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Here’s the entire text of the Q&A from Homestore’s (ticker: HOMS) Q3 2005 conference call. The prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Question-and-Answer Session

Operator

Operator Instructions Your first question comes from Aaron Kessler, Piper Jaffrey.

Q - Aaron Kessler

Thank you, good quarter. A couple of quick questions for you. In the 20% Media guidance I believe you gave, what total assumptions are you making for the new initiatives for that for next year?

A - Mike Long

The 20% guidance we're referring to, Aaron, is what we have consistently shared in our investor presentations that for the overall goals for Homestore is to build a company that could reliably produce 20% topline revenue growth and 20% margins, and that's what I was referring to as the overall Homestore corporate objective.

Q - Aaron Kessler

Okay. And then, it looks like so far for most of this year, you've underspent a little on some of the new investments you're planning to make. Then I guess that Q4 guidance implies you're going to be increasing those investments. What area could we expect to see an increase from?

A - Lew Belote

This is Lew. We have been making the investments, the only thing that has been deferred has been the data center, which we'll take later into the 2006 than we projected. We continue to invest in sales and marketing. You will see an increase in product development expense in all three segments and so the actual initiatives have not changed from what we talked about earlier.

Q - Aaron Kessler

One final question. Any more on brokerage kind of deals that we should expect to see over the next six months or so?

A - Mike Long

Yes. We are. We call it the Company Showcase Offering. And we have been adding on a fairly regular basis a number of brokerages around the country. However, NRT is the largest possible sale that we could make and we've already made that one. None of the scale of NRT.

Q - Aaron Kessler

Great. Thank you.

Operator

Your next question comes from Mark Argentino, Craig-Hallum.

Q - Mark Argentino

Good afternoon guys. A couple of questions from you. Looking at the Print business a little bit more specifically. I know you have gone to a color format now. Could you walk us through a little bit what could look like for next year and specifically if you've been doing anything in terms of driving traffic back to the website, and really what we could expect to see out of that segment of the business, because it's the one that continues -- to improve, but it continues to be, you know, in the form of investment and possibly presents some upside opportunity.

A - Mike Long

Yes. Yes. Mark. There's three areas I'd point you to. One is that in improving the kind of existing business model, we have improved the quality of the book and made it far more attractive as you've pointed out. It's now a four-color promotional material book and it's -- so it's much more attractive. The second thing is that we are, we're accelerating the time from the move occurring to the actual receipt of the book and we've added national advertisers, which have allowed us to double the number of potential books that we could mail. And we hope to realize the benefits of that during 2006, because the national advertisers help us cover the costs of distributing the book into territories where we may not, as of today, have a strong, local advertising sales force. And as to the website in driving traffic to the website, we have not formally launched welcomewagon.com and will not do so until the first quarter of 2006, and at that point you will see us accelerate our efforts to drive traffic to that site and we think it will be a very positive consumer experience. The final point is that, as I said in my formal comments earlier today, we are -- we look forward to announcing a new business model and early in the 2006, which integrates our offering with our realtor customers and we're very excited about that, so they can leverage the Welcome Wagon brand.

Q - Mark Argentino

Just so I understand a little bit better, when we think about the print business in terms of the book, you're basically generating CPM or revenue per book. So hence, you're able to ship more books, does that directly tie into more revenue?

A - Mike Long

It does. And that's where the benefit of the national advertisers came in. We didn't have -- we do not have today, you know, on the ground salespeople covering all local advertisers in the country and as we -- so the national advertisers will cover, basically give us a national footprint for the book on the traditional Welcome Wagon model and then by moving that en brand and that model online with welcomewagon.com and moving more towards a self-service advertising model, that should lower our distribution costs and increase our revenues as well.

Q - Mark Argentino

Great, that's helpful. Thank you.

Operator

Your next question comes from Jeetil Patel, Deutsche Bank.

Q - Zelman

Hey, guys, this is actually, Zelman (ph) for Jeetil. Two questions. On -- given, you talked about earlier how you think the fundamental business is doing well despite some of the weaknesses in the real estate market. Can you talk a little bit about where you're seeing any weakness in spending from realtors, but more particularly from home builders and sort of what you're seeing in that area. And the second question is, with regards to the investment from Elevation Partners, should we expect to see you guys move into some sort of ancillary businesses to real estate, maybe other verticals offline or should we expect, when you talk about those new growth opportunities, that they're going to be still pretty much in the real estate industry?

