Q2 2025 QuinStreet Inc Earnings Call
Yeah.
Speaker Change: Good day and welcome to Queen Street fiscal second quarter of 2025 financial results Conference call. Today's conference is being recorded following prepared remarks, there will be a Q&A session and if you wish to ask a question. Please specify a follow up I don't Wanna if at any time. During this call you require immediate assistance. Please press star zero.
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Speaker Change: At this time I would like to turn the conference over to senior director of Investor Relations and finance Mr. Robertson barrel. Thank you you may begin.
Speaker Change: Thank you operator and.
Speaker Change: And thank you everyone for joining us as we report <unk> fiscal second quarter 2025 financial results.
Speaker Change: Joining me on the call today are Chief Executive Officer, Doug Valenti, and Chief Financial Officer, Greg Wong.
Speaker Change: 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 of future performance.
Speaker Change: 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 forward.
Speaker Change: Forward looking statements are based on assumptions as of today and the company undertakes no obligation to update these statements.
Speaker Change: Today, we will be discussing both GAAP and non-GAAP measures a reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release, which is available on our Investor Relations website at Investor that Quint Street Dot com.
Speaker Change: With that I will turn the call over to Doug Valenti. Please go ahead Sir.
Doug Valenti: Thank you Rob.
Welcome everyone.
Doug Valenti: We delivered record revenue again in fiscal Q2.
Doug Valenti: Define typical seasonality.
Doug Valenti: Driven by the unprecedented surge and broadening of auto insurance client demand.
Doug Valenti: Revenue in other client verticals also continued to perform well.
Growing 15% year over year in the quarter.
Doug Valenti: Adjusted EBITDA remained strong.
Doug Valenti: Profitability continued to benefit from operating leverage.
Doug Valenti: We expect adjusted EBITDA margin to expand further from here.
Doug Valenti: As we continue to optimize media efficiencies and client results and auto insurance.
And as we progress a range of other revenue growth and margin expansion initiatives.
Doug Valenti: We also expect strong demand in auto insurance to continue.
Doug Valenti: And continued strong growth in our non insurance client verticals.
Doug Valenti: Turning to our outlook.
Doug Valenti: We expect fiscal Q3 revenue to be between 265.
Doug Valenti: And $275 million.
Doug Valenti: And Q3 adjusted EBITDA.
Doug Valenti: It would be between 19.5.
And $20 million.
Doug Valenti: We are once again, raising our outlook for full fiscal year 2025.
Doug Valenti: We now expect full fiscal year revenue.
Doug Valenti: About $1.085 billion.
Doug Valenti: And adjusted EBITDA.
Doug Valenti: To be about 82 point.
Doug Valenti: $5 million.
Doug Valenti: Finally.
Doug Valenti: We previously discussed FCC changes to T. C. P. A regulations expected to go into effect in January.
Doug Valenti: Those regulations were stayed by the courts, just prior to going into effect.
Doug Valenti: And they are not likely to be reinstated.
Doug Valenti: There may be replacement regulations regarding consumer contact rates.
Doug Valenti: But we believe that they would be less disruptive than those that were stayed.
Doug Valenti: And more consistent with.
Doug Valenti: With Quinn streets current approach.
Doug Valenti: With that I'll.
Doug Valenti: I'll turn the call over to Greg.
Greg Wong: Thank you Doug.
Greg Wong: Hello, and thanks to everyone for joining us today.
Greg Wong: Fiscal Q2 was another record revenue quarter for Quincy Cigna.
Greg Wong: Significantly outpacing typical sequential seasonality.
Greg Wong: As Doug mentioned, the strength was mainly due to the continued unprecedented ramp of auto insurance client demand.
Greg Wong: Our non insurance businesses also maintained its strong momentum and grew double digits.
Greg Wong: So the December quarter.
Greg Wong: Total revenue grew 130% year over year it.
Greg Wong: It was $282 $6 million.
Greg Wong: Adjusted net income was $11 $9 million or <unk> 20 per share.
