EDGAR 10-K Filing

Company CIK: 1828852
Filing Year: 2023
Filename: 1828852_10-K_2023_0001828852-23-000033.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
General
Mondee Holdings, Inc. is a leading, travel technology company and marketplace with a portfolio of globally recognized technology solutions in the leisure and corporate travel sectors. We provide a state-of-the art platform, technologies, apps, operating systems and technology-enabled services that seamlessly facilitate travel transactions to better serve travelers through travel affiliates and numerous other emerging channels. These technology solutions with access to global travel inventory and extensive negotiated travel content, combined with our distribution network, create a compelling modern travel marketplace. Our modern marketplace provides 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.
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" 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. The feature-rich technology solutions provide the necessary modern consumer engagement services such as conversational commerce, seamless connectivity and 24/7 assistance, as well as operating systems with modern financial technology, insurance 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 our ability to successfully integrate acquisitions 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 expanded the travel content available on our technology solutions by entering relationships with additional travel market suppliers, including network airlines, low-cost carriers, hotel aggregators, and lodging properties, creating an even broader global travel marketplace.
We believe that our technology-led business model positions us well to be a leading travel marketplace in the growing gig economy and recovering global travel market, by supplying modern operating systems for segment-targeted travel search, booking and service. We have leveraged our position in the traditional travel distribution ecosystem to create a marketplace that offers significant depth and breadth of content, transaction platform and innovative technology to maximize value for travelers, travel affiliates and suppliers. We believe the three pillars of our business - technology, content and distribution - create a powerful competitive advantage that will protect our market leadership and propel our 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, travel and tourism was one of the largest and fastest growing global economic sectors. We believe these sectors represented approximately 10% of global gross domestic product (“GDP”) in 2019. We believe that global 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) recovered to approximately 91% of 2019 levels while 2022 international scheduled air seats recovered to approximately 69% of 2019 levels.
The travel bookings segment can be subdivided into Self-Service Consumer Travel and Assisted and Affiliated Consumer Travel.
Self-Service Consumer Travel includes travel inventory sold to travelers by airlines and hotel companies directly, Online Travel Agencies and Metasearch companies. We do not focus on this market segment.
Assisted and Affiliated Consumer Travel, on the other hand, includes inventory sold to a traveler through affiliates and curators such as travel agents, travel management companies, corporations, call centers, associations and other membership organizations. Through these third parties, end consumers gain access to airline and hotel reservations, car reservations and other accommodations, which have been configured for specific trip or experience requirements and best-value priced. We focus on this segment of the travel bookings 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 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 underserving the emerging consumer groups. We believe these stakeholders generally fail to reach or satisfy significant segments of the rapidly emerging gig economy travel market, including small and medium sized enterprises (“SMEs”) and most member organizations, creating significant market opportunities. It is in this Assisted and Affiliated Consumer Travel segment that we provide comprehensive 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
We will continue to capitalize on our disruptive technology, extensive content and large, scalable distribution network to propel our future growth both organically and through acquisitions. We believe this multi-pronged strategy best positions our Company to take advantage of the pent-up demand, changes and rapid growth of the travel market expected in the recovery from the COVID-19 economic slowdown.
Technology
Our technology solutions bring needed innovation to an industry that remains largely run on legacy distribution systems. We plan to continue innovating and further disrupt the travel market by prioritizing the following growth-oriented actions:
•Expand our Leading Travel Platform for the Gig Economy. We have prioritized the implementation and ongoing expansion of Mondee’s “Travel Solutions in a Box” offering, which will require the continued building of infrastructure supporting the emerging gig travel economy. We intend to equip travel experts and gig workers with our full suite of business tools and efficiently provide them with full access to our travel content.
•Extend our Platform to Serve SMEs. We are using our technology to identify new customer segments, such as small businesses. According to Statista, there were over 300 million SMEs globally in 2021 and we estimate that millions of them book online and receive no special treatment. We believe our subscription-based service can help these small enterprises achieve savings on travel bookings, while also receiving superior customer service. We launched our direct subscription service to SMEs, membership organizations, and other affinity groups in the second half of 2021, and we have already experienced tremendous growth in this product, with more than 125 million members having access as of December 31, 2022.
•Monetize New Features. We believe we can maximize profits by implementing further add-on and ancillary booking features on our platform. For example, our customers 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 adding these lucrative features will expand our technology solutions.
