Match Group Inc (MTCH) 2003 Q3 法說會逐字稿

Ladies and Gentlemen, thank you for standing by, and welcome to the IAC Q3 earnings conference call.

At this time, all lines are in a listen-only mode mode.

Later, we will open lines for your question and answers.

As a reminder, today's call is being recorded.

I would now like to turn the conference over to Vice Chairman, Victor Kaufman.

Please go ahead, sir.

Thank thank you, Operator, and good morning everyone.

As you know, we may, during this call, discuss our outlook for future performance, and also you're aware that there are risks and uncertainties associated with these forward-looking statements, and our results could be materially different from the views expressed today.

These risks have been set forth in our public reports filed with the SEC.

And finally, we will also discuss certain non-GAAP measures, and I refer you to our press release for all comparable GAAP measures and full reconciliations.

Joining me are on the call today is Barry Diller, our Chairman and CEO, Dara Khosrowshahi, Executive VP and CFO, and Roger Clark, Vice President of Investor Relations.

We had a great quarter.

We hit our adjusted EPS budget number of 17 cents per share, 136% increase over the comparable period for last year.

This number would have been 18 cents per share, but for certain unforeseen charges we took in the third quarter, which have virtually no future effect on the results of our primary operating businesses.

We've also set forth these charges in our press release and 10 K. filed today, and I won't review them now, other than to say, for example, that it it isn't meaningful to incur a charge for repurchasing some of our outstanding bonds at more than face value when it's a favorable transaction from a cash standpoint.

Our third quarter growth in operating income before amortization, which we refer to as OIBA, has also been extremely strong.

In this regard, USA Travel- sorry, IAC Travel, led the way with (inaudible) growth of 64%.

HSN ticketing also performed extremely well.

From a budget standpoint, our OIBA for the year, and for the third quarter, are significantly in the plus column.

We further said that we expect our adjusted EPS number for the year to fall within a range of 72-75 cents per share.

Our yearly budget is at the upper end of that range, and if we fall short of this budgeted figure, in all probability, the unforeseen charges to which I previously referred, as well as certain unforeseeable seen we've incur in the fourth quarter as set forth in our press release, will be the reason.

Operationally, in all of our primary business segments, we should have a spectacular year.

As we stated in our release, we aggressively repurchased 20 million shares during the third quarter at an average price of, at this time, $35.80 per share.

We've now authorized an additional 50 million shares for repurchase from time to time, depending on market condition.

However our intent, at least for now, is to buy back authorized shares, now totaling 57.7 million shares, over the next 12 months or so, if opportunities are there.

Now, Barry Diller will give you some of his thoughts, to be followed by Dara Khosrowshahi, who will give some details for the third quarter and the full year, and then we'll have Q&A.

Barry?

Thank you.

Good morning, everyone.

Two years ago this time, we changed our public disclosure and we ended the process of guidance.

We, instead, believe that publishing our pure internal budgets would be a positive change and it would happen through transparencies, but we found, in practice, that it's otherwise.

We all know that no one can predict, with any precision, the detailed operations of a company that grows at the rate that ours does, a few months in advance, much less a year or two forward, unless you put in all kinds of contingencies and protections against the possibility of missing the numbers.

So that releasing our budgets in detail inevitably becomes an act of guidance, with endless waste of time and attention, rather than what we think budgeting should be, and what it has been in our company, which is a rigorous, many-months process that we do very intensively, obviously, with the result being a management tool that solely is designed to stimulate and incentivize and stretch growth in each of our operations.

And we put stringent focus on the short term, while never compromising long-term strategies.

And we would like, of course, as few distractions to those tasks as possible.

So, we will, in the future, tell you all we can, while foregoing what we're now irrevocably convinced is a bad process, leading inevitably to manipulative behavior and having utterly nothing to do with increasing the value of the business.

Here is what we will tell you.

First, we believe we will continue to have strong growth over the next years.

And, we do know at least enough about next year to tell you that our best guess is that our operating income, before amortization - I cannot say that word always, but forgive me, maybe some day I'll be able to -- ought to be between $1 billion and $1.2 billion.

Secondly, we'll extensively discuss our overall strategy, the strategy of our operating businesses, their competitive positions, and all the details inside that, so long as they don't give any kind of advantage to our competitors.

We will also make every effort to inform you of unusual trends, movements, seasonality, elective investment spending, capital expenditures, et cetera, in all of our businesses.

You're going to hear today from Mr. Khosrowshahi, who will give examples of this, and in a minute I'm going to do the same.

Also, we've supplied today21 pages of information, describing exactly how we get from point A to point B. Some might criticize us for being long-winded.

We are striving to be thorough, transparent and clear.

There's been a lot of comment about our issuing our multiple theories of metrics to explain our earnings.

We've been asked to just issue GAAP and call it a day.

We do put, first and clear, our GAAP numbers but given the inability to extrapolate therefrom how the businesses are actually performing, we add information on operating income, before amortization and adjusted EPS, to take into account non-cash and other issues, which we also carefully note.

We also provide pro forma metrics so that apples are compared to apples, which, otherwise, would distort our performance.

We provide reconciliation of all of these numbers to GAAP so that there can be no confusion between the purity of GAAP and metrics that we believe more clearly explain our businesses.

Our disclosure is designed to provide a range of information, from the very superficial for those who just want pure clean headlines, to those that wish to pore over them in the deepest way.

We're going to continue each quarter to meet in this form, for a detailed discussion as long as our shareholders have questions, and we'll continue in each quarter -- sorry, I was going to repeat that sentence, which I doubt there is a-

On November 11th, to which everybody is invited, we're going to spend six hours presenting our financial position, both short and long-term, and our strategy for our company, as well as having our principal business leaders present their strategies and the business conditions for each of the businesses.

We're mindful that our new policy isn't exactly going to be greeted with cheers by some of those who's job it is to provide detailed, go-forward models and analysis of what the future will bring.

Certainly we don't want to make anybody's work in understanding the Company harder, and we're going to do everything in ever way we can, with more frequent dialogue, to give all of the information possible of a factual nature, together with trends, metrics, for the businesses, So that those that are interested in understanding IAC are in symmetry with our own processes.

We continue to organize ourselves as an operating company.

This has really been the work that started, as I think all of you know, when we began to simplify things about a year ago, and bought in our public subs, which was, now, technically counting, how long ago?

A year ago this quarter.

So it goes back six months and ends one quarter ago.

IAC Travel we've organized under Erik Blachford.

The businesses will be fully integrated by year end.

