Good day, and welcome to the QuinStreet Fourth Quarter and Fiscal Year 2019 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Erica Abrams. Ma’am, please go ahead.

Thank you, Chelsea. Good afternoon, ladies and gentlemen. Thank you for joining us today to report QuinStreet’s fourth quarter and fiscal year 2019 financial results. Joining me on the call today are Doug Valenti, CEO; and Greg Wong, CFO of QuinStreet. This call is being simultaneously webcast on the Investor Relations section of our website at www.quinstreet.com. Before we get started, I would like to remind you that the following discussion contains forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause the results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 10-Q filing made on May 10, 2019. Forward-looking statements are based on assumptions as of today, and the company undertakes no obligation to update these statements. Today, we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures are included in today’s earnings press release, which is available on our Investor Relations website. With that, I will turn the call over to Doug, CEO of QuinStreet. Please go ahead.

Thank you, Erica. Fiscal Q4 was a record revenue quarter for the company, closing out a record revenue year in fiscal 2019. Business ramped throughout the quarter, and June was a record revenue month. There’s a lot of momentum in the business. Our business footprint expansion over the past few years has created an enormous amount of activity and opportunity and a great number of attractive growth initiatives, or greater number of attractive growth initiatives, than at any time in company history. That momentum and those efforts lifted us to the record results, which also included growing strongly sequentially from the March to June quarters, contrary to a typical seasonal drop. We expect to grow sequentially this quarter, our fiscal 2020 Q1, again handily beating typical seasonal patterns and setting another quarterly revenue record. We also expect yet another annual revenue record in full fiscal year 2020. That said, fiscal Q4 results were disappointing versus our expectations and outlook. The results were particularly disappointing given the business trajectory and forecast we had through the first two months of the quarter. The revenue forecast came down by over $6 million in the last few weeks of June as the rate of acceleration and results from a number of initiatives slowed or stalled due to various factors. Some of the causes had to do with client or media partner delays or setbacks. Most of those have gotten, or will get back on track. But the fall-off also exposed the clear need for us to improve operations and execution to better manage the increase in the breadth and complexity of the business over the past few years. The demands of managing the larger footprint and scale of initiatives outran our organizational development in the short run. We should have done better, and we…

Thank you, Doug. Hello, and thanks to everyone for joining us today. As you can see from our press release, Q4 wrapped up a record revenue year for QuinStreet even though our Q4 performance was disappointing versus expectations. As Doug discussed, we have made important changes to our operating structure to improve execution and better address this large and growing market opportunity ahead of us. That said, revenue did continue to ramp in the back half of the fiscal year, resulting in a record revenue month in June, a record revenue quarter in Q4, and record revenue for the full fiscal year. As a reminder, in the past two years, we have grown annual revenue from around $300 million to $455 million. So although we’re disappointed with the quarter versus expectations, we remain excited about the business momentum and the opportunity ahead. For fiscal year 2019, we posted revenue of $455.2 million, an increase of 13% year-over-year. Adjusted EBITDA was $34.5 million, or 8% of revenue. Excluding the one-time charge related to DCEH, adjusted EBITDA would have been $40.3 million, or 9% of revenue, an increase of 16% year-over-year. Adjusted net income for fiscal 2019 was $24.7 million, or $0.47 per share. Our financial services client vertical represented 73% of total revenue and grew 17% year-over-year to $330.4 million. Excluding mortgage, the rest of our financial services business grew 29% year-over-year. Our education client vertical represented 15% of total revenue and declined 11% year-over-year to $68.5 million. And our other client vertical represented the remaining 12% of revenue and grew 28% year-over-year to $56.3 million. Turning to more details on the fourth quarter, total revenue was $122 million and grew 9% year-over-year. We also grew 5% sequentially, significantly outpacing typical seasonality and demonstrating the continued growth momentum in our business.…

