2021.
Critical Accounting Policies and Estimates
The preparation of the consolidated financial statements for the years endedDecember 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-Kand related disclosures in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes fornotes. We use our judgment to determine the years endedDecember 31, 2022appropriate assumptions to be used in the determination of certain estimates and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K. We basewe evaluate our estimates on an ongoing basis. Estimates are based on historical experience, terms of existing contracts, our observance of trends in the travel industry, and on various other factorsassumptions that we believe to be reasonable under the circumstances. Our actual results may
differ from these estimates under different assumptions or conditions. Our critical accounting estimates supplement, but not duplicate, the description of accounting policies or other disclosures in the notes to the financial statements. Matters that involve significant estimates and judgments of management include the following:
Revenue Recognition
We make several estimates in our revenue recognition process that affect the net revenues presented on our consolidated statements of operations.
The majority of our revenues are generated from Travel Transaction Revenues by providing online travel reservation services, which principally allow travelers to book travel reservations with travel suppliers through our technology solutions. In addition, we generate Fintech Program Revenues which are commission revenues from banks and financial institutions based on the travel booking spend processed through fintech programs partnered with our platform. At the point in time when a travel booking service is performed and the Company’s single performance obligation has been fulfilled, the Company makes an estimate for variable consideration based on cumulative booking, which is calculated per applicable pricing tier. Additionally, when the same travel booking is processed, the Company makes an estimate for variable consideration for the traveler taking the trip, to the extent that there is a risk of significant reversal constraining the variable consideration, until the trip is taken, since the occurrence of the trip is influenced by outside factors, such as the actions of travelers and weather conditions.
We earn incentives from airline companies based on the volume of airline ticket bookings that have flown. We also receive incentives from our GDS service providers based on the volume of segment bookings mediated by us through the GDS systems. The periods in which the contractual targets are based on range from months to years. The rate at which the Company earns the incentives from airline companies and GDS service providers, or travel suppliers, is subject to fluctuations, as the incentive amount earned on any given day is contingent on the cumulative prior performance under contract. Additionally, some travel supplier contracts have tiered level pricing where the incentive rate applied depends on several performance targets specified in the contract. At the end of each reporting period, the Company estimates the incentives earned based on pricing tier the Company will most likely fall under after considering the accumulative bookings. Revenue earned and recognized relating to incentives with airline companies and GDS service providers will be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.
Valuation of Goodwill, Definite-Lived Intangible Assets, and Indefinite-Lived Intangible Assets
The application of the acquisition method of accounting for business combinations requires the use of significant estimates and assumptions to determine the fair value of the assets acquired and liabilities assumed. Our estimates of the fair value are based upon assumptions that we believe are reasonable. When we deem appropriate, we utilize assistance from third-party valuation firms. The consideration transferred is allocated to the assets acquired and liabilities assumed based on their respective fair values at the acquisition date. The excess of the consideration transferred over the net of the amounts allocated to the identifiable assets acquired and liabilities assumed is recognized as goodwill.
We review long-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The assessment of possible impairment is based upon the ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related asset group.
Goodwill increased during the year ended December 31, 2023 due to the acquisitions of Orinter, Interep, Consolid, and Skypass, and was partially offset by the divestiture of LBF US. See Note 7 to our consolidated financial statements for additional information related to the acquisitions.
We test goodwill for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have two reporting units and test goodwill for each respective reporting unit. In prior years, our annual goodwill impairment tests were performed as of December 31. During the third quarter of 2023, the Company voluntarily changed its annual goodwill impairment test date from December 31 to October 1, as the new date of the assessment better aligns with the Company's long-term business planning process. This change was not material to the Company's consolidated financial statements as it did not delay, accelerate, or avoid any potential goodwill impairment charge.
The estimated fair value of our two reporting units was determined using the income approach valuation technique by discounting the Company’s future cash flows and further corroborated by the market approach. The discount rate in the income approach is determined based on the reporting unit’s estimated weighted-average cost of capital and adjusted to reflect the risks inherent in its cash flows, which requires significant judgments. As of October 1, 2023, we performed our annual goodwill impairment test that resulted in
the calculation of fair value of the respective reporting units that substantially exceeded carrying value. Therefore, the Company concluded that there was no impairment of goodwill.
The estimation of fair values of our reporting units reflect numerous assumptions that are subject to various risks and uncertainties, including key assumptions regarding each reporting unit’s expected growth rates and operating margin and the competitive environment, as well as other key assumptions with respect to matters outside of our control, such as discount rates. The estimation of fair value requires significant judgments and estimates, and actual results could be materially different than the judgments and estimates used. Discount rates have been impacted during the period due to rising interest rates and adverse changes in the macroeconomic environment. Future events and changing market conditions, including economic uncertainties such as inflation, rising interest rates and risks of a potential recession, may lead us to re-evaluate the assumptions used to estimate the fair values of our reporting units, which may result in a need to recognize additional goodwill impairment charges that could have a material adverse effect on our results of operations.
Earn-Out Liabilities
See Note 5 to our consolidated financial statements for additional information related to the Company’s fair value measurements. When little or no market data is available, the fair value is measured using unobservable inputs (“Level 3 inputs”). Our liabilities measured using Level 3 inputs primarily consist of earn-out liabilities acquired from acquisitions. The fair value of earn-out liabilities are estimated using the Monte Carlo simulation method. In determining the fair value, the following factors were considered: the expected future financial performance of the acquired entities, the underlying financial metric on which form the basisearn-out payment is based upon, historical financial performance, and the Company’s credit risk.
Equity-Classified Earn-Out Shares
The Company issued earn-out shares as part of the reverse recapitalization that closed on July 18, 2022 and these earn-out shares vest based on the trading price of the Company’s Common Stock. The earn-out was determined to be equity-classified, and the Company estimates the fair value of the award on the date the shares are allocated to a holder. The Company obtains a third-party valuation to determine the fair value. The Monte Carlo method was used to determine the expected value of the earn-out shares to be vested by simulating our Common Stock price from the allocation date to the end of the vesting period. The income approach was used to determine the fair value of the award on the allocation date, which includes estimating future cash flows to be received by the award owners over the economic life of the award and converting the cash flows to their present value equivalents using an appropriate discount rate that accounts for making judgments about the carrying valuesrelative risk of assetsnot realizing the annual cash flows and liabilities. Actual results could differ materially from those estimates.for the time value of money.
Recent Accounting Pronouncements
See Note 2 — Summary of Significant Accounting Policies, to our consolidated financial statements for the years ended December 31, 20222023 and December 31, 20212022 included in Part II, Item 8 of this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We areNot applicable for a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information required by this item is presented at the end of this Annual Report on Form 10-K beginning on page F-1, and is incorporated herein by reference. An index of thosethe financial statements is found in Part IV, Item 15, Exhibits, Financial Statement Schedules,filed as part of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As previously reported on a Current Report on Form 8-K filed with the SEC on July 20, 2022,6, 2023, our Board approved the engagement of KNAV P.A. (“KNAV”)Deloitte & Touche LLP as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the years ended December 31, 2022 and December 31, 2021,2023, included in Part II, Item 8 of this Annual Report on Form 10-K. Accordingly, KNAV P.A. served as independent registered public accounting firm of the Company’s interim period ended March 31, 2023, fiscal years ended December 31, 2022, the fiscal years ended December 31, 2021 and 2020 of Mondee Holdings II, Inc. and its subsidiaries, prior to the Business Combination. Accordingly, Marcum LLP (“Marcum”), the Company’s independent registered public accounting firm prior to the Business Combination, was informed on July 18, 20226, 2023 that it would be dismissed effective following its completion of its review of the Company’s financial statements for the second quarter of 2022, which consist only of the accounts of ITHAX prior to the Business Combination, and replaced by KNAV as our independent registered public accounting firm.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022.2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due to the material weaknesses in our internal controls over financial reporting described below.
Management’s Report on Internal Controls over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management evaluated the effectiveness of internal control over financial reporting based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on that we are currently working to remediate, which relate to improper segregationevaluation, Management concluded that the Company’s internal control over financial reporting was not effective as of duties, inadequate design, implementation, and maintenance of adequate information systems controls, including access and change management controls and timely recording of material transactions. In addition, priorDecember 31, 2023, due to the Business Combination, ITHAX identifiedmaterial weaknesses described below.
Material Weaknesses Identified
A material weakness is a material weaknessdeficiency, or combination of deficiencies, in internal control over financial reporting related to complex financial instrumentssuch that existed as of December 31, 2022, which we are also working to remediate.
Previously Identified Material Weaknesses in Internal Control over Financial Reporting
In connection with our Chief Executive Officer and Chief Financial Officer’s evaluationthere is a reasonable possibility that a material misstatement of the effectivenesscompany’s annual or interim financial statements will not be prevented or detected on a timely basis. The Company did not maintain controls to execute the criteria established in the COSO Framework for the control environment, risk assessment, control activities, information and communication, and monitoring components, which resulted in control deficiencies that constitute material weaknesses, either individually or in the aggregate, within each component of our controls, we previously identifiedthe COSO Framework. The material weaknesses in these components of the COSO Framework resulted from the lack of a sufficient complement of qualified personnel within the Company’s accounting functions:
Control Environment
The Company did not design and implement an effective control environment based on the criteria established in the COSO Framework. The Company did not maintain a sufficient complement of personnel with appropriate levels of knowledge, experience, and training in accounting and internal control matters commensurate with the nature, growth and complexity of the Company’s business. The lack of sufficient appropriately skilled and trained personnel contributed to our failure to: (i) design and implement certain risk-mitigating internal controls; and (ii) consistently operate our internal control over financial reporting. These material weaknesses primarily manifested in improper segregation of duties, inadequate design, implementation, and maintenance of adequate information systems controls, including access and change management controls and timely recording of material transactions.
In addition, prior to the Business Combination, ITHAX identified a material weakness in our internal control over financial reporting. This material weakness was related our accounting for complex financial instruments.
In response to theseThe control environment material weaknesses management is in the processcontributed to other material weaknesses within our system of completing the following remediation actions:
•We are establishing a formal risk assessment process to identify and evaluate risks relevant to financial reporting objectives
•We are implementing segregation of duties around the approval of journal entries and accounting processes.
•We are implementing a training program addressing internal control over financial reporting including educatingin the following COSO Framework components:
Risk Assessment
The Company did not design and implement an effective risk assessment based on the criteria established in the COSO Framework. The control owners regardingdeficiencies constitute material weaknesses, either individually or in the requirementsaggregate, relating primarily to: (i) identifying and analyzing risks to achieve its objectives; (ii) considering the potential for fraud in assessing risks; and (iii) identifying and assessing changes in the business that could impact our system of each control.internal controls.
Control Activities
The Company did not design and implement effective control activities based on the criteria established in the COSO Framework in certain processes. The control deficiencies constitute material weaknesses, either individually or in the aggregate, primarily relating to:
We determined that the material weakness around 1.improperLack of segregation of duties inadequaterelated to the ability to create, approve and post journal entries within the Company’s general ledger system.
2.Lack of effectively designed and implemented controls to review and approve account reconciliations at the appropriate level of precision, with appropriate supporting documentation.
3.Lack of effectively designed and implemented controls to assess and review the accounting treatment for significant events, significant accounting policies, and significant accounting estimates, including the establishment of appropriate communication channels for the timely dissemination of information.
4.Lack of effectively designed and implemented controls to review and approve work performed by management’s third-party consultants related to the measurement of certain instruments, as well as income-tax related balances.
5.Inadequate design, implementation and maintenance of adequate information systems controls including access security and change management controls that enable the Company to generate and use relevant quality information to support a functioning control environment.
6.Failure to timely recording ofrecognize material transactions priorrelated to being a public company revenue, which includes the appropriate evaluation of revenue recognition based on terms of the Company’s contracts, with appropriate review by management including review of both internal and external information.
7.continuedLack of effectively designed and implemented controls over account balances and transactions at newly-acquired subsidiaries.
Information and Communication
The Company did not design and implement effective information and communication activities based on the criteria established in the COSO Framework. The Company did not consistently operate controls for generating and using relevant quality information and did not establish communication protocols to exist assupport the functioning of December 31, 2022.We also determined thatinternal controls.
Monitoring
The Company did not design and implement effective monitoring activities based on the criteria established in the COSO Framework. The material weakness around accounting for complex financial instrumentscontinuedin the monitoring activities resulted from the Company’s lack of effective ongoing evaluation to existascertain whether the components of internal controls are present and functioning, and as of December 31, 2022. These material weaknesses may not allow for usa result, the inability to have proper segregation of duties and the ability to close our bookscommunicate all relevant internal control deficiencies in a timely and reliable manner to detectthose parties responsible for taking corrective action.
The above material weaknesses have the potential to cause material accounting errors in substantially all financial statement account balances and correct any potential misstatements, and to report our resultsdisclosures if not remediated on a timely basis.
We have begunare in the process of, and we are focused on, designing and implementing effective internal control measures to improve our internal control over financial reporting and remediate these material weaknesses. Our efforts include a number of actions:
•We are actively recruiting additional personnel within our accounting and finance department, in addition to engaging and utilizing third party consultants and specialists to supplement our internal resources and segregate key functions within our business processes, if appropriate;
•We are designing and implementing additional review procedures within our accounting and finance department to provide more robust and comprehensive internal controls over financial reporting that address the relative financial statement assertions and risks of material misstatement within our business processes;
•We are designing and implementing the maintenance of adequate information systems controls, including access and change management controls; and
•We are designing and implementing information technology and application controls in our financially significant systems to address our relative information processing objectives.
While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal controls over financial reporting and remediate the material weaknesses. Our remediation efforts to address the identified material weaknesses are ongoing. Our efforts include several actions:
• Hired and continue to hire qualified accounting and internal controls professionals with the appropriate level of experience and training to design, maintain and improve our accounting policies, procedures and controls to prevent and detect material misstatements related to the presentation and disclosures of the consolidated financial statements and review of third-party consultants. In 2023, we
hired our Sr. Director Internal Controls and Compliance, Vice President of SEC Reporting and Technical Accounting, and Sr. Manager of SEC Reporting and Technical Accounting.
• In 2023, we completed several risk assessments, which assisted the Company in determining where risks exist. We will continue to diligently reviewexpand and strengthen these assessments and continue to address these risks.
• Hired and continue to hire qualified staff and outside resources to segregate key functions within our financial and information technology processes supporting our internal control over financial reporting.
Management’s Report on Internal Controls over Financial Reporting• Designing and implementing additional control activities related to the review of the accounting treatment for significant events, significant accounting policies, and significant accounting estimates within our accounting and finance department, including those that are prepared by third-party consultants.
This Annual Report on Form 10-K does not include a report• Designing and implementing additional control activities related to the review of management’s assessment regardingmaterial revenue transactions and the Company’s contracts related to revenue.
• Designing and implementing effective information and communication activities to support the functioning of internal controls.
• Designing and implementing effective monitoring activities to ascertain whether the components of internal controls are present and functioning.
We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. While we believe the steps taken to date and those planned for future implementation will improve the effectiveness of our internal control over financial reporting, or an attestation reportwe have not completed all remediation efforts. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.internal control over financial reporting.
Attestation Report of Independent Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm on internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”
Changes in Internal Control over Financial Reporting
Other than the material weakness remediation efforts underway,described above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 2022,2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item will be included in our definitive proxy statement (the “20232024 Proxy Statement”) to be filed with the SEC within 120 days after our fiscal year ended December 31, 2022,2023, in connection with the solicitation of proxies for our 20232024 annual meeting of stockholders, including under the caption “Directors, Executive Officers, and Corporate Governance”, and is incorporated herein by reference.
Code of Ethics
Our Board has adopted a Code of Ethics, applicable to all of our employees, executive officers and Directors. The Code of Ethics is available at the corporate governance section of our website at https://investors.mondee.com/corporate-governance/governance-overview. Information contained on or accessible through the website is not a part of this Annual Report on Form 10-K, and the inclusion of the website address in this Annual Report on Form 10-K is an inactive textual reference only. Any amendments to the Code of Ethics, or any waivers of its requirements, are expected to be disclosed as required by SEC and Nasdaq rules. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included in our 20232024 Proxy Statement, including under the headings “Executive Compensation” and “Directors, Executive Officers and Corporate Governance” and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The information required by this Item will be included in our 20232024 Proxy Statement, including under the headings “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management,” and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item will be included in our 20232024 Proxy Statement, including under the headings “Directors, Executive Officers and Corporate Governance” and “Certain Relationships and Related Party Transactions,” and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item will be included in our 20232024 Proxy Statement, including under the heading “Proposal 2: Ratification“Ratification of Approval of Independent Registered Public Accounting Firm,” and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are included in this Annual Report on Form 10-K:
1. The following Report and ConsolidatedRefer to Part II, Item 8 — Financial Statements of our company are included in this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm (KNAV P.A., Atlanta, Georgia, PCAOB ID No. 2983)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
See Index to Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this item by reference.Supplementary Data.
2. All financial schedules have been omitted because the required information is either presented in the consolidated financial statements or the notes thereto or is not applicable or required.
3. The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Annual Report on Form 10-K are listed in the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K. The exhibits listed in the Exhibit Index are incorporated by reference herein.
ITEM 16. FORM 10-K SUMMARY
None.Exhibits follow:
EXHIBIT INDEX
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit
No. | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| 2.1 | | | | 8-K | | 001-39943 | | 2.1 | | December 20, 2021 |
2.2† | | | | 8-K | | 001-39943 | | 2.1 | | February 1, 2023 |
| 3.1 | | | | 8-K | | 001-39943 | | 3.1 | | July 20, 2022 |
| 3.2 | | | | 8-K | | 001-39943 | | 3.1 | | September 30, 2022 |
| 3.3 | | | | 8-K | | 001-39943 | | 3.2 | | July 20, 2022 |
| 4.1 | | | | S-4 | | 333-263727 | | 4.1 | | March 21, 2022 |
| 4.2 | | | | 8-K | | 001-39943 | | 4.1 | | July 20, 2022 |
| 4.3 | | | | 8-K | | 001-39943 | | 4.2 | | July 20, 2022 |
| 4.4* | | | | | | | | | | |
| 4.5 | | | | 8-K | | 001-39943 | | 4.3 | | July 20, 2022 |
| 4.6 | | | | 8-K | | 001-39943 | | 10.1 | | October 21, 2022 |
| 4.7 | | | | 8-K | | 001-39943 | | 10.3 | | September 30, 2022 |
| 10.1 | | | | S-4 | | 333-263727 | | Annex F | | March 21, 2022 |
| 10.2 | | | | S-4 | | 333-263727 | | 10.2 | | March 21, 2022 |
| 10.3 | | | | S-4 | | 333-263727 | | 10.3 | | March 21, 2022 |
| 10.4# | | | | S-4 | | 333-263727 | | Annex D | | March 21, 2022 |
| 10.5# | | | | 8-K | | 001-39943 | | 10.8 | | July 20, 2022 |
| 10.6# | | | | S-4 | | 333-263727 | | 10.6 | | March 21, 2022 |
| 10.7# | | | | S-4 | | 333-263727 | | 10.7 | | March 21, 2022 |
| 10.8 | | | | 8-K | | 001-39943 | | 10.3 | | July 20, 2022 |
| 10.9# | | | | 8-K | | 001-39943 | | 10.5 | | December 20, 2021 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit
No. | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| 2.1 | | | | 8-K | | 001-39943 | | 2.1 | | December 20, 2021 |
2.2† | | | | 8-K | | 001-39943 | | 2.1 | | February 1, 2023 |
| 2.3† | | Stock Purchase Agreement by and among Mondee Brazil, LLC, Mondee Holdings, Inc., Consolid Mexico Holding, S.A.P.I. de C.V., José Luis Castro Gómez, Abraham Shabot Cherem, Judith Guerra Aguijosa, and the other parties thereto, dated as of May 12, 2023. | | 8-K | | 001-39943 | | 2.1 | | May 16, 2023 |
| 2.4† | | | | 8-K | | 001-39943 | | 2.1 | | May 16, 2023 |
| 2.5† | | | | 10-Q | | 001-39943 | | 2.5 | | November 14, 2023 |
| 2.6† | | | | 8-K | | 001-39943 | | 2.1 | | November 17, 2023 |
| 3.1 | | | | 8-K | | 001-39943 | | 3.1 | | July 20, 2022 |
| 3.2 | | | | 8-K | | 001-39943 | | 3.1 | | September 30, 2022 |
| 3.3 | | | | 8-K | | 001-39943 | | 3.2 | | July 13, 2023 |
| 3.4 | | | | 8-K | | 001-39943 | | 3.1 | | October 23, 2023 |
| 3.5 | | | | 8-K | | 001-39943 | | 3.1 | | December 20, 2023 |
| 4.1 | | | | S-4 | | 333-263727 | | 4.1 | | March 21, 2022 |
| 4.2 | | | | 8-K | | 001-39943 | | 4.1 | | July 20, 2022 |
| 4.3 | | | | 8-K | | 001-39943 | | 4.2 | | July 20, 2022 |
| 4.4 | | | | 10-K/A | | 001-39943 | | 4.4 | | April 19, 2023 |
| 4.5 | | | | 8-K | | 001-39943 | | 4.3 | | July 20, 2022 |
| 4.6 | | | | 8-K | | 001-39943 | | 10.1 | | October 21, 2022 |
| 4.7 | | | | 8-K | | 001-39943 | | 10.3 | | September 30, 2022 |
| 4.7 | | | | 8-K | | 001-39943 | | 10.3 | | October 23, 2023 |
| 4.9 | | | | 8-K | | 001-39943 | | 4.1 | | December 20, 2023 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit
No. | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| 10.1 | | | | S-4 | | 333-263727 | | Annex F | | March 21, 2022 |
| 10.2 | | | | S-4 | | 333-263727 | | 10.2 | | March 21, 2022 |
| 10.3 | | | | S-4 | | 333-263727 | | 10.3 | | March 21, 2022 |
| 10.4+ | | | | S-4 | | 333-263727 | | Annex D | | March 21, 2022 |
| 10.5+ | | | | 8-K | | 001-39943 | | 10.8 | | July 20, 2022 |
| 10.6+ | | | | S-4 | | 333-263727 | | 10.6 | | March 21, 2022 |
| 10.7+ | | | | S-4 | | 333-263727 | | 10.7 | | March 21, 2022 |
| 10.8 | | | | 8-K | | 001-39943 | | 10.3 | | July 20, 2022 |
| 10.9+ | | | | 8-K | | 001-39943 | | 10.5 | | December 20, 2021 |
| 10.10 | | | | S-4 | | 333-263727 | | 10.11 | | March 21, 2022 |
| 10.11 | | Amended and Restated Securityholders Agreement, by and among Mondee Holdings, LLC, Mondee Group, LLC, Vajid Jafri, Prasad Gundumogula, Ramesh Punwami, Timothy Turner, Jeffrey Snetiker, Surjit Babra and any other executive employee of the Company or its Subsidiaries, who, at any time acquires securities of the Company and each of the Other Securityholders, dated as of May 1, 2020 | | S-4 | | 333-263727 | | 10.17 | | March 21, 2022 |
10.12† | | | | S-4 | | 333-263727 | | 10.23 | | March 21, 2022 |
| 10.13 | | | | S-4 | | 333-263727 | | 10.28 | | March 21, 2022 |
| 10.14 | | | | S-4 | | 333-263727 | | 10.29 | | March 21, 2022 |
| 10.15 | | | | 8-K | | 001-39943 | | 10.4 | | July 20, 2022 |
| 10.16+ | | | | 8-K | | 001-39943 | | 10.13 | | July 20, 2022 |
| 10.17+ | | | | S-4-A | | 333-263727 | | 10.44 | | May 20, 2022 |
| 10.18+ | | | | S-4-A | | 333-263727 | | 10.45 | | May 20, 2022 |
| 10.20+ | | | | S-4-A | | 333-263727 | | 10.47 | | May 20, 2022 |
| 10.21+ | | | | S-1-A | | 333-266277 | | 10.21 | | September 7, 2022 |
| 10.22 | | | | 8-K | | 001-39943 | | 10.2 | | September 30, 2022 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit
No. | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| 10.23 | | | | 8-K | | 001-39943 | | 10.14 | | July 20, 2022 |
| 10.24 | | | | 8-K | | 001-39943 | | 10.16 | | July 20, 2022 |
| 10.25 | | | | 8-K | | 001-39943 | | 10.2 | | October 25, 2022 |
10.26† | | | | 8-K | | 001-39943 | | 10.2 | | January 18, 2023 |
10.27† | | | | 8-K | | 001-39943 | | 10.2 | | February 3, 2023 |
| 10.28 | | | | 8-K | | 001-39943 | | 10.1 | | September 30, 2022 |
| 10.29 | | | | 8-K | | 001-39943 | | 10.15 | | July 20, 2022 |
10.30† | | | | S-4-A | | 333-263727 | | 10.43 | | June 13, 2022 |
10.31† | | | | 8-K | | 001-39943 | | 10.2 | | January 18, 2023 |
10.32† | | | | 8-K | | 001-39943 | | 10.2 | | February 3, 2023 |
10.33† | | Share Pledge Agreement, by and between Mondee Brazil, LLC and Mondee, Inc., the “Lenders,” Orinter Viagens E Turismo S.A., and TCW Asset Management Company LLC, signed April 14, 2023, effective as of March 28, 2023. | | 8-K | | 001-39943 | | 10.3 | | April 19, 2023 |
10.34+† | | | | 8-K | | 001-39943 | | 10.1 | | April 20, 2023 |
10.35+† | | | | 10-Q | | 001-39943 | | 10.6 | | May 15, 2023 |
| 10.36† | | | | 8-K | | 001-39943 | | 10.2 | | October 17, 2023 |
| 10.37† | | | | 8-K | | 001-39943 | | 10.1 | | October 23, 2023 |
| 10.38† | | | | 8-K | | 001-39943 | | 10.2 | | October 23, 2023 |
| 10.39† | | | | 8-K | | 001-39943 | | 10.2 | | October 23, 2023 |
| 10.40 | | | | 8-K | | 001-39943 | | 10.4 | | October 23, 2023 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit
No. | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| 10.10 | | | | S-4 | | 333-263727 | | 10.11 | | March 21, 2022 |
| 10.11 | | Amended and Restated Securityholders Agreement, by and among Mondee Holdings, LLC, Mondee Group, LLC, Vajid Jafri, Prasad Gundumogula, Ramesh Punwami, Timothy Turner, Jeffrey Snetiker, Surjit Babra and any other executive employee of the Company or its Subsidiaries, who, at any time acquires securities of the Company and each of the Other Securityholders, dated as of May 1, 2020 | | S-4 | | 333-263727 | | 10.17 | | March 21, 2022 |
10.12† | | | | S-4 | | 333-263727 | | 10.23 | | March 21, 2022 |
| 10.13 | | | | S-4 | | 333-263727 | | 10.28 | | March 21, 2022 |
| 10.14 | | | | S-4 | | 333-263727 | | 10.29 | | March 21, 2022 |
| 10.15 | | | | 8-K | | 001-39943 | | 10.4 | | July 20, 2022 |
| 10.16# | | | | 8-K | | 001-39943 | | 10.13 | | July 20, 2022 |
| 10.17# | | | | S-4-A | | 333-263727 | | 10.44 | | May 20, 2022 |
| 10.18# | | | | S-4-A | | 333-263727 | | 10.45 | | May 20, 2022 |
| 10.19# | | | | S-4-A | | 333-263727 | | 10.46 | | May 20, 2022 |
| 10.20# | | | | S-4-A | | 333-263727 | | 10.47 | | May 20, 2022 |
| 10.21# | | | | S-1-A | | 333-266277 | | 10.21 | | September 7, 2022 |
| 10.22 | | | | 8-K | | 001-39943 | | 10.2 | | September 30, 2022 |
| 10.23 | | | | 8-K | | 001-39943 | | 10.14 | | July 20, 2022 |
| 10.24 | | | | 8-K | | 001-39943 | | 10.16 | | July 20, 2022 |
| 10.25 | | | | 8-K | | 001-39943 | | 10.2 | | October 25, 2022 |
10.26† | | | | 8-K | | 001-39943 | | 10.2 | | January 18, 2023 |
10.27† | | | | 8-K | | 001-39943 | | 10.2 | | February 3, 2023 |
| 10.28 | | | | 8-K | | 001-39943 | | 10.1 | | September 30, 2022 |
| 10.29 | | | | 8-K | | 001-39943 | | 10.15 | | July 20, 2022 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit
No. | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| 10.41† | | | | 8-K | | 001-39943 | | 10.5 | | October 23, 2023 |
| 10.42 | | | | 8-K | | 001-39943 | | 10.2 | | November 8, 2023 |
| 10.43+† | | | | 10-Q | | 001-39943 | | 10.1 | | November 14, 2023 |
| 10.44+† | | | | 10-Q | | 001-39943 | | 10.2 | | November 14, 2023 |
| 10.45† | | | | 8-K | | 001-39943 | | 10.1 | | December 20, 2023 |
| 10.46† | | | | 8-K | | 001-39943 | | 10.2 | | December 20, 2023 |
| 10.47+ | | | | 8-K | | 001-39943 | | 10.1 | | January 8, 2024 |
| 10.48† | | | | 8-K | | 001-39943 | | 10.2 | | January 19, 2024 |
| 10.49† | | | | 8-K | | 001-39943 | | 10.2 | | March 12, 2024 |
| 16.1 | | | | 8-K | | 001-39943 | | 16.1 | | July 20, 2022 |
| 16.2 | | | | 8-K | | 001-39943 | | 16.2 | | July 7, 2023 |
| 19* | | | | | | | | | | |
| 21* | | | | | | | | | | |
| 23.1* | | | | | | | | | | |
| 23.2* | | | | | | | | | | |
| 24* | | | | | | | | | | |
| 31.1* | | | | | | | | | | |
| 31.2* | | | | | | | | | | |
| 32.1** | | | | | | | | | | |
| 32.2** | | | | | | | | | | |
| 97* | | | | | | | | | | |
| 101.INS | | XBRL Instance Document |
| 101.SCH | | XBRL Taxonomy Extension Schema |
| 101.CAL | | XBRL Taxonomy Calculation Linkbase |
| 101.LAB | | XBRL Taxonomy Label Linkbase |
| 101.PRE | | XBRL Definition Linkbase Document |
| 101.DEF | | XBRL Definition Linkbase Document |
| 104 | | Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit
No. | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| 10.30 | | | | S-4-A | | 333-263727 | | 10.43 | | June 13, 2022 |
| 16 | | | | 8-K | | 001-39943 | | 16.1 | | July 20, 2022 |
| 21* | | | | | | | | | | |
| 23* | | | | | | | | | | |
| 31.1* | | | | | | | | | | |
| 31.2* | | | | | | | | | | |
| 32.1** | | | | | | | | | | |
| 32.2** | | | | | | | | | | |
| 101.INS | | XBRL Instance Document |
| 101.SCH | | XBRL Taxonomy Extension Schema |
| 101.CAL | | XBRL Taxonomy Calculation Linkbase |
| 101.LAB | | XBRL Taxonomy Label Linkbase |
| 101.PRE | | XBRL Definition Linkbase Document |
| 101.DEF | | XBRL Definition Linkbase Document |
| 104 | | Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101) |
* Filed herewith.
** Furnished herewith.
+ Indicates management contract or compensatory plan or arrangement.
† Certain confidential information (indicated by brackets and asterisks) has been omitted from this exhibit because it is both (i) not material and (ii) the type of information that the registrant treats as private or confidential.
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index, except for exhibits 32.1 and 32.2, which are hereby furnished. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at
ITEM 16. FORM 10-K SUMMARY
None.
www.sec.gov.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 10, 2023March 29, 2024
| | | | | | | | |
| | |
| MONDEE HOLDINGS, INC. |
| | |
| By: | /s/ Prasad Gundumogula |
| | Name: Prasad Gundumogula |
| | Title: Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | | | | |
| Name | | Position | | Date |
| | | | | |
By: | /s/ Prasad Gundumogula | | Chief Executive Officer and Director (Chairman) | | April 10, 2023 |
| Prasad Gundumogula | | (Principal Executive Officer) | | |
| | | | | |
By: | /s/ Daniel Figenshu | | Chief Financial Officer | | April 10, 2023 |
| Daniel Figenshu | | (Principal Financial and Accounting Officer) | | |
| | | | | |
By: | /s/ Orestes Fintiklis | | Director | | April 10, 2023 |
| Orestes Fintiklis | | | | |
| | | | | |
By: | /s/ Mona Abolenaga Kanaan | | Director | | April 10, 2023 |
| Mona Aboelnaga Kanaan | | | | |
| | | | | |
By: | /s/ Asi Ginio | | Director | | April 10, 2023 |
| Asi Ginio | | | | |
| | | | | | | | | | | | | | | | | |
By: | /s/ Roopa Purushothaman | | Director | | April 10, 2023 |
| Roopa Purushothaman | | | | |
| | | | | | | | | | | | | | | | | |
By: | /s/ Noor Sweid | | Director | | April 10, 2023 |
| Noor Sweid | | | | |
| | | | | | | | | | | | | | | | | |
By: | /s/ Pradeep Udhas | | Director | | April 10, 2023 |
| Pradeep Udhas | | | | |
MONDEE HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS
| | | | | |
| |
| DESCRIPTION | | | | | PAGE |
| Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP; Austin, TX; PCAOB ID No. 34) | |
Report of Independent Registered Public Accounting Firm (KNAV P.A.,; Atlanta, Georgia,GA; PCAOB ID No. 2983) | |
| Financial Statements: | |
| Consolidated Balance Sheets | |
| Consolidated Statements of Operations | |
| Consolidated Statements of Comprehensive Loss | |
| Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Deficit | |
| Consolidated Statements of Cash Flows | |
| Notes to the Consolidated Financial Statements | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Mondee Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Mondee Holdings, Inc. and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of operations, comprehensive loss, changes in mezzanine equity and stockholders’ deficit and cash flows, for the year ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Austin, Texas
March 29, 2024
We have served as the Company’s auditor since 2023.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Mondee Holdings, Inc. and Subsidiaries
Opinion on the consolidated financial statements
We have audited the accompanying consolidated balance sheets of Mondee Holdings, Inc. and Subsidiaries (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive loss, changes in mezzanine equity and stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KNAV P.A.
We have served as the Company's auditor since 2021.
