Good morning everyone and welcome to the Travelzoo Second Quarter 2012 Financial Results Conference Call. At this time, all participants have been placed in a listen-only mode. And the floor will be open to questions following the presentation. Today’s call is being recorded. It is now my pleasure to turn the floor over to your host Chris Loughlin, Travelzoo’s Chief Executive Officer. Sir, you may begin.

Thank you, operator. Good morning and thank you for joining us today for Travelzoo’s second quarter 2012 financial results conference call. I’m Chris Loughlin, Chief Executive Officer. With me today is Glen Ceremony, the Company's Chief Financial Officer. Glen will walk you through today’s format.

Thank you Chris and good morning everyone. Before we begin our presentation, we would like to remind you that all statements made during this conference call and presented in our slides, that are not statements of historical facts constitute forward-looking statements, and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could vary materially from those contained in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are described in our Forms 10-K and 10-Q and other periodic filings with the SEC. Please note that this call is being webcast from our investor relations website at www.travelzoo.com/earnings. Please refer to our website for important information, including our earnings press release issued earlier this morning, along with the slides that accompany today's prepared remarks. And archive recording of this conference call will be available on the Travelzoo investor relations website at www.travelzoo.com/ir beginning approximately 90 minutes after the conclusion of this call. For the format of today’s call, I will review our second quarter financial results and then Chris will provide an update on our strategy. Thereafter, we will conclude with a question-and-answer session. Now, please open our management presentation, which is available at www.travelzoo.com/earnings. Turning to slide four, this provides you the key financial highlights for the quarter. We achieved revenue of $39.4 million this quarter which is slightly higher than prior quarter despite an expected seasonally slower quarter and up 5% year-over-year. We achieved record earnings per share of $0.45, which is up 53% from our $0.30 earnings per share for the same period last year. And we had growth in new subscribers, helping the Travelzoo brand reach our 25 million worldwide subscriber milestone this quarter. These results are demonstration…

Thank you, Glen. So let’s turn to slide 16, which captures the essence of our business model. On the one hand, we’re growing our audience, which you can see on the x-axis; on the other hand, we’re introducing new products to grow our revenue per subscriber over the time, which you can see on the y-axis. Over the last few years our growth has come from the introduction of Local Deals and Getaways. This has been transformative for our company engaging us more directly with our subscribers and expanding the breadth of our offering. Despite the success of Local Deals and Getaways, our top line revenue has slowed. This is due in part to the fact of overlapping a period of rapid expansion, but also due to reduction in spending by airlines and online travel agencies, a tough environment in Europe and increased competition. While we’re disappointed about this lower top line growth, we’re confident in our industry position as high quality leader and we’re pleased with our objective of consistent earnings growth amid an industry of loss makers. We now find ourselves in the enviable position of being able to invest in future growth while returning profits. Our four strategic elements, which we believe will spur future growth, are, to ramp up our sales force and improve productivity, which you already see that we’re doing. We accelerate scriber growth through incremental investment, invest in product innovation and subscriber engagement to capture more of the opportunity, leverage the Travelzoo network to further distribute local deals and getaways. And I’ll give you an update on our plan around these strategic elements in the next few slides. Turning to slide 17, this provides you an update of our sales force hiring efforts. Last quarter, we set a goal of hiring 50 additional…

Thank you. The floor is now opened for questions. (Operator Instructions) Our first question comes from Ed Woo, Ascendiant Capital. Edward Woo – Ascendiant Capital Markets: Yeah. Thanks for taking my question. I had a question about guidance for increased investment in, I guess for the market in your mobile spending the $0.15 to $0.20 per quarter, do you think that’s going to be offset by revenue growth right away or do you think it’s going to be a slower ramp to catch up with that?

Good morning, Ed. Glen will answer this question.

Hi. Yeah, there will be a lag. What we’ve seen in the past is it will be anywhere from 12 to 24 months for the revenue of those investments to really start kicking in. Obviously, that’s the majority of the ramp up is in that period, so I think we’ll see some in the near-term, but I would count on 12 to 24. Edward Woo – Ascendiant Capital Markets: Was there any concerns in terms of doing such big job in investment, currently was this doing something more gradual or was this some type of opportunity that you see in the marketplace to stepping up just quickly?

