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Executives

Stacy Ybarra - Director of IR

Jim Voelker - Chairman and CEO

David Binder - CFO

Analysts

Kerry Rice - Wedbush Morgan

James Dobson - Stanford Group

Jeffery Shelton - Natixis

Derrick Wood - Pacific GrowthEquities

InfoSpace Inc. (INSP) Q4 2007 Earnings Call February 5, 2008 12:00 PM ET

Operator

Good day, everyone, and welcometo today's InfoSpace fourth quarter, 2007 conference call. (OperatorInstructions). And at this time for opening remarks and introductions I wouldlike to turn the program over to Ms. Stacy Ybarra. Please go ahead, ma'am.

Stacy Ybarra

Good afternoon and welcome toInfoSpace's fourth quarter 2007, earnings conference call. I'm Stacy Ybarra,Director of IR. With me on the call today is Jim Voelker, Chairman and CEO, andDavid Binder, Chief Financial Officer. Before we get started I want to remindyou that during the course of this call InfoSpace representatives will makecertain forward-looking statements. These forward-looking statements, include statementsregarding InfoSpace's expectations for our online business, expectationsregarding its marketing and strategic initiatives, expectations for itsfinancial performance for the first quarter 2008, and expectations regardingthe future for the company's business. Other statements which may be made inresponse to questions which refer to our belief, plans, expectations orintensions are also forward-looking statements for purposes of the Safe Harbor,provided by the Private Securities Litigation Reform Act. Because thesestatements pertain to future events and are subject to various risks anduncertainties and actual results could differ materially from InfoSpace'scurrent expectations and believe.

Factors that could cause orcontribute to such difference include, but are not limited to the risksdiscussed in InfoSpace annual report on Form 10-K for the year ended December 31, 2006 and itsquarterly report on Form 10-Quarter, which are filed with the Securities andExchange Commission. InfoSpace undertakes no obligation to update itsforward-looking statements.

Now, I'll turn the call over toJim. Following his comments, David will review the fourth quarter results andfirst quarter outlook. Then Jim will wrap up with closing remarks and we willopen up the call to your questions.

Jim Voelker

Thank you, Stacy and goodafternoon everyone. 2007 was an eventful and positive year for InfoSpaceshareholders and stakeholders. Two transactions unlocked substantial marketvalue and we distributed that value and more to shareholders, while retainingour online search business and a healthy balance sheet.

A brief review of the events isin order before we move on to fourth quarter results and a discussion of oursearch business. When the Board appointed a new management team five years agoInfoSpace was a company searching for direction in myriad of legal issues. Aswe progressed we strived to optimize our assets by divesting non-corebusinesses, making acquisitions to bolster growing business and driving cash flows.It has been anything, but a straight road, marked by successes anddisappointments. On the plus side we have driven over $230 million in cash flowand yielded $440 million in asset sales.

On the other side we entered andexited the mobile content business over a three year period, enjoyed extremegrowth and profit and suffered sudden decline. Yet, when viewed as a whole,enterprise value has grown from a $126 million to $826 million and $1 investedfive years ago has yielded 650% return. That's a record we are proud of. Thelatest transactions were completed in the fourth quarter. The sale of ourdirectory assets to IDR for $225 million and the sale of our mobile assets toMotricity for a $135 million, both in cash,. In each case we believe we extractedtop value. The directory assets were purchased in 2004 for $108 million.Contributed over $50 million of cash flow in subsequent years and then sold fora multiple of 11 times cash flow. The mobile assets had yet to yield a profitand sold for over two times revenues. In addition we were able to shieldvirtually all of the gain from these sales by the application of our NOL,saving over a $100 million in cash taxes. This led to a special dividend of$300 million or $9 pre share, following our May dividend of $208 million or$6.30 per share. Overall, the Board and Management have been and remainedfocused on maximizing our assets and delivering shareholder value andliquidity.

We’re excited to move forward,focused on a single business, online search, with several assets in place, over4 million unique searches per month, 100 plus distribution partners, strongcommitted modernization partnerships with Google and Yahoo and many others, anda differentiated award winning product. We also have a proven, highly scaleablebusiness model and a experienced and talented team, focused solely on search.And we’re off to a good start.

Fourth quarter revenues andadjusted EBITDA were well ahead of expectations. Revenues were $39 million up15% year-over-year and 15% sequentially. It's important to note that ouroperating results are profoundly impacted by the many events in the fourthquarter. Specifically: the divestitures, dividend, restructuring and taxaccounting.

