Match Group Inc (MTCH) 2002 Q2 法說會逐字稿

Good morning.

Welcome to today's conference call.

All participants will be able to listen only until the question and answer session of the call.

At the request of this company, this call is being recorded for instant replay purposes.

If you have any objections, you may disconnect at any time.

I would now like to introduce your moderator for today's call, Mr. Victor Kaufman.

Good morning, everyone.

Before we get started our lawyers once again insist that I say that we may discuss in our call (indiscernible) for future performance and risks and uncertainties associated with these forward-looking statements and our results could be materially differ from what we currently anticipate.

We refer you to the information regarding these risks contained in our public filings with the SEC.

Joining me on this call is Barry Diller, our Chairman and Chief Executive Officer, Dara Khosrowshahi, Chief Financial Officer, and Roger Clark, Vice President of Investor Relations and Finance.

We had a really great second quarter.

Cash net income for the operating businesses increased by 57% with all of our primary businesses significantly contributing to this result.

Our margins relating to our operating businesses expanded significantly from 15.9% to 18.6%.

We ended the quarter with over 8 and a half dollars per share in attributable net cash and securities.

If you just take this net cash and securities number and add a very modest value for our two most established businesses, HSN, and Tickmaster, our primary interactive businesses, Expedia, Hotels.com, and Match.com, all reported outstanding results yesterday are not accorded any real value in the stock price today.

In some ways it is not surprising given the overall state of the market.

No one likes this type of market.

But we are positioned perfectly.

Our businesses generate substantial free cash flow, about 290 million dollars this year, and we have a clearly defined growth strategy in businesses growing even in the present economic climate.

Of course we have challenges.

Many of them.

But we are focused clearly on your future.

USA now ranks the 8th largest company in terms of audience reach on the Internet.

Recently surpassed Amazon and gaining grounds on a few others.

I wouldn't be surprised to see us in the top five in 12 to 18 months.

Combined our interactive businesses generated 2.7 billion dollars in gross transactions in Q2, a level approaching that of Ebay the leader in this metric.

As of this quarter we are the most profitable Internet commerce company around, beating Ebay, Amazon, Yahoo!, and all others and proving our businesses

exceptionability to scale.

Using the revenue from the screen metric, QVC is still number one in profitability and we are number two.

We are proud of our accomplishments and we want to reiterate we are only at the beginning of our evolution.

With this introduction, I will now ask Dara to give you some specifics about the second quarter and our outlook for the rest of the year.

After which Barry Diller will give you preliminary remarks.

Thank you, victor.

I would like to preface this by saying as we said before we decided to move away from the EBITDA metric and state of our cash net income which captured depreciation and other charges that are on going costs of the business.

However, because most people are still measuring our individual businesses relative performance based on EBITDA we will continue to provide EBITDA segment information for the remainder of the year.

However, for next year we will consider other metrics such as operating income (indiscernible) to provide segment detail.

As far as our outlook goes as you know we filed our budget with the SEC in January and we will now give you perspective on how we are tracking against the budget for 2002.

We currently expect to beat our budget for total revenue by 2%.

Operating EBITDA by 14%, and total EBITDA by 7%.

For cash net income if we were to exclude certain items of non-operating nature that arose during the year such as lower than anticipated interest income and the consolidation of hot networks which has significant - had significant losses we would be ahead of our budget.

Hour, even including these items we expect to meet our cash net income budget for the year.

(indiscernible) 56.6 million shares into the share count we expect a cash EPS of 37 cents for the year with Q4 expected to be about 4 cents stronger than Q3 due to seize analyst factors.

With that, Barry.

Thank you, Dara.

I am going to talk for a couple of minutes and then we'll get to the question and answer that always enlivens this process.

First of all, Warren Buffett says you get the investors you deserve.

I believe we will get that happen to us.

And that is appropriate.

What we will do is simply continue the process that we - we have always operated - it began in earnest last year when we did the (indiscernible) travel transaction.

That

is to continue to build this balance sheet and continue to make this company extremely strong in every area of its ability to compete.

That means having strong and simple balance sheet.

It does mean operating conservatively while at the same time, of course, we are a company that enjoys, likes, has profited by startup businesses.

And we will continue to invest in them.

We have this terrific intersecting ground between supply and customers.

All of our businesses, all of our interactive businesses do relate to each other.

It is why we want to continue to build the balance sheet to simplify everything that we can because we have a terrific area to compete in.

And our ability to do so over time is gonna build value if we continue to do it with this extremely conservative basis that we enjoy today, and for which there is some criticism of people saying, what are you doing with all of that cash?

I would argue that today and particularly tomorrow and the day after it is gonna (indiscernible) us extremely well.

