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Bankrate (NYSE:RATE)

Q1 2014 Earnings Call

May 07, 2014 4:30 pm ET

Executives

Bruce J. Zanca - Chief Marketing Communications Officer and Senior Vice President

Kenneth S. Esterow - Chief Executive Officer, President and Director

Edward J. DiMaria - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Analysts

Jordan E. Rohan - Stifel, Nicolaus & Company, Incorporated, Research Division

Joyce Tran - BofA Merrill Lynch, Research Division

Heath P. Terry - Goldman Sachs Group Inc., Research Division

John Campbell - Stephens Inc., Research Division

Victor B. Anthony - Topeka Capital Markets Inc., Research Division

Kaizad Gotla - JP Morgan Chase & Co, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2014 Bankrate, Inc. Earnings Conference Call. My name is Phillip, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Bruce Zanca, Senior Vice President. Please proceed, sir.

Bruce J. Zanca

Thanks, operator. Good afternoon, everyone, and thank you for joining us for Bankrate's Q1 2014 earnings announcement. Here with me in our New York office is the company's President and CEO, Ken Esterow; and our Senior VP and CFO, Ed DiMaria.

Let me briefly review the call's format. First, Ken and Ed will deliver brief prepared remarks concerning the first quarter 2014 results that I trust you saw in our press release. Following their prepared remarks, Ken and Ed will take some questions.

Okay. I'll quickly run through the legal prerequisites, and then we'll get started. We remind you that some of the statements made on this conference call, including those regarding the company's future prospects, growth, future revenue and profitability, and our ability to continue to reduce cost and successfully implement strategic initiatives constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our views with respect to future events and financial performance but are not guarantees of future performance and are subject to numerous uncertainties and risks relating to the company's operations and business environment, which may cause the company's actual results in the future periods to be materially different from those contemplated in such forward-looking statements. While we cannot anticipate all of these uncertainties and risks, we have identified some important factors currently known to us in the press release that preceded this discussion, and we'd encourage you to read our reports filed with the SEC, including the discussions under risk factors in our annual report on Form 10-K for the year ended December 31, 2013, which is available on the SEC's website.

So with that, I'll turn the call over to Bankrate's President and CEO, Ken Esterow. Ken?

Kenneth S. Esterow

Thanks, Bruce. Hello, everyone, and thanks for joining. I'm really excited to share Bankrate's First Quarter 2014 Results with you this afternoon. Not only our banking, credit cards and insurance all driving year-over-year growth in revenue and EBITDA, but also today, we announced the acquisition of Caring, Inc., a leading consumer destination for those seeking information and support as they care for aging family members and loved ones.

We've got a lot to cover on today's call, so let's dive in. In terms of Q1 2014, our revenues of $136.5 million reflect a 26% increase over 2013. Bankrate's EBITDA for the quarter increased 27% to $36 million. What's more, we were able to maintain our EBITDA margin while making a number of the large -- longer-term investments that I highlighted on the last call in the areas of advanced analytics, optimization, personalization and mobile to unlock even more value from our massive and growing audience.

Let's move into how each of our businesses is performing, starting first with credit cards. Cards delivered 19% revenue growth for the quarter over last year through a combination of owned and operated site traffic growth, higher offer clicks and increased card approval rates on our flagship CreditCards.com site. These factors all contributed to strong approved card volume growth. We also benefited from higher issuer effective CPAs for monetization.

Generally, consumer interest in cards grew with an improving economic picture, favorable trends in consumer credit and increased issuer focus in card marketing. Unique visits to CreditCards mobile site doubled this quarter over last year. What's also exciting is that revenue per offer click on mobile was up 80% versus last year as we continue to work with issuers on optimizing funnel performance for the mobile visitor. So what's that mean for us? It means that total mobile revenue for CreditCards.com is becoming meaningful and more than 3% of total card revenue and growing fast, up from just a bit more than 1% a year ago. And there's certainly a lot more greenfield ahead of us in mobile.

In the next few months, cards will introduce an updated mobile experience, including our rich content and tools. We will also extend our monetization platform for card issuers to include our mobile audience as well. Both of these efforts are expected to deliver even better performance in revenue for mobile.

Next, Bankrate Insurance achieved 2 important milestones in the quarter. First, more than 1/3 of Bankrate Insurance's revenue is now coming from our owned and operated sites. Our owned and operated lead volume is up 60% year-over-year.

