Holger Bartel - Executive Chairman Christopher Loughlin - Chief Executive Officer Glen Ceremony - Chief Financial Officer.

Edward Woo - Ascendiant Capital Daniel Kurnos - Benchmark Company Tom White - Macquarie.

Good morning, everyone, and welcome to the Travelzoo Fourth Quarter 2014 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 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 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 website at www.travelzoo.com/earnings.

Please refer to company's website 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 website 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 and thank you all for joining us today for Travelzoo's fourth quarter 2014 financial results conference call. I'm Holger Bartel, Executive Chairman of Travelzoo 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 fourth 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 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 $31.5 million, down 16% year-over-year, primarily due to declines in Search, Local Deals and Getaways.

Our non-GAAP loss per share this quarter was $0.04, which is lower than the prior year period EPS due primarily to the lower revenue and an increase in spending on member acquisitions. Our members grew 4% year-over-year, along with continued mobile app downloads. Slide 4 highlights our revenue by segment.

Revenue in North America was $21.1 million, representing a year-over-year decline of 18% and in Europe revenue was $10.4 million, representing a year-over-year decline of 12%. In local currency, Europe revenue decreased year-over-year by 10%. The next few slides cover further detail of our North America and Europe segments.

Slide 5 shows that North America year-over-year revenue decreased by $4.5 million.

$600,000 was due to our planned reduction of Search product marketing spend, an additional $1.8 million was due to lower voucher sales for Local and the remaining $2.1 million was due to Travel, which was impacted primarily by lower voucher sales for Getaways and in addition, lower hotel fixed-fee placement and lower spending by certain online booking engines.

During the quarter we continued to run more deals through our Hotel Booking Platform instead of the Getaways model, which affects revenues because in these cases revenue is recognized much later. In Local, voucher sales coming from push promotions have decreased, while we are increasing the number of deals that are available when our users want them.

On slide 6, the Europe year-over-year revenue decreased by $1.5 million.

$300,000 was due to our planned reduction of Search product marketing spend, $400,000 was due to lower voucher sales for Local and the remaining $800,000 was due to Travel, which was impacted by lower voucher sales for Getaways and a decline in the value of the euro and British pound. Slide 7 provides some detail on our operating income and loss.

We had a $600,000 overall non-GAAP operating loss. North America had a $900,000 operating loss, which was offset by Europe's $400,000 operating income.

The operating income was lower due to continued investments to develop our products as well as an increase in our investment in our member audience, despite revenues that were lower in part due to our transition of our product focus.

The non-GAAP income amounts exclude income of $1.8 million from a release of reserve related to our settlement agreement in connection with disputes over unclaimed property audits with the remaining states. As you may recall, we took a $22 million charge in our third quarter of 2013, which created the majority of the reserve for this matter.

As we have settled the remaining claims this quarter, we adjusted the reserve accordingly. We have now completed the settlement with all states over this matter and will complete all significant cash payments related to these settlements in early 2015. Slide 8 shows the cost of revenue and operating margin.

The cost of revenue as a percentage of revenue increased year-over-year. We launched our Hotel Booking Platform to portions of our member base, which increased customer service cost in the short term.

We increased our investment in product development and member acquisitions, despite the impact of lower revenue in the current period, resulting in a lower non-GAAP operating margin.

Moving on to slide 9, North America operating expenses decreased year-over-year by $600,000, due primarily to our planned reduction of Search product marketing spend, offset by certain one-time charges.

Europe operating expenses decreased by $100,000 due primarily to our planned reduction of Search product marketing spend, offset by an increase in member acquisition spend.

The overall decreases in operating expenses included cost we incurred this quarter for our companywide meeting to ensure our teams are engaged and aligned on the key elements of our strategy. Turning to slide 10, this shows that our headcount decreased this quarter by 8 employees. Our lower revenues and continued investments led to lower productivity.

