Digital Media Solutions, Inc. (DMS) on Q2 2021 Results - Earnings Call Transcript
Operator: Good day and thank you standing by. Welcome to the Digital Medial Solutions Inc. 2Q 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Thomas Bock, Executive Vice President of Investor Relations. Please go ahead.
Thomas Bock: Thank you for joining us to discuss DMS’ financial results for the second quarter of 2021. With me on the call are Joe Marinucci, Co-Founder and CEO; and Vasundara Srenivas, CFO. We posted our earnings announcement this morning in a press release and also on our Investor Relations website. By now everyone should have access. Before we begin, I would like to call your attention to our Safe Harbor provision for forward-looking statements in our financial results press release. The Safe Harbor provision identifies risk factors that may cause actual results to differ materially from the contents of our forward-looking statements. For a more detailed description of the risk factors that may affect our results, including disclosure about the effects of the coronavirus outbreak, please refer to our financial results, press release, and our SEC filings. Also, during this call, management's commentary will include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures for our reported results can be found in the tables of our financial results press release, which we have posted to our Investor Relations website at investors.digitalmediasolutions.com. The additional financial and other information to be discussed on this call can also be found on our Investor Relations website. Now, I'd like to turn the call over to Joe Marinucci, our CEO.
Joseph Marinucci: Thank you, Tom and good morning to everyone for joining the call today. Q2 was a record breaking quarter for DMS, and I'm excited to dive into the reasons behind our success. This morning, we issued a press release with many details on our financials. So, we will do our best not to duplicate that information. Vasundara will provide additional color on the published numbers in her remarks. I'm going to talk to you today about why and how our second quarter, especially including our VMM was so strong and how our actions and results put us in a really good spot for the remainder of the year and beyond. Just quickly to frame this call, during the second quarter, we set records and beat expectations for revenue, gross profit margin and EBITDA. Reported revenue was $105.1 million and adjusted revenue was $109.3 million. Total revenue growth was 42.4%. Adjusting for acquisitions was 19.9%. Gross profit margin was 32.1%. And our Variable Marketing Margin, or VMM, was 38.2%. I'll talk in detail about this number in a moment. Lastly, our adjusted EBITDA was $16 million and our balance sheet remains healthy with net leverage of three times. So, this morning I'm going to provide the top three reasons we had such a strong quarter and then I'll provide the top three highlights for the remainder of 2021. Here we go with Q2. First, we expanded our margin during the quarter, despite what's on the horizon regarding privacy and cookies and recognizing how changes will lead to concentrated demand within the walled gardens of Google, Facebook and alike, we grew margins by more effectively targeting consumers, improving our engagement with these consumers and driving more efficient conversions. Our consumer engagement score, or CES, continues to demonstrate our strong ability to efficiently create engagements and conversions that result in transactions and customers for our advertising clients. The CES for the period was 72, up from 69 and Q1 indicative of more targeted consumer engagement. We're able to create these efficiencies across all our verticals, because we continue to increase our leverage within the digital advertising ecosystem, using superior consumer insights, our marketplace brands, our first party data, our proprietary technology, our vast distribution capabilities, and the many other tools in our arsenal that drive engagement. And as our advertiser clients spend more with us because of our effectiveness, we deploy more media dollars, which in turn engages more consumers, grows our first party data asset and delivers enhanced ROI. The more our first party data assets grows, the better we become at targeting and engaging consumers. And that leads to better ROI for our advertiser clients, which leads them to spending more with us. But the other benefit of our efficiency gains is margin expansion for us as demonstrated by our increasing Variable Marketing Margin, or VVM, that is happening even as CPMs across digital media, but especially within the walled gardens go up. Our VMM in Q2 was 38.2%. That is up from 32% in Q1. Second, we continue to play from strength-to-strength within our largest vertical of insurance. Our insurance revenue, which now accounts for almost two-thirds of our revenue, grew by 92.2% in Q2 and by 73.1% organically. Insurance is showing strong growth for us for a number of reasons. Consumer demand for all insurance products is strong, and consumers are increasingly shopping online to determine the best options, promotions, and savings available to them. Helping consumers connect with the insurance providers that meet their needs is what we do best. And our growing auto insurance quote request volume up 107% from Q2 of last year shows this. The three digit increase in quote request volume is also indicative of the cross-section between consumer demand and auto insurance advertiser demand, which brings me to my next point. Advertiser demand for insurance also remains very strong. We work with all the top insurance providers, and we've been actively growing a list of insurance agents who bought from us. In addition, during Q2, we launched zip code ignite, a loyalty and retention program that