Match Group Inc (MTCH) 2008 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the IAC quarter one earnings conference call.

During today's presentation, all parties will be in a listen only mode.

Following the presentation, the conference will be open for questions.

(OPERATOR INSTRUCTIONS) This conference is being recorded today, Wednesday, April 30, 2008.

I'd now like to turn the conference over to Mr.

Tom McInerney, Executive Vice President and CFO.

Please go ahead.

Thanks, Operator and thank you everyone for joining us today.

On the call with me today is our Chairman and CEO, Barry Diller.

During this call, we may discuss our outlook for future performance.

These forward-looking statements typically are preceded by words such as we expect, we believe, we anticipate, or similar statements.

These forward-looking statements are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.

Some of these risks have been set fourth in our Q1 2008 press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures.

I refer you to our press release and the investor relations section of our website for all comparable GAAP measures and full reconciliations.

To the results.

The consolidated figures are laid out in the release and reflect some very positive development and some challenges but as we continue our planning for the spins, it really makes sense to discuss each of the five companies separately.

At retailing, HSN grew revenue 9% excluding America's Store.

While we got good top line growth, total HSN operating income before amortization was essentially flat.

We had 140 basis point decline in gross profit margins resulting from a shift in product mix to electronics and cookware which are typically lower margin items and continued pressure on net shipping and handling revenue as costs continue to rise which we cannot pass on to the customer in this environment.

One of HSN's strengths is the diversity and depth of its product assortment which allows it to shift products and meet demand in difficult retailing environments and this quarter is an example of that.

The market for jewelry, apparel and most soft home product is very challenging right now so we've moved air time to more productive but lower margin categories.

The good sales growth at lower gross margin percentage left actual gross margin dollars up 1% year-over-year.

Not what we would aspire to normally but better than many retailers at this time.

Q2 is off to a solid start given the environment and we currently expect the trends we saw in Q1 to continue, i.e.

a strong top line albeit at reduced gross margins as we manage the merchandise mix to areas where the customer is more receptive.

We're looking for absolute gross margin dollar and OIBA growth in the quarter for HSN, but not to the degree we would expect in an environment where we could better optimize merchandise mix.

Our catalogs business remained challenged in Q1.

Revenue declined 7% while operating income before amortization fell from $8 million in Q1 2007 to a loss of $5 million this quarter.

Our catalogs business primarily operates in the home and apparel categories both of which have felt the brunt of current market conditions.

With lower consumer demand and aggressive competitive action.

While Q1 is our seasonally slowest quarter, and we certainly expect to achieve real profitability on a full year basis, the remainder of the year will be challenging, with near term profit growth unlikely.

We're taking all of the short-term actions you'd expect.

Sharply lowering circulation and other operating expenses, reducing inventories and adjusting merchandising strategies where possible to better suit the environment.

We don't expect a quick turnaround but this is a business which had in excess of a billion in sales last year, has strong and recognizable brands which will sustain us through this difficult period while others flounder and should be in a position to return to more normal margin levels when conditions improve.

Now to Ticketmaster.

Obviously looking at the numbers you'll see it had a very strong quarter top line despite a difficult comparison yet margins contracted and profits declined year-over-year.

These divergent financial results are a bit driven by a bit of complicated story, but it's obviously important so let me go into some detail here.

First, there's an element of incomparability because we had about $5 million in non-recurring positive items in the year ago period.

We spoke about this last year.

Second, we're making a number of discrete investments to position the business for life, post-Live Nation, specifically, we acquired Paciolin and TicketsNow which combined contributed revenue but no OIBA in the quarter although we expect this to change over the course of this year.

We stepped up efforts to gain scale in the secondary market and one part of that strategy has been working with major sports league and our team clients to write inventory into our system.

This comes with up front cost.

And, we put additional resources into organic growth efforts in certain international markets, China and Germany are the two biggest examples, and these are essentially start-up operations where we plan to invest low single digit millions of dollars on an annual basis.

