QNST
#On the gross profit, I mean, that was ---+ it looks like a 3x higher than last year, 30% revenue growth.
That's a really good result.
What drove ---+ were you guys expecting that degree of lift.
Or is that ---+ anything that's kind of not sustainable there.
Anything kind of onetime lift there.
Is that kind of a new go-forward run rate.
No.
It's nothing that's unsustainable, <UNK>.
That's kind of where we were expecting to be in the quarter at this revenue level, and I would expect that to continue.
Okay.
That's helpful.
And then on Katch, congrats on that deal.
When did that close.
Did you say early in the quarter.
It closed about mid-quarter, in November, was the close.
We had a couple of months of revenue from that in the quarter, <UNK>.
Okay.
And then I think you said $4 million or so in rev per quarter going forward.
Anything around seasonality there.
And also, if you can maybe help us with the margin profile, any kind of EBITDA contributions.
No real seasonality effect.
That's going to be pretty close to that as best we can estimate it.
There'd be some puts and takes on that business as we figure out what we're able to keep and grow and what we might need to take out.
But we think that's going to be pretty close to the average, more driven by those details of the business than by seasonality.
In terms of margin profile, very similar to our margin profile in terms of media margins.
Little lower than ours.
But once you put it into our mix, we pretty much lift it up to ours.
So it won't change margin profile.
It's still got of the ---+ we've said that incremental revenue tends to come in at about 30 points of margin and that is what we would expect with the Katch revenue as well.
Okay.
And then I might've missed this, but it sounds like you guys bought the assets of Katch.
Was it pieced out.
Were there pieces that were going elsewhere.
There were pieces that went elsewhere.
We only bought the auto, home, mortgage ---+ auto and home insurance and mortgage assets and then the technology platform assets.
There were health and life business assets that went elsewhere.
And I think they had some other pieces that I'm not as familiar with, but the 2 big chunks were the piece we bought, which were auto, home insurance and mortgage which we wanted.
And we wanted the tech platform out of the space basically.
And then the other piece we understand went to another company in the space.
We looked at all of it.
We got what we wanted, and we got it really at the price wanted to pay for.
Yes, it looks like you guys got it at a fantastic price.
We don't think any was pulled out of future quarters, Jim.
It would not be ---+ not something that we would expect at all.
I'm trying to think if there was anything that came through in that way, and I'm coming up with nothing.
So no, this was just a good, strong quarter in the quarter.
Yes.
I was not being overly precise with the mid-quarter thing.
It was in November, so I think it's ---+ I wouldn't read anything into that.
It's generally proportionate with the time we owned it in the quarter.
We're still not saying about 8% for the yearly EBITDA margin guidance.
That's correct.
We think that the general trend over the next couple of years should be that we'll add EBITDA margin ---+ that we'll grow EBITDA margin as we add revenue because we will grow fixed and semi-fixed costs significantly slower than we expect to add revenue.
And so that revenue and its approximately 30% of contribution it comes with before fixed and semi-fixed costs should drop disproportionately into EBITDA.
So we ---+ in terms of the actual number, other than that general model, I would say our intention is to continue to expand EBITDA margin to that top line leverage, but I don't have a specific number for you.
We aspire to get into the double digits again as soon as we can, and we aspire to keep pushing it from there.
This was absolutely opportunistic.
We are ---+ we look at potential acquisitions almost continuously, but there are none that I would say right now we are particularly excited about.
That being said, if and ---+ we're a pretty good platform for adding companies in our space if they fit our criteria, so we'll continue to review that.
I don't expect that, that's going to be a big part of our growth story or our strategy going forward.
That said, we will continue to be responsive and engaged and certainly opportunistic.
I just wanted to follow up on the insurance spend.
I know that you guys see that have somewhat of a whipsaw times, and just in relation to the hurricane activity.
Are you guys seeing any change in spend.
Or is there any change in mood or behavior.