Atlanta, Georgia
April 10, 2023
PCAOB ID - 2983
Item 17. Financial Statements
MONDEE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
| | December 31, |
| 2022 | | 2021 |
| MONDEE HOLDINGS, INC. AND SUBSIDIARIES | | MONDEE HOLDINGS, INC. AND SUBSIDIARIES |
Consolidated Balance Sheets (In thousands, except share and per share data) | | Consolidated Balance Sheets (In thousands, except share and per share data) |
| December 31, | | | December 31, |
| 2023 | | | 2023 | | 2022 |
| Assets | Assets | | | |
| Current assets: | |
| Current assets | |
| Current assets | |
| Current assets | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 78,841 | | | $ | 15,506 | |
| Restricted short-term investments | 8,639 | | | 8,484 | |
| Accounts receivable, net of allowance of $4,861, and $5,005 as of December 31, 2022 and December 31, 2021, respectively | 21,733 | | | 10,178 | |
| Contract assets, net of allowance of $750 and $1,000 as of December 31, 2022 and December 31, 2021, respectively | 5,794 | | | 3,935 | |
| Cash and cash equivalents | |
| Cash and cash equivalents | |
| Restricted cash and short-term investments | |
| Accounts receivable, net of allowance of expected credit losses of $5,185, and $4,861 as of December 31, 2023 and 2022, respectively | |
| Contract assets, net of allowance of expected credit losses of $7 and $750 as of December 31, 2023 and 2022, respectively | |
| Prepaid expenses and other current assets | Prepaid expenses and other current assets | 4,673 | | | 2,588 | |
| Total current assets | Total current assets | $ | 119,680 | | | $ | 40,691 | |
| Property and equipment, net | Property and equipment, net | 11,332 | | | 8,874 | |
| Goodwill | Goodwill | 66,420 | | | 66,420 | |
| Intangible assets, net | Intangible assets, net | 57,370 | | | 63,708 | |
| Loan receivable from related party | — | | | 22,054 | |
| Amounts receivable from related parties | |
| Operating lease right-of-use assets | Operating lease right-of-use assets | 1,384 | | | — | |
| Deferred income taxes | Deferred income taxes | 237 | | | — | |
| Other non-current assets | Other non-current assets | 1,674 | | | 1,588 | |
| TOTAL ASSETS | TOTAL ASSETS | $ | 258,097 | | | $ | 203,335 | |
| Liabilities, Redeemable Preferred Stock and Stockholders’ Deficit | Liabilities, Redeemable Preferred Stock and Stockholders’ Deficit | | | |
| Current liabilities: | |
| Current liabilities | |
| Current liabilities | |
| Current liabilities | |
| Accounts payable | |
| Accounts payable | |
| Accounts payable | Accounts payable | 33,749 | | | 19,529 | |
| Deferred underwriting fee | Deferred underwriting fee | 500 | | | — | |
| Amounts payable to related parties | Amounts payable to related parties | 13 | | | 716 | |
| Paycheck Protection Program (PPP) and other government loans, current portion | 72 | | | 338 | |
| Government loans, current portion | |
| Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 9,319 | | | 10,354 | |
| Deferred revenue | 5,828 | | | 6,450 | |
| Earn-out liability, net, current portion | |
| Deferred revenue, current portion | |
| Long-term debt, current portion | Long-term debt, current portion | 7,514 | | | 11,063 | |
| Total current liabilities | Total current liabilities | $ | 56,995 | | | $ | 48,450 | |
| Deferred income taxes | Deferred income taxes | 307 | | | 512 | |
| Note payable to related party | Note payable to related party | 197 | | | 193 | |
| PPP and other government loans excluding current portion | 159 | | | 1,915 | |
| Government loans, excluding current portion | |
| Earn-out liability, net, excluding current portion | |
| Warrant liability | Warrant liability | 1,293 | | | — | |
| Long-term debt excluding current portion | 126,882 | | | 162,170 | |
| Deferred revenue excluding current portion | 14,656 | | | 14,288 | |
| Operating lease liabilities excluding current portion | 1,620 | | | — | |
| Long-term debt, excluding current portion | |
| Deferred revenue, excluding current portion | |
| Operating lease liabilities, excluding current portion | |
| Other long-term liabilities | Other long-term liabilities | 2,713 | | | 2,632 | |
| Total liabilities | Total liabilities | $ | 204,822 | | | $ | 230,160 | |
| Commitments and contingencies (Note 13) | | | |
| Commitments and contingencies (Note 14) | | Commitments and contingencies (Note 14) | | | |
| | Redeemable Preferred Stock | Redeemable Preferred Stock | |
| Series A Preferred stock - 85,000 authorized, $0.0001 par value, 85,000 shares issued and outstanding as of December 31, 2022 (liquidation preference $87,323) | 82,597 | | | — | |
| Redeemable Preferred Stock | |
| Redeemable Preferred Stock | |
| Series A Preferred stock - 250,000,000 authorized, $0.0001 par value, 96,300 and 85,000 shares issued and outstanding as of December 31, 2023 and 2022, respectively (liquidation preference $110,180 and $87,323 as of December 31, 2023 and 2022, respectively) | |
| Series A Preferred stock - 250,000,000 authorized, $0.0001 par value, 96,300 and 85,000 shares issued and outstanding as of December 31, 2023 and 2022, respectively (liquidation preference $110,180 and $87,323 as of December 31, 2023 and 2022, respectively) | |
| Series A Preferred stock - 250,000,000 authorized, $0.0001 par value, 96,300 and 85,000 shares issued and outstanding as of December 31, 2023 and 2022, respectively (liquidation preference $110,180 and $87,323 as of December 31, 2023 and 2022, respectively) | |
| | Stockholders' deficit: | |
| Common stock – $0.0001 par value; 500,000,000 and 60,800,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively; 82,266,160 and 60,800,000 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively | 7 | | | 6 | |
| | MONDEE HOLDINGS, INC. AND SUBSIDIARIES | | MONDEE HOLDINGS, INC. AND SUBSIDIARIES |
Consolidated Balance Sheets (In thousands, except share and per share data) | | Consolidated Balance Sheets (In thousands, except share and per share data) |
| December 31, | | | December 31, |
| 2023 | | | 2023 | | 2022 |
| | Stockholders' deficit: | |
| Stockholders' deficit: | |
| Stockholders' deficit: | |
| Common stock – 500,000,000 Class A and 250,000,000 Class C shares authorized, $0.0001 par value, 83,252,040 and 82,266,160 Class A shares issued and outstanding as of December 31, 2023 and 2022, respectively | |
| Common stock – 500,000,000 Class A and 250,000,000 Class C shares authorized, $0.0001 par value, 83,252,040 and 82,266,160 Class A shares issued and outstanding as of December 31, 2023 and 2022, respectively | |
| Common stock – 500,000,000 Class A and 250,000,000 Class C shares authorized, $0.0001 par value, 83,252,040 and 82,266,160 Class A shares issued and outstanding as of December 31, 2023 and 2022, respectively | |
| Treasury stock - 4,623,532 and 0 shares of Class A Common Stock as of December 31, 2023 and 2022, respectively | |
| Shareholder receivable | Shareholder receivable | (20,336) | | | — | |
| Additional paid-in capital | Additional paid-in capital | 271,883 | | | 163,459 | |
| Accumulated other comprehensive loss | (621) | | | (273) | |
| Accumulated other comprehensive losses | |
| Accumulated deficit | Accumulated deficit | (280,255) | | | (190,017) | |
| Total stockholders’ deficit | Total stockholders’ deficit | $ | (29,322) | | | $ | (26,825) | |
| TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | $ | 258,097 | | | $ | 203,335 | |
The accompanying notes are an integral part of these Consolidated Financial Statements.consolidated financial statements.
MONDEE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per share data)
| | | Year Ended
December 31, |
| | 2022 | | 2021 |
| | Year Ended
December 31, | |
| | Year Ended
December 31, | |
| | Year Ended
December 31, | |
| | 2023 | | | | 2023 | | 2022 |
| Revenues, net | Revenues, net | | $ | 159,484 | | | $ | 93,194 | |
| Operating expenses: | | |
| Sales and marketing expenses, including non-employee stock-based compensation of $0 and $16 respectively | | 114,111 | | | 65,776 | |
| | Personnel expenses, including stock-based compensation of $61,690 and $3,920 respectively | | 82,057 | | | 23,422 | |
| General and administrative expenses, including non-employee stock-based compensation of $352 and $0 respectively | | 9,662 | | | 7,455 | |
| Operating expenses | |
| Sales and marketing expenses | |
| Sales and marketing expenses | |
| Sales and marketing expenses | |
| Personnel expenses, including stock-based compensation of $12,438 and $61,690, respectively | |
| General and administrative expenses, including non-employee stock-based compensation of $1,349 and $352, respectively | |
| Information technology expenses | Information technology expenses | | 5,333 | | | 4,058 | |
| Provision for doubtful accounts receivable and contract assets | | 312 | | | 1,874 | |
| Provision for credit losses, net | |
| Depreciation and amortization | Depreciation and amortization | | 11,770 | | | 12,861 | |
| Restructuring and related costs | | 2,542 | | | — | |
| Restructuring expense, net | |
| Total operating expenses | Total operating expenses | | 225,787 | | | 115,446 | |
| Loss from operations | Loss from operations | | (66,303) | | | (22,252) | |
| Other income (expense): | | |
| Other income (expense) | |
| Interest income | |
| Interest income | |
| Interest income | Interest income | | 637 | | | 505 | |
| Interest expense | Interest expense | | (26,654) | | | (23,683) | |
| Gain on extinguishment of PPP loan | Gain on extinguishment of PPP loan | | 2,009 | | | 5,868 | |
| Changes in fair value of warrant liability | Changes in fair value of warrant liability | | (108) | | | — | |
| Other income, net | | 308 | | | 980 | |
| Other income (expense), net | |
| Total other expense, net | Total other expense, net | | (23,808) | | | (16,330) | |
| Loss before income taxes | Loss before income taxes | | $ | (90,111) | | | $ | (38,582) | |
| Provision for income taxes | | (127) | | | (323) | |
| Benefit (provision) for income taxes | |
| Net loss | Net loss | | $ | (90,238) | | | $ | (38,905) | |
| Net loss attributable per share to common stockholders: | | | | |
| Cumulative dividends allocated to preferred stockholders | |
| Net loss attributable to common stockholders | |
| Net loss attributable per share to common stockholders | |
| Basic and diluted | |
| Basic and diluted | |
| Basic and diluted | Basic and diluted | | $ | (1.34) | | | $ | (0.64) | |
| Weighted-average shares used to compute net loss attributable per share to common stockholders | Weighted-average shares used to compute net loss attributable per share to common stockholders | | | | |
| Basic and diluted | Basic and diluted | | 67,368,620 | | | 60,800,000 | |
| Basic and diluted | |
| Basic and diluted | |
The accompanying notes are an integral part of these Consolidated Financial Statements.consolidated financial statements.
MONDEE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Loss
(In thousands)
| | | Year Ended
December 31, |
| | 2022 | | 2021 |
| | Year Ended
December 31, | |
| | Year Ended
December 31, | |
| | Year Ended
December 31, | |
| | 2023 | | | | 2023 | | 2022 |
| Net loss | Net loss | | $ | (90,238) | | | $ | (38,905) | |
| Other comprehensive loss, net of tax: | | |
| Loss on currency translation adjustment | | (348) | | | (311) | |
| Other comprehensive loss, net of tax | |
| Gain (loss) on currency translation adjustment | |
| Gain (loss) on currency translation adjustment | |
| Gain (loss) on currency translation adjustment | |
| Comprehensive loss | Comprehensive loss | | $ | (90,586) | | | $ | (39,216) | |
The accompanying notes are an integral part of these Consolidated Financial Statements.consolidated financial statements.
MONDEE HOLDINGS, INC. AND SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| MONDEE HOLDINGS, INC. AND SUBSIDIARIES |
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Deficit (In thousands, except share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | |
| Mezzanine Equity | | | Stockholders’ Deficit |
| Redeemable Preferred stock | | | Class A Common Stock | | Treasury Stock | | Shareholder | | Additional
Paid-in-
Capital | | Accumulated
Other
Comprehensive
Loss | | Accumulated
Deficit | | Total
Stockholders’
Deficit |
| Shares | | Amount | | | Shares | | Amount | | Shares | | Amount | | Receivable | | | | |
| Balance at December 31, 2021 | — | | | $ | — | | | | 1 | | $ | — | | | — | | | — | | | $ | — | | | $ | 163,465 | | | $ | (273) | | | $ | (190,017) | | | $ | (26,825) | |
| Retroactive application of recapitalization | — | | | — | | | | 60,799,999 | | 6 | | | — | | | — | | | $ | — | | | (6) | | | — | | | — | | | $ | — | |
| Balance at December 31, 2021 | — | | | $ | — | | | | 60,800,000 | | | $ | 6 | | | — | | | $ | — | | | $ | — | | | $ | 163,459 | | | $ | (273) | | | $ | (190,017) | | | $ | (26,825) | |
| Issuance of Class A Common Stock upon the reverse recapitalization including PIPE financing, net of transaction costs | — | | | — | | | | 13,947,218 | | | 1 | | | — | | | — | | | — | | | 48,465 | | | — | | | — | | | 48,466 | |
| Issuance of Mondee Holdings LLC Class G units upon prepayment of debt | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | 9,750 | | | — | | | — | | | 9,750 | |
| Merger earn-out shares (Refer to Note 20) | — | | | — | | | | 7,400,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Settlement of related party loan | — | | | — | | | | — | | | — | | | — | | | — | | | (20,336) | | | — | | | — | | | — | | | (20,336) | |
| Common control acquisition | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | (2,000) | | | — | | | — | | | (2,000) | |
| Payment made on behalf of Mondee Holdings LLC | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | (5,241) | | | — | | | — | | | (5,241) | |
| Shares issued upon exercise of common stock warrants | — | | | — | | | | 118,942 | | | — | | | — | | | — | | | — | | | 1,368 | | | — | | | — | | | 1,368 | |
| Transfer of private placement warrants to public warrants | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | 536 | | | — | | | — | | | 536 | |
| Issuance of redeemable Series A Preferred Stock, net of issuance costs | 85,000 | | | 79,691 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Issuance of common stock warrants | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | 3,891 | | | — | | | — | | | 3,891 | |
| Accrual of dividends and accretion of redeemable series A redeemable preferred stock | — | | | 2,906 | | | | — | | | — | | | — | | | — | | | — | | | (2,906) | | | — | | | — | | | (2,906) | |
| Repurchase of public warrants (Refer to Note 4) | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | (7,481) | | | — | | | — | | | (7,481) | |
| Stock-based compensation | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | 62,042 | | | — | | | — | | | 62,042 | |
| Currency translation adjustments | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (348) | | | — | | | (348) | |
| Net loss | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (90,238) | | | (90,238) | |
| Balance at December 31, 2022 | 85,000 | | $ | 82,597 | | | | 82,266,160 | | $ | 7 | | | — | | | $ | — | | | $ | (20,336) | | | $ | 271,883 | | | $ | (621) | | | $ | (280,255) | | | $ | (29,322) | |
| Issuance of common stock through employee stock plans | — | | | — | | | | 737,955 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Tax withholding related to vesting of restricted stock units | — | | | — | | | | (230,253) | | | — | | | — | | | — | | | — | | | (1,945) | | | — | | | — | | | (1,945) | |
| Common stock repurchased | — | | | — | | | | (2,389,954) | | | — | | | 2,389,954 | | | (9,970) | | | — | | | — | | | — | | | — | | | (9,970) | |
| Stock-based compensation | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | 13,787 | | | — | | | — | | | 13,787 | |
| Currency translation adjustments | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,219 | | | — | | | 2,219 | |
| Net loss | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (60,817) | | | (60,817) | |
| Employee stock purchase plan | — | | | — | | | | 30,727 | | | — | | | — | | | — | | | — | | | 96 | | | — | | | — | | | 96 | |
| Settlement of shareholder receivable | — | | | — | | | | — | | | — | | | 2,033,578 | | | (20,336) | | | 20,336 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | |
Consolidated Statements of Changes in Mezzanine Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| MONDEE HOLDINGS, INC. AND SUBSIDIARIES |
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Deficit (In thousands, except share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | |
| Mezzanine Equity | | | Stockholders’ Deficit |
| Acquisitions of Orinter, Interep, Skypass, and Purple Grids | — | | | — | | | | 3,037,405 | | | 1 | | | — | | | — | | | — | | | 34,668 | | | — | | | — | | | 34,669 | |
| Issuance of redeemable Series A Preferred Stock, net of issuance costs | 11,300 | | | 8,887 | | | | — | | | — | | | — | | | — | | | — | | | 2,157 | | | — | | | — | | | 2,157 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Divestiture of LBF | — | | | — | | | | (200,000) | | | — | | | 200,000 | | | (1,782) | | | — | | | — | | | — | | | — | | | (1,782) | |
| Accrual of dividends and accretion of redeemable Series A Preferred Stock | — | | | 14,320 | | | | — | | | — | | | — | | | — | | | — | | | (14,320) | | | — | | | — | | | (14,320) | |
| Balance at December 31, 2023 | 96,300 | | $ | 105,804 | | | | $ | 83,252,040 | | | $ | 8 | | | 4,623,532 | | | $ | (32,088) | | | $ | — | | | $ | 306,326 | | | $ | 1,598 | | | $ | (341,072) | | | $ | (65,228) | |
Dividends accrued for preferred stockholders were $120.01 and Stockholders’ Deficit
(In thousands, except share and$27.33 per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mezzanine Equity | | Stockholders’ Deficit |
| Redeemable Preferred stock | | Class A Common Stock | | Shareholder | | Additional
Paid-in-
Capital | | Accumulated
Other
Comprehensive
Loss | | Accumulated
Deficit | | Total
Stockholders’
Deficit |
| Shares | | Amount | | Shares | | Amount | | Receivable | | | | |
| Balance at December 31, 2020 | — | | | $ | — | | | 1 | | $ | — | | | $ | — | | | $ | 159,529 | | | $ | 38 | | | $ | (151,112) | | | $ | 8,455 | |
| Retroactive application of recapitalization | — | | | — | | | 60,799,999 | | 6 | | | $ | — | | | (6) | | | — | | | — | | | $ | — | |
| Balance at December 31, 2020 | — | | | — | | | 60,800,000 | | 6 | | | — | | | 159,523 | | | 38 | | | (151,112) | | | 8,455 | |
| Stock-based compensation | — | | | — | | | — | | | — | | | — | | | 3,936 | | | — | | | — | | | 3,936 | |
| Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | (311) | | | — | | | (311) | |
| Net loss | — | | | — | | | 0 | | — | | | $ | — | | | — | | | — | | | (38,905) | | | $ | (38,905) | |
| Balance at December 31, 2021 | — | | | — | | | 60,800,000 | | | 6 | | | — | | | 163,459 | | | (273) | | | (190,017) | | | (26,825) | |
| Issuance of Class A Common Stock upon the reverse recapitalization including PIPE financing, net of transaction costs | — | | | — | | | 13,947,218 | | | 1 | | | — | | | 48,465 | | | — | | | — | | | 48,466 | |
| Issuance of Mondee Holdings LLC Class G units upon prepayment of debt | — | | | — | | | — | | | — | | | — | | | 9,750 | | | — | | | — | | | 9,750 | |
| Merger earn-out shares (Refer to note 3) | — | | | — | | | 7,400,000 | | | — | | | — | | | — | | | — | | | — | | | — | |
| Settlement of related party loan | — | | | — | | | — | | | — | | | (20,336) | | | — | | | — | | | — | | | (20,336) | |
| Common control acquisition | — | | | — | | | — | | | — | | | — | | | (2,000) | | | — | | | — | | | (2,000) | |
| Payment made on behalf of Mondee Holdings LLC | — | | | — | | | — | | | — | | | — | | | (5,241) | | | — | | | — | | | (5,241) | |
| Shares issued upon exercise of common stock warrants | — | | | — | | | 118,942 | | | — | | | — | | | 1,368 | | | — | | | — | | | 1,368 | |
| Transfer of Private Warrants to Public Warrants | — | | | — | | | — | | | — | | | — | | | 536 | | | — | | | — | | | 536 | |
| Issuance of redeemable series A preferred stock, net of issuance costs | 85,000 | | | 79,691 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Issuance of common stock warrants | — | | | — | | | — | | | — | | | — | | | 3,891 | | | — | | | — | | | 3,891 | |
| Accrual of dividends and accretion of redeemable series A redeemable preferred stock | — | | | 2,906 | | | — | | | — | | | — | | | (2,906) | | | — | | | — | | | (2,906) | |
| Repurchase of public warrants (Refer to note 4) | — | | | — | | | — | | | — | | | — | | | (7,481) | | | — | | | — | | | (7,481) | |
| Stock-based compensation | — | | | — | | | — | | | — | | | — | | | 62,042 | | | — | | | — | | | 62,042 | |
| Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | (348) | | | — | | | (348) | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (90,238) | | | (90,238) | |
| Balance at December 31, 2022 | 85,000 | | $ | 82,597 | | | 82,266,160 | | $ | 7 | | | $ | (20,336) | | | $ | 271,883 | | | $ | (621) | | | $ | (280,255) | | | $ | (29,322) | |
The accompanying notes are an integral part of these Consolidated Financial Statements.consolidated financial statements.
MONDEE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
| | Year Ended
December 31, |
| 2022 | | 2021 |
| MONDEE HOLDINGS, INC. AND SUBSIDIARIES | | MONDEE HOLDINGS, INC. AND SUBSIDIARIES |
| Consolidated Statements of Cash Flows | | Consolidated Statements of Cash Flows |
| Year Ended
December 31, | | | Year Ended
December 31, |
(in thousands) | | (in thousands) | 2023 | | 2022 |
| Cash flows from operating activities | Cash flows from operating activities | | | |
| Net loss | |
| Net loss | |
| Net loss | Net loss | $ | (90,238) | | | $ | (38,905) | |
| Adjustments to reconcile net loss to net cash used in operating activities | Adjustments to reconcile net loss to net cash used in operating activities | |
| Depreciation and amortization | Depreciation and amortization | 11,770 | | | 12,861 | |
| Depreciation and amortization | |
| Depreciation and amortization | |
| Non-cash gain on LBF US divestiture, net | |
| Deferred taxes | Deferred taxes | (437) | | | 184 | |
| Provision for doubtful accounts receivable and contract assets | 312 | | | 1,874 | |
| Provision for credit losses, net | |
| Stock-based compensation | Stock-based compensation | 62,042 | | | 3,936 | |
| Non-cash lease expense and lease impairment charges | |
| Amortization of loan origination fees | Amortization of loan origination fees | 6,563 | | | 2,361 | |
| Payment in kind interest expense | Payment in kind interest expense | 9,036 | | | 14,582 | |
| Gain on forgiveness of PPP Loan | Gain on forgiveness of PPP Loan | (2,009) | | | (5,868) | |
| | Change in the estimated fair value of LBF earn-out considerations and warrant liability | (489) | | | 265 | |
| Gain on termination of lease | |
| Unrealized gain on foreign currency exchange derivatives | |
| Change in the estimated fair value of earn-out consideration and warrants | |
| Changes in operating assets and liabilities | Changes in operating assets and liabilities | |
| Accounts receivable | Accounts receivable | (11,867) | | | (6,697) | |
| Accounts receivable | |
| Accounts receivable | |
| Accounts receivable from related parties | |
| Contract assets | Contract assets | (1,859) | | | 485 | |
| Prepaid expenses and other current assets | Prepaid expenses and other current assets | (2,085) | | | 23 | |
| Operating lease right-of-use assets | Operating lease right-of-use assets | 1,846 | | | — | |
| Other non-current assets | Other non-current assets | (373) | | | (757) | |
| Amounts payable to related parties | Amounts payable to related parties | (689) | | | (358) | |
| Accounts payable | Accounts payable | 10,554 | | | 2,115 | |
| Accrued expenses and other liabilities | Accrued expenses and other liabilities | (742) | | | 892 | |
| Deferred revenue | Deferred revenue | (254) | | | (2,666) | |
| Operating lease liabilities | Operating lease liabilities | (1,693) | | | — | |
| | Net cash used in operating activities | Net cash used in operating activities | (10,612) | | | (15,673) | |
| Cash flows from investing activities | Cash flows from investing activities | | | |
| Capital expenditures | Capital expenditures | (7,267) | | | (4,022) | |
| Purchase of restricted short term investments | (417) | | | — | |
| Sale of restricted short term investments | 262 | | | 910 | |
| Capital expenditures | |
| Capital expenditures | |
| Purchase of restricted short-term investments | |
| Sale of restricted short-term investments | |
| Purchase of short-term investments | |
| Maturity of short-term investments | |
| Cash paid for acquisitions, net of cash acquired | |
| Net cash used in investing activities | Net cash used in investing activities | (7,422) | | | (3,112) | |
| Cash flows from financing activities | Cash flows from financing activities | | | |
| Repayments of long-term debt | (45,338) | | | (638) | |
| Loan origination fees for long-term debt | — | | | (75) | |
| Proceeds from PPP and other government loans | — | | | 3,790 | |
| Proceeds from issuance of redeemable preferred stock | 85,000 | | | — | |
| Issuance cost from preferred stock | (1,418) | | | — | |
| Repayment of debt | |
| Repayment of debt | |
| Repayment of debt | |
| Loan origination fee | |
| Proceeds from issuance of preferred stock | |
| Payment of preferred stock issuance cost | |
| Proceeds from exercise of common stock warrants | Proceeds from exercise of common stock warrants | 1,368 | | | — | |
| Proceeds from Business Combination and issuance of PIPE shares | Proceeds from Business Combination and issuance of PIPE shares | 78,548 | | | — | |
| Payment of offering costs | (23,704) | | | — | |
| Payment of offering costs for Business Combination | |
| Payment made on behalf of Mondee Holdings LLC | Payment made on behalf of Mondee Holdings LLC | (5,241) | | | — | |
| Repurchase of public warrants | |
| Proceeds from borrowings | |
| | Repurchase of public warrants | (7,481) | | | — | |
| Net cash provided by financing activities | 81,734 | | | 3,077 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (365) | | | (311) | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | 63,335 | | | (16,019) | |
| Cash, cash equivalents and restricted cash at beginning of year | 15,506 | | | 31,525 | |
| Cash, cash equivalents and restricted cash at end of year | $ | 78,841 | | | $ | 15,506 | |
| | | Supplemental cash flow information: | |
| Cash paid for interest | $ | 10,820 | | | $ | 6,740 | |
| | MONDEE HOLDINGS, INC. AND SUBSIDIARIES | | MONDEE HOLDINGS, INC. AND SUBSIDIARIES |
| Consolidated Statements of Cash Flows | | Consolidated Statements of Cash Flows |
| Year Ended
December 31, | | | Year Ended
December 31, |
(in thousands) | | (in thousands) | 2023 | | 2022 |
| Stock repurchases | |
| Payments of tax on vested restricted stock units | |
| Proceeds from issuance of common stock | |
| Net cash provided by financing activities | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | |
| Cash and cash equivalents and restricted cash at beginning of year | |
| Reclassification of restricted short-term investments into restricted cash | |
| Cash and cash equivalents and restricted cash at end of year | |
| | Supplemental cash flow information: | |
| Supplemental cash flow information: | |
| Supplemental cash flow information: | |
| Cash paid for interest | |
| Cash paid for interest | |
| Cash paid for interest | |
| Cash paid for income taxes | Cash paid for income taxes | $ | 677 | | | $ | 82 | |
| Cash paid for LBF US transition services | |
| Non-cash investing and financing activities | Non-cash investing and financing activities | |
| | Legacy Mondee shares converted to Mondee Holdings Inc. | Legacy Mondee shares converted to Mondee Holdings Inc. | 6 | | | — | |
| | Legacy Mondee shares converted to Mondee Holdings Inc. | |
| | Legacy Mondee shares converted to Mondee Holdings Inc. | |
| Assumption of net liabilities from Business Combination | Assumption of net liabilities from Business Combination | 15,002 | | | — | |
| Unpaid offering costs | 4,656 | | | — | |
| Redeemable Preferred stock dividend accrual | 2,906 | | | — | |
| Unpaid offering costs for Business Combination | |
| Issuance of common stock warrants | Issuance of common stock warrants | 3,891 | | | — | |
| Conversion of warrant classification | Conversion of warrant classification | 536 | | | — | |
| | Settlement of related party loan | Settlement of related party loan | (20,336) | | | — | |
| Settlement of shareholder receivable | |
| Common control acquisition | Common control acquisition | (2,000) | | | — | |
| Issuance of Mondee Holdings LLC Class G units upon modification of debt | Issuance of Mondee Holdings LLC Class G units upon modification of debt | 9,750 | | | — | |
| Property and equipment included in accounts payable | |
| Fair value of Class A Common Stock issued in connection with acquisitions | |
| Fair value of earn-out liabilities issued in connection with acquisitions | |
| Shares withheld for tax withholding on vesting of restricted stock units | |
| Deferred consideration in connection with acquisitions | |
| Accrued Series A Preferred Stock dividend | |
| Interest capitalized for software development | |
| Noncash purchase consideration received for LBF divestiture | |
| Unpaid preferred stock offering costs | |
| | Unpaid LBF US transition services | |
| Unpaid LBF US transition services | |
| Unpaid LBF US transition services | |
| Net working capital adjustments due from sellers of acquired businesses | |
The accompanying notes are an integral part of these Consolidated Financial Statements.consolidated financial statements.
MONDEE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
1. NATURE OF OPERATIONS
Mondee Holdings, , Inc., is a Delaware corporation. We refer to Mondee Holdings, Inc. and its subsidiaries collectively as the “Company,” “us,” “we” and “our” in these consolidated financial statements. The CompanyMondee is a leading travel technology company andconsisting of a marketplace with a portfolio of globally recognized brands in the leisure, retail and corporate travel sectors. The Company provides state-of-the art technologies, operating systems and services that modernize travel market transactions to better serve travelers seeking enhanced life-style choices directly or through travel affiliates. These technology solutions, combined with the Company’s distribution network, access to global travel inventory and its extensive, negotiated travel content, create a modern travel marketplace. The Company believes this modern travel marketplace provides enhanced options to the increasingly discerning traveler, on efficient consumer- friendly distribution platforms that support its travel supplier partners in utilizing highly perishable travel inventory. In addition to the rapid development of a modern travel marketplace, the Company is increasingly focused on expanding its marketplace to the gig economy segment of the travel market. The Company believes gig workers are seeking more flexible, diverse content travel services and that its platform is well suited to serve them. The Company also offers a new subscription incentive-based behavioral change platform that is designed to be user-friendly to make booking business trips rewarding for both the traveler and the corporation.
Business combinationCombination
On July 18, 2022 ( the "Closing Date"), we consummated the business combination (the "Business Combination") pursuant to the Business Combination Agreement (the "BCA"), dated December 20, 2021, by and among ITHAX Acquisition Corp. ("ITHAX"), IthaxITHAX Merger Sub I, LLC, a Delaware limited liability company and wholly owned subsidiary of ITHAX (“First Merger Sub”), IthaxITHAX Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of ITHAX (“Second Merger Sub”) and Mondee Holdings II, Inc., a Delaware corporation (“Mondee”).
On the Closing Date, following the Domestication, First Merger Sub merged with and into Mondee, with Mondee surviving such merger as a wholly owned subsidiary of the Company (the “First Merger,” and the time at which the First Merger became effective, the “First Effective Time”), and immediately following the First Merger, Mondee merged with and into Second Merger Sub, with Second Merger Sub surviving such merger as a wholly owned subsidiary of the Company (the “Second Merger,” together with the First Merger, the “Mergers,” and the time that the Second Merger became effective being referred to as the “Second Effective Time”).
On the Closing Date, the registrant changed its name from ITHAX Acquisition Corp. to Mondee Holdings, Inc. For further detailed information, please refer to Note 3.3 — Reverse Recapitalization.
In connection with the closing of the business combination:combination
•All shares of Class A common stockCommon Stock of Mondee outstanding as of immediately prior to the First Effective Time were cancelled and automatically converted into the right to receive an aggregate 60,800,000 shares of Class A common stock,Common Stock, par value $0.0001 per share, of the Company (the "Company Class A Common Stock").
•Each issued and outstanding unit of First Merger Sub immediately prior to the First Effective Time were converted into and exchanged for one validly issued, fully paid and nonassessablenon-assessable share of Class A common stock of the first surviving company (the “First Surviving Company Class A Common Stock”).
•All redeemable outstanding 12,075,000 public warrants and 337,500 private placement warrants of ITHAX representing the right to purchase one Class A ordinary share were adjusted to represent the right to purchase one share of the CompanyCompany’s Class A Common Stock.
• Certain investors received the contingent right to receive a portion of additional shares of Class A Common Stock upon achievement of certain milestones set forth in the BCA, in the form of 9,000,000 earn-out shares. At the time of closing, 6,500,000 earn-out shares were issued.
•The settlement of a related party loan receivable immediately upon completion of the Business Combination by delivery of right to receive shares of the CompanyCompany’s Class A Common Stock.
•All outstanding ITHAX Class A (after redemptions) and Class B ordinary shares were cancelled and converted into shares of the Company Class A Common Stock.
•The unvested Incentive Stock Units of Mondee Holdings LLC (the "Mondee Stockholder") fully vested in connection with the consummation of the Business Combination.
•The asset purchase agreement with Metaminds Technologies Pvt. Ltd., ("Metaminds"), (entity under common control) for a purchase price of $2,000$2.0 million to acquire substantially all of Metaminds assets.
•Amendment to Amendment 7 to the TCW loan reflecting a debt modification which resulted in the issuance of 3,000,000 Class G units of the Mondee Stockholder and a prepayment of the principal and fee of $41,210.$41.2 million.
•On the Closing Date, certain investors (the "PIPE Investors") purchased from the Company an aggregate of 7,000,000 shares (the "PIPE Shares") of Company Class A Common Stock at a price of $10.00 per share, for an aggregate of $70,000$70.0 million (the "PIPE Financing"), in a private placement pursuant to a separate subscription agreement consummated substantially concurrently with close of the Business Combination.