We are focused on increasing productivity over time, yet believe our current investments are necessary to help achieve this in future periods. Slide 11 shows our DSO was held flat to last quarter, yet higher than last year, due primarily to an expected longer collection cycle from one of our new partners in Search.

Our cash position was $54.8 million, down from $57.2 million last quarter, due primarily to the negative FX on the cash that we hold in Europe. Much of our cash is held in non-US locations and therefore would be subject to US taxation if we brought it back to the US. Therefore we have been careful to manage our capital allocation within each region.

On slide 12, in summary, revenue declined as expected in the areas of Search, Local, and Getaways. In addition, we plan for the lower profitability due to continued investments in product development and member acquisition. Our cash position remains solid, yet was impacted by the continued negative FX translation on our European cash.

Looking forward to this next quarter, we expect the following. We expect the recent year-over-year decline in revenue to persist. This is due in part to the transition of our products that is underway.

We expect to continue our increased investment in product development, as we transform our products in order to address what we believe is needed to enhance and protect our business. In addition, we expect to incur increased levels of professional costs for various initiatives, as well as increased levels of marketing costs.

In regards to the marketing, we intend to continue our increased level of spending on member acquisitions and other marketing over the next several quarters by approximately $2 million to $3 million year-over-year. We will moderate this investment subject to the performance of our business so that we can meet our internal targets.

In summary, because of these investments, this means we expect to generate lower operating income or potentially operating losses year-over-year. We are taking steps to control non-investment area costs and are focused on increasing productivity of the resources we have deployed. This concludes the financial summary of our fourth quarter of 2014.

And now Holger will provide you an update on Travelzoo's strategy..

Thanks, Glen. Please turn to slide 14, please. Our growth strategy continues to build on two pillars. On the one hand we're looking to grow our audience, in particular the number of subscribers of members, this is shown on the X-axis here. At the same time we are also 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 find deals 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.

As page 15 shows, this strategy has not yet translated into the kind of growth we are looking for. We have a solid member base and audience. They are growing, especially on the mobile and social front, as we show it on the right. But our products are still not easy and not complete enough to help users find what they need.

Allow me to explain this more on page 16. We've been very successful in the past 15 years to inspire our members by telling them about great deals at quality places.

We will tell them for example, to take a five-day trip to Iceland had an amazing price, but when they are simply looking to find a deal for an upcoming weekend getaway in New York, we offer very little help. This is very important because we feel that that is a very basic need among a mass audience.

Looking for a specific deal on specific dates at a specific destination is something that a lot of people need every day. Being inspired via email to go to places that you didn't think about is certainly a less – is certainly a smaller opportunity.

So it's really important to understand why we have been focusing so much on building this hotel platform that allows our users to find deals when and where they need them. How does this strategy translate into our business? As page 17 shows, we are investing right now into making our products easier to search and simpler to use.

In particular, we have launched a Hotel Booking Platform which allows users to find deals anytime and book them easily on any device. We have rolled out this platform to part of our audience, but we are not happy with the content. In fact, we rolled out and tested this platform at the beginning of 2014 and we are actually not happy with the product.

The feedback we received from our members was that there are too little hotels, the hotels that we show are too expensive. And also we found that our offering in this platform was really not competitive with other sites. So we haven't really emphasized this platform to our members over the last couple of quarters.

But we've been working hard on a transition and makeover of this platform to solve and address these issues, and we intend to re-launch and test a different product with better content sometime this quarter. But in the short term this means that our product related expenses are up as a percentage of revenue, as we show on the right side.

Also, moving deal transactions from vouchers onto the Hotel Booking Platform has shown to increase revenue per deal in some tests that we did, but it also comes with a delay in revenue recognition. So keep in mind that net revenues from bookings are only recognized after the hotel stay has been completed.

With vouchers, on the other hand, revenues are recognized when the voucher is sold. So as we transition our deals more from vouchers towards the Booking Platform, revenue recognition is becoming delayed. On page 18, let me talk about our Local Deals products. Like all others in the industry, we are seeing a shift in consumer habits.

