Bankrate (RATE) Kenneth S. Esterow on Q2 2016 Results - Earnings Call Transcript

| About: Bankrate Inc. (RATE)

Bankrate, Inc. (NYSE:RATE)

Q2 2016 Earnings Call

August 04, 2016 5:00 pm ET

Executives

Kayleen Yates - Senior Director-Corporate Communications

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

Steven D. Barnhart - Chief Financial Officer & Senior Vice President

Analysts

John Campbell - Stephens, Inc.

Laura Martin - Needham & Co. LLC

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2016 Bankrate Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

I would now like to introduce your host for today's conference, Ms. Katie Yates, Vice President, Corporate Communications. Ma'am, please go ahead.

Kayleen Yates - Senior Director-Corporate Communications

Thanks, operator. Good afternoon, everyone, and thank you for joining us for Bankrate, Inc.'s second quarter 2016 earnings call. Here with me in our New York office is the company's President and CEO, Ken Esterow; and our Senior Vice President and Chief Financial Officer, Steve Barnhart. Let me briefly review the call's format. First, Ken and Steve will deliver brief prepared remarks. Following the remarks, the lines will be opened for Ken and Steve to take some questions.

We remind you that some of the statements made in this conference call, including those regarding the company's future prospects, growth, future revenue and profitability, and our ability to successfully implement strategic initiatives constitute forward-looking statements.

These forward-looking statements reflect our current views with respect to future events and financial performance that 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 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 encourage you to read our reports filed with the SEC, including the discussion under Cautionary Statement Concerning Forward-Looking Statements and Risk Factors in our Annual Report and Form 10-K for the year ended December 31, 2015, as updated in our quarterly reports on Form 10-Q, which are available on the SEC's website.

A reconciliation of certain of the non-GAAP measures referenced in this call can be found in the back of the press release with the financial statements. We also posted a presentation with supplementary information and metrics on Bankrate's Investor Relations website, at investor.bankrate.com.

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

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

Thanks, Katie, and good afternoon, everyone. Thanks for joining today's call.

As we announced this afternoon in our earnings release, for Q2 2016, Bankrate generated revenue of $98.3 million, up 10% over the second quarter 2015, exceeding guidance. Our second quarter adjusted EBITDA of $22.6 million also exceeded our guidance. The quarter's results demonstrate that not only are we able to drive top-line revenue growth and achieve our strategic objectives, but also that we can start to successfully rebuild towards adjusted EBITDA growth. On June 17, we closed the previously announced NextAdvisor acquisition.

Steve will cover the quarter's financial results in more detail. So I'll move right into our business performance for the quarter. For our flagship Credit Card segment, we accomplished what we set out to do in the quarter in terms of diversifying our consumer demand for credit cards beyond natural search, with additional focus on paid marketing across social, display and direct response TV. Further, there's been much less volatility in terms of organic consumer inquiries than we saw in the first quarter, which is encouraging.

We continue to make strong progress in our cards business, driving ROI positive investments in paid marketing to reach more end market consumers. In the quarter, our cards segment posted its higher revenue ever. Needless to say, we're pleased with our continued cards leadership position and evidence that the strategy is working. As you may recall from the last quarter, we outlined our strategy to restore cards to adjusted EBITDA growth.

We're no longer content to simply wait for consumers searching for credit cards to find us organically, but we are instead controlling our fate. We're well down the path toward building a virtuous circle in cards, where our leading site authority, conversion and monetization, enables us to drive profitable revenue growth through investments in paid marketing. In turn, these paid marketing investments create higher consumer awareness and engagement for cards, improving our site authority, reinforcing our brand, and supporting our organic foundation.

These online marketing efforts are leveraging advanced analytics to use first-, second- and even third-party data to optimize SEM programmatic display and social media campaigns. Also, NextAdvisor started using their leading content marketing capabilities on CreditCards.com in addition to their core NextAdvisor business.

Our direct response television efforts also increased in the quarter, with roughly $1 million in media spend in the quarter. The good news is that our initial results show that we are indeed able to use offline media to drive significantly higher offer click volume (5:16), and to break through some of the brand clutter in the category. Over the coming quarters, we will continue to refine our approach, including our creative and media mix.

