Digital Media Solutions, Inc. (DMS) on Q3 2021 Results - Earnings Call Transcript
Operator: Hello, and welcome to the Digital Media Solutions Third Quarter 2021 Earnings Call. My name is Lauren, and I will be coordinating your call today. I will now hand you over to your host, Thomas Bock, Executive Vice President, Corporate Strategy and Investor Relations to begin. Thomas, please go ahead.
Thomas Bock : Thank you for joining us to discuss DMS' financial results for the third 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 content of our forward-looking statements. For a more detailed description of the risk factors that may affect our results, including disclosure about the effects of the 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 welcome everyone. 2021 has been a year of double-digit growth for DMS. Specifically, during Q3, revenue was up 30% on a reported basis over the year ago quarter with record revenue of $107.4 million, and record adjusted revenue of $111.8 million. Q3 results were driven by strong growth across both our primary segments; Brand-Direct Solutions, which grew 32%, and Marketplace Solutions, which grew 47%. Performance across our segments was led by 77% growth in our largest vertical, insurance, 64%, if you adjust for the Crisp acquisition. During the Q3 period, even with some industry headwinds as a result of rising loss ratios of our auto insurance clients, we saw continued growth in auto, which represented 46% of insurance revenue. Auto insurance was closely followed by health insurance, which now makes up 43% of our insurance revenue and is growing. Within auto insurance, we sell to many of the top carriers, plus, we have a robust network of independent insurance agents supported through programs like ZipQuote Ignite that we've spoken about previously. And within health insurance, we have advertisers in both the over 65 and under 65 categories, giving us diversification. I'm also excited to say that in Q3, we successfully launched the Protect Health Insurance Agency and here in Q4, we've been writing policies since the beginning of the Medicare Annual Enrollment Period. As a result, we now have access to the $135 billion commission TAM component of the insurance market. Outside of insurance, ecommerce, career and education, and consumer finance together grew by 8% year-over-year. During the third quarter, we also launched the Efficiency and Technology Initiative or ETI. This initiative is focused on making strategic decisions and is designed to drive better connectivity inside the DMS ecosystem, which creates efficiency and growth. The ETI is expected to result in future annual savings of $8.4 million once fully implemented prior to yearend 2021 with $3.5 million in annualized savings already completed as of September 30. In mid-August, we announced a strategic review. I cannot offer an update currently beyond what we announced, but we'll do so as soon as there is something to share. As a reminder, our goal is to maximize value for shareholders and we hired two of the best banks to advise us. That said, there is no guarantee that strategic review will conclude with the transaction of any sort. Shifting into Q4, the current quarter includes the Medicare Annual Enrollment Period for over 65 health insurance, which began October 15, plus the open enrollment period for under 65 health insurance, which started November 1. We have good early indications that advertising spend during this year's AEP and OEP period will be up from last year, which has us optimistic that we are on track to exceed our expectations for the entire period. As a result of the current trends across health insurance and the holiday shopping season, our Q4 guidance is $112 million to $122 million in revenue, $116 million to $126 million in adjusted revenue and $16.5 million to $19.5 million in adjusted EBITDA. Beyond the Q4 period, we are looking forward to 2022 and the growth opportunities we see, which include, growth powered by our proprietary toolsets of data, technology and media reach; continued growth in insurance, both in auto and health insurance; expansion of our Protect Medicare Agency business, which was a scrap start for us in Q3 and expected to grow strongly in 2022; and of course, the effects of our efficiency and technology initiatives, which will further streamline our business, allowing us to grow faster while reducing redundant costs. With that, I will pass the call over to Vasundara to cover the financials.
