Match Group Inc (MTCH) 2012 Q2 法說會逐字稿

Good morning.

At this time I would like to welcome everyone to the IAC second quarter conference call.

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

After the speaker's remarks, there will be a question-and-answer session.

(Operator Instructions) Thank you.

Jeff Kip, CFO, you may begin your conference.

Thanks, good morning, everyone.

Welcome to our second quarter 2012 earnings call.

Our Chairman, Barry Diller, and our CEO, Greg Blatt, will make some brief remarks, after which I'll return with some detail on each of our businesses.

Then we'll go to Q&A.

But first I'll read to you the standard Safe Harbor language.

Let me remind you that 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 second quarter 2012 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 in the Investor Relations section of our website for all comparable GAAP measures and full reconciliations.

With that, I'll turn it over to Barry.

Thank you.

Good morning.

The turmoil this morning in so many particularly tack, so to speak, surprises.

Sorry but we're so consistently [erringly] maybe, but consistently, showing not only growth in our businesses but also the bromide of returning capital to shareholders with us is real and also very consistent.

Since 2005 we bought back 50% of our stock.

In this quarter we're, we bought back 2.3 million and year-to-date 9 million.

So it would be hard to say, this is not hard to say, it just simply is consistent repatriation.

In addition today, we've announced that we are increasing our dividend -- quarterly dividend from $0.12 to $0.24 which is a doubling, which has a current yield of about 2% which is also again consistent.

We felt some time ago that companies that had certainly not given up growth but had very strong balance sheets, very strong cash flow, should pay a current dividend to shareholders.

And we're kind of in a way catching up this one-time doubling.

I would not look to see it in future years, necessarily, certain quarters or years.

But I would hope that over time we would be increasing our dividend.

So, I do underline this consistency, because I think that particularly for a Company that has some complexity, this is more than one business that we operate, though close to 90% of our revenue comes from advertising and subscriptions.

But we do have some complexity, and I think that the obligation within that complexity is that we treat capital extremely carefully, which I think we've demonstrated over a fairly long period of time.

So with that, Mr. Blatt.

Thanks, Barry.

I'm just going to comment on the thinking behind some of the segment changes this quarter and then let Jeff take you deeper into the numbers.

Certainly, no surprise that there's been a clamor to understand our search business better.

The change to search and applications and the related changes in disclosure, I think better reflect how we think about the business and hopefully set the framework for a better understanding by all of you as we go.

So I thought I'd take a couple minutes just to lay out generally how we think about it and why that name best reflects.

At the core of this segment is Ask.com.

Ask is about running a search engine and increasingly about adding Q&A content around our search results in a variety of categories that really help provide in those categories a unique differentiated experience from most of the others in the market.

After that, it's about marketing Ask, both online and offline, and distributing it, which happens primarily through our applications group.

The applications portion of this segment creates a variety of downloadable applications which we market directly to consumers, our B2C business, or distribute through third party application developers, our B2B business.

In the B2B business, the applications we distribute are mostly search-based applications and they get offered to consumers while they're downloading applications of the third parties we made distribution deals with.

A good example is if somebody is updating their JAVA software, they will be offered the opportunity to also download an Ask Toolbar at the same time.

Our B2C business markets our own applications directly to consumers through a variety of online methods.

And these, these applications generally have a mix of search and non-search features.

Television Fanatic is an example, which not only provides an easy access to television viewing online but also enables search directly on the consumers web browser.

The search and application segment is a single business.

We run it under common management and the vast majority of revenue is search-based revenue.

Nonetheless the creation and distribution of applications really is a distinct skill set in a huge market.

It's created large and profitable distribution opportunities for our search business but it's also started to lead to non-search revenue which we hope to increase over time.

So to both understand the growth characteristics of the search business and the potential for non-search revenue we thought it made sense -- we thought it makes sense to break them out separately.

As for the separation of media and other, this is really more administrative.

We have a bunch of businesses that are media businesses and a number of businesses that aren't and we just decided to provide greater transparency.

We could have gone the other way, but we thought it was more helpful to lay it out this way and we think better reflects the way we think about it and manage it.

Jeff.

Thanks, Greg.

Again, this was another great quarter for IAC with consolidated revenue and OIBA up 40% and 48%, respectively.

Further, our consolidated OIBA margin expanded 100 basis points in the quarter, our sixth consecutive quarter of overall OIBA margin expansion.

Let me now offer a few comments on financial performance at each segment.