At this point I would like toturn the call over to David Binder our new CFO to walk through details.

As many of you know, David isbeen with InfoSpace for four years as our Vice-President of Finance. Hisappointment follows Allen Hsieh's planned departure in connection with thesales of our mobile and directory businesses. I want to thank Allen for hisservices to InfoSpace over the years. He is been both a good friend and a greatcolleague and we wish him well on his endeavors.

Now I'll turn the call over toDavid and after his discussion I'll finish with comments on our priorities andopportunities. David?

David Binder

Thanks Jim, and welcome to ourcall today. Along with the performance of our search business, our fourthquarter financial results are greatly impacted by the sale of the directory andmobile business, the shareholder dividend and the previously announcedreduction in staff.

I will start to review thenumbers first for the look at our net income for the fourth quarter and fullyear, and then turn to the revenue margin and adjusted EBITDA performance ofour search business.

Given that there are severalimportant items to call out, we have posted a table on our website to highlightsome of the key data. Net income in the fourth quarter is $57.8 million or$1.74 per share, up by $30.2 million from the prior year. This result iscomprised of income from discontinued operations of $131.5 million, offset by aloss from continuing operations of $73.7 million. Within the results of ourcontinuing operations, we recognized employee costs associated with the dividedand restructuring equaled to $45.6 million, stock based compensation of $16.9million and a GAAP tax expense of $16.4 million. Within discontinuedoperations, we recognized a net gain from the sale of our directory and mobilebusinesses equaled to $139.9 million, partially offset by a loss fromdiscontinued operations of $8.4 million.

For the full year we recorded netincome of $16.9 million or $0.52 per share, up by $32 million from 2006. Thisresult is comprised of income from discontinued operations of $114.6 million,offset by a loss from continuing operations of $97.7 million. For the year,continuing operations includes employee related expenses associated withdividend and restructuring, equaled to $65.8 million, stock based compensationof $34.1 million and GAAP tax expenses of $26.7 million. Within discontinuedoperations for the year, we recognized $139.9 million from the net gain of thesales, partially offset by a loss from discontinued operations of $25.3million.

Overall in 2007 we booked a GAAPtax expense of $125 million, however by utilizing our NOL carry forwards, thecompany will pay less than $6 million in cash taxes. In addition the companymaintains an NOL balance of $789 million.

Now, I will turn to a closerreview of the performance of our continuing operation, the online searchbusiness. As Jim mentioned earlier, revenue for the fourth quarter was $39.1million, which exceeded our expectations by $4 million to $5 million. Grossprofit in the fourth quarter was $20.1 million, an increase of $1.5 millionfrom the third quarter and a decrease of $1 million from the fourth quarter of2006. Gross profit margin in the quarter was 52%, down 3% sequentially from thethird quarter.

In the fourth quarter weexperienced growth from both our owned and distribution lines of businesses.However, the rate of growth was higher from distribution. In the quarterdistribution represented approximately 64% of our total revenue, up from 60% inthe third quarter.

Adjusted EBITDA in the fourthquarter was a negative $42.6 million. Included in this amount is the expense of$45.6 million, I previously mentioned, resulting from employee costs associatedwith the shareholder dividend and restructuring. Excluding these costs, ouradjusted EBITDA would be $3 million n the fourth quarter exceeding our guidanceby $2 million. The average basic share count in the fourth quarter was $33.3million. However, it is worth noting that we ended the quarter with $34.3million outstanding.

For the full year of 2007,revenue was $140.5 million, a decrease of 13.3 million or 9% from 2006. Inlooking at this trend, our distribution business represented 82% of thesequential annual decline. We saw significant volatility from our partners,most notably in the second quarter of 2007. Since then, we've seen sequentialquarterly growth, in both our distribution and total revenue.

For the year gross profit was$78.8 million, down $12.7 million from 2006. Gross profit margins for the fullyear were 56%, down 3% from the prior year. Adjusted EBITDA for 2007 was anegative $47: 6 million, which includes employee costs associated with bothdividends, and restructuring charges of $65.8 million. Excluding these charges,adjusted EBITDA would have been $18.2 million in 2007. Average basic shares forthe year were $32.6 million. Again we ended 2007 with 34.3 million outstanding.

Now, turning to the balancesheet, we ended the year with approximately $575 million in cash, short andlong-term investments; an increase of $360 million from the third quarter. Thistotal includes the cash received from both directory and mobile transactionsand does not reflect the cash dividend we paid on January 8th, of approximately$300 million.

