QVC Group Inc (QVCGA) 2014 Q4 法說會逐字稿

Good day, everyone, and welcome to the Liberty Interactive Corporation Q4 2014 earnings call. Today's call is being recorded. At this time, for opening remarks and introductions I would like to turn the call over to Courtnee Ulrich, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you.

Before we begin I would like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, stock repurchases, future financial performance, in-service and product launches, and other matters that are not historical facts.

These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including without limitation possible changes in market acceptance of new products or services, market conditions conducive to repurchases, the availability of acquisition opportunities, competitive issues, regulatory issues, and continued access to capital on terms acceptable to Liberty Interactive. These forward-looking statements speak only as of the date of this call, and Liberty Interactive expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Interactive's expectations with regard thereto, or any change in events, conditions or circumstances upon which any such statement is based.

On today's call we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations, preliminary note and Schedules 1 through 5, can be found at the end of this presentation.

Now I would like to introduce Greg Maffei, Liberty's President and CEO.

Thank you, Courtnee. And good afternoon to all of you out there. Today, speaking on the call besides myself, we will have Liberty Interactive's CFO Chris Shean, and here with a guest appearance at the home office, QVC's CEO Mike George.

On to the highlights, first at Liberty Interactive. We are pleased to note that the trading of both our stocks, both LVNTA and QVCA, are above their respective pre-attribution levels, which is gratifying.

Looking now briefly at the operating results of some of the units in the group, QVC Group grew US revenue 5% and adjusted OIBDA 8% in Q4, both good performances in a positive market. QVC.com revenue as a percent of total revenue continued its pace upwards and increased to 48%. We achieved positive quarterly adjusted OIBDA at QVC Italy for the first time, a notable result.

We received a one-time special dividend from HSN -- net pre-tax proceeds of $146 million, of which, because we sold an exchangeable debenture, we didn't receive all the proceeds and so we net our piece down to $146 million. We are pleased with the actions of HSN in paying this special dividend and announcing an increased buyback target.

We repurchased $107 million of QVCA shares from November 1 to January 31. For the calendar year this made $785 million in repurchases. When combined with the dividend of Liberty Venture stock, which is distributed to QVC Group holders, in October, we returned $3.26 billion in value to our shareholders in calendar 2014. When you look at the cash component, with the cash component done at the $1 billion and the $785 million of repurchases, we are now basically at our target leverage ratio of around 2.5 at QVC. Going forward, I expect the repurchases at QVCA will more closely track the free cash flow generation of QVC.

Looking now on Liberty Ventures, we ended the year with $2.8 billion in cash and liquid investments. As we've noted previously, we are actively looking for investments. We like the idea of hunting for big game. We think there is less competition at that level, and we like the fact that we built a larger cash forward, and continue to grow the cash balance and liquid investment balance at Liberty Ventures.

Turning to the digital commerce company and their activities, we completed the FTD Provide deal. I think that was a strong deal for our shareholders. And we look forward to improving results at FTD. CommerceHub acquired Mercent, a great line extension for CommerceHub, whose own business continued to perform very well, and we think they've got great opportunities by extending in the Internet support space.

With that, let me turn it over to Chris Shean to discuss the financials.

Thanks, Greg.

Excluding the impact of digital commerce companies, QVC Group's revenue increased 1% in the fourth quarter and 2% for the year, while adjusted OIBDA increased 3% for the quarter and 4% for the year. Taking a quick look at the liquidity, at the end of the quarter the QVC Group had attributed cash and liquid investments of $443 million and $5.8 billion principal amount of attributed debt. QVC's total debt to adjusted OIBDA ratio, as is defined in their credit agreement, was approximately 2.4 times as compared to a maximum allowable leverage of 3.5 times.

When our 10-K gets filed later this week, you will notice that QVC is remedying a material weakness in its IT general controls. This issue primarily relates to access controls at certain international subsidiaries. We are actively implementing remediation plans to correct this problem. We note that the issue solely related to internal access controls; was not an external breach; and the issue did not have any effect on our reported financial results.

Now I'll hand the call over to Mike George for additional comments on QVC.

Thank you, Chris.

We were pleased with our progress for the quarter and the year, expanding the reach and relevance of our brand, and delivering a compelling shopping experience built around our four pillars of discovery, storytelling, social engagement, and outstanding service. We achieved a record customer count, strong growth in our digital and broadcast platforms, and highly advantaged financial results relative to most major retailers.

