Okay, I think the door closing is a good sign to start the presentation. Good morning, I'm Sam Hirsch. I work with Adam Clauber and the insurance research team. Today we have with us Quinn Street, a digital performance marketing company. They've had great growth over the past couple years as insurers shifted back to growth mode, became much more competitive, spent significantly more in advertising. Long term, we like Quinn Street. We think they're going to become more important to insurance distribution. as they enable targeted customer acquisition and that's really going to power and support the shift from an agency distribution model to direct and digital channels. With that, hand it off to CEO Doug Valenti.
Thank you, Sam. Welcome. Nice to see everyone and happy to be here to tell you guys about Quinn Street. First of all, I should say the safe harbor statement does apply. Who is Quinn Street? Well, first of all, we are the premier performance marketing company in financial services and home services, and we see our job as to be the leading innovator in performance marketing, and we have been the pioneer of performance marketing for over 27 years now. So this is a market and a business model that we created and that we pioneered, and we continue to lead and to push forward a little bit more about us as I said we've been around for 27 years now founded in 1999 we pioneered performance-based digital marketing we deal we deliver millions and millions of customer acquisition prospects to our clients monthly with precision transparency and measurability which is key that's why we founded the company who said everything in digital is measurable let's create a platform that allows clients to measure and buy on that basis as i said founded in 99 profitable since 2001 now doing over a billion dollars in revenue annually and over 100 million dollars in adjusted evita we run billions of dollars in marketing campaigns and have done so over the past 20 plus years we have thousands of media partners in campaigns live at any given time and we have a strong we do very strong cash flow and have a very strong balance sheet i think we have net debt of 50 million dollars now um and cash flow uh we have i think our capital expenditures are about 10 million dollars a year so most of the ebitda after taxes is free cash flow a little bit more about our business model this is an overview i'll walk you through it uh the most important point is in the is in the top making media efficient the world's largest channel ours is a very fundamentally oriented business model very micro economically based what we do for our clients is we allow them to buy media much more efficiently and at scale and we are a big scale company that serves big scale clients the only thing that really matters is media cost and media efficiency so how do we make media efficient for our clients let me talk about it in two different ways one kind of a pragmatic view and then one of the more theoretical view which is the way we view ourselves from a pragmatic standpoint let's talk about auto insurance where the largest client in that vertical if they bought all the traffic in digital associated with auto insurance shopping they can convert maybe 40 of it with their footprint a good their footprint of product the footprint of coverage their footprint of risk that means that 60 of that would be wasted 60 percent of their media buy would be wasted and they're the most effective in the industry so dramatically more for more the other clients if they buy through quinn street they only buy the segments they want they only pay the price it's worth and all the other clients do the same we serve every major client in all of our verticals so the other clients buy the segments they want that the price is they worth they that it's worth to them so that the efficiency for everyone is dramatically increased. That's why most of our large clients buy everything we can deliver. They go uncapped with us. It's open to buy. Now, there was a theoretical way to think about that, which is the underpinnings of our business model, the microeconomic underpinnings. We think of media and in-market consumers as a supply curve that has certain value and certain volume. And we see our job is thin slicing that supply curve and matching that thin slice to the client that it's most valuable to. And as we do that, as you will recall from your consumer surplus sessions in microeconomics, we extract maximum efficiency or surplus from that curve. And that's what we see ourselves doing every day of our lives. So we make money on that media efficiency, and we drive client demand through that media efficiency. So we're a very fundamentally oriented business model, and that's why it has worked so well for so long, and it actually is accelerating at this point a little bit more on the marketplace on this chart on the left-hand side you can see we we deal with digital media wherever consumers are in market we are indifferent lately they are becoming in market on chat GPT we are there we're live in insurance we're live in home service or live in banking there and we're profitable there already obviously we're in Google we do SEM campaigns we're one of the biggest SEM buyers in the world and we have major partnerships with other folks who have either members or visitors or consumers that are in market we help those consumers find the right match for them someone that can solve their problem and we help our media partners make a lot more money on their media than they could without us because we have that aggregated demand model on the right hand side clients we are in insurance home services loans and credit solutions for our M1 brand credit cards and banking that is a footprint that can probably carry us for the next decade plus and drive very strong double-digit growth