The shares of the CompanyCompany’s Class A Common Stockcommon stock are currently listed on The Nasdaq Global Market (“Nasdaq”) under the symbol “MOND".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation and Consolidation
The Consolidated Financial Statements and accompanying notesconsolidated financial statements have been prepared in accordance with generally accepted accounting principles inGAAP as contained within the United States of AmericaFinancial Accounting Standards Board’s (“U.S. GAAP”FASB”) Accounting Standards Codification, and pursuant to the rules and regulations of the SecuritiesSEC, including the instructions to Regulation S-X. All intercompany transactions and Exchange Commission (“SEC”).
The Consolidated Financial Statements include the accounts of the Company and its wholly- owned subsidiaries. All significant intercompany accounts and transactions have beenbalances are eliminated in consolidation.
Going concern
The Company has prepared its Consolidated Financial Statements assuming that the Company will continuequalifies as a going concern. As of December 31, 2022, current liabilities are $56,995 and current assets are $119,680, of which $78,841 is unrestricted cash. The Company has an unused line of credit of $15,000. The Company is required to make debt repayments aggregating to $7,586emerging growth company as defined in the next twelve months from the dateJumpstart Our Business Startups Act of issuance2012, and, as such, may make use specified reduced reporting requirements and is relieved of the consolidated financial statements. The Company believesother significant requirements that it will be ableare otherwise generally applicable to make such specified debt repayments when the balance is due. There is no substantial doubt about the Company's ability to continue as a going concern.
COVID-19
The COVID-19 pandemic, and measures to contain the virus, had an unprecedented impact on the global travel industry and materially and negatively impacted our business, financial results and financial condition. With the evolution of milder COVID-19 variants, availability of multiple vaccine booster doses and increasing familiarity with the virus, many COVID-19 related travel restrictions have been lifted, and countries around the world reopened their borders for foreign travel. Overall, the full duration and total impact of COVID-19 remains uncertain and it is difficult to predict how the recovery will unfold for the travel industry and, in particular, our business, going forward.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESother public companies.
Use of estimates
The preparation of the Consolidated Financial Statementsconsolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of AmericaGAAP requires us to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statementsconsolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other factors 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 could differ materially from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, the fair value of assets acquired and liabilities assumed for business combinations; useful lives of property and equipment,equipment; revenue recognition,recognition; the determination of the incremental borrowing rate used for operating lease liabilities, allowances for doubtful accounts, and customer chargebacks, the valuation of financial instruments, including the fair value of share-basedstock-based awards, warrant liabilities, earn-outs issued in connection with the business combination,acquisitions, income taxes, impairment of goodwill and indefinite life intangibles, capitalization of software development costs, and other contingencies.
The COVID-19 pandemic has created and may continueCompany reclassified prior period financial statements to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact our results of operations. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continueconform to evolve and additional information becomes available, our estimates may change materially in future periods.
Cash, cash equivalents, restricted cash and restricted short-term investments
We considerThe Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of cash on hand, highly liquid investments in money market funds and various deposit accounts.
We record certificate of deposits (“CDs”) with original maturities greater than three months asThe Company has restricted cash and short-term investments on the consolidated balance sheets. These investments are heldrelated to maturity and recorded at amortized cost basis.
We have entered into agreements with financial institutions to extend letters of credit to certain airlines and the Airlines Reporting Corporation ("ARC"). These letters of credit are extendedintended to secure paymentpayments for the potential purchase of airline tickets in the ordinary course of business. We have placed short-term certificates of deposits and investmentinvestments in money market funds with financial institutions as collateral under these arrangements and accordingly, they have beenthese balances are presented as ‘restricted short-term investments’ and ‘restrictedrestricted cash and cash equivalents’, respectively,short-term investments of $8.0 million and $8.6 million on the consolidated balance sheets.sheets as of December 31, 2023, and 2022, respectively.
The following table provides a reconciliation of cash and cash equivalents and restricted cash to amounts reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:(in thousands):
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Cash and cash equivalents | $ | 27,994 | | | $ | 78,841 | |
| Restricted cash presented in restricted cash and short-term investments | 6,672 | | | — | |
| Total cash, cash equivalents and restricted cash | $ | 34,666 | | | $ | 78,841 | |
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| Cash and cash equivalents | $ | 78,841 | | | $ | 15,506 | |
| | | |
| $ | 78,841 | | | $ | 15,506 | |
Accounts receivable, contract assets and allowance for doubtful accounts
As of December 31, 2023, accounts receivable presented on the consolidated balance sheets includes $5.1 million of accounts receivable from our customers, including travel product suppliers, our Global Distribution System (“GDS”) service providers and banks partnered with our Fintech Program and our Software-as-a-service (“SaaS”) platform users, $82.6 million of other receivables from financing institutions partnered in the receivables process (refer to further discussions below), and $29.0 million of other receivables from affiliated travel agencies and travelers.
Accounts receivable including receivable balances from customers, arefinancial institutions and travel agencies and travelers is recorded at the original invoiced amounts net of an allowance for doubtful accounts. TheWe make estimates of expected credit losses for our allowance by considering a number of factors, including the length of time accounts receivable are past due, previous loss history continually updated for doubtful accounts and contract assets was estimated based on historical experience, aging ofnew collections data, the receivable, credit quality of our customers, the customers,financial institutions, agencies and travelers, current economic trendsconditions, reasonable and supportable forecasts of future economic conditions and other factors that may affect our ability to collect from customers, financial institutions, agencies and travelers, respectively. The provision for estimated credit losses on accounts receivable is recorded to provision for credit losses, net on the consolidated statements of operations.
As of December 31, 2023 and 2022, the Company determined the estimated credit losses to be in the amount of $5.2 million and $4.9 million, respectively, which is recorded in accounts receivable, net of allowance on our consolidated balance sheets. The estimated credit losses were primarily due to other receivables from travel agencies and travelers, with the exception of $0.2 million from accounts receivable from customers.
In Brazil, the Company partners with financing institutions to allow travelers the possibility of purchasing the travel product of their choice through financing plans established, offered and administrated by such financing institutions. Participating financing institutions bear full risk of fraud, delinquency, or default by travelers placed booking through affiliated travel agencies. When travelers through travel agencies elect to finance their purchases, we receive payments from financing institutions as installments become due regardless of when the traveler makes the scheduled payments. In most cases, we receive payments before travel occurs or during travel, and the period between completion of booking and receipt of scheduled payments is less than one year. The Company uses the practical expedient and does not recognize a significant financing component when the difference between payment and revenue recognition is less than a year.
In partnering with the financing institutions, the Company has the option to collect payments upfront or receive in installments as they become due. Fees paid to financing institutions for payments received in installments are recorded within sales and marketing expenses, as such expenses are associated with the collection of other receivables due from travelers and travel agencies. Financing fees associated with upfront payments are recorded within interest expense, as the Company pay additional fees to financing institutions as compared to the collection on the scheduled installments. During the year ended December 31, 2023, the Company incurred upfront payment collection fees of $3.4 million which represents 8% of the total other expense, net on the consolidated statements of operations. The Company did not incur upfront payment collection fees in the year ended December 31, 2022.
Contract assets represent unbilled and accrued incentive revenues from our customers based on the achievement of contractual targets defined at contract inception. The provision for estimated credit losses on contract assets is recorded to provision for credit losses, net on the consolidated statements of operations. As of December 31, 2023, expected credit losses identified in our contract assets with customers were determined to not be material. As of December 31, 2022, expected credit losses identified in our contract assets with customers were determined to be $0.8 million.
During the year ended December 31, 2023, the Company recorded a loss of $0.4 million to provision for credit losses, net, due to provision charged to earnings of $1.2 million, offset by the revision of estimates of expected credit losses on accounts receivables and contract assets of $0.8 million.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed on a straight-line basis using mid‑month convention over the estimated useful lives of the related assets. Repairs and maintenance expenditures are expensed as incurred.
Our property and equipment are assigned the following useful lives:
| | | | | |
| Useful Lives |
| Computer equipment | 3-7 years |
| Furniture and office equipment | 5-7 years |
| Capitalized and purchased software | 3 years |
| Leasehold improvements | Shorter of the useful life and the remaining lease term |
Website and internal-use software development costs
Acquisition costs and certain direct development costs associated with website and internal-use software are capitalized and include external direct costs of services and payroll costs for employees devoting time to the software projects principally related to platform development, including support systems, software coding, designing system interfaces and installation and testing of the software. These costs are recorded as property and equipment within capitalized software, and are generally amortized beginningfrom when the asset is substantially ready for use. Costs incurred for enhancements that are expected to result in additional features or functionalities are capitalized and amortized over the estimated useful life of the enhancements which is considered to be three years. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the
recoverability of these assets. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.
Recoverability of goodwill and indefinite-lived intangible assets
Goodwill is not subject to amortization and is tested annually or more frequently when events and circumstances indicate impairment may have occurred. In the evaluation of goodwill for impairment, we typically perform our qualitative assessment, prior to performing the quantitative analysis, to determine whether the fair value of the goodwill is more likely than not impaired. If a quantitative assessment is made we compare the fair value of the reporting unit to the carrying value and, if applicable, record an impairment charge based on the excess of the reporting unit’s carrying amount over its fair value.
We generally base our measurement of the reporting units’ fair values on the present value of expected future cash flows. The discounted cash flow model reduces the reporting unit’s expected future cash flows to present value using a rate of return based on the perceived uncertainty of the cash flows. Our significant estimates in the discounted cash flow models include: growth rates, profitability, capital expenditure and working capital requirements, and our weighted average cost of capital. The market approach to valuation is used to corroborate the income approach and considers the Company’s stock price, shares outstanding, and debt. Significant estimates in the market approach include: the extent to which the publicly traded stock price represents fair value, given the trading history, trading volume, and concentration of ownership at a point in time, and how closely the book value of debt reported under GAAP represents its fair value at a point in time.
In our evaluation of our indefinite-lived intangible assets, we typically first perform a qualitative assessment prior to performing the quantitative analysis, to determine whether the fair value of the indefinite-lived intangible asset is more likely than not impaired. An impairment charge is recorded for the excess of the carrying value of indefinite-lived intangible assets over their fair value, if necessary. We base our measurement ofmeasure the fair value of our indefinite-lived intangible assets, which consist of trade name,names, using the relief-from-royalty method. This method assumes that the trade name has value to the extent that its owner is relieved of the obligation to pay royalties for the benefits received from them.
Intangible assets
Intangible assets are amortized over the period of estimated benefit using the straight-line method, as the consumption pattern of the asset is not apparent. No significant residual value is estimated for intangible assets.
| | | | | |
| Amortization PeriodUseful Lives |
Covenants not to compete | 5 years |
| Trade name with definite life | 15 – 20 years |
| Acquired technology | 10 years
| Customer relationships | 5-105 – 15 years |
| Supplier relationships | 15 years |
| Developed technology | 5-105 – 10 years |
| Assembled workforce | 3 years |
Business combination
The total purchase consideration for an acquisition is measured as the fair value of the assets transferred, equity instruments issued, and liabilities assumed at the acquisition date. Costs that are directly attributable to the acquisition are expensed as incurred and included in general and administrative expense in our consolidated statements of operations. Identifiable assets (including intangible assets) and liabilities assumed (including contingent liabilities) are measured initially at their fair values at the acquisition date. We recognize goodwill if the fair value of the total purchase consideration is in excess of the net fair value of the identifiable
assets acquired and the liabilities assumed. Determining the fair value of assets acquired and liabilities assumed requires us to use significant judgment and estimates including the selection of valuation methodologies, cost of capital, future cash flows, and discount rates. Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. We include the results of operations of the acquired business in the consolidated financial statements beginning on the acquisition date.
Our acquisitionsbusiness combinations include an earn-out consideration as part of the purchase price that is classified as a liability.are liability-classified. The fair value of the earn-out consideration is estimated as of the acquisition date based on our estimates and assumptions, including valuations that utilize
customary valuation procedures and technique.techniques. The fair value measurement includes inputs that are Level 3 measurement (unobservable inputs in which little or no market data exists). Should actual results increase or decrease as compared to the assumption used in our analysis, the fair value of the earn-out consideration obligations will increase or decrease, as applicable. Changes in the fair value of the earn-out consideration are recorded within operating expenses.
When substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the transaction is accounted for as an asset acquisition. The Company accounts for asset acquisitions pursuant to a cost accumulation and allocation method. Under this method, the cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis. Goodwill is not recognized in an asset acquisition and any difference between consideration transferred and the fair value of the net assets acquired is allocated to the identifiable assets acquired on a relative fair value basis.
Recoverability of intangible assets with definite lives and other long-lived assets
Intangible assets with definite lives and other long-lived assets are carried at cost and are amortized on a straight-line basis over their estimated useful lives of oneup to twenty years. We review the carrying value of long-lived assets or asset groups, including property and equipment, to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, we will assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using appropriate valuation methodologies which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset groups carrying amount and its estimated fair value.
Assets held for sale, to the extent we have any, are reported at the lower of cost or fair value less costs to sell.
Leases
The Company adopted Topic ASC 842, Leases, on January 1, 2022, using a modified retrospective method applied to all contracts. As a result, consolidated statements for reporting periods after December 31, 2021 are presented in accordance with the current lease standard and those prior to January 1, 2022 are presented under ASC 840. Further information regarding the adoption impact is provided under "Recent Accounting Pronouncements Adopted." The Company elected to utilize the available practical expedients in the leasing transition guidance and did not reassess the existence of leases, classification of leases, or initial direct costs in existing or expired contracts. Additionally, the Company elected the package of practical expedients to not allocate contract consideration between lease and non-lease components.
The Company identifies a contract as a lease or containing a lease upon signing, and categorizes it as an operating or finance lease. Lease assets and liabilities are recorded upon lease commencement. The Company primarily has operating leases for office space.
Operating leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating“Accrued expenses and other current liabilities” and “Operating lease liabilities, excluding current and operating lease liabilitiesportion” on the Company’s consolidated balance sheets. The Company does not currently maintain any finance lease arrangements. ROU assets represent the Company’s right to use an underlying asset and lease liabilities represent the Company’s obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term. The Company does not recognize short termshort-term leases that have a term of twelve months or less as ROU assets or lease liabilities. The Company’s short-term leases are not material and do not have a material impact on its ROU assets or lease liabilities. ROU assets and lease liabilities are recognized at commencement date and determined using the present
value of the future minimum lease payments over the lease term. ROU assets include prepaid lease payments made in advance, and excludes any incentives received or initial direct costs incurred.before lease commencement.
The incremental borrowing rate is used as the discount rate to calculate present value of lease payments and determine lease assets and liabilities, as the rate implicit in the lease is not determinable. The incremental borrowing rate represents the estimated rate of interest the Company would have to pay to borrow on a collateralized loan over a similar term an amount equal to the lease payments in a similar economic environment. Operating lease assets also include prepaid lease payments and incentives received before lease commencement. Lease expenses are recognized on a straight-line basis over the lease term.
Leases with renewal options are included if deemed reasonably certain to be exercised. The exercise of renewal options for office space is at the Company's discretion.
Revenue recognition
OurThe majority of our revenues are generated from Travel Transaction Revenues by providing online travel reservation services, which principally allowsallow travelers to book travel reservations with travel suppliers through our technology solutions. TheseIn addition, we generate Fintech Program Revenues which are commission revenues from banks and financial institutions based on the travel booking spend processed through fintech programs partnered with our platform.
We have determined the nature of our promise is to arrange for travel services to be provided by travel suppliers, and are therefore an agent in the transaction, whereby we record as revenue the net commission we receive in exchange for our travel reservation services. In these transactions, the travel supplier is determined to be our customer. Travel suppliers primarily consist of GDS service providers, airline companies, hotel companies, tour service providers, and car rental companies. Our revenue is earned through mark-up fees, commissions and incentives, and is recorded net of estimated cancellation and refunds.
We earn mark-up fees and certain commissions at ticketing, as our performance obligation is satisfied upon issuance of the ticket or reservation details to the traveler. We also earn certain commissions and incentives per booking when the underlying trip is taken by traveler. Our Travel Transaction Revenues are all priced on a booking basis, where the commission and incentive rates could be flat fees or tiered fixed percentages and are subject to frequent modifications in a dynamic market. From time to time, the Company issues credits or refunds to the traveler in the event of cancellations.
At the point in time when a travel booking service is performed and the Company’s single performance obligation has been fulfilled, the Company makes an estimate for variable consideration based on cumulative booking, which is calculated per applicable pricing tier. Additionally, when the same travel booking is processed, the Company makes an estimate for variable consideration for the traveler taking the trip, to the extent that there is a risk of significant reversal constraining the variable consideration, until the trip is taken, since the occurrence of the trip is influenced by outside factors, such as the actions of travelers and weather conditions.
Within our Travel Transaction Revenues, payments due from our customers vary from a monthly basis to an annual basis attributable to: a) mark-up fees and certain commissions are received when booking services are primarily related to reservationperformed; b) certain commissions and incentives earned per booking or based on cumulative booking performance due based on the specific billing terms with our customers. The majority of airline tickets. It also includes, toour arrangements with customers have similar terms and conditions within the travel industry, and in general there are short-term variations in billings and collections that are realized within a year.
We recognize Fintech Program Revenues at a point in time when the payment of the trip booked by traveler is settled through the fintech program partnered with the Company.
Revenue from Software-as-a-service (“SaaS”) platform
To a lesser extent, services relatedwe also generate revenues by entering into subscription contracts for access to reservationour travel management offerings. These revenues are reflected within our SaaS platform segment. Under these contracts, payment is collected upfront when the customer signs up to use the platform. Subscription revenue is recognized on a straight-line basis over the term of hotel accommodation, rental car, travel insurance and other travel products and services. While we generally referthe agreement using a time-based measure of progress, as the nature of the Company’s promise to the customer is to stand ready to provide platform access. The Company earns variable consideration in the form of a consumer thatbooking fee for each instance a traveler books travel reservation servicesa trip on our technology solutionsthe
as our customer, for accounting purposes; our customers areplatform. The Company applies the travel suppliers. Our contracts with travel suppliers give them the ability to market their reservation availability without transferring responsibility to deliver the travel service to us. Therefore, we are an agent in a transaction and our revenues are presented on a net basis (that is, the amount billed to a traveler less the amount paid to a travel supplier) in the consolidated statements of operations. Our revenue is earned through service fees, margins and commissions.
We earn incentives from airline companies which are recognized based on the achievement of targets set by contract, that mainly relate to the amount of airline ticket bookings that have been flown, and consequently are not subject to cancellation. We also receive incentives from our Global Distribution System (“GDS”) service providers based on the volume of segment bookings mediated by us through the GDS systems. In addition to the above travel-related revenue, we also generate revenue from incentives received from credit card companies for ancillary services based on the volume of transaction amount processed by us.
Revenue from service fee, margin and commission on sale of airline tickets is recognized when the traveler books the airline ticket as the performance obligation is satisfied by us on issuance of an airline ticket to the traveler. Revenue is recorded net of cancellation, refunds and chargebacks. In the event of cancellation of airline tickets, revenue recognized in respect of commissions and margins earned by us on such tickets is reversed and is netted off from the revenue earned during the fiscal period at the time the cancellation is made by the customers.
Revenue from commission and margin on other travel products and services is recognized when the traveler completes the reservation as our performance obligation is satisfied at that point.
Revenue relating to contracts with travel suppliers which include incentive payments from airline companies and GDS are accounted for asseries guidance variable consideration whenestimation exception to recognize the amountvariable fees upon the completion of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur. This revenue is recognized net of cancellations, refunds and shortfall penalty fees, as applicable, at a time when performance targets are achieved.
When an airline ticket is purchased, there is a risk of customer chargebacks including those related to fraud. We record estimates for chargebacks of our fees or margin or commission earned upon sale of airline tickets as variable consideration. We record estimates for losses related to chargebacks of the cost of tickets as an operating expense classified within sales and marketing expense. Reserves are recorded based on our assessment of various factors, including the amounts of actual chargeback activity during the current year.
Our ‘Rocketrip’ platform offers a corporate travel cost savings solution through its technology platform. We generate subscription and set-up revenue from customers who are provided access to our platform as software-as-a-service. Revenue is recognized over the term of the contract.
‘TripPlanet’ is an end-to-end business travel platform for small-to-medium sized enterprises, membership organizations, associations, educational institutions, and NGOs. The platform combines the Company's global content hub, marketplace, and conversational commerce engine to provide organizations discounted rates for airfare, hotels, and cars using our private platform. Individuals within these organizations can also utilize the platform for leisure travel. The platform is set up as a subscription base service where revenue is recognized over the term of the contract. Revenue from commission and margin on the travel bookings are recognizedas this is when the traveler completes the reservation as our performance obligation is satisfied.
‘Unpub’ provides consumer groups accessRefer to a subscription based private membershipSee Note 11 — Revenue for disaggregation of revenue by segment, by stream including underlying travel platform where they can purchase flights, reserve hotel roomsproduct and rental cars,service type, and receive member benefits. Revenue related to the subscription platform is recorded over the contract period. Revenue from commission and margin on the travel bookings are recognized when the traveler completes the reservation as our performance obligation is satisfied.
Sales and marketing expenses
Sales and marketing expenses are generally variable in nature and consist primarily of: (1) credit cards and other payment processing fees associated with merchant transactions; (2) advertising and affiliate marketing costs; (3) fees paid to third parties that provide call center, website content translations, fraud protection services and other services; (3)(4) customer relations costs; (4) and (5) customer chargeback provisions.
We report advertising and affiliate marketing costs under “Sales and Marketing expenses” in the consolidated statements of operations.
Advertising costs are expensed as incurred. These costs primarily consist of direct costs from search engines and internet portals, television, radio and print spending, private label, public relations, and other costs. The Company incurred advertising expenses of approximately $18,622$5.9 million and $16,595$18.6 million during the years ended December 31, 2022,2023, and 2021,2022, respectively.
The Company makes use of affiliate marketing to promote airline ticket sales and generate bookings through its websites and platform. The platform provides affiliates with technology and access to a wide range of products and services. The Company pays commission to third party affiliates for the bookings originated through the Company’s websites and platform based on targeted merchandising and promotional strategies implemented by the Company from time to time.
Personnel expenses
Personnel expenses consist of compensation to the Company’s personnel, including salaries, stock-based compensation, bonuses, payroll taxes and employee health and other benefits.
Information technology
Information technology expenses consist primarily of: (1) software license and system maintenance fees; (2) outsourced data center and web hosting costs; (3) payments to contractors; and (4) data communications and other expenses associated with operating the Company’s services.
The Company is subject to certain indirect taxes in certain jurisdictions including but not limited to sales tax, value added tax, excise tax and other taxes we collect concurrent with revenue-producing activities that are excluded from the net revenues we recognize.
Debt issuance costs and debt discounts
Debt issuance costs include costs incurred in connection with the issuance of debt, which are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability and are amortized over the term of the debt toas interest expense. Debt issuance costs of the revolving credit facility are amortized on a straight-line basis, while all other debt issuance costs are amortized using the effective interest method. Debt discounts incurred in connection with the issuance of debt have been reported as a direct deduction to the carrying value of debt and are being amortized to interest expense using the effective interest method. Amortization of debt issuance costs and debt discounts included in interest expense was $6,563,$8.8 million, and $2,361$6.6 million for the years ended December 31, 2023, and 2022, and 2021, respectively.
Stock-based compensation
The Company’s employees and independent consultants participate in the Mondee Stockholder's stock-based compensation plans and the Company's 2022 Equity Incentive Plan. Stock-based compensation expense has been allocated by the Company based on the awards and terms granted to the Company’s employees and independent consultants. The fair value of awards in Mondee Stockholder issued to the Company’s employees are treated as capital contributions and the associated stock-based compensation expense are expensed on the Company’s Statements of Operations.
The Company accounts for stock-based awards in accordance with ASC 718 Stock-based compensation. Stock-based compensation expense related to restricted stock units ("RSUs") and stock incentive units ("Class D Incentive Units") are recognized based on their grant date fair value on a straight-line basis over the respective requisite service periods. Forfeitures are accounted for when they occur. The requisite service period for RSUs and Class D Incentive Units are generally one to three years and four years, respectively.
RSUs with market conditions vest over the derived service period and are subject to graded vesting. Stock-based compensation for these awards are recorded over the derived service period, regardless of whether the market conditions, are met unless the service conditions are not met. . The market condition for these awards will be met and one-third of the RSU will vest if the CompanyCompany’s Class A Common Stock price reaches or exceeds a volume-weighted average price of $12.50, $15.00 and $18.00 for any 20 days within any
30 days trading period. For awards with market conditions, the effect of the market condition is considered in the determination of fair value on the grant date using Monte Carlo simulations.
For RSUs with no vesting conditions, stock-based compensation for these awards will be recorded upfront on grant date. The fair value for these RSUs will represent the market price of the Class A Common stock at the time they were granted. For RSUs with service conditions only, the Company will recognize stock based compensation expense over the requisite service period on a straight-line basis.
The Company estimates the fair value of employee stock options using the Black-Scholes option pricing model. The model requires management to make a number of assumptions including expected volatility, expected term, risk free interest rate and expected dividends. The Company evaluates the assumptions used to value its share based awards on a quarterly basis.
See Notes to Consolidated Financial Statements, Note 19—20—Stock-Based Compensation for further details.
Employee benefits
Contributions to defined contribution plans are charged to the consolidated statements of operations in the period in which services are rendered by the covered employees. Current service costs for defined benefit plans are recognized in the period to which they relate.
The liability in respect of defined benefit plans is calculated annually by the Company using the projected unit credit method. The Company records annual amounts relating to its defined benefit plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, future compensation increases and attrition rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recognized as a component of net periodic cost. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions. These assumptions may not be within the control of the Company and accordingly, it is reasonably possible that these assumptions could change in future periods. The Company reports the net periodic cost under personnel expenses on the consolidated statement of operations.
The Company recognizes its liabilities for compensated absences depending on whether the obligation is attributable to employee services already rendered, rights to compensated absences vest or accumulate and payment is probable and estimable.
Income taxes
The Company is subject to payment of federal and state income taxes in the U.S. and other forms of income taxes in other jurisdictions. Consequently, the Company determines its consolidated provision for income taxes based on tax obligations incurred using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The deferred tax assets are recorded net of a valuation allowance when, based on the weight of available evidence, the Company believes it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.
The Company evaluates uncertain tax positions to determine if it is more likely than not that they would be sustained upon examination. The Company records a liability when such uncertainties fail to meet the more likely than not threshold.
A US shareholder is subject to current tax on “global intangible low-taxed income” ("GILTI"(“GILTI”) of its controlled foreign corporations ("CFCs"(“CFCs”). The Company is subject to tax under GILTI provisions and includes its CFCs income in its US income tax provision in the period the CFCs earn the income.
Foreign currency translation and transaction gains and losses
The assets and liabilities of subsidiaries whose functional currency is other than the U.S. dollar are translated at the period end rate of exchange. Consolidated statements of operations items are translated at quarterly average exchange rates applicable during the period. The resulting translation adjustment is recorded as a component of accumulated other comprehensive loss and is included in consolidated statements of changes in mezzanine equity and stockholder’sstockholders’ deficit.
Transactions in foreign currencies are translated into the functional currency at the rates of exchange prevailing at the date of the transaction. Monetary items denominated in foreign currency remaining unsettled at the end of the yearreporting period are translated at the closing rates as of the last day of the year.reporting period. Gains or losses, if any, on account of exchange difference either on settlement or translationremeasurement are recognized in the consolidated statements of operations. Foreign currency transaction gains and losses will be included in “Otherother income (expense), net”net in the Company’s consolidated statements of operations.
Comprehensive loss
Comprehensive loss is comprised of net loss and other comprehensive loss. Other comprehensive loss includes gains and losses on foreign currency translation.
Segment reporting
We identify a business as an operating segment if: i) it engages in business activities from which it may earn revenues and incur expenses; ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is our Chief Executive Officer (‘CEO’(“CEO”), to make decisions about resources to be allocated to the segment and assess its performance; and iii) it has available discrete financial information. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Operating segments are aggregated into a reportable segment if the operating segments are determined to have similar economic characteristics and if the operating segments are similar in the following areas: i) nature of products and services; ii) nature of production processes; iii) type or class of customer for
their products and services; iv) methods used to distribute the products or provide services; and v) if applicable, the nature of the regulatory environment.
The Company has two operating segments that have been identified based on serviceservices offered as well as the nature of their operation: ‘Travel Marketplace’Travel Marketplace and ‘SAAS Platform’.SaaS Platform. The Travel Marketplace segment (transactional business serving the end travelers directly or through travel affiliates) primarily consists of selling airline tickets through our proprietary platform. The SAASSaaS Platform segment offers corporate travel cost savings solutions through its own technology platform. Our operating segments are also our reportable segments. See Note 1718 for segment information.
Fair value measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
•Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
•Level 2 – Inputs that are observable, either directly or indirectly. Such prices may be based upon quoted prices for identical or comparable securities in active markets or inputs not quoted on active markets, but corroborated by market data.
•Level 3 – Unobservable inputs that are supported by little or no market activity and reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market.
Certain risks and concentrations
Our business is subject to certain risks and concentrations including dependence on relationships with travel suppliers, primarily airlines, dependence on third-party technology providers, exposure to risks associated with online commerce security and payment related fraud. We also rely on global distribution system partnersGDS service providers and third-party service providers for certain fulfillment services.
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, and cash equivalents, restricted cash, short-term investments and accounts receivable. Significant customersparties are those that represent more than 10% of the Company's total accounts receivable and contract assets. As of December 31, 2023, three financial institutions with other receivable balances accounted for more than 10% of total accounts receivable and contract assets. As of December 31, 2022, two customersparties accounted for 23% of total accounts receivable and contract assets.Theassets.
The Company’s cash and cash equivalents, restricted cash and short-term investments are on depositheld with major financial institutions. Suchinstitutions and such deposits may be in excess of insured limits. On March 10, 2023, Silicon Valley Bank (“SVB”), based in Santa Clara, California, was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as the receiver. At the time of closing, the Company had a total cash balance of $250 held in the deposit accounts at SVB. On March 12, 2023, the U.S. Department of the Treasury, Federal Reserve Board, and FDIC released a joint statement announcing that the FDIC will complete its resolution of SVB in a manner that fully protects all depositors at SVB and that depositors will have access to all of their money starting March 13, 2023, thus enabling the Company to access all of its $250 held in the deposit.TheThe Company believes that the remaining financial institutions that hold the Company’s cash and cash equivalents, restricted cash and short-term investments balances are financially sound, and accordingly, minimum credit risk exists with respect to these balances. The Company has not experienced any losses due to institutional failure or bankruptcy.
The Company performs credit evaluations of its customers, financial institutions, and travel agencies and travelers, and generally does not require collateral for sales on credit. The Company’s accounts receivable comprisesdue from customers comprise of amounts primarily due from affiliates, airline companies as our travel suppliers, and global distribution system companiesbanks partnered with our Fintech Program; other receivables primarily due from financial institutions providing scheduled installment payments in Brazil, all of which are well established institutions that the Company believes to be of high quality. As of December 31, 2023, there has been no credit loss estimated for above receivable balances. The Company reviews other accounts receivable balances with agencies and travelers to determine if any receivables will potentially be uncollectible and includes any amounts that are determined to be uncollectible in the allowance for doubtful accounts.
Contingent liabilities
Loss contingencies arise from claims and assessments and pending or threatened litigation that may be brought against the Company by individuals, governments, or other entities. Based on the Company’s assessment of loss contingencies at each consolidated balance sheet date, a loss is recorded in the consolidated financial statements if it is probable that an asset has been impaired, or liability has been incurred and the amount of the loss can be reasonably estimated. If the amount cannot be reasonably estimated, we disclose information about the contingency in the consolidated financial statements. We also disclose information in the consolidated financial statements about reasonably possible loss contingencies.
The Company will review the developments in the contingencies that could affect the amount of the provisions that have been previously recorded, and the matters and related reasonably possible losses disclosed. The Company will adjust provisions and changes to its disclosures accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. Significant judgment is required to determine both the probability and the estimated amount of loss. These estimates have been based on our assessment of the facts and circumstances at each consolidated balance sheet date and are subject to change based on new information and future events.
Outcomes of litigation and other disputes are inherently uncertain. Therefore, if one or more of these matters were resolved against the Company for amounts in excess of management’s expectations, the consolidated results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected.
Derivatives
The Company accounts for derivative financial instruments as either equity or liabilities in accordance with ASC Topic 815, Derivatives and Hedging, or ASC 815, based on the characteristics and provisions of each instrument. Embedded derivatives are required to be bifurcated from the host instruments and recorded at fair value if the derivatives are not clearly and closely related to the host instruments on the date of issuance. Derivative instrument liabilities are classified in the consolidated balance sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
The Company accounts for warrants as equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480 Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Company Class A Common Stock and whether the warrant holders could potentially require “netnet cash settlement”settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each reporting date while the warrants are outstanding.
The Company is exposed to foreign currency fluctuations and enters into foreign currency exchange derivative financial instruments to reduce the exposure to variability in certain expected future cash flows. The Company uses foreign currency forward contracts with maturities of up to nine months to hedge a portion of anticipated exposures. These contracts are not designated as hedging instruments and changes in fair value are recorded in other income (expense), net on the consolidated statement of operations. Realized gains and losses from the settlement of the derivative assets and liabilities are classified as operating activities on the consolidated statement of cash flows. The foreign currency exchange derivatives are recognized on the consolidated balance sheet at fair value within accrued expenses and other current liabilities. The Company does not hold or issue derivatives for trading purposes.
Redeemable preferred stock
The shares of series A preferred stock (the "Seriesour Series A-2 and A-3 Preferred Stock (together, “Series A Preferred Stock"Stock”) are redeemable at the option of the holder at the fifthfourth year of anniversary of the initial issuance in September 2022, and at any point in time by the Company. In accordance with ASC 480, Distinguishing Liabilities from Equity, theThe shares of the Series A Preferred Stock are classified within temporary equity as events outside the Company’s control (regardless of probability) triggers such shares to become redeemable. Costs associated with the issuance of redeemable preferred stock are presented as discounts to the fair value of
the redeemable preferred stock and are amortized using the effective interest method over the term of the respective series of preferred stock. Refer to Note 12 - 13 — Redeemable Preferred Stock for further discussion.