Given the dividend deal relatedfees, cash taxes and the employee expenses associated with the dividends andrestructuring, we expect our cash balance to be between $210 million and $215million.

Within our investments we hold$37.4 million in Auction Rate Securities. In the fourth quarter we moved thisbalance from short-term to long-term investments, in recognition that we wouldbe unable to liquidate if we were to choose to do so today. In addition werecorded a loss of $2.2 million in our Statement of Operations, resulting froman impairment to the value of these investments.

Now, turning to our outlook: Forthe first quarter of 2008, we expect revenue to range between $35 million and$37 million. Adjusted EBITDA to be between $2.5 million and $3.5 million andnet income to be between breakeven and $1.4 million or up to $0.4 per share.

Now I'll turn the call back overto Jim to add on.

Jim Voelker

Thanks David. We have a solid setof search assets, the foundation been our metasearch technology, which isbecoming more relevant everyday. Over the past five years the web has grownexponentially, now with over a 100 million sites. Naturally, as Web search hasemerged as the most important tool for discovery, the investment in technologyhas grown exponentially as well, with Google, Yahoo, Microsoft and Ask, takingfundamentally different approaches to indexing and organizing information.

In addition, (inaudible)specialized their vertical search engines with focus on a certain topic, suchas health or travel, they have added a new dimension for users. All thisactivity underscores the value of our metasearch technology, which hascontinued to evolve with the industry at large.

We developed the capacity tounderstand the strengths of various engines, the intension of users aroundspecific queries and methods to distil the best results set. This is pouringout in our industry leading success rate as track by comScore, and by the J.D.Power Award for highest customer satisfaction two years running. We have anexcellent and improving product. And we need to be more aggressive and inincreasing exposure to it.

We are focusing our efforts onDogpile, where the lion share of our users reside, by adding more verticals toour index, launching a new user interface and later in the year innovation isfocused on the intersection of social networking and search. Additionally, wewill boost direct to consumer marketing to support the Dogpile brand andeducate audiences on the unique benefits of Dogpile.

Specifically, we expect toincrease the marketing spend by 50% in 2008. To lead these efforts BruceAllenbaugh was recently hired to the newly created position of Chief MarketingOfficer. Bruce is a seasoned marketing executive with a proven record ofdeveloping high impact brands such as Pepsi and Safeco.

While our mascot Arfie didn'tmake a appearance at the Superbowl this weekend, Bruce and his team will beincreasing his and Dogpile's visibility.

On the distribution side, webenefit from having more than 100 private label partners, including six newpartners signed in the fourth quarter. Among these partners are content sitessuch as RealNetworks, community sites like MyPoints.com and connectivity siteslike Verizon DSL.

And we recently launched twoproducts that significantly broaden our appeal to the connectivity market:Private-Label portal and DNS Assist. In the past year or so there has beenmovement by ISPs away from internally developed portals to private label oroutsourced arrangements. Reasons include, improved access to content andadvertising and scale, and the non-linear step to Web2.0 technologies. Ourportal product features an Ajax-based user personalized home page, which offersstandard contents, such as news, weather, sports and stocks, as well as a broadmenu of user configurable content modules for easy access to our assessedspeeds, widgets and applications.

The widget catalogue, userdefined tabs and drag and drop functionality make it simple to organize apersonal homepage. It is built on an extensible platform that allows forco-branding, while also providing a high degree of customization for ourdistribution partners and their content and services. Importantly the portalincludes our metasearch service providing strong monetization, as well as fixedmodules for contextual display advertising. We’re pleased with the initialmarket response and will launch two partners in the first quarter.

Another trend in the ISP marketis DNS Assist which resolves user typing errors and replaces the standard 404error page with helpful suggestions, corrections and related search terms. Wedeveloped filtering technology, as well as the landing page designs andintegration of text based relevant ads. This is a relatively untapped, highvolume market and we’re currently testing with several ISPs with very encouragingresults. As our overall goal is to grow quality searches, these products helpexpand and strengthen relationships with our distribution partners.

Along with the revenueinitiatives, we're focused on rebalancing our operating structure and reducingcost in line with the new size of our business. We’ve reduced our staff byapproximately 35 positions during the fourth quarter. And expect to realizeapproximately $7 million to $9 million in annual cost savings.