Thank you, Greg. I wanted to remind everyone of the five key initiatives helping to drive the strong momentum we are seeing in the business. The first key initiative is the continuing increase in our share of wallet with clients as they shift more marketing budget to digital and to performance. Most marketing clients are still under-penetrated, and the proportion of their budget spent online, on performance marketing, and with QuinStreet compared to our most advanced and successful digital marketing clients. Most marketing clients are also still generally under-penetrated, and the proportion of their budget spent online compared to the portion of consumer activity now represented by digital media versus other channels. This under-penetration and need to catch up is driving secular trends to spend more in digital media and on performance marketing. And the trends are accelerating. We continue to see these fundamental and inevitable trends as the most powerful drivers of our base business for many years to come. The second key initiative is expanding the number and size of our media partnerships with big brands. These partnerships allow us and our marketing clients to access more end-market consumers, and they create new, strategically important performance marketing revenue streams for the brands. Revenue from this relatively new channel about doubled in fiscal year 2019 over fiscal year 2018, and we expect it to double again in fiscal year 2020 to well over $100 million in revenue. QuinStreet’s white-label, industry-leading distributed marketplace technologies and product solutions are uniquely and ideally suited to this opportunity. The third key initiative is a reinvestment in and resurgence of QuinStreet owned and operated media websites. Our initiatives to refocus and rebuild these properties over the past couple of years are paying off. Traffic to our core financial services sites was up significantly last…

Thank you, sir. [Operator Instructions] And our first question will come from John Campbell with Stephens.

Hey guys, good afternoon.

Hey John.

Hey, one of your competitors recently called out some pressure on the personal loans channel. I know that a kind of nice emerging growth driver for you guys, so if you could maybe just talk to what you’re seeing out there, if there’s been a notable slowdown, or if you’re expecting any kind of slowdown in the quarters ahead.

We saw that, and I think they particularly called out margin pressure there, or maybe it was just the mix that was affecting their overall margin pressure. We are not seeing some dynamics. Now, recall, we’re probably earlier in our penetration curve than they are in that vertical. But we have been seeing quite strong growth in performance in personal loans in all dimensions of that business. That continues to be a very strong and fast-growing business at scale for us.

Okay, that’s helpful. And then I want to get an update on the platform opportunity. What’s the latest there? Where do you guys sit? And then I guess for Greg, are you building any of the contributions into FY2020 guidance?

The product, as we, I think, had indicated last quarter, was code-ready as of June. We have now been given a batch of agencies to roll out with beyond the pilot agencies. We’re in the midst of working with those agencies to do that. We have not – because this is a very long-term and a little bit – it’s a new product for everybody, so it’s very difficult to project the timing on this and ramp of this particular product. We have not built anything into the forecast for fiscal year 2020 for QRP, so we do expect there will be contributions from QRP, but because it’s a new product and a new ramp and difficult for us to forecast, we’ve taken the approach of not including anything. Obviously, given that we’re now in contact with and rolling with the first batch of agencies, it’s unlikely to not contribute anything, so it should be additive to the forecast. One other thing is we have hired a new executive to head that project up now that we’re in roll-out mode. It’s an executive with many years of insurance industry experience, including running agencies for some of the big carriers. So we’re excited about the project, excited about the progress, excited about him and what he brings to that, and excited to be able to be at the point of early rollout.

Yes. That all sounds great. Thank you.

Thanks, John.

Thank you. Our next question will come from Jason Kreyer with Craig-Hallum.

Hey guys, good afternoon.

Hey, Jason.

Hey Doug, just wondering if you can kind of simplify your commentary on the execution issues. If I look at the results versus the model, it seems like that was probably embedded in financial services. And you kind of indicated some things with rollout of media partners. But just wondering if you can talk about maybe what industries or verticals that impacted and just help us understand what’s going on.