Government assistance
The Company records assistance from government agencies in the consolidated statements of operations under "otherother income (expense)." Government assistance relates to export incentives received under Service Exports from India Scheme (SEIS)(“SEIS”) introduced by the Government of India to incentivize the export of specified services from India. Amounts related to government assistance are recorded in the consolidated statements of operations when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. For the years ended December 31, 20222023 and 2021,2022, the Company recognized SEIS income of $760$0 and $0,$0.8 million, respectively.
Net loss per share attributable to common stockholders
Basic net loss per share attributable to common stockholders is derived by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss attributable to common
stockholders is derived by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents. Potential shares of common sharesstock from stock options, unvested restricted stock units, earnout awards and common stock warrants are computed using the treasury stock method. Contingently issuable shares are included in basic EPSnet loss per share only when there is no circumstance under which those shares would not be issued.
As the Merger has been accounted for as a reverse recapitalization, the consolidated financial statements of the merged entity reflect the continuation of Mondee's.Mondee's financial statements;statements. As such, Mondee's equity has been retroactively adjusted to the earliest period presented to reflect the legal capital of the legal acquirer, ITHAX. As a result,Therefore, net loss per share was also retrospectively adjusted for periods ended prior to the Merger. See Note 33— Reverse Recapitalization for details of this recapitalization and Note 2021 — Net Loss Per Share for discussions of the retrospective adjustment of net loss per share.
Recently adopted accounting pronouncements
On January 1, 2022, the Company adopted Financial Accounting Standards Board (“FASB”) ASU No. 2016-02, Leases (Topic 842), which requires recognition of right-of-use (“ROU”) assets and lease liabilities for most leases on the Company’s Consolidated Balance Sheet. The Company adopted Topic 842 using a modified retrospective transition approach as of the effective date as permitted by the amendments in ASU 2018-11. As a result, the Company was not required to adjust its comparative periods’ financial information for effects of the standard or make the new required lease disclosures for the periods before the date of adoption (i.e., January 1, 2022). The Company elected the package of practical expedients which allowed the Company not to reassess (1) whether existing or expired contracts, as of the adoption date, contain leases, (2) the lease classification for existing leases, and (3) whether existing initial direct costs meet the new definition. The Company also elected the practical expedient to not separate lease and non-lease components for its facility leases. The Company notes that adopting the new standard resulted in recording a lease liability and right- of-use asset associated with the Company’s facility lease agreement totaling $2,339 and $2,223, respectively, as of January 1, 2022.
In August 2020, the FASB issued ASU No. 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for the Company for fiscal years beginning after December 31, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and adoption must be as of the beginning of the Company’s annual fiscal year. The Company adopted ASU 2020-06 beginning with our fiscal year starting on January 1, 2022 with no impact on its Consolidated Financial Statements.
Recent accounting pronouncements not yet adopted
In June 2016, the FASB issued ASUAccounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments-CreditInstruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” or ASU No. 2016-13. The amendments in ASU No. 2016-13 introduce an approach based on expected losses to estimated credit losses on certain types of financial instruments, modify the impairment model for available-for-sale debt securities and provide for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The new standard requires financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The standard will be effective for the Company adopted ASU 2016-13 as of January 1, 2023 with early application permitted. The Company is evaluating theno material impact of adopting this new accounting guidance onto its Consolidated Financial Statements.consolidated financial statements.
In October 2021, the FASB issued new guidance relaterelated to recognizing and measuring contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance will require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination as compared to current U.S. GAAP where an acquirer generally recognizes such items at fair value on the acquisition date. The new guidance is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance as of January 1, 2023 and applied Topic 606 to recognize and measure contract assets and contract liabilities of acquisitions executed in fiscal 2023.
Recent accounting pronouncements not yet adopted
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments In Response to the SEC’s Disclosure Update and Simplification Initiative, which amends U.S. GAAP to include 14 disclosure requirements that are currently required under SEC Regulation S-X or Regulation S-K. Each amendment will be effective on the date on which the SEC removes the related disclosure requirement from SEC Regulation S-X or Regulation S-K. The adoption is not expected to have a material impact on the Company's consolidated financial statements as these requirements were previously incorporated under the SEC Regulations.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which amends disclosure requirements relating to segment reporting, primarily through enhanced disclosure about significant segment expenses and by requiring disclosure of segment information on an annual and interim basis. This standard is effective for annual consolidated financial statements for the year ending December 31, 2024 and for interim periods beginning in 2025. The Company is currently evaluating the impact of adopting this new accounting guidancestandard on its Consolidated Financial Statements.
Change in financial statement presentation
In connection with the preparation of its consolidated financial statements as of and for the years ended December 31, 2022 and 2021, the Company changed the presentation of “Sales and other Expense” and “Marketing Expense” within the Consolidatedstatements.
Statement
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires entities to annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of Operations.those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate). This standard is effective for annual consolidated financial statements for years ending after December 31, 2024 for public entities. The Company changedis currently evaluating the presentation by combining “Sales and other Expense” and “Marketing Expense” into “Sales and Marketing Expense”. The change is a resultimpact of an increased overlap between the nature and purpose of expenses that fall within these groups. This change in presentation has been applied retrospectively and does not change any previously reported subtotals or totalsthis standard on the Consolidated Statement of Operations and Comprehensive Loss.its consolidated financial statements.
3.REVERSE RECAPITALIZATION
As discussed in Note 1, onOn July 18, 2022, the Company consummated a business combination pursuant to the Business Combination Agreement.TheAgreement. The Business Combination was accounted for as a Reverse Recapitalization, rather than a business combination,reverse recapitalization for financial accounting and reporting purposes. Accordingly, Mondee was deemed the accounting acquirer (and legal acquiree) and ITHAX was treated as the accounting acquiree (and legal acquirer). Under this method of accounting, the reverse recapitalization was treated as the equivalent of Mondee issuing stock for the net assets of ITHAX, accompanied by a recapitalization. Mondee has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
•Mondee’s pre-combination stockholders have the majority of the voting power in the post- Businesspost-Business Combination company;
•Mondee’s stockholders have the ability to appoint a majority of the the Company's board of directors;
•Mondee’s management team is considered the management team of the post-Business Combination company;
•Mondee’s prior operations is comprised of the ongoing operations of the post-Business Combination company;
•Mondee is the larger entity based on historical revenues and business operations; and
•The post-Business Combination company has assumed Mondee’s operating name.
The net assets of ITHAX are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities, and results of operations prior to the Business Combination are those of Mondee. The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the Business Combination, have been retroactively restated.
Earn-out Shares
Following the closing of the Business Combination, holders of the earn-out shares are entitled to the right to receive up to an aggregate amount of 9,000,000 shares of the Company Class A Common Stock that would vest (in part) in equal thirds if the trading price of shares of the Company Class A Common Stock was greater than or equal to $12.50, $15.00, and $18.00 for any 20 trading days in any 30 consecutive trading day period at any time during the period beginning on the first anniversary of the closing of the Business Combination and ending on the four anniversary of the closing of the Business Combination.
In the event that there is a company sale and during the vesting period that will result in the holders of shares of the Company Class A Common Stock receiving a company sale price equal to or in excess of the applicable price per share set forth above, then immediately prior to the consummation of the company sale any such vesting of earn-out shares that has not previously occurred shall be deemed to have occurred and the holders of such earn-out shares shall be eligible to participate in such company sale. In the event of any merger, sale, consolidation, recapitalization, equity transfer, restructuring, reorganization or other similar business transaction that does not constitute a company sale, any remaining unvested earn-out shares shall not be forfeited, shall remain outstanding, and shall remain subject to the remaining applicable vesting triggering events set forth above.
In the event of a company sale, including where the consideration payable is other than a specified price per share, for purposes of determining whether the applicable stock price levels set forth above have been achieved, the price paid per share of common stock will be calculated on a basis that takes into account the number of earn-out shares that will vest (i.e., the ultimate price per share payable to all holders of common stock will be the same price per share used to calculate the number of earn-out shares that vest). The holders will have all of the rights of a holder of common stock with respect to the unvested earn-out shares, except that the holders will not be entitled to consideration in connection with any sale or other transaction and the earn-out shares cannot be sold, redeemed, assigned, pledged, hypothecated, encumbered or otherwise disposed of prior to vesting.
As the terms of the earn-out shares do not give the holders a right to require the Company to redeem them, the underlying shares are not redeemable outside of the Company’s control, and the earn-out shares are settled through the or through the vesting, a fixed number of shares, the earn-out shares are not a liability within the scope of ASC 480, Distinguishing Liabilities from Equity. Further, although the earn-out shares meet the definition of a derivative, they qualify for the equity-scope exception to derivative accounting because they meet the criteria for equity indexation and equity classification under ASC 815-40, Contracts in Entity’s Own Equity. Note that if a company sale occurs as a result of a cash offer, the calculation of the share price used to determine if the applicable stock price level set forth above has been achieved would include the earn-out shares. Lastly, the earn-out shares are indexed to the company’s own stock, as there are no other events that would accelerate the vesting of such shares other than the share price being in excess of the applicable stock price levels set forth above or a company sale. Accordingly, these earn-out shares are equity classified.
In accordance with terms of the Business Combination and upon closing, the Company approved a total of 9,000,000 earn-out shares of Company Class A Common Stock (the "earn-out shares"), which were allocated as follows at December 31, 2022.
| | | | | | | | |
Shareholder Type | Grant Date | Number of Shares |
Employee | 7/18/2022 | 6,000,000 | |
Investor | 7/18/2022 | 500,000 | |
Employee | 9/7/2022 | 900,000 | |
Non-employee | 9/12/2022 | 200,000 | |
Unallocated shares | — | 1,400,000 | |
Total | | 9,000,000 | |
While the earn-out shares are legally issued (except for 200,000 earn-out shares issued to non-employee) and placed into escrow, they are not considered outstanding for accounting purposes until resolution of the earn-out contingency.
The estimated acquisition date fair value was determined using a Monte Carlo simulation valuation model. Assumptions used in the valuation at the Closing Date were as follows:
| | | | | |
| Assumptions |
Fair Value of Class A Common Stock | $10.13 |
Selected Volatility | 60 | % |
Risk-free interest rate | 3.14 | % |
Contractual terms (years) | 4.0 |
Of the initial allocated shares, 500,000 earn-out shares were allocated to key investors for participation and approvals of the business combination agreement. As such these earn-out shares meet the definition of a derivative, however they qualify for the equity-scope exception to derivative accounting because they meet the criteria for equity indexation and equity classification under ASC 815-40, Contracts in Entity's Equity. As such the fair value impacts totaling $4,157 were recorded within equity under Additional paid in capital owing to insufficient retained earnings balances as of the date of issuance of the earn-out.
Further, 6,000,000 of the earn-out shares were issued to the Chief Executive Officer of the Company, which were determined to be equity settled in accordance with topic 480. The Chief Executive Officer was awarded earn out shares primarily to lead and direct activities contributing to the successful close of the business combination in his capacity of an executive officer responsible for oversight with no future services required. Additionally such incremental payments were offered only to specific and identified employees of Mondee, accordingly the Company determined his awards to be compensatory in nature owing to his service agreement and oversight role in the Business Combination. The Company recorded compensation expenses upon completion of the Business Combination totaling $50,060 within the Consolidated Statement of Operations for the year ended December 31, 2022.
Subsequent to the Closing Date of the Business Combination, the Company allocated an additional 1,100,000 earn-out shares, of which 900,000 were issued to an employee for his continued services and 200,000 were allocated, but will be issued subject to a requisite service period condition. These earn-out shares require future service to secure the option which confirms that these earn-outs are compensatory in nature in accordance with topic 718. The stock based compensation expense for employee earn-out shares were recognized over the derived service period. For non-employee earn-out shares, the Company recorded share based compensation expense on a monthly basis over the longest period between the implicit or derived service period. The Company recorded an additional $6,785 of compensation expense for employee to Personnel Expenses within the Consolidated Statement of Operations for the years ended December 31, 2022. The non-employee is an advisor to the company and its share based compensation expense of $352 were recorded to General and Administrative expenses within the Consolidated Statement of Operations.
During the year 2022, the grant-date fair values of the earn-outs granted to employees and non-employees were estimated using the following range of weighted average assumptions:
| | | | | |
| Assumptions |
Fair Value of Class A Common Stock | $10.19-$12.32 |
Selected Volatility | 61.0%-61.1% |
Risk-free interest rate | 3.48%-3.56% |
Contractual terms (years) | 3.8-3.9 |
As of December 31, 2022, unrecognized earn-out compensation expense totaled $5,007 expected to be recorded over the balance term. As of date of issuance of this report the remaining 1,400,000 earn-out shares remain unallocated.
Upon the closing of the Business Combination and the PIPE Financing, the Company received net cash proceeds of $62,191.$62.2 million. The following table reconciles the elements of the Business Combination to the Consolidated Statementsconsolidated statements of Cash Flowscash flows and the Consolidated Statementsconsolidated statements of Changeschanges in Mezzanine Equitymezzanine equity and Stockholders’ Deficitstockholders’ deficit for the year ended December 31, 2022:2022 (in thousands):
| | | | | |
| Recapitalization |
| Cash proceeds from ITHAX, net of redemptions | $ | 8,548 | |
| Cash proceeds from PIPE Financing | $ | 70,000 | |
| Less: Cash payment of ITHAX transaction costs and underwriting fees | $ | (7,357) | |
| Less: Cash payment of Legacy Mondee transaction costs and advisory fees paid | $ | (9,000) | |
| Net cash proceeds upon the closing of the Business Combination and PIPE financing | $ | 62,191 | |
| Less: Cash payment of ITHAX and Legacy Mondee transaction costs subsequent to closing of the Business Combination | $ | (7,347) | |
| Net cash proceeds as of December 31, 2022 | $ | 54,844 | |
| Less: Non-cash net liabilities assumed from ITHAX | $ | (3,105) | |
| Less: Legacy Mondee transaction costs incurred and unpaid as of December 31, 2022 | $ | (3,274) | |
| Net contributions from the Business Combination and PIPE financing as of December 31, 2022 | $ | 48,465 | |
Immediately upon closing of the Business Combination, the Company had 74,747,218 shares issued and outstanding of the Company Class A Common Stock. The following table presents the number of shares of the Company Class A Common Stock outstanding immediately following the consummation of the Business Combination:
| | | | | |
| ITHAX Class A Ordinary Shares, outstanding prior to Business Combination | 24,825,000 | |
| ITHAX Class B Ordinary Shares, outstanding prior to Business Combination | 5,433,750 | |
| Less: Redemption of ITHAX Class A Ordinary Shares | (23,311,532) | |
| Shares issued from PIPE financing | 7,000,000 | |
| Total shares from the Business Combination and PIPE Financing | 13,947,218 | |
Legacy Mondee shares1 | 60,800,000 | |
| Total shares of Class A Common Stock immediately after Business Combination (Class A Common Stock)* | 74,747,218 | |
*Total shares excludes earn-out shares of 7,400,000.
| | | | | |
| 1 | The number of Legacy Mondee shares was determined from the 1 Mondee Holdings II, Inc. Class A Common Stock outstanding immediately prior to the closing of the Business Combination, converted at the Exchange Ratio of 60,800,000 |
In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $28,360$28.4 million related to legal, accounting, and other professional fees, which were offset against the Company’s additional paid-in capital. Of the $28,360, $14,776$28.4 million, $14.8 million was incurred by Mondee and $13,584$13.6 million was incurred by ITHAX. As ofFor the years ended December 31, 2023, and 2022, the Company has made cash payments totaling $23,704$4.5 million and $23.7 million, respectively, for transaction costs incurred by both Mondee and ITHAX. As of December 31, 2022, $3262023, $0.3 million of transaction costs were attributable to the issuance of Private Warrantsprivate placement warrants that were determined to be a liability, and as such were recorded to other expenses within the Consolidated Statementconsolidated statement of Operations.
1 The number of Legacy Mondee shares was determined from the 1 Mondee Holdings II, Inc. Class A Common Stock outstanding immediately prior to the closing of the Business Combination, converted at the Exchange Ratio of 60,800,000
Asset Acquisition Under Common Control
On July 18, 2022, the Company entered into an Asset Purchase Agreement (the “Asset Purchase”) with Metaminds Technologies Pvt. Ltd., (“Seller” "Metaminds"Metaminds Technologies”), Prasad Gundumogula and Madhuri Pasam, and Mondee Group, LLC (“Mondee Group”) where the Company acquired the assets and liabilities of Metaminds Technologies for a purchase consideration of $2,000.$2.0 million. Gundumogula owns all of the equity interests of Mondee Group, while Gundumogula and Pasam, who are married to one another, both own Metaminds..Metaminds Technologies. Metaminds derives its revenue from providing IT Solutions and Services exclusively to Mondee.
Gundumogula and Madhuri collectively own all the issued and outstanding shares of the capital stock of Metaminds Technologies, while Gundumogula is the sole equity owner of Mondee Group. Gundumogula is also the CEO of Mondee, Inc.,the Company, and at the time of the transaction owned approximately 83% of outstanding Class A Common Stock of Mondee. As such, Metaminds Technologies and Mondee are entities under common control.
In addition, the related party loan receivable with Mondee Group was settled upon the consummation of the Business Combination by a right to receive the CompanyCompany’ Class A Common Stock totaling to $20,336$20.3 million and agreed consideration for the assets of Metaminds Technologies totaling $2,000.$2.0 million. Consistent with SAB Topic 4E, the Company recorded such right to receive the Company Class A Common Stock as a deduction from shareholders'reduction to stockholders' deficit. The agreed consideration was reflected as a deemed dividend within shareholders'stockholders' deficit.
The Asset Purchaseasset purchase was accounted as an asset acquisition, as Metaminds Technologies is not considered a business in accordance with the guidance in ASC 805, Business Combinations. The asset purchase dodoes not consist of inputs, processes, and are not generating output as required in ASC 805 to qualify as a business, and is therefore accounted for as an assetsasset acquisition. Although this transaction is considered an asset acquisition, no assets or liabilities were recorded as it was trivial.not material. The cost of the investmentspurchase consideration was determined to be $2,000 pursuant to the terms of the Asset Purchase. The cost of the investment of $2,000$2.0 million and was treated as a deemed dividend and is reflected in additional paid-in-capital.
4. WARRANTS
As of December 31, 2022,2023, the Company had the following common stock warrants outstanding:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Warrants | | Exercise Price | | Issuance Date | Expiration |
| Private Warrants | | 232,500 | | | 11.50 | | | 7/18/2022 | 7/18/2027 |
| Common Stock Warrants | | 1,275,000 | | | 11.50 | | | 9/29/2022 | 9/29/2027 |
| Total | | 1,507,500 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Warrants | | Exercise Price | | Issuance Date | | Expiration |
| Private Placement | | 232,500 | | | $ | 11.50 | | | 7/18/2022 | | 7/18/2027 |
| Preferred Stock | | 1,275,000 | | | $ | 7.50 | | | 10/17/2023 | | 9/29/2027 |
| Preferred Stock | | 169,500 | | | $ | 7.50 | | | 12/14/2023 | | 9/29/2027 |
| Total | | 1,677,000 | | | | | | | |
Public and Private Warrants
On February 1, 2021,consummation of the Business Combination, 12,075,000 public warrants and 337,500 private placement warrants for ITHAX consummated the initialcommon stock converted into public offering (“IPO”)and private placement warrants of 24,150,000 units (the “Units”), including the fullMondee’s Class A Common Stock. These warrants have an exercise by the underwriters of their over-allotment option. Each Unit included oneprice per share of Class A ordinary share$11.50. The public and one half of one warrant (the “Public Warrants”). Simultaneously with the closing of the IPO, ITHAX consummated the sale of 675,000 private placement units (the “Private Placement Units”), including the exercise by the underwriters of their over-allotment option. ITHAX Acquisition Sponsor LLC (the “Sponsor”) purchased 465,000 Private Placement unitswarrants that remain unexercised will expire on July 18, 2027, or earlier upon redemption or liquidation.
Public warrants may be redeemed, in whole and Cantor purchased 210,000 Private Placement Units. Each Private Placement Unit consisted of one Class A ordinary share and one half of one warrant (“Private Warrants”).
The Company had the right to redeem the Public Warrantsnot in part, when the last reported sales price of shares of the CompanyCompany’s Class A Common Stockcommon stock exceeds $18.00 per share for any 20 trading days within a 30 trading day period, ending on the third trading day prior to the date on which the Company sends the notice of redemption to the public warrant holders (the “Reference Value”) exceeds $18.00.
. If the Reference Value exceeds $18.00 Public Warrantsper share, public warrants are redeemable at $0.01 per warrant in whole and upon a minimum ofnot less than 30 daysdays’ prior written notice. The Company’s board of directors (the "Board") may also elect to require all warrant holders to exercise the Public Warrants on a cashless basis if the Reference Value exceeds $18.00. The number of shares to be issued for the cashless exercise would be equal to the quotient obtained by dividing (x) the product of the number of shares underlying the warrants, multiplied by the excess of the fair market value over the warrant price by (y) the fair market value. The fair market value is the average reporting closing price of the shares for the ten trading days ending on the third day prior to the date on which the notice of redemption was sent to each warrant holders.holder.
The Private Warrantsprivate placement warrants have terms and provisions that are identical to those of the Public Warrants.public warrants. However, the Private Warrantsprivate placement warrants are not redeemable by the Company as long as they are held by aITHAX Acquisition Sponsor LLC (the “Sponsor”) or its permitted transferees. If the Private Warrantsprivate placement warrants are held by holders other than the Sponsor or its permitted transferees, the Private Warrantsprivate placement warrants will be redeemable by usMondee in all redemption scenarios, and exercisable by the holders on the same basis as the Public Warrants.public warrants.
Upon
At the time of the closing 12,075,000 Public Warrantsof the Business Combination on July 18, 2022, the Company determined that the public warrants and 337,500 Private Warrants (togetherare considered indexed to the "Warrants") were outstanding.Company’s stock and meet the requirements for equity classification under ASC 480 and ASC 815. As long as the public warrants continue to be classified as equity, subsequent changes in fair value are not recognized. The Private Warrantsprivate placement warrants were designated as a liability at the time of the closing of the Business Combination on July 18, 2022, and continue to be classified as a liability as of December 31, 2022.2023. The Private Warrantsprivate placement warrants are considered liability classified instruments because their settlement amount differs depending on the identity of the holder, which precludes the warrants from being considered indexed to the Company’s equity. The Company determined that the Public Warrants met the requirements for equity classification under ASC 480 and ASC 815 and are considered indexed to the Company’s stock. As long as these warrants continue to be classified as equity, subsequent changes in fair value are not recognized.
During September 2022, a holder of Private Warrantsprivate placement warrants converted 105,000 Private Warrantsprivate placement warrants to Public Warrants.public warrants.
The Company estimated the fair value of Private Warrantsprivate placement warrants on a recurring basis at the respective dates using the Black-Scholes option valuation model, formodel. The inputs to the Private Warrants. The Black-Scholes option valuation model inputs are based on the estimated fair value of the underlying shares of the CompanyCompany’s Class A Common Stock at the valuation measurement date, the remaining contractual term of the warrant, the risk-free interest rates, the expected dividends, and the expected volatility of the price of the underlying shares of the CompanyCompany’s Class A Common Stock. These estimates, especially the expected volatility, are highly judgmental and could differ materially in the future. The Company recognized a gain of $1.2 million and a loss of $108$0.1 million related to the change in fair value of the Private Warrantsprivate placement warrants during the yearyears ended December 31, 2023 and 2022, recorded as a loss onchanges in fair value of warrant liability within the consolidated statements of operations.
The following table provides quantitative information regarding assumptions See Note 5 — Fair Value Measurement for further detail on inputs used in fair valuing the Black-Scholes option-pricing model to determineprivate placement warrants.
For the fair value of the Private Warrants as of July 18, 2022 and December 31, 2022:
| | | | | | | | | | | | | | |
| July 18, 2022 | | December 31, 2022 | |
| Stock price | 10.13 | | 10.88 | |
| Term (in years) | 5.0 | | 4.55 | |
| Expected volatility | 60 | % | | 60 | % | |
| Risk-free rate | 3.1 | % | | 4.1 | % | |
| Dividend yield | — | % | | — | % | |
Each whole Warrant entitles the registered holder to purchase one share of the Company Class A Common Stock at a price of $11.50 per share, at any time commencing on August 18, 2022, provided that the Company has an effective registration statement under the Securities Act covering the shares of the Company Class A Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available. The Warrants expire on July 18, 2027, or earlier upon redemption or liquidation. Throughyear ended December 31, 2022, 118,942 Warrantspublic warrants were exercised, at a price of $11.50, generating proceeds of $1,368.
Tender offer
On September 16, 2022, the Company announced a tender offer agreement to tenderfor all of its outstanding public and private placement warrants at a rate of $0.65 per warrant in cash, up to 12,293,543 of its outstanding Public Warrants and Private Warrants to purchase the shares of the Company Class A Common Stock.cash. The Offer was not conditioned on any minimum number of warrants being tendered andoffer expired on October 17, 2022 with 10,741,390 public warrants being tendered. The remaining 1,319,653 public warrants were redeemed in cash at a rate of $0.01 per warrant in cash.warrant. The gross cash paid was approximately $7,481$7.5 million, including incremental direct cost of $486$0.5 million to acquire the public warrants. The Company recorded the payment as a reduction to
additional paid-in capital in the Consolidated Statementconsolidated statement of Changeschanges in Mezzanine Equitymezzanine equity and Stockholders’ Deficit.stockholders’ deficit. As of December 31, 2023 and 2022, there were no Public Warrantspublic warrants outstanding.
Common Stock Warrants issued in connection with the Series A Preferred Stock
On September 29, 2022, in connection with the sale of the85,000 shares of Series A Preferred Stock, the Company issued warrants for shares of the CompanyCompany’s Class A Common Stock. The Company issued a five-year warrantwarrants to buy an aggregate total of 1,275,000 shares of the CompanyCompany’s Class A commonCommon Stock, par value $0.0001 per share with an exercise price of $11.50 per share. The warrant may be exercised at the earlier of September 29, 2027 or the five year contracted periodliquidation of the Company. Each outstanding warrant not exercised on or before the expiration date will become void. The warrants are not subject to restrictions on transfers and each holder is permitted to transfer the warrants. The warrants can be exercised on a cashless basis at the option of the holder. The warrants had a grant-date fair value of $3.07 at issuance and are fully vested. The following table provides quantitative information regarding inputs used in the Black-Scholes option-pricing model to determine the fair value of the warrants as of September 29, 2022:
| | | | | |
| September 29, 2022 |
| Fair value of Class A Common Stock | $ | 9.13 |
| Selected volatility | 40.00 | % |
| Risk-free interest rate | 3.98 | % |
| Contractual terms (years) | 5.00 |
The Company recorded the warrants as a component of equity as they are indexed to the shares of the Company’s Class A Common Stock. As a result of the preferred financing in October 17, and December 14, 2023, these warrants for 1,275,000 shares of the Company’s Class A Common Stock were surrendered in exchange for the warrants discussed below.
On October 17, and December 14, 2023, in connection with the sale of 11,300 shares of Series A-3 Preferred Stock, the Company issued warrants for shares of the Company’s Class A Common Stock. The Company issued warrants to buy an aggregate of 1,444,500 shares of the Company’s Class A common Stock, par value $0.0001 per share with an exercise price of $7.50 per share. The warrants may be exercised at the earlier of September 29, 2027 or the liquidation of the Company. Each outstanding warrant not exercised on or before the expiration date will be come void. The warrants are not subject to restrictions on transfers and each holder is permitted to transfer the warrants. The issuance of warrants iscan be exercised on a cashless exercise that are not redeemablebasis at the option of the company.
holder. The warrants had a weighted-average grant-date fair value of $3.07$2.38 at issuance and are fully vested. TheThese warrants are exercisable until September 29, 2027. were issued in replacement of surrendered 1,275,000 warrants discussed above, and therefore only the incremental value associated with the newly issued warrants of $1.49 on a per share basis were recognized as issuance costs.
The following table provides quantitative information regarding assumptionsinputs used in the Black-Scholes option-pricing model to determine the fair value of the warrants to purchase the sharesas of the Company Class A Common Stock as of September 29, 2022:respective issuance dates:
| | | | | |
| September 29, 2022October 17, and December 14, 2023 |
Fair Valuevalue of Class A Common Stock | 9.13$1.02 - $2.56 |
Selected Volatilityvolatility | 4073.00 | % |
| Risk-free interest rate | 3.98 | %4.00% - 4.94% |
| Contractual terms (years) | 53.79 - 3.95 |
The Company recorded the warrants as a component of equity as they are indexed to the shares of the CompanyCompany’s Class A Common Stock.
5. FAIR VALUE MEASUREMENT
The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period.
The following table sets forth the Company’s financial liabilities that were measured at fair value, on a recurring basis:basis (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Liabilities | | | | | | | |
Warrant liability - private warrants(2) | $ | — | | | $ | — | | | $ | 1,293 | | | $ | 1,293 | |
| | December 31, 2023 | | | December 31, 2023 |
| | | | December 31, 2021 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Liabilities | Liabilities | |
LBF earn-out consideration(1) | $ | — | | | $ | — | | | $ | 597 | | | $ | 597 | |
| | Liabilities | |
| | Liabilities | | Level 1 | | Level 2 | | Level 3 | | Total |
Foreign currency exchange derivatives(1) | |
Private placement warrant liability(2) | |
Orinter earn-out consideration(3) | |
Consolid earn-out consideration(4) | |
Interep earn-out consideration(5) | |
Skypass earn-out consideration(6) | |
| | Total liabilities | |
| Total liabilities | |
| Total liabilities | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Liabilities | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | | | |
Private placement warrant liability(2) | $ | — | | | $ | — | | | $ | 1,293 | | | $ | 1,293 | |
| | | | | |
| (1) | The LBF earn-out consideration represents arrangementsCompany uses foreign currency forward contracts with maturities of up to paynine months to hedge a portion of anticipated exposures. The foreign currency exchange derivatives are recognized on the former owners of LBF Travel, Inc. (“LBF”) acquired by the Company in 2019. The undiscounted maximum payment under the arrangement is $2,700 in aggregateconsolidated balance sheet at the end of fiscal year 2021 and 2022. As of December 31, 2022, no payments were made as LBF did not meet the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) threshold required. Earn-out consideration is included infair value within accrued expenses and other current liabilities on the Company’s Consolidated Balance Sheets.liabilities. |
| (2) | On February 1, 2021, with the closing of the IPO,its initial public offering, ITHAX consummated the sale of 675,000 private placement units. In connection withunits, including the closingexercise by the underwriters of the Business Combination, the private placement units separated into their underlying securities: the Company Class A Common Stock and the Private Warrants.over-allotment option. As of December 31, 2022,2023, the Company had 232,500 private placement warrants outstanding. |
| (3) | The Orinter earn-out consideration represents arrangements to pay the former owners of Orinter, which was acquired by the Company in 2023. The undiscounted maximum payment under the arrangement is $10 million in aggregate at the end of fiscal years 2023 through 2025. As of December 31, 2023, no payments have been made. Earn-out consideration is included in earn-out liability, net, current portion and earn-out liability, net, excluding current portion on the Company’s consolidated balance sheets. |
| (4) | The Consolid earn-out consideration represents arrangements to pay the former owners of Consolid, which was acquired by the Company in 2023. The Company may be required to make earn-out payments up to an aggregate of $1.0 million and 400,000 shares of common stock contingent on Consolid meeting certain adjusted EBITDA targets for the trailing 12 months ending May 12, 2024 and the year ended December 31, 2024. As of December 31, 2023, no payments have been made. Earn-out consideration is included in earn-out liability, net, current portion and earn-out liability, net, excluding current portion on the Company’s consolidated balance sheets. |
| (5) | The Interep earn-out consideration represents arrangements to pay the former owners and key executives of Interep, which was acquired by the Company in 2023. The Company may be required to make earn-out payments of up to $3.0 million contingent upon Interep reaching specified EBITDA targets by the end of fiscal year 2025. As of December 31, 2023, no payments have been made. Earn-out consideration is included in earn-out liability, net, current portion and earn-out liability, net, excluding current portion on the Company’s consolidated balance sheets. |
| (6) | The Skypass earn-out consideration represents arrangements to pay the former owners of Skypass, which was acquired by the Company in 2023. The Company may be required to make earn-out payments of up to an aggregate of 1,800,000 shares of common stock contingent on Skypass meeting certain adjusted EBITDA targets. In the event the EBITDA target is exceeded, the Company is required to pay 2.5% on any excess of the EBITDA target, settled in shares. The number of shares payable will be calculated based on the market value of the Company’s Class A Common Stock at settlement date. As of December 31, 2023, no payments have been made. Earn-out consideration is included in earn-out liability, net, current portion and earn-out liability, net, excluding current portion on the Company’s consolidated balance sheets. |
Short-Term Financial Assets and Liabilities
The Private Warrantscarrying values of the Company’s short-term financial assets and liabilities including cash, cash equivalents, restricted cash and short-term investments, accounts receivable, accounts payable, deferred underwriting fees, and accrued expenses approximated their fair values as of December 31, 2023 and 2022, due to their short-term nature. The Company’s restricted cash and short-term investments comprise of cash and certificate of deposits held at banks. All of the Company’s outstanding debt are accounted forrecorded on an amortized cost basis.
Foreign Currency Exchange Derivatives
The notional amount of the foreign currency exchange derivatives outstanding as liabilities in accordance with ASC 815-40of December 31, 2023 is $9.6 million. The notional amount of a foreign currency forward contract is the contracted amount of foreign currency to be exchanged and are presented within warrant liabilityis not recorded in the Consolidated Balance Sheets.balance sheets. The warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability in the Consolidated Statements of Operations.
For Level 3 LBF earn-out consideration, the Company assesses the fair value of expected earn-out consideration at each reporting period using the Monte Carlo Method, which is consistent with the initial measurement of the expected earn-out consideration. This fair value measurement is considered a Level 3 measurement because the Company estimates projections during the earn-out period utilizing various potential pay-out scenarios. The Monte Carlo simulation method repeats a process thousands of timesforeign currency exchange derivatives are recorded in an attempt to predict all the possible future outcomes. At the end of the simulation, several random trials produce a distribution of outcomes that are then analyzed to determine the average present value of earn-out. The earn-out consideration is included in accrued expenses and other current liabilities on the Company’s Consolidated Balance Sheets. Change in the fair value of earn-out consideration is reflected in our Consolidated Statements of Operations. Changes to the unobservable inputs do not have a material impact on the Company’s Consolidated Financial Statements.income
The Company established(expense), net in the initial fair valueconsolidated statement of operations. For the Private Warrants on July 18, 2022, the date of the Business Combination, and revalued onyear ended December 31, 2022, using a Black-Scholes option pricing model. The Warrants were classified as Level 3 at2023 the initial measurement date, and December 31, 2022 due to the useCompany recorded loss of unobservable inputs.$0.1 million, in other income (expense), net.