I'll show you some numbers on that in a second and how do we compete we compete with matching technologies that allow us to hyper segment and hyper match at the right price on the right way at the right conversions on the consumers that's our technology stack we're the most technology driven company in our industry and always have been and always will be including ai which i'll talk about again in a second we have thousands of integrations with clients and media that allow us to constantly refine that segmentation that matching including value our largest client by the way on our platform defines 10 000 unique segments of consumers uniquely allocates their budget to each of those segments uniquely prices each of of those segments to lifetime value. That's what I mean when I say thin slicing the demand curve. And it drives dramatic value for them and dramatic value for us. And you can see it in their results, you can see it in our results. We have billions and billions of dollars worth of data that we generate when we run in these campaigns and learn what works and what doesn't work and what permutation, where and how. That is maybe our most valuable competitive asset data, because not only do we have that data and it's unique data that you only get by spending money to do it, but we've been applying AI to that data since 2008, which is when we first launched machine learning algorithms. It was in 2008. And we're constantly working to increase the efficiency of all of that, and it changes continuously. So we have millions and millions of permutations of campaigns going on all the time. Of course, we can only manage with technology and again as I said we are by far the most technology oriented company in our industry and always happen I have more engineers than most of my many of my competitors have employees we serve the big brands in all of our verticals which speaks to our strength speaks to our capabilities why do we serve the big grounds I'll talk about that in a second but largely because they could count on us and we can deliver and you can plan around us including performance volume and compliance and this is a list of our major brands in all of our verticals so why do they choose us as I said proven results we deliver value we deliver predictably we deliver it to their to their metrics we provide scale and reach if there are consumers in digital we will find them we will integrate with them and we will convert them for our clients that means that we we manage thousands and thousands of points of contact that they can't manage individually third we price purely on performance a click that converts into a policy at a certain value at a certain rate of a certain lifetime value a an approval and a credit card issuer contacts that's worth a certain amount to that to that issuer a client for a windows job of a certain size at a certain profitability for a certain installer in a certain market in the forum and we price that at either at the click level at the lead level at the call level sometimes at the actual conversion level whatever makes sense for us and the client to make their economics work and our media economics work and align incentives And we manage end-to-end compliance. All of our verticals require compliance of some type. There are government regulatory requirements that we have to manage, brand compliance that we have to manage. Compliance to our major clients is an extraordinarily important factor, and we manage it better than anybody through technology and through staff. We also have big media partnerships. We have our own media campaigns that we run directly with folks like Google and now ChatGPT and others. But we also partner with others. You can see on the left side here names of a number of the brands that we work with to help them convert their consumers because we can monetize that traffic better than they can and we have the marketplace technologies that they don't have. On the right-hand side, you can see a number of our own brands that we use for mostly paid campaigns but also for some membership sign-up campaigns and some campaigns that are pulled into answers for chat GPT and answers for Google now as they've rolled out their own version of AI overviews. By the way, as Google's rolled out AI overviews over the past few years, it's now about 60% of queries have an AI overview. Our volumes and revenue with Google have grown over 100%. It's been a boon for us, it's been a boon for them. HomeBuddy, listed on the right hand side, was our most recent acquisition. We also acquired years ago Modernize and Am1, and have grown our footprint historically, largely through acquisition. We are a very natural acquirer in a very fragmented space, and that will continue to likely be a major component of our growth strategy. and Modernize was the footprint that allowed us to hyperscale our home services business and HomeBuddy is an add-on to that, and we expect that there will likely be more over We're a very effective acquirer, and if you saw the metrics on HomeBuddy, you'd note that that's a big return acquisition for us. And Modernize has been a runaway success. We have big competitive advantages, many of which I've alluded to, but let me just talk about them again. A massive store of proprietary data. You only get that data from running campaigns and you only run those campaigns from spending money. Billions and billions of dollars worth of data on what works and what doesn't work and what permutation. Millions and millions of permutations, actually probably billions of permutations. We have a proprietary data stack that allows us to manage all that data and manage these campaigns and optimize The core of that is our AI algorithms for optimization of the marketplace, but many, many other components to that technologically, including, as I said, giving