Executives
Bruce Zanca - SVP
Tom Evans - President and CEO
Ed DiMaria - SVP and CFO
Analysts
Andrew Jeffrey - Suntrust
Paul Thomas - Roth Capital
Youssef Squali - Jefferies andCompany
Brian Fitzgerald - Banc of AmericaSecurities
Mark Mahaney - Citi
John Pitzer - Credit Suisse
Kyle Evans - Stephens
Bankrate Inc. (RATE) Q4 2007 Earnings Call February 5, 2008 4:30 PM ET
Operator
Good day and welcome to the Bankrate,Incorporated fourth quarter and year end 2007 Conference Call. Today's call isbeing recorded. At this time, for opening remarks I would like to turn the callover to Mr. Bruce Zanca. Please go ahead, sir.
Bruce Zanca
Thank you. Good morning, everybody,and thank you for joining us on this conference call to report on Bankrate'sfourth quarter and full year end 2007 financial results. I'm Bruce Zanca, I'mSenior VP here at Bankrate. Here with me in our New York office is the company's Presidentand CEO, Tom Evans and our Senior VP CFO, Ed DiMaria.
Let me take over just a minute togo over the format of the call today. First, Tom will give us details on theresults and color of the quarter and year. Ed will give us some details on thefinancial results, and then we'll have plenty of time to answer your questions.
But before we do that, I need totake care of the legal prerequisites. Our lawyers have asked me to remind youthat some of the statements made in this conference call, including those regardingthe company's future prospects and revenue growth, its ability to continue toreduce costs and successfully implement strategic initiatives constituteforward-looking statements within the meaning of the Securities Act of 1933, asamended, and the Securities Exchange Act of 1934, as amended.
The company intends that theseforward-looking statements may be subject to Safe Harborcreated under the securities laws. These forward-looking statements reflect ourcurrent views with respect to future events and financial performance, but aresubject to uncertainties and factors relating to the company's operation andbusiness environment, which may cause the company’s actual results to bematerially different from any future results.
We encourage you to read thesection entitled Risk Factors in our form 10-K and subsequent filings with theSEC.
So with that being taken care of,let me introduce you to our President and CEO Tom Evans. Tom?
Tom Evans
Thanks, Bruce. Welcome everyoneand thanks for joining us today. We've got a lot to cover, so we'll get at itright away.
I trust that everyone has seenthe two press releases we put out at 4 o'clock this afternoon with our Q4 fullyear 2007 earnings and covering the two acquisitions that we announced today.
So let's get to the fourthquarter of the year 2007 report and then tell you about the companies weacquired, and more importantly where we are going and why are we so excited ofour business in 2008.
The fourth quarter ended up laterthan we expected, particularly after it started out so well. But for the year,we ended up exactly where we said we were going to be on an annual basis. Youwill remember after the second quarter, we raised our original annual guidancefrom between $36 million and $40 million in EBITDA to between $39 million and$43 million. And then said after Q3, that we expected to be slightly betterthan the midpoint of that guidance, which should be $41.6 million we reported.And that is exactly where we came in.
We also indicated that we wouldbe at the low end of the revenue guidance of between $95 million and $100million, primarily because print was consistently weaker than we expected to bethroughout the year. So it turned out to be a solid year and right in line withour raised guidance.
For the year, traffic increasedby 40%, our online revenue increased by 31%, EBITDA increased by 48% and ourEPS, ex FAS-123R increased from $0.92 to a $1.39 a $0.47 increase or a 51% improvementover 2006.
The only disappointment in 2000was, of course, the print business but I don't think that was a surprise toanyone. I think one of the amazing statistics about our business is that itshows the elasticity of our model and that for the year, CPC mortgage revenueon bankrate.com was 41% higher on mortgage traffic and clicks, in what wasobviously a tough year for the mortgage business. For our entire network inco-brands, it was up over 25% for the year, but bankrate.com's websiteperformance was dramatic.
So we are proud of theaccomplished performance for the year, however, the fourth quarter was a weirdquarter. Revenue for October was the best first month of any quarter we've everhad and very much on track for a better than anticipated Q4.
November was solid as well. In fact,November generated the highest CPC revenue of any month ever. But by earlyDecember, with the cash in the financial markets mostly on concerns about thefinance and mortgage related sectors, we began to see a slow down in trafficand received several advertiser cancellations from some of the largeinstitutions that were so prominent in the news. In fact, we had nearly $2million in canceled displayed ads in the last few weeks of December.
