Match Group Inc (MTCH) 2002 Q1 法說會逐字稿

Good morning. Welcome to the USA Network's first quarter earnings conference call. At the request of USA Network, this call is being recorded. If you have any objections, you may disconnect at this time. All participants will be able

to listen only until the question and answer session of the call. I would like to introduce your hosted, Vice Chairman, Mr. Victor Kaufman. Sir, you may begin.

Good morning, everyone.

Before we get started, once again our lawyers insist that I say that we may discuss in this call our outlook for future performance and [RFX] and uncertainties associated with the forward looking statements, and the results could be materially different from what we presently anticipate.

We refer you to information regarding these risks contained in our public filings with the SEC. Joining me on the call today are Barry Diller, our Chairman and CEO, Dara Khosrowshahi, our CFO, and Roger Clark, VP of Investor Relations and Finance.

We have clearly had reached some momentous time in our history.

Yesterday, our shareholders overwhelmingly approved our Vivendi transaction, which we hope to close in early May. This quarter, we achieved an all-time record for EBITDA growth and the company's history for our operating businesses and we came close to setting a record for margin expansion of USA Interactive as one of the true leaders in the new world of interactivity is really on to something, and we think it's something special. All of our primary operating businesses performed well for the first quarter, led by the extraordinary growth of our three pure online businesses that experience EBITDA growth of more than 225%, hsn had big growth of 26% with sales increases of 13%. This latter number, HSN sales increase, may throw some of you, since we previously said that we experienced a 20% sales increase in January. But slow down in the sales growth resulted from a significant switch on our part, from the sale of high-priced, low margin computers and other electronics to much higher margins, [Softtone] goods, and health and beauty products.

Many of which are HSN exclusive brands. So our sales increase may be lower, but we significantly beat our margin goal and achieved our EBITDA budget for the first quarter, and we expect this trend to continue for the year with sales growing by approximately 13%, but with higher margins, and HSN it definitely on track to hit its EBITDA budget for this year. And we're happy we're able to really grow these margins, and we believe in the long-term that that is a much more important metrics than the way in which we're growing on the top line, which is extremely healthy. On an overall basis, USA is running 11% above our EBITDA budget for the year perform if we achieve this number, we'll have operating ebitda of $720 million for the year, which is almost 70% of our actual 2001 EBITDA number, including all of our entertainment assets, which as you know we sold and reduced our capitalization almost in half.

This will be quite an achievement, and this is without any affect of any acquisitions, which we expect to consummate during the year. With this introduction, I'd like Dara to now walk you through some additional metrics relating to our divisions and public subsidiaries.

Thank you, Victor.

Before we get off the subject of HSN, I want to talk about the all fair business. In the first quarter, hsn.com grew 128% last year over continuity programs, and upsells grew 40%. hsn.com is now approximately 11% of HSN sales.

And while we view all of HSN's platforms as totally interrelated as they drive each other, we think there's real opportunity in the direct channels.

Just this weekend, we had ready to wear fashion event with a 20% uprate, which is terrific. We're getting better and better at upsales as we move

along.

Ticketing continues to move online, and continues to reap the benefits of margin expansion as a result. In Q1, 38% of tickets were sold online, with online sales of 40% in March.

We think we'll hit or goal of being 45% online by year-end. That combined with increased leverage helps grow EBITDA 11% on fairly modest top-line growth. Ticket mass are electronic ticketing product is installed in 70 venues and growing quickly.

Matches popularity continues to grow, adding 145,000 subs this year. Matches sub bases over 520 thousand paid members, of 178% from a year ago.

Our distribution partners are contributing greatly to match's success, and we think it's added to our direct channel, match.com, which is becoming a real brand. Online channel -- this quarter last year, Expedia first turned a profit and one year later Expedia has increased EBITDA over six-fold to 35 million. Cash flow from operations just this quarter came in an at extraordinary $122 million. Improving our faith in the merchant model, merchant revenues surpassed agency revenue for the first time ever, accounting for 50 percent of sales.

They put even more distance between it and Travelocity this quarter. HRN] with EBITDA of 63% to 26 million. On 57% higher revenue had several milestones this quarter. They said a new one-day record with 3 million in sales on February 27th, and launched its new hotels.com brand to great .fanfare. In less than one month, hotel.com is already generating 7 to 10% of sales on a daily bays.

He added a record 1500 properties. This quarter, as many it added in its first nine years of business.