On the issuer front, we're providing innovative solutions. For example, we're working with a bank today to present a targeted card offer if the CreditCards.com visitor is also identified as an existing customer of that bank, which should meaningfully increase conversion, while meeting the bank's objectives to improve their customer cross-sell.

Finally, the macro environment for credit card marketing remains strong, with issuers continuing to shift budget to digital channels and competing for consumer demand. Two large issuers highlighted a post-recession high for new credit cards issued in the quarter. And the two largest global payment networks reported a combined 9% year-over-year growth in U.S. card purchase volume, also in the second quarter of 2016.

Investors should keep in mind, the target adjustable market for credit card marketing is very large and expanding. We estimate that, today, we have less than 2% share of the roughly 60 million worldwide (6:26) new general purpose cards issued every year. And strong secular trends continue in our favor.

Moving to our Banking segment. Our turnaround efforts here remain mid-cycle, as we are not yet seeing the expected improvements in financial performance. On the positive side, we drove accelerating performance in mortgages throughout the quarter with our value-based pricing efforts. Mortgage revenues grew 48% versus the second quarter of 2015. And this growth was consistently strong through the quarter, even before the tailwind of higher refinancing demand post Brexit towards the end of June.

However, the success and traction we've generated with our mortgage value-based pricing has not yet been replicated with deposits. With deposit rates hovering at near all-time lows and excess bank reserves of more than $2 trillion, there continues to be simply much less demand from banks to advertise deposits, almost irrespective of advertising cost.

Moreover, the same uncertainty which drove mortgage rates to near all-time lows helped many banks to exceed their deposit funding goals without their planned advertising expenditures. Our near-term outlook is that this headwind for deposit advertising continues for both consumer inquiry and display revenue, but longer-term, advertiser demand for deposits would return when rates rise.

We have a dual-pronged approach to mitigate the downturn in display revenue that we've discussed on previous calls. First, our own recently deployed programmatic ad technology is gaining traction. In the quarter, we generated almost $1 million in programmatic display, up 49% from Q1 2016 sequentially.

We're activity securing more programmatic advertisers. And, by the way, eMarketer notes that more than two-thirds of display advertising is now booked programmatically. We're integrating our ad technology into more ad exchanges and locking-in key private marketplace deals with a variety of financial services advertisers to begin to yield up on our most valuable inventory.

Second, we continue to focus on high-value integrated sponsorships, such as the one we introduced in the quarter with Veterans United for VA mortgages. This barbell of high value, high consumer intent but lower volume sponsorships combined with high volume, lower CPM programmatically sold ads is where our display business is heading.

Now, within our Senior Care segment, revenue was up 5% year-over-year versus the prior-year quarter. Our Caring sales team is adding communities to our network at a healthy clip. At the end of Q2 2016, we have more than 5,300 participating communities, up roughly 20% year-over-year from the second quarter of 2015. We also move forward with our in-home care and financial services offerings. Over time, we expect this cross-selling between home care and senior care financing to increase the value and monetization of our Caring consumer inquiries.

With that summary of our business performance, let me now turn the call over to Steve, who'll cover the financials.

Steven D. Barnhart - Chief Financial Officer & Senior Vice President

Thank you. As Ken said earlier, Bankrate reported record Q2 revenue of $98.3 million, up 10% versus the prior year. Adjusted EBITDA of $22.6 million was 28% lower versus the prior year. However, it exceeded the guidance of $20 million to $22 million that we provided in May.

Two items in the quarter caused us to report a $41 million GAAP net loss. The first is a $25 million non-cash impairment charge to goodwill on our Banking segment, which I'll discuss shortly. The second item is a $20 million charge to reserve for a previously announced pending legal settlement, approximately 70% of which is expected to be reimbursed by our insurance coverage.

Moving on to the operating business. In our Credit Card segment, we posted revenue of $69.7 million, up 24% year-over-year. Revenue growth was driven by a 38% increase in consumer inquiry revenue from our owned and operated properties, as the strategy of increasing investment in paid marketing to drive traffic continued in Q2.