Sure. It was pretty much across the board, Jason, and that’s one of the ways you know you’ve gotten to the point where it’s an execution issue. We had a fraying of the forecast across most of the businesses. We found out it began happening in May. We didn’t find that out until we got into the closing of the books when we were about halfway through June on May. And then of course, we tracked it to the month of June. So while we continue to see good growth momentum and upward trajectory, it just was a different slope than we had forecast and that the businesses had forecast. So it was a combination of a lot of things. It’s initiatives with media partners that were supposed to launch and ramp that didn’t get launched and didn’t begin their ramp sometimes because of an issue with the media partner, sometimes issues on our side in terms of either the way we forecasted or the way we executed it. It was new clients and getting them launched and having that be delayed, and those folks were included in the forecast, sometimes on our end, sometimes on their end. It was just an across-the-board issue. It was in pretty much every business, and almost proportionately I’d say the places where we saw the biggest drop-offs were – because it’s the biggest business, insurance, auto insurance, because it just has the most going on and the most volume; education, partly because of the launch of a new, very exciting client with our QMP technology, and the delay and then a change in the way we had to account for revenue there. Mortgage got worse yet. I expect we will be up. We believe we’re coming off the bottom of mortgage, and we’ll…

A lot of great color there, so thank you for that. And you mentioned the mortgage business, which has continued to be a little bit challenging. Can you give me kind of what the outlook is there just relative to the backdrop that rates have come in a lot? I think we had some economic data this week that said the refi cycle has started to reemerge there. Do you think that could potentially get turned around in 2020? Or what are your thoughts on it?

I think we’ll be up in 2020. We’re already going to be up sequentially this quarter over last. I think that we have a very good plan and operating cadence to do that. We are finally getting a little bit more of a tailwind, as you indicted. There have been an awful lot of headwinds in that market, as we and all of our competitors have reported. But I do think that I feel good about probably the last two quarters of fiscal year 2019 being the bottom, and I do think it’s up from here. How much up, I think we have to see. The good news is rates are really down, and there’s a little bit more life in the market, and we’re I think into a better operating strategy that is more accommodative of the new environment. The bad news is it’s been a really, really long refi cycle, and there’s not a lot of stock out there, housing stock, that hasn’t refi-ed at this point in the yield curve. So I don’t think it’s going to be a gangbuster, but I don’t think it’s going to be a big drag, given this now small scale and given that I think we’re up and to the right from here rather than down hard and to the right like we were this past fiscal year.

Okay. And just the last one from me. You gave some good commentary on where QRP stands and how that’ll shape up as we go through the year. But just wondering, have you guys ironed out what the revenue model is there? And then just wondering what the timing is for being able to share some details around what the economic model looks like.

We have not finalized the details of it. We are doing that in partnership with our big carrier partners as well as in partnership with the agencies. We just want to be very deliberate and cautious about making sure that what we come up with meets everybody’s expectations and needs and is highly additive to the channel. As you know, the broad outlines are that, of course, there won’t be media costs. It’ll be more of a SAAS economic model in terms of its profile. But the exact pricing we have not yet determined, but we’re getting – the box is small around where we think it ends up as we’ve gotten good feedback from the pilot agencies, which is very positive for us. And as we’ve cycled with our carrier partners, I think we’ll have a decision made within the next few weeks in order to accommodate the rollout of the new agencies, the new agency list. And at that point we’ll be able to share because it’ll be public anyway. So soon as we know, we’ll be sharing it because it’ll be coming out because the agencies will be talking about it, and it’ll be public knowledge through that channel at some level. But I think the broad outlines are we believe it to be a meaningful eight-figure opportunity. We believe that it will have SAAS-like margins because it’s a platform with an engineering team, so it’s all pretty much semi-fixed costs, or really no incremental cost to serve incremental volume. And we’ll largely price based on volume, but that exact pricing structure and exact pricing point, not yet finalized because, again, we’re doing it in collaboration with all the important constituencies in that process.

All right. Thanks, guys.

Thank you.

Thank you. Our next question will come from Jim Goss with Barrington Research.

Hello. This is Pat on for Jim.

Hey Pat.

I was wondering if you could provide a little more color on just the method of scaling the non-insurance/non-education business that’s sort of increasing penetration within certain verticals or expanding into new ones, and what those might be.