Ed, may I just comment, and then Glen can comment also on this. We’ve spent the last two years putting in that brand new business into Travelzoo. And we’re really focused on productivity within that business, not just on our sales force, but also through our audience. What we’re seeing is that we are the most productive in the industry set within that local voucher type business. So we’re satisfied now, that we’ve achieved what we set out to do. And what we’re seeing on the audience size is very strong with fee rates, half of people, who’re purchasing a second deal, already bought or purchasing a deal, already purchased one before. So that gives us confidence now to say okay, that’s good, the systems are in place, the processes are in place. We can add heads relatively easily; we are demonstrating that we can do that. So now it’s time to put our foot back on the gas on audience growth. And we’re very excited about the quality of our content. I mentioned Newburgh and Dallas, and a few others, but that we just now need more people to know about these phenomenal deals that we have. Glen would you like to add anything to this?

Edward Woo – Ascendiant Capital Markets: All right. And the other question I have is, have you seen any change in the model of competition, and local deals, I know you have to talk to daily deals case, either changes of being able to sign up your merchants or changes in commission rates?

Glen can answer that question.

I don't think, anything dramatically have changed, it’s still highly competitive out there, and there is always pressure on the take rates, I would say ours are relatively consistent, but our view is, it’s kind of a one-by-one situation, it’s the really high-quality establishment. We’re not going to like chop or take rate and how, but we're also going to look at the wider opportunity. But compared to last quarter, no big change in competition, I think it is highly competitive out there, there’s a lot of options out there. But as we’ve said last quarter, our hope and what we think, we’re seeing in the market is that the smaller ones are going to – that on the lower end are going start dropping out, because they always do new funding, and not have the ability to sustain a business. And that’s what we feel very confident, because we’re in a position where we are earning a profit in this business and we think we are placed to take advantage of the opportunity. Edward Woo – Ascendiant Capital Markets: Okay. Thank you and good luck.

Thank you, Ed.

Thanks, Ed.

Our next question comes from Daniel Kurnos of Benchmark. Daniel Kunros – The Benchmark Company: Just to start with Chris, at first glance, just looking at the numbers before getting into the presentation, it looked like you didn’t pursue your re-acceleration strategy and if anything ran your expenses a bit leaner than expected, but then you noted that you hired sales staff to begin after June. I’m just curious if you could give us a sense of why you didn’t opt to pursue this more aggressive strategy in this quarter, and if there was anything you have with the industry dynamics or other factors that influence your decision on the timing of spend?

Well, I think if you recall, we announced that about – we announced our intention about three weeks after the end of the last quarter and that gives us ten weeks to achieve the goal. It’s not realistic to hire all of the people within ten weeks. People generally need – if you find the people that takes you – it could take you four to six weeks to find the right candidates and get them through the interview process then they need to resign and its somewhat also could be skewed. In the U.S., you can give a two week resignation or you could probably walk out the door immediately, but in Europe, some people need to give three months resignation in order to start. So it’s not that we didn’t pursue aggressively, we certainly did, but it’s just – I think it’s a normal time horizon that we applied there. Daniel Kunros – The Benchmark Company: Okay. So, but then you mentioned here about the subscriber re-acceleration, which I think you actually had touched on in Q1. I’m kind of curious how you feel about pricing on the third side as it relates to marketing in that area. I mean you clearly committed here to a more aggressive re-acceleration strategy, but are you concerned that the initial return might be somewhat limited by the higher current pricing environment? And do you think you might keep spend more towards the bottom of your quarterly range at the beginning and possibly increase it towards the higher end over time?

There are lots of questions in that. So, okay, I really don’t know. I mean we haven’t – you don’t know pricing at this level until we start to spend and put our piece out. So, with respect to subscribers spending and the way in which we go about acquiring subscribers obviously changes, now that media has changed, I mean it’s more social, it’s more mobile. It’s a little bit of a different world. With respect to search, I think that’s a separate group within our organization and we don’t typically search to acquire subscribers. So they’re some more unrelated. Daniel Kunros – The Benchmark Company: Do you have a preference international versus domestic for where you think, you’ll target your subscriber ads going forward?