Historically, we've relied principally on acquisitions to grow internationally, but in these two large markets, plus certain others we've determined it will cost us less net capital to enter greenfield and/or through joint venture or very early stage acquisitions than through buying an established competitor.

As we enter earlier stage more cost is born through the P&L and less is capitalized.

Third, there's still some continued margin pressure from climbing rebate levels to clients and other general cost increases although this what I'd call general margin pressure is by far the smallest contributor, and continues to be at the level that has historically been offset through volume growth and leverage.

While there's a lot going on the fundamental issue for Ticketmaster is replacing the volume and scale it expects to lose from Live Nation and we think these actions will go a long way toward doing that.

We'll give you more specifics on this when we get closer to the spinoff, but we think Ticketmaster will be a stronger, more balanced Company, when this is done.

With Q1 behind us, the rest of the year looks better as well.

The concert calendar looks solid, we face an easier comparison in Q2, and we're confident that the recent investments will begin to bear fruit.

We expect revenues to grow faster than profit for the balance of the year, but not nearly to the degree we saw in Q1 and we're certainly looking for absolute dollar profit growth over the balance of the year.

Turning now to LendingTree.

The lending business is obviously still hurt by macro conditions with revenue substantially down year-over-year and operating and loss for the quarter, but we told you the near term goal was breakeven and we made substantial progress toward that.

Revenue is up sequentially, the cost actions of last year have taken hold, and sequentially the losses narrowed from $24 million including certain charges in the Fourth Quarter to just $1 million in the first.

We currently expect this progress to continue.

We believe the franchise is fully intact and when conditions improve, LendingTree will be well positioned to take advantage of it.

On the real estate side of Lending Tree, we're seeing real progress from our Company owned brokerage which is now operational in 14 markets with nearly 1,000 realestate.Com realtors spanning the U.S.

In Q1 the business lost $3.9 million in OIBA, significantly less than last year.

Building a real estate business in this market is not for the faint of heart, but the fact that we're making real progress is we think a testament to the transformational nature of our model and will present real upside for an independent LendingTree.

Turning now to Interval which had strong top and bottom line growth in its seasonally strongest quarter.

For the period, the business grew revenue and OIBA 34 and 22% respectively, with the inclusion of ResortQuest Hawaii in this quarter results and not in the prior year period accounting for the difference in revenue and OIBA growth rates.

During the quarter, Interval grew the active membership base by 4% and renewed several major developer clients, including Diamond and Hyatt.

Simply stated, we believe the fundamentals and growth prospects of this business are outstanding.

Just a quick note, we acquired ResortQuest Hawaii on May 31, of last year, so the business will be anniversaried for one month of Q2.

Now to new IAC which will comprise our media and advertising businesses, Match, ServiceMagic, entertainment and emerging business following the spins.

Overall consolidated results for new IAC were exceptional in the First Quarter.

Media and advertising grew Q1 revenue strongly at 28% and OIBA even stronger at 115% due largely to the improved economics associated with the renewed contract with Google effective the first of the year and continued growth in our Fun Web products business, ask.Com, our distribution business, and Citysearch.

Revenue per query grew nicely across all proprietary search properties even beyond the contractual improvements.

Proprietary revenue grew faster than network and now represents 62% of total revenue.

During the quarter, by agreement with Google, we worked more closely to align our interest with respect to the distribution business.

The result of which was strong, yet slower revenue growth but significantly higher profit growth versus previous quarters.

In Q2, this realignment will continue but at a more rapid pace as we quickly transition through our network partner agreements.

Consequently network revenue is likely to decline in Q2 and you should expect to see considerably lower consolidated revenue growth than in the First Quarter but more importantly, profit growth should remain strong.

At Match, revenue and OIBA grew 10 and 21% respectively.

Our international business saw strong growth in number of subscribers and revenue per subscriber.

