Q2 2021 Digital Media Solutions Inc Earnings Call
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Good day and thank you for standing by welcome to the digital media solutions incorporated Q Q2, 'twenty 1 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
I asked a question during the session you will need the bright star 1 on your telephone please be.
For today's conference is being recorded if you require any further assistance. Please press star Zero I would now like to hand, the conference I'd break it comes back executive Vice President of Investor Relations. Please go ahead.
Yeah.
Thank you for joining us to discuss the message financial results for the second quarter of 2021.
With me on the call are Joe May renew cheap co founder and CEO and the since you're sharing the boss CFO.
We posted our earnings announcement this morning, and the press release and also on our Investor Relations website by now everyone should have access.
Before we begin I would like to call your attention to our safe Harbor provision for forward looking statements in our financial results press release.
The safe Harbor provision identifies the risk factors that may cause actual results to differ materially from the content of our forward looking statements.
For a more detailed description of the risk factors that may affect our results, including disclosure about the effects of the Corona virus outbreak.
Refer to our financial results press release, and our SEC filings.
Also during this call management's commentary will include non-GAAP financial measures.
Reconciliations between GAAP and non-GAAP financial measures for our reported results can be found in the tables of our financial results press release, which we have posted to our Investor relations website at investors that digital media solutions Dot com.
The additional financial and other information to be discussed of this call can also be found on our Investor Relations website.
Now I'd like to turn the call over to Joe <unk>.
Joe.
Thank you Tom and good morning to everyone. Joining the call today Q2 was a record breaking quarter for Dms and I'm excited to dive into the reasons behind our success.
This morning, we issued a press release with plenty of details on our financials. So we will do our best not to duplicate that information. The Sundar will provide additional color on the published numbers in her remarks, I'm going to talk to you today about why and how our second quarter, especially including our Vms was so strong and how our actions and results put us in a really good spot for the.
The remainder of the year and beyond.
Just quickly the Frameless call during the second quarter, we set records and beat expectations for revenue gross profit margin and EBITDA.
Reported revenue was $105.1 million and adjusted revenue was $109.3 million.
Total revenue growth was 42, 4% adjusted for acquisitions was 19, 9% gross profit margin was 32, 1% and our variable marketing margin or Vms was 38, 2%.
Talk in detail about this number in a moment.
Lastly, our adjusted EBITDA was $16 million and our balance sheet remains healthy with net leverage of 3 times.
So this morning, I'm going to provide the top 3 reasons, we had such a strong quarter and then I'll provide the top free highlights for the remainder of 2021.
Here, we go with Q2.
First we expanded our margin during the quarter. Despite what's on the horizon regarding privacy and cookies and recognizing how changes will lead the concentrated demand within the walled gardens of Google Facebook and the like we grew margins by more effectively targeting consumers improving our engagement with these consumers and driving more efficient conversions.
Consumer engagement score or CES continues to demonstrate our strong ability to efficiently create engagement and conversions that result in transactions and customers of our advertising clients.
Yes for the periods of <unk> 72 up from 69% in Q1 indicative of more targeted consumer engagement.
We're able to create these efficiencies across all our verticals because we continue to increase our leverage within the digital advertising ecosystem using superior consumer insights our marketplace brands. Our first party data our proprietary technology, our vast distribution capabilities and the many other tools in our Arsenal that drive engage.
Net.
And as our advertiser clients spend more with us because of our effectiveness, we deploy more media dollars, which in turn engages more consumers grows our first party data asset and delivers enhanced the rois.
Our first party data asset growth the better we become the targeting and engaging consumers and that leads the better ROI for our advertiser clients, which lead them spending more with us.
The other benefit of our efficiency gains is margin expansion for us as demonstrated by our increasing variable marketing margin or <unk> that is happening even as cpm's across digital media, but especially within the walled gardens go up our Vms in Q2 was 38, 2% that is up from 32 per.
Percent in Q1.
Second we continue to play from strength the strength within our largest vertical of insurance.
Insurance revenue, which now accounts for almost 2 thirds of our revenue grew by 92, 2% in Q2 and by 73, 1% organically.
Insurance is showing strong growth for us for a number of reasons.
Consumer demand for all of insurance products is strong and consumers are increasingly shopping online to determine the best options promotions and savings available to them.
