Hello, everyone. Welcome to the Travelzoo First Quarter 2020 Financial Results Conference Call. All participants have been placed in a listen-only mode. And the floor will be open for questions following the presentation. Today's call is being recorded. The Company would like to remind you that all statements made during this conference call and presented in the 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 these 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 refer to the Company's website for important information, including the Company's earnings press release issued earlier this morning. An archived recording of this conference call will be made available on the Travelzoo Investor Relations website at travelzoo.com/ir. Now, it's my pleasure to turn the floor over to Travelzoo's Global Chief Executive Officer, Holger Bartel; and its Chief Accounting Officer, Lisa Su. Lisa will start with an overview of the first quarter 2020 financial results.

Thank you, operator. And welcome to those of you joining us today. First, please let me explain why we report Q1 earnings today. In March, the SEC issued a release, which allowed companies to delay the filing of their quarterly reports by 45 days due to the circumstances related to the COVID-19 pandemic. This allowed us to have more time for the accounting work related to Travelzoo's acquisition of Jack's Flight Club, the reclassifications required for the Asia Pacific business, and impairment analysis for long-lived asset. Please open the management presentation to follow along with our prepared remarks. The presentation and PDF format is available on our Investor Relations website. The first slide on page number three provides the effects of the COVID-19 pandemic. Revenues decreased year-over-year by $8.9 million. Loss of revenues and certain one-time expenses caused the EPS to go negative. On the next slide, on page four, you can see, due to the effects of the one-time charges in Q1 2020, we have put together a chart to show what the one-time expenses were, which include impairment of goodwill and bad debt, which are directly related to the current pandemic. While our net income from continuing operations was still negative, these one-time non-cash items increased our loss by $2.7 million. Without these non-cash book expenses, the Company would have reported around a $1 million loss for Q1 2020. On page five and page six, our revenue is detailed by business segment. When we provide you FX figures, both North America and Europe recorded a decrease in revenue of 32% due to the pandemic. We saw advertising drop off significantly in March of 2020 in both Europe and North America, due to advertisers reducing or canceling advertising due to the pandemic. Consequently, as shown on page number seven, the operating expenses were relatively flat compared to year-over-year. But we went into a negative position due to the loss of revenue. The Company's cash balance decreased to $14.4 million at the end of Q1 2020, but we expect to generate $13 million to $14 million in cash from operations in Q2, offset by cash used in financing, which includes $6.8 million to pay down the promissory note. We expect to end Q2 with around $24 million to $25 million. On page number nine, the summary is that the Company experienced revenue decline [Technical Difficulty] lost revenue due to the COVID-19 pandemic. We attempted to reduce expenses through Q1, but by the time [Technical Difficulty]. We expect the reductions [Technical Difficulty]. Company also had two significant unusual non-cash expenses in Q1 2020, which are related to the impairment [Technical Difficulty] $2.9 million and an increased for bad debt [Technical Difficulty]. We discontinued the APAC business [Technical Difficulty] will eliminate significant [Technical Difficulty] highly profitable [Technical Difficulty]. We also had a onetime [Technical Difficulty]. Now, Holger will provide an update on [Technical Difficulty] before we open the floor for questions.

Thank you, Lisa. Going into Q2, we were able to adjust our content offering quickly and successfully. After 92% of Travelzoo members told in an online survey they were interested in receiving travel deals if the offers were flexible, we focused our weekly Top 20, which has for the past 20 years been the definite list of the week’s best travel deals on the internet, on flexible and worry-free offers. Travel dates of most deals are extended to late summer, fall or even into 2021. Accelerating demand from our members has created a relatively strong business for Travelzoo. In Q2, we have already generated cash flow from operations of more than $11 million quarter-to-date. We also worked on and have already achieved a significant reduction in operating expenses. Please refer to slide 11 and 12. And besides being focused on generating positive cash flow, we will, as previously announced, leverage the opportunity to grow Jack's Flight Club profitable subscription revenue, particularly in the U.S. where it launched in Q2 2020. Now, back to the operator.

[Operator Instructions] Our first quarter comes from Jim Goss of Barrington Research.

