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

Thank you, Lisa. Good afternoon, ladies and gentlemen. Thank you for joining us today to report QuinStreet's second 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-Q filing. 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'll turn the call over to Doug, CEO of QuinStreet. Please go ahead..

Thank you, Erica, and thank you all for joining us today. Fiscal second quarter results were in line with our outlook for full-year revenue and EBITDA. We delivered record fiscal second quarter revenue.

There continues to be good and accelerating momentum and opportunity in the business, particularly in our core financial services and home services client verticals, which grew 20% year-over-year. Good progress is also being made on growth and operating initiatives that we expect to yield strong and improving results in coming quarters.

Current quarter results, our fiscal third quarter are expected to set a quarterly revenue record for the company. Notably, our QRP ramp is off to a quick start with six large insurance agency clients now signed and expected to launch shortly.

We estimate that the signed QRP clients already represent over $10 million in annual revenue opportunity to QuinStreet. In addition, QRP clients not yet signed, but in the advanced stage of the sales pipeline, that is at contract stage, represent over $10 million more in estimated annual revenue opportunity.

Regarding the Goldman Sachs-led process to review strategic alternatives, we are reviewing a broad range of alternatives as previously indicated. At this point, the process has generated options along the full range of possible alternatives, including indications of interest to acquire the company.

We are in the early stages of qualifying and assessing options. In the meantime, we continue to move ahead with strategies to set us up for maximum performance and shareholder value and have begun to divest underperforming businesses. This is being done in parallel with, and we see as complimentary to, our broader process with Goldman Sachs.

The divestitures are part of an overall plan to narrow our focus to a smaller number of our best-performing businesses and market opportunities and to restructure to align resources and efforts with them. We are making good early progress.

We have already sold our Brazil Education business and are in the process of spinning out Brazil Financial Services. A buyer is in the final stages of due diligence on acquiring another of our client verticals with a potential close of that deal before the end of February.

These moves to narrow our focus to a smaller number of our best-performing businesses and market opportunities are expected to simplify strategic discussions, result in improved execution and performance and deliver faster and more predictable growth.

We also expect faster margin expansion from topline leverage on a smaller cost base and from a heavier mix of businesses with SaaS-like margins beginning with QRP.

Not including any other outcomes that may result from the broader process to review strategic alternatives, we would expect the full transition period to a new footprint and format to take a number of quarters. With that, I'll turn the call over to Greg..

Thank you, Doug. Hello, and thanks to everyone for joining us today. We continued to deliver solid results in the second quarter, driven by the strength of our marketplace technologies in our core Financial Services and Home Services client verticals.

Total revenue increased 13% year-over-year to $118.1 million, a record fiscal second quarter for QuinStreet. Adjusted EBITDA was $9.1 million or 8% of revenue. Adjusted net income was $6.3 million or $0.12 per share on a fully diluted basis.

In the quarter, we grew our cash balance by $5.6 million to close the quarter with $76.1 million of cash and equivalents. Looking at revenue by client vertical. Our Financial Services client vertical represented 76% of Q2 revenue and grew 20% year-over-year to $89.1 million.

All of our Financial Services businesses with the exception of mortgage, delivered strong double-digit year-over-year revenue growth in the quarter. Excluding mortgage, Financial Services grew 27% year-over-year.

We saw strength in auto insurance, our largest Financial Services client vertical in the second quarter, where revenue increased 25% year-over-year, reflecting a meaningful increase in spending from a broad range of large carrier clients.

We expect this trend of more clients spending more budget in our marketplaces to continue as they shift more budget to digital and more digital spend to performance marketplaces. Our Education client vertical represented 12% of Q2 revenue and declined 10% year-over-year to $14.5 million.

Our other client vertical, which includes Home Services and B2B, represented the remaining 12% of Q2 revenue and grew 7% year-over-year to $14.5 million. We delivered strong revenue growth in our Home Services client vertical, which was offset by softness in B2B. Moving on to adjusted EBITDA.

Adjusted EBITDA was $9.1 million or 8% of revenue, down slightly sequentially. This is due to seasonally lower revenue in the December quarter, falling on top of our semi-fixed cost base, which we do not adjust for revenue seasonality.

Adjusted EBITDA in the back half of the fiscal year is expected to expand as we head into our seasonally stronger March and June quarters. Turning to the balance sheet. We grew our cash balance by $5.6 million in the quarter.