Starting with search and applications and then Barry, Greg and I will take questions.

Search and application segment once again, performed extremely well in the second quarter with revenue in OIBA up 46% and 47%, respectively, and margins flat for the prior year, consistent with our expectations on the last call.

You'll note that we've changed our disclosure metrics for the segment to revenue and queries with attribution between websites and applications.

We're aware that this change leaves us now unfortunately with three labels; search and applications, websites and applications, but we thought it necessary for clarity.

Our queries and revenue come primarily from search-based applications, so it's difficult to pull apart search from applications for those metrics.

But they all either come as a result of someone having downloaded an application, or from someone having gone to a website without the involvement of an application, so we believe that showing the relative breakdown between the two sources is helpful.

Revenue from websites grew 44% in the quarter.

Websites queries are up 66% year-on-year, driven by our marketing efforts domestically and internationally.

Overall revenue for websites is growing more slowly than queries, however, because first last year's numbers include revenue from the Direct Sponsored listings business we sold in the fourth quarter of 2011.

And secondly, revenue at Pronto is flat year-over-year.

Revenue at the Dictionary website grew only modestly versus the prior year, and we exclude both Pronto and Dictionary from our queries metric.

Applications queries grew 26%, while monetization also improved versus the prior year, with revenue for the quarter up 49%.

Looking forward to the second half year, we now project greater search and applications revenue growth than we previously expected, with modest sequential growth through the back half of the year.

In terms of margin, we now expect the trends we've seen through the first half of the year to continue with OIBA margin in the segment roughly flat through the prior year.

Moving onto our Match segment.

Our core Match businesses; Match, People Media and Chemistry, continue to grow with 12% revenue growth in the quarter.

The second quarter was also our ninth consecutive quarter of year-on-year double-digit subscriber growth in the core businesses.

Our revenue growth slowed modestly from the first quarter, in large part because we cut back unprofitable marketing on certain properties and delayed marketing spend on others to coincide with new product initiatives.

We're hopeful, however, that these new initiatives will strengthen that growth, going forward.

Developing revenues decreased in the quarter but that's really the result of the reduced marketing of Singlesnet, which masked real revenue growth at OkCupid and in Canada.

Meetic remains on track with the objectives Greg has laid out on previous calls with full year revenue expected to be down mid single-digits and full year EBITDA expected to be flattish to last year on a same currency basis, excluding acquisition-related accounting impacts.

For the remainder of year we expect overall Match revenue growth to continue at approximately its current rate and we also expect modest margin expansion year-on-year.

Our local segment grew revenue modestly and OIBA more than 20% in the second quarter.

Revenue growth was lower than expected as we pulled back inefficient marketing dollars.

And we expect similarly modest revenue growth and lower but still double-digits OIBA growth in the third quarter with a lower revenue expectations created again by our efforts to optimize our marketing.

Finally, Media and other, as we mentioned, has now been separated into two segments to group the businesses together the way we think about and manage them internally.

Media includes Electus and Vimeo, both of which saw approximately double or more revenue growth -- revenue versus the prior period a year ago, as well as CollegeHumor, Notional and DailyBurn.

Media now also includes Newsweek The Daily Beast, given our consolidation of that business at the end of the May.

Looking forward to the remainder of the year, we expect top line growth in the segment to continue, driven primarily by Electus and Vimeo, revenue will further increase year-over-year from the addition of Newsweek The Daily Beast.

We also now expect an OIBA loss for this segment in the range of $20 million to $25 million for the second half of the year, with a majority of the OIBA loss coming in the third quarter, given both expanded investment across our Media businesses and the consolidation of Newsweek The Daily Beast.

Finally, in Other, which includes Shoebuy as well as some of our early stage investments like Hatch Labs and High Line Ventures, will continue to invest with second half loses approximating first half results.

With that, we'll take your questions.

Operator?

Do we have an operator?

Pardon me, your first question comes from the line of Mark Mahaney of Citi.

Your line is open.

Thank you.

Thanks for the greater disclosure by the way in the Search and Application segments.

So could you just go through the why as to why your outlook for the search revenue in the back half of the year may have changed from flattish to -- sequentially, to a little bit of growth?

And then, just through those margins it looks Iike you're guiding to margins in the back half of the year may be down a little bit from the first half of the year, but I know flattish year over year.

Is that just the normal seasonality of the investments in the business?