Vasundara Srenivas : Thank you, Joe, and good morning to everyone. I'll start off with some color on our revenues. Reported revenue was $107.4 million, a record quarter, up 30% over the same quarter last year and adjusted revenue was $111.8 million, up 31% year-over-year. Organic revenue grew 11% over Q3 2020 and the split between organic and inorganic revenue was healthy at approximately 85% to 15%. Insurance, which accounted for approximately 63% of our total revenues in Q3 grew 77% over the third quarter of 2020; 64% when you adjust for the Crisp acquisition. Staying for a moment with insurance, in the quarter, auto made up 46% of total insurance, health came in at 43%, followed by life at 6% and home at 5%. As you can see, we are much better diversified than we were last year. To put this into perspective, in the year ago period, auto accounted for 65% of our insurance revenues. Just touching on the other sectors, brand and e-commerce, which represented 15% of our total revenues, was up 8%, compared to the year-ago quarter, showing positive momentum as we head into the holiday season. Career and education, which was approximately 11% of our total revenues in Q3, declined 3% year-over-year, with the combination of COVID spikes and government programs affecting our customers' advertising demand. Consumer finance, approximately 9% of our total revenues has shown good strength for us, up 25% in Q3 over the prior year's quarter. The macro environment had a stronger effect on our gross margins as insurers maintained demand while dialing back their advertising spend. For the third quarter, reported gross profit was $31 million, equating to a 29% margin within the 28% to 31% range we discussed on our last earnings call and compared to 32% margin in Q2 2021 and the 30% margin we achieved a year ago. Variable marketing margin, or VMM, was 35%, compared to 38% in Q2 2021 and 35% a year ago. On a reported segment basis, excluding intra-company revenues, the Q3 Brand-Direct Solutions gross margin was 23%, compared to 26% in Q2 2021 and flat from the same quarter last year and the Q3 Marketplace Solutions gross margin was 25%, compared to 29% in Q2 2021 and 30% from a year ago. Other solutions primarily, including our SaaS software business had a gross margin of 72%, contributing to our overall gross margin level. For operating expenses, as Joe mentioned, we have an ongoing commitment to drive efficiencies and reduce costs in the way we execute our operations and support infrastructure, which included the investment in DMS Voice. We have been streamlining and eliminating systems to create better experiences for our publisher partners, advertiser clients and consumers and added capabilities, which delivered revenue and margin improvements. The ETI is focused on technology efficiencies and organizational design that will continue to drive better productivity across the organization by reducing the redundancy that has occurred as a result of acquisitions, plus significant growth over the years. The ETI will also streamline decision-making and efficiently reduce our operational costs. $3.5 million cost in annualized savings were completed during the third quarter, however, the majority will be completed in the fourth quarter. On an annualized basis, we will improve the cost structure by $8.4 million, but the effect on Q3 was negligible given the timing. The effects of the initiative will show up both in our cost of goods sold, as well as in OpEx with approximately 90% of the $8.4 million in OpEx. For example, we are migrating from a fully cloud-based infrastructure to a hybrid cloud on-premises solution, which is required to enable a truly scalable, agile infrastructure and gives us maximum flexibility and control of hardware, network performance, storage, redundancy, and cost efficiencies. Important to note, these efficiencies and cost savings are not just a one-time initiative. We are embracing the efficiency and cost-savings philosophy with plans for continual introspection to identify and resolve redundancies throughout the business. Our total operating expenses amounted to $26 million in the third quarter, a decrease of $3 million from Q2 2021 and up $2 million year-over-year. As you may recall, we became a public company on July 16, 2020 and while Q3 was our first quarter and we stifled against public company expenses, several areas of OpEx have risen as a result of recent acquisitions and our investment in people, processes and technology. We ended the second quarter with a total headcount of approximately 600 full-time equivalents. Finally, on profitability, our adjusted EBITDA in the quarter was $11 million or a margin of 10%, compared to $14 million or a margin of 17% in the same quarter last year. Our net income came in at $5.4 million or a margin of 5%, up from $1.3 million or a margin of 2% in the same quarter last year. EPS came in at $0.10, compared to $0.09 in Q3 2020. Lastly, turning to the balance sheet and liquidity, we ended this quarter with $18.7 million in cash, cash equivalents and marketable securities, flat from the end of Q2, reflecting normal shifts in working capital. Our total debt at quarter end was $224 million and net of issuance costs, it was $218 million. As of quarter end, we had the full $50 million balance available to us on our revolving credit facility. Last month, we issued updated guidance, and we are comfortable that we're on track to achieve that guidance. Of course, like every company, there are unknowns we must monitor, including these that I want to call out right now. Q4 is a seasonally very important quarter for us. We have spent a lot of effort and resources to ensure that the health insurance open enrollment period, which has been ongoing since October 15 is a successful