Asmallworld AG (ASWN) Earnings Call Transcript & Summary

Good day, and welcome to the ASMALLWORLD earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jan Luescher, CEO of ASMALLWORLD. Please go ahead.

Thank you, Chantelle. I would like to welcome everyone to this earnings call for ASMALLWORLD's 2020 H1 results. Thank you for your continued interest in ASMALLWORLD, especially during these turbulent times we find ourselves in right now. My name is Jan Luescher, I am the Chief Executive Officer and I will lead you through today's call. The call will follow the presentation named 2020 H1 Results presentation. In case you have not downloaded this document yet, you can find the link to it in this morning's press release or you can also go straight to our corporate website, www.asmallworldag.com/financial-reports where you find all our financial documents and you can download it from there. During this call, I will touch on the operational and financial highlights for the first 6 months of 2020. As usual, I will present a few select deep dives to provide additional context where we think it makes sense. And in the end, we will also open up for a brief Q&A session. So starting on Page #2 of the document, I would like to briefly recap the ASMALLWORLD vision for context. So ASMALLWORLD is the world's leading travel and lifestyle community focusing on experiences, the modern-day definition of luxury. Centered around the ASMALLWORLD social network, we operate a digital travel and lifestyle ecosystem, which inspires our members to travel better, experience more and make new connections. Moving on to Page #3 for an overview of what we just heard and an overview of our businesses. The ASMALLWORLD Group consists of 7 businesses today that make up the ASMALLWORLD travel and lifestyle ecosystem. At the center is ASMALLWORLD, our social network, which attract customers with a high willingness to spend on travel and experiences, and this interesting audience then creates demand for other businesses around and ranging from events to the world's leading nightlife concierge, The World's Finest Clubs, to bespoke travel arrangements and hotel bookings for ASMALLWORLD Private and the ASMALLWORLD Collection. In short, with the ASMALLWORLD social network, we attract our customers and then increase our share of wallet with them with our additional businesses. Now let's move to Page #5 with the operational highlights for the first 6 months of the year. Most importantly, with the launch of the ASMALLWORLD Collection in July, so technically not in the first half of the year but like with all the work that had been done in the first half of the year, it's still worth mentioning it, we have reached a major milestone for the company. With this step, we have now completed the build-out of our travel and lifestyle ecosystem. That means all the businesses we wanted to have are now fully operational, and this is a moment worth celebrating. Strategically, this will now allow us to shift our focus from building new businesses to improving them, making them more effective and more efficient. Also, we, of course, have to talk about COVID-19, which has had a significant impact on all our businesses limiting the overall growth of our group. Social distancing restrictions led to cancellations of virtually all of our in-person events, and travel restrictions led to many booking cancellations in the travel business, with very little new business being generated as uncertainty about travel rules and travel restrictions persist. For a business like ours, the challenge to grow and maintain something like a business as usual was very real. And at the same time, there were a few positive elements as well. We saw strong Prestige membership sales and a good demand for first-class and more flight packages and upgrade strategies, which were both fueled by an increasing demand for safe travel, especially in the form of business and first-class flights and by clever marketing by our teams, which sort of helped to sell these services. Given the challenging environment, we've also taken measures to reduce our cost, which has helped us to maintain profitability despite the environment and despite the ongoing investments into the launch of the ASMALLWORLD Collection in July. In terms of what that means for the financial results, you can see the headlines on Page 6. Revenue grew at 4.4% from CHF 5.9 million to 5-point -- sorry, from CHF 5.7 million to CHF 5.9 million in the first half of 2019 compared to the same period last year, and this despite the challenging environment that I had mentioned earlier. In terms of profitability, we -- let's say we've maintained profitability in the same level of last year. We've achieved CHF 0.4 million of EBITDA compared to CHF 0.5 million for the first half of last year. And that's despite, like I said, the environment and the investments that we had to make into the ASMALLWORLD Collection for the launch in July. In terms of net income, we were exactly on par compared to last year with CHF 0.3 million for the period and that resulted in earnings per share of CHF 0.03 per share. The member base year-on-year grew by 11% from -- sorry, 54,831 in June 2019 to 60,821 in June 2020. In terms of cash position, we stood at CHF 3.8 million at the end of June. In summary, at least this is a result we can be proud of. Our businesses have been highly impacted by the global health crisis but we managed to grow our business regardless even though it was on a smaller scale. In addition, we also had to offset the investment cost for a launch of the ASMALLWORLD Collection and still managed to keep our profitability during these difficult times. I believe this demonstrates the resilience of the business that we have built and gives an indication of what will be possible once we come out of this health crisis and can return to something like a business as usual. As to the operational and financial highlights, we are now moving to the reporting of our 2 business units, Subscriptions and Services. For participants who have just joined the call, the basis for this presentation is a document called 2020 H1 results presentation and you can download it from our corporate website. You will find the link in this morning's press release. So moving to Page #8 with an overview of the highlights for the Subscription business. The Subscription business was primarily