In summary, InfoSpace is in adynamic market that has substantial growth ahead of it. We’ve a talented team,a solid direct customer base, growing distribution network, great partners formonetization, leading technology assets, financial strength and a high leveragebusiness model that generates non-cash flows. We’re proud of our record ofcreating value thus far. And the game is far from over, with that we’ll bepleased to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions). Ourfirst question will comes from [Kerry Rice] with Wedbush Morgan.

Kerry Rice - Wedbush Morgan

Hi, guys, a nice quarter. Coupleof questions; one which I assume you're somewhat anticipating, is the impact ofMicrosoft's potential acquisition of Yahoo and how that consolidation could bepositive for InfoSpace? And then I have a couple of follow-up questions.

Jim Voelker

Sure, Gary.Well, this is something that we've been waiting for, I guess, and we mightthink of it as the reconsolidation of that network. If you go back a few yearsfor us and of course, just to set the stage a little broader here, we by virtueof the structure we run with the metasearch, and we send every query to avariety of engines, we are in pretty interesting position to look at thedifferent monetization levels, in the way they different engines and beyondengines the ad networks work on queries and how they monetize those.

And if we go back a few years,there really wasn't much to choose between - the kind of monetization we sawfrom the Yahoo network or the Google network - they were fairly similar. And ifwe go back and look at the time when Microsoft determined they would buildtheir own network and began to take traffic away from the Yahoo network, on arelative basis the gap got wider and Google continued to get stronger. Thathasn't necessarily been bad overall for us, but we certainly prefer having muchmore competition in that space for advertisers. And we believe that that theconsolidated network between Microsoft and Yahoo will help their monetization andwill help us overall in the long-term. I think in the short-to-medium run, itprobably doesn't mean a lot.

Kerry Rice - Wedbush Morgan

I think Microsoft doesn't use alot of distributors today; do you think Yahoo will pay more, higher rates?

Jim Voelker

No, not, necessarily higherrates, but as you know, these ad networks have a tremendous network affect,right, they draw more advertisers, the more eyeballs you have, the moreadvertisers you are driving, the higher your keywords get bid etcetera, etcetera.Right?

Kerry Rice - Wedbush Morgan

Right.

Jim Voelker

And so, we would look at that.And it will also help, frankly it will help stabilize, what you have beentalking about rev share. I mean, if we looked out a couple of years and wecontinued on the road that we were on, and we saw greater diversions, by thetime our contracts came up in 2011, Google would, again if this trend hadcontinued in a static way, Google would have much more pricing power in termsof revenue share. So, we think this serves two ways. A larger network willmonetize better and will also serve to keep everybody honest on rev share.

Kerry Rice - Wedbush Morgan

Okay. And then on operatingexpenses, obviously you said that you will be spending more on sales andmarketing and the restructuring is $79 million in annual costs savings. Whenshould we see the roughly $2 million a quarter kick in or should I think aboutit in Q1? And then maybe longer term, what other restructuring efforts or maybecost cutting efforts do you think about, to bring down G&A even further?

David Binder

No, we are looking at the lionshare of the effect of the cost savings to be completely in to the incomestatement in the third quarter and fourth quarter of this year, and to seeEBITDA reflected that way.

Jim Voelker

Actually on the second part ofit, Kerry, we will take a little bit of wait and see. Well we went from runningthree businesses here to one. There were certainly some shared services, if youwill, that we went to work on here and cut back on. We are pretty comfortablewith the size of the business right now. We are pretty comfortable that wecould grow revenues fairly substantially here with very minimal ads to hedge.So, we feel really good about the leverage in the model. Could there be a fewmore positions as time goes on did we learn new things a little bit moreefficiently? Yes, but it’s not going to be a substantial amount.

Kerry Rice - Wedbush Morgan

Okay. So, are you still lookingfor 15% EBITDA margins exiting the year?

David Binder

Yeah, that's a good way to lookat it Kerry, exiting the year.

Kerry Rice - Wedbush Morgan

Okay. And then one finalquestion. Now that you've done the $300 million distribution related to thedirectory proceeds, sale of the directory business, have you thought anymoreabout doing another kind of special dividend related to the sale of the mobilebusiness?

Jim Voelker

Well first of all I would saythat the overall dividend was related to both sales, and it's really a matterof looking at what your cash needs are going forward and the like. At thispoint remember, we have a few different ways look at this; one is we've abuyback in place, so kind of watch and see how the equity performs here, and iffrankly we think this stock stays really cheap that might be a little bit moreattractive. So, we look at all the different opportunities we have here.

