IAC Reports First Quarter Results

IAC Reports First Quarter Results

NEW YORK, May 4 /PRNewswire-FirstCall/ -- IAC/InterActiveCorp (NASDAQ:IACI) reported first quarter results today.

* Revenue up 14% to $1.6 billion * Operating income up 226% to $128 million * Net income up 80% to $69 million; Diluted EPS up 84% to $0.09 * Operating Income Before Amortization up 30% to $253 million * Adjusted Net Income up 22% to $171 million; Adjusted EPS up 24% to $0.22

"IAC had a positive quarter in all respects ... and most importantly beyond the metrics, is making consistent progress in becoming a disciplined operating Company capable of above average performance," said IAC Chairman and CEO, Barry Diller.

IAC has repurchased 49.2 million shares year-to-date through May 3, at an average price of $22.13.

Given the pending spin-off transaction, we thought it appropriate to present Q1 results for the businesses which will comprise IAC and Expedia, respectively, after the spin-off:

"New" IAC Q1 2005 Q1 2004 Growth Revenue $1,168 $1,034 13% Operating Income Before Amortization $143 $115 25% Operating income $101 $63 60%

"New" Expedia Q1 2005 Q1 2004 Growth Revenue $485 $413 17% Operating Income Before Amortization $140 $102 38% Operating income $108 $67 62%

Results for the businesses after the spin-off exclude the impact of corporate expense (see page 2 for details). The businesses comprising Expedia will consist of IAC Travel, as reported on page 2, but will exclude Interval International and TV Travel Shop ("TVTS"). The businesses comprising IAC will consist of all other segments as reported on page 2, plus Interval International and TVTS.

Please see page 7 for full GAAP financial statements and page 13 for definitions of non-GAAP measures.

SEGMENT RESULTS

Segment results for the first quarter ended March 31 were as follows ($ in millions):

Q1 2005 Q1 2004 Growth REVENUE IAC Travel $563.9 494.0 14% Electronic Retailing 602.6 561.1 7% Ticketing 211.3 202.3 4% Personals 54.2 48.8 11% IAC Local and Media Services 41.2 32.1 29% Financial Services and Real Estate 105.8 39.7 166% Teleservices 77.1 71.8 7% Other (9.1) (6.0) -52% Total $1,647.1 $1,443.8 14%

OPERATING INCOME IAC Travel $129.9 $84.7 53% Electronic Retailing 46.2 29.3 58% Ticketing 40.0 40.7 -2% Personals 4.4 2.8 54% IAC Local and Media Services (13.1) (27.8) 53% Financial Services and Real Estate (3.3) (3.6) 8% Teleservices 4.2 3.2 33% Corporate and other (80.7) (90.2) 11% Total $127.6 $39.1 226%

OPERATING INCOME BEFORE AMORTIZATION IAC Travel $168.5 $127.6 32% Electronic Retailing 59.8 42.9 40% Ticketing 47.0 46.8 0% Personals 5.4 6.3 -14% IAC Local and Media Services (11.9) (13.6) 13% Financial Services and Real Estate 9.7 3.1 215% Teleservices 4.2 3.2 33% Corporate and other (29.9) (22.2) -35% Total $253.0 $194.1 30%

IAC Travel includes results from Interval International and TVTS, which will remain with IAC following the spin-off, as well as results from TripAdvisor, which previously had been part of IAC Local and Media Services.

Please see page 12 for further segment detail and reconciliations of Operating Income Before Amortization to the comparable GAAP measure. Please see page 13 for definitions of non-GAAP measures.

DISCUSSION OF FIRST QUARTER FINANCIAL AND OPERATING RESULTS

IAC TRAVEL

IAC Travel revenue grew by 14% to $563.9 million, primarily driven by results from the merchant hotel business, including revenues generated from international websites, the air business, acquisitions including TripAdvisor, and growth at Interval International.

International revenue increased 36%, or 31% excluding the benefit of foreign exchange. Results were primarily driven by websites in the United Kingdom, Germany, and Canada, as well as the acquisition of Expedia Corporate Travel -- Europe, all of which experienced continued growth in the merchant hotel and air businesses. International revenues were negatively impacted by a decline in revenues at TVTS. In March 2005, TVTS substantially reduced operations by ceasing the sale of third-party travel products through its broadcast programming and significantly reducing headcount.

Merchant hotel revenue increased 7%, driven primarily by an increase in merchant hotel room nights stayed and an increase in revenue per room night. Merchant hotel room nights stayed, including rooms delivered as a component of packages, increased 4% to 7.3 million, reflecting continued growth in the international business, partially offset by a decline in the domestic business. Revenue per room night increased 7% due primarily to increases in average daily room rates, partially offset by a decline in merchant hotel raw margins (defined as merchant hotel net revenue as a percent of gross bookings). The merchant hotel business continues to benefit from growth in the packages business.