I must admit that it surprised us,particularly given the strength of our business in September, October, andNovember. We were able to scramble and fill about $0.5 million of that withother advertisers, but we are disappointed that we couldn't make up the fullamount and provide the upside surprise we thought we had in our pocket, particularlygiven the strength of October and November.
So I don’t want to belabor thisand we are not making excuses, but situations like this are exactly why wedon't issue quarterly guidance.
As I have said to many of youbefore, the most difficult thing about running this business is that we can'tmake the business fit into a nice neat 90 day chunks. I was thinking about thisearlier in the day and thought that if we've reported this quarter fromSeptember 15 to December 15 or October 15 to January 15 we’d had a blowoutquarter. Similar thing happened back in Q2 of '06 with traffic; we came roaringback the next several quarters. In this case, it was a timing issue and trustme, the business has come roaring back.
I also admit that in December, wemade a conscious decision to do something different than what we had done atthe end of 2006. Rather than scrambling around at December trying to find everybit of revenue that we could jam into the end of the year, and not knowingwhether it was there or not, we decided instead to focus on setting up our 2008year, and attempted to go off to a better start than we did in January of lastyear.
I don't know whether you're goingto consider us smart or rookie or whether you aren't happy that we didn't tryto do both, but this actually turned out to be a great decision. We've gottenoff to a fantastic start in 2008.
I can tell you, in fact, thatJanuary of 2008, is the best month we’ve had in the history of the company. We'vehad the highest unique visitors, the highest page views, the highest CPCrevenue, the highest display revenue and the best month we've ever had forBankrate Select, and I'm talking about apples-to-apples, just Bankrate, notincluding any of the revenue from NCS, the credit card lead gen company orSavingforcollege, both of which we acquired in December. I’m speaking of just Bankrate.
And just to give you a sense,January traffic was more than 50% above the best month we've ever had, and 70%above last January. CPC revenue for January was more than 50% above November,the best CPC month we've ever had, and more than doubled last January CPCrevenue.
Display revenue was 47% abovelast January’s, and towards the end of January, we've actually seen a modestpickup in print. Traffic was obviously really strong and even before the fedrate fed rate cut on January 18th, and since then, we've seen an unprecedentednumber of consumers coming to Bankrate.
The great news is that many ofour CPC advertisers were getting healthier, on the increased volume, what isclearly a refinancing boom. And we certainly don't expect that to continue toat this pace, but it's been a fantastic way to start the year, and the revenueramp is in sharp contrast to last January where traffic was strong, but wedidn't take advantage of that, as much as we could, from the display salesstandpoint.
We did not repeat that problemthis year. In fact, our biggest problem in January was that at times, the ratetables has gotten thin as advertisers just couldn't keep pace with the trafficin click volumes and were dropping off the tables and pausing sporadically andin fact, once should that occur, we did something quite out of character forus.
To try to help those advertisersdeal with the volume, we actually gave away 35% discount on all mortgages andhome equity clicks to the last nine days of January. So the numbers I mentionedabout CPC revenue being doubled last year includes that 35% discount and thatheavy traffic I think certainly will also help Bankrate Select.
But it made for a crazy month, soI am pleased that we have forethought to be better prepared for it. Ed is goingto go through the quarter the 2000 year end financials then I'll talk about thetwo acquisitions we announced today and give you an update on the rest of thebusiness including the two acquisitions we announced in December. Ed?
Edward DiMaria
Thanks Tom. As you can tell byTom’s opening remarks the management team is very upbeat about 2008 and thecore business is starting off the year at a blistering pace combined with thecompletion of four key acquisitions in the last 60 days.
This was an exciting way toconclude to 2007 with the acquisition of NCS and Savingforcollege. And thenbegan 2008, with the acquisition of InsureMe and Fee Disclosure earlier today,more on that in a minute in Tom's business report. We believe that all fouracquisitions are core to Bankrate’s offering and are consistent with theacquisitions strategy we’ve articulated for the past two years.
Now, the final top line resultsfor fiscal 2007. Total revenue came at in $95.6 million at the low end of ourrevenue guidance for the year of $95 million to $100 million. EBITDA excludingstock compensation came in at $41.6 million and that's a 66 percentile of ourEBITDA guidance range of $39 million to $43 million. Please note that this wasthe revised range. Our guidance through June 2007 was $36 million to $40million.
So we ended up exceeding the topend of our originally declared guidance and came in above the mid point of ourrevised range. Without late display cancellation in the five weeks of Decemberas Tom mentioned, we would have likely equaled or exceeded the top end of ourrevised range. Also, we did benefit from the new acquisitions by picking upsome new revenue in December.