They purchase deals for restaurants, bars or fun activities less in advance, but at the time when they need them. This shift from push to pull is also affecting us and we are responding in several ways. On one hand, we are increasing the number of deals that are live on our sites and our apps, which can be purchased at any time.

In our top markets in the US, for example, we almost doubled the amount of deals year-over-year. We intend to grow this further, because as people are searching for deals when they need them, a larger inventory of deals means that they are more likely to find something they like.

On the other hand, we are also developing products that make it easy for our users to find deals close to them wherever they are. We are also experimenting with alternatives to the relatively rigid voucher format.

None of this has really come to fruition yet in 2014, as we are continuing to refine these product offerings before we start offering them to our members.

You can see in the bottom right of the page that this strategy is starting to bear fruit, as both mobile purchases and what I call pull purchases have increased in year-over-year as a percentage of total sales. But the decline in trend from push remains for the time being stronger than the upwards trend from pull. So we're still seeing a net decline.

Let's now look at Search on page 19. In the past we didn't manage this product towards profitability. We often ran marketing which drove users to SuperSearch or Fly.com, which didn't generate a profit or didn't come back. We have become more selective now and reduced this overspending on marketing these Search products. But this affects the volume.

So revenue is decreasing while profitability is up. Let's move to the second pillar of our strategy, our members, growing our audience and growing our member base. In the past our member acquisition has been relatively one-dimensional. We have been running online ads to drive users to our sites, with the objective to turn them into long-term members.

What we now have begun to explore are new and different ways to augment our high quality audience both online and offline. As we test new forms of marketing, they can sometimes be less efficient at the beginning until we learn and can optimize them.

We also have a very large follower base on Facebook and we feel like we haven't been utilizing this to the extent that we can. I'd like to have Chris comment a little bit later on that topic. We also believe that there's a great opportunity in our loyal members themselves.

Millions of them love the brand and love to take advantage of our deals and leveraging their affection with the brand towards referrals represents not only a large but also highly efficient way to increase our audience. You might have noticed that starting in this presentation we have been talking about members instead of subscribers.

We just feel that the word subscribers is quite a passive word. And when we really think about our members they are contributing and we want them to contribute more to our business in the future. They are giving us tremendous feedback on the deals that they are using.

And so we learn about what places to recommend, what places to recommend more, what deals were great, what deals were not so great, and what to provide better to the member base in the future.

In addition we also have the Travelzoo Network, which publishes deals to partner sites such as the LA Times, Yahoo Travel, or Frommers, just to name a few examples. And that creates more awareness of our quality deals well beyond our site.

So as Glen mentioned and shown on slide 21, we will continue to ramp up subscriber marketing during the current quarter and early next year. This will continue to impact our profitability and earnings per share, but we believe it's the right investment into the company's future.

We have found the lifetime value of a member is several times greater than their cost of acquisition, but it takes several quarters to bring the investment back. Also, I have to say that 5 years ago most of our revenue was driven by advertising. All we really knew about the behavior of our members was on which deals they clicked.

We didn't have much information about what deals they actually purchased. This has really changed over the last five years, because we have more deals that we are selling ourselves and we are making money by earning commission on the sale of these deals.

But that also helps us to better understand what members like, what they do, which members are active, and which ones are actually purchasing deals. So with that increased knowledge, our member acquisition will increasingly focus on acquiring members that are highly valuable, rather than acquiring just a sheer amount of large new members.

So our focus on member acquisition going forward will be more on quality rather than quantity. Turning to page 22nd, again, we are proud to be the quality leader in this business. Day after day our staff of over 100 producers select, research, negotiate and validate the very best deals.

Whether it's the Spa at the Four Seasons or dining at a top-rated restaurant, our focus is always on quality. We do not want to recommend any deal to our members which we would not use ourselves. And our test booking centers in Europe and North America ensure the deals that we publish are real and valid and not just bait and switch.