driven by Prestige membership sales for the first half of the year while other areas slowed during the health crisis. Overall, the segment grew by 2.1% for the period compared year-on-year. And year-on-year, we've also experienced continued membership growth with 11% member growth year-on-year. So most importantly, as I mentioned, was that the ASMALLWORLD Prestige memberships saw strong demand due to business and first-class flight upgrades or like the press from members to do that, which they can do with the miles that come with that package. Regular ASMALLWORLD sign-ups slowed during the corona months, so we had actually started quite strong for the first month of the year. But then as soon as corona started, we saw new member rates going down. But we anticipate that to improve again when we have realized events resume as a strong driver for sign-ups. Unfortunately, also World's Finest Clubs, the world's leading nightlife concierge, saw very low renewals and almost no new sales as the nightlife business was especially strong hit with only about 20% of nightclubs operating from within -- from our network. Overall, it's -- when you see the EBITDA margin for the segment, it looks like profitability for the segment took a bit of a hit. But I also want to make sure that I state that this is also due to accounting reasons, and we will actually see that normalize again for the full year as we move into the second half of the year. So please don't read too much into it. The profitability has not suffered in a strong way but it hasn't grown as much as it should have had for in during -- or would have done in during like a regular year. As mentioned and as you'll see on Page #9 as well, the Prestige membership was the most important source of sales growth for the period for the segment. As a reminder, the membership has a regular price of EUR 5,200 and is one of the more expensive memberships for the ASMALLWORLD community. What it does, it comes with 250,000 miles and more award miles, which can be used on award -- a flight award, so you can book business class flights of first-class flights or you can upgrade your economy flights to business and first class. And you can do that in sort of a cheaper way than you could if you would buy those stores flights outright. And in a period where safety for traveling was an important topic, we managed to basically sort of use that theme and sell more memberships with that claim to make travel more safe and with the promotion that we ran over the last few months and also into the second half of the year. In short, we actually sold more memberships during the first half of 2020 than we sold during the full year of 2019. We do not necessarily expect that to continue for the full year. I think there's naturally a saturation point that we will hit, but it's very impressive that during a time where not much traveling is actually happening, we managed to sort of almost double the sales in -- for this membership. So this is one of the few bright spots during the first half of the year. Also moving on to the next page. We launched an initiative called #kindnessspreadsfaster in March as soon as the corona outbreak has happened, where we invited members to bring their friends into ASMALLWORLD and show everyone that kindness can actually spread faster than any virus. That was the image that we wanted to create. You'll see on that chart that where members have engaged, how many acts of active kindness, as we labeled them, measured as new sign-ups, messages, likes and so on for users have taken place during the roughly 1.5 months of the initiative from sort of March going into May. In terms of financial impact, this didn't really sort of have a positive impact on the financials because we had sort of people joining for free, but it increased activity, it increased awareness. And even though it had no immediate business benefit, there's obviously a potential to convert these free members into paying members over time. And also, I think from a perception point of view, we got great feedback from our members that we sort of were trying to keep the spirit high and like keep people in touch through the technological means of our platform. This concludes the highlights for the Subscription segment. And then moving on to the Services segment on Page #12. The Service segment grew slightly faster than the Subscription segment with an increase of 8.2% year-on-year. The segment as well saw mixed performances across different businesses due to corona. On the positive side, First Class & More, our smart luxury travel service saw their service revenues go up for a similar reason as we saw the increase in the Prestige membership, mainly to help people to find a cost-effective way to travel business and first class by selling them flight packages or upgrade options. Unfortunately, other businesses were impacted more and were difficult to sort of keep on track during this period. So for example, our events business was reduced significantly during the health crisis. The social distancing rules made it virtually impossible to host events. We have decided in mid-March to do a global stop of events. And we've now, in August, slowly reintroduced events in a few places where it makes sense but still on a much lower scale, and so there's -- we're always with the risk that we will have to cancel them again, so the events business clearly impacted by the health crisis. And also the travel business, specifically ASMALLWORLD Private, with its bespoke travel arrangements, we've seen virtually -- like we've seen the business dry up. So more everything that was booked was basically canceled. And we haven't so far seen a strong recovery to have more travel come in. We discuss certain travel options with members. We also did a push now in August for -- to sell safe travel options to our members, and we have generated a lot of interest. Having said that, people leave it to the last minute to actually buy their travels due to the ongoing fluctuation in travel restrictions and new travel bans being issued almost on a daily basis. So people leave it to the last minute to see if they got to book or not, but definitely not an easy business to be in as well during this health crisis. And on the positives, what you can see from the EBITDA margin, the margin for this business, where we have turned positive compared to the first