It's really accelerating. As always, all is not perfect. PRC continues to suffer from the economic downturn which hit last year. This quarter revenue in EBITDA, we're down 13% in 43% over last year respectively. However, we are seeing business starting to solidify. During the quarter, PRC added Target, Bill Point and lodging.com as customers, and expanded its relationships with American Express, AT&T, and Federal Express. We are, however, continuing to see pricing pressure on the Sigma. Victor, back to you.

Thank you, Dara.

What is truly amazing - something that with all of this growth, we're still in the very early stages of this company.

And lots more interesting things to look forward to in the future. Our balance sheet as strong as ever with $2. billion in net cash proforma for the Vivendi transaction, and we're off to a great record-breaking year. And operator, with that, we're

ready to take questions.

At this time, we're ready to begin our question and answer session of the call.

If you want to ask I question, press star 1. You'll be announced prior to asking your question. To withdraw your question, ask star 2.

Our first question comes from Victor Miller.

Good morning.

A question on the strategic view on assets. On acquisitions, net cash of $2.9 billion, four currencies to offer buyers, even more borrowing capacity just raising EBITDA numbers for the year.

Can you give us a framework word the type of transaction, [you want] to do in terms of size and -- deals you would not do that have been rumored to be contemplating if you want to offer that, and are there any assets that you would revisit, specifically, Dara, you just mentioned precision response, and Barry, just maybe an update on Citysearch; where the profitability isn't quite there?

Thanks.

We'll be happy to try to respond to that, don't go backward.

Thank you.

We'll start with -- that wasn't a compliment, necessarily.

We'll start with Citysearch. I think what is happening with Citysearch is we're continuing to build traffic, but more importantly we're doing what we said we would do, which is we're concentrating on the product itself this year. We're actually our feeling about sales is that the fact we don't want to put out expense for sales at this time, because in the larger sense, Citysearch is not yet ready. It is gathering audience -- our worry is not a current revenue.

Our worry, and our concentration, is on building the audience. The audience will get built in two ways. First of all, completely as the product evolves and gets better.

And the next -- out in a couple months I think will again continue to show that this local geography is a great place to do things, and that's what we're working towards. And what we'll follow from that, not right away, but probably in a year or so, is a real sales effort, as against a real service.

So our -- there's nothing we have learned deters us from this strategy. And given the nature of our business, and as I said, if we're right, we're really right, and if we're wrong, we paid most of the expense so far and we're doing just fine. The kind of speculative work this company should always do consistent with the facts that we can more than afford to make these kinds of investments.

So Citysearch, that's the Citysearch story.

As far as acquisitions, there is no particular files. We're quite happy to spend a lot of time making an acquisition for $12 million.

Or 50 or 80, as we have done in the last several months. And a few instances. We're also happy to chew on bigger fish, and we're also doing that.

I don't think what you'll see is something that is transforming, meaning I don't see nor do my colleagues - I think they, in the next year, there will be some transforming transaction, and of course it's possible, but I don't really see it.

And the kinds of things that have been speculated about us, those so-to-speak large transactions involving very well-known, very well-known brands, that have market caps beyond let's say a couple of billion dollars, I think you could put that in the transforming category.

Other than that, what has happened to us, and we were of course -- anti-climatic with this, yesterday, when we got this approval from our shareholders, gives this company such great focus and definition, and while it may have been anti-climatic, I think what my colleagues have seen, and most people who talk to us in the last several months or so have seen is that we now have a really intense focus and understanding of what businesses are appropriate for us to align ourselves with, to look out for the future, and what aren't.

It also -- I think that focus -- I was -- not forces, it's a natural outgrowth of the focus -- it makes us evaluate things, we're doing that we may [say] in relation to one of your other questions, that those businesses may not be for us in the future.

Businesses that we may have invested out of certain point in our evolution.

And we're constantly doing that. We're going to continue to do it. And I think the only thing -- the only thing that is incredibly important has come out of this process is that it has given us much more of a functional understanding of exactly the course for us to follow.

And if we just follow that opportunity that's in front of us, while continuing to keep the businesses that we've got moving along with the growth they've had, this company is at the beginning of its cycle, not even the early middle.

Thanks very much.

You're welcome.

Our next question comes from Deutsche Bank Securities.

Couple questions.