Helping consumers connect with the insurance providers that meet their needs is what we do best and are growing auto insurance quote request volume up 107% from Q2 of last year shows this the 3.
<unk> the increase in quote request volume is also indicative of the cross section between the consumer demand in auto insurance Advertiser demand, which brings me to my next point.
Advertiser demand for insurance also remains very strong we work with all of the top insurance providers and we've been actively growing the list of insurance agents, who bought from US. In addition, during Q2, we launched Zipcode ignite of loyalty and retention program that encourages individual agents to invest larger budgets. This program is.
You already had a measurable impact.
We closed our previously announced the acquisition of assets from Chris results at the beginning of April as the result, we benefited from a full quarter of contribution concentrated within health insurance. Chris results has had a positive impact across our revenue and margin numbers in Q2, and we will have an even stronger impact of the remainder of the year and thats per.
Segway to third our strategic investments boosted both of our revenue and efficiency during Q2.
The growth requires innovation and evolution and we're not afraid of that challenge our investment strategy, including our M&A strategy is deliberate and designed to help us be the most efficient what's the.
The growth focused company, we can be the.
This year, we've completed 2 transactions Intel in February and the assets of Crisp results in April the timing of the crisp results transaction was important to set us up for a strong Medicare open enrollment period coming in the fourth quarter of the year the.
Early Q2 close of the acquisition gives us time to integrate Chris results enhancing its already strong health insurance business with the leverage achieved from our first party data asset proprietary technology and extensive media reach we've already seen synergies between the Chris results team and the rest of the Vms with the positive impact on Q2.
As a result.
Our earlier acquisition Intel is a proprietary web push marketing technology with sophisticated AI and machine learning that we acquired in February the.
The Intel technology as part of our efficiency story for Q2 as the Intel allows us to reengage consumers by encouraging them to complete the information requests of by storing up future demand by delivering personalized messages designed to stimulate action Inc.
Intel also brings added value to our publishing partners by encouraging website traffic to our direct to consumer E Commerce advertiser clients by allowing them to re target consumers, who have abandoned their shopping carts.
This is important year round, but is magnified during the seasonally significant Q4 online shopping period.
During the second quarter, we also made strategic investments to bring call Center software in house and launched Dms voice.
<unk> voice adds to our already strong proprietary technology stack and presents additional solutions to our advertiser clients more importantly, Dms voice enables us to boost our gross margin immediately during Q2 due to the cost savings on our call center expenses that have been booked into cost of goods sold and Dms voice will continue.
<unk> to boost our gross margin in Q3 and beyond.
Lastly, we made strategic hires last quarter to strengthen some of the capabilities and experience sets on our teams, including the finance and legal teams.
So shifting into the remainder of the year I am enthusiastic about what's the comp for the rest of 2021 of the beyond just like a highlighted 3 things about Q2, I will now spotlight 3 things coming in Q3 and Q4.
First everything we've talked about for Q2 margin efficiency, playing some strength the strength within insurance and strategic investments are expected to stay and play throughout the remainder of the year remember as our advertiser clients continue to spend more with US our first party data asset growth in our consumer targeting and engagement.
Improves.
This growing advertiser client spend and first party data asset boosts ROI for our clients and of boosts efficiency measured through the <unk> for us into Q3 into Q4 and beyond.
Our insurance business continues to grow on the back of strong consumer and advertiser demand and the strongest demand for health insurance during the open enrollment period as of yet to come this year.
Especially with crisp results within the folds of Dms. We are confident we are well positioned for taken the tailwind of the digital transformation happening in health insurance advertising, especially in Medicare.
The investments we made in Q2 and prior to enhance our people our processes and our toolbox, including our first party data asset of proprietary technology and our expansive media reach were all made with an eye towards future growth.
Much of the anticipated growth, including a scaled up OUP periods and innovative reengagement bundles that lead to stronger ecommerce conversions will be recognized this year.
Second protect dot com, our flagship consumer portal continues to grow.
When we rolled out protect dot com, we started with just the auto insurance. During Q2, we added life insurance home security and mortgage refinanced by the end of Q3, we expect to see additional growth in adjacent verticals like home services and we plan to launch the completed site design and consumer portal, which will allow people.
To log in to personalize their experiences and results and the future of protect dot com is to be recognized as the premier destination for people looking for a fully integrated experience to protect their personal property the health and their finances, all the 1 place where the brand they know and trust. This the integration.