half of last year. I mean, it was positive for the full year, so we maintained that. So there is definitely -- it's maturing our Service business. And looking forward, the most important aspect of the Service business was the launch of ASMALLWORLD Collection in July, which -- a business that I want to present a bit more over the next few pages of this presentation. So going to Page 13, the ASMALLWORLD Collection is our latest service business and was successfully launched in July. Like I mentioned, a major milestone because now all the businesses that we wanted to have as part of the ASMALLWORLD travel and lifestyle ecosystem are now in place, which is great. For this specific business, the technology came or the basis of the technology came from the acquisition of LuxuryBARED, the luxury travel agency that we acquired early last year. I mean, we took their online hotel booking platform and improved it and made it a lot better. We also built 3 completely new front-ends, so we scrapped our old front-ends and built new ones for web, iOS and Android all within the ASMALLWORLD environment and with the ASMALLWORLD design. The result is a more modern and more intuitive and highly visual booking experience with a distinctive look and character, and I'm very proud of this latest addition to our service line. In case you haven't seen it yet, you can access it directly from your phones or from your web browser by going to www.asmallworldcollection.com or probably from your ASMALLWORLD app. It's open to members and nonmembers alike. So in terms of offering, the booking engine actually -- or the hotel booking engine actually caters to high end, the high expectations of ASMALLWORLD members. It's a high-end booking platform. As such, we only feature hotels we love. So the selection of the hotels is -- it is curated and we don't strive to be a booking.com with all hotels in the world but to have a catered offering. And in terms of rates, we always offer 2 rates, at the lowest rate and the ASMALLWORLD Preferred Rates. And we're going to sort of, again, give you a bit more detail what that means over the coming pages. So Page #14. The first USP of our collection is our curated list of hotels. So all our hotels are handpicked and we only feature hotels we love. So the implication is that none of the hotels that we have in the platform are bad hotels. And whatever our customers book, they should have a great hotel experience. So they don't have to do the search for a place where they don't know hotels. And instead of having 500 hotels in a city like Trip, we have four and those are the ones that we believe our members, our customers will appreciate and they can pretty much book blindly. We have -- for our launch, we had 600 hotels and we plan to expand that selection, but we will maintain our high-quality standard. So the goal is not to be comprehensive but to have a good mix between different price points, although it is at the high end of the market and different styles so that we offer the right variety, but we don't go into the direction of having too much choice or having poor hotels in our collection. The second USP, which you see on Page 15, is our choice of rates. We always offer 2 rates to choose from for our members. And you will see the cart, as it's shown in the web browser, for a luxury double room here. Don't remember which hotel that is. That is how it presents itself. So you can either choose the lowest rate that we have on offer, which is comparable with most of the other booking sites due to price parity. It's the same price that you find in most places. And with the tick marks, you can see what you get with that rate. And next to it, you will find the exclusive ASMALLWORLD Preferred Rate, which is a booking rate that we offer exclusively on ASMALLWORLD, and that comes with many exclusive perks. You see from the tick marks here, for example, here, it's a daily breakfast for 2; room upgrade on arrival; food and beverage credit, which is usually USD 100; early check-in; late checkout; and complementary WiFi. And for some hotels, the price is actually the same for the lowest rate or the preferred rate like you see in this example. So it's pretty much a no-brainer to book it with us. For other hotels, it could be at the lowest rate is slightly lower and the ASMALLWORLD Preferred Rate is higher. But given what you get in terms of benefits, it might still make sense to book the higher rate and go with the ASMALLWORLD Preferred Rate. So the idea is that with the combination of always having a great selection of hotels and 2 rates that you can't find anywhere else, it makes complete sense to always go and check hotels on a ASMALLWORLD first or even if you already know which hotel that you'll go to, to check whether ASMALLWORLD features it and see what the difference is in price between the lowest rate and the ASMALLWORLD Preferred Rate and then choose the rate that makes more sense to you. Also a great USP in Page 16, maybe a bit less so than the other 2, is the way it looks and feels to book with the ASMALLWORLD Collection. As I said, we completely redesigned the front-ends from scratch. Here, you see pictures from the web version. And the new design focuses on visuals. Text is reduced and it creates, in essence, a high-end booking experience also from a visual point of view and much more -- many more images, less text than other pages have to really give it a distinct feel. Page #17. We also offer a seamless experience across web and app. That means the -- all the different platforms work together. So you can -- and all the functionality is actually present in all the platforms. So you can book on web, you can book on mobile, you can book on iOS and Android and it all goes to the same back-end. So it means that when you've booked it on web, you can change it on iOS and the other way around. So you can see your reservations and can modify them or cancel them if you want to, and all the platforms offer the same great visual design actually, so it feels consistent across the platforms. Give me one second. A technical issue here. Okay. Here we go. My PowerPoint's crashed. So Page 18 also illustrates that we're obviously not doing this alone. So we have great partners that we're working with to offer such a great portfolio of hotels and offer all the benefits to our members that we have as part of the ASMALLWORLD Preferred