Match Group Inc (MTCH) 2012 Q4 法說會逐字稿

Good day and welcome to the IAC reports Q4 2012 results conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr Jeff Kip, CFO, for opening remarks and introductions.

Please go ahead, sir.

Thanks, operator, for the help.

Thank you to everyone who has joined us this afternoon for our fourth-quarter 2012 earnings call.

Barry and Greg will make several remarks after which I'll come back and offer some comments on our fourth-quarter financial results and financial outlook for full-year and first-quarter 2013.

Then we will go to Q&A.

For your convenience, the notes for our remarks will be posted in the investor relations section of our website shortly after the call.

Let me first 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 fourth-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 for all material non-GAAP measures.

Barry?

Thank you.

As I think many of you know, I've always thought it was kind of poor form to take up most of the time on these calls with formal remarks.

And as I think you all know, we've consistently shortened that portion to give more time to your questions.

However, there are times when we want to take time to more fully explain ourselves.

And after our last call, when we reported excellent results and a positive future outlook, our stock when into what I thought was an inexplicable tailspin.

So today, we're going to give you another positive financial report.

But we will be taking some additional time to talk fully about the outlook for each of our key businesses.

We hope that it will give you a real and substantive foundation for why we are so optimistic about our future.

And if we go into an inexplicable tailspin again, you can blame the messenger.

So with that, Mr. Blatt?

Thanks Barry.

Hello everybody.

We just finished our third consecutive year of outstanding growth.

And we expect outstanding growth again in 2013.

We are excited about the business and we've been looking forward to talking to you all about it.

It feels like a longer stretch than usual between calls, so we have a lot to talk about.

I'm going to walk through near- and long-term outlook for Match and Search and Applications and then touch briefly on the other segments.

Then Jeff will get a little more granular on the associated financial information, Barry will talk about capital, and then if anyone is still out there we will take your question.

Let's start with Search and Applications.

We had a great quarter with Q4 OIBA and revenue up 63% and 30%.

Pro forma for the About acquisition OIBA and revenue were up 40% and 20%, and for 2013 we're expecting solid double-digit revenue and strong double-digit OIBA growth in each case pro forma for About, which is seriously exceeding expectations.

On an as reported basis obviously the numbers will be even stronger.

To paraphrase Mark Twain, the rumors of this business' death have been greatly exaggerated.

Search and Applications has a solid foundation of looking ahead to strong growth for the foreseeable future.

Now let's look at some of the granular issues that people have been talking about this quarter.

And then I'll talk a little bit about our long-term outlook.

As all of you know, at the beginning of Q4, Google changed its advertising policies.

The primary impact to our business relates to the marketing of our Ask.com product on Google.

The policy changes reduced both click through rates from our marketing and our revenue per query.

As we tried to digest the impact of these changes, we pulled back on marketing, which had a larger effect on revenues than OIBA, as the online spend cut hit the least profitable marketing dollar, and because off-line spend tends to have a delayed payback.

We've now reconfigured our marketing program around the policy changes and we're confident we can begin to build back up our spend in revenue levels at increasingly efficient margins through 2013, with the negative impact most heavily felt in Q1.

I think it's important to point out that this area only represents around 12% of the total contribution to the segment.

So while marketing Ask on Google is important to the business and these policy changes do affect us, it's certainly not determinative.

Additionally, we've recently agreed with Google on a new set of guidelines for our Applications business.

We actually reached out to Google this past summer to proactively try to deal with the number of practices that have arisen in the industry that we weren't engaging in.

While I wouldn't say the new policies are the exact ones we would've implemented on our own, we worked hard with Google on crafting them, and we are supportive of the efforts to make sure that practices are proconsumer and benefit everyone long-term.

Given our strong relationship with Google, and the comparatively high resources we put into product development, engineering, partnerships, marketing systems, and our Ask brand, we feel even better about our competitive position following the changes than we did before.

Overall these policy changes are going to dent our 2013 results a little as against what they would have been, but those results will still be strong, and we think overall they strengthen the long-term prospects of the business, laying foundation for even higher growth in 2014.

Let me also touch quickly on what we think are a few misconceptions that have been causing some noise this quarter.

First, there have been allegations that we are engaged in arbitrage, but the reality is we market our Search and Applications businesses in the exact same way we market every other business we have, both online and offline.

Frankly, in the same way every business does.

If we can make more revenue from marketing our products than it costs to do so, we market them.

It's the same as for Match, HomeAdvisor, and everything else.

And it is the same on Google as it is on Bing and on television; there is absolutely nothing unique about our marketing approach to Search and Applications.

And I think most determinedly Google has a policy that clearly defines arbitrage and clearly prohibits it.

We are in complete compliance with that policy and we continue to be a big advertiser on Google.

So to the only definition that matters, Google's, we are not engaged in arbitrage.

Questions have also been raised about the impact of increased competition in marketing our search products.

Mostly because of potential new entrants into the market.

Again, we think this reflects a misunderstanding of our business.

We market our products on a vertical by vertical basis.

When we are buying keywords for health related page, we compete with advertisers in the medical category.

When we buy keywords for a car related product, we compete with car advertisers.

When we buy marketing for a scrapbooking application, we compete with scrapbooking marketers.

There is heavy competition in all our verticals and that competition is among different groups from vertical to vertical.

New advertisers are coming onto Google and Bing every day in all these verticals; that is generally what drives up CPCs over time.

It would be very difficult if not impossible for any single entrant or even a series of entrants to meaningfully impact that general trajectory of more and more ad dollars coming into the system, especially across multiple verticals.

We've been seeing this trajectory since the inception of search marketing.

We of course benefit from the rising CPCs on the other side.

Specifically, we have seen no meaningful impact on our business from any particular entrant into this area, either recently or at any other time.

Another concern that has been raised is that browser changes are making life difficult for our Applications business.

On the one hand, that is true.