For the fourth quarter, totalrevenue came in at $25.2 million, up 22% over 2006. Earnings per diluted shareexcluding stock compensation was $0.33, up 22% over 2006 and EBITDA excludingstock compensation was $9.8 million, up 21% over 2006.
For the full fiscal year, again,total revenue came in at $95.6 million, up 20% over 2006. Earnings per dilutedshare excluding stock compensation were $1.39, an increase of 51% over the$0.92 for 2006 and EBITDA excluding stock compensation came in at $41.6 millionrepresenting an increase of 48% over the $28.1 million reported in fiscal 2006.So, again this really a solid performance especially considering the eventsthat unfolded in the mortgage market during 2007.
Now some color on revenue for thefourth quarter and final fiscal year numbers. Again, total revenue came in at$25.2 million for the fourth quarter of 2007, an increase of 22% over thefourth quarter 2006 revenue of $20.7 million. The key driver of growth for thequarter was a 33% increase in online revenue. With Q4, 2007 coming in at $22.8million compared to $17.1 million in Q4, 2006. And that represents an increaseof $5.7 million, again in online revenue. Print, however, decreased by 32% from$3.6 million in Q4 2006 to $2.5 million in Q4 2007.
Display advertising revenue forthe fourth quarter of 2007 came in at $12.5 million, an increase of 29% overthe $9.7 million reported in the fourth quarter of 2006. The fourth quarterresults reflected strong core ad display and display ad demand, for the first twomonths of the quarter, followed by the pull back in December that Tom described.Also, we benefited from some NCS lead gen revenue that have been onbakrate.com; as we began to test this new lead generation channel, and we alsopicked up some revenue from the traffic generated by NCS affiliates. Displayadvertising revenue for the full fiscal year, came in at $46.8 million, a $9.5million, or 26% increase over 2006 revenue of $37.3 million.
Cost per click or CPC rate searchrevenue came in at $10.3 million in Q4 2007, compared to $7.4 million in Q42006, representing an increase of 39%. The increase was achieved through more CPCclicks, as well as higher CPC rates. As I mentioned, CPC proved to be solid allyear long, with CPC revenues for the full fiscal year coming in at $36.9million, a $10.2 million, or at 38% increase over the $26.7 million we postedfor fiscal 2006.
Also during the quarter, we had asmall benefit from the additional yahoo contract to a full mortgage rate tablelistings they now provide for all markets Bankrate serves, and the addition ofthe deposit auto loan channels on yahoo. This program began to get tractiontowards the end of the quarter, so the benefit was limited, but the trafficfrom these new channels started out strong for 2008.
We continue to benefit from themove.com relationship as well. Also, we opened our 2008 CPC rate searchbusiness with a 20% increase for deposit clicks effective January 1st, 2008.
Page views for the currentquarter were $131 million, up 10.5 million or 9% over the $125 million reportedin Q4 2006, with the majority of this growth realized through gains in organictraffic.
Now briefly, Bankrate Select.First and consistent with our recent statement concerning the information we'llbe sharing, we'll not be providing details concerning revenue or otherstatistics for Bankrate Select’s early components of our overall leadgeneration business for competitive reasons. Bankrate Select provided modestcontribution in the fourth quarter, over all the impression was reduced infavor of some testing of our new credit card product. Select increasedsignificantly in January 2008 with the heavy traffic we've seen on the site.
Bankrate Select is now one offive lead generation products we now have in our arsenal. The others beingcredit cards with the acquisition of NCS, insurance with the acquisition ofInsureMe, 529 savings plans with the acquisition of Savingforcollege and realestate related lead generation development of the Fee Disclosure business.
Our print, publishing andlicensing revenue was $2.5 million for the quarter representing a decrease of32% in the fourth quarter of 2006 revenues $3.6 million. The print businessaccounted for 10% total revenue during the current quarter. The fourth quarterprint numbers were a set back, as we thought we seen the bottom with thisbusiness earlier in 2007. Obviously this proved not be the case.
We, however, annualize thecontribution that we believe this business provides and we remain confidentthat the business drives a significant amount of traffic to our website, whichmore than makes up for the poor top line performance. Also, more and more printadvertisers are using our online product further solidifying this business as a[heater] for our online business.
Print gross margin for thequarter was $200,000 or 8% excluding stock compensation. This is compared tothe 2006 gross margin excluding stock compensation of 13%. Overall gross marginon sales excluding stock compensation for the fourth quarter was 70.3% comparedto 73% in the same quarter last year and 75% for the full fiscal year, comparedto the 70% for 2006.
