Q1 2020 Travelzoo Earnings Call
[music].
Participants having placed in listen only mode in the four 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 1990 thought.
Actual results could.
Could vary materially from those contained in these forward looking statements.
Factors that could cause actual results could 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 FCC.
Unless required by law the company undertakes no obligation to update publicly any forward looking statements whether as a result of new information.
For 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 archive recording of this conference call will be made available on the travels <unk> Investor Relations website, I traveled zoo Dot Com Flash IR.
Now, it's my pleasure to turn the floor over to travel these global Chief Executive Officer, Holger, Bartel, and its chief accounting officer leases to Lisa will start with an overview of the first quarter 2020 financial results.
Thank you operator and welcome to go going here.
Right. Please let me explain why we report Q1 earnings today.
In March.
I see that really which allowed company quicker labor filing of their quarterly report by 45 days.
Circumstances related to the Korean Franklin Templeton.
This allowed us to have more time predict how you work related to travel acquisition or Jack right.
The reclassifications required for Asia Pacific business.
And impairment analysis for a long lived asset.
Please open the management presentation to follow along with my prepared remark.
The presentation and PDF format is available on our Investor Relations website.
The first slide on page number three provide you the couple Goodnight <unk>.
Revenue decreased year over year by 8.9 billion.
Locker revenue.
One time expenses cars there you go negative.
On this slide on page four <unk> <unk>, you could affect the onetime charges in Q1 2020.
We have put together a chart to show, but the one time expenses were recurring crude impairment of goodwill and bad debt, which are directly related to the current my goodness.
Well, our net income from continuing operation for skilled nursing care.
Onetime noncash item increase to our <unk> by 2.7 million.
Without <unk> non cash expenses the company would have reported around to 1 million dollar lot.
Clinton Clinton.
On page five includes.
Our revenues held by segment.
When you lighting FX phones with both North America, when Europe recorded a decrease in revenue of 42%.
Peter camping.
We saw advertising dropped off significantly in March of Twinkling in both Europe, and North America, either advertising can be seen or canceling advertising eat it depends on it.
Consequently, as shown on page number seven the operating expenses are relatively flat compared year over year.
But we went into Imagitas Dickerson Easter losses that.
The company pasta salad, <unk> 14.1 million at the end of Q1 win.
But we expect to generate $30 million to $40 million can pass from operations and we see.
Offset by cost you can find in Wisconsin display.
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On slide number nine the summary that the company skin revenue decline with what's the most often <unk> they've been met.
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Okay.
We also had a one time that's it.
Apple Google since I have here.
Okay, well be open for questions.
Thank you Lisa going into Q2, we were able to adjust our content offering quickie in to successfully.
After 92% of Travelzoo members told US seeing an online survey they were interested in receiving travel deals if the office we're flexible.
We focused I will wiki took 20.
Which has for the last 20 years being the definite list of the weeks best travel deals on the Internet.
One 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 travelers who.
In Q2.
We have already generated cash flow from operations of more than 11 million.
The U.S. dollars due to date quarter to date.
We also worked on and have already achieved a significant reduction in operating expenses.
Please refer to slides 11.
And 12.
Andy.
Besides staying focused on generating positive cash flow.
We will as previously announced leveraged the opportunity to grow checks flight club profitable subscription revenue, particularly in the U.S. Where'd launched in Q2 Twentytwenty.
Now back to the operator.
The floor is now open for questions.
If you do have a question. Please press the star followed by one on your Touchtone phones at this time.
Once again, if you do have a question ladies and gentlemen, today star followed by one on your Touchtone phone. Please hold while we poll for questions.
My first question comes from Jim Goss of Barrington Research. Your line is now open.
Okay. Thank you I have a several questions one is I'm I'm wondering.
If this a situation that has developed.
And the turmoil creates a marketshare opportunity for travel zoo versus a bigger competitors or are there aspects of the business that you think you can penetrate more significantly that might have been owned by them that you will not be part of your profile or other things that might or might.
I'd be a positives and they come out of this for you.