Yes. As you know, Pat, we have a number of verticals that we’ve been scaling now for a number of years that are incremental to our historic big businesses in education and auto insurance in particular. And I say auto insurance because we’ve added a lot of other insurance verticals now. I think we’re in five or six total insurance verticals at this point that are growing nicely for us. And so home services, for example, personal loans as an example, credit cards as an example, are all businesses that are now at $50 million-plus-ish in revenue scale and growing at exceptionally strong double-digit rates. But we also have a number of other businesses that are just behind those in terms of their scale, whether it be banking or other verticals within financial services in particular that are also ramping at pretty high rates. And again, as Greg indicated in his review, if you pull out mortgage, overall financial services grew at 38% year-over-year last quarter, which is exceptionally obviously strong growth at really good scale. So what’s driving that are the things I talked about. It’s more and more clients, more and more budget from those clients as we perform, more media partnerships, more ability to monetize that media as we get more efficient in matching and with more client coverage, contributions from other areas of the business, including our owned and operated sites, new types of services, which allow us to serve clients outside of our traditional marketplace model. There are a lot of clients out there that cannot really – or haven’t yet developed the ability to operate in a marketplace efficiently, or to compete with folks that are bigger than them or that have been in these marketplaces for 10, 15, 20 years. But they want…

No. That’s good.

Okay, thank you.

Thank you. Our next question will come from Adam Klauber with William Blair.

Thanks. Good afternoon. How much did the insurance vertical grow year-over-year?

We don’t break them all out separately, Adam, but as Greg indicated, as I said, if you take all of the financial services businesses except mortgage, had strong solid growth year-over-year in the quarter. And in total, they grew about 38% ex-mortgage. Again, mortgage was down, and mortgage was down pretty significantly year-over-year on the quarter.

Would you, again just ballpark – I know the personal loans and credit cards are smaller and growing very, very high growth rate. Did insurance grow as – it hadn’t been growing as much in the last two quarters. Was it just a little slower than you would have liked in this quarter?

Well, it’s a bigger business, and it’s a more mature business. And it’s kind of hard to answer the question if they’re slower than we like because everything’s always slower than I like. So yes, but I wouldn’t say that we’re concerned about the insurance business. As we look into this year, we expect insurance to grow right in that range that we’re forecasting for the whole company in terms of – and so we expect insurance to be pulling its weight in 2020 and going forward. We’ve got a lot of budget from a lot of carriers at a lot of projects with a lot of media partners in insurance that I expect are going to continue to give us a lot of momentum there for many years to come. The growth in the other business, I don’t point that out to in any way diminish our enthusiasm or commitment to insurance. I just point that out to illustrate the broadening of the footprint and the growth platform.

Yes. And I would add, if you just look at the – I think the rate of growth in insurance a lot of times could depend on the rate environment within the carriers. But I would say if you look at the overall theme, or overarching theme of budget shifting from offline channels to online channels, and within online to performance, I think those tailwinds alone, those general tailwinds, allow us to grow insurance in the double-digits for as far as the eye can see.

Yes. We just did this analysis for the Board as we went through the planning, and that’s exactly the conclusion we came to for them, is we said there are going to be cycles in and out for various regions depending on how work carriers are with rate changes and everything else. But as we assess the overall market and our penetration and the footprint and the media landscape, we just have a very hard time seeing us not being able to grow insurance as good strong double-digits for as far as we can reasonably see.

Okay. Maybe let me ask in a different way. You had a shortfall of roughly $6 million on the revenue line. Was that more the insurance? Was that the other financial services? Or was that mortgage? For what company?

It was across the board. No, it was across the board, and insurance had about its share of proportionately, is the way I would express it as you look at how it dropped off. So it was probably half of that, or half of that, and Greg tells me a little bit more. But I wouldn’t read anything into that, just that we have a lot more going on in insurance because it’s a lot bigger, more complicated business. But we had a drop-off in education. We had a drop-off in mortgage. And this, again, is partly how you know it’s an execution/organizational fatigue thing. When you see so many things going wrong in so many places all at once, it tends to be the organization has kind of reached its limits. And I own that. I did not do the job I needed to do of keeping us ahead of that. I’m fixing that, and I think we’re already well on our way to having been fixed, based on what I’m seeing right now.