First of all, you can talk about I guess not so much on the dollar or valuation metrics, or as you look at new acquisitions, out there in the marketplace, how do you evaluate -- looking into new categories?

As supplier base? What kind of characteristics do you look at in terms of business models that attract you over the next several years?

Secondly, if you look at the existing subsidiaries or companies that you've amassed up to this point, you know, you're already seeing some synergies between Ticketmaster and Expedia in terms of cross-selling opportunities.

Can you address, in the near- term, which businesses do you foresee some good synergies over the next two years, and then over the next five years, where do you think the okay longer-term opportunity is?

Which -- I guess entities do you think will be pretty synergistic with other businesses?

Think there's some competition for length of questions now are getting almost as long as the answers.

We both should watch it, as they say. No -- again, somewhere on part of it.

Certainly my colleagues here can chime in. In terms of characteristics, obviously, this company is involved, as our name indicates, interactivity.

And also you can think of that in a way also as being an intermediary between supply and distribution.

And any business that has those characteristics of which there are many. They are obvious, or I shouldn't say they're obvious, necessarily, but it's not hard to say what goes in that pot and what stretches it.

That's what we're doing. Also, don't want to -- while we have not been shy about saying we're inquisitive, and we did put that road map out, and it was simply -- let me put it this way, it's a road map like those video games, where the road is very wide -- and it speculative, while of course we're going to make acquisitions, and we're in the middle of talking about a number of them, talking more than talking, I would say, various definitions of negotiating, we shouldn't overdo this to the point that it has a kind of hour expectancy.

They will come this year, some.

Some will come next year. I think that it will simply be a somewhat unsteady progress, as we evaluate things, and as my colleagues know, in many cases we get extremely close, and then we say, oh, no, we're not sure we are going to do this.

We torture the end stage of this process.

Which is, we think, appropriate. And in some cases where we've been -- we've never gone over the line, but we have been at the very end of the process and simply said, not for us, and go home.

And so I don't want us to get -- I don't want us to get like overheated in this area. And cash is not burning any hole in our pocket. So I think -- while we're happy to mention any specifics questions we can on our acquisitions, and certainly any general discussion about it, somewhat the more you talk about it, I think the more quicksilver issue it becomes.

Anybody else got anything to add to this? No. I guess that's it.

Okay.

So, one follow-up is would you -- looking at demand side, as much as you look at even

supply-side, in being this intermediary for interactivity?

No, no, look, don't misunderstand me.

When I apply -- in the intermediary space, when I say supply, I mean the people who other than our retail business; our direct electronic retail business, people who own goods and services that have, so-to-speak, some of same, not services but goods.

We are the intermediary between that and distribution.

Distribution meaning big type, AOL, MSN, et cetera.

Got it.

So that's the difference that I mean by that.

These are all like terms of our own arts.

It helps clarify things for ourselves, as we're in this working process, scoping out all this opportunity.

For example, people have speculated over the last month or two that since we said we might be interested in the financial services area, that we might consider using our balance sheet for banks, insurance company, mortgage companies, and those are impossible.

We're not doing any of those things.

And in our minds, the true supply-side. We're going to be an intermediary. We're not going to use our

balance sheet to buy in a sense hard assets. But we're more in the service area.

One last thing on the issue of the relationship between the entities or the direct synergies.

They're all over the place for us. As we begin to develop scales, in these businesses, whether it's the travel businesses relating to each other or the travel business relating to Citysearch or relating to HSN, or PDTF, the business we bought in the UK, which kind of brings together all of our travel services and services of opportunity are they can have or it's in the personal site relating to the travel site, all these things become this area of scale relational situations between each of these.

They're all in the -- in the so to speak sequence of doing things, because they're all fairly active, these services that we're engaged in.

Then they all really do start to relate to each other.

By the way, that's very earlier stage. We're much more interested in building these businesses individually than we are in linking them together.

Linking them together will come in time. But we will never sacrifice the building of an individual business for any synergistic purpose.

We think that would not be smart.

Thank you.

Next question?

Our next question from Salomon Smith Barney.

Okay. I'm going to try to be concise. Good morning, guys.

We haven't been necessarily concise, but certainly you don't need to follow our lead.

Okay. I'll keep it loose then.

Do whatever you want.

On Home Shopping Network, Barry, the international piece, while there weren't very many things that weren't very strong in terms of positive upside, relative to I guess your budgets in the quarter, DH is lower than what you guided to, and I was wondering to what degree you've been impacted with the situation with respect to [HSN] and how you are thinking about international, because you guys have got so many things on your plate, and bunch of different profit centers.

