Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the IAC First Quarter Earnings Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded Thursday, May 3, 2007. I would now like to turn the conference over to Tom McInerney, Executive Vice President and Chief Financial Officer of IAC. Please go ahead, sir.

Thanks, operator, and thank you, everyone, for joining us today. 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. Also, you are aware that there are risks and uncertainties associated with these forward-looking statements and our results could be materially different from the views expressed today. Some of these risks have been set forth in our earnings release filed earlier today with the SEC and our other publicly filed reports. We will also discuss certain non-GAAP measures. I refer you to our press release and the Investor Relations section of our website for all comparable GAAP measures and full reconciliations. I will highlight a few items in our financial results before turning it over to Doug and Barry. One quick comment, in most cases, we have changed our segment names from generic to the appropriate brand name. Example, what was once called Ticketing, is now called Ticketmaster. This is formatting only, and we think will be clearer, but in no segment has it changed in any way the business composition of what's in there. Our results in Q1 were mixed. The tables in the release lay out the numbers clearly, and I don't want to bore you all with a repetitious reading, but you will see a very good quarter in most of our principle businesses, including Ticketmaster, ServiceMagic, Interval, Match, and our Media and Advertising business, including Ask. HSN and LendingTree had challenging quarters, particularly on the margin side, and this drove consolidated operating income before amortization to be down modestly year-over-year. With a slightly lower effect of tax rate as compared to last year and a lower share count, adjusted EPS was up 8% year-over-year. Let's turn…

Thanks, Tom. I will take just a few moments to go a bit deeper into the businesses and give you some texture to the results. Overall, this quarter reflects what we talked about a few months ago, very solid performance in most of our business mixed with ongoing challenges at HSN and LendingTree. At HSN, the turn in the business is taking longer than we would like, but there are continued signs of progress. At LendingTree, the challenges are related to the broader mortgage market, and we are facing them head-on. I will start with retailing. We had good result from our Catalogs and Shoebuy businesses. But at HSN, the financial results for this quarter are frankly not what we expect, particularly on OIBDA, as Tom described earlier. That said, we are cautiously encouraged as the HSN team continues to make progress against key initiatives in turning the business. For example, we're bringing lower price point items to the market in an effort to attract new customers for HSN, and we're upping airtime for these items. Over a third of total airtime went to products priced under $50, up more than 5 percentage points from last year. We revamped our spring fashion week, incorporating different trends and merchandise each evening, with an editorial style presentation, a runway and a celebrity guest stylist. The format was a hit. Viewership grew over the course of the week, new customers were up 25% from last year's week, and customers were buying 12% more than last year. Our new 6000 square foot outdoor set was unveiled this quarter and is the first of its kind in the industry. This will enable HSN to present the full spectrum of outdoor lifestyle products. Importantly, this will include some of the great Cornerstone products that we have,…

Good morning, everyone. I think that today it is best to quickly go to your questions. But first, as they say on The Today Show, this was a good news, bad news and good news quarter. The bad first, which you already know, HSN and LendingTree performed poorly. The good, the rest of IAC, showed big growth. And I think the other good is that nothing in the quarter pulls down my confidence that HSN is going to soon be a far better competitor. And I also think that LendingTree is going to emerge from the poor mortgage cycle stronger than ever. But beyond that, Tom and Doug have given a lot of detail to both the quarter and the trends. The best thing for me to do is just to get on with your questions. So let's begin. Operator?

(Operator Instructions). Anthony Noto, Goldman Sachs.

This is actually Jenny Watson in for Anthony. We're wondering about your thinking regarding the optimal capital structure for IAC and what the primary reasons or obstacles are for not pursuing that structure now?

I don't think I totally understand -- I mean I understand the question, I don't know how I can respond. The optimal capital structure for IAC is certainly to have enough cash resources for any contingency, and beyond that is not to be overleveraged. And we were making some progress at that. We have explained why at least one of the reasons was, we couldn't even consider purchasing stock in this quarter. Our intentions long-term were quite clear. We will be opportunistic about it. But other than that, we're not going to comment on it, except after the fact. So, I think that -- if I take your question properly.

Yes, that does answer it. Thanks.

Okay. Next question please.

Thank you. Our next question comes from Jeetil Patel, Deutsche Bank Securities. Please go ahead.