And then I know last quarter you talked about particularly with AmOne and the personal loans, there’s some new big relationships beginning to ramp up. Did that materialize at all this quarter? Are you seeing a month and a half into this quarter, are those new relationships ramping up better?

They are, but they were too a significant part of the miss because some of them did not ramp and maintain the ramp rate that we expected. Now that said, if you look at the rate of growth of personal loans for us has been tremendously exciting. And that business, as I think I said last call, that we expect that business will get to $100 million in revenue run rate in the not-to-distant future. And we’re nipping at the heels of that. So yes is the short answer to your question. Much of that has been fixed and has regained attraction, and it was just a lot going on all at once in personal loans as we’ve more than doubled that business from the base that it had. If you added AmOne and our personal loans business together, we’ve now more than doubled that footprint just since buying AmOne less than a year ago. That’s a lot of stuff going on. And so the ramp or the slope came down a little, and that did affect us as we got to the end of the quarter, but still a darned impressive ramp.

And then on mortgage, again, it sounded like it continued to drop even sequentially, if I’m understanding right. When we look at the comparison of first quarter of last year to the year-over-year comparison, are you still looking for another good drop in mortgage in the upcoming quarter year-over-year?

Yes. It’s going to be challenged from a year-over-year basis. Our job right now is to get it growing sequentially again. And then what will result out of that is year-over-year growth, but I think it’ll be challenged from a year-over-year basis for the next two quarters, I would say.

Yes. And the reason I said – I think Greg got the forecast in front of him. So I think the answer is, as we look at the year forecast, so sequentially we expect to grow, and I think we expect to grow sequentially pretty much every quarter this year in mortgage as we get on track with the new market dynamics and our revised strategy and operations there, which we had to do to accommodate the market. But I think as you look year-over-year, it’s one of only two businesses that we expect to be down year-over-year this fiscal year, the other one being education, mostly driven by the DCEH comparable.

Okay. And on that, education in the last couple quarters looks like it’s settled more in the $15 million range. Is there any reason it should stairstep down from there? Yes.

No. I think again – and I’m going to hate to have to say this quarter after quarter till the end of the calendar year, but I think if you pull DCEH out, education’s actually operating and going pretty well. That’s where we’re getting a lot of traction with the new products, a lot of new QMP clients, which is super-exciting for us and for those clients. And I think that business – I think we’ll all be very pleased with how education does and how we can talk about it once we lap DCEH. It’s just that DCEH, it’s a big boat anchor to be dragging around with us for a couple more quarters.

Sure.

Yes. And, I mean I would look at it as well, despite being down 37% year-over-year due to the loss of DCEH, if you actually look at the sequential growth, it grew sequentially for the March quarter to the June quarter, which is not typical in our business, so.

Okay. And then just jumping back to insurance, I guess two more questions on that. Would you say that PGR growth was in line with the rest of the vertical, the other insurance, better or worse? I’m sorry, it’s at Progressive.

I haven’t looked at that specifically in terms – I thought Progressive – let me put it this way. We had a couple of new big carrier budgets come in the past quarter. And so I don’t think Progressive’s – I think Progressive’s performance is not going to be in line with the overall vertical’s performance because we have had a number of other carrier partners pick up a lot of budget, particularly in mobile, which is super-exciting for us, and some carriers that are really able to do better with mobile than some of the more traditional clients. And so again, I haven’t seen the final numbers on the Progressive versus the rest. Greg would probably know it. But I’m guessing that, based on that, Progressive’s growth year-over-year is going to be less than the overall verticals growth year-over-year.

Okay, okay. And then also staying with insurance for a minute, when we saw obviously EverQuote and Lending Tree, their insurance vertical, they had pretty big growth year-over-year. Are they taking share from you guys?

