Q1 2020 Earnings Call
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Hi, and welcome to the first quarter 2020, <unk> core earnings conference call.
At this time all participant lines are in listen only mode.
The speakers presentation, there will be a question and answer session.
Good question during the session, we only need the press Star then one on your telephone.
Please be advised that today's conference maybe recorded if you acquire any further assistance. Please press Star then zero.
I would now like the hand, the topics over to your speaker today, Bill Michelle Vice President Investor Relations. Please go ahead.
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Thank you and welcome everyone to do Corps first quarter 2020 earnings Conference call.
By now you've had the opportunity to review a copy of our earnings release and supplemental information.
If you've not yet review these documents are available on the Investor Relations section of our website at <unk> Dot com.
I'm joined today by Chris Walters, Chief Executive Officer, Mark Newman, Chief Financial Officer, and Todd Mckay President of wealth management.
Before we again, let me remind everyone that today's discussion contain forward looking statements based on like environment. As we currently see it and speaking only as of the current date.
As such they include risks and uncertainties and actual results and events could differ materially more current expectation.
Please refer to our press release and other efficacy filings, including our forms 10-K. Thank you and other reports for more information on the specific risk factors.
We see no obligation to update or forward looking statements except required by law.
Well discuss both GAAP and non-GAAP financial measures today in the earnings release, Melbourne, Florida on a full reconciliation.
Reconciliations of each non-GAAP financial measure discuss the nearest applicable GAAP measure with that let me hand over to Chris.
Thanks, Bill and good morning, everyone.
I hope that you and your family for safe and healthy during these unprecedented times.
I'd like to start today with an update on how we're positioned in light of Carbonite Pete.
First we took early action to the safety of our employees and to ensure the effective operation of our business.
For the past eight weeks you have had almost the entirety of our workforce working from home.
It's a tools they need to be effective and supporting our customers and advisors across our businesses.
For the tenor show employees were still visiting and office location on daily basis.
We're kicking extra precautions and being incredibly mindful of their safety in addition to providing extra pay.
I'm very pleased that are employees are safe and weve been able to continue to serve our clients effectively with our team working from home.
I'm also pleased that we've been able to give back to the community through our partnership with feeding America, and a donation equivalent to 5 million deals.
Overall through the situation our productivity and service metrics have remained virtually unchanged and that as a testament to work dedicated employees.
We are fortunate to have two strong businesses with ongoing demand through this type of environment.
People still need to file their taxes.
And more than ever people will need to plan for their financial needs, including their retirement.
In tax preparation.
This environment is likely to enhance the shift towards online filed.
In wealth management.
Our advisors enjoy trusted relationships with their customers by providing both tech services as well as wealth management.
Our advisors are largely focused on the long term value creation, they achieve for their customers based on unique financial needs of each client.
Further I've been overall business, we have positive cash flow and ample liquidity to cover our current operational needs.
Mark will touch more on this in a few moments.
Well, we are fortunate in many ways.
We've certainly seen significant business impact as a result of cobot 19 outbreak.
Primary impact in tax prep.
It's due to the expansion of the tax season to July 15th pushing the deadline for potential customers to filed their returns.
For the third quarter.
We therefore required to continue our marketing efforts over an extended period of time and to maintain our customer support levels to ensure a good customer experience increasing or cost while the number of filers remains the same.
In wealth management, the primary impact stems from the decline in interest rates impacting our cash sweep income.
As rates are now zero.
I see no further downside on this front.
Additionally, the decline in the market hasn't impact to advisory fees and trails.
That would become more apparent in the second quarter, albeit muted.
By the mix of equity versus fixed income as well as the payout rate for independent business.
Taking a step back as I've now crossed a three month Mark my tenure as CEO.
I'd like to share a few additional thoughts on how we're positioned and the road ahead.
Last quarter I highlighted our 2019 performance and how we advanced the ball in terms of positioning for future growth.