A - Mike Long

Okay. I'll take the last question first. That is, we want to maintain and focus on the real estate sector. We think it's a very attractive market opportunity and it's very large and at this point in the development of our Company, we do not want to be distracted or lose focus on that opportunity. As to any softness in willingness to spend among real estate practitioners, that has not been our experience. As I said in my formal comments, we think that the effect of a potential slowdown of the real estate markets is a big plus for us. We've had an incredible, almost twelve-year uninterrupted seller's market where all product in the real estate industry sold and it sold pretty close to listing price. So effectively marketing that product was -- maybe helped sort of out who actually got the buyers, but it didn't really determine whether a property sold and what price it may have been sold at. Now we're entering a buyer's market and the winners and losers will be chosen, I think, by those that are very effective at marketing and in other words, we're going to have to roll our sleeves up and become very effective marketers of homes. The online venue has proven and is proving to be where the consumers are and where the opportunity is. So far, such a small percentage of the advertising spend has moved online, any reallocation of the advertising spend, which is almost $20 billion total, creates a huge market opportunity for us. We're quite optimistic about online real estate advertising, even in a soft real estate market.

Q - Zelman

Okay. And just one last follow-up on your sales force, can you talk about how that's going, whether it's tough to be hiring new workers or whether everything is going fine on the ramp-up?

A - Mike Long

We're trying to be very selective as far as the quality of salespeople that we're bringing on. We're not experiencing a shortage of qualified candidates, no.

Q - Zelman

Okay. Thank you.

Operator

Operator Instructions Your next question comes from Stewart Barry, ThinkEquity.

Q - Stewart Barry

Good afternoon and congratulations.

A - Mike Long

Thanks, Stewart.

Q - Stewart Barry

As we look ahead and your 20% growth for the Media Services business, is that -- is there implied price increasing with the agents or is that more of breadth of agents? That's question one.

A - Mike Long

The 20% you're referring to, I'll go back to the earlier question. My comments about 20%, we have established that had some time ago, actually well over a year ago, we've established that as Homestore's growth target of 20% top line and 20% margins, so my comments were not specific to the Media Services segment.

Q - Stewart Barry

Irregardless of the growth rate, I guess, do you expect any growth to be driven more by pricing or increased breadth of agents or a combination of both?

A - Mike Long

Actually, I think both. We believe that the value of our advertising and the channel that we offer to real estate practitioners, that the value is going up. Just like we've experienced, for example, the increase the traffic costs, we think that is an overall indication of the value of internet marketing. Also we think the migration of offline spend to online spending is in its very early stages and the number of practitioners are effective at online advertising is still quite small and we expect that number to grow. This is all very early in the development of this online real estate advertising opportunity.

Q - Stewart Barry

Okay. My second question is, just kind of a point of clarification, Mike, did you say you expected to reach 20% EBITDA margins, your long-term EBITDA margin target next year?

A - Mike Long

We've established that as a corporate target. I didn't put a time frame on it.

Q - Stewart Barry

Okay. I was mistaken. I thought you said 2006. Finally, I notice that operating margins and software were down a little bit sequentially, could you elaborate on that a little bit?

A - Mike Long

Could you repeat the question, Stewart, sorry?

Q - Stewart Barry

That operating margins were down, sequentially in the software business.

A - Lew Belote

That's a direct result of the Top Marketer investment. All the dollars that were pouring behind that product which is now a trial with almost 2000 Realtors, that cost is being absorbed in that division. So there's zero revenue coming from that cost structure at this point.

Q - Stewart Barry

Okay. Thank you very much.

Operator

At this time there are no further questions.

Mike Long, Mike Long, Chief Executive Officer

Okay, we would like to thank everyone for participating in our call this afternoon and we look forward to speaking with you again with our fourth quarter results early next year. Thank you.

Operator

This concludes today Homestore Third Quarter 2005 Financial Results Conference Call. You may now disconnect.

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