I want to talk for a minute about our public subsidiaries and the exchange offer that is exchange concept proposal which is still active.

And I recognize that it is controversial.

I understand that, of course, it has (indiscernible) a good many people.

I think if you are a USA shareholder, it is wildly clear that a simplified and consolidated operation for us is the best thing.

And we have every right and reason to want to get there.

We also have patience in getting there.

But we do feel that having said that we want to acquire the balance of our public subsidiaries and put everything into one simplified and consolidated business is certainly, for USA shareholders the absolutely best thing that we can do.

But we would also argue that it is in the best interest of the shareholders of each of these subsidiaries.

It is our feeling that while financial engineering in the past gave us flexibility by having multiple (indiscernible) that you can do various things with, we don't think those are today's times.

We don't think they will be tomorrow's times.

Our argument, which is that a mix of very high growth businesses medium growth businesses and stable lower growth businesses is a fantastic working ground since all of these entities are interactive and they must begin now consolidated to relate to each other.

Because that is gonna create its own growth, the combination of all of these businesses in one house creates its own growth by all sorts of various programs that will include database marketing, rewards programs, etc. we now have such large audience combined that the work that we have to do now is not to create synergies of cost reductions, but to create real and natural synergies for revenue which only can - I should not

say only - but most effectively done if everything is in the same house.

So our feeling is that eventually - and we do have patience here - we will prevail in this process.

I said to the managers that I value very highly who operate these businesses, if, in fact, they felt their stock would double every couple of months, six months, whatever, they and I would say, well, this is crazy process.

And we should not do this.

We don't believe that is true.

We don't think these markets themselves and the particular (indiscernible) after the last two days in the travel sector makes any sense whatsoever.

But nevertheless these times are changing.

I do not believe that even the highest growth companies are gonna have the fantastic stratospheric beyond the sky evaluations.

Our feeling about this process is that we are going to continue to work with the managements.

We are sensitive to their sides.

We combine great business, in the travel sector, Ticketmaster business, and Match.com business.

We know we are on to something terrific.

But again, redundantly, but I am redundant, it ought to be in one consolidated and balanced house.

As to stock options, one of the topics of the day, we are certainly going to expense options.

But what is really going to happen we believe is that there will be much less options while at the same time we think there is a better reward system (indiscernible) system.

And that is probably - I say probably because we are in the beginning process - we would use restricted stock.

We think it is a better way of to incentivize the members of this enterprise.

And it will have two qualities.

One is that it will have (indiscernible).

Our feeling is you need to be with the company a number of years before - you ought to be a long-term player to - first of all, to affect the business and then get rewarded we are saying.

The second thing, we are going to make them performance based.

We are, struck by the idea that one of the things about options is that they are far too democratic.

They reward a lazy person and terrific person essentially equally in terms of option for option.

We don't think that is a very good system.

We think there is a way using restricted stocks you have (indiscernible) vesting, and then have performance metrics that say - amount will go up or down depending upon performance is a really good thing to do.

So while to us, the issue of expensing options isn't really the topic.

The topic really is how do you incentivize employees, and actually make those incentives as it relates to the owners of the business appropriate?

How do you make the incentives -

they are not aligned.

Shareholders and employees are not aligned.

They are two different classes.

The issue is what is appropriate for shareholders to do to incentivize and reward employees for performance for which they will benefit.

We think there are other ways do this.

Over the next months we are going to not only in our USA but with the subsidiaries we are going to work towards coming up with such a plan.

The next thing is what are we going to do with our cash.

I want to make a statement about that and we will answer any other questions.

We are going to use cash to expand our businesses.

We will use cash to acquire businesses, and use it as startup capital for brand new businesses, I said before that we have had real success at.

We will be buyers of our stock hopefully an inch before this crazed market stabilizes.

I want to make one comment about HSN - also in addition to employees I think eventually are going to get as well on incentives, etc., get the executives you deserve, I think you get, of course, the board you deserve.

And one of the things we do with our board is we tell them bad news first.

This is not really in the area of bad news.

But it is factual.

So we are going to talk about it at the outset.

We had a better than okay quarter with HSN.

EBITDA was up 21%.

The first 20 days of July are slower than expected.

We actually - we were up 20%.

It is not that this is bad news.

But it is factual.

We are a bit into the month, slower than expected.

We believed that we are gonna achieve the results that we have said we would achieve.

But we are in a process with HSN that we deeply believe and are going to continue to do.

It may have some short-term depression.

I don't believe too much.

But it may.

And that is we are moving, transisting as we have told you in the past to higher margin goods.

We are building young brands that we think we must do, and we will continue to do.

In the other area is HSN International, we have talked about it in the past.

But to give it to you it together with HSN, we expanded (indiscernible) last year.