For the quarter we grew consolidated net revenue 4% and adjusted OIBDA 6% in constant currency, with particular strength in the US and UK. And revenue growth in China, which is not consolidated, accelerated, up 27% in local currency in the quarter. For the full year consolidated net revenue increased 3% and adjusted OIBDA was up 4% in constant currency, despite significant headwinds in Japan.

We continue to see strong customer response to our eCommerce enhancements, especially in the mobile space, with our initiatives around responsive design, second screen apps, touch ID, and other innovations. For the quarter, eCommerce revenues grew 11% globally in constant currency to reach 43% of revenue, and mobile commerce orders increased 46% in constant currency, to represent 44% of all eCommerce orders. For the full year we delivered $3.5 billion in eCommerce revenue and over $1.7 billion in mobile orders, once again making QVC one of the world's largest and most profitable eCommerce and mobile commerce retailers.

We also expanded our broadcast presence. Q-Plus, our second channel in the US, now reaches 54 million homes. And we saw continued strong results from our three additional channels in the UK and two additional channels in Germany. In Japan we are investing in improved channel positions and also experimenting with 30-minute TV segments on other channels to reach new customers. And in the US we were pleased in 2014 to conclude a multi-year extension agreement with our largest TV distributor, Comcast.

The success of these initiatives can be seen in the expansion of our customer base. For the quarter, our customer count, excluding China, increased 6%, including a 6% increase in new customers and an 11% increase in reactivated customers. And on a full-year basis, we achieved our highest ever total customer count. Including our China JV, we served approximately 13.4 million customers in 2014, introduced about 4 million new customers, and reactivated more than 2.5 million previously dormant customers.

For the quarter we expanded our adjusted OIBDA margins 59 basis points, largely on the strength of higher product margins and more efficient marketing spend. And for the full year we achieved a 35-basis point OIBDA margin improvement.

And while we reinvested in the business -- in technology, eCommerce, warehouse automation, and our France launch, and on other growth initiatives -- our CapEx spend of $182 million for 2014 represented just 9.5% of adjusted OIBDA, our lowest capital investment ratio since 2005. Combined with tight inventory management, with inventory down 3% year over year on a constant currency basis, we once again demonstrated our commitment to delivering high levels of free cash flow.

Turning to the results by market, the US teams delivered an outstanding fourth quarter and full year. Revenue grew 5%, adjusted OIBDA rose 8%, and adjusted OIBDA margin expanded 73 basis points in the quarter. For the full year, revenues grew 4%, adjusted OIBDA rose 6%, and adjusted OIBDA margin expanded 47 basis points.

Units sold increased 9% in the quarter, driven by sales gains in all categories except electronics. Within the home category we saw strength in the floor care, home improvement, automotive accessories, and toy departments. Great ideas like our FrostGuard windshield and wiper cover, that sold a record 540,000 units in a single day, helped power the quarter. Beauty, apparel, and accessories also contributed to the strong quarter, due in part to our nonstop style event in December and our customer choice beauty awards. Top-performing brands included Dooney & Bourke, Wen, Josie Maran, Isaac Mizrahi Live and LOGO by Lori Goldstein. ECommerce revenue grew 11% in the quarter to 48% of US revenue, up from 45% last year. And mobile commerce grew 48% to represent 42% of total eCommerce orders, up 10 percentage points from the prior year.

Our US customer base has never been stronger. Active customer count grew 9% in the quarter, with new customer count up 11% and reactivated customer count up 12%. For the full year we grew customer count 6% to nearly 8 million customers, with gains from existing, new, and reactivated customers. We also improved retention rates for each of these customer subsets. As a result, we entered 2015 with the largest US customer base in our nearly 30-year history.

Adjusted OIBDA margins expanded strongly due to higher product margins, lowered marketing spend as we improved the efficiency of our online marketing and increased profitability from our private label QCard program.

We are encouraged that the labor dispute on the West Coast appears to be resolved. While it has created challenges to certain aspects of the overall and US supply chain, to date we have experienced very few issues with goods not being ready to sell at the required time. And while it will likely take a few weeks to move through backlogs in the ports, we do not anticipate any meaningful impact.

