Match Group Inc (MTCH) 2010 Q4 法說會逐字稿

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  • Operator

  • Please stand by for real-time transcript.

  • Good morning.

  • My name is Steve.

  • I will be your conference operator today.

  • At this time, I would like to welcome everyone to the IAC Q4 2010 earnings call.

  • All lines have been placed on mute to prevent any background noise.

  • After the speakers' remarks there will be a question-and-answer session.

  • (Operator Instructions)Thank you.

  • Mr.

  • Tom McInerney, CFO, you may begin.

  • Thomas McInerney - EVP and CFO

  • Thank you, operator, and everyone for joining us this morning for Q4 2010 earnings call.

  • Barry and Greg will make some brief remarks, after which I will come back to quickly highlight some issues.

  • But first I will remind you 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 forth in our Q4 2010 press release and our periodic reports filed with the SEC.

  • We'll also discuss certain non-GAAP measures and I refer to you our press release in the Investor Relations section of our website for all comparable GAAP measures and full reconciliations.

  • With that I'll turn it first to Barry.

  • Barry Diller - Chairman and CEO

  • Thank you, Tom.

  • Good morning.

  • I really am going to speak very briefly, but as befits the fact that we have named a, as I think you all know, new CEO for the company.

  • I'm not exactly going into the rocking chair, but that is a significant change in the company.

  • I expect that we will become much more focused, aggressive, ambitious than we've been before, and we do that on top of or alongside very strong earnings that have been consistent now over a good many quarters - continues with this last quarter.

  • We're optimistic about this 11 year, and I think, again, with Greg Blatt as our CEO, I think that we will continue to make real progress.

  • And with that I turn it over to Mr.

  • Blatt.

  • Greg Blatt - EVP

  • Thanks, Barry.

  • I'd say I'm excited to be here with you all, but it's more accurate that I'm excited to be here actually talking to you since I've been sitting in this room, through these calls silently since I joined IAC in 2003.

  • Anyone who knows me understands that silence was extremely difficult for me.As you may know, I served as general counsel at IAC for many years.

  • During that time I became involved in general corporate management, mergers and acquisitions strategy, human resources.

  • After our last round of spin-offs in 2008, I headed to Dallas to run our various on-line dating businesses, then in December took the IAC CEO role.

  • Given our multi- business structure, I'd like to think the experience both in corporate management and operating business management gives me a great perspective from which to operate and drive the entire enterprise going forward.

  • While at Match, I never fully lost touch with what was going on throughout the rest of IAC but the company has evolved a lot during that time.So now I'm digging in trying to get a deep understanding of where the growth levers are and how best to exploit them.

  • So far I see lots of opportunities, of course a few challenges, and I couldn't be more excited about tackling all of them.

  • I'm not going to give a state of the union today, maybe next time, but I thought it worth calling out a few things.First and foremost, I'm really struck by how much our search business has evolved from what was an ask-centric business, designed to compete head on with Google, to a business with multiple brands, great and evolving creative assets and real marketing expertise across a wide range of on-line distribution channels.

  • We compete now based on our ability to meet a variety of distinct consumer needs, better than the broader based search engines, primarily through nimbleness and product creation and service to our distribution partners.

  • Over time we expect to generate significant revenue streams from these brands beyond search, such as subscription and micro payments from the user base.

  • It's obviously not a simple business and there's real competition, but it feels like a different world today than did it two years ago when we were trying to compete head on.

  • By refocusing away from the center, we think we've expanded our real opportunities significantly.

  • We've got great scale, potential coming off a record year, we're starting with a good base and real momentum.

  • And that's not even mentioning CityGrid, which is playing a whole different game, than it was two years ago.

  • Second, I can't finally talk to you all and not call out what a great business Match is, so, it's a great business.

  • We just completed a second straight outstanding year.

  • Not just in revenue and OIBA growth, which speak for themselves, but our products are better, our consumer proposition is stronger, our community is deeper and our marketing sharper and more efficient.

  • Additionally, we've got a great team in place led by industry veterans Mandy Ginsberg, running Match and Chemistry, and Josh Meyers running People Media.

  • And now that I've gotten out of their way, I think the fun will really start there.

  • In short, the machine is humming.

  • The market continues to be under penetrated.More and more people will meet each other on-line.

  • We invest more in product and evolving technologies, in staying out in front than anyone else.

  • And we're uniquely positioned to continue to drive category growth and to benefit from it.

  • An example is our announcement today of our OkCupid acquisition, a great site that is helping to grow the category.

  • And we've got more great product rollouts coming down the pike.

  • We're going to satisfy people's varied on-line meeting needs better then anyone else, and I don't see this stopping.

