Q2 2022 Quinstreet Inc Earnings Call
Speaker 1: Good day ladies and gentlemen and welcome to the Queen Street Second Quarter fiscal 2022 financial results call. Today's conference is being recorded. At this time I would like to turn the conference over to Hayden Blair. Please tell the height.
Good day, ladies and gentlemen, and welcome to the clean sheet second quarter fiscal 2022 financial results call. Today's conference is being recorded at this time I would like to turn the conference over to heighten Black. Please go ahead.
Okay.
Speaker 2: Thank you, Laura. And thank you to everyone joining us as we report Quinn Street's second quarter of fiscal year 2022 financial results.
Thank you Laura and thank you to everyone joining us as we report Quint Street second quarter fiscal year 2022 financial results.
Speaker 2: Joining me on the call today are Chief Executive Officer Doug Valenti and Chief Financial Officer Greg Wong.
Joining me on the call today are Chief Executive Officer, Doug <unk> and Chief financial.
Shall officer, Greg Wong.
Speaker 2: Before we begin, I would like to remind you that the following discussion will contain forward-looking statements.
Before we begin I would like to remind you that the following discussion will contain forward looking statements.
Speaker 2: Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guaranteed the future performance.
Forward looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance.
Speaker 2: Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8K filing made today and our most recent 10Q filing.
Factors that may cause results to differ from our forward looking statements are discussed in our recent SEC filings, including our most recent 8-K filing made today.
And our most recent 10-Q filing.
Speaker 2: Forward-looking statements are based on assumptions as of today, and the company undertakes no obligation to update these statements.
Forward looking statements are based on assumptions as of today and the company undertakes no obligation to update these statements.
Speaker 2: 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 at investor.quinstreet.com.
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 at Investor Dot Quint Street Dot com.
Speaker 2: With that, I will turn the call over to Doug Blenti. Please go ahead. Thank you, Hayden. The December quarter.
With that I will turn the call over to Doug Valenti. Please go ahead.
Thank you Hayden.
The December quarter, our fiscal Q2.
With a more difficult quarter than expected and the insurance client vertical.
Speaker 3: As auto and home insurance carriers reduced to spending aggressively through the end of the county year, two offset high 20.
As auto and home insurance carriers reduced spending aggressively through the end of the calendar year.
To offset high 2021 claim costs.
Speaker 3: Insurance client spending bounced back strongly in January , up almost 80% over December . With the reset of the calendar year,
Insurance client spending bounced back strongly in January .
Up almost 80% over December .
With the reset of the calendar year.
And as we had expected.
And had been communicated by carriers.
Speaker 3: Combined with the strength we are seeing in the rest of the client verticals in business, we were on a run
Combined with the strength, we're seeing in the rest of the client verticals and business.
We were on a run rate in January .
Speaker 3: to more than meet or beat the full fiscal year forecast we provided last quarter.
More than meet or beat the full fiscal year forecast, we provided last quarter.
But.
Speaker 3: Auto and home insurance carrier clients have once again significantly cut budgets and pricing in February .
Auto and home insurance carrier clients had once again significantly cut budgets and pricing in February .
Speaker 3: We have just been digesting the adjustments this past weekend and through today. The immediate impact of the insurance client cuts is a reduction in our outlook.
We have just been digesting the adjustments this past weekend.
And through today.
The immediate impact.
All of the insurance client cuts is.
Is it a reduction in our outlook for this quarter.
And the rest of the fiscal year.
To reflect the lowered spending.
Speaker 3: That is reflected in the outlook numbers we put out today, with which we are obviously disappointed. That said,
That is reflected in the outlook numbers, we put out today.
With which we are obviously disappointed.
That said.
Due to the diversity of our business.
And the resiliency of our team and model.
We still expect to grow revenue.
Speaker 3: and generate between 40 and $45 million of adjusted EBITDA this fiscal year. We will also remain nicely cash flow positive with a strong balance sheet.
And generate between 40% and $45 million of adjusted EBITDA This fiscal year.
We will also remain nicely cash flow positive.
With a strong balance sheet.
Even as we weather this continuing.
But still likely relatively short term.
Storm.
And insurance.
Speaker 3: Our medium to long-term outlook remains exceptionally positive.
Our medium.
So long term outlook remains exceptionally positive.
So.
What is happening in auto and home insurance.
Speaker 3: wire carriers, cutting spending and pricing. While we...
Wire carriers cutting spending and pricing.
While we are not privy to all of our clients Innerworkings.
Speaker 3: Nor would it be appropriate for us to share any non-public details if we had them.
Nor would it be appropriate for us to share any nonpublic details if we had them.
Speaker 3: Some trends seem clear and publicly known. The claim cost environment is difficult and dynamic. Rates that worked for the past couple of years are no longer working. And factors are changing.
Some trends seem clear and.
<unk> publicly known.
The claim cost environment is difficult.
And dynamic.
Rates that worked for the past couple of years are no longer working.
And factors are changing rapidly.
There is increased frequency of claims.
As more folks go back to work.
And become more active generally.
Speaker 3: cost to repair or hire due to supply chain issues.
Cost to repair are higher due to supply chain issues.
Speaker 3: demand outstripping supply, inflation generally, and inflation specifically in the new and used automobile replacement.
Demand outstripping supply.
Inflation generally.
And inflation specifically.
The new and used automobile replacement market.
Speaker 3: Careers have begun to raise rates to reflect these increased costs.
Carriers have begun to raise rates to reflect these increased costs.
Speaker 3: but we appear to be closer to the beginning than the end of that cycle.
But we appear to be closer to the beginning.
Then at the end of that cycle.
And in some cases.
Speaker 3: rate increases have not been enough to offset rising costs. Carriers are pausing writing business in entire states and therefore cutting marketing spending while they analyze the
Rate increases have not been enough to offset rising costs.
Carriers are pausing, writing business and entire states.
And therefore cutting marketing spending.
While they analyze these factors.
And work to file new.
Higher rates.
To reflect the changing economics.
In addition.
Speaker 3: Consumers are bulking at switching or buying new policies as they encounter the initial way
Consumers are bulking at switching or buying new policies as they and capture the initial wave of higher rates.
Speaker 3: making mark-ring spending less effective and efficient.
Making marketing spending less effective.
Sure.
Net.
Speaker 3: We are in a period of a lot of uncertainty.
We are in a period of a lot of uncertainty.
Speaker 3: and importantly, transition in the auto and home insurance market. And it is being reflected.
<unk> and.
And importantly.
Transition and the auto and home insurance market.
And it is being reflected and pauses.
Reductions.
Speaker 3: and volatility generally in marketing spin.
And volatility generally in marketing spend.
Speaker 3: How long has this transition period in auto and home insurance likely to last?
How long is this transition period in auto and home insurance likely to last.
Speaker 3: We have served the auto insurance market for almost 15 years.
We have served the auto insurance market for almost 15 years.
Speaker 3: And well over 20 years, if you count the predecessor company, we acquired to enter the client vertical. So we've seen some of these adjustment cycles.
And well over 20 years, if you count the predecessor company, we acquired to enter the client vertical.
So we are seeing some of these adjustments cycles.
The last one.
Was in or around 2016.
Speaker 3: when higher incident frequency due to distracted driving.
When higher incident frequency due to distracted driving.
From smartphones usage.
Speaker 3: combined with higher costs to repair bumper sensor technologies.
Combined with higher costs to repair a bumper sensor technologies.
Speaker 3: to significantly change underwriting economics.
To significantly change underwriting economics.
Speaker 3: That cycle affected us for about six months.
That cycle.
Affected us for about six months.
Dan.
It is now.
Speaker 3: No one is closer to or in closer communication with auto insurance carrier marketing clients than we are.
No one is closer to four and closer communication with auto insurance carrier marketing clients than we are.
Speaker 3: based on our actual past experience with similar cycles. And
Based on our actual past experience with similar cycles.
And based on discussions with carriers.
Speaker 3: These cycles typically most negatively affect marketing budgets for somewhere around six months. And based on that, we have to be back to more normalized market and positive.
These cycles typically most negatively affect marketing budgets for somewhere around six months.
And based on that.
We hope to be back to more normalized market.
And positive to a more normalized market.
And positive momentum.
In the auto insurance client vertical.
Somewhere between late spring.
And early fall.
Why is six months.
Two reasons.
Speaker 3: First, that is typically long enough for most carriers to analyze and just and find...
First that is typically long enough for most carriers to analyze.
Just and file new rate models.
Speaker 3: Second, that is the length of a typical consumer policy period.
And second.
That is the link of a typical consumer policy period.
Speaker 3: So new rates will typically kick in no more than six months after the cycle starts. so
So new rates will typically kick in.
No more than six months after.
After the cycle starts.
What happens next.
The further we get into the transition period.
The more consumers reached their renewal period.
Speaker 3: and the more they get hit with increased rates from their current carriers.
And the more they get hit with increased rates from their current carrier.
Speaker 3: That usually drives a gradual, then accelerating increase in the number of consumers that shop with other carriers.
That usually drives a gradual then accelerating increase in the number of consumers that shop with other carriers.
Speaker 3: and begins a positive super cycle in our business. We clearly saw that and experienced it.
And begins a positive super cycle in our business.
We clearly saw that an experienced it.
After the 2016 transition period.
Speaker 3: Why is our momentum so long term, why is our medium too long-term outlook still exceptionally positive?
Why is our momentum so long term why is our medium to long term outlook still exceptionally positive.
Well I just noted one key reason.
Speaker 3: This difficult transition period is likely to lead to increased consumer shopping activity and auto insurance in coming months and quarters.
This difficult transition period is likely to lead to increased consumer shopping activity in auto insurance in coming months and quarters.
Speaker 3: And that should be a strong tailwind for our insurance business.
And that should be a strong tailwind for our insurance business.
Like we have seen before.
Speaker 3: and especially when combined that the gains we have made and expect to continue to make in market share quality results.
And especially when combined with the gains we have made and expect to continue to make and market share.
Quality results for clients techs.
Technology.
And media.
Speaker 3: A second reason, our medium to long-term outlook is still exceptionally positive.
A second reason our medium to long term outlook is still exceptionally positive.
Speaker 3: is a strong momentum that continues in our non-insurance client verticals. Creditors in client verticals continue to recover nice with client budgets and...
Is the strong momentum that continues in our non insurance client verticals.
Credit driven client verticals continued to recover nicely with.
With client budgets and consumer activity.
Growing at high rates.
Progress in home services, perhaps our biggest long term market opportunity.
Speaker 3: perhaps our biggest long-term market opportunity continues to be strong and
Continues to be strong and steady.
Overall.
Speaker 3: non-insurance client-vertible revenue grew 36% year-over-year in the December quarter. Those strong twin trends.
Non insurance client vertical revenue grew 36% year over year in the December quarter.
Those strong trends.
Combined with the eventual resurgence and insurance.
Speaker 3: both well for coming quarters and years.
Bode well for coming quarters and years.
Speaker 3: The third reason our medium to long-term outlook remains exceptionally positive is the progress we're making with big new growth initiatives, especially right now.
The third reason our medium to long term outlook remains exceptionally positive is.
Is the progress, we're making with big new growth initiatives.
Especially right now with <unk>.
<unk> revenue is accelerating.
Speaker 3: despite the current challenges and auto insurance, which do affect the activity of our agency clients.
Despite the current challenges in auto insurance, which do affect the activity of our agency clients.
Speaker 3: Multiple clients have moved into the ramp phase of their implementations of the class.
Multiple clients have moved into the ramp phase of their implementation of the platform.
Speaker 3: The pipeline also continues to grow and progress well. Broadening our footprint for future growth.
The pipeline also continues to grow and progressed well broadening our footprint for future growth.
And scale.
Speaker 3: We now expect QRP revenue to exceed $1 million per month by June .
We now expect <unk> revenue to exceed $1 million per month by June .
Speaker 3: based on actual projections from ramping agency clients.
Based on actual projections from ramping agency clients.
Speaker 3: Looking beyond this auto insurance transition period, we have never had a better combination of market opportunities and pet- We have never had a better combination of market opportunities and pet--
Looking looking beyond this auto insurance transition period.
We have never had a better combination.
Of market opportunities.
Imperative advantages and.
An exciting growth initiatives.
In the history of <unk>.
Speaker 3: I hate what is happening in auto insurance, right?
I hate what is happening in auto insurance right now.
Speaker 3: because of its near-term impact on our results. But I could not be more pleased with that.
Because of its near term impact on our results.
But I could not be more pleased.
With our position overall.
And our outlook for the future.
Speaker 3: And that could not be more proud of our team.
And I cannot be more proud of our team.
Speaker 3: which is easily the best in company history and how they have navigated and ex
Which is easily the best in company history, and how they have navigated and execute to continue to deliver results and progress for long term value creation.
Speaker 3: to continue to deliver results and progress for long-term value creation in such a complicated environment. With that, I will turn...
Creation.
In such a complicated environment.
With that I will turn the call over to Greg.
Thank you Doug.
Hello, and thanks to everyone for joining us today.
Speaker 3: Revenue into December quarter, declines 7% year of year, to 125.3 million dollars.
Revenue in the December quarter declined 7% year over year to $125 3 million.
Speaker 4: Gapnet loss was $5.6 million or $0.10 per share.
GAAP net loss was $5 6 million or <unk> 10 per share.
Speaker 4: Adjustment net income was $3.2 million or $6 per share. Adjusted EBITDA was $5.6 million.