We believe that our passionate focus on the very best deals at the very best places drives loyalty in the long run and positions us well for long-term success. So let me summarize, finally, our management focus, shown on page 23. Maintaining and strengthening our quality leadership is crucial.

We intend to resume topline growth in multiple ways, via products that make pull equally simple as push and by continuing to grow the number of people who use us. But as we invest on both fronts we would like to remain profitable.

Operator?.

Thank you. [Operator Instructions] All right. Our first question comes from the line of Ed Woo with Ascendiant Capital. Your line is open..

Yes, thanks for taking my question. I had a general comment. What do you see out there for the travel industry right now? I know we've been getting - hearing some comments about Europe. And then also it seems like, I'm not sure if the low oil prices have changed anything in terms of the travel industry or any of the pricing on airfares..

Chris, do you want to comment on this?.

Yes, sure. Hi, Ed. Many of the airlines are hedged in to a slightly higher price through the middle of the year, and you can see that by airline, same with the cruise lines. So we're not seeing too much change there yet. Clearly it's much cheaper for consumers to drive for Getaways.

And we are seeing just on the hotel side we are seeing quite some deals in January, but we don't expect that to continue so aggressively. I think we'll start to see occupancy levels in those major cities come back in probably mid-February. And then right now for example is just a terrific time to go to New York if you wanted a deal.

The European currency is clearly very attractive. You're seeing that in the news. I think we really were the brand that was driving that message in the last two weeks and we are seeing some of the Middle Eastern carriers take advantage of that. We just saw a fantastic two for one sale to Rome from Qatar.

So it seems that the – those airlines that need to expand in the US market are really taking advantage of it. And I'm assuming that the hedging strategy for the Middle East is quite different to what we see here in the US – with the US carriers..

Have you seen any….

With regards to hotels, Ed, just to comment also on this question. Of course as the economy in the US is improving and hotels become busier and fuller, it's more difficult to get great deals. But it's not that the deals don't exist, it's that the deals are more specific.

Before, like two or three years ago, they might have been offered over a very long period of time. Today they might be offered over more specific time periods.

And that's why this shift in our hotel business to this booking – Hotel Booking Platform is so important and critical, because with that platform we really allow people to find when these deals are available.

And even if they need to go at a certain time to a certain place, we will tell them what is the best deal that's available on these dates and what's the best value that you can get.

That's something where we didn't help in the future, that's an occasion where we didn't generate any revenue in the past, and that's something that is a big opportunity for us in the future. So we're still quite eager to launch this Hotel Platform and to make it better and really allow our users to find the deals when they need them.

It's a very, very important part of our strategy and something that we believe is a quite tremendous opportunity. We just don't see it yet in Q4 because we have been working intensely on the product..

You mentioned that US hotels are doing better, so you're seeing less dealing or deals. What about in Europe? It seems that the macro environment in – it now looks like northern countries seem to be weakening.

Are you seeing more potential deals and offers from those hotels that may drive traffic to offset the weak economy?.

Yes, I would say our observation reflects what is generally going on in the economy. It's a divergence between North America, in particular the US and the European countries, where in Europe clearly the economy is not doing as well and we see in many areas more and more aggressive deals.

But also we have to keep in mind that that really has a significant impact on our financial results in 2015 because of the exchange rates. The euro and the British pound, which constitute a very significant part of our business now, because our Europe operations have grown so much in the last few years.

In fact a few quarters ago they contributed half of our profits, because of that and the decline in these currencies by 15%, that's definitely something that will also impact our revenues throughout the year 2015, because I don't see this trend of a weak euro and a weak pound changing any time quickly..

Great. Moving on to a different question, it looks like – how much do you spend last quarter in member acquisition? It looks like your members numbers were relatively flat quarter-over-quarter.

Was there anything that really changed?.

Glen will comment on that. But before he addresses that more specifically, Ed, as I pointed out earlier we are now focused much more on high quality members and active members, rather than just increasing the total number of members.