It's obviously a difficult business to manage, even in the U.S..

I'm just curious, kind of, what your sense of what you guys are doing internationally is right now. And then the second question was, with regard to Expedia, and room, obviously, the numbers continue to be I guess blow-out if that's the right word.

I thought what was interesting in the quarter, is even though expedia seems to be at a smaller base of revenues of 116 million versus rooms 166, the incremental margin or operating level was fairly extraordinary.

I was wondering if you could speak to that a little more, and directionally where we can expect that to go, because it's pretty impressive, with the 30% margin and whatnot. Thanks.

Pleasure.

To the first question, international. Yeah, in a word, -- completely impacted by what has happened with Turk Media, all of Curt's interests in Germany. The situation is that the Chief Executive of our interests in -- outside the United States in Europe, very, very entrepreneurially driven.

Very, very aggressive in opening new businesses. Off of the success that we've had in our first business in Germany, in retailing, where we did so much last year, we talked about this before, which we did a little too much last year.

This could also be, by the way, a side definition of [Turk] itself, and how it got in trouble.

Which is that a kind of overexpansion and risk taking that was not followed by executional precision.

For us, it's certainly not getting us in trouble because these are various forms of joint ventures, one we control, one we don't control. The extent of it is that the expansion hurt our German business because focus was taken away from it. The expansion itself is costly because you're starting business is in Italy and UK And et cetera, and buying a TM 3 from Murdoch in which to do travel and games and various things, new programs, cable program service for the german market. Of course, it's now -- we've been in this now, so to speak, in this troubled state in Germany for six months, with Germany and our international interests.

So this is not news to us, and I think we are managing through it. We're managing through it to the extent that we can relative to the issues with Kirk itself, and to a degree it's unpredictable in terms of what the outcome will be, other than to say the following: that Germany is a good business, and Germany will return once these problems - we work ourselves through the problem.

The problem, by the way, was we were basically out of business for a couple months because we had -- the decision had been made to change all of this backroom systems and its computer systems, all of which failed on the same day, which really hurt the business for a very long period of time.

And we're still sort of bailing out of it, though the systems now are fixed. So I think Germany is okay. Italy is a very good market for us to be in, without any question.

The U.K. is a market that we think we can compete in, particularly since we're building significant other U.K. businesses around that will allow us to cross, the is set are.

Questionable what happens that [INAUDIBLE], we're not sure. I can't tell you what will happen with Kirk, though I doubt they'll continue to be a player with us. Over time, they certainly not been shy in saying they'll have to sell many of their interests.

But in terms of its impact on our company, its impact on our company on the negative side is relatively minor, and it still has promise. But to the -- the answer to the question about managing it, yes, managing it from the United States is difficult to do, and we are working on that problem as well.

One thing to add, I think there is a real possibility that things get messier as a result of the Kirsch bankruptcy in dealing with kind of insolvency issues and who we're dealing with and funding and all of these operations outside of Germany. Obviously, Germany is cash flow positive.

So you may see some bumps over the next several months, but financially, from our

standpoint, the impact is in no way significant.

Is there a put call type of agreement that you guys have with them or some ability for to you take up there, their interests some multiple cash flow?

There is, but it relates to other factors that don't exist now.

For example, the possibility of going public, which is not something that we're actively considering. I do think there will be changes in ownership and relationships in those territories, and I would say it probably will work through over the next six to nine months, would be my guess. Your second question on Expedia and Room, I think the main reason why the margins are different is the different way in which they record revenue. HRN, because it has solely a merchant model, does revenue kind of on its gross bookings basis, and Expedia does its revenues on an agency basis some that affects the margin.

Dara, do you have anything to add?

If you look at HRN in the same way that you look at Expedia's revenues, in other words, if you look at their world profits, which would be what Expedia reports its revenue, and as far as operating leverage of the businesses, they're pretty similar. Expedia, for every dollar of growth it had in the quarter on its revenue, it put 50%, 50 cents to its EBITDA line, and for HRN the number is very similar, which is for every dollar of gross profit, that it grew in the quarter, it's also pushed 50 cents to the bottom line.

If you look and match that number, is around 40 cents. So pure online businesses carry pretty incredible operating leverage and are similar to each other.