Second, carriers who are on quality-based structures now represent more than 80% of our national carrier revenue, generating our own lead demand and aligning price into lead quality fit together since leads from our owned and operated sites are generally of higher overall quality. And when our carriers experience a better product, we'll benefit as well. We're looking for the quality shift to continue, supported by a new dynamic lead scoring model aimed at further refining affiliate lead quality.

We've also rolled out a local agent life cycle program, which is driving higher spend per agent, especially among our top agents. The number of local agents spending more than $1,000 a month with Bankrate Insurance is up some 60% versus this time last year.

And finally, with respect to improving the consumer experience in insurance, we've just beta tested an optimized lead form for home insurance, and we're seeing an 18% lift in lead volumes.

For our banking business, a 48% growth in deposit clicks and calls effectively offset a 27% decrease in mortgage clicks associated with the general decline in refinancing activity we've seen. Display revenues set another quarterly record, up 22% over last year as our highly valued audience continues to find favor with advertisers.

Moreover, our banking audience is bigger than it's ever been and continues to grow. To add some color to the ongoing strength of our franchise in banking, visits to our flagship, Bankrate.com; have almost doubled since 2011. And we set a single day record of 5 million page views on March 25. We're also seeing some early wins with respect to our money ball initiative to continuously test and optimize user experience. We've increased the number of tests running on the Bankrate.com site by more than fivefold since last year with some good results. Bankrate mobile also continues to show improved performance. Mobile click-through rates and RPV are both up about 20% this past quarter versus when we launched our mobile responsive site in the fourth quarter of last year.

So we're very pleased with the operating performance of each of our businesses. And before returning the call over to Ed to cover our financial results in detail, I do want to stop and recognize and thank our business leaders, Chris Speltz, Jeff Grant, Don Ross and their teams for a really great quarter.

And with that, I'd like to turn the call over to Ed.

Edward J. DiMaria

Great. Thanks, Ken. Okay, as you can see we had a very strong quarter. I'm sure everybody is interested in getting into the detail, so let me get started.

As with past calls, I will provide a high-level financial overview of the quarter and then provide some color on current trends, as well as run through the financial details. Ken will take you through the Caring acquisition, as well as run through Q2 and annual 2014 guidance, then we'll be happy to take your questions.

Also note the reconciliation between GAAP to the non-GAAP measures that I reference in my remarks can be found in the back portion of the press release.

From a high-level standpoint, revenues for the quarter were $136.5 million, up $28 million or approximately 26% over the $108.4 million in revenue posted in the prior year quarter.

Adjusted EBITDA of $36 million was up 27% over the $28.4 million we reported in Q1 2013, and that was at a margin of 26.4% in Q1 2014, which was up 20 basis points over Q1 '13.

GAAP net income was $4.8 million for Q1 2014, which represents EPS of $0.05 versus net income of $2.2 million in Q1 2013 or EPS of $0.02.

Non-GAAP adjusted net income was $17.4 million for Q1 2014, which is adjusted EPS of $0.17 compared to $0.12 in the prior year. And that calculates out to an increase of $0.42 in adjusted EPS for the first quarter.

So I just ticked off very strong high-level numbers. Needless to say, we are pleased with the start to 2014. But more important, we are excited about the future and the opportunities ahead. Let me take a minute to run through a few points to give you a flavor for the trends before we get into the financial details.

First, insurance. The strategy we have been focused on continues to bear fruit in a big way. Jeff and his team in Denver have been doing an excellent job with our high-quality traffic focus and leadership within the industry. We are doing this across the platform of leads, clicks and calls with a high component of direct traffic. Note as Ken mentioned, we now drive over 1/3 of our insurance revenue from direct sources, and we are focused on driving this towards 50% by year end. As evidenced, the strategy is working. Overall, insurance product revenues were up 45% year-over-year with insurance click revenues up by 94%. For partners providing feedback where we're able to track, conversion rates were up an estimated 70%. The conviction around our strategy has really paid off. It's opened up a ton of exciting opportunities for new growth. There's still a lot of work to do, but we're excited about the progress we have made, so stay tuned, more to come.

Second, coming off a strong 2013 in cards. We opened up 2014 with a solid 19% increase in our cards business, and strong demand from our partners for the high-quality Bankrate consumer continues. We are now developing more touch points with our huge organic audience to serve them with more optimized offers to -- and content to drive growth in deeper, more frequent engagement with our consumers on our platform. You will hear more about this in the coming months and quarters as our MyBankrate strategy unfolds.