We think we will close our acquisition of Hotwire today, which is adding a really good business to our portfolio, and a really good management team, to what, across all of our companies, already, is the greatest group of curious, practical and smart people I've ever been involved with.

Let me give you some flavor on Travel.

Macro trends domestically are solid, with hotel occupancy rates up and airplane loads at very high levels, especially during our heavy weekend leisure periods.

Whether this continue remains to be seen when more capacity is added to air carriers.

Corporate travel is fairly weak, and the international markets are also- they're not as strong as the U.S., but are starting to show some signs of health.

The European markets are mixed, and some markets showing higher occupancy rates.

Online travel trends are solid.

We expect leisure and corporate growth of around 30% to, approximately, $35 billion and $8.5 billion, respectively, for the year.

International travel, however, is still tiny.

European online travel is growing $10 billion, and still is only 4% of the total market.

We continue at IAC Travel to gain share against our competitors.

Our air volume is very solid, both here and internationally and we keep solidifying our lead in the merchant hotel business.

However, we're definitely feeling more competition from hotel chains, large, medium-sized, and from other online travel sites trying to replicate our success.

Travelocity, Orbitz, and from the hotels themselves, are all being competitive, getting smarter about using the Internet, and it's resulted in, of course, more more aggressive pricing online and more aggressive marketing trends.

In the meantime, occupancy rates have come up, which makes having supply and pricing more important than ever.

The integration of Hotels and Expedia, together with the addition of Hot Wired, is going to make us, we think, a far more valuable partner than ever for our hotel partners.

The online hotel merchant business is dynamic.

With our integration efforts moving fast behind it, we believe that the sharp focus that's built our leadership is going to return without any organizational distractions.

Now, we can't predict the future, but we do have the best customer service, we have the best technology, we have bigger scale.

It let's us invest in every area, including the brand, all of which we believe is going to allow us to continue to win in the long term.

What we think, what our goal is, is to be the number one seller of worldwide travel, on or off line, in three years.

We're already at number five in the short, short life of Expedia, which is -- which is, in its own, rather remarkable.

So, while our goal is very ambitious, to become number one, we think that we've at least got arguing rights.

In the meantime we're going to continue to invest in international travel markets.

Europe alone is larger than the U.S. nd it's getting to where the U.S. was two or three years ago.

International travel for us, in the quarter, is up 74%, and net revenue is up 109%, so we keep gaining share on our competitors.

We're number one in the U.K., including online and television.

We're number two in France, with our just-purchased anyway.com, and we're growing 4-5 times faster organically than out biggest competitor.

We're also number one online in Germany, which is the biggest travel market in Europe.

Expedia Corp Travel, ECT, is continuing to win new clients, including Harvard, M. I. T., Northeastern, Onyx , and Akamai, which actually achieved 100% online adoption within one month of implementation.

Meanwhile, our newest acquisition, Hot Wired continues to win real share, and it's winning share from Priceline.

We're now the largest sellers of Opaque Air, with gross travel bookings of 6%, versus, we gather, a drop of 42% at Priceline.

HSN.

HSN performance continues to get better.

Domestic revenue growth is accelerating, with revenues up 5 and 8% in the first two quarters, and, now, up 14% in the third quarter.

The leadership in merchandising and dot com is now in place.

This is the third quarter in a row that we've won share from QVC.

We launched our new HSN website with much better user navigation and functionality.

And you'll look next year to see us focusing much more on customer service.

It's our very big initiative, and we'll pay a lot of attention to it next year.

Ticketmaster had another strong quarter, through a very strong September, powered by a number of big concerts.

It's up 30% in operating income, year to date, on top of our year last year, when it had 45% in growth.

On Lending Tree, as expected, we're just -- this is the first quarter.

We consolidated Lending Tree.

Rising interest rates are lowering refinance activity, as I think all of you know, which only makes it more important for us to work with our lending partners to convert to other types of lending, especially purchase mortgages and home equity loans.

We are addressing huge markets here, $9 trillion in U.S. (inaudible) and $3.9 trillion in originations in '02, $2.5 (trillion) of it in mortgages.

We cut about .7% share of mortgages,which we think we can drive up very significantly next year and beyond.

The most important thing is that our brand awareness has more than tripled that of any other online site, and is higher than even Nationwide Bank Lenders.

We bought a company called Get Smart, which adds another channel for our partners.

We're just starting in real estate, which is another huge market, with $75 billion in real estate commissions expected in '03.

Victor Kaufman mentioned earlier that we bought back shares aggressively.

Our intention is to keep our share levels at around 800 million shares.

But, long term, you can look for us to flexibly shrink our capitalization when we're undervalued.

Just this quarter we spent over a $1.5 billion cash buying back our own stock and debt, or on acquisitions that we've announced.

So I doubt anyone can accuse us of hoarding our cash or being free with our stock.

We do think, though, that we're going to be less aggressive on acquisitions.

The market has made acquisitions in our area somewhat, potentially, depending, dis-economic.

We're going to de-emphasize acquisitions during the year.

Doesn't mean that they won't come up.

It doesn't mean that -- that around the corner, an opportunity will present itself.

I mean, that is who we are.

But, it is not what we believe is the work of the next year.

The work of the next year is to continue to execute the agenda, is to continue to build these brands, and continue to figure out ways, how these brands relate to each other, et cetera.

That's the work.

As far as DUE is concerned, we have had no discussions.

We said we're happy with our exist can go securities, particularly if they're in the hands of GE.

If we're presented with an alternative that's better for us, we'll consider it.

But in any event, you can look for us to monetize the value within these securities, either directly or indirectly, whenever it's appropriate.

And we do have a new name now, it has created some confusion.

We've had several so far.

I think this is, this is the name we think, for all time.

It is IAC, InterActive Corp.

It is not IACI, although it's sometimes referred to because it's the stock symbol.

But it is IAC.

We hope you'll become as comfortable, as I think most of us have become, in using it in these last months.

With that, I'm going to now turn to Dara Khosrowshahi, who's going to go through some of the financial particulars.

Thanks, Barry.

I'll talk about the overall and then I'll get into the segment.

Overall revenue and operating income before amortization, or OIBA, for Q3 were up 36% and 100%, respectively.

Operating income was down $6 million, due to an increase in the amortization of non-cash charges of $103 million this quarter.

Most of that from non-cash compensation as a result of our buy-in of a formerly public sub.

The acquisitions of Interval, Lending Tree, EPI, and TVTS, did affect the results in Q3 of '03.

And, if you excluded the contribution from those businesses, and you reversed out certain non-operating charges in both Q3 of this year and last year, on an apple-to-apples basis, our revenue and OIBA grew 27% and 65%, respectively.