Greg Wong: And adjusted EBITDA was $19 $4 million.
Greg Wong: Looking at revenue by client vertical.
Greg Wong: Our financial services client vertical.
Greg Wong: Represented 78% of Q2 revenue and grew 208% year over year.
Greg Wong: The $219 $9 million.
Greg Wong: The record performance was largely driven by auto insurance, which grew 615% year over year.
Greg Wong: Okay.
Greg Wong: Our home services client vertical represented 21% of Q2 revenue and grew 21% year over year to $59 $6 million.
Greg Wong: Other revenue was.
Greg Wong: It was the remaining $3 $1 million of Q2 revenue.
Greg Wong: Turning to the balance sheet.
Greg Wong: We closed the quarter with $58 million of cash and equivalents and no bank debt.
Greg Wong: Moving to our outlook.
Greg Wong: For fiscal Q3, our March quarter.
Greg Wong: We expect revenue to be between 265 and $275 million.
Greg Wong: And adjusted EBITDA to be between 19, and a half in $20 million.
Doug Valenti: As Doug already mentioned.
Doug Valenti: We are again, raising our full fiscal year 2025 outlook.
Doug Valenti: We now expect revenue to be between.
Doug Valenti: 1.065 billion and $1 $105 billion and adjusted EBITDA to.
Doug Valenti: To be between 80 and $85 million.
I'd like to note that our full fiscal year outlook implies strong sequential margin expansion in the June quarter, our fiscal Q4.
Doug Valenti: As we continue to optimize media efficiencies and client results in auto insurance.
Doug Valenti: And as we make progress on a number of growth initiatives.
Doug Valenti: Moving forward.
Doug Valenti: Queen media and client optimizations.
Doug Valenti: Favorable mix shifts as auto insurance growth rates normalize.
Doug Valenti: Growing new higher margin opportunities.
Doug Valenti: And ongoing productivity improvements.
Doug Valenti: We believe that we are getting within reach of our target, 10% adjusted EBITDA margin.
Doug Valenti: With that I'll turn it over the operator for Q&A.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you wish to ask a question. Please press star followed by the one on your telephone keypad.
Speaker Change: Do you ever hear any problems that you had to speedway east and should you wish to cancel your request. Please press star followed up with you.
Speaker Change: If you're using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Speaker Change: Thank you and your first question comes from the line of John Campbell from Stephens, Inc. Please go ahead.
John Campbell: Hey, guys. Good afternoon, congrats on a great quarter.
Speaker Change: Thank you Sean.
Speaker Change: Sure Hi, I wanted to start off.
Speaker Change: One of your large customers on the earnings call today was pretty upbeat I mean, they talked a lot about ramping up growth just across the board, but mainly in auto.
Speaker Change: This is also you know one of the largest national carriers. That's also kind of running half throttle from our national exposure standpoint, you.
Speaker Change: I know, there's a handful of your customers that are kind of similar situation. So it's great to see you guys put up record results you know against that backdrop I'm kind of curious about your ability to maintain the momentum I'm I'm, hoping Doug maybe you could talk to or provide some color around maybe the capacity that's out there kind of what remains is some of these carriers start to open more and more.
Speaker Change: And kind of what Youre seeing in the channel you know as you go week to week month to month.
Speaker Change: Yeah, No sure John It's a great question, we see a lot of capacity.
Speaker Change: Pasadena in front of US we have broadened the client base pretty dramatically.
Speaker Change: Over the past.
Speaker Change: Year or so.
Speaker Change: And we now have a record number of carrier spending.
Speaker Change: Seven figures plus a month.
Speaker Change: Now with us.
Speaker Change: Hmm.
Speaker Change: Most of those carriers do not have all the exposure they want in the channel.
Speaker Change: They're not putting nearly as much budget into digital as they should.
Speaker Change: If you look at ratios of eyeballs and shopping habits.
Speaker Change: And this channel versus other channels.
Speaker Change: So if you combine that the capacity that our clients have budget wise with the potential they have to spend more.
