Good morning, everyone, and welcome to the Travelzoo First Quarter 2015 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. Before introducing you to your host and beginning the company's presentation, the company would like to remind you that all statements made during this conference call and presented in the company's 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 differ materially from those contained in the forward-looking statements. Factors that could cause the actual results to differ materially from those in the forward-looking statements are described in the company's forms 10-K and 10-Q and other periodic filings with the SEC. Unless required by law, the company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. Please note that this call is being webcast from the company's Investor Relations Web site at www.travelzoo.com/earnings. Please refer to the company's Web site for important information, including the company’s earnings press release issued earlier this morning along with the slides that accompany today’s prepared remarks. An archived recording of this conference call will be available on the Travelzoo Investor Relations Web site at www.travelzoo.com/ir, beginning approximately 90 minutes after the conclusion of this call. Now, it is my pleasure to turn the floor over to your host, Mr. Holger Bartel, Travelzoo's Executive Chairman. Sir, you may begin.

Thank you, operator. Good morning, everyone and thanks for joining us today for Travelzoo's first quarter 2015 financial results conference call. I'm Holger Bartel, Executive Chairman. And joining me today are Chris Loughlin, our Chief Executive Officer; and Glen Ceremony, the company's Chief Financial Officer. Glen will walk you through today's format.

Thank you, Holger. For the format of today's call, I will review our first quarter financial results and then Holger will provide an update on our strategy and how it impacts our financial performance in the short term. Thereafter, we will open the call for our question-and-answer session. Now, please open our management presentation, which is available on our Investor Relations Web site at www.travelzoo.com/earnings, to follow along with our prepared remarks. Slide 3 provides the key financial highlights for the quarter. Our revenue for the quarter was 36.5 million, down 9% year-over-year, primarily due to declines in Local Deals and Getaways as well as the negative impact of the strong dollar on our European revenues. Our earnings per share this quarter was $0.13, which is lower than the prior year period due primarily to the lower revenue and an increase in spending on products and member acquisitions. Our members grew 4% year-over-year along with continued increases in social media followers and mobile app downloads. Slide 4 highlights our revenue by segment. Revenue in North America was 24.7 million representing a year-over-year decline of 6%. And in Europe, revenue was 11.8 million representing a year-over-year decline of 15%. In Europe’s base functional currency, which is the British pound, Europe revenue decreased year-over-year by 7% and after further adjusting for a decline in the euro, the year-over-year Europe revenue decline was 4%. The next few slides cover further detail on our North America and Europe segments. Slide 5 shows the North America year-over-year revenue decrease by 1.7 million, 1.1 million of which was due to lower voucher sales for local and 1.2 million was due to travel, which was impacted primarily by lower voucher sales for Getaways and reduced spend by certain implications factors. During the quarter, we continued to run…

Please turn to Slide 14 then. Our growth strategy continues to be built on two pillars. On one hand, we are looking to grow our audience and in particular the number of members. This is shown on the X-axis here. And at the same time, we are enhancing our products to serve our users better. We not only want them to receive deals from us by email and social media but we also want to help them when they are actively searching for something specific, like a hotel room in a destination on a certain date. We believe that these product enhancements will result over time in higher revenues per member. On Page 15, let’s look at our audience strategy first. Three quarters ago, we have revamped our efforts in growing our member base more rapidly than in the previous two years. On the one hand, this includes increased investment into acquiring new members via marketing, as Glen spoke about, and on the other hand, we are also exploring and testing new ways to leverage the existing member base. We also continued to expand our network of top quality publishers. Page 16 gives more details. During the first quarter, we increased member acquisition and related marketing spend by roughly 2 million over the same quarter in the prior year with a larger share in North America. Over the next two quarters, we plan to further increase these investments with a stronger focus on Europe. We are also planning to further test various offline companies. Provided that we meet our internal revenue and profit expectations, these planned investments would be approximately $1 million over the first quarter of 2015 and $2 million to $3 million over the previous year. As I mentioned in the past to recall, we are now focusing…

Thank you. The floor is now open for questions. [Operator Instructions]. Our first question comes from Dan Kurnos of the Benchmark Company. Your line is open. Please go ahead.

Great. Good morning. Thanks for taking my questions. I just want to dig down a little bit here into the subscriber polls here. I know that we’ve talked before about maybe offering a few more metrics so we can get a sense of how – what your ROI is there and how the business is actually trending in terms of active subs into a repeat business, and so if you could give us any color there, that would be great. But I guess I also just want to get a sense of maybe quantifying exactly what new member growth was in the quarter, how much of it was actually due to seasonality? Obviously, a lot of people sign up at the beginning of the year. And why was churns so high since total subs were only up 4% year-over-year although you spent a lot more on new subs? Thanks.