Turning to Japan, net revenue declined slightly in the quarter, an improved trend over our Q2 and Q3 results as we began to recover from the impact of the April 1 consumption tax increase. And our count of new customers grew 4% in the quarter. That is the first significant quarterly growth since Q1 of 2012, as we invested in additional TV distribution to help overcome the loss of channel visibility associated with the transition from analog to digital TV. Adjusted OIBDA margins declined due to lower volumes, timing of certain personnel expenses and higher TV distribution expenses. As I've mentioned on previous calls, the pace of recovery in Japan remains uncertain, given the macro headwinds, but we do feel the worst is behind us.

Germany experienced a slight decline in net revenue and adjusted OIBDA in the quarter. Overall we are pleased with the strength of the German turnaround in 2014. And while results in Q4 were off the pace that was set in Q2 and Q3, we remain confident in the health of this business. The top-line softness was driven in part by calendar shifts and shipment timing issues, along with higher return rates. And our cost restructuring initiatives in Germany are working, with fixed manpower expenses declining over 90 basis points despite the lower sales volume.

In December we were delighted to announce the employment of Mathias Bork as CEO of QVC Germany, effective January 1 of this year. Mathias replaced Steve Hofmann, our Euro CEO, who was also leading Germany on an interim basis. Mathias joined QVC Germany as Chief Marketing Officer in 2009, brought 25 years of retail industry experience in both German and international positions for such major players as Germany's Autogroup, the Home Shopping Europe, and Britain's Harrods. So, we're really delighted to have Mathias in this role.

The UK continued its strong run with net revenue up 6% and adjusted OIBDA up 12% in local currency in Q4. We are seeing strong increases across categories, good performance from our additional beauty and fashion channels, and outstanding eCommerce growth, up 18% to 37% of total UK revenue in local currency. And mobile commerce grew 50% and now represents 64% of all eCommerce orders. Warehouse automation and other cost initiatives are also supporting the strong expansion in OIBDA margins.

In Italy, revenue grew 8% in local currency, with strong results across most categories. As I referenced on our last earnings call, in 2013 some sales shifted from Q3 to Q4 due to backlog associated with the launch of our Italy logistics center. This had a corresponding positive impact on our Q3 growth rate this year and a negative impact on our Q4 growth rate. So it is somewhat understated from the overall trend of the business. And we were delighted to see our first profitable quarter, as Greg mentioned, with adjusted OIBDA of a little over EUR600,000 versus a EUR1 million decline last year.

Net revenue in our China joint venture increased 27% for the quarter and 24% for the year in local currency. We served over 1.2 million customers over the last 12 months, including nearly 870,000 new customers, and we are beginning to get some traction in our eCommerce initiatives. Our We Chat mobile application we launched in June -- it's getting great customer response, and in Q4 represented over 5% of total orders. We had a modest adjusted OIBDA loss in the quarter as we continued to invest in expanding our TV distribution. We are currently in 89 million homes, up from 70 million a year ago.

Now before I turn it back to Chris, I'll wrap up with a few comments on 2015. We focused on a number of key initiatives to continue building our brand and enriching the shopping experience. We are working on the first full redesign of our website since 2007, which will bring our core brand attributes of discovery, storytelling, social, and service to the web in new and compelling ways. We'll be increasing the mix of original and counter programming on our secondary channels to draw in additional customers and create incremental purchase occasions for our existing customers. And we continue to deepen our customer engagement through more personalized communications.

We'll launch France this summer across broadcast, online, mobile, and social platforms. It will be our third new market in the last five years. As we've discussed on prior calls, we are launching France with a lowered CapEx spend relative to our Italy launch, with just $4 million of capital costs incurred in 2014, and another $18 million planned for 2015. We also anticipate an adjusted OIBDA loss of approximately EUR20 million to EUR25 million this year as we launch the business.

And on February 2, we unveiled new shipping and handling rates in the US to further strengthen the value equation for our customers. We recognize that customers are increasingly sensitive to the S&H rates, and with good momentum in the business in 2014, we felt this was the right time to proactively adjust our rates. We took three actions. We changed the rates for most items, where we charge shipping and handling, with a large majority of those items now featuring $3 or $5 rates. In addition, we eliminated refunds for shipping and handling on returns, unless QVC was at fault or the item was defective. And we eliminated shipping and handling discounts for multiple items in the same quarter.