The online gross margin excludingstock compensation expense for the fourth quarter came in at 77% in 2007 and84% for the full fiscal year compared to 85.7% in the fourth quarter of 2006and 84% for the full fiscal year. The decrease in the online gross margin forthe quarter was result of running the new NCS business in December onbankrate.com and also some affiliate traffic. We ran this at a relatively lowgross margin in December to begin to invest and setup the business for 2008.
We believe that we can graduallyimprove these margins by concentrating on increasing direct NCS lead generationthrough Bankrate organic and direct SCM advertising. While also increasing inkey affiliate revenue margin through sharing content, volume and other productsNCS will be offering to affiliates. The overall improvement in margins for thefull year reflects the change in mix during 2007, with a higher percentage ofour business coming from online sources versus print.
Our EBITDA margin, excludingstock compensation expense, was 39% for the current quarter and also 39% in thefourth quarter of 2006 for the adjusted EBITDA of $9.8 million compared to $8.1million in the same quarter last year.
The drop in the fourth quartermargin compared to earlier quarters in 2007 reflects investments made inacquisitions and work in our new website combined with lower December margins.The cost incurred during the fourth quarter for the new website were primarilyexpenses we are supposed to capitalize. We are now, however, in the developmentphase and most of the outside cost will be capitalized in 2008, with theexception of training and certain cost associated with content, which will beexpense.
Our adjusted EBITDA margin forthe full year 2007 was 44%, compared to 35% for the full year 2006. AdjustedEBITDA was $41.6 million in 2007, up $13.5 million, or 48% over the $28.1million adjusted EBITDA of 2006, and note the $28.1 in 2006 excludes the $3million legal settlement charge.
We achieved the 44% EBITDA marginby realizing an 85% incremental EBITDA margin on the $15.9 million increase insales in 2007 over 2006. For 2007, online revenue per 1000 page views was $151,compared to $131 in 2006. We sold more ad units at higher CPMs in 2007,compared to 2006.
Operating expenses increased forquarter by $2.2 million from $9.3 million in the fourth quarter of 2006 to$11.5 million in the fourth quarter of 2007. The increase was driven by highersales, marketing and product development cost, offset by lower general andadministrative expenses.
Sales and product developmentexpenses were up, due to higher human resource and development cost associatedwith new products we are working on for 2008, primarily the new website and a highershare base compensation expense.
Marketing expenses increased aswe continued to ramp our SCM spend during the quarter, and a higher share basedcompensation expense.
General and administrativeexpense decreased as a result of lower general expenses, lower legal andaccounting cost offset again by higher share-based compensation expense.
We ended the year with 202 employees,which includes 166 Bankrate employees and 36 new employees from the acquisition.We will continue to make smart increases in personnel to develop our business,particularly in areas, where we expect to have immediate strong growth such asdeposits, mortgage, credit cards, insurance, college, finance and our new FeeDisclosure business.
In spite of these plannedinvestments, you can see from overall revised guidance on the press releasethat we expect to add between 54% and 64% growth in EBITDA dollars in 2008.
Our income tax provision of $3.3million for the quarter and $14.3 million for the year represented a 44%effective rate on book income for the fourth quarter and a 41.6% effectiverates for the year. The higher effective income tax rate in the quarter isattributable to the tax effect by the true-ups and an adjustment in the savedportion of tax rate. We made estimated tax payments during the fourth quartertotaling $4.8 million and $14.3 million for the full year.
We ended the year with $125.1million in cash and cash equivalent, up $15.2 million from the end of 2006where we reported a $109.9 million. We generated $42.6 million in cash flowfrom operations before payments for income tax during the year. We made paymentthis year totaling $14.3 million for income tax, this resulting in a net cashflow from operations of $28.5 million. We also used $28.3 million in cash forthe fourth quarter acquisitions.
In summary, again results for thefiscal year 2007, total revenues were $95.6 million, adjusted EBITDA was $41.6million and adjusted EPS was a $1.39 per fully diluted share.
And with that I'll turn the callback over to Tom to provide business report. Tom?
Tom Evans
Ed, thanks. Before discussing theacquisitions, let me just remind everyone the strategy we laid out a coupleyears ago and how we think we are executing on that game plan. You willremember that we said we wanted to broaden the breadth and depth of personalfinance content and products that we offer at our site. Over the past severalyears, we moved effectively from being focused primarily on mortgage and homeequity to deposits and auto loans. That has obviously worked very well asdeposits was our biggest channel in 2007 both in terms of revenue and clicks.
We also stated that we wanted toexpand into the areas of real estate, retirement, credit cards, college financeand insurance either through partnerships, acquisition or by building itourselves. With the two acquisitions we announced today, we feel that we havegone a long way toward the completion of that original strategy and our effortsnow are focused on execution, integration and developing those businesses to bemeaningful revenue and EBITDA contributors that we think they can be.