And what we have done is changed the management.

We now have solid good management that has been functioning for the last several months.

We bought out (indiscernible) who was our partner for 100 million dollars.

Closed down UK.

Rebuilding the businesses in Germany and Italy.

It is going along fine.

We probably will get a local partner to replace [Perk] German-based partner.

Many people want us to do it.

Our process right now is essentially to pick the best one.

Nobody does not believe that European business and particularly the German home shopping business is not of great value.

We have got a lot of people, two, three different entities that would like to join with us that are local and huge companies in Germany.

I hope - I think

we will pick the best.

And we will have a local partner that we think is the right way to go.

I didn't want to go on too, too long with that.

But I wanted to give you at least an opening point of view in these turbulent times.

Now me and my colleagues will answer any of your questions 00:18:26 however well we can.

Operator.

The first question comes from Anthony [Notal,] Goldman Sachs.

I guess, Barry my question is directly for you in regards to Expedia room.

As I look at both companies and outlook, it is obvious they are competing.

Their margins are contracting given that hotels is directing in its own brand and vacation packages.

Expedia continues to invest in vacation packages, but also has infrastructure expenses.

Those dollars are going to build their individual businesses that could ultimately be used to drive their growth in reference to competition, and growth (indiscernible) minimizes your ability to grow shareholder growth.

How will you maximize growth of these companies relative to competition if you can't get them brought in over the next year?

And if you can't, what is the catalyst to mobilized you to be more aggressive?

The value of the stock, substocks, deterioration of their performance, and when we will we see the progress become more aggressive?

I think the natural forces will at a certain point in time bring the companies together and bring them inside of USA.

As far as the competitive situation, we'll talk about it.

Yesterday I must say God knows why would I try to figure things out and give explanations where there (indiscernible) indicate and otherwise.

Here hotels and Expedia come out with terrific statements about their (indiscernible) businesses and growth.

Which has been (indiscernible) now.

The truth is hotels (indiscernible) building a brand called Hotels.com.

If you think about companies and business, the idea that (indiscernible) smart enough while all of this craze is going on (indiscernible) go out and get their hands on the dang hotel.com which they did in the stealth of night and did not pay very much for in real terms.

And then begin internal marketing campaigns.

By the way those students on how to spend money on media look at Hotels.com spent its money on media, didn't use an agency, spot every single spot strategically.

And to the extent they did that, yes, it cost them a couple of bucks short-term.

But now they are off to about I think 20% or so of their sales are in

Hotels.com.

And every dollar invested in that is a dollar that will overtime come home because Hotels.com is gonna become a brand.

Now look at it on another company side, Expedia.

Expedia also spends marketing dollars and Expedia's brand is I think anybody will say getting every day more known here and throughout the world.

Every dollar Expedia spends on its brand will come home over time.

The fact of the matter as they compete with many others other than themselves, and they are investing their money during this period where they are having such growth to increase their brand recognition is everyday smart, something I back, and I would increase not decrease.

As far as the overall (indiscernible) is concerned in terms of their abilities to compete with each other, there are plenty of businesses that are housed inside that compete against each other in all sectors.

That doesn't concern USA right now given the fact that these have been - Expedia very freshly but hotels has been here for a couple of years.

Expedia now has had its - certainly probably six months of experience.

There are ways these companies can work together now.

I think they could work together much better if they were consolidated inside one business.

Again we are patient.

Eventually I think the natural law will have them come together.

If you would like to ask a question or have a comment press star one.

You will be announced prior to asking your question.

The next question comes from Tom Underwood, Legg Mason.

My question regards, you have a discussion in the press release about revenue alternatives from the merchant hotel businesses of Expedia and Hotels.com.

As I understand it, accounting like Expedia does it using the net revenue would give you more flexibility with both negotiating contracts with hotels and it is viewed as being less controversial by the SEC and perhaps your shareholders.

My question would be what are the advantages of doing it the other way and why is there even an on going discussion?

Tom, I think the real answer is there is only one correct way to account in this area.

There are like 13 criteria that you need to think about in deciding what is the correct method.

We face this kind of unlikely situation because the way in which Hotels.com runs its business and the way Expedia runs its merchant hotel business are different in terms of how they deal with the hotels and how they deal with the

customers.

This is an issue that we raised ourselves, thought about ourselves, thought of it as being something that we could handle in one of two ways.

We could have said nothing today, gone to the SEC, worked out what the SEC and our accountants thought was the best process believing as we do the way that hotels and Expedia account is totally appropriate.

And then either may change or not depending how the process went.

Or do what we have done which is to acknowledge that we think we have something that should be brought to the SEC and tell everyone that we are going to do that.