Third, our deposit click business was up by 70% in Q1, and our CPM business was up by 22%. Now with double-digit growth in our banking business, that's off to a good start as well.

And on the development side, we are busy at work investing in our future to drive sustained, long-term growth. And given our growth and performance, we're doing this without taking down our margins. We think we have a ton of opportunity to leverage our enormous Bankrate consumer audience, which Ken highlighted. In a few minutes, he'll also take you through our new senior living vertical, Caring. So lots of exciting news.

Okay, let's run through the financial details. Revenue from our leads business of $89.6 million was up by approximately 24% on a blended basis versus Q1 2013. The overall year-over-year increase was driven by strength in both credit cards and insurance lead revenue.

Regarding credit cards, revenues were up by approximately 19% year-over-year as I previously mentioned. Issuer marketing remains strong with more card products and offers, traffic increase and customer monetization continue to improve. This is a great start to the year, and we do expect strong growth in cards to continue.

Our insurance CPL revenue was up by approximately 31% from Q1 2013. Total insurance revenues for both leads and clicks were up by approximately 45%, as I previously highlighted.

Our display advertising business continues to be strong with revenues totaling $10.6 million in Q1 2014, up 22% year-over-year given the high-quality Bankrate in-market consumer audience and high advertiser conversion rates.

On the CPC side, revenues of $34.7 million were up 38% versus Q1 2013. Our insurance CPC product revenue was up 94% year-over-year as I previously mentioned, and our banking CPC product revenue was up 11%, with deposit growth of 70%, partially offset with a 21% decline in mortgage click revenue given the cool-off in refi. Now I just want to take -- I want to make sure everyone has context. Banking total mortgage click revenue was only about 6% of consolidated revenue. So the impact of the cool-off is very minor in the context of our entire business.

With respect to margins, our overall gross margin percentage on revenue on a non-GAAP basis, excluding stock compensation, for the first quarter 2014 was 66.3% compared to 66.8% in the first quarter of 2013. The overall gross margin was slightly lower in the current year quarter, primarily as a result of the higher growth rate in the insurance business in Q1 2014, which does run at a lower gross margin compared to cards and banking. And again, keep in mind, we outperformed in insurance with the business up 45%. And although we are rapidly driving up the direct traffic in insurance, there remains a component of good quality affiliates to the business. So with the outperformance, the overall blended margin for our consolidated business just ran slightly lower.

Operating expenses excluding stock compensation, amortization and depreciation and other noncash or nonrecurring items totaled $54.4 million in Q1 2014 versus $44 million in Q1 2013 and $50.1 million in Q4 2013. OpEx was higher year-over-year and sequentially as we continue to increase our marketing activities to move more traffic through our owned and operated sites, consistent with our strategy.

Marketing costs were $33.2 million in Q1 2014 versus $26.1 million in Q1 2013 and $30.5 million last quarter in Q4 2013.

One thing we are now doing is playing offense, trying new things with an eye towards future growth opportunities and not necessarily an immediate current quarter ROI. Our growth has put us in a position to do this during the quarter. We spent several million dollars on marketing and testing activities that did impact current quarter EBITDA. We believe that some of these investments will open up additional high-quality traffic sources and growth for our business. We will continue to look for opportunities to make these investments.

Again, as I mentioned in my opening remarks, adjusted EBITDA of $36 million was up by 27% year-over-year, and we increased our EBITDA margin by 20 basis points to 26.4%.

We ended the quarter with approximately $244 million in cash, up $14 million from year end during a heavy growth quarter where we did use some working capital. For example, receivables were up by approximately $16 million given the strong growth in revenue.

Our leverage ratio at Q1 end was 0.4x on a net debt basis on LTM EBITDA of $129.5 million.

Now here I want to take a few minutes to run through some numbers with respect to Caring. First, just to remind everyone that the $244 million in cash we reported is, of course, as of March 31 and prior to closing on Caring, which we just closed. In the filed 8-K, you can see we funded $54 million in cash to make the acquisition.

A little about the business model. Ken will spend some more time on the specifics, but generally, they focus on attracting organic audience with original content and information to aid in the process of finding suitable housing for seniors in the assisted living space. They provide leads to facilities within their network. And when a lead converts, meaning a senior moves into one of the facilities, they get paid a referral fee, typically in the $2,000 range.

