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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. 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.For today’s format I will review our third quarter 2011 financial results, and then Chris will provide an update on our strategy. Thereafter we will 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, this slide provides you the key financial highlights for the quarter. We achieved record revenues of $38.7 million this quarter which is up 40% from the same period last year. This represents our fastest year-over-year revenue growth rate in five years. We also achieved earnings per share of $0.36 which is up 62% from $0.22 for the same period last year. In addition, we continued solid growth in new subscribers adding approximately 600,000 new subscribers. On slide six, we look at revenue by segment. Revenue growth in North America was 32%, our highest quarterly growth rate in five years. In Europe, revenue growth was 65% year-over-year, and in local currency terms, we increased by 59%. We are encouraged by this continued acceleration of revenues in each segment. Slide seven provides more detail on our operating income. Operating income for the company this quarter was $9.2 million; $7.8 million came from our North America business, while Europe contributed record profits of $1.4 million reaching over a year of profitability. Operating income increased by over 60%, despite a slowdown on local deals in August and continued prudent investments in local deals. Our income tax expense was $3.3 million resulting in net income of $5.9 million.
Slide eight, illustrates the change in the structure of our cost of revenue resulting from the growing significance of our Local Deals format. On the left is a chart displaying the makeup of our cost of revenue. Starting from the left bar is our cost of revenue from last year which was before we had any significant Local Deals volume. Working to the right you see the addition of cost that represents some of the components needed to run Local Deals.These include subscriber refunds, customer service and credit card processing. One change unique to this quarter is that we began recognizing the merchant portion of the credit card fees gross rather than netting them against revenue of the prior quarters. As you can see on the chart to the right, despite these structural changes that have been impacted cost of revenue, our overall operating margin increased this quarter even while we continue to invest in local deals during a seasonally slower third quarter. This is probably a good time to pause and reflect on the overall impact that Local Deals has had in our business, since we started it 12 months ago. In addition to the revenue growth one indicator here of the impact would be looking at our operating margins over time. If you calculate our 12 month trailing average operating margin ending at our third quarter a year ago and you compare it to the same trailing average end of this quarter excluding the Q1 Delaware settlements, you see that the average margin is going from 19% to 24% that’s 5 percentage point improvement in operating margin. This is why we are investing over the last 12 months in the Local Deals opportunity. This demonstrates that we are delivering on our long term goal to balance our top and bottom line growth. Read the rest of this transcript for free on seekingalpha.com