The U.S. merchant hotel business continues to operate in a more challenging environment than in the prior year period, due primarily to increased competition from third party distributors, increased promotion by hotel chains of their own direct sites and higher overall occupancy rates, resulting in decreased availability of favorably priced inventory compared with the prior year period. These trends are generally expected to continue.

Air revenue grew by 8%, driven primarily by a 21% increase in air tickets sold, partially offset by a decline in revenue per ticket. Interval International revenue grew, primarily driven by growth in membership and transaction revenues.

Overall revenue margins (defined as net revenue as a percent of gross bookings) decreased by 70 basis points. This decrease was primarily driven by a decline in merchant hotel raw margins and air revenue per ticket, partially offset by higher merchant hotel average daily rates. A higher mix of air revenues also contributed to the decrease.

IAC Travel Operating Income Before Amortization grew by 32% to $168.5 million and operating income grew by 53% to $129.9 million, driven primarily by higher revenue, higher gross margin and operating efficiencies, partially offset by an increase in international selling and marketing expenses as well as losses generated by TVTS, including charges recorded in connection with the substantial reduction in its operations. Selling and marketing expense grew by 2%, driven by a 43% increase internationally. We expect that Q2 growth rates in Operating Income Before Amortization will be lower than Q1 due to an expected increase in the growth rate of selling and marketing expense relative to Q1, and an expense reversal which benefited Q2 2004 results.

ELECTRONIC RETAILING

HSN U.S. revenue grew by 6% to $498.0 million, driven primarily by a 5% increase in average price point and a 140 basis point decline in overall return rates. Growth in average price point was primarily the result of higher average selling prices within most categories. HSN.com increased revenues by 24%.

HSN U.S. Operating Income Before Amortization grew by 36% to $56.5 million and operating income grew by 53% to $43.3 million, resulting primarily from higher revenue and a 120 basis point increase in gross profit margins which was due mainly to higher initial markups and lower retail markdowns, return rates, and inventory reserves. In addition, HSN experienced operating efficiencies including lower costs to process and service customer orders.

HSN International revenue grew by 12% to $104.7 million, or 7% excluding the benefit of foreign exchange, due to sales growth at HSE Germany and the addition of the UK Quiz TV business. Operating Income Before Amortization grew by 160% to $3.3 million and operating income grew by 215% to $3.0 million, resulting primarily from higher revenue. Results exclude Euvia, which is treated as a discontinued operation of IAC due to its pending sale.

TICKETING

Ticketing revenue grew by 4% to $211.3 million, driven by international revenues, which increased 25%, or 19% excluding the benefit of foreign exchange, partially offset by a 1% decrease in U.S. revenue. Acquisitions in Sweden and Finland during 2004 and strong revenue growth in the UK and Canada, partially offset by the loss of license income from the 2004 Summer Olympics, contributed to international results. The slight decrease in U.S. revenue resulted mainly from lower ticket sales primarily attributable to the timing of concert onsales versus the prior year and to the NHL lockout, partially offset by increases in other revenue.

Ticketing Operating Income Before Amortization was flat at $47.0 million, reflecting higher revenue, offset by increased costs associated with the development and support of ticketing technology and higher domestic ticket royalties. Operating income decreased 2% to $40.0 million, due to higher amortization of intangibles.

PERSONALS

Personals revenue grew by 11% to $54.2 million, driven primarily by a 6% increase in paid subscribers and higher average revenue per subscriber. International subscribers grew 24% excluding declines at uDate.

Personals Operating Income Before Amortization declined by 14% to $5.4 million, resulting mainly from higher customer acquisition costs relating to the company's new marketing campaign. Operating income grew by 54% to $4.4 million, reflecting lower non-cash distribution and marketing expense and amortization of intangibles.

IAC LOCAL AND MEDIA SERVICES

IAC Local and Media Services revenue grew by 29% to $41.2 million, driven primarily by the inclusion of ServiceMagic, which was acquired in Q3 2004, and improved results at Citysearch, which grew revenue by 50% due to strong results in the Pay-for-Performance business. EPI revenue decreased by 6%, primarily due to declines in the fundraising channel, partially offset by growth in the online businesses.

IAC Local and Media Services Operating Income Before Amortization loss narrowed by 13% to $11.9 million, driven by reduced losses at Citysearch and the inclusion of ServiceMagic, partially offset by higher losses at EPI. Operating loss improved by 53% to $13.1 million, further driven by lower amortization of intangibles at Citysearch.

FINANCIAL SERVICES AND REAL ESTATE

Financial Services and Real Estate revenue grew by 166% to $105.8 million, driven primarily by increased revenue per transaction in the lending business, which benefited from the integration of LendingTree Loans. The dollar value of closed loans in the period grew by 52% to $9.6 billion, led by refinance activity. Revenue from the real estate businesses grew, driven by a higher number of referrals and closings.