In Q1 of 2014, Caring generated over 15,000 senior housing leads and $2.6 million in revenue and an EBITDA loss of approximately $1.6 million. There's a lag from when leads are converted into move-ins, which as I just mentioned, is how Caring is paid. So they're seeing EBITDA losses begin to narrow. We are looking for this unit to generate approximately $8 million to $10 million in revenue under our ownership this year and cost us approximately $1 million to $1.5 million in EBITDA losses, again this year, and note, this is built into our guidance. But we expect it to exit 2014 at breakeven to slightly profitable, and we expect the unit to show very strong revenue growth and to be profitable and accretive in 2015. We will look to be transparent with respect to Caring's results. We just want everyone to understand the business clearly and know how it is doing as we work it into our network, and we just really think this vertical is a big winner for us.

So with that, Ken will give you some more color on Caring, and then we'll cover guidance.

Kenneth S. Esterow

Great. Thanks, Ed. And as this is the first acquisition under my tenure, I am going to spend a few minutes walking you through the vertical, the drivers, how we think about the opportunity, and then we'll open the call for questions.

So as I started the call, we're really pumped to bring Caring into the Bankrate family. Caring is a leading online destination providing those seeking information about assisted living and related topics, especially as they care for aging parents, spouses and loved ones.

It's built its business over the past 7 years in a way that should be familiar to investors and partners. As with Bankrate.com and CreditCards.com, Caring is focused on aggregating its audience directly by providing consumers with rich and complete content, with editorial integrity and consumer reviews, all in an effort of becoming the authority for assisted living and senior care. And as with our credit cards business, where we are aligned with issuers in terms of a CPA or cost per sale model, Caring provides qualified referrals to assisted-living facilities which then compensate Caring for referrals that result in a new resident move-in.

From a macro perspective, there's a lot to like in this vertical. The overall senior housing market is some $60 billion and growing at more than 5% a year, driven by an aging America. Senior housing providers spend an estimated $3 billion a year on marketing, and as with their other businesses, more of that marketing spend is being directed online. Monthly rent in an assisted-living facility can range from $2,000 to $5,000 or more. This high-lifetime value combined with steady resident turnover creates a stable and ongoing demand for new residents. What's more, the assisted-living market is fragmented. The top 25 assisted-living providers represent less than 40% of the market in terms of units.

There are now more than 43 million Americans caring for an aging family member or loved one, who are increasingly starting to research and become educated online. Caring.com generates more than 2 million unique visitors a month with its 500,000 pieces of content ranging across caregiving and elder care topics.

Moreover, the large majority of assisted-living residents are private pay, so Caring's rich content helps to educate caregivers to make this important, high-impact and high-cost life decision. Its unbiased directory of 100,000 senior-living facilities and its growing base of consumer reviews are independent of any commercial relationship with Caring. Much like with Bankrate.com, this independence is a key competitive differentiator.

As part of Bankrate, Caring.com will be able to take advantage of Bankrate's SEO skill set and access our network of high-quality affiliate partners. We'll also, of course, include Caring's senior housing directory in Bankrate's retirement channel, which today has 1.4 million monthly visits. We'll also plug into Bankrate's PR machine. We're expecting Caring to show many of the same scale elements as card and banking, attracting a large and growing audience directly through SEO and SEM, supplemented by a smaller proportion of affiliates.

Caring-trained family advisers qualify and deliver leads to assisted-living facilities through a sophisticated and proprietary referral platform. What's more is Caring has already technically integrated into many of the providers CRM platforms and contract referral conversion at the move-in level.

And finally, we're really pleased that Caring's co-founders, CEO, Andy Cohen; and CTO, Steve Fram; as well as EVP of Performance Marketing, Karen Cassel; and the Caring team will be staying on to lead Caring's continued growth.

Now in terms of updating our outlook. With the strong Q1 start and addition of Caring, Inc.'s revenue, we are raising our revenue target for the year to between $540 million and $550 million.

In terms of EBITDA, we're still focused on a range of $145 million to $150 million. This outlook reflects continued stable EBITDA margins overall, while allowing us to invest for growth and integrate Caring.

For Q2, with April results in and May card unit CPAs continuing to trend up, we're targeting revenue of $130 million to $135 million and EBITDA of $32 million to $34 million.

And with that, I would like to open the call up for your questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Jordan Rohan with Stifel.