one on all sides of our business. The strength of the upcoming holiday shopping season during these uncertain times will also have an effect on our Q4 results. A quarter ago, we were cautiously optimistic that the worst of COVID was behind us. However, the Delta variant emerged and impacted the U.S. affected our employees, our advertising clients and beyond. Though we are seeing some improving trends again, it is difficult to predict whether we will once again have to deal with future spikes. However, with continued investments in our people, processes, and technology and with continued execution, we remain comfortable with our previously mentioned gross margin range of 28% to 31% and variable marketing margin of 32% to 36% for the full year 2021. As a reminder, next year, we plan to pivot to GAAP revenue for both reporting and guidance, but for consistency, we will continue to provide guidance for both GAAP and adjusted revenue for the remainder of 2021. Our 2021 full year GAAP revenue guidance is a range of $421 million to $431 million and our adjusted revenue guidance range is $437 million to $447 million, while we expect adjusted EBITDA of $60 million to $63 million including the impact of acquisitions that were completed during the first half of the year, unchanged from last month's update. We anticipate a free cash flow conversion to continue into Q4, which, in turn, we expect to help our ability to continue to delever absent any future acquisitions. In summary, we reported a record revenue quarter in Q3. We are excited about our early results during the AEP and OEP periods and we believe that our efficiency and cost savings initiatives will become part of the fabric of our organization. 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: Our first question comes from Michael Graham from Canaccord. Michael, please proceed.
Michael Graham : Hi. Thank you, and thanks a lot for the information. Just wanted to ask two questions, if I could. The first one is just on the auto insurance space. What are you thinking about in terms of how long it might take for the carriers to sort of cycle through this period of compressed margins and sort of return back to normal levels of marketing spend? Like how long has that taken in prior industry cycles like this? And then the second one, I just wanted to ask you, you talked last quarter about launching DMS Voice, which seems like a good sort of boost to margins. You mentioned this quarter some COVID-related headwinds in your call centers. So just wanted to ask – talk about your progress there more broadly and how big this channel can be for you over time?
Joseph Marinucci : Hey, Michael. Good morning. This is Joe Marinucci. Good to have you on the call. We used to have Maria on. I know you are in for her today.
Michael Graham : We are multi-talcum. So, yes, thanks. Thank you.
Michael Graham : Okay. So, first question on auto insurance and the bid price cycle and how long that might last. I guess, what I'd first say is that we have confidence that we are at a bottom on insurance now, because we are working with both the enterprise insurers, and then we have our agent footprint, which is substantial. And beyond this, we've been tracking the KPIs and bid prices for the better part of the last couple of months as we've seen some compression here and with the KPIs that we track and looking at the bid prices and the feedback that we have from the carriers plus the stability that we get from the agent model, we believe that we are at a stable bottom now. So, the compression, in our opinion has ended, how long the cycle is going to last, you'd kind of have to look back to the same cycle in 2016, 2017. There is a relatively firm degree of optimism going into 2022 that bid prices will start to come back up. But that's to be determined, but that's pretty much consensus from the people that we speak to, enterprise clients, agents and then other competitors in the space. So, I think we're working our way through. We've reached the bottom and hopefully in early 2022, we start coming back up. Second question on DMS Voice, look, generally, that's an internal solution and it has served us well and it helped us deliver top to bottom and side of our funnel capabilities. The issue that we had in Q3 was specific to our Memphis call center where we staff a lot of our health insurance team that right now is obviously critically important to us during the open enrollment period. So, because we have a static contact center there, that type of environment is more susceptible to the COVID issues that the country has been played with, which has obviously not been great and we did have the delta spike in that call center. So that was isolated to that one specific location. But the larger totality of DMS Voice is about agility and flexibility and leveraging data technology, media reach, specifically the technology that is the voice, and most of those agents are at home. So, the platform itself is solid, but we did have an issue in our static call center, which not a whole lot we can do about that if you have a Delta outbreak, we've got to roll out safety protocols and make sure that we are taking care of our people first and getting them back in when it is appropriate. So that was the specific issue with the Memphis call center, which was, I would say, acutely problematic, because we need to staff up heading into the AEP period. So there was a number of different things that we had to do once we worked our way through that to make sure that we were at capacity. So we could hit the ground running here during open enrollment, which we were able to execute on those strategies.
Michael Graham : Okay. Thanks. Sounds good, Joe. I appreciate all the color.
Joseph Marinucci : You are welcome.