Hi, Jim Ah, Yes, I think so what travels through Das is we are providing our members with irresistible all first step motivate them to go on trips that did you can think about so in that respect our service to the travel industry is to create demand and at the time when.
Many consumers I hesitate to travel that's exactly what the travel industry needs you can imagine that would tell us around the world you Alliance and cruise lines, all wanting to see demand and that's what we do and that's why times like right now on normally good for our business in the past when via periods like 911.
For 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.
I'm, assuming it by in the prior to the travel providers I'm. Just wondering if you could talk about the formulation and process and negotiations with those travel to voters in creating something.
You know that.
You know that there could be could be a more of a an issue. If there were things you have to buy and resell and the new around that.
Yes, the travel Provital traveler provide just like it but most importantly, the question is two members like it and what Oh, we'll watch from what it offers to members. They said they can looking a deal but they don't have to decide right away when they travel they can.
But they don't have tool and the deal is flexible.
In many cases, it's even refundable. So what that allows the member is to make travel decisions and plan at the time went to uncertainty is still high and it's not even keel. When you can travel to some of these countries. So that creates the demands I spoke about and Thats why the travel industry, any particularly hotels and resorts.
Very happy with that all screen right now and it's also an offering red Travis is quite unique they're not a yeah no other companies in North America, or Europe that have expected to see model.
So you don't have any risk exposure on those flexible travel deals that would the here. The intermediaries. So you don't really have an issue where you might have.
I think that someone like Expedia and <unk> by a certain number of hotel rooms are 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 read the ones that she will many risk and in fact, the routine to funds or impede im already to travel to provide us off to the trip is completed.
Okay. The nice Relisting on I'd ask you is I think in a number of cases that global pandemic creates changes that will persist into the future.
Beyond the end of the current crisis or what would you think of our.
Elements that my father category for Travelzoo and for the industry.
Well, we plan of course for <unk> the industry to take some time to come back and we are not the woman travel. We also do you sure restaurants activities. We are planning of course, a very prudently force low return, but to be also believes that.
The return to travel can come points, if you much more quickly than a lot of people expect.
In fixed or some of the destinations and hotels in Twentytwenty, one already seeing a.
Much higher occupancy rates and the as you can imagine off the three and a half months off most people being stuck at tool the old eager to travel again, so we actually seeing and we have seen already for the last two months.
At our members I'm very excited to travel again, and we if we see that into demand. The that has accelerated from April to me into June. So I think yes, the travel industry could possibly because we're much more quickly than people expect right now.
I might throw in one more and that relates to international travel and restrictions that airport somebody airports that are have been locked down our reopening, but with a certain requirements that there might be.
Say 72 hour window in which you need to shown evidence that you had a cover test that proved negative and you might say something else once you get into that area and in in a few showed any symptoms they make quarantine you or or charge summit significant costs.
I wonder how much of the stumbling block that's sort of process is going to be to get travel in a facilitated once again.
We get that couldn't see we must accept it and our members tell us to seeing steadymed important foot to Dan first flexibility, you'll fall force when they buy a trip the one to not have to worry about the need if they have to cancel it and second.
Certainly NAS at hotels resorts flying Airlines anything that contains an increase of step safety and security is something that they're willing to do and understand so that's what we I admit for all members.
Okay. Thank you very much appreciated.
Thank you.
Our next question comes from Michael Kupinski with Noble capital markets. Your line is now open.
Thank you Jim asked a lot of by questions and good question. 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 it seems like the.
At least the experts are saying that the industry may 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 art as you watch state restrictions kinda or are they kind of affecting what the travel is in North America. At this point I was wondering just give us a flavor between domestic <unk> bookings versus international.
Yes, Mike absolutely correct.
Hearing exactly that from a woman listen we see you didn't their behavior.
Chris trips they are taking its domestic pleased if they can they can drive tool or next step is trips within the U.S.. So puts a b to Hawaii or maybe to the mic to Mexico and or the I'm more comfortable with international travel to Europe into Asia Pacific starving for and four.