We generated solid results across a number of categories made strategic acquisition.
<unk> organized into a more streamlined business hired exceptional people across all levels in the business and investment in the business to drive returns.
Since the February call. We have acted quickly to ensure that we have a full leadership team in place and the right operational structure to support and accelerate the execution of our priorities.
At high level, we consolidated operations within the business units combined our software efforts under one leader Curtis Campbell and wealth management efforts under Todd Mckay.
We've supplemented our business.
With strong new leaders, including ahead of growth and marketing Raj Doshi.
Our new CFO Mark Mehlman.
New head of HR, Jodi Diaz, and two very talented technology leaders and Paul Lehman and our new CIO.
<unk> as Europe.
We also recently had the opportunity to conduct a deeper dive into the business.
There are a few key challenges and opportunities each division that the management team is focused on I'll walk you through those before we get into.
The Q1 results.
For tax act, the offering has undergone a significant product upgrade and weve right sized pricing to offer a smaller discount to the competition.
But it is coming at the expense of a lost from the number you filers.
This was expected and with much of it behind us the company needs to ship to growth.
To do so requires data driven marketing approach utilizing new and cost effective strategies to drive customer acquisition.
Over the past few months, we've done a lot of testing with many new partners as well as added some additional tools.
We have been improving our team and structure.
And we have learned a great deal, which will help us in the future <unk> early results were extremely promising though our efforts were hampered by the government's decision to delay tax filings.
The most impactful work will be over the next seven months as we finish off the tax season and prepare for next.
Our goal is to come into next tax season with product and marketing both optimized and working in concert.
It's a big undertaking which I believe will be a powerful combination.
As we attract new customers and delight them with our improved product experience.
Just saving them money and identifying ways to improve their financial situation.
I also have an opportunity to drive customer engagement.
And actually even to improve retention.
We've made a giant leap in our product quality and we will continue to push it further setting the stage for the significant improvements we witnessed in customer enjoyment year over year to continue.
We plan to continue to make improvements in the experience, including differentiated features to drive further gains in customer conversion.
I see a great deal of opportunity for the business over the medium and long term.
And that's perhaps one of the things but has been most exciting to me in terms of my initial observations.
We anticipate that the product improvements will drive higher retention rates going forward.
New initiatives, such as assisted tax preparation.
Drive higher unit economics.
When combined with improved marketing efforts and additional engagement.
On the off season these improvements mean.
We'll be in a stronger position to grow units and revenue in coming years.
In wealth management over the past two years, we have converted to a new clearing platform rolled out a new technology stack for advisors.
Acquired in integrated first global a large tax focused broker dealer.
This business looks very different than it did a few years ago and has uniquely well positioned going forward to address a very large opportunity.
You've heard us say in previous earnings calls that we potentially grow seven to eight times, our current size without or advisors, having to introduce themselves to a single person. They don't already do business with and without us having to bring in.
It's single New advisor.
We continue to believe this to be true I know, we part of organic growth efforts, which we plan to make our top priority moving forward.
You're actively engage too.
Improve our service an operational performance to delight our advisors.
A line systems processes and technology to improve efficiency and scalability.
And maximize the advisor performance by providing tools, including supporting official prospecting to increase client penetration and wallet share.
It is also clear that one area, we needed to address was providing an option to see <unk> want to add wealth management as a service offering to their clients, but who don't want to become a full time advisor.
To accomplish this we announced the acquisition of H CAPHS.
We anticipate the adding HCAT best to our platform will significantly enhance or go to market strategy.
Celebrating organic growth for cross sell opportunities and new incremental revenue streams.
It's kfs has successfully worked with C.P.A. firms on a partnership basis.
With this acquisition CP is concentrically outsource the wealth management work to affirmed they trust, while ensuring close coordination.
We no longer have to walk away from this opportunity.
Because we have another turnkey option to allow them to monetize and serve their client base.
This grows their business and ours.