We think we have a very good shotat having four to five channels, each contributing 20% to 25% of our revenue;certainly a more diversified and exciting portfolio that we had a couple ofyears ago.
Let me now tell you aboutInsureMe. InsureMe is an insurance lead gen company with 100s of marketingaffiliates and at literally 1000’s of customers in the form of insurance agentlead buyers. What InsureMe does is generate consumer prospects for insuranceprofessionals, both companies and agents looking for auto, home, life, healthand long-term care products.
In addition to direct and searchengine and marketing business to its website, the company has over 500 activeaffiliates and has 1000s of agent customers. Based in Englewood, Coloradothe company is run by a talented trio; founder Tim McTavish, COO Robin Paquetteand CFO Mike Sajdak. They built an impressive, growing and profitable companyin the insurance lead gen space.
You heard us talk before aboutour interest in partnering or acquiring a company in the insurance base, wethink this is a perfect fit for Bankrate and are absolutely delighted thatworking with the InsureMe team we are going to be able to make this happen. Wepaid $65 million in cash for the business.
In addition, there is a $10million cash earn-out potential for reaching predetermined EBITA target in eachof the next two years, and the entire 68% InsureMe team including themanagement group will be staying on to run the company.
We believe the acquisition willbe accretive in the first year, and the team is highly motivated to maximizeits potential and reach their earn-out. We've been very impressed with the InsureMebusiness, the team is very buttoned up. The technology platform and customerservice functions are very impressive, and the momentum of the business isstrong.
It was clear to us that theycould have continued to be a successful company going it alone, but I thinkwe're lucky to be able to convince them that their business could blossom evenmore alongside Bankrate, and it was important for us such well run operationwas sitting there, particularly given that we had our plate full already.
We just signed the deal thismorning, and I know they are listening, so I want to say welcome to the InsureMe team in Englewood. There are some very exciting opportunitiesfor integration, co-branding, and leveraging Bankrate's organic traffic, andwe're beginning those as soon as possible.
The other acquisition weannounced today is a company named Fee Disclosure. We actually got to know thetwo founders Mark Zimmerman and Mike Kratzer a couple of years ago when FeeDisclosure was little more than an idea. We've maintained contact with themover the past several years, and monitored the development of their business.
Though their business model isstill immature, it's exactly the kind of content and consumer offering that wewould have looked to develop. What Fee Disclosure does, is provide local realestate agents and consumers with transparent comparison information on all of thedifferent fees associated with mortgage, loans in real estate closet.
Title insurance, escrow fees,fess for appraisals and home inspections, mold, septic and radon inspectionsand more. Exactly the kind of information that consumers need to know and withthe current mortgage environment exactly what legislators, government agenciesand consumer advocates have been for pushing the industry for.
In fact, on the Sunday beforeChristmas there was a front page store in the business section of the New YorkTimes praising Fee Disclosures content and the benefit it provides toconsumers. Fee Disclosure currently has over 30,000 local vendors that haveregistered on its platform. Combined with Bankrate's traffic, we think this isa perfect fit for our [mortgage] channel and retail business.
We think we've got a pretty goodsense to how to monetize local vendors, given our success with our rate tablesand we are excited about the opportunity to build us business over time and atthe same time provide a great consumer product.
Mike and Mark, the founders, willbe moving to Florida and joining our team in North Palm Beach and as the business model is new, we donot expect this is to be accretive as we will be investing in the business tobuild it out this year. That's a bit of departure for us, but we felt that theoperating was so inner goal and so important and an addition to our contentoffering that we decided to acquire the company.
We paid $2.85 million in cash forthe business and think we can ramp it to be an important contributor quickly.The founders have additional cash from that opportunity over the next several yearsand we are optimistic that this will be a great acquisition for us goingforward.
Lastly our Chairman, Peter Morseand I just returned from the visit two weeks ago to China. Unannounced to all of you,with even many insiders in our organization, we've had for the past year asmall group in Beijing build up Bankrate China, a similar site and lookingfield to our domestic US site, but in Mandarin.
In order to meet the localownership and regulatory licensing requirements the Bankrate website is operatedthrough a wholly foreign owned enterprise owned by Bankrate Inc., which acts incooperation's with an affiliate PeoplesRepublic of China company owned by certainBankrate China employees. And ICP license permitting us to publish was grantedon February 1st, just less than a week ago. The Chinese operation launched thebeta version of the site in early January, which you can see at bankrate.com.cnfor all of you who speak Mandarin or can read Mandarin. We expect that thissite will be live and launched on April 1st. Obviously the Chinese consumersbanking [matters in this nation] is very different from ours in the US, rates areregulated and the consumers are not as sophisticated as ours in this country.