Glen, why don’t you take the first part and then I’m going to comment on the churn and quality.

Yes. Dan, good morning. On how we look at the member acquisition is we’re going out in the market and looking at the prices and we look at it from a lifetime value perspective. And at the prices we’re seeing, it’s still based on our member – our long-term revenue per member. It still makes sense for us to keep on adding subscribers. So with increased investments did add significant amount of subscribers during the quarter and that was helpful from a long-term perspective, because I think in the past few years we haven’t made those kind of investments. So, we’re pleased to see that. I think from an unsubscribed basis, I don’t know if we’ve seen in Q1 a regular peak in added subscribers organically, so I don’t know if that part you got right, but these un-subscribes happen over time and we didn’t see any huge unusual patterns there.

And part of the unsubscribed is also what we call technical unsubscribed. Sometimes when some ISPs contact us and say, you are – we have identified that certain emails are not valid and even though we see these people have clicked in the past, recently they might have become inactive and then we unsubscribe such an email address, and that just varies from quarter-to-quarter depending on what we hear back from the ISPs because overall for us it’s very important of course to have good deliverability of our emails. And then second – as I said last quarter, we are really focusing much more on quality of new members. They are more expensive to acquire, so we don’t see the increase in spend immediately for actually probably in the next two quarters. We will not see it in a dramatic increase in overall membership because two, three years ago when our model was mainly advertising, we could just look at the new member and see how much did they click. Now we are selling vouchers, we are generating hotel bookings, we can judge much better if a new member is worth a lot to us or relatively little. A new member that we acquire who quickly makes a hotel booking from which we generate, let’s say, $50 in commission, of course it’s quite valuable and we were not able to do that in the past. So as you see, we have an increased focused on quality rather than quantity.

Perfect. The second part of that answer, Holger, was actually exactly what I was looking for. And then there was a pretty big reduction in the European headcount. Can you give us your thoughts? Obviously, if you exclude FX, it sounds like Europe wasn’t as bad I think maybe as we were anticipating. So just your thoughts on sort of how you attack the non-U.S. platform and really where you see the areas of opportunity?

Chris, do you want to comment on Europe.

Yes. We only saw headcount reduction in Europe of three, so maybe you’re looking at the North American number which was a little bit more than three. The European picture looked at the FX rate having a clear impact on the results, having the teams quite pleased with how the quarter came out. They are also transitioning into the new Hotel Booking platform, which means they are not selling vouchers with the recognized revenue right away and we are obviously showing some revenue into the next quarter from that booking platform. There’s quite a bit of groundwork that needs to be done prior to launching that booking platform into the markets as well. So I don’t want to use the word distracted, but the team has to get that work done in order to get the booking platform live in those countries. I mean, you can’t just go into Germany with the New York hotel written in English, for example. That needs to be written in German. It needs to be priced in euros and you got to contract with those hotels in those markets. So all of that work is being done. I think Glen pointed out in reality, Europe was down 4%. Some of that was pullback on SuperSearch and Fly.com to drive some profitability. So I think generally the European are reasonably happy there.

I really want to compliment our teams this quarter in North America and Europe. They worked very, very hard. We had a slow start and then we really did quite well in March. But as Chris said, there’s a lot of transition but the people really went in and – really just to comment on this headcount reduction because it’s really related more to an increased shift on performance and our motto is sort of do more for less. And one area where both Chris and I are particularly pleased is for example local deals. We’ve become incredibly productive there and the team in local has done a fantastic job in March. You still see of course revenues declining year-over-year but what is happening that a few of the fairly weak players have left that area and that allows the strong players to really grab some additional territory and become even more successful, and that’s why we’ve seen some really good gains in local deals for example and in a few other areas in North America as well. We’re quite pleased with that and our motto continues to be to just raise the bar.

Great. Thanks for all the color there. And yes, Chris, obviously I know North America was down a lot more. I just thought maybe building out the platform, you would be adding the heads there, but you gave a good explanation just to sort of your thought process there. So just maybe one more I guess maybe for you, Holger, then I’ll step aside. I know we’ve talked about sort of refreshing the Web site and sort of your longer term goals here. Obviously, you’ve made Search functionality a bigger priority and it’s gotten a little bit more prominence on several of the pages. Just curious on sort of your timing of when we get maybe another sort of frontend refresh or how you think about breaking out the segments to be both more mobile friendly although you have a strong travel presence on the mobile app. And just how you think about breaking out the Web site going forward? Thanks.