encourages individual agents to invest larger budgets. This program has already had a measurable impact. We closed our previously announced acquisition of assets from Crisp Results at the beginning of April. As a result, we benefited from a full quarter of contribution, concentrated within health insurance. Crisp Results has had a positive impact across our revenue and margin numbers in Q2 and will have an even stronger impact or remainder of the year. And that's a perfect segue to third, our strategic investments boosted both our revenue and efficiency during Q2. Growth requires innovation and evolution, and we're not afraid of that challenge. Our investment strategy, including our M&A strategy is deliberate and designed to help us be the most efficient, most effective growth focused company we can be. This year, we've completed two transactions Aimtell in February and the assets of Crisp Results in April. The timing of the Crisp Results transaction was important to set us up for a strong Medicare Open Enrollment Period coming in the fourth quarter of the year. The early Q2 close of the acquisition gives us time to integrate Crisp Results, enhancing its already strong health insurance business with the leverage achieved from our first party data asset, proprietary technology and expensive media reach. We've already seen synergies between the Crisp Results team and the rest of the DMS with the positive impact on Q2 as a result. Our earlier acquisition Aimtell is a proprietary web push marketing technology, which sophisticated AI and machine learning that we acquired in February. The Aimtell technology is part of our efficiency story for Q2, as Aimtell allows us to reengage consumers by encouraging them to complete their information requests or by stirring up future demand by delivering personalized messages designed to stimulate action. Aimtell also brings added value to our publishing partners by encouraging website traffic to our direct-to-consumer and e-commerce advertiser clients by allowing them to retarget consumers who have abandoned their shopping carts. This is important year-round, but is magnified during the seasonally significant Q4 online shopping period. During the second quarter, we also made strategic investment to bring call center software in-house and launch DMS Voice. DMS Voice adds to our already strong proprietary technology stack and presents additional solutions to our advertiser clients. More importantly, DMS Voice enables us to boost our gross margin immediately during Q2 due to the cost-savings on our call center expenses that have been booked into cost of goods sold. And DMS Voice will continue to boost our gross margin in Q3 and beyond. Lastly, we made strategic hires last quarter to strengthen some of the capabilities and experience sets on our teams, including the finance and legal teams. So, shifting into the remainder of the year, I'm enthusiastic about what's to come for the rest of 2021 and beyond. And just like I highlighted three things about Q2, I will now spotlight three things coming in Q3 and Q4. First, everything we talked about for Q2 margin efficiency, playing from strength-to-strength within insurance and strategic investments are expected to stay in place throughout the remainder of the year. Remember as our advertiser clients continue to spend more with us, our first party data asset grows and our consumer targeting and engagement improves. This growing advertiser client spend and first party data asset boosts ROI for our clients, and it boosts efficiency measured through the VMM for us into Q3, into Q4 and beyond. Our insurance business continues to grow on the back of strong consumer and advertiser demand. And the strongest demand for health insurance during the Open Enrollment Period is yet to come this year. Especially with Crisp Results within the folds of DMS, we are confident we are well-positioned for taking the tailwinds of the digital transformation happening in health insurance advertising, especially in Medicare. The investments we made in Q2 and prior to enhance our people, our processes, and our toolbox, including our first party data asset, our proprietary technology and our expansive media reach, were all made with an eye toward future growth. Much of the anticipated growth, including a scaled up OEP period and innovative re-engagement funnels that lead to stronger e-commerce conversions will be recognized this year. Second, Protect.com, our flagship consumer portal, continues to grow. We rolled out Protect.com, it started with just auto insurance. During Q2, we added life insurance, home security and mortgage refinance. By the end of Q3, we expect to see additional growth in adjacent verticals like home services, and we plan to launch the completed site design and consumer portal, which will allow people to log in to personalize their experiences and results. And the future for Protect.com is to be recognized as the premier destination for people looking for a fully integrated experience to protect their personal property, their health and their finances, all in one place for the brand they know, and trust. This integration makes the consumer experience more sticky, especially as we introduce loyalty benefits and programs. Why does this matter? Because as Protect.com becomes a known consumer brand, it becomes easier to attract consumers to Protect.com and to keep them. More consumers that are more loyal mean greater advertising spend and you know, this story already. So, all leads to even stronger margins. And the third and final point I'd like to highlight is that, the end of the year is historically seasonally strong for us. And we've taken actions to amplify our strengths this year. You may remember that we talked about super seasonality for Q4 last year, and we anticipate to see that again this year