Is there any particular reason to think that low 20%, 21% isn't the right kind of margin level for the business long term?

Thank you.

Hi, Mark.

Look, I think the reason for just the increased outlook is just performance.

We grow this business through launching new products -- developing and launching new products in the Application side and new distribution arrangements.

And on the Website side, we do it through continuing to produce more differentiated Q&A content and finding great ways to market it.

And momentum has been good.

And, and the pace has picked up, so it's really nothing more than that.

This is a business of discrete decisions and outcomes sort of over and over again, and there is really no magic in it; it's just we've been able to do a little better than we'd thought.

On the margin thing, I'll let Jeff speak to the specifics.

But, in general, again, our margins in this business are a series of discrete decisions - - we're increasing marketing spend here, we're investing in a new product there, and it bounces around a little bit.

So, I don't think there's any particular trend; it's going one way or the other, and it will bounce around a little bit within a range.

But, Jeff, if you want to further elaborate on that range or the back half of the year, please do.

Yes, I really think Greg covered most of it on a very simple level.

We're increasing some investment in both online and offline marketing through the back half of the year.

I don't think your 20% to 21% number is a bad number; if you look at sort of the trend line over the last several quarters, that's about the middle.

And essentially with our -- with moving our marketing efforts you're going to see it move around a little bit, it's not really a seasonality as much as it is, as Greg said, a series of discrete decisions.

Next question.

Thank you, Greg.

Thank you, Jeff.

Operator Your next question comes from the line of Michael Graham of Canaccord.

Your line is open.

Hi.

Good morning.

Thank you.

Just on the buybacks and the dividends, it's great that you increased the dividend.

Could you just give us your updated thinking on how much cash you think is the right amount to keep on hand?

And how you're thinking about your preference for dividends or repurchases in the future?

And then, as another question, just on Meetic, it seems like things are starting to stabilize there.

You've got another quarter under your belt, so can you give us your updated thinking on when we might expect to see margins in Meetic start to get closer to what you see in the US?

Thanks.

On capitalization I - - we kind of think, and I say it that way because it's a bit of a range, but we'd like to have $500 million to $750 million of cash, readily available cash, on hand.

And we tend to review that, probably every few months.

And, actually, in a way, we've reduced -- as we've had consistent cash flow over such a period of time -- we've kind of revised that figure somewhat downward.

We may continue to do so, though we'll never get into a situation where we don't have net cash -- that means relatively little debt.

We have almost no debt.

Only debt we have is a financing for the building of our headquarters, which totals about, I don't know, $80 million or $90 million at this stage.

So, we're never going to be in a position where we're, so to speak, cash-hungry.

As far as increasing dividends, I said it earlier -- we've done a solid increase today, as I said, more of a catch-up; and we'll look to increase it, probably on an annual basis as we proceed.

We'll also continue, opportunistically, to purchase stock in the Company, for which we have also -- I'm going to be really bromidic today, so I'm sorry -- consistent over, now, ten years.

So, Greg, you want to answer Meetic?

Yes.

I think -- let me step back and sort of reiterate what the objectives were for the year, because this all gets lost in the margin conversation, I think, on Meetic.

Which I understand why it's important from sort of a modeling perspective but it's really not the way we think about the business.

Which is, last year we lost over 120,000 PMC in that business, or almost 15% of the business.

The goal coming in this year was to fix some key internal things, principally conversion, re-subscription rates and ROI and marketing.

The result of that has been a big shift in sort of how much marketing happens and where that marketing happens.

So, big decline in marketing is what's led to a - - what Jeff laid out, which would be a decline in revenue for the year and flattish EBITDA with, most importantly, the beginning of subscriber growth again.

We will grow subscribers this year after having lost significant subscribers last year.

The operating plan is onto ahead of schedule.

We have moved the metrics that we have set out to move meaningfully.

But the thing about this business is that, this year we expanded margin by decreasing revenue and marketing.

You can do that for a little bit, but pretty soon you don't have a business anymore.

So, I don't think of this as a margin expansion story in the near term, which I've said sort of multiple times.

I think what I would expect next year, if things go according to plan, is that there will be profit growth next year.

But there will be more revenue growth, which invariably means margin contraction, and there will be even more subscriber growth, which leads to future growth.

This is a business where marketing is, by definition, margin negative in any given period.

In any business where you recognize revenue over a long period of time, but cost of acquisition immediately, that's the dynamic.

And, the first half of the year, we cut back marketing meaningfully because the metrics weren't good enough to support it.