We now have better tools and ways to understand which members are active, which members are profitable, which members have a high lifetime value, and we're focusing on increasing the quality rather than the sheer total amount of members. So we don't necessarily see that reflected in the overall number. But Glen, please add on here..

Yes. There still is an increase, Ed, around 600,000 year-over-year in the member acquisition that we deployed this quarter. So we didn't go all the way up to the max of what we were – kind of had as far as a range. We had some other costs during the quarter as well.

With the kind of re-look at our strategy and the products, we wanted to make sure we got the entire company together. We have a lot of offices and a lot of teams in different offices. We got those – everyone together this quarter.

There were some costs associated with that, but we felt it was important to get the team aligned and focused on this transition period that we're going through..

Great. Well, thank you and good luck..

Our next question comes from the line of Dan Kurnos with Benchmark Company. Your line is open..

Great, thanks. Good morning. Holger, let me ask – start by asking you two high level vision type questions. The first is, look, I mean, a few years ago Travelzoo had a real identity and clearly you still have a pretty entrenched loyal user base.

So I guess as you shift towards some of the more competitive environments, particularly the Hotel Booking Platform, and away from some of the things that you guys were really able to differentiate from your competitors with in terms of the quality of deals.

I'm just curious how you think about creating products that can really be differentiated in this environment as it gets more competitive and more people enter the space. Actually, why don't you start with that one and then I'll follow up with my with my second vision question..

Sure. I think there's two areas. When you look at the big booking engines that are out there, you see two things. One, it's all about volume and like all hotels, anything under the world, regardless of whether they are good or bad.

Yesterday I actually was on the site of a competitor and they touted, okay, fantastic deal at the Hotel Pennsylvania in New York. I went to TripAdvisor, I was looking at pictures and videos of this hotel. It's actually – a lot of the people who have stayed there say it's not a good place. It's quite a terrible place to stay.

We have members that really trust us. So for us selection and recommendation is important.

The second area which is probably even more important and which wasn't about, maybe that obvious in the – when we tested this platform, and the booking engine earlier in 2014, Travelzoo is associated with deals and our users believe that when they come to Travelzoo they find deals.

Now, deals are not always available, but we will help our users to find the very best values on the dates that they are searching for. And the very best value in our eyes is often – can be viewed as a deal. If you find in a very, very busy period in New York a four-star hotel for $199, when all others cost $400, that is relatively still a good deal.

So our positioning will be very consistent with what the Travelzoo brand is about, which means help users find the best deals and values whenever they need them..

That's an interesting point, to go off that for a second.

As you think about it, is there a way, either as an affiliate seller to profit from that? Or do you really think that ultimately over time you can generate enough volume and scale and get enough deals of quality through the hotels directly to drive the booking engine or is it a combination of the two?.

On the user side we have a very, very large audience worldwide. And one thing that's also important to understand about this Hotel Platform is that in the past when Travelzoo had a specific deal in a specific location, let's say for example our French office negotiated a fantastic deal at a hotel in Paris.

It was a very cumbersome process and actually a very time consuming process to make users in other countries aware of that deal. So you are – let's say you are in the US and you are looking for a deal in Paris, you would not even be aware that we have a fantastic deal at a hotel in Paris.

With the Booking Platform, the way we are designing this, that is really changing. Because we will make these deals accessible to any of our over 20 million members worldwide pretty much immediately. That's clearly the vision.

So – and I think, because we are fulfilling now a much – with this product we are fulfilling a much more basic need, again, how many people need a hotel in New York or Chicago next weekend versus how many people can jump on an airplane tomorrow to fly to Iceland, the need on the user side is just tremendously different.

On the supply side, obviously it doesn't make sense for us to work with all hotels individually and directly, particularly in very remote and niche locations. So we are also looking to integrate some partners from which we get some inventory of hotel deals, as long as they can provide good rates to us..

Great. That's very helpful….