Jordan E. Rohan - Stifel, Nicolaus & Company, Incorporated, Research Division

I've done a little bit of work investigating the eldercare and senior care business, and I seem to remember that A Place for Mom is actually significantly larger in terms of revenues than what -- than the $8 million to $10 million range of credits [ph] for Caring.com. It's also private equity owned. Can you talk a little bit more about what made this particular company so good and worthy of $54 million in cash? And then secondly, can you -- within that business, can you break apart the percentage of their traffic that's organic versus -- and even direct NAV, SEO, SEM, and if there any affiliate relationships that drive leads and referrals for Caring.com?

Kenneth S. Esterow

Thanks, Jordan. So I think A Place for Mom has been in the business for quite some time, was purchased by Warburg a number of years ago and has gotten a lot of traction with their model. To your point, a couple of differences to how A Place for Mom is approaching the market versus the way Caring is. First, A Place for Mom is really focused on direct response. It's really about driving people into a lead funnel, less focused on building organic traffic, less focused on building authority, less focused on building its credibility and independence from their assisted living and other senior care housing partners. The second element that we're really excited about is because of the way Caring's put their business together, we think it really complements well Bankrate's profile, and being able to plug Caring into the Bankrate network of affiliate partners, the Bankrate PR machine, leveraging our SEO capabilities, we think is a no-brainer. Finally, Andy, Steve, Karen and the team have really built a nice business without a lot of resource, and we're confident that bringing Bankrate's financial resources to bear and building their expertise in the vertical is a winning combination. But A Place for Mom has a great business, and it's one of the reasons that we're attracted to the vertical. They've demonstrated that they can grow, they can create relevance and content. We don't have a sense of the breakout on organic versus referrals, and we don't think there's a lot of affiliates, but we're going to be focusing our business in building out the way we knew how to build out a business and drive a scale -- a scalable model that really takes advantage of Bankrate.

Operator

Your next question comes from the line of Joyce Tran from Bank of America Merrill Lynch.

Joyce Tran - BofA Merrill Lynch, Research Division

Can you comment on the acquisition Caring.com? What the long-term margins would look like? I know, it's probably at a loss right now, and also the annual users and leads that's generating today.

Kenneth S. Esterow

Sure. So let's start with the second question first. So we're expecting Caring to drive somewhere in the neighborhood of 70,000 leads for the year, inclusive of the stub period, where we didn't own the business generating about 5,000 to 6,000 move-ins for the year, so call that a 7%, 7.5% in conversion rate. I think that's important to highlight, and Ed referenced it, is there's a lag -- a couple of month's lag from when a lead has surfaced and when a family makes a decision to move in. So as this business grows, we expect the conversion rate to continue to improve. In '15 we're looking for 10% conversion rate between leads and move-ins. And in the out years, that will get even better as our brand gets out there, our footprint gets out there, we leverage our affiliates and our PR and refine our optimization of our lead funnel.

Edward J. DiMaria

As far as the margin goes, I mean, obviously, it's a new business, it's going to have a huge growth rate, it's going to have a lot of growth for a long period of time to come for the foreseeable future, and obviously, we're going to invest in that. There'll be marketing. Obviously, it will have a big brand component to it. To that end, given the authority that we think we can build with this in combination with us. All that being said, this is going to have a similar profile to a Bankrate, to a CreditCards because it's going to have a higher component of direct traffic in that regard. It will have more organic traffic similar in profile to those businesses that won't have a high affiliate component really at all. So it's going to have a margin similar to our overall margin, if not potentially over time a little bit better than the business' margin right now. So that's where we would expect it to settle out over time.

Operator

Our next question comes from the line of Heath Terry from Goldman Sachs.

Heath P. Terry - Goldman Sachs Group Inc., Research Division

It certainly seems like you guys are really working to highlight the progress that you're seeing in mobile. Can you give us a sense of sort of where you feel you are from a development perspective, either in terms of the technology assets that you need, the app footprint that you want to have in terms of getting your mobile footprint or strategy up to what you feel like is right for the company, whether it's sort of 50% through, 75% through, 20% through, some sort of context in terms of how we should think about that, as well as sort of any sense that you can give us around kind of the investment that you've got planned or need to have planned? Certainly with the revenue upside that we saw this quarter, it seems like you can begin to invest more into the business and still maintain the high level margin you've had.