Now that the metrics are getting good and our marketing is becoming more profitable we're starting to increase it, and we hope that happens over time.

So, I don't think it's a margin expansion story, it's a profit growth story.

In terms of approaching the US, again, I've said from the beginning, Meetic will not have the margins that the US business has because of the multi-country nature, there's certain inefficiencies in it.

But, I would think that it will approach, over time, sort of the overall Match business, which includes Match US, at very, very high margins and then other businesses within the portfolio at lower margins.

So, in the long term, I think you can think about that; but, short term, I don't think of this as a margin expansion story at all.

It's a growth story.

Next question, please?

Your next question comes from the line of Jason Helfstein of Oppenheimer.

Your line is open.

Thank you.

I've got two questions.

Just one on Search and one on Newsweek Daily Beast.

So I think some people may have been positively surprised just about the revenue growth spread between on applications versus queries.

So can you just talk a bit more - - how you're able to generate 49% revenue growth on 26% query growth.

And, obviously, there are some things that are missing from that query such as downloadable down fees and I think some B2B revenue.

Can you just go into a bit more detail about that?

And then my second question, Barry, can you just give us your sense of the outlook for Newsweek and Daily Beast?

Clearly there's a whole lot more expenses now you're taking in with the consolidation.

Is there a kind of a plan B to make it perhaps a lighter asset like an online-only business, and kind of at what point would you draw that line in the sand?

Thanks.

So I'll take your Applications question.

You saw, effectively, higher monetization, there's actually not that much excluded between queries and revenues on the Applications side.

But, at the core, it represents both improved optimization of the search results and the monetization there rolling through the business, particularly on the B2B side and mix on the B2B side where we've had some lower RPQ partners roll out and higher RPQ partners come in and grow over the last 12 months or so.

And so it's more a mix issue and a optimization issue than anything else.

And it's great.

Newsweek, Daily Beast.

Yes, the consolidation does put it squarely on our heads.

We knew this really shortly after Sidney Harman died, but -- that the indication was, though it wasn't any kind of absolute, nor is it an absolute today, that the Harman family didn't think that they were going to contribute to the losses in the business.

And, neither, by the way, are we going to contribute to the losses of the business as they have been this year.

Our investment next year will be considerably less than it is this year.

The brand Newsweek, though, is much better, much stronger than it was when we acquired it.

And probably, over the last three, four years, there has been a true improvement in the book.

Tina Brown and her editorial staff have done a superb job.

And Newsweek around the world, in terms of the events that we do for which we have quite large demand, and events are a profitable business for us, in many places in and outside the United States.

So the brand is good.

What is the problem?

The problem is in manufacturing, producing a weekly news magazine, and that has to be solved.

It's going -- every [company's] going to face the same problem, other than luxury brands, over a period of time, because advertising in this category is entirely elective.

And the transition will happen, I believe.

I'm not saying it will happen totally, but the transition to online from hard print will take place.

We're examining all of our options.

Our plan is that by September/October and certainly firmly plan in place for next year is going to be different than it is this year.

I can't tell you in what ways it will be different, but it will be different.

And just a quick follow-up, Jeff.

Can you just tell us what the revenue and OIBA impact of Newsweek was of the consolidation on the quarter, or maybe just back it out for us?

We know what the organic growth was Media, excluding Newsweek?

That's not something we disclosed in the release, so - -

Okay.

Thank you.

Next question, please?

Your next question comes from the line of Nat Schindler of Bank of America.

Your line is open.

Yes.

Hello.

Thank you for the additional disclosure in Search, but it begs a question, can you give us a little more color on how you're able to grow your Search websites business so much faster than any peer out there?

And also how that -- why it differs so markedly from the numbers that comScore reports for Ask?

Sure, a couple of things.

First of all, on the comScore issues, I think -- and I'm not sure if this is clear in the release or not -- but when we talked about queries the way we define queries is really online actions that lead to a -- our delivering a search results page.

So, it's possible that some of those can come off of display advertising, can come off of search engine optimization on other search engines, or off of sort of search engine marketing sponsored listings.

So, for some of the things that we count as queries there could also be Bing queries, or Google queries, which probably don't show up in comScore.

They're very helpful looking at our growth sort of comparatively over time, but not necessarily comparatively to other people.

I think there could be some noise in that.

In terms of how we can do it, I think it goes back to what we said, which is, we have sort of abandoned our approach of trying to compete with the search engines head on.