Adjusted net income was $3 2 million or <unk> <unk> per share.
Adjusted EBITDA was $5 6 million.
Looking at revenue by client vertical.
Speaker 4: Our financial services client vertical represented 72% of Q2 revenue and declined 13% year-to-year, $1090.2 million.
Our financial services client vertical represented 72% of Q2 revenue and declined 13% year over year.
$90 2 million.
Speaker 4: Doug will cover the details of what is going on and the insurance client vertical in his remarks.
Doug will cover the details of what is going on in insurance claim vertical in his remarks.
Speaker 4: All other financial services businesses grew at double digit rates or more in the quarter.
All other financial services businesses grew at double digit rates or more in the quarter.
Within our credit driven client verticals.
Speaker 4: Progress and revenue growth continue well ahead of our initial outlook for the year. And we continue to expect revenue in those businesses to return to pre-pandemic levels by June .
Progress and revenue growth continue well ahead of our initial outlook for the year.
And we continue to expect revenue in those businesses to return to pre pandemic levels by June .
Speaker 4: Our home services client vertical represented 27% of Q2 revenue and grew 16% year of year to $33.8 million.
Our home services going vertical represented 27% of Q2 revenue.
<unk> grew 16% year over year to $33 8 million.
Speaker 4: From services, remains in the very early earnings, and is perhaps our largest addressable market. Our strategy is simple.
Home services remains in the very early innings and is perhaps our largest addressable market.
Our strategy is simple.
Speaker 4: expand our core trades where we have low established client and media relationships. 2.
One <unk>.
Expand our core trades, where we have well established client and media relationships.
To scale our growth rates.
Speaker 4: which are earlier in their development. And three, add new trades into the portfolio of offering.
Which are earlier in their development.
Three new trades into the portfolio of offerings.
Speaker 4: We expect this multi-pronged growth strategy to drive double digit organic growth for as far as the I can see.
We expect this multi pronged growth strategy to drive double digit organic growth for as far as the eye can see.
Speaker 4: Other revenue which kids consists primarily of performance marketing agency and technology services was the remaining $1.4 million.
Other revenue, which consists primarily of performance marketing agency and technology services.
Was the remaining $1 4 million in Q2 revenue.
Speaker 4: Turning to the balance sheet, we grew our cash balance by $6 million and closed the quarter with $115 million of cash and equivalence.
Turning to the balance sheet, we grew our cash balance by $6 million and closed the quarter with $115 million of cash and equivalents.
In summary.
While insurance spending remains volatile.
Speaker 4: momentum in non-insurance verticals remain strong.
Momentum in non insurance verticals remains strong.
Speaker 4: A confidence in our team, our competitive positioning.
Our confidence in our team.
Our competitive positioning.
Speaker 4: and our growth initiatives, including QRP, remains at the null-automized. With that, I'll turn the call.
And our growth initiatives, including <unk> remains at an all time high.
With that I'll turn the call over to the operator for Q&A.
Speaker 1: Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off, lower your signal to reach a equipment. Again, press star 1 to on your phone to reach a equipment. So call yourself and chain neighbouring on your phone with
Thank you, ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off slow your signal to wait till the equipment.
Press Star one to ask a question.
Speaker 1: We'll now take our first question from Jason Claire of Craig Helen. Your line is open, please go ahead.
We will now take our first question from Jason <unk> of Craig Hallum. Your line is open. Please go ahead.
Hey, guys good afternoon.
Speaker 5: Doug, I just wanted to step back and understand the cadence a little bit better. So if we can't go back to when we last talked a quarter ago, it sounds like maybe there was a little bit of choppiness.
Doug I, just wanted to step back and understand the cadence a little bit better. So if we kind of go back to when we last talked a quarter ago. It sounds like maybe there was a little bit of Choppiness in the December quarter, I am not sure if that was isolated to December or not.
Speaker 5: in the December quarter. I'm not sure if that was isolated to December or not. You saw the January rebound that we talked about last quarter that you had anticipated, but then it was kind of the move in recent weeks. And so, one, I want to make sure that cadence is correct. And then two, you know, curious.
You saw the January rebound that we talked about last quarter that you had anticipated, but then it was kind of the move in recent weeks and so.
One I want to make sure that cadence is correct and then two L.
Curious.
Speaker 5: you know, if there was a little bit of volatility in December , I mean, what are you hearing from the carriers that leave you down the path of this three to six months kind of hesitation as opposed to just a shorter term period of volatility?
If there was a little bit of volatility in December .
What are you hearing from the carriers that lead you down the path of this three to six months.
Hesitation as opposed to just a shorter term period of volatility.
Speaker 3: Yeah, thank you Jason. I think you got the cadence generally right. You know, we started to see some effects on budgets late last year, particularly in September they began after Ida.
Yes, Thank you Jason and.
And I think you've got the cadence generally right.
Starting to see some of that.
Exxon budgets late last year, particularly in September they began after either.
Speaker 3: kind of was a straw that broke the camel's back on lost ratios for the calendar year. I think we talked about that for 2021.
It kind of was the straw that broke the camel's back on loss ratios for the calendar year I think we talked about that for 2021.
Speaker 3: We saw the carriers indicated to us that they'd be coming back strong in January as they reset lost ratios for the new camera.
We saw the carriers indicated to us that they'd be coming back strong in January .
As they reset loss ratios for the new calendar year.
Speaker 3: And we're full speed ahead, full steam ahead. We got actual budgets, so we began setting up even the systems and pricing and budgets in our systems.
We are.
Full speed ahead full steam ahead, we've got actual budgets, we began setting up even the systems with pricing and budgets and our systems to the carriers going into January .
Speaker 3: for the carers going into January . January came and sure enough we hit the ground running hard, carers spending hard, prices went up, vines went up, you know, we were up almost 80%.
January came and sure enough we hit the ground running hard carrier spending hard prices went up volumes went up we were up almost 80%.
Speaker 3: In January over December , very consistent with, in fact, a little bit ahead of our forecast for the second half of the fiscal year.
In January over December very consistent with in fact, a little bit ahead of our forecast for the second half of the fiscal year.
Speaker 3: And then late last week over the weekend and yesterday we got new pricing from carriers for February , which was right back to January ish. I'm sorry, to December ish again. And the feedback we got was and and a bunch of states got closed down by a bunch of carriers. In other words, they quit spending in certain states because they lost their issues or excess.
And then late last week over the weekend and yesterday, we got new pricing from carriers for February which was right back to January ish I'm, sorry December ish again, and the feedback we got was and a bunch of states got closed down by a bunch of carriers that were they quit spending in certain.
States because the loss ratios were excessive.
Speaker 3: So what the carriers are dealing with is a loss ratio environment that is changing rapidly and doesn't fit their current rates. And so they, you know, like everybody else with a losing money for customer, they don't want to make it up and boring.
So what the carriers are dealing with us.
The loss ratio environment.
That is changing rapidly.
It doesn't fit their current rates and so.
Like everybody else with their losing money per customer they don't want to make it up in volume.
Speaker 3: And so they're going state by state now, reassessing their rating model.
So there it's Goin' state by state now.
Necessity their rating models.
Speaker 3: Some have already increased rates in pricing in various states. Some are in the process of doing so, some have paused states while they're in the process of doing so.
Some have already increased rates and pricing in various states. Some are in the process of doing so some have paused states. While they are in the process of doing so.
Speaker 3: So in general terms, what the feedback we're now getting is, say, we, the carriers, expected that we would be running hard right now. But as we started to try to run hard, we found out that the loss ratio issues I'm associated with this period.
So in general terms, what the feedback we're getting is say we the carriers expected that we would be running hard right now, but as we started to try to run hard we found out that the loss ratio issues.
Associated with this period, which.
Speaker 3: of transition out of COVID and inflation and all the other things.
Of transition out of Covid and inflation and all the other things.
Speaker 3: are worse than we had anticipated and affecting our economic force and we had anticipated. And so we're gonna step back, reduce pause spin, figure out how to rewrite, rewrite and relaunch.
Or worse than we had anticipated and affecting our economics worse than we had anticipated and so.
We're going to step back reduce pause spend figure out how to re underwrite the rate and relaunch.
Speaker 3: And so that's that's the that period we're going to. So
So that's that's the period, we're going to so.
Speaker 3: I think we end, they January came out just like we thought. And then the January is also started coming in and they weren't working for the carriers. This is I think all public at this point. They certainly fire publicly. Some very big carriers have announced, rate increases and announced they got to increase again. So. So.
I mean, we in.
They January came out just like we thought.
Then the January results just started coming in in.
And they are working for the carriers as this is I think all public at this point. They certainly filed publicly some very big carriers have announced rate increases and announced they got they've got to increase again.
So now this.
Speaker 3: What usually happens is they take some period of time to figure out the new variables, figure out the new economics, re-rate, refile, reopen states.
What usually happens is they take some period of time to figure out the new variables to figure out the new economics re rate re file reopen states.
Speaker 3: And then to move forward and as I indicated in my discussion and in our discussion with carriers, that has typically historically been about a six month bottom.
And then they move forward and as I indicated in my discussion and in our discussions with carriers that has typically historically been about a six month bottom.
Speaker 3: And they expect that this time it seems like it probably will be about a six month bottom
And they expect that this time it seems like it probably will be about a six month bottom.
Speaker 3: And that puts us in as we calculate it, and we look at the entire cycle, that we think that we return to pretty good, a pretty good insurance market and spending again, and even quite good if you look at historic.
And that puts us in as we calculate it and as we looked at the entire cycle.
That we think that we returned to pretty good.
Pretty good insurance market and spending again and even quite good if you look at historic <unk>.
Speaker 3: When the re-rating happens in the late spring to early fall, time.
<unk> when rewriting happens in the late spring to early fall timeframe. That's exactly what we saw in 2016, both in terms of timing and and reaction.
Speaker 3: That's exactly what we saw in 2016, both in terms of timing and reaction.
Speaker 3: And, you know, and if you look at the numbers for 2018, the, you know, the surge was pretty aggressive after the down within, within about a year and a half, our insurance business, all our insurance business, I think had more than doubled.
And if you look at the numbers for 2018 the.
The surge was pretty aggressive after the down within the within about a year and a half our insurance business, our insurance business I think had more than doubled.
So.
Speaker 3: We certainly don't like what's happening. It's something that does happen in insurance, if there are significant changes in the environment that incremental underwriting changes and price changes don't account for. It's understandable that this period is more complicated given how COVID has been and given the effects of COVID on supply chains in inflation and auto pricing.
We certainly don't like what's happening is something that does happen in insurance that there are significant changes in the environment that incremental.
Underwriting changes in price changes don't account for this understandable to this period is more complicated given how COVID-19 has been and given the effects of COVID-19 on supply chains and inflation in auto and auto auto pricing.
Speaker 3: But it doesn't make it any of us painful for us to go through. The only good news is we do very good about the other side. And obviously we're well equipped to whether this and still stay, normally it's still grow revenue for the year and stay nicely positive in terms of cash to improve it. Move it.
But it doesn't make it any of us are painful for us to go through there and the good news is we were very good about the other side and obviously, we are well equipped to weather. This and still stay are not only still grow revenue for the year and stay nicely positive in terms of cash flow in pockets.
Speaker 5: I appreciate all that context and I want to ask the question just on concentration. Now, it certainly sounds like you're hearing that across the board from pretty much all carriers. But I was under the assumption that as we got to kind of late summer early fall a year ago.
I appreciate all that context and I wanted to ask the question just on concentration now it certainly sounds like you are hearing that across the board from pretty much all carriers.
I was under the assumption that as we got to kind of late summer early fall a year ago. Some carriers had already started to make adjustments to rate cards based on some of the trends already emerging. So maybe you could just humor me and kind of talk about concentration if youre seeing big changes across carriers or is everybody.
Speaker 5: Some carriers had already started to make adjustments to rate cards based on some of these trends already emerging. So maybe you could just humor me and kind of talk about concentration if you're seeing big changes across carriers, or as everybody really taking these same drastic cuts.
Taking these same drastic cuts.
Speaker 3: I would say, I can't say everybody and I'd say that, but I'd say it is not isolated to any single or any small group of carriers. This isn't across the board issue.
I would say I can't say, everybody in and I'd say that but I'd say it is not isolated to any single for any small group of carriers, where this is across the board issue.
Speaker 3: and different carriers are in different phases of their
And different carriers are in different phases of their.
Speaker 3: program to re-underwrite, re-rate, file, reopen. So it's a pretty complicated...
Program too.
Re underwrite re rate file.
File reopen.
So it's a pretty complicated picture, but it's.
Speaker 3: If there's a spectrum from one carrier to everybody, it's but further toward the everybody side of the equation and is the one carrier side of the equation.
If there is a spectrum from one carrier to everybody, it's but further towards the everybody side of the equation is the one carrier side of the equation.
Speaker 3: Okay, just the last one. We're seeing it with all of our biggest clients.
Okay, and then just the last one obviously, we're seeing it with all of our biggest clients.
Okay, which make up the vast majority of our revenue.
Speaker 5: Can you talk maybe about what you think you guys can do over this period of the next three to six months, just a better position, Quinn Street, for more market share games on the other side of?
Can you talk maybe about what you think you guys can do over this period of the next three to six months just to better position Quint Street for more market share gains on the other side of this.