Okay. Thank you. I have several questions. One is, I'm wondering if this situation that is developed and the turmoil creates a market share opportunity for Travelzoo versus bigger competitors, are there aspects of the business that you think you can penetrate more significantly that might have been owned by them that will not be part of your profile, or other things that might be a positive that might come out of this for you?

Hi, Jim. Yes, I think so. What Travelzoo does is, we are providing our members with irresistible offers that motivate them to go on trips that they didn't think about. So, in that respect, our service to the travel industry is to create demand. And at a time when many consumers are hesitant to travel, that's exactly what the travel industry needs. You can imagine that hotels around the world, airlines and cruise lines all want to see demand? And that's what we do. And that's why times like right now are normally good for our business in the past. When we have periods like 9/11, or the economic crisis, it was always a time when our business did quite well. So, yes, I think there's a good opportunity for us over the next few months and probably even for the next one or two years.

But you also talk about the flexible travel deals you're offering. And assuming you need buy-in on the part of the travel providers, I'm just wondering if you could talk about the formulation process and negotiations with those travel providers in creating something, that could be a more of an issue if there were things you had to buy and resell and then you were on the hook?

Yes, the travel providers like it. But most importantly, the question is do members like it. And what our voucher model offers to members is that they can lock in a deal, but they don't have to decide right away when they travel; they can, but they don't have to. And the deal is flexible. In many cases, it's even refundable. So, what that allows the members to make travel decisions and plan at the time when the uncertainty is still high and it's not even clear when you can travel to some of these countries. So, that creates the demand I spoke about. And that's why the travel industry and particularly hotels and resorts are very happy with that offering right now. And it's also an offering that travel is quite unique. They are no other companies in North America or Europe that have exactly the same model.

So, you don't have any risk exposure on those flexible travel deals that were, you're the intermediary, so you don't really have an issue where you might have -- I think someone like Expedia might buy a certain number of hotel rooms or flights and then resell them. You don't have any of that type of exposure in any of the elements for your business?

Yes, correct. We don't assume any risk. And in fact, we retain the funds and pay them only to the travel providers after the trip is completed.

Okay. The last thing I might ask you is, I think in a number of cases, the global pandemic creates changes that will persist into the future, beyond the current crisis. What would think of elements that might fall in that category for Travelzoo and for the industry?

Well, we plan of course for the industry to take some time to come back and we're not only in travel, we're also in leisure, restaurants activities. We are planning of course very prudently for slow return, but we also believe that the return to travel can come possibly much more quickly than a lot of people expect. In fact, some of the destinations and hotels in 2021 are already seeing much higher occupancy rates. And as you can imagine, after 3.5 months of most people being stuck at home, they are all eager to travel again. So, we are actually seeing and we have seen already for the last two months that our members are very excited to travel again, and we see that in the demand that has accelerated from April to May and to June. So I think yes, the travel industry could possibly recover much more quickly than people expect right now.

And I might throw in one more and that relates to international travel and restrictions at airports. Some of the airports that are having lockdown are reopening but with certain requirements that there might be say a 72-hour window in which you need to show an evidence that you had a COVID test that proved negative, and you might face something else once you get into that area, and if you showed any symptoms, they might quarantine you or charge some significant costs. I wonder how much of the stumbling block that sort of process is going to be to get travel end up facilitated once again.

We hear that consumers accept it, and our members tell us two things that are important to them. First, flexibility of offers. When they buy a trip, they want to not have to worry about the need if they have to cancel it; and second, cleanliness at hotels, resorts, flying airlines. Anything that contains and increases their safety and security is something that they are willing to do and understand. So, that's what we heard back from our members.

Our next question comes from Michael Kupinski with Noble Capital Markets. Your line is now open.

Thank you. Jim asked a lot of my questions and good questions. So, I have just a few more. The question I have is, even after travel restrictions are lifted, particularly here in the United States, it seems like the -- at least the experts are saying that the industry may recover in phases and with consumers traveling more domestically, maybe doing more drives and rather than airlines before they do international travel. First of all, do you agree with that? And then, secondly, as U.S. state restrictions -- are they kind of affecting what the travel is in North America at this point? I was wondering if you could just give us a flavor between domestic bookings versus international.