Content
We already have an extensive high value inventory of travel content for all travel segments, and we believe the following initiatives help us to further expand the quality and depth of our travel content offerings:
•Expand Global Flight Content. To differentiate our Company from our competitors, we continue to expand our extensive flight content by working with all airlines as they need to fill planes quickly as the impact of the COVID-19 pandemic wanes. Most airlines reduced flights and capacity to partially offset 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.
•Strengthen Hotel and other Non-Flight Inventory. We added hotel bookings to our technology solutions in 2020 and non-flight content accounted for less than 20% of our bookings, as of December 31, 2022. We continue to focus on expanding our hotel content with targeted acquisitions and by building 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.
•Add New Categories of Content. We have prioritized the addition of new categories of travel content, such as cruises, travel packages, events and entertainment, organically and through acquisitions. For example, travel affiliates currently initiate a majority of cruise bookings through offline channels and specialty distributors, therefore, we can leverage our strong relationships with 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 during 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 believe there is substantial room for growth in both the leisure and business travel sectors. We plan to take the following actions to strengthen our worldwide travel distribution network:
•Increase International Market Share. We plan to expand our presence globally to become a leading operating system for global travel accommodations. We plan to make international expansion a priority in 2023 and in the future.
•Facilitate the Growth of the Gig Travel Economy. We are expanding our “Travel Solutions in a Box” offering, which is designed to enable travel experts and gig workers to become competitive travel providers. We expect that this new pool of gig workers will exponentially increase the travel provider market in the near future. Importantly, these travel experts and gig workers will rely on our 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 will also encourage travel suppliers that desire to sell their travel content through these new gig travel providers to use our marketplace, which will further bolster our 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 our technology solutions, we provide these features efficiently to SMEs, nonprofits and other membership organizations. Our apps already bring a deep set of travel benefits and we plan 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 have historically built scale and added capabilities through merger and acquisition transactions. We have demonstrated an ability to execute accretive and synergistic acquisitions as well as integrate and fundamentally improve our acquired businesses. During 2023, we expect to continue pursuing strategic opportunities that strengthen our technology solutions, expand the breadth and depth of our content, and enhance our distribution infrastructure.
In particular, among a number of emerging growth options, we have identified potential opportunities that will grow our inventory of hotel and lodging, cruise and tour offerings. With even greater content offerings, our Company plans to expand our travel and experiences packaging capabilities, and we are assessing acquisition candidates with this expertise to enhance these functions on our technology solutions. Also, we have identified opportunities to increase our international footprint by acquiring distributors, aggregators and platforms based in 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.
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 compete for our own 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 inventory utilizing primarily legacy distribution systems, which we believe do not compete favorably with our modern technology solutions. Most of these competitors are based outside the North American market with a specific area of geographic focus, whereas we have 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 our services in certain market sub-segments, which currently comprise a small part of our revenues since we are focused on leisure, not 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 target these corporate and SME customer groups with the same level of benefits and services typically afforded only to large corporations.
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 and content consumers primarily fall into the three following categories:
•Gig Economy Workers, Travel Experts, Home Based Agents, and Travel Agencies. We currently provide travel inventory and other travel content to over 55,000 travel affiliates and agents worldwide through our technology solutions and, with the planned release of our platform’s new features, we will also create 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 travel influencer and services space are able to partner with us to develop, grow and monetize their existing and newly-acquired traveler networks. They receive access to the latest technology travel platform, service support, financial technology solutions and value-priced content to drive significant growth. Examples of these types of gig-economy workers 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 core group of our customer base. Rocketrip works with large-scale enterprise customers to motivate their employees with shared rewards to save costs on business travel by making more value-conscious travel choices. Our apps, on the other hand, provide comprehensive travel booking services on a subscription basis to employees and members of SMEs, nonprofits, and other membership organizations. Our technology solutions’ customer base includes access to over 125 million members.
•Travel Consumers. Gig travelers and affiliated consumers make up 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.
Intellectual Property
Our intellectual property is an important component of our business. We rely 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 have no active patents or patent applications, but we intend to pursue patent protection to the extent we believe it would be beneficial and cost effective.
As of March 31, 2023 we 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 on trade secrets and confidential information to develop and maintain our competitive advantage. We seek to protect our 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. We also require 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 have developed proprietary, artificial intelligence (“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 have 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 have assembled a team of more than 125 highly skilled engineers, 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’s web-based offerings are responsive, mobile-enabled, and operating system-agnostic.