Domestic revenue per subscriber increased 6% due to a greater percentage of subs at higher price points while the number of subs declined slightly.

Chemistry.Com continues to enjoy success with brand recognition doubling in the past seven months and more than quadrupling since the launch of its first off line marketing campaign in April of last year.

This has carried through to subs which were up 35% in the quarter.

Match's OIBA grew 21% due to lower customer acquisition costs as a percentage of revenue in international markets plus certain cost efficiencies.

In Q2, we have already launched new advertising campaigns domestically to jump start Match.Com and continue the momentum of the Chemistry.Com product, so in Q2 we expect the rate of profit growth to be strong but down from Q1 levels.

All in while we're still searching for that next product or marketing lever to expand the next U.S.

category this business is very solid.

Turning now to the balance sheet.

We end the quarter with 1.4 billion in cash and sure its and pro forma the net cash and securities of $551 million.

Free cash flow for the quarter was $112 million, up $52 million or 86% from the prior year due primarily to lower cash taxes paid, lower capital expenditures and aggressive management at working capital during the period.

Our businesses have focused intensely on cash flow management in this environment and it shows.

One final modeling note for Q2 before I conclude.

I'll remind people that in 2007, we made a number of early stage minority investments so next quarter we'll see some below the line impact from this of roughly a few million dollars.

And with that I'll turn it over to Barry.

Thank you, Tom.

Good morning, everyone.

The litigation with Liberty that had distracted us for so much of the quarter was resolved by the Court in our favor.

What this means for us are primarily two things.

First, there is now no uncertainty either for IAC or for Expedia as to the clarity of the proxy that I hold for controlling shares in each Company.

I know that this has been the subject of speculation and instability both inside our Company and throughout the investment community and while I would have preferred that the questioning of it had never been raised, and that we would not have had to go through wasteful litigation to get there, I'm at least glad that one overhanging negative has been so definitively swept away.

And second, we intend to proceed with the spins.

Our Board met Monday and furthered the step by step process that we hope it will result in filing with the SEC in May and with the spinoffs completed in August.

We've had discussions with our Board about the mechanics of how these Companies will work and we expect to make those specifics known as soon as we are able to.

What we're not discussing is the possibility of a so-called swap transaction with Liberty.

While the potential for such a deal exists just by the nature of our relationship, I think it's very unlikely that one will occur.

I've learned many things these last months, the most important of which is how right we were to recommend splitting IAC into five separate public companies, and this quarter's results only further that conviction.

For instance, if I really wanted to give you more than a superficial State of this Union of 60 plus businesses, it would take far more than today, and of course the moment of the time, there would always be something negative somewhere that would overshadow the positives.

Once spun, each of these Companies will have your proper time and attention to dig under the hood and really understand their prospects and challenges.

As we move towards the spin, we're planning multiple sessions with investors and analysts to fully put fourth the management of these companies and their plans for each of these entities.

In the meantime, the best way to use our time today is to get to the answering of questions of interest to all of you, so with that, let's do questions.

At this time we will conduct a question and answer session.

OPERATOR INSTRUCTIONS) Our first question comes from the line of Jeetil Patel with Deutsche Bank Securities.

Please go ahead.

Great.

Thank you.

Two questions.

Tom, I guess you talked about HSN doing pretty well up 9%.

Can you talk about whether you're gaining share from other players out there or is it just a function of your customer spending going higher or you're attracting more traffic or more calls coming in from new customers?

And then second, as you look at the Ticketmaster business, are you in a position today with a lot of the investments and initiatives you've had on your way over the last couple of quarters to offset the Live Nation revenue in OIBA for '09 at this point or do you think there's still a lot more work to be done to try to compensation for that impact as you look into the out year?

Yes, Jeetil, on HSN, obviously our largest competitor in the direct space hasn't reported yet but if you look across the broad swath of retailers I think there's no question we're doing very well indeed.