Kerry Rice - Wedbush Morgan

Okay. Thanks a lot.

Operator

And our next question will comefrom Clay Moran, Stanford Group.

James Dobson - Stanford Group

Hi, this is James Dobson askingquestion for Clay. My first question is, can you talk a little bit about thepricing trends you see, has it stabilized or has it been increasing a little?And then second, I know you mentioned you are trying to concentrate on Dogpile,what about your other owned properties, maybe WebCrawler and Excite, if you cangive us maybe some trends of what you are seeing there? Thanks.

David Binder

James, I can do the first partand then I'll kick it over to Jim for the second. In terms of pricing I thinkyou are referring to the rates that we're seeing, how we're monetizing ourtraffic is that right?

James Dobson - Stanford Group

Yes.

David Binder

And we're seeing those continuingto grow, they grew throughout 2007 and the early indications in 2008 seem to befairly strong.

Jim Voelker

And on the second part of it, ifwe look at our owned and operated sites as a whole, out of our 4 million users,you know the lion share, some 70% plus, are at Dogpile. So, that gives us kindof, if you will, critical mass, to work off and that's really where most of ourefforts will be concentrated. We do use WebCrawler and MetaCrawler and aim themat slightly different audiences. Frankly use them a little bit as a test bed totry different kinds of marketing efforts, to test different kinds of features,things of that nature, but Dogpile is where we are going to concentrate most ofour effort.

James Dobson - Stanford Group

Could you give me a reminderagain on how big the buyback emplaces?

Jim Voelker

$100 million.

James Dobson - Stanford Group

Great. Thank you.

Operator

And we will take our nextquestion from (inaudible).

Unidentified Analyst

Hi, guys. Just want to make surethe $39 million in revenue - is that all search, correct?

David Binder

That's correct. Yes. Everythingwithin the mobile and directory business is discontinued operation.

Unidentified Analyst

Got you, got you. So I waswondering, I mean, I am actually pleased with guidance for Q1, but I amwondering if you could just explain why we might be seeing a little dip inthere? I know seasonal factors are involved.

Jim Voelker

That's really the lion share wetypically see first quarter down.

Unidentified Analyst

Okay. And then, I think someoneelse asked this, but just want to make sure. So, I am assuming that you arestill looking for gross margins 55 to 60 and 58% EBITDA margin, basically goingout of the '08?

David Binder

On the EBITDA margin, yes,exiting 2008. The gross profit margin is really going to be affected by the mixbetween distributions and owned site.

Unidentified Analyst

Yeah, because I mean, I see nowthat 64% of the revenue is coming from distribution. So, I am assuming, mightbe more likely for the low end of that range.

Jim Voelker

If the mix between owned anddistribution continues in that trend, then we would expect the margins to comedown, respectively. And I would expect that that mix is going to have somevolatility throughout the year. But remember [Ali], our focus is on theabsolute dollars that we can drive here to the bottom. And revenue mix issomewhat unimportant to us, right. I mean we prefer, we would like to see, bothof them growing real fast, but both of these are profitable businesses. And so,either way it is pretty much fine with us.

Unidentified Analyst

Of course. And of course it helpsincrease your cash balance. Besides the stock buyback possibly, andpotentially, say, dividend distribution, are you looking to make anyacquisitions? I mean is that part of the strategy going forward?

David Binder

We really like the business modelwe have; we said this all along, if we could find really high quality searchtraffic dead right on top of our business model, we would be very, veryinterested in it and I would tell you, we haven't found a lot of that out thereyet. But we keep searching for things. But in terms of kind of some type ofmore broad diversification, no, we want to stay. We like the business model wehave here. We think it is highly leveragable. We want to stay very focused onit and that's what we are looking to do.

Unidentified Analyst

Got you. All right thanks, guys.

David Binder

Thank you.

Jim Voelker

Thank you.

Operator

Jeff Shelton with Natixis. Yourline is open. Please go ahead.

Jeffery Shelton- Natixis

Thanks, Jim. I was hoping youcould go into a little bit more detail about the strength on the distributionside on the sequential basis; was most of that growth from, I would say, yourcore partners or was it related to some of the more gray areas, which causesome variability earlier in the year?

Jim Voelker

I don't know. David do you wantto -- I don't know how much more detail we really want to get at that. I willjust tell how it wasn’t one or two partners, that it was kind of distributedacross the distribution chain here.