with the Open Enrollment Period for health insurance and the e-commerce holiday shopping season happening at the same time. Insurance is our largest vertical with health insurance experiencing significant growth, thanks to the efforts we already had in place, plus the addition of Crisp Results. And e-commerce is our second largest vertical, with significant e-commerce revenue hitting at the end of the year, especially within the following categories; non-profits scaling their sustained donor basis, direct-to-consumer and subscription brands seeking to scale customer and subscriber acquisition, and seasonally commerce brands that need advertising support to achieve their end of year revenue metrics. Of course, there are uncertainties with regard to how the pandemic will impact in-store shopping this holiday season, but we anticipate e-commerce will be strong whether or not the pandemic subsides again in the United States. Before summarizing is worth noting that in May we refinanced our credit facility to provide increased financial flexibility to support our growth initiatives. And in late Q2, DMS joined the prestigious Russell 3000 Index, expanding our visibility within the investment community. Bring us back to the top before I hand over the call to Vasundara. Q2 was a record quarter for us because we took action to expand our margin as shown by our strong 38.2% VMM. We played from strength-to-strength, especially within the insurance vertical, leveraging consumer and advertiser demand to grow. We made strategic investments that had immediate impact and expectations of long-term benefit. And we're looking forward to the remainder of the year because the actions we took during Q2 set us up for success in Q3, Q4, and beyond. The Protect.com continues to grow in terms of everyone that touches, consumers, publisher partners, and advertiser clients, and its ability to grow revenue and EBITDA. And finally, the end of the year, inclusive of both OEP and the holiday season are historically strong for us, and we are confident we've taken steps to make them even stronger this year. With that, I'll pass the call over to Vasundara.
Vasundara Srenivas: Thank you, Joe and good morning to everyone. Like Joe, I will also be focusing my remarks on the color beyond the numbers issued in this morning's press release. So, let's jump in. For Q2, we beat guidance for revenue, EBITDA and margins. Reported revenue was $105.1 million, up 39.7% over the same quarter last year, and adjusted revenue was $109.3 million, up 42.4% year-over-year. Organic revenue grew 19.9% over Q2, 2020 and the split between organic and inorganic revenue was healthy at approximately 84% to 16%. The primary driver of growth was insurance, which accounted for approximately two-third of our total revenues in Q2. Like Joe noted, insurance revenue grew 92.2% over the second quarter of 2020, 73.1% when you adjust for Crisp acquisition. The addition of the Crisp Results assets diversified our insurance revenue. In the quarter, auto made a 51.7% of total insurance, with health now representing 36.4% followed by life at 6% and home at 5.9%. To put this into perspective in the year ago, period auto accounted for 71.1% of our insurance revenues. Although, we believe there is considerable continued growth to be seen with an auto insurance, we recognize the importance of diversification, which will make us less susceptible to the ups and downs of one particular industry. Just touching on the other revenue streams, career and education contributed solid growth this quarter. And we re-launched our consumer finance category in July, so we look forward to reporting this vertical's contribution later this year. We are extremely proud of our gross margin, gross profit and Variable Marketing Margin numbers for Q2, as they represent proof of the flywheel effect that we have so often spoken off. For the second quarter, reported gross profit was $33.7 million equating to a 32.1% margin, nicely ahead of our typical 27% to 30% range and above the 28.5% margin in Q1, 2021, and the 30.3% margin we achieved a year ago. Variable Marketing Margin, or VMM, was 38.2% compared to 32% in Q1, 2021 and 34.1% a year ago. This upside in gross margin was driven by strong execution and strategic investments like DMS Voice, which allowed us to create efficiencies and reduce our cost of good sold. The creation of DMS Voice enabled us to streamline and eliminate systems to result in better experiences for our publisher partners, advertiser clients, and consumers, and has added capabilities which have resulted in revenue and margin improvements. Furthermore, our strong gross margin performance came despite some of the effects of iOS 14 changes, as well as other posts cookie privacy shifts, which are contributing to increase CPMs. Our ability to improve gross margins in the quarter, even despite these industry headwinds further highlights the positive impact of our diversified traffic sources and our insulation from broader industry changes that have negatively impacted a number of our peers. On a reported segment basis, the Q2 Brand-Direct Solutions gross margin was 26%, up from 23.8% in Q1, 2021 and up from 24.2% in the same quarter last year. And the Q2 Marketplace Solutions gross margin was 28.9%, up from 25.7% in Q1, 2021 and down from 30.3% from a year ago, primarily due to strategic decision at the end of Q2, 2020 to prioritize growth and market share over near-term margin. Other solutions, primarily include our SaaS software business, had a gross margin of 76.1%, contributing to our overall gross margin level. For operating expenses, we remained focused on improving the leverage in our business, while balancing our investment for growth. Our total operating expenses amounted to $25.8 million and the second quarter, an increase of $5.6 million from