The specialty of apparel for the quarter down 3% same-store department stores perhaps the closest comparable in the broad retailing I think it was down 8%, so even if you adjust for some of our mix to kind of conservatively interpret the numbers, there's no question we did better.

We're investing incremental, not huge sums but incremental dollars and it's one of the things that affects the bottom line margin in service.

We just moved all of our service back onshore, for example, we had a multi-year effort to try and make it work offshore.

We're putting that back to a customer and we're seeing positive trends in the customer data.

We have customer counts are up, customer engagement is good.

Feedback is good.

And so the fundamentals of the business are quite solid indeed in this environment.

It just in this environment it doesn't add up to as much as you'd like.

So it's off line moving to on air?

Yes, I mean online is good.

HSN and online now is nearly 30%, at HSN.Com was up over 20% in the quarter.

So continued good traction there.

On Ticketmaster, we'll provide more specifics when we get closer to spin but we're kind of well on our way.

I think your question was are we there or is there still a long way to go and I'll say I don't think there's a long way to go.

How the numbers exactly add up for '09 in terms of as these acquisitions come through and the investments and other things we're doing, we're going through that planning process now but I can say categorically we're certainly not a long way away, maybe not any way away but that will be in the adding over the next several weeks to replacing the profit from that business.

And do you think that those, the make-up for that will come in the form of the secondary business or will it come from Paciolin and TicketsNow primarily?

I think it's all of the above.

TicketsNow is a secondary player obviously.

Paciolin helps us, those are the two big acquisitions we did and a lot of the investment we've been making through the last several years including internationally, so it's all contributing.

Operator, next question?

Thank you.

Our next question comes from the line of Jennifer Watson with Goldman Sachs.

Please go ahead.

Great, thank you.

Can you discuss where you think Ticketmaster margins stabilize over the longer term and what factors are at play in terms of pushing them higher versus lower?

And then also just I have another question on lending.

Yes, I think it's hard to say, Jennifer right now and I don't think we have a target yet on Ticketmaster's margins because I think it really depends on this revenue mix shift.

We've got more revenue now coming from the secondary market and that part of the business even adjusting, even kind of pro formaing for the acquisition is a growing faster.

That's a lower margin business right now at TicketsNow plus our own efforts.

Some of the emerging international markets is a lower margin business we're getting higher revenue, so I don't know there is a target.

I do know that if you look at kind of this very large margin percentage contraction we had in Q1, only about a quarter of it is what I would kind of characterize as core margin pressure in the ticketmaster business.

Rebates or other cost escalations and historically we've been more than able to offset that the just through volume and leverage growth.

Kind of three-quarters of that are these investment dollars either acquisitions at lower margins or other spending that's going to replace this business and I think as we get into next year, that will even out and we will either be getting very high revenue growth at some continued margin contraction or not at all.

Next question, please?

Thank you.

Our next went comes from the line of Justin Post with Merrill Lynch.

Yes, a couple questions.

First one for Barry.

Could you talk about the Private Equity interest in the individual companies?

Are people wanting to maybe invest in some of these things?

I know you won't say anything specific but how is the landscape and secondly maybe for Tom.

We calculated proprietary revenues up close to 40% for Ask.

I guess first, how do you plan to address the queries down year-over-year?

Do you think you can change that around and can you quantify what percent was from Google or what percent was from your own initiatives to drive that monetization improvement?

First relative to Private Equity, we've had lots of discussions, we have lots of people knocking on the door and coming in and talking about different schemes and ideas.

The truth is as we go through this, I think we're not probably going to do any of them.

I think that the best thing to do is simplicity.

We may do one or some modified thing but I don't think we're going to do anything that would particularly engage Private Equity world.

The best thing is to get these companies spun out and to get them into the public markets, get their managements out there so to speak and taking care of their own businesses and talking to the investment community.

I think that's probably the better step forward for us at this point.

The one thing, sorry, I won't even go any further with that.

Okay let me take the second part of the question in terms of the media and advertising results.