Not that we can tell. We get as much budget as we can deliver on, and you’ve heard me say this before, Adam. And so really, the basis of competition is media. It’s whoever can get the media and have it perform to the expectations of the client and to their own margin targets. And I would put [indiscernible] around EverQuote when I talk about margin targets because they still don’t make money. And in our business, anybody can generate revenue at a loss. That’s the easiest thing in the world to do. It’s being able to generate revenue and make a margin and sustain that margin over time that matters. So we’ll see if and when they ever get there. So in media, we just aren’t seeing those guys in our media landscape. We’re not running into them. They’re not fighting us for share. They’re not taking deals away from us. And I’d go so far as to say almost never. I don’t remember the last time that we ran into either of those companies. Now, remember, they have very different media footprints. EverQuote is dominantly display an advertorial and some SEM, but SEM in areas that we don’t really participate. And then Tree similarly has historically mostly advertorial and display, some SEM and some partnerships that we don’t have. But we have not seen those folks compete effectively with us in our media footprint either in our existing partnerships or our target partnerships. Where we get competition is still mainly from a small private that we still compete with more and more effectively, not nearly as tough a competitor as they were a number of years ago, called MediaAlpha, and MediaAlpha is really our main competitor in our footprint of media. But we just don’t see those other guys much. And it’s hard for me to say where their growth is coming from. Tree’s case, I don’t know how much of it is ValuePenguin, which was a phenomenal acquisition for them, organic property, had a lot of insurance traffic. So I don’t know how much is organic, inorganic, so it’s hard for us to compare them. But the specific answer to the question, "Are they taking share from us," from clients, no, and in our media footprint, no.

Okay. Thanks a lot guys.

Thanks, Adam.

Thank you. Our next question will come from Eric Martinuzzi with Lake Street.

Hey, couple of questions from me. Obviously Q4 was a disappointment. Your outlook for 2020 is a little bit below the Street. But it sounds like Q1, based on your color, certainly on the revenue side, it sounds like you’re comfortable. I just wanted to put those numbers out there with the Q1. So Street’s at $124 million and $12.9 million on the adjusted EBITDA. Do I have that correct, that the Q1 – you’re comfortable with that?

I would say we don’t guide on a quarterly basis, Eric. I think what we said for the full year is 10% to 15% full year growth on the top line and 10%, hopefully more, on EBITDA. I would characterize what we see in the first quarter is a lot of executional improvements from what we saw in Q4.

And again, just to state the obvious, we did 122-point-something in Q4. If the Street’s at $124 million, and we just said that Q1’s going to be a record quarter, then we’re probably awfully close, if not really, really comfortable, with that number, or we wouldn’t be saying as confidently that we are going to set a new revenue record in Q1 over Q4. So I think by implication, the answer is probably a pretty strong yes, but again, we’re trying to get out of the mode of guiding quarter-to-quarter and trying to just give a year and then revise the year as we go, as we’ve done the last couple of years, as Greg said, if that makes sense to you.

Yes, it does. And I’m new to the story, so I’ll follow that up with a seasonality question. Given the outlook for the year of shooting for better than 10% on the adjusted EBITDA, are there seasonal aspects to your Q1 that pressure – if I’m looking at the full year, is there seasonal pressure in Q1 on the margin?

No. I mean typically what you’ll see, Eric, on the top line is Q1 is pretty flat, or for folks that are used to calendar quarters, let me talk to this. September quarter is typically pretty flat to the June quarter. Where you see the seasonality is in the December quarter. The December quarter is typically down, I would say, 8% to 10% sequentially in December.

He’s asking about marginal.

Yes. And then from a margin standpoint, we have a semi-fixed cost base that doesn’t get adjusted with revenue. And so yes, where you have seasonality in the drop the top line, it will affect your EBITDA margin because we don’t adjust our cost base due to seasonality in the top line.