Kenneth S. Esterow

Great. Thanks, Heath. So on the first point, I want to break that down into 2 elements. One is the investments we're making in mobile for our core businesses in cards and insurance and banking. As I mentioned on the call, our cards business will continue to invest in a better user experience for mobile, adding our content, adding tools because right now, if you go to our m.CreditCards.com site, it's basically a card listing site. Extending the CPA monetization platform that we use in desktop from our issuers into mobile will also provide benefit. The real investment we believe, as I said on the last call, is not just focusing on our mobile user experience and our apps, it's really taking this end-to-end view. So we have appointed a mobile editor in Bankrate.com, who's taking our content and making sure it's resonating with the mobile audience. We're looking to build tools, which are under development to integrate with our upstream publisher and affiliate partners in their mobile audience, a move we announced in December is performing really nicely. Building out some tools for that audience is something that is well along its way, should be delivered summer of this year. Downstream, our mobile advertiser in mortgages may need some additional tools as well, which we'll provide to them, mobile lending pages and the like. So we're not delivering a consumer who's had a great mobile experience on Bankrate into a less than great experience on the advertiser's site. All that stuff is in process. We know how to do it. We know the investment is manageable within the confines of our commitments with respect to this year's EBITDA margins, and it's going to span cards, banking, insurance, given sort of the profile of our demand aggregation, there's probably less benefit in '14 from a mobile focus. It's really taking some of the bigger bites at the structural changes that are happening in that business around lead quality and monetization and creating a great experience. That said, we think there's a lot we can do in insurance for the mobile user to provide a more compelling path for them to engage with us and shop for car insurance. The second piece, mobile, is around MyBankrate. And that's moving from this episodic -- I'm in the market for a house, therefore, I'm looking for a mortgage or it's the turn of the year and I'm looking for places to invest or make CD or money market decisions or lower my credit card rate or find a great rewards card into a consumer customer experience where there's ongoing engagement. We're providing features and tools and benefits to that customer, that visitor, in a way that will engage both on desktop and mobile. And we are well underway of finalizing those plans. We're looking to launch something by the end of the year. And with our growth in revenue and the healthy gross margins, we're confident that we can accomplish that within our targets and make that part of our business really mobile first. And that's going to be a shift for us, but it's something that we are gearing up to do from a resource perspective, we're gearing up to do from a talent perspective and we're gearing up to do from a financial perspective. So we're really excited about our progress, and we'll keep our investors updated on these calls and over the course of the year.

Operator

Our next question comes from the line of John Campbell from Stephens, Inc.

John Campbell - Stephens Inc., Research Division

Just congrats on that Caring acquisition. It looks like it could be another solid, long-term growth driver for you guys. So last quarter, I believe you guys said the insurance leads were running about 80% of 4Q '12. I might have missed this, but what were lead volumes this quarter relative to last?

Edward J. DiMaria

Yes, there were still down a little bit, not as much as they were. We were sort of roughly a little over 90%, but still down a little bit off first quarter of last year. We do actually expect lead growth in the second quarter.

John Campbell - Stephens Inc., Research Division

Got it. So the early signs in April -- maybe leads are picking up a bit?

Edward J. DiMaria

Yes.

Kenneth S. Esterow

So, yes, for Q2 '14, we're expecting total insurance lead volumes to be up over last year at improved quality, at improved pricing and with much higher click rate, click engagement as well.

Edward J. DiMaria

An important part of our monetization.

John Campbell - Stephens Inc., Research Division

Got it. And so this is the first time, I guess, in 4 quarters that the insurance leads will start to pick up.

Edward J. DiMaria

Correct.

John Campbell - Stephens Inc., Research Division

Okay, great. And then, could you guys give us a little bit more color, first, just on the overall Caring impact to EBITDA guidance for the year; and then, if there's any Caring seasonality we should maybe consider as we -- as far as revenue contributions?

Edward J. DiMaria

Well, like I said, in my prepared remarks, we expect it will cost us between $1 million and $1.5 million this year, and so we've built that into our thinking. We didn't change our guidance range, we reaffirmed it. So essentially, we're going to absorb that $1.5 million within our guidance range. We obviously think that we can pay for that given the performance in the business, we can absorb that, no problem.

Kenneth S. Esterow

And the expectation is by the end of the year, is exiting the year, EBITDA positive and then '15, will be meaningfully profitable and accretive. In terms of seasonality, there is some seasonality. What tends to happen is around the holidays, Thanksgiving and Christmas, when adult children are home with their parents, they see some issues that raise some concerns, they huddle, they figure out, they need to help make this decision, they'll get a spike in call activity and visits, an engagement that turns into leads, which turn into move-ins for the second and third quarter. That said, our expectation is because of the rapid growth that we'll drive in this business, that seasonality will be a bit obscured just because of growth. So we're going to grow through the seasonality, but there will be some.