GAAP earnings per share from continuing operations came in at two cents a share, versus a loss of seven cents a share last year.

This was a result of higher operating results and a lower pro tax rate, which was offset partially by the higher amortization of non-cash charges that I mentioned earlier.

Our free cash flow for the nine months ended September 30 was $1 billion, up 110% over last year.

Now, a little less than half of our year-to-date free cash flow was driven by increases in working capital, the majority of that in the travel businesses.

These working capital changes are very seasonal, with most of the positive working capital coming in quarters one and two, and quarters three and four being neutral to negative.

Now, we do not think that free cash flow will grow next year the same rate as earnings growth, for a number of reasons.

First, we think we'll pay more in cash taxes next year as the business earns more.

Second, the working capital of the travel business, while positive, will probably grow at a slower rate, than earnings will grow.

And, third, Cap Ex is going to increase the fuel investments for the out years.

Because of these and other factors, again, we don't think free cash flow is a financial metric to which evaluation multiples should be applied, since the results can vary widely year from year.

Now, I'll quickly take you through the segments.

Travel, as Barry mentioned, continues to be a big growth engine.

Our revenue in the sector grew 60% and OIBA increased 64% over the comparable prior year.

The strength of the core was somewhat offset by disappointing results at GBTS, in addition to the charge related to the termination of a satellite contract, and a write-off of some packaging technology at hotels.com, as a result of the integration of Expedia and Hotels.

The termination of the Travelocity contract has had a negative short term effect on the hotels.com business, which will carry over Q2 into Q4 and early next year.

We thought we'd be able to offset the Travelocity spend with increased marketing spend at hotels.com, but we haven't been able to put those dollars to work as efficiently as we had with Travelocity.

However, we do think that our ability to integrate Expedia and hotels. com on a faster time line will far outweigh the shorter cost expenses.

Electronic retailing revenue was up 17%, with 14% domestic growth and 31% international growth, and OIBA overall up 23%, excluding the charge taken last year in relation to Italian operations.

International revenue growth, not including foreign exchange gains, would have been 14%, most of which was contributed by UVO, our German call-in TV business.

HSN Germany revenue was approximately flat on a Euro basis.

In 2003, we focused on the key elements of the German business, including financial control, technology, and customer service infrastructure and operational processes.

One of the major initiatives in Germany now is to build it up the merchandising organization the way we've done in the U.S.

Ticketmaster had another great quarter driven by strong concert results in the U.S. and Canada, especially in September, with online sales for Simon and Garfunkel, John Mayer, the Eagles, Shania Twain, and Bruce Springsteen.

We've always said that we think Ticketmaster can grow the top line in the high single digits and the bottom line close to 20% over the medium term, and year-to-date operating income before amortization is up 30 % on top of the year when we grew 45%.

Since we'll be growing off such a strong year, we do expect Q4 in next year's ticketing growth to be much more modest, in the single-digit range.

We grew our personals revenue 44%, OIBA, 107% ,and our subscriber count, 39%, over last year.

Not including eBay, subs were up 10% sequentially, as a result of the great consumer reaction to our new technology platform.

We did lower subscriber pricing for three and six-month subscription packages in the personals business, which will result in lower revenue per subscriber in the future, which we think will be offset by lower termination results as a result of the subscribers choosing three and six month packages as opposed to multi packages.

We do expect to have an OIBA decline in Q4 relative to what we had last year, as a result of the charges that we talked about in our earnings release, due to the integration of eBay to Match operations.

Also, we expect to spend significantly more in marketing and international, which will position us for very significant growth in 2004.

Operationally, Match had great news, entering into a new, more deeply integrated partnership with Microsoft, and expended the term of its arrangement with America Online, and will, therefore, continue to provide personal services through a (inaudible) AOL channel and dating and personals channels.

Lending Tree, in its first quarter as part of IAC , put up outstanding results, with a record transaction volume originated of more than $10 billion of loans and real estate transitions, up 75% versus the same period last year.

We expect for Lending Tree full-year revenue of $164 million, and OIBA of $29 million.

This is Lending Tree for the full year, not for the period that we owned it, and not including costs related to the IAC transaction.

Again, full year, 2003.

As expected, we are seeing the sector's interest of increases in interest rates in bringing down mortgage volume, fairly significantly.

We expect mortgage volume to come from -- to come down from $3.3 trillion in 2003, to an estimated $1.6 trillion in 2004.

This is according to the Mortgage Bankers of America.

We think we can increase our market share significantly, and grow our other lending businesses, especially purchase mortgages and home equity loans, and we expect in, 2004, to keep OIBA close to flat as a result of that increase in share.

This will position us for explosive growth in 2005 as we in the market start growing, continue to grow.

Now, for EPI, Q3 is a seasonably weak quarter, as we continue to build coupon book inventory for a big Q4 selling period.

Big business trends are strong, but they will be partly offset by a $5-10 million dollars investment that we're making in Q4, for the development and launch of EPI online coupon products, and the development of beta test of our registered car product.

Saving money is what the Internet is all about and the EPI's new product swill make it easier and more accessible than it ever has before for consumers.

We expect to invest approximately another $10-15 million in these initiatives next year, which we think will be profitable in 2005 and beyond.

Next year we plan to spend heavily, $100 million, in incremental operating expenses, and at least $50 million in capital, to draw new growth initiatives to our Company on a go-forward basis.

We can afford to make these kinds of investments with $4.4 billion of cash on our balance sheet, and over $2 billion in monetizable securities, and the significant cash generation power of our businesses.

We're committed to grow our businesses over the short and long term, and have never been in a better position to do.

With that, I'll open it up to questions.

Operator?

Ladies and gentlemen if, you would like to ask a question at this time, please press the star, followed by the 0 -- excuse me, the 1 on your touch tone phone and you will hear a tone indicating that you've been placed in queue, and you may remove yourself from queue by pressing the pound key.

If you are using a speakerphone we ask that you please pick up your handset before pressing the numbers.

Again, to ask a question, please press star, then 1.

Our first question comes from the line of Anthony Noto with Goldman Sachs.

Please go ahead.

Thank you very much.

A couple of questions.

Barry, you mentioned about the competitive forces in travel that are increasing, both from suppliers being competitors as well as other online travel companies.

I'm just wondering if you could give us a little bit more color on the quarter and how that may have impacted the financials?

I want to make a statement, and if you could react to it and tell me if it's wrong or if there is some more color you can add.

As I look at your growth in revenue, sequentially, in absolute dollars, it's about $85 million.