Regulatory Compliance
Our 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”) in the United States and, in other countries, the International Air Transport Association (“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, we receive and store a large volume of personal information (“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”) 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”) (as amended by the California Privacy Rights Act (“CPRA”)), the Virginia Consumer Data Protection Act, the Canadian PI Protection and Electronic Documents Act (“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 have 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 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, we had 932 total employees and 927 full-time employees.
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 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/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 Company 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.

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ITEM 1A. RISK FACTORS
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 our existing customers, and reduce customer 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-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 and end consumers. Our business to business marketing aims to drive activity and attract businesses to our technology solutions and websites, and our business to business-to-consumer (“B2C”) marketing aims to drive engagement with these businesses, travelers and end users of our products.
We may be successful in attracting new customers or members in the form of corporations, travel agents, travel management companies or entities. However, there is a risk that these customers’ end consumers 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, 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 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 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 customer 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 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. Our future capital requirements, however, will depend on many factors, including the 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. 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., Canada, 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 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 inflation and interest rates, 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 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”), and the lenders party to the agreement from time to time (“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. On February 6, 2020, we entered into a first amendment to the TCW Agreement and an incremental joinder with TCW for an aggregate principal amount of $55 million. On January 11, 2023, we entered into a ninth amendment to the TCW Agreement for an aggregate principal amount of $15 million and to provide that we may request a term loan of an additional $20 million, which request may be accepted or rejected by the Lenders. 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, 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 10 prior modifications of the TCW Agreement 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, 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. If the Lenders accelerate the repayment of borrowings, we may have insufficient assets to repay the Lenders pursuant to the terms of the TCW Agreement 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, 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.
Client 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 client complaints effectively. If we do not handle client complaints effectively, our reputation and brand may suffer, and we may lose our customers’ 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, 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 Agreement 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 Agreement 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, 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 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, teleconference 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, we 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 used by consumers 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”) 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 that material weaknesses and control deficiencies will not be discovered in the future. 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, 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.
Although we generally maintain formal contractual relationships with our travel suppliers, we do currently, and may continue to, maintain more informal arrangements with certain travel suppliers, such as airlines, GDS service providers, hotels and other travel product companies, which can be terminated with or without notice and may create uncertainty with respect to the agreed terms including pricing. If these arrangements are terminated unexpectedly, or there is disagreement regarding the terms of the agreement with such travel supplier, our financial results or operations could be negatively impacted.
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, 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 customer 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, 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 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. 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, 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”) 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”). 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 from customers with travel reservations 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”), 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”), the UK Data Protection Act contains provisions, including its own derogations, for how the GDPR is applied in the UK (“UK 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 meet internal control needs at the same 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 payments 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 Agreement 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, 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”) as a benchmark for establishing the applicable interest rate may affect the cost of servicing our debt under the TCW Agreement. The Financial Conduct Authority of the UK (the “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”) 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”), 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. 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.
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, 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 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. 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”) 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 laws of the EU member states by the end of 2023. As the OECD proposals were being evaluated, several jurisdictions have enacted or proposed measures to impose new digital services taxes on companies. These taxes are incremental to taxes 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”) 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 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 presentational 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, 2022 and December 31, 2021 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”) 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 an 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 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 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 Mondee Stockholder (the “Pro Rata Distribution”). Upon the consummation of the Pro Rata Distribution, the 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”), 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 current trading price of such securities, and may experience a positive rate of return based on the current trading price of our Common Stock. 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 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 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 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% 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 (“Mondee Group”), and (b) through his spouse, Madhuri Pasam (“Pasam”).
In addition, the pre-Business Combination equity holders of the Mondee Stockholder and their affiliates (the “Legacy Mondee 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, we have outstanding 1,275,000 Preferred Financing Warrants to purchase an aggregate of 1,275,000 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 price for both our private placement warrants and our Preferred Financing Warrants (the “Outstanding Warrants”) is $11.50 per share 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. 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 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 Warrant 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 85,000 shares of our Series A Preferred Stock that were sold 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% per annum (which rate increases to SOFR plus 10.50% 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 March 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”). 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; not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; 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.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Our corporate headquarters are 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, 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 expects to continue to reduce reliance on fixed office space in the future.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, see Note 13 - Commitments and Contingencies, to our consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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, there were 196 holders of record of our shares of Common Stock. Certain shares are held in “street” name 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.
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
None.