Speaker 3: Yeah, I think everything we've been doing, I mean, we have aggressively worked to get closer to all of the big carriers so that we can't, and all of our big media partners, to do a much better job of understanding the segmentation and the value of every segment. And that is now ever more valuable because it's changing.
Yes, I think everything we've been doing it I mean, what we are we have aggressively worked to get closer to all of the big carriers. So that we can and all of our big media partners to do a much better job of understanding the segmentation and the value of every segment and that is now ever more valuable.
It is changing.
Speaker 3: And so the more precise we can allow them to be about their segmentation and targeting, and the more precise we can allow them to be about their value and pricing for those segments, which is exactly what Q&P does.
And so the more precise we can allow them to be.
About their segmentation and targeting and the more precise we can allow them to be about their value and pricing for those segments, which is exactly what <unk> does the better off we are so we are doubling down on deepening our relationships with all of the carriers to help them understand how to translate.
Speaker 3: the better off we are. So we are doubling down on deepening our relationships with all of the carriers to help them understand how to translate in this period, not just underwriting rates, but segment value, which has changed.
In this period.
Not just underwriting rates, but segment value, which is changing.
Speaker 3: as you can well imagine. And so I would say that we're gonna continue to be very, very close to all the point, and we're closer now to more big carriers than we've ever.
As you can well imagine and so I would say that we're going to continue to be very very close to all the <unk> and we're closer now to a more big carriers than we've ever been.
Speaker 3: There was a time when we weren't nearly as close to the agent for the model.
There was a time when we werent nearly as close to the agent driven models.
Speaker 3: as we are now. And now there's some of our closest best relationships with whom we get, we've had enormous growth and have great relationships built on performance. So I think that's what we're good at. I think we're the best at that. And I think we're gonna, we're gonna double down on that. And I think it boasts well for this period. The other thing is we're gonna keep investing QRP and getting that product down because that'll have the agencies. And I think we're gonna keep investing.
As we are now in there now there are some of our closest best relationships with whom we get we've had enormous growth and have great relationships built on performance. So I think that's what we're good at I think we're the best at that and I think we're going to we're going to double down on that and I think it bodes well for this period.
The other thing is we're going to keep investing in <unk> and getting that product out because that will help the agencies.
With all these states shut down for different carriers agencies.
Need and want all the assistance they can get to be more productive. So we're going to keep keep doing that and of course, we will keep working on our other verticals.
Speaker 3: And we have, you know, double and triple digit growth on a credit given verticals, which are big businesses. And I really saw the double digit, strong double digit growth as far as you can see in home services. We're working on that. So, you know, we'll keep working on all the vectors and hopefully position us best for the other side. And in the meantime, you know, grow what we can control. So,
We have a doubling.
Double and triple digit growth on a credit driven verticals, which are big businesses.
Really solid double digit strong double digit growth for as far as the eye can see and home services.
We're working on that so we'll keep working all the vectors and.
And hopefully position us best for the other side.
And in the meantime grow grow what we can control.
I appreciate all the transparency from you. Thank you.
Thank you Jason.
Speaker 1: Thank you, we'll not take our next question from John of Stevens. Your line is open, please go ahead.
Thank you we'll now take our next question from John of Stephens. Your line is open. Please go ahead.
Hey, guys good afternoon.
Speaker 6: Hey John . Hey, from a, from a big picture standpoint, I mean, you guys are clearly pulled up around the long term, you know, outlook on the business. It sounds like, you know, that the insurance side of things is going to be more of a transitory event. I think your guidance obviously implies that.
Hey, John .
From a from a big picture standpoint, I mean, do you guys have clearly brought up around our long term outlook on the business it sounds like.
On the insurance side of things is going to be more of a transitory event and I think your guidance, obviously implies that kind of recovery you know exiting the fiscal year.
Speaker 6: I think you're going to be faced obviously with the dynamic of whether investors believe in it or not. You guys have a really strong balance.
I think youre going to be facing obviously with the dynamic of whether investors believe it or not you guys have a really strong balance sheet I think of $115 million of cash I'm. Just curious about what you guys are thinking about as far as buybacks and how that might change if theres any kind of noise or dislocation in stock as you kind of navigate through the turbulence on the insurance side.
Speaker 6: I'm just curious about what you guys are thinking about as far as buybacks and how that might
Speaker 3: Yeah, I think it's a good question. And I would say that it's something that is...
Yeah.
I think it's a good question and I would say that.
It's something that is.
Speaker 3: has been discussed at the board level and we'll probably continue discussing I think to your point kind of watching see what happens to this period and
Has been discussed at the board level, and we'll probably continue to discuss and I think to your point, we kind of watch and see what happens through this period.
Speaker 3: combination of how the how investors react with how the business continues to perform.
Combination of how the how investors react with <unk>.
While the business continues to perform and if we see a.
Speaker 3: pretty significant dislocation between those two. I'd say that not unlike we have in the past, we would be.
Pretty significant dislocation between those two I'd say that not unlike we have in the past we would be.
Speaker 3: very open to considering
Very open to considering.
Speaker 3: doing things with that cash in terms of capital allocation and you know buybacks and the like and as a we just had this conversation at the board level a couple board meetings ago and
Doing things with that cash in terms of capital allocation and buybacks and the like.
We just had this conversation at the board level, a couple of board meetings ago.
Speaker 3: So it's not something that we never think about. As you know, we've done it a few times in our history and at one point did a $50 million buy back. So...
So it's not something that we never think about as you know we've done it a few times in our history and one point due to $50 million buyback so I.
Speaker 3: I think we're open to it and we'll to your point. We're probably more open to it tomorrow than we were yesterday.
I think we're open to it and we will to your point, we're probably more open to it tomorrow than we were yesterday.
Speaker 6: on the non-intrante rev growth, I mean that was very...
Makes sense.
Noninterest Rev growth I mean that was very strong I think 36%, which you guys said.
Speaker 6: If you back up the home service.
If you back out the home services business I think that I mean, obviously implies a fairly sharp growth out of the credit driven product. So I don't know if you can maybe talk or provide a little bit of color around the sources of that strength and maybe more specifically if you can kind of outline the personal loans and credit card run rates and how that's looking kind of pre pandemic levels.
Speaker 6: I think that M&M obviously implies fairly sharp growth at a credit driven product. So I don't know if you can maybe talk or provide a little bit of color.
Speaker 6: Any more specifically if you can kind of outline the personal loans of credit card run rate.
Speaker 3: Yeah, we expected that those two businesses combined will be well beyond pretty close to pre-pandemic levels of this quarter and well beyond them next quarter.
Yes.
We expect that those two businesses combined will be well beyond pretty close to pre pandemic levels this quarter.
And well beyond the next quarter, so the June quarter.
Speaker 3: And both businesses are doing very well, I think one's growing in the 70-ish percent year-to-year range at decent scale, pretty good scale. And then the other's growing at triple digits at good scale. So those two businesses combined are meaningful to us. Tens and tens of millions of dollars. I don't think combined grade, they're $100 million yet, but they're getting close. Is that right?
And both businesses are doing very well I mean, I think one is growing and the 70 ish percent year over year range, a decent scale pretty good scale and then the other is growing at triple digits at good scale. So.
Two businesses combined or are meaningful to us tens and tens of millions of dollars out I think combined Greg there are $100 million, yet, but we're getting close is that right.
Speaker 3: Yeah, yeah, I agree with that. Yes. And we may and Greg, will we exit the year with those two? They're running at $100 million? Is that right? I would, I would explain.
Yes, yes, I agree with that yes.
And we May and Greg when we exit the year with those two.
They're running at $100 million does that.
Yeah.
Would expand you'll run rate yes.
Speaker 3: Yes, I'd expect that. So that gives you a sense for their scale, John . These are pretty big businesses going at really high rates. And we're seeing kind of all the vectors in those businesses working. We are, we're gaining share in media. We're seeing more traffic from...
Yes, I would expect so that gives you a sense for their scale job and these are pretty big business is growing at really high rates and we're seeing kind of all the vectors in those businesses working we are.
We're gaining share in media.
We're seeing more traffic from media.
Speaker 3: We are getting, we have more clients than we've ever had.
We are getting we have more <unk>.
Clients than we've ever had.
Speaker 3: We have closer relationship for those clients and getting more budget from those clients and better pricing for those clients that we ever had. So those businesses are firing on all the right cylinders and it's you know, dominantly associated with coming out of COVID.
We have closer relationships with those clients and getting more budget from those clients in better pricing from those clients that we ever had so those businesses are firing on all the right cylinders and it's.
Dominantly associated with coming out of Covid.
Speaker 3: And the banks themselves, banks broadly defined, lenders, issuers, et cetera, having really strong balance sheets after the last few years of conservatism, low interest rates, et cetera. And those two things combined are creating a great environment for...
And the the banks themselves banks broadly decline lenders issuers et cetera, having really strong balance sheets. After the last few years.
Ill of conservatism low interest rates et cetera.
And those two things combined are.
We're creating a great <unk>.
Environment.
Strong growth in.
Speaker 3: And catch up really because there's a rimbursop catching up. But we expect growth beyond the catch up. So we should catch up to pre pandemic, as I said, probably this quarter, if not this quarter for sure next quarter. And then I see a lot of momentum to continue very good trends in those businesses over the next few years.
Catch up really because we're still remember so catching up.
And we expect growth beyond the catch up so we should catch up to pre pandemic as I've said, probably this quarter about this quarter for sure next quarter, and then I see a lot of Oh.
Momentum.
To continue very good trends in those businesses over the next few years.
Okay. That's very helpful. Thanks, guys.
Thank you John .
Speaker 1: Thank you, we'll now take our next question from Jim of Barrington. Your line is open, please go ahead.
Thank you, we'll now take our next question from Jim of Barrington.
Barrington. Your line is open. Please go ahead.
Thanks.
Speaker 2: I was first wondering whether the recent trend given the chip shortage to fewer new cars and more used cars has had any perceptible impact on the level of repair costs. We're told it has Jim.
Sure.
I was first wondering whether the recent trend given the chip shortage to fewer new cars and more used cars has had.
Any perceptible impact and the level of repair costs.
We're told it has Jim.
Whether it's the what we were told is that the.
Speaker 3: the increase in pricing of used cards.
The increase in pricing.
Of used cars.
Speaker 3: This is having a pretty significant impact on client costs.
This is having a pretty significant impact on claim costs.
Speaker 3: policies that have that replacement clause, which I guess most now do. And so there
For policies that have that replacement cost, which I guess most now do.
Hum.
So the replacement cost.
Speaker 3: of use cars as you know pretty dramatically and use a new course too for that matter, pretty dramatically because of the general circumstance.
Of used cars.
A pretty dramatically and used and new cars too for that matter up pretty dramatically because of the.
The general rule.
Our circumstances in the auto market.
Speaker 2: And just to sort of an observation, but if the if there is a trend to repricing to higher levels on the part of all the carriers, it doesn't seem to create much of an incentive to switch. So why advertise?
Okay, and just to sort of an observation, but if the if there is a trend to repricing to higher levels on the part of all the carriers it doesn't seem to create much of an incentive to switch so why advertise.
Speaker 2: And it does seem like it's the same sort of reactionary impact you get from any other consumer product, you know, like during COVID, there was a lot of, there were a lot of advertisers who cut back in general because
And it does seem like it's the same sort of reactionary impact you get from any other consumer product.
During Covid there was a lot of there were a lot of advertisers or cut back in general because.
Uh huh.
Speaker 2: You know, there wasn't much incentive to bite at the other, at the buying end.
There wasn't much incentive debate.
Sure thing and.
Speaker 2: You know, some wondering if you're looking at that and whether...
So I'm wondering if how are you.
Youre looking at that and weather.
Speaker 2: Whether you think they're just because something has happened in the past, like over this three to six month cycle.
Whether you think that just because something has happened in the past like over this three to six months cycle.
Speaker 2: How do you have the confidence that this would be repeated? Given this sort of increased variability month to month, you've sort of been pointing out.
How do you have the confidence that this would be repeated given given this sort of increased variability month to month, you've sort of been playing out.
Speaker 2: It seems like there's a bit of a quandary here and the
It seems like there's a bit of a quandary here and the <unk>.
Speaker 2: and that's not going in the favor of wanting to create an incentive to try to save money by changing your different career. I student frente?
It's not going in the favor of.
Wanting to create an incentive to try to save money by changing to a different carrier.
Well the carriers.
Remember, we make money as people shop.
Right.
Speaker 3: And so what the industry tells us they have seen forever and what we have seen in the past 15 plus years is that when there is a round of rate increases.
<unk>.
And so what the industry tells us they have seen forever.
And what we have seen in the past 15 plus years as it were.
There is a round of rate increases.
Speaker 3: consumers now are motivated to shop because all they know is they're they're they're right went up and they wonder if they can go shop
Consumers now are motivated to shop, because all they know is there are there rate went up.
And they wonder if they can go.
Shop somewhere else and save money.
Speaker 3: The fact that others are raising rates to, may or may not matter. In general terms, when consumers shop, if they actually shop efficiently.
The fact that others are raising rates to me.
There may not matter in.
In general terms when consumers shop, if they actually shop efficiently.
Speaker 3: Because of the complexity of insurance, on insurance pricing and the segmentation and pricing and dependency on individual carrier economics and portfolios, et cetera. In general terms, if a consumer actually does efficiently shop for car insurance, they tend to save between $400 and $700.
Because of the complexity of insurance auto insurance pricing and segmentation in pricing and dependency on individual carrier economics, and portfolios et cetera in general terms, if a consumer actually does efficiently shop for car insurance they tend to save.
