Good day, ladies and gentlemen and welcome to the QuinStreet First Quarter Fiscal 2020 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to hand things over to Erica Abrams. Please go ahead, Erica..

Thank you, Lisa. Good afternoon ladies and gentlemen. Thank you for joining us today as we report QuinStreet's first quarter fiscal 2020 financial results. Joining me on the call today are Doug Valenti, CEO; and Greg Wong, CFO of QuinStreet. This call is being simultaneously webcast on the Investor Relations section of our website at www.quinstreet.com.

Before we get started, I would like to remind you that the following discussion contains forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected by such statements and are not guarantees of future performance.

Factors that may cause the results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 10-K filing made on August 29, 2019. Forward-looking statements are based on assumptions as of today and the company undertakes no obligation to update these statements.

Today, we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures are included in today's earnings press release, which is available on our Investor Relations website. With that, I will turn the call over to Doug, CEO of QuinStreet. Please go ahead..

Thank you, Erica and thank you all for joining us today. As projected, we set another revenue record in fiscal Q1. Revenue in our financial services client vertical ex mortgage grew 32% year-over-year. Most importantly, the changes we announced last quarter to improve execution and regain momentum are already paying off.

And we expect accelerating positive effects on the business from those changes as we move forward. We are maintaining our full fiscal year outlook for both revenue and EBITDA. Let me give you more color on the EBITDA outlook since it implies that we expect higher margins throughout the rest of the year.

First, our gross margin in Q1 reflected relatively heavy investment in new media opportunities for our fast growing financial services businesses. We have already made good progress optimizing those sources to a higher medium margin in Q2, and we expect those investments in new media opportunities to contribute to continued strong revenue growth.

Investments in new media opportunities where we test and ramp new sources then go through a cycle of margin and performance optimization are an ongoing part of our business model as many of you know. Second, with respect to gross margin and EBITDA, we are seeing a mix shift to higher margin businesses.

Our fastest growing at-scale client vertical businesses have higher than average gross margins and now represent almost $200 million of annual revenue. We expect the mix shift trend to higher margin client verticals to continue throughout this fiscal year.

Finally, with respect to gross margin and EBITDA, we are in the early stages of ramping new businesses with SaaS-like margins, including but not limited to QRP. The insurance agency rating and management platform developed in partnership with our largest insurance client.

We expect those businesses to be an increasing part of our mix as the year progresses and into the future. As noted in our press release, we have retained Goldman Sachs to lead a process to review strategic alternatives. Also as noted in the press release, we will undertake a broad review of potential alternatives to enhancing shareholder value.

We have not set a timetable for the conclusion of our review of strategic alternatives and following this earnings call, we do not intend to provide updates until we determine that further disclosure is necessary or appropriate. There can be no assurances that the review of strategic alternatives will result in a transaction or other outcome.

We are pleased that we delivered record revenue in Q1, and accelerated year-over-year growth. Our initiatives to improve execution have already had a strong positive impact across the business and as a result, we feel confident in delivering strong results in Q2.

Let me reiterate that we remain enthusiastic and confident about our long-term market opportunity, assets and capabilities. And as I said earlier, we are maintaining our outlook for both revenue and EBITDA for full fiscal year 2020.

With that as important backdrop given increased M&A and other activity in our markets and inbound interest, we believe that the time and window of opportunity are right to assess our mix of businesses, structure and independence in light of delivering the best value to shareholders. With that, I'll turn the call over to Greg..

Thank you, Doug. Hello and thanks to everyone for joining us today. Q1 was a good start to our fiscal year with revenue increasing 12% year-over-year to $126.6 million, another record revenue quarter. The changes to our operating structure that we announced last quarter have been paying off as evidenced by our return to double-digit revenue growth.

Adjusted EBITDA was $9.4 million or 7.5% of revenue. Adjusted net income for the first quarter was $6.2 million or $0.12 per share on a fully diluted basis. In the quarter, we grew our cash balance by $8 million to close the quarter with $70.5 million of cash and equivalents.