May have seen we recently entered into.
An amended acquisition agreement, which among other things lowered the purchase price and extended the closing window.
The rationale for this transaction remains strong.
If not even enhanced in this environment.
Each kfs brings a clear strategic advantage to us.
And the business has been growing at double digit asset growth rates with adjusted EBITDA margins about 30%.
It gives us a new way to monetize the 700 retirement plans our advisor stark each year for their clients and this represents an incremental revenue stream for advisors.
It gives us a new way to retain assets, providing off ramp opportunity for retiring or plateaued advisors.
It's not only drives asset retention, but also improved margin transitioning from affiliate model to a captive ARIA.
And in this type of environment.
More people generally look to advisory.
Further in this environment advisors may choose to exit the business.
I think it's Kfs will give us increased ability to capitalize on both of those trends.
In short we believe it will be helped drive significant and profitable growth overtime.
This business it never had more potential.
And the stages now set to turn our attention to organic growth.
Have a great deal of opportunity to accelerate growth.
And have an execution focused team in place to begin to capture it.
In addition to the opportunities within each business. We plan to also explore a few opportunities across our businesses that haven't really been thoroughly tested today.
One example, I would like to highlight is prospecting within our tax pro user base to convert to.
And tax advisors.
We currently have approximately 20000 tax pro users and about 4000 event tax advisors.
Even if only 5% converted it would represent a 25% increase in our advisor base.
Another example isn't applying.
<unk> marketing resources to help our van tax advisors grow their businesses.
Most advisor practices have limited marketing scalar resources. So if we can leverage the significant marketing capabilities within our organization.
Help them drive new customer acquisition, it could make the material impact.
Finally, before we discuss Q1 results.
I want to note that since joining as CEO I and the rest of the team have been conducting exhaustive reviews of the business.
Came to our attention the flows data that we noted last quarter for Q4.
Untamed, they miss classification between line items that roll up to the ending balance.
Specifically certain client reinvestment amounts included in the net flows line should have been categorized as market impact and other.
In order to be consistent with past practices.
This resulted in the company mentioning.
On last quarter's call.
That fourth quarter net inflows into advisory assets were approximately 200 million.
And net inflows into total client assets were approximately $180 million.
The figures for the fourth quarter should have been net outflows of approximately 90 million for advisory assets and net outflows of 834 million.
Total client assets.
This also resulted in us calling out record advisory flows of approximately 1 billion for the full year when the actual number was approximately 712 million.
Which.
While strong was not a record.
Again these items relate to the classification fluid relative to our past practice, but do not impact the total reported advisory assets or total client assets amounts reported.
We apologize for this administrative error and I've included a summary of this change in our 10-Q.
We've also taken corrective measures to ensure that something like this does not happen again.
Outflows in Q4 due to multiple factors, including normal attrition.
Asset reallocation as well as anticipated outflows related to the acquisition of first global.
We're still tracking below our anticipated and modeled attrition.
But did experience some of this in Q4 and we could see more over the next few quarters.
We have initiatives underway to keep the outflows below anticipated levels.
Now for a review of Q1 results.
Starting first with wealth management.
First quarter wealth management revenue was 145 million.
At the top of our guidance range and segment income was 22.6 million above the high end of our target range.
These results reflect healthy revenue performance combined with expense control measures that were implemented in light of recent events.
In wealth management the decline in market did not impact our advisory fees in Q1 as their build in advance for each quarter.
Based on the prior quarters ending balances.
The change in interest rates, which happened in the last month of the quarter also did not show up in Q1 results.
As a result in the first quarter the business performed well despite the coven 19 outbreak.
On a consolidated basis net flows into total client assets were about 125 million.
We ended the quarter with 61 billion in total client assets.
Net inflows into advisory assets in the first quarter were.
Very healthy 390 million and we ended up the quarter with 23.6 billion and advisory assets.
Advisory assets as a proportion of total client assets ended the quarter at 38.7%.