And once you get the leverage, once you get -- I mean, the so-to-speak scale effect, what we begun to see in several places, and I think we'll continue to see, and by that the way, that -- it is our lead-in question in terms of what we're interested in acquiring.

The scale effect.

Of these things is why this company just by -- you could call it serendipity, an original smart, or you could call it George -- but the businesses that we are in, and the fact that we are of the very beginning of their growth, which is unquestionable and talking about interactivity and being this intermediary between supply and distribution, where once you get two things happen, once you get up to scale, the leverage is truly fantastic in terms of sustainable margin.

And the second thing is that is when you get a relationship on one to the other to the other, which -- and then the thing that you get is you get some real barriers to entry for other people coming in.

And that's for us.

I mean, that is why at this point, which is why this company now in its pure, pure

state, has got such ahead of us. Next question.

Thank you.

Our next question comes from Piper Jaffrey.

Yeah, good morning.

A couple questions. One, going back to Expedia/ Room question, is there any evidence that Expedia is gaining some market share from Room and the hotel area?

I know that their growth had a lot to do with the package deals that they've been offering, but it also seems in the hotels they were growing faster than Room.

And what are your thoughts on the competition that's going between the two? And quick follow-up, if I may: Barry, could you talk a little bit -- I'm not going to ask about the type of acquisitions or the interconnection, which you said is not in there yet, but if you could give us some time line as to when can we expect some benefit from interconnecting these businesses that you are still adding to?

Are we talking about some time this year?

Is it something that more in the next three to five years? Or what is the time line for this road map that you were describing?

Thanks.

On the first question, I think the reality of the hotel business is that -- only like 3% of it is online, so I don't think that Room is taking business away from Expedia.

Expedia is not taking business away from Room.

They're both expanding on a really huge basis, in a category that has kind of endless growth, as far as we can see.

So we're extremely happy with both. They do compete. And we think that's healthy within our organization.

But we don't see each other affecting the other's ability to grow.

It's not a -- just add to that, before Dara chimes in.

This is not only - Victor is correct, it's got very small online characteristics given the size of the market itself, but there are a lot of other players in it as well.

And while Expedia and HRN are certainly significant players, they're going to be a lot of people in there, and it's going to keep growing and growing and growing.

There's just no way around that one.

Specifically, comparing the growth rates, part of the reason why HRN's growth rate is a little slower than Expedia's is, because HRN does get a significant amount of its revenues from its affiliates, and its affiliates are growing slower than Expedia.

Travelocity being one of them.

So, from an affiliate standpoint, Expedia is gaining share on HRN affiliates. If you look at launch of

hotel.com, that growth is actually significant.

These guys are, as you all know who are invested directly in HRN and have contact with management of HRN, these guys are killers.

They're great, great executives, and they realize before anyone else that what they should go do is establish a brand of their own, so that they can continue to compete, and that was -- I mean, going out and getting hotel.com at the low price they paid for it and then essentially changing all their marketing under this name and certainly probably the company too, but and having it be what, 8.7% now, take up in a month or so, plus or minus that?

I mean, that's remarkable.

Let me talk about the -- just for a second, the last question that you raised about the relationship of these companies and whether we'll see the effects in the market.

As I said, I think that the work now is to get each of these businesses to grow in their own fileup.

But combined effective in our Relations with everybody, is getting some traction. It is certainly is true in our relationship with portals. We're now more important to distribution because we are bringing revenue to distribution. And we are getting into conversations where in fact we're able to take a group of our assets and make a better distribution deal than we could have last month or last year.

I think that's going to continue.

I think that is one of the, so to speak, internal network effects of our own growth, the success of these individual businesses.

That's great. Thanks.

Next question.

Our next question comes from Peter Mirsky of SG Cowen.

Thanks very much.

Can you talk about how HSN is doing now? I know you changed the merchandise mix, up revenues up about 20% in January, sounds like there was a slowdown in February, March and maybe a sense for where you hope to get in revenue per household by year end?

As we said in our introductory remarks, we kind of intentionally dealt with reduction in our sales estimates because we saw that the computer and electronics business, which to a very large degree drove really sales last year, with low margin, was something that in the last six months of last year had receded and we view this as very healthy.

We think the switching to other categories of higher margin and accepting a lower top-line growth but with much more leverage off of that top line is just great for the business. So we anticipate about a 13% increase in sales for the rest of the year, and hitting our ebitda margin probably creates just huge leverage off of that sales growth, which is something we've been building for for the last two years of spending on our infrastructure and improving the way in which we deal with our customer.