The financial impact of the S&H changes will, of course, depend on how customers respond to the new rates. But we expect the changes to be largely neutral to revenue growth, with the decline in S&H revenue roughly offset, we anticipate, by an increase in product sales. And we would expect the net OIBDA impact to be in the range of 20 to 30 basis points on the US business for the full year. We do view this as an important investment for the long-term strength of our franchise. And of course we'll continue to strive for cost and productivity gains to help offset as much of this investment as possible.

We also anticipate facing continued currency headwinds in 2015. The primary impact of exchange rate changes for QVC is simply the conversion of local currency results back into USD reported results. On a consolidated basis, the impact of exchange rate movements on margins is low, since most of our expenses are incurred in local currency, and a large majority of our goods are purchased and paid in local currencies. Depending on the mix of direct imports, the degree of pricing pressure we receive from our vendors, and our ability to pass along price increases to consumers, we might see a modest margin impact in some international markets for a quarter or two, but these impacts are unlikely to be meaningful on a full-year consolidated basis.

And, finally, we expect that our capital spend will be $200 million to $210 million for 2015, including investments in IT infrastructure, digital eCommerce, data security, broadcasting, and the France launch.

And with that I'll turn it back to Chris.

Thanks, Mike.

Moving on to Liberty Ventures, due to the reattribution of the digital commerce businesses on October 3, and the completion of the FTD and Provide Commerce transaction on December 31, we have defined our continuing consolidated digital commerce companies as Backcountry.com, Bodybuilding.com, CommerceHub, Evite, and The Right Start. From September 30, 2014 on, the results of the digital commerce companies will be reflected in the Liberty Ventures Group. Prior to this date, the digital commerce results were reflected in the QVC Group results.

The continuing consolidated digital commerce business revenue increased 7% in the fourth quarter and 9% for the year. Adjusted OIBDA increased 17% for the quarter and 22% for the year. Each of the significant continuing digital commerce businesses experienced revenue growth. Backcountry.com revenue increased as a result of increased order volume and average order value. Bodybuilding.com revenue increase was primarily due to increased order volume. CommerceHub revenue growth was mainly attributed to growth in active customers and an increase in the aggregate transactions processed. The growth in adjusted OIBDA was primarily the result of increased revenue.

Now let's take a quick look at the liquidity picture of the Ventures Group. At the end of the quarter the Group had attributed cash and liquid investments of $2.8 billion and $2.1 billion in principal amount of attributed debt. The value of the public equity method securities and other public holdings attributed to the group was $2.8 billion and $1.2 billion, respectively, at the end of the quarter.

Now I'll hand the call back to Greg.

Thank you, Mike and Chris. To the audience, we appreciate your continued interest in Liberty Interactive. With that, Operator, I would like to open the call for questions.

(Operator Instructions)

Alex Fuhrman, Craig-Hallum Capital Group.

Thanks so much and congratulations on a great year here. We'd love to touch quickly on the growth margins, particularly in the US. Very strong here for QVC growth margins. We'd love to know, just get a sense of how much of that do you think was driven by the mix shift away from consumer electronics versus actual potentially increase in margins within every given category?

I would say it was mostly mix shift, so certainly this shift away from consumer electronics was meaningful, the relative health of our fashion businesses, which have been really on a strong run rate and have some of the highest margins of any of our businesses. So, I think it's largely product mix. We're always looking carefully at pricing opportunities but in the context to try to make sure we're providing a strong delivered value to the consumer. Most of it is mix driven.

Thanks, Mike. Can you just touch on the Comcast agreement renegotiation? Was there anything substantially different, either the rate or the way you're paying the fees in terms of the way that the commissionable sales base is calculated? Anything material there that is different from your prior agreement with Comcast?

Nothing material. Without getting into the specifics of the agreement, our basic formula and format for how we pay commissions, the exclusion of off-air sales, all those things basically continued with no material changes.

Great. Thank you very much and good luck this year.

Barton Crockett with FBR Capital Markets.

Great. Thank you. I was curious about the digital commerce part of Ventures now. A couple of things -- one, CommerceHub, which I think had a very impressive presentation at your investor day, doing 30% OIBDA growth. I think you talked about an $8 million improvement here. Would that be consistent with the kind of growth rate we were seeing at the investor day, or has that changed?

And then, secondarily, on digital commerce, as these businesses continue to grow, when do we get to a point where we could think about maybe these things being at a scale that they could be spun off as a separate full company or a separate tracking stock?