Operator: Our next question comes from the line of Marvin Fong from BTIG. Marvin, please go ahead.
Marvin Fong : Good morning. Thank you for taking my questions. Just thought I have a question on gross margin. I think it's fair to assume auto insurance a little weaker, but I thought it'd be helpful if you could provide sort of an update on your other major segments how pricing and margins are behaving? Are they basically kind of mirroring the strength in revenue growth? And then a second question, just on Protect Health Insurance Agency. I know it's begun underwriting in time for the fourth quarter open enrollment period. Maybe you could just kind of give us an update on how that's going? And then, also might be helpful to give us additional color on how you are thinking about that for next year when it should be ramped more fully?
Joseph Marinucci : Hey, Marvin. Good morning. This is Joe speaking. So, I think I'll work backwards through your questions and cover the Protect Medicare Agency first. Yes, so that was pretty much stood up during the Q3 period. And right up until the point where we made the public-facing announcement in early October, it was to be determined, if we were going to have licensing in place to have those agents on the phone during the open enrollment period, which started the 15th of October. So it was an all-out sprint in the quarter to lay the foundation to get the infrastructure in place and the licensing in place to have those folks on the phone. And I am proud to say, excited to say that the team across the totality DMS pulled hard and we got it done. And we have roughly 25 licensed agents on the phone during this open enrollment period, which it was really important for us to get in market this year because we are seeing really positive early indications in terms of performance there. We obviously have really strong top-of-the-funnel capabilities, leveraging our data, our technology, and our media reach and now having the ability to write policies and be vertically integrated, that is very exciting for us. And as I said, the early indications are in line with those expectations, very positive. So, growth going forward for next year, I mean, this is a headcount-driven model in terms of having qualified licensed agents on the phone and we feel very confident that with the learnings that we'll have in this open enrollment period and with the infrastructure we've already built and with, let's call it, subsequent investment in that infrastructure that we can substantially ramp this model into 2022. And because it's headcount-driven, we have a plan, we have a formula, we can execute on that. And we could take 25 agents up to, say, 150 agents, which is in line with our plan, and that would drive fairly linear growth when you look at adding that headcount, it just is a function of how we add that headcount, how that headcount is trained, recruit, hired and trained and put on the platform. But the goal would be to have exponentially more agents on the phone next year during the open enrollment period than we have this year and being in market this year during that period is what sets us up to make that happen. So we're very excited about that. With regard to gross margins outlook, I'll just say generally that and I think the Vasundara is probably going to want to contribute here, as well. But look, just generally, you hit on it in the auto insurance. We saw bid price compression in the quarter. And we were not sure where the bottom was there, but we wanted to continue to stay in market and deliver on the advertising budgets that we had. So we did absorb some of that compression internally, which obviously hits our variable marketing margin and then pulls through to our gross margin level. So that was certainly an issue for us inside of the insurance category, which, as you are aware, during the period was the majority of our revenue, 63%. So there is a disproportionate hit there to variable marketing margin and overall gross margin. Outside of insurance, we did not see the same type of compression that we saw inside of insurance. So margins were generally stable elsewhere in the business. Vasundara, I'll flip it to you if you want to provide any more color to Marvin on this.
Vasundara Srenivas : Sure, Joe. Thanks. Hi, Marvin. I think, firstly, I'd like to say, right, our reported gross margins was 29%, well within the guidance range of 28% to 31% that we've been talking about. Slightly below the prior quarter last year again, for all the reasons we just talked about, the auto insurance vertical impact, as well as the FX and the spike in COVID infections. I think, Joe hit it, I mean, insurance was the area that got hit. But if I kind of break it out and we've said this before, we don't manage the business to specific margin goals, right? We continue to focus on optimizing our services to create efficiencies. We just touched on DMS Voice. Advertiser clients continue to spend more with us. Our first-party data asset grows. The rest of the business grows overall and our gross margin grows. So I would say across the rest of the portfolio, it's pretty stable. But as we said, I mean, the efficiencies that we’ve put in place will be, again, across the different verticals, not just insurance. So, overall, comfortable with the 28% to 31% range going forward and VMM of 32% to 36%.