Financial Services and Real Estate Operating Income Before Amortization grew by 215% to $9.7 million, driven primarily by higher revenue, reflecting in part higher revenue per closing at LendingTree Loans, partially offset by increased marketing costs and customer rebates for real estate. The higher marketing costs contributed to a loss of $5.1 million in the real estate business. Operating loss narrowed by 8% to $3.3 million, driven by the above factors, partially offset by increased amortization of intangibles.

TELESERVICES

Teleservices revenue grew by 7% to $77.1 million, primarily due to increased business with existing clients, both domestically and internationally. Teleservices Operating Income Before Amortization and operating income increased by 33% to $4.2 million, driven by higher revenue on lower fixed costs, including depreciation.

OTHER

Operating Income Before Amortization was impacted by a 35% increase in corporate and other expense to $29.9 million, driven mainly by transaction expenses related to the spin-off of $4.9 million. Operating income was impacted by an 11% decline in corporate and other expense, driven primarily by a decline in non-cash compensation expense. Non-cash compensation expense decreased 27% to $50.5 million, primarily driven by a decrease in the amount of non-cash compensation expense related to IAC's mergers with its formerly publicly traded subsidiaries, partially offset by an increase in other non- cash compensation expense. In future periods, non-cash compensation expense is expected to include charges related to pending transactions, including the spin-off.

Equity in the losses of VUE increased to a loss of $21.2 million. During Q4 2004, VUE recorded a charge related to asset impairments, for which we recorded the proportionate share related to our 5.44% common stake on a one- quarter lag.

Equity in the income of unconsolidated affiliates and other declined 31% to $4.9 million, driven by an $18.3 million pre-tax charge related to realized and unrealized losses on marketable securities, partially offset by a $16.7 million pre-tax gain on the sale of our minority interest in the Italian home shopping operations.

The effective tax rates for continuing operations and adjusted net income were 52% and 41% respectively in Q1 2005 compared to 40% and 38% in Q1 2004. Q1 2005 effective tax rates were higher than the federal statutory rate of 35% due principally to state taxes, non-deductible transaction costs related to the spin-off, and foreign losses for which no tax benefit was recognized. The Q1 2005 effective tax rate for continuing operations was further impacted by the non-deductible amortization of non-cash compensation. Q1 2004 effective tax rates were higher than the federal statutory rate principally due to state taxes, and the effective tax rate for continuing operations was further impacted by non-deductible amortization of intangibles.

SEGMENT OPERATING METRICS

IAC TRAVEL Q1 2005 Q1 2004 Growth Gross Bookings By Geography (mm): Domestic $3,245 $2,837 14% International 947 652 45% Total $4,192 $3,489 20%

Net Revenue By Geography (mm): Domestic $446 $408 9% International 117 86 36% Total $564 $494 14%

Gross Bookings by Brand (mm): Expedia $3,444 $2,672 29% Hotels.com 483 494 -2% Other 265 323 -18% Total $4,192 $3,489 20%

Gross Bookings by Agency / Merchant (mm): Agency $2,417 $1,895 28% Merchant 1,775 1,594 11% Total $4,192 $3,489 20%

Packages revenue (mm) $118 $104 13% Number of transactions (mm) (a) 9.7 8.2 18% Merchant hotel room nights (mm) (b) 7.3 7.0 4%

INTERVAL: Members (000s) 1,717 1,622 6% Confirmations (000s) 270 266 2% Share of confirmations online 21.0% 17.2%

HSN - U.S. (Households as of end of period) Units Shipped (mm) 10.0 10.1 -1% Gross Profit % 37.6% 36.4% Return Rate 15.4% 16.8% Average price point $53.66 $51.02 5% Product mix: Home Hard Goods 25% 27% Home Fashions 15% 14% Jewelry 17% 17% Health / Beauty 30% 31% Apparel / Accessories 13% 11% HSN total homes (mm) 87.0 83.3 4% HSN/ America's Store FTEs (mm) 75.3 72.8 3% HSN.com % of Sales 18% 15%

TICKETING Number of tickets sold (mm) 27.9 26.7 4% Gross value of tickets sold (mm) $1,384 $1,326 4%

PERSONALS Paid Subscribers (000s) 1,074.5 1,011.7 6%

FINANCIAL SERVICES & REAL ESTATE Loan closings - units (000s) (c) 64.4 63.3 2% Loan closings - dollars (mm) (c) $9,589 $6,301 52% Real Estate closings - units (000s) 3.0 1.6 83% Real Estate closings - dollars (mm) $697.8 $381.1 83% Total transactions - units (000s) (d) 1,656 1,836 -10% Revenue per transaction $63.89 $21.65 195%

Note: rounding differences may exist. (a) Transactions are reported as booked. (b) Merchant room nights are reported as stayed for Expedia and Hotels.com, and booked for Hotwire. (c) Loan closings consist of direct loans and loans through the exchange. (d) Transactions are comprised of lending and real estate transmits and closings. For qualifying forms sent to multiple parties, each transmit is counted as a transaction.