  • We're the original social network, and like every social network Match gets stronger with scale.

  • More to come during our Q1 results call as I dig deeper into these and our earlier stage operations, but let me close by acknowledging that I'm taking over at a time when things are going great.

  • My general objective is to maintain momentum while pulling the right levers on future opportunity to ensure we're driving real shareholder returns well into the future.

  • With that, back to Tom.

  • Barry Diller - Chairman and CEO

  • Well, wait a minute, sorry.

  • You know, you mentioned, OkCupid, which comes out in a separate release, so why don't you give everybody just a little [pre-seal] why you wanted to acquire it and what it will mean and whatever else you want to say, to give some texture to it before we get into any further details.

  • Greg Blatt - EVP

  • Sure thing.

  • We think this is a huge category.

  • It's meeting a fundamental need, which is to meet people, and we think more and more people are going to meet on-line.

  • We don't think this is a winner-take-all category.

  • We think that different people at different stages want different things.

  • A 26-year-old guy living in New York may want a very different thing than a 26-year-old guy living in Des Moines, and that 26-year-old guy living in New York may want something very different by the time he's 32.

  • This is a site that appeals to a younger demographic generally than our other sites.

  • We know that it's bringing people into the category, and we know that people who come into the category through advertising based sites often develop a real appetite for the broader, more sophisticated feature set that the subscription sites offer, and for the more committed communities which fundamentally change the experience.

  • So we think by operating all these models together, we think that we're going to help sustain and fuel growth across the various models.

  • There's real great inter-dependency there.

  • Barry Diller - Chairman and CEO

  • Okay.

  • Tom?

  • Thomas McInerney - EVP and CFO

  • Okay, thanks, Greg.

  • Just before we jump into Q and A, I will spend a few moments on some supplemental information as it relates to Q4 and looking forward.

  • In search, we continued as you see in the release to see strong top-line growth, very strong top-line growth, posting our highest revenue ever.

  • We saw good and balanced growth across our principal brands.

  • Margins were up nicely when adjusting for the $9.6 million restructuring charge at Ask.

  • And, excluding this charge, OIBA margin was approximately 18%, or 110 basis points better than the prior year.

  • We've said all along, kind of quarter after quarter, that our disciplined cost focus, coupled with good revenue growth should allow us plenty of margin opportunity in the business, and you see that coming through this quarter.

  • For the year in full, we're very pleased with the results.

  • Revenue was up 23% year-over-year, and OIBA was up 37%, even inclusive of that Q4 charge.

  • Obviously from here forward the comps are tougher, and these rates of growth would be difficult to sustain, but the Q1 trends are quite solid and we're optimistic, very optimistic, about a good 2011 in this business.

  • Match, as Greg said, had another very strong quarter, driven by many of the same fundamentals we saw in Q3, resulting in a 21% increase in core business subscribers with the Yahoo distribution arrangement contributing just 4% of that.

  • Just to remind you, we refer to Match.com, USChemistry.com, and the People Media sites as the core sites.

  • And this core accounts for virtually all of the profit of the overall business, hence we're focused on that metric.

  • This 21% Q4 sub growth comes after similar growth in Q3.

  • So, obviously our execution is outstanding.

  • And I hope this convinces you all of what we've always said, this business is far from mature, the opportunity is still substantial, and when we execute well, as we have been, we will grow at very attractive rates.

  • Profit followed revenue, with OIBA of 34% for the quarter, and 30% for the full year.

  • And, looking forward we expect fundamentals to remain quite good.

  • In Media & Other, we had numerous transact ional effects that not only impacted the current period but also the full-year results.

  • Each of Evite and Gifts.com, which went to Liberty in the exchange for stock and instant action which ceased operations were reclassified to discontinued operations for Q4 and all preceding quarters.

  • Results for The Daily Beast were fully consolidated for Q4 but will be accounted for on the equity income basis beginning now, basically the end of January, beginning of February, as the JV with Newsweek just closed.

  • The totality of these events, when you factor kind-of all of it through, should reduce losses in this segment materially for the full year 2011, although Q1 with the month of The Daily Beast and some seasonal effects, will still be negative roughly in line with previous quarters.

  • And finally, we made some significant strides in reducing our reducing our capitalization, you all know this, acquiring the 12.8 million shares during the quarter as part of the tax-free exchange with Liberty, and finished the year quite strong in terms of cash generation.

  • For the full year we generated more than $250 million in free cash flow, which I will remind you is an after-tax figure.

  • And we ended the year with just over $1.2 billion in net cash and marketable securities.

  • So with that operator, let's get to questions.

  • Barry Diller - Chairman and CEO

  • Tom, how much stock have we bought back?