A few additional updates on call out here for wealth management.
First I'm incredibly proud of the team and their ability to so quickly shift to remote working environment.
Not only did they transition almost seamlessly, but our service metrics actually continued to improve materially throughout the quarter.
Well, there has been ongoing effort to optimize processes and procedures.
Including daily keep your eye tracking.
We're pleasantly surprised to see the metrics continue to improve during the transition.
Again, great work by the team.
Recruiting also continued to be strong with about 55, new advisors, joining in Q1, including 42, new tax pro advisors as well as established advisor transfer.
Two of the transferring advisors have assets in the 50 to 100 million range that we expect to transfer over in the current quarter.
We also added six new accounting firms in the quarter with approximately 10 million and cumulative accounting revenue, representing an estimated 1 billion prospecting opportunity in total client assets.
As it relates to our proprietary tax smart investing software platform for T.F. side, we continue to make progress now with about 1100 advisors on the platform.
Advisers, even tax loss harvesting tool.
Placed trades over the past quarter that equates to millions of dollars and potential tax savings for their clients.
Overall, good progress in wealth management.
So let's move the tax preparation.
Normally on this call were summarizing all of the ins and outs of tax season.
That would have ended on April 15th.
As you know in late March the IRS announced that the season has now been extended to July 15th.
The us all the full season summary has been pushed out let me give you an update on our progress since our last call.
In mid February we indicated that we had started the season.
But out of position from marketing perspective, but that our product improvements, we're really resonated with retention and conversion rates up four and five percentage points respectively.
In the month or so after our call a product metrics continue to improve.
By March Twentyth, our retention rate was up.
Another 0.5 points versus the prior year and the conversion rate was up another two point.
Two seven points up year over year.
These are phenomenal improvements in one year.
On top of these metrics are customers net promoter scores.
I have been up double digits versus last year, which is another indicator of customer satisfaction, which we anticipate will benefit us in upcoming years.
On the marketing side, we tested and implemented some new marketing activities.
Since not everyone is familiar with our brand it can require some time and multiple impressions per customer to be considered.
However, as we got to mid March we started to see new users coming in.
In fact, our new user mix improved over the course of about a week.
And was coming in at almost double where we would have peaked the prior year.
This was all very exciting and gives us confidence that our marketing improvements are working.
And on the tax Act pro side.
We were up year over year through March 20th gaining market share.
The IRS announced the delay on March 21st which first applied to payments.
And then the filing date.
Post these announcements filing volumes across all message slowed materially.
The DIY segment of the industry.
Which had been trending up 3.6% year over year prior to the announcement.
Was down 11.5% as of April 17th and total IRS be filed across all methods was down 18% as of April 17th.
For the quarter tax prep revenue came in as.
118.3 million.
Significantly below our prior guidance due to a shift of the volume out of the quarter. Following the extension of the taxi.
Segment income came in at 37.8 million, reflecting the impact to revenue.
Well as the increased investments.
Much of which has been around testing new an alternative approaches to acquire customers.
Our consumer E files for the quarter were down slightly.
Or in single digits versus the same period last year with pro you files approximately flat.
In addition to the positive trends, we were seeing prior to the deadline change I would call. It a few other things.
As it relates to our expanded test and assisted we have continued to see good results.
Had plenty of demand and in fact, we expanded a test further than we had initially intended by about 20%.
Feedback from customers about the experience has been very positive.
As a reminder, our goal this year is to exit the season with significant learnings and to launch a broader assisted tax offering next season.
Sure testing prove a viable economic model.
And I'm pro similar to last years.
Our market share trends throughout the season, so far have continued to show modest gains.
As we look out over the next few months, where in our uncharted territory.
This will be the first tax season in the history of our business to spend almost seven months.
The traditional filing patterns don't apply this year and maybe further impacted by what the virus thoughts from here.
We will use the remainder of the season to continue to test and optimize our marketing activity.