We've discussed the decline in card affiliate revenues on our earnings calls over the several past quarters. Certain third-party affiliates moved to direct links with issuers or other networks in 2015. And as a result, affiliate revenues in Q2 2016 were down 5% versus the prior-year quarter. We believe we have now overlapped the movement of affiliates in 2015, and it should not impact our rate of revenue growth going forward. In any case, as we've communicated on past calls, card affiliate revenue is low-margin and has little bottom-line impact.

Credit Cards adjusted EBITDA of $24.7 million was 4% lower than prior year, while adjusted EBITDA margins were about 10.6 percentage points lower. Consistent with the trends we discussed on last quarter's call, lower margins can be attributed to, one, a higher mix of revenue generated through paid marketing; and two, increased investment in products and technology, which will have a longer-term return.

To give you a sense of the revenue mix shift towards paid marketing, the percentage of consumer inquiries from paid marketing in Q2 2016 doubled over the prior-year level. We expect the paid marketing revenue mix to continue increasing, as we further ramp our investment in paid marketing, and have a full quarter of benefit from NextAdvisor in our financials. Because the NextAdvisor acquisition closed late in the quarter, on June 17, NextAdvisor had limited impact on credit card results.

In the Banking segment, total revenue of $23.2 million was 14% lower versus the prior-year quarter. Consumer inquiry revenue totaled $15.4 million in Q2, down 5%, driven by lower deposit advertisement demand. Mortgage revenues, on the other hand, grew 48% year-over-year, on 75% higher consumer inquiries, benefiting from the value-based pricing initiatives that we implemented in Q3 of last year. We are also implementing these strategies in the deposit vertical, but as Ken said, the macro bank deposit and interest rate environment remains challenging.

Deposit and other revenue of $7.8 million in Q2 was down 27% compared to the prior year, driven in large part by the same weak demand from deposit advertisers. Many of our largest deposit CPC advertisers supplement their rate table participation with display advertising, and the same factors that caused them to reduce their CPC spending also caused them to reduce their display ad spending.

Adjusted EBITDA for the Banking segment in Q2 was $4.8 million, down 48% from Q2 2015. The decline in adjusted EBITDA was mainly due to lower revenue. The performance of the Banking segment in Q2 caused us to review our Banking segment goodwill, and we recorded a $25 million non-cash impairment charge in the quarter.

Our Senior Care business generated revenue of $6 million during the second quarter. Adjusted EBITDA was $0.5 million, with the segment approximately break-even for the first half of the year.

In our Corporate segment, which includes Quizzle, expenses before costs associated with governmental investigations and related matters, and excluding depreciation, amortization and stock-based compensation, were $7.4 million in the second quarter, up $3.7 million versus the prior year. The largest portion of the increase in corporate costs stemmed from investments in finance personnel and systems. We expect the level of corporate costs to lower a bit in Q3 and Q4, as projects are completed.

Operating cash flow for the second quarter was approximately $18 million. There is approximately $12 million of operating cash usage due the portion of the $75 million NextAdvisor purchase price that was put into escrow. We also had $2.6 million in capital expenditures as we continue to invest in products and technology. We ended the quarter with nearly $122 million in cash.

Ken?

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

Great. Thanks, Steve. Now, before turning to our updated guidance, I'd like to take a moment to thank my senior business leaders and Chris and Scott and Karen, as well as their entire teams who responded to rate challenges in the first half of the year with terrific focus, intensity and teamwork.

I think we've changed and built more in the past six months to nine months than perhaps any time in the company's history, certainly since Bankrate went public again in 2011. Our mission of helping consumers to master life's financial journey and being the best source of high-value customers for providers remains the same.

Turning to guidance. We're particularly encouraged by the trends in our cards business, offset in part by the aforementioned challenges in banking. Including NextAdvisor in our guidance for Q3 2016, we're now expecting revenues of $110 million to $116 million, with adjusted EBITDA of between $23 million and $25 million. For the full-year 2016, we're expecting revenues of between $419 million and $430 million, and adjusted EBITDA of $99 million to $103 million.

In closing, we are all intensely focused on creating value for shareholders, not only by driving consistent top-line revenue growth, but also by rebuilding rate towards profitability growth, growth that we believe will start to kick-in in the fourth quarter of 2016.