But you didn't have a corresponding increase in EBITDA, and that's even adding back the $17 million.

And it's my view that it's not supplier pressure that's hurting that, because your gross margins expanded, it's actually because you're spending more on marketing.

And, first, is that true, number one?

Then number two, where are you spending the marketing dollars, and what impact do you think that's having on your competition, both near term and long term?

And then I have one follow-up.

Thanks.

Yes.

No, it is true.

We are certainly spending aggressively in marketing, and we're spending it in all of the usual places.

We don't want to detail the exact placement of it, because we think it's not smart for competitive purposes.

But there's definitely an increase in marketing spend.

We think it's sensible.

I mean, we've got this lead, the lead is increasing.

We want it to increase.

We have the ability to do it.

We're not constrained in any area, and we're not short-term about it.

So, for us, what we what we want to do, during this period, which is dynamic, where there is competition, shouldn't surprise anybody.

I mean, how could there not be, when the sector has -- when this online travel thing has just, in the last couple of years, certainly, exploded.

I mean, it is natural.

The strategy for us, of course, as that is happening, and as we have widened the lead, year over year, quarter over quarter, is to make certain we continue it.

We know this.

We know that the travel sector is still young online.

We know that we still are relatively small percentage of all travel.

I think it is that we sell, in terms of hotel rooms, what is it, 3 percent?

Or less than, sorry, it's less than 5%.

Well less than 5% of hotel rooms.

So, for us, as we go through this period, our strategy is to continue to be aggressive in marketing, so I'm going on a bit about that.

But, I do think it's important for everybody to understand what the underlying strategy that we have is.

To add a little bit to that, on the TVTS, underperformance was more significant than just the charges.

So, certainly TVTS added some negative there.

We did have the charges, and, as we did mention, with hotels.com, we tried to make up some of the Travelocity volume with increased marketing spend there, which was somewhat unusual.

But, you know, TVTS is irrelevant to this company.

I mean, we made a purchase of a television shopping service in Britain, for a little over $100 million, a year or so ago.

And, I think everybody knows, our interest in developing shopping on air, as well as online, and we recently -- it's changed its management, we put it under Expedia, which was the right thing to do.

It has had poor performance in this last period, in this last year.

And we'll see how it goes.

Certainly, it is in the right place, for management purposes, but it's, for the strategies of this company, in terms of what we're trying to accomplish in travel, it is insignificant.

All right.

Barry, given that the gross margin did expand, it doesn't look like you've had to concede on pricing, in the cost that you incur with the suppliers and the hotel rooms.

Do you think that's something that you'd be willing to give up on, going over the next couple of years, to further create switching costs and create barriers entry for your new online competitors like Travelocity and Orbitz?

Or is that something you think you can maintain while still keeping them up as you drive more demand?

People should understand, and I know there's certainly a lot of noise in this area, our margins are stable.

Now, nobody can predict what they're going to be here and there, but with all of this intense pressures, margins for us have been stable.

We can't say they're absolutely going to be, but we see nothing now that tells us otherwise.

As a matter of fact, we have some people in the company saying that our margins are going to increase.

We're a little more cautious than that, so we're certainly not saying it as part of our, so to speak, considered opinion about the future, but, there it is for the moment.

Great.

Thank you very much.

Pleasure.

Next question, please.

Our next question comes from the line of Paul Keung with CIBC World Markets.

Please go ahead.

Yes.

This is a similar-type of question.

But I guess we really need to know the specifics here.

When you're looking at- you're increasing your marketing spend next year, and I guess, and mindful of trying to extend that leadership at the same time, are you seeing a corresponding improvement in efficiency, or reduction in customer acquisition costs, now that you have the ability to integrate across different brands?

No.

We are not yet seeing that.

I don't think we're going to see the effects of lowering customer acquisition costs for some time.

Again, it's of not great concern to us.

The category is too early, we're doing extremely well.

Our growth in every area is extremely large.

And, so, for us, right now, again, our strategy is to solidify and extend our position.

If we execute that intelligently, eventually, customer acquisition costs will come down.

But it's not our first priority.

We're also are of the belief, part of the strength of IAC, beyond IAC Travel, is that with the amount of consumers that we have in our audience, 45-some-odd million of them, monthly, that is the best key, we believe, to the future of customer acquisition costs stabilizing for us, and us having a competitive advantage in barrier to entry against other people who are coming into the field.

So, not for today, but, probably for the day after tomorrow, meaning a year or two away.

Okay.

So, it is safe to say, then, that going after next year, any scalability that we see in your business, you're going to use it up, and, I guess, maintain those margins, for the most part, in trying to maintain that lead?

I don't know that you could actually say we'll, quote, "use it up."

But we're not going to be calculating it in the idea that it should stick to our thighs.

We're going to calculate it without Deemer or Dunn (phonetic) and what I said.

So, certainly a part of it will be used.

And, and I, again, can't put too fine a point on exactly how much of it.

But, again, the strategy for us, what we think about, is what we've talked about, not necessarily what we retain, other than we, certainly, want short-term performance.

We've had short-term performance, and regulating how much of it to take, as against how much of it to invest, is an everyday issue for our company.

All right, okay.

And then the second one is a lot easier question.

Trying to understand your free cash flow translation, now that you've given us a little bit insight into next year, is it safe to assume that free cash translation is very consistent on an absolute basis of that, of the OIBA increases?

What do you mean by "free cash flow?"

In terms of, if we finish this year at, call it $1.2 billion, if we look at your free cash flow next year, will the realizing working capital growth won't be as positive an effect as we've seen, but we see sort of a similar increase on your free cash flow as we'll see on your OIBA line?

No.

The point was that free cash flow growth is going to be slower than OIBA growth.

It will be slower?

Okay.

Because the working capital number isn't going to grow like the operating results.

It's going to grow less, and then CapEx up another $15 million.

So it's those two items taking it down?

Yes.

Okay.

Thanks.

Next question, please.

Our next question comes from the line of Victor Miller with Bear Stearns.

Please go ahead.

Good morning.

Barry, obviously, you opened by saying that it's more difficult to predict the future the farther you go out, so may I ask you a little bit about this fourth quarter that we're in the middle of.

You mentioned in your press release some challenges on the Travelocity, hotels.com side, the Lending Tree side, the price strategy, the personals you just mentioned, the EPI online that you want to invest some money there.

Could you talk about that?

Could you talk about what charges, what the total number of amount of charges, you would expect, in ballpark, Dara, in fourth quarter, as we look at trying to come up with our EBITDA number, or, now, OIBA, number?