We will look to not only see how we can impact this season, but also make sure we come into next season in an even better position with both product and marketing optimize from day one.
With these learnings and improved product.
And higher conversion, and then NPS scores, which positively impacts our lifetime value I am optimistic about our potential for next year.
In summary, our businesses in a fortunate position.
Having two strong profitable businesses each of which has ongoing demand in this environment.
We believe we have adequate liquidity cash flow and flexibility to sustain us through difficult times.
In the long term as a company, we occupy an amazing position.
Given that we have the opportunity to support millions of Americans each year in the pursuit of their financial goals.
We have an enormous potential both in and across our businesses.
I now have the pleasure of turning the call over to our new CFO Mark Mountain.
For the first time.
I couldn't be more excited to have mark join us.
And I know you will be a great partner and make positive impact on the business.
Mark.
Thanks, Chris.
I'm really excited to be here blucora.
Let's go over to working with all of you as we continue to execute on a priorities and grow the business.
Joined Blucora, because I'm passionate about our purpose.
Having spent the last several years and attacks focused business.
Understands first hand, the complexity, but also the opportunity that comes from the changing tax landscape.
Having a partner who helps you navigate the scenarios life can throw it you is invaluable.
And as Chris mentioned earlier.
Services, we provide matter even more now and this time of uncertainty.
And my first week I can already see the passion of our people and the value our tools can bring to our advisors on the wealth management side and the directly users of our tax Act solution.
I'm excited to bring disciplined and focused investment into those areas of opportunity that allow for everyone to benefit.
Lastly.
I believe we're fortunate to have analysts that cover our business or industry quite a number of years and to a number cycles.
Look forward to getting to know you and leveraging your insights to ensure we're providing the right level context. So you can properly measure our business.
Now I'll just hit on a couple of topics today, then open it up to killing it.
Sure Chris.
I will also begin but the core in the virus related item.
As you all know dependent mic has had a significant negative impact on the global economy and caused a substantial disruption securities markets.
These factors negatively impacted key wealth management business drivers interest rates and client asset levels to be specific.
These macro economic factors.
The resulting decline in our share price when measured as of March 31.
Served as a triggering event that resulted in a review of the goodwill of our business units.
Based on that reveal any implied value as of March 31.
It seems to our carrying value.
We recorded an impairment of goodwill of approximately $271 million relating to our wealth management business.
While additional impairment is possible ship economic or business conditions worsen we.
We believe our impairment test as a 331 factored in conservative assumptions for wealth management business.
All in noncash item. It is nonetheless, a large and nonrecurring item I wanted to start there and provide a bit of color.
At a move to the rest of the results for the first quarter.
As Chris mentioned wealth management revenue of 145 million was at the top of our guidance range.
Excluding the impact of course global revenue for wealth management increased roughly 13 million year over year.
Tax preparation revenue if the extension of the tax season and related volume being pushed into future quarters came in significantly below our prior guidance range at 118.3 million.
As a result consolidated first quarter revenue also came in below our prior guidance range at 263.3 million.
The impairment resulted in us reporting GAAP net income for the quarter, which came in at a negative 315.5 million or negative $6.60 per share.
Adjusted EBITDA, which reflects corporate operating expenses coming in a bit better than expected.
The 3.3 million.
Non-GAAP net income was 43.6 million when 90 cents per share.
In terms of liquidity.
Company generated about $39 million or free cash flow in the first quarter.
We also just down net 45 million from our revolver to ensure that we had ample reserves in an uncertain market.
As a result, we ended the quarter with 168 million cash and equivalents on our balance sheet.
We also recently amended credit agreement to give us a bit more flexibility going into the balance of the year.
Enabling more flexibility to invest the new opportunities as we managed altered timing of our expected cash flows.
As Chris mentioned, we believe we have more than sufficient liquidity to cover our operational needs, including non recurring cash obligations and 2020, such as our headquarters move an acquisition and integration costs.