the clients integrations and their ability to define segmentation on our platform in a way that allows us to hyper-scale and hyper-manage that segmentation. We have thousands of proprietary workflows, of course, allow us to stitch all that together. Many of those more and more managed with technology as we roll AI more broadly out across the We have thousands, number four, of proprietary integrations with clients and media, which are difficult to get and difficult to manage, and once you have them sticky, continue to feed our data and allow us to feed our optimization. We have hundreds of engineers and technical product employees. as i said before i have more engineers than some of my client my competitors have employees uh our strategy has always been to be the product and technology leader in performance marketing and people ask me well how do they know i do that and i say well i have over a billion dollars in revenue and over 100 million dollars in eva dot i don't have proprietary media to speak of not branded and i don't have a brand so how else could i be doing it it's the only way i could be doing it and we will continue to be leaders in technology and performance marketing. And of course, number six, millions of permutations of those campaigns going on at any given time to continuously refresh that data and continuously allow us to optimize. We believe and I think we're proving we will be an AI winner. As I said before, we launched our first machine learning algorithm in 2008. We're the industry leader in AI forever. And we're now rolling out, not only are we continuing to build on that to continue to do hyper-segmentation optimization through our algorithms. But we're rolling AI out across the business in more ways now because we can, because all of us can. Some examples of that from a performance of productivity standpoint, of course, even more powerful optimization algorithms. New and updated carrier rates in our QRP platform, which is the leading rating platform in insurance. we run comparison rates for our for agencies and for our clients when progressive tells you they'll show you other carriers rates that's us auto quote explorer is us so we are a rating platform we believe rates are a fundamentally important component of the long your long-term strategy and digital and we have the best rating platform in the industry none of our competitors have a rating platform. And we are applying AI to get more rates faster and keep those rates updated in a more efficient way. We generate more and better ads and creative and launch more of our campaigns faster and more effectively with AI. We have AI-enabled natural language analytics from our data that our front line employees can use now, whereas they used to have to write queries. On the revenue side, we have seen dramatic increases in revenue from our proprietary campaigns on Google as they've rolled out AI overviews. As I said, over the past year and a half or so, we've grown our revenue with Google and the AI overview format by over 100%, and that's to over $100 million in revenue. So I'm not talking about, you know, from one to two. I'm talking about from, you know, from big scale to big scale. We're an early participant on OpenAI. We're live, as I said, in insurance, in home services, in banking, and already making money. It is a big focus for them. It's a big focus for us. Recently, a large client asked us for an introduction to them because they want to work with folks like us because they know that's where the budget is, that's where the buying power is, that's where the consumer choice is, and they know that's a place that they need to go to get a return on their capital. and we're improving conversions of consumers and for clients dramatically by applying AI as an interface across the business so a lot and a lot going on and these are just examples this is not an exhaustive list there are dozens and dozens of places it's one of the reasons where why I think if you listen to a call a couple of calls ago I noted that we had gone from 600 million dollars in revenue to 1.2 billion dollars in revenue and only added 28 employees we expect to continue to see those kinds of efficiencies in the business going forward we went from 900 employees to 928 employees when running from 600 million in revenue to about 1.2 billion dollars in revenue these markets are big well over 100 billion dollars in our existing footprint and growing performance marketing for the verticals we're in tend to be the last stop for clients when they get to digital and they allocate budget to digital eventually they get to performance once they're in performance they start concentrating budget there 80 of our growth historically and continuingly comes from existing clients giving us more budget not from signing up more clients and cycling through clients but from clients growing their budgets with us big markets the bed these two this was uh insurance and home services which together represent about 80 percent of our current revenue but again there is no lack of headroom in this business model our own performance by the way on the left hand side you see about currently running about 35 home services 65 financial services home service has been growing was growing more rapidly and then insurance really hyper scaled for a while coming out of the the post-covid uh doldrums and now starting to level up level back out again and we expect that this ratio is it will be what we will see next year but you can see in fiscal 2024 and our fiscal year ends june 30th so we're in the end of our current fiscal year our july our fiscal 27 is about to begin july 1st but you can see that we've grown quite nicely and more importantly we've grown even faster than we've grown revenue we've been expanding margins at a pretty strong rate and we expect to continue