The consumer experience more sticky, especially as we introduce loyalty benefits and programs why does this matter because as protect dot com becomes of known consumer brands it becomes easier to attract consumers to protect dot com and to keep that more consumers that are more loyal will mean greater advertising spend and the store.
We already saw leads to even stronger margins.
In the third and final point I'd like to highlight is that the end of the year is historically seasonally strong for us and we've taken actions to amplify our strength this year.
Remember that we talked about Super seasonality for Q4 last year, and we anticipate the seed that again this year with the open enrollment period for health insurance and the E Commerce holiday shopping season happening at the same time.
Insurance is our largest vertical with health insurance experiencing significant growth. Thanks to the efforts we already had in place plus. The addition of Chris results and E. Commerce is our second largest vertical with significant e-commerce revenue hitting at the end of the year, especially within the following categories.
Non profit scaling their sustained donor basis direct to consumer and subscription brands seeking the scale customer and subscriber acquisition and seasonally commerce brands that need advertising support to achieve their ended the year revenue metrics.
Of course, there are uncertainties with regard to how the pandemic will impact in store shopping this holiday season, but we anticipate e-commerce will be strong whether or not the pandemic subsides again in the United States.
Of course summarizing it is worth noting that in May we refinanced our credit facility to provide increased financial flexibility to support our growth initiatives.
And in late Q2, Dms joined the prestigious Russell 3000 index, expanding our visibility within the investment community bring.
Bring the faster the top before I hand over the call to the Cintra Q2 was a record quarter for us because we took action to expand our margin as shown by our strong third and 8.2% the MF.
<unk> strength, the strength, especially within the insurance vertical leveraging consumer and advertiser demand to grow.
We made strategic investments that had immediate impact and expectations of long term benefit and we're looking forward to the remainder of the year because the actions. We took during Q2 set us up for success in Q3 Q4 and beyond.
Dot com continues to grow in terms of everyone, who touches consumers publisher partners and advertiser clients and its ability to grow revenue and EBITDA and final of the end of the year inclusive of both OE and the holiday season, our historically strong for us and we are confident we have taken steps to make them even stronger this year with that.
I'll pass the call over to the center.
Thank you Joe.
Good morning to everyone like Joe I will also be focusing my remarks on the color beyond the numbers issued in this morning's press release.
So let's jump in for Q2, we beat guidance for revenue EBITDA and margins.
Total revenue was 100 debt and $5.1 million up 39, 7% over the same quarter last year and adjusted revenue was $109.3 million of 42, 4% year over year.
<unk> revenue grew 19, 9% over Q2, 2020, and the split between organic and inorganic revenue was healthy at approximately 84% to 16.
The primary driver of growth with insurance, which accounted for approximately 2 third of our total revenue in Q2 like Joe noted insurance revenue grew 92, 2% over the second quarter of 2020, 731% when you adjust for quest acquisition.
Edition of the crisp results assets diversified insurance revenue in the quarter automate.
The 1.7% of total insurance with health now representing 36, 4% followed by life at 6% and home at 5.9% to put this into perspective in the year ago period.
Accounting for 71, 1% of our insurance revenue.
Although we believe there is considerable continued growth to be seen within auto ensuring the recognize the importance of diversification, which will make us less susceptible to the ups and downs of 1 particular industry.
Just touching on the other revenue streams career and education contributed solid growth this quarter and the relaunch of consumer finance category in July. So we look forward to reporting the political contribution beta this year.
I'm extremely proud of our gross margin gross profit and David the marketing margin numbers for Q2 as day represent proof of the flywheel effect that we have so often spoken off for the second quarter reported gross profit was $33.7 million equating to a 32, 1% margin 19.
The ahead of our typical 2007% to 30% range and above the 28 and a 5% margin in Q1.2021, and the 33% margin we achieved a year ago variable marketing margin of DNN with 38, 2% compared to 32% in Q1.2021 and 34.
The 1% a year ago. This upside in gross margin was driven by strong execution and strategic investments like Dms voice, which allowed us to create efficiencies and reduce cost of goods sold the.
Creation of Dms voice enabled us to streamline and eliminate systems to result in better experiences for our publisher partners Advertiser clients and consumers and has added capabilities, which have resulted in revenue and margin improvement.