Speaker Change: To be more efficient and more aligned with the with consumer activity.
Speaker Change: We see a lot of upside from here, we think we're going to consolidate around this new higher base.
Speaker Change: And be able to grow good strong double digits from here for as long as we can see we're also opening up a whole new dimensions of insurance.
Speaker Change: In terms of addressable markets, we're in a relatively small part of the overall market.
Speaker Change: We're highly leveraged to direct carriers.
Speaker Change: We will and are adding and growing very rapidly our exposure to agent driven carriers.
Speaker Change: Which is almost the other half of the addressable market and we are very under indexed there.
Speaker Change: And we are rapidly pursuing other areas of insurance, including business insurance, which is yet again, another half of the overall market and.
Speaker Change: The overall market and our estimates so.
Speaker Change: A lot of capacity in our current footprint with our existing clients, where we have great relationships that are working with them to optimize them and and our spend.
Speaker Change: Spend better.
Speaker Change: And a lot of capacity in other areas that we have opened up.
Speaker Change:
Speaker Change: New initiatives and have begun to serve and are in the process of.
Speaker Change: Beginning to scale so.
Speaker Change: A lot of opportunity insurance for a long long time to come in our estimation.
Speaker Change: Okay, that's great to hear and then.
Speaker Change: Maybe on the gross margin or I'm, sorry, I don't overall, just EBITA margin.
Speaker Change: I think you guys are pretty accurately depicted channel just kind of being a mismatch of nino over over demand and under supply.
Speaker Change: And I think you've thought that maybe that being somewhat of a transitory issue where they were.
Speaker Change: Correct itself over time as you know some of your media partners shift up funnels, and just basically change in their media sources.
Speaker Change: I'm curious you know is it is it kind of unpack your guidance on FY <unk> Q it looks like you're looking for about 9% margin at the midpoint. So above what you know expectation that would be a lot of your margin expansion. So it would be a great outcome. So I'm curious about how much of that is kind of that dynamic and the Martin you know the channel kind of correcting itself versus more of a self help.
Speaker Change: And some of the other initiatives you're working on.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: A couple of things.
Speaker Change: The margins last quarter.
We're a little lower than we might have expected. If we had a normalized mix, but we had a very heavy mix of auto insurance and to your point, we had a heavy mix of auto insurance. It wasn't yet optimized because of the surge has been so rapid that we're you know we're working as hard as we can but can't quite catch it yet in terms of optimizing.
Speaker Change: Whereas I optimizing there's definitely media out there that hasn't been properly segmented hasn't been properly matched to the right client hasn't been properly priced to its performance and it has and it hasn't been properly priced in terms of what we should be buying it for us and we're working on that every day and making progress and that's what we do for a living so a lot of it will be.
John Campbell: That dynamic John the one that exact dynamic you talked about.
John Campbell: But there are a lot of other things going on.
John Campbell: A lot of.
John Campbell: A lot of growth in the other verticals and other businesses and products, where we have significantly higher margins.
John Campbell: And a lot of work being done to.
John Campbell: To improve just structurally our margins.
John Campbell: By opening up new media sources and building ones that we know we can we can scale that are higher margin than the current media sources. We have in building capacity. There, we're really under indexed in and for example, social display native.
John Campbell: Areas that we know we can be bigger than we have seen others have some success and we're growing those very rapidly there are aquavit in media.
Acquisition, which has gone extraordinarily well so a lot of moving parts, but you know much of it to do with what you alluded to but then other things that we work on day to day initiative wise and growth wise.
John Campbell: Do you want to expand the margin and Thats, what well, you'll see that step this quarter, where we were expecting.
John Campbell: EBITDA margins to be higher than they were last quarter.
John Campbell: And you'll see that again.
John Campbell: I mean, you'll see that in the fourth quarter.
John Campbell: And they love it as we get even more momentum on those activities and more progress on those activities and again, a pretty significant jump we expect.
John Campbell: In the fourth quarter over the third quarter, but I would again point out where else are expecting this quarter over last quarter. So our.