Roll-forward of Level 3 Recurring Fair Value Measurements
The following tables summarizes the fair value adjustments for earn-out considerationliabilities measured using significant unobservable inputs (level 3) (in thousands):
| | Year Ended
December 31, |
| 2022 | | 2021 |
| Year Ended
December 31, | | | Year Ended
December 31, |
| 2023 | | | 2023 | | 2022 |
| Balance, beginning of year | Balance, beginning of year | $ | 597 | | | $ | 332 | |
| Change in the estimated fair value of LBF earn-out consideration | (597) | | | 265 | |
| Additions of earn-out consideration with the acquisition of Orinter | |
| Additions of earn-out consideration with the acquisition of Interep | |
| Additions of earn-out consideration with the acquisition of Consolid | |
| Additions of earn-out consideration with the acquisition of Skypass | |
| Change in the estimated fair value of earn-out consideration | |
| Balance, end of the year | Balance, end of the year | $ | — | | | $ | 597 | |
The following tables summarizesearn-out consideration represents the fair value adjustmentsvalues of contingent consideration in connection with the Company’s acquisitions. See Note 7 — Acquisitions and Divestitures for Private Warrant liability measuredfurther detail. The earn-out considerations are fair valued using significant unobservable inputs (level 3):
| | | | | | | | |
| Year Ended
December 31, |
| 2022 | |
Private warrants recognized upon closing of Business Combination | 1,721 | | |
Transfer of Private Warrants to Public Warrants | (536) | | |
Change in the estimated fair value of warrants | 108 | | |
Balance, end of the year | $ | 1,293 | | |
the Monte Carlo Method and are Level 3 measurements because the Company estimates projections during the earn-out period utilizing various potential pay-out scenarios. The fairMonte Carlo simulation method repeats a process thousands of times in an attempt to predict all the possible future outcomes. At the end of the simulation, several random trials produce a distribution of outcomes that are then analyzed to determine the average present value of Company’s short term financial assets andthe earn-out liability. The valuation model utilized the following inputs for the valuation of the earn-out liabilities including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximated their carrying values as of December 31, 20222023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Orinter | | Interep | | Consolid | | Skypass | | |
| Cost of equity | 28.0% | | 32.0% | | 28.0% | | 25.5% | | |
| EBITDA volatility | 66.0% | | 66.0% | | 74.0% | | 59.0% | | |
| Equity volatility | 87.0% | | 87.0% | | 97.0% | | 78.0% | | |
| Required metric risk premium | 21.0% | | 24.5% | | 21.5% | | 19.5% | | |
| Risk-neutral adjustment factor | 0.75 - 1.00 | | 0.72 - 1.00 | | 0.91 - 0.97 | | 0.69 - 0.98 | | |
The earn-out consideration is recorded in earn-out liability, net, current portion and earn-out liability, net, excluding current portion on the Company’s consolidated balance sheets. Changes to the unobservable inputs do not have a material impact on the Company’s consolidated financial statements. The Company recognized a loss of $2.7 million and a gain of $0.6 million for the
remeasurement of the earn-out liabilities during the year ended December 31, 2021, due2023 and 2022, respectively, recorded as general and administrative expenses within the consolidated statements of operations.
Private placementwarrant liability
Fair value of the warrant liability is as follows (in thousands):
| | | | | | | | | | | |
| Year Ended
December 31, |
| 2023 | | 2022 |
| Balance, beginning of the year | 1,293 | | | — | |
| Private placement warrants recognized upon closing of reverse recapitalization | — | | | 1,721 | |
| Transfer of private placement warrants to public warrants | — | | | (536) | |
| Change in the estimated fair value of private placement warrants | (1,156) | | | 108 | |
| Balance, end of the year | $ | 137 | | | $ | 1,293 | |
The private placement warrant liability is fair valued using the Black-Scholes option-pricing model. The following table provides quantitative information regarding inputs used in the Black-Scholes option-pricing model to their short-term nature. As such,determine the fair value of the private placement warrants as of December 31, 2023 and 2022:
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Stock price | $2.76 | | $10.88 |
| Expected term (in years) | 3.6 | | 4.6 |
| Expected volatility | 73.0% | | 60% |
| Risk-free rate | 4.0% | | 4.1% |
| Dividend yield | —% | | —% |
Changes to the unobservable inputs do not have a material impact on the Company’s consolidated financial statements. The Company records restricted short-term investments, long-term debt,recognized a gain of $1.2 million and long-term debt due from related parties on an amortized cost basis.a loss of $0.1 million during the years ended December 31, 2023 and 2022, respectively, recorded in changes in fair value of warrant liability within the consolidated statements of operations.
There were no transfers between Level 1, Level 2 or Level 3 fair value hierarchy categories of financial instruments for the years ended December 31, 20222023 and December 31, 2021.2022.
Assets Measured at Fair Value on a Nonrecurring Basis
Our non-financial assets, such as goodwill, intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur such that a non-financial instrumentasset is required to be evaluated for impairment and an impairment is recorded to reduce the non-financial instrument’s carrying value to the fair value as a result of such triggering events, the non-financial assets areasset is measured at fair value for the periodwhen such triggering events occur.
For the years ended December 31, 20222023 and December 31, 20212022 the Company hasdid not recordedrecord any impairment charges on non-financial assets.
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:following (in thousands):
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| Capitalized software | $ | 32,283 | | | $ | 27,606 | |
| Computer equipment | 912 | | | 749 | |
| Furniture and office equipment | 332 | | | 428 | |
| Leasehold improvements | 14 | | | 233 | |
| Capitalized software development in process | 4,107 | | | 1,218 | |
| Total property and equipment | 37,648 | | | 30,234 | |
| Less: accumulated depreciation and amortization | (26,316) | | | (21,360) | |
| Total property and equipment, net | $ | 11,332 | | | $ | 8,874 | |
| | | | | | | | | | | |
| As of December 31, |
| 2023 | | 2022 |
| Capitalized and purchased software | $ | 44,078 | | | $ | 32,283 | |
| Computer equipment | 1,079 | | | 912 | |
| Furniture and office equipment | 288 | | | 332 | |
| Leasehold improvements | 194 | | | 14 | |
| Capitalized software development in process | 4,148 | | | 4,107 | |
| Total property and equipment | 49,787 | | | 37,648 | |
| Less: accumulated depreciation and amortization | (32,476) | | | (26,316) | |
| Total property and equipment, net | $ | 17,311 | | | $ | 11,332 | |
Depreciation and amortization expense was $5,432$6.5 million and $4,979$5.4 million for the years ended December 31, 2022,2023, and 2021,2022, respectively. Capitalized software development costs during the years ended December 31, 2023, and 2022 was $11.9 million and 2021 was $7,437 and $4,600,$7.4 million, respectively.
During the year ended December 31, 2023 and 2022, activity related to disposals were not material.
7. ACQUISITIONS AND DIVESTITURES
Orinter Acquisition
On January 31, 2023 (the “Orinter Closing Date”), the Company disposed furniture, equipment,acquired all of the outstanding equity interests in Orinter Tour & Travel, S.A. (“Orinter”) from OTT Holding Ltd (the “Orinter Sellers”) (such transaction referred to as the “Orinter Acquisition”). Orinter is a high-growth and leasehold improvements, resultingleading travel provider that currently serves a multitude of travel companies, with a strong presence in Brazil and Latin America. Through this acquisition, the Company has expanded its geographic footprint to include Brazil’s domestic and outbound travel market. Additionally, Orinter’s direct relationships with Latin American hotels will provide valuable cross-sell opportunities for the Company.
The acquisition date fair value of consideration transferred for Orinter is as follows (in thousands):
| | | | | |
Cash consideration (i) | $ | 21,085 | |
Issuance of Class A Common Stock (ii) | 16,037 | |
Fair value of earn-out consideration (iii) | 3,060 | |
| Total purchase price consideration | $ | 40,182 | |
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(i) Cash consideration of $20.0 million paid and $1.5 million holdback consideration transferred to an escrow account as a lossguarantee in case of necessity of reimbursement, payment and/or use by Orinter for fulfillment of obligations of Orinter deriving from customers credits and customers prepayment. The Company intends to claw back the net working capital adjustment of $0.5 million against the holdback consideration, and recorded this clawback amount in prepaid expenses and other current assets on disposalthe consolidated balance sheet.
(ii) Issuance of approximately $3.1,726,405 shares of common stock to be maintained in an escrow account. The costrelease of the shares are as follows: (a) 903,202 after a period of 12 months from the Orinter Closing Date, and (b) 823,203 shares after a period of 24 months from the Orinter Closing Date.
(iii) The purchase consideration includes an earn-out obligation of $10.0 million (paid in equal installments over 3 years) contingent on Orinter meeting certain EBITDA targets for the years ended December 31, 2024, 2025 and 2026, respectively.
The following table summarizes the fair values of the assets disposedacquired and liabilities assumed at the acquisition date (in thousands):
| | | | | |
| Assets acquired: | Estimated Fair Value |
| Cash | $ | 624 | |
| Accounts receivable | 39,960 | |
| Prepaid expenses and other current assets | 1,447 | |
| Property and equipment | 336 | |
| Goodwill | 14,524 | |
| Operating lease right-of-use-assets | 172 | |
| Indemnification asset | 2,651 | |
| Intangible assets | 29,650 | |
| Fair value of assets acquired | 89,364 | |
| Liabilities assumed: | |
| Accounts payable | 31,243 | |
| Accrued expenses and other current liabilities | 6,437 | |
| Operating lease liabilities | 103 | |
| Indemnification liability | 2,651 | |
| Deferred tax liability | 8,748 | |
| Fair value of liabilities assumed | 49,182 | |
| Total purchase consideration | $ | 40,182 | |
Goodwill
The excess of the purchase price consideration over the fair values assigned to the assets acquired and liabilities assumed was $177, accumulated depreciationrecorded as goodwill. The resulting goodwill is primarily attributable to expected post-acquisition synergies from integrating Orinter’s technology with Mondee’s platform and amortizationtechnology. Goodwill recorded in connection with the acquisition was $174,allocated to the travel marketplace segment and is not amortizable for income tax purposes. The goodwill attributable to the net bookacquisition was recorded as a non-current asset and is not amortized but is subject to an annual review for impairment.
Identifiable Intangible Assets
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (fair value in thousands):
| | | | | | | | | | | |
| Useful life (years) | | Fair value |
| Customer relationships | 11 | | $ | 22,000 | |
| Trade names | 15 | | 7,650 | |
| Total acquired intangibles | | | $ | 29,650 | |
Since the acquisition, Orinter was $3.included in the Company’s travel marketplace segment.
For the year ended December 31, 2023, the Company recorded $0.4 million of acquisition costs related to the Orinter Acquisition in general and administrative expenses on the consolidated statements of operations. The amounts of revenue and pretax net income of Orinter included in the Company’s consolidated statement of operations from the Orinter Closing Date to December 31, 2023 were $63.7 million and $11.7 million, respectively.
7.
Indemnification asset and liability
The Company recorded an indemnification asset and corresponding liability of $2.7 million for the outcome of a contingency from tax liabilities related to employment and other taxes with respect to Orinter’s pre-acquisition activities, for which we are indemnified by Orinter Sellers.
Interep Acquisition
On May 12, 2023 (the “Interep Closing Date”), the Company acquired all of the outstanding stock of Interep Representações Viagens E Turismo S.A. (“Interep”, such transaction referred to as the “Interep Acquisition”). Interep is a Brazilian travel operator that focuses on the upscale segment of the travel market. This acquisition further expands the Company’s geographical footprint in Latin America, enhance its product offerings and provide a complementary distribution network to that of Orinter, given Interep’s focus on the luxury market.
The acquisition date fair value of consideration transferred for Interep is as follows (in thousands):
| | | | | |
Cash consideration (i) (ii) | $ | 4,633 | |
Issuance of Class A Common Stock (iii) | 3,097 | |
Other consideration - travel credit (iv) | 50 | |
Fair value of earn-out consideration (v) | 1,700 | |
| Total purchase consideration | $ | 9,480 | |
In connection with the acquisition, the Company agreed to pay total consideration of (i) $4.0 million on the Interep Closing Date, (ii) a deferred payment of $0.7 million paid over 36 installments, (iii) 411,000 shares of Company Class A Common Stock, (iv) $0.1 million in travel credits, and (v) an earn-out component up to an aggregate of $3.0 million contingent on Interep meeting certain adjusted EBITDA targets by the end of fiscal year 2025.
The Company estimated the preliminary fair value of acquired assets and liabilities as of the effective time of the Interep Acquisition based on information currently available and continues to adjust those estimates upon refinement of market participant assumptions for integrating businesses. The Company is continuing to obtain information to determine the acquired assets and liabilities, including the customer deposit liability balance, tax liabilities and other attributes. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period, but no later than one year from the date of the Interep Closing Date. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized, to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. Final determination of the fair values may result in further adjustments to the values presented in the following table.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
| | | | | |
| Assets acquired: | Estimated Fair Value |
| Cash | $ | 2,925 | |
| Accounts receivable | 21,989 | |
| Prepaid expenses and other current assets | 683 | |
| Property and equipment | 61 | |
| Operating lease right-of-use-assets | 63 | |
| Other non-current assets | 9 | |
| |
| Goodwill | 2,403 | |
| Indemnification asset | 1,844 | |
| Intangible assets | 7,570 | |
| Fair value of assets acquired | 37,547 | |
| Liabilities assumed: | |
| Accounts payable | 22,962 | |
| Accrued expenses and other current liabilities | 1,112 | |
| Operating lease liabilities | 63 | |
| Other long-term liabilities | 14 | |
| Indemnification liability | 1,844 | |
| Deferred tax liability | 2,072 | |
| Fair value of liabilities assumed | 28,067 | |
| Total purchase consideration | $ | 9,480 | |
The Company recorded $5.2 million for customer relationships with an estimated useful life of 7.5 years, and $2.3 million for trade names with an estimated useful life of 15 years. The resulting goodwill is primarily attributable to the assembled workforce and expanded market opportunities from the Interep Acquisition. Goodwill recorded in connection with the acquisition was allocated to the travel marketplace segment and is not amortizable for income tax purposes. The Company recorded an indemnification asset and corresponding liability of $1.8 million for the outcome of a contingency from tax liabilities related to employment and other taxes with respect to Interep’s pre-acquisition activities, for which we are indemnified by Interep sellers.
For the year ended December 31, 2023, the Company recorded $0.1 million of acquisition costs related to the Interep Acquisition in general and administrative expenses in the consolidated statements of operations.
The amounts of revenue and pretax net income of Interep included in the Company’s consolidated statement of operations from the Interep Closing Date to December 31, 2023 were $18.3 million and $2.3 million, respectively.
Consolid Acquisition
On May 12, 2023 (the “Consolid Closing Date”), the Company acquired all of the outstanding stock in Consolid Mexico Holding, S.A. P.I. de C.V. (“Consolid”) (such transaction referred to as the “Consolid Acquisition”). Consolid is a high-growth, leading travel provider based in Mexico with the main objective of generating higher income for travel agencies in Mexico and around the world through first-class technological tools with products and services. Through this acquisition, the Company expands its geographic footprint in Mexico’s domestic and outbound travel market, as well as in other areas of Latin America.
The acquisition date fair value of consideration transferred for Consolid is as follows (in thousands):
| | | | | |
| Amount |
| Cash consideration | $ | 3,406 | |
| Fair value of earn-out consideration | 1,820 | |
| Total purchase consideration | $ | 5,226 | |
In connection with the Consolid Acquisition, the Company agreed to pay cash consideration of $3.4 million and an earn-out component up to an aggregate of $1.0 million in cash and 400,000 shares of the Company’s Class A Common Stock, contingent on Consolid meeting certain adjusted EBITDA targets for the trailing 12 months ending May 12, 2024 and the year ended December 31, 2024. The Company intends to claw back the net working capital adjustment of $0.6 million against future earn-out payments, and therefore, the $0.6 million is recorded net against the fair value of the earn-out liability on the consolidated balance sheet since these amounts have the right to offset.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
| | | | | |
| Assets acquired: | Estimated Fair Value |
| Cash | $ | 4,050 | |
| Accounts receivable | 3,569 | |
| Prepaid expenses and other current assets | 1,236 | |
| Deferred income tax assets | 690 | |
| Property and equipment | 90 | |
| Goodwill | 1,662 | |
| Operating lease right-of-use-assets | 143 | |
| Intangible assets | 1,174 | |
| Other non-current assets | 41 | |
| Fair value of assets acquired | 12,655 | |
| Liabilities assumed: | |
| Accounts payable | 5,441 | |
| Accrued expenses and other current liabilities | 1,534 | |
| Operating lease liability | 143 | |
| |
| Other long-term liabilities | 311 | |
| Fair value of liabilities assumed | 7,429 | |
| Total purchase consideration | $ | 5,226 | |
The intangible assets acquired include customer relationships with a fair value of $0.7 million and an estimated useful life of 8.5 years, as well as trade names with a fair value of $0.5 million and an estimated useful life of 15 years. The resulting goodwill is primarily attributed to the assembled workforce and expanded market opportunities obtained through the Consolid Acquisition. Goodwill recorded in connection with the acquisition was allocated to the travel marketplace segment and is not deductible for income tax purposes. For the year ended December 31, 2023, the Company recorded $0.3 million of acquisition costs related to the Consolid Acquisition in general and administrative expenses in the consolidated statements of operations.
The amounts of revenue and pretax net income of Consolid included in the Company’s consolidated statement of operations from the Consolid Closing Date to December 31, 2023 were $5.7 million and $1.2 million respectively.
Skypass Acquisition
On August 12, 2023 (the “Skypass Closing Date”), the Company executed the Share Purchase Agreement to purchase all of the outstanding shares of Skypass Travel Inc., Skypass Travel de Mexico Sa de CV, Skypass Travel Private Limited and Skypass Holidays, LLC (collectively, “Skypass”) (such transaction referred to as the “Skypass Acquisition”). Skypass is an international travel operator specializing in national and international air travel and hotel bookings primarily for travelers and employees associated with international corporations. The Skypass Acquisition allows the Company to expand its reach in the cruise and holiday packages travel sectors.
The acquisition date fair value of consideration transferred for Skypass is as follows (in thousands):
| | | | | |
| Amount |
Cash consideration(i) | $ | 3,214 | |
Issuance of Class A Common Stock at Closing(ii) | 5,320 | |
Deferred stock consideration(iii) | 1,584 | |
Fair value of earn-out consideration(iv) | 434 | |
| Total purchase price consideration | $ | 10,552 | |
In connection with the acquisition, the Company agreed to pay total consideration of (i) $3.0 million on the Skypass Closing Date, with an adjustment for working capital, (ii) 900,000 shares of the Company’s Class A Common Stock on the Skypass Closing Date, (iii) 100,000 shares of the Company’s Class A Common Stock within 60 days after each of the first, second and third anniversaries of the Skypass Closing Date, and (iv) an earn-out component up to an aggregate of 1,800,000 shares of Company Class A Common Stock over a four year period contingent on Skypass meeting certain adjusted EBITDA growth targets. In the event the EBITDA target is exceeded, the Company is required to pay additional shares of 2.5% on excess of the EBITDA target. The number of shares payable will be calculated based on the market value of the Company’s Class A Common Stock at settlement date.
The Company estimated the preliminary fair value of acquired assets and liabilities as of the effective time of the Skypass Acquisition based on information currently available and continues to adjust those estimates upon refinement of market participant assumptions for integrating businesses. The Company is continuing to obtain information to finalize the acquired assets and liabilities, including accounts receivables balance, tax liabilities and other attributes. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period, but no later than one year from the date of the Skypass Closing Date. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized, to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. Final determination of the fair values may result in further adjustments to the values presented in the following table.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
| | | | | |
| Assets acquired: | Estimated Fair Value |
| Cash | $ | 1,746 | |
| Accounts receivable | 2,797 | |
| Prepaid expenses and other current assets | 25 | |
| |
| |
| Goodwill | 4,009 | |
| Operating lease right-of-use-assets | 1,006 | |
| Intangible assets | 4,135 | |
| |
| Fair value of assets acquired | 13,718 | |
| Liabilities assumed: | |
| Accounts payable | 668 | |
| Accrued expenses and other current liabilities | 684 | |
| Operating lease liabilities | 714 | |
| |
| Deferred income tax | 1,100 | |
| |
| Fair value of liabilities assumed | 3,166 | |
| Total purchase consideration | $ | 10,552 | |
The intangible assets acquired include customer relationships with a fair value of $3.4 million and an estimated useful life of 8.4 years, as well as trade names with a fair value of $0.8 million and an estimated useful life of 15 years. The resulting goodwill is primarily attributed to the assembled workforce and expanded market opportunities obtained through the Skypass Acquisition. Goodwill recorded in connection with the acquisition was allocated to the travel marketplace segment and is not deductible for income tax purposes. For the year ended December 31, 2023, the Company recorded $0.2 million of acquisition costs related to the Skypass Acquisition in general and administrative expenses in the consolidated statements of operations.
The Company has included the financial results of Skypass in its consolidated financial statements from the Skypass Closing Date to December 31, 2023, which have not been material to date. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the consolidated statements of operations.
Purple Grids Acquisition
On November 13, 2023 (the “Purple Grids Closing Date”), the Company completed the acquisition of Purple Grids, Inc., a company focused on combining open AI with business intelligence and Robotic Process Automation (“RPA”) to automate customer experiences (such transaction referred to as the “Purple Grids Acquisition”). The acquisition was accounted for as an asset acquisition. The purchase of Purple Grids was $8.7 million, which primarily consisted of $5.5 million in shares of the Company’s Class A Common Stock and an earn-out component of $3.2 million contingent on the achievement of certain revenue and stock price targets. The earn-out consideration is equity-classified in accordance with ASC 815 as it was concluded to be indexed to the Company’s stock. The fair value of the earn-out consideration is estimated as of the acquisition date based on our estimates and assumptions utilizing the Monte Carlo simulation method.
As part of the asset acquisition, the Company recorded $10.9 million for developed technology and $0.5 million for assembled workforce with estimated useful lives of seven years and three years, respectively, and assumed $3.1 millionin deferred tax liabilities.
LBF US Divestiture
In July 2023, the Company entered into a letter of intent with a former employee to sell LBF Travel Inc, LBF Travel Holdings LLC, Avia Travel and Tours Inc, and Star Advantage Limited (collectively, "LBF US") for net proceeds of 200,000 shares of the Company’s Class A Common Stock, which was valued at $1.8 million as of the disposal date. The Company allocated $0.5 million of the value of the shares to post-sales support provided to LBF US subsequent to the sale and recognized the remaining $1.3 million as purchase consideration. The divestiture of LBF US closed in September 2023. LBF US was initially acquired by the Company on December 20, 2019 ("2019 Acquisition") and operated within the travel marketplace segment. The buyer was a previous owner of LBF Travel Inc, who then became a Mondee employee along with the 2019 Acquisition until Mondee’s divestiture of LBF US.
In connection with the sale, the Company recognized a net gain of $1.3 million, which was recorded in other income (expense). Additionally, the Company agreed to provide certain short-term transition services to support the divested business through the third quarter of 2023, which was subsequently amended to extend through January 2024. The Company incurred $10.4 million of transition service costs for the year ended December 31, 2023, which was recorded in other income (expense), net. As of December 31, 2023,
the Company has paid $7.7 million towards the LBF US transition services, and have a remaining amount of $2.7 million unpaid. The results of the divested business through date of sale and the transition services provided to LBF US post the sale were reflected within the travel marketplace segment.
Unaudited Pro Forma Operating Results
The following unaudited pro forma combined financial information presented the results of operations as if (i) the business combinations with Orinter, Interep, Consolid and (ii) the divestiture of LBF US were consummated on January 1, 2022 (the beginning of the comparable prior reporting period), including certain pro forma adjustments that were directly attributable to the Orinter, Interep, and Consolid Acquisitions, including additional amortization adjustments for the fair value of the assets acquired. These unaudited pro forma results do not reflect any synergies from operating efficiencies post their acquisition dates. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations. The unaudited pro forma financial information did not include the effect of Skypass Acquisition due to its insignificant impact to the Company's consolidated operation results.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | |
| (in thousands) | 2023 | | 2022 | | | | |
| Revenues, net | $232,983 | | $191,885 | | | | |
| Net loss | (43,715) | | (75,193) | | | | |
8. GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill and intangible assets, net consisted of the following:following (in thousands):
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| Goodwill | $ | 66,420 | | | $ | 66,420 | |
| Intangible assets with indefinite lives | 12,028 | | | 12,028 | |
| Intangible assets with definitive lives, net | 45,342 | | | 51,680 | |
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Goodwill | $ | 88,056 | | | $ | 66,420 | |
| Intangible assets with indefinite lives | 10,653 | | | 12,028 | |
| Intangible assets with definitive lives, net | 91,376 | | | 45,342 | |
Impairment Assessments. We perform the assessment of possible impairment of goodwill and indefinite-lived intangible assets on an annual basis or more frequently if events and circumstances indicate that an impairment may have occurred. During 2022the years ended December 31, 2023 and 2021,2022, there were no impairments of goodwill or intangible assets.
Goodwill. The following table presents the changes in goodwill by reportable units:units (in thousands):
| | | | | | | | | | | | | | | | | |
| Travel Marketplace | | SAAS Platform | | Total |
| Balance as of December 31, 2020 | $ | 58,999 | | | $ | 7,421 | | | $ | 66,420 | |
| Additions | — | | | — | | | — | |
| Impairment charges | — | | | — | | | — | |
| Balance as of December 31, 2021 | 58,999 | | | 7,421 | | | 66,420 | |
| Additions | — | | | — | | | — | |
| Impairment charges | — | | | — | | | — | |
| Balance as of December 31, 2022 | $ | 58,999 | | | $ | 7,421 | | | $ | 66,420 | |
| | | | | | | | | | | | | | | | | |
| Travel Marketplace | | SAAS Platform | | Total |
| Balance as of December 31, 2021 | $ | 58,999 | | | $ | 7,421 | | | $ | 66,420 | |
| Additions | — | | | — | | | — | |
| Impairment charges | — | | | — | | | — | |
| Balance as of December 31, 2022 | 58,999 | | | 7,421 | | | 66,420 | |
| Additions (Note 7 - Acquisitions and Divestitures) | 22,598 | | | — | | | 22,598 | |
| Divestiture of LBF US (Note 7 - Acquisitions and Divestitures) | (1,678) | | | — | | | (1,678) | |
| Foreign currency translation impact | 716 | | | — | | | 716 | |
| Balance as of December 31, 2023 | $ | 80,635 | | | $ | 7,421 | | | $ | 88,056 | |
Indefinite-lived Intangible Assets. Our indefinite-lived intangible assets relate to trade names acquired in various acquisitions during the years ended December 31, 2020 and December 31, 2019.
Definite life Intangible assets, net consisted of the following as of December 31, 2022:2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average Remaining Useful Life (in years | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Customer relationships | 6.74 | | $ | 60,778 | | | (29,288) | | | 31,490 | |
| Trade name | 8.95 | | 9,580 | | | (5,295) | | | 4,285 | |
| Acquired technology | 0.00 | | 7,430 | | | (7,430) | | | — | |
| Supplier relationships | 12.00 | | 5,767 | | | (1,153) | | | 4,614 | |
| Developed technology | 6.19 | | 7,220 | | | (2,267) | | | 4,953 | |
| Covenants not to compete | 0.00 | | 332 | | | (332) | | | — | |
| Balances as of December 31, 2022 | | | $ | 91,107 | | | (45,765) | | | 45,342 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average Remaining Useful Life (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Customer relationships | 8.12 | | $ | 93,139 | | | (36,454) | | | 56,685 | |
| Trade name | 12.62 | | 21,265 | | | (6,408) | | | 14,857 | |
| | | | | | | |
| Supplier relationships | 10.98 | | 5,767 | | | (1,538) | | | 4,229 | |
| Developed technology | 6.57 | | 18,402 | | | (3,276) | | | 15,126 | |
| | | | | | | |
| Assembled workforce | 2.87 | | 501 | | | (22) | | | 479 | |
| Balances as of December 31, 2023 | | | $ | 139,074 | | | (47,698) | | | 91,376 | |
Definite life Intangible assets, net consisted of the following as of December 31, 2021:2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average Remaining Useful Life (in years | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Customer relationships | 7.74 | | $ | 60,778 | | | (24,613) | | | 36,165 | |
| Trade name | 9.95 | | 9,580 | | | (4,816) | | | 4,764 | |
| Acquired technology | 0.00 | | 7,430 | | | (7,430) | | | — | |
| Supplier relationships | 13.02 | | 5,767 | | | (769) | | | 4,998 | |
| Developed technology | 7.26 | | 7,220 | | | (1,467) | | | 5,753 | |
| Covenants not to compete | 0.00 | | 332 | | | (332) | | | — | |
| Balances as of December 31, 2021 | | | $ | 91,107 | | | (39,427) | | | 51,680 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average Remaining Useful Life (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Customer relationships | 6.74 | | $ | 60,778 | | | (29,288) | | | 31,490 | |
| Trade name | 8.95 | | 9,580 | | | (5,295) | | | 4,285 | |
| | | | | | | |
| Supplier relationships | 12.00 | | 5,767 | | | (1,153) | | | 4,614 | |
| Developed technology | 6.19 | | 7,220 | | | (2,267) | | | 4,953 | |
| | | | | | | |
| Balances as of December 31, 2022 | | | $ | 83,345 | | | (38,003) | | | 45,342 | |
Amortization expense for intangible assets was $6,338$9.5 million and $7,882$6.3 million for the years ended December 31, 20222023 and 2021,2022, respectively.
The estimated future amortization expense related to intangible assets with definite lives is as follows:follows (in thousands):
| | | | | |
| December 31, | |
| 2023 | $ | 6,338 | |
| 2024 | 6,337 | |
| 2025 | 6,163 | |
| 2026 | 5,815 | |
| 2027 | 5,815 | |
| Thereafter | 14,874 | |
| $ | 45,342 | |
| | | | | |
| For the years ended December 31, | |
| 2024 | $ | 11,986 | |
| 2025 | 11,812 | |
| 2026 | 11,442 | |
| 2027 | 11,297 | |
| 2028 | 11,297 | |
| Thereafter | 33,542 | |
| $ | 91,376 | |
8.9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:following (in thousands):
| | | | | | | | | | | | |
| December 31, | |
| 2023 | | 2022 | |
| Accrued expenses | $ | 8,149 | | | $ | 3,314 | | |
| Provision for chargebacks | 148 | | | 377 | | |
| Accrued compensation and benefits | 7,209 | | | 1,374 | | |
| Accrued travel agent incentives | 3,942 | | | 3,458 | | |
| Customer deposits | 4,127 | | | — | | |
| | | | |
| Current portion of operating lease liabilities | 1,133 | | | 796 | | |
| Other current liabilities | 407 | | | — | | |
| | | | |
| $ | 25,115 | | | $ | 9,319 | | |
| | | | | | | | | | | | |
| As of December 31, | |
| 2022 | | 2021 | |
| Accrued expenses | $ | 3,314 | | | $ | 4,834 | | |
| Provision for chargebacks | 377 | | | 3,176 | | |
| Accrued compensation and benefits | 1,374 | | | 1,427 | | |
| Accrued travel agent incentives | 3,458 | | | 296 | | |
| Earn-out consideration payable | — | | | 597 | | |
| Operating lease liabilities | 796 | | | — | | |
| Other current liabilities | — | | | 24 | | |
| $ | 9,319 | | | $ | 10,354 | | |
9.10. DEBT
Paycheck Protection Program Loan (“PPP Loan”)
On April 13, 2020,In 2021, the Company was granted a loan from JP Morgan Chase Bankreceived an aggregate of $3.6 million in the aggregate amount of $4,292,loans pursuant to the Paycheck Protection Program (the "PPP"(“PPP”) under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). As the legal form of the PPP loan is debt, the Company accounted for the loan as debt under ASC 470. The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight week period. If the company expects that it reasonably assured (i.e., probable) to meet the PPP’s eligibility and loan forgiveness criteria, the Company may elect to account for the proceeds expected to be forgiven as an in-substance government grant that is earned through the Company’s compliance with the loan forgiveness criteria. In June 2021, the Company applied for forgiveness prior to the 10-month period and as such no interest and principal payments were due. On August 16, 2021, the Company received full forgiveness for the $4,292 PPP loan and accounted for as gain on forgiveness of PPP Loan.
On January 11, 2021, the PPP opened an additional round of funding, which allowed eligible borrowers that had previously received a PPP loan to apply for a second draw PPP loan with the same general terms as the first. Second draw PPP loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
In January 2021, one of the Company’s subsidiaries was granted a Second Draw PPP Loan of $2,000 based on qualified spending, decreased quarterly revenue, and other factors. Second Draw PPP Loans are eligible forThe Company received full forgiveness based on qualified spending during an 8 to 24 month covered period, assuming employee and compensation levels are maintained. Loan payments are deferred for at least 10 months after the end$1.6 million of the covered period. If not forgiven, the Second Draw PPP Loan has a maturity of five years and a 1% interest rate.
In addition, another subsidiary received a Second Draw PPP loan in the amount of $1,576 in February 2021. The loan is subject to 1% interest rate. If not forgiven, the unforgiven portion is payable in 45 consecutive payments of principal and interest, beginning on June 9, 2022 and continuing on the same day of each month thereafter.
In August 2021, the Company applied for forgiveness of the $1,576 PPP loan, and received full forgiveness in November 2021, and accounted forthe remaining $2.0 million balance in May 2022, which was recorded as a gain on forgiveness of PPPthe loan in 2021. In March 2022, the Company applied for forgiveness of the $2,009 PPP loan and received full forgiveness in May 2022, and accounted for as gain on forgiveness of PPP loan in 2022.respective years.