I think that the CommerceHub Q4 results were consistent with the full-year results and maybe slightly ahead but largely in line. And we just got them into their own, over to the other side here at Liberty Ventures. You want us to already get rid of them, Barton? You've got to give a little time here.

We think there are some things we can to do to add value. At some point it may be time to send the ducklings out on their own but at the time I think leaving them in the hatch and growing them and doing some transactions and some other things; and letting them run their course because a bunch of them are growing quite well. I think that's the course of action we'll be following.

Okay, great. Thank you.

Matthew Harrigan with Wunderlich Securities.

Thank you. I was really curious on the light model in France. That is a major fifth largest economy, I think. And less than $50 million burn, I think, between the CapEx and the OpEx. And I know there are idiosyncrasies of every market and you've got some gating elements on carriage and all that, that limit things. But could we infer that if this model works that you could go into the Netherlands or Sweden or some of these mid-sized economies, a little bit more readily with even less burn than that?

And then, you are one of the real winners on media fragmentation. But when you look at guys like Sony who might do a full equivalent to a cable bouquet on their launch, how are you thinking about that as a potential conduit for QVC?

Matthew, on the first question, there's two different issues there in terms of looking at smaller-sized markets. I think we've clearly learned how to launch a market with less capital investment than we had in Italy. We were just in a different place as a company.

Our systems are better able to be transported to new markets without the heavy systems investment we needed in Italy. We've gotten a little more comfortable with third-party partners to perform various elements of customer service and distribution. So, we would think that that lower rate of CapEx spend is sustainable as we look at the markets.

But the bigger challenge with a market the size of the Netherlands or Sweden is just having enough homes and revenue to offset the fixed operating cost. There is a certain minimum scale investment in fixed cost to run these business and do them at the level of quality we want associated with our brand.

So, I think we still have to look at creative models to penetrate that next tier of markets. for example, in the Netherlands, you could envision an operation that you might run out of Germany and broadcast in the local language but out of Germany.

So, I think we have to get creative about further reducing the OpEx burn in a smaller market. I think we've got the capital side well in hand but the OpEx side would still be a bit of a challenge and we want to try to be creative about models to address that.

And I'm sorry, you'll have to give me your second question.

The virtual MVPDs are basically replicating a cable bouquet as opposed to just serial programming like Netflix. It Sony does the full-blown incarnation of a Comcast-type bundle, I assume you'd expect to be included in a service like that and you are just happy to see more distribution? Or is that something that is not even vaguely on your screen yet?

It's definitely on our screen. Those sorts of models are good news for us, as far as we are concerned because, again, we can go wherever those virtual models go. We've certainly been in discussions with Sony and other players that are looking in the space. And to the extent that various forms of subscription models, over-the-top subscription models, emerge and get reasonable traction, we would expect to be a part of those bundles.

Thanks, Mike. Thanks for taking the questions.

Jason Bazinet with Citi.

Two quick ones. One for Mr. George. I was a little surprised in your comment that the shipping and handling you thought would be revenue neutral. Can you just elaborate a little bit on how much shipping and handling revenue hit you expect because of these changes?

And then second, for Mr. Maffei, I got this question from an investor -- I assume that the dividend that HSN paid didn't alter your equity stake in HSN. If you could just confirm that, that would be great.

I'll take the easy one. It did not.

Okay, thanks.

Again, we've got to see how the customer responds. So, I don't want to be overly prescriptive about exactly how we would model the impact of the S&H. But order of magnitude, if we saw something like a 20% reduction in our net S&H revenues, that's a range we could envision. You would need maybe a little bit over 1 point or so of incremental product sales growth to offset that.

So we've got to let the market tell us. There is so many puts and takes with what mix of business is being purchased by the consumer, how they respond to the shipping and handling rate that -- our best center point estimate would be revenue neutrality. It could be a little better than that, a little bit worse than that.

And keep in mind that there are a lot of moving factors here. For example, the fact that we have been growing our fashion business as strongly and reducing our consumer electronics business is another added dynamic that makes the story a little bit complex because for the most part consumer electronics has shipping and handling included. So when you move away from consumer electronics you are moving from no shipping and handling revenue to some revenue. So, all those things factor into that kind of an estimate.

Understood. Thank you very much.

Matt Nemer with Wells Fargo Securities.

Thanks so much. Congratulations on a great quarter. I also wanted to ask about the shipping fee change in the US. I'm just hoping to better understand the rationale for the timing for doing it now. It seems like the business is doing great, so is the idea that you would like to hit the gas and take more share? Just want to understand the timing around that.