  • Over the last, take it, three years.

  • Thomas McInerney - EVP and CFO

  • Since the spin-off, 68 million shares, which is roughly a third or more.

  • Barry Diller - Chairman and CEO

  • I thought it was 40 --

  • Thomas McInerney - EVP and CFO

  • Yes.

  • It's 40 on a gross basis.

  • It's a third net because we had some old warrants that get exercised, so I look at it both ways.

  • But obviously a very substantial amount of stock, but because we have generated such strong free cash flow from our operations and the sale of non core assets, we've still got the very substantial cash position, obviously despite how quickly we've been trying to give it back.

  • Barry Diller - Chairman and CEO

  • All right.

  • Let's go to questions.

  • Thank you.

  • Barry Diller - Chairman and CEO

  • (Operator Instructions) And your first question comes from the line of Justin Post with Bank of America/Merrill Lynch.

  • Your line is open.

  • Justin Post - Analyst

  • Great.

  • Can you talk about the search business, how the new deal might affect margins as far as the query results next year?

  • And then what percentage of queries is coming from tool bars, and what's your outlook for kind of partner ads as you look into next year?

  • Thank you.

  • Thomas McInerney - EVP and CFO

  • Justin, Tom.

  • I'm not sure what you're referring to in new deals.

  • Our existing arrangement with Google has two years left to run so there's no imminent change there.

  • And I think your second question was on kind of margins and the tool bar business and things like that.

  • I think, as I said on the last call, the tool bar business is a very attractive margin business for us.

  • It's as attractive as any of the proprietary sites we operate.

  • The cost structure is a bit different, how much is in marketing versus other elements of the cost structure, but it's -- we're reasonably agnostic where our volume comes from in the search business, whether it's via one of our tool bar brands or via one of the proprietary sites.

  • As long as we're growing revenue and controlling costs, you will see the kind of margin opportunity we saw in Q4.

  • Justin Post - Analyst

  • Thanks.

  • I was referring to the -- not the paid side but the organic side or the free search results.

  • I think you signed a new deal.

  • I'm just wondering if that's going to help margins as you look forward to the next two years?

  • Thomas McInerney - EVP and CFO

  • I'm not sure what you're referring to.

  • Justin Post - Analyst

  • Didn't you kind of disband the organic side of Ask --

  • Thomas McInerney - EVP and CFO

  • I'm sorry, in connection with the Ask restructuring, we basically coupled some of our in-house technology and supplemented with additional outsourced and outside technology.

  • It's a deminimus financial impact.

  • Justin Post - Analyst

  • Thank you.

  • Barry Diller - Chairman and CEO

  • Next question, please.

  • Operator

  • Your next question comes from the line of Ross Sandler from RBC Capital Markets.

  • Your line is open.

  • Ross Sandler - Analyst

  • Hey, guys, thanks for taking the question, and nice quarter.

  • I've got three quick questions.

  • So first, to follow up on the search business, can you talk about this big re-acceleration that you're seeing in the revenue growth?

  • I know in the release you commented on queries, RPQ, and improving click-through rate.

  • Can you give us a little bit more color about what you're doing differently?

  • Have you seen an inflection point in the tool bar business?

  • Just any kind of color on where that growth is coming from, and are there any kind of one time-ish things going on in search in the fourth quarter?

  • The second question is just on Match and Match margins.

  • So last quarter you had this big margin uptick.

  • There was some deferred revenue in there.

  • This quarter it's a little bit over 100 basis points.

  • So is the current margin improvement the right way to think about it for 2011 with the full impact of some of the partnerships you've signed?

  • And then the last one is just a follow-up on Match, but is the strategy with Singlesnet and OkCupid, is it to drive some of these free advertising driven businesses into up-selling them subscriptions, or is it just continue to kind of grow page views and ad impressions, or is the whole idea to convert them to paid?

  • Can you talk about the strategy with the free side?

  • Thomas McInerney - EVP and CFO

  • Sure.

  • On the search side, the growth rates were obviously higher than they had been earlier in Q10 on a quarter to quarter basis.

  • In this segment, five points of revenue growth is $10 million.

  • It's just not a huge sum of money.

  • So I think I've always said that the growth rates are going to jump around.

  • I don't think it's a turning point or an inflection, and this is the new normal of a high 20s% growth rate.

  • That would be very tough to sustain.

  • On the other hand, I don't think there was -- I know there wasn't any one-time items or unusual effects.

  • It was a quarter where across all our principal brands and lines, both on a proprietary side and the network side, we just had good execution, kind of a favorable environment.