Rate. Here, you see the different organizations that ASMALLWORLD is part of and that allow us to offer these rates. So first of all, we are part of Virtuoso, the organization of independent luxury travel agencies. We're part of Hilton Impresario, Waldorf Astoria and Conrad Hotels are part of this group. We're part of the Hyatt Prive preferred travel agency. I believe part of the Peninsula Pen Club and also a member of the world's Leading Hotels of the World. And we have other great partners that help us to offer this great offering that we have for our customers. Slide 19 offers a short overview how we think about the Collection strategically and where we want to take it. Obviously, we know that the demand for travel is currently depressed. It's not the best time to be launching a new travel service. We're absolutely aware of that. But we look at this more mid to longer term, and we've started it -- started all the work so we pulled through with it. And we want to be well positioned when the world starts to travel again. So for ASMALLWORLD, the Collection provides a completely new revenue stream and allows us to further monetize our travel-savvy audience and leverage the synergies with their other services. As mentioned earlier, it's open to nonmembers as well so it's not just limited to ASMALLWORLD members, which further increases the potential for selling hotels themselves but also the cross-selling with other services and to gain new members. We had 600 hotels at launch. We already increased them to 650. The most recent that we probably want to go beyond 800 before at the end of the year. So the goal is to probably be then reach 1,000 quite soon in early next year. We believe that sort of the number that we will feature is somewhere around 1,200 hotels, so we've identified already which ones that we would like to add, and we will steadily work on increasing the number of hotels while maintaining the quality but then providing a better offer of hotels for all the different travel locations. The service will also be promoted in the ASMALLWORLD news feed, on our social media, in our ASMALLWORLD Explorer articles and that will help it to increase visibility and gain more reach. And we're also planning an affiliate program to leverage third parties to promote the service as well, which we will probably start in -- at some point in the second half of this year. So overall, very exciting to finally launch it and to finally sort of have this slide. And we're looking forward to how it can contribute to the group over the -- in the near future, in the midterm future once travel actually becomes [ healthy ] again. So after sort of the details for a more detailed view of the Subscription segment and the Services segment, we will now go to the consolidated financials, starting on Page 21 with the income statement. Obviously, on our website, you will find a more comprehensive financial report. You can download from there. But we're going to go through the highlights here to give you a bit of an overview of how to make sense of the numbers. So for the income statement, Page 21, most importantly, and as previously noted, sales increased by 4.4% due to growth from both business units, a bit more from the Services one. It is also worth noting that the direct expenses increased quite a bit, so you'll see that increasing 53%. This is due to higher cost of goods sold for the Prestige membership and the services that First Class & More has provided, which have an input cost. So this is not worrying but actually a good sign that we sold these services. And on the other side, we reduced personnel cost by 26%, which means that we're getting at the cost that we can control under control right now or that is fixed cost. There are a couple of effects here. One is staff reductions that we had to make due to the new circumstances. Luckily, we also have furlough support from furlough schemes in Switzerland and in the U.K., which lowered our wages a little bit for the period. And we also had slightly less cost from share-based compensation during the period, which all contributed to that 20% -- 26% decrease in cost year-on-year. Further down the income statement, I would also like to highlight that the financial income position is slightly higher than it was a year ago. This is primarily due to FX changes on the Swiss franc-euro rate. We have outstanding liabilities in euro in sort of this sort of the appreciating Swiss franc is reflected here in financial income. And this, of course, is not a number that we can embrace heavily, but it might go in either direction for the next 6 months. But since it's quite a definitive significant position, I just wanted to talk about it. And in terms of earnings per share, as I mentioned, it's on par with 2019 or first half 2019 with CHF 0.03 per share. And moving on to the balance sheet on Page 22. And here, we've seen actually quite a bit of movement. This was due to a payout of CHF 5.6 million, which is part of the agreed acquisition cost of First Class & More. And in short, CHF 3.7 million that we've paid out were actually due as cash compensation which were not in scope of the acquisition but stated in our books. So that was basically paid out now. And CHF 1.9 million was an earn-out as part of the acquisition -- agreed acquisition costs that would be paid over time, we have had -- in 2019, 2020 and 2021, at which point it will be completed. So as a result, our cash position was actually reduced so by CHF 3.1 million from CHF 6.9 million to CHF 3.8 million. And on the business side, receivables went down a bit due to fewer events. That's the primary reason for that and slightly less activity in a couple of other areas. And accrued income increased due to early First Class & More subscription renewals and other couple of other few positive effects. And in sum, the total size of the balance sheet due to mainly the payout First Class & More was reduced by CHF 3.4 million overall. So you see that at the bottom, so the balance sheet size went from CHF 11.6 million to CHF 8.23 million (sic) [ CHF 8.25 million ] from year-on-year change. On the next page, you will see the second part of the balance sheet. And here, most importantly, also as effect of the payouts of First Class & More, you will see the reduction in liabilities. You primarily see this in 2 places, in bullet number one, that's the first