GAAP FINANCIAL STATEMENTS

IAC CONSOLIDATED STATEMENT OF OPERATIONS (unaudited; $ in thousands except per share amounts)

Three Months Ended March 31, 2005 2004

Service revenue $1,020,395 $856,492 Product sales 626,702 587,333 Net revenue 1,647,097 1,443,825 Cost of sales-service revenue 366,526 329,478 Cost of sales-product sales 382,828 365,269 Gross profit 897,743 749,078

Selling and marketing expense 339,284 308,174 General and administrative expense 216,066 167,321 Other operating expense 27,542 20,079 Amortization of cable distribution fees 16,726 17,222 Amortization of non-cash distribution and marketing expense 432 6,339 Amortization of non-cash compensation expense 50,529 68,968 Amortization of intangibles 74,376 79,717 Depreciation expense 45,150 42,150 Operating income 127,638 39,108

Other income (expense): Interest income 54,013 45,277 Interest expense (21,663) (19,393) Equity in the losses of VUE (21,166) (352) Equity in the income of unconsolidated affiliates and other 4,920 7,175 Total other income , net 16,104 32,707

Earnings from continuing operations before income taxes and minority interest 143,742 71,815 Income tax expense (73,967) (28,444) Minority interest in income of consolidated subsidiaries (351) (511) Earnings from continuing operations 69,424 42,860 Income (loss) from discontinued operations, net of tax 2,788 (1,333) Earnings before preferred dividends 72,212 41,527 Preferred dividends (3,263) (3,264) Net earnings available to common shareholders $68,949 $38,263

Earnings per share Basic earnings per share from continuing operations $0.09 $0.06 Diluted earnings per share from continuing operations $0.09 $0.05

Basic earnings per share $0.10 $0.05 Diluted earnings per share $0.09 $0.05

IAC CONSOLIDATED BALANCE SHEET (unaudited; $ in thousands)

March 31, December 31, 2005 2004 ASSETS CURRENT ASSETS Cash and cash equivalents $1,951,465 $1,099,698 Restricted cash and cash equivalents 59,246 41,377 Marketable securities 2,169,064 2,409,745 Accounts and notes receivable, net 588,875 500,630 Loans available for sale, net 368,111 206,256 Inventories, net 248,168 240,977 Deferred income tax 150,740 109,752 Assets held for sale 332,742 339,880 Other current assets 206,160 167,452 Total current assets 6,074,571 5,115,767

Computer and broadcast equipment 809,923 794,730 Buildings and leasehold improvements 165,808 166,138 Furniture and other equipment 159,266 158,784 Land 20,285 21,168 Projects in progress 93,704 71,247 1,248,986 1,212,067 Less: accumulated depreciation and amortization (741,824) (702,366) Total property, plant and equipment 507,162 509,701

Goodwill 11,267,079 11,210,964 Intangible assets, net 2,301,846 2,333,663 Long-term investments 1,500,950 1,609,335 Preferred interest exchangeable for common stock 1,428,530 1,428,530 Cable distribution fees, net 71,482 77,484 Notes receivable and advances, net of current portion 637 615 Deferred charges and other 72,775 112,466 Non-current assets of discontinued operations 340 340 TOTAL ASSETS $23,225,372 $22,398,865

LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term obligations and short-term borrowings $723,651 $562,966 Accounts payable, trade 965,620 800,110 Accounts payable, client accounts 219,245 176,921 Accrued distribution fees 34,733 36,904 Deferred merchant bookings 704,349 361,199 Deferred revenue 121,778 104,611 Income tax payable 111,068 57,093 Liabilities held for sale 281,731 313,035 Other accrued liabilities 458,239 487,555 Current liabilities of discontinued operations 9,052 9,306 Total current liabilities 3,629,466 2,909,700

Long-term obligations, net of current maturities 785,522 779,453 Other long-term liabilities 152,488 151,580 Deferred income taxes 2,551,620 2,485,224 Common stock exchangeable for preferred interest 1,428,530 1,428,530 Minority interest 84,486 39,074

SHAREHOLDERS' EQUITY Preferred stock 131 131 Common stock 6,999 6,970 Class B convertible common stock 646 646 Additional paid-in capital 14,131,903 14,058,797 Retained earnings 2,497,709 2,428,760 Accumulated other comprehensive income 40,034 81,051 Treasury stock (2,079,164) (1,966,053) Note receivable from key executive for common stock issuance (4,998) (4,998) Total shareholders' equity 14,593,260 14,605,304 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $23,225,372 $22,398,865