Looking at revenue by client vertical, our financial services client vertical represented 73% of Q1 revenue and grew a 20% year-over-year to $92.9 million. Excluding mortgage, our financial services business grew at 32% year-over-year. Revenue from our largest client represented 18% of total revenue in the first quarter.

The reduction in concentration was due primarily to more aggressive spend by other insurance clients in our marketplace. A record number of insurance clients spent $1 million or more a month in the quarter with us.

We expect the trend of more clients spending more budget in our marketplaces to continue as they ship more budget to digital and more digital spend to performance marketplaces. Our relationship and commitment to our largest client are no way diminished nor is there demand for the results from our marketplaces.

Our education client vertical represented 14% of Q1 revenue and declined 22% year-over-year to $17.4 million. A year-over-year decline was due to the collapse of Dream Center Education Holdings, our large education client, and that will continue to be a tough year-over-year comparable until we lapped this customer loss at the end of November.

Our other client vertical which includes home services and B2B represented the remaining 13% of Q1 revenue and grew 25% year-over-year to $16.3 million. Moving on to adjusted EBITDA, we remain focused on expanding profitability. The first quarter included relatively heavy media investment in our financial services client vertical.

As is typical in our business, media optimization follows that investment, and we've already seen good progress in optimizing those investments to higher medium margin. We are maintaining our outlook for full fiscal year 2020 EBITDA.

EBITDA margins in the coming quarters are expected to expand due to further media optimizations and increasing mix shift to higher margin businesses and the ramping of new businesses with SaaS like margins including but not limited to QRP. Turning to the balance sheet, we grow our cash balance by $8 million in the quarter.

We began the quarter with $62.5 million, generated $9.5 million in operating cash flow, offset by $1 million of CapEx to close the quarter with $70.5 million of cash and equivalents. Normalized free cash flow for the quarter was $8 million or 6% of revenue.

Most of our adjusted EBITDA drops to normalize free cash flow due to the low capital requirements of our business model. In summary, we continue to be excited about our opportunity and business model and believe we are well-positioned to continue to deliver double-digit revenue growth and expanding margins for the rest of fiscal 2020 and beyond.

With that, I'll turn the call over the operator for Q&A..

Our first question will come from Jim Goss, Barrington Research..

With this strategic review, I assume you can say whatever you can say on this call at least. And I'm just wondering usually that implies principally looking at a sale or a breakup or something.

Does it also extend to anything on the table like potentially being a buyer of other things? Or is it really only just trying to monetize what we have right now?.

We're going look at a broad range of options, Jim. So, it doesn't imply any single path or narrow set of paths, so we're going to take a very broad look. We think we've hired one of the best financial advisors in the world to help us do that.

We think there could be a lot of opportunities in a lot of different areas, so I think as we said in the press release and as I said the board's intention is that we take a very broad view of the range of options that can help us to make sure that we're delivering on the best possible path to shareholder value..

Operationally, you talked about the heavy investment in new media opportunities. The revenues were above what we might have expected, but the gross profit was lower because the cost revenues were higher and the margin - the EBITDA margin was lower than I expected.

I was just wondering if those are all trends, we should be baking into a model carrying out over the next couple of quarters like the 7.4%.

Greg mentioned was - and we thought maybe 9.4%, so I'm just wondering if you had to ratchet those down because of the higher costs of new media and whatever else you're looking into over the course of the year?.

Right. No, we would not recommend that you take those into account in your modeling. As I said in my remarks and I think Greg reiterated in his and recall we only guided the year, we did not guide the quarter, but we don't control those expectations directly as you know.

As we look at the year, we feel very good about hitting the outlook that we provided last quarter for this fiscal year, which I think was a 10% adjusted EBITDA margins and growth into 10% to 15% range on revenue. We will make investments periodically in media opportunities, that's part of our business model.

We happen to make higher investments this past quarter than we might have in any typical quarter. We're going to do that opportunistically when we see and have the opportunities.