Okay, that's not what we do.

We have a search engine, but increasingly what we've done is we have figured out areas of search, they're especially resonant with our brand Ask and our ability to overlay Q&A content on it.

So, for example, the query -- what is the best exercise for burning calories?

-- is a query that people enter.

We have a great experience for that.

We have Q&A content.

It is differentiated and great.

And we effectively take that page and we market it across the web in a targeted way -- the way we market Match and other things across the web.

We do it with display advertising, search engine marketing, etc.

You take the query -- buckwheat pancakes -- and we don't have a particularly differentiated experience.

We don't go out and we don't market that.

So we've sort of gone vertical to vertical and we've figured out - -

Are you saying we're against carbohydrates?

I am, but we are not.

And so I think it's important to understand that what we're doing is a strategy that is going after a particular part of the search market.

But to compare it to Google and their growth rate, which represents the entire search market, which doesn't have marketing costs associated, it's a flawed comparison.

We've gotten very good at creating this differentiated experience in categories that we've identified where our brand really works.

We've provided offline marketing to support that, and right now it's going great.

You look at our offline marketing -- when we market Ask, we market the Q&A experience.

I mean, it is a different experience in search generally and a subset of it, which makes it probably less likely that we will ever supplant Google as the number one search engine.

But, it is a much clearer path to meaningful growth in a solid business than what we've pursued before.

So we feel really good about it.

But we think the broader comparisons probably don't make sense.

Thank you.

Question please?

(multiple speakers) Your next question comes --

Operator, you seem to not be totally alert to us on this call.

But, let's do the next question, please.

Your next question comes from the line of Kerry Rice of Needham & Company.

Your line is open.

Thanks a lot.

I was hoping, Barry or Greg, can you talk about ServiceMagic and seeing it looks like a little bit of slowdown in the domestic business, what would you owe that to?

Because I would think this would be one the strongest quarters here in the summer for that business.

Yes, I think when we changed management a year ago, there was a reason that we did it, which we articulated very clearly.

Which is, it's a great business that was built, but it was a business that was not built on consumer experience, brand resonance, et cetera.

It was a buy-every-customer-every-time business.

And we brought in management with a very different focus.

And, what we've done over the last few quarters is -- you've heard this across a number of our businesses because it's a common theme is -- we've basically optimized a fair amount of marketing, which means you cut out unprofitable marketing which has the impact of making revenue growth slower but also expands margins and makes the business stronger, while simultaneously working on a whole host of initiatives that we feel really good about, which have taken a while to get going, but that will roll out over the next couple of quarters that we think will really attack the consumer resonance story in a way that we're going to invest behind.

So I think it -- I don't want to call it treading water because there's tons and tons of work going on under the hood, but I think we're going to be looking to sort of Q4 and 2013 to start showing the fruits of those efforts.

And, we're very optimistic.

But I don't think there's any macro trend or anything else that's going on that's affecting us, I think it's just our own operational priorities and the scheduling with which they hit market.

We reviewed, Greg and I, the other day their plans for the future, which were as good as any plan - - it's a plan, but it's as good as any plan.

I feel more optimistic about ServiceMagic since the day we bought it.

And I think it has to be proven, but it has really great prospects.

Next question, please.

Great.

Your next question comes from the line of Heath Terry of Goldman Sachs.

Your line is open.

Great.

Thanks.

On the Search business, if you could, could you give us a sense of what you're strategy is for mobile, particularly with respect to tool bars?

I know we've talked about this a bit in the past, but given how quickly that market is evolving, would appreciate a bit of an update?

Sure.

So, on the Website side, for instance, or what we think of -- maybe this doesn't exactly hold and we'll have to figure out how to talk about these various metrics as we go forward.

But, Ask has a mobile product.

And it works the same way that it does on Websites.

It has a similar Q&A experience.

They seek out marketing and other things in a similar way, and the growth has been quite good, although often very small based.

In terms of the Applications business, mobile is a huge area for applications.

And we've only begun to scratch the surface.

Now, the extent to which, in mobile, applications will provide the same distribution opportunities for our Search business that desktop has, is unclear.

But, we know about desk -- what we know about mobile applications is, there's a whole bunch of ways to monetize in addition to that, through easier micro payments and everything else.

So, because of the huge growth in desktop search, we have not yet allocated that much resources to the mobile applications business, but we're starting to.