John Campbell: Progress across the board.
Doug Valenti: Makes sense thanks, Doug.
John Campbell: Thank you John.
Speaker Change: Thank you and your next question comes from the line of Jason <unk> from Craig Hallum. Please go ahead.
Speaker Change: Great. Thank you great job guys.
Speaker Change: Wanted to ask about CPA.
Speaker Change: My understanding is that a lot of carriers requested.
Speaker Change: TCP or compliance even before that deadline was put in place. So curious if theres anything.
Speaker Change: Any notable takeaways kind of in this period of time that it seems like the industry was operating under <unk> compliance and then the work that you did leading up to Pee CPA I'm wondering if there's any learnings there that you think you can apply to the business going forward to make things more efficient.
Speaker Change: That's a great question. It was you know we were.
Speaker Change: We were getting ready for tpa for over a year, we knew what was coming we were very well.
Speaker Change: Wired into to the FCC and want to be we're going to be no what theyre thinking and make sure. We're ahead of those things.
Speaker Change: And so we did an awful lot of work and I think we did learn a lot we tested a enormous number of approaches to matching and communications and <unk>.
Speaker Change: And contacts with consumers and despite the fact that the regulations did not go into effect. We will we will improve a lot of areas based on that feedback and that's that testing.
Speaker Change: It was disruptive in many ways, because we still had to prepare for it and to your point, Jason many clients required us to implement early.
Speaker Change: Just to make sure it was working well and I'm not being critical that's made sense, if youre going to have to comply you jada tested early before the actual due date.
Speaker Change: And so we.
Speaker Change: We had I think we would have done even better in the quarter.
Speaker Change: Had we not had to go through that disruption, which certainly wasn't as big as it would have been if we had fully implemented across the board, but it was not insignificant and it was a distraction quite frankly from a lot of other activities.
Speaker Change: So I would say that yes, we did learn a lot we will roll those into continuing to improve.
Speaker Change: You know I said when I talked about their regulations require that they would be a short term disruption, but they they would likely accelerate long term trends to make the channel alone.
Speaker Change: Better safer more participatory place for consumers and for clients and I think those long term trends will continue to go forward and we've learned yet more about how to push those long term trends.
Speaker Change: We will benefit <unk> Street will disproportionately benefit from those long term trends and we get to do that now without the.
Speaker Change: Short term non insignificant disruption would have occurred if everybody would have been forced to convert right away and adapt.
Speaker Change: Which in this ecosystem would've been.
Speaker Change: It would've been disruption a disruptor so it's.
Speaker Change: We're happy we went through it we learned a lot where we still will take the lead on making sure. This is a great channel a compliant channel a safe channel for our clients and for consumers.
Speaker Change: And we get to do that now without the with having had a little disruption trying to having to prepare for it but not the big disruptor of having to actually fully implement.
Speaker Change: I appreciate that.
Speaker Change: Wanted to piggyback off of Johns question, just just on margins and what Youre seeing there we've talked for a few quarters now about this supply constraint or the media constraint that exist.
Speaker Change: Can you give any more detail on like are there any indications that that's starting to open up or or the factors that you can do.
Speaker Change: And I think again, you're alluding to that in the Q4 guide, but is there any more color on what other industry participants are doing that could give us more supply in the market.
Speaker Change: Sure we have seen a number of media companies broadly defined because you know media companies come in all shapes and sizes.
Speaker Change: They can be folks with databases that are dead with permission emails as well as folks that publish materials and content.
Speaker Change: There are we have seen them.
Speaker Change: Pretty aggressively shift their activity and their focus back to.
Speaker Change: Two auto insurance and that takes a little while to ramp.
Speaker Change: But we definitely are seeing results from that increased supply from that increased activity and opportunities from that.
Speaker Change: And we ourselves have shifted a lot of our own activities on the owned and operated side back to auto insurance to grow our own campaigns.
Speaker Change: And all media digital and.
Speaker Change: And are seeing a lot of great results and very strong growth there. So.
Speaker Change: I don't think that we should expect that.
