Good morning everyone and welcome to the Travelzoo Third Quarter 2012 Financial Results Conference Call. At this time all participants have been placed in a listen-only mode and the floor will be opened for 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 third 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 today's format, we will review our third 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 three. This provides you the key financial highlights for the quarter. Our revenue came in at $35.4 million this quarter which is an 8% year-over-year decline. This was the primary driver of our reduced earnings per share of $0.22 along with investments and sales force expansion and subscriber marketing. In addition, we showed modest growth in new subscribers. Slide four provides you detail of the $3.3 million year-over-year decline in our revenue. This was driven by two primary factors. The most significant decline was from our search…

Thank you, Glenn. I would like to begin by saying that while we are disappointed with the results of this quarter and we do face some near term challenges, we are confident in or future growth opportunity. The chart on the left shows you how we grow our business. We have two inputs. On the one hand we are growing our audience which you see on the X-axis, and on the other hand we are increasing our revenue per subscriber, which you see on the Y-axis. We grow our audience by investing in marketing. Revenue per subscriber grows as we introduce more products and services to our subscribers. Over the past 14 years, we have been very successful in executing on our business model. On the right, I will highlight the near-term challenges we are facing and our longer-term opportunities. As Glen already pointed out, we have experienced challenges with our SuperSearch and Local Deals offerings and this negatively impacted our revenues. Our investments in sales force expansion and audience growth impacted our earnings and we continue to experience headwinds caused by airline consolidation and a challenging economy, particularly in Spain and France. Despite these challenges, we remain confident about our future opportunity and we are focused on our four strategic elements which we believe will drive future growth. Sales force expansion, audience investment, further product development, especially in hotels, and taking advantage of this shift to mobile for which we are well set up. So let's turn to the next slide and review these strategic elements. At the end of the Q1, we set a goal of hiring 50 additional sales staff worldwide to drive future revenue growth. On the left, you can see that we have made good progress on accelerating hiring in Q3, adding over 20 sales…

(Operator Instructions) Our first question comes from Ed Woo of Ascendiant Capital. Your line is open.

On the press release a couple of weeks back you said that you are in process to acquire a hotel booking engine. I am curious about what the status of that is. And if you do not acquire a company, will you be building the technology.

Hi, Ed, great to hear from you and thanks for the question. We have been in active negotiations with several companies for the last, I would say, week. And we are continuing to asses our options there. So we are quite excited about this opportunity. If we can't get a company at the price that we would like, then of course we will consider another approach.

You know obviously you can't disclose any term yet, but just in terms of the scale of something like this initiative. Do you think that it’s going to be significantly capital intensive, likely capital intensive, medium capital intensive? Just so that we could gauge your future capital needs.

Well, I certainly think there will be some capital required to build, if we build, and if we acquire then of course we will take something, well I guess we will have to figure out how we finance that if we do buy. But it’s a little early to give you concrete answer on how we will structure it because we don’t really have the candidate necessarily confirmed. So once we get to that point I think we will be able to give you a better answer.

Okay. And the other question I had is, I saw that your incremental marketing went up. It’s over $1 million this quarter. I think last quarter you mentioned that you were going to spend $2 million to $4 million. Is this just a wrapping up period? Have you changed your expectations on this?

Well, we did begin the marketing in the middle of the quarter so that’s one thing. So we were a little bit late to start. We are in putting in the new metrics around lifetime value and so we are also learning, we are focused heavily on conversion and optimization, audience segmentation. What's pretty exciting is that we now have, we know the income levels as well as the locations of all of our subscribers in North America. And for a large portion those who have purchased, we have a full demographic set around those subscribers. So there are investments going on in these areas that are not so obvious but they also contribute to our success. We will continue to spend aggressively, which we outlined in the presentation. But we are going to moderate that with -- as we watch our revenues we state clearly that we want to remain profitable through this growth phase. And so that means we have to pull back sometimes, we will. But ultimately we want to get there.

Thank you. Our next question comes from Dan Kunros of Benchmark. Your line is open.

Chris, l want to step back for a second and get your thoughts on the overall deal space. I know that you have mentioned in the past about the irrationality of other players in the space and you mentioned again in the presentation here. And I am curious how the landscape has evolved here? Obviously Groupon had some struggles last quarter. And how you look at the long-term outlook in the space and if you guys in particular are seeing any pressure on your take rates.