  • It was largely volume-led, new partners coming in on the distributed tool bar side, new products being launched on the proprietary side, good -- starting to see some revenue contribution from the Citygrid business as well.

  • So it's just -- when things are working right, you can get to that kind of quarter.

  • There's nothing unusual.

  • On the other hand, I don't think it's necessarily a turning point or a new normal.

  • Greg Blatt - EVP

  • On Match margins, I will confess to you in my two years running Match the only time I ever thought about margin was on these earnings calls.

  • So it's certainly not the way we run the businesses, particularly because the nature of our business is such that every marketing dollar we spend is actually negative to margin in the current period.

  • So there's always this trade-off between spending on marketing and your margin in a given period.

  • That said, I think that barring discrete marketing initiatives, like we're marketing in Brazil, we could theoretically increase that marketing.

  • That would have a negative impact on margin.

  • Same in some of the other international territories.

  • In our core businesses we've got enough efficiencies going forward, that I think the margin improvement you've seen this year will continue, barring discrete activities by our own hand, which would be new product, marketing investments and really new territory marketing investments.

  • In terms of OkCupid and Singlesnet, I guess it's certainly true that, if given the choice between having a consumer sign up for Match and giving us X dollars a month and sign up for OkCupid and giving us X cents per month, we'd rather have them do Match, but it's not the way we're orchestrating the strategy around it.

  • We really do believe that these are not, in general, trade-offs, and that people in different stages of life at different moments want and are willing to do different things.

  • While I think there will be some cross-selling efforts and some other things, I don't -- we're not looking at it as a traffic acquisition play for our subscription sites.

  • We think this is an important part of the portfolio going forward that meets a specific need, and we think there will be synergies from it, frankly both ways.

  • We may well send people who come into some of our paid sites and aren't willing to pay back down in the other direction.

  • So we think there's a mutually beneficial sort of ecosystem that we're developing there.

  • Ross Sandler - Analyst

  • Thanks, guys.

  • Thomas McInerney - EVP and CFO

  • Thank you.

  • Barry Diller - Chairman and CEO

  • Next question, please.

  • Operator

  • Next question comes from the line of Mark Mahaney from Citi.

  • Your line is open.

  • Mark Mahaney - Analyst

  • Two questions.

  • On the search segment operating margins, is it scale and other factors that have finally brought those margins back up to a multi-year high, and do we extrapolate from this and assume that those margins can kind of slide north from here?

  • And then secondly, on the ServiceMagic business, that 2% year-over-year declines in service requests, maybe it seems odd, given where we are in the economic cycle, you think that these starting to pick back up perhaps or maybe it's a tough comps issue.

  • Is it a concern or not?

  • Do you need to do anything to address that and to re-accel-- or have those service requests grow next year or this year?

  • Thank you.

  • Thomas McInerney - EVP and CFO

  • Mark, the search margins, it's funny, you could almost echo Greg's comments on the Match side.

  • It's the kind of business where as long as you're reasonably tightly controlling your operating expenses, which we do, and obviously via the restructuring at Ask lowered them going forward as part of that action, then as long as you're getting good revenue growth you kind of can't help but see some margin opportunities.

  • So I do think there's margin opportunity.

  • We don't organize around it in the sense that we're always looking for products to invest in, new marketing channels to open, spend the marginal dollar which will yield positive earnings without -- we're mostly focused on OIBA growth, as opposed to percentage margin, but that said, when you get the revenue growth in these businesses, you tend to see margin lift, and I think that dynamic is intact.

  • On the ServiceMagic side, I guess I would say a couple things.

  • One is I would not overly focus on the 2% SR decline in the quarter.

  • This is a lead generation business at its core where you're bringing lots of consumers into the funnel, you are matching them up with service providers at price points and making revenue off of that.

  • It's a whole kind of economic equation.

  • What we really focus on is what's revenue growth less the marketing spend that we're putting out to try and drive those customers into the funnel.

  • That number was up about 10% in the quarter, so I don't think there was kind of a negative switch in the ServiceMagic in Q4 versus the rest of the year.

  • That said, the business has clearly not turned.

  • I think it's very consistent what we said throughout 2010, which is we've kind of leveled out and we're working very hard to improve it in a very difficult environment, but we're not yet ready to call a turn or a much more benign environment.

  • Mark Mahaney - Analyst

  • Thank you, Tom.

  • Thomas McInerney - EVP and CFO

  • Thank you.

  • Operator

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

  • Jeetil Patel - Analyst

  • Hey guys, a couple of questions.

  • First of all, for Greg, obviously you've come in and kind of looked at the business, not just from the Match and personal standpoint but broadly.