Marvin Fong : That's great. That's great. And if I could do a follow-up. Just on M&A, I know you guys don't want to give too much away. But just curious, I think kind of across the publicly traded area, valuations have come in. Just curious on what you might be seeing in terms of valuations for assets you might be interested? And are they coming down? And just any thoughts about your strategy going forward would be great. Thanks.
Joseph Marinucci : Hey, Marvin, it's Joe back in again. You're correct. It is – there certainly are a lot of opportunities in our space. It's a relatively fragmented space. I would say that market temperature is still on the hotter side right now. From a perspective of you have more sellers, but there is also a lot of interest, as well. So, we'll continue to navigate this. We've been very deliberate when it comes to deploying our financial and human capital specifically, as it relates to M&A. We obviously want to keep a pulse on what's going on out there. We have dedicated corporate development staff. But we're in the midst of our Q4 period. You know what the guidance is for the period. We have the open enrollment period. We stood up the Protect Medicare Agency organically. We are really excited about organic growth prospects right now and finishing this year as strongly as we can. But we'll certainly not put the blinders on and be cognizant of the fact that there could be opportunities out there and the corporate development team does a great job of staying on top of that. But specifically to your question, the market is still on the hotter side, right now, both in terms of quantity sellers and then interest from the buyer side. So valuations are still on the higher side. I think that's the direct answer to your question.
Marvin Fong : Gotcha. That's great color. Thank you, Joe. Thank you, Vasundara.
Joseph Marinucci : Good talking to you, Marvin. Have a great morning.
Operator: Our next question comes from the line of Jason Kreyer from Craig-Hallum. Jason, please go ahead.
Jason Kreyer : Hey. Good morning, guys. Joe, some of the other public companies that sell into the Health and Medicare segments have reported a little bit of choppy results and outlook and kind of cited some churn in regulatory changes. Just curious if you can dive further into exactly what you're doing in that Health and Medicare category? How you are helping carriers? Maybe how you're differentiated relative to others that are in the market?
Joseph Marinucci : Hey, Jason. Good morning. Good to speak to you. So, I can't speak to the inner workings of some of the other public companies. Yes, you're right, I saw some of the announcements that came out of - specifically the eHealth yesterday. There is some choppiness. And when we look at our business, we view ourselves as best-in-class in that top part of the funnel, which is why we are a strategic marketing partner to companies like eHealth, like SelectQuote, like GoHealth, as an example. And that's because we are leveraging that centralized toolbox, which we've talked quite a bit about, which starts with data, first-party data, then you have our technology, our proprietary technology, which connects us into our media reach. So, I would tell you that this is really simple. It tracks back directly to the data and our ability to put the right offer, in front of the right person, in the right place, at the right time. And because, we are able to source consumers that have high intent to interact, as you move down that funnel, conversion statistics stay relatively predictable and ability to convert at acceptable rates where there is ROI on marketing spend is there. And the consistency of the ability to do that is what I would say, gives us stability in our ecosystem as a strategic marketing partner and then, as we move over to the other side, being in the agency business. We are very confident in our top-of-the-funnel capabilities to source good quality consumers that have intent to interact and purchase the senior health insurance products. So, best-in-class up top usually results in good outcomes down low. And we're a strategic marketing partner to these folks, and now we're in market with our own agency. So with regard to what's going on in our ecosystem, we are very confident about that. With regard to what might be going on in those other ecosystems, I don't fully have my arms around that. But I can tell you that we have very, as I said, earlier when speaking to Marvin, we have very positive early indicators here with the results that we are seeing inside our agency model.
Jason Kreyer : Perfect. And then, just bouncing back into auto insurance. I am wondering if you can break that down a little further. How broad-based kind of the compression was there? Was that across enterprise and agency? And then, from a carrier perspective, were you just seeing that maybe from a couple of large carriers? Or are you seeing kind of a little bit of hit to combined ratios and marketing budgets across pretty much all the carriers you are working on?