And doing it in the context of saying, really, as you have said, people in the outside world would believe hotels and Expedia are in really either in the same business or very similar business.

So it is somewhat unusual inside of one company to have these two different accounting treatments.

I guess as a follow-up.

What you are saying then is that before Hotels.com - I understand there are differences in the contracts in the sense that many of Expedia's contracts don't have specific inventory allocations, where hotels frequently do, and have incentives on top of using the inventory allocations.

With that, wouldn't that mean that really the only choice would be reviewing what you see in terms of hotels accounting or maintaining the inconsistencies.

What we are doing is saying that hotels and Ernst and Young our auditors are saying, the accounting process that hotels and Expedia are following although different are both totally appropriate.

We can't tell you now whether the SEC will share in that view or not.

And that's the reason that we are going to them because we want to be up-front.

As you know however you treat, this won't change any company's bottom line or the metrics that are relevant in terms of either of their growth.

We think that we can clearly set forth our numbers the way they are now in a way that is not confusing.

If we are asked to change in one way or the other, we can also do the same.

The next question comes from Victor Miller, Bear Stearns.

Good morning.

Margin improvement in like HSN, match, and Expedia.

What margin advantages are you seeing from just volume gains and/or just from cost advantages of migrating online now that you have 11% of HSNs and 45% of Tickmaster, and 45% percent of Hotels.com?

And I have a follow-up.

Here is the great stuff about the businesses we

are N once you get the scale and leverage effects, the margins go up because the (indiscernible) costs are there but the variable costs are variable and your infrastructure is there.

Every little point you drive it more on line is a margin opportunity point for you.

Every one of our businesses and every one of our businesses is going more and more, of course, on line is going to produce that effect.

I believe that we are at the beginning of this process by the way because I believe that the scale that we are at now is - I mean is modestly at its very youngest age.

Internet adoption while high is still fairly limited to communication and other things.

People still do not do most things on the Internet.

But I - I mean obviously and God knows everybody who is with me in this room and people who are investors of ours and cheering us for years know how deeply we believe this, which is as these systems get more and more adopted which is inevitable, as you get them on all of the time, which is also inevitable, it doesn't even matter if the pipe gets much wider for our purposes, though it would be nice to have broadband but it is not mandatory.

Every step along this way is gonna come increasingly swiftly notwithstanding any other thing and when it happens, we will get much, much more leverage and scale in each of these businesses that we are in.

I went a bit beyond it.

But I don't think it is inappropriate to talk about in these times, how while the bubble is gone, thank God, the real work which is every day, more and more people get more - more and more people begin to use these systems for other than simple communication, we have now at Tickmaster - nobody would have ever dreamed of this.

We have 40 to 50% days or events we put up that are on line.

I mean that adoption, all of which has taken place essentially in the last couple of years.

Sorry I went on.

There it is.

To add one more thing.

What you see as a result of this leverage is the incredible in-flow of cash.

We generated 290 million dollars of free cash in six months.

We have so much of our, whether you call it EBITDA, earnings or anything falling into free cash, that's the true power of the businesses that we are in.

One of the things also that has been swirling around the stock is on the prospects of [Vendi] I believe and I could be wrong, you have never been a big fan of the music business.

You always suggested you didn't want to run a quote/unquote fully (indiscernible) movie studio.

What intentions does USA have for [Vendi's] media assets other than the (indiscernible).

Zero.

How is that.

That's a very clarifying answer.

There you have it.

It is not that I think the music business is a bad business.

It is a good business in terms of what it takes to make a record.

Television show, obviously they have piracy concerns.

I think the music is a sound business.

It is one I don't have any aptitude or interest in.

I doubt I ever will.

I answered your question.

No reason for me to ramble on about it.

Next question from Kathy [Stapony] of Prudential Securities.

Questions on HSN.

If one of you could elaborate to what you are seeing in terms of slow down.

If you look at it on customer basis, are you looking at customers spending less than they did earlier in the year, perhaps indicative of curtailing had a they are spending on what they expect the economy to be doing good forward.

You have high profile lines to launch this year, yet you are expecting to hit the EBITDA numbers.

If you can clarify how it will be done, if potentially that requires more marketing spend.

And finally, wondering if the potential loading dock strike on the west coast could affect HSN's business?

First of all, we have got 20 - 24 days, as the 25th day.

We were up substantially.

I don't consider it a trend.

The second quarter as you know we reported was quite strong in terms of its growth.

The real answer I think is I don't know yet.

I think we have to see how obviously the rest of the summer goes, and the early fall before you make any real predictions.

There is (indiscernible) for HSN is usually because it is the anniversary month and they make a big deal about their birthdays.

They offer special rewards and other kinds of things.

And that often if you have informerical products that can increase sales and lower margins.