Speaker Change:
Speaker Change: In the foreseeable future there will be a big gap between demand and supply anymore, I think that supply is catching up.
Speaker Change: But it was you know it was tough there for a few quarters because the surge was so rapid.
Speaker Change: And so Matt and mass at.
Speaker Change: That it was kind of impossible.
Speaker Change: But tonight out strip.
Speaker Change: Everyone's ability to to kind of ramp back up.
Speaker Change: Their media activities, but I don't I don't think that's going to be a big constraint for.
Speaker Change: Over the next few quarters I think we're we're almost caught up frankly and I think we will we will stay caught up I think that there is there I don't think there's a big Miss and big structural mismatch, we're going to have to be dealing with.
Speaker Change: Alright got it thank you.
Speaker Change: Thank you and your next question comes from the line of Zach Cummins from B Riley <unk>. Please go ahead.
Zach Cummins: Yeah, Hi, good afternoon, I, just wanted to piggyback off of Jason's question on Tpa.
Speaker Change: First can you comment on any potential impact, especially on the margin side that you had around implementation ahead of the planned date for for FCC is one to one consent rule.
Speaker Change: And I know in your prior guidance that you issued in Q1, you baked in some headwind home services as a result of this implementation.
Speaker Change: Just curious if you are now assuming a higher growth rate for home services, especially as we go into the second half of your fiscal year.
Speaker Change: Yes, we are.
Speaker Change: Our expecting.
Speaker Change: That the home services performance will be better in the back half of the fiscal year. Then it would have been had we fully implemented.
Speaker Change: New T C P. A changes in that as it does one of the factors baked into R.
Speaker Change: Our guidance.
Speaker Change: In the back half.
Speaker Change: It was in terms of commenting on the work.
Speaker Change: We worked on a per year and we worked on it hard so I would say that what I was pleased with was the exceptional work that all of the teams did our marketplace team our engineering team in particular home services team.
Speaker Change: I'm getting ready for the changes and so I think the impact would have been less severe than we feared.
Speaker Change: Because of that great work and because we were you know.
Speaker Change: We werent as far off with the new rules as a lot of other people are in terms of how we operate.
Speaker Change: I mean, we've always limited batch rates always being the last 10 to 15 years.
Speaker Change: And there are even people that who referred to.
Speaker Change: Limiting match rates says that it's kind of a quint Street approach.
Speaker Change: We believe that it matters and we know there's a sweet spot in terms of consumer engagement consumer.
Speaker Change: Response rates and how and how many times you match that most consumers do want multiple options by the way so I'm asking them more than once it's usually a consumer preferred thing.
Speaker Change: But they probably don't want to be contacted order be matched to more than about five in the sweet spot seems to be about three so I think we proved that once again to all the testing and we will continue to be to be disciplined as we have been for a very long time on that plant. So that we get the best combination of consumer engage.
Speaker Change: And conversion for our clients and and best experience for those for those consumers.
Speaker Change: Yeah.
Speaker Change: Understood. That's helpful and my one follow up question is really around auto insurance are nice to hear the broad based strength that you are seeing amongst carriers.
Speaker Change: I was just curious if you could go a little bit deeper in terms of the contribution you're seeing from maybe your top one or two carriers versus maybe how you expect that to evolve throughout calendar 2025.
Speaker Change: Broader base of carriers should should have profitability metrics to spend more money to acquire customers.
Speaker Change: We have a couple of clients that are are significantly bigger in terms of their spend than the than the rest are just further along than we were closer to them.
But I would say that in all care and Greg may be able to give you some numbers, but I would characterize it kind of qualitatively.
Speaker Change: I have never seen.
Speaker Change: More.
Speaker Change: <unk> significant carrier, so I'm not talking about anybody small because.
Speaker Change: Although there are a bunch of those two but no more of the big carriers more engaged in digital and a very productive smart way that I am seeing right now.
Speaker Change: Is it I don't think that's an exaggeration to call it dramatically different than it was going into COVID-19.