Furthermore, our strong gross margin performance came despite some of the effect of iOS 14 changes as well as other post cookie privacy shifts which are contributing to increase CPM.
The ability to improve gross margins in the quarter, even despite the industry headwinds further highlights the positive impact of of diversified traffic sources and.
Insulation from broader industry changes that have negatively impacted a number of our peers.
On a reported segment basis, the Q2 brand direct solutions gross margin was 26% up from 23, 8% in Q1.2021 and up from 24, 2% in the same quarter last year.
And the Q2 marketplace solutions gross margin was 28, 9% up from 25, 7% in Q1, 2021 and down from 33% from a year ago, primarily due to strategic decision at the end of Q2.2020 to prioritize growth and market share over the near term margin.
Other solutions primarily include our SaaS software business kind of.
Gross margin of 76, 1% contributing to our overall gross margin level.
For operating expenses we.
We remain focused on improving the leverage in our business, while balancing our investments for growth of total operating expenses amounted to $25.8 million in the second quarter, an increase of $5.6 million from Q1, 2021, and up $9.5 million the year adjusted for onetime expenses in the second quarter of 2000.
'twenty, 1 related to nonrecurring acquisition costs of $4 million stock compensation of $1.3 million nonrecurring the suite, capturing reserves of <unk> 4 million and mostly non recurring additional expenses of $1.8 million pertaining mostly to pre acquisition legal fee settlement and consulting.
As the newly formed public company, we rightsize some of our corporate functions and invested in people processes and technology to position improved and sustained performance and comply with the fiduciary obligations.
Building, a competitive and entrepreneurial workforce that helps ensure we have the critical skill sets the innovative minds and the passion for the continued implementation of sophisticated processes and technology to measure analyze and optimize the sustained quantity and accuracy remain top priorities.
We ended the second quarter with a total head count of approximately 600 full time equivalent.
Finally on profitability adjusted EBITDA in the second quarter was $16 million or an adjusted EBITDA margin of approximately 15, 2% EBITDA decreased 2.2% year over year. As a reminder, we did not have public company expenses in the year ago quarter and this decrease despite margin improvements.
Due to increases in operating expenses from legal consulting fees compliance related matters, the SEC filings IP and staffing to.
To meet public company obligations and investment in stock incentives to attract and retain a workforce and a highly competitive industry.
Including a pro forma acquisition the adjustments for the prior year, our adjusted EBITDA increased from $13.7 million to $16 million, an increase of approximately 17, 1% low.
Lastly, turning to the balance sheet and liquidity, we ended the quarter with $18.8 million in cash cash equivalents and marketable securities down $5 million from the end of Q1, reflecting the crisp results acquisition plus normal shifts in working capital.
As discussed we put in place of new $275 million publicly rated credit facility during the quarter, which increased our financial flexibility of total debt at quarter end was $225 million and net of issuance of cost it was $218.2 million.
As of quarter end, we had the full 50 million balance available to us on a new revolving credit facility.
After achieving record revenue and EBITDA in Q2, and because of the 3 things Joe noted, including expected strength during the upcoming OAP and holiday shopping period, the comfortable that they are on track to achieve guidance. We previously gave.
Of course like every company there are unknown to the Max monitor these of the 2 of them wanted to call out right now.
Although we are hopeful the pandemic of subsiding. The recent spikes in Covid may impact reopening of parts of the economy and the speed at which companies have their employees return to the offices the.
Pandemic impacted consumer behaviors, including their online shopping and research patents Covid also impacted a publisher partner and advertise the clients' employees the downtime increasing when infection rates rise diver.
Diversification helps us in times of change and we are cautiously optimistic of the worst of the pandemic is behind us all.
Also the recent privacy related changes from Apple and the change in cookies Transit time line from Google tell us that the big Tech companies have not landed on the final solution. When it comes to consumer tracking and privacy. These changes impact of advertisers and advertising solution providers and we don't anticipate this topic to be closed any.
Time soon.
However, with continued investment in growth and a focus on optimizing of services to create efficiencies the arc.
If you're an advertiser demand and the strategic investments that had an immediate impact along with expectations of long term benefits.