Edward J. DiMaria

Yes. Obviously, it's going to lose more in the early part of the year and as we said, exit the year at breakeven to profitable.

Kenneth S. Esterow

Early part of this year.

Edward J. DiMaria

Yes, early part of this year, it will lose more. And then, more of that $1 million to $1.5 million, and then exit the year, breakeven to profitable.

Kenneth S. Esterow

And it's a type of business we really know how to manage. So if you go back to Bankrate in 2007 sort of primarily focused on banking, mortgages and deposits, we've extended that successfully into credit cards, we've extended that successfully into insurance. And now given the macro profile of this vertical with the tailwinds at our back of an aging population, a fragmented supplier base, steady demand for referrals that result in move-ins, lifetime value based on $3,000, $4,000, $,5000 a month in rent, private pay, complicated decisions, this all -- this all aligns with what we do really well. And we're really confident that we can take this business, extend it in the vertical and really take advantage of what Bankrate has to offer.

Operator

Our next question comes from the line of Victor Anthony from Topeka Capital Markets.

Victor B. Anthony - Topeka Capital Markets Inc., Research Division

Two questions. One, Ed, I think you mentioned -- I wasn't too clear, but $34 million in testing of, I believe, you said marketing, wanted to get a sense of what that was and what the result of that test was? And second, on Care.com (sic) [Caring.com], you talked about diversifying your business model just a second ago. Over time, when I look at Bankrate.com over the years, you essentially have diversified, but you've stayed within essentially financial services and Care.com (sic) [Caring.com] seems to be a departure from that. So maybe you could give us a sense of how to think about from a higher level to Bankrate.com, is it more of a financial services business, or should we think about it more of a lead-generation business within the context of the acquisition?

Edward J. DiMaria

Okay, I'll take the first one. So the numbers that I quoted was -- there was $33.2 million in total marketing expenditures in Q1 2014, that's total across the consolidated entity for all activities. And of that, I indicated that there were several million, basically a couple million of that was used for testing and investing activities on new things, so not the whole $33 million. In fact, the lion's share, most of that $33 million was used for the typical types of marketing activities that we do such as SEM and other things that we do to drive traffic. And we do that at an ROI, a very strong positive ROI as we've done in past quarters. But what we had done this quarter, given the growth and momentum in the business, what we began to do was allocate marketing funds for -- looking at opportunities for growth in the future where we could invest in traffic and test it, test it as a loss, test it as an EBITDA loss and begin to see if over time we could make those activities profitable and not really worry in the current quarter about making money with those marketing activities. That was the focus of the prepared remark comments. So I indicated that there were a couple million dollars directed towards those new types of activities.

Kenneth S. Esterow

And that comes out of the capacity that inures with growth. And something that I highlighted in the last call and in a number of sort of follow-on discussions with investors and conferences and whatnot that we are -- we made the shift and having turned the corner with insurance that we can start playing offense and begin to explore some interesting ways to capture traffic, extend our brands and grow. And we have the appetite to take that risk, we have the capacity to take that risk, can still deliver really solid EBITDA margins and innovate some of our marketing techniques, innovate some of our marketing channels and continue to grow as a business. On the Caring side, first of all, just want to make this one point because sometimes it's confusing. It's not Care.com, which is a very successful publicly-traded business, it's Caring.com that we acquired. That said, while Caring is less directed in sort of financial services, it's sort of a logical extension of what we do well. So obviously, banking with deposits and mortgages is front center in financial services; credit card, same thing. As you get further into auto insurance and home insurance, it's a financially-motivated product, but there are a lot of other aspects of that product as well, and this is the next logical extension. It's an important life decision. It's very expensive. It requires a lot of information, a lot of support, a lot of research, and it's where the marketplace will pay a premium for an end-market customer. So we're really excited about this vertical. And the more we get into it and the more we'll share with our investors over the coming quarters how it's doing, we're confident you'll get excited about it, too.

Operator

All right. And our next question comes from the line of Douglas Anmuth from JPMorgan.

Kaizad Gotla - JP Morgan Chase & Co, Research Division

This is Kaizad Gotla in for Doug. First one, Caring. I was wondering if you could -- or if you did provide how many provider relationships they have today. And maybe just talk a little bit about the level of integration with their CRM systems that Caring.com has, is that something that's unique to them? And then second, just on insurance revenue per lead, that increased 45% this quarter. Wondering if you could just help us think about the room for growth in RPL going forward.