Speaker Change: I think that the capabilities the focus.
Speaker Change: Our willingness and ability to engage on a digital level analytically.
Speaker Change: With us to get the kind of results you can get if you do that which are by the way spectacularly better.
Speaker Change: And then if then other channels or not doing it analytically are well in this channel.
Speaker Change: As such.
Speaker Change: The dramatic improvement in the gym.
Speaker Change: Inadequate increase in the number of carriers that are capable and wanted to be better at it and we're working hard at being better at it. Obviously there are a couple that lead the pack and they've led the pack for a long time.
Speaker Change: And it can be tough to catch them.
Speaker Change: But they are but you are we are seeing a lot more smart activity.
Speaker Change: And the broader carrier group.
Speaker Change: Than we've ever seen.
Speaker Change: And it's not surprising that this channel is incredibly efficient.
Speaker Change: But it's very different you have to have a different skill set.
Speaker Change: Win in this channel.
Speaker Change: And it's taken a while for for a number of companies to two.
Speaker Change: And still take a while for a number for everybody to build those capabilities because it's hard.
Speaker Change: But we are seeing.
Speaker Change: I would say again I'll keep using the word dramatic progress.
Speaker Change: From where we were just a few years ago.
Speaker Change: Understood well, thanks for taking my questions and congrats again on the strong results.
Doug Valenti: Thank you Zack.
Speaker Change: Thank you and your next question comes from the line of Patrick <unk> from Barrington Research. Please go ahead.
Speaker Change: Good afternoon, and congrats on congrats again on the strong results.
Had a question on the other financial services verticals I was wondering if you could talk about the just to clarify the 15% growth that you talked about was that the other financial service verticals or was that just all other revenue categories, including home services.
Speaker Change: That was all non insurance client verticals.
Speaker Change: Was the 15% and Greg I don't know if you have any other of the numbers that you wanted.
Speaker Change: I wanted to share.
Greg Wong: Yes, I would say that's exactly it was all a financial services ex Oh, I'm, sorry, Oh total business ex insurance grew 15% are non insurance financial services businesses delivered year over year growth itself I would tell you good year over year growth.
Speaker Change: The only place it where.
Speaker Change: Where we did see really good performance, but we had a very tough comp was against credit card. So very happy with our performance in credit cards in the quarter, but it was closer to flat this quarter, just given the comp from last year, but.
Speaker Change: Pretty robust growth across the business.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Then.
Speaker Change: Go ahead.
Speaker Change: No that's right Pat I was just kind of reinforce that but I would say that we're very happy with the performance of the other businesses. We don't give out the numbers for every every one of the verticals but.
Speaker Change: The 15% was again, our non insurance, which would include home services.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: You talked about are.
Speaker Change: Going after more eight insurance insurance agent driven business I was just wondering if you could talk about.
Speaker Change: The margin profile of that side of the market.
Speaker Change: This is kind of the direct side.
Speaker Change: Sure we would expect that it will be as good or better I don't know if there will be dramatically better as we scale.
Speaker Change: Because the media market gets pretty efficient at scale, but we do believe that.
Speaker Change: What will help us margin wise is it.
Speaker Change: Can largely be.
Speaker Change: Incremental yield on existing media.
Speaker Change: And anytime you can because there are consumers that really do want to work with an agent for good reason.
Speaker Change: And we have not we've been very under represent we've under represented that part of the market. So consumers that come through our flows.
Speaker Change: Haven't had as much of an opportunity.
Speaker Change: To engage with an agent in a productive way and so therefore it wouldn't convert.
Speaker Change: So I think it will be additive to margin.
Speaker Change: For a long time and eventually the margins will be similar maybe a little bit better overall than the current market as we get to more maturity and scale. So I think that's years out.
Speaker Change: Initially.
Speaker Change: As you know it will I think it'll be a higher margin component.
Speaker Change: Because of the fact that again much of that will be yield on existing media, which you now.
Speaker Change: Erratically almost pure margin.
Speaker Change: Okay. Thank you.
Speaker Change: You bet.