And with that, let's open up the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you. Our first question comes from John Campbell from Stephens, Inc. Your line is now open.

John Campbell - Stephens, Inc.

Hey, guys. Good afternoon. Congrats on a great quarter.

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

Thanks, John.

John Campbell - Stephens, Inc.

So, on the cards segment, it looks like the revenue per inquiry, that's accelerating pretty nicely. Just curious about what you guys kind of have implied in guidance. I know the competition in the issuer space seems to be kind of running at full throttle. Are you guys assuming that maybe flattens out towards the end of the year? Or are you expecting continued kind of acceleration there?

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

I'm sorry. You cut out halfway through your question. I'm sorry. Can you repeat? Something in the middle of the year?

John Campbell - Stephens, Inc.

Sure. So the question is on the revenue per inquiry. It's picking up pretty nicely in the cards segment. It seems like competition is pretty rampant and pretty much running at full throttle in the industry. So I was wondering if you guys are factoring in a continued acceleration in that revenue per inquiry, or is that going to cool off towards the end of the year.

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

So I think there's two things that go into our revenue per inquiry. One is the mix of our business, the pieces that come from organic, paid and the different components of paid, and there's going to be a mix element that factors in with the NextAdvisor acquisition as well that operates with different EPCs or CPAs than core credit cards. And our guidance reflects all those impacts.

In terms of the competitive environment, based on our results and based on what we're seeing for the back half of the year, we feel really good about where we stand. We're really happy to have the NextAdvisor team on board. They're working with the cards team. I was on Bloomberg today, and you'll see a content marketing piece, at least I saw it two hours ago, that showed both CreditCards.com and NextAdvisor. And we're really excited about bringing those two elements together.

So I'm not going to speak specifically of the competitors. We're focused on what we do well, ramping our business, growing revenue. In the issuer environment, pricing is a function of issuer demand, and I think everyone knows we run a monthly auction with respect to our highest demanded categories across our platform, and through the issuers and the issuer demand that sets pricing. And to-date, that has been favorable certainly over the last two years. And based on the external environment we're seeing, we're bullish on that continuing through the back half of the year.

John Campbell - Stephens, Inc.

Okay. That's helpful. And then, just a quick question. On the insurance business sale that you guys did a couple of months ago, can you remind us – the $25 million payout, I guess remind us on the timing of that payout, and then what that is exactly contingent upon?

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

Yeah, I'll let Steve take that one.

Steven D. Barnhart - Chief Financial Officer & Senior Vice President

Yeah, John. So it was – and after some cash adjustments, it netted out a little lower than $25 million. I can't remember the exact number, maybe $22 million, something more $22-ish million. But it paid out at two years, but that was contingent upon their ability to do so at that time based on their financing arrangements or could convert into a note. So those were the dynamics on that.

John Campbell - Stephens, Inc.

Okay. And then, just housekeeping. How many buybacks in the quarter? And then, where do we stand with the current authorization?

Steven D. Barnhart - Chief Financial Officer & Senior Vice President

We finished the $50 million buyback in the quarter.

John Campbell - Stephens, Inc.

Okay. And then, any plans on future authorizations?

Steven D. Barnhart - Chief Financial Officer & Senior Vice President

We don't have anything to announce today, no.

John Campbell - Stephens, Inc.

Okay. Thanks, guys.

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

Thanks, John.

Operator

Thank you. Our next question comes from Laura Martin from Needham & Company. Your line is now open.

Laura Martin - Needham & Co. LLC

Hi, guys. Nice to talk to you. Hey, I'd love an update, Ken, on myBankrate. We haven't talked about that in a while. I was just wondering what's going on there. And then, it feels to me like there's a lot of pricing pressure in banking. We were talking about the programmatic. And so I'm real interested in what – is that programmatic putting downward pressure on your prices, just like when we moved to variable pricing?

One of the reasons we were losing share is because we didn't have variable pricing. So, by definition, variable pricing lowered price point. So, could you talk about the pricing pressure in the business by segment? I'd be really interested in that. Thanks.