On the other hand, it is no more true today than it has ever been.

Over the eight years we have operated this business, we've tackled every browser change that has come.

This has meant adapting to deal with multiple platforms, the rise of Firefox, of Chrome, their rapid release schedules, as well as major updates to Internet Explorer, each of which have presented multiple challenges to our business.

Typically, there is an initial impact from a given set of changes and then we adapt our products and services accordingly.

The adaptations help us clawback the impact we saw at the beginning.

This is why we've always said that this has the potential be a little choppy quarter to quarter.

Despite all this, we've grown this business fourfold since we acquired it in 2005.

Frankly, it's an area where we really do think past tense to be prologue, and believe our ability to navigate the dynamic landscape in which we operate is a competitive advantage.

We have teams of engineers who spend all their time adapting our products to the latest browsers, to the latest operating systems, et cetera.

And despite the continuing complexity and challenges of these landscapes, we continue to grow our distribution meaningfully.

Next, we've heard that our applications are of questionable value to users and they therefore face an existential threat.

But value in this context is of course subjective.

This business was built on the back of a products that let you put smiley faces into your instant messaging, from some perspectives that product might be of questionable value.

But the millions of people who downloaded it obviously felt differently.

And that product alone generated over $120 million of revenue.

There's a reason we refer to these products as digital snacks.

An application that allows you to play video games from the 80s is highly engaging to some and of lesser value to others.

But while these products may not change the world, they cost our 10 millions of users nothing and yet provide them some enjoyment and convenience.

And as long as that continues to be the case, we think they will continue to flourish.

Lastly, there is what to us is a somewhat new phenomenon called trading the SEMrush data.

For those of you who don't know, SEMrush tracks various keyword activities and some people have started using that as a proxy for the performance of our Search and Applications business.

Anyone who did that in Q4 would have concluded that our Search and Applications business was going to be down meaningfully.

But it wasn't.

We had a great Q4.

This is principally for two reasons.

First, as we said the activity it tracks make up a relatively small part of the overall contribution to the segment.

And second, it doesn't take into account the fact that volatility in keyword volume tends to happen in the test and low ROI keywords.

So that even with respect to the activity it does track, it doesn't highly correlate to profit growth.

The reality is, the SEMrush data is a pretty poor proxy for the business.

Stepping back for a second and looking at the segment longer term, we think the market for our products and services is robust.

But there is data that would indicate desktop search will continue to grow.

Desktop sales still predicted to increase for a while, hours spent on desktop is expected to increase over the next few years.

We conservatively expect a flattening desktop search market.

We believe that still provides us with a lot of runway.

We grow primarily through new product development, new distribution partnerships, and marketing efforts.

In other words, our growth is entirely correlated to that of the industry.

From 2010 to 2012 our queries grew 80%, dramatically higher than the market overall.

And because our global share is still estimated at well under 5%, there is no reason to believe that our growth should be meaningfully impacted by slowdowns in desktop search growth overall in the foreseeable future.

Moreover, we see big opportunities in mobile and tablets over time, where our efforts are really just beginning.

Mobile is now making up more than 7% of Ask queries, up meaningfully from last year.

That is under penetration versus the market.

But the core Ask customer tends to be a later adopter of new technologies.

So it is not very surprising.

Moreover, our growth tends to be driven by marketing and distribution efforts, which to date have been minimal in this area.

But while the mobile economics are still subpar, they are improving, and we're seeing opportunities opening up for distribution and we are jumping in.

In addition, About's mobile page use now represent approximately 20% of total, and Dictionary's about 40% of total.

We know that the more content rich our pages, the better their opportunities for mobile distribution, and that is already the direction we are heading in strategically.

Finally, Dictionary is making real progress in monetizing its application on direct pay basis, and while the numbers are small in absolute terms, the learning is important in terms of our broader application business.

To wrap up, as I mentioned at the outset, we are expecting strong 2013 results.

And we feel confident long-term.

Let me recap the main reasons why.

We've got a strong pipeline of proprietary applications and the distribution business is strong.

We just renewed our partnerships with both Symantec and Oracle, two of the premier partners in the business.

For the first time in years the Ask.com direct domain business is growing meaningfully, and we've seen the increasing resonance of the brand across multiple channels.

The About transaction is exceeding expectations and showing that we can leverage our competencies across multiple properties.

The market is large, we're a small part of it, and we see opportunities in mobile opening up.

Finally, Google has just implemented the most sweeping changes to its policies governing our businesses in a decade.

The changes have us and Google totally aligned and we are confident these changes leave us in a strengthened competitive position.

The growth rates will slow from the media ride we were on in '11 and '12, but we've been saying that would happen since the ride started.

The point is this continues to be a great business with a solid foundation and we are confident this segment should yield double-digit growth for the foreseeable future.

Now to Match, which we are also feeling very really good about.

Q4 came in with 35% OIBA growth and 16% revenue growth.

In looking ahead to '13 we think we are going to see high-double digit OIBA growth and low-double digit revenue growth for the full-year.

First let's talk about core, which is our US Match.com, Chemistry, and people media businesses.

Core PMC growth rates increased slightly in Q4, and looking at 2013, we expect core PMC growth to begin to increase in Q2, rebounding to the low teens by Q3.

This is driven primarily by strong conversion and efficiency gains.

Last year we focused primarily on events and games until Q4, and it's rewarding to see that our ecosystem continues to be highly responsive to product improvement.

Despite the fact that events didn't pack the immediate customer acquisition punch we were hoping for, they're really hitting their stride now.

We've launched in June and already we've put on over 1,600 events in 80 markets, with approximately 150,000 people attending.

In January, we had approximately 350 events, and we're anticipating 4,000 to 5,000 in 2013.

We're now starting to take margin on certain events, which drives up the revenue per user.

But more importantly the events are starting to have real impact on category and brand perception.