IAC STATEMENT OF CASH FLOWS (unaudited; $ in thousands)

Three Months Ended March 31, 2005 2004 Cash flows from operating activities: Earnings from continuing operations $69,424 $42,860 Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: Depreciation and amortization 119,526 121,867 Amortization of non-cash distribution and marketing expense 432 6,339 Amortization of non-cash compensation expense 50,529 68,968 Amortization of cable distribution fees 16,726 17,222 Amortization of deferred financing costs - 161 Deferred income taxes 14,625 (22,723) Equity in losses (income) of unconsolidated affiliates, including VUE 17,198 (2,460) Non-cash interest income (10,870) (9,952) Minority interest in income of consolidated subsidiaries 351 511 Increase in cable distribution fees (13,150) (12,106) Changes in current assets and liabilities: Accounts and notes receivable (49,054) (17,233) Loans available for sale (161,804) - Inventories (5,427) (6,275) Prepaids and other assets (43,030) (51,450) Accounts payable and accrued liabilities 130,862 60,297 Deferred revenue 21,859 (64,390) Deferred merchant bookings 342,451 400,194 Funds collected by Ticketmaster on behalf of clients, net 31,895 81,972 Other, net (38) 2,334 Net cash provided by operating activities 532,505 616,136 Cash flows provided by (used in) investing activities: Acquisitions, net of cash acquired 2,292 (4,729) Capital expenditures (50,047) (34,215) Increase in long-term investments and notes receivable (29,189) (805) Purchase of marketable securities (475,783) (1,344,834) Proceeds from sale of marketable securities 705,638 1,334,757 Other, net 16,364 8,893 Net cash provided by (used in) investing activities 169,275 (40,933) Cash flows provided by financing activities: Warehouse loan borrowings 160,756 - Principal payments on long-term obligations (299) (399) Purchase of treasury stock by IAC (2,213) (882) Proceeds from subsidiary stock, including stock options 555 - Proceeds from issuance of common stock, including stock options 14,490 40,834 Preferred dividends (3,263) (3,264) Other, net (8,227) 10,470 Net cash provided by financing activities 161,799 46,759 Net cash used in discontinued operations (635) (8,526) Effect of exchange rates changes on cash and cash equivalents (11,177) (1,211) Net increase in cash and cash equivalents 851,767 612,225 Cash and cash equivalents at beginning of period 1,099,698 859,618 Cash and cash equivalents at end of period $1,951,465 $1,471,843

DILUTIVE SECURITIES

IAC has various tranches of dilutive securities (warrants, convertible preferred, and options). The table below details these securities as well as potential dilution at various stock prices (amounts in millions, except average strike/conversion price):

Avg. Strike / As of Shares Conversion 4/25/05 Dilution at:

Average Share Price $22.23 $25.00 $30.00 $35.00 $40.00

Absolute Shares as of 4/25/05 664.0 664.0 664.0 664.0 664.0 664.0

RSUs 11.3 11.3 11.3 11.3 11.3 11.3 Options 74.8 $11.73 24.6 26.6 29.2 31.0 32.4 Warrants 73.1 $24.81 8.4 9.9 14.1 19.4 25.6 Convertible Preferred 19.4 $33.75 0.0 0.0 0.0 19.4 20.2 (initial) Total Treasury Method Dilution 44.3 47.8 54.6 81.1 89.6 % Dilution 6.2% 6.7% 7.6% 10.9% 11.9% Total Treasury Method Diluted Shares Outstanding 708.3 711.8 718.6 745.2 753.6

IAC has outstanding approximately 12.3 million shares of restricted stock and restricted stock units ("RSUs"), which generally vest over five years from date of grant, including 4.8 million issued in 2005, and including 1.0 million which will be settled in cash and therefore have no dilutive effect.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2005, IAC had $4.2 billion in cash and marketable securities. This includes $172.7 million in net funds collected on behalf of clients by Ticketmaster and $846.4 million in combined deferred merchant bookings and deferred revenue at IAC Travel.

As of March 31, 2005, IAC had total debt of $1.5 billion, $723.7 million of which is included in current maturities. Total debt consists mainly of 7.00% Senior Notes due 2013, 6.75% Senior Notes due 2005, and short-term borrowings at LendingTree Loans, and does not include IAC's convertible preferred stock with a balance sheet carrying value based on the par value of $0.01 per share and a face value of $656 million. The convertible preferred is initially convertible at $33.75 (subject to downward adjustment if the price of IAC common stock is more than $35.10 at the time of conversion).