Q1, 2021 and up $9.5 million year-over-year, adjusted for one-time expenses in the second quarter of 2021 related to non-recurring acquisition costs of $0.4 million, stock compensation of $1.3 million, non-recurring lease restructuring reserves of $0.4 million, and mostly non-recurring additional expenses of $1.8 million pertaining mostly to pre-acquisition legal fees settlements and consulting. As a newly formed public company, we right-sized some of our corporate functions and invested in people, processes and technology to position improve and sustain performance and comply with our fiduciary obligations. Building a competitive and entrepreneurial workforce that helps ensure we have the critical skill sets, the innovative minds and the passion for the continued implementation of sophisticated processes and technology to measure, analyze and optimize, while we sustain quality and accuracy remain top priority. We ended the second quarter with a total headcount of approximately 600 full-time equivalent. Finally, on profitability, adjusted EBITDA in the second quarter was $16 million or an adjusted EBITDA margin of approximately 15.2%. EBITDA decreased 2.2% year-over-year. As a reminder, we did not have public company expenses in the year ago quarter. And this decreased, despite margin improvements, is due to increases in operating expenses from legal consulting fees, compliance related matters, SEC filings, IT and staffing upgrades to meet public company obligations and investment and stock incentives to attract and retain our workforce in a highly competitive industry. Excluding our pro forma acquisition adjustments for the prior year, our adjusted EBITDA increased from $13.7 million to $16 million, an increase of approximately 17.1%. Lastly, turning to the balance sheet and liquidity. We ended the quarter with $18.8 million in cash, cash equivalents and marketable securities, down $5 million from the end of Q1, reflecting the Crisp Results acquisition plus normal shifts in working capital. As discussed, we put in place a new $275 million publicly rated credit facility during the quarter, which increased our financial flexibility. Our total debt at quarter-end was $225 million and net of issuance cost, it was $218.2 million. As of quarter-end, we had the full $50 million balance available to us on our new revolving credit facility. After achieving record revenue and EBITDA in Q2, and because of the three things Joe noted, including our expected strength during the upcoming OEP and holiday shopping period, we are comfortable that they're on track to achieve guidance we previously gave. Of course, like every company there are unknowns we must monitor. These are the two I want to call out right now. Although, we are hopeful, the pandemic is subsiding, the recent spikes in COVID may impact reopening of parts of the economy and the speed at which companies have their employees returned to the offices. The pandemic impacted consumer behaviors, including their online shopping and research patents. COVID also impacted our publisher partner and advertiser client employees with downtime increasing when infection rates rise. Our diversification helps us in times of change and we are cautiously optimistic that the worst of the pandemic has behind us all. Also the recent privacy related changes from Apple and the changing cookie sunset timeline from Google tell us that the big tech companies have not landed on the final solution when it comes to consumer tracking and privacy. These changes impact all advertisers and advertising solution providers, and we don't anticipate this topic to be closed anytime soon. However, with continued investment in growth and our focus on optimizing us services to create efficiencies, we are comfortable with higher gross margin range of 28% to 31% and Variable Marketing Margin of 32% to 36% for the full year 2021. In an effort to be more transparent and to simplify the DMS story, next year we plan a pivot to GAAP revenue for both reporting and guidance. That's the consistency we will continue to provide guidance for both GAAP and adjusted revenue for the remainder of 2021. As such, our 2021 full year GAAP revenue guidance is a range of $438 million to $447 million. For our current quarter Q3, we expect GAAP revenue of $108 million to $110 million, adjusted revenue of $113 million to $115 million. and adjusted EBITDA of $17.2 million to $18.1 million. Consistent with our last earnings call, we continue to confirm full year 2021 guidance for adjusted revenue of $455 million to $465 million. And for adjusted EBITDA of $72 million to $75 million, including the impact of acquisitions that were completed during the first half of the year. We expect our free cash flow conversion to continue in the second half of 2021, which in turn we expect to help our ability to continue to delever absent any future acquisitions. In summary, we achieved record numbers this quarter, as a result of the actions we took to expand our margin as demonstrated through our VMM, the growth within our largest vertical insurance on the back of broad-based consumer and advertiser demand and the strategic investments that had an immediate impact along with expectations of long-term benefits. Although, we will continue to monitor the both COVID recovery and what that means to our business in 2021 and beyond, we look forward to the remainder of the year, because the actions we took during Q2 are expected to have continued positive impact in Q3 and Q4. Our Protect.com growth plans will help strengthen revenue and EBITDA, and because we have taken the steps to boost our historically strong OEP and holiday seasons. With that, we thank you for your interest in DMS, and we will now open the lines for questions. Operator, please let our listeners know what they have to do to ask questions.