one, other short-term liabilities reduced, of course, significantly from CHF 4.6 million to CHF 0.6 million. So this is a significant change. And then you also see the longer-term provisions that we had in our balance sheet decrease from CHF 5.6 million to CHF 3.6 million, that both of those are due to the payout to First Class & More. And other important changes, in accrued liabilities, we saw an increase again due to the prepayments or payments for Prestige and First Class & More memberships and the long-term financial liabilities, it also increased from CHF 2.8 million to CHF 4.4 million. This is due to primarily 2 effects. One was financing provided by Pellegrino Capital formerly known as ASMALLWORLD Capital, our main investor, and by government loans that we have sort of taken advantage of as part of the different support schemes during corona times, most -- primarily like 90% is a loan from the Swiss government that we could get at zero interest rate that we sort of used to [indiscernible] for the business. And if you look at the equity position, you see that it's slightly less negative than it was before. Our accounting policies do not have goodwill, so we depreciated the whole acquisition of First Class & More and other acquisition. So instead of having a big balance sheet, we sort of netted it against the equity. That's why we have a negative equity position to start with but the positive effect of the year sort of maybe slightly less negative. And of course, you can see also here in the last line, the overall reduced balance sheet from CHF 11.6 million to CHF 8.2 million also reflected on this balance sheet. Moving on to cash flow, the cash flow statement on the first part of it on Page 24. Most importantly to note here is that the strong increase in operating cash flow, which improved by CHF 1.4 million compared to the first half 2019. I mean it's a significant increase, and it's a significant achievement that shows the health and the resilience of the business. So really, really an important point. I think it's -- we're stating in one of the really positive takeaways from today's presentation. Main position that changed. I mean, obviously, everything contributed, but the -- we have an increase in deferred income due to the Prestige membership payouts and early First Class & More renewals that contributed there. That's why the number is fairly high for the period. Also, we see the second with cash flow statement position, the investing activities cash flow. We see the position of minus CHF 5.6 million due to the payout of First Class & More and their acquisition of subsidiaries. Obviously, that's not an acquisition, that's the payout, but it's reflected in that position, which obviously is a major line item for the cash flow sheet for this period. Moving on to the second part of the cash flow statement on the next page. The cash flow from financing activities increased this year by CHF 1.5 million. So this is basically what we discussed earlier, the financing that came from Pellegrino Capital, our main investor, earlier this year and then the government loans that we have sort of taken advantage of during corona times in April. And that increased our operating -- our cash flow from financing activities. And then at the bottom, you'll see the net cash change, which was reduced by CHF 3.1 million, which is the sum of all of these effects that we talked about. Obviously, should you like to see the full financial report, you can find it for download on our investor website with this presentation -- or next to this presentation. Good. Moving on to the outlook for the second half of the year on Page 27. I mean despite the difficult environment, we will continue to manage the headwinds as much as we can and position ourselves for a period of profitable growth after this health crisis is over. And here, I would like to make a few specific points which will be in the focus for the second half of the year. Most importantly, we will continue to drive awareness for the ASMALLWORLD Collection and increase or improve our hotel offering so it is well positioned for when travel and hotel bookings will resume. And also, as mentioned earlier now that the ASMALLWORLD travel & lifestyle ecosystem is completely built, we can actually shift our focus to refining individual business and making them more effective and more efficient. Initially, we will focus on the ASMALLWORLD NEWS FEED. It's one of the elements that we want to focus on and the networking functionality, so we can actually increase the attractiveness of our service and the stickiness of our users. So it's one of the things we want to look at during the second half of the year. And there are many other smaller topics that we'll be looking at and -- now that we sort of kept our heads down for -- the last few months kept our heads down to launch the collection. Now we can sort of, I mean, look up again and see what else is most important to be worked at for the overall business. In terms of guidance for the full year results, I mean, we haven't provided guidance for the year so far. And we will -- we decided not to reintroduce numerical guidance or a range. But we are, I'd say, cautiously optimistic and we expect sales for the second half of the year to be comparable to what we've achieved for the first half of the year. Of course, it all depends on how the crisis or health crisis will continue to evolve. We also, though, expect that we will be profitable or stay profitable for the full year. If you think about it, like the -- obviously, for the first half of the year, the first 3 months have been sort of on first -- yes, 3 months roughly have been normal months and the other 3 have been difficult. The second half of the year, we expect the full 6 months to remain difficult before we get a vaccine or anything else that will help with the pandemic. So it's not going to be the most exciting year for us in terms of growth. It's all about positioning ourselves well, doing -- making the necessary steps to like stay profitable for the year, which we -- we're confident that we can achieve and then bounce back as soon as we can go all out with travel events and everything else, that's sort of our customer’s value. So this concludes my update for the first half or the first 6 months of 2020. I hope this was useful. And I would like to open now for a brief Q&A session.