Issue Purchases of Equity Securities
Tender Offer
On September 16, 2022, we commenced our offer to each holder of our outstanding public warrants and private placement warrants to receive $0.65 in cash (the “Offer Purchase Price”), without interest, for each outstanding public warrant or private placement warrant tendered by the holder pursuant 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% less than the purchase price to be received in connection with the Offer to Purchase. The execution and delivery 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, or approximately 89.1% of the outstanding public warrants, were validly tendered in and not withdrawn 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,
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. Because 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.
Accordingly, on October 18, 2022, we and Continental, as warrant agent, entered into the Warrant Amendment, which permitted us to redeem each public warrant that remained outstanding upon the closing of the Offer to Purchase for 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 all 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

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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, 2022 and December 31, 2021 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 inventory 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.
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" 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 sales of airline tickets 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, fintech revenues, as well as incentive payments from airlines, GDS service providers, and banks and financial institutions, which we leverage in our payment processing and settlement platform. We also fulfill and settle the reservations booked through affiliated travel agents or directly by travelers.
As a result of our Business Combination with ITHAX, we obtained further financing during the year ended December 31, 2022. As 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 part 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.
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
TCW Debt Amendments
On January 11, 2023, we executed a ninth amendment to the TCW Agreement (the “Ninth Amendment”), wherein Wingspire Capital LLC (“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 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, 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 “Orinter Purchase Agreement”); (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.
Orinter Acquisition
On January 31, 2023 (the “acquisition date”), the Company executed the Share Purchase and Sale Agreement to acquire all of the outstanding equity interests in 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 whose integration through this acquisition expands the Company’s 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 $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 Distribution
In connection with the Business Combination as described further below, the Mondee Stockholder received 60,800,000 shares of our Common Stock. In March 2023, the Mondee Stockholder effected the Pro Rata Distribution. Upon the consummation of the Pro Rata Distribution, the Mondee Stockholder ceased to hold any shares of our Common Stock.
Business Combination
On the Closing Date, we consummated the Business Combination with Mondee, whereby First Merger Sub merged with 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 treated as the acquired company for financial statement reporting purposes. Upon consummation of the First Merger, Second Merger, 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.
In connection with the Closing:
•All issued and outstanding 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 ended December 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 “Metaminds Agreement”) 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 “Remaining Balance”).
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 as a deduction from shareholders' deficit. In connection with the Business Combination, the Mondee Stockholder received our Common Stock, which was distributed to Mondee Group on March 10, 2023, pursuant to the Pro Rata Distribution. Mondee Group assigned the right to receive 2,033,578 shares 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 had a grant-date fair value of $3.07 at issuance and are fully vested. The Preferred Financing Warrants are exercisable until September 29, 2027. Refer to Note 4 to the consolidated financial statements for the year ended December 31, 2022 included 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 Purchase 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 height of the COVID-19 pandemic, we recognized the dual needs of: i) driving material operating efficiencies and, ii) positioning 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-setting 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;
•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.
Use of Transaction Volumes
Transaction volume represents the gross value of transactions handled by our platform between a third party seller or service provider and the ultimate customer. We generate revenue from service fees earned on these transactions and, accordingly our revenue increases or decreases based on the increase or decrease in either or both the number or value of transactions we process. Revenue will increase as a result of an increase in the number of customers using our platform or as a result of an increase in service fees from higher value services offered on the platform. As an example of one of these two factors, while transaction volume was flat from 2020 to 2021, our revenue increased from $65.8 million to $93.2 million during that same period as a result of an increase in transaction value, driven by our development of new revenue streams such as fintech revenue as well as the addition of subscription based and other ancillary revenues. Our management believes that transaction volume has a strong correlation to the opportunity to realize revenue and is therefore a useful unit of measurement for our investors.
Comparability of Financial Information
Our results of operations and statements of assets and liabilities may not be comparable between the year ended December 31, 2022 and the year ended December 31, 2021 as a result of the Business Combination.
Lastly, our 2020 and 2021 annual financial results were more severely impacted by the COVID-19 pandemic, an event that occurred out of the ordinary course of business, in comparison with the financial results during 2022. The travel industry began to recover during 2021 as vaccination rates increased, infection rates decreased, and restrictions began to lift, and continues to trend upwards towards pre-pandemic travel activity during 2022.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with GAAP, 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 trends in our business and our historical operating performance on a more consistent basis. We believe that the use of both Adjusted EBITDA 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 believe are indicative of our core operating performance.
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 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 net excluding sales of export incentives which 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 are 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, 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:
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) %
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, 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:
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) %
Basis of Presentation
We currently conduct 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 consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 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 have four material revenue streams: transactional revenue, incentive revenue, fintech program revenue, and subscription services revenue.