She will flow Twentytwenty, one and we addressed at without vouchers, all the vouchers that we have into travel opportunities. We have four trips to Europe into into a Asia Pacific or you know long haul trips.
All of these all for sub valued at least until the Twentytwenty. One in fact, we had even a couple that with a valid until 2022.
There was one office that we negotiated follow members into multi use which broke every record of any deals that we if it was supplied to our members. So what would have thoughts how comfortable are members would be to travel and purchase a trip to them. All these so we were quite a quite a.
Surprised with that in a positive way and then keep in mind, we acted older business, we're not only in the U.S. So we also operate in Europe, we have a lot of members in Europe.
And within Europe are starting to life first people can travel around again everywhere, so travel restrictions or lifting everywhere, but since our model is based on blending future trips, it's something that doesn't even in picked up that much right now.
Well, the Mel bees offer was compelling, but [laughter] anyway in terms by its.
No I didn't but I was very tempting [laughter] I wish I don't take vacations that frequently so oh I wish I could but in terms of the domestic versus international is there any particular I guess is or are you make more money on international or how I I'm just trying to understand.
If that it doesn't really make that much difference to you that if the consumers are actually traveling more domestically.
And there's no difference for US you will see if you look at the top two and if if you look at the top 20, this month and compare it to.
You know three four months ago, you will see if you will find in every country will be published a top 20, you will find much more domestic or force. So we can we can very easily adopt and adjust to that.
Gotcha and wanted to.
Big opportunities for you, it which could be a significant growth opportunity. If you is the Jack's flight club I was wondering if you could just give me a sensor the benchmarks you hope to achieve now that you've introduced this to the U.S. and the second quarter and whether or not you know just kinda in journal, whether you are seeing.
Subscription take rates that are encouraging I. It would seem to me like it'd be kind of a tough time to launch something like that but.
No I've been wrong before so [laughter], what's what are your thoughts about the subscription business in the U.S. at this point.
Yes.
Yeah, very interesting and sometimes the things are calling to intuitive Ah two or have been calling to intuitive to what you're seeing so check flight club started in the UK and 90% of their subscribers I in the UK now.
This quarter, what they have launched in the U.S. and a one for you what do you have that business model itself cost it to subscription service. So while a you know wild travel I mean, we're not the travel company, but while travel companies revenue was really nosedived you know a check slide club is is continuing to.
So you know two to two charge a subscription fees today to their members. So it's it's it's a very attractive model and you know we were surprised ourselves in April when our members toward us I want to use this time to them stuck at told to travel to plan future trip. So the information.
That chicks like lot provides what's actually very important to them during that time.
And why not only in the U.S. you know when you look at ERP US you see a lot of seals, you see great Lcs you see amazing how fast you see high email fios. 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 sought to yield to Oh from New York to core our sabal for $50 round trip, we alluded to I will nimbus within literally one always had sold out so I.
I think members and consumers are very eager to get that kind of information. So we believe desert good opportunity to interrupt you wish to service right now maybe even better than it was half a year ago, so, but the future will tell.
Gotcha. Okay. You know, it's it's quite surprising that you are doing so well in the second quarter. I. You know I was kind of prepared for something a little bit far worse. It could you just kinda give us a sense of the revenues impact in the quarter I know that you've indicated that your cuts.
<unk> expenses significantly. It was just wondering can you maybe even train the level of expenses that you cut whether or not those how much of that is permanent versus temporary if you can just kinda give us a sense of that.
Well look revenues in Q2 will clearly be down no doubt about that but compared to many auto companies are we seeing if you sit and things for you or complement we indeed have fee as much much.
I thought they not a lot of other companies.
Lease 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 quick tee off to the quarter and and then you will have more insights.
On the expense fraud, and I would say that a lot of to reductions, particularly in the area of.
Staff cost in marketing, which I'll, which I'll have to mean expenses marketing went down by almost 100% staff and expenses probably by more than 50%. So what they are significant decreases.
And as we sit in the presentation. We are now building a long term structure.