But again, as we look at the year, when you combine the things we talked about in terms of already having optimized a lot of that media to higher gross margin plus the fact that we're continuing to see a mix shift or higher than average margin businesses, which represent almost half of our revenue now or about $200 million a year in revenue.

And then the ramping up some of our SaaS margin products, including QRP, which are not in any of our estimates at this point because again we haven't done it before.

But on that particular product, we expect the first four contracts for QRP with pretty significant agency partners to be done by the end of December, and we have a pipeline now, an active pipeline on that product that represents several million dollars a month in revenue opportunity for the company, at essentially 90-plus-percent margins.

And again, that was not in our initial outlook either. So we expect that that's - that will be - that we will have contributions for that business this year So again, long way of saying no, we would not read anything into the 7.5% except that the timing of the investments in media happened to be last quarter. We still feel good about the year.

We still feel good about the trajectory on revenue and EBITDA for the year. And again, try to give you some color on that just to make sure that you understood why we felt that way..

I appreciate that the 10% number was certainly the one I was looking at. And then finally, in terms of mortgages, I know that's been soft spot despite the fact that mortgage rates have been lower and that's persisted. You haven't really seen any uptake even though it's been a good environment for that particular vertical..

We have, I think we're making good progress, recovering and putting the foundation and beginning to rebuild our mortgage business and I feel good about the path we're on but it's still down pretty dramatically versus a year ago.

The market reset were significant as everyone knows we've talked about and many of our other folks in our industry have talked about. And it shutdown, a lot of capacity at many of the mortgage companies was reduced.

It's going to take them a while to rebuild that capacity for those that are going to try and a lot of the media also went away for the same reasons, they got efforts and media got shifted to other vertical. So, it's a relatively long cycle to come back from a disruption that wasn't that significant.

I don't think we're down and out mortgage forever but I think it's going to be a relatively long cycle back and we were still down pretty dramatically year-over-year due to those factors in the last quarter. And I don't know when we lap that pretty soon. I guess in the next couple of quarters, we'll lap it again.

I don't think mortgage would be taking us to glory in the near future. But I also don't think mortgage is down and out forever. I think we'll rebuild it. I feel good about our progress doing that and our plan to do that and our products there. But mortgage is still down, was still down quite a bit year-over-year in the quarter..

Up next is John Campbell, Stephens..

So, yes, I guess, it was last time that you talked about strategic review, I suppose all our questions with no holding back.

So first, what was the - Doug, what was the aha moment or kind of the epiphany that made you feel compelled or the board felt compelled to run a more, I guess, official strategic review process?.

There were a number of factors that came into play. Obviously as you know, there's been a lot of activity in our industry over the past couple of years and really at an increasing rate and scale particularly on the M&A side. We've had inbound interest.

And as a public company, of course, board felt like it's our responsibility to - when we have things like that happen in a serious way to make sure we step back and take a big picture view of how we make sure we handle those kind of things and how we get on a path to ensuring the best possible outcome for the shareholders.

We think the timing is pretty good. I mean as we sorted through those two things, we looked at the fact that there's good momentum in the business. We're recovering the momentum that we've felt like we dipped a little bit the end of last fiscal year as you know. We feel like we're really recovering that momentum. We have a lot of great things going on.

It's a good economy, interest rates are low. If we're going to go through this, now's the time to go through it. Don't wait till the bottom falls out of the economy or interest rates start spiking or other things might affect us.

So we feel like if you're going to be prudent and thoughtful about doing something like this, the timing is pretty good now rather than waiting and having things turn against, you so we thought that was a factor, and I say that the fourth factor is that we are seeing - and a lot of this has come through a lot of our partnership discussions, that's been a big growing part of our business, really strong growing interest in performance marking and recognition.

Performance marking is absolutely key to the future of monetization of media and memberships and any time you have traffic online.