Due to the uncertainty and evolving guidance associated with the PPP program’s eligibility and forgiveness criteria, the Company determined that it was not reasonably assured that the loan would be forgiven by the SBA and therefore was not appropriate to account for the proceeds as an in-substance government grant. The Company concluded it was appropriate to account for the PPP
Term Loan as debt until receipt of formal approval for loan forgiveness from the SBA, at which time the Company will extinguish the PPP Loan as debt and recognize a gain on loan extinguishment on the consolidated statement of operations.
Canadian Loans (“Other Government Loans”)
Canada Emergency Business Account
In April and June 2020, the Company was granted an interest free loan from Royal Bank of Canada in the aggregate amount of $50 CAD (equivalent $39 USD), pursuant to the Canada Emergency Business Account (“CEBA”) loan forgiveness, funded by the Government in Canada. Additionally in 2021, the Company was granted another CEBA loan with the Canadian government of $20 CAD (equivalent $16 USD). As the legal form of the CEBA loan is debt, the Company accounted for the loan as debt under ASC 470. The loan is provided to qualifying businesses to cover short term operating expenses, payroll, and non-deferrable expenses. The Company will be eligible for 25% loan forgiveness if the loan amount equal to 75% of the highest amount drawn from the CEBA until March 31, 2021 is repaid by December 31, 2023. The Company had an outstanding loan balance of $70 CAD (equivalent $52 USD) and $70 CAD (equivalent $55 USD) for the years ended December 31, 2022 and 2021, respectively.
The Company concluded that it was appropriate to account for the CEBA as debt until receipt of formal approval for loan forgiveness from the government of Canada, at which time the Company will extinguish the CEBA loan as debt and recognize a gain on loan extinguishment on the consolidated statements of operations. As of December 31, 2022 and December 31, 2021, the Company had not submitted payment for any portion of the outstanding loan, and as such the loan continues to be accounted for as debt.
Highly Affected Sectors Credit Availability Program
On August 12, 2021, the Company was granted a Highly Affected Sectors Credit Availability Program (“HASCAP”) loan with the Canadian government of $250 CAD (equivalent to $198 USD). The proceeds should be used to exclusively fund the operational cash flow needs of the Company. Loan payments are deferred for 13 months after drawdown with a maturity date of 10 years and 4% fixed interest rate. As of December 31, 2022, the Company had an outstanding loan balance of $243 CAD (equivalent $179 USD).
The following table summarizes the Company's outstanding PPP and other governmental loans arrangements:
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| HASCAP | $ | 179 | | | $ | 198 | |
| CEBA | 52 | | | 55 | |
| PPP | — | | | 2,000 | |
| Total PPP and other governmental loans | $ | 231 | | | $ | 2,253 | |
| Less: current portion of PPP and other governmental loans | (72) | | | (338) | |
| Total PPP and other governmental loans, net of current portion | $ | 159 | | | $ | 1,915 | |
Obligation to GDS Service Provider
As a result of the acquisition of LBF in 2019, the Company assumed the liability of the outstanding payment obligation with a GDS service provider (‘GDS Obligation’). This GDS Obligation originally emanated from a settlement agreement with the GDS service provider amounting to $1,419. The GDS Obligation bears an interest rate of 6% per annum and is due by July 1, 2022.
During the year ended December 31, 2022, the Company accrued $4 in interest expense, and submitted $298 in principal repayments and $5 in interest repayments. The outstanding balance of the GDS Obligation was $0 as of December 31, 2022. During the year ended December 31, 2021, the Company accrued $27 in interest expense, and submitted $447 in principal repayments and $21 in interest repayments. The outstanding balance of the GDS Obligation was $298 as of December 31, 2021.
TCW Credit Agreement
On December 23, 2019, the Company, entered into a financing agreement (the “TCW Agreement”) with TCW ("Lenders") consisting offor a $150,000 multi-draw$150.0 million term loan in aggregate (the "Term Loan"“Term Loan”), of which the first draw was for a principal amount of $95,000, with a maturity date of December 23, 2024. Additionally, on the same day, the Company entered into a revolving credit
facility (‘LOC’(“TCW LOC”) with an aggregate principal amount not exceeding $15,000. Undrawn$15.0 million. The line of credit will terminate on December 23, 2024 and undrawn balances available under the revolving credit facility are subject to commitment fees of 1%. These facilities are guaranteed by the Company and were guaranteed by the Mondee Stockholder and are secured by substantially all of the assets of the Company. No amounts on the revolving credit facility have been drawn down as of December 31, 2023 and 2022, respectively.
The Term Loan has a stated interest rate of SOFR plus a specified premium (“Applicable Margin”) that ranges from 7.00% to 10.50% in accordance to the financing agreement. For the year ended December 31, 2023, the stated interest rate under the TCW Term Loan was SOFR + 8.50% and 2021, respectively.
On June 22, 2021, the Company entered into a fourth amendment with TCW,to the Term Loan, which specifies that if Company does not secure $25,000$25.0 million in financing, or enter into a change of control agreement, by June 30, 2022 then the Mondee Stockholder must issue 3,600,000 Class G units to TCW. In connection with the fourth amendment and in consideration thereof, the Company incurred an amendment fee of $1,754,$1.8 million, which was paid in kind (“PIK”) and added to the outstanding principal balance.
On December 31, 2021, the Company entered into a fifth amendment with TCWto the Term Loan to increase the Applicable Margin by 1% and capitalize interest during the period of October 1, 2021 to March 31, 2022. The PIK rate was increased to 12.25% beginning October 1, 2021. Additionally, quarterly installments for loan repayment were deferred until June 30, 2022. The modification is only in effect through June 30, 2022, at which time the Applicable Margin will revert to the original percentages.
On July 8, 2022, the Company entered into a seventh amendment to the financing agreement to the TCW Agreement,Term Loan, pursuant to which, among other things, extended the June 30, 2022 quarterly repayment of interest and quarterly principal repayment to September 30, 2022, and Closing Date, respectively.
Additionally, the amendment modified the applicable marginApplicable Margin for the period after the date of the consummation of the Business Combination. The relevant applicable marginApplicable Margin shall be set at the respective level indicated for each fiscal quarter based upon the average daily balance of the outstanding Term Loan obligations during the immediately preceding fiscal quarter. However, from and after the first day of the first fiscal quarter following the 18 month anniversary of the consummation of the Business Combination (such date, the “18 Month Anniversary Date”), the applicable margin,Applicable Margin, with respect to the interest rate of (a) any reference rate loan or any portion thereof and (b) any LIBOR rate loan or any portion thereof, shall be set at the Applicable Margin Level in effect on the last day of the fiscal quarter during which such 18 Month Anniversary Date occurs.
Finally, the amendment stipulated the issuance of 3,000,000 Class G units of the Mondee Stockholder to TCW and a SPAC prepayment fee of 3% applied against the SPAC prepayment amount. The SPAC prepayment fee was due upon the consummation of the Business Combination.
On July 17, 2022, the Company entered into an amendment to the seventh amendment to the TCW Agreement,Term Loan, pursuant to which, among other things, TCW consented to reduce the amount of the loan required to be prepaid at closing to $40,000$40.0 million ("SPAC Prepayment"). On July 18, 2022, the consummation of the Business Combination occurred which resulted in the following:
a) SPAC Prepayment $40,000of $40.0 million
b) SPAC Prepayment Fee $1,200of $1.2 million
c) 3,000,000 Class G Units of the Mondee Stockholder issued at a per share price of $3.25
On October 24, 2022, the Company executed an eighth amendment to the financing agreement with TCW,Term Loan, pursuant to which, among other things, the amendment provides consent to a portion of the payment of the June Interest Payment at a rate per annum of up to 2.5% to be paid by capitalizing such interest and adding such capitalized interest to the then outstanding principal amount of the Term Loan (such amount, the “June PIK Amount” and the consent to permit the June PIK Amount the “June Interest Payment Condition”), (ii) waive the payment defaults, (iii) amend certain terms and conditions of the Financing Agreement.
On January 11, 2023, the Company executed a ninth Amendment to the Term Loan (the “Ninth Agreement”), wherein Wingspire Capital LLC (“Wingspire”) became a party to the to the Term Loan. The effectiveamendment resulted in the redesignation of $15.0 million under the Term Loan from other lenders to Wingspire (the “TCW Term Loan”). Concurrently, Wingspire funded an additional $15.0 million on top of the already outstanding Term Loan (the “Wingspire Term Loan”), with a total of $30.0 million contributed by Wingspire as part of this amendment. Further, pursuant to the ninth Amendment, Wingspire consented to take over the TCW LOC for a principal amount not to exceed $15.0 million. Both the TCW Term Loan and Wingspire Term Loan are referenced herein as the Term Loan.
Until January 11, 2024, the Company has the option to increase the Term Loan by $20.0 million under two conditions: (i) the Company must have a trailing 12-month EBITDA of at least $25.0 million; and (ii) the Company must draw in increments of at least $5.0 million. The Company did not exercise the option to increase the Wingspire Term Loan.
On January 31, 2023, the Company executed a tenth amendment to the Term Loan. The tenth amendment (1) set forth the terms on which we could acquire Orinter, pursuant to the Orinter Purchase Agreement, among us, Mondee Brazil, LLC, a Delaware limited liability company (“Mondee Brazil”), OTT Holdings Ltda. (“OTT Holdings”), Orinter, and the other parties named therein; (2) set forth the terms on which we could pay the earn-out payment contemplated to be paid to OTT Holdings and certain key executives of OTT Holdings pursuant to the Orinter Purchase Agreement; (3) required that Mondee Brazil join as a party to the TCW Agreement and the Security Agreement (as defined in the TCW Agreement); (4) required that Mondee, Inc. pledge 100% of the equity interests of Mondee Brazil; and (5) required that Mondee Brazil and Mondee Inc. pledge 100% of the equity interests of Orinter.
On October 13, 2023, the Company executed an eleventh amendment to the Term Loan (the “Eleventh Amendment”). The Eleventh Amendment (1) provided consent to the Company’s acquisitions of Interep, Consolid and Skypass; (2) required that the Company pledge 100% of the equity interests of Interep, Consolid and Skypass, and certain other subsidiaries; (3) specifies that certain leverage ratios, minimum unadjusted EBITDA and fixed charge coverage ratio covenants shall not be measured through the term of the TCW Agreement; (4) sets forth certain qualified cash requirements; (5) adds as an event of default the failure of the Company to achieve certain refinancing milestones; (6) provides that the revolving credit commitment shall be uncommitted and discretionary in nature; and (7) provides for the payment of certain fees. On November 2, 2023, the Company entered into a waiver with TCW Asset Management Company, Wingspire Capital LLC regarding the Term Loan which waived certain mandatory prepayment obligations of the Company.
For the year ended December 31, 2023, the stated interest rate under the TCW Term Loan was SOFR + 8.50% and for the year ended December 31, 2022, the stated interest rate was SOFR with an Applicable Margin ranging from 8.50% to 10.50%. In addition to the stated rate of interest on the loanTerm Loan pursuant to which interest payments were calculated, debt issuance costs and debt discounts on the Term Loan are amortized over the term of the borrowing arrangement as additional notional interest expense, and added to the calculation of effective interest rate on the TCW Term Loan. Including such additional notional calculations, the effective interest rate on the Term Loan for the years ended December 31, 2023, and 2022 was 23.0% and 22.9%, respectively. The effective interest on the Wingspire Term Loan for the year ended December 31, 20212023 is 22.99%17.1%. See table at the end of this Note for components of interest expense recognized in the years ended December 31, 2023 and 15.55%, respectively.2022.
As of December 31, 2022, and December 31, 2021,2023, the total estimated fair value of the Company’s TCW Credit AgreementTerm Loan was $143,651$149.0 million and $183,936, respectively.the Wingspire Term Loan was $13.9 million. As of December 31, 2022, the estimated fair value of the Company’s Term Loan was $143.7 million. The fair value of debt was estimated based on Level 3 inputs.
The TCW AgreementTerm Loan includes the provisions for customary events of default including non-payment of obligations, non-performance ofnon-compliance with covenants and obligations, default on other material debt, bankruptcy or insolvency events, material judgments, change of control, and certain customary events of default relating to collateral or guarantees. Upon the occurrence of any event of default, subject to the terms of the TCW AgreementTerm Loan including any cure periods specified therein, customary remedies may be exercised by the Lenders under the TCW AgreementTerm Loan against the Company. The Company was in compliance with all of its financial covenants under the TCW AgreementTerm Loan as of December 31, 2022.2023.
Subsequent December 31, 2023, the Company executed the twelfth and thirteenth amendments to the Term Loan, which extended the maturity on the Term Loan to March 31, 2025. Refer to Note 24 — Subsequent Events for further information about the amendments.
Orinter Short-term Loan
With partnering financing institutions in Brazil, the Company has the option to collect payments from travelers and travel agencies’ upfront or receive payments through scheduled installments. The Company is also able to collateralize the outstanding receivable balances with those financial institutions to make bank advances through financing agreements. The Company elects options based on the bank fee terms as part of its regular cash management process.
In December 2023, Orinter entered into a loan agreement (“Orinter short-term loan”) for €2.2 million with a maturity date of October 2024. All borrowings under the Orinter short-term loan bear interest at a rate of 6.7489%. Orinter’s receivables due from financial institutions comprising the outstanding balance serve as collateral on the loan. Interest expense for the Orinter short-term loan was immaterial for the year ended December 31, 2023. The Company was in compliance with all of its financial covenants under the Orinter short-term loan as of December 31, 2023.
The following table summarizes the Company's outstanding borrowing arrangements, excluding PPP and other governmental loans (in thousands):
| | | | | | | | | | | |
| As of December 31, |
| 2023 | | 2022 |
| Term Loan | $ | 114,708 | | | $ | 106,250 | |
| | | |
Payment in kind interest on Term Loan1 | 56,063 | | 46,518 |
| | | |
| | | |
| | | |
| Others | 2,578 | | 14 |
| | | |
| Total outstanding principal balance | 173,349 | | 152,782 |
| Less: Unamortized debt issuance costs and discounts | (11,842) | | (18,386) |
| Total debt | 161,507 | | 134,396 |
| Less: Current portion of long-term debt | (10,828) | | (7,514) |
| Long-term debt, net of current portion | $ | 150,679 | | | $ | 126,882 | |
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| TCW Credit Agreement | $ | 106,250 | | | $ | 150,000 | |
Cumulative PIK interest for TCW Credit Agreement1 | 46,518 | | | 36,858 | |
| GDS Obligation | — | | | 298 | |
| Others | 14 | | | — | |
| Total outstanding principal balance | $ | 152,782 | | | $ | 187,156 | |
| Less: Unamortized debt issuance costs and discounts | (18,386) | | | (13,923) | |
| Total debt | $ | 134,396 | | | $ | 173,233 | |
| Less : Current portion of long term debt | (7,514) | | | (11,063) | |
| Long term debt, net of current portion | $ | 126,882 | | | $ | 162,170 | |
The following table sets forth the total interest expense recognized related to the loans payable to lenders and other payment obligations mentioned above.above (in thousands):
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| Cash interest expense | $ | 10,903 | | | $ | 6,587 | |
Payment in kind interest, net2 | 9,036 | | | 14,582 | |
| LOC commitment charges | 152 | | | 153 | |
| Amortization of debt issuance costs | 6,563 | | | 2,361 | |
| $ | 26,654 | | | $ | 23,683 | |
| | | | | | | | | | | |
| Year ended December 31, |
| 2023 | | 2022 |
| Cash interest expense | $ | 13,637 | | | $ | 10,903 | |
Payment in kind interest, net1 | 9,363 | | | 9,036 | |
| LOC commitment charges | 152 | | | 152 | |
| Amortization of debt issuance costs | 8,846 | | | 6,563 | |
| $ | 31,998 | | | $ | 26,654 | |
1 Includes paid in kind amendment fee of $1,754.
2 Represents Payment in Kind Interest for the Company’s outstanding TCW LoanTerm Loans, net of the reclassreclassification of interest expense related to capitalized software development amounting to $623$0.2 million and $358 in$0.6 million for the years ended December 31, 2023 and 2022 and 2021 respectively.
The Company incurred an additional $3.4 million of interest expense associated with Orinter and Interep’s operations for upfront collection of other receivables partnered with financing institutions. Interest expense paid out in cash for the year ended December 31, 2023 and 2022 was $17.2 million and $10.8 million.
The futureaggregate annual principal maturities of our Term Loan, Orinter short-term loan, and governmental loans for each of the Company’s borrowing arrangements, PPP loans and other government loansnext five years, based on contractual terms are as follows:listed in the table below (in thousands):
| | | | | | | | | | | |
| Year ending December 31, | Borrowing Arrangements | | PPP and Other Governmental Loans |
| 2023 | $ | 7,514 | | | $ | 72 | |
| 2024 | 145,268 | | | 20 | |
| 2025 | — | | | 20 | |
| 2026 | — | | | 21 | |
| 2027 | — | | | 21 | |
| Thereafter | — | | | 77 | |
| 152,782 | | | 231 | |
| Less: Loan origination fees | (18,386) | | | — | |
| $ | 134,396 | | | $ | 231 | |
10. | | | | | | | | | | | |
| Year ending December 31, | Borrowing Arrangements | | Governmental Loans |
| 2024 | $ | 10,828 | | | $ | 51 | |
| 2025 | 162,521 | | | 21 | |
| 2026 | — | | | 21 | |
| 2027 | — | | | 21 | |
| 2028 | — | | | 21 | |
| Thereafter | — | | | 58 | |
| $ | 173,349 | | | $ | 193 | |
11. REVENUE
Disaggregation of revenue
The Company believes that the disaggregation based on the reportable segments best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market, and other factors. Disaggregated revenue by reportable segment also best depicts revenue by stream, type of contract, and type of customer. As described above in Note 2 — Summary of Significant Accounting Polices, the Company has two reportable segments, Travel Marketplace and SAASSaaS Platform.
| | | | | | | | | | | | | | |
| | Year Ended
December 31, |
| | 2022 | | 2021 |
| Revenue from Travel Marketplace | | $ | 157,473 | | | $ | 92,038 | |
| Revenue from SAAS Platform | | 2,011 | | | 1,156 | |
| | $ | 159,484 | | | $ | 93,194 | |
The following table presents revenues by segment, underlying travel product and sales channel for the fiscal years ended December 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2023 | | 2022 |
| Travel Marketplace revenues | | $ | 222,075 | | | | $ | 157,473 | | |
| Travel Transaction revenues | | 208,842 | | | | 145,154 | | |
| Air | | $ | 125,982 | | | | $ | 144,459 | | |
| Travel Package | | 46,434 | | | | 57 | | |
| Hotel | | 26,805 | | | | 222 | | |
| Other | | 9,621 | | | | 416 | | |
| Fintech Program revenues | | 13,233 | | | | 12,319 | | |
| | | | | | |
| SaaS Platform revenues | | $ | 1,250 | | | | $ | 2,011 | | |
| Subscription services revenue | | 1,250 | | | | 2,011 | | |
| | | | | | |
| Revenues, net | | $ | 223,325 | | | | $ | 159,484 | | |
Within our Travel Marketplace segment, the Company, as an agent, facilitates traveler suppliers to sell underlying travel products and provides booking services to travelers. We generate travel transaction related revenue from the booking services based on the booking amount of the underlying travel products. In addition, we generate commission revenues from banks and financial institutions based on the travel booking spend processed through fintech programs partnered with our platform. Our customers within Travel Marketplace segment include travel suppliers and fintech partners.
As noted in Note 2 — Summary of Significant Accounting Polices, all Travel Marketplace segment revenues are transactional in nature and are based on flat fees per booking and tiered fixed incentive rates based on cumulative gross booking values and/or based on volume of bookings during a period. All Travel Marketplace segment revenues are recognized at a point in time when our single performance obligation is fulfilled. We estimate for variable considerations based on cumulative bookings and for the traveler eventually taking the trip using the expected value approach at the end of each reporting period.
We earn Air transaction revenues that include mark-up fees, commissions and incentives derived from the airline ticket booked, and associated ancillary services, such as fees charged for premium seat selection, luggage, and travel insurance. Similarly, the Travel
Package, Hotel and Other subcategories related Travel Transaction revenues are derived from travel package booking, hotel booking, and other bookings made as well as additional ancillary services purchased by the travelers. Travel Package presented revenues are generated from a single booking by the traveler for multiple underlying travel products, such as airline tickets and hotel services reserved through one booking. Other subcategories include transaction revenues from car rental, cruises, and other bookings.
Within our SaaS Platform segment, we earn subscription revenues from the user of our SaaS platform and recognized over the term of the agreement using a time-based measure of progress, as the nature of the Company’s promise to the customer is to stand ready to provide platform access.
The disaggregated revenue by reportable segment also represented our revenue by stream, type of contract, revenue recognition timing and type of customer.
Revenue by sales channel
The following table presents the Travel Marketplace segment by sales channel for the fiscal years ended December 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2023 | | 2022 |
| Transaction through affiliates and with customers | | $ | 213,892 | | | | $ | 123,746 | | |
| Transactions from travelers’ direct bookings | | 8,183 | | | | 33,727 | | |
| Travel Marketplace revenues | | $ | 222,075 | | | | $ | 157,473 | | |
We generate mark up fees and certain commissions from booking reservations directly placed by travelers through our platform. The Transaction through affiliates with customers includes our revenues generated from mark-up fees and commissions via bookings placed by travel agencies. Fintech program revenues which are not differentiated by sales channels. Along with the LBF divestiture in July 2023, transactions from traveler’s direct booking in 2023 decreased to a lesser extent as compared to 2022.
Contract balances
The timing of revenue recognition, billing, and cash collection results in the recognition of accounts receivable, contract assets and contract liabilities on the Consolidated Balance Sheets.consolidated balance sheets.
Contract assets include unbilled amounts resulting from contracts in which revenue is estimated and accrued based upon measurable performance targets defined at contract inception and in which the related performance obligation is satisfied..satisfied.
Contract liabilities, discussed below, are referenced as “deferred revenue” on the Consolidated Balance Sheetsconsolidated balance sheets and disclosures. Cash received that are contingent upon the satisfaction of performance obligations are accounted for as deferred revenue. Deferred revenue primarily relates to advances received from GDS service providers for bookings of airline tickets in future.
The opening and closing balances of accounts receivable, contract assets and deferred revenue are as follows:follows (in thousands):
| | Accounts
Receivable | | Contract
Asset | | Deferred
Revenue |
| Ending Balance as of December 31, 2020 | $ | 5,355 | | | $ | 4,420 | | | $ | (23,404) | |
| Increase/(decrease), net | 4,823 | | | (485) | | | 2,666 | |
| Accounts Receivable | | | Accounts Receivable | | Contract
Asset | | Deferred
Revenue |
| Ending Balance as of December 31, 2021 | Ending Balance as of December 31, 2021 | 10,178 | | | 3,935 | | | (20,738) | |
| Increase/(decrease), net | Increase/(decrease), net | 11,555 | | | 1,859 | | | 254 | |
| Ending Balance as of December 31, 2022 | Ending Balance as of December 31, 2022 | $ | 21,733 | | | $ | 5,794 | | | $ | (20,484) | |
| Increase/(decrease), net | |
| Ending Balance as of December 31, 2023 | |
During the year ended December 31, 2023, the Company recognized revenue of $2.6 million from the deferred revenue balance as of December 31, 2022. During the year ended December 31, 2022, the Company recognized revenue of $4,047$4.0 million from the deferred revenue balance as of December 31, 2021. During the year ended December 31, 2021, the Company recognized revenue of $2,981 from the deferred revenue balance as of December 31, 2020.
During the year 2021, the Company reclassified a liability with another GDS service provider related to the segment shortfall fee from ‘Accrued expenses’ to ‘Other long-term liabilities’, as the Company expects to fulfil the obligation subject to the amended contract terms and conditions. The balance was $1,111 as of December 31, 2022 and 2021.
During the year 2022, the Company modified its agreement with a select GDS service providers.provider. Pursuant to this modification, the shortfall fees of $2,697 have been$2.7 million were recognized to Deferred Revenue.deferred revenue.
12. INCOME TAXES
The components forof loss before income taxes consisted of the following:following (in thousands):
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| United States | $ | (90,611) | | | $ | (38,396) | |
| International | 500 | | | (186) | |
| $ | (90,111) | | | $ | (38,582) | |
| | | | | | | | | | | |
| Year ended December 31, |
| 2023 | | 2022 |
| United States | $ | (76,838) | | | $ | (90,611) | |
| International | 13,490 | | | 500 | |
| $ | (63,348) | | | $ | (90,111) | |
The provision for (benefit from) income taxes consisted of the following:following (in thousands):
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| Current tax expense: | | | |
| Federal | $ | — | | | $ | — | |
| State | 109 | | | 18 | |
| International | 455 | | | 121 | |
| 564 | | | 139 | |
| Deferred | | | |
| Federal | (11) | | | 42 | |
| State | (195) | | | 142 | |
| International | (231) | | | — | |
| (437) | | | 184 | |
| Total provision (benefit) for income taxes | $ | 127 | | | $ | 323 | |
| | | | | | | | | | | |
| Year ended December 31, |
| 2023 | | 2022 |
| Current tax expense: | | | |
| Federal | $ | (235) | | | $ | — | |
| State | 889 | | | 109 | |
| International | 183 | | | 455 | |
| 837 | | | 564 | |
| Deferred | | | |
| Federal | (2,978) | | | (11) | |
| State | (469) | | | (195) | |
| International | 79 | | | (231) | |
| (3,368) | | | (437) | |
| Total (benefit from) provision for income taxes | $ | (2,531) | | | $ | 127 | |
Components of the Company's deferred income tax assets and liabilities are as follows:follows (in thousands):
| | | | | | | | | | | | | | | |
| Year ended December 31, | | | | |
| 2023 | | 2022 | | | | |
| Net operating loss | $ | 27,423 | | | $ | 29,822 | | | | | |
| Interest expense limitation | 28,134 | | | 19,068 | | | | | |
| Deferred revenue | 4,318 | | | 4,787 | | | | | |
| Accrual and reserves | 4,170 | | | 2,033 | | | | | |
| Stock based compensation | 1,671 | | | 1,251 | | | | | |
| Fixed assets | — | | | 274 | | | | | |
| Capitalized research and development costs | 4,199 | | | 4,380 | | | | | |
| Capital Loss | 1,580 | | | — | | | | | |
| Lease liability | 1,004 | | | 627 | | | | | |
| Other | 363 | | | 194 | | | | | |
| 72,862 | | | 62,436 | | | | | |
| Valuation allowance | (52,240) | | | (47,827) | | | | | |
| Total deferred tax assets | 20,622 | | | 14,609 | | | | | |
| | | | | | | |
| Intangible assets | (29,387) | | | (14,314) | | | | | |
| Fixed Assets | (1,940) | | | — | | | | | |
| Right-of-use lease asset | (877) | | | (365) | | | | | |
| | | | | | | |
| Total deferred tax liabilities | (32,204) | | | (14,679) | | | | | |
| Total net deferred tax liability | $ | (11,582) | | | $ | (70) | | | | | |
As a result of various acquisitions during the year ended December 31, 2023, the Company recorded approximately $15.0 million of deferred tax liabilities and $0.7 million of deferred tax assets.
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| Net operating loss | $ | 29,822 | | | $ | 32,329 | |
| Interest expense limitation | 19,068 | | | 12,278 | |
| Deferred revenue | 4,787 | | | 5,212 | |
| Accrual and reserves | 2,033 | | | 3,232 | |
| Stock based compensation | 1,251 | | | — | |
| Fixed assets | 274 | | | — | |
| Capitalized research and development costs | 4,380 | | | — | |
| Lease liability | 627 | | | — | |
| Other | 194 | | | 169 | |
| 62,436 | | | 53,220 | |
| Valuation allowance | (47,827) | | | (35,611) | |
| Total deferred tax assets | 14,609 | | | 17,609 | |
| | | |
| Intangible assets | (14,314) | | | (16,533) | |
| Fixed Assets | — | | | (1,588) | |
| Right-of-use lease asset | (365) | | | — | |
| Total deferred tax liabilities | (14,679) | | | (18,121) | |
| Total net deferred tax liability | $ | (70) | | | $ | (512) | |
The provision for (benefit from) income taxes differdiffers from the amounts computed by applying the U.S. federal income tax rate to income (loss) before income taxes for the following reasons:
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| Federal tax at statutory rate | 21.06 | % | | 21.00 | % |
| State, net of federal benefit | 5.77 | | | 9.05 | |
| Stock-based compensation | (1.24) | | | — | |
| Permanent differences | 0.86 | | | 0.74 | |
| Prior year payable true ups | — | | | — | |
| Adjustment to deferred through goodwill | — | | | — | |
| Transaction costs | 3.69 | | | — | |
| PPP loan forgiveness | 0.60 | | | — | |
| Foreign rate differential | (0.08) | | | (0.23) | |
| Change in valuation allowance | (13.56) | | | (31.29) | |
| Sec. 162(m) net down | (16.73) | | | — | |
| Other | (0.51) | | | (0.11) | |
| Effective tax rate | (0.14) | % | | (0.84) | % |
| | | | | | | | | | | |
| Year ended December 31, |
| 2023 | | 2022 |
| Federal tax at statutory rate | 21.00 | % | | 21.06 | % |
| State, net of federal benefit | (0.65) | % | | 5.77 | % |
| Stock-based compensation | (3.01) | % | | (1.24) | % |
| Permanent differences | 0.33 | % | | 0.86 | % |
| US tax effect of foreign earnings | (5.81) | % | | — | % |
| | | |
| Transaction costs | (1.24) | % | | 3.69 | % |
| PPP loan forgiveness | — | % | | 0.60 | % |
| Foreign rate differential | 3.85 | % | | (0.08) | % |
| Change in valuation allowance | (3.38) | % | | (13.56) | % |
| Impact of business divestiture | (5.26) | % | | — | % |
| | | |
| IRC section 162(m) executive compensation limitation | (1.33) | % | | (16.73) | % |
| | | |
| Other Items | (0.50) | % | | (0.51) | % |
| Effective tax rate | 4.00 | % | | (0.14) | % |
| | | |
As of December 31, 2022,2023, the Company had net operating loss carryforwards for federal and state purposes of approximately $100,951$105.1 million and $122,647 respectively. As of December 31, 2021, the Company had net operating loss carryforwards for federal and state of approximately $108,530 and $141,368,$117.1 million, respectively. The federal net operating losses will begin to expire in 2032, and the state net operating losses will begin to expire in 2027, if not utilized. Net operating losses generated after December 31, 2017 may be carried forward indefinitely for federal tax purposes. Accordingly, $62.8 million of federal net operating losses will not expire.
Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided in the Internal Revenue Code of 1986, as amended ("IRC"), and similar state provisions. Certain tax attributes of the Company were subject to an annual limitation as a result of the change ofCompany’s ownership of the Company in the yearchanges during 2016 and 2019 and the acquisition of a fewvarious subsidiaries, which constituted a change ofchanges in ownership as defined under the Internal Revenue Code SectionIRC section 382. As a result of the analysis, afederal net operating losslosses of $16,633 has$16.6 million and state net operating losses of $16.6 million have been lost permanently and the related deferred tax asset has been written down.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local, jurisdictions,and foreign taxing authorities, where applicable. Because the Company has net operating loss carryforwards, there are open statutes of limitations, in which federal, state, and foreignmay allow such taxing jurisdictions mayauthorities to examine the Company's tax returns for all tax years from 2011 through the current period.
Realization of the future tax benefits of the Company's net deferred tax assets is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. The Company has concluded, based on the weight of available evidence, that its net deferred tax assets will not be fully realized in the future, on a more likely than not basis. Accordingly, a valuation allowance of $47,827$52.2 million and $35,611$47.8 million has been established against the deferred tax assets as of December 31, 20222023 and December 31, 2021,2022, respectively. The net valuation allowance increased by $12,216$4.4 million and $11,109$12.2 million during the years ended December 31, 20222023 and December 31, 2021,2022, respectively. Management reevaluates the positive and negative factors at each reporting period. The Company has recognized deferred tax liability of $951 and $1,307 as of December 31, 2022 and December 31, 2021, respectively, on account of temporary differences arising out of goodwill amortizable for tax purposes. Such deferred tax liability may be offset to a certain extent against deferred tax assets created on indefinite-lived tax attributes i.e., IRC section 163(j) interest carryforward and net operating losses generated post-tax year 2017. The Company has not set off deferred tax liability on the goodwill of $307 and $512 against deferred tax assets since such liabilities cannot be used as a future source of taxable income for the years ended December 31, 2022 and December 31, 2021, respectively. Whereas, the Company has recognized a deferred tax asset of $237 in the foreign jurisdiction, as of December 31, 2022.
The Company has adopted the provisions of FASB’s Accounting Standard Codification Topic 740, Income Taxes, which provides guidance for accounting for uncertainty in tax positions and requirerequires that companies recognize a benefit from a tax position in their Consolidatedconsolidated financial statements only if it is more likely than not that the tax position will sustain,be sustained, upon audit, based on the technical merits of the position. For tax positions that meet the recognition threshold, the Company would recordrecords the largest amount of the benefit that ishas greater than 50 percent likelylikelihood of being realized upon effective settlement with the taxing authority.
As of the yearsyear ended December 31, 20222023 and December 31, 2021,2022, the Company had no$0.4 million and $0 unrecognized tax benefits, respectively, and does not anticipate any significant change to the unrecognized tax benefit balance. balance to occur within the next 12 months.
| | | | | | | | | | | |
| Year ended December 31, |
| (in thousands) | 2023 | | 2022 |
| Unrecognized tax benefits, beginning of fiscal year | — | | | — | |
| | | |
| Increases related to tax positions taken during prior periods | 351 | | | — | |
| | | |
| | | |
| | | |
| Unrecognized tax benefits, end of fiscal year | $ | 351 | | | $ | — | |
The Company would classifyclassifies interest and penalties related to uncertain tax positions in income tax expense, if applicable. The Company has not provided for U.S federalU.S. income andtaxes or foreign withholding taxes
on undistributed earnings from non-U.S. operations as of December 31, 20222023 because the Company intends to reinvest such earnings indefinitely outside of the United States.States, unless such earnings can be repatriated without material income tax consequences.