First of all in the query side, it's easy to drive queries in this business through various online marketing techniques and the real key is driving loyal users, retained users, those that will come back that you don't have to pay for day in and day out.

So queries were down very modestly in Ask as we called out in the release, but as we look at the data, core users were up.

Retention is up.

Frequency is up.

And so the kind of the fundamental health of that user base that really uses Ask as opposed to the ones we were driving through marketing because marketing was down substantially in quarter and really what we've done, taking a step back is looked at the entirety it of the business with new management as we have a new team in there and really focusing on driving profit, driving that loyal user base that will position us for long term success, so we're not kind of the slightest bit troubled by that.

The most significant factor, you mentioned it, Tom but the truth is we spent a fortune in advertising last year and we know that when you put the marketing dollars out, spikes go up and you get a lot more queries.

The issue is retention.

The issue is as Tom referred to it, but the contrast between what we spent this year and what we spent last year is just quite large and the other thing is with the new management, not to denigrate the old management, but the new management is so focused and tasked to leading very clear objectives that are wonderfully chopped up and boxed out in very theatrical ways by the leader Jim Safka to energize everybody to meet specific goals and just it's an entirely different operation than it was last year.

Thank you.

Next question?

Thank you.

Our next question comes from the line of Mark Mahaney with Citi.

Please go ahead.

Great.

Thanks, Tom, you provided a very useful peel back of the margin pressures in Ticketmaster.

Could you do the same thing to HSN?

Those were pretty low gross margins.

What percentage of that do you think were kind of near term cyclical economic and simple mix shift and what percentage of that could be actually structural just a change in online retailing in terms of shipping or free shipping requirements and then secondly, those media and advertising margins looked very strong, positive.

Is that sustainable going forward given the old history of that Company it should be but are there, is there anything one-time in there or is that sustainable?

Thank you.

On HSN, it's a little hard to bifurcate with precision obviously Mark, but I'd say roughly kind of three quarters, one quarter.

It's mostly mix, which is a very proactive reaction to where we see the consumer buying.

It's not something we would plot or plan or design but it is one of the strengths of the business that you can react quickly and you have product on shelves and you can adjust accordingly.

The only thing in the gross margin and we've talked about this before that we do still see and I don't know if I'd call it structural or maybe cyclical but it's not a near term answer is we do see cost escalation in the shipping side because of competitive pressures which is really the large number of web retailers out there that you really can't pass on to the customer, and I think that's, it varies but call it 30, 40, 50 basis points and over the long term if you have a healthy economy and you have a healthy growing business you should be able to mitigate that one way or the other.

In an unhealthy environment there's really no mitigation possible.

To the media and advertising question, yes, we called this out.

It's a combination of multiple factors.

One is because of the new arrangements with our sponsored listings partner, a marked shift toward the proprietary side of the business away from the network side of the business so we do expect continued substantial margin increases for the balance of the year in that media and advertising business.

The other thing is as Barry alluded to we've managed cost pretty aggressively, we've pulled back on unproductive marketing and that's a contributor as well so it's a healthy financial outlook and picture there.

Thank you, Tom.

Thank you.

Sorry go ahead.

Next question.

Sorry about that.

Our next question comes from the line of Doug Anmuth with Lehman Brothers.

Please go ahead.

Thanks for taking my question.

Just a couple things on lending.

In the first one just a clarification.

It looks like you did basically a comparable dollar amount of total closing versus Q1 last year on basically half the number of closing units.

Can you clarify that and then secondly are you still just as committed to the loan origination business at Lending Tree?

Thank you.

Doug, just can you rephrase the first part of that?

I'm not sure I got it.

Well, it looks like the total dollars that you closed Q1 this year versus Q1 1 last year were pretty comparable but the actual number of closing was basically half the number of units, versus last year?

Let me check on that.

Let me answer the second part of your question first.