[Operator Instructions] Our first question will come from Pierre Gauthier, AlphaValue.

Thank you, Jan, for this very clear presentation and bravo for the earnings in the most difficult circumstances. There is a question on the back of my mind, which is really about the success -- because of the success in the business level for H1. How much of that is related to this product which goes in terms of differentiating the seating positions in aircraft, and therefore, as you said, clients buying this transition in aircraft and willing to get these upgrades for business class or first class? Is that a big -- is it a significant driver in the resilience of your business in H1?

Pierre, good to have you on the call. Thank you for the question. Yes, it is. So I mean, maybe a few things to provide additional context. I mean the product has been -- we introduced this in 2018, we got the -- so basically like worked with the all of the different companies to provide the benefits for it, most importantly, Miles & More, so the loyalty subsidiary of Lufthansa, Lufthansa Group and also Etihad in the Middle East, among other partners. And the product has actually been popular sort of since its introduction. And we had good sort of steady sales with the product over the last, I would say, 2 years. Now when corona hit, we just -- we were obviously sitting down and think like, what can we do during this period because it's hard to get new members in for ASMALLWORLD, who usually join for events or to meet up with people and all of that, that was obviously not happening. And so we pivoted in terms of our marketing and are sort of using our brain power for the Prestige membership. And we also managed to get a deal with Miles & More with a slightly lower cost for the product, which then allowed us to go out and promote the product with a special offer and through our different sales channels and with the positioning of, "Hey, wouldn't you rather like travel business class or first class instead of economy during sort of these times and like where you want to be socially distant from others." And that was sort of the angle which we've approached and marketed quite successfully during the first half of the year. I mean, the price helped and the claim helped. And yes, I mean, it was -- if it wasn't for the product, we probably would have had negative growth in the Subscriptions business for the first half of the year. So it definitely compensated sort of the slightly below-expectation growth that we had in the regular membership, in the regular First Class and More sort of -- membership and ASMALLWORLD memberships. We actually -- I mean, we look at it in a positive way and say, well, I mean, it's great that we managed to pivot and push this product during this time where the offers were a bit more difficult. So I guess it's the beauty of having a couple of different products that you can sell so -- but we actually will probably see it reverse and sort of becoming less of a -- like a sales hit in the second half of the year, probably even next year as we had a saturation and sort of probably you note that how quite low. And we will, but then hopefully see a pickup again in sort of the regular memberships as they go up. So I hope that kind of gives you a bit more context for the question. I'm not sure if I 100% sort of answered it. So feel free to add more position to the question or if you have a follow-up to it.