12.13. REDEEMABLE PREFERRED STOCK
On September 29, 2022 (“preferred stock closing date”), the Company issued and sold an aggregate 85,000 shares of its Series A Preferred Stock at $1,000 per share (the "Seriestogether with warrants exercisable for 1,275,000 shares of Class A Preferred Stock"common stock at $11.50 per share (“Original Warrants”), resulting in gross proceeds of $85,000. The$85.0 million.
On October 17, and December 14, 2023, the Company completed subsequent private placements of 11,300 shares of the Company’s newly designated Series A-3 Preferred Stock, together with warrants exercisable for 1,444,500 shares of Class A common stock at $7.50 per share (“Incremental Warrants), resulting in gross proceeds of $11.3 million (“2023 Financing Transaction”). The Incremental Warrants were issued in exchange for surrendering the Original Warrants. See Note 4 — Warrants for further details on the common stock warrants.
In connection with the 2023 Financing Transaction, the Company filed an Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series A-1, Series A-2 and Series A-3 Preferred Stock, and converted Series A Preferred Stock were authorized byissued on the Company's certificate of incorporation by filing a certificate of designation as authorized by the Board. The proceeds were bifurcated between the shares of thepreferred stock closing date to Series of AA-1 Preferred Stock and warrants to purchase shares of the Company Class A Common Stock on a relative fair value1:1 basis. TheSubsequently when the 2023 Financing Transaction closed, these Series A-1 Preferred Stock concurrently converted into Series A-2 Preferred Stock on a 1:1 basis. As of December 31, 2023, the Company incurred issuance cost of $1,418. The Company calculates the accretion of thehad 85,000 shares of the Series AA-2 and 11,300 shares of A-3 shares of Preferred Stock to its redemption using effective rate method and is reported as a deemed dividend. The effective interest rate for the year ended December 31, 2022 is 13.99%.outstanding.
The shares of the Series AA-2 and A-3 Preferred Stock have the following key terms:
1.
•A stated value of $1,000.00$1,000 per share;
2.•The holder isholders are entitled to receive a cumulative dividenddividends at the annual rate of SOFR plus 7.00%8.50%. After the second anniversary of the preferred stock closing date the holder isholders are entitled to receive a cumulative dividenddividends at the annual rate of SOFR plus 10.50%12.00%;
3.•The holders have a put right to redeem the shares of the Series AA-2 and A-3 Preferred Stock for cash at the stated value, plus any unpaid dividends after 5four years from the issuancepreferred stock closing date (On or after September 29, 2027);2026). The preferred shares can only be redeemed in cash and the price per share of Series A-2 and A-3 Preferred Stock on the date of redemption is equal to the stated value per share price plus, an amount equal to the accrued dividends plus, accrued and unpaid dividends since the most recent dividend payment date. In the event the Company does not meet a certain 2025 EBITDA target, the holders can accelerate the right to put the preferred stock back on or after March 31, 2026;
4.•The shares of the Series AA-2 and A-3 Preferred Stock are non-voting;
5.•The shares of the Series AA-2 and A-3 Preferred Stock are not convertible into shares of the Company's Class A Common Stock;
6.•The shares of the Series AA-2 and A-3 Preferred Stock are senior to the shares of the Company Class A Common Stock and any class or series of capital stock expressly designated as ranking junior to the shares of the Series A Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up (“Junior Stock”). The shares of the Series A Preferred Stock are on a parity with any class or series of the Company’s capital stock expressly designated as ranking on a parity with the shares of the Series A Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up (“Parity Stock”).
•The shares of the Series A Preferred Stock issued represents redeemable shares, with a redemption period at the option of the holders beginning on or after the fifth anniversary from the closing date. The preferred shares can only be redeemed in cash based on the terms of the certificate of designation. The price per share of Series A Preferred Stock on the date of redemption is equal to the stated value per share price plus, an amount equal to the accrued dividends plus, accrued and unpaid dividends since the most recent dividend payment date. The Company may also redeemrepurchase the outstanding shares of the Series AA-2 Preferred Stock at any time for an amount equal to the greater of the stated value price per share of the Series AA-2 Preferred Stock plus, an amount equal to the accrued dividends plus, accrued and unpaid dividends since the most recent dividend payment date with respect to such share as of the applicable redemption date or if any, to result in, prior to the second anniversary of the preferred stock closing date, a multiplier to the product of 1.225 times the stated value of the shares of the Series AA-2 Preferred Stock, from and after the second anniversary of the preferred stock closing date, a multiplier equal to 1.325 times the stated value of the shares of the Series AA-2 Preferred Stock.
In accordance with The Company may repurchase the guidance in ASC 480 "Distinguishing Liabilities from Equity”, theoutstanding shares of the Series AA-3 Preferred Stock areat any time for an amount equal to be classified as temporary equity if any event that is outside the Company’s control (regardless of probability) could triggerstated value per share price plus, an amount equal to the security to become redeemable outsideaccrued dividends plus, accrued and unpaid dividends since the Company’s control. most recent dividend payment date.
The shares of the Series A Preferred Stock met the definition of a temporary equity and is recorded in temporary equity in accordance with ASC 480 as redeemable preferred stock inon the accompanying Consolidated Balance Sheets.consolidated balance sheets. The shares of the Series A Preferred Stock will be accreted up to their redemption using the accretion method.
For The proceeds were bifurcated between the yearshares of the preferred stock issued and the common stock warrants issued on a relative fair value basis. Incremental to the warrants issued, the Company incurred issuance costs of $0.3 million for the 2023 preferred financing and $1.4 million for the 2022 preferred financing, respectively. The Company calculates the accretion of the shares of the preferred stock to its redemption using effective rate method and is reported as a deemed dividend. The effective interest rate for the years ended December 31, 2023 and 2022 theis 17.74% and 13.99%, respectively.
The Company recorded $2,323$11.6 million and $0.0 million of accrued dividends. The amount isdividends for the years ended December 31, 2023 and 2022, respectively. Accrued dividends on the shares of preferred stock are reported in redeemable preferred stock on the Company’s Consolidated Balance Sheet.consolidated balance sheet. No dividends werehave been paid asout since issuance of December 31, 2022.
these shares of Series A Preferred Stock.
13.14. COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company may be a party to litigation and subject to claims incidental to its business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these matters will not have a material adverse effect on its business.results of operations, financial position and cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of judgment, defense and settlement costs, diversion of management resources, and other factors. As of December 31, 20222023, the Company currently has twothe following outstanding legal claims that may have an adversea material impact.
Litigation Relating to LBF Acquisition. In the federal court action, Thomas DeRosa, an allegeda shareholder of LBF Travel Management Corp. (f/k/a LBF Travel, Inc.), the entity that sold LBF Travel Holdings, LLC to Mondee, sued LBF Travel Management Corp. and its CEO to recover a portion of the proceeds of the sale of LBF Travel Holdings, LLC to Mondee. Mondee was later added as a party to this litigation via a third-party complaint that alleges, among other things, that Mondee aided and abetted the directors and officers of LBF Travel Management Corp. in breaches of their fiduciary duties in connection with the acquisition. The case remains pending in Federal court.Court. There is a separate state court action that has been stayed. While the Company believes itthat they will be successful defending DeRosa’s claims,based on their position, it is nevertheless reasonably possible that the Company could be required to pay a judgmentany assessed amounts in favor of DeRosa, butorder to contest or litigate the assessment and an estimate offor a reasonably possible amountrange of loss of any such paymentpayments cannot be made.
Litigation Relating to Restrictive Legends. On December 8, 2023, plaintiff Raja Venkatesh (“Venkatesh”) filed a complaint in the United States District Court for the Southern District of New York against the Company, its Chief Executive Officer and Chairman, Prasad Gundumogula (“Gundumogula” and, together with the Company, the “Mondee Defendants”), and the Company’s transfer agent, Continental Stock Transfer & Trust Company (“CST”). The complaint, which is captioned Raja Venkatesh v. Mondee Holdings, Inc., Prasad Gundumogula, and Continental Stock Transfer & Trust Company, Case No.: 1:23-cv-10734-VEC (S.D.N.Y.) (the “Venkatesh Action”), asserts ten causes of action: (1) violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5 against the Mondee Defendants; (2) violation of 8 Del. C. § 158 against Mondee and CST; (3) violation of 8 Del. C. §§ 8-401 and 8-407 against Mondee and CST; (4) breach of fiduciary duty against the Mondee Defendants; (5) negligence against Mondee and CST; (6) conversion against Mondee and CST; (7) civil conspiracy against all Defendants; (8) breach of contract against Mondee; (9) breach of the implied covenant of good faith and fair dealing against Mondee; and (10) injunction against the Company and CST. The claims asserted in the Venkatesh Action all relate to Plaintiff’s allegations that the Company improperly placed and maintained certain restrictive legends on his shares of common stock in the Company purportedly in violation of the terms of a Registration Rights Agreement, to which Plaintiff and the Company are parties. The relief sought in the complaint includes a permanent injunction requiring the removal of the restrictive legends, compensatory damages for losses allegedly sustained by Venkatesh as a result of defendants’ conduct, punitive damages, and costs and expenses incurred in connection with the Venkatesh Action. On February 12, 2024, the Mondee Defendants filed a motion to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim. In addition, Gundumogula moved to dismiss the complaint for lack of personal jurisdiction. Also on February 12, 2024, CST filed a motion to dismiss the complaint. Responses to the Mondee Defendants’ and CST’s motions to dismiss are due by April 12, 2024. The pretrial conference, which was originally scheduled for February 9, 2024, has been adjourned pending resolution of the
pending motions to dismiss. The Company intends to vigorously defend the claims asserted in the Venkatesh Action. At present, the Company is unable to reasonably estimate a possible range of loss , if any, associated with these claims.
Litigation Related to Ingenico. On October 13, 2021, Mondee Inc. received a summons from Global Collect Services B.V. (“Ingenico”) to appear in the District Court of Amsterdam with respect to a claim of $548$0.5 million for past dues and outstanding invoices, fees, plus interest and costs of collection. The Company is in current discussions to settle this lawsuit, but an estimate of a reasonably possible amount of any such payment cannot be made.
Letters of Credit
The Company had $7,432$7.9 million and $7,258$7.4 million secured letters of credit outstanding as of December 31, 20222023 and December 31, 2021,2022, respectively. These primarily relate to securing the payment for the potential purchase of airline tickets in the ordinary course of business and are collateralized by term deposits, for which the contractual obligation is less than a year.
Commercial Commitments
14.The Company has commercial commitments arising in the normal course of business of the industry in which it operates. Under the terms of such contracts, the Company receives cash in advance for production goals over a period of several years. In the event of under-performance or termination of the applicable contract, the Company may be obligated to repay amounts still to be earned. At December 31, 2023, the Company had under-performed the required goals of one such contract, where the unearned balance was $9.2 million and is recognized as part of our current and non-current Deferred Revenue balance on the consolidated balance sheet. The Company and counter-party both intend to continue the terms of the contracts.
15. OPERATING LEASES
The Company leases various office premises and facilities under non-cancelable operating leases that expire at various dates through January 2031. Some of the Company’s leases contain one or more options to extend or terminate. The Company considers options to extend or terminate the lease in determining the lease term.
Prior to the adoption of ASC 842, rent expense on operating leases was recognized on a straight-line basis over the term of the lease. In addition, certain of the Company’s operating lease agreements for office space also include rent holidays and scheduled rent escalations during the initial lease term. The Company recorded the rent holidays as a deferred rent within other liabilities on the Consolidated Balance Sheets. The Company expects to record deferred rent liability and scheduled rent increase on a straight-line basis into rent expense over the lease term commencing on the date the Company took possession of the leased space.
Operating lease expense for the yearsyear ended December 31, 2023 was $1.6 million, of which $0.4 million was variable lease expense. For the year ended December 31, 2022 operating lease expense was $1.3 million, and 2021variable lease expense was $1,268 and $1,485, respectively.not material. The Company records operating lease expense in the Consolidated Statementconsolidated statement of Operationsoperations within general and administrative expenses. The Company had no finance leases as of December 31, 2023 and 2022.
On adoption of topic ASC 842 “Leases”, supplemental balance sheet information as of December 31, 2022 related to operating leases is shown below:
| | | | | |
| As of December 31, 2022 |
Reported as: | | |
Assets: | |
Operating lease right-of-use assets | $ | 1,384 | |
Liabilities: | |
Accrued expenses and other current liabilities | $ | 796 | |
Operating lease liabilities, non-current | 1,620 | |
Total operating lease liabilities | $ | 2,416 | |
As of December 31, 2023 and 2022, the weighted-average remaining lease term and weighted-average discount rate for operating leases is 4.56 years and 12.86% respectively.are as follows:
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Weighted-average remaining lease term | 3.75 | | 4.56 |
| Weighted-average discount rate | 15.97 | % | | 12.86 | % |
Supplemental cash flow information as of December 31, 2023 and 2022 related to operating leases are as follows:follows (in thousands):
| | | | | |
| Year Ended
December 31, 2022 |
Cash paid within operating cash flows | $ | 1,178 | |
Operating lease right-of-use assets recognized in exchange for new operating lease obligations | 3,313 | |
| | | | | | | | | | | |
| Year Ended
December 31, |
| 2023 | | 2022 |
| Cash paid within operating cash flows | $ | 1,311 | | | $ | 1,178 | |
| Operating lease right-of-use assets recognized in exchange for new operating lease obligations | 1,474 | | | 3,313 | |
As of December 31, 2022,2023, the future minimum lease payments under non-cancelable operating leases are as follows:follows (in thousands):
| | As of December 31,
2022 |
| 2023 | 1,026 | |
| For the years ended December 31, | |
| 2024 | |
| 2024 | |
| 2024 | 2024 | 689 | |
| 2025 | 2025 | 384 | |
| 2026 | 2026 | 281 | |
| 2027 | 2027 | 210 | |
| 2028 | |
| Thereafter | Thereafter | 540 | |
| Total operating lease payments | Total operating lease payments | 3,130 | |
| Less: Imputed interest | Less: Imputed interest | (714) | |
| Total operating lease liabilities | Total operating lease liabilities | $ | 2,416 | |
15.16. EMPLOYEE BENEFIT PLAN
The Company sponsors severala 401(k) defined contribution plansplan covering its employees in the United States of America. A management committee determines matchingParticipants may contribute a portion of their compensation to the 401(k) plan, subject to limitations under the Internal Revenue Code. The Company does not match contributions made by the Company annually. Matching contributions are made in cash and were $0 during the years ended December 31, 2022 and $17 during the years ended December 31, 2021, respectively.to its 401(k) plan.
The Company’s Gratuity Plan in India (the “India Plan”) provides for a lump sum payment to vested employees on retirement or upon termination of employment in an amount based on the respective employee’s salary and years of employment with the Company. Liabilities with regard to the India Plan are determined by actuarial valuation using the projected unit credit method. Current service costs for these plans are accrued in the year to which they relate. Actuarial gains or losses or prior service costs, if any, resulting from amendments to the plans are recognized and reported as personnel expenses in the Consolidated Statementconsolidated statements of Operations.operations.
The benefit obligation has been measured as of December 31, 2022,2023, and December 31, 2021.2022. The following table sets forth the activity and the funded status of the Gratuity Plans and the amounts recognized in the Company’s consolidated financial statements at the end of the relevant periods.periods (in thousands):
| | | | | | | | | | | |
| Particulars | Year Ended December 31, |
| 2022 | | 2021 |
| Present value of obligation as at the beginning of the year | $ | 444 | | | $ | 383 | |
| Interest cost | 30 | | | 25 | |
| Acquisitions | — | | | — | |
| Current service cost | 169 | | | 90 | |
| Benefits paid | (142) | | | — | |
| Net actuarial (gain)/loss recognized in the year | 113 | | | (46) | |
| Effect of exchange rate changes | (52) | | | (8) | |
| Present value of obligation as at the end of the year | $ | 562 | | | $ | 444 | |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Present value of obligation as at the beginning of the year | $ | 562 | | | $ | 444 | |
| Interest cost | 29 | | | 30 | |
| Past service cost | 28 | | | — | |
| Current service cost | 114 | | | 169 | |
| Benefits paid | (234) | | | (142) | |
| Net actuarial (gain)/loss recognized in the year | (214) | | | 113 | |
| Effect of exchange rate changes | 30 | | | (52) | |
| Present value of obligation as at the end of the year | $ | 315 | | | $ | 562 | |
The following table sets forth the amounts to be recognized on the consolidated balance sheets (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Present value of obligation as at the end of the year | $ | 315 | | | $ | 562 | |
| Fair value of plan assets as at the end of the year | — | | | — | |
| Funded status / (unfunded status) | (315) | | | (562) | |
| Excess of actual over estimated | — | | | — | |
| Unrecognized actuarial (gains)/losses | — | | | — | |
| Net asset/(liability)recognized in consolidated balance sheet | $ | (315) | | | $ | (562) | |
| Current portion | $ | 14 | | | $ | 10 | |
| Non-current portion | $ | 301 | | | $ | 552 | |
| | | | | | | | | | | |
| Particulars | Year Ended December 31, |
| 2022 | | 2021 |
| Present value of obligation as at the end of the year | 562 | | | 444 | |
| Fair value of plan assets as at the end of the year | — | | | — | |
| Funded status / (unfunded status) | (562) | | | (444) | |
| Excess of actual over estimated | — | | | — | |
| Unrecognized actuarial (gains)/losses | — | | | — | |
| Net asset/(liability)recognized in consolidated balance sheet | (562) | | | (444) | |
| Current portion | 10 | | | 12 | |
| Non-current portion | 552 | | | 432 | |
Accumulated benefit obligation in excess of plan assets:assets were as follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Accumulated benefit obligation | 146 | | 168 |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Accumulated benefit obligation | $ | 91 | | | $ | 146 | |
Components of net periodic benefit costs, were as follows:follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| Particulars | 2022 | | 2021 |
| Current service cost | 169 | | | 90 | |
| Interest cost | 30 | | | 25 | |
| Net actuarial gain recognized in the period | 113 | | | (46) | |
| Expenses recognized in the consolidated statement of operations | 312 | | | 69 | |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Current service cost | $ | 114 | | | $ | 169 | |
| Past service cost | 28 | | | — | |
| Interest cost | 29 | | | 30 | |
| Net actuarial (gain)/loss recognized in the year | (214) | | | 113 | |
| Expense (benefit) recognized in the consolidated statement of operations | $ | (43) | | | $ | 312 | |
The components of actuarial (gain)/loss on retirement benefits are as follows:follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| Particulars | 2022 | | 2021 |
| Actuarial (gain) / loss on arising from change in financial assumption | 162 | | | (34) | |
| Actuarial gain on arising from experience adjustment | (49) | | | (12) | |
| Total actuarial gain/(loss) on obligation | 113 | | | (46) | |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Actuarial gain/(loss) on arising from change in financial inputs | $ | 214 | | | $ | (162) | |
| Actuarial gain/(loss) on arising from experience adjustment | — | | | 49 | |
| Total actuarial gain/(loss) on obligation | $ | 214 | | | $ | (113) | |
The weighted average actuarial assumptionsinputs used to determine benefit obligations and net gratuity cost were:
| | | | | | | | | | | |
| Year Ended December 31, |
| Particulars | 2022 | | 2021 |
| Discount rate | 7.45 | % | | 7.06 | % |
| Rate of compensation increase | 10.00 | % | | 7.00 | % |
The following table summarizes the expected benefit payments for the Company’s Retirement Plan for each of the next five fiscal years and in the aggregate for the five fiscal years thereafter:
| | | | | |
| December 31: | |
| 2023 | $ | 10 | |
| 2024 | 21 |
| 2025 | 18 |
| 2026 | 33 |
| 2027 | 46 |
| 2028 - 2032 | 463 |
| $ | 591 | |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Discount rate | 7.35 | % | | 7.45 | % |
| Rate of compensation increase | 9.59 | % | | 10.00 | % |
16.17. RELATED PARTY TRANSACTIONS
1.Related Parties with whom transactions have taken place during the period:
1.Mondee Holdings LLC — Affiliate entity
2.Prasad Gundumogula — Chief Executive Officer (“CEO”)
3.Metaminds Software Solutions Ltd (“Metaminds Software”) — Affiliate entity
4.Metaminds Technologies Pvt Ltd (“Metaminds Technologies”) — Affiliate entity
5.Metaminds Global Solutions Inc. (“Metaminds Global”) — Affiliate entity
6.Mondee Group LLC — Affiliate entity
2.SummaryA summary of balances due to and from related parties, and transactions with related parties are as follows:follows (in thousands):
| | | | | | | | | | | | | | |
| Balances as at Period End | | December 31,
2022 | | December 31,
2021 |
| Amount payable to related party | | | | |
| | | | |
| Metaminds Technologies | | — | | | 196 | |
| Metaminds Global | | — | | | 317 | |
| Mondee Group LLC (a) | | — | | | 203 | |
| Metaminds Software (g) | | 13 | | | — | |
| Amount receivable from related party | | | | |
| Mondee Group LLC (a) | | 38 | | | — | |
| Loan receivable from Related Party | | | | |
| Mondee Group LLC (b) | | — | | | 22,054 | |
| Note Payable to Related Party | | | | |
| Note payable to CEO (c) | | 197 | | | 193 | |
| | | | | | | | | | | | | | |
| | December 31, |
| Balances as at Period End | | 2023 | | 2022 |
Amount payable to related party(1) | | $ | 42 | | | $ | 13 | |
Amount receivable from related party(2) | | 43 | | | 38 | |
Loan receivable from related party(3) | | 83 | | | — | |
Note payable to related party(4) | | 201 | | | 197 | |
Rent payable to related parties and an affiliate associated with these related parties and an employee(5) | | 1,284 | | | — | |
| | | | | | | | | | | | | | |
| | Year Ended December 31, |
| Transactions with Related Parties | | 2023 | | 2022 |
Offshore IT and software development services, sales support and other services(6) | | $ | — | | | $ | 660 | |
Interest income(7) | | — | | | 282 | |
Payment made on behalf of Mondee Holdings LLC(8) | | — | | | 5,241 | |
Service fees(2) | | — | | | 2,379 | |
Loan receivable from related party(3) | | 83 | | | — | |
Lease expense(5) | | 381 | | | 169 | |
| | | | | | | | | | | | | | |
| Transactions with Related Parties | | December 31,
2022 | | December 31,
2021 |
| Offshore IT, sales support and other services from | | | | |
| Metaminds Software (d) | | — | | | 90 | |
| Metaminds Technologies (d) | | 54 | | | 230 | |
| Metaminds Global (d) | | 78 | | | 208 | |
| Offshore software development services from | | | | |
| Metaminds Software (d) | | — | | | 362 | |
| Metaminds Technologies (d) | | 216 | | | 919 | |
| Metaminds Global (d) | | 312 | | | 831 | |
| Interest income from Mondee Group Loan (b) | | 282 | | | 505 | |
| Service fee from Mondee Group LLC (a) | | 2,379 | | | 1,223 | |
| Rent expense – from Metaminds Software (e) | | 169 | | | — | |
| Payment made on behalf of Mondee Holdings LLC (f) | | 5,241 | | | — | |
_________________________
| | | | | |
| (1) | | | | | As of December 31, 2022 Mondee Tech Pvt Ltd had a payable to Metaminds Software, which was settled in the three months ending March 31, 2023. As of December 31, 2023, Interep owes a travel credit to Asi Ginio, a member of the Board of Directors, in exchange for the general advisory services Mr. Ginio provided to the former owners of Interep in connection with the Interep Acquisition. |
(a)(2) | Pursuant to a UATP Servicing Agreement dated May 11, 2021, Mondee sold certain airline tickets using prepaid UATP credit cards arranged by Mondee Group LLC, in exchange for a service fee equal to 10% of the revenue derived from the sale of such airline tickets. Mondee Group LLC,is owned by the Company’s CEO, Prasad Gundumogula, and is not a wholly-owned subsidiary of the Company. Mondee Group led the fund raisingfundraising and arranged the funds that were used to purchase prepaid UATP credit cards at a discount from their face value from a certain airline. |
| | | | | |
(b)(3) | Mondee has a securedIn July 2023, the Company provided financing of $0.1 million to its Chief Financial Officer ("CFO") as part of his relocation package. The promissory note receivable from Mondee Group LLC, bearingbears an annual interest rate of 2.33% compounded annually,3.3% per annum and matures at the earlier of April 2026 or when the CFO's employment with a 10-year term,the Company terminates. All outstanding principal, inclusive of any accrued and unpaid interest, is secured by 14,708 Class A unitsslated for settlement upon maturity of the note. The Company has the option to forgive the obligation in the Mondee Stockholder. The note was settledone-third increments which is contingent upon the occurrenceabsence of any breach of the Business Combination, partly by a right to receive shares ofCFO's obligations with the Company Class A Common Stock to the extent of $20,336 and partly by the Asset Acquisition discussed in Note 3. |
| | | | | his continued service. |
(c)(4) | The Company has a note payable to the CEO amounting to $197$0.2 million and $193$0.2 million as of December 31, 20222023 and December 31, 2021, respectively, and is included in loan payable to related party on the Consolidated Balance Sheets.2022, respectively. The loan is collateralized and carries an interest rate of 2%2.0% per annum. Principal and interest are due on demand. |
| (5) | | | | | The Company currently leases office space from Metaminds Software. The lease commencement date for this was April 1, 2022. The lease had an original lease term of 11 months, and has been renewed, and the monthly minimum base rent is immaterial. From August 2023, the Company started leasing office spaces from certain employees and entities associated with these employees. These leases were recognized on the Skypass Closing Date and have 3 year terms. The monthly minimum base rent is immaterial. |
(d)(6) | Metaminds Technologies Pvt. Ltd. and Metaminds Software Solutions Ltd, corporations limited by shares organized under the laws of India, and Metaminds Global Solutions Inc. (“Metaminds”), provide certain consulting services to Mondee and its subsidiaries in the areas of software development, fulfillment and other support. The CEO co-owns Metaminds with his wife. The CEO is a material shareholder in Mondee, and both the CEO and his wife serve on the Board of Directors of Mondee, Inc. and certain of its subsidiaries. Prior to acquisition of certain assets and liabilities of Metaminds Technologies Pvt Ltd (“Metaminds Technologies”), Mondee hired all employees of Metaminds Technologies and Metaminds Software Solutions Ltd (“Metaminds Software”) in April 2022. There were no services rendered by Metaminds Technologies and Metaminds Software for offshore IT, offshore software development, or sales support for the period subsequentfor the year ended December 31, 2023. |
| (7) | The Company had a secured promissory note receivable from Mondee Group, bearing an interest rate of 2.3% compounded annually, with a 10-year term, and was secured by 14,708 Class A units in Mondee Holdings, LLC. The note was settled upon the occurrence of the reverse recapitalization with ITHAX, partly by a right to receive the Company’s Class A Common Stock to the hiringextent of all employees up to$20.3 million and partly by the asset acquisition of Metaminds Technologies (defined below). On March 10, 2023, the Company received — shares of Class A Common Stock, which were valued at $20.3 million. The shares are reflected as treasury stock on the consolidated balance sheet as the shares have not been retired as of December 31, 2022. |
2023. | | | | | |
(e) | The Company currently rents office space from Metaminds Software Solutions Ltd. The lease commencement date for this was April 1, 2022. The lease has a term of 11 months, has been renewed, and the monthly minimum base rent is immaterial. |
| | | | | |
(f)(8) | Corresponds to a payment made to Rocketrip put option holders by the Company on the behalf of Mondee Holdings LLCLLC. |
| | | | | |
(g) | Mondee Tech Pvt Ltd has a payable to Metaminds Software, which was settled in the three months ending March 31, 2023. |
17.18. SEGMENT INFORMATION
We haveThe Company has the following reportable segments: Travel Marketplacetravel marketplace and SAASSaaS Platform. These reportable segments offer different products and services and are managed separately because the nature of products and services, and methods used to distribute the services are different. Corporate includes unallocated functions and expenses. In addition, we record restructuring expense, legal expense, warrant transaction expense, and sale of export incentives excluded fromMondee’s primary segment operating performance in Corporate. Our primary operating metricmeasure is Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Assets, liabilities, one-time legal expenses, income tax expense and expensesother income (expense), net are reviewed on an entity-wide basis by the CODM,Chief Operating Decision Maker (“CODM”), and hence are not allocated to these reportable segments. Segment revenue is reported and reviewed by the CODM on a monthly basis.
Such amounts are detailed in our segment reconciliation below.below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 |
| Travel Marketplace | | SAAS Platform | | Corporate | | Total |
| Third-party revenue | $ | 157,473 | | | 2,011 | | | — | | | 159,484 | |
| Intersegment revenue | — | | | — | | | — | | | — | |
| Revenue | $ | 157,473 | | | 2,011 | | | — | | | 159,484 | |
| Adjusted EBITDA | $ | 12,451 | | | (570) | | | — | | | 11,881 | |
| Depreciation and amortization | (11,223) | | | (547) | | | — | | | (11,770) | |
| Stock-based compensation | (62,042) | | | — | | | — | | | (62,042) | |
| Restructuring and related costs | (2,542) | | | — | | | — | | | (2,542) | |
| Sale of export incentives | (760) | | | — | | | — | | | (760) | |
| Legal expense | | | | | (744) | | | (744) | |
| Warrant transaction expense | | | | | (326) | | | (326) | |
| Operating loss | | | | | | | (66,303) | |
| Other expense, net | | | | | | | (23,808) | |
| Loss before income taxes | | | | | | | (90,111) | |
| Provision for income taxes | | | | | | | (127) | |
| Net loss | | | | | | | (90,238) | |
| | Year Ended December 31, 2023 | |
| Year Ended December 31, 2023 | |
| Year Ended December 31, 2023 | |
| Travel Marketplace | | | Travel Marketplace | | SaaS Platform | | | | Total |
| | | Year Ended December 31, 2021 |
| Revenue | |
| | Travel Marketplace | | SAAS Platform | | Total |
| Third-party revenue | $ | 92,038 | | | 1,156 | | | 93,194 | |
| Intersegment revenue | — | | | — | | | — | |
| Revenue | |
| | Revenue | Revenue | $ | 92,038 | | | 1,156 | | | 93,194 | |
| Adjusted EBITDA | Adjusted EBITDA | $ | (3,745) | | | (1,710) | | | (5,455) | |
| Depreciation and amortization | Depreciation and amortization | (12,296) | | | (565) | | | (12,861) | |
| Stock-based compensation | Stock-based compensation | (3,936) | | | — | | | (3,936) | |
| Payroll tax expense related to stock-based compensation | |
| Restructuring (expense) income, net | |
| Acquisition cost | |
| Legal expenses pertaining to acquisitions | |
| Transaction filing fees and related expenses | |
| Change in fair value of earn-out liability | |
| Operating loss | Operating loss | | (22,252) | |
| Other expense, net | | | | | (16,330) | |
| Total other expense, net | |
| Loss before income taxes | Loss before income taxes | | | | | (38,582) | |
| Provision for income taxes | Provision for income taxes | | | | | (323) | |
| Net loss | Net loss | | | | | (38,905) | |
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 |
| Travel Marketplace | | SaaS Platform | | | | Total |
| | | | | | | |
| | | | | | | |
| Revenue | $ | 157,473 | | | 2,011 | | | | | 159,484 | |
| Adjusted EBITDA | $ | 12,451 | | | (570) | | | | | 11,881 | |
| Depreciation and amortization | | | | | | | (11,770) | |
| Stock-based compensation | | | | | | | (62,042) | |
| Restructuring and related costs | | | | | | | (2,542) | |
| Sale of export incentives | | | | | | | (760) | |
| Legal expense | | | | | | | (744) | |
| Warrant transaction expense | | | | | | | (326) | |
| Operating loss | | | | | | | (66,303) | |
| Other expense, net | | | | | | | (23,808) | |
| Loss before income taxes | | | | | | | (90,111) | |
| Provision for income taxes | | | | | | | (127) | |
| Net loss | | | | | | | (90,238) | |
Geographic information
The following table represents revenue by geographic area the United States, and all other countries, based on the geographic location of the Company’s subsidiaries.subsidiaries (in thousands). Geographic stratification changed in the year ended December 31, 2023 as a result of the impact of acquisitions viewed in comparison to the whole company.
| | Year Ended December 31, |
| 2022 | | 2021 |
| Year Ended December 31, | | | Year Ended December 31, |
| 2023 | | | 2023 | | 2022 |
| United States | United States | $ | 149,781 | | | $ | 91,432 | |
| International | 9,703 | | | 1,762 | |
| $ | 159,484 | | | $ | 93,194 | |
| Brazil | |
| Rest of Americas | |
| Asia Pacific | |
| $ | |
The following table represents information on the Company's long-lived assets (excluding capitalized software) and operating lease assets by geographic area the United States, and all other countries, based on the geographic location of the Company's Subsidiaries. As of December 31, 2021, long-lived assets located outside of the United States were not material.(in thousands).
| | | | | |
| Year Ended December 31, |
| 2022 |
United States | $ | 1,016 | |
International | $ | 642 | |
| $ | 1,658 | |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| United States | $ | 2,432 | | | $ | 1,016 | |
| India | 979 | | | 625 | |
| Rest of Americas | 710 | | | 17 | |
| | | |
| $ | 4,128 | | | $ | 1,658 | |
18. COMPANY19. CLASS A COMMON STOCK
On July 18, 2022, the Company’s Class A Common Stock and Warrants began trading on Nasdaq Global Market under the ticker symbols “MOND” and “MONDW”, respectively. As described above in Note 4 — Warrants, the public warrants were delisted as all public warrants were tendered or redeemed.
Class A Common Stock
As of December 31, 2023 and 2022, the Company had authorized a total of 500,000,000 shares for issuance of Company Class A Common Stock. As of December 31, 2022, 82,266,1602023, 83,252,040 shares of the Company Class A Common Stock are issued and outstanding. Not reflected in the shares issued and outstanding as of December 31, 20222023, is approximately 331,60053,071 related to restricted stock units that vested in 20222023 but have not yet been settled and issued. As of December 31, 2021,2022, the Company has 60,800,00082,266,160 shares of the Company Class A Common Stock issued and outstanding. Not reflected in the shares issued and outstanding is approximately 331,600 shares related to RSUs that vested in 2022, but had not been settled and issued.