Yes, Michael, absolutely correct. We're hearing exactly that from our members and we see it in their behavior. First trips they are taking is domestic place if they can drive to. Next step is trips within the U.S. or possibly to Hawaii or maybe to Mexico. And they are more comfortable with international travel to Europe into Asia Pacific starting in full and for sure for 2021. And we addressed it with our vouchers, all the vouchers that we have and the travel opportunities we have for trips to Europe and to Asia Pacific or long world trips. All of these offers are valid, at least until 2021. In fact, we had even a couple that were valid until 2022. There was one offer that we negotiated for our members in the Maldives, which broke every record of any deal that we had ever supplied to our members. So, who would have thought how comfortable members would be to travel and purchase a trip to the Maldives. So, we were quite surprised with that in a positive way. And then, keep in mind, we are a global business. We're not only in the U.S., but we also operate in Europe. We have a lot of members in Europe. And within Europe, starting July 1st, people can travel around again, everywhere. So, travel restrictions are lifting everywhere. But, since our model is based on planning future trips, it's something that doesn't even impact us that much right now.

The Maldives offer was compelling. But anyway, in terms of…

Did you buy it?

No, I didn't, but it was very tempting. I wish -- I don't take vacations that frequently. So, I wish I could. But in terms of the domestic versus international, is there any particular -- I guess, is there -- do you make more money on international or how -- I am just trying to understand is that -- it doesn't really make that much difference to you that the consumers are actually traveling more domestically.

And there's no difference for us. You will see, if you look at the Top 20 -- if you look at the Top 20 this month and compare it to three, four months ago, you will see -- you will find in every country where we publish the Top 20 will find much more domestic offers. So, we can very easily adopt and adjust to that.

And one of the big opportunities for you and which could be a significant growth opportunity for you is the Jack's Flight Club. I was wondering if you could just give me a sense of the benchmarks you hope to achieve, now that you've introduced this to the U.S. in the second quarter, and whether or not, just kind of in general, whether you're seeing subscription take rates that are encouraging. It would seem to me like it'd be kind of a tough time to launch something like this. But, I've been wrong before. So, what are your thoughts about the subscription business in the U.S. at this point?

Yes, very interesting. And sometimes things are counterintuitive to or have been counterintuitive to what you think. So, Jack's Flight Club started in the UK and 90% of their subscribers are in the UK now. This quarter they have launched in the U.S. And one beauty of their business model is of course that it's a subscription service. So while travel -- I mean, we're not a travel company, but while travel companies’ revenues really nosedived, Jack's Flight Club is continuing to charge subscription fees to their members. So, it's a very attractive model. We were surprised ourselves in April when our members told us I want to use this time that I'm stuck at home to travel -- to plan future trips. So, the information that Jack's Flight Club provided was actually very important to them during that time. And right now, in the U.S., when you look at airfares, you see a lot of sales, you see great airfares, you see amazing airfares, you see high airfares. They change as quickly as we have never seen before. So, the timing to launch the service in the U.S. is, to some extent, the best ever because now we see -- we saw a deal to -- from New York to Curacao for $50 round trip. We alerted our members. Within literally one hour it had sold out. So, I think members and consumers are very eager to get that kind of information. So, we believe there's a good opportunity to introduce this service right now, maybe even better than it was half a year ago. So -- but the future will tell.

Got you. It's quite surprising that you are doing so well in the second quarter. I was kind of prepared for something a little bit far worse. Could you just kind of give us a sense of the revenues impacting the quarter? I know that you've indicated that you're cutting expenses significantly. I was just wondering, can you maybe even frame the level of expenses that you cut, whether or not those -- how much of that is permanent versus temporary? If you can just kind of give us a sense of that?

Well, look, revenues in Q2 will clearly be down, no doubt about it. But, compared to many other companies, we think, as you said, and thanks for your compliment, we indeed have fared much, much better than a lot of other companies. Lisa I explained why our results for Q1 came late. For Q2, we don't see this happening again. So, our goal is to provide results for Q2 much more quickly after the quarter end. And then, you will have more insights. On the expense front, I would say that a lot of the reductions particularly in the area of staff cost and marketing, which are our two main expenses, marketing went down by almost 100%, staff and expenses probably by more than 50%. So, there are significant decreases. And as we said in the presentation, we are now building a long-term structure to run this business profitably again as quickly as we can. We would like to reach profitability again before the end of this year.

