Please refer to our website for important information, including our earnings release issued earlier this morning, along with the slides that accompany today’s prepared remarks.An archive recording of this conference call will be available on the Travelzoo Investor Relations’ website at www.travelzoo.com/ir, beginning approximately 90 minutes after the conclusion of this call. For the format of today’s call, I will review our Q2 2011 financial results, and then Chris will provide an update on our strategy. We will then conclude with a question-and-answer session. Now if you will please open our management presentation, which is available at www.travelzoo.com/earnings. Turning to slide five, we achieved record revenues of $37.6 million in Q2 2011, up 34% on the same period last year. We also achieved EPS of $0.30, up from $0.20 in the same period last year, and we continued our growth in new subscribers, adding approximately 800,000 new subscribers, that’s almost 300,000 more than in Q2 2010. On slide six, this provides more detail on our operating income. Operating income for the company in Q2 2011 was $7.6 million; $6.5 million came from our North America business, while Europe contributed record profit of $1.1 million and its fourth consecutive quarter of profitability. Our income tax expense was $2.8 million, resulting in net income of $4.9 million. Turning to slide seven, we look at revenue by segment. Revenue growth in North America was 25%, our highest quarterly growth rate in four years. In Europe, revenue growth accelerated to 67% year-over-year, and in local currency terms, we increased by 53%, ahead of our Q1 pace. Turning to slide eight, we present our operating income. North America, operating income was stable year-over-year and Europe increased twofold as it continued its profitability. This resulted in operating income of $7.6 million, representing a year-over-year growth rate of 29%, despite a $2 million television advertising test, an investments in Local Deals to future – to fuel future growth.
Slide nine, gives us more insight into operating expenses. Operating expenses in North America increased due to our investments in Local Deals and our $2 million television advertising test.In Europe, operating expenses increased due to our investment in Local Deals as well. Yet as we scale in Europe, as a percentage of Europe revenues, expenses decreased from a 109% to 84%. So despite our investments in both North America and Europe, because our total revenues increased 34% as a percentage of total revenue, the total operating expenses year-over-year remains stable at 73%. Slide 10, shows that our head count increased from 296 in Q1 of 2011 to 343 this quarter, our highest ever sequential growth rate in new employees. The majority of our new hires during Q2 were in Local Deals. As you can see our productivity declined as our new staff come up to speed. We are investing for future growth to bring the best deals to our subscribers, and we intend to increase productivity as revenue grows. Turning to slide 11, we take a look at our cash management, DSOs or day sales outstanding, decreased to 40 days, compared to 41 days in Q1 2011 and improved by five days, when compared to 2010. We ended the quarter with $40.1 million in cash and cash equivalents. This was down from prior quarter as a result of the Q1 2011 one-time $20 million State of Delaware settlement. As we continue to grow the Local Deals portion of our business, the cash flow increase. As consumers pay us immediately and then we pay the merchants their share at a later day. We summarize the financial results for the quarter on slide 12. We had a strong quarter with record revenues. The fastest year-over-year growth rate in four years. We had strong year-over-year growth in operating income despite investments in Local Deals and the $2 million television advertising test in the U.S. We also had our second best Q2 ever in terms of subscriber growth. Read the rest of this transcript for free on seekingalpha.com