What we've done on the origination side of the business is yes, we're still committed to it but we have very much adjusted to the current market environment and so we scaled down the operation, taken a lot of cost out of it.

We've also set it so that it's operating at very consistent volumes level.

One of the things that hurt us in the prior environment were volume levels going up and down at any given month which meant either had too many people or too few people and so it led to kind of real profit pressures in that business.

So I think it is an important part of the business.

We think it will provide real upside when this market comes back and it is a when, not an if and in the meantime it contributes a little bit and I'll come back and answer your earlier question later.

Okay, great.

Thank you.

Next question, please?

(OPERATOR INSTRUCTIONS) Our next question comes from the line of Brian Pitz with Banc of America.

Please go ahead.

Thank you, two questions.

Broadly will you comment on the overall online ad rates in terms of CPM's and CPC's in the quarter and should we expect Q1 levels of marketing spend to continue at Ask?

And basically can you sustain growth without that really hurting market share?

Thanks.

Yes, as we look across our businesses, it's property by property but I'd say both as a buyer and seller, we see it in certain categories.

Lendings display rate the properties they're buying into have absolutely come down.

That's not a surprise.

At the same time here is the selling example.

Evite is up and they just took an increase and that's being passed through.

So I think it very much depends on the category.

We are seeing in our sales operation I guess I'll call it slower decision-making, a little bit harder to convert the pipeline and so there are some sell-through pressures but it's not so much in price.

It's just a little bit in terms of slowness to react.

On the media and advertising marketing question, I think that the plan for the year is right now, generally and obviously we'll kind of read and react, but it's generally to spend at kind of comparable levels to what we did in Q1.

It will bounce around.

Yes, we're not going to materially increase that marketing.

We've got so much work to do in Ask to refine the product and refine it by that I mean to really point our foot at a much more assured way of growth and that does not particularly involve marketing.

So I don't think we're going to see it in the near term.

I think at some point we should see increased marketing but not for some time.

We've got several quarters yet to go through before I think we get to a place where we think sensible marketing where you can retain the query, retain the unique, retain the person, in metric terms, is the thing that we're after for the future.

Great.

Thank you.

Next question, please?

Thank you.

Our next question comes from the line of Jeffrey Lindsay with Sanford Bernstein.

Please go ahead.

Hello.

Just wondering if you could give us any updates on the spin-out process, at what stage you're at?

What has happened and what has to happen?

Just in very high level terms and what if anything we might expect to see from the outside so we understand how things are progressing?

And then could you give us any sort of details on the principles by which the debt cash and operating expenses will be allocated to the new businesses and how much of this has already been agreed?

Thank you.

As I said earlier, the spins, we are proceeding.

We had a Board meeting as I mentioned earlier which was a step in the stations of the movement here that we have to go through and I would think that we're going to have probably one or two more Board level discussions about this.

We have a filing in I think it's May we hope and we really are just in the process, a massive effort mostly, I mean it's a massive detailed effort to get these filings together and to do all of the things that we have to do.

All of them were procedural.

We don't anticipate anything that would slow us down.

May get comments from the SEC, that may take a little while but it's normal process and we think that we believe that we'll get this done in the third quarter.

So hopefully the early part.

And to the second part of the question in terms of capital structure, we spent a lot of time on that and we continue to, obviously the credit markets and capital markets generally are very dynamic and so we don't have specifics yet to announce and probably won't for several weeks to a month plus.

Those details will probably not be in the initial filing but the principle which I think you asked about on the capital structure side is we're going through for each of the four businesses plus new IAC and spending a lot of time saying what is the appropriate capital structure for this entity in this capital market.

And so for the more mature businesses that has one general direction, for the earlier stage businesses another, and the reality is we have the luxury of not having a substantially leveraged structure to begin with, so we have flexibility here and we think we'll end up with appropriate capital structures kind of times five.