We are not.
That said, a lot of the carriers still haven't come back to the market strongly after last year's loss ratio issues.
They haven't gotten their ---+ they haven't completely gotten their product where they want it in order to go out and spend aggressively in marketing.
But we are not hearing from the carriers that are spending with us anything about loss ratio effects from the hurricane season and from the losses associated with that.
Okay.
And then last one for me.
On Education, you guys show like you're kind of bottoming out there.
Is it just plus or ---+ give or take 5% growth here and there.
Any kind of thoughts there.
The general trends continue to look better as we've said.
It's hard for us to call the bottom because it's been such a difficult period in Education, and you still have a lot of companies who are not fully adapted to the new model.
But as you've heard me say before, we've ---+ most of the companies that were the most exposed in a negative way to the new regulations are either gone or have dramatically downsized.
Most of the companies that are left have ---+ are at least a few years into their ---+ into adapting to the new operating environment.
And as a proportion of our business, for-profit Education now only represents 12% of total revenue, so it can only hurt us so much.
So I think we kind of look at it like that.
I don't mean to make it sound like we're not engaged and hopeful for Education because we are.
I think if you were to twist my arm right now, I'd tell you that I think there may be more upside potential versus expectations in Education over the next few years than more downside.
And that's a pretty profound shift versus where we've been in that business vertical and that client vertical over the past 5 years or so.
Sure.
I lied.
I have one more.
As far as capital allocation, it doesn't sound like M&A is much of a use.
You don't have any debt to pay down.
What can we think about cash from here.
We're still going to focus on keeping that cash on the balance sheet for the most part.
Number one priority will be finding opportunities like Katch or like the AWL partnership to deploy the cash in a way that gives us strong leverage and strong return in terms of the business impact.
A distant second will be we have in the past and we will continue to review whether or not it makes sense to buy back stock.
And when we see a ---+ when we feel like we have an excess, if we ever had that of cash and there's a big difference between what we think we're worth and where the stock's trading, we'll continue, I'm sure, as a board to review and discuss that option.
And ---+ but I think the ---+ and first and foremost, we're going to keep a strong balance sheet to make sure we have plenty of flexibility and resilience as we continue to put in place the elements it takes to have a strong, growing business for a lot, lot of years to come.
Second would be, hey, are there Katch and AWL type opportunities out there.
And then third, as we've done over the past few years, we will periodically review whether or not it makes sense to maybe buy back stock.
That's something that we have had a plan in place for and we'll continue to have plans in place for, if and as it make sense and if and as the stock is trading at levels that we think are well out of line with the value that we think is ---+ that it actually has.
From a 606 standpoint, Wally, our initial assessment is it really ---+ it's more of a disclosure issue for us, the way our business operates.
So I don't expect it to have any real impact on the business.
From a tax perspective, given the fact that we are under full valuation allowance, more primarily domestic based, I don't expect that to have a big impact on us as we're not going to be a taxpayer for quite a while.
What it will do is it affects ---+ you'll gross down your deferred tax assets, but your NOLs won't change from that standpoint.
So I don't expect either of those to have a big impact on our business.
You're right, Wally.
The new regulations are not so new anymore.
And I was referring to those that were promulgated in the Obama administration.
You're also right that the new administration has proposed loosening a number of those regulations and perhaps even eliminating the gainful employment provision that hasn't been approved yet or promulgated yet.
But certainly the environment is better when it comes to regulations because the Department of Education is ---+ in this administration is at least less proactive in their efforts to control or regulate or otherwise affect for-profit Education than the previous one.
So I would say that ---+ but that all said, most of the companies in this space are assuming ---+ and I think this is prudent, are assuming that the new regulations won't go away and that even if the regulations are loosened in the current administration, there's not insignificant risk the next administration could be democratic again and it could be right back where we started.
So I think they are, for the most part, operating as if they're going to have to live with these relations forever.