  • I guess maybe some thoughts about where you're spending incremental time as you look at 2011 in terms of growth potential opportunity, improving upon the business operations and the opportunity set.

  • Second, can you talk about Match and how it stacks up in the world of social media?

  • Is that an issue since we've heard from some investors that, that's been a bit of a concern of theirs?

  • Just maybe elaborate on how you fit into the broader framework of social media and Facebook, then a quick housekeeping question.

  • Greg Blatt - EVP

  • I look at the business -- obviously the personals business and the search business are the two big engines driving earnings right now.

  • And my big objective there is to not get in the way of current momentum but to make sure that we're pulling all the levers necessary to sustain that momentum long term, and we've got good management there, and I'm working with them, but I would say no revolution happening there.

  • I think we then have what I'd call a number of -- what I call sort of unvalued options within IAC.

  • Citygrid being one of them, Vimeo being one of them, ServiceMagic to some extent, being one of them.

  • Businesses that aren't significant contributors at the moment, but that I think have the potential to be major asset value contributors down the road.

  • I think there -- what we're trying to do is work with management, assess the opportunity, assess the right levels of investment and make sure that we're playing big enough.

  • And that's very much in play.

  • I think broader, what I would like to see is -- I was at Match for two years.

  • We sort of pursued a strategy which was I sort of call it my Scrabble strategy, which is you build off the board.

  • And we had Match, we saw opportunity that was adjacent to it.

  • We didn't make big sideways leaps, but we, through a series of relatively small but smart value creating acquisitions we were able to build and create value in a way that others wouldn't have been able to do.

  • I think one of the things I'm focused on is trying to align management and our structures and organizations to be looking at those things as well as driving their near term results.

  • So I think that's really my primary focus at the moment.

  • In terms of Match and social media, I mean, there's a lot of talk right now about some of these apps out there, and I won't mention any of them by name, but you have to be very careful of the numbers that you see.

  • These apps tout their users, but they use tactics that, a -- sort of, Match wouldn't use ever, and that Facebook -- many of them probably violate Facebook rules, and my instinct is, that if you asked 70% to 80% of the people who they tout as users, whether they were users of these apps, they wouldn't even know what the apps were because they engage in these viral sort of -- these quizlets that sucks people in and it makes them members without even knowing it.

  • I think you really have to dig deep beyond these stats that are out there.

  • Once more, these guys are buying traffic.

  • If you go on Facebook as a 42-year-old single male, interested in women -- that's the one experience I can tell you about precisely, you will see these ads all over the place, and basically what's happening is we've seen for years people come in to Facebook, they spend heavily for a few months, then it doesn't pay out, then there's a new group who comes in and pays heavily.

  • I worry about everything, because that's my job, but I don't think there is any evidence whatsoever that there are people out there making decisions about I want a date, I'm going to use one of these apps as opposed to using Match or one of our other sites, which is very different than OkCupid which is a real site, it delivers a real consumer experience for daters and is a real, I think, long-term sustained player in this area.

  • So I don't really think about it, no, Match is very involved in social media.

  • We're one of the biggest advertisers on it.

  • You probably know Facebook has made true virality, true viral growth, much more difficult on Facebook, than it was two or three years ago.

  • And I think frankly, in that world, we're actually better positioned than most to play on it long term.

  • Thomas McInerney - EVP and CFO

  • Hey, Jeetil, you had one housekeeping question you said?

  • Jeetil Patel - Analyst

  • Yes.

  • Did the Liberty transaction prohibit you from buying back stock in the quarter?

  • Thomas McInerney - EVP and CFO

  • No, I don't think so.

  • Barry Diller - Chairman and CEO

  • No.

  • I would just add one thing, which wasn't mentioned, which is our investments in media, just something I'm obviously directly involved in and interested in.

  • And while it doesn't take, and hasn't taken, big investment, not to say that if there was an opportunity we wouldn't be up for it, but we have, with Electus and with CollegeHumor and its development, we're making a lot of progress building a kind of, I'd say new-age production and distribution entity in these various program forms, some digital, some not.

  • It's not a big contributor.

  • It doesn't -- it takes some cash, but relatively little.

  • I think last year total investment was what, Tom, would you say?

  • Thomas McInerney - EVP and CFO

  • Single digit millions of dollars.

  • Barry Diller - Chairman and CEO

  • For all of the activities?

  • Thomas McInerney - EVP and CFO

  • Yes.

  • Barry Diller - Chairman and CEO

  • So it's not a cash drain, and it's -- but it's something that we're going to continue to build, and if we're successful, it will become a real part of the company.

  • So I just wanted to add that.

  • Thomas McInerney - EVP and CFO

  • Next question, please.