Well, we said in the presentation that we’re looking at the U.S., Canada, UK, Germany and wherever we can find the most attractive advertising opportunities and we would pursue those. For us those markets are of equal importance. And then within the United States, obviously, it’s where we have the Local Deals platform running in the major MSAs. Daniel Kunros – The Benchmark Company: Okay. Great, thanks. Speaking about the expense team for a second, you did mention that your cost of revenues was down significantly in the quarter versus your run rate of closer to $4 million and down sequentially as a percentage of revenue. You talked about the lower subscriber refunds is the driver there. I’m just curious if you could give us some color on how we should think about cost of revenues going forward?

Glen, would you answer the question please?

Yeah, I would say, they’re always going to be impacted by the subscriber refunds, right. I think we had some spikes in the prior quarter, in Q1 from a couple of deals, but as time passes, I would say at this level or the kind of in the 90%, low 90s levels is what we would expect. We think we’ve done a good job of kind of assessing the risk upfront, the merchants kind of limits that – the refund that flows through the cost of revenue because we can delay. The payment terms are different for riskier merchants than they are for high quality. Daniel Kunros – The Benchmark Company: Got it. And Chris, just again on the international versus domestic, as you ramp your head count, I’m curious where you see the greater market opportunity and if you have a particular focus in the near-term one versus the other?0

The four markets I mentioned is, where we have the focus at this time. These are all big markets and for us they’re equally important. Obviously the U.S. is still our largest market. It’s the largest territory. So I would think – we have more focus there, but the UK and Germany at the time will see a ramp too. And one of the thing on the subscriber growth, you said, why didn’t you guys accelerate faster last quarter. Please don’t miss the point that we added 500,000 downloads to our mobile app, and that doubled the penetration amongst mobile. That’s not in the first number you see on new subscribers added. So we’re not calling those people as subscribers, but they are engaged and we’re looking at the lifetime value of those people. For us that’s tremendously exciting and that’s really where we switched our attention in this last quarter. Daniel Kunros – The Benchmark Company: Got it. Just a couple more from me, generically speaking we’ve seen fundamental resilience in the broader travel market and within travel search advertising, could you give us some insight into what you’re seeing from a macro perspective and how the landscape looks to be shaping up for the remainder of the year?

Yeah. I mean, I would say from our perspective prices are relatively high at this time in search and that demand – that was an indication that demand is relatively – it’s not high, but it’s, I would say medium to high relative to our experience in the past. Daniel Kunros – The Benchmark Company: And on the travel, broader travel market, any macro insights either domestically or internationally?

Well, obviously, the airline consolidations add prices are high. It seems there might be some opportunity for us particularly across the Atlantic coming into the fall. And we definitely we saw more hotel deals in the major cities this year versus last year. So it seems that consumers may pull back a little bit more. And it’s always there seems it’s more incidents or two which is, can we get a reservation at the restaurant. It seems that it’s possible which tends to indicate that demand is a little softer at the moment, but I think it’s probably best to look at the analysis of the banks and then you can understand that better. Daniel Kunros – The Benchmark Company: Sure. And then just lastly from me on a company specific note, how do you think you’ve faired and what have you done to recover some of the lost revenue that you noted in Q1, and you did call out that sort of continue to shift away from third-party marketing by the travel intermediaries, I’m just curious how long you think that will persist? Thanks a lot.

I think these businesses, the third parties, they’re going for efficiency, they’re rather going for profits than revenue growth and that’s what we’re seeing across group of private and public companies in that space. So it’s been rather static, some of them will pull back, some of them went out of business in Europe. So, that’s what we saw. I don’t think it particularly changes very much. The smaller to medium size guys could change with seasonality as we get into the winter particularly in Europe some of those businesses may fail because they may not have the cash to get through the winter, so that’s a concern, but I think we had the same concern last winter. And I would say no change; it would be my overall remark. Daniel Kunros – The Benchmark Company: All right. Thanks a lot again.

Thank you.

I’m not showing any further questions at this time. I’d now like to turn the conference back to Mr. Loughlin.

Thank you, operator. Ladies and gentlemen, thank you for your support. We look forward to speaking with you in the next quarter. Have a nice day.

Thank you, ladies and gentlemen. This does conclude today’s conference. You may now disconnect your lines at this time and have a nice day.