<unk> 400, $700 a year.
Speaker 3: So despite the fact that rates increase, they won't because of the fact that rate increases are happening across the board, what they industry is seeing historically.
So.
The fact that rates increase as well because of the fact the rate increases are happening across the board.
What the industry has seen historically and what we have seen.
Speaker 3: Is that drive consumers to at least go out and see, hey, maybe a wonder if I could save money somewhere else?
Is that drives consumers to at least go out and say, Hey, maybe I wonder if I could save money somewhere else.
Speaker 3: And a large number of those consumers will actually save money because they're actually shopping their insurance. And so we expect that cycle to repeat itself. The industry expects us to repeat itself. The industry, the clients tell us it's always worked that way.
A large number of consumers will actually save money because they are actually shopping their insurance and so we expect that cycle to repeat itself the industry expects us secretary repeat itself the industry. The clients tell us it's always worked that way.
Speaker 3: You know, again, in our experience, we sat in 2016's last time we saw the most relevant comparator.
And again in our experience we saw in 2016 as last time, we saw the most relevant comparator.
Speaker 3: We saw it and we saw it in a pretty big way and everybody raised rights back then to because the effects are happening for everybody.
We saw it and we saw a pretty big way and everybody raise rates back then too.
The effects are happening for everybody.
Speaker 3: Distracted driving was increasing frequency. Bumper sensors were increasing repair costs. And then there was an ice storm in Texas, which happened to, but that was more of them, like the eye to thing, more of a temporal thing. But then those two things structurally changed underwriting everybody had to rewrite, re-rate, re-launch.
Distracted driving with increasing frequency.
Bumpers sensors, we're increasing repair costs and then there was an ice storm in Texas, what's happened too, but that was more of the like the other thing more of a temporal thing, but then those two things structurally changed underwriting everybody had to rewrite re rate relaunch.
Speaker 3: And there was a huge surge that, as I said, we more than doubled our own insurance business. And I think 18 months, Greg, is it not getting that number one? That's right.
And there was a huge surge that and as I said, we more than doubled our auto insurance business.
Think 18 months, Greg did I get that.
Let me get that number right yes.
That's right.
Speaker 3: So this is, you know, that's the way the industry has worked historically. But, you know, don't take my word for it. I think that's probably pretty easily researched. But that's the way it has happened. And we're told it has always happened in auto insurance.
So this is.
That's the way the industry has worked historically.
Take my word for it I think thats, probably pretty easily researched but that's the way. It has happened and we're told it has always happened in auto insurance.
Speaker 3: from folks that have been running those copies for a long time.
From folks that have been.
Running this company for a long time.
Speaker 2: All right, well that's a reasonable point. The $400 to $700 they might say might be not from what they're paying now, but what they might have to be paying relative to the new claims. And you can help them search through the complexity a little bit and come to some comparative conclusion.
Alright, well, that's a reasonable point.
The 400 to $700 they might save might be not from what they are paying now, but what they might have to be paying relative.
To the new claims and.
Help them searched through the complexity, a little bit and come to some comparative conclusions.
Speaker 2: So as long as you're shopping, that's what your game is. And then the other thing, you mentioned QRP getting up to about a million per month and revenue by June .
So as long as Acura shopping that's what your games and then the other thing you mentioned QR P getting up here about a $1 million per month in revenue by June .
Speaker 2: I know that should be fairly high margin of business, but how quick does it get to a pretty good bottom line results from the million per month you think you can generate?
I know that should be fairly high margin business, but how how.
How quick does it get to a pretty good bottom line results from the 1 million per month do you think you can generate.
Speaker 3: Yeah, we're into the 80% contribution margin on that pretty fast. I'm probably at the.
We're into the 80% contribution margin on that pretty fast.
Probably at the.
Speaker 3: Probably at the million dollar a month level. Greg.
Probably at the million dollars a month level Greg.
Speaker 3: If you think about the caution that the main dollar market
If you think about the costs in that.
Speaker 3: Yeah, we're probably at that point right out at about an 80% contribution.
Yeah, we're probably down at about we're probably at that point right at about an 80% contribution margin.
Speaker 2: Okay. Alright, that's helpful too. Thank you very much.
<unk>.
Okay.
Alright, that's helpful. Yeah. Thank you very much.
Thank you Jim.
Speaker 1: Thank you, and I'll take our next question from next of Lake Street. Your line is out then, please go ahead.
Thank you.
Take our next question from Max of Lake Street. Your line is open. Please go ahead.
Speaker 3: Hey guys, I just want to turn back towards the balance sheet at $115 million in cash. Can you go a little deeper into like future investments? I know we talked about buybacks, but inter-gantic opportunities may be outside of the insurance where, like, what are you guys seeing in that? Yeah.
Hey, guys I, just wanted to turn back towards the balance sheet at $115 million in cash can you go a little deeper into like future investments I know, we talked about buybacks, but inorganic opportunities maybe outside insurance vertical like where do you guys see that yes.
Speaker 3: Yeah, well, with the last couple of acquisitions we've made to your point, have been outside the insurance protocol too.
Yes, well with the last couple of acquisitions. We've made are to your point have been outside the insurance vertical too.
Speaker 3: to boost verticals that we thought we could really build big and win big. And M1 for personal loans, which is now our third largest business and growing like crazy. And modern.
To boost verticals that we thought we could really big.
Build big and win big yet.
And one for personal loans, which is now our third largest business and growing like crazy.
And modernize and home services, which was a one plus one equals three from our.
Speaker 3: which is a one plus one equals three from our old home services business and where we got now.
Home services business, and where we've got now to.
Speaker 3: scale to see good strong double digit, probably 20th percent for your growth for as far as literally as far as you can see.
Scale to see good strong double digit probably twentyish percent for your growth for as far as literally as far as you can see.
Speaker 3: So we are, that is exactly our first priority for cash and for capital. It's continuing to find opportunities like that. Or it's still a very fragmented industry. We are still a very effective aggregator and consolidator of those type of businesses. And that is still job one for us when it comes to capital allocation. And we'll continue to be for, I imagine a long one.
So we are that is exactly our first priority for cash and for capital.
Continuing to find opportunities like that or is it still a very fragmented industry. We are still early there.
Very effective aggregator and consolidator of those type of businesses and that is still.
Job one for us when it comes to capital allocation and we will continue to be for I imagine a long long time.
Speaker 3: Thank you. And then I want to shift to more of the model here. I kind of have to step down here and gross margin. I was wondering if that's what you kind of expect for a run rate throughout the fiscal year 2022. Around 8% I believe.
Okay. Thank you and then I want to shift to more of the model here and kind of a step down here gross margin I was wondering if that's where you kind of expect for a run rate throughout the rest of the fiscal year 2020 to around 8% I believe.
Yes.
Speaker 4: Greg, you want to take that? Yeah, I'll take that one. The drop in gross margin is primarily due to just the loss of operating leverage. So you have lower revenue levels.
Greg you want to take that.
Yeah, I'll take that one the drop in gross margin is primarily due to just the loss of operating leverage so you have lower revenue levels.
Speaker 4: dropping in on top of a fixed cost base that doesn't really change throughout the year. So gross margin will flux based on the amount of revenue drive every quarter. Remember the December quarter is not only worry dealing with challenges and volatility with an insurance, but we also worry in our seasonally lightest quarter is the December quarter. So it's really just the lower top line on top of a very similar semi-fix cost base.
Dropping into on top of our fixed cost base that doesn't really change throughout the year. So gross margin will flex based on the amount of revenue drive every quarter remember the December quarter.
Is not only worry.
Dealing with challenges and volatility within insurance, but we also.
We are in our seasonally lightest quarter as in the December quarter. So it's really.
Just a lower top line on top of a very similar semi fixed cost base.
Okay. Thank you guys that's it for me.
Speaker 1: Once again, ladies and gentlemen, if you have a question, please press star one.
Once again, ladies and gentlemen, if you have a question. Please press star one.
Speaker 1: Good luck to your next question from Chris Ophengiller. Your line is open. Please go ahead.
We'll now take our next question from Chris Your line is open. Please go ahead.
Okay.
Speaker 7: I just got in the coat, I got in the coat late.
Hi.
I just.
Got it I got on the call late.
<unk>.
Speaker 7: But can you share why there was an increase in G&A? I think there was about a $3 million increase.
But can you.
Sure and you know why why there was an increase in G&A I think there was about a $3 million increase there.
Speaker 4: Yeah, hey, Chris, this is Greg. That's just a one-time charge that we took to revalue or fair value, just the fair value of an urnaut associated with an acquisition we did last year. That acquisition has been performing better than we expected. So we had to adjust the fair value of the urnaut. So that's what that was, about 2.7 million.
Yeah, Hey, Chris This is Greg that's just a one time.
Charge that we took to revalue or.
Fair value adjust the fair value of an earn out associated with an acquisition we did last year.
The acquisition has been performing better than we expected. So we had to adjust the fair value of the earn out so that's what that was about $2 $7 million.
Speaker 4: which is a good thing to me. The position is performed better than originally planned. Right, right.
Which is a good thing.
Position, it's performing better than originally planned.
Right right Okay great.
And then.
Speaker 7: You guys mentioned, okay, so three to six months, you see more volatile times for insurance. You know why is that? Why is it two to six months? Why is the timing there that the way to...
You guys had mentioned okay. So three to six months you see more volatile times for insurance.
Why is that why is it three six months why is the timing there.
The way it is.
Speaker 3: Yeah, that's the time that, um, this is a, uh, we've got to be these periods before in the carriers and the industry's down to the periods a lot more than we have and then talking to the carriers about the, the typical time it takes to re-rate.
Yes, that's the time that.
This is <unk>.
Got to have experienced before in the carriers in the industry downturn, there's a lot more than we have in and talking to the carriers about the typical time it takes to.
Re rate.
Re launch.
Speaker 3: and get those rates in place and to recover in a period like this, where there's a mismatch between current rates and pricing and claim costs.
Get those rates in place and to recover in a period like this where there's a mismatch between current rates and pricing and claim costs.
Speaker 3: Historically, it's been about a six month period, you know, in terms of across the bottom, maybe a year from total start to finish. This period looks like it probably began sometime around last September , really. And one of the other analysts asked that question about some of the rates, because others had been seeing some of this in beginning to change rates. And so that puts us in the...
Historically, it's been about a six month period.
And in terms of across the bottom maybe a year from total start to finish.
This period looks like it probably began some time around last September .
<unk>.
And one of the other analysts asked a question about some of the rates.
<unk> had been seeing some of this and beginning to change rates.
And so that puts us in the.
Speaker 3: As we look at the timeframe, we look at where the carriers are on, what the carriers are telling us about their plans to re-rate and reopen and reopen states. That puts us into, we thank the late spring, early fall timeframe.
As we look at the timeframe, we look at where the carriers are and what the carriers are telling us about their plans to re rate and open and reopened states.
That puts us into we think the late spring early fall timeframe.
Speaker 3: So it's, you know, and again, it's historically, there's two main drivers at that six month bottom. One is by, you know, within six months, most large carriers have the ability to very effectively take the data they're getting, run their underwriting models, rerun their rate models, and launch those new rates and get them approved in the states where they need to.
And again.
Historically, there are two main drivers of that six month bottom one is.
By you know within six months, most large carriers are.
The ability to very effectively.
Take the data, they're getting re run their underwriting models rerun their rate models and launch those new rates and get them approved and this in the states where they need to.
Speaker 3: Obviously they wouldn't be a big, successful carrier if it took them a lot longer than that.
Obviously, there wouldn't be a big successful carrier if it took them a lot longer than that.
Speaker 3: The second reason is that most consumer insurance policies are a six month term.
And the reason is that most consumer.
Insurance policies or a six month term your auto insurance is probably a six months term that means that you're going to you know depending on where you are in that six months term yeah.
Speaker 3: Your auto insurance is probably a six month term. That means that you're going to, you know, depending on where you are in that six month term, you're going to get a rate increase as soon as it's over. Once you get that...
Youre going to get a rate increase as soon as it's over.
Once you get that rate increase you are going to go shopping or some high percentage of folks are going to go shopping.
Speaker 3: You're going to go shopping or some high percentage of folks are going to go shopping to find out if it was just their carrier and if it was, can they say money elsewhere? And so that's where kind of begins the shopping cycle.
Find out if it was just their carrier.
And if it was can they save money elsewhere, and so thats, where kind of begins the shopping cycle.
Speaker 3: that the industry talks about and that we have experienced also ourselves. So those are the two main determinants. The time it takes to re-rate, re-launt.
The industry talks about and that we have experienced also ourselves. So those are the two main determinants period. The time it takes to re rate relaunch and the second is the average consumer.
Speaker 3: And the second is the average consumer behavior based on the fact that they're going to get a rate increase. Okay.
Behavior based on the fact that theyre going to get a rate increase.
Okay, Alright, alright, great, Thanks, Doug and Greg.
Thank you Chris.
Speaker 1: Thank you. A replay of today's call will be available for a week starting at 5pm Pacific time today. The replay can be accessed by calling
Thank you a replay of today's call will be available starting at five P. M Pacific time today.
Replay can be accessed by calling.
Speaker 1: 1719-457-082-0, and entering passcode 435-1235. This concludes today's call. You may now disconnect.
1719457080, and entering pass code 4351 to clarify.
This concludes today's call.