Two questions. Can you talk about the sustainability of the Ticketmaster growth? It is looking pretty good at mid-20s and probably some upside from the venues or the tours being stronger than expected. Do you think this business has the capability of maintaining a 15% to 25% growth rate as we look at this year and the event calendar out there? And second, as you look at your retailing business, do you think it's a bigger priority for you right now to try to manage the cost structure down versus try to grow the top line, I guess if you look at the priority in the near term, or first, what is the priority as you go forward over the next several quarters?

Tom, why don't you take the first question and then I'll come back to HSN.

Yeah, I think I feel like I have been singing this same tune for it would have to be years now, if you go back to my prior stint at Ticketmaster. But I think we directionally feel that very strong growth, both top and bottom line at Ticketmaster is sustainable, that we have enough growth drivers in terms of our balanced presence domestically and internationally entering new markets, and we're not done there, new products, new services, winning more than our fair share of clients and there's always clients to gain, no matter how many we have, there's always more to go get new revenue streams, new businesses, etc., that there's enough kind of oars in the water, and as long we execute well, and we have for a long period of time, we should outgrow the market by some degree. Now, we have had a favorable market. It was favorable last year focusing on our biggest market, which is North American music and it was favorable again at the beginning of the year. So, I would never say that the type of top line growth we posted in the quarter, we love it, we will take it when we can, and sometimes the wind is at our back and we will go with it. I don't think that magnitude is sustainable, but certainly double-digit growth, certainly faster than the market. It will be a nice mix of top and bottom line, and the drivers remain intact.

On HSN, I think it is a mix of many things. I mean, we are making investments and have been making investments, and that is where you see the results for this quarter. And it will last for some time longer, hopefully not the whole year. We are making investments to grow with the top line. And of course, relative to the bottom line, we are I think prudently dealing with the cost structure of HSN while we go through this period. We want to have our expenses other than the initiatives that we're putting forward in various parts of HSN. These initiatives are designed to make the business more competitive. And the results that come from that, we're waiting for, we're waiting for the top line to start gaining momentum. Many of the seeds have been put in place already. And much of the work, not all the work, of course, but the ground tracks have been laid. And I think as we go through the year, I think we will see the grip begin to take hold.

And quick follow-up. When do you think you get back on track in the L.A. market from a distribution standpoint?

Tom?

Time Warner is our partner there, and because of very unique facts and circumstances which is there, acquisition of Adelphia in that market, we've worked with them kind of collaboratively, not that we wished it, but we accommodated, I guess is the best way of putting it, a temporary loss of approximately a million homes while they rationalize their systems and go through some of that post-merger stuff. We will come back. It will either be in the very short term or sometime into next year, and kind of there is a range there, and anything is possible within that time frame. But it is temporary. It hurts us a little bit. It's not dramatic, because it is only a million homes. And again, it was a very unique set of facts and circumstances, and we accommodated their needs there because of the acquisition.

Next question.

Our next question comes from Doug Anmuth from Lehman Brothers. Please go ahead.

Thank you. Can you provide some details on a comment you made regarding the corporate discussions? And then secondly, can you give us some kind of update on the timing related to Ask and the search deal, which expires at the end of the year? Thank you.

The first question, no, we can't. For, I would hope you would all understand, understandable reasons. On the second, we are in discussions with everybody. The Ask/Google expiration at the end of the year, I think we will be way ahead of it in terms of solidifying what our future is going to be. And that is about all we can say about it right now, other than I am kind of certain it will be done by summer.

And just follow up with one thing on HSN? We're seeing a re-acceleration in certain parts of e-commerce, in particular at Amazon very strong growth. So, I'm curious if you think the HSN challenges are more company-specific or is it possible we're seeing a bigger trend here that is shifting in terms of how people are purchasing from their home?

I don't think that we're seeing a shift. I think we are going to over a long period of time -- long period of time, probably the next three years, five years. I think we will see more and more online purchases. I think that HSN and our competitors on-air or are going to have higher percentages online as the broadband continues to expand and this convergence of pictures, video and data continues its convergence. So, I think the shift is inevitable. But I don't think that the issues for on-air are yet, so to speak, I mean, the issues -- what will happen to the on-air is going to be compromised in terms of its ability still to be a vastly significant area of commerce.

Great, thank you.

Next question please.

Our next question comes from Imran Khan from J.P. Morgan. Please go ahead.

Hi, this is actually Bridget Weischaar in for Imran. A quick question on Ticketmaster, the revenue growth was fantastic, but it looks like the margins dipped a little bit, and you said it was due to international investments. How do you see the OIBDA margin progressing through F'07?