Although we will continue to monitor the post COVID-19 recovery and what that means to our business in 2021 and beyond we look forward to the remainder of the year because the actions. We took during Q2 are expected to have continued positive impact in Q3, and Q4 of protect dot com growth plans, we'll have strength in revenue and EBITDA.
And because we have taken the steps to boost our historically strong OUP and holiday seasons with that we thank you for your interest in Dms and we will now open the lines for questions. Operator, Please let our listeners know would they have to do to ask questions.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by the number 1 on your telephone keypad again. It is star 1 we'll pause for just a moment.
Okay.
Yeah.
Yeah.
Your first question comes from the line of Murray of Richard with Canaccord.
Good morning, and congrats on strong results I just wanted to ask you about your emphasis on growing your agent business can you talk about how this agent model sort of impacts of unit economics, and you mentioned that that's largely an order right. Now can you can you maybe talk about whether you plan to sort of implement this across.
Other verticals in the future as well.
Yes.
Hi, Maria good morning, the speak to you again.
So with regard to the agent model and how it impacts unit economics.
Generally.
It favorably impacts unit economics and.
As opposed to doing it the enterprise clients and it gives us great diversity in that we work with both the enterprise clients and the major insurers and we are of very substantial.
Base of independent sales agents, approximately 6000, and we have very strong growth initiatives there to continue to grow that base.
The recently talked about our ignite program that we run.
That has helped us grow those agents and we continue to be focused there because of the favorable unit economics that come out of dealing with a leading to the independent agents that will continue to be an area of focus for us because of again the more favorable unit economics that exists there.
It was what was the second part of the question again.
I was just kind of I was just trying to ask if you are planning to implement this across other verticals as well.
Well insurance as you are aware is a substantial portion of our revenue it's about 60% of approaching 2 thirds of revenue now.
And working with the independent sales agents.
Inside of the auto insurance vertical is underpinning some of the growth inside of insurance and it is a fairly unique ecosystem with the independent sales agents inside of the insurance category, specifically inside of the property and casualty segment, which skews heavily towards auto so.
We have a <unk>.
High degree of focus there right now specifically inside of insurance.
And then inside of property and casualty with auto but outside of that there are the other categories health being the second largest category inside of the insurance vertical that we do work in right now and we do plan to continue to look at opportunities to scale there of.
Obviously with the major insurers and the brokers and then beyond into the independent sales agents as well. So yes. There is an initiative to continue to expand and work with independent sales agents outside of property and casualty.
Got it.
Very helpful. Joe and my other question is sort of as you look at your business today are there any areas of the platform or any verticals, where you see sort of the need to invest more and more broadly how are you thinking about the balance between growth and profitability.
So generally I mean, we saw great margin improvement this past quarter, obviously with both growth gross margin and variable marketing margin moving up and.
The best way for me to communicate that I guess is we talked a little bit about the consumer engagement score in Q2, and how it went up to 72 from 6.9.
And that's on the back of.
Even though global reach for US was down engagements are up and that that's the title in our ecosystem right. So it benefits all.
Verticals on both the marketplace and the brand direct side.
From the top down you'd have insurance first and then brand E Commerce.
Current education, and consumer finance, which is really starting to reemerge for us so as we continue to invest in.
The engagements that we have of consumers through leveraging our marketplace solutions are owned and operated websites.
The interacting with consumers. It has this flywheel effect, which.
Is effectively reinvesting in the first party data asset, which is connected to the media reach through our proprietary technology and as we continue to go through those cycles.
We just get more efficient, which is why even though for US global reach was down. This is not an impression based business right. So we're not looking at how many impressions we had access to we're looking at.
Our ability to effectively and efficiently engage consumers.
And needing less impressions to do that.
Means that we have more quality engagement and as Youre aware were paid on performance so that means that both.
Near customers <unk> customers has to be coming out of those engagements, which when you see rising.
See the consumer engagement scores go up and we see margin increasing it means we're doing a good job of it so we're going to continue to invest in.
The technology and the resources to continue to be efficient on the front end there.
How we go about putting the right offer in front of the right person in the right place at the right time because of that benefits all categories of insurance brand ecommerce true in education, and consumer finance the backs, where the investment asks the B and then we will be successful in the verticals behind that if that makes sense.
Okay. That's great. Thank you so much for the color appreciate it.
Thank you Maria and good morning.
Your next question comes from the line of Marvin Fong with <unk>.