To run this business profitably again as quickly as we can be would like to reach profitability again before the end of this year.
Perfect. Thank you so much for addressing the questions appreciate it.
Sure Welcome Michael.
Thank you. Our next question comes from Ed Woo with Ascendiant capital. Your line is no.
Yes. Thanks for taking my question. My question is have you seen any differences in how the travelers are consumers react in Europe or versus the you Uh huh.
Particularly when you're done maybe werent earlier, like Spain, and Italy versus some of the weekends that aren't giving it a little bit later like in the U.S.
Hi, it's really interesting question and the simple answer if it's almost expected to see him every week as we said earlier first smaller domestic trips Dan Moore trips with a shorter flights and in a longer trips down the road. The only difference you see is.
That are in the U.S. consumers, we're more optimistic a little bit soon or next west Germany. We a restrictions were released more quickly than in other countries, because Germany was not as much affected and and UK.
In Spain, and France for lot lost so, but the same patrons everywhere.
Right No question as you know you're hearing a little bit, particularly you about you know we certainly didn't cases.
You know, possibly some numbers is all locked out have you noticed any changing consumer behavior slowing down.
A couple weeks.
No in fact [noise].
In the past couple of weeks, we saw even a better response for members, but I think that is simply a resolved off the flexibility or that I want to use the offering and that's exactly what the members appreciate that no one knows about the future into product. We have allows them to looking at deal and bookings Laurie.
Sorry, because if anything happens and any color, we'll just have them again, they will not be affected negatively.
Great and then Mike.
My final question is on you know just like obviously you know you mentioned that you launched in you know recently Suncor you Oh, you know when all the airlines have stopped flying.
You didn't notice any big attrition, how many of your customer base.
Describer base, we'll just by club.
The attrition rates or would that lost a three four months period was pretty much the same as it was before so no different steel we didn't see during that period as many new sign ups as to be would have seen before but that is also now changing into in the U.S., we haven't really begun introducing checks lights up.
Well when they must be we'll 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 to service to a more and more consumers into U.S.
Yeah, Yeah definitely correct about the prices being a lot more volatile and I'm definitely not like discount or are there any concern as airlines no either go out of business or significantly reduced or Mike schedules.
We will see but a if you look around the airline industry has received Massey if support from governments to I seem to very weak ones have gone out of business already and the ones that are still around to.
If both slipped himself a a good cushion into.
We will see but.
Personally I'm much more optimistic about the airline industry, then probably the consensus that is all with deal people. What we are hearing de off to be off that they have to be.
People are tie out off just being a tool and if you are not able to go anywhere for three months that just creates even more interesting trips down. The road you mentioned you on a diet for three week for three months.
That makes who even one more and more often debt to go out and eat again that simply what it is people wanting to travel.
That's good well congratulations on a stronger start to the second quarter and Uh Huh. Thank you My answer my question.
Great things that.
Thank you. Our next question comes from Steve Silver with Argus Research Your line is no.
Thank you and congratulations on the resiliency of the business in the second quarter outlook is very impressive considering everything going around the world.
Most of my questions have been answered as well I'm. The one that you didn't touch upon on the Paul was really be.
The sale of the Japan business and licensing agreement that came out of that and I was hoping you could just touch upon the financial implications for the company moving forward.
Yes release mentions that travels you does maintain ownership of the.
Member base from the legacy business I was trying to get a sense as to the economics of the deal and perhaps if travel there does participate in any way in the future as that membership base would grow under the new relationship.
Ah, Yes, as Steve I think it's a very ER positive and attractive agreement for US we retain ownership of key assets. While at the same time, obviously, you know eliminating any risk from any performance in Japan. So according to the license agreement or travel.
So with Japan, KCI obtained a license to you wish to intellectual property of travels with so that's the trademarks to software the processes et cetera, and debts exclusively for Japan and in exchange for you receive a royalty payment.
Which is based on the achievement of certain net revenue targets. So that's you know not show what the agreement is about.
Okay, great. Thank you so much and congratulations again.
Great. Thank you everyone. So back to do you operate or Dan.