Joseph Marinucci : It's pretty consistent across the enterprise clients. Obviously, the agents provide a greater degree of stability in terms of how they spend their marketing dollars. But, when you don't see this stuff coming in, it starts to move in, in a fashion where it's continually moving down. It's hard to plan ahead of that. So it puts you in this place where you're somewhat reactive to it. So we had to make adjustments in the third quarter and then, subsequently, monitor those adjustments as we moved into the fourth quarter to ensure that we could maintain the budgets that we have at the enterprise level and service those clients because they need to keep spending and then also serve the agent-customer base, as well. And, I guess, what I am telling you is, when you don't know where the bottom is, sometimes you maintain certain spend levels, which is what I was getting at with Marvin on gross margin, when Vasundara came in behind on, you try to spend through this stuff to maintain advertising budget. And in doing so, sometimes, you do this at low margin or potentially no margin to see what the cycle is and that just generally affects the totality of the business. So, the price compression was pretty consistent across the enterprise-level customers. There was some compression at the agent model, but not nearly as much. I would tell you the agent base that we have gives us a good degree of stability on the auto insurance side, which is why on a Q-on-Q basis, quarter-on-quarter basis, we still grew pretty demonstrably in the category, but there is no denying that there was price compression at the enterprise-level and that had a negative impact on the business and the industry in total, so.
Jason Kreyer : Got it. Okay. Thanks for the color. Appreciate it.
Joseph Marinucci : You got it, Jason. Have a good morning.
Operator: Our next question comes from the line of Nick Jones from Citi. Nick, please proceed.
Nick Jones : Great. Good morning, Joe. Thanks for taking the questions. Two, if I could? I guess one, is maybe looking at the e-commerce business, as we go into the holiday season, is there any impact or any sign of an impact from supply chain challenges? I think in some categories, we are hearing that holiday spend is getting pulled forward. I don't know, people are kind of planning a little bit more due to kind of certain items being out of stock. And then, the second question, without, I guess, looking for a comment on the strategic review, is the strategic review impacting the M&A strategy? I guess, in other words, are you potentially not being as aggressive on acquisitions as you work through the strategic review? Thanks.
Joseph Marinucci : So, I'll work backwards with you. And good morning, Nick. Good to have you on the call. I'll work backwards on that. So with regard to strategic review, it's basically business as usual for us as a public company. Obviously, that in the background does create a little bit of noise. But we need to continue to run the business as we have run the business. And as I said to Marvin, it's a fairly busy M&A environment right now and you have a lot of sellers out there, but you also have a lot of interest on the buyer side. And I would generally say that prices are on the warmer to hot side. And we are keeping the tab on that to make sure that we're aware of the opportunities, but we are also very much heads down on our plan for the balance of the year. Very excited about the momentum that we have here during the open enrollment periods with the Health Insurance segment of the business and we did make an acquisition earlier this year at Crisp that we made strategically ahead of this open enrollment period. So, executing during the open enrollment period on that strategy as a result of that acquisition is kind of like the continuation of our M&A strategy. But I wouldn't say we are closed down, but we're heads down on the organic side, and we are certainly keeping our eyes on the M&A grid, so to speak, for the companies that we track. So, and then, regards to strategic review, it's in the – it was in the script, in the press release. No comment until there is something to comment on. So we'll just continue to move forward with that. We've got two really good banks, Goldman Sachs and Canaccord working on that. So, if and when there is an update, we'll obviously communicate that to the market. On the question with regards to e-commerce, it's a good one. There is a lot of supply chain issues in the country that are highly publicized. We generally don't see those types of issues with the advertisers that we work with and we've not been given any early indications as we head into or we are now very close to that e-commerce holiday shopping season. There are some unknowns around that, and we'll have to see how that plays out. But the current guidance that we have provided, which we went through on the call in terms of where we believe we'll finish the year. It contemplates the degrees of unknown that exists in the market with regard to the holiday shopping, the AEP period, some of the uncertainty that still exists with COVID. So that's all factored into the GAAP revenue guidance of $421 million to $431 million. The adjusted revenue guidance of $437 million to $447 million and the expected adjusted EBITDA of $60 million to $63 million, right? So, and then the Q4 projections and the totality of that is, I'll just go with the adjusted revenue, $116 million to $126 million in adjusted revenue and $16.5 million to $19.5 million in adjusted EBITDA. It takes all of those variables into account and we are excited about that, because that would be another record revenue quarter and we are seeing really good positive early indicators on performance that lead us to believe that we are going to get there.
Nick Jones : Great. Thank you.
Joseph Marinucci : You are welcome, Nick.
Operator: That is the end of the Q&A session. And this concludes today’s call. Thank you for joining and I hope you have a lovely rest of your day. You may now disconnect your lines.