To attain ultimate flexibility, we're scenario planning for different environments, and looking at when and where we would lower our cost structure. So when we went in fast to accelerate FICO glow.
From a capital allocation perspective.
We will be very prudent.
We negotiated terms for each kfs give us time to continue monitoring credit markets to fund that purchase.
The shortlist of where to deploy cash would be to fund each kfs plus organic growth opportunities.
We would not expect any share repurchase activity in the near term.
Looking past Twentytwenty, we would expect debt pay down in addition to organic growth opportunities to be the primary focus areas.
Finally in terms of outlook given the delay in tax season, and the uncertainty given the pandemic are electing at this time to withdraw our prior tax people guidance not to provide additional guidance at this time.
We believe this to be the prudent approach considering the number of variables currently at play.
With that I'll turn it over to the operator for killing it.
Operator.
Thank you.
The asked the question at this time, you would need to press Star then one on your telephone to withdraw your question. Please press the pound team again that is star then one if he would like to ask the question.
Our first question comes on the line of Chris Shutler with William Blair. Your line is now open.
Chris Shutler for your line is on mute. Please unmute your line.
Hello can you hear me.
Okay fair enough.
Okay, sorry about that.
So first on the tax business. The just want to make sure that I heard you correctly, Chris that the consumer E files were in a first quarter down by a single digit percentage year over year or is that correct.
That's correct.
Can you put a finer point on that is that like upper single digits mid single digits, just ballpark trying to get a sense.
Sure the IRS data.
Sure you files were down 2.6% that was Peru.
April 24.
Oh, I'm, sorry that was a.
When you said consumer you files were down single digit percentage, where are you talking about your own business, where you're talking about the IRS.
Oh, so are we talking about our own business. We indicated that we were down single digits as of the end of March.
Got it and you're just saying that yes. So directionally you think about where the IRS was was that.
Yeah Okay.
Okay got it.
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And then you can you talk about you mentioned the early results are some of the digital marketing spend has been.
Extremely promising maybe just dive into.
Exactly what.
You were testing.
What what you're looking at what the keep you guys are that that look really strong.
And looking out to both the second quarter and next year.
Hi, clearly you spent a lot more in the quarter. So you would expect units to be better as a result, do you think that you'll be able to dial back the expense quite a bit from.
We weren't where we were at and still get but an equally good result.
So we were testing a wide variety of methods right. There a number of things, but we hadn't been employing that that others in our market had been and so we tested across and we look at a variety of metrics to gauge success right and.
A number of them and you all look as well traffic.
Starts and I'm completes a and so we'll know more as we make it to them the season about the full effect.
Can you say anything Chris about the or the the extra call it 25 or $30 million and it looks like you you spent in the first quarter in that business and <unk>.
Should we view it as.
A decent bit of that is a just a a shift from Q2 into Q1 or.
Hard to say.
I can't really saying, which were not sharing any more of a details of that.
He said, we we spent tested a wide variety of of tactics that we but we would deliver a good return we'll know more about the effect of that as the season completes.
Okay and.
And then maybe lastly, just the is it looks like on your website you kept the.
The messaging around free for really the entire season.
Maybe just talk about that decision.
And what you're expecting the messaging to be at a high level next season.
It's worth noting the distinction between free messaging and free filers. So many filers.
When they start the process. They believe they may be free <unk>. The reality is they have more complex tax situations and so they end up being paid filers as they complete the process.
So I think just like many other than the category free will be an important part of messaging going forward.
Okay. Thank you.
<unk>.
Thank you. Our next question comes on the line avail, Kati with JP Morgan Your line of South end.
Good morning.
Thanks for taking my questions. Following up on Christmas question isn't just to help us.
I understand the cadence of tax season, I'm going forward. It it's fair to use the IRS data to understand how your businesses and training the past several weeks of how we think about the next several months.
Oh, we provided some guidance about you know us being down single digits.