Thank you ladies and gentlemen, this concludes todays teleconference.
You may disconnect your lines at this time, please stay safe and have a nice day.
[music].
[noise] Oh [noise].
[music].
[music].
Hello, everyone.
The traveled to first quarter 2020, <unk> financial results Conference call.
All participants are being placed in listen only mode and the four 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 presented in the slides that are not they've got some historical facts constitute forward looking statements that are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1990 thought.
Actual results.
Could vary materially from those contained in these forward looking statements.
Factors that could cause actual results could differ materially from those on the forward looking statements are described in the company's forms 10-K, and 10-Q and other periodic filings with the FCC.
Unless required by law the company undertakes no obligation to update publicly any forward looking statements whether as a result of new information.
He for 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 archive recording of this conference call will be made available on the Travelzoo Investor Relations website, I traveled do dotcom Flash IR.
Now, it's my pleasure to turn the floor over to travel these global Chief Executive Officer, Holger, Bartel, and its chief Accounting Officer Lisa.
Lisa will start with an overview of the first quarter 2020 financial results.
Thank you operator.
Welcome to though.
Correct.
First let me explain why we report Q1 earnings.
In March.
It's really which allow company <unk>.
Quarterly report by 45.
You did a circumstance is related to the coded right close.
Wow, that's to have more time criticality work related to travel is acquisition or Jack White.
The reclassifications required for Asia Pacific business.
And impairment analysis for a longer [laughter].
Right, Okay. Good management presentations at Pollo long our prepared remark.
The presentation and PDF format is available on our Investor Relations website.
The first slide on page number three.
Yes.
Excellent.
Revenue increase year over year like nine though.
Lots of revenues.
One time expenses cockpit, that's gotten back at it.
On the next slide on page four you could see you could look back at the one time charges in Q1 2020.
We have put together a chart show what the onetime expenses were looks in crude impairment of goodwill.
Bad debt, which are directly related to the current like that.
Well, our net income from continuing operations were still not cutter <unk> onetime noncash items increased the aardvark by 2.7 million.
Without knowing patchwork center.
The company would have reported around $1 million lot.
Clinton Clinton.
On page five includes.
Our revenues held by [laughter] Gardner.
When new lighting affects forward, both North America on Europe recorded a decrease in revenue 3%.
Peter Congrats.
We saw advertising drop off significantly in March 20 claim in both.
Okay and North America.
The advertising, we do see or airplane advertising you did Atlanta.
Consequently, as shown on page number sub in the operating expenses are relatively flat.
Yeah.
But we went into maybe the sequencing the losses that.
The company pasta salad.
Before.
And that's one.
But we expect to generate 13 $14 million.
Some operate safely we see <unk>.
Okay. That's I talk to you can find.
The <unk> dollar pay downs.
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Yes, that's.
Around 45 don't dollar.
On page number nine the summary.
The company's games revenue decline, but what about in Boston <unk> isn't much.
Yes, [laughter], one but by the time to maybe for the amazing.
Yes, that's exactly.
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I'm pretty also has been difficult I didn't know nontoxic sensitive one.
With our related stuff and that's a good well.
2.9 day.
I mean, you see that that one.
Good thank you need to eat smart business.
With a one time boxes or something.
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Well, let me make significant Mako.
And it's your acquisition effect, but I.
Highly profitable boot barn kind of fun partners.
Yes, maybe Uh huh.
That's like sub had negative stuff.
We also had one time.
Yes.
Oh, well move will provide updates on that focus for the open [laughter].
Thank you Lisa going into Q2, we were able to adjust our content offering quickie and successfully.
After 92% of Travelzoo members told us in an online survey they were interested in receiving travel deals if the office we're flexible.
We focused our weekly top 20.
Which has for the last 20 years being the definite list of the weeks 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 travelers.
In Q2, we have already generated cash flow from operations of more than 11 million.
You asked dollars due to date quarter to date.
We also worked on and have already achieved a significant reduction in operating expenses.
Please refer to slides 11.
And 12.