But we didn't have any informerical products.

There are some early facts.

We have given you the early facts.

The thing about the business is we are launching - I think it is probably the most important launch an in HSN's history in that it is taken Kathy (indiscernible) who was without any question the greatest saleswoman I have ever seen on television and was so at QVC for, wow, I think - if not, 10 years or a little more than 10 years, not much less than that, is coming to HSN beginning in the fall with her own line.

And we are going to put a real true push against this.

We believe that it can give us the ability to compete for share with QVC.

So we are

doing what HSN should be doing.

And we have got a good group to do it.

We just solidified our merchandising group with having closed a senior merchandising person, just closed three or four days ago, starts right away.

Couple weeks.

We got a good merchandising team underneath her.

I think things are okay.

Then again early part of July we - we think by the way this is reflected by everybody who is in this same business of ours from what we have heard anecdotally in terms of July.

But those first days, again, with the exception of yesterday, which was an extremely strong days, those are the facts and we wanted you to have them.

Kathy on the loading dock strike question.

We really have no concerns.

We have many alternatives to deal with the shipping goods.

Your next question comes from Gordon Hodge, Thomas Weisel Partners.

Question on the interval acquisition.

Curious when you expect to close it and can't imagine you would be using stock for that at these price levels.

Also, if you could comment about the future of ECS and the unwinding of the agreement with Sportsline.

Can't comment on the interval transaction.

I think we are going through a process of rationalizing the business.

We are taking a careful look at every single contract that we have and determining which are the profitable ones, and which are not.

We are having discussions with all of our partners as to how we can make ECS a profitable business going forward.

And the Sportsline deal was part of that process.

It wasn't working out for us or them.

We agreed to part.

But as you can see by the results the numbers are getting better.

Although they are negative, still.

And we expect them to get better.

We overbuilt the business in the early period.

It is now being run realistically, pragmatically.

And we will build from a smaller base but more solid.

In the initial period we overstaffed, did all sorts of things.

I think we made a series of early mistakes in starting a business and I think now it is under much, much, better tutelage.

The contracts you have got NBA, NHL and some other -

Yes, NASCAR as well.

Again, we are having very positive discussions with all of our partners.

We are gonna establish a base and grow from there.

The next question comes from Safa Rashtchy U.S.

Bancorp Piper Jaffray.

Good morning.

Barry, as you are executing on the vision of what we are calling net for commerce to try to connect all of these entities together and get some additional revenue out of the whole system, where does that process kind of stand in relation to - because of the recent efforts by you to integrate all of the companies and then your comments right now that that's an eventual goal but not an immediate action.

So due to recent - do the recent developments put a hold on the internal goal of creating this net for commerce strategy?

Are you growing as fast as you could, specifically within the travel group, with Hotels.com, and Expedia still competing and obviously if you want to choose one property for one type of operation you have to make some decision between the two.

Just give us color.

First of all, I must tell you, competition between Expedia and hotels is healthy.

And it should be encouraged not discouraged in any environment.

There are things that they can do together to make their competition to each other even more effective and to others even of greater strength.

I don't want people to misunderstand the idea of internal competition in enterprises, whatever, whether public subs or inside, is a sound business proposition.

As far as what else we are doing, I mean I meant to say it in my opening stuff but I mislaid a note I made, prompted by [Mr.

Calhoun] to say, this environment is of course having an effect on our acquisition program.

For those of you who read and understood our potential 9 billion dollars of acquisitions in the near term, you can toss that out for now for sure.

It does not mean we won't acquire things.

Of course, we will acquire things.

But it does mean that in this environment where essentially values are extremely difficult to determine right now, right this period, this will all shake itself out.

I actually believe this is an essential profitable time we are

going through.

But we really now do have to question values of certain things that are on the so to speak not sales block but offered to sale.

Whether being offered to sale in public entities or as things that are privately owned.

I think that one of the things for us that we are certainly going to do is work - we are gonna certainly go after opportunity but we will certainly be as tough as we can on value and acquiring things sensibly as I think you all know we have a very good record in this area.

And what you also know is that we are at a time right this minute and I don't think it will go on for endless years.

But I think it will resolve in various ways in temples of firmness - terms of firmness at some point relatively soon, six months, four months, nine months, something like that.

But here I have predicted senselessly, who knows.

Where you will get a better take on values.

We are certainly aware of that.

That's affecting, of course, acquisitions.

The fact is we have so much work to do internally notwithstanding the subs coming in, when and if they do, but internally in terms of businesses that we want to begin and we want - we have already begun and we want to fuel the capital that it is not exactly as if we are going to be identify.

We think we can grow and grow terrifically.

Now we would like to grow much more.