We've just launched our first -- we're powering search on a new Android browser, for instance, that is downloadable, which is our first big sort of Search and Applications deal in mobile other than our O and O. And so we're just scratching the surface, we think big opportunity there.

And, again, cautioned by the fact that we're going after it with some aggression, but it's slow because the opportunity in desktop is still so overwhelmingly large.

Desktop search and applications continue to grow meaningfully despite the growth in mobile.

So, we're playing in both areas, but the heavy focus is still on desktop.

Next question, please.

Your next question comes from the line of Mark May of Barclays.

Your line is open.

Thanks for taking my questions.

Good morning.

I had two.

The first one was on Meetic.

If I understood what you were saying earlier, a lot of the sluggish growth there is sort of intentional, if you will, from pulling back on inefficient marketing channels.

I wonder if you could also isolate any impact that you're seeing from more of the macro environment on that business and/or the competitive environment as my impression is that the competitive landscape in Europe and the UK might be more so than here in the US.

And then, second question, on the Media segment, which outperformed our expectations.

I believe, some of that was driven by the Electus business.

To what extent will the Electus business be lumpy from quarter to quarter, and, if that's the case, how much visibility do you have in Electus revenue going forward?

Thanks.

On Meetic, yes, the big revenue decline at Meetic is driven by, as you can see from the numbers, pretty substantial declines in marketing, which are planned -- which are being offset by improvements in conversion in the rest of the things -- but that's the big driver there.

I think the macro climate -- the online dating business has proven to be relatively insulated from economic crisis.

Nothing is certain, and what happens over there and what may happen over there may be unprecedented, but the place you typically see it is in sort of shorter duration of subscriptions.

We've started to see a small amount of that in certain areas, akin to what we saw in the US back in '08 and '09, but nothing that yet has the alarm bells up in terms of the macro environment.

In terms of competition, I actually don't think the landscape is different.

I think it's country to country.

Germany, the competition is very intense.

In France, Meetic has a more dominant position than Match does here.

So, it's very much country to country.

And, I think that the competitive environment always plays a role.

But I don't think that the year-over-year decline has been impacted by any increase in competitive environment.

The competitive environment sort of helped contribute to the situation that we inherited, but it has certainly not deteriorated since then.

If anything, I think that the competitive environment may be improving over there.

On Electus, as we continue to build up our series production, those agreements usually cover a season.

So we -- I don't think there will be particular lumpiness, though we don't think about Electus nor much else on a quarterly basis.

But Electus's work, led by Ben Silverman and Chris Grant and Drew Buckley, has been, actually, I think, better than anybody either thought, expected.

And it's growing in almost every area.

It has series on broadcast networks and cable networks.

And I don't really think that it's -- it's certainly nothing in our, so to speak, in our financial reporting that is troublesome.

It -- we're deficiting it to a small degree.

I would say much smaller investment than any of us had anticipated.

And the reason we were willing to make an investment because we thought that the market was there, and that we could achieve some things, and build a substantial business.

But their progress has been so good that it's taken far less capital than we had anticipated.

Thanks.

Thank you.

Next question, please?

Your next question comes from the line of Peter Stabler of Wells Fargo Security.

Your line is open.

Good morning.

Thanks for taking two quick questions, please.

First of all, could you describe for us, or give any color around the duration of your distribution agreements on the B2B Application partnerships and whether there were any significant adds in the quarter?

Yes.

The agreements, like any distribution agreement, they get negotiated partner to partner.

So they can be anywhere from one to three years.

They often get re-negotiated before the end.

So, in any given quarter, you may be -- you probably have one or two expiring.

You may be re-negotiating one or two early.

But there's no -- we're certainly not facing any cliff or anything like that in the near future.

They roll.

There's no moment where we've got some issue.

So I think we're pretty secure in that regard.

And then, quickly, on ServiceMagic, I'm wondering if you could provide some color around the service provider population there and whether that's been stable or growing.

Thank you very much.

Service provider -- certainly the active service provider network has been stable over the last couple of quarters, up a little bit, down a little bit.

I think some of the initiatives that we're launching are going to help drive that up along with consumer demand, the two need to match each other, and we've got good initiatives in that direction.

Thanks very much.

Next question, please?

Your next question comes from the line of Gene Munster of Piper Jaffray.

Your line is open.

Good morning.

I want to talk a little bit about Stir here, I've seen more TV ads around it.

I'm just wanting to know how we should think about what you're doing I guess in other verticals around dating.