And the bottom line is that, your original budget, I think, was roughly 13-14% above what you actually reported for your 191.7 number, for fourth quarter, relative to third quarter.

When you add all of this in, how comfortable are you with, on a pre-charge basis, given the challenges, given the fact that you had to predict something ten months ahead of time, with what that original 4Q budget looked like?

Thanks.

Well, if you look at Q4, you are going to have an additional effect on hotels and Travelocity.

We can't really be specific about exactly what that number is going to be.

You are going to have some charges on uDate, some additional charges, which are going to be in the two-three million dollars range.

So, those are really going to be additional charges in Q4.

We are, compared to budget, going to be investing in EPI, which really wasn't in the budget.

We did talk about the personals.

And, then, lastly, on, I think, Lending Tree, we also talked about

So, those are really the elements.

Oh, I'm sorry, Citysearch is also going to be lower in Q4.

It's pretty much going to trend where it was in Q3, which is a significant shortfall against budgets.

So, those are kind of the elements that are going to be negative variances.

But, Victor, just to repeat, if you take out all of those charges for the fourth quarter, as well as what we've had for the third quarter, we do anticipate that, ex those charges, we would meet our adjusted EPS budget for the year.

And our internal budgets would be exceeded.

Our internal budgets, on an operating basis, will be exceeded quite significantly.

Look, I'm not going to editorialize much more about this, and I really don't want to editorialize at all.

But that is, of course, the problem with making predictions far in advance, particularly if you're doing it on a budget basis with no contingencies where, in fact, life is contingencies.

Meaning things come up, you want to invest more here, you want to do more there, et cetera, et cetera.

If you put no pad in any of this, then, in effect, you're going to have these kind of variances.

But the only thing that's important for us is two things, really.

One, that the operating budgets, which were very aggressive, have been met, or exceeded.

And the other is, that we're making no compromise to making investments, notwithstanding the fact that if you slice this very thin on the slicer, you can say, well, given what was overall anticipated as against what will come in, there's a variance.

So, on one side, the important part for us is the budgets were exceeded, so the businesses are operating well.

And the second thing is we're making investments in excess of that.

If I may just have a follow-up.

It looks like HSN is going to make even more ground again for the third straight quarter on QVC.

Could you talk about the progress there and why you think you're seeing that?

And then, Dara, could you talk a little about what that $350 million CapEx number is really going to be slated to do, in terms of, you said it would be gross growth initiatives for the future?

Could you talk a little bit about that, please?

As far as HSN, those of you who have been on these calls for a long time, that's been--

Seven years.

Sorry?

Seven years for me, yeah.

So, for seven years, you've been hearing about our efforts at HSN, taking it from where it was to getting it stabilized, to being aggressive about it, probably too early, losing us a year or two, I think, in its growth.

But there's no question that about a year ago it began to come together, for a whole series of reasons.

Part of it is under the leadership of Tom McInerney, a really first-rate executive we took from inside our company at Ticketmaster and moved over to be the CEO of HSN.

Part of it is the addition of Marty Neland (sp?) in running merchandising for us and building now a first-rate merchandise organization.

And partly it is that, those of you who know this business at all, know that it's meshing of all of these gears that have to work perfectly before you get any traction.

That process really started a while ago.

It's just now coming in to its power.

And the result of it is, and you see it, we watched these numbers, the reason I've said for years that I think the electronic retail business is a good business for us to have, because retail discipline, particularly, 24X7, minute- by-minute retail discipline is very good for us.

We watch these figures, literally, hourly.

And you can see, you've seen, doing that, over the last months, it just gets more solid each hour, and the weight of it, in the dollars per minute and planning that goes into it.

So, sorry, took a little while, but you asked why that is showing its effect , and I think that that effect is going to gain momentum over the next year or two.

It's a good, good business.

And, those people who've said it's not core to us, it is- who could say it is not Interactive?

And it is, now, ever increasingly going to become also integrated with the online, which continues to grow.

So, that's why.

Dara?

On CapEx, Victor, I would stress that these numbers are very preliminary.

Around $100 million of that spend is slated for real estate which may or may not happen next year.

The other $250 million is operational, and again, it's a very preliminary look of the growth initiatives and that compares fairly well, historically.

Again, we're adding businesses to our fold, so that's naturally going to grow.

The big investments, the big incremental investments are going to come at HSN, which is going to be investing aggressively in customer service and fulfillment areas.

And then, Ticketmaster, which is investing very aggressively in new technology development on a go-forward basis, especially to its core ticketing system.

Expedia, hotels.com, IAC Travel and Match, all of them are going to be investing very aggressively internationally to set themselves up for growth, I'd say in '04, late '04 and '05.

So those are the big spend areas.

And I would say one other thing, just about HSN just to fill up on it.

The one area that we still need to make progress - every other area, I think we're at parity - but the one area we've got make progress is customer service.

By the way, this company has made progress in customer services across all of its businesses, particularly, though, at HSN.

We lag in various metrics, answering the phones, getting the goods there, getting the goods delivered, et cetera.

We do lag QVC, and it is our intention to close that gap next year.

Thanks very much.

Victor, just to add one other thing, in terms of operations, we're going to spend over $100 million on initiatives that will be operating-oriented, in addition to the CapEx expenditures.

So that's within the, kind of, operating numbers that you can anticipate.

Okay, thanks very much.

Next question, please?

Your next question comes from the line of Jeetil Patel with Deutsche Bank Securities.

Please go ahead.

Hey, guys.

A couple of questions.

With the increased investment that we should expect as you look through 2004, can you give us a sense of what kind of ROI or kind of investment time frame or return we should think about, as you invest in the business, both domestically and more importantly internationally?

You sounded like the international investments will pay off late '04-'05.

Do you think we'll see a continued build-up of the investment internationally and how would you prioritize domestic investment versus international, given the competitive landscape out there? and, then, I have a follow-up.

Well, these are the kinds of priorities that are number one and number one.

You can't make it number two.

We're going to continue to invest domestically, obviously, but the truth is, our tracks are deep there.

The investment there, as we discussed earlier, is certainly the strength in our marketing and other kinds of things.

There's nothing much less of a heavy nature to invest on the U.S. side.

Internationally, there's an enormous amount to do.

So, that is going to be our focus.

Certainly, for the next couple of years.

It, actually, I think, I can't narrow it any further than that, maybe my colleagues can help?

But in terms of payback, it kind of pays back very quickly.

I mean, the investments that we're making in international travel, because, again, those effects that you saw in the U.S., beginning a couple of years ago, where the scale and leverage just skyrocketed past whatever you put into the business, the same, as I had said earlier, we're in the same position internationally, as we were a year, couple of years ago.