Good morning, Thanks, everyone for taking my questions.
Apologize I jumped on the call of late so you may have already.
Mentioned this but the.
Just the thought of variable marketing margin.
Great performance, great to see the improving.
Terms of the guidance it looks like.
The sequentially down in the third quarter just.
Just wondering.
Wondering.
What were the drivers of that.
And within your range of 32% to 36% what would be the.
The factors that might cause of the trend towards the upper end of that range versus the lower end of that range and then second question just longer term I think you mentioned some of the splits within.
Within your insurance vertical.
Life insurance of our health insurance, sorry of 36% et cetera, just curious Joe if you'd be willing to.
The.
I'll take a stab at maybe in the long run what your exposures might be between auto health and some of your other insurance categories. Thanks.
Yes so.
I'll, let <unk> comment on the variable marketing margin, but.
The.
I guess, just generally with regard to variable marketing margin. This is the first quarter that we released debt as everybody is aware and we did so in an effort to increase transparency and improve investor communications. Because we felt this is a metric that investors have asked for and the value.
Several of our peers are obviously reporting it so we're very happy to be able to start producing this metrics of that people can gauge the effectiveness of media spend I'll, let misunder speak to the variability of there in a second.
With regard to the breakout of the segments of insurance.
Property and casualty of.
The C is the biggest category and that would be.
Led by auto and that is still.
We generally have not talked about this but automotive is about half of the insurance business right now followed by now the emergence of health, obviously, you've made a pretty substantial acquisition there at the beginning.
Of the second quarter.
The Christmas results business that we acquired and health is now an emerging category for us or accelerating and emerging category for us inside of the insurance rate behind automotive and then the so those 2 are going to make up the vast majority of our insurance revenue Marvin and then behind that you are.
Gonna have a life insurance and home insurance as the.
The 2 I would say categories that we have total then that we're looking to expand in behind the the big 2 of automotive and health insurance. So we can work on.
Continuing to update these categories as we continue to.
Report numbers quarter to quarter, and we will talk more about the I guess, the lesser of 2 categories as they become more significant but the big 2 of our automotive followed by health insurance the sooner if he would like to comment a little bit on the variability of the BMO I'll, let you do that now the degree of sure. Thanks. Thanks, Joe Hi, Marvin I think if you think about of Vienna.
Im today, and what's happened over time and the results of me put out recently, we made some strategic decisions in terms of the way we execute our operations we can.
Create the Dms boy.
Was acquisition of the software that enabled us to streamline and eliminate system.
Better experiences so those of the big driver as per our Vietnam percentage, it's being higher does that.
We do expect that to continue going forward at a higher percentage, but as we integrate current more efficiently into the business as we look at voice and its value proposition across the business. The rising cost of CPM. So as you can see there is an upside but there's also.
The downside there are they are cautiously optimistic so I would say, we do have opportunity to beat that target at the very comfortable with that range that they put out there as guidance hopefully that addresses your question.
Yes no.
Thank you very much if I could maybe.
I had 1 follow up.
Just as we look ahead, the fourth quarter I think Joe you mentioned, they're big quarters seasonally.
I understand of the open enrollment period will be.
We'll see how that progresses, but on the ecommerce side since you referenced there just curious on your visibility there.
The amount of business you might be generating there on the.
On the brand direct side or the marketplace side.
The update us on the on your thoughts there.
Generally more of a and we've had good visibility into the E. Commerce brand segment of the business. Although there is some uncertainty around.
What kind of holiday shopping season, we're going to see.
Whether or not consumers.
No.
Behaved the way the behaved last year of whether Theres, some shift there where there's more in store shopping.
That's still to be determined but.
Specifically the answer your question on visibility.
Feel that we have very good visibility because of the relationships, we have with the advertisers and we are deeply embedded in their planning cycles.
For the full year, but specifically for those advertisers, who lean heavily on that holiday shopping season.
We're very in tune with.
Sure.
Spend budget goals, so on and so forth and how they plan on moving into.
The holiday shopping season, and the run up to that because some of that actually comes in the Q3 period as you head into the Q4 period. So yes.
Generally we believe we have good visibility across the totality of the business and the different vertical slash segments of the business.
It does transcending it down into those different verticals and the sales teams are very engaged with the advertising clients in terms of how they're going to spend those dollars during the different times of the year. So I would say generally we have good visibility and specifically with brand ecommerce going into the holiday season that is <unk>.