Speaker Change: Thank you and your next question comes from the line of Chris Sakai from singular research. Please go ahead.
Speaker Change: Yeah.
Chris Sakai: Yes, hi.
Chris Sakai: You talked about potentially entering business insurance can you talk about the margin the margins there.
Chris Sakai: Sure Chris It's there it's early and so we don't know exactly where those are commercial and business insurance margins settle out we're still early in the process of we have all of them. We have we have now a critical mass of the <unk>.
Chris Sakai: Clients that cover the most important segments as clients.
Chris Sakai: And we are now building our media.
Chris Sakai: And so it's too early to say so I would project that the margins will probably be somewhere near our averages.
Chris Sakai: 30 ish 25 to 30 ish.
Chris Sakai: Percent range as we get to any reasonable scale, they're not there yet because we're still early and we're still building that media profile. The good news is.
Chris Sakai: Those much of the not and like I said about agent driven demand there are a lot of customers.
Chris Sakai: Customers in our current flows who match.
Chris Sakai: Business or commercial insurance and so therefore, they havent been converting for us because we didn't have it in our offers and we will be able to convert them now because we have the demand and where we've hooked up quote unquote. The pipes if you will.
Chris Sakai: To the to the folks that can serve them. So there there'll be a lot of that early on not on like I said, there would be and for agents and then over time as we scale it probably.
Chris Sakai: Close to our average is what I would expect until we get to really big scale at which point we might be.
Chris Sakai: More where auto insurance is because it really hit the really big scale you can still yeah.
Chris Sakai: Market that market and again, that's years out, but then that market gets a little more mature.
Chris Sakai: The media margins come down some but the contribution margin stay healthy because you get so much of fishy efficiency out of the other operating lines.
Chris Sakai: The way to think about the evolution of margin in these verticals.
Chris Sakai: Okay. Thanks.
Chris Sakai: Thanks for that.
Chris Sakai: One other question I had with.
We've seen pretty pretty volatile swings with insurance I mean, just a year ago to now it's been pretty volatile and we're on the upside now.
Chris Sakai: Can you help me understand is this something regular or normal with insurance or are we are we seeing a change or or or is there going to be potentially a bouncing again.
Chris Sakai: Yes.
Chris Sakai: That's a great question obviously.
Chris Sakai: I think and and industry experts and carriers have said.
Chris Sakai: What happened in the prior downswing.
Chris Sakai: <unk> was unprecedented.
Chris Sakai: There's never been a period of such a hard market in insurance.
Chris Sakai: And it was driven by.
Chris Sakai: What we've talked about right coming out of Covid.
Chris Sakai: You had supply constraints, which drove up cost you had inflation, which drove up cost.
Chris Sakai: You had higher.
Chris Sakai: Incident rates amongst consumers as they got back to driving not just because they were driving more.
Chris Sakai: But because they were distracted more because they were using their cell phones, even more and so are they there that cell phone usage had continued to grow.
Chris Sakai: But they hadn't been driving so much during COVID-19 and then as you came out of it over they started driving and they were using cellphones Oh, they had more accidents and so you had a very unique combination is driven by very unique.
Chris Sakai: <unk>.
Chris Sakai: Which we haven't seen.
Chris Sakai: Likes of which ever I guess it unless you go back to the flu epidemic early in the last century, so I have.
Chris Sakai: Everything that we know about insurance and that what we've been told by our clients and industry experts says that the downswing, which was dramatic.
Chris Sakai: Was very unique.
Chris Sakai: Hobby unlikely.
Chris Sakai: There will be there have been and there will be.
Chris Sakai: At times, when there's less dramatic ups and downs in insurance driven by things like weather.
Chris Sakai: And the severity of weather and if in any particular year.
Chris Sakai: We've seen those over the past 20 years that we've been in we in the predecessor company required then in insurance.
Chris Sakai: But those are those are very manageable.
Chris Sakai: Obviously, we we made the last one manageable we never went cash from our operating profit negative or EBITDA negative.