  • Operator

  • The next question comes from the line of Jason Helfstein from Oppenheimer and Company.

  • Your line is open.

  • Jason Helfstein - Analyst

  • Thanks.

  • Two questions.

  • The first on Citygrid, the second on share buy-back.

  • You guys referenced improvements at Citygrid, saying it's a whole different ball game from two years ago.Given that we've really seen a lot more attention on the local advertising space obvious well Google Groupon and we've seen pretty significant run-ups in other publicly traded stocks at a local place, or we'll put a deal mechanism in place, so how do you think Citygrid fits into that?

  • Do you expect to put more resources behind that to pursue that?

  • Or secondly, would you consider selling that to somebody who wants to value that sales force and those advertising relationships more than the market does?

  • And then secondly, on buybacks, if you add up the amount of stock you re-purchased, this year was about $900 million, which was obviously pretty significant, you're still sitting on a lot of cash.

  • How should we think about buybacks and the magnitude of buybacks going forward?

  • Thanks.

  • Greg Blatt - EVP

  • On our Citygrid, this is a business that I would probably guess, if it were not part of IAC would be getting far bigger valuation, based on the sort of environment that you're talking about, but within us at this moment in time, it's not getting the attention.

  • We're playing for something big here, and we think there's a real chance this comes out of the pack.

  • It's doing different things than Groupon and some of the others.

  • But it's trying to be the best at delivering real content rich advertising for merchants and getting them the best responsiveness, and we think that so far it's going great.

  • We're working on scaling it right now, and continuing to optimize it, and our hope is that it comes out of the next few months really singing.

  • It hasn't really contributed much to us financially yet, but it's starting to as we hit 2011, although that's not the measure by which we will judge it in the coming months.

  • It's really about creating an asset value that fits in with that general environment that you're talking about, and in terms of resources, it's getting what it needs.

  • It's certainly not resource constrained.

  • You know, you've got to build these sort of networks, and you've got to balance all sides of it, and it's not just about going fast, it's about getting it right.

  • And we feel very good about where we are at the moment.

  • Barry Diller - Chairman and CEO

  • On stock buybacks, as I think you know historically, we don't really predict it.

  • It's not in our interest.

  • We've been buyers of our stock for a very long period of time opportunistically.

  • We have, as the figures show, bought back a great deal and we will probably seek to continue to shrink the company.

  • The company's capitalization opportunistically, but we'll talk about it as we always do, which is we will tell you when the quarter just passed what we've purchased, and we don't predict the future.

  • Jason Helfstein - Analyst

  • A quick follow-up.

  • Can you disclose how many sales people Citygrid has today and how that compares to maybe two years ago?

  • Thomas McInerney - EVP and CFO

  • Yeah, it's got a few dozen direct sales, but the model Citygrid is very much focused on is being an ad network where it's working with major resellers, so it works, for example, with the major digital yellow page digital arms, and lots of other people that have big local sales forces so that the strategy we pursued was not to try and build a multi hundred, even thousand plus feet on the ground sales force, because we thought that was a too long and too difficult proposition, but to work with all the people that already have those sales forces on the ground, and take their advertisers into our network and distribute those ads, as Greg said, content rich with our own content augmentation, either on our own O&O properties, or on a publisher network that's now 300 plus.

  • It's in essence a local advertising network that is an alternative to Google.

  • It's something nobody else has.

  • If you talk to people in the local space, and we talk to everybody, I think everybody will tell you, it's a very good idea, and a very big opportunity.

  • It's certainly is like all networks, as Greg said, recall both sides of it, and it's tough to get it there, but the rewards are very rich if you do.

  • Jason Helfstein - Analyst

  • Thank you.

  • Thomas McInerney - EVP and CFO

  • Thank you.

  • Barry Diller - Chairman and CEO

  • Next question, please.

  • Operator

  • The next question comes from the line of Brian Fitzgerald from UBS.

  • Your line is open.

  • Brian Fitzgerald - Analyst

  • Thanks, guys.

  • Maybe a follow-up to Jason's questions and something both Greg and Tom you have talked to.

  • We've seen you're working with [Yex] in conjunction with Citygrid, and you're allowing these local businesses to add marketing messages or promos or special offers to the listing info that shows throughout Citygrid.

  • Any -- and I know it's early days but any color in terms of traction or interest around that particular partnership?

  • Thomas McInerney - EVP and CFO

  • I can't speak to the details of Yex specifically other than I know that we're scaling with them.

  • I think it's off of a low base, not a big partner for us today, but it's something, they have a pretty unique product in the local space, and I think we're optimistic we can grow our business with it.