Kenneth S. Esterow

So I'll take the first one. In terms of their partners, they work with probably half of the communities that are out there, including 9 out of the 10 most -- the biggest or most popular, including Sunrise and Brookdale and Emeritus and a number of the companies that are well known to investors and well known to seniors and their families. The integration is something that Caring has done. I believe, 1 or 2 other providers have done it, including A Place for Mom, which is a link so that when we take a consumer and provide the referral to the community, we can track over a period of weeks and months what the status of that referral is and get feedback in real time when that resident moves in or doesn't move in. And it takes some work both on the Caring side and it takes some work on the community side, which creates some friction, and we believe the competitive differentiator because we are seamlessly integrated in handing off referral to the community that they can follow-up on and then we can follow up on the status of that referral. So while it's not rocket science to do, it does take a commitment on behalf of the provider and the facility to be willing to integrate. And Caring has been able to do that because of its high-quality lead volume and the percentage of leads that turned into move-ins.

Edward J. DiMaria

Yes. In terms of RPL growth, it's safe to say that, obviously, it was up and it was up significantly because if you look at the lead growth overall, it was up 31%. And as I indicated, we did that on 90% of the volume, so obviously we did that by monetizing our leads significantly higher in excess of 40%. And we do think that we continue to drive up RPL year-over-year because one of the things that we've been able to do is get a higher monetization index to quality. And as we drive higher quality traffic, direct traffic, direct traffic -- all of our traffic or 80% of our traffic, as Ken mentioned, is indexed to quality and therefore, the more direct traffic and higher quality traffic you drive, it accretes to a higher RPL. But I think that we don't want to get too hung up on specifically RPL and ultimately how that plays out. I think the thing that we want to focus on is, hey, driving a great ROI for our carriers. As I indicated, it was up 70% during the period. And if we can continue to do that, if we can continue to drive more high-quality traffic, we think that we can drive growth in the business and drive it sustainably. So...

Operator

[Operator Instructions] And we do have a question coming from the line of Victor Anthony from Topeka Capital Markets.

Victor B. Anthony - Topeka Capital Markets Inc., Research Division

Yes, maybe I'll jump in and ask one more question just on the, I guess, the longer-term margin profile of Bankrate and how should we think about the business essentially over the next probably 2, 3 years.

Edward J. DiMaria

Victor, I mean, with growth, the one thing that this business does, obviously, it generates a lot of cash and we can pretty easily accrete that to margin. I think though that what we're really focused on right now is taking some of that incremental margin, that incremental -- high incremental EBITDA margin and investing that in the business and not letting margins get necessarily too far ahead. So what we've indicated is we're going to invest in the future, we're not going to take margins down. We guided to essentially a slightly increase in our margin for this year, and we think that we could probably increase our margins, call it in the 100 basis points or so each year for the next couple of years, and we can probably do that comfortably and continue to drive long-term growth. I think that that's probably the right way to be thinking about it.

Operator

All right, ladies and gentlemen, this concludes the question-and-answer session of today's call. And I'd like to turn it back over to Ken Esterow for closing remarks.

Kenneth S. Esterow

Great, operator. And thanks, everyone, for joining today. Let me sum with a couple of final thoughts. Our core businesses are working great, and we're maniacally focused on making them better through optimization and advanced analytics. We believe there's a treasure trove to be had in leveraging our Bankrate audience and our credit cards audience and our insurance audience and shifting the paradigm from this episodic transaction-based engagement to ongoing annuitized customer-type relationships that are centered around mobile, that are centered around ongoing benefits and features, where we can begin to anticipate when consumers may need or want certain financial information and be responsive to our partner offers.

Caring is an incredible extension of our platform and what we do well, provides a platform for growth, creates, we believe, a whole new set of optionality around our business in adjacent verticals and services that we can provide.

I also want to take the time to welcome our newest members of the Caring team out in San Mateo. I'll be out there next week for some time. And we're really excited about the upcoming quarter, and we're committed to the year. So with that, thanks for listening. Have a great spring, and we'll talk to you in a few months.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you all for your participation. You may all now disconnect. Have a wonderful day.

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Source: Bankrate's (RATE) CEO Kenneth Esterow on Q1 2014 Results - Earnings Call Transcript
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