We began the quarter with $70.5 million, generated $9.9 million in operating cash flow, offset by outflows of $3 million for acquisition related notes and $1 million of CapEx. We closed the quarter with $76.1 million of cash and equivalents. Normalized free cash flow for the quarter was $8.1 million or 7% of revenue.

Most of our adjusted EBITDA drops to normalized free cash flow due to the low capital requirements of our business model. In summary, we believe that we have more identified big growth opportunities and initiatives against them than at any point in company history.

As noted in our press release, we have begun to divest underperforming businesses and we expect that transformation to a new footprint and format to take a number of quarters. Regarding the outlook, we delivered Q2 results that were in line with the full-year outlook for revenue and EBITDA provided last quarter.

We expect to deliver Q3 results that are also in line with that outlook for revenue and EBITDA, not including any impact from divestitures or the strategic process. With that, I'll turn the call over to the operator for Q&A..

Thank you, sir. [Operator Instructions] We'll take our first question today from John Campbell, Stephens Inc..

Hey, guys. Good afternoon..

Hey, John..

So great work on QRP. That's a really exciting development for you guys. I guess first question is I want to make sure I get a good grip on the guidance. Is it safe to assume that you guys are still not including QRP contributions in the guidance? Or is it kind of meant to offset some of the divestitures? I just want to make sure I get that down pat..

We still don't have any QRP in our guidance..

Okay.

And then I guess just – and it might be a little bit too early for this, but how long does it typically take to recognize that QRP rev once customers are signed?.

Yes. We're not sure, John. That's part of the reason, as you know, we've said before, we're not really forecasting it. In the pilot, it's pretty quick from launch to usage and revenue. We've got a number, as you've – as you just heard us talk about, in the process of launching.

Exactly what pace they'll begin usage, we don't know yet because we haven't done it before. We don't expect it to be quarters. We think to 100%, it's likely months, but we really just don't know since we haven't really done it before other than in the pilot. There's super strong interest and feedback. We've done it through the pilot.

Folks are putting a lot of effort into launching. The value proposition is extraordinarily strong. We expect that most will use it in a small group initially just to make sure that they get training done and functionality tested.

And then based on, again, our pilot experience, we would expect them to roll it out pretty quickly from there given the benefits. As you know, in the pilot – the pilot organization saw about a 40% lift in productivity, which is not surprising given the power of this platform and the usability and the functionality.

So we would expect a lot of incentive drawn out fast. But again, we just don't know at what rate it will ramp. So we're not comfortable projecting until we have a few of these folks going through it..

Okay. That makes a lot of sense. And then speaking of launching, I think I'm going to launch an air ball on this one, but I thought I'd give it a shot.

On the strategic review, have you guys actually received a live – any live offers? Or is it just basically kind of exploratory at this stage?.

We have received live offers..

Okay. I'll get back in queue. Thanks guys..

Thank you, John..

Our next question will come from Jason Kreyer, Craig-Hallum..

Hey, good afternoon. Thank you for taking questions. I just wanted to touch on QRP again. Maybe you can touch just a little bit on the margin profile that you expect as that kind of gets up and running.

And then any feedback that you've heard from the first six agencies that you're kind of in contract with at this point? I don't know if those were all part of the pilot process, but just wondering if there's any specific commentary around those..

Sure, Jason. Margin wise there is – as you know, this is a very high margin for us because it's a technology service without any media or variable costs that drops into fairly limited semi-fixed cost base, which is a product group that's peripheral to our core product group.

So from a gross margin or variable margin basis, we expect this business to run in the 80s-plus-percent. And the more it scales, the higher the margin gets because, again, you're dropping that into a fairly limited semi-fixed cost base that's going to grow significantly more slowly.

So I think we will go out initially with probably 80% margin as soon as we get to any seven-figure kind of scale and then we'll go from there.

So it's a very high margin business then the – in terms of feedback, I can only provide you with the – from the pipeline there's been a lot of engagement, a lot of interest, a lot – a pretty fast move from engagement demos to contract and now moving into launch. We haven't lost anybody at the contract stage. That's been the pipeline so far.

So we tend to think if it's in contract stage, it's going to get there pretty fast. It's just not a complicated contracting relationship. As far as feedback beyond that, all reports from our product team are that the launches are going well, but it's hard to tell what that means.

I guess the only thing that means is we haven't seen any major hiccups in terms of either client side or our side on the product. So we're just now in the position of waiting for these first six to get launched.

Again, our expectations that they'll be live, the current communicated expectations, and this somewhat dependent on client resources, of course, but current expectations as communicated to us by the clients and by the product team that there'll be – the folks that are signed to be launched by the end of this quarter.