And so I think you look at all those things together, we kind of step back and said it's - maybe nothing comes of this but we know there's reason for us to step back and take a look, let's take back and take a great look and make sure we do it right and do it in this window if this is in fact a window and again I think we're fortunate enough and we've been working with Goldman on some other things.

But we're fortunate enough to have been able to partner with certainly in my view one of the greatest financial advisors in the world to help us through that.

So I think it just feels like it's the right thing to do at this time spurred by a lot of activity and some inbound interest that we think we have to try to sort through and again as I said, the wind is right and I think the timing is right from an industry and interest standpoint..

Okay, that makes a lot of sense. I appreciate that. I guess, Greg, on the gross margin pressure in the quarter, how much of that was - it was AmOne versus the media investments you called out.

Is it mostly media investments?.

Yeah, it is mostly media investments. If you look at it from a year-over-year perspective, John, a lot of it actually is incremental head count that we didn't have last year associated with that AmOne acquisition.

That said, we did invest pretty significantly in new media and financial services which brought down what we call our media margin that would cover those incremental costs. So, yeah, I’d look at it as really investment in the media and financial services..

That make sense and remind us again just typically what those kind of contracted - what's the duration you would like on some of those media purchases?.

Recall, John, most of these are not media purchases, most of these are revenue shared deals and this one - these in particular were revenue share deals. In a couple of cases, I think, we may have committed to short-term but, in general, we don't make long-term commitments to buy traffic.

We will sometimes do that if we're early into a deal but typically it's a rev share and we are - and you know it, and when we have this on our mix all the time, we'll very often go into a new media area and find out that in order to hold our position while we iterate up to the margin, we want, we'll guarantee a certain amount to the partner over a period of time until we get to the point where we can shift over to the rev share model.

In this case, we just have some media that we were pushing really hard in a couple of our fast growing businesses. We felt like that the media was going to perform better, faster than it did. We still would have made those investments anyway because we think they're very important to expanding that media footprint in those businesses.

It's just timing wise it took us a little bit longer and we didn't get to the margin profile we wanted as fast as we wanted to. We're getting it there now and/or we've cut those media sources out. So I wouldn't think of it as any kind of long-term commitment, it's typically very short-term if at all.

And in these cases, it was very short-term, just happened to hit us pretty hard relatively hard last quarter. Now I will be clear though we are going to make media investments. The timing of this one just affected EBITDA in the last quarter maybe a little bit more than certainly expectations showed but it doesn't change our outlook for the year.

And we've - and again we're going to make media investments as we go. But I don't expect the new media investments to alter our enthusiasm or optimism for our outlook for the year either..

Yes. And to be clear, we've never been - our business is not accessing low margin business. We are happy to invest in low margin business upfront if we know that we can optimize it up to acceptable margins over time and that's what we tried to say in our prepared remarks is we've seen that.

We've seen that in Q2, we've seen those margins start creeping up and that's going to help impact the rest of the year..

The margins on the businesses they were impacted by that media and some of those businesses, I mean, some of those margins are already up 5 points..

That's right..

So and that's pretty significant chunk of business. So we're again it's pretty short cycle with just - because of the timing of the investments which we can't always choose, it makes a quarter look weaker than may have been expected, but it does not affect our view of the year at all..

Okay.

So basically, I guess, similar to the upfront investment you had, it was like AWOL back in the day?.

Yes, similar, it's just that the short-term cycle, we're guaranteeing a little bit for the media while we sorted out and then we iterate it up works and we run with it and expand it which is part of what feeds our business and has for 20 years or we cut it out.

If we find that we, in fact, can't optimize, I think and to be clear what optimization is, is what rate does it convert? For what clients does it match? What's the right price for it? How do we segment it to get the best match rates? And all the stuff that we do is probably when we say optimization that's what we're talking about.

It's the kind of thing that makes our business tick every day..

Up next is Jason Kreyer, Craig-Hallum..

Apologies, I hopped on late.