We have been feeling good about the performance of the business. When we look at something like this, that's always out there on your long-term plans as a potential risk to the business, depending on how consumers react over time to shipping and handling rates. Our view was, why not start to deal with that potential risk at a time when our business is healthy as opposed to scrambling when the business is all of a sudden suffering because consumer resistance has risen. So I think it's fair to say, that I couldn't point to any meaningful decline in our sales velocity that we thought was associated with the S&H rates we charged. And we're also being, therefore, conservative about how much velocity will pick up as a result of these changes.

So, that is more just a 5- to 10-year view of saying we've got a healthy business, good results, a lot in the hopper in terms of cost and productivity initiatives, so why not be proactive in a year in which we could absorb it? Certainly it will have some impact on the P&L, so that's why we wanted to call out that 25 basis point potential impact, which is obviously a 12-month impact that you then anniversary. So we just like taking this on in a proactive way during a time of overall health for the business.

And that 20 to 30 basis point impact, does that include potential offsets? Or is that a number that could go down as you deploy productivity offsets?

The way I would think about it is, with the caveat that we never give guidance on the year, we talk in general terms about always trying to find a way to get a 10 to 20 basis point OIBDA improvement in our business. That is what we always march to every year. Some years we do better and some years worse. Obviously, in 2014 we did better than that.

And that 10 to 20 basis point improvement assumes a lot of productivity initiatives. The way I would think about this 25 basis points is, it would be a reduction against that kind of a trend. There's an inherent level of productivity we need to just get stable to improving OIBDA margins. This would be, let's call it, a decrement on top of however you would plan or assume we would be achieving those benefits in the base business.

Understood. Okay. And then just, lastly, in terms of CapEx, is the 2014 QVC number a pretty good number to use for 2015, including the incremental France CapEx? Or anything that would deviate from that?

I made a comment that our CapEx should be $200 million to $210 million in 2015. So, a little bit higher run rate than 2014, largely due to that step up in cost (inaudible).

Got it. Apologies, I missed that. Thanks so much.

Our final question will come from James Ratcliffe with Buckingham.

Hi, thanks for taking the question. Two on Ventures, if I could. First of all, could you give us any color on the impact of the Mercent acquisition, either on the cash balance, revenue, EBITDA, et cetera?

And, second, just thinking about the cash you have and the investments, with markets at all-time highs, how do you trade that off, and presumably on the evaluation of assets you could be looking at versus the time value of money and the long-term need to meet those IRS obligations? Thanks.

First on Mercent, we didn't disclose the value of that because it wasn't material. And I think that probably also speaks to the fact it's not going to be a major cash drain. Our challenge at CommerceHub is not finding ways to spend our money, it's managing the good growth we have and finding logical extensions that the management team can handle and still maintain the growth and strength of their current business. So Mercent is a nice little test. We think it could be meaningful but it is not a material cash number.

On the trade-off between time value of money and opportunity, I think I've said before, I've been here nine-plus years, for the first eight of them we sat and said we have too much cash at Liberty media. And we sat on our balance sheet, sat on our balance sheet, sat on our balance sheet. And, frankly, with a series of smart deals where we picked our spots, primarily when we look at incremental capital spend it would be SIRI and Charter, that were generating the excellent returns that have made the difference.

I think we're probably people who are, frankly, less concerned with that time value money thing than making the right bets. And we do note, as you have noted, that the market's pretty high. It's not easy to find cheap investments. In fact we probably are constitutionally in a more difficult position than hedge funds or even PE funds. Why? -- because, first, we've talked about before the tax drag we have, which means we have to be able to come in and find influence to help find our way out of our investments at the end in a more tax efficient manner.

But, in addition, just going in and buying 3% or 5% of something, given that we need to have a longer-term time frame, internal build up, probably doesn't work. We need to be able to buy a meaningful stake and have that voice. It just raises the bar on the difficulty of finding things.

So, I hope I've sufficiently scared you about the risks we have because I really think it is the reality, that we are going to wait for the right moment.

All right. Thank you.

To the group, thank you out there for your interest in Liberty Interactive. And we are very happy you joined us and we look forward to speaking against next quarter, if not before.

Thank you. And, again, ladies and gentlemen, that does conclude today's conference. Thank you all again for your participation.