Well, it’s a very competitive space and there is still many companies out there that are losing large amounts of money. And we saw, certainly in this quarter we saw some of those businesses, smaller businesses go, larger businesses rationalize. So that’s still ongoing. The benefit for us of course is we -- there are several benefits, but one is that we are seeing talent in the market now that are trained. And you saw that we were able to bring on 20 more sales people this quarter. Many of those people had worked in this industry before, which is somewhat new to our business. Five years ago that would not have been the case. We are also seeing that a rising tide lifts all boats and there is a lot of mobile innovation going on from the likes of the three of four large players. And we are also participating in these sort of mobile developments. So I would say overall those are the positives. It’s still fiercely competitive out on the street. But we tend to focus on higher quality restaurant and establishments where they are concerned about the audience that they are reaching. So we might bump into some of the more luxurious players out there who position themselves as luxurious. But that we just tend to have a much larger audience and can bring a greater response to those establishments. So, on the one hand positive, on the other hand challenging. And then about the future, we are very excited about our future. I mean we are a very well known travel brand. We are top 1000 website in the world according to Alexa. And we believe that we have a tremendous opportunity that when our 22.5 million subscribers, when they are travelling now, maybe they are in San Diego and they see something in the destination that they may take advantage of as well as our home. We also see that the -- we have learned a lot more about the commission model through offering the voucher program and as we introduce that platform, we will be able to get more engaged with our subscribers on a daily basis as they travel. So I think our position in the market will be much more skewed towards travel. We are staying out of lots of categories. So we have got the governor on our machine but we are not sending out lots of goods deals and so forth compared to the others. And I think that’s becoming quite clear to the audience as well. So we are pleased about that.

Great. Thanks for the color on that. You actually touched on sort of two, my next questions. The first of which on the headcount front. You mentioned that you are unwilling to over publish in daily deals and that’s sort of been a theme for you guys especially for maintaining profitability. So I guess my question is, does that imply that you think there is a large market penetration opportunity available to you and in which geographies specifically? Has that changed from the UK and U.S.?

Well there is certainly a large publishing opportunity remaining in the United States. I mean there is cities like Nashville and Memphis and so forth that we don’t publish in. But we to approach these opportunities in a profitable sense, so to have two or three people employed to focus on getting local establishment the highest quality level in Memphis, may not be the most profitable approach. But we might have five or six or ten people who would call on five or six of these smaller cities and therefore it would be profitable. So those are opportunities still for growth. And we think about the strategy we want to publish more. So we publish more in the existing markets that we are in. And that comes with time as you see in the sale force ramp. We also want to publish more in more markets. So there are markets that we don’t have a light still, and then we also want to improve our profitability for every deal that we send. And that can come through various things. For example in the call, we mentioned that we have some challenges with our conversion process in the local deals. It’s a known problem, we are working on it. Over the last couple of weeks we really saw some great improvements with a chance for going up to the right for our conversion rate. So these little things can have a tremendous impact on selling more, if you like. And then the deal structure that also is something that we are honing in on. Do you offer a fixed menu or do you offer a certain discount. And this can have a dramatic impact on how audiences respond.

Great. You know, one thing that you just mentioned there and that I wanted to get into just a little bit more was, in terms of conversion, I just wanted to ask if you are concerned that maybe Getaways are either taking up too much virtual real estate on our voucher pages. Or are you seeing any adverse impact from the removal of the number of vouchers sold when you are offering your daily deals?

No. I mean the Getaways is clearly a very successful product. Glen mentioned on the call we are up 45% on that product. It obviously doesn’t make much sense, Getaways are sitting within the Local Deals environment. That’s just a function of how we built this systems and that we sell vouchers. We will migrate that into the hotel category and I think you will start to see some significant improvements on the visual aspects of the Travelzoo website in time. And that’s largely driven by the our ability to give the user or our desire to give the user a much cleaner simpler view of our products. But Getaways has been very positive.

Yeah. That’s definitely something that I was getting at in terms of platform migration. So answered my next question. And then finally in terms of the hotel bookings engine or website. I am just curious, obviously you have sort of a foray on entry into the hotel arena already. But once you get into more of a book anytime type platform, you are going to bump up against the OTAs and I am just curious how you see competition against them and how break into that space more heavily. Thanks.

Well, let's just start with the industry as a whole. When you talk to the hotels, they are never sold out. Okay. So even with all of the OTAs out there, the hotel’s are not sold out. And in New York City many hotels just -- they are always available on the weekend, even the nicest hotels. So there is a demand on the hotel side for more business. The second thing is, from an audience perspective we have just with our -- if you like to call it our flash sales approach, we have about a100 million clicks a year coming in on hotel deals. Now many of these people leave, perhaps, I wouldn’t say disappointed but maybe they leave and say well, it’s a great deal but I couldn’t get it on the date that I want and therefore they go and book somewhere else. Maybe they do go and book on an OTA. Still a lot of leakage coming out as a result of that. So we believe that it’s a smart idea to say, okay, here is a great deal. It’s still available for the dates that you have to travel to get the deal, but maybe if you don’t want to travel on this date you can still go and get this other deal. And of course we have no intention in going head-to-head with the large OTAs. We don’t want to be an OTA. We simply want to provide or audience with a service they are craving for from us. And also provide the hotels with a solution that really helps them on the everyday. And the last point on it, we sort of -- we have to take more control of that handoff for the user. If you click from a hotel deal to a small hotel booking engine on a mobile environment, it’s just not very good. And in many cases the consumer ends up calling and they would rather do it on their mobile device. So there is a key driver in there which is the world is changing. We are seeing a heavy shift to mobile. We are in a great position to take advantage of that. And if we get that platform in now, we will be good for the future.

(Operator Instructions) As there are no more questions, at this time I would like to turn the call back now to Mr. Loughlin.

Thank you, operator. Thank you ladies and gentlemen. Have a good day.