And then the last part of your question I think was on operating expenses and I take from that kind of corporate and public Company expenses and we're working through detailed plans, again all five companies on that, there will obviously be some modest incremental public Company expenses at the four companies and they will be materially reduced corporate and public Company expenses at IAC and we certainly don't expect the total of that, the next four up and the one down to be more than we have now and if it can be less, we'll accomplish that.

We think, I think it will be less and I certainly will be vastly less at corporate.

Corporate, beyond simply public Company issues, just a whole corporate apparatus that is responsible for a great swath of companies is obviously going to have much more limited responsibilities.

Let me just, while I have the mic I want to answer Doug's question because I looked at the data.

On LendingTree the difference in the metrics between closing and dollars is simply that we exited the home equity business at LTL.

There are a lot of units there and not a lot of dollars, so that's why that was divergent.

Next question, please?

Thank you.

Our next question comes from the line of Imran Khan with JPMorgan.

Please go ahead.

Hi.

This is [Bridget Wyesha] calling in for Imran.

Quick question about HSN.

I know that you said that sales of jewelry and apparel were weaker than electronics.

Can you tell us how inventory levels are in those product lines and also, could you explain why your return rate jumped up to about 19.1% from 18.4% last quarter?

Thank you.

Yes, at HSN, I think perhaps a bit more than a bit, certainly experienced and educated all of us having suffered through last year, we've done a pretty good job on inventories.

There's always little pockets here and there but inventories are down materially from Q1 levels a year ago and so we generally feel fine about inventory levels there.

On the return rate, we've seen this trend for some for some period of time and we don't have a good answer on it.

Certainly we've done some things on the service side that have made it easier for customers return, that's a good customer service, pre-printed return labels and the like but I think there's, and again this may be kind of macro and longer term with the proliferation of web retailers and peoples comfort with having things shipped to their house, I think more and more people are willing to try something and send it back if it's not exactly what they wanted.

We certainly don't see anything in the data, the complaints, the surveys or whatever that says there's any kind of structural problem, service problem.

In fact it's the reverse.

We think customers are increasingly happy with our service.

It's just kind of the trend of customer behavior there and it has been for awhile.

Next question, please?

Thank you.

Our next question comes from the line of Aaron Kessler with Piper Jaffray.

Please go ahead.

Hi, guys, just a couple questions.

First on the Ask business, can you give a sense of what the domestic growth versus international growth was and any verticals that were strong or weak in the quarter and also your comparison shopping business Pronto has been setting some decent share, any sense for how much has been added in the quarter or the growth rates and also how are you driving traffic, is it organic or is it more SVO and SVM that you're using to drive traffic for Pronto?

Thank you.

Yes, on the first question, we're getting good growth both domestically and internationally, both in the U.S.

and U K.

I think that we're getting higher quality growth and more proprietary growth on the domestic side of the business.

RPQ up substantially and monetization up substantially across the domestic business even aside from the new sponsored listings arrangement so I think in terms of what translates to the bottom line it's definitely skewed towards the U.S.

UK and other markets continue to be challenging for us.

Pronto drives most of its traffic via search engine marketing, not unlike other comparison shopping engines there is an increasing slug of users who are direct domain and come in but that business has gotten to scale.

It's about at breakeven now.

On an increasing revenue base, and we have a real business and now our goal is obviously to extract profit and cash from it, but it's a great service, continues to grow at very healthy rates, and should make money for us soon.

Great and do you have any ballpark estimates on the G&A when you do a spinoff how much extra G&A you would incur or it's too hard to say at this point?

Well, I think it's probably 5 million to $7 million per each of the four companies, take the lower end of the range for the smaller companies and the higher end of the range for the bigger of the four, and that as we said earlier, that times four, 28, $30 million plus will come out of the corporate that remains with new IAC.

Great, thank you.

Thank you, next question, please?

Our next question comes from the line of Ross Sandler had with RBC.

Thanks, guys, just a couple of questions on the media and advertising segment.