So we see the business as very healthy.

It's -- the results of HSN are the result of health, healthy conditions.

There's been speculation about that when we made a change in the management of our merchandise operation, where people said, "Oh, my god," -- excuse me -- "you let go, so to speak, the head of merchandising.

It means the merchandising is in trouble." On the contrary, it's an indication of merchandising's health.

In part of again the evolution of the business. It's really only now, we talked about this last quarter or two, that we've got a group together that is very, very related to each other.

And one thing that those of you who look at QVC understand completely is that it is [really] a sum of the parts business, where each part is incredibly important to each other.

[INAUDIBLE] of a lot of gears.

Our merchandising operation which was getting stronger under the hood rather than at the top of the driver of the car, merchandising, needed to be, so to speak, broken apart.

So it related more to each of the constituents of company. And it is also an indication, so to speak, of the health of another issue inside HSN, which is now it has a true operating operator in Bob [Roseplatt], who now wanted to connect the part of merchandising, the other parts of the business, because of confidence in the people who were involved in all the little -- not the little, all of the departmental parts of merchandising rather than one person controlling every decision in merchandising.

So this was -- this had nothing to do with changing the merchant because we didn't like the merchandise.

We liked the growing, building of brand merchandise that's going on through the couple hundred people who are engaged in merchandising at HSN, and we wanted to integrate it better.

And that's why that happened. So the things that have happened at hsn, as against last year, where we pushed sales too hard, and we've talked about that in the past, now we are beginning to get the effect of good products, good margins, good sequencing -- not endless repetition of things, running around in somewhat circles at lower margins.

So the business is being better managed on the ground, and I think that quarter by quarter by quarter will start to show itself.

Okay.

I guess what I was getting at is, do you feel comfortable you're eight a run rate toward that 13%? Because it seems you were

below that having done plus 20% in January.

We just said it.

We're comfortable that we're going to achieve that rate.

Okay. Thanks very much.

Thank you. Next question.

Our next question comes from Gordon Hodge from Thomas Weissel.

Good morning. Can you give metrics revenue in cash flow metrics for travel group, and then include in your guidance, given it's still spending?

And if you could talk about what the plans are in the timing for collapsing the LLC structure

and simplifying that financial structure?

The last part of your question, you're a little too soft, couldn't hear it. Who? What?

The liberty and obviously any limited liability corporation, sort of embedded within USA. I assume that goes away, but I'm just curious when.

It definitely goes away, and it should be within several months after we close.

We just have one little piece left with liberty and hsn and

we should get that done very promptly.

Great.

Yep.

We -- the gross bookings for that business are around $250 million, and it's about a breaking-end business, that's all. We haven't disclosed any details.

This will be the -- will this be the launching pad or provide the infrastructure to launch a U.S. Cable?

Most definitely.

Most definitely. Those of you who of any familiarity with the UK, we think by the way that business has reached the point where its leverage effects will turn it quickly into profitability this year.

But those of who have seen it, it's very effective at what it does. It's built a real business in terms of being a rely factor in British travel.

And the management of that business will be responsible for supervising the launch of our U.S. Video Travel Channel.

So we expect that this will sometime during the year, we can't really tell you when yet, with precision, but sometime during the year this activity will get underway here.

And we're really glad that we've got pros engaged in doing this with us rather than us trying to start it from scratch.

Thanks.

Next question, please.

Just asked and answered.

Our next question comes from [Visitan] Vickers from J.P. Morgan.

Good morning. If I look at the revenue guidance you provided and look at where Expedia, Room and Ticketmaster Online, Citysearch took their guidance too, it looks like revenues are going down on operations.

Okay. But the guidance you gave, I thought was just for the corps businesses.

In those businesses, it really is PRC, which is really operating below budget.

Okay.

No, that being down in households is totally related to our disengagement process, the sale of our broadcast properties, and the loss of Broadcast Homes.

And we proforma the numbers to make it on an apples-to-apples basis.

So that's not the effect at all. It's just the switch-over to product that really is a lower price product. Computers and electronics are fairly high priced, which drives sales but have very low margins.

You're saying by being in fear, Total Homes is not impacting you?

No, we -- apples to apples basis, it's not impacting us.

Okay.

Extremely healthy, and we really worked through this disengagement process in very favorable way.