So, you're going to see those hyper growth-effects, fairly near term.

I think on, specifically, international in the travel sector.

You will see real spend on Q4, Q1, Q2 and you're going to see the international, well we hope you'll see the international results hit that breakeven point and come into profitability late next year.

The other investment and travel that we didn't talk about is Expedia Corporate Travel, which will probably take a little bit longer to develop.

That's not really something that we're looking to turn in '04, so to speak.

We think the results will start coming in in '05.

But we think tha the potential there is, as you know, huge.

It is a very, the corporate travel market is very big and under penetrated on the Internet side.

We are the best-positioned and we have great people doing this.

Now, Hewlitt was leading this at the ECT, Expedia Corporate Travel.

It's not a big investment, actually.

But, in fact, it, I mean, what is the total investment for ECT?

Probably $15-20 million.

That's what I would think.

Not a large investment.

But, if you sit around Expedia and you listen to all of the plans that they have, and the progress that they've made over in just a short time, in terms of getting clients, and in terms of the market itself and in terms, again, with goal and ambition.

Goal and ambition is that's Expedia Corporate Travel is going to be the largest corporate travel provider in the world.

It ain't going to happen overnight, but that's the goal.

Got it.

And we've got the best tools to do it!

And, you know, when you look at, I guess, the investment that you're making in the business, so should we assume that as you invest and the results come in positive, we should start to see that in the form of even faster growth as we go through 2004?

And, then finally, last question, distribution, it just seems like it's becoming increasingly important on the Internet today, obviously, you're making investments to capture your share of it.

How do you look at mining the existing 45 million customers that you talked about and trying to get them to basically buy into the travel business, which, I'm sure, there're quite a few folks that haven't still transacted online with Expedia or hotels.com.

It's evolutionary, and it's true internally for us as well.

Our philosophy and strategy has been that we want these businesses to stay very focused on just what they do.

We do not want to push synergies too early.

We know they're there, we know that there is enormous power in this aggregated audience, and in doing all sorts of cross-work with it.

And some of those initiatives are going to take place in '04.

But, we've probably spent more focus at the corporate level on distribution over the last six months, and our feeling is, that our strategy, which is kind of relative independents, is in terms of portal-life is a good one, we've got good strong distribution agreements all over the place, we've got distribution agreements with everybody!

We got white label agreements with all sorts of affiliate.

I don't know, we probably got tens of thousands of different kinds of distribution relationships.

Literally.

And, so, we think that the distribution is not a current problem.

And we're certainly hawkish about it never becoming one, and we'll do the things that it will take to make certain of that.

So, I think that was not the whole of your question, I may have left off a piece of it.

On the first part of the question, in terms of the pay-off in 2004, I think, in some areas, you'll see some but the kind of geometric payoff is going is more likely to be seen in 2005, 2006 and beyond.

Thank you.

Next question?

Your next question comes from the line of Safa Rashtchy with Piper Jaffray.

Please go ahead.

Good morning.

Barry, first, a question on the disclosure issue, which you spent considerable amount of time and I appreciate all of the efforts in making the numbers more available to us.

But, it does seem that the trend that IAC Interactive has been to more consolidate and give fewer details, even fewer than your competitors in the travel sector.

And, given that the fundamentals in the core operations, say, in Expedia and hotel.com seem to be pretty strong, it seem that got giving those metrics and information about how they're doing dilutes the overall strength that would, otherwise, be obvious?

And if you could comment on that.

I will.

And -- okay, I'll have a quick follow-up.

Let me do that.

Look, here's the thing.

We've been accused of too much information.

I think that's an accusation.

Not by me.

That's an accusation we take comfort in, but, here's the thing on travel.

First of all, we have, now, consolidated things under IAC Travel, which is you can understand for every reason the right thing to do and we're going to continue to give you all of the information about trends and other kinds of things.

Do you know what we're not going to do?

We're not going to give food to the competitors, freely and gracefully.

We're not going to make information available we think is a ex-competitive nature that will hurt in any way our continuing to keep our leadership.

A lot of people out there, who want to know all sorts of things about what we're doing in order to plan counter strategies against them.

So, what we're trying to do, and you will see us doing this in the future, is we're going to absolutely balance our desire to give complete information and you will not find us not giving information, in any area, other than what we consider to put us at any kind of competitive disadvantage.

We're never going to use that to hide anything, either.

If there's bad news to report or anything that we can tell you, we're going to tell you that first.

That's our policy.

Good news can come in time.

So, that's our feeling about that and, yes, it is true that in just these certain areas, every one of them, are areas in which the competitive bell rings for us.

We're not going to provide some details.

We're look forward to that.

Now, moving on to match.com and also a little bit about Citysearch, which I would like you to comment on what you see in there especially in light of Dara's comment on maybe a little weak in Q4.

But on match.com do you see any parallel between the personals and travel industry in the sense that there's increased competition, there's increased marketing expenses and, somewhat slower growth in that sector, and overall, what's your outlook for the personals market as a whole?

And, also, if you could, also, comment on the Citysearch part.

I'm very optimistic about match, I think match actually has gained 15,000 subs this month-to-date.

And, every month for the last four, maybe?

Uh-huh.

We've had net gains in subs and went through a period earlier in the year where every month we had slight net loss in subs.

And, so, I think match.com is in a very competitive world.

And it is still the leader, not only the leader, but, it is instead of in that competitive framework, having losing the sub count, it is, in fact, gaining sub count and it not spending large amounts of marketing money to do so.

As a matter of fact, it has, if I'm not mistaken, cut back a good deal on marketing spend over the last, contemplated marketing spend, over the last several months.

In Q2 and part of Q3, it did.

In Q4, we're going to increase the marketing for the new year, because that's.

It's a good time to spend money for dating.

Q1 is the big.

The world turns, somehow, after people get cold, they get lonely!

So, we're quite pleased with match.com.

Everything that we see in the new products that they -- the principle reason why I think the sub count reversed itself and started to grow is the introduction of match.

I don't know what that --?

Came out after the summer.

And their new bells and whistles and new things that they're putting in these matching systems are really aggressive, and, genuinely interesting.

As far as Citysearch is concerned.

Citysearch is now focussed on getting customers to sign up, on a PFP model and relate it to our consumers.

We're way ahead of our projections on that, and I think we're going to have about, I don't know, about 25-30,000 by the end of the year, customers.

In the system.

And Citysearch has narrowed its scope, meaning it's narrowed its scope of service.

So that it works to develop this paid-for-performance model that has so skyrocketed the fortunes of Yahoo and led to all of the speculation about Google.