Operator: Your first question comes from the line of Maria Ripps with Canaccord.
Maria Ripps: Good morning, and congrats on strong results. I just wanted to ask you about your emphasis on growing your agent business. Can you talk about how this agent models sort of impact to unit economics? And you mentioned that that's largely in order right now. Can you make -- can you maybe talk about whether you plan to sort of implement this across other verticals in the future as well?
Joseph Marinucci: Hi, Maria. Good morning. Good to speak to you again. So, with regard to the agent's model and how it impacts unit economics, generally, it favorably impacts unit economics and as opposed to dealing with the enterprise clients. And it gives us great diversity in that we work with both the enterprise clients and the major insurers, and we have a very substantial base of independent sales agents, approximately 6,000. And we have very strong growth initiative there to continue to grow that base. We've recently talked about our ignite program that we run, that has helped us grow those agents. And we continue to be focused there because of the favorable unit economics that come out of dealing with the independent agents. That'll continue to be an area of focus for us because of, again, the more favorable unit economics that exist there. What was the second part of the question again?
Maria Ripps: I was just going to -- I was just trying to ask if you were planning to implement this across other verticals as well.
Joseph Marinucci: Well, insurance, as you're aware, is a substantial portion of our revenue. It's above 60%, approaching two-thirds of revenue now. And working with the independent sales agents inside of the auto insurance vertical is underpinning some of the growth inside of insurance. And it is a fairly unique ecosystem with the independent sales agents inside of the insurance category, specifically inside of the property and casualty segment, which skews heavily towards auto. So, we have a high degree of focus there right now, specifically inside of insurance, and then inside of property and casualty with auto. But outside of that, there are the other categories, health being the second largest category inside of the insurance vertical that we do work in right now. And we do plan to continue to look at opportunities to scale there, obviously with the major insurers and the brokers, and then beyond into the independent sales agents as well. So, yes, there is an initiative to continue to expand and work with independent sales agents outside of property and casualty.
Maria Ripps: Got it. That's very helpful, Joe. And my other question is, sort of as you look at your business today, are there any areas of the platform or any verticals where you see sort of the need to invest more. And more broadly, how are you thinking about the balance between growth and profitability?
Joseph Marinucci: Well, so generally, I mean, we saw great margin improvement this past quarter, obviously with both growth -- gross margin and Variable Marketing Margin moving up. And the best way for me to communicate that, I guess, is we talked a little bit about the consumer engagement score in Q2 and how it went up to 72 from 69. And that's on the back of -- even though global reach for us was down, engagements are up and that title in our ecosystem, right? So, it benefits all verticals on both the Marketplace and the Brand-Direct side. You're going from the top down, you'd have insurance first and then brand e-commerce and then career and education, and then consumer finance, which is really starting to reemerge for us. So, as we continue to invest in the engagements that we have with consumers through leveraging our Marketplace solutions, our owned and operated websites and interacting with consumers, it has this flywheel effect, which is effectively reinvesting in the first party data asset, which is connected to media reach through our proprietary technology. As we continue to go through those cycles, we just get more efficient, which is why even though for us global reach was down, this is not an impression based business, right? So, we're not looking at how many impressions we had access to. We're looking at our ability to effectively and efficiently engage consumers and needing less impressions to do that, means that we have more quality engagement. And as you're aware, we're paid on performance. So that means that both near customers and/or customers have to be coming out of those engagements, which when you see rising -- when you see the consumer engagement score go up and you see margin increasing, it means we're doing a good job of it. So, we're going to continue to invest in the technology and the resources to continue to be efficient on the front end there, with how we go about putting the right offer in front of the right person in the right place at the right time, because that benefits all categories, insurance, brand e-commerce, carrier and education, and consumer finance. So that's where the investment has to be. And then, we will be successful in the verticals behind that, if that makes sense.