So if you've covered some of this stuff, again sorry for spending more time on it here but just on those new media services you talked, is there anything new that you haven't gone after in the past or are these specific to any particular industries that you participate in?.

In any of our particular verticals, there is this different mix of media that these are particular investments. We're in a vertical where we are - one of our biggest verticals where we have great presence in some types of media and not as greater presence in some others where we think there's a lot of opportunity.

We began expanding into some of those areas where we think there's a lot of opportunity but are newer to this particular vertical. And what we found was that they did not - that our expectations for the key performance metrics of that media which take a while to see because there's a little bit of a longer cycle time in that vertical.

We're not what we expected. We learned a lot from it. We cut some back out. We now have optimized others and I think now we're in a position to really effectively ramp that segment of media for that vertical which is what we - that's what the investment was all about was figure it out.

So then you know how to optimize it whether you can optimize it and how big you can grow it. So it was a segment of media that's relatively new for that vertical but is one we're very familiar with in other verticals and it will work. We just had to find the right mix and the right approach to work in it..

And I wanted to switch gears on to QRP, some of the commentary you made there.

Can you just give us kind of a snapshot of where that stands today, and how you're thinking about the progression of that? And then what are the factors that go into that progression? I mean are you at the mercy of some of these external parties because you talked about having a backlog there.

And so I'm wondering what keeps that backlog from being recognized sooner than later?.

And again recall, we haven't done this before in this exact way, but let me tell you what we know, right. We have a very deep pipeline at this point, a very active discussions, that pipeline of active discussions, and this is with companies that do a lot of quoting in the independent agent channel, of course, because that's what this product is for.

That pipeline represents several million dollars a month in revenue opportunity for us, and that's just the active pipeline. As you know, we size that overall market to be over 100 million quotes, and you can assume that our average pricing as an introductory pricing is about a $1 a quote.

We expect of that active pipeline that there are four contracts that we'll get done by the end of December, that will represent pretty meaningful revenue opportunity because they're pretty decent size agencies. In terms of Windows, when those will go live. That's the part we haven't done yet. So we're not exactly sure, but the product is ready.

The integrations are pretty straightforward. Most of these partners though will want to put the product in place and run it parallel to their existing systems for a while, while they test it and train and make sure it works the way they expect it to work and that their agents are trained on it.

So I don't expect it to be a switch in terms of the revenue coming, but I expect it to be - the pilot clients went fairly well fairly fast. So a lot of value to these partners with this platform.

Our pilot partner, I believe, estimated that he had improved the productivity of his agents by 40%, which is massive, and doesn't surprise me given the efficiencies in the platform. So there's a lot of - it's a very compelling value proposition. It's a big value add for the agencies.

Our carrier partners are very supportive and want this rolled out because of the benefits it provides to them. So that's kind of the state of play. As we've said before, we don't know exactly what the ramp looks like because we haven't done it before.

But obviously, as we'll keep reporting to you as we make incremental progress in each step and right now, the two best metrics are deep active discussion pipeline, which represents $7 million per month in revenue as we estimate it based on the metrics, I told you in terms of really quotes and rate per quote.

And then four contracts out of that pipeline and that pipeline has probably got 30 or 40 pretty significant players in it. We expect four of those contracts to be signed by the end of December, which means we'll be inactive install, if you will, and testing in ramp mode beginning the first of the year. It is kind of a turn on a switch.

This is obviously a SaaS product. All we have to do is have a log and we get very little data from them to get it live. So we don't expect it. This is a long installation or integration process. So we'll keep you posted.

But I would expect live revenue happening in our fiscal third quarter, the calendar first quarter and I think it only ramps from there..

Tons of great color in there. So, thank you for all of that. And then maybe one more for me, probably a great question.

Just wondering if you can unpack that 20% growth that you saw in financial services? Are there any call outs that surprised you or any industries within there that outperformed or underperformed?.

Not besides mortgage, I mean, we don't want to get into - any how we said this for several quarters. We'd rather not break it down any further within the various verticals. But I mean the big call out, or two big call outs, one is overall will be 20% and next mortgage will be 32% which means that.