I'm not excluding that there will be an affiliate strategy. But it's something that we are not thinking about it right now, because first we have to have a good product. And then I also think our members really – we have seen that in the past, if we have a good product for our members, they will clearly tell others about it.

And I think there's a big opportunity for us that, once we have a product that people like, to have them refer others to this product..

Okay. That's helpful to hear how you think about that. So let me ask you sort of the follow-up….

Can I comment on one more thing….

You certainly may..

Because I hear a lot that people say the hotel booking business is not attractive, it's very competitive, it's a very – it's not an attractive business. The reality is we have two very, very big, huge worldwide players in Expedia, the Expedia family on the one hand, and Priceline/Booking.com family on the other hand.

That opens in our opinion a good strategy, a good opportunity for doing something that is a bit different. And also in addition, the margins in this business are just tremendously large. There's very few industries that you see that have such attractive margins. So I think it's an area where it is very attractive to play in the long-term.

But no, I mean we understand that you as the analysts or investors, everybody's becoming very impatient because we say for the last few quarters, well, we're working on creating pull products, we're working on the Hotel Platform.

How long is this taking, you're making investments, you're – now we have actually even incurred a loss in Q4 because of these investments. We feel it's the right thing to do. But we are impatient ourselves. When I came back into the business in September, one of my – I'm very ambitious.

One of my goals is to launch this revised Hotel Platform as quickly as possible to improve the experience for our users to allow our members to find deals when they need them. So you might not see a lot of the work that's going on within the company, but we are working very hard on that.

And I just want to acknowledge that we understand that of course we are all impatient and want to see results more quickly..

I think it was not really a patience issue for me anyway. It was more – the reason I asked you about the vision was just to get a sense of – it's certainly helpful to get all that background.

And we'll see what happens with TripAdvisor trying to go to a direct booking system and clearly a lot of smaller players are either going out of business or getting gobbled up by larger players in the space and understanding kind of attractive opportunity.

But so let me segue all of that into my second high level vision question, which really comes down to the core travel business. Historically we've seen kind of ebbs and flows from your advertisers in terms of coming back to the table. Obviously last year we had some disruption from the political environment.

And this year it sounds like if the core travel declines are going to persist at least in the near term as you work through the Hotel Booking Platform.

How integral is the legacy core Travel platform to the ultimate long-term vision that you have for the business? And do Getaways and that Travel platform, does that morph into a component of the Hotel Booking Platform as advisors – excuse me, as advertisers potentially shift the way that they spend their advertising budgets?.

So Chris is much more close to daily operations. So I'll let him actually respond to this question..

The model that we've been operating with the tour operators and many of the large brands, I mean, hotel brands still advertise with us directly and they pay more than $50,000 for an inclusion in our Top 20 every week. That's not changing at the macro level. In fact if anything it's getting stronger.

We always have one or two large clients in that group that are changing. You have a new CMO or you have a new owner of a business, and that can have a one or two quarter impact on that business for us. But in the last three months I've been out to meet plenty of the advertisers and I'm very confident in that side of the house.

I don't see a need for change. The one area that's quite exciting for us going forward Holger mentioned earlier, Facebook. We're one of the largest brands in Travel on Facebook and Twitter. We're up there with Groupon and Expedia, definitely punching above our weight. But we don't use that data very effectively.

The other thing we have been collecting for more than a year now is the behavioral data of what's going on. So we now know if someone has a much stronger intention to go cruising rather than to go rent a car or something like that. We haven't started to leverage that data.

There's a lot of experimentation happening inside the business and I think that that's quite exciting. We ran an experiment for a UK hotel just two weeks ago and we were able to talk to people. The hotel is in the Cotswolds, about 40 minutes outside of Oxford.

We were able to talk directly to people who lived around that property who liked gardening, who liked Oxford University, and who liked the brand of the hotel. And there are very few travel brands that are able to do that with such broad base of content and a broad base of consumers. So it's a very early stage. The results are certainly positive.