Maria Ripps: That's great. Thank you so much for the color. I appreciate it.
Joseph Marinucci: Yeah. Thank you, Maria. Have a good morning.
Operator: Your next question comes from the line of Marvin Fong with BTIG.
Marvin Fong: Good morning. Thanks everyone for taking my questions. I apologize. I jumped on the call a little late. So, you may have already mentioned this. But just on the Variable Marketing Margin, great performance, great to see that improving. In terms of the guidance, it looks like it would be sequentially down in the third quarter. Just wondering what were the drivers of that? And within your range of 32% to 36%, what would be the factors that might cause it to trend towards the upper end of that range versus the lower end of that range? And then second question, just longer term. I think you've mentioned some of the splits within your insurance vertical, life insurance or health insurance, sorry, at 36%, et cetera. Just curious, Joe, if you'd be willing to take a stab at, maybe in the long run, what your exposures might be between auto, health and some of your other insurance categories. Thanks.
Joseph Marinucci: Yeah. So, I'll let Vasundara comment on the Variable Marketing Margin. But for -- I guess just generally with regard to Variable Marketing Margin, this is the first quarter that we released that as everybody's aware. And we did so in an effort to increase transparency and improve -- and best communications because we felt this is a metric that investors have asked for and the value and several of our peers are obviously reporting it. So, we're very happy to be able to start producing this metrics so that people can gauge the effect of this of media spent. I'll let Vasundara speak to the variability there in a second. With regard to the breakout of the segments and insurance, property and casualty, obviously is the biggest category. And that would be led by auto. And that is still -- we generally have not talked about this, but automotive is about half of the insurance business right now, followed by now the emergence of health. Obviously, we've made a pretty substantial acquisition there at the beginning of the second quarter, with the Crisp Results business that we acquired. And health is now an emerging category for us or accelerating and emerging category for us inside of insurance, right behind automotive. And then, those two are going to make up the vast majority of our insurance revenue, Marvin. And then behind that, you're going to have a life insurance and home insurance as the two, I would say, categories that we have told and that we're looking to expand in behind the big two of automotive and health insurance. So, we could work on, continuing to update these categories as we continue to report numbers quarter-to-quarter. And we'll talk more about the -- I guess, the lesser two categories as they become more significant, but the big two are automotive followed by health insurance. Vasundara, if you would like to comment a little bit on the variability in the VMM, I'll let you do that now.
Vasundara Srenivas: Sure. Thanks. Thanks Joe. Hi Marvin. I think if you think about VMM today and what's happened over time and the results we put out, right, recently, we made some strategic decisions in terms of the way we execute our operations. We create a DMS Voice, which was acquisition of a software that enabled us to streamline and eliminate system through results and better experiences. So, those were the big drivers for our VMM percentage is being hired. With that said, we do expect that to continue going forward at a higher percentage, but as we integrate Crisp more efficiently into the business, as we look at Voice and its value proposition across the business, the rising cost of CPMs, so as you can see, there is an upside, but there's also a downside there, or we're cautiously optimistic. So, I would say we do have opportunity to beat that target, but we are very comfortable with the range that they've put out there as guidance. Hopefully that addresses your question.
Marvin Fong: Yeah. No, it did. Thank you very much. If I could maybe add one follow-up. Just as we look ahead the fourth quarter, I think Joe you mentioned, it's going to be a big quarter seasonally. I understand the Open Enrollment Period will be -- we'll see how that progresses, but on the e-commerce side, since you've referenced there, just curious on your visibility there on the amount of business you might be generating there on the Brand-Direct side or Marketplace side, just update us on your thoughts there.
Joseph Marinucci: Generally, Marvin, we've had good visibility into the e-commerce brand segment of the business. Although, there is some uncertainty around what kind of holiday shopping season we're going to see whether or not consumers behave the way they behave last year, or whether there's some shifts there where there's more in-store shopping, that's still to be determined. But specifically to answer your question on visibility, I feel that we have very good visibility because of the relationships we have with the advertisers. And we're deeply embedded in their planning cycles for the full year, but specifically for those advertisers who lean heavily on that holiday shopping season, we're very in tune with their ad spend budget's goals, so on and so forth and how they plan on moving into the holiday shopping season and the run-up to that because some of that actually comes into Q3 period as you head into the Q4 period. So, generally, we believe we have good visibility across the totality of the business and the different vertical/segments of the business. It does transcend and get down into those different verticals. And the sales teams are very engaged with the advertising clients in terms of how they're going to spend those dollars during the different times of the year. So, I would say generally we have good visibility and specifically with brand e-commerce going into the holiday season, that is certainly true.