We've spoken with governmentregulators and banks in Chinaabout the need for the kind of financial education program that we’ve done hereat Bankrate.com with our basics, guides, calculators, products and rateinformation and our financial literacy program. Everybody we've spoken to thinksthis is great approach to the Chinese market, and that will be our initialfocus with the site in China.We want to provide consumers with the kind of financial information that willmake them better informed consumers.
It will be a while before this isa significant business, generating many an important revenue, but we wanted todevelop our site, build our relationship as early as possible. You have seenthe cost of the efforts flow through financials in the past quarter and thecost of operation is already factored into our guidance for 2008.
Let me give you quick update onour redesign. The redesign of the Bankrate site is in full motion. We expectthe new redesigned rate tables and rate table funnel to be testing toward theend of Q1 and the redesign of the rest of the site to be launched at end of Q2.
It doesn't mean we are justsitting around waiting for the launch however. We have already integrated the adsand tools on the Savingforcollege site and integrated the college financecontent into the Bankrate site. Nationwide card services is off to a greatstart. In December, as Ed mentioned, we will get some of their ads appearing onbankrate.com and you will see more integration on our site in the future.
Obviously, we want to be able tooffer our co-brand partners the additional products of credit cards and nowinsurance .We’d hope to have some traction on that this year, it really doesgive us a broad portfolio of products to offer our partners, without havingthem have to do much in the way of integration or development work.
As for 2008 guidance, factoringin the accretive nature of the InsureMe acquisition and the expense associatedwith the Chinese development and the Fee Disclosure build out, we are updatingand increasing our guidance.
In 2008, we're now expectingrevenues of between $167 million and $172 million, and EBITDA between $64million and $68 million. That low end of the guidance represents a 75% increasein revenue and a 54% increase in EBITDA in 2008 over 2007.
And again, I'll reiterate what wesaid on our last call. We expect our core business to be growing to be growingin excess of 25% in 2008, and it's obviously off to a great start already.
We do expect to be running thebusiness in 2008 at lower margins, at the 44% we ran the business this year, aswe’ve begun to mix the lower margin NCS, InsureMe, and Savingforcollegebusiness with the Bankrate core business.
However, webelieve that we will be able to improve those margins overtime, just as we havein the past three years, and particularly as we push our organic traffic at in-marketconsumers across those platforms, co-brands and other sales opportunities.
I'm sorry to begoing on so long, so now why don’t we open it up to questions. Operator?
Question-and-Answer Session
Operator
(Operator Instructions). We'lltake our first question from Andrew Jeffery with Suntrust.
Andrew Jeffrey - Suntrust
Hi good afternoon guys.
Tom Evans
Hi Andrew.
Andrew Jeffrey - Suntrust
Hi, a couple of questions Tom, Imean, obviously the, some of the greatest fears in the market seems tohave manifested at least in Decemberwith respect to advertiser cancellations and obviously then we've had this bigrally in the ten year treasury and commensurate increase in mortgage refinance.So a couple of things in that, lets call one: can you get a little moregranular on your comfort? Based on one month of the year, with respect to theoutlook for the full year, we used to say we don't a repeat event especially ifwe go under recession.
And then two, given the strengthin January are we looking at a front end-loaded year and, I mean, we knew Iknow it's tough to budget on a quarter-by-quarter basis, but, when you lookinternally: you are expecting 1Q to spike and then the rest of the year to comeoff? Or: how should we think about those things? And I've got one follow-up.
Tom Evans
Yeah, I mean: take it one at atime. First part, it really was a wildquarter. I mean: we were absolutely smoking and in fact we talked a lot of youand we talked to -- we were at Investor Conferences saying we haven't seen it.I mean October, best month ever. November great month a CPC month ever, all ofa sudden you've got -- I mean it's not exactly news to anybody that cityMerrill Lynch, E-Loan, E-Trade Countrywide all these guys were just gettinghammered.
I mean: everyday you pick up thepaper, the news was worse than the next. And we saw a cancellation, I mean:from those name brand guys who pulled back. We don't, again without that kindof event occurring this year, we haven't seen that kind of problem; we are offto a great start. Traffic wasn't just when the Fed lowered the interest rates.January one or two every single day except for January 1st, our traffic was upover the year prior and pretty dramatically.