We set out a plan to grow much more some months ago like world conditions have changed and we are going to react to that in the short-term.

Long-term we are not going to keep billions and billions of dollars in cash sitting in cash for cash sake.

At the same time we understand the value of cash and we will treat it conservatively.

I have gone beyond the question again.

But I want everyone to have a solid understanding in this area as we can give them.

My question actually has more to do with the internal integration that you were just alluding to, not the acquisitions.

Given that you said you are going to leave these companies alone for awhile to be somewhat independent.

Is that slowing this internal integration down, especially with the travel group or are you going to go as planned?

No.

I think we will continue to invest and expand.

I don't think - if there is an opportunity out there, and there are opportunities there.

The issue is what is the value of those opportunities and when the people who sell them actually recognize they better take real value rather than yesterday's wild dreams.

But we are going to move in every way we can.

We have the resources to do it God knows.

And the area

that we have got, this intersecting ground in interactivity, we are the only macro players at it.

We are going to keep going.

The next question comes from Jaetil Patel, Deutsche Banc Securities.

Couple questions I had on the swigs strategies or longer term growth businesses.

With regard to evaluations, you historically talked about 13 times forward EBITDA would be the max you would be willing to look at.

I know there is a lot of uncertainty out there as it relates to evaluation.

Can you give us a sense how you are reevaluating this, and is it appropriate to look at earnings or operating profit and can some new metrics around that if that is possible at this point.

And can you talk about opportunities as it relates to expansion domestically?

As it relates internationally?

Do you think there is enough appetite outside of the states particularly as you look at the integrated interactive services offering?

To address the first question we are as we said, in moving away from EBITDA to cash net income we are going to be evaluating our acquisitions based on a bottom line EPS basis and whether it is going to be accretive or not.

So we have been looking at deals on that basis for 6 months now, and we will continue to do so.

One factor that is just really a truism in this market is that acquisition prices tend to go down slower than kind of the drop in the market.

So that's part of the reason why we think that we really have to see where values land.

That will take a longer period of time rather than a shorter period of time or we will be tougher on the process because we should.

The thing is when we would have acquisition suggestions that we have here all of the time, and we go through the normal, which all of you (indiscernible), used to be we ripped out the EBITDA page and we have replaced it with actual cash as the thing that we really look at now and we should.

And that governs us now. (indiscernible) healthy on every level.

As it relates to every sector.

U.S. growth in this area and the areas we are not in that we can get in and get in at reasonable costs and we are - there are four or five acquisitions that we have got now that we are absolutely prepared to proceed with, that are not of huge costs, that get us going in areas that we are not, and we are going to do it.

And I think this period of

time is gonna allow us to concentrate on that more fully than we could have if we were all over the place.

I think on the international question, we think there are significant opportunities internationally.

If you take a look at Hotels.com, for example, their international operations have been growing very significantly.

But we are gonna be careful internationally.

We realize we are a U.S. based company and we will be measured in our expansion.

Certainly a lot of it will be organic.

And I think you will see most of the acquisitions coming out of the businesses that we own rather than completely new businesses than we are not in.

Next question comes from Christopher Dixon, UBS Warburg.

On the non-recurring, I think you showed 44 million in the non-recurring period forward.

Are there any other non-recurring that you are looking at in relationship to shutdowns?

And can you review for us the accounting values of securities in [BUE.] I think you are carrying (indiscernible).

On the non-recurring items we don't anticipate any.

But we can't predict the future.

Second question.

We see the [BUE] securities to a large degree other than common stock interest which is one to grow that they are virtually the equivalent of cash and we think it is appropriate that you really tax effect the receipt of that cash and present value it.

Basically today we value on the books the 750 million dollar class A preferred it over a little over 500 million.

The 1.75 billion class B about a billion four.

And the common stock at a billion.

We are very comfortable in the values.

Just to repeat something we said many times, our ability to collect on the proceeds rank totally superior to any [Vendi] Universal creditor.

We have positioned ourselves very well from a legal standpoint.

And we are extremely highly confident that we will realize full value on all of these assets.

I would add this because I think it is - I mean I think it is appropriate.

This company owns no stock in the [Vendi] Universal.

As you know I have a somewhat late night job as the CEO of the [BUE,] and I was in Paris on Monday for a review of operations with the new management.

And while I very much like and admire John (indiscernible) and have nothing negative to say about him and his history of [Vendi] Universal, I can tell you this about the management, (indiscernible) is straight direct, has one goal in mind which is to stabilize the company financially for which they are doing extremely solid work and has absolutely the mandate of getting shareholders back the value that has gone away from the enterprise.

I only have to say one other thing about it just because here I am and here all of you are, the media which is one of the heroes of this and one of the unreported heroes of this process of (indiscernible) Jr. who has I mean essentially not slept for a month while he has worked to stabilize them financially and to try to bring together all of these elements.