And then we'll be watching the ramp so that we can – we'll have a lot more information for you next quarter in terms of how the launches went and where we think we are on the ramps and we'll give you more update on the pipeline. Obviously, we've only told you about signed and contract stage.

We have a very, very big deep pipeline for this product, so there's a lot more to come..

Perfect. Thank you. In regards to the divestitures, maybe a couple there.

Can you talk a little broadly about what components of the business you would classify as kind of either underperforming or less profitable that you maybe looking to divest? And then along those same lines, any financials around the contribution that we've seen over the last few months or the last year on the businesses that have already been divested, so we could just kind of take a look at how that would impact our models..

Yes. No. Obviously, a great question, the numbers for the Brazil businesses that have been divested already are relatively immaterial. Greg will be able to give you that in the after call in terms of inputs to your models. Beyond that, it's going to be hard for us to say ahead of time until the deals aren't actually closed for probably obvious reasons.

It’s difficult to talk about particular transactions until you actually get them closed. Once they close, then Greg will be able to help give you estimates of what those numbers mean to or have meant to the financials and we’ll provide you with numbers that allow you to reconcile that with the model. But we don't have – in terms of – to this point.

The first two are relatively small, but important because they were a drag both on growth and on margin.

The next one will be a little bit bigger than that and hopefully we'll get it done on the timing we expect, which again is at this point we expect by the end of February and we'll be able to provide in the – we'll decide based on its materiality whether or not we announced that and when do we give you numbers at that point, if we wait till the end of the quarter and give you the numbers then.

But at this point, relatively immaterial given the relative small scale of the Brazil operations, but meaningful as a starting point and meaningful in terms of their impact. But the next one is going to be more significant and will have some impact on your margins..

Yes. The current one, Jason, Brazil is single digits millions annually in revenue. So it's immaterial..

Okay. I appreciate that. I'm going to try to sneak one more in just, we've seen a little bit of a pullback in the gross profit margins kind of over the last two or three quarters and we've hashed that out a little bit over the last two conference calls here.

But just wondering if you can kind of set up expectations going forward? We saw a little bit of progression there in the December quarter and so we're kind of wondering where we are in terms of kind of those media margins progressing into the back half of the year..

Yes. I would – we don't provide outlook from that standpoint on the forward-looking quarters. To give you a little color on where we currently are, our media margin grew this quarter over sequentially over the last quarter. And so we're making good progress. As you know, Jason, in our business and we've talked about this.

Margin optimization as you take on new media into our platforms, always follows revenue growth. And so upfront we initially take on new sources at sometimes where at a lower margin level, as we know we can optimize that up over time to acceptable margins. I think we're making good headway on that path.

And again, we grew media margin percentage sequentially over the September quarter, this quarter..

Yes. I wouldn't read anything significant into it. Just to add-on to it, I think we're in 0.5 point of what is our long-term target media margin and variations of plus or minus a point in any particular quarter, really usually don't mean anything.

In this case, I would say don't mean anything other than the mix that we're working on at that time in terms of business and media opportunities and where we're seeing opportunities.

And as you know, it tends to work itself out over time as we get – we may have in any particular quarter a little bit more activity with some newer sources that we feel like are important for us to take on and be working on or where we're having to respond to some competition there, while we work to build our monetization up, but it's not a – I would not read into it any kind of meaningful structural implications for the business model..

Perfect. Thank you for the color..

Thank you, Jason..

Next up is Jim Goss, Barrington Research..

Thanks. Maybe beginning with Education that that position has become smaller and smaller, and I'm wondering if it plays a role in your future.

And also to the extent that there has been an OPM trend in that industry, has that helped you or hurt you? In fact, did you even foster that to some extent given the nature of what you can deliver for private education companies?.

We'll review education as part of our broader process as we will all of the businesses. Jim, I think is a short answer.

And we won't talk about where we come out on any particular business until we actually make a decision or have a transaction is the way we'll have to go through dealing with that for obvious reasons in terms of sensitivities along the whole different bunch of dimensions. In terms of the OPM trends, we don't see it as harmful at all.

I mean, we have a number of clients that are OPMs and we have good relationships with those folks. I think over time, the OPMs can be great partners of ours and many are already are because we allow them to do a better job managing the media buys and the marketing spin. And that's a huge part of what they do in their business model as you know.