After only half a year, approximately one-third of US singles are now aware of the fact that Match offers events, and 67% of singles say that these events make them more likely to do online dating.

Of particular note, 15% of people who previously said they were not open to online dating said they are open to it as a result of events.

This is very meaningful long-term to category expansion and competitive differentiation for Match.

Developing, which is everything but core and Meetic, bottomed out in Q4, but we're expecting growth in PMC and revenues throughout 2013, starting low but coming in for the full-year at double-digit levels.

This growth is driven by strong gains at OkCupid, which by year's end will have more paying subscribers than all but the 3 of the 29 brands included in core and by Canada.

As for Meetic, there's not much to say that hasn't already been said.

We accomplished our objective for '12, which was to meaningfully increase conversion and marketing efficiencies, and reverse subscriber declines, all while holding profit essentially flat.

Now we head into '13 with expectations for solid PMC revenue and profit growth.

It's really a tremendous turnaround from what was at the time of purchase a suffering asset.

I also think Meetic is yet another nice demonstration that this category can succeed even in tough economic times, which Match has demonstrated previously in the US.

So for the first time, 2013 should see solid revenue and PMC growth in each of core, developing, and Meetic.

Now let's look longer term where again we are very bullish.

Market fundamentals first.

Our domestic market is expanding.

There are three secular trends in our favor.

The growing population, increasing percentage of the population being single, and stigma against online dating continuing to decline.

I'm going to give you some numbers, and like any data cobbled together like this, it's all a little soft, but directionally it's very sound.

Currently in the US there about 100 million single people, and about 50% of them say they are open to online dating.

By 2017, the single population is expected to be 112 million people, and we conservatively expect somewhere between 55% and 60% of them to be open to online dating.

This means an expansion of our addressable market from around 51 million to between 62 million to 67 million, or an increase of 21% to 31% over the next five years.

Today we are still reaching a relatively small percentage of the addressable market and we expect that market to expand over the coming years.

A big part of our strategy for domestic growth lies in our portfolio approach.

We think it will yield meaningful benefits over the coming years through pricing optimization and lowering the cost of customer acquisition across our various services.

We know that there are people in this category willing to pay a lot, some willing to pay a little, and some not willing to pay at all.

Historically Match offered essentially a set price which meant we were undercharging those users who were willing to pay more, and losing altogether the customers who weren't willing to pay that much.

Now we are able to move above the set price with a variety of add-ons and packages and move below the fixed price by moving non-converting registrations into lower-priced brands.

Simultaneously, people coming into the lower-priced brands are increasingly being offered and taking additional paid features and services.

As a result, we're starting to look at every registration no matter which entry point it comes in through as a potential registration for all our other services.

Because our lower-priced products acquire a large number of users at little or no marketing expense, this lowers the cost of customer acquisitions for the higher-priced brands as we more effectively figure out ways to increase the optimal matching of user to specific service.

OkCupid alone with zero cost of acquisition provides us with free access to millions of online daters, and we're just starting to offer those daters the OkCupid subscription product, access to events through Match subscriptions, and paid add-ons like OkCupid's new Crazy Blind Date offering, all without negatively impacting the traditional OkCupid experience.

Additionally over the last year we've been investing in building a variety of new products, all of which have either just launched or about to launch.

These include the mobile app Tinder, that's getting a lot of traction, as well as Kiss.com, our relaunch of Singlesnet, Tallygram, Facebook exploration engine that recently launched, Combosaurus, an interest search matching engine released to the public last week, and Rabble, a photo-based dating app that is getting ready to launch.

We invested heavily last year in developing all these products that are only now hitting the market.

Some will work, some won't.

But given that we only need to acquire a customer once in order to market our various products to them, this expansion in low-cost acquisition vehicles should drive meaningful COA efficiencies over the coming years in a way that no one else can come close to rivaling.

The portfolio approach also helps expand the category.

Many first-time entrants into the category come into the lower-priced products, whether ours or those of our competitors.

Rather than cannibalize our monetization, these products help expand our user base.

From 2010 through 2012, despite the fact that this was a period of proliferation of low- and no-price dating alternatives like OkCupid, we added 590,000 core subscribers, during the preceding three years, we only added 66,000.

In other words during the three years of intensive lower-cost competition we added nine times more subscribers than we did during the prior three year period.

The key is that once people have embraced the idea of meeting online, they become increasingly willing to pay for value differentiation.

Through features like events and games, Match.com is becoming the clear gold standard of online dating.

Those peoples who want the most features and functionalities and who want to be in the higher income bracket, a more serious community, are therefore looking to Match.

Accordingly as the base of the category pyramid broadens, there are more and more people migrating up to the top, a space increasingly occupied by Match.com.

For the last few years we've been gathering and creating these assets but only now with Sam Yagan, cofounder of OkCupid entrenched as full-time CEO of the portfolio are we starting to operationalize the potential we've been amassing.

We think it will be a powerful approach.

As for Europe, we expect it to follow similar pattern as North America, though we are behind in terms of collecting a portfolio of assets.

The recent acquisition of Twoo, a global social discovery network based in Belgium, is really the first meaningful step in that direction.

It's doing almost 60,000 registrations every day, up about 30% from just December, with zero cost of acquisition.

We are going to learn how to drive some of the registrations to our premium priced products, and we're going to figure out ways to directly monetize some portion of the others.

Lots of opportunity here.

And the rest of the world also holds real untapped possibilities.

We think a portfolio approach is going to be necessary in these geographies too.

So unlike the USA it probably won't be the pure subscription products that lead the way.

To date though that is really the only business model we've been playing with.

But that is now changing.

With the acquisition of Twoo, the many services being developed through our Chinese partnership, our existing subscription services, and some of the new services we are launching in North America, coupled with the inexorable growth in rest of world economies, and the increase of easier payment means over time, we feel confident about the global growth opportunities.