Voting Rights
Each holder of the Company Class A Common Stock is entitled to one vote in respect of each share of the Company Class A Common Stock held of record by such holder on all matters voted upon by the Company's stockholders, provided, however, that, except as otherwise required in the amended and restated certificate of incorporation, dated September 29, 2022 (as amended from time to time, the "Certificate of Incorporation") or by applicable law, the holders of the shares of the Company Class A Common Stock will not be entitled to vote on any amendment to the Certificate of Incorporation that alters or changes the powers, preferences, rights or other terms of one or more outstanding series of the Company's preferred stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the Certificate of Incorporation (including any certificate of designation relating to any series of the Company's preferred stock) or pursuant to the Delaware General Corporation Law.
Dividend Rights
Subject to the rights of the holders of the Company's preferred stock and any other provisions of the Certificate of Incorporation, holders of the shares of the Company Class A Common Stock will be entitled to receive such dividends and other distributions in cash, stock or property of the Company when, as and if declared thereon by the Board, in its discretion, from time to time out of assets or funds of the Company legally available therefor.
Liquidation Rights
Subject to the rights of holders of the preferred stock, in the event of any liquidation, dissolution or winding up of the Company's affairs, whether voluntary or involuntary, after payment or provision for payment of the Company's debts and any other payments required by law and amounts payable upon shares of the preferred stock ranking senior to the shares of the Company Class A Common Stock upon such dissolution, liquidation or winding up, if any, the Company's remaining net assets will be distributed to the holders of the shares of the Company Class A Common Stock and the holders of any other class or series of capital stock ranking equally with the the shares of the Company Class A Common Stock upon such dissolution, liquidation or winding up, equally on a per share basis.
Transfer Rights
Subject to applicable law and the transfer restrictions set forth in Article VII of the the bylaws of the Company adopted on July 18, 2022, shares of the Company Class A Common Stock and the rights and obligations associated therewith shall be fully transferable to any transferee.
Other Rights
Other Rights
There are no redemption or sinking fund provisions applicable to the shares of the Company Class A Common Stock. The rights, preferences and privileges of holders of the shares of the Company Class A Common Stock will be subject to those of the holders of any preferred stock, including the Series A Preferred Stock, that we may issue in the future.
Share Repurchases
19.In 2023, the Company’s Board of Directors (the “Board”) authorized a share repurchase program to purchase up to $40.0 million of the Company’s outstanding shares of Class A Common Stock. The amount and timing of repurchases is determined at the Company’s discretion, depending on market and business conditions, and prevailing stock prices among other factors. Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including insider trading laws. The program is not subject to any self-imposed Company trading restrictions or blackout periods and has no expiration date.
During the year ended December 31, 2023, the Company repurchased 2,389,954 shares of its Class A Common Stock for a total of $10.0 million. The repurchase was at a weighted-average price of $4.16 per share when excluding commissions, and are recorded to treasury stock on the Company’s consolidated balance sheets. As of December 31, 2023, $30.0 million remained available under the Share Repurchase Program.
20. STOCK-BASED COMPENSATION
Class D Incentive Units
In February 2021, the Board of Managers of the Mondee Stockholder approved the amended and restated 2013 Class D Incentive Unit Plan. The plan authorizes 91,177,477 Class D Incentive Units of the Mondee Stockholder for issuance to the Company’s employees. During 2021, 42,288,769 units were granted to certain employees, consultants of Metaminds Software Solutions Ltd, consultants of Metaminds Technologies Pvt Ltd, and other external consultants. During the yearsyear ended December 31, 2021 and December 31, 2022, the Company recognized stock-based compensation from Class D Incentive Units granted in 2018 and 2021.
Class D incentive units are estimated using the “Black-Scholes” option pricing model. The “Black-Scholes” model requires the use of assumptions,inputs, including expected volatility and expected term, which greatly affect the calculated values and require significant analysis and judgment to develop. The expected term of Class D incentive units was calculated as the weighted average of the time to vesting. The risk-free rate is based on the rates in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to each award's expected term. The expected volatility is based on the volatility of publicly traded industry peer companies. A dividend yield of zero is applied since Mondee Stockholder has not historically paid dividends and has no intention to pay dividends in the near future.
The per unit fair value of the Class D incentive units granted during and prior to fiscal year 2018 were estimated at the date of grant using “the Black-Scholes” option pricing model, using the following assumptions:inputs:
| | | | | |
| 2018, 2017, and 2016 Grants |
| Expected term (in years) | 0 – 2.5 |
| Risk-free interest rate | 2.9 | % |
ExpectedSelected volatility | 26.0 | % |
| Expected dividend rate | 0 | % |
Weighted averageWeighted-average contractual lifeterm (years) | 0 – 2.5 |
The per unit fair value of Class D incentive units granted during the year ended December 31, 2021 ranged between $0.002 and $0.13 and was estimated as of grant date using the following assumptions:inputs:
| | | | | |
| 2021 Grants |
| Expected term (in years) | 0 – 2.5 |
| Risk-free interest rate | 0.81% – 1.26% |
ExpectedSelected volatility | 50.92% – 53.85% |
| Expected dividend rate | 0 | % |
Weighted averageWeighted-average contractual lifeterm (years) | 0 – 2.5 |
There were no Class D incentive units granted duringsubsequent to the Year Endedyear ended December 31, 20222021 under the Class D Incentive Unit Plan.
As of December 31, 2022, 100% of the Management Incentive Units for Class D units were fully vested as a result of the change in control event that is the consummation of the Business Combination. As of December 31, 2022, the total unrecognized stock-based compensation expense related to the incentive units outstanding was $0.
The following table summarizes the Class D Incentive Units activity for the yearsyear ended December 31, 2022 and 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Class D
Incentive Units
Outstanding | | Weighted
average grant
date fair
value of units | | Weighted
average
remaining
contractual
life (Years) | | Weighted average
exercise price |
| Unvested – December 31, 2020 | 394,669 | | 0.003 | | | 0.67 | | 0.01 | |
| Granted | 42,288,769 | | 0.12 | | | — | | | 0.07 | |
| Vested | (29,036,941) | | 0.130 | | | — | | | 0.01 | |
| Forfeited or canceled | (3,368,011) | | 0.002 | | | — | | | 0.71 | |
| Unvested – December 31, 2021 | 10,278,486 | | 0.13 | | | 2.00 | | 0.03 | |
| Granted | — | | — | | | — | | | — | |
| Vested | (10,228,486) | | 0.127 | | | 2.40 | | 0.03 | |
| Forfeited or canceled | (50,000) | | 0.004 | | | — | | | 0.01 | |
| Unvested – December 31, 2022 | — | | | — | | | 0 | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Class D
Incentive Units
Outstanding | | Weighted
average grant
date fair
value of units | | Weighted
average
remaining
contractual
life (Years) | | Weighted average
exercise price |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Unvested – December 31, 2021 | 10,278,486 | | $ | 0.13 | | | 2.00 | | $ | 0.03 | |
| Granted | — | | — | | | — | | | — | |
| Vested | (10,228,486) | | 0.127 | | | 2.40 | | 0.03 | |
| Forfeited or canceled | (50,000) | | 0.004 | | | — | | | 0.01 | |
| Unvested – December 31, 2022 | — | | | — | | | 0 | | — | |
The Incentive Units granted during fiscal year 2021 have service-based vesting requirements with an accelerated vesting clause in which all unvested incentive units shall become vested upon the sale of the Company. The stock-based compensation expense related to such incentive units is recognized ratably over the service period. The service-based vesting period for these awards is four years, with the exception of the units granted to the Company’s Chief Executive Officer, which vests 100% on the grant date. These Class D Incentive Units have a participation threshold ranging from $0.01 to $0.71.
The companyCompany recognized stock-based compensation related to the Class D incentive units for $1,106 and $3,936$1.1 million for the year ended December 31, 2022 and 2021, respectively.2022.
Upon the consummation of the Business Combination on July 18, 2022 (the "Closing Date"), the Company adopted two new long-term stock-based compensation incentive plans: (1) the Mondee Holdings, Inc. 2022 Equity Incentive Plan (the "2022 Plan") and (2) the Mondee Holdings, Inc. 2022 Employee Stock Purchase Plan (the "ESPP"). The following is a general description of the material features of those plans, which is qualified in its entirety by reference to the provisions of the 2022 Plan and ESPP, as applicable.
2022 Equity Incentive Plan
The Board adopted, and the stockholders of the Company approved, the 2022 Plan, effective as of the Closing Date. The maximum number of shares of Company Class A Common Stock that may be issued pursuant to the 2022 Plan is 9,615,971. The 2022 Plan provides for the grant of stock options, restricted stock units ("RSUs), stock appreciation rights ("SARs"), dividend equivalents, substitute awards, and other stock-based awards (such as annual incentive awards and performance awards) for issuance to employees, directors, and other service providers to the Company or its affiliates.
Earn-out Shares
Following the closing of the Business Combination, holders of earn-out shares are entitled to the right to receive up to an aggregate amount of 9,000,000 shares of the Company Class A Common Stock that would vest (in part) in equal thirds if the trading price of shares of the Company Class A Common Stock was greater than or equal to $12.50, $15.00, and $18.00 for any 20 trading days in any 30 consecutive trading day period at any time during the period beginning on the first anniversary of the closing of the Business Combination and ending on the fourth anniversary of the closing of the Business Combination.
In the event of a company sale during the vesting period that will result in the holders of shares of the Company Class A Common Stock receiving a per share value equal to or in excess of the applicable price per share set forth above, then immediately prior to the consummation of the company sale, any such vesting of earn-out shares that has not previously occurred shall be deemed to have occurred and the holders of such earn-out shares shall be eligible to participate in such company sale. In the event of any merger, sale, consolidation, recapitalization, equity transfer, restructuring, reorganization or other similar business transaction that does not constitute a company sale, any remaining unvested earn-out shares shall not be forfeited, shall remain outstanding, and shall remain subject to the remaining applicable vesting triggering events set forth above.
In the event of a company sale, including where the consideration payable is other than a specified price per share, for purposes of determining whether the applicable stock price levels set forth above have been achieved, the price paid per share of common stock will be calculated on a basis that takes into account the number of earn-out shares that will vest (i.e., the ultimate price per share payable to all holders of common stock will be the same price per share used to calculate the number of earn-out shares that vest). The holders will have all of the rights of a holder of common stock with respect to the unvested earn-out shares, except that the holders will not be entitled to consideration in connection with any sale or other transaction and the earn-out shares cannot be sold, redeemed, assigned, pledged, hypothecated, encumbered or otherwise disposed of prior to vesting.
As the terms of the earn-out shares do not give the holders a right to require the Company to redeem them, the underlying shares are not redeemable outside of the Company’s control, and the earn-out shares are settled through vesting, a fixed number of shares, the earn-out shares are not a liability within the scope of ASC 480, Distinguishing Liabilities from Equity. Further, although the earn-out shares meet the definition of a derivative, they qualify for the equity-scope exception to derivative accounting because they meet the criteria for equity indexation and equity classification under ASC 815-40, Contracts in Entity’s Own Equity. Note that if a company sale occurs as a result of a cash offer, the calculation of the share price used to determine if the applicable stock price level set forth above has been achieved would include the earn-out shares. Lastly, the earn-out shares are indexed to the company’s own stock, as there are no other events that would accelerate the vesting of such shares other than the share price being in excess of the applicable stock price levels set forth above or a company sale. Accordingly, these earn-out shares are equity classified.
In accordance with terms of the Business Combination and upon closing, the Company approved a total of 9,000,000 earn-out shares of Company Class A Common Stock (the "earn-out shares"), which were allocated as follows at December 31, 2023.
| | | | | | | | | | | | | | |
| Shareholder Type | | Grant Date | | Number of Shares |
| Employee | | 7/18/2022 | | 6,000,000 | |
| Investor | | 7/18/2022 | | 500,000 | |
| Employee | | 9/7/2022 | | 900,000 | |
| Non-employee | | 9/12/2022 | | 200,000 | |
| Employee | | 4/20/2023 | | 180,000 | |
| Forfeit add back | | 10/11/2023 | | (200,000) | |
| Employee | | 12/31/2023 | | 1,353,333 | |
| Unallocated shares | | — | | 66,667 | |
| Total | | | | 9,000,000 | |
Except for the 1,533,000 earn-out shares allocated, net of forfeitures, on April 20, 2023 and December 31, 2023, the remaining earn-out shares have been legally issued to the respective shareholders and have restrictions that prohibit the shareholders from transferring them until the vesting market conditions are met. These earn-out shares in escrow are not considered outstanding for accounting purposes until resolution of the earn-out contingency.
The estimated fair value of the allocated earn-out shares were determined using a Monte Carlo simulation valuation model. Inputs used in the valuation of allocated shares at Closing Date were as follows:
| | | | | |
| July 18, 2022 |
| Fair Value of Class A Common Stock | $10.13 |
| Selected Volatility | 60 | % |
| Risk-free interest rate | 3.14 | % |
| Contractual terms (years) | 4.0 |
Of the initial allocated shares, 500,000 earn-out shares were allocated to key investors for participation and approvals of the business combination agreement. As such, these earn-out shares meet the definition of a derivative, however, they qualify for the equity-scope exception to derivative accounting because they meet the criteria for equity indexation and equity classification under ASC 815-40, Contracts in Entity's Equity. As such, the fair value impacts totaling $4.2 million were recorded within equity under Additional paid in capital owing to insufficient retained earnings balances as of the date of issuance of the earn-out.
Further, 6,000,000 of the earn-out shares were issued to the Chief Executive Officer of the Company, which were determined to be equity settled in accordance with Topic 480. The Chief Executive Officer was awarded earn out shares primarily to lead and direct activities contributing to the successful close of the business combination in his capacity of an executive officer responsible for oversight with no future services required. Additionally such incremental payments were offered only to specific and identified employees of Mondee, accordingly the Company determined his awards to be compensatory in nature owing to his service agreement and oversight role in the Business Combination. The Company recorded compensation expenses upon completion of the Business Combination totaling $50.1 million within the consolidated statement of operations for the year ended December 31, 2022.
Subsequent to the Closing Date of the Business Combination, the Company allocated an additional 1,100,000 earn-out shares, of which 900,000 were issued to an employee for his continued services and 200,000 were allocated, but will be issued subject to a requisite service period condition. These earn-out shares require future service to secure the option which confirms that these earn-outs are compensatory in nature in accordance with topic 718. The stock based compensation expense for employee earn-out shares were recognized over the derived service period. For non-employee earn-out shares, the Company recorded share based compensation expense on a monthly basis over the longest period between the implicit or derived service period. The Company recorded an additional $6.8 million of compensation expense for employee to personnel expenses within the consolidated statement of operations for the year ended December 31, 2022. The non-employee is an advisor to the company and its share based compensation expense of $0.4 million were recorded to general and administrative expenses within the consolidated statement of operations for the year ended December 31, 2022.
The grant-date fair values of the earn-outs, subsequent to the Closing Date, granted to employees and non-employees were determined using the Monte Carlo simulation method. Inputs used in the valuation were as follows:
| | | | | |
| September 2022 |
| Fair value of Class A Common Stock | $10.19-$12.32 |
| Selected volatility | 61.0%-61.1% |
| Risk-free interest rate | 3.48%-3.56% |
| Contractual terms (years) | 3.8-3.9 |
For the year ended December 31, 2023, the Company utilized its remaining capacity to allocate earn-out shares and granted as follows:
The Company granted 180,000 shares on April 20, 2023. The estimated grant date fair value of shares allocated in April 2023 was determined using the Monte Carlo simulation method. Inputs used in the valuation were as follows:
| | | | | |
| April 20, 2023 |
| Fair value of Class A Common Stock | $10.70 |
| Selected volatility | 65.0% |
| Risk-free interest rate | 3.9% |
| Contractual term (years) | 3.2 |
The Company granted 1,353,000 shares on December 31, 2023. The estimated grant date fair value of shares allocated in December 2023 was determined using the Monte Carlo simulation method. Inputs used in the valuation were as follows:
| | | | | |
| December 31, 2023 |
| Fair value of Class A Common Stock | $2.76 |
| Selected volatility | 80.0% |
| Risk-free interest rate | 4.1% |
| Contractual term (years) | 2.5 |
The Company recognized $4.1 million of compensation expense for employees related to personnel expenses within the consolidated statement of operations for the year ended December 31, 2023. The non-employee is an advisor. The Company recognized $1.1 million of compensation expense in general and administrative expenses within the consolidated statement of operations for the year ended December 31, 2023.
As of December 31, 2023, unrecognized earn-out compensation expense totaled $1.8 million expected to be recorded over the balance term. As of date of issuance of this report there are 66,667 earn-out shares that remain unallocated.
Restricted Stock Units
On the Closing Date, the Company granted 331,600 RSUs to three employees under the 2022 Plan. The RSUs became fully vested as of the date of grant and entitle the holders to receive shares of Company Class A Common Stock six months from the grant date. The issuance of the shares are not subject to continued employment through the applicable 6-month period and accordingly the total compensation cost recorded on the fully vested RSUs amount to $3,316.$3.3 million. The RSUs granted were equity-classified and
recorded in accordance with ASC 718 “Compensation - Stock Compensation." The Company valued the RSUs using the market price of the shares of the Company Class A Common Stock at the time of the Business Combination.
Upon the consummation of the Business Combination and pursuant to the 2022 Plan, the Company granted to each Board member (i) 5,000 RSUs for each year such Board member was elected to serve on the Board and (ii) 5,000 RSUs as a special one-time award (the "Special RSU Grant"). The 5,000 RSUs granted as part of the Special RSU Grant vest as follows: (1) one-third will vest if the Company Class A Common Stock price reaches or exceeds a volume-weighted average price ("VWAP") of $12.50 for any 20 days within any 30-day trading period; one-third will vest if the Company Class A Common Stock price reaches or exceeds a VWAP of $15.00 for any 20 days within any 30-day trading period; and the final one-third will vest if the Company Class A Common Stock price reaches or exceeds a VWAP of $18.00 for any 20 days within any 30-day trading period. For the remaining RSUs granted to each Board member, 5,000 RSUs will vest annually for each year such Board member serves on the Board. The issuance of the shares of Company Class A Common Stock are subject to continued service with the Company through the applicable vesting date. The
holders have the right to receive the number of shares of Company Class A Common Stock corresponding to the number of RSUs that have vested on the 6-month anniversary of the vesting date.
For the Special RSU Grant, the Company will recognize share based compensation expense over the derived service period. With respect to the other RSUs, the Company will recognize share based compensation expense using the straight-line method over the requisite service period during which such RSUs vest.
A summary of the Company’s RSU activity during the year ended December 31, 20222023 was as follows:
| | Number of Restricted Stock
Incentive Units
Outstanding | | Weighted-Average Grant Date Fair Value |
| Unvested – December 31, 2021 | $ | — | | | $ | — | |
| Number of Restricted Stock
Incentive Units
Outstanding | | | Number of Restricted Stock
Incentive Units
Outstanding | | Weighted-Average Grant Date Fair Value |
| Unvested – December 31, 2022 | |
| Granted | Granted | 436,600 | | 9.9 | Granted | 3,158,078 | | 7.25 |
| Vested | Vested | (331,600) | | 10.0 | Vested | 459,426 | | 8.54 |
| Forfeited or canceled | Forfeited or canceled | — | | — | Forfeited or canceled | 79,600 | | 7.51 |
| Unvested – December 31, 2022 | 105,000 | | $ | 9.4 | |
| Unvested – December 31, 2023 | |
During the year ended December 31, 2022, theThe Company recorded stock-based compensation expense related to the RSUs of $3,730.$6.7 million and $3.7 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2022,2023, the Company had 105,0002,724,052 granted but unvested RSUs with unamortized stock-based compensation expense of $578$16.1 million remaining to be recognized over a weighted-average period of 1.182.13 years.
The Company did not recognize any tax benefits related to stock-based compensation expense during the year ended December 31, 20222023 or December 31, 2021.2022.
Secondary Sale
In June 2023, the Company facilitated the sale of 5,250,000 shares of the Company’s Class A Common Stock at a price of $10.00 per share to investors for an aggregate purchase price of $52.5 million. Of the 5,250,000 shares that were sold in the transaction, 2,148,783 shares of common stock were sold by current and former employees. The Company did not receive any proceeds from the secondary sale, however, as the shares were sold above fair value, the Company recognized the excess purchase price paid above fair value to current and former employees as stock-based compensation expense. The Company recognized $1.8 million in personnel expense on the consolidated statement of operations for the year ended December 31, 2023.
Of the 5,250,000 shares sold, 2,122,529 shares, or an aggregate purchase price of $21.2 million, were sold by related parties of the Company.
Stock Options
The committee administering the 2022 Plan (the "Committee") shall have the authority to grant to any eligible employee one or more Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options to eligible employees. The exercise price per share subject to a Stock Option shall be determined by the Committee at the time of grant, provided that the per share exercise price of a Stock Option shall not be less than 100% of the Fair Market Value (as defined in the 2022 Plan) at the time of grant. The term of each Stock Option shall be fixed by the Committee, but shall not be greater than 10 years after the date such Stock Option is granted. As of December 31, 2022,2023, no stock option awards have been issued under the 2022 Plan.
Stock Appreciation Rights
SARs may be granted alone or in conjunction with all or part of any Stock Option granted under the 2022 Plan. The exercise price per share of Class A Common Stock subject to a SAR shall be determined by the Committee at the time of grant, provided that the per share exercise price of a SAR shall not be less than 100%of the Fair Market Value (as defined in the 2022 Plan) at the time of grant. The term of each free standing SAR shall be fixed by the Committee, but shall not be greater than 10 years after the date such SAR is granted. The SARs shall be exercised at such time or times to such terms and conditions determined by the Committee at the time of the grant. As of December 31, 2022,2023, no SAR awards had been granted under the 2022 Plan.
Employee Stock Purchase Plan
The Board adopted, and the stockholders of the Company approved, the ESPP effective as of the Closing Date. The initial number of shares of common stock authorized for sale under the ESPP was 1,923,194. The following is a general description of the material features of the ESPP, which is qualified in its entirety by reference to the provisions of the ESPP:
•The maximum aggregate number of shares of Class A Common Stock that may be issued pursuant to the ESPP will be equal to 2% of the fully-diluted shares, subject to certain adjustments;
•The ESPP will permit participants to purchase Common Stock through contributions (in the form of payroll deductions or otherwise to the extent permitted by the administrator) of up to the lesser of 8% of their eligible compensation or $25,000 maximum per offering period, which includes a participant’s regular and recurring straight time gross earnings and other eligible compensation, as defined in the ESPP. Subject to the eligibility requirements and dollar limits discussed above, a participant may purchase a maximum of $25,000 worth of shares of Class A Common Stock during each offering period.
Subject to such limits, the administrator may increase or decrease, in its absolute discretion, the maximum number of shares of Class A Common Stock that a participant may purchase during future offering periods. Amounts contributed and accumulated by the participant during any offering period will be used to purchase shares of Class A Common Stock at the end of each offering period. The purchase price of the shares of Class A Common Stock cannot be less than 85% of the lower of the fair market value of our Class A Common Stock on the first trading day of the offering period or on the last trading day of the offering period; and
•A participant may withdraw from the ESPP voluntarily at any time by delivering written notice of withdrawal prior to the close of business on the date established by the administrator. A participant will be deemed to have elected to withdraw from the ESPP upon the termination of the participant’s employment for any reason or in the event the participant is no longer eligible to participate in the ESPP.
As of December 31, 2022,2023, under the ESPP, has not yet been activated and accordingly no30,727 shares have been issued.
20.21. NET LOSS PER SHARE
The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2023 and 2022 (in thousands, except for stock and 2021:per share data):
| | | | | | | | | | | |
| For the year ended December 31,, |
| 2022 | | 2021 |
| Numerator: | | | |
| Net loss attributable to common stockholders | $ | (90,238) | | | $ | (38,905) | |
| Denominator: | | | |
| Weighted average shares outstanding, basic and diluted | 67,368,620 | | | 60,800,000 | |
| Basic and diluted net loss per share | $ | (1.34) | | | $ | (0.64) | |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Numerator: | | | |
| Net loss | $ | (60,817) | | | $ | (90,238) | |
| Cumulative dividends allocated to preferred stockholders | (11,557) | | | — | |
| Net loss attributable to common stockholders | $ | (72,374) | | | $ | (90,238) | |
| Denominator: | | | |
| Weighted average shares outstanding, basic and diluted | 77,213,602 | | | 67,368,620 | |
| Basic and diluted net loss per share | $ | (0.94) | | | $ | (1.34) | |
The basic and diluted net loss per share for the twelve monthsyear ended December 31, 20222023 and 20212022 has been computed to give effect to the conversion of the Mondee shares outstanding into shares of the CompanyCompany’s Class A Common Stock as though the conversion had occurred as of the beginning of the earliest period presented.
Basic and diluted net loss per share attributable to common stockholders are the same for the twelve monthsyears ended December 31, 20222023 and 2021,2022, as the inclusion of potential shares of the CompanyCompany’s Class A Common Stock would have been anti-dilutive for the periods presented.
The following table presents the potential shares of common sharesstock outstanding that were excluded from the computation of diluted net loss per share of common shares as of the periods presented because including them would be anti-dilutive:
| | | | | | | | | | | |
| For the year ended December 31, |
| 2022 | | 2021 |
| Warrants (Private Warrants and Preferred Financing Warrants) | 1,507,500 | | | — | |
| Outstanding earn-out shares | 7,600,000 | | | — | |
| Restricted stock units* | 105,000 | | | — | |
| Potential common share excluded from diluted net loss per share | 9,212,500 | | | — | |
*Includes 35,000 RSUs issued that vest on occurrence of market conditions and 70,000 RSUs issued that vest over service period
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Common stock warrants | 1,677,000 | | | 1,507,500 | |
| Outstanding earn-out shares | 8,933,333 | | | 7,600,000 | |
| Consolid earnout shares | 400,000 | | | — | |
| Skypass earnout shares | 1,800,000 | | | — | |
| Purple Grids earnout shares | 2,542,857 | | | — | |
| Restricted stock units | 2,724,052 | | | 105,000 | |
| Potential common shares excluded from diluted net loss per share | 18,077,242 | | | 9,212,500 | |
21.22. RESTRUCTURING AND RELATED COSTSEXPENSE, NET
During the yearyears ended December 31, 2023 and 2022, the Company took actions at some of the offshore office locations to reduce the size of its workforce to optimize efficiency and reduce costs. The Company completed the vast majority of announcements that affected employees by October 2022, including office closures .
During the yearyears ended December 31, 2023 and 2022, the Company recorded expenses of $2,542, forand $2.4 million and $2.5 million, respectively, in restructuring expense, net on the restructuring actions, included within "Restructuring and related costs" in the Consolidated Statementsconsolidated statements of Operations .operations. These expenses are one-time and are related to employee severance and other termination benefits, and accelerated amortization of right of use asset leases. Accordingly, the Company accounted for restructuring and related costs pursuant to ASC Topic 420 " Exit or Disposal Cost Obligations" considering these expenses as a one-time benefit.well as impairment charges on right-of-use assets. During the year ended December 31, 2023, the Company terminated an office lease in India and recognized a gain of $0.3 million.
During the years ended December 31, 2023 and 2022, the Company made employee severance and other termination benefits cash payments of $1,689$2.1 million and $1.7 million and accelerated amortization of right of useright-of-use assets of $853$0.0 million and $0.9 million, respectively. Outstanding restructuring charges at the reporting period are recorded in accrued expenses and other current liabilities, on the Company's consolidated balance sheets.
Activities related to our restructuring impacted our travel marketplace segment. The following is a roll forward of the outstanding restructuring charges by cost type for the year ended December 31, 2023 (in thousands):
22. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance as of December 31, 2022 | | Additions | | Adjustments | | Cash Payments | | Balance as of December 31, 2023 |
| Severance costs | | $ | — | | | $ | 2,447 | | | $ | (14) | | | $ | (1,859) | | | $ | 574 | |
| Other exit costs | | — | | | 277 | | | (2) | | | (250) | | | 25 | |
| Total | | $ | — | | | $ | 2,724 | | | $ | (16) | | | $ | (2,109) | | | $ | 599 | |
Costs anticipated to incur subsequent to the year ended December 31, 2023 are immaterial.
23. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the Consolidated Financial Statementsconsolidated financial statements were issued. Based upon this review, other than as described below, the Company did not identify any additional subsequent events that would have required adjustment or disclosure in the Consolidated Financial Statements.
TCW Amendmentconsolidated financial statements.
On January 11, 2023,17, 2024, the Company executed a ninthtwelfth amendment to the financing agreement with TCW, wherein Wingspire Capital LLC ("Wingspire"Term Loan (the “Twelfth Amendment”) became a party. The Twelfth Amendment (1) provided consent to the TCW Agreement. Wingspire funded an additional $15,000Company’s acquisition of term loan commitment on top of the already outstanding Term Loan. Additionally, the Amendment split the Term Loan into two loans. Term Loan A will be represented by Wingspire with an outstanding principal balance of $30,000 and Term Loan B will be represented by TCW with an outstanding principle balance of $137,800.
Additionally, Wingspire consents to take over the TCW LOC for a principal amount not to exceed $15,000. Until January 11, 2024, the Company has the option to increase Term Loan A by $20,000 under two conditions: (i) the Company must have a trailing 12-month EBITDA of at least $25,000; and (ii) the Company must draw in increments of at least $5,000.
On January 31, 2023, we executed a tenth amendment to the TCW Agreement (the “Tenth Amendment”). The Tenth Amendment (1) set forth the terms on which we could acquire Orinter, pursuant to that certain Share Purchase and Sale Agreement, dated as of January 31, 2023, among us, Mondee Brazil, LLC, a Delaware limited liability company (“Mondee Brazil”), OTT Holdings Ltda. (“OTT Holdings”), Orinter, and the other parties named therein (the “OrinterPurchase Agreement”);Purple Grids; (2) set forth the terms on which we could pay the earn-out payment contemplated to be paid to OTT Holdings and certain key executives of OTT Holdings pursuant to the Orinter Purchase Agreement; (3) required that Mondee Brazil join as a party to the TCW Agreement and the Security Agreement (as defined in the TCW Agreement); (4) required that Mondee, Inc.Company pledge 100% of the equity interests of Mondee Brazil; and (5) required that Mondee Brazil and Mondee Inc. pledge 100%Purple Grids; (3) defers a portion of the equity interests of Orinter.
Orinter Acquisition
On January 31,principal and interest payments due in December 2023 (the "acquisition date"), the Company executed the Share Purchase and Sale Agreement to acquire all of the outstanding equity interests in Orinter Tour & Travel, S.A. ("Orinter") from OTT Holding Ltd (the "Sellers"). Orinter is a high-growth and leading travel provider with a strong presence in Brazil and Latin America. Orinter currently serves 4,800 travel companies. Through this acquisition, the Company has expanded its geographic footprint to include Brazil's domestic and outbound travel market. Additionally, Orinter’s direct relationships with Latin American hotels will provide valuable cross-sell opportunities for the Company.
As part of the acquisition, the Company paid: (i) $20,464 in cash, $18,928 of which was paid to Sellers on acquisition date and $1,536 of which was deposited in escrow account on the acquisition date and (ii) $17,264 in shares of the Company Class A Common Stock at $10.00 each (“OTT Shares”). Of the OTT Shares, 903,202 of the shares will be maintained in an escrow for one year and the remainder will be maintained in an escrow for two years. Additionally, there is an earn-out obligation of $10,000 (paid in three equal installments over 3 years) that will be owed to the Sellers. The earn-out payments are contingent on Orinter meeting EBITDA targetstermination of $10,500, $11,500, and $12,500, in each of the three years, respectively.
Silicon Valley Bank Closure
Silicon Valley Bank (“SVB”) was closed on March 10, 2023, by the California DepartmentTerm Loan; (4) defers certain refinancing milestones and modifies certain liquidity requirements; (5) modifies the payment of Financial Protectioncertain administrative fees to quarterly rather than annually; and Innovation, which appointed(7) provides for the Federal Deposit Insurance Corporation (“FDIC”) as receiver. To protect depositors, the FDIC transferred all the deposits and substantially allpayment of the assets of SVB to Silicon Valley Bridge Bank, N.A. (Bridge), a newly formed bridge bank that will be operated by the FDIC as it markets the institution to potential bidders. On March 12, 2023, the Department of the Treasury, Federal Reserve, and FDIC (collectively, the Agencies) announced that they were invoking the Systemic Risk Exception to the Federal Deposit Insurance Act to permit the FDIC to take action to fully protect all depositors of SVB, regardless of their deposit insurance coverage. In addition, the Agencies also announced that SVB depositors would have access to all their money starting March 13, 2023.
As of March 10, 2023, the Company had $250 of cash and cash equivalents on deposit with SVB, which represents approximately 0.3% of the Company’s total cash and cash equivalents as of December 31, 2022.
“Right to receive” shares of the Company (treasury stock)certain fees.
Pursuant to settlement of Mondee Group LLC note, Mondee received right to receive shares of ourOn March 11, 2024, the Company amounting to $20,336. In connection with the Business Combination with ITHAX, the Mondee Stockholder received 60,800,000 shares of our Common Stock, which was distributed to Mondee Group on March 10, 2023, pursuantexecuted a thirteenth amendment to the Pro Rata Distribution. Mondee Group assigned the right to receive 2,033,578 shares of our Common Stock to Mondee, Inc., for the settlementTerm Loan (the “Thirteenth Amendment”). The Thirteenth Amendment (1) provided an extension of the Remaining Balance. The sharesmaturity on the Term Loan to March 31, 2025 while the Company works to finalize a long-term facility; (2) no event of our Common Stock were valued at $10.00 each,default for any refinancing milestone; (iii) extends the date on which resulted in 2,033,578 shares being issuedarefinancing fee is potentially payable to Gundumogula by our Company. The Remaining Balance was reflected as treasury stock since the settlementApril 30, 2024; (iv) defers a portion of the Remaining Balance wasprincipal amortization due in March 2024 to the earlier of the date of the refinancing of the credit facility or June 30, 2024, and capitalizes a resultpart of Gundumogula transferring our Common Stockinterest due in March 2024; (v) waives any events of default that may have occurred prior to us.the Amendment; and (vi) a fee of $0.4 million “paid in kind” and added to the outstanding principal of the Term Loan.
Restructuring
During the three months ended March 31, 2023, the Company announced reductions to employees at the Delhi, India office location. The purpose of this actions is to pursue greater cost efficiencies and to realign our business and strategic priorities