Yes, we have a lot of work underway, a lot of projects we’re working with some outside companies as well. Not a lot that you see right now but we’re quite ambitious for this year and we hope to have quite some product changes towards the end of the year. But we are all working very hard to improve things on the way as quickly as we can. Thanks, Dan.

All right, great. Thank you.

Thank you. Our next question comes from the line of Ed Woo of Ascendiant Capital. Your line is open. Please go ahead.

Thank you. I had a couple of clarifying questions. I didn’t know – Glen, you mentioned that Q2 guidance you expect continued declines in revenue. Is it a similar decline or do you state what the magnitude of the declines were?

No, we didn’t get into the magnitude. We haven’t done that historically but what we’re seeing is just with this new product transformation, that does have an impact on the revenue. And then on top of that, there are a few other things that I mentioned, vacation packager revenue is down and that will be sustained and the FX impact will increase going into this quarter in particular because it was at a peak to last year’s Q2. So if you look at the last several quarters’ declines, I think that’s a good barometer for what we’re expecting.

Great. And then you mentioned that you’re going to be increasing marketing spending 2 million to 3 million year-over-year for the next several quarters. I know that you probably have some product development investments in the first quarter as well but yet your overall expenses were about relatively flat versus last year. Do you think that that could be the same over the next several quarters that you can increase the spending? And how were you able to [ph] increase these spending but yet manage to have overall expenses about flat?

A lot of hard work by the team. I think part of that was due to just the team really looking at – taking a hard look at the non-investment areas and making sure we’re being as productive as possible. So still part of it was self-funded. So we’re hoping to continue that effort and make sure we’re trying our best to keep those non-investment areas as productive as possible.

Great. And then last question I have is how’s the hotels booking engine progressing? Has it – is it fully live open to everybody or is it still kind of in beta testing in North America and Europe?

Anyone can book a hotel but as I said, we haven’t promoted it yet and we still have fairly weak content in some destinations. We focus on those destinations that are most important. And before we really promote it more to our member base, we want to make the product better and also increase the content. But if you want to go to Travelzoo and book a hotel for New York for this weekend, you can do so and we are happy if you do.

And to be clear that’s within the United States. It’s not live in any of the other countries yet and it’s not on the homepage yet.

And you might not find it easily, because we really don’t – we’re still a bit in testing more rather than promoting more. Thanks, Ed.

All right, thank you.

Thank you, Ed.

Thank you. Our next question comes from the line of Tom White of Macquarie. Your line is open. Please go ahead.

Hi, guys. This is Mackey [ph] in for Tom White. Thanks for taking my question. My first question is a product-related question. Base stage, you guys are transitioning towards more of a pull-oriented marketplace. Can you give us an update of what sort of inning you guys are in, in terms of scaling out your supply and developing the product?

Our main focus is on hotels at this time, so I think we have invested quite a bit of effort and money as well over the last one and half years to build that platform, but there’s still quite a bit of product enhancements that has to occur. And as Chris mentioned, we have to roll it out in other countries, even worldwide at some point in time. And then regarding the content, yes, we have very good coverage now in sort of the top 10 destinations for North America but I think we need another couple of quarters to really bring in more hotels in areas where what I would call secondary markets.

Okay, great. Thanks. And a follow-up question actually is recently we’ve seen a lot of M&A in the travel industry. And I was wondering if you guys see any opportunity or risk for you?

I would say it’s probably more of a good thing for us, because particularly in hotel distribution you now just have two massive players. And when I speak with consumers, they say, oh, great, I’m using a Web site called Trivago. They compare all these prices from Expedia and Hotels.com and Orbitz and Travelocity. And I tell them, well, are you aware that all these sites are owned by the same company? Oh, no, I didn’t know about it. And then are you even aware that Trivago is even owned by the same company? No, of course. Well, so they basically in essence compare their own products against other Web sites that they own themselves. So you really have massive concentration there and I think when we speak with the hotels, they are quite relieved to have some additional players in this space. And we are one of the remaining independent players here. And I think right now that’s a good position to be in.

Okay, great. Thanks. And last question --

I thought that was your last question.

One more, sorry. I’m seeing – we saw a bit of leverage in your cost of revenue this quarter, the first time in quite a while. I was just wondering if this is a sustainable trend going forward?

I think from a year-over-year basis that makes sense. With the seasonality between Q4 and Q1 that was the main driver of that drop seasonally.

Okay, great. Thank you.

Thank you. I’ll now turn the conference back over to Mr. Holger Bartel.

Well, ladies and gentlemen, thank you again for your time and support. We look forward to speaking with you again next quarter. Have a nice day. Bye.