But I think that you think a few years down the road, Travelzoo will certainly be a leader in this big data space..

Yes. Maybe we could talk about it offline, follow up. I'd be curious to hear if you are using or finding any effectiveness in Facebook look alike program, but probably more of an off-line discussion.

So not to monopolize, let me just ask the two other sort of primary questions I wanted to get to which were, one, it looks like you've implemented some more gates on the website with the obvious intention of getting people to sign up. I'm wondering how effective that's been. And then number two on the mobile side.

Since, Holger, you spoke to the quality of adding members, I'm wondering if you're paying up to acquire downloads or if you're pursuing a different mobile strategy? Thanks..

Keep in mind we're doing quite a bit of testing these days. So what you might see as sort of a sign-up barrier is different than what other people might see. So don't draw any conclusions. In the end it's about finding the best mix between acquiring members but also maintaining a relatively high revenue level from the website.

Yes, we are looking on member, on acquiring and adding new members on all fronts, whether it's people who sign up for our deal emails, whether it's people who are becoming followers for us on Facebook or whether it's people downloading our app. So we are focusing on all these matters..

On the gating implementation, just any benefit from that so far in terms of sign-ups?.

Sorry, what implementation?.

The overlay. As Holger mentioned, we're testing many different models and we don't even know which one you're referring to because there are several out there. But of course we're constantly improving that. There's more of a focus on that, Dan, than perhaps before. And really the thing about it is the acquisition of active members.

We need to find people who like our taste, who have got money and have got time to participate in our deals. So where we're looking for members is changing. And then communicating to those members how they can use us, that's improving as well. And that's a perpetual activity in the business..

All right. So it's young. Thanks for the color, Chris. Thanks for all the color, guys..

Yes. Thanks for all the questions..

All right. And our next question comes from the line of Tom White with Macquarie. Your line is open..

Hi, guys, thanks for taking my question. I've got one sort of product related question and then just a quick housekeeping one.

But on the product side, I guess, when we think about your transition towards more a pull-oriented product strategy for your Travel business, what kind of inning do you think you are sort of in, in terms of scaling out supply there and developing the product? And then when we think about sort of the demand side of that marketplace, do you sort of – are you sort of expecting or hoping that kind of once you've hit a certain tipping point in terms of deal or hotel volume that that might tip and start driving consumer traffic? Or do you think kind of the demand side will be driven more by maybe sort of marketing or explaining to your subscribers kind of about this new offering? I'm just kind of curious how to think about where we are in the supply build-out and then kind of what really gets the demand side kicking in.

And then I've just got a quick follow up. Thanks..

It will be a combination of all of this. But most importantly it will be the product. I mean, our members in the past have come to our website. If you come to our website on the homepage and you will say, okay I want to find a deal in New York, I want to find a deal for staying in New York this weekend, it's simply not possible to do this.

It's possible, but it takes you 20 minutes and it's extremely frustrating. So our members have learned that they love our emails, they love our Top 20, but they find our site and our products not particularly useful when they need something.

So it will take some time to change that behavior, but we think that a product that is more pull oriented will change that. But we will of course also support that with messaging, both to our members of course and then also through messaging outside of our member base via marketing..

Okay, thanks. And then just in the prepared remarks just kind of about the outlook, there was a mention of incurring some sort of increased level of professional costs for various initiatives. I was just wondering if maybe you could provide a bit of color on exactly what those are for..

Glen?.

Yes. I think those costs are just primarily product related. Sometimes we hit areas that we need to explore and invest in, and we don't have the time or expertise internally to address that. So not hugely significant, but thought we'd mention it..

Okay.

So more sort of product related as opposed to, I don't know, legal or stuff like that?.

Correct..

Okay. That does it for me. Thank you very much, guys..

Okay. I'll turn the call back to Mr. Holger Bartel..

So, thank you all. Thanks for your time. Thanks for your support, and we look forward to speaking with you again next quarter..

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time and have a pleasant day..