Andy.
Besides staying focused on generating positive cash flow, we will as previously announced leveraged the opportunity to grow checks flight club profitable subscription revenue, particularly in the U.S., We had launched in Q2 Twentytwenty.
Now back to the operator.
The floor is now open for questions.
If you do have a question. Please press the star followed by one on your Touchtone phone. So at this time.
Once again, if you do have a question ladies and gentlemen does star followed by one on your Touchtone phone.
Please hold while we poll for questions.
My first question comes from Jim Goss of Barrington Research. Your line is now open.
Okay. Thank you I have a several questions one is I'm I'm wondering.
Yes. This.
Situation that has developed a and the turmoil creates a market share opportunity for travelzoo versus a bigger competitors.
Are there aspects of the business that you think you can penetrate more significantly that might have been owned by them that you will elaborate part of your profile or other things at night.
But the positives that might come out of this for you.
Hi, Jim Yes, I think so.
What travels through DOCSIS, we are providing our members with irresistible all first step mcareavey 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 the time when many consumers I hesitate to travel that's exactly what the chair.
For the industry needs you can imagine thats, what tells around the world Airlines and cruise lines Baldwin to see demand and Thats, what we do and that's why times like right now on normally good for our business in the past when we had periods like 911 or the economy 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.
I'm, assuming it by in the prior to the.
Capital providers I'm, just wondering if you could talk about the formulation and process and negotiations with those travel providers.
In creating something.
That.
You know that that could could be a marva an issue. If there were things you have to buy and resell and the new around that.
Yes, the travel provider the travel provide us like it but most importantly, the question is two members like it and what I will watch a model offers to members is that they can looking at deal, but they don't have to decide right away when they travel they can but they don't have to end the deal is flexible.
In many cases, it's even refundable, so what that allow us to members to make travel decisions and plan at the time went to uncertainty is still high and it's not even keel. When you can travel to some of these countries. So that creates the demands I spoke about and Thats why the travel industry, any particularly a hotels and resorts.
I'm very happy with that offering right now and it's also an offering rep Travis is quite unique.
Yeah, no other companies in North America, Europe that have expected to see model.
So you don't have any risk exposure on those flexible travel deals that would.
You are the intermediary. So you don't really have an issue where you might have.
I think the as someone like Expedia night by 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, the routine to funds.
In PJM already to travel provide us off to the trip is completed.
Okay, the nice as well as Sam I'd ask you is.
I think in a number of cases, the global pandemic creates changes that will persist into the future.
And the out of the current crisis.
What what you think of our elements that my father category for Travelzoo and for the industry.
Well, we plan of course for <unk>.
The industry to take some time to come back and we are not only in travel we often do you show restaurants activities.
Blending of course, a very prudently for slow return, but.
I also believe that.
To return to travel can come possibly much more quickly than a lot of people expect.
In fact, some of the destinations and hotels in Twentytwenty, one or do you seeing.
Much higher occupancy rates and as you can imagine off the three and a half months off most people being stuck at all they all eager to travel again, so we 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 into demand. The that has accelerated from April to me into June. So I think yes, the travel industry could possibly recover much more quickly than people expect right now.
I might throw one more and that relates to international travel and restrictions that airport. Some of the airports that are have been locked down our reopening, but with a certain requirements that there might be.
Say, a 72 hour window in which you need to shown evidence that you added covered test that proved negative and you might say something else once you get into that area and in and if you showed any symptoms quarantine, you or or charge summit significant costs.
I wonder how much of the stumbling block that showed a process is going to be to get travel in a facilitated once again.
We had that couldn't see was accepted and our members tell us towards seeing steadymed important to Dan 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.
When teams and increase this debt safety and security something that they're willing to do and understand so that's what we I admit follow members.
Okay. Thank you very much appreciate it.
Thank you.
Our next question comes from Michael Kupinski with Noble capital markets. Your line is now open.
Thank you Jim asked a lot of bike questions and good question. So I have just a few more.
The question I have even after travel restrictions are lifted it particularly here in the United States. It it seems like the.