  • I'd say more generally what you're describing in kind of hundreds of permutations is a good example of what we're trying to do where, we're mixing and matching our content -- content from our re-seller partners, content that may be third party sourced, and importantly, calls to action, whether it's a deal, print a menu, make a phone call, anything that would allow an advertiser to see the proverbial loop being closed, i.e., the consumer took action, which means they very much engaged with the ad, and then distributing that all over the web.

  • It's a highly valuable form of advertising, and you think about it, it's much more rich than simple blue links, and I think this is where local is going generally, not just us, but others.

  • And we've got a good head start in building this network.

  • Obviously there's hundreds of competitors playing lots of different angles, but nobody amassing kind of the network dynamic on both sides of the equation that we are.

  • Brian Fitzgerald - Analyst

  • Great, thanks.

  • Thomas McInerney - EVP and CFO

  • Thank you.

  • Operator

  • Your next question comes from the line of John Blackledge from Credit Suisse.

  • Your line is open.

  • John Blackledge, your line is open.

  • Barry Diller - Chairman and CEO

  • Let's move on.

  • Thomas McInerney - EVP and CFO

  • Why don't we jump to the next question, operator.

  • Operator

  • Next question comes from Douglas Anmuth from Barclays Capital.

  • Your line is open.

  • Douglas Anmuth - Analyst

  • Great.

  • Thanks for taking the questions.

  • Just wanted to ask two things.

  • First, Greg, was hoping you could just comment on the on-line dating competitive landscape, and maybe just more so from the pure play perspective, from the companies that you've been competing with there for several years, and curious to get your sense on what the overall market might be growing in that space, and obviously how much you're taking share there in your opinion?

  • Secondly, I know this comes up all the time now, obviously with the transition to mobile, but how are tool bars -- how is this business going to migrate as more searches are going on-line?

  • You've got Yahoo, for example, the 20% of their searches overall coming from mobile.

  • As that happens, how does it impact tool bars?

  • Thanks.

  • Greg Blatt - EVP

  • On the competitive landscape, it's a hard one, because we're really the only major player that is public, and touts numbers.

  • And frankly, many of our competitors should tout numbers that I think are tough to parse through and really get a sense of what they really mean underneath, because they're not subject to SEC scrutiny of honesty.

  • So it's hard for me to know.

  • You see lots of numbers.

  • We're growing.

  • We also see lots of competition still in the space, I would say.

  • You look at the television air waves, and there are a lot of people coming in, spending dollars.

  • So I think it's still vibrant.

  • There are always in any given moment winners and losers, and I see people doing a little better and doing a little worse, but I don't see any significant change in sort of the intensity of the competition we're facing from the traditional players on both new and old, and obviously there are lots of people coming in with, quote unquote, new models trying to come around.

  • So I think it's a very competitive space.

  • We're growing.

  • I think the category is growing.

  • It's very hard for me to tell you at what pace the overall category is growing.

  • In terms of tool bars and mobile, I think, you know, we compete in a number of different ways.

  • I think one of the big aspects of our tool bars is they are the way we monetize a number of products.

  • And I think as mobile adoption and tablet adoption comes, we're going to be monetizing those products in different ways.

  • Micro payments is a big one, subscriptions is a big one, both of which are much easier in the mobile and tablet landscape where there are built-in payment mechanisms and everything so that evolution will happen over time.

  • I think we'll adapt with it.

  • I think that as that happens, you will see that facilitating a revenue mix shift from search in a bunch of our products to these other forms.

  • Thomas McInerney - EVP and CFO

  • I would just add that I think it's far from conclusive that as search on those types of devices grows, that it's cannibalistic of the alternative.

  • There's a good case it could be incremental as you're walking around town or in a different part of your house or whatever it may be.

  • We certainly haven't seen any evidence as you can see from our results that it's cannibalistic.

  • It may just grow the pie.

  • Barry Diller - Chairman and CEO

  • Next question, please.

  • Operator

  • The next question comes from the line of Kerry Rice from Wedbush Securities.

  • Your line is open.

  • Kerry Rice - Analyst

  • Thanks.

  • Tom, I was hoping that maybe you could help me walk back through.

  • You obviously give adjusted EPS in the press release, but as you mentioned earlier, you had numerous one-time items, and you mentioned the restructuring in Ask.

  • If we think about kind of an apples-to-apples comparison what other one-time items do we need to back out if we want to compare this kind of to last year's adjusted EBIT -- EPS?

  • Thomas McInerney - EVP and CFO

  • Well, let's see, I'm not sure I can give this in precision on the call, but we had $14.8 million of restructuring and transaction expenses that was the combination of the Ask charge, I think I mentioned in that my script, of $9.6 million, then we had a little over $5 million of transaction expenses related to the Liberty transaction, and that would have hit the adjusted EPS figure on a not fully tax affected, because some of those items are not deductible, so $14.8 million probably translates to $11 million, divided by the share count would have been the add-back there.