So I would say it's not harmful in my opinion. And so – and it probably is somewhat helpful because you have an organization who – many times has more keen focus, more scale and more sophistication around marketing. And we do better with those kinds of organizations quite frankly.

So probably a net positive, and again we have – I don't think there are any significant OPMs, we don't already serve and most are growing their relationship with us and we're working hard to try to do even more. So I would – I guess my assessor would be pretty much a net positive.

It's not a – it is a focus of ours to work with the OPMs, but it's been a focus of ours for a number of years. So it's not a new phenomenon to us, but it is a – they are growing part of the ecosystem for sure. In terms of the for-profits, we still see a lot of volatility amongst the for-profits. The OPMs largely serve as you know the not-for-profits.

And so there is still volatility in the for-profit side is postsecondary industry and we continue to try to navigate that as best as we can. They’re about half of our revenue by the way. Just for context, about half of our revenues not-for-profit scores and their OPMs about half of our revenue is for-profits..

Okay. And with the mortgage refinancing, is there a light at the end of the tunnel? I've been surprised that how that hasn't turned around in their regard..

Yes, I think that's been a matter of a couple of things. One is, our priorities and focus. We have had a lot of opportunities and needs to focus efforts elsewhere. And the rebuild in mortgage for us is not a simple task. And so part of it’s just been prioritization, resource allocation against opportunities that we felt like we're better.

The second is a change in strategy to make sure that as we rebuild mortgage and as that refi market comes back, that we do it on a more solid media base. And we have some good opportunities to do that with some assets we own, some things that we're doing.

And so this combination of prioritization and resource allocation and the fact that we are going to seek to rebuild that business a little bit differently than we've built it in the past and in a way that we hope will be more resilient next time the refi market turns.

We're kind of fatigued with going up with the refi market and down with refi market and up with refi market and down with the refi market, we'd like to put in place and we have a blueprint to do so a business that is a bit more resilient though less volatile. And so it's going to take a little bit more work than just running back up with the market.

But that's how I would characterize mortgage right now..

Okay. And lastly, I know you indicated earlier that you have actually gotten some offers for the entire company, but it seems the way your earnings release was written, this effort has – appears to be much more focused on reshaping the positioning of the companies and in terms of sectors and the nature of the exposure.

Is that reading too much into the whole review back Goldman Sachs or is that sort of the direction you're trying to point us to?.

No, I would say that's reading too much into it and we feared that that might – we're trying to navigate the fact that we're doing both in parallel. And so just to be clear, in the Goldman Sachs process, we're mow – we’re looking at a number of things.

We're now at the point where we've gotten indications of interest, for those of you familiar with these kinds of processes and those indications are attractive to us theoretically, but we have to go through the further process of qualifying those and assessing them and getting them to the point of actual negotiated purchase agreements or not.

And that takes some time. And you want to be very deliberate and careful about that because you want to make sure that you're not responding to things that you don't take to a full process of vetting and qualification and due diligence and getting all the Is dotted and Ts crossed.

We are now at the point of doing that are going – or entering that process when – with some of those indications. And then while we're doing that, it's our job to keep moving the business forward.

And as we do that, and if and as we get to the end, to the point where we have a qualified fully vetted offers for the company or not from those that have come in, we're going to need to – for the shareholders and Board, compare that to the go-forward independent option.

And we want to make sure we are continuing to develop the best possible go-forward independent option we can. And then we'll compare those and make a decision as a Board of Directors that we think is in the long-term best interest of the shareholders. And as you know, there's a lot going on in the business.

So in some ways, there's a little bit of an evolving target. So I would just say that we are fully engaged in and are getting full value from in my opinion, a well-run Goldman Sachs process. We are at the stage of working from narrowing down indications and working for those indications to fully qualified firm offers or not.

We'll be going through that over the next month or so, I would guess, based on timing. And then we'll be at a point where we can compare those two where we are in the business and what we think the go-forward looks like in the strategy, and we'll be able to model those two together.

And with the help of advisers and counsel and the full Board will take a look and say, "Okay, what do we think is most attractive for the shareholders?" I can tell you that there's a lot of work going into both.

So it would be reading way too much into what I said to say that we're kind of steering away from the strategic alternatives process and focusing on the independent. We are fully focused on both at this point..

All right. Thanks. Great response. Appreciate it..

You bet and thank you..

Robert Breza from Northland Capital Markets has the next question..

Hi. Good afternoon, everybody.