Certainly true.
That's terrific. Thanks, Sterling that's interesting so much.
Youre welcome Martin.
Your next question comes from the line of Jason <unk> with Craig Hallum.
Great. Thanks, guys.
Joe just wanted to ask I know the first party data sets are a key competitive advantage for you guys and so curious to what degree.
The conversations with customers revolve around kind of utilizing those in lieu of debt impending cookie deprecation and then now that we got that delay from Google just kind of curious how you look at the pipeline going forward. I mean do you think that there is an opportunity to really expand the.
The pipeline given you've got more time to have these conversations are or do you think there is potential risk that we hit some type of an air pocket, where people just kind of weighed on those decisions for another year until we get closer to the deadline.
Hey, Jason Good morning, it's good to speak to you again, so I think I'm going to.
Go backwards through that question with the cookie aspect of it first.
It leads us to the to the front part of the question. So I think I've commented on this previously.
We're basically non rely on cookies at this point.
95 plus percent.
Of our media buying and how we deploy our media dollars does not rely on cookies and that's the result of US leveraging the first party data asset, which that originates from us spending our media dollars and interacting with consumers mainly.
Our marketplaces, and our owned and operated websites. So.
Yes, Google can push the clock back a year.
The likely benefits some people in the ecosystem, who are heavily dependent on cookies.
It has virtually no effect on us.
So they may move the clock up again, I don't know whats going to happen there, but it was kind of a non event for us.
With regard to just generally first party data and.
How that benefits us.
The <unk> update.
As you're aware it was released on April 26, and also included App tracking transparency and if you look at some of the statistics a few weeks after the rollout.
Disproportionately low amount of users have actually allowed tracking right. So the.
Of the conversation around data privacy, and then you get into.
How that impacts platforms like Facebook.
That could lead to some challenges in terms of.
How AD dollars are spent because you have.
The limited AD targeting in.
Optimization. It obviously affects conversion on campaigns and then modifications to attribution and reporting are there too right. So.
Because we leverage first party data because.
We have of 1 to 1 relationship with the consumer which comes off.
The back of the them interacting with us directly in those marketplace solutions.
We have that data and we're communicating directly with those consumers that we're leveraging.
The ability to put the right offer in front of that right person the right place at the right time as a result of having that data. So we don't have to rely on the third party data that would've been affected by the iOS 14 update of the limitation of that data I should say.
I generally feel like we're well positioned.
As a result of leveraging the first party data assets that we have and you see that our consumer engagement score that I talked to me about what the score going up.
The 72 from 69, even though reaches down so it just means we're more effective.
And being more effective we're effectively reducing friction from the ecosystem because again it just goes back to creating value by putting the right offer in front of the right person in the right place at the right time, and Thats why engagements up conversion's up margins up.
So it's a good experience for the consumers to get experienced with the advertiser like so.
I kind of ran around that so it was a long answer pretty short question I'll see if I did my job.
It wasn't even that chart of the question somewhat.
I appreciate the response.
The switch gears, a little bit to protect.
Protect dot com just wondering if you can maybe shine some light on.
To what degree are you currently marketing that and driving consumer traffic to that property today, and maybe contrast that with what you expect down the road and then where we shouldnt anticipate consumer trends over time.
Yeah.
So we're we're very excited about protect dot com. We're building as mentioned on the earnings call. We're building out the tax to be our flagship product designed to connect consumers with insurance products and services.
And also products and services with within adjacent categories. So, we're continuing to invest and protect dot com and we've already connected a meaningful amount of consumers with insurance providers I think it's more than half of million consumers now through the portal. It's currently still focus on auto insurance, but it's starting to diversify.
And this year, we're expecting approximately $25 million in revenue from protect dot com by year end.
And specifically the expectations going into Q3 is.
The expansion into.
The additional lines of insurance and then also adjacent verticals like home services.
And also of site redesign and portal update as we continue to invest in.
That marketplace solution, so big expectations, we're already well on our way with having interacted with so many consumers as we have already interacted with and.
We expect meaningful revenue to come behind the investment we've made in protect I'll come this far.
It's a pretty.
First of all.
Cash flow was $25 million in revenue to come through that tight when last year. It was effectively zero so.