There were a number of factors in the quarter. It was a bit of an unusual quarter. We skewed much higher in music than traditionally in Q1. I think we were up multiple percentage points in music as a percentage of the mix. And while music is very profitable and as or more profitable on a per-ticket basis, on a percentage basis it is lower because of the rebate rates and the pricing. So, when music skews high, we tend to get higher revenues per ticket, but the percentage margin doesn't necessarily come through. So that was part of it, part of it was faster growth internationally, where we do operate at slightly lower margins, not dramatically lower. And then, we continue to make very substantive investments in product technology and services for our clients. It is directly related, and this has been kind of the formula, each quarter it adds up a little bit differently, but the formula over the last several years has been constant innovation in the delivery of quality products and services to our clients on one side and the consumers on the other. And that's what allows us to grow faster than the market. So, what we tend to do is manage the business on an OIBDA growth basis. We want solid double-digit OIBDA growth over time. Each quarter will be a little bit different, and if investments can help us get there, but the percentage margin is a little bit lower, that's fine. The real focus is on that percentage revenue growth. So, I think going forward, I don't see any broad margin pressure issues. We are not managing for margin expansion per se. But, I think the margins should be reasonably stable, although in any given quarter they can jump around.

Thank you.

Next question please.

(Operator Instructions). Our next question comes from Justin Post from Merrill Lynch. Please go ahead.

Thank you. First, we'd start with Ask. I'm wondering if you could talk about the core query growth on Ask.com and how much you got helped by Google's monetization efforts, if you could help us out with that. And then obviously, bigger picture, underperforming your OIBDA growth targets this year with the new outlook, how do you feel or what do you think are the key drivers that's going to get you back to a double-digit level, maybe in '08 or by '09? What are the key areas we should be watching for?

I will take the second, and Doug, why don't you do the first.

In terms of Ask, RPQ was definitely helped significantly. However, that is a combination of factors. One is, it is clearly Google helping revenue per query increase, but it's also, as we alluded to in the comments, much more specific mix shift, particularly in our proprietary areas, which include Ask U.S. and UK, and Fun Web Products where we are getting a higher percentage of commerce queries versus sort of research queries, which tend to monetize better. So we're seeing very solid revenue per query growth. We are also seeing very solid query growth, up high single digits on the proprietary side, and on the network side doing very very well as well. So, solid growth on both RPQ and on queries.

On growth, we have two problems, HSN, which we have talked about, and LendingTree and its cyclical situation. We think they are not going to get fixed overnight. We think that the second half is going to be stronger than the first half. We think we will return to double-digit growth, certainly as we get into '08, would be absolutely our expectation. Other than the two issues that we have, everything else that we -- you can't obviously exclude them, that's silly, but you can simply explain them, but other than the cyclical LendingTree, which I absolutely believe all the things that we are doing is going to make us emerge from -- the cycle will change and we will emerge stronger. HSN, good work is being done and good results will come out. Everything else, as I said, is performing quite well. So certainly, we expect double-digit -- can't put it in exact point in time, but there it is. Next question.

Our next question comes from Mark Mahaney from Citigroup. Please go ahead.

Thank you. Two quick questions. First, the Match subscriber growth of 1% year-over-year seemed unusually low. Any color on that? Is it reasonable to expect that that growth would reaccelerate? And just in the ticketing business, in order to think about what the growth will be like through the balance of the year, how big of a tour event is The Police relative to other events? Is this the biggest event you would have seen in the last year and a half? Is it like Harry Potter is to the bookselling business? Thank you.

Tom.