Doug, maybe just as you're getting these indications of interest, as you step back and see, let's say, the first wave of these, are they asking? Or is it your inference maybe in looking at these that you say – we said it cleaned up this Brazilian thing a year-ago, and we got to do a little bit of hard work as we go through this process.

Or are they willing to do the hard work? Or do they want you to do the hard work and clean it up? Or just curious on that and then as a follow-up to that, when you look at the process you're undertaking, have you seen a lot of, call it, voluntary people leaving? I mean obviously, there's going to be involuntary, as we all know, but I'm just curious to make – to get an understanding of people's desire to continue forward..

Sure. Nobody's told us to divest underperforming assets in the strategic process, if that's the question. And nobody said that they would or would not move forward if we did something or did not do something.

These are decisions being made based on management's recommendations to the Board to make sure we create the best possible profile for the business going forward, whether there's a strategic process or not.

So the short answer to your question is no, and – but at the same time, none of the folks that we're talking to, in my opinion are going to be less interested if we don't own some of these underperforming assets are not included in the package. So I think that's obviously important. That's why I said in my prepared remarks it's complementary.

We clearly wouldn't do these things if they, in some way, interfered with the process. In terms of attrition, no, we've had zero attrition of key employees.

And I would say that the key employees are enthusiastic about going forward and are excited about potentially, the results of the process but also excited about potentially, the results of the process but also excited about the go-forward strategy that's been developed as a management team over time.

And there's strong agreement, unanimous agreement amongst the senior team and key employee base that this is the right thing for the business and excitement about the new business opportunities we're going to be focusing on and about there are opportunities for their personal professional growth and also their wealth creation.

So I'd say morale is extraordinarily good. We're a company that communicates, we think, pretty openly and transparently with employees and brings them along. But I would say that, right now, enthusiasm and morale and engagement are really, really good. I've never – I don't think they've ever been any better..

Fantastic. Maybe, Greg, just a follow-up accounting question for you.

As you look at bringing on the new QRP business and the assessment, should we – I mean, I know you or Doug commented that you hadn't done it before, but just from a revenue recognition point of view, is it going to be daily rev rec-based off engagement? Or how do we see that just hitting the P&L line in future quarters? I obviously realize it's not going to be immediately..

No. The rev rec simple. We get paid per quote period, per quote generated on the platform. So it's a super, super clear, direct rev rec of activity on the platform. Couldn't be any simpler and will be recorded at the time – will be invoiced monthly, I guess, but basically recorded at the time the quote's generated, and everybody's comfortable with that.

That's kind of the business model of the systems we're launching alongside or that we're replacing.

And then we get to pay a price per quote that is very attractive relative to, again historic systems, and therefore even more attractive, given the value-add of this platform, so very, very simple revenue model and very, very straightforward and simple rev rec..

Perfect. Thank you..

Thank you..

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

Thanks.

Is the reason you didn't reaffirm your guidance because the divestiture could change that? And assuming that no divestiture, would you reaffirm year-end guidance for revenue?.

Yes and yes..

Okay, that figured exactly….

That figured – you kind of laid it out exactly correctly, Adam. It's – yes, right, Greg? I mean I don't think Greg would disagree..

I would agree..

Yes, and yes..

Okay, great. And then sounds like insurance was pretty strong.

And is that from carriers that haven't been spending a lot of money becoming more engaged? Is it even the heavy users being more engaged? Can you give us some…?.

I don't know if we got cut off or not, I couldn't tell if you finished your question, but I think you said on insurance, was it from new users or existing users being – it's a combination. I think we had great growth with existing large clients continuing to work with us to find ways to spend more effectively on the platform.

I think, had more large clients spending record levels for them, at least record over the past, gosh, seven, eight years on the platform than we've had ever. Again, at least over the past seven, eight years, there was a period early on where a few big clients spend a lot when we were early in the business. I'd have to go back and look at that.

But in terms of the breadth of the spend, I think it's the broadest with the most large players spending the most large amounts. And then we also had a number of folks who have been big with us for quite some time, spend a lot more.

And so I'd say it was – the biggest theme would be broadening of the spend among large clients and more large clients than ever spending significant amounts. And I want to say probably a record month of folks spending over into the millions per month with us, but I don't have that numbers in front of me.

So I won't say that, but I have the impression that, that was the case. So it was a – broadening would probably be the biggest theme, but continuing to find ways to work with clients to allow them to spend more and more effectively on the – more money more effectively on the platform and in the channel..

Great. And then as far as QRP, the independent agent universe is extremely large. There's sort of a tiering, larger agents, there's mid-size and then there's tons and tons of small agents.