Chris Sakai: And we said while were going to we said we're going to continue to invest through this cycle, because we know it's coming back and when it comes back we want to be ready to take full advantage of it and we did that.
Chris Sakai: So it was not a great time to go through but at least we knew it was temporary and and we're now benefiting.
Chris Sakai: From.
Chris Sakai: Doing the right thing during the downturn to be ready for the other side and I think sorry I.
Chris Sakai: Long way of saying, it's not going to be as volatile as it has been last couple of years.
Chris Sakai: It's going to probably come back to a pretty normal up into the right curve that has some variability in it but very manageable variability overtime.
Chris Sakai: And there's likely going to be that way for at least the rest of my career and probably.
Chris Sakai: Decades, if you look at the long term curve back behind it.
Chris Sakai: The Covid issue.
Chris Sakai: Yeah.
Chris Sakai: Okay, great Thanks for that Doug.
Chris Sakai: You bet Thanks, Chris.
Speaker Change: Do you and your next question comes from the line of Eric <unk> from Lake Street. Please go ahead.
Eric: Yes, it does with the arrival of the New administration tariffs are definitely on the table and I was just curious to know.
Speaker Change: Auto carrier rates are tied to the price of the replacement parts.
Speaker Change: Many of those parts are imported to the U S.
Speaker Change: We've kicked the can 30 days.
Speaker Change: Mexico, and Canada, but we haven't.
China have you had any conversations with audio carriers regarding the potential kind of return of inflation due to tariffs.
Speaker Change: Yes, we've heard nothing from clients on that.
Speaker Change: Good question, obviously, we have not heard that being a concern or an issue from clients when speaking with us.
Speaker Change: Yeah.
Speaker Change: Your guests and anybody's guess is as good as anybody else is in terms of when whether how we get we actually get tariffs.
Speaker Change: But we have not heard that is something that people are planning around are worried about at least in their conversations with us and as they talk to us about what they're looking to do with us over the next year.
Speaker Change: Quarters, So no not something we've heard.
Speaker Change: Okay.
Speaker Change: If we go to a pessimistic scenario where tariffs are.
Speaker Change: Do go into effect would there be if the assumption that there would be a request for a carrier to carrier.
Speaker Change: Ours would be going back to the states for a re rating process.
Speaker Change: Yeah, probably although they're in very good shape right now as you probably know the loss ratios are coming in.
Speaker Change: And profit which is the key.
Speaker Change: A key profitability measure for these carriers coming in very strong.
Speaker Change: And so you know.
Speaker Change: They they have good pricing now, but they've also.
Speaker Change: Opened up the channels of communication opportunity to get pricing when they need it from the states even California.
Speaker Change: It is beginning to make it easier for carriers to actually raise their rates based on their cost because the states have learned that it's just economics, if you werent sure.
Speaker Change: Citizens to be able to get.
Speaker Change: <unk> insurance carriers have to be able to rate economically.
Speaker Change: And so I think if there's.
Speaker Change: One of the good things that maybe came out of the past few years is a lot of lessons learned on on the parts of everyone, but hopefully including <unk>.
Speaker Change: Anybody that makes rate decisions or regulates rate decisions because.
Speaker Change: As long as the carriers are doing it based on real economics, and obviously inflation of any con would be real economics.
Speaker Change: Then you kind of have to let them do it or they will not be able to serve your citizens right.
Speaker Change: I think that that is a is to.
Speaker Change: The direct answer to your question, Yeah, I think they would.
Speaker Change: I'm not an expert in this you could ask the industry, but my guess is yeah they'd be able to go back and get right.
Speaker Change: Got it thanks for taking my questions.
Speaker Change: You bet. Thank you Eric.
Speaker Change: Thank you once again should you have a question. Please press star followed by the one on your telephone keypad.
Speaker Change: Thank you and there are no further questions at this time. Thank you everyone for taking the time to join Green Street's earnings call. We have the information is available in the earnings press release issued this afternoon and this concludes today's call.
Thank you.
Speaker Change: Okay.