He has done a really great service.

He certainly has his equity to protect.

But he has done a great job for the [Vendi] Universal shareholders.

Since nobody will probably ever say it, those of you who are shareholders in [Vendi] Universal, I think that they absolutely are attacking sensibly and soundly every single problem that they have got.

And I think their prospects are pretty good to come out of it.

Victor, basically valuing the overall preferred which have a preferred on (indiscernible) equity of a billion and that's how you are getting to the 2.1 billion you are showing in the notes.

Totally correct.

One or two more questions.

Next question comes from Larry [Haverty,] State Street Research.

Stocks are sometimes priced on volatility.

And since this transaction has or has not been announced the volatility is increased very significantly in the securities or to use the phrase of Warren Buffett, you have attract add bad class of shareholders.

If you look at the cash build up in the subsidiaries it is amazing.

I think it was 200 million in the last quarter because a lot of things get paid before the service is done.

And if you -

Billion dollars between them.

If you format the growth and in two years these things are selling five six times, I don't understand why you aren't active at the subsidiary level in attempting to reduce the risk in the corporations while the dialogues are going on, and getting rid of volatile shareholders causing the volatility in all the stocks and basically hurting the real investors.

I mean -

You mean the churn and stern of the shareholder basis suck -

It is financially very attractive to do it.

And whether or not the subs should use their cash.

That is something that has been discussed.

Obviously you can't make any comment beyond that.

Certainly what you are saying has sense.

Whether or not it becomes the policy of the subs is something we can't comment on.

I have a hard time -

I think me and my colleagues certainly share this.

We think and there is nothing you can do about it, we did - I absolutely believe to the core that when we announced this on June 3 reasonable doubt we were doing the right thing for USA and doing the right thing essentially for our subsidiaries and I obviously believe it.

If I didn't believe it we would have changed our policy because I am not afraid to say I am wrong when I am wrong, and I am wrong plenty of times.

But I -

- we are captive.

That will move itself out.

USA and the subs have been captive of a lot of internal beaters on each other and exploitators.

That's what I would call anything but my long-term investors from my point of view.

I find it interesting that the people from Expedia could make the statement that the stock was under value by 65, and not be buying it with 452 billion of cash they got at 44 dollars that.

Doesn't compute to me, Barry.

Larry, your statement is on the record.

And I am sure that the Expedia directors and Expedia special committee will hear it and they can respond to you directly.

I won't make any comments on it.

The next question comes from John [Kotes], Omega adivsors.

Are you planning to sign off on the validity statements on August 14th?

And other thing is my hearing must be going bad I thought I heard you say you might be buying back stock.

I think the statement I made was clear.

And I recognize your hearing issues.

What I said we are going to use our cash and we are going to use our cash to acquire, invest, etc., and we will buy back our stock at a time hopefully an inch before this crazed market turns.

That's what - that's our intention.

Now I can't say more or less about it for all sorts of obvious reasons.

I forgot your - am I going to sign off.

Listen, yes, I am going to sign off.

And every single person underneath me in this enterprise is gonna sign off too.

We are in this - as a matter of fact I have to have in a very busy day I have to spend - because our counsel is sitting two doors down the room is insisting I spend two hours today on this topic so I can do the appropriate due diligence to do that.

Which, which the way, fine, great, better process.

Yes, I will sign off.

With that I will also sign off this call.

Thank you all for participating in it on behalf of me and my colleagues we are here to answer your questions whenever.

And whatever.

And we will now go back to the process of managing the enterprise.

Thank you very much.

All participants you may disconnect at this time.

This concludes today's conference call.

I think on the international question, we think there are significant opportunities internationally.

If you take a look at Hotels.com, for example, their international operations have been growing very significantly.

But we are gonna be careful internationally.

We realize we are a U.S. based company and we will be measured in our expansion.

Certainly a lot of it will be organic.

And I think you will see most of the acquisitions coming out of the businesses that we own rather than completely new businesses than we are not in.

Next question comes from Christopher Dixon, UBS Warburg.

On the non-recurring, I think you showed 44 million in the non-recurring period forward.

Are there any other non-recurring that you are looking at in relationship to shutdowns?

And can you review for us the accounting values of securities in [BUE.] I think you are carrying (indiscernible).

On the non-recurring items we don't anticipate any.

But we can't predict the future.

Second question.

We see the [BUE] securities to a large degree other than common stock interest which is one to grow that they are virtually the equivalent of cash and we think it is appropriate that you really tax effect the receipt of that cash and present value it.

Basically today we value on the books the 750 million dollar class A preferred it over a little over 500 million.