Can you talk about your marketing efforts? How are you actually going out and marketing to those three tiers, the large, the mid and the small?.

Yes. For the large, we're doing it with basically national sales representation, folks – all of the folks that have been in that industry. In one case, one of our national sales managers used to run all the agency relationships for one of the large carriers.

So that effort in partnership with our largest carrier partner, who's also helping us with the pipeline, is going on for the larger entities. And we're focused mostly on the larger entities, as you can well imagine, in terms of our early sales efforts and partnership efforts.

For the smaller, we are in partnership discussions where we should be able to do some implementations into existing systems and have kind of one-too-many effects rather than having go sweep those folks up one at a time. We have one very exciting partnership in kind of – at a pretty good stage for doing that.

So that's – but the general strategy would be national sales representation from folks dedicated and focused on this product, with real industry expertise and contacts, working in partnership with some of our carrier partners, for the large.

And on the small, I'm looking at technical integration partnerships where we can capture, in some cases, literally thousands of entities with one integration..

Great. Thank you. That makes a lot of sense. Thank you..

You bet. Thank you, Adam..

Next up is Eric Martinuzzi, Lake Street..

Just a clarification first and then a question. The high watermark for the company's revenue, I've got it as the quarter ended September of 2019, and that revenue was $126.6 million.

Is that correct?.

Correct. Record quarter was the September quarter. This was a record fiscal second quarter, this quarter..

Right. I was specifically referring to your outlook for the fiscal third quarter, the language that says you expect to set a quarterly revenue record for the company, meaning that it would be greater than $126.6 million in Q3..

Yes. We also said that we expected that it would be in line with our annual guidance, so kind of triangulate from there..

Okay. And then my question has to do with – the Education segment, obviously, you still had the DCEH, I think, in there in Q2. Wondering if that segment sees some relief in the third quarter as a result of having a clean comp versus a year ago..

Yes. Eric, we left the loss of DCEH at the end of November, so it did affect the quarter, this fiscal second quarter. I would expect to see better performance as we move forward in the year that said that it's Education and we've been in it for a long time, and it is a volatile space.

So when I say expect to see better performance, I do expect to see better performance, but it remains volatile..

Right now, we'd expect it to grow double digits year-over-year in the third quarter based on the current forecast. So yes, the answer is it should definitely perform better now that we've left DCEH was – what you would hope given that, that was such a significant loss of revenue..

Understand. Thank you..

Our next question will come from Chris Sakai, Singular Research..

Hi, Doug and Greg..

Hey, Chris..

product development, sales and marketing and general and administrative. Over the last year and six months, they've looked like they're increasing up on all fronts. I'm just wondering – but the margins have been decreasing. And I'm wondering if there is going to be a leveling off of those anytime soon.

Or what's your goal there?.

I think what you'll see in our operating expenses, Chris, is – as a reminder, we did a couple of acquisitions at the end of last year. So you will – if you look from a year-over-year perspective, you’ll see higher operating expenses until we lap those acquisitions.

But beyond that, as we've talked about and we've communicated, our general model is to grow our operating expenses at a lot lower rate than our revenue growth. And so we expect our – over the long-term, that our operating expense base would increase about mid-single digits a year. So that would be the trend out I would think about..

Organically?.

Yes. Organically. But you will see higher or elevated levels on a year-over-year basis until we lap the acquisitions..

Okay. All right. Thanks. That’s all the questions I had..

Next question will come from John Campbell, Stephens Inc..

Hey guys. Thanks for the additional question. I have two quick ones. Doug, I think you said the back half of the year, double digits out of Education.

Greg, I don't know if you can provide this or you have this on hand, but what was Education growth excluding DCEH in this past quarter?.

I don't have that offhand, John, I apologize..

Okay. I can probably fish that out later. And then the second one I had a little bit more off the wall.

I don't know if this is even remotely impactful to you guys, but with the CECL accounting changes, did that have – does that any influence on the credit cards business or personal loans, anything where, I guess, that you have to adjust for potential loss ratios?.

No, we have not seen any impact from that..

Okay. That’s all I got. Thanks guys..

Thanks John..

[Operator Instructions] At this time, there are no further questions. Ladies and gentlemen, a replay of today's call will be available starting today at 7:00 p.m. Central Time and run through the 15th of February. To access the replay, please call 719-457-0820 or toll free 888-203-1112 and enter the passcode 9369036.

This does conclude today's conference. We would like to thank you all for your participation. You may now disconnect..