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

Sure. Great. On the myBankrate, and our goal to establish an ongoing relationship with our mass of audience, we've provided an update last quarter, we're around sort of 3 million consumers across banking, with myBankrate and myCreditCards (21:30).

The focus in the second quarter really was about ramping our card spend and card marketing efforts, and getting banking on track in some of the core elements. With the site redesign for banking, which is rolling out in the second half – I think the first element is about to be launched. We'll start weaving in a lot more of the myBankrate offerings. Same thing with myCreditCards. We think it's an important long-term opportunity for us, and yields additional monetization, and reduces ongoing cost of customer acquisition as people consider other financial products.

On the advertising pricing side, let me break it down into two pieces. When we talk about value-based pricing, that's really in our rate tables. So, when we have consumers specifically looking for mortgage rates, or deposit rates, or auto loan rates, and that's where we've moved from one size fits all, every click costs the same, that was sort of call it 12 months ago, to calibrating our pricing based on the value of that click to the advertiser, the search and traffic, the time of day, the value of the request, the loan size, FICO score, et cetera. And in mortgages, we've had a lot of success with that. Our units of volume were up 75% in the quarter. Overall revenue was up 48%. We think that was a great trade.

On the deposit side, we're not seeing the price elasticity from deposit advertisers. So, as we've tested different price points in trying to sync up with what our deposit advertisers are seeing in terms of their conversion funnel and accounts being opened, there's less advertiser demand at even lower price points.

When I talk about programmatic, it's really in our display environment. Display has typically been, if you go back a couple of years, about a third of our revenue. We had a very traditional way of selling display advertising, looking for Insertion Orders for fixed advertising units. We also sold a little bit of sponsorships from time-to-time. The display advertising market has really pivoted to programmatic. Advertisers are looking for audience. They're looking to re-target their existing customers. Technology and analytics allows to do that at scale efficiently, which has put downward pressure on our effective CPMs.

So what I mentioned on the call is we're sort of bifurcating our display approach. We've got a group of really terrific sales people focused on high-value sponsorships that are working with advertisers to focus on their brand, and weaving in their content and their offering into the Bankrate experience. If you go to the site today, Veterans United is probably the best example of that. We've done others in previous quarters with advertisers.

And then, on the programmatic stack, it's really using this real-time marketplace and making sure that our inventory is available in as many exchanges as makes sense, and that with certain endemic advertisers, the highly valuable financial services providers, that we've set up the appropriate backstops and thresholds to make sure that the yield that we're providing to the advertisers is commensurate with the value we're providing to them.

And we've made a lot of progress in Q2. We stood up our programmatic stack for the first time, I think, in Q4 of 2015. That part of our business continues to accelerate. But I think it's fair to say our display revenue will be challenged for the foreseeable future, just given the macro trends.

Laura Martin - Needham & Co. LLC

Very helpful. Thanks so much.

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

Thanks, Laura.

Operator

Our next question comes from Andrew Jeffrey from SunTrust. Your line is now open.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Hey, guys. Thanks for taking the question. Steve, can you just help us a little bit with NextAdvisor in terms of what you expect the revenue and EBITDA contribution to be in the back half of the year?

Steven D. Barnhart - Chief Financial Officer & Senior Vice President

Yeah. I mean, we have really reflected the NextAdvisor impact in the guidance, and it is partially offset by some of the weakness we're seeing in banking since we gave guidance back in May.

But in terms of breaking it out balance of the year, we have already begun to run content marketing – NextAdvisor has already begun to run content marketing for the benefit of CreditCards.com. And we don't want to go down the path of trying to isolate NextAdvisor for external discussions when a lot of their work really is mingled with CreditCards.com.

So they're shifting ad inventory from use on one side to the other. We want them to be indifferent and we'd like you to be indifferent as well. So, other than sort of disclosure requirements we have to meet, we'll present one credit card segment which will include NextAdvisor.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Okay.

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

I think it's fair to say, if you were looking at what they did last year, for the back half of the year circa $25 million in revenue – $25 million to $35 million in revenue, and call it $8 million or so – $7 million or $8 million of EBITDA adjusted down for a one-time card offer they had from an issuer that allowed them to ramp up marketing in a sort of six-week to eight-week period.