At the end of March and and that's also data out there about the the IRS, but making any more than that is.
It was more of them shirts.
Okay and whatnot.
Got it.
So I'm not the castle peak revenue. So we didn't have a full quarter of lower rates and one Q2, two we step off in a lower rate can you cry provide some perspective on how much were stepping down from the casualty promenade going from one Q2 Q.
Sure.
Sure I'm. So when you when you look at the the cash sweep that that.
We had and we're fortunate and and obviously how we.
Oh, we contractually have that the deal on the cash sweep we were at about 7.3 million them and revenue and and.
In Q1 and as Weve. This.
Stated that Ah that's that's obviously driven by interest rate environment on an annualized basis, we're looking at between two and 3 million for the year.
So to the really for the rest of the year.
On an annualized basis.
That's correct and this is mark and I can share a bit more context for your well, but on an annualized basis going forward. We would expect between two and 3 million that did not start in the first quarter.
As the rates really came down to zero in March and there was a month delay so you can forecast.
The balance of the year based on an annualized two to 3 million going forward at <unk> percent.
Got it okay. That's helpful. Thank you.
And there's some pricing so Chris you mentioned in the prepared remarks studies.
Can you disclose some of the gap like as we look ahead.
How do you think about.
The pricing dynamics relative to turbotax and HR block and the next couple of years.
We ultimately want to continue to be a value offering.
Relative to Turbotax, and so we'll think very carefully and I think we've talked about in prior calls we do pretty extensive price testing that gives us some guidance.
Or informs us somewhere we ultimately should be.
But as you know were more guy you weren't did Brendan so we think it'll be important to maintain that position.
Got it.
Thank you for taking my question.
Sure.
Thank you next question comes from Alex Paris, with Barrington Research. Your line is now open.
Hi, guys I just have a couple of questions on the wealth management side of the business.
I think you mentioned fresh in your prepared comments that are well there was no.
Significant impact.
On advisory fees and trail in Q1, there will be in Q2, but that effect would be somewhat muted.
By the mix between fixed income and equity question number one and pay outs. So I was wondering can give us a little bit more color in terms of your assets under management Oh, the buckets that it's in fixed income versus equity and then what you mean with regard to Pat.
Todd you want to take us.
Yeah sure. So good question on that when we look at or the mix of of our equity to fixed income and inside both the advisory business as well as a day you a overall it obviously varies depending upon a depending upon the the advisor and client.
Typically we've seen that run that 60% to 65% equity to fixed income. So when you look at the correlation of market increase or or decline you factor that into the to the overall mix.
And then the other point you make was around.
It was around payout and we've seen payouts be a relatively flat and that is is the split of of revenue.
With a with our advisors, ER and ER and Bluecore, a and we've seen that be flat overtime, but when you look at the effect of the market. Those two factors factor into the to the cash flow coming into the a into the business overall.
I got you Okay. Thanks, and then not just one last one now.
Can you.
Outlined the revised terms engage K fs transaction I know the price was reduced the time was extended but maybe just a little bit more color and that's there.
Sure I can take that it so the price was revised down.
160 to 100.
And we have a lot of flexibility on the timing of the close so much more extended timeline. There is an earn out right into performance.
Returned to the expectations that we're in the initial.
Deal they have an opportunity to get back to the purchase price as you might imagine that would require some great great performance from the business as well as like some very favorable market conditions.
Great very helpful. Thank you the perfect.
Thank you.
We have no further questions in the queue at this time I would now like to turn the call back to management for closing remark.
Great.
Thank you all for joining us today and for your interest in good core I would like bank.
All of our employees across the company for their hard work dedication flexibility and determination during this period.
This year is already brought number of changes and challenges.
And you have arisen to the challenge on each one.
And finally, thank you to all to our advisory customer than clients you play a major role in our success and we couldn't be more proved to be able to play a role and yours.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now that's kinda.
<unk>.
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