So when we hit the 18, I mean: weare already getting calls from some of you guys, saying hey what's going onwith the rate tables, they are looking a little thin. There was so muchtraffic, there was so much activity we were burning through advertiser’sbudgets and it’s why we instituted that 35% rate reduction for the last ninedays. Now as of February 1, we are back up to the former rates, but bank aregoing to still need to advertise and we’ve got a lot of commitments in, notsaying that they are iron clad, they are not going to cancel, but their backordering advertising, the consumer is back, CPC dollars are up.
We have heard from so many guysthat they are so much healthier now as a result of this boom. People arestarting to think about hiring again now. They are a little skittish about howmuch do I load up and how many people do I bring in, because if we take adecline in the economy it could be problematic. But I am going to tell youthere is a completely different mood out there and we've seen it reflected inthe consumer. I mean: we had the best month we’ve ever had in the history ofthe company. Last month we did 6 million units on Bankrate. January did over8.8 million.
So they are coming, we are seeingnew people come to the site. We are very bullish, advertisers want to generatebusiness and we do have the advantage of with people focusing on better creditcustomers: that's our customer. I mean: our guys at the ad paper, our guys atthe prime loans, our guys are the guys that credit companies and mortgagecompanies and re-fi guys are giving loans to.
So that part of it is working. Iam so sorry, I can't see what it looks like going forward, but it sure feelsvery positive right now. And again, other than the two weeks that we had --two-and-a-weeks in December, it was a great fourth quarter. So we were flyingby that environment after a great third quarter, after a really solid firsthalf of the year.
Now, we're not really, the honestanswer Andrew, but that part of the year is front-loaded, honest, we're notreally sure. I, we sure don’t think so, because I think that once we get intothe integration of NCS, of InsureMe and we get to theredesigned Bankrate, we think that's going to really pump a lot of wind in oursales.
We don't have any of those newcompanies that we own on any of our co-brands, yet that provides some upsideopportunity. We think that's a later in the year event.
So I will tell you,notwithstanding the economy and I don't mean to say that that's not a concern,it's a concern for all of us. We've never been sort of more bullish about ourbusiness and never felt better about the business going into a year, and I canhonestly tell you, other than -- if we step back and look at our year, and thisis the toughest thing about as I said in the prepared remarks about a companylike Bankrate.
We had sort of two to three weakperiods during the year, one in August and one in December, that were reallyskittish, and other than that it was a phenomenal year, and everything that welook at in terms of revenue ramp, and traffic, and clicks and being able tomonetize that and advertising demand was up for the year.
And tell you what our budget wasjust to give you, I’d tell you where we ended up, and I mean that originalguidance was not sandbagging, that's really where we thought we'll be. Weraised guidance and then we exceeded a bit part of that so. I'll stop going onand on and on, but we are feeling good about the business, but not really surehow it's going to shake out and again that's why we don't guide in on a 90-daybasis, we guide for the year.
Andrew Jeffrey - Suntrust
Okay. And then on the one followup: could you give us a snap shot so on the pro forma basis as to what youthink the revenue mix looks like by financial category?
Tom Evans
Well. It depends on what point intime, but, as I said, we think and the nice thing about the fact that mortgagedare becoming a less and less of our percent of our total revenue.Notwithstanding that mortgage continues to grow with double-digits for thefourth year in a row and maybe for all of Bankrate going back before I got tothe company, but in light of two pretty challenging years in the housing andmortgage industry we've grown at double-digits. So mortgages, I mean: my guessas good as like swap me as I do this. But I mean I think you are talking sortof a early out mortgage 30%, deposit 30%, insurance 20%, credit card 20%. Iguess it's 100% already. And there we throw….
Andrew Jeffrey - Suntrust
So yeah, that's more than a 100.Yeah okay.
Tom Evans
Print 10% and all other 10%, so Iguess 120%. But consumer habits are changing, more consumers are coming online.We've watched with admiration the ramp of the InsureMe business, the ramp ofthe NCS business. We are delighted to have those as two Bankrate companies nowand we are excited. We think that those are going to be growing businesses.Those are going to be great for us and imagine somebody coming under Bankrateand after looking for a mortgage, we pop something up and say: “would you likean insurance quote”.
After looking for an auto loan,we pop, we have popup, that there are pop under, but after they leave thatlender site says, would you like to quote on your auto insurance, because weknow you are just looking for an auto loan, and we think this is greatopportunity for us and they are perfect fit with Bankrate. I mean: it’s notlike we are trying to do something with these acquisitions that we have neversignaled before that you need though. Hey wait a second. Why are they gettinginto stocks and bonds? Why are they getting into something sort of far a field?This is right in our [wheeled] house, where we know the consumers are activelylooking for the kind of information that we provide.