Okay. Great. Thank you very much.

Welcome.

Next question?

If you want to ask a question, press star 1.

Our next question comes from David Lyons from Prudential Securities.

Hi.

It's Kathy Steponius. Two questions. First, some of your subdivisions or businesses that you own excluded non-cash market is costs for promotions on the USA Cable Networks? By I was wondering what happens with those deals 1 the Vivendi deal closes, that is, are those marketing expenses go cash pay, and does that lower EBITDA, and is that factored into your current guidance? And the second question was, Barry, I'm wondering how much of your time you're spending working on Vivendi Universal or Vivendi Universal Entertainment vis-a-vis USA? Thanks.

Kathy, on the first question, I think you know in terms of our budget and other metrics, we provide things on a non-cash basis.

Marketing expenditures of that, in which to a large degree I think are at HRN and Ticketmaster. They are treated as a non-cash expense. We do have some arrangements with the Vivendi to utilize some timeline on USA into the future. And to that extent, it will be a non-cash item. I don't see us transferring that into a cash-paid item of marketing, although each of the companies will do its own form of marketing, as you're seeing with matches.

As far as my time, of course varies.

I spend some days 30% on the Vivendi Universal, some days I spend two-thirds of my time on it. But the fact is that as you all know, people who have multiple operations on -- responsibility, and I don't think it's the issue of the exact amounts of time. I think what has happened as a result of this, this USA interactive has complete focus and gets my complete attention, and there is nobody who works in this company or who relates to us on an interactive side that thinks otherwise, and also I'm able to in my nighttime hours -- no, in my other hours, I'm able to spend some time on the Vivendi Universal Entertainment.

Without, I think, hurting my strategic role there.

So, I think it's in [INAUDIBLE], I mean all indications for me are that from my experience thus far, and we've been operating this, other than legally, of course, as if the businesses had been separated for the last couple months. And I and my colleagues are completely comfortable on the USA Interactive side that there's no sort of [UNKNOWN SPEAKER] of energy.

On the other side, Vivendi Universal Entertainment, I think those people would also say that it's going along okay.

I mean, it's not a precise art.

But so far, it's okay.

Operator, we'll take one more question, if there is one.

Or next question from Scott Ehlers of UBS Warburg.

Thanks.

Chris Dixon. Barry, perhaps you can talk about the opportunity in the Internet with community services. Match.mom has been [extraordinarily] successful.

And when we looked at other opportunities, careers and thinking in other kinds of ways of putting people together and extracting monies,

what do you do in terms of the make-buy decision? Do you take match.com and drive it, or do you look for other opportunities? Is this an area you want to pursue?

The last -- 80 to -- I didn't hear the last five words.

Is this an area you want to pursue? Where is your overall strategy?

Oh, absolutely yes.

We're looking -- we were -- I mean, it's another indication. Sometimes when we're early, we're wrong. But we were early in this area of personals.

We believe personals is much broader than the way match.com began, which was essentially to get people literally married, and that's what they billed themselves as, and they had a solid but relatively narrow definition.

We think those definitions are completely broad.

And certainly in terms of people relating to people, they deal with flirting, they deal with talking, they deal with all forms of interaction between people.

That then, of course, relates to community. Community relates to all sorts of other activities that people do that relate to the services that -- many of services that we offer.

So this area, both by internal growth and by acquisition and by acquisition in the broadest iteration of the word community something, what we're after.

And I think that's -- those are the kinds of things you'll see us either starting ourselves or acquiring over

the next month.

Thank you very much.

You're welcome.

Thank you all. We will -- we're, I must say, one final wrap-up, is when this transaction is actually completed, which I guess is now May 3rd or somewhere around the pre-teens of May, we are -- in this first quarter that's behind us, so to speak proforma, since we've been operating the company since January based upon the separation, there is now, without being endlessly redundant about it, there is now this remarkable focus and opportunity ahead of us. And my colleagues, who have -- the people who operate these companies, are divisions and our subs, have done in terms of putting this transaction together, in terms of all of the work that is taking place over the last three months -- I mean, this company and its people are in great shape.

So, we look forward to the next quarter, and we look forward to this continuing dialogue, and we do believe in as much transparency as there can be, so our glass house is open for inspection every day of the week.

So call us and ask us, and we'll be as responsive as we possibly can.

Meanwhile, thank you for

joining us on the call.