May now disconnect.
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Speaker 1: Good day ladies and gentlemen and welcome to the Queen Street Second Quarter fiscal 2022 financial results call. Today's conference is being recorded. At this time I'd like to turn the conference over to Hayden Blair. Please tell her how you...
Good day, ladies and gentlemen, and welcome to the credit Suisse second quarter fiscal 2022 financial results call. Today's conference is being recorded at this time I would like to turn the conference over to Hayden Black. Please go ahead.
Okay.
Speaker 2: Thank you, Laura. And thank you to everyone joining us as we report Quinn Street's second quarter of fiscal year 2022 financial result.
Thank you Laura.
And thank you to everyone joining us as we report Quint Street second quarter fiscal year 2022 financial results.
Speaker 2: 2022 financial results. Joining me on the call today are Chief Executive Officer Doug Valenti and Chief Financial Officer Greg Wong. Before we begin I would like to remind you that the following discussion will contain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees a future performance. Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8K filing made today and our most recent 10Q filing.
Speaker 2: Joining me on the call today are Chief Executive Officer Doug Valenti and Chief Financial Officer Greg Wong.
Joining me on the call today are Chief Executive Officer, Doug.
And Chief Financial Officer, Greg Wong.
Speaker 2: Before we begin, I would like to remind you that the following discussion will contain forward-looking statement.
Before we begin I would like to remind you that the following discussion will contain forward looking statements.
Speaker 2: Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements, and are not guarantees a future performance.
Forward looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance.
Speaker 2: Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8K filing made today and our most recent 10Q filings.
Factors that may cause results to differ from our forward looking statements are discussed in our recent SEC filings, including our most recent 8-K filing made today and our most recent 10-Q filing.
Speaker 2: Forward-looking statements are based on assumptions as of today, and the company undertakes no obligation to update these statements.
Forward looking statements are based on assumptions as of today and the company undertakes no obligation to update these statements.
Speaker 2: 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 at investor.quintstreet.com.
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 at Investor Dot Quint Street Dot com.
Speaker 2: With that, I will turn the call over to Doug Valenti. Please go ahead. Thank you, Hayden. The December quarter
With that I will turn the call over to Doug Valenti. Please go ahead.
Thank you Hayden.
The December quarter, our fiscal Q2.
What's a more difficult quarter than expected and the insurance client vertical.
Speaker 3: as auto and home insurance carriers reduced spending aggressively through the end of the calendar year.
As auto and home insurance carriers reduced spending aggressively through the end of the calendar year.
To offset high 2021 claim costs.
Speaker 3: Insurance client spending bounced back strongly in January , up almost 80% over December . With the reset of the calendar year.
Insurance clients spending bounced back strongly in January .
Up almost 80% over December .
With the reset of the calendar year.
And as we had expected.
And had been communicated by carriers.
Speaker 3: Combined with the strength we were seeing in the rest of the client verticals in business, we were on a run.
Combined with the strength, we're seeing in the rest of the client verticals and business.
We were on a run rate in January .
Speaker 3: to more than meet or beat the full fiscal year forecast we provided last quarter.
C more than meet or beat the full fiscal year forecast, we provided last quarter.
But.
Speaker 3: Auto and home insurance carrier clients have once again significantly cut budgets and pricing in February .
Auto and home insurance carrier clients had once again.
<unk>, we cut budgets and pricing in February .
Speaker 3: We have just been digesting the adjustments this past weekend and through today. The immediate impact of the insurance client cuts is a reduction in our outlook.
We have just been digesting the adjustments this past weekend.
And through today.
The immediate impact.
All of the insurance client cuts is.
Is it a reduction in our outlook for this quarter.
And the rest of the fiscal year.
To reflect the lowered spending.
Speaker 3: That is reflected in the outlook numbers we put out today, with which we are obviously disappointed. That said,
That is reflected in the outlook numbers, we put out today.
With which we are obviously disappointed.
That said.
Due to the diversity of our business.
And the resiliency of our team and model.
We still expect to grow revenue.
Speaker 3: and generate between 40 and 45 million dollars of adjusted EVA DAW this fiscal year. We will also remain nicely cash flow positive with a strong balance sheet.
And generate between 40% and $45 million of adjusted EBITDA This fiscal year.
We will also remain nicely cash flow positive.
With a strong balance sheet.
Even as we weather this continuing.
But still likely relatively short term.
Storm.
In insurance.
Speaker 3: Our medium to long-term outlook remains exceptionally positive.
Our medium.
So the long term outlook remains exceptionally positive.
Sure.
What is happening in auto and home insurance.
Speaker 3: wire carriers, cutting spending, and pricing.
Wire carriers cutting spending and pricing.
While we are not privy to all of our clients inner workings.
Speaker 3: nor would it be appropriate for us to share any non-public details if we had them.
Nor would it be appropriate for us to share any nonpublic details if we had them.
Speaker 3: Some trends seem clear and publicly known. The claim cost environment
Some trends seem clear and.
<unk> publicly known.
The claim cost environment is difficult.
And dynamic.
Speaker 3: Rates that worked for the past couple of years are no longer working, and factors are changing rapidly. There is increased frequency of planes.
Rates that worked for the past couple of years are no longer working.
And factors are changing rapidly.
There is increased frequency of claims.
As more folks go back to work.
And become more active generally.
Speaker 3: costs to repair or hire due to supply chain issues.
Cost to repair are higher due to supply chain issues.
Speaker 3: demand outstripping supply, inflation generally, and inflation specifically in the new and used automobile replacement market.
Demand outstripping supply.
Inflation generally.
And inflation specifically.
The new and used automobile replacement market.
Speaker 3: Carriers have begun to raise rates to reflect these increased costs.
Carriers have begun to raise rates to reflect these increased costs.
Speaker 3: but we appear to be closer to the beginning than the end of that cycle.
But we appear to be closer to the beginning.
And the end of that cycle.
And in some cases.
Speaker 3: rate increases have not been enough to offset rising costs. Carriers are pausing writing business in entire states and therefore cutting marketing spending.
Rate increases have not been enough to offset rising costs.
Carriers are pausing riding business in entire states.
And therefore cutting marketing spending.
Well they analyze these factors.
And work to file new.
Higher rates can.
To reflect the changing economics.
In addition.
Speaker 3: Consumers are balking at switching or buying new policies as they encounter the initial way
Consumers are bulking at switching or buying new policies as they encounter the initial wave of higher rates.
Speaker 3: making marketing spending less effective and efficient.
Making marketing spending less effective and efficient.
Net.
Speaker 3: We are in a period of a lot of uncertainty.
We are in a period of a lot of uncertainty.
Change.
Speaker 3: and importantly, transition in the auto and home insurance market. And it is being reflected.
And importantly.
Transition and the auto and home insurance market.
And it is being reflected and pauses.
Reductions.
Speaker 3: and volatility generally in marketing spin.
And volatility generally in marketing spend.
Speaker 3: How long is this transition period in auto and home insurance likely to last?
How long is this transition period in auto and home insurance likely to last.
Speaker 3: We have served the auto insurance market for almost 15 years.
We have served the auto insurance market for almost 15 years.
Speaker 3: And well over 20 years, if you count the predecessor company, we acquired to enter the client vertical. So we're seeing some of these adjustment cycles.
And well over 20 years, if you count the predecessor company, we acquired to enter the client vertical.
So we are seeing some of these adjustments cycles.
The last one.
Was in or around 2016.
Speaker 3: when higher incident frequency due to distracted driving.
When higher incident frequency due to distracted driving.
From smartphones usage.
Speaker 3: combined with higher costs to repair bumper sensor technologies.
Combined with higher costs to repair a bumper sensor technologies.
Speaker 3: to significantly change underwriting economics.
To significantly change underwriting economics.
Speaker 3: That cycle affected us for about six months.
That cycle.
Affected us for about six months.
Dan.
Like now.
Speaker 3: No one is closer to or in closer communication with auto insurance carrier marketing clients than we are.
No one is closer to four and closer communication with auto insurance carrier marketing clients and we are.
Speaker 3: based on our actual past experience with similar cycles.
Based on our actual past experience with similar cycles.
And based on discussions with carriers.
Speaker 3: These cycles typically most negatively affect marketing budgets for somewhere around six months. And based on that, we hope to be back to more normalized market and positive.
These cycles typically most negatively affect marketing budgets for somewhere around six months.
And based on that.
We hope to be back.
Two more normalized market.
And positive to a more normalized market.
And positive momentum.
In the auto insurance client vertical.
Somewhere between late spring and.
In early fall.
Why is six months.
Two reasons.
Speaker 3: First, that is typically long enough for most carriers to analyze, adjust, and find out what's going on.
First that is typically long enough for most carriers to analyze.
Just and file new rate models.
Speaker 3: Second, that is the length of a typical consumer policy period.
And second.
That is the length of a typical consumer policy period.
Speaker 3: So new rates will typically kick in no more than six months after the cycle starts.
So new rates will typically kick in.
No more than six months after the cycle starts.
What happens next.
The further we get into transition period.
The more consumers reached their renewal period.
Speaker 3: and the more they get hit with increased rates from their current carrier.
And the more they get hit with increased rates from their current carrier.
Speaker 3: That usually drives a gradual, then accelerating increase in the number of consumers that shop with other carriers.
That usually drives a gradual.
Then accelerating increase in the number of consumers that shop with other carriers and.
Speaker 3: and begins a positive super cycle in our business. We clearly saw that and experienced it.
And begins a positive super cycle in our business, we clearly saw that an experienced it.
After the 2016 transition period.
Speaker 3: Why is our medium to long-term outlook still exceptionally positive?
Why is our momentum so long term why is our medium to long term outlook still exceptionally positive.
Well I just noted one key reason.
Speaker 3: This difficult transition period is likely to lead to increased consumer shopping activity and auto insurance in coming months and quarters.
This difficult transition period.
Is likely to lead to increased consumer shopping activity in auto insurance in coming months and quarters.
Speaker 3: And that should be a strong tailwind for our insurance business.
And that should be a strong tailwind for our insurance business.
Like we have seen before.
Speaker 3: and especially when combined that the gains we have made and expect to continue to make in market share quality results.
And especially when combined with the gains we have made and expect to continue to make and market share.
Quality results for clients.
Technology.
And media.
Speaker 3: A second reason, our median to long-term outlook is still exceptionally positive.
A second reason our medium to long term outlook is still exceptionally positive.
Speaker 3: is a strong momentum that continues in our non-insurance client verticals. Creditors in client verticals continue to recover nicely with client budgets and
The strong momentum that continues in our non insurance client verticals.
Credit driven client verticals continued to recover nicely.
With client budgets and consumer activity.
Growing at high rates.
Progress in home services, perhaps our biggest long term market opportunity.
Speaker 3: perhaps our biggest long-term market opportunity continues to be strong and...
<unk> to be strong and steady.
Overall.
Speaker 3: non-insurance client-vertible revenue through 36% year-over-year in the December quarter. Those strong twin trends.
Non insurance client vertical revenue grew 36% year over year in the December quarter.
Those strong trends.
Combined with the eventual resurgence and insurance.
Speaker 3: Bode well for coming quarters and years.
Bode well for coming quarters and years.
Speaker 3: The third reason our medium to long term outlook remains exceptionally positive is the progress we are making with big new growth initiatives. Especially right now.
The third reason our medium to long term outlook remains exceptionally positive.
Is the progress, we're making with big new growth initiatives.
Especially right now with QR P.
<unk> revenue is accelerating.
Speaker 3: despite the current challenges and auto insurance, which do affect the activity of our agency clients.
Despite the current challenges in auto insurance, which do affect the activity of our agency clients.
Speaker 3: Multiple clients have moved into the ramp phase of their implementations of the class.
Multiple clients have moved into the ramp phase of their implementation of the platform.
Speaker 3: The pipeline also continues to grow and progress well, broadening our footprint for future growth.
The pipeline also continues to grow and progressed well broadening our footprint for future growth.
And scale.
Speaker 3: We now expect QRP revenue to exceed $1 million per month by June based on actual projections from
We now expect <unk> revenue to exceed $1 million per month.
June .
Based on actual projections from ramping agency clients.
Speaker 3: Looking beyond this auto insurance transition period, we have never had a better combination of market opportunities and
Looking looking beyond this auto insurance transition period.
We have never had a better combination.
Of market opportunities.
Competitive advantages.
And exciting growth initiatives.
And the history of <unk>.
Speaker 3: I hate what is happening in auto insurance, right?
I hate what is happening in auto insurance right now.
Because of its near term impact on our results.
But I could not be more pleased.
With our position overall.
And our outlook for the future.
And I could not be more proud.
Of our team.
Speaker 3: which is easily the best in company history and how they have navigated and ex
Which is easily the best in company history, and how they have navigated and execute to continue to deliver results.
Speaker 3: to continue to deliver results and progress for long-term value creation in such a complicated environment. With that, I will turn it over to
And progress for long term value create create.
Creation.
And such a complicated environment.
With that I will turn the call over to Greg.
Thank you Doug.
Hello, and thanks to everyone for joining us today.
Speaker 4: Revenue in the December quarter declined 7% year over year to $125.3 million.
Revenue in the December quarter declined 7% year over year to $125 $3 million.
Speaker 4: Gap net loss was $5.6 million or 10 cents per share.
GAAP net loss was $5 6 million or <unk> 10 per share.