No, that's very clear. And I have another question, if you may. It's about the business model on this ASMALLWORLD Collection website. Do you get, what, a share of the actual spending of the clients on a per room basis and whatever they spend on top? How is it built up?

Right. Good question. Apologies. I should probably like -- should have gotten into it in the presentation. It's actually a pretty straightforward business model that most online travel agencies or that sell hotels are following. So it's a commission-based structure. So in essence, you need to have an agreement with the hotel that you can feature the hotel on your booking engine, whether that is Booking.com or Expedia or us. And once you have the agreement or as part of the agreement, you also agree how much of the commission you get on the sales of a booking. The standard rate is 10%, which is what we're getting for most hotels. Sometimes you can negotiate it slightly better or -- but I mean, we don't have strong pricing power yet in the market. So we usually go with the standard rate or we have the standard rate. And we basically -- we don't keep inventories. All we do is we pass on the credit card information to the hotel. The hotel then charges the customer. And once the payment has been made, we then claim the 10% commission back from the hotel at the end of the stay. And so this is how the model works and so if you spend -- so if you spend 1,000 on a weekend somewhere on hotels, we will probably get 100 of that in sort of a month's time from now. So that's, in simple terms, how it works with an example. And sorry, no extra -- we don't get any extra from the additional spend. So if they go and have more food or dinner there, that's for the hotel. The only -- we only get something on the actual hotel night.

Our next question will come from Marie Gruebner, H&A Investment Banking.

A couple of questions from my side. The first one relates to just needed really the accounting impact of Prestige. What is exactly that put pressure on the profitability in the Subscription segment from the Prestige membership accounting? Or better yet, how high was that impact?