If I look back at prior quarters that trended financial tables I think there may have been a bit of a restatement with the percentages between network and proprietary.

Did something shift from one or the other?

And then I have one follow-up, thanks.

Let me check on that.

I don't think anything major.

I think the significant increase in network is because of our new arrangements as I outlined earlier, but either I'll get the answer or we can follow-up off line.

I'm not sure which historical quarter you're looking at.

What's the follow-up?

Okay, and then I'm looking at the growth rate between on the proprietary side went from somewhere in the 20% range for 2007 up to about 40% in 1Q 2008.

Is it fair to characterize most of that jump is the Google renegotiation or is there some--?

No, no.

The media and advertising and the answer, I just found the answer to your first question.

The first question is we included now Citysearch in that proprietary network split so it's a combined media and advertising segment split along those two measurements.

The media and advertising revenue was up 28% in the quarter and more than half of that growth was not related or less than half of the growth was related to that new arrangement, so we're getting very good growth at Citysearch, we're getting good growth at Evite, we're getting good growth in our Fun Web businesses, in monetization generally and the trends across the media and advertising segment are very healthy, even aside from that arrangement although the arrangement obviously helps us to a great degree.

Next question, please?

Our next question comes from the line of Scott Kessler with Standard & Poors Equity.

Thanks very much.

I guess this was kind of detailed earlier, but can you speak to whether or not you would expect any potential additional challenges to the spinoff plan?

Obviously, one of the major, the major hurdle on the lawsuit has been resolved but is there anything out there that we may not be thinking about at this point that might possibly delay things to any extent?

Thanks a lot.

No.

We can't, whoever knows about some cataclysmic event but there's nothing in our process that I think is appears to us as if it would cause us delay.

Okay, great.

Thanks a lot.

You're welcome.

I think we'll do our last question, so let it come.

Thank you.

Our last question comes from the line of Heath Terry with Credit Suisse.

Please go ahead.

Great.

On the Match business, I was hoping you could kind of give us a little bit more depth in terms of what you're seeing in that industry in the category as a whole.

Is Match's flat revenue should we view that as share issue or is it just as more entrants come into the category or is it simply that the category itself isn't growing?

As best we can tell, it's largely a category issue.

I mean getting precise share data certainly as we look at the larger players we don't see big growth anywhere.

I don't think Yahoo!

is growing significantly,e-harmony, et cetera.

It's a funny business in that your addressable market is quite large but consumers tend to very much come in and out of the service.

A typical customer or user will come to Match, stay for a couple months, maybe two, maybe four, if they're successful or they're not successful in either case they leave, frequently more than half the time they come back and I think the same pattern is true for other competitors and so a significant percentage of kind of the addressable market use the service in a given period but getting that stickiness, getting people to make a kind of perpetual part of that behavior has not yet happened and so if you look at this business over the last I think it's 11 years now that we've been in it, there's always been these kind of plateaus and then reinvigorated growth as we figured out a way to kind of break through that.

We have not yet as I said earlier figured out that one.

As it relates to the domestic market, at the same time we're over 30% international and have good growth there.

So we have to keep innovating.

We're confident we'll find that at the same time we have the number four brand now as well, via Chemistry so it's a very solid business but clearly we need to reinvigorate that core Match business domestically while other things are doing fine.

No entrant has come in that has changed so to speak leadership or characteristics of leadership.

There are lots of new niche entrants that have come in, but certainly nothing has taken away from Match's leadership and Match's introduction of a new site that's already kind of up there, but puts Match in a very good position for the future so anyway, thank you.

That's it for this quarter.

Hopefully the next time, we are on this call we will be on this call split five ways.

We're imminently about to.

That's true, Tom.

We should not overpromise in that.

You never can tell about that.

We do think it will be some time as we said in the third quarter, hopefully the earliest part but whatever it is some time around that time, this will be a divided nation.

So, but a stronger one.

So thank you all for participating and we'll talk with you at the next quarterly call.

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