Speaker 4: Adjustment net income was $3.2 million or $6 cents per share. Adjusted EBITDA was $5.6 million.
Adjusted net income was $3 2 million or <unk> <unk> per share.
Adjusted EBITDA was $5 6 million.
Looking at revenue by client vertical.
Speaker 4: Our financial services client vertical represented 72% of Q2 revenue and declined 13% year-to-year $1090.2 million.
Our financial services client vertical rep.
<unk> represented 72% of Q2 revenue and declined 13% year over year to $90 $2 million.
Speaker 4: Doug well covered the details of what is going on and the insurance client vertical in his remarks.
Doug will cover the details of what is going on in the insurance claim vertical in his remarks.
Speaker 4: All other financial services businesses grew at double digit rates or more in the quarter.
All other financial services businesses grew at double digit rates or more in the quarter.
Within our credit driven client verticals.
Speaker 4: progress and revenue growth continue well ahead of our initial outlook for the year. And we continue to expect revenue in those businesses to return to pre-pandemic levels by June .
Progress and revenue growth continue well ahead of our initial outlook for the year.
Can we continue to expect revenue in those businesses to return to pre pandemic levels by June .
Speaker 4: Our home services point vertical represented 27% of Q2 revenue and grew 16% year of year to 33.8 million dollars.
Our home services going vertical represented 27% of Q2 revenue.
<unk> grew 16% year over year to $33 8 million.
Speaker 4: From services, remains in the very early earnings, and is perhaps our largest addressable market. Our strategy is simple.
Home services remains in the very early innings and is perhaps our largest addressable market.
Our strategy is simple.
One <unk>.
Speaker 4: expand our core trades where we have low established client and media relationships. 2.
Expand our core trades, where we have well established client and media relationships.
To scale our growth trades.
Speaker 4: which are earlier in their development. And three, add new trades into the portfolio of offering.
Which are earlier in their development.
And three add new trades into the portfolio of offerings.
Speaker 4: We expect this multi-pronged growth strategy to try double digit organic growth for as far as the I can see.
We expect this multi pronged growth strategy to drive double digit organic growth for as far as the eye can see.
Speaker 4: Other revenue, which kids consist primarily of performance marketing, agency, and technology services, was the remaining $1.4 million.
Other revenue, which consists primarily of performance marketing agency and technology services.
Was the remaining $1 4 million in Q2 revenue.
Speaker 4: Turning to the balance sheet, we grew our cash balance by $6 million and closed the quarter with $115 million of cash and equivalence.
Turning to the balance sheet, we grew our cash balance by $6 million and closed the quarter with $115 million of cash and equivalents.
In summary.
While insurance spending remains volatile.
Speaker 4: Momentum in non-insurance verticals remain strong.
Momentum in non insurance verticals remains strong.
Speaker 4: Our confidence in our team, our competitive positioning.
Our confidence in our team.
Our competitive positioning.
Speaker 4: and our growth initiatives, including QRP, remains at the moment I. With that, I'll turn the call.
And our growth initiatives, including <unk> remains at an all time high.
With that I'll turn the call over to the operator for Q&A.
Speaker 1: Thank you. Ladies and gentlemen, if you would like to ask a question, please signify pressing star one on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off, lower your signal to reach a requirement. Again, press star one to ask your question.
Thank you, ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off slow your signal to wait till the equipment again press star one.
Ask the question.
Speaker 1: We'll now take our first question from Jason Crayer of Cray Helen. Your line is open, please go ahead.
We'll now take our first question from Jason <unk> of Craig Hallum. Your line is open. Please go ahead.
Hey, guys good afternoon.
Speaker 5: Doug, I just wanted to step back and understand the cadence a little bit better. So if we can't go back to when we last talked a quarter ago, it sounds like maybe there was a little bit of choppiness.
Doug I, just wanted to step back and understand the cadence a little bit better. So if we kind of go back to when we last talked a quarter ago. It sounds like maybe there was a little bit of Choppiness in the December quarter I'm not sure if that was isolated to December or not.
Speaker 5: in the December quarter. I'm not sure if that was isolated to December or not. You saw the January rebound that we talked about last quarter that you had anticipated, but then it was kind of the move in recent weeks. And so, I want to make sure that cadence is correct. And then two, you know, curious.
You saw the January rebound that we talked about last quarter that you had anticipated, but then it was kind of the move in recent weeks and so.
One I want to make sure that cadence is correct and then two L. <unk>.
Speaker 5: If there was a little bit of volatility in December , I mean, what are you hearing from the carriers that leads you down the path of this three to six months kind of hesitation as opposed to just a shorter term period of volatility?
Curious.
If there was a little bit of volatility in December .
What are you hearing from the carriers that lead you down the path of this three to six month kind of hesitation as opposed to just a shorter term period of volatility.
Speaker 3: Yeah, thank you Jason. Um, I think you got the cadence generally right. You know, we, it's, we started to see some effects on budgets late last year, particularly in September . They began after Ida.
Yes, Thank you Jason.
And I think he called the cadence generally right we started to see some of that.
Exxon budgets late last year, particularly in September they began after either.
Speaker 3: kind of was a straw that broke the camel's back on loss ratios for the calendar year. I think we talked about that for 2021. We saw the carriers indicated to us that they've becoming that strong in January as they reset loss ratios for the new count.
I kind of was it.
That broke the camel's back on loss ratios for the calendar year, I think we talked about that for 2021.
We saw the carriers, indicating to us that they would be coming back strong in January .
As they reset loss ratios for the new calendar year.
Speaker 3: And we're full speed ahead, full steam ahead. We got actual budgets. And we began setting up even the systems and pricing and budgets in our systems.
And there were you know.
Full speed ahead full steam ahead, we've got actual budgets, we began setting up even the systems and pricing and budgets and our systems to the carriers going into January .
Speaker 3: for the carers going into January . January came and sure enough we hit the ground running hard, carers suspending hard, prices went up, binds went up, you know we were up almost 80%.
January came and sure enough we hit the ground running hard carrier spending hard prices went up volumes went up we were up almost 80%.
Speaker 3: In January over December , very consistent with in fact a little bit ahead of our forecast for the
In January over December very consistent with in fact, a little bit ahead of our forecast for the second half of the fiscal year.
Speaker 3: And then late last week over the weekend and yesterday we got new pricing from carriers for February , which was right back to January ish. I'm sorry, to December ish again. And the feedback we got was and a bunch of states got closed down by a bunch of carriers. In other words, they quit spending in certain states because they lost their issues or excess.
And then late last week over the weekend and yesterday, we got new pricing from carriers for February which was right back to January ish I'm, sorry December ish again, the feedback we got was and a bunch of states got closed down by a bunch of carriers that were they quit spending in certain.
States because they loss ratios are excessive.
Speaker 3: So what the carriers are dealing with is a lost ratio environment that is changing rapidly and doesn't fit the current rates. And so they, you know, like everybody else with their losing money for customer, they don't want to make it up and volume.
So what the carriers are dealing with us.
Loss ratio environment.
That is changing rapidly.
It doesn't fit their current rates and so they.
Like everybody else with their losing money per customer they don't want to make it up in volume.
Speaker 3: So they're going state by state now, reassessing their rating model.
So there its go on state by state now reassessing their rating models.
Speaker 3: Some have already increased rates in pricing in various states. Some are in the process of doing so, some have paused states while they're in the process of doing so.
Some have already increased rates and pricing in various states. Some are in the process of doing so some have paused states. While they are in the process of doing so.
Speaker 3: So in general terms, what the feedback we're not getting is, say, we, the carriers, expected that we would be running hard right now. But as we started to try to run hard, we found out that the loss ratio issues I'm associated with this period.
So in general terms, what the feedback we're getting is say we the carriers, we expected that we would be running hard right now, but as we started to try to run hard we found out that the loss ratio issues.
Associated with this period, which.
Speaker 3: of transition out of COVID and inflation and all the other things.
Of transition out of Covid and inflation and all the other things.
Speaker 3: are worse than we had anticipated and affecting our economics portion, we had anticipated and so we're gonna step back, reduce pause spin, figure out how to re-underwrite, re-rate and relaunch.
Are worse than we had anticipated and affecting our economics worse than we had anticipated and so.
We're going to step back reduce pause spend figure out how to re underwrite re rate and relaunch.
Speaker 3: And so that's that's the that period we're going to. So
So that's that's the period, we're going to so.
Speaker 3: I mean, we end, they January came out just like we thought. And then the January's also started coming in and they weren't working for the carriers. This is, I think, all public at this point. They certainly fire publicly. Some very big carriers have announced rate increases and they've got to increase again. So.
I mean, we and they January came out just like we thought.
Then the January results just started coming in in.
And they weren't working for the carriers.
I think all public at this point.
Perfect final publicly some very big carriers have announced rate increases and announced they got they got to increase again.
So what now this.
Speaker 3: What usually happens is they take some period of time to figure out the new variables, figure out the new economics, re-rate, refile, reopen states.
What usually happens is they take some period of time to figure out the new variables to figure out the new economics of re rate re file.
Reopen states.
Speaker 3: And then to move forward and as I indicated in my discussion and in our discussion with carriers, that has typically historically been about a six month bottom.
And then they move forward and as I indicated in my discussion and in our discussions with carriers.
Typically historically been about a six month bottom.
Speaker 3: And they expect that this time it seems like it probably will be about a six month bottom.
And they expect that this time it seems like it probably will be about a six month bottom.
Speaker 3: And that puts us in, as we calculate it, and we look at the entire cycle, that we think that we return to pretty good, a pretty good insurance market and spending again, and even quite good if you look at historic.
And that puts us in as we calculate it and as we looked at the entire cycle.
That we think that we returned to pretty good.
Pretty good insurance market and spending again and even quite good if you look at historic.
Speaker 3: When the re-rating happens in the late spring to early fall, time.
Trends when rewriting happens in the late spring to early fall timeframe. That's exactly what we saw in 2016, both in terms of timing and reaction.
Speaker 3: That's exactly what we saw in 2016, both in terms of timing and reaction.
Speaker 3: And, you know, if you look at the numbers for 2018, the, you know, the surge was pretty aggressive after the down within about a year and a half, our insurance business, all our insurance business, I think had more than doubled.
And.
If you look at the numbers for 2018.
The surge was pretty aggressive after the down within the within about a year and a half our insurance business auto insurance business I think has more than doubled.
So.
Speaker 3: We certainly don't like what's happening. It's something that does happen in insurance, if there are significant changes in the environment that incremental underwriting changes and price changes don't account for. It's understandable that this period is more complicated given how COVID has been and given the effects of COVID on supply chains and inflation and auto pricing.
We certainly don't like what's happening, it's something that does happen in insurance. If there are significant changes in the environment that incremental.
Underwriting changes in price changes don't account for it's understandable that this period is more complicated given how COVID-19 has been and given the effects of COVID-19 on supply chains and inflation in auto and auto auto pricing.
Speaker 3: But it doesn't make it any of us painful for us to go through. The only good news is we do very good about the other side. And obviously we're well equipped to whether this and still stay, normally, still grow revenue for the year and stay nicely positive in terms of cash, so on.
But it doesn't make it any less painful for us to go through there and the good news is we feel very good about the other side and obviously, we are well equipped to weather. This and still stay are not only still grow revenue for the year and stay nicely positive in terms of cash flow in pockets.
Speaker 5: I appreciate all that context and I want to ask the question just on concentration. Now it certainly sounds like you're hearing that across the board from pretty much all carriers. I was under the assumption that as we got to kind of late summer early fall a year ago.
I appreciate all that context and I wanted to ask the question just on concentration now it certainly sounds like you are hearing that across the board from pretty much all carriers, but I was under the assumption that as we got to kind of late summer early fall a year ago, some carriers had already.
Speaker 5: Some carriers had already started to make adjustments to rate cards based on some of these trends already emerging. So maybe you can just humor me and kind of talk about concentration if you're seeing big changes across carriers, or as everybody really taking these same drastic cuts.
<unk> started to make adjustments to rate cards based on some of the trends already emerging. So maybe you can just humor me and kind of talk about concentration if youre seeing big changes across carriers or is everybody really taking the same direct to cut.
Speaker 3: I would say, I can't say everybody. And I'd say that, but I'd say it is not isolated to any single or any small group of carriers. This isn't across the board issue.
I would say I can't say everybody.
And I would say that but I'd say it is not isolated to any single for any small group of carriers.
Is it across the board issue.
Speaker 3: and different carriers are in different phases of their...
And different carriers are in different phases of their.
Speaker 3: program to reunderwrite, re-rate, file, reopen. So it's a pretty complicated
Program too.
Re underwrite re rate file.
File reopen.
So it's a pretty complicated picture, but it's.
Speaker 3: If there's a spectrum from one carrier to everybody, it's further toward the everybody side of the equation and the one carrier side of the equation.
If theres a spectrum from one carrier to everybody, it's but further towards the everybody side of the equation is the one carrier side of the equation.
Speaker 3: Okay, just the last one. We're seeing it with all of our biggest crimes.
Okay, and then just the last one obviously, we're seeing it with all of our biggest clients.
Okay, which make up the vast majority of our revenue.
Speaker 5: Can you talk maybe about what you think you guys can do over this period of the next three to six months just a better position, Quinn Street, for more market share games on the other side of us?
Can you talk maybe about what you think you guys can do over this period of the next three to six month, just to better position Quint Street for more market share gains on the other side of this.