The 1.75 billion class B about a billion four.

And the common stock at a billion.

We are very comfortable in the values.

Just to repeat something we said many times, our ability to collect on the proceeds rank totally superior to any [Vendi] Universal creditor.

We have positioned ourselves very well from a legal standpoint.

And we are extremely highly confident that we will realize full value on all of these assets.

I would add this because I think it is - I mean I think it is appropriate.

This company owns no stock in the [Vendi] Universal.

As you know I have a somewhat late night job as the CEO of the [BUE,] and I was in Paris on Monday for a review of operations with the new management.

And while I very much like and admire John (indiscernible) and have nothing negative to say about him and his history of [Vendi] Universal, I can tell you this about the management, (indiscernible) is straight direct, has one goal in mind which is to stabilize the company financially for which they are doing extremely solid work and has absolutely the mandate of getting shareholders back the value that has gone away from the enterprise.

I only have to say one other thing about it just because here I am and here all of you are, the media which is one of the heroes of this and one of the unreported heroes of this process of (indiscernible) Jr. who has I mean essentially not slept for a month while he has worked to stabilize them financially and to try to bring together all of these elements.

He has done a really great service.

He certainly has his equity to protect.

But he has done a great job for the [Vendi] Universal shareholders.

Since nobody will probably ever say it, those of you who are shareholders in [Vendi] Universal, I think that they absolutely are attacking sensibly and soundly every single problem that they have got.

And I think their prospects are pretty good to come out of it.

Victor, basically valuing the overall preferred which have a preferred on (indiscernible) equity of a billion and that's how you are getting to the 2.1 billion you are showing in the notes.

Totally correct.

One or two more questions.

Next question comes from Larry [Haverty,] State Street Research.

Stocks are sometimes priced on volatility.

And since this transaction has or has not been announced the volatility is increased very significantly in the securities or to use the phrase of Warren Buffett, you have attract add bad class of shareholders.

If you look at the cash build up in the subsidiaries it is amazing.

I think it was 200 million in the last quarter because a lot of things get paid before the service is done.

And if you -

Billion dollars between them.

If you format the growth and in two years these things are selling five six times, I don't understand why you aren't active at the subsidiary level in attempting to reduce the risk in the corporations while the dialogues are going on, and getting rid of volatile shareholders causing the volatility in all the stocks and basically hurting the real investors.

I mean -

You mean the churn and stern of the shareholder basis suck -

It is financially very attractive to do it.

And whether or not the subs should use their cash.

That is something that has been discussed.

Obviously you can't make any comment beyond that.

Certainly what you are saying has sense.

Whether or not it becomes the policy of the subs is something we can't comment on.

I have a hard time -

I think me and my colleagues certainly share this.

We think and there is nothing you can do about it, we did - I absolutely believe to the core that when we announced this on June 3 reasonable doubt we were doing the right thing for USA and doing the right thing essentially for our subsidiaries and I obviously believe it.

If I didn't believe it we would have changed our policy because I am not afraid to say I am wrong when I am wrong, and I am wrong plenty of times.

But I -

- we are captive.

That will move itself out.

USA and the subs have been captive of a lot of internal beaters on each other and exploitators.

That's what I would call anything but my long-term investors from my point of view.

I find it interesting that the people from Expedia could make the statement that the stock was under value by 65, and not be buying it with 452 billion of cash they got at 44 dollars that.

Doesn't compute to me, Barry.

Larry, your statement is on the record.

And I am sure that the Expedia directors and Expedia special committee will hear it and they can respond to you directly.

I won't make any comments on it.

The next question comes from John [Kotes], Omega adivsors.

Are you planning to sign off on the validity statements on August 14th?

And other thing is my hearing must be going bad I thought I heard you say you might be buying back stock.

I think the statement I made was clear.

And I recognize your hearing issues.

What I said we are going to use our cash and we are going to use our cash to acquire, invest, etc., and we will buy back our stock at a time hopefully an inch before this crazed market turns.

That's what - that's our intention.

Now I can't say more or less about it for all sorts of obvious reasons.

I forgot your - am I going to sign off.

Listen, yes, I am going to sign off.

And every single person underneath me in this enterprise is gonna sign off too.

We are in this - as a matter of fact I have to have in a very busy day I have to spend - because our counsel is sitting two doors down the room is insisting I spend two hours today on this topic so I can do the appropriate due diligence to do that.

Which, which the way, fine, great, better process.

Yes, I will sign off.

With that I will also sign off this call.

Thank you all for participating in it on behalf of me and my colleagues we are here to answer your questions whenever.

And whatever.

And we will now go back to the process of managing the enterprise.

Thank you very much.

All participants you may disconnect at this time. 00:57:45 This concludes today's conference call.