That's where we're at with protect.
Got it perfect. Thank you.
Youre welcome.
Your next question.
Your next question comes from the line of Nick Jones with Citi.
Great. Thanks for taking the questions.
Maybe 2 on the first 1.
Given your exposure to auto insurance, what are your thoughts I guess on kind of 1 the heart.
Kind of used auto market in the the kind of.
The increase demand.
At higher level of the unusual other than what that looks like kind of from here do you see that kind of moderating the visibility into that and does kind of the <unk>.
Our performance of any correlation of the kind of this increased demand and what might maybe come to the back half of this year and early next share and then the.
The second question really just on M&A.
Think of the press releases instead, there is still a nice pipeline there.
Were you able to give any color on maybe the size of potential acquisitions or kind of are there going to be similar to the credit bar other larger or smaller any color there would be great. Thanks.
Hey, Matt good morning, because the speak to you again.
So on the on the auto question first with the property and casualty of the auto insurance.
Look we saw significant growth in insurance during the quarter.
Up 92% from the prior quarter, so very substantial growth net powered by broad based demand will request volume increased 107%. So the demand is there from the consumers and demand is currently there from the insurers as well.
So matching the 2 up certainly helps us and as I mentioned earlier.
Maria we see that from the enterprise clients and we also see it coming from the agents as well.
With more people I guess, specifically to your question about.
Yeah.
While the cars are changing hands here.
Generally yes.
More people on the road at this time less than you had last year. So.
Some of the carriers to major carriers progressive and route have communicated that.
So they are anticipating loss ratios to rise as a result of having more drivers on the road. So.
I guess the commentary on that is as you could see.
There's some pricing pressure.
From the major carriers, just as a result of anticipated loss ratio is going up because of all of the activity that you're talking about.
But we don't really look at that as a threat to the pricing in the ecosystem because we have good diversity, because we work with the enterprise level clients and we also as Maria keyed into the unit economics of the agent level are more favorable. So we've got really good balance there and that we've got a very sizable Asia.
So I think generally yes. It is certainly a hot market for autos lot of demand a lot of cars on the road people are driving more of as a result loss ratios could go up could be some pricing impact there depending on who the enterprise client is but.
We like where we're positioned in the market on both sides in terms of having the enterprise clients, having the agents and then generally just being really efficient and effective with our media dollars.
As can be seen in the margin expansion.
So then I guess the question on M&A.
So look we've done to.
2 deals this year.
We've done the.
Intel push froze arm of steel in February and then the acquisition.
The first results in April and these were 2 really important deals for us for 2 very different reasons.
<unk>.
The Intel push for the <unk> was really an investment in technology.
Sure.
And let's call it.
Yes.
Portability channels with how we communicate with consumers and how we.
At the market to them and re engage them right and then if you look at the Chris results the acquisition that was.
Further investment in our insurance category to help.
Rapidly expand what was already a growing business that we had built in health insurance to the 2 very different acquisitions.
I'd like to note that we're still very deeply involved with the integration of those businesses and as with every acquisition that we do we look to fully integrate synergize and harmonize those businesses within the <unk> ecosystem. So.
We're I would say aggressively down the road on that but there is still work to be done.
At the same time.
We look at organic growth and M&A as being the 2 levers that we could sort of grow the business. So.
We continue to look at interesting opportunities as they present themselves. It's difficult for me to comment on specifics of that but what I can tell you is that we've been disciplined in the past I believe we've done an excellent job our entire team.
Has done an excellent job at sourcing quality acquisitions.
Integrating them synergize them harmonizing them inside of the ecosystem. So we're going to continue to be just as disciplined as we always have.
And.
There is certainly no shortage of opportunities out there because it's a fragmented space so the.
The pound the team that we have will continue to be out there looking for stuff that makes sense for us to potentially acquire to accelerate the already strong organic growth profile of the business. So we're excited about it but not much more I can say other than we've done a good job and we're going to continue to be disciplined to do the things we've already done.
Great. Thank you.
You got it.
There are no additional questions at this time I would like to turn it back over to management for closing remarks.
Perfect.
Airtime.
Perfect. Thank you operator.
And thank you everybody for joining us this morning, we look forward to.
The discussion in the next quarter. Thank you.
Ladies and gentlemen, this does conclude today's conference call you may now disconnect.