to do that when we got it for the current quarter the quarter we are in after having a record quarter last quarter where we grew EBITDA about twice as fast as we grew revenue we said we're going to have another record quarter this quarter we're going to grow EBITDA revenue faster again and once again we'll grow EBITDA quite a bit faster than revenue so we expect to continue to be in margin expansion mode for quite some time to come I'm going to leave it on that for a second because I think you want to think about our current valuation relative to that performance in terms of capital deployment we are we do generate a lot of cash historically we have prioritized making sure we're investing in growth initiatives first accretive acquisition second and returning capital shareholders third we think long-term value is going to be created by growing scaling the business first and foremost I did say in the last call, and I'll say it again, that given the current stock dynamics, returning cash to shareholders is probably a higher priority than it has been historically. We have historically acquired about $100 million of our own stock in buybacks, and we have a current approved authorization of $40 million. How are we going to keep growing? We have three big nine-figure businesses that we have a lot more momentum and opportunity to grow in, insurance, home services, what we call our credit-driven verticals, which are lending, credit cards, and banking. We are very early in all three, even insurance is early. I would say that we might be 10% to 20% into the insurance opportunity at this point. only one of our clients is really spending on an allocated basis what we think they should be spending in digital and only one of our clients is really spending it in the hyper segmented value-oriented lifetime value way that we think they should be spending it mostly other clients are trying to catch that client because that client has done so well in that market and so there's a lot of momentum I think we have eight insurance clients now the most we've ever had spending more than one million dollars a month with us and all of them are continuing to push to find help us get us to help them figure out ways to grow more and spend more number two continue to grow our digital and client wallet share most clients do not yet spend as much in digital as they should if you look at the where consumers are shopping that is a long-term tailwind for us that shift to digital is still relatively early shockingly and there's a lot more to go and so continue to work that wallet share is going to be a tailwind for us for many years to come. Number three, continue to expand our footprint in each of our verticals by adding new products, adding new media, adding new clients and new segments of clients which we're doing at all of our verticals. When I say insurance we're in all forms of different insurance so we're adding new forms of insurance all the time. Lately in insurance one of the fastest growing components is selling leads and calls to agents which is a market we really haven't been an insurer PNC and that's half the market most of our insurance businesses direct to the big carriers that we grew that leads and calls to agents by over 50% last year we're going to grow at another 50% this year and we're already running at nine figures or I'm sorry 100 million dollars in that business well we will expand our footprint catching more budget more media more yield we just added Aquavita media a couple years ago and HomeBuddy recently. The reason I mentioned those is they both expand both our product footprint and our media footprint. We need more media to continue to fuel the demand from our clients. While digital media is growing generally, we want even more. And what Aquavita and HomeBuddy do is they allow us to get into the social, native, and display areas of media, which represent vast new sources of media supply for shopping consumers and an area that we have not historically we participated in. Alcovita has been a runaway success. You can track our filings and see how we continue to have to mark up the earn out. HomeBuddy, similarly based primarily in those channels, is looking like it will be a runaway success as well. And then number four, continue to develop industry best technologies. We still have half of our employees in product and engineering roles and we expect that we will continue to be the innovator as I said earlier and the leading innovator technologically in performance marketing that's our strategy it will continue to continue to be our strategy and then and as a summary slide in terms of key investment highlights as i said we're a digital performance marketplace platform hopefully now you understand what that means we have unique and strong competitive advantages on the data side technology side integration side workflow side client and and supply side we're addressing huge markets that are still early and continue to expand we have participating in number four massive shift for to online spending that is still relatively early and once online to performance marketing which tends to be the last stop and the big growth area once they get there they being the clients we're growing our revenue rapidly we're expanding our margins more rapidly and we have strong cash flow and a strong balance sheet again net 50 million dollar net debt of 50 million dollars right now and we will we're running right now if you look at last quarter running over 100 about 120 million dollars a year and adjusted EBITDA and that's that was just last quarter that doesn't take into consideration next year I said on our last call that I as we are in early planning stages as we look at fiscal 27 which begins july 1st we expect to once again to grow a strong double digit rate so we expect to grow adjusted ebitda significantly faster than revenue so we expect to continue to expand margins and cash flow and with that um i'll open it up