Yes, I think that’s the main point, Eric, is that we’re pretty much a revenue minus – margin on revenue after media cost drops into semi-fixed cost base. So as that top line moves, so moves margin in the short-term. And we expect to grow revenue considerably faster than that semi-fixed cost base, which is why we continue to have great confidence about expanding our EBITDA margins, because that’s the basic business model, right, revenue minus media costs dropping into a semi-fixed cost base, which is mostly head count growing at a slower rate in revenue. And so that’s why you’ve heard me say, and others have heard me say, we get top line leverage because we’re top line leveraged expansion model, and that I can see the mid-teens from here if you run some pretty simple assumptions to a model. Now, we’ve added a little bit more semi-fixed cost base this year not by growing the existing base but by acquiring a couple of businesses that we think are going to accelerate our revenue growth in the future. And I’ve already begun that, and that’s AmOne and CloudControlMedia in particular and, on a slightly smaller basis, MyBankTracker. So those change the equation a little bit on the short run because you get a little bit more increase in that semi-fixed cost base before you get the full revenue benefit, but we expect those all to be pretty highly accretive over the next few years. And I would say AmOne already is and is growing at least so. But the main characteristic will be, as that top line drops a little bit in the December quarter, which is our softest quarter, you’ll have a little bit of a margin impact due to loss of top line. And then March is usually our strongest quarter. Now, we’ve been growing through that seasonality last couple years, but typically March is our strongest annual quarter, and it also is often our strongest EBITDA quarter for the same reason despite some incremental employee tax things that get involved. So that’s how I would think about it at a high level.

Got you. I appreciate the details. Thanks.

You bet.

Thank you. Our last question will come from Chris Sakai of Singular Research.

Hi Doug and Greg, I just had a couple questions. I’ll try and make it fast. What was the increase for other intangible assets of about $17 million? What was going on there?

Acquisitions. So is your call, Chris, we made three acquisitions this year in the year, AmOne in the October timeframe, and then two in the fourth quarter.

Okay, great. And then are you seeing any new customers for the education segment?

Yes, we are. In fact, one of our big initiatives there is adding clients, because we have a whole lot of clients both on the not-for-profit side, which is an emerging client base for online marketing, as you know as well as a lot of schools, and even in the traditional for-profit space that are more regional that we have not served or not emphasized. And so we have dedicated personnel who are working to add those clients, and also our CloudControlMedia operation is very focused on new clients and new services to clients. And we are seeing a lot of traction with the new products in education and a lot of traction with those new products with new clients, so we are.

Okay, great. And then one thing about the stock-based compensation. I know it increased. How do we see that, going forward?

Yes. Chris, the real increase in stock-based comp was associated with valuing awards, the higher stock price, so it’s tougher to say. A lot of it depends on the share price we see on the market in terms of how it affects our stock-based comp.

Yes. We can give you a little bit more color about how we do that. I mean we have a comp consultant, Compensia, which is one of the best in the country. They run a set of comparable companies that has to be approved up through the Board of Directors Compensation Committee that have the right characteristics and acceptable parameters for being considered comparables by all the various agencies that oversee this stuff. And we look at the dilution from stock-based compensation from all those competitors, and we usually benchmark ourselves to about the middle of that pack. And then that’s how we grant on a go-forward basis from a dilution standpoint. The actual dilution we’ve seen historically has been somewhere in the 1.5% range by the time you net out the grant budget, which is just a little bit higher than that, but then you have to net out grants, the stock that doesn’t get vested, and then the stock you hold back for tax purposes. And so the dilution rate tends to track at about 1.5% to max around 2% on average over the past decade to 20 years, and we track that pretty closely to make sure we maintain. We have to be competitive for employees, but we also don’t want to be overly dilutive to our shareholders in doing so. In terms of the actual cost itself, as Greg said, the jump – we have not deviated from those practices. It’s just that, when you take a higher stock price and apply it to the same percentage dilution, you get a much bigger expense number. So I wouldn’t read anything into that except we got the stock price up hopefully through performance, and we’ll keep trying to get that part of it up.

Okay, all right. Thanks, guys.

Thank you.

Thank you. This concludes our teleconference call. I would like to read the replay information. That phone number is 1-888-203-1112, and the passcode is 9296142, and the PIN, 5876. Thank you, ladies and gentlemen, and please enjoy the rest of your day.