Our next question comes from Ed Woo with Ascendiant Capital.

Yes. Thank you for taking my question. My question is, have you seen any significant differences in how the travelers or consumers react in Europe versus the U.S., particularly in regions that maybe were hit earlier like Spain and Italy, versus some of the regions that are getting hit a little bit later, like in the U.S.?

Hi, Ed, really interesting question, and the simple answer is it's almost exactly the same everywhere as we said earlier for smaller domestic trips, then more trips with shorter flights, and then longer trips down the road. The only difference you see is that in the U.S. consumers were more optimistic a little bit sooner. Next was Germany where restrictions were released more quickly than in other countries because Germany was not as much affected. And then, UK and Spain and France followed last. But, same patents everywhere.

And another question is, you're hearing a little bit, particularly in the U.S. about resurgence in cases and possibly in some places, talk about lockdown. Have you noticed any change in consumer behavior, slowing down within last couple of weeks?

No. In fact, in the past couple of weeks, we saw even a better response from members, but I think that is simply a result of the flexibility that our deals are offering. And that's exactly what the members appreciate that no one knows about the future. And the product we have allows them to lock in a deal and book it worry-free because if anything happens and any closures happen again, they will not be affected negatively.

My final question is on Jack's Flight Club. Obviously, you mentioned that you launched it recently in the second quarter in the U.S. When all the airlines have stopped flying, you didn't notice any big attrition from your customer base, subscriber base or Jack's Flight Club?

The attrition rates over that last three, four-month period was pretty much the same as it was before, so no difference there. We didn't see during that period as many new signups as we would have seen before, but that is also now changing. And in the U.S., we haven't really begun U.S., we haven't Jack's Flight Club to our members. We will do that starting in the next couple of weeks. And as I mentioned earlier, I'm quite optimistic that this is a good time to introduce this service to more and more consumers in the U.S.

You're definitely correct about the prices being a lot more volatile and definitely a lot more discount. But, but are there any concerns as airlines either go out of business or significantly reduced, or flight schedules?

We will see. But, if you look around, the airline industry has received massive support from governments. So, I think the very weak ones have gone out of business already and the ones that are still around have bolstered themselves a good caution. And we will see, but firstly, I'm much more optimistic about the airline industry than probably the consensus that is out there. People -- what we are hearing day after day after day after day, people are tired of just staying at home. And if you are not able to go anywhere for three months, that just creates even more interest in trips, down the road. Imagine you're on a diet for three weeks -- for three months, that makes you even want more and more after that to go out and eat again. That’s simply what it is. People want to travel.

Our next question comes from Steve Silver with Argus Research. Your line is now open.

Thank you and congratulations on the resiliency of the business in the second quarter outlook, it's very impressive considering everything going on in the world. Most of my questions have been answered as well. The one that you really didn’t touch upon on the call was really the sale of the Japan business and the licensing agreement that came out of that. I was hoping you could just touch upon the financial implications for the Company moving forward. The press release mentions that Travelzoo does maintain ownership of the member base from the legacy business. I just want to get a sense as to the economics of the deal and perhaps if Travelzoo does participate in any way in the future as that membership base would grow under the new relationship?

Yes. Steve, I think it's a very positive and attractive agreement for us. We retain ownership of the assets, while at the same time, obviously, eliminating any risk from any performance in Japan. So, according to the license agreement, Travelzoo Japan K.K. obtained a license to use the intellectual property of Travelzoo. So, that's the trademark, the software, the processes, et cetera. And that's exclusively for Japan. And in exchange, we receive a royalty payment, which is based on the achievement of certain net revenue targets. So,, that's in a nutshell what the agreement is about.

Okay, great. Thank you so much. And congratulations, again.

Great. Thank you, everyone. So, back to the operator then.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Please stay safe and have a nice day.