Andrew Jeffrey - Suntrust
Thank you very much.
Tom Evans
Thank you.
Operator
We'll take our next question fromRich Ingrassia with Roth Capital.
Paul Thomas - Roth Capital
Hey Tom this Paul Thomas actuallyfor Rich.
Ed DiMaria
Hey Paul.
Paul Thomas - Roth Capital
Not to hound the point too much,but maybe looking back of your previous experience maybe even before Bankrateand looking at where we are in the economic cycle and back to sort of whathappened in December: do you feel like sort of turned the corner here? It justseem like we are kind of at the beginning of way things are going to go: what'syour perspective on that?
Tom Evans
Yeah, my sense -- that’s a goodquestion. My sense is, let me tell about the current environment and I will saylittle bit about my perspective based upon 25 years in the media business,which is amazing since I am only 40. The first part of it is there is nevergoing to be more noise about those big advertisers that we talked about. Imean, I won’t say something cataclysmic and I don't think any of us thinks thatthat's going to happen.
So that was the worst time, ifyou think about the new it happened. I mean: I was keeping track on pulling outsort of press clippings from sort of November 10th on, but I mean: it wasreally a mess for some of those names that I mentioned earlier. Now, typicallyin a media session and the media pull back, what does happen and I have livedthrough, half dozen of years. The stuff that's sort of peripheral. The stuffthat's nice to do. The stuff you do with business is really great. The stuffyou do when business is solid, that stuff gets cut as things get moredifficult.
What holds is that core, thestuff you have to be, those consumers that are in market, you prime, primeadvertising place. And it's when you start cutting golf sponsorships and allthe kinds of peripheral stuff you do, you don't loose your core, and I can tellyou, Bankrate is core to those advertisers.
I mean: we're the place thatpeople to come to in order to lock in conversions. We are the people replaces, that people goto get that in-market consumer, and particularly the prime consumer. Sowe really think we're going to be able to maintain our position. We had CEOsbeing terminated, and that always causes a dislocation. And gosh: what shouldwe do, should we do? Should we spend the money as everything is status quo? Or:do we sort of put things on hold?
And I never say it was theperfect storm or will always be, listen or not making excuses, but my sense isthat that part of it the worst is over, and I'm not saying the economic worstis over, but certainly for those marketers, the uncertainty is over and theyare going to be still trying to sell mortgages next year, still trying to sellcredit cards, still trying to sell home equity loans, and get people to signupfor checking and savings products, and Bankrate is a place is for them to dothat.
Paul Thomas - Roth Capital
Great, thanks for theperspective.
Tom Evans
Thank you.
Paul Thomas - Roth Capital
And one another quick one Tom?
Tom Evans
Yes.
Paul Thomas - Roth Capital
You talked about a graphic adincrease before, happening in January, and then you mentioned the discount. Dida price increase go through? Or: what's the status of that?
Tom Evans
Yeah, two separate points. The35% discount that I mentioned was strictly for mortgage and home equity CPCclicks. So we reduced just because we were the tables we are getting thin, wewere -- basically there was so muchtraffic and so many consumers, we were burning through the budgets of our advertisersin order to help them.
In order to maintain the ratetables, we did two things, number one: we gave them in a sense 35% of theclicks for free. And the second thing we did was: we increased the editoriallistings on the tables. So you'll go into an average market where we might hadfive listings and now we have nine or we have 10 or we have eight and we didthat as a consumer service. We didn’t consumers coming to the site and notseeing a plurality of lenders on Bankrate's, so it was an amazing time and Iwas right, it was almost like these guys were getting more important, I mean:they were really sort of gasping for breathe.
I mean: we heard from some ofthese guys by 10 o'clock inthe morning they had more leads than they were able to work. So they wereturning off. They were turning off their campaigns and pausing on Bankrate atnot being active because they just couldn't the volume. So that was thestrictly CPC.
On the display side what we saidwas that we were going to target a sort of mid-teen 15% increase in displayadvertising rates and got to tell you that's where we've about come out. So Imean: the deals we've signed have been right in that ballpark and in Januarythe advertising we were running was right in that ballpark. So, and in fact itwas interesting because Select did so well for a period of a time and Selectwas competitive on a CPM basis or on ECPM basis with some of those high-payingadvertisers.
Paul Thomas - Roth Capital
Thanks Tom.
Tom Evans
Yeah. Thank you.
Operator
We go next to Youssef Squali withJefferies and Company.
Youssef Squali - Jefferies and Company
Thank you very much and goodafternoon everybody. Couple of questions, first if I look at the new guidanceat the mid-point, basically it implies an