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

IAC RECONCILIATION OF CASH FLOW FROM OPERATIONS TO FREE CASH FLOW (unaudited; in millions)

Three Months Ended March 31, 2005 2004 Net Cash Provided by Operating Activities $532.5 $616.1 Warehouse loans payable 160.8 - Capital expenditures (50.0) (34.2) Preferred dividend paid (3.3) (3.3) Free Cash Flow $640.0 $578.7

For the three months ended March 31, free cash flow increased by $61.3 million due primarily to higher earnings, a cash tax refund and an increased contribution to working capital from deferred merchant bookings and deferred revenue at IAC Travel, offset by decreases in Ticketmaster client cash and by higher capital expenditures. Free Cash Flow includes an increase in warehouse loans payable in Financial Services and Real Estate, which is offset by a use of working capital related to an increase in loans held for sale. Deferred merchant bookings and deferred revenue at IAC Travel contributed $355.8 million to the change in working capital during the period, versus $333.0 million in the prior year. Ticketmaster client cash contributed $31.9 million to the change in working capital in the current period, versus $82.0 million in the prior year.

IAC RECONCILIATION OF GAAP EPS TO ADJUSTED EPS (unaudited; in thousands except per share amounts)

Three Months Ended March 31, 2005 2004

Diluted earnings per share $0.09 $0.05 GAAP diluted weighted average shares outstanding 735,348 752,167

Net income $68,949 $38,263 Amortization of distribution and marketing expense 432 6,339 Amortization of compensation expense 50,529 68,968 Amortization of intangibles 74,376 79,717 Discontinued operations, net of tax (2,788) 1,333 Equity in the losses of VUE 21,166 352 Impact of income taxes and minority interest (44,990) (57,721) Preferred dividends 3,263 3,264 Adjusted Net Income $170,937 $140,515

Adjusted EPS weighted average shares outstanding 763,914 777,528

Adjusted EPS $0.22 $0.18

GAAP Basic weighted average shares outstanding 698,502 697,499 Options, warrants and restricted stock, treasury method 36,846 54,668 Conversion of preferred shares to common (if applicable) - - GAAP Diluted weighted average shares outstanding 735,348 752,167

Convertible preferred; add'l restricted shares for adjusted EPS 28,566 25,361 Adjusted EPS shares outstanding (a) 763,914 777,528

(a) For Adjusted EPS purposes, the impact of RSUs is based on the weighted average amount of RSUs outstanding, as compared with shares outstanding for GAAP purposes, which includes RSUs on a treasury method basis.

Please see page 13 for definitions of non-GAAP measures.

IAC RECONCILIATION OF DETAILED SEGMENT RESULTS TO GAAP (unaudited; $ in millions; rounding differences may occur)

Q1 2005 2004 Revenue IAC Travel $563.9 $494.0 Electronic Retailing: HSN U.S. 498.0 467.8 HSN International 104.7 93.3 Total Electronic Retailing 602.6 561.1 Ticketing 211.3 202.3 Personals 54.2 48.8 IAC Local and Media Services 41.2 32.1 Financial Services and Real Estate 105.8 39.7 Teleservices 77.1 71.8 Other (9.1) (6.0) Total Revenue $1,647.1 $1,443.8

Operating Income Before Amortization IAC Travel $168.5 $127.6 Electronic Retailing: HSN U.S. 56.5 41.6 HSN International 3.3 1.3 Total Electronic Retailing 59.8 42.9 Ticketing 47.0 46.8 Personals 5.4 6.3 IAC Local and Media Services (11.9) (13.6) Financial Services and Real Estate 9.7 3.1 Teleservices 4.2 3.2 Corporate Expense and other adjustments (29.9) (22.6) Intersegment Elimination 0.0 0.4 Total Operating Income Before Amortization $253.0 $194.1

Amortization of non-cash items IAC Travel $38.6 $42.9 Electronic Retailing: HSN U.S. 13.2 13.2 HSN International 0.3 0.3 Total Electronic Retailing 13.6 13.6 Ticketing 7.0 6.2 Personals 1.1 3.5 IAC Local and Media Services 1.3 14.2 Financial Services and Real Estate 13.0 6.6 Teleservices - - Corporate Expense and other adjustments 50.8 68.1 Total amortization of non-cash items $125.3 $155.0

Operating (Loss) Income IAC Travel $129.9 $84.7 Electronic Retailing: HSN U.S. 43.3 28.4 HSN International 3.0 0.9 Total Electronic Retailing 46.2 29.3 Ticketing 40.0 40.7 Personals 4.4 2.8 IAC Local and Media Services (13.1) (27.8) Financial Services and Real Estate (3.3) (3.6) Teleservices 4.2 3.2 Corporate Expense and other adjustments (80.7) (90.7) Intersegment Elimination 0.0 0.4 Total operating income $127.6 $39.1 Total other income (expense), net 16.1 32.7 Earnings from cont. operations before income taxes and min. int. 143.7 71.8 Income tax expense (74.0) (28.4) Minority interest (0.4) (0.5) Earnings from continuing operations 69.4 42.9 Discontinued Operations, net of tax 2.8 (1.3) Earnings before preferred dividends 72.2 41.5 Preferred dividends (3.3) (3.3) Net earnings available to common shareholders $68.9 $38.3