And Citysearch is the perfect place to do it.

Nobody else, really, is in the local space as Citysearch is.

It's just got to get it right.

And it is making progress on that.

I thank you.

Next question?

Our next question from the line of Daryl Smith with J. P. Morgan, please go ahead.

Good morning.

On the Hotwire side of the equation, traditionally benefited from preferential pricing associated with their close connection with airline suppliers.

With airlines now liquidating their investment when can we anticipate that their existing pricing contracts roll off and when do you think you'd expect financial impact of that on the business?

I have a follow-up question as well.

I'm sorry, forgive me.

If you just repeat the last part of your question, cross talk here and I couldn't hear it.

If you look at the airlines now liquidating their investment what's the potential impact on the roll off of that pricing contracts and then what's the impact on your business and when can we anticipate that happening?

I don't know if there's any.

I think our agreements with airlines are long-term.

And, so, I don't think that it will have any effect.

Anybody else here have anything to comment on it?

So that's the answer to that.

Sorry, what's the follow-up?

And, then, relative to your international schedule on the travel side, you currently manage two distinct brands, hotel.com and Expedia, how committed are you to doing that and then you think you're right now currently satisfied with the amount of exposure you have internationally or do you need more supply relative to hotels or airlines?

And then finally, if you look at sort of the gross margin trends and the hotels business in Europe, what do you think the long-term margin given the fact of the market?

We do anticipate that we'll be operating brands, certainly we'll be operating the hotels and Expedia brand.

I think we'll be operating several other brands as well.

As we continue to develop individual territories and individual markets, countries, et cetera.

I really can't give you an answer, although I'd be happy to try and supply you one, if anyone here has a specific answer about margins internationally?

I think it's probably too early.

We anticipate that over the long-term the margins are going to be similar to the U.S.

But maybe a little bit higher because the international markets are much more fragmented as far as hoteliers go.

But in general, as far as our long-term planning we do think that margins are going to be similar.

In response to the question about supply and whether we're satisfied with supply internationally, I'd say that's a big no.

We are working very, very hard and increasing kind of our supply group, all across Europe, I'd say we have a lot of work to do in the U.K.

We have done good work there but we have work to do there.

We have work to do in Germany, and France, and we're getting in to a bunch of new markets in Europe.

Italy, Spain, et cetera, on a supply side.

So, I think we have a lot of work to do on the supply and that just represents upside this year, going into next year.

Next question?

Our next question from the line of Peter Mersky with Oppenheimer and Company.

Please go ahead.

Thanks very much.

Could you comment first on Hotwire just in light of the comments Priceline had about their opaque pricing.

I know Hotwire is smaller and was faster growing, but just what you're seeing there.

And also on your share repurchases, you mentioned shrinking the cap and offsetting dilution.

What would you view as your primary goal in the share repurchases, taking advantage of value or offsetting dilution?

First, on Hotwire.

Do we have a numeric answer for this.

Hotwire has been gaining share very consistently against priceline.

I'm not sure exactly what you're referring to in what Priceline said.

But whereas Priceline's air volume sells very significantly, Hotwire was able to grow the air volume versus last year.

If you take a look at, kind of opaque travel bookings, in Q3, Hotwire sold around 78% of priceline total travel bookings, that's up from 57% last year, Q3 '02 last year.

So Hotwire's been gaining share on Priceline pretty consistently and we now spend more in marketing than priceline does.

We think the consumer proposition is a better consumer proposition.

Priceline has one proposition where consumers have to bid and hotwire is like the buy-it-now model and consumers know what the prices and we've been able to gain share and, hopefully, we'll continue doing that.

Okay but you're not seeing any kind of weakness or fall off in that?

No, we have not.

What we've seen is growth.

That's just clear.

I mean, we think that the model is probably a more sustainable model over time and it has, without any question, shown that in the marketplace.

We've seen no reason to think that is in any way slowing.

Clearly, the air side is not going to grow as fast as it has historically but it's not going to be nearly as weak as the priceline area.

And on the hotel side, Hotwire is starting from a much, much smaller base, so we see the hotel area growing very quickly going forward.

One of the great things about the acquisition for us is Hotwire is barely in the hotel business and given that we're rather seriously in the hotel business, welding those two together and offering it inside Hotwire is going to, we think, certainly provide us with great hotel growth.

And on your first question, relating to share purchase and value dilution, I think that it's both.

We're going to care about being opportunistic in terms of value and as Barry said earlier, we're going to care about kind of a level of our outstanding shares.

We kind of think in our own mind about 800 million shares is the right level, we'll reduce the capitalization, at times, through stock buy-backs and at other times, we'll increase it through acquisitions, but we think we can keep it fairly stable and we view stock as very dear and it will not go out easily.

Great, thanks very much.

Thank you.

Next question.

Our next question comes from the line of Tom Underwood with Legg Mason.

Please go ahead.

You mentioned that you had the goal of being number one in travel within three years, I was wondering how big do you think you'll have to be within three years to be number one?

Oh, excellent.

But I don't know.

I can't give you the exact number that that is.

I think it's actually, about, 20--

I think it's more than 20.

I think it's about 20 billion, as I last saw it.

But, you know what?

It's very easy and we'll give you an exact figure.

I figured it would be a little north of 20, cause you're really talking about a AMX, aren't you, after the post Rosenbluth is being what you're looking at and any growth they'd have over the next three years?

Exactly right.

What I was doing was take Rosenbluth in and then add the numbers that I thought would happen over the period.

So it's probably by then north of 20, by some, don't know how much.

On Hotwire you mentioned the opportunity within hotels, I'm wondering, you outperformed Priceline dramatically on the air side, how did things look on the rental car and hotel side for opaque versus priceline.

Very good.

Again, we're starting from a smaller base on both those areas, we're getting share on Priceline.

Great, thanks.

Next question?

Our next question comes from the line of Shawn Milne with SoundView.

Please go ahead.

Thank you.

Barry, just a quick question on HSN International.

The revenue growth was pretty solid, I think it was about 31%, but the OIBA number was a little bit lower than, perhaps, what I was expecting.

Any comment on that?

Q3 is historically a weak quarter.

As in Europe, a lot of Europeans are vacationing, et cetera, so you don't see the kind of bottom line profitability that you would, just in Q3 so, most of that is seasonal.

And then just secondly, you talked about OIBA growth, overall next year, and if you use a billion to 1.2 billion roughly, that's about 10-30% growth from '03.

The lower end of that range we'd almost be delevering on the revenue growth that we're expecting.

Could you add a little more color on that?