So I think it's fair to say we expect to do as well as that, if not better. But going forward, as Steve said, we're not going to break it out. And it'll become increasingly more difficult to break it out just because of how closely we'll try to work the businesses together.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Okay. That's fair enough. So I guess going at it a little bit of a different way, from a different angle. The guidance certainly implies a fairly steep ramp in the fourth quarter. It would appear to me, just looking at my model preliminarily, in both revenue and EBITDA. I assume that's coming from credit card. Should we anticipate a real nice lift in margin, despite what would apparently be a ramp in paid marketing? Am I thinking about that the right way? And what would drive it, if I am?

Steven D. Barnhart - Chief Financial Officer & Senior Vice President

Well, I think if you look at – Andrew, if you look at the factors why the second half was stronger than the first half, we do have normal second half seasonality, and a lot of that is in the cards business, that supports a higher second half versus the first half. And then, you've obviously got NextAdvisor coming in, supporting the second half versus the first half. So those are the two big things that in terms of total EBITDA contribution, adjusted EBITDA contribution, that elevate the second half.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Just seems like fourth quarter's stronger than third. I guess, I'm focused in on the way that breaks out.

Steven D. Barnhart - Chief Financial Officer & Senior Vice President

Well, I think, if you're looking at it – and particularly if you look at it year-over-year, you've got to remember, the last year's fourth quarter was not a traditional seasonality. Typically, we've got a good Q3 and a bit of a stronger Q4. Last year, with the items that hit in both banking with deposits and cards, Q4 actually stepped down from Q3, which is not normal and not the relationship we would typically expect.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Okay. So I guess, and we can dig in a little more offline, but when I think about the segment profitability in the back half, would you expect Banking to improve a little bit? Ken, it sounds like perhaps you're taking some cost actions and so forth, so maybe a little more balanced contribution from Banking in the second half of the year.

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

Yeah. I think the low point on Banking, and we're sort of looking at the second quarter...

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Okay.

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

...and it's not necessarily – it's not going to be cost-driven. It's really about improved revenue performance as some of our initiatives take hold. And on the Cards side, as we sort of think about these businesses, inclusive of NextAdvisor getting to sort of a normalized EBITDA run rate of sort of plus-30%, with some puts and takes over time, but that's sort of how we're thinking about it.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Okay. And then, from a business model perspective and then I'll jump off.

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

Yeah.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

You mentioned the efficacy you think you can bring to bear from NextAdvisor and its marketing strategies has differentiated from what Bankrate was able to do standalone. Do you see any evidence of that virtuous cycle yet in Credit Cards?

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

Yeah. I would – even before NextAdvisor, we highlighted on the first quarter call, as we were ramping this up, we were staring at a pretty big divot, as the ecosystem changed for us relative to natural search. And the Cards marketing team down in Austin has done a terrific job in ramping that spend, proving out positive ROI.

Now the margin profile obviously is different for paid than organic. And we've got tracking tools in place to follow the consumer from the time they see an ad, whether it's display or SEM or social, and how they behave, whether they come back; if they come back, whether they convert. We're using tools to allow us to track cross-channel, cross-device. You have to triangulate a bit, but we're confident that our ramp in paid marketing spend in the second quarter was ROI-positive, contribution margin positive.

On the direct response television, I'd say right now it's about a push based on our tracking in terms of contribution margin positive. But as we refine our media message and our buying strategy, we're absolutely confident that we can turn that ROI-positive. And we're still sort of teething into it from a learnings perspective. But what we're really focused on on the second quarter is prove that we can move the needle, that our creative work (31:55) and drove response in terms of additional visits to CreditCards.com, additional direct type visits of people who saw the ad and did something, including typing in CreditCards.com. And that's really encouraging.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Okay. All right. Great. Thank you.

Operator

I am showing no further questions. I would now like to turn the call back over to Kenneth Esterow for any further remarks.

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

Thanks, operator. Thanks, everyone, for joining today's call. We look forward to updating everyone next quarter. And enjoy the rest of your summer. We'll talk to you soon.

Operator

Ladies and gentlemen, thank you for participating in today's conference. You may all disconnect. Everyone, have a great day.

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