Supplemental: Depreciation expense IAC Travel $11.3 $10.0 Electronic Retailing: HSN U.S. 10.2 10.2 HSN International 2.4 2.6 Total Electronic Retailing 12.5 12.7 Ticketing 8.8 7.3 Personals 3.0 3.3 IAC Local and Media Services 2.5 1.8 Financial Services and Real Estate 1.4 0.9 Teleservices 3.8 4.8 Corporate expense and other adjustments 1.8 1.3 Total depreciation expense $45.2 $42.2

DEFINITIONS OF NON-GAAP MEASURES

Operating Income Before Amortization is defined as operating income plus: (1) amortization of non-cash distribution, marketing and compensation expense, (2) amortization of intangibles and goodwill impairment, if applicable, (3) pro forma adjustments for significant acquisitions and (4) one-time items. We believe this measure is useful to investors because it represents the consolidated operating results from IAC's segments, taking into account depreciation, which we believe is an ongoing cost of doing business, but excluding the effects of any other non-cash expenses. Operating Income Before Amortization has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses, including non- cash compensation, non-cash payments to partners, and acquisition-related accounting.

Adjusted Net Income generally captures all items on the statement of operations that have been, or ultimately will be, settled in cash and is defined as net income available to common shareholders plus: (1) amortization of non-cash distribution, marketing and compensation expense, (2) amortization of intangibles and goodwill impairment, if applicable, (3) pro forma adjustments for significant acquisitions, (4) equity income or loss from IAC's 5.44% interest in VUE, (5) one-time items, net of related tax, and minority interest and (6) discontinued operations, net of tax. We believe Adjusted Net Income is useful to investors because it represents IAC's consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other charges which are not allocated to the operating businesses such as interest expense, taxes and minority interest, but excluding the effects of any other non-cash expenses.

Adjusted EPS is defined as Adjusted Net Income divided by weighted fully diluted shares outstanding for Adjusted EPS purposes. We include dilution from options and warrants per the treasury stock method and include all shares relating to restricted stock/share units ("RSU") in shares outstanding for Adjusted EPS. This differs from the GAAP method for including RSUs, which treats them on a treasury method basis. Shares outstanding for Adjusted EPS purposes are therefore higher than shares outstanding for GAAP EPS purposes. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, IAC's consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other charges which are not allocated to the operating businesses such as interest expense, taxes and minority interest, but excluding the effects of any other non-cash expenses. Adjusted Net Income and Adjusted EPS have the same limitations as Operating Income Before Amortization, and in addition Adjusted Net Income and Adjusted EPS do not account for IAC's passive ownership in VUE. Therefore, we think it is important to evaluate these measures along with our consolidated statement of operations.

Free Cash Flow is defined as net cash provided by operating activities, including preferred dividends received from VUE, less capital expenditures, investments to fund HSN International unconsolidated operations and preferred dividends paid by IAC. In addition, Free Cash Flow includes tax distributions on the VUE common and preferred interests upon receipt of the distributions by IAC. For purposes of Free Cash Flow, we also include changes in warehouse loans payable in Financial Services and Real Estate due to the close connection that exists with changes in loans held by sale which are included in cash provided by operations. We believe Free Cash Flow is useful to investors because it represents the cash that our operating businesses generate, before taking into account cash movements that are non-operational.

Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. For example, it does not take into account stock repurchases. Therefore, we think it is important to evaluate Free Cash Flow along with our consolidated statement of cash flows.

We endeavor to compensate for the limitations of the non-GAAP measures presented by also providing the comparable GAAP measures, GAAP financial statements, and descriptions of the reconciling items and adjustments, to derive the non-GAAP measures.

For IAC's Principles of Financial Reporting, a detailed explanation of why we believe these non-GAAP measures are useful to investors and management, please refer to IAC's website at http://www.iac.com/investors.htm.

Conference Call

IAC will audiocast its conference call with investors and analysts discussing the company's first quarter financial results and certain forward-looking information on Wednesday, May 4, 2005, at 11:00 a.m. Eastern Time (ET). The live audiocast is open to the public at http://www.iac.com/investors.htm.