sam to questions thank you bill yeah no it's a great question and i guess for those that that
are aren't in the room that it's uh how do you how do we accelerate insurance because there's been a one client that's been so far out in front and by the way they they went from what they were four or five in market share a decade ago to now number one in market share which is and by the way auto pnc insurance is all about market share right you're in a regulated industry where uh which means that your your price is regulated and it's a mature industry so your growth rate is is is relatively small your potential growth you're probably growing with population so how do you make money you make money by gaining market share that's why it's such a great client for a client base for us because they're all fighting for market share as they should be as a way to generate value and Sam was saying well gosh we've had this one carrier that's done so well and by the where they are our biggest partner and have been our closest partner for many, many years. How do we get the others to participate? I think it's happening. I think the way we do it is there's twofold. One is we engage, and we do engage very directly with these carriers, with sales teams and account management teams, and I will go and other executives will go. And then there's the natural, and in that engagement, we try to bring to them the argument that I just made to you about why they can have so much better media buying and media efficiency the good news is the largest client has grown so effectively that has created a felt need for many of these folks to say how the heck do I catch up because I'm being left behind and that is a powerful motivator so I think that the for years I feel like we had to evangelize and we had to convince them it was important I I don't feel like we have to do that anymore. And that's great news. I think now it's a matter of helping them down the path faster. I think we're out of the phase of, hey, this is important. You guys need to pay attention to it. You need to know this is really good for you. I think the vast majority of them get that. And now it's a matter of helping them on the path. And it is not an easy path. They have to be able to understand for themselves their segmentation, their lifetime value, their analytics, and many of them don't have that capability but they're building it and they're building it fast and digital, they're seeing digital as more important, they're building the capabilities and I think AI is going to accelerate that for them because they'll be able to get more done faster on that basis. So I think it's an unstoppable trend now, it's just a matter of how fast we can do it And as you've seen, it's come very quickly lately, and I think it's going to accelerate. This is the breakout. They're going to do it in here at this one, right? Yeah, because it's the last meeting. You mean like the home insurance side or the PNC business generally? We haven't seen much of an effect. We've seen them ask us to help them be more aggressive and to find more opportunities. And they've asked us to help them identify places they can be more efficient. So it hasn't affected their demand with us, but it has affected in some ways how they engage with us. And I'd say that they are engaging in some ways more aggressively than they have historically. They're a great client and they're an incredibly capable company and they are asking us to make sure that we are helping them pay attention to opportunities in the market and we're being very responsive to that. So I'd say that it hasn't affected their spend with us in a negative way. It has affected their engagement with us in quite a positive way. And I think that makes sense. I think that one of the things that they're finding is that it's more competitive. And they've been so far out front for so long that they're now asking themselves, and they probably have plans that we don't know about that are to figure out how to counter that and how to regain the efficiencies that they had when they had so much of the market to themselves but it's getting it you know as i said we now have eight clients spending over a million dollars a month with us the most in history which means that there's now more competition for this media um and so they're i have no doubt that they'll respond to that pretty effectively in terms of just
in you know raising the bar yet again but hasn't had a negative effect we've seen both yeah we've
seen both as you probably and sam i'm sure you know better than i do that they've been uh they've been selectively cutting rates um for a while now a number of the clients have including the leading client because their their loss ratios have were you know the rates that they took at coming out of the post-covid period got them in a position where they could do that and other things that they've done in their business to be more efficient so we've seen both i i think it i don't think it materially impacts the long-term view of the business they're still going to want to do marketing to gain market share when they have the rates that they feel like are appropriate for competitively so I don't see it as a I think they're so stable now it's just going to be a normal trade-off just like it has been for most of the time we've been in and remember we've been in insurance for 20 years so there have been lots of lots of ups and downs but in a more stable market, you have taking rate, cutting rate, getting right with the market, and then growing market share alongside that, and I think we're in that kind of a normalized shared period. But we have not seen any, we don't foresee any significant downside from it. Yeah, Bill.