Marie, a good question and the right one to ask. So the reason why it leads to a bit of pressure is the way we have to recognize cost and revenues from those products. So as with all our subscriptions, we usually have to sort of account for them over the periods of which they are valid. So for most of our memberships it is for 1 year and then basically account for it with 1/12 each month. The Prestige is slightly different because it has a higher cost component with -- so we have to -- purchased amounts and some other benefits from our partners. And we have to recognize the cost immediately as it's -- basically as it is sold and then that portion of the revenue and then over the next 12 months, we will recognize the rest of it, which is basically the profit. So in that sense, you could say it's front-loaded in terms of cost but the profit comes in afterwards. And since we sold a lot of the memberships in -- towards the end of the half of the year, we have sort of seen full cost, but only -- in some cases, only 1/12 of the profit yet. So in a way, you can almost say, this is a good thing because we have sort of profit in the bank that will just accrue over the second half of the year without having to sell anything, but it will sort of -- it kind of artificially reduces the profitability in the short term due to the volume of what we had. Is that clear? Does that make sense?

Yes, yes. It's a lot clearer. And second question is like what is the breakdown between regular and Prestige in terms of your 60,000 members? And so what, for the second half, you won't have any growth in Prestige anymore, is that how we should understand this?

So -- we have so far not really sort of published the exact relationship. But we always said it's sort of 99% access and the rest is Prestige or others. Maybe now with the regular a bit slowing and having a lot of them here it's maybe 98% access and a few more of the Prestige, but it's definitely not something that goes into like a meaningful kind of a balance or anything like that. It's still a smaller, way smaller group. But having said that, the sales, look, we -- I don't think we'll have extremely strong sales in the second half of the year for -- in Prestige, sorry, for 2 reasons. One is we kind of had a special offer with a lower price, so -- which is running out at the end of August now. So we bring this offer from our partner, Miles & More and we said, "Hey, can we push it a bit and sort of that helps to have it discounted," which always is a sales incentive. And then we -- I think with our target audience that we have, we kind of pushed the message fairly hard over the last 3 months. So I think there's -- as I said, there's probably a saturation. Everyone who wanted 1 probably bought 1 by now. And unless we manage to get a whole new audience or like -- in the second half of the year, it'll probably be a bit more difficult to maintain the pace of these sales. So I expect them to be a lot slower for the second half of the year. Having said that, we had repeat customers that bought every year by now, so we can only sell 1 membership per person a year. Having said that, given that slight activity is restricted, and the miles are usually the main sales argument, we actually don't know whether people can use their miles anytime soon, meaning they probably sit on a bit more miles than they need, which also means they might not renew that often or likely that they will do it a bit lower. So all of that means, look, we're very happy that we managed to have the great push in H1. We expect it to slow down in the second half of the year. And then probably, it will pick up again as soon as actually air travel will sort of resume in a meaningful way and it will probably be at some point next year or if it comes earlier, I'm happy to, but I can -- yes. So it will probably not be in par with the first half of the year. I mean we have to -- to give you a bit more positive view, I mean, we had quite a bit of sales still in July and August. So still, I mean, that's -- we won't have nothing in the second half of the year, but it will be -- definitely not be exact same amount as we had in the first half of the year. But we will see a positive impact from the accounting practice that we have with the 12 months on the profitability in the second half of the year. So that will help that part.

Okay, got it. And my second question was related to your -- to the cash and sort of cash burn or cash creation in the second half. So you had CHF 3.8 million at the end of the first half. You took a hit with the earn-out for First Class & More of CHF 5.6 million. Other than that, operating cash flow was positive to the tune of CHF 1.1 million. Can you give us some light on the cash needs in the second half? And whether the CHF 3.8 million are enough or whether you have plans to kind of bolster that cash cushion?

Yes, it's a good question. So we -- I can say that. So we will have a bit of a cash need for the earn-outs of First Class & More from, as I say, 1 we paid and there will be 2 more payments. They won't be as high as what we did now because now it's -- it was also a cash position that was actually not part of the sales scope that was paid out. So it won't be like in the range of CHF 5 million, again, it will be less. So...

So how much more left for First Class & More? How much do we have to kind of...