Speaker 3: Yeah, I think everything we've been doing, I mean, we are, we have aggressively worked to get closer to all of the big carriers so that we can't, and all of our big media partners, to do a much better job of understanding the segmentation and the value of every segment. And that is now ever more valuable because it's changing.
Yeah, I think everything we've been doing it I mean, what we are we have aggressively worked to get closer to all of the big carriers. So the weekend and all of our Big media partners to do a much better job of understanding the segmentation and the value of every segment and that is now ever more valuable.
This is changing.
Speaker 3: And so the more precise we can allow them to be about their segmentation and targeting, and the more precise we can allow them to be about their value and pricing for those segments, which is exactly what Q&P does.
And so the more precise we can allow them to be.
About their segmentation and targeting and the more precise we can allow them to be about their value and pricing for those segments, which is exactly what <unk> does the better off we are so we are doubling down on deepening our relationships with all of the carriers to help them understand how to translate.
Speaker 3: the better off we are. So we are doubling down on deepening our relationships with all of the carriers to help them understand how to translate in this period, not just underwriting rates, but segment value, which has changed.
In this period, not just underwriting rates, but segment value which is changing.
Speaker 3: as you can well imagine. So I would say that we're going to continue to be very, very close to all the point. And we're closer now to more big barriers than we've ever.
As you can well imagine and so I.
I would say that we're going to continue to be very very close to all the clot and we're closer now to a more big carriers than we've ever been.
Speaker 3: There is a time when we weren't nearly as close to the agent to the model.
There was a time when we werent nearly as close to the agent driven models.
Speaker 3: as we are now. And now there's some of our closest best relationships with whom we get, we've had enormous growth and have great relationships built on performance. So I think that's what we're good at. I think we're the best at that. And I think we're gonna, we're gonna double down on that. And I think it boasts well for this period. The other thing is we're gonna keep investing QRP and getting that product down because that'll have the agencies. So Do
As we are now in there now there are some of our closest best relationships with whom we get we've had enormous growth and have great relationships built on performance. So I think that's what we're good at I think we're the best at that and I think we're going to we're going to double down on that and I think it bodes well for this peer.
<unk>.
The other thing is we're going to keep investing <unk> in getting that product out because that'll help the agencies.
Speaker 3: And they, you know, with all these states shut down for different carriers, each of you's need and want all the assistance they can get to be more productive. So we're going to keep doing that. And of course, we'll keep working on our other vertebrae.
<unk>.
With all these state shutdown from different carriers agencies.
Need and want all the assistance they can get to be more productive. So we're going to keep keep doing that and of course, we will keep working on our other verticals.
Speaker 3: And we have, you know, double and triple digit growth on our credit given verticals, which are big businesses. And I really saw the double digit, strong double digit growth as far as you can see in home services. So we're working on that. So I, you know, we'll keep working on all the vectors and hopefully position us best for the other side. And in the meantime, you know, grow what we can control.?
We have doubled.
Double and triple digit growth on a credit driven verticals, which are big businesses.
Really solid double digit strong double digit growth for as far as the occupancy in home services.
We're working on that so well.
We will keep working all the vectors.
And hopefully position us best for the other side.
In the meantime grow grow what we can control.
I appreciate all the transparency from you. Thank you.
Thank you Jason.
Speaker 1: Thank you, we'll now take our next question from John of Stevens. Your line is open, please go ahead.
Thank you we'll now take our next question from John of Stephens. Your line is open. Please go ahead.
Hey, guys good afternoon.
Speaker 6: Hey John . Hey, from a, from a big picture standpoint, I mean, you guys are clearly pulled up around the long term, you know, outlook on the business. It sounds like, you know, that the insurance side of things is going to be more of a transitory event. I think your guidance obviously implies that.
Hey, John Hey from a from a big picture standpoint, I mean, you guys are clearly bought up around our long term outlook on the business it sounds like the <unk>.
Insurance side of things is going to be more of a transitory event and I think your guidance, obviously implies that kind of recovery you know eggs.
During the fiscal year.
Speaker 6: I think you're going to be faced obviously with the dynamic of whether investors believe in it or not. You know, you guys have a really strong balance.
I think youre going to be facing obviously with the dynamic of what our investors believe it or not you guys have a really strong balance sheet I think of $115 million of cash I'm. Just curious about what you guys are thinking about as far as buybacks and how that might change if theres any kind of noise or dislocation in the stock as you kind of navigate through the turbulence on the insurance side.
Speaker 6: Cash, I'm just curious about what you guys are thinking about as far as buybacks and how that might
Speaker 3: Yeah, I think it's a good question. And I would say that it's something that is...
Yeah.
I think it's a good question and I would say that.
It's something that is.
Speaker 3: has been discussed at the board level. And we'll probably continue discussing, I think, to your point, kind of, watching see what happens to this period and...
Has been discussed at the board level, and we'll probably continue to discuss it and I think to your point, we kind of watch and see what happens through this period.
Speaker 3: combination of how the how investors react with how the business continues to perform.
Combination of how the how investors react with.
While the business continues to perform and if we see a.
Speaker 3: pretty significant dislocation between those two. I'd say that not unlike we have in the past, we would be.
Pretty significant dislocation between those two I'd say that not unlike we have in the past we would be.
Speaker 3: very open to considering
Very open to considering.
Speaker 3: doing things with that cash in terms of capital allocation and buybacks and the like. And as we just had this conversation at the board level a couple of board meetings ago.
Doing things with that cash in terms of capital allocation and buybacks and the like and I say, we just had this conversation at the board level couple of board meetings ago.
Speaker 3: So it's not something that we never think about. As you know, we've been at a few times in our history and one point did a $50 million buyback. So
So it's not something that we never think about as you know we've done it a few times in our history and at one point did a $50 million buyback so.
Speaker 3: I think we're open to it and we'll to your point. We're probably more open to it tomorrow than we were yesterday.
I think we're open to it and we will to your point, we're probably more open to it tomorrow than we were yesterday.
Speaker 6: on the non-intrances, rev growth, I mean that was very...
Yes makes sense.
Entrants Rev growth I mean that was very strong I think 36%, which you guys said.
Speaker 6: If you back up the home service
If you back out the home services business I think that I mean, obviously implies a fairly sharp growth out of the credit driven products. So I don't know if you could maybe talk or provide a little bit of color around the sources of that strength and maybe more specifically if you can kind of outline the personal loans or credit cards run rates and how that's looking kind of pre pandemic levels.
Speaker 6: I think that I mean obviously implies fairly sharp growth at a credit driven product. So I don't know if you can maybe talk or provide a little bit of color.
Speaker 6: Any more specifically if you can kind of outline the personal loans of credit card run rates.
Speaker 3: Yeah, we expected that those two businesses combined will be well beyond pretty close to pre-pandemic levels of this quarter and well beyond them next quarter.
Yes.
We expect that those two businesses combined will be.
Beyond pretty close to pre pandemic levels this quarter.
And well beyond the next quarter, so the June quarter.
Speaker 3: And both businesses are doing very well. I mean, I think one's growing in the 70th-ish percent year-to-year range at decent scale, pretty good scale. And then the other's growing at triple digits at good scale. So those two businesses combined are meaningful to us. Tens and tens of millions of dollars. I don't think combined grade, they're $100 million yet, but they're getting close. Is that right?
And both businesses are doing very well I mean, I think one is growing and the 70 ish percent year over year range, a decent scale pretty good scale and then the others growing at triple digits at <unk>.
Scale so.
Those two businesses combined or are meaningful to us tens and tens of millions of dollars out I think combined Greg there were $100 million, yet, but they're getting close is that right.
Speaker 3: Yeah, yeah, I agree with that. Yes. And we may and Greg, will we exit the year with those two? They're running at $100 million. Is that what I would explain?
Yes, yes, I agree with that yes.
And we May and Greg when we exit the year with those two.
I get a $100 million does that.
I would expand you'll run rate, yes, yes.
Speaker 3: Yes, I've expected that. So that gives you a sense for their scale, John . And these are pretty big businesses going at really high rates. And we're seeing kind of all the vectors in those businesses working. We are, we're gaining share and media. We're seeing more traffic from...
Yes, I would expect so that gives you a sense for their scale job.
And these are pretty big business is growing at really high rates.
And we're seeing kind of all the vectors in those businesses working we are.
We're gaining share in media.
We're seeing more traffic from media.
Speaker 3: we are getting, we have more clients than we've ever had.
We are getting we have more clients than we've ever had.
Speaker 3: We have closer relationship for those clients and getting more budget from those clients and better pricing for those clients that we ever had. So those businesses are firing on all the right cylinders and it's, you know, dominantly associated with coming out of COVID.
We have closer relationships with those clients and getting more budget from those clients in better pricing from those clients that we ever had so.
Those businesses are firing on all the right cylinders and it's.
Dominantly associated with coming out of Covid.
Speaker 3: And the banks themselves, banks broadly decline, lenders, issuers, et cetera, having really strong balance sheets after the last few years of conservatism, low interest rates, et cetera. And those two things combined are creating a great environment for strong growth.
And the bank.
Banks themselves banks broadly defined lenders issuers et cetera, having really strong balance sheets. After the last few years.
Conservatism low interest rates et cetera.
And those two things combined are.
We're creating a great environment.
Strong growth in.
Speaker 3: and catch up really because we're so, remember we're so catching up, but we expect growth beyond the catch up. So we should catch up to pre-pandemic, as I said, probably this quarter, if not this quarter for sure next quarter. And then I see a lot of momentum to continue very good trends in those businesses over the next few years. Thank you very much.
Catch up really because we're still reimbursable catching up.
And we expect growth beyond the catch up so we should catch up to pre pandemic, because I've said, probably this quarter about this quarter for sure next quarter, and then I see a lot of.
Our momentum to continue very good trends in those businesses over the next few years.
Okay. That's very helpful. Thanks, guys.
Thank you John .
Speaker 1: Thank you, we'll now take our next question from Jim of Barrington. Your line is open, please go ahead.
Thank you we'll now take our next question from Jim of Barrington. Your line is open. Please go ahead.
Thanks.
Speaker 2: I was first wondering whether the recent trend given the chip shortage to fewer new cars and more used cars has had any perceptible impact on the level of repair costs. We're told it has, Jim.
Yes.
I was first wondering whether the recent trend given the chip shortage to fewer new cars and more used cars has had.
Any perceptible impact on the level of repair costs.
We're told it has Jim.
Whether it's the <unk>.
We were told us that.
Speaker 3: the increase in pricing of used cards.
The increase in pricing.
Of used cars.
Speaker 3: This is having a pretty significant impact on client costs.
Having a pretty significant impact on claim costs.
Speaker 3: policies that have that replacement clause, which I guess most now do. And so there
For policies that have that replacement cost, which I guess most now do.
And so the replacement cost.
Speaker 3: of use cars as you know pretty dramatically and use a new course too for that matter, but pretty dramatically because of the general circumstance.
Of used cars.
Pretty dramatically and used and new cars too for that matter up pretty dramatically because of the.
The general rule.
Circumstances in the auto market.
Speaker 9: And just to sort of an observation, but if the, if there is a trend to repricing to higher levels on a part of all the carriers, it doesn't seem to create much of an incentive to switch. So why advertise?
Okay, and just to sort of an observation, but if the if there is a trend to repricing to higher levels on the part of all the carriers it doesn't seem to create much of an incentive to switch so why advertise.
Speaker 9: And it does seem like it's the same sort of reactionary impact you get from any other consumer product. You know, like during COVID, there was a lot of, there were a lot of advertisers who cut back in general because.
And it does seem like it's the same sort of reactionary impact you get from any other consumer product to you now.
During Covid there was a louder there were a lot of advertisers or cut back in general because.
The.
Speaker 9: You know, there wasn't much incentive to bite at the other, at the buying end.
There wasn't much incentive to bite.
Sure thing and.
Speaker 9: You know, some wondering if how you're looking at that and whether
So I'm wondering if you.
Are you looking at that and weather.
Speaker 9: Whether you think they're just because something has happened in the past, like over this three to six month cycle.
Whether you think that just because something has happened in the past like over this three to six months cycle.
Speaker 9: you know, how do you have the confidence that this would be repeated, given this sort of increased variability month to month, you've sort of been pointing out.
How do you have the confidence that this would be repeated given given this sort of increased variability month to month, you've sort of been playing out.
Speaker 9: It seems like there's a bit of a quandary here and the
It seems like there's a bit of a quandary here and the <unk>.
Speaker 9: not going in the favor of wanting to create an incentive to try to save money by changing you to a different carrier. What the carrier is?
It's not going in the favor of the plant.
Wanting to create an incentive to try to save money by changing to a different carrier.
Well the carriers.
Remember, we make money as people shop.
Right.
Speaker 3: And so what the industry tells us they have seen forever and what we have seen in the past 15 plus years is that when there is a round of rate increases.
<unk>.
And so what the industry tells us they have seen forever.
What we have seen in the past 15 plus years as it were.
There is a round of rate increases.
Speaker 3: Consumers now are motivated to shop because all they know is they're they're they're right went up and they wonder if they can go Shop
Consumers now are motivated to shop, because all they know is there their rate went up.
And they wonder if they can go.
Shop somewhere else and save money.
Speaker 3: The fact that others are raising rates too, may or may not matter. In general terms, when consumers shop, if they actually shop efficiently.
The fact that others are raising rates to me.
There may not matter in.
In general terms when consumers shop, if they actually shop efficiently.