At least the experts are saying that the industry may 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 art as you watch state restrictions kind are are they kind of affecting what the travel is in North America. At this point I was wondering just give us a flavor between domestic <unk> bookings versus international.
Yes, Mike absolutely correct.
Hearing exactly that from a 1 million listen we cede India behavior.
First trips the taking its domestic places they can they can drive tool.
Next step is trips within the U.S., so, possibly to Hawaii or maybe to the mic to Mexico and the I'm more comfortable with international travel to Europe into Asia Pacific standing in for.
And force will fall Twentytwenty, one and we addressed that with our watch as all the vouchers that we have and to travel opportunities. We have four trips to Europe and tool.
Into Asia Pacific or you know long haul trips.
All of these off a sub valued at least until the Twentytwenty. One in fact, we had even a couple that reevaluate until 2020 tool.
There was one office that we negotiated follow members into Maldi, if which broke every record of any deals that we have it was supplied to our members. So would have thoughts how comfortable.
Members would be TUI travel and purchase a trip to the mall diesel we were quite a quite a.
Surprised with that in a positive way and then keep in mind, we are global business, we're not only in the U.S. So we also operate in Europe, we have a lot of members in Europe.
And within Europe, starting July 1st people can travel around again.
Every week, so travel restrictions are lifting every week, but since our model is based on blending future trips.
It's something that doesn't even in picked up that much right now.
Well in all these offer was compelling but.
Anyway in terms by it.
No I didn't but it's very tempting [laughter] 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 or are you make more money on international or how I'm just trying to understand if that it doesn't really make that much difference geos that if the consumers are actually traveling more domestically, yes, and there is no difference for US you will see if you look at the top two and if I. If you look at the top 20, this month and compare it to.
You know three four months ago, you will feed it for you will find in every country will be published a top 20, you will find much more domestic or force. So we can we can very easily adopt and adjust to that.
Gotcha and one of the.
Big opportunities for you and which could be a significant growth opportunity. If 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. and the second quarter and whether or not.
Just cutting journal, whether you are seeing the subscription take rates.
That are encouraging it would seem to me like there would be kind of a tough time to launch something like that but.
No I been.
Long before so what are your thoughts about.
Subscription business in the U.S. at this point.
Yes.
Yes, very interesting and sometimes things are counter intuitive to or have been calling to intuitive to what you're seeing so check flight club started in the UK and 90% of the subscriber sign that UK now.
This quarter, what they have launched in the U.S. and.
One for you what do you have that business model itself cost and it's a subscription service so while.
While travel I mean, we're not the travel company, but while travel companies revenue was really nosedived.
Check slight club is is continuing to.
I will talk to charge.
Subscription fees today to their members so it's a very attractive modeling.
We were surprised ourselves in April when our members toward that I wanted to use this time to them stuck at home to travel to two planned future trip. So the information that chicks like lot provides what's actually very important to them during that time.
And why not knowing that you with you know when you look at ERP US you see a lot of seals, you see great ERP FCC amazing how fast you see higher fee. They change as quickly as we have never seen before so the timing to launched his service in the U.S. is to some extent the best ever because.
Now we see we saw a deal too.
From New York to core our solid for $50 round trip, we alluded our members within literally one always had sold out so.
I think members and consumers are very eager to get that kind of information. So we believed as a good opportunity to interest to wish to service right now maybe even better than it was half a year ago, so, but the future will tell.
Gotcha.
It's quite surprising that you are doing so well in the second quarter I.
It was kind of prepared for.
Something a little bit far worse.
Could you just kinda 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 train the level of expenses that you cut whether or not those how much of that is permanent versus temporary.
If you can just kinda give us a sense of that.
Well look revenues in Q2 will clearly be down no doubt about that but compared to many other companies. We think as you sit and things for you or complement we indeed have fee as much much.
I thought than a lot of other companies.
Lease 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 and 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 costs in marketing, which I'll, which our to mean expenses.
Marketing went down by almost 100% staff expense is probably by more than 50%. So what they are significant decreases.