  • I think in addition to that, we had a $4.5 million write-down of a financial investment we had in connection with our ServiceMagic business, and those would be the principal ones that were affecting adjusted EPS.

  • So when you do all that, you will get, because of the share count reduction, as a result of the buybacks and things like that, you're going to get adjusted EPS growth that exceeds, in fact, the OIBA growth for the quarter, but we can work with you off-line on that if you want to go through it in detail.

  • Kerry Rice - Analyst

  • Okay.

  • Then, kind of a clarification, but maybe looking forward a little bit, thinking about the different segments and OIBA levels, obviously with the add-back of $9.6 million restructuring, as you mentioned earlier, OIBA for search was much higher than it has been in awhile.

  • Is that a new level we should expect going forward, especially with what we're seeing with the tool bar growth, or should we see that come back down?

  • I don't know if you can kind of highlight similarly with media & other and the core as you have those one-time items what we should expect from OIBA.

  • Barry Diller - Chairman and CEO

  • I suggest maybe you do this offline.

  • Kerry Rice - Analyst

  • Okay.

  • One final question then.

  • You mentioned social media.

  • I think you guys also are doing some work or kind of experimenting with content farms or doing some of that.

  • Can you talk a little bit about what you're doing there?

  • Barry Diller - Chairman and CEO

  • I don't know what you're --

  • Thomas McInerney - EVP and CFO

  • We're not sure what you're referring to.

  • Greg Blatt - EVP

  • Are you referring to Pronto?

  • Kerry Rice - Analyst

  • Yes.

  • Thomas McInerney - EVP and CFO

  • We have a nascent effort as part of a growth initiative in our Pronto shopping search business to try and, we have a particular take, I guess I would call it, let's call it the demand model, since we all know what we're talking about, but it's small and nascent.

  • It doesn't rise at all to the level of this conversation for the moment.

  • Obviously if there is something there, we'll scale it and talk about it but it's a little experiment we have going on.

  • Kerry Rice - Analyst

  • Okay.

  • Thank you.

  • Barry Diller - Chairman and CEO

  • Thank you.

  • Next call, please.

  • Next question, please.

  • Operator

  • Next question comes from the line of Mark May from Needham & Company.

  • Your line is open.

  • Mark May, your line is open.

  • Barry Diller - Chairman and CEO

  • Let's do one more question.

  • Operator

  • Your last question comes from the line of Jim Friedland from Cowen and Company.

  • James (Jim) Friedland - Analyst

  • Thanks.

  • Just a couple of housekeeping questions.

  • On corporate overhead that's been trending down if we adjust out some of the one-time items over the past couple years, should we expect that trend to continue?

  • And then on tax rate and working capital, you guys have been generating cash, a nice amount of cash from working capital over the past couple of years, and it seems like it may be due to tax benefits.

  • Do you expect that trend to continue, and can you give us an idea of what a normalized cash tax rate might look like this year?

  • Thanks.

  • Thomas McInerney - EVP and CFO

  • Yes.

  • I think we're in the mid-50s on corporate.

  • I don't think it's for the moment, and there may be future opportunities, but for the moment, not trending down further off of that normalized or adjusted rate you referred to (inaudible).

  • I think it should be flattish.

  • The cash tax is, on working capital, the dynamics of the working capital business are search is essentially a zero working cap business, and Match is essentially a positive working cap business, since you get paid in advance of revenue recognition.

  • So I think those trends will generally sustain themselves, whether it's to the magnitude and any given quarter they can vary but nothing is fundamentally changed there.

  • And on the tax side, it's the hardest to predict because you get into timing of various deduction items and things like that.

  • I think in the trailing eight quarters we generated free cash flow, which exceeded our OIBA cumulatively by a good amount.

  • I don't think that's a normal state of affairs going forward.

  • On the other hand I think it will be well less than a 35% to 40% statutory rate.

  • So maybe somewhere in between, 75% to 80% free cash flow to OIBA type ratio with movements in any given quarter.

  • James (Jim) Friedland - Analyst

  • Okay, that's really helpful.

  • Thanks a lot.

  • Thomas McInerney - EVP and CFO

  • You're welcome.

  • Barry Diller - Chairman and CEO

  • All right.

  • Well, thank you all, and we will see you next quarter, and when we'll report the beginnings of this year.

  • We thank you for your attention.

  • Good day.

  • Operator

  • Ladies and gentlemen, this concludes today's conference call.

  • You may now disconnect.