Is this something that could add up to be something that's measurable or is it kind of a one off just to drive sub growth?

Thanks.

Well, we've really launched -- we announced back in May that we were launching in June and July two particularly big initiatives in Match, which I think have the potential to be transformative in the industry.

Stir, which are events for members, is one of the areas; and sort of a new form of communication online, to take the part of games, really, between two people, is the other.

And, together, I think they really start to transform the experience and you need to have huge scale in order to do them and a fair amount of investment and logistics and everything else.

So I think it's going to be hard for others to match.

The primary driver right now is to drive sub growth, drive sub duration, to drive conversion, all those things.

But I do think that they start to have the potential to expand beyond that.

We ran very hard and fast and launched something that is relatively raw.

And we launched it at scale.

I mean, at the current pace we'll have several hundred thousand people at events this year -- which is pretty amazing and like nothing that anybody's ever done.

We're doing it without major investment.

I mean, if you look at our margins, it's not like there's big compression and that we're staffing up with teams of thousands.

We've really figured out a good way to do it.

Our members love it.

I think we're just starting to nail the marketing on it.

They're a whole bunch of features we haven't yet enabled.

So I think the first objective is to really make Match truly, truly different and identifiably so than all the competition.

And then I think from there I think it has many opportunities.

We've got scale across all our properties that nobody else has.

We've got a huge audience of people.

Singles are generally high consumers, and we're figuring out interesting things to do with them and this is the beginning.

We'll take one last question.

Thank you.

The last question comes from the line of Victor Anthony of Topeka Capital.

Your line is open.

Thanks for putting me on, and congratulations on a great quarter.

There were several assets within the portfolio that are garnering a lot of investment interest.

Electus being one of them you just talked about.

Vimeo being the other Urbanspoon.

To a lesser degree, Pronto.

Wonder if you could just discuss the overall strategy for those businesses.

Is it to just groom them and ultimately spin them out or sell them?

Or do you just keep them within the portfolio over the next several years?

And, Barry, second, if you could, any thoughts you have on the [Aireo quad] victory, I would love to hear them.

Thanks.

On those businesses that you mentioned, I think each has its own story, we're investing in them because we believe in their potential.

I think we've said several times before that we tend to look at a bunch of these businesses along with certain businesses that we're developing inside our other segments is IAC's version of R&D.

We're in the business of creating businesses, and we have good ideas that we believe in.

We like to reinvest part of our capital on a relative basis, a very small part of our capital measured as against our own cash flows, or against any of what our competition would term R&D.

And we do that for as long as we believe in the prospects of the business.

What we do with them over time is very circumstance dependent.

I mean, Pronto may have a different end than Urbanspoon than Vimeo, they're just all different things.

You've seen in the past that we have a willingness to do things with our configuration to drive shareholder value.

But we also don't feel any urgency to do anything, because, again, we think these investments are manageable.

We believe in their prospects and we'll see over time.

On Aireo, we passed the first hurdle, which was the injunction was denied.

This will go on for, I would expect, some while -- the litigation -- although I'm hopeful that the - - we're the defense, they're the - -

Plaintiffs.

The plaintiffs, thank you.

That the plaintiffs would at some point say, actually affirm this basic right to receive over-the-air broadcast signals free without any middleman essentially co-opting the process.

And Aireo's system is one that allows people -- far better than being able to get it through an antennae -- to receive their rights, their broadcast signals -- basis of which communications law has existed for an endless period of time.

I recognize the world has changed and broadcasters -- because if it weren't for re-transmission consent, if it weren't for that, broadcasters being able to get extra revenue from the distribution of their signals on cable, broadcasters ought to cheer us because we're ostensibly adding audience.

They, of course, at this point don't see it that way.

I'm hopeful they will.

I think it's a wonderful product.

And for those of you who live in New York -- we're just getting up to kind of scale -- go to Aireo.com on a tablet or on a mobile or on a PC and look at it.

I think you'll be surprised at how this DVR in the cloud, so to speak -- the ability to have no wires, no anything, ubiquitous, take it with you wherever you go, on whatever device you have -- I think is a very appealing consumer product.

So, it's my little spot for Aireo.

With that, on behalf of my colleagues, thank you very much.

I hope you have a restful or exciting summer, whichever it is you desire or both.

And we will be back with you in three months.

Thanks.

Thank you.

This concludes today's conference call.

You may now disconnect.