If we setting the presentation. We are now building a long term structure.
To run this business profitably again as quickly as we can be would like to reach profitability again before the end of this year.
Perfect. Thank you so much for addressing the questions appreciate it.
Sure Welcome Michael.
Thank you. Our next question comes from Ed Woo with Ascendiant capital. Your line is no.
Yes. Thanks for taking my question. My question is how do you see many.
This is and how the travelers are consumers react in euro versus the ULA.
Our next Larry and we use that maybe were hit earlier, like Spain, and Italy versus some of the rigs that are getting hit a little bit later like in the U.S.
Hi, it's really interesting question and the simple answer it's almost exactly the same every week as we said earlier for smaller domestic trips Dan Moore trips with shorter flights and then longer trips down the road. The only difference you see is.
That in the U.S. consumers, we're more optimistic a little bit sworn off next west Germany. We restrictions were released more quickly than in other countries, because Germany was not as much affected and then UK.
In Spain, and France follow it lost so but see impediments everywhere.
All right is another question as you know you're hearing a little bit, particularly you about.
Researchers in cases.
And possibly some numbers is locked out have you noticed any changing consumer behavior slowing down.
A couple weeks.
No in fact.
In the past couple of weeks, we saw even a better response for members, but I think that is simply a result of the flexibility that our view is offering and that's exactly what the members appreciate that no one knows about the future and to product. We have allows them to looking at deal and book.
I would worry free because if anything happens in any closures have them again, it will not be.
Affected negatively.
Great. Thanks, Mike.
My final question is on.
Flight, obviously, you mentioned that you launched yet.
Recently in the quarter you.
You don't want all the airlines have stopped lying you didn't notice any.
Big attrition part of your customer base.
Subscriber base just by club.
The attrition rates over that last three four months period was pretty much the same as it was before so no difference deal.
We didnt see during that period as many new sign ups as to be would have seen before but that is also now changing into in the U.S.. We haven't really begun introducing checks lights up to our must be we'll do that starting in the next couple of weeks.
As I mentioned earlier I'm quite optimistic that this is a good time to introduce to service to more and more consumers into us.
Yes, definitely correct about the prices being a lot more volatile and definitely hallmark discount.
Are there any concern as airlines, either go out of business or significantly reduced or Mike schedules.
We will see but if you look around the airline industry has to receive massive support from government. So I think the very weak ones have gone out of business already and the ones that are still around.
If both of them sales a good portion and.
We will see but.
Personally I'm much more optimistic about the airline industry than probably the consensus that is our deal people. What we are hearing the off to be off to the off to be.
People are tired off just being a tool and if you are not able to go anywhere for three months that just creates even more interesting chips down. The road you mentioned you on a diet for three week for three months.
That makes it even one more and more often debt to go out and eat again that simply what it is people wanting to travel.
That's good well congratulations on the stronger start to the second quarter and Oh. Thank you My answer my question.
Great. Thanks, Ed.
Thank you. 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 at very impressive considering everything going around the world.
Most of my questions have been answered as well the one that you've made in touch upon on the call which will be.
The sale of the Japan business and licensing agreement that came out of that and I was hoping you could just touch upon the financial implications for the company moving forward.
Yes release mentions that travels you does maintain ownership of the.
Member base from the legacy business I was trying to get a sense as to the economics of the deal and perhaps if travels it does participate in any way in the future as debt 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 key assets while at the same time, obviously, eliminating any risk from any performance in Japan. So according to the license agreement Trevor.
So with Japan.
KCI obtained a license to use the intellectual property of travels with so that's the trademarks to software the processes et cetera, and debts exclusively for Japan and in exchange for you receive a royalty payment.
Which is based on the achievement of certain net revenue targets. So.
Thats in a nutshell, what the agreement is about.
Okay, great. Thank you so much and congratulations again.
Great. Thank you everyone. So back to do you operate a day.
Thank you.
Ladies and gentlemen, this concludes todays teleconference.
You may disconnect your lines at this time, please stay safe and have a nice day.