Marvin Fong: That's terrific. Thanks, Joe and Vasundara thanks so much.
Joseph Marinucci: You're welcome, Marvin.
Operator: Your next question comes from the line of Jason Kreyer with Craig-Hallum.
Jason Kreyer: Great. Thanks, guys. Joe, just wanted to ask you -- I know these first party data sets are a key competitive advantage for you guys. And so, curious to what degree the conversations with customers revolve around kind of utilizing those in lieu of that impending cookie deprecation. And then, now that we got that delay from Google, just kind of curious how you look at the pipeline going forward. I mean, do you think that there's an opportunity to really expand the pipeline, given you've got more time to have these conversations or do you think there's potential risk that we hit some type of an air pocket where people just kind of wait on those decisions for another year until we get closer to that deadline?
Joseph Marinucci: Hey, Jason. Good morning. Good to speak to you again. So, I think I'm going to go backwards through that question with the cookie aspect of it first, because it leads us to the front part of the question. So, I think I've commented on this previously. We're basically non-relying on cookies at this point, 95%-plus of our media buying and how we deploy our media dollars is non-relying on cookies. And that's the result of us leveraging the first party data asset, which that originates from us spending our media dollars and interacting with consumers mainly on our marketplaces and our owned and operated websites. So, yes, Google did push the clock back a year. Yes, that likely benefits some people in the ecosystem who are heavily dependent on cookies. It has virtually no effect on us. So, they may move the clock up again. I don't know what's going to happen there, but it was kind of a non-event for us. With regard to -- just generally first party data and how that benefits us, the iOS 14 update, as you're aware, it was released on April 26th and also included app tracking transparency. And if you look at some of the statistics a few weeks after the rollout, disproportionately low amount of users have actually allowed tracking, right? So, the conversation around data privacy, and then you get into how that impacts platforms like Facebook, that could lead to some challenges in terms of how ad dollars are spent because you have limited ad targeting and optimization. It obviously affects conversion on campaigns and then, modifications to attribution and reporting are there too, right? So, because we leverage first party data because we have a one-to-one relationship with the consumer just comes off the back of them interacting with us directly in those Marketplace Solutions. We have that data and we're communicating directly with those consumers that we're leveraging the ability to put the right offer in front of that right person in the right place at the right time as a result of having that data. So, we don't have to rely on the third-party data that would have been affected by the iOS 14 update or the limitation of that data, I should say. So, I generally feel like we're well-positioned as a result of leveraging the first party data asset that we have. And you see that in our consumer engagement score that I talked to Maria about with the score going up to 72 from 69, even though reaches down. So, it just means we're more effective and, and be more effective. We're effectively reducing friction from the ecosystem. Because again, it just goes back to creating value by putting the right offer in front of the right person in the right place at the right time. And that's why engagement's up, conversion's up, margin's up. So, it's a good experience for the consumer. It's a good experience for the advertiser alike. So, I kind of ran around that. So, it was a long answer to pretty short question. I'll see if I did my job.
Jason Kreyer: It wasn't even that short of a question. So, I appreciate the response. I'm going to switch gears a little bit to Protect.com. I'm just wondering if you can maybe shine some light on, to what degree are you currently marketing that in, in driving consumer traffic to that property today, and maybe contrast that with what you expect down the road and then, where we should anticipate consumer trends over time.
Joseph Marinucci: Right. So, we're very excited about Protect.com. We're building -- as mentioned on the earnings call, we're building out the tech to be our flagship product design to connect consumers with insurance products and services, and also products and services within adjacent categories. So, we're continuing to invest in Protect.com and we've already connected a meaningful amount of consumers with insurance providers. I think it's more than half a million consumers now through the portal. It's currently still focused on auto insurance, but it's starting to diversify. And this year, we're expecting approximately $25 million in revenue from Protect.com by year-end. And specifically the expectations going into Q3 is, the expansion into additional lines of insurance and then also adjacent verticals like home services and also a site redesign and portal update as we continue to invest in that Marketplace Solution. So, big expectations. We're already well on our way with having interacted with so many consumers as we've already interacted with, and we expect meaningful revenue to come behind the investment we've made in Protect.com thus far. It's a pretty substantial goal this year, $25 million in revenue to come through that site when last year it was effectively zero. So that's where we're at with Protect.