So, we're calling on mortgages as particularly bad but I think overall financial services vertical grown 32% ex the mortgage business which is kind of on its can, we feel pretty good about, right..

Next up is Chris Sakai, Singular Research..

Just had a question on, I guess, in these sort of improvements, operational improvements that you're doing, I wanted to see if you could sort of quantify how will these affect margins next quarter and into the year?.

Yes. There are really a number of changes. We talked about three of them on our last call of the consolidation of our media organizations back into a functional group, centralized function group run by Tim Stevens. We're seeing great progress there in terms of execution, improvements in execution against the business.

We have already seen positive impacts on margin from those activities and most of our businesses including very important in insurance.

We consolidated - we created a new layer of re-accountability in the various business verticals and that we're seeing great ownership from that new leadership level and real ownership for their numbers and clarity in terms of their execution initiatives has been going well.

The third thing we talked about last time was their centralized reporting and more transparent reporting into initiatives, more detailed reporting into initiatives. We have - that's been going well.

We continue to review that as a group every Tuesday now in our executive sessions and I feel like we have better visibility, better clarity, better shared vision and shared view of the progress and the expectations of the various initiatives.

A fourth initiative that we added since the last call was that we did re-centralize or had not made this final decision yet last time, but we did re-centralize all the product resources, out of the verticals back into a central functional team.

I would say that that may be the most exciting move that we made in terms of how fast Nina, who is our Head of Product has got her arms around, that set of initiatives and that function and has really inflected the progress and you know we have a lot of product opportunities here.

When I say product, it's really the implementation of the segmentation matching an algorithmic platforms in the various verticals and all the things around that to make this businesses work better and we have early indications from that including a couple of big tests and some initiatives there have gone very well and imply good strong contributions to margin and already had tens of thousands of dollars per month in margin opportunity, but that's on tests that were scaled much more dramatically than that.

So I would say all - I mean I'm not displeased with any of it. I'm actually very pleased and I'm extraordinarily happy that it happened so fast and that we're seeing so much impact so quickly..

The only other question I have is and maybe you've addressed this before but you guys have $70 million of cash there on the balance sheet.

You guys have any plans for that or any sort of acquisitions or can you further comment on that?.

Yes. We'll continue to be opportunistic about acquisitions, Chris, as we have been. AmOne has been a big success for us. MyBankTracker has been a big success for us. Before that, CloudControlMedia was a big success for us.

So we'll continue to be opportunistic and have a high standard for acquisitions and I feel like the track record we've had for the last couple of years there is being selective but making acquisitions that were great. I think that's going to continue to be our number one priority.

Investing - and just in finding ways to invest aggressively in the business and that can beat you up. Acquisitions could be in product areas where we might capitalize some product development. We have a couple of those going on. I say second priority would be just making sure we maintain a very conservative financial profile.

$70 million is a lot of cash. But given our size, it's not that much cash. And so we'll - but we do generate cash so we keep doing that. And the third would be, we have demonstrated historically, we will continue to demonstrate that.

If there are other ways to use that cash to benefit shareholders and to generate shareholder value, we will consider those and do those things where it makes sense. But we don't have any near-term plans to do anything by way of buybacks or dividends, particularly, given the process we just entered.

But obviously - historically, we've been willing to do that. We've demonstrated we'll do that and we'll continue to be mindful of that but it's a third priority, first and foremost, invest in the business smartly, which we feel like we've demonstrated and we will continue to do.

Second, make sure you maintain your good conservative financial profile so that we take on operational complexity, but not financial complexity; and third, be mindful of there could be other ways to use cash to help the shareholders which we have been and we will be..

Our next question will come from Adam Klauber, William Blair..

A couple of different questions, how much did CloudControlMedia and MyBankTracker add to revenue this quarter?.