We generate transactional revenue primarily by airline ticket sales, which include mark-up fees as well as commissions from the sale of ancillary products such as travel insurance, seats, and bags. We also derive transactional revenue from hotel and rental car commission. We generate backend incentives from airlines for achieving volume targets. We also generate booking incentives from the three separate GDS service providers and supplier direct systems, which host the airlines’ inventory that we use to sell in our marketplace. We earn incentives 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, revenue is recognized at the time of booking, when we are in an agent position, and thus not responsible for the delivery of travel and have no significant obligations following the processing 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 “Sales 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.
Sales expenses are generally variable in nature and consist primarily of: (1) credit cards and other payment processing fees associated with merchant transactions; (2) fees paid to third parties that provide call center, website content translations, fraud protection services, and other services; (3) offshore customer support; and (4) 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. 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 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 to increase the size of 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 interest and expense, and (4) government assistance. Interest expense relates to interest on loans and amortization of debt issuance costs. Interest income was recorded from the Mondee Group Note, 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”) 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, 2022 and 2021
We have derived this data from our audited consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 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 2022 and 2021:
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, or 71%, compared to the same period 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.
Operating Expenses 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 period in 2021. The increase was primarily driven by an increase in affiliate marketing and web advertising spend as travel demand increased during the period due to the travel industry’s continued recovery from 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.
Personnel Expenses
Personnel expenses for the year ended December 31, 2022 increased by $58.6 million, or 250%, compared to the same period in 2021. The increase was primarily attributable to an increase in stock based compensation due to Earn-Out Shares and restricted stock units of $60.9 million. The remainder of the change is driven by an decrease in salaries, payroll taxes, and benefits of $0.9 million, due to the reduction in force for year ended December 31, 2022.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2022 increased by $2.2 million, or 30%, compared to the same period in 2021. The increase was primarily due to an increase in legal and professional fees of $2.4 million which was attributed to our preparation and filings with the SEC in connection with the Business Combination.
IT Expenses
IT expenses for the year ended December 31, 2022 increased by $1.3 million, or 31%, compared to the same period in 2021. The increase was primarily due to an increase in web hosting and software costs and expenses caused by an increase in transactions and website traffic.
Provision for Doubtful Accounts
Provision for doubtful accounts for the year ended December 31, 2022 decreased by $1.6 million, or 83%, 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.
Depreciation and Amortization
Depreciation and amortization expenses for the year ended December 31, 2022 decreased by $1.1 million, or 8%, compared to the same period in 2021. The decrease was primarily due to certain customer relationships and acquired technology intangible assets being fully amortized during the year ended 2021. This was partially offset by an increase in depreciation in computer software as a result of additional capitalized software.
Interest Income
Interest income for the year ended December 31, 2022 increased by $0.1 million, or 26%, compared to the same period in 2021. The increase was primarily due to an increase in non-cash interest income from the Mondee Group note.
Interest Expense
Interest expense for the year ended December 31, 2022 increased by $3.0 million, or 13%, compared to the same period in 2021. The increase was driven by an increase in our outstanding debt balance as Payment in Kind ("PIK") interest continues to accrue towards the outstanding debt balance..
Gain on Extinguishment of PPP Loan
Gain on extinguishment of PPP loan for the year ended December 31, 2022 decreased by $3.9 million, or 66%, compared to the same period in 2021. The decrease was driven by the size and number of PPP loans forgiven in 2021, totaling $5.9 million, whereas in year ended December 31, 2022 the forgiveness of our remaining PPP loan resulted in a $2.0 million gain upon extinguishment.
Other (Income) Expense
Other income for the year ended December 31, 2022 decreased by $0.7 million, or 69%, compared to the same period in 2021. 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.
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, 2022 decreased by $0.2 million, or 61%, compared to the provision for income tax for year ended December 31, 2021, mainly driven by the impact of change in deferred tax liability on intangible assets.
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, we entered into a fourth amendment to the TCW Agreement (the “Fourth Amendment”), which specifies that if we did not secure $25 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, we incurred an amendment fee of $1.8 million, which was "paid-in-kind" (“PIK”) and added to the outstanding principal balance.
On December 31, 2021, we entered into a fifth amendment with TCW to increase the Applicable Margin (as defined 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 reverted to the original percentages.
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 for 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 after the consummation 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 (or 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 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, we executed the Tenth Amendment. The Tenth Amendment (1) set forth the terms on which we could acquire Orinter, pursuant to the Orinter Purchase Agreement; (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.