Jason Kreyer: Got it. Perfect. Thank you.
Joseph Marinucci: You're welcome.
Operator: Your next question comes from the line of Nick Jones with Citi.
Nick Jones: Great. Thanks for taking the questions. Maybe two, and the first one, given your exposure to auto insurance, what are your thoughts, I guess, on kind of one, the hot kind of used auto market and the kind of increased demand or at higher levels than usual. And then, what that looks like, kind of from here, do you see that kind of moderating visibility into that and does kind of the pop arts performance have any correlation to kind of this increased demand and what might -- maybe come through the back half of this year and early next year? And then, the second question really just around M&A, I think in the press release you said there's still a nice pipeline there. Are you able to give any color on maybe the size of potential acquisitions or kind of -- are they going to be similar to Crisp or are there larger or smaller, any color there would be great. Thanks.
Joseph Marinucci: Hey, Nick. Good morning. Good to speak to you again. So, on the auto question first, with the property and casualty of the auto insurance, look, we saw significant growth in insurance during the quarter, up 92% from the prior quarter. So very substantial growth and that's powered by broad-based demand as quote request volume increased 107%. So, demand is there from the consumers, and demand is currently there from the insurers as well. So, matching the two up, certainly helps us. And as I mentioned earlier with Maria, we see that from the enterprise clients and we also see it coming from the agents as well. With more people -- I guess specifically your question about, a lot of cars are changing hands here. And I think generally you have more people on the road at this time last than you had last year. So, some of the carriers, two major carriers progressive in route, have communicated that they're anticipating loss ratios to rise as a result of having more drivers on the road. So, I guess the commentary on that is you could see some pricing pressure from the major carriers, just as a result of anticipated loss ratios going up because of all the activity that you're talking about. But we don't really look at that as a threat to pricing and ecosystem because we have good diversity, because we work with the enterprise level clients. And we also -- as Maria keyed into, the unit economics at the agent level are more favorable. So, we've got really good balance there in that, we've got a very sizable agent pool. So, I think generally, yes, it is certainly a hot market for autos. A lot of demand, a lot of cars on the road, people are driving more, as a result loss ratios could go up. It could be some pricing impact there depending on who the enterprise client is. But we like where we're positioned in the market on both sides in terms of having the enterprise clients, having the agents, and then generally just being really efficient and effective with our media dollars, as can be seen in the margin expansion. So, then, I guess, the question on M&A. So, look, we've done two deals this year. We've done the Aimtell/PushPros/Aramis on February and then the acquisition of Crisp Results in April. And these were two really important deals for us for two very different reasons. The Aimtell/PushPros/Aramis was really an investment in technology, and let's call it, portability channels with how we communicate with consumers and how we market to them and re-engage them, right? And then, if you look at the Crisp Results acquisition, that was further investment in our insurance category to help rapidly expand -- was already a growing business that we had built in health insurance. So, two very different acquisitions. And I'd like to note that, we're still very deeply involved with the integration of those businesses. And as with every acquisition that we do, we look to wholly integrate, synergize and harmonize those businesses within the one DMS ecosystem. So, we're -- I'd say, aggressively down the road on that, but there's still work to be done. But at the same time, we look at organic growth and M&A as being the two levers that we could throw to grow the business. So, we continue to look at interesting opportunities as they present themselves. It's difficult for me to comment on specifics, you know that. But what I can tell you is that we've been disciplined in the past. I believe we've done an excellent job. Our entire team has done an excellent job at sourcing quality acquisitions, integrating them, synergizing them, harmonizing them inside of the ecosystem. So, we're going to continue to be just as disciplined as we already have. And there's certainly no shortage of opportunities out there because it's a fragmented space. So, the talented team that we have will continue to be out there, looking for stuff that makes sense for us to potentially acquire, to accelerate the already strong organic growth profile that the business have. So, we're excited about it, but I -- not much more I can say other than we've done a good job, and we're going to continue to be disciplined and do the things we've already done.
Nick Jones: Great. Thank you.
Joseph Marinucci: You got it.
Operator: There are no additional questions at this time. I'd like to turn it back over to management for closing remarks.
Thomas Bock: Perfect. Thank you, operator. And thank you everybody for joining us this morning. We look forward to our next discussion in the next quarter. Thank you.
Operator: Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.