Speaker 3: because of the complexity of insurance, on insurance pricing, and the segmentation in pricing, and dependency on individual carrier economics and portfolios, et cetera. In general terms, if a consumer actually does efficiently shop for car insurance, they tend to save between $400 and $700.
Because of the complexity of the insurance auto insurance pricing and segmentation in pricing and dependency on individual carrier economics, and portfolios et cetera in general terms, if a consumer actually does efficiently shop for car insurance they tend to save.
400, $700 a year.
Speaker 3: So despite the fact that rates increase, they won't because of the fact that rate increases are happening across the board, what they industry is seeing historically.
So.
Despite the fact that rates increase as well because of the fact that rate increases are happening across the board.
What the industry has seen historically and what we have seen.
Speaker 3: Is that drives consumers to at least go out and see, hey, maybe a wonder if I could save money somewhere else?
Is that drives consumers to at least go out and say, Hey, maybe I wonder if I could save money somewhere else.
Speaker 3: A large number of those consumers will actually save money because they're actually shopping their insurance. And so we expect that cycle to repeat itself. The industry expects that cycle to repeat itself. The industry, the clients tell us it's always worked that way.
A large number of consumers will actually save money because they are actually shopping their insurance and so we expect that cycle to repeat itself the industry expects us soccer to repeat itself the industry big clients tell us it's always worked that way.
Speaker 3: You know, again, in our experience, we saw it in 2016's last time we saw it the most relevant comparator.
And again in our experience we saw in 2016 as last time, we saw the most relevant comparator.
Speaker 3: We saw it and we saw it in a pretty big way and everybody raised their respect then to, because the effects are happening for everybody.
We saw it and we saw a pretty big way.
Everybody raised rates back then too.
The effects are happening for everybody.
Speaker 3: Distracted driving was increasing frequency. Bumper sensors were increasing repair costs. And then there was an ice storm in Texas, which happened too. But that was more of the, like the eye to thing, more of a temporal thing. But then those two things structurally changed underwriting everybody had to rewrite, re-rate, re-launt.
Distracted driving with increasing frequency.
Bumpers sensors, we're increasing repair costs and then there was an ice storm in Texas, which happened too, but that was more of them like the other thing more of a temporal thing, but then those two things structurally changed underwriting everybody had to rewrite re rate relaunch.
Speaker 3: And there was a huge surge that, as I said, we more than doubled our insurance business. And I think 18 months, Greg, then I get that, and we get that number one. That's right.
And there was a huge surge that and as I said, we more than doubled our auto insurance business.
Thank <unk> 18 months Gregg Goodnight.
I get that number right yes.
Yes, that's right.
Speaker 3: So this is, you know, that's the way the industry has worked historically. But, you know, don't take my word for it. I think that's probably pretty easily researched. But that's the way it has happened. And we're told it has always happened in auto insurance.
So this is.
That's the way the industry has worked historically.
I'll take my word for it I think thats, probably pretty easily researched.
That's the way it has happened and we're told it has always happened in auto insurance.
Speaker 3: From folks that have been running this cup of coffee for a long time.
From folks that have been been running this company for a long time.
Speaker 9: All right, well that's a reasonable point. The $400 to $700 they might say might be not from what they're paying now, but what they might have to be paying relative to the new claims. And you can help them search through the complexity a little bit and come to some comparative conclusion.
Alright, well, that's a reasonable point to the 400 to $700 they might save might be not from what they are paying now, but what they might have to be paying relative to the new claims and you just try and help them searched through the complexity, a little bit and come to some comparative conclusions.
Speaker 9: So as long as they're shopping, that's what your game is. And then the other thing, you mentioned QRP getting up to about a million per month and revenue by June .
So as long as Acura shopping that's what Youre games and then the other thing you mentioned QR P getting up to about $1 million per month in revenue by June .
Speaker 9: I know that should be fairly high margin business, but how quick does it get to a pretty good bottom line results from that million per month you think you can generate?
I I know that should be fairly high margin business, but oh.
How quick does it get to a pretty good bottom line results from that million per month do you think you can generate.
Speaker 3: Yeah, we're into the 80% contribution margin on that pretty fast. Um, probably at the.
We're into the 80% contribution margin on that pretty fast.
Alright, probably at the.
Speaker 3: Probably at the million dollar a month level. Greg.
Probably at the million dollars a month level Greg.
Speaker 3: If you think about the caution that, the main dollar might get fair enough.
If you think about the cost from that.
Speaker 3: Yeah, we're probably then at that point right out at about an 80% contribution.
Yeah, we're probably down at about we're probably at that point right at about an 80% contribution margin.
Yeah.
Speaker 9: Okay. Alright, that's helpful too. Thank you very much.
Okay.
Alright, that's helpful. Yeah. Thank you very much.
Thank you Jim.
Speaker 1: Thank you, and I'll take our next question from Max of Lake Street. Your line is open, please go ahead.
Thank you.
Our next question from Max of Lake Street. Your line is open. Please go ahead.
Speaker 3: Hey guys, I just want to turn back towards the balance sheet at $115 million in cash. Can you go a little deeper into like future investments? I know we talked about buybacks, but, uh, inter-gantic opportunities may be outside of the insurance Earthquake. What are you guys seeing in that? Yeah.
Hey, guys I, just wanted to turn back towards the balance sheet at $115 million in cash can you go a little deeper into like future investments I know, we talked about buybacks, but inorganic opportunities maybe outside insurance vertical like where do you guys see that yes.
Speaker 3: Yeah, well, with the last couple of acquisitions we've made to your point, have been outside the insurance protocol too.
Yeah, well with the last couple of acquisitions, we've made to your point have been outside the insurance vertical too.
Speaker 3: to boost verticals that we thought we could really build big and win big and M1 for personal loans, which is now our third largest business and growing like crazy. And modern.
To boost verticals that we thought we could really big.
Build big and win big in.
And one for personal loans, which is now our third largest business and growing like crazy.
And modernize and home services, which is a one plus one equals three from our.
Speaker 3: which is a 1 plus 1 equals 3 from our old home services business and where we've got now.
Home services business, and where we've got now to.
Speaker 3: scale to see good strong double digit, probably 20th percent for your growth for as far as literally as far as you can see.
Scale to see good strong double digit probably 20 ish percent for your growth for as far as literally as far as the eye can see.
Speaker 3: So we are, that is exactly our first priority for cash and for capital. It's continuing to find opportunities like that or it's still a very fragmented industry. We are still a very effective aggregator and consolidator of those type of businesses and that is still job one for us when it comes to capital allocation and will continue to be for, I imagine a long one.
So we are that is exactly our first priority for cash and for capital.
Continuing to find opportunities like that or is it still a very fragmented industry. We are still a very effective aggregator and consolidator of those type of businesses and that is still <unk>.
Job one for us when it comes to capital allocation and we will continue to be for I imagine a long long time.
Speaker 3: Thank you. And then I want to shift to more of the model here. I mean, kind of to step down here and gross margin. I was wondering if that's what you kind of expect for a run rate throughout the rest of your 2022, around 8% I believe.
Okay. Thank you and then I want to shift to more the model here and kind of a step down here gross margin I was wondering if that's where you kind of expect for a run rate throughout the rest of the fiscal year 2020 to around 8% I believe.
Yes.
Speaker 4: Greg, you want to take that? Yeah, I'll take that one. The drop in gross margin is primarily due to just the loss of operating leverage. So you have lower revenue levels.
Greg you want to take that yes.
Yeah, I'll take that one the drop in gross margin is primarily due to the just the loss of operating leverage so you have lower revenue levels.
Speaker 4: dropping in on top of a fixed cost base that doesn't really change throughout the year. So, across margin, we'll flux based on the amount of revenue drive every quarter. Remember, the December quarter is not only worry dealing with challenges and volatility with an insurance, but we also worry in our seasonally lightest quarter is the December quarter. So it's really just the lower top line on top of a very similar semi-fixed cost base.
Dropping into on top of our fixed cost base that doesn't really change throughout the year. So gross margin will flex based on the amount of revenue drive every quarter remember the December quarter.
Is not only worry.
Dealing with challenges and volatility within insurance, but we also.
We are in our seasonally lightest quarter as the December quarter. So it's really.
Just a lower top line on top of a very similar semi fixed cost base.
Okay. Thank you guys that's it for me.
Speaker 1: Once again, ladies and gentlemen, if you have a question, please press star one.
Once again, ladies and gentlemen, if you have a question. Please press star one.
Speaker 1: Then I'll take our next question from Chris of Thingila. Your line is certain, please go ahead.
We'll now take our next question from Chris of thinking that your line is open. Please go ahead.
Okay.
Speaker 7: I just Got in the coat. I got in the call late
Hi.
I just.
Got it I got on the call late.
Speaker 7: But can you share why there was an increase in G&A? I think there was about a $3 million increase.
<unk>.
But can you.
Sure and you know why why there was an increase in G&A I think there was about a $3 million increase there.
Speaker 4: Yeah, hey, Chris, this is Greg. That's just a one-time charge that we took to revalue or fair value, just the fair value of an urn out associated with an acquisition we did last year. That acquisition has been performing better than we expected. So we had to adjust the fair value of the urn out. So that's what that was of about 2.7 million.
Yeah, Hey, Chris This is Greg that's just a one time.
Charge that we took to revalue or.
Fair value adjust the fair value of an earn out associated with an acquisition we did last year.
Acquisition has been performing better than we expected. So we had to adjust the fair value of the earn out. So that's what that was about $2 7 million.
Speaker 4: which is a good thing to me. The issue is performance better than originally planned. Right, right.
Which is a good day.
The transition is performing better than originally planned.
Right right Okay great.
And then.
Speaker 7: You guys mentioned, okay, so three to six months, you see more volatile times for insurance. You know why is that? Why is it two to six months? What's the why is the timing there? That, that, the way it is.
You guys mentioned, okay. So three to six months, you see more volatile times for insurance.
Why is that why is it three to six months why is the timing there.
The way it is.
Speaker 3: Yeah, that's the time that this is a, we've got to be these periods before in the carriers and the industry's down to these periods a lot more than we have and then talking to the carriers about the typical time it takes to re-rate.
Yes, that's the time that.
This is <unk>.
Got to have experienced before in the carriers in the industry downturn, there's a lot more than we have in and talking to the carriers about the typical time it takes to.
Re rate.
Re launch.
Speaker 3: and get those rates in place and to recover in a period like this, where there's a mismatch between current rates and pricing and and claim costs.
Get those rates in place and to recover in a period like this where there's a mismatch between current rates and pricing and claim costs.
Speaker 3: Historically, it's been about a six month period, you know, in terms of across the bottom. Maybe a year from total start to finish. This period looks like it probably began sometime around last September , really. And one of the other analysts asked that question about some of the rates because others had been seeing some of this in beginning to change rates. And so that puts us in the
Historically, it's been about a six month period.
And in terms of across the bottom maybe a year from total start to finish.
Just curious it looks like it probably began sometime around last September .
<unk>.
And one of the other analysts asked a question about some of the rates.
This had been seeing some of those some beginning to change rates.
And so that puts us in the.
Speaker 3: As we look at the timeframe, we look at where the carriers are, and what the carriers are telling us about their plans to rewrite and reopen and reopen states. That puts us into, we think, the late spring early fall timeframe.
As we look at the timeframe you look at where the carriers are and what the carriers are telling us about their plans to re rate and opened and reopened states.
That puts us into we think the late spring early fall timeframe.
Speaker 3: So it's, you know, and again, it's historically there's two main drivers at that six month bottom. One is by, you know, within six months, most large carriers have the ability to very effectively take the data they're getting, and rerun their underwriting models, rerun their rate models, and launch those new rates and get them approved in the states where they need to.
And again.
Historically, there are two main drivers of that six month bottom one is.
By you know within six months, most large carriers are.
The ability to very effectively.
Take the data they're getting.
Re run their underwriting models, a rerun their rate models and launch those new rates and get them approved and this in the states where they need to.
Speaker 3: Obviously, it wouldn't be a big, successful carrier if it took them a lot longer than that.
Obviously, it wouldn't be a big social carrier, if it took them a lot longer than that.
Speaker 3: The second reason is that most consumer insurance policies are a six month term. Your auto insurance is probably a six month term. That means that you're going to, you know, depending on where you are in that six month term, you're going to get a rate increase as soon as it's over. Once you get that.
Second reason is that most consumer.
Insurance policies or a six month term.
Your auto insurance is probably a six months term that means that you're going to you know depending on where you are in that six month term.
Youre going to get a rate increase as soon as it's over once you get that rate increase you are going to go shopping or some high percentage of folks are going to go shopping to find out if it was just their carrier.
Speaker 3: You're going to go shopping or some high percentage of folks are going to go shopping to find out if it was just their carrier and if it was, can they say money elsewhere? And so that's where it kind of begins the shopping cycle.
And if it was can they save money elsewhere, and so thats, where kind of begins the shopping cycle.
Speaker 3: that the industry talks about and that we have experienced also ourselves. So those are the two main determinants. The time it takes to re-rate, re-launt.
The industry talks about and that we have experienced also ourselves. So those are the two main determinants period. The time it takes to re rate relaunch and the second is the average consumer.
Speaker 3: And the second is the average consumer behavior based on the fact that they're going to get a rate increase. Okay.
Behavior based on the fact that theyre going to get a rate increase.
Okay, Alright, alright, great, Thanks, Doug and Greg.
Thank you Chris.
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