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 ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K assuming that we will continue as a going concern. We are required to make debt repayments aggregating to $7.59 million in the next twelve months from the date of issuance of the consolidated financial statements.
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 ended December 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 $83.58 million, net of issuance costs.
As of the date on which our consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K were available to be issued, we believe that the cash on hand, cash generated from operating activities, available line of credit, and additional investments obtained through the Business Combination will satisfy our working capital and capital requirements for at least the next 12 months and accordingly, substantial doubt about our ability to continue as a going concern is alleviated.
Cash Flow Summary for the Years Ended December 31, 2022 and 2021
The following table summarizes our cash flows for the periods presented:
Year Ended
December 31, 2022
2022 2021
($ 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)
Cash Used in Operating Activities
During the year ended December 31, 2022, cash used in operating activities was $10.6 million. The primary factors affecting our operating cash flows during this period were our net loss totaling $90.2 million, which was offset by non-cash charges of $86.8 million primarily consisting of stock-based compensation of $62.0 million, PIK interest expense of $9.0 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
forgiveness of our PPP loan. Cash used from changes in our operating assets and liabilities was $7.2 million, primarily owing to $2.1 million increase in prepaid expenses and other current assets, $11.9 million increase in accounts receivable, $1.9 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 changes were partially offset by a $10.6 million increase in accounts payable.
During the year ended December 31, 2021, cash used in operating activities was $15.7 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $38.9 million, offset by our non-cash charges of $30.2 million primarily consisting of PIK interest expense of $14.6 million and depreciation, amortization of $12.9 million, and stock-based compensation expense of $3.9 million. The cash used from changes in our operating assets and liabilities was $7.0 million, which was primarily due to a $6.7 million increase in accounts receivable, $2.7 million decrease in deferred revenue and a $0.9 million decrease in accrued expenses and other current liabilities, partially offset by a increase in other long term liabilities and a $2.1 million increase in accounts payable.
Cash Used in Investing Activities
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 and equipment.
During the year ended December 31, 2021, cash used in investing activities was $3.1 million, which was primarily due to the purchase of property and equipment.
Cash Provided by Financing Activities
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, 2022 include the following contractual obligations and commitments:
•TCW Term Loan - Principal and interest payments related to the TCW Term Loan. As of December 31, 2022, we had an outstanding balance 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. See Note 9 to our consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K.
•Obligation 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, 2022 and December 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 ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K.
•Operating Lease Obligations - Fixed lease payments related to our operating leases. As of December 31, 2022, we had outstanding operating lease obligations of $2.4 million, with $0.8 million payable within 12 months. See Note 14 to our consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K.
See Note 13 to our consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K 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 ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K and related disclosures in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes for the years ended December 31, 2022 and December 31, 2021 included in Part II, Item 8 of this Annual Report on Form 10-K. 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.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are 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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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, and is incorporated herein by reference. An index of those financial statements is found in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
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, our Board approved the engagement of KNAV P.A. (“KNAV”) 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, included in Part II, Item 8 of this Annual Report on Form 10-K. KNAV served as independent registered public accounting firm 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, 2022 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.

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ITEM 9A. CONTROLS AND PROCEDURES
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. 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 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 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 evaluation of the effectiveness of our controls, we previously identified material weaknesses in 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 these material weaknesses, management is in the process 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 educating control owners regarding the requirements of each control.
We determined that the 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.We also determined that the material weakness around accounting for complex financial instruments continued to exist as of December 31, 2022. These material weaknesses may not allow for us to have proper segregation of duties and the ability to close our books in a timely and reliable manner, to detect and correct any potential misstatements, and to report our results on a timely basis.
We have begun 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 will continue to diligently review our internal control over financial reporting.
Management’s Report on Internal Controls over Financial Reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.
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, 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, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item will be included in our definitive proxy statement (the “2023 Proxy Statement”) to be filed with the SEC within 120 days after our fiscal year ended December 31, 2022, in connection with the solicitation of proxies for our 2023 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.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included in our 2023 Proxy Statement, including under the headings “Executive Compensation” and “Directors, Executive Officers and Corporate Governance” and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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 2023 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.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item will be included in our 2023 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.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item will be included in our 2023 Proxy Statement, including under the heading “Proposal 2: Ratification of Approval of Independent Registered Public Accounting Firm,” and is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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 Consolidated 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 of this Annual Report on Form 10-K, incorporated into this item by reference.
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.