David Binder

In the past we’ve talked aboutthe sort of a mix between our organic and SEM partners and I would say that inthe fourth quarter the sequential growth was pretty much shared across thosetwo buckets and we didn’t see a significant mix between those types ofpartners.

Jeffery Shelton- Natixis

And how much of the five or sixnew contracts that you said you signed on showed up in the fourth quarter?

David Binder

To a very little extent, a littlebit of that sequential growth is coming from new partners, most of it is comingfrom base that had been in there in the third quarter.

Jeffery Shelton- Natixis

And the distribution as apercentage of total was 64% in the fourth quarter. What was it in the fourthquarter of last year?

David Binder

Off the top of my head, it wasaround 60%.

Jim Voelker

It was a little bit under 60%.

Jeffery Shelton- Natixis

Okay. And so, that would implythat you are fairly flattish on the Dogpile on NOL side from a revenue perspectiveyear-over-year?

David Binder

That’s right.

Jeffery Shelton- Natixis

And so given the initiatives thatyou are undertaking in terms of driving traffic, we should expect to see somegrowth there in '08 versus '07?

David Binder

That’s the advantage.

Jim Voelker

That’s the plan.

Jeffery Shelton- Natixis

Okay. Thank you.

Operator

(Operator Instructions) We now goto Derrick Wood, Pacific Growth Equities

Derrick Wood - Pacific Growth Equities

Thanks. You talked aboutincreasing marketing spend by 50%; can you give us a sense of what you spent onDogpile in ’07?

Jim Voelker

Our overall marketing spending isbelow $10 million in '07. So, we’re looking to grow 50% off that base.

Derrick Wood - Pacific Growth Equities

Okay. Thanks. And in terms of theARS that you classified, I am not sure how much cash that was, but let's moveto long-term securities. Can you give a little more clarity on that and why youmay have not written down more of that?

Jim Voelker

We actually assess the value, thefair value of the option rate security and we'll do so again at the end of thefirst quarter. The amount that we wrote down was reflective of the differencebetween the par value of those securities and what the fair value is as of theend of December. The other than temporary piece of that is what we reflected inour income statements, that $2.2 million that I referenced earlier.

Derrick Wood - Pacific Growth Equities

Okay. And in terms of looking atdepreciation going forward, we had a pretty good run rate here, it was $1.4million in the quarter?

David Binder

Yes. And then you'll see in ourguidance, one of the factors in our guidance is pretty flat on depreciation.

Derrick Wood - Pacific Growth Equities

Okay. And just to reiterate, sothe upside versus your expectations on the top line really came from moreupside from distribution partners and it was both organic and SEM?

Jim Voelker

That's correct.

Derrick Wood - Pacific Growth Equities

Okay. Thank you.

Stacy Ybarra

Operator, we have time for onemore question.

Operator

Our final question will come from(inaudible).

Unidentified Analyst

Hi, guys. Thanks for taking mycall. Jim you talked about an excellent year at 15% EBITDA margin, which isgreat, but I mean, given the inherent cost structure of the business, is thereany reason why, when look at it a couple of years, this couldn't be a 25% plusmargin business or are there more investments that you feel like you need tomake?

Jim Voelker

No, I think, the thing we loveabout this business model is kind of, there are a couple of things, right.We've already seen what it looks like at $150 million in revenue, I mean,unfortunately that was a couple of year back. But, so we know that it can, itproduces, it takes, if you will, particularly organic traffic that comes to ourowned and operated sites and turns that in to bottom line cash flow very, veryefficiently. So, that's really the leverage that we are pushing for here.

And as I mentioned earlier Ithink the kind of size of the company in terms of the cost infrastructure rightnow, is appropriate for where we are and where we want to go, but it can alsocarry a lot more revenue. It is again, a very highly leveragable kind of model.So, we this year want to be very aggressive on trying to grow that owned andoperated base. And we think we have the products in place and with some newenhancements behind that, and some good communication programs, and smart adspending here in order to do that.

Unidentified Analyst

All right. Sounds exciting, guys.Thanks.

David Binder

Thank you.

Jim Voelker

Thank you.

Operator

That would conclude ourquestion-and-answer-session. At this time I would like to turn the conferenceback to our speakers for any additional or closing comments.

Stacy Ybarra

Thanks for joining the call thisafternoon.

Operator

Thank you everyone for yourparticipation in today's conference and you may disconnect at this time.

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