Additional Information And Where to Find It

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements relating to IAC's anticipated financial performance, business prospects, new developments, pending transactions and similar matters, and/or statements that use words such as "anticipates," "estimates," "expects," "intends," "plans," "believes" and similar expressions. These forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from those contained in the forward-looking statements included in this report for a variety of reasons, including, among others: adverse changes in economic conditions generally or in any of the markets or industries in which IAC's businesses operate, changes in senior management at IAC and/or its businesses, the rate of growth of the Internet, the e-commerce industry and broadband access, the rate of online migration in the various markets and industries in which IAC's businesses operate, the ability of IAC to expand successfully in international markets, the successful completion of pending corporate transactions and the integration of acquired businesses, and the integrity, security and redundancy of the systems and networks of IAC and its businesses. Certain of these and other risks and uncertainties are discussed in IAC's filings with the Securities and Exchange Commission ("SEC"). Other unknown or unpredictable factors also could have a material adverse effect on IAC's business, financial condition and results of operations. In light of these risks and uncertainties, the forward-looking statements discussed in this press release may not occur. Accordingly, readers should not place undue reliance on these forward-looking statements, which only reflect the views of IAC management as of the date of this press release.

IAC is not under any obligation and does not intend to publicly update or review any of these forward-looking statements contained in this press release, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

Additional Information about the Ask Jeeves Acquisition

In connection with its previously announced, pending acquisition of Ask Jeeves, Inc. ("Ask Jeeves"), IAC has filed a registration statement with the SEC that includes a preliminary combined proxy statement/prospectus of Ask Jeeves and IAC and other relevant documents. Ask Jeeves stockholders should read the definitive proxy statement/prospectus and other relevant materials when they become available, because they will contain important information about Ask Jeeves, IAC and the proposed merger.

In addition to the documents described above, Ask Jeeves and IAC file annual, quarterly and current reports, proxy statements and other information with the SEC. The proxy statement/prospectus and other relevant materials (when they become available), and any other documents filed with the SEC by Ask Jeeves or IAC are available without charge at the SEC's website at http://www.sec.gov/, or from the companies' websites, at http://www.ask.com/ and http://www.iac.com/, respectively.

Ask Jeeves, IAC and their respective officers and directors may be deemed to be participants in the solicitation of proxies from Ask Jeeves stockholders in connection with the proposed merger. A description of certain interests of the directors and executive officers of Ask Jeeves and a description of certain interests of the directors and executive officers of IAC is set forth in the preliminary combined proxy statement/prospectus, which was filed with the SEC on April 26, 2005. Additional information regarding the interests of such potential participants will be included in the definitive proxy statement/prospectus and other relevant documents to be filed with the SEC in connection with the proposed merger.

Additional Information about the IAC Spin-Off

As previously announced, IAC intends to spin-off its travel-related businesses into a separate publicly-traded company. In connection with the proposed spin-off, IAC has filed a preliminary proxy statement/prospectus with the SEC. Stockholders of IAC are urged to read the definitive proxy statement/prospectus, when it becomes available, because it will contain important information about IAC, the proposed spin-off transaction and related matters. Investors and security holders can obtain free copies of the definitive proxy statement/prospectus when it becomes available by contacting Investor Relations, IAC/InterActiveCorp, Carnegie Hall Tower, 152 W. 57th Street, 42nd Floor, New York, NY 10019 (Telephone: (212) 314-7400). Investors and security holders can also obtain free copies of the proxy statement/prospectus and other documents filed by IAC and Expedia with the SEC in connection with the proposed spin-off transaction at the SEC's web site at http://www.sec.gov/.

In addition to the proxy statement, IAC files annual, quarterly and current reports, proxy statements and other information with the SEC, each of which should be available at the SEC's web site at www.sec.gov. You may also read and copy any reports, statements and other information filed by IAC at the SEC public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information.

IAC and its directors, executive officers and certain members of management and other employees may be deemed to be participants in the solicitation of proxies of IAC's stockholders to approve the proposed spin-off transaction. Such individuals may have interests in the transaction as described in IAC's proxy statement/prospectus, including as a result of current holdings of options or shares of IAC's stock and future holdings of options or shares of Expedia's stock, which will be impacted in the transaction. Information regarding IAC and the equity interests of its directors and officers who may be deemed to be participants in the solicitation of proxies is contained in IAC's preliminary proxy statement/prospectus, filed with the SEC on April 25, 2005.

About IAC/InterActiveCorp

IAC operates leading and diversified businesses in sectors being transformed by the internet, online and offline... our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world. To view a full list of the companies of IAC please visit our website at http://iac.com/.

Contact Us IAC Investor Relations Roger Clark / Lauren Porat (212) 314-7400

IAC Corporate Communications Deborah Roth / Andrea Riggs (212) 314-7254 / 7280

IAC/InterActiveCorp 152 West 57th Street, 42nd Floor New York, NY 10019 212.314.7300 Fax 212.314.7309 http://.iac.com/

Source: IAC/InterActiveCorp

CONTACT: Roger Clark or Lauren Porat of IAC Investor Relations, +1-212-314-7400, or Deborah Roth, +1-212-314-7254, or Andrea Riggs, +1-212-314-7280, both of IAC Corporate Communications

Web site: http://www.iac.com/

------- Profile: Ent