It's very hard to say, we integrate those businesses, those are based - we integrate those assets immediately into the businesses. So, a) hard to say because of the way we integrated them, they don't really run as separate entities; and b) I don't have those numbers in front of me..

We don't because they are integrated, it's fully. It's not really breakout-able.

I would say, if you look at CloudControlMedia though, for example, it was very minimal inorganic growth, a lot of the growth that we saw at a CloudControlMedia was taking our QMP platform, which is very effective for media buying across the channel and applying that to their existing client base and we saw lot of organic growth through that..

Yeah. And recall that was the main premise of that deal was accelerating the rollout of our new products, and in particular, QMP is a channel management platform.

And I think we now have eight clients on QMP, which is great but as Greg said that won't be CloudControlMedia revenue, that would be QMP revenue out of QuinStreet, so - and that revenue is going to ramp relatively slowly as we get more and more spend to those platforms, but it represents very, very attractive long-term business for us..

Then as far as the mortgage headwind from what you said that sounds like it was roughly $8 million to $9 million this quarter.

Any sense of, will it be that level next quarter or will it be materially lower next quarter? Just not look for an exact number but just in any sense, will there still be a pretty good mortgage headwind next quarter?.

Yes, I think, Adam I think mortgage is going to - as Doug stated before I think we are - I feel positive about the progress we're making towards the rebuilding up that business, it has been painful for us.

I think it'll continue to be a tough comp for us for a few more quarters and that's kind of how I characterize where we are in mortgage, it's not going away. We are working on it. We're happy with the progress in terms of where we are going to rebuilding that. But I think it will continue to be a tough comp for the next two quarters..

Okay..

Next quarter won't look that much different than this quarter in terms of its impact, Adam to your point. I think it'll be similar impact next quarters as it had this quarter..

And then just following that line of thought next quarter, is your seasonally low quarter, any puts and takes we should think about going to that seasonally low quarter that will help or hurt.

Again what's traditionally a tougher quarter?.

Yes. We expect it will be seasonally down. I don't know I think it'll be on the lower end possibly of our historic seasonally down. We've got good momentum in a number of the businesses, but I don't think there shouldn't be any surprises. We expect as I said in the prepared remarks, it's going to be a good strong quarter for us..

And then with QRP, the QRP ramp up.

When the agents transfer over again that they'll test the system, but when they transfer over is the expectation, they'll use your system for 100% of their quotes to 100% of your auto quotes at least?.

We think eventually we don't know again since we haven't done it before, we don't know over what period of time.

Once you use our system, it's hard not to want to use it for 100% of your quotes because it's just so much simpler and it's so much easier, less cumbersome for the agents to use and auto is the first product, but we'll - I think home now rolls through the platform as of December.

And so, initially auto - but it'd be auto and home as of December, so yeah, we think eventually yes. We just don't know exactly at what rate again; they'll transition because again we just haven't done it before. Once we get data and we see a few of them do it, I think we'll do a better job of modeling and then communicating that for you guys..

And then as far as your annual guidance you're referring reaffirmed and that's great. Obviously, this quarter is better. Is that mainly on the annual being a little conservative, is it recognition that you still got this big mortgage headwind.

How should we think about that bit of that disparity?.

We feel good about it. We've just ran a reforecast of everything based on Q1 actuals, Q2's latest forecast and everything we know now. And we know a lot more now than we did going into the year and the answer is that we still feel really good about the annual guide..

And then last question, when was Goldman actually hired? Was that just recently? Was it a month ago, two months ago?.

We've been working with them for a couple of months on a less formal basis as they have been working with us on various partnerships. And then in terms of retaining them for this process, the board formally approved that, formally approved it yesterday but made the decision to do it at the board meeting which was a week or so ago..

And ladies and gentlemen there are no further questions. That does conclude today's conference. A replay of this call will be available starting at PM Central Time this evening by dialing 888-203-1112 and entering passcode 2521392. This replay will run through November 14, 2019 at PM Central Time. Once again, everyone, thank you for your patience.

You may now disconnect..