Secondly, you talked about $100 million in investment next year, incremental investments.

Is the majority of that marketing, or what else could you break out in terms of buckets?

That thank you.

The first part I think you just misunderstood us.

The range is significantly higher than that, yet, the low end would be much higher than 10% so I think it's just a math issue.

Hello?

Yeah.

If you didn't hear that, we want you to hear that clearly.

Okay.

The low end of the number is significantly more than 10%.

I mean, simple math would get you way higher than that.

Perhaps, I'm too high in '03?

Pardon me?

Perhaps I'm too high on '03.

We can come back to that on the second part about investments.

Most of that is actually not marketing spend of $100 million, it's broad spend across the company.

I can't give you big buckets because it's in every single one of the businesses, but it's about customer service, new technology, both in domestic and international spend, across the businesses.

Okay.

Thanks.

Next question?

Next question comes from the line of Brian Egger with Harris Nesbitt.

Please go ahead.

Just following up on your earlier comments about the merchant hotel business.

Two questions.

One is are you seeing any material change in the propensity of hotel suppliers to allocate inventory to the merchant channel as occupancy rates are improving.

And secondly on Priceline.com I know their have their advertising initiatives in the merchant hotel business affected the competitive landscape which you talked about more than other factors or is it just one of several observations you're making about the competitive dynamics of that business?

Look, of course there's some changes in terms of supply relative to marketing in our channel.

And, when things improve, although they've improved slightly, there's going to be some diminution of working in this channel.

But, for us, there's certainly sufficient supply to meet our goals.

As far as the second question.

I think that the Priceline advertising, frankly, isn't significant enough to be causing kind of macro moves in our business.

Okay.

Thank you.

Next question?

I think we'll do two more questions, and, then, we'll -- unless there's much more pressure on questions, we have said that we will answer everybody's questions, and, so, if there is more pressure behind it, we'll keep it going for whoever wants to stay on the line.

Our next question comes from the line of Doug Campbell with Spirit Capital.

Please go ahead.

Thanks very much.

In terms of, I have two questions.

Going to number one, and travel over three years, do you see this as a matter of continuing to do what you are doing, or will it require some significant changes in your processes for getting that business?

And, second question is in the mortgage business, with the name recognition you have, and the gigantic size of the market, why you didn't give a specific target for increasing share in that market.

Could you talk about that a little bit?

And, the rest of that question is the same as the first one, what do you have to do to get there?

What was the first?

Change in travel.

Oh, as far as travel is concerned, no, no.

There's nothing -- we don't have to change anything, other than what we have to do.

We're at the ended stage, of the integration process, which has certainly been on us for the last six months, and we've got to have that settle itself down and I think it will settle itself down very quickly.

We have to, of course, therefore, bring real focus, given our lead, given competition, given all of these things.

But, there's nothing that the model and our position is a completely sound one.

We are a great place to access travel.

And, so, investing, continuing to invest in the tools that make that so, continuing to invest in ways to tell people about it, continuing to keep relationships with our partners, which is really important, because IAC Travel believes that it's suppliers are it's partners.

There's always tensions between suppliers and distributors, but the way to have that be healthy is to continue, for us to prove, to the suppliers, that we're a great marketing channel.

We've been able to prove it over the period of time.

We think we'll continue to prove it and continue to actually underscore the sense of partnership.

So, if we do those things, we're fully convinced that, as one of my colleagues, I think, said yesterday, it's ours to lose.

There're those who have lost it, when it's theirs to lose and we do not mean to have that happen to us.

That's the travel part of it.

As far as mortgages are concerned, and as far as growth is concerned, you just look at the size of the market and we look where we are, and you look at our brand, already, unaided or aided, or anything, recognition, in the consumer's mind, that we are a better way to access certain financial services and we're going to have real growth against that, to be able to quantify, we think is of no particular purpose.

There's so much room, there's so much opportunity as against such a very relatively low base-cost of invested capitol for us here that this is purely execution for us and purely adopting new products as reFI, obviously, comes to an end in this period of reFI.

It's not going to stop all other parts of these financial service products, every one of which we've got an aggressive plan for.

We think that without quantifying it, just look at the difference between the two and look at the position already at Lending Tree and make your own opinion.

Thanks very much.

You're welcome.

Next question, please.

Our next question comes from the line of Cort Corbin with Credit Suisse First Boston.

Please go ahead.

It's actually Robert Chisman.

Thank you so much for taking so many questions.

Just a balance sheet question which I'm sure you haven't had to worry that much about.

After these stock buybacks and some of these acquisitions, your net cash position has somewhat shrunk.

Could you give us any sense of updates that you've had with your credit rating agencies, whether or not an investment grade credit rating is important or essential to you?

And, as you start to thinking about uses of cash, the type of cushion that you might want to keep over time in terms of cash on the balance sheet.

Thanks.

Okay.

Yes, the investment grade rating is important to us.

I think we've operated consistently with that over the last eight years, really, the existence of the Company, we will continue to do that.

And I would say, in terms of cash cushion, since we are conservative, it's probably somewhere between a billion 5 and two billion.

That gives us room, operationally, as well as for acquisitions in the future.

And I would say, as far as our conversations with the ratings agencies go, it really has had to be an education process with the ratings agency, over the past two years.

There aren't that many business models that are like ours that they're familiar with.

And so far, as they are getting more familiar with our model, they're getting more comfortable with the credit.

Great, thank you.

One more question and, then, we'll let you all go about your day.

Certainly, and that will be from the line of Paul Keung with CIBC World Markets.

Please go ahead.

How soon can you buyback your stock given the 11th coming up?

I think, actually, we can't buy it back.

We're going to wait until a few days after the investor day and we hope you all will join us for our day of giving you more information about the company and especially the operations.

Really, we do invite all that are on this call to participate, if you can, one way or the other, either in person or not.

Because, we can putting, and I think it's appropriate, we're putting real effort, principally behind having all of you, instead of you do from us every quarter, but, having the people who run these businesses, who are responsible for the growth, be in front of you, talking about every part of their business that they can and giving you a full and update as possible for them to organize.

So, we're putting a lot into trying to put this together, which gives us a somewhat high bar to work against, but we think it's appropriate that we do so.

So, those of you that won't, we look forward to you hearing from us, not necessarily seeing us.

Given that we're doing this in our pajamas's -- no, we're not we're all actually properly dressed.

Next quarter or on the 11th in New York.

Thank you all very much.

Ladies and Gentlemen that does conclude our conference for today.

Thank you for your participation and also for using AT&T's Executive Teleconference service.

You may now disconnect.