On your first question, if you go back to 1999, we bought Match.com, and over that period, there's many, I don't know the number exactly, but there have been many many periods where sub growth has flattened out. I mean, that is essentially what happened, domestic subs were down a little bit, but essentially flat, close to flat. And that happens for while and then we find new innovation. This is a business that is a periodic consumption business as much as it is subscription, because people come in and out of the service. Repeat users are a very high percentage of our revenue mix now, they come, they leave, they come back. And it responds to product innovation, it responds to marketing, it responds to distribution. So, when we look through the drivers of why we got sub growth leveling out domestically this quarter, there's a number of things we could point to, none of which are structural or permanent. We need to come back with creative marketing. We need to come back with product innovation. We need to look to our registration to conversion funnel and content in SEO, and I can go on and on, and I won't. And this has happened before. And the business is bigger. It still, it has, relative to the -- I think the last number I saw was 80 million singles just in the U.S. who are open to a relationship. This category is still very under-penetrated and there is still plenty of opportunity, but we expect it to come in fits and starts. And in the meantime, we had pricing, as Doug mentioned in the quarter, we are going to optimize that by market, so we're going to look at some of the smaller markets where we may have gone too far and step that back while leaving it in place in the bigger markets. And at the same time, continue to invest internationally. So, we think longer term, we will be fine. And it is just one of these things. I'm sorry, your second question was The Police. I don't have the figures off the top of my head, but there was nothing that jumped off in this. Our business has always been shockingly balanced. We have thousands of events that sell every quarter and the top five events usually comprise a reasonably low percentage of the total tickets. This is not the book business.

Thank you very much

Next question please.

Our next question comes from Heath Terry from Credit Suisse. Please go ahead.

Great, thank you. When you look at growth in the ticketing business, can you talk about the breakdown between price and volume that you've seen there and to what extent that you feel like price is a source of growth in Ticketmaster going forward?

Tom.

Yeah, it has been -- and again, this has been reasonably consistent, each quarter is a little bit different story, but it has been a very good balance. Our tickets were up, unit volume in the first quarter, were up 15% and pricing was up approximately 10%. So, both of those were big. And as I said earlier, we don't count on those quarter in or quarter out, but this general, kind of both being material drivers, both being contributors, have been the pattern for a while. We don't try and manage the business or count on in the future big pricing. We take it when we can get it. When we work with clients on renewals, we look for value-added ways we can push pricing up. And ultimately, over the long term, we think it's going to correlate with event pricing, which has tended to continue to go up, not on a short-term basis, but over the long-term as live entertainment events continue to rise in price, most likely our pricing well as well, although we really try and manage the business so that we can drive real revenue growth from the volume side first, because we feel like that, we can control, that and new products, and whatever pricing we get is gravy.

Next question.

Our next question comes from Robert Peck from Bear Stearns. Please go ahead sir.

Hi, Barry, I was wondering if you could talk a little bit about the Ticketmaster lawsuit with eBay and so, what particularly the issue is there. And then number two, there has been a bigger picture, a lot of strategic acquisitions that have taken place across the search and advertising space. Could you comment on your view of acquisitions and where there may be holes in the portfolio going forward? Thanks.

Relative to eBay and really StubHub, so, StubHub is now eBay. The lawsuit is very simple, which is that we believe that they infringed on our relationship with our contracts. That is the basis of it, and we feel fairly -- not fairly, we feel strongly about it. So, that's that on that point. And the second -- sorry, what was it?

It was on strategic acquisitions in this space and where there could be holes in the portfolio, for IAC going forward?

I don't think there is a hole in the portfolio. I think we have got a big portfolio and we have a ton of internal initiatives. And we are involved, as we always are, in explorations of acquisitions, nothing of a huge size. The largest is probably about $500 million. But they range from tuck-ins, very little, $10, $20 million, something like that in terms of investments to low 100s. But other than tuck-ins and areas where we do see some opportunity, there is nothing, there is no hole there, and we don't have big eyes for acquisitions. Of course, I always have to say around the corner, something could come, but I certainly don't see it.

Thanks Barry.

Next question.

Our next question comes from Kevin Kuzio from Dwight Asset Management. Please go ahead.

Thank you. Good morning. Because the stock buybacks are such an important part in my thinking about our investment here, I hope you forgive my going back to the corporate transaction comment just to help me understand what that could incorporate. I'm curious if you could maybe say whether it was more inside-looking, kind of organizational, or perhaps a revisit of an Expedia-like tender that was considered and rejected before versus kind of outside-looking M&A activity or something like that?

Actually, I can't, and it's not that I want to be mysterious about it, but because we spent some time on this, and it was material, and we may revisit it again, and we don't know when that will be, I just can't -- I can't put it in any category. So, there's nothing I can say about it.

Okay, thank you. Fair enough.

You're welcome.

And at this time, we have no further questions in queue. I would like to turn the conference back to management for any concluding comments. Please go ahead.

Thank you all very much. And we will of course be with you next quarter. Good day.

Thank you. And ladies and gentlemen, that does conclude the IAC first quarter earnings conference call. We thank you again for your participation today, and you may now disconnect.