But we don't expect huge near-term financial contribution outside of North America and Europe, longer term we think we are very well-positioned to turn those geos into strong growth contributors.

Let me quickly summarize the factors which make us feel excited about this business -- an expanding domestic market which is still underpenetrated, the portfolio of domestic brands, desktop, and mobile, which will continue to bring more people into the category and lower our cost of acquisition; a strengthening category leadership position of the Match brand; improving modernization of our lower-cost brands; momentum at Meetic; opportunities just now opening up in the rest of the world; and a proven ability to leverage successes and competencies across multiple product lines and multiple geographies.

As I said earlier we see strong performance in the segment in '13, and we see solid growth in this business for a long time to come.

We're now signing up approximately 1 million new users every week.

That is a huge number.

But only about 7% of them are paying us.

Yet we continue to get better at providing products that our users are willing to pay for, and to optimize the prices they pay.

We think people are going to keep meeting online for a long time, and we think we are clearly the most strongly positioned to continue to capitalize on that trend worldwide.

Let me hit the remaining segments very quickly.

In local, HomeAdvisor has completed its rebrand, is now running television advertising, and we're excited about its prospects.

We think growth will accelerate throughout the year.

CityGrid continues to have asset value, but coming out of its restructuring in Q4 will take some time to regain traction to the point where it's making meaningful contribution.

In Media, we've completed the restructuring at Newsweek Daily Beast, Vimeo continues its great growth, Electus keeps turning out more and more great product, and DailyBurn is starting to get some traction.

Finally, the recent acquisition of Tutor.com is something we're really excited about.

For relatively modest price, we brought an asset that has huge potential upside, and we think that we possess the specific competencies required to realize that potential.

The overall take away here is that there is both upside opportunity in this collection of assets and operating and investment discipline.

Stepping back, we're very excited about where IAC stands, well balanced for the near-term, expecting a fourth consecutive year of outstanding growth and the long term, with big untapped market opportunities in our big businesses, and numerous earlier-stage businesses poised to break out.

With that I'll turn it over to Jeff.

Thanks, Greg.

I'm now going to take everyone through some key points on our fourth-quarter results and our full-year and first-quarter 2013 expectations.

In the fourth quarter of 2012, before restructuring charges, we grew consolidated OIBA 48% to $134.9 million, and consolidated revenues 28% to $765 million.

Including the About business and News Beast pro forma, OIBA grew 39% and revenue 17% versus the prior year.

In order to fully capture our year-over-year operating results and progress, we're going to talk about our results both on an as reported and a pro forma for About and News Beast basis over the next few quarters.

OIBA margin in the quarter expanded year over year to 240 basis points, excluding restructuring charges.

Including restructuring charges OIBA margin still expanded 90 and 100 basis points respectively on an as reported and pro forma basis, our eighth consecutive quarter of OIBA margin expansion.

The restructuring charges of the fourth quarter consisted of $7 million associated with the closure of the Newsweek print magazine, $1.8 million in CityGrid, and $2.8 million associated with the shutdown of Hatch Labs in the Pronto business within Search and Applications.

It's worth noting that our reported adjusted EPS is flat year on year, however there are two points to recognize here.

First, that number includes restructuring costs, and secondly, our tax rate a year ago was approximately 2,500 basis points or 25% lower on rate due to the release of reserves -- old reserves.

If you don't give effect to these changes, our adjusted EPS growth rate would obviously approximate our OIBA growth rate.

This wraps up the year in 2012 where IAC delivered 44% overall OIBA growth on 36% revenue growth.

As Greg mentioned, the third straight year of this level of OIBA or higher for IAC.

Let me now give some color on our business segments, including some thoughts on performance looking forward into 2013.

In the fourth quarter, Search and Applications OIBA grew faster than revenue, driven by first, the reduction in incremental lower-margin marketing spend that Greg mentioned.

Secondly, outperformance by Ask direct domain and SEO businesses, demonstrating the increasing strength of the of the Ask brand.

And thirdly, the addition of the About business, which is a higher margin business than the existing Search and Applications businesses.

For full-year 2013, we are expecting to be able to grow segment OIBA, pro forma for About, solid to strong double-digits percent, with About making a meaningful contribution to growth on both a pro forma and an as reported basis.

We've previously discussed our expectation for significant synergies at About and we are already progressing ahead of our initial expectations there, having realized 35% growth in OIBA in About in the fourth quarter versus the businesses results the prior year.

Overall, we expect to experience modest margin leverage in the segment, as we realize marketing efficiencies and grow About, meaning revenues will grow a little more slowly than OIBA overall in 2013.

In the first quarter of 2013, we do expect a slower start for the segment than the full-year because first, we feel the biggest -- we will feel the biggest impact from both Ask related marketing pullbacks in both online and offline marketing in the quarter, and due to a reduction in advertising revenue for some of our applications related to Google policy changes.

Secondly, CPCs coming from Google have been softer than usual in January.

We've included those issues in our overall thoughts on targets for the year, however.

And overall we still expect to grow our segment revenue sequentially in the first quarter, even if only modestly so.

Further, pro forma for About we also still expect modest year-over-year double-digit OIBA growth on low double-digit revenue growth.

We expect quarters two through four to follow a similar sequential growth pattern as we saw in 2012, without obviously the sequential hit this segment took in the fourth quarter from Google policy changes last year.

At Match, as Greg noted, we are now projecting a strong full-year 2013 performance based on our recent wins on the conversion front and our product and marketing roadmap for the year.

We expect to see strong double-digit growth in Match segment OIBA driven by low double-digit revenue growth across the segment inclusive of Meetic, and the kind of operating leverage we have consistently seen at Match overall.

The first quarter of 2013 will see modestly stronger OIBA growth, but modestly lower revenue growth in full year 2013.

We will also see in the first quarter Meetic revenue grew year on year for the first time since acquisition, reaching solid double digits, including the purchase accounting impact in the quarter.

Moving onto the local segment.

Fourth-quarter 2012 OIBA fell from $4.4 million last year to $1.3 million in 2012, including the $1.8 million restructuring charge at CityGrid mentioned earlier, and expenses related to the site and brand relaunch at HomeAdvisor.

In the first quarter of 2013, we also expect this segment to contribute very little OIBA overall on mid-single digits revenue growth given really the same factors we saw in the fourth quarter of 2012.

However, we expect local to rebound over the course of full year 2013, and see overall double-digit growth, although modest double-digit growth in both revenue and OIBA for the year, as CityGrid gets traction as the positive trends from HomeAdvisor's rebranded marketing continue.

The Media and Other segments, together in the fourth quarter, lost $12.4 million in OIBA on an operating basis, and took additional one-time charges of approximately $7.7 million, the majority of which was for the shutdown of the Newsweek print magazine.

As we discussed on our last call, for full year 2013, we expect to significantly reduce the OIBA loss in the combined Media and Other businesses.

On a pro forma business, including all of the Newsweek Daily Beast 2012 losses prior to consolidation, the OIBA loss for the segment last year would've been $7.7 million on a full-year basis, or about $63 million without the restructuring charges.

As we told you on the last call, we expect this loss to come down in 2013 to roughly $25 million to $30 million or so for the full year.

This will be inclusive of about $6 million to $8 million of deferred revenue pickup we expect from moving our Newsweek print subscriber liabilities to other magazines, about $4 million to $5 million of which will likely be recognized in the first quarter.

It's important to note, however, as always, that our range for the Media and Other segments is subject to change and may move up or down during the year based on decisions to increase or pullback on investments.

In terms of revenue for the two segments, we expect solid to strong double-digit revenue growth for the full year, as the loss of print revenue at News Beast will be offset by significant revenue growth in revenue in our Vimeo and Electus businesses, and the addition of the revenue from our recent Tutor.com acquisition.

As a final note, we expect that approximately 40% of the full-year OIBA loss for the Media and Other segments combined will hit in the first quarter of 2013, quarterly losses will then decrease sequentially from quarter to quarter.

To wrap up the financial discussion, we are expecting another strong year of consolidated OIBA performance in 2013.

On an as reported basis, approximately 30% growth versus full-year 2012 consolidated OIBA, inclusive of all restructuring costs.

We expect solid to strong double-digit revenue growth on a consolidated basis as well, lower than in prior years, driven primarily by the shutdown in Newsweek print, and the overall modestly lower revenue growth in Search and Applications as we grow out of the Google policy changes.

As we referenced in certain of our segment discussions, we also expect the first quarter to start out a little more slowly than the rest of the year, and we currently expect both consolidated OIBA and consolidated revenue growth for the quarter in the strong double digits, high teens range, on an as reported basis, with meaningful higher OIBA growth on a pro forma basis.

It is worth noting that this is the first time we've disclosed targets for the first quarter of 2013.

Now Barry's going to talk briefly about capital allocation and then we'll open it up to Q&A.

Thank you.

We generally talk about capital allocation using terms like return on cash to shareholders, being over or undercapitalized, but today I'd like to expand on that, because we are in a very different capital position today than we have been in years past.

After years of having $2 billion plus of net cash, we started 2009 with approximately $1.8 billion.

We ended 2012 with net cash of approximately $175 million.

Several years ago, we committed we would not be overcapitalized indefinitely.

Now we can say we are there.

During that period, we generated approximately $2 billion of cash from a combination of free cash flow, asset dispositions, derivative exercises, and other activities, not including our recent debt issuance.

So when you do the math, we spent approximately $3.5 billion on nonoperating activities over the last four years.

That is a considerable amount of activity and here is what we have done with it.

The biggest piece is stock buybacks.

Over the last four years, we have repurchased 97 million shares of stock, for a total consideration of $2.7 billion, and at an average price of $27.37.

This includes the repurchase of 6.4 million shares during this last quarter, for a total consideration of about $300 million.

In addition, we've paid out about $75 million in dividends and, based on yesterday's stock price, our yield is currently 2.3%.

To put it in perspective, during this period, we returned to our shareholders 250% of our free cash flow.

Over the same amount of time, we spent $800 million on a series of acquisitions, all of which, most all of which, fell within our core areas of business.

These have returned approximately $70 million of after-tax cash since the acquisition.

And we expect they will generate over $165 million of earnings this year.

After taking into account the return on cash, that means we acquired those businesses at an adjusted multiple of 4.3 times.

This is not an accident.

We have developed a competency for identifying businesses in our core areas where we believe we can make meaningful improvements to operations through a transfer of know-how.

We have demonstrated it repeatedly in the personal segment, most prominently and recently with Meetic.

As the early returns make pretty clear we are going to be able to do it in Search and Applications.

And our most recent acquisition, Tutor.com, represents another candidate for the same kind of activity.

That is our capital allocation story over the last four years.

We have struck a solid balance between returning capital to shareholders and making sound acquisitions.

We have done more than lip service to the classic mantra of capital allocation, that of making solid acquisitions and returning capital.

The net result of these activities is that our capital situation is now clearly different than it has been.

We expect to generate over $400 million of free cash flow in 2013.

We also have an undrawn revolver and plenty of remaining debt capacity without pushing up against our comfort zone.

Going forward, we plan to continue paying a dividend that is consistent with our earnings growth and we'll continue to follow our current acquisitions policy.

And as we have said for many years now, and I think we've over fulfilled anyone's expectations, we will continue to buy stock back opportunistically.

So that is the long, detailed, and we hope well understood report, formal report.

And now we will take your questions.

(Operator Instructions)

Ross Sandler, Deutsche Bank.

I just have one question, but first off thanks for all the color, and thanks for posting the comments on the website so we can go back and read them.

The question is, since you guys are literally taking the gloves off here, why don't we go all the way?

Shares are trading down 2% to 3% in the after-market, I don't know if that is real or not.

But despite your many helpful clarifications, what if we hypothetically envision a scenario where you go into another tailspin as Barry called it after this call?

What other measures would you consider taking?

Are there any things that you would consider doing to create additional shareholder value, like more leverage, more buyback, or even a spin?

Thanks.

Well, we will go -- we will continue to operate our businesses.

We will continue to follow the capital allocation policy that I just went on about.

And we will trust that the markets will react appropriately.

Now, it may take a quarter, it may take two.

We can't really do anything manipulatively to it.

Obviously, if we have -- we bought back stock back opportunistically, continue to do so.

The lower stock goes, the more I would say hungrier we will probably get for doing so, consistent with how much cash we've got.

So, I don't think we should struggle too much.

We've told you why we're so optimistic about our key businesses.

We can't prove it, because the future of course is the only proof.

But as you know, we've had our short interest move up in direct relationship to reports and rumors that our growth is more than challenged.

And we know of this kind of activity, is more and more the way of the world and momentum and manipulated trading.

So I would just advise that I would be wary of taking this lock step rumor mongering and shorting as any kind of gospel, and just try and remember that while we really are confident, it's awfully hard to disprove the negative where there is money involved.

If I can follow up, Barry, so you created north of 100% return on the Expedia TripAdvisor spin.

I know this is a different scenario, but would you consider separating the businesses either Search separate from the rest of it or personal separate from the rest of IAC?

We talked about everything here, but our conclusion now, and I'd see no reason why it would change, notwithstanding any condition or should say any condition, because that's not real, but I think that this consolidation of businesses is, we think, good for us.

We think that there are relationships between all of our businesses.

So, I think we would be reluctant.

You want to add anything?

Yes, I'd just say at some point math takes over and becomes compelling.

We think it's at that point now.

But maybe it's tomorrow.

We are going to generate huge cash flow this year.

Our earnings are going to be great, and our growth is going to be great, and at some point that is going to be reflected.

So I think as Barry said, while spins are always possible at some point in the future, they are not going to be because some short-term dislocations in the stock price driven by God knows what.

Thanks guys.

Neil Doshi, Citi.

Greg, can you provide a little more detail as to what are some of the changes that you've implemented on the Search and toolbar side to become more compliant with Google?

And then, as we think about mobile, it seems like on the Search side you guys have grown the business a lot through the applications and toolbars, if it is more challenging to use toolbars on the mobile side, how can we think about IAC growing mobile without being able to implement a lot of those toolbars?

Thanks.

Sure, look, the policy -- so I'm not going to get into the details that is part of our contract.

We've got a contract with Google; this was a negotiated process.

As Jeff said, in certain areas we are going to show fewer ads.

There are certain things about installing across multiple browsers.

Materially fewer ads.

On some of them fewer.

There's a whole bunch of stuff.

I think in general the fact that we are -- the fact that we distribute a branded search engine, which is Ask.com, I think gives us a whole lot of advantages with respect to Google, with respect to the policies that are applicable.

And so I think that without getting into details on say a lot of the noise that we know is out there about these policies, generally don't apply to the large part of our business.

In terms of mobile, I think toolbar is a thing.

In Internet Explorer we use toolbars; on Chrome we use something called an extension, it's not a toolbar.

I think mobile and tablets are just opening up, and at the end of the day what we're doing is distributing Search.

And we do that because we have good monetization, good technology, and the ability to develop great applications.

And we're seeing lots of opportunity open up there as the monetization, although it is still subpar, gets better and better.

I'm not going to tell you exactly what sort of technological feature or exactly where the distribution is going to happen, obviously it's very basic at the beginning and we will show it to you over time, but I think that the point there again is that mobile represents long-term incremental growth for us.

We've got tons of growth in the near term on desktop, and frankly probably the medium term, and the growth in mobile is really going to start happening this year, and you'll see it as it comes, but it's actually a very wide-open area in terms of both the technologies available and the abilities to monetize these applications, both through Search and otherwise.

So we're feeling quite optimistic about it.

Mark Mahaney, RBC.

Two questions.

You made just a very brief reference to Google CPC trends in January, any more color on that?

Does that seem to strike you as anything other than seasonal?

And then in terms of mobile monetization Greg, I think you made some comments that you're relatively optimistic about mobile monetization rising up to desktop levels.

Can you expound on that a little bit?

That seems like a very reasonable insight.

The financials markets may have viewed that differently over the last year, but are there particular data points you're looking at that give you confidence in that?

Thanks.

I'll let Jeff take the CPC comment next, but I don't think I said what you think I said, meaning that if I did I didn't necessarily mean it.

I think that mobile monetization is going to improve meaningfully from where it is today.

I don't know that given the form factor -- people use the word mobile to mean a lot of things.

When I talk about mobile I'm talking about a device that you hold in your hand and can operate with one hand, I'm not talking about larger tablets and all that where the form factor allows for much more comparable monetization to desktop.

I think mobile will get better, but I think my instinct is and has been that it will be a long way before true mobile devices like hand-held smartphones are comparable to desktop in terms of monetization.

But the hope is you make up for it in volume, and that because as we all know, regardless of what you want to say about desktop and mobile, the combination of the two is growing rapidly.

And clearly desktop is still here, it's still going and it's going to be here for a long, long time.

And so the mobile build keeps coming on top of that.

And so I think that in aggregate you're going to have lots of revenue growth opportunity.

Mark can you just repeat the CPC question?

I just want to know if it was seasonal or if we're seeing anything else?

No, I don't think it's particularly seasonal.

I think we actually look at it across the system as part of the general ad policy changes, where because CPCs are the product of supply and demand as you have people shuffling to adjust just as we have, we think there is a temporary shift.

I actually think it's something we've seen start to rebound a little bit, and we're not terribly worried about.

But I do think that Q1 tends to be a little lower.

Q1 is lower seasonally, and then there is this added delayed effect of the policy changes.

Peter Stabler, Wells Fargo Securities.

Greg, early in your remarks you referred to mobile accounting for 7% of Ask queries, and you attributed that to the fact that Ask users are later adopters I think to use your term.

Would it be safe to say that the profile of the toolbar installer user fan is similar in terms of being let's say a laggard in terms of adoption of technology and new form factors?

I would not use the word laggard.

But, yes, I think in general, the people who use our products are not the advanced adopters.

And I think that the 7% figure also needs to be thought of in the following way, which is we're making -- we've made virtually no efforts at distribution on mobile.

So the 7% is actually mostly organic, and as against our organic traffic it's actually more representative of the market generally, and as we start to do distribution that number will tick up as well.

So I think the answer to your question is yes, but the 7% exaggerates that.

Jason Helfstein, Oppenheimer & Co.

Two questions, can you go into little bit more detail on Match, specifically we saw core revenues 5%, but core subs were better than that.

Was that just a function of adding the subscribers later in the quarter?

Or just talk about any kind of pricing trends we're seeing.

Or is it a function of the weaker results we saw from the developing assets?

And then secondly, to the extent that you are having/have had detailed discussions with Google on the applications and the rule changes, and Google continues to think about how to push its Google Play platform out there, is this causing more discussions that perhaps are a catalyst towards how your applications work in a more mobile environment?

Thanks.

Okay on the Match side, I think it's a combination of things.

I think there is some mix there which is People Media.

Some increase in People Media, which tends to be lower-priced, is a big effect in Q4 when you get a big push at the very end of the quarter.

So to your point, you're not getting the revenue reflected throughout the whole quarter.

I'm not trying to sit the third point, but it's really a mix of those first two, and I think that what we are going to see over the course of the year, as we talked about is we're going to be driving revenue per user up through the various things I talked about in my opening remarks, which is taking margin on events, different add-ons that we've been doing to drive up the price of Match while still pushing people into longer-term packages, which tend to bring revenue per user down.

So this is balancing of the two components, and I would say by second quarter the GAAP between revenue and PMC on the core side ought to narrow substantially.

Oh, on the Google side, I'm sorry I'm not sure what the places issue has to do with our application, so I didn't quite understand.

I think it's come up in numerous calls and you get asked how are you transitioning applications to mobile, because there are no toolbars in mobile, there's apps.

Google is clearly thinking about all of its partners on the application side and meeting with all of you guys, as we've heard.

As they're thinking about the new policies, do you think this is a catalyst toward working with Google to let's say work on distribution of your applications into mobile?

No.

I think our applications policies are -- they cover mobile, we're good with mobile.

I do think people get really bogged down in this notion of toolbar and people need to think about toolbar as something that is simply the way we format our applications on desktop.

That is not a form factor that works on desktop -- on mobile, so we will configure our applications in different ways and distribute them in different ways.

And that way is going to be different on an iPhone than on a Windows tablet, et cetera.

It's going to be a whole variety --

The word to use for that is applications.

That's right.

And Search will be good monetization.

I don't think -- we haven't had discussions with them with any note about driving applications into their places product or anything like that.

I said Google Play, it is the payment platform as far as what they're --

Oh.

Google platform, I think we are always looking at ways to directly monetize our applications.

Clearly as I said on mobile, there are more and more opportunities to do that than there were on desktop, and Android that sure will be a part of it over time.

Last one quick one, Barry, you said no, effectively, no in the medium term to a Match spinoff.

What about a tracking stop so effectively people could invest in the asset they want to invest in without actually separating it from the business?

As I said before, we think the best configuration is a consolidated number of businesses that we think relate to each other, and that we also think are very good -- sorry, the ability to manage through them is really enhanced often by their relationship of one to the other.

Best practices, in terms of being able to populate these businesses with effective leaders, et cetera.

So, I am not much for tracking stock, so -- I think there -- I think actually, I am much for spin offs; that has already been rather clearly demonstrated.

As I say, I don't think it is time yet.

It may never be time to spin off assets, but that is always a possibility.

But I don't think I would substitute a tracking stock for a spinoff.

I will say again we are expecting great growth in both these businesses this year and beyond.

So we are -- we see a both good double-digit growers for as far as we can see and we are excited about both of them, and again this current fog that has come out of nowhere besides, we feel really good about it.

The fog was created because people thought that our Match businesses were going to have much slower growth, that the universe was not really big et cetera, et cetera.

You spent 10 solid minutes explaining why you feel otherwise.

Now, I think you are right.

But time will tell.

I have enormous confidence.

And the other part of it, obviously was, and I referred to it when I talked about this whole short, what I consider, it's inappropriate to call it anything but this short process, which was based upon literally some leaks and other things that ended up in newsletters and other reports saying that our Search and Applications business was over.

Now, we spent another 10 or 15 minutes telling you all why we felt otherwise.

I don't want to be defensive; I know there is no productivity in that.

So, the only thing I would just say is that we're going to do our best.

We've tried to explain our businesses to you today in depth.

We are optimistic about the year.

And we are optimistic beyond the year.

Thank you very much.

John Blackledge, Cowen and Company.

Thanks for all the data on the call.

Couple of questions.

Did you consider raising the share buyback authorization heading into, with the print?

That's one, and then two, on Match, are the offline initiatives, are they going to have a bigger impact on paying subs or ARPU or both?

And then if you could give the mobile search ad revenue as a percent of total, that would be great.

Thank you.

What do we have in authorized shares now?

The issue for us is never going to be how many shares are authorized.

Because whenever we want to buy stock, if we want to, we will increase the authorization, so that is not a material issue.

Now some people use it to do a big authorization, but don't necessarily have to implement it.

Because they think it sounds good.

We are -- I'm sure we will be authorizing more shares, it's just a question of when.

On Match side, I think events -- as I said we launched it, we thought there was potential to do a whole bunch of things.

One is to improve the efficiency of acquisition.

As I said, that did not happen as quickly and as dramatically as we had thought, but we've got new marketing out that we feel really good about, and it's performing well.

In terms of revenue, we're starting to drive direct revenue this year for them, which will increase ARPU, and that also helps drive conversions, so it really is across -- and retention -- so it's really across all of those -- all of those various areas and in different stages it has different levels of impact.

The other question was?

The mobile advertising in Search as a percent of total.

We gave you a sense of the page views that we were seeing across the products and revenue per query is substantially less.

So, it's -- you can do the math, we don't disclose it, but it's still small and will be growing.

Thanks.

Mark May, Barclays Capital.

Two on Search please.

You said in your prepared marks, Greg, that the Ad Words policy changes that took effect in the quarter, I think your wording was had an impact roughly 12% of the Search segment.

Do you mind just clarifying that?

And how you get to that figure might be helpful.

And then secondly, regarding the new guidelines around apps, I think you mentioned that it will have an impact, it will impact I think you said quote, a bit.

Would you mind quantifying what a bit is?

And why are you -- why are you comfortable that you can grow after this initial bit impact in Q1?

Thanks.

Sure, on the first question --

Sorry, the last question is sort of the key, I would take it first.

Sure, the second question, we do all these things on an LTV basis, so we literally, we can look at virtually any change that a policy has, and we can calculate its impact on the LTV of a toolbar and an application.

And we can then calculate the marketing cost of that application and then we can forecast it out.

So, we know within pennies just from testing all these things, frankly as we are negotiating with Google we can quantify the impact.

We were going to have -- but for these things, we were going to have an off-the-chart year, it was going to be another year of 40%, 50% growth, so they're real impacts, but even when you calculate them out, we're going to be at the levels that Jeff laid out, it is pretty clear in front of us.

If Google CPCs are bad or anything else, of course you start to -- but assuming the world as we know it, we understand the impact of the policy changes pretty well.

And I think, and I think this is an important point, we really are in a strengthened competitive position.

So we look at this as a one-time hit, which we will feel this year, but the hit is going to be on us much less hard than it is on many other people out there, because of the existence of our Ask business.

And the benefits --

Inherently, this, we think, almost all of it is a healthy development.

That is right.

Is it meaning that this enables you to more competitively go after distribution?

We will have a more attractive LTV to offer to distribution partners on a comparative basis than we had before.

It may be a little less than it was on an absolute basis, but it will be comparatively much stronger.

Especially since one of the things that, as I said, we reached out to Google proactively in the summer because there were a lot of people doing things that we weren't willing to do.

And we were starting to lose business to those people and we wanted clarification, and those people are not going to be doing those things anymore.

Which again puts us on a much more advantageous perspective with respect to distribution partners.

So we feel really good about that.

The hits on LTV are a one-time hit.

We really, and I have to say our relationship with Google has never been better.

Really harmonious process.

Didn't agree with them on everything.

But we are participants in it, because we really are in it for the long term, and to Barry's point really do think that overall these things strengthen the segment long term.

It is important to underline -- we set this off.

Now, Google may have in their own wisdom come upon the same thing.

We sent them a 30-page, how long was it?

We reached out to them with a comprehensive analysis of the market and ideas about how to cleanse it.

How to cleanse it.

But it was a very long.

Yes.

It involved little --

To your point I'm sure Google was thinking about the same thing.

I'm not saying they weren't.

But we are not -- we are not blindsided by this and again it is not exactly where we would've ended up ourselves, but overall we feel really good about it.

On the first point, basically what we said was that we make of the segments OIBA we make about 12% of it off of marketing Ask on Google.

So you can think about the ways one would calculate that.

I'm not going to walk through the whole derivation, but you've got contribution margin from the keywords that you buy, and then against the thing, and then you calculate in sort of your repeat customers, and you allocate some cost and you do all that sort of stuff and that's -- you get to -- you can do it three or four ways and you get to around 12% no matter which way you choose.

Brian Fitzgerald, Jefferies.

Greg you mentioned About mobile pages at about 20% and Dictionary at 40%.

Where can those get longer term?

And does the inherent nature of that data or that service drive that, or are there things related to the interfaces or apps that can move that needle quicker?

What I would say is that we have seen that in the growth of mobile, reference actually tends to be a larger part of mobile search than of desktop search, because a lot of mobile search tends to be you can imagine you are somewhere and you want to know the answer to X. Dictionary is a prime example of that, and that is where Ask, About, and Dictionary all play.

So we are very well-positioned from a Q&A reference perspective for that area.

I think that Dictionary, frankly, put more effort into it earlier and really saw that as an area that they were going to go after.

About a little more, and Ask has just had so much runway that it's just starting a little bit later in terms of really putting it into it.

So in terms of where they can end up, that depends on a lot of macro assumptions about what's going to happen to mobile and desktop search.

I have laid out what our view is at least over the next four to five years, which is desktop search is going to be flattish and we don't expect a decline in that area.

We expect to be able to continue to get growth in that area, and we expect to continue to increase our penetration in mobile and tablet devices.

And then a quick follow-up.

Could you just give us some color on mobile web versus app traffic?

Do you differentiate between those two?

We differentiate in terms of the way one gets distribution for one versus the other can be different, but at the end of the day, all the Search and the surf get served up on the web, so the only question is where you're getting the query, and obviously we're indifferent; we'll go wherever we can get the query the cheapest, and the most widespread, and we're seeing lots of opportunity in both areas.

Thank you for staying with us all this time.

We appreciate that you seem to have all paid attention, and we look forward to talking with you next quarter.

Good day to everyone.

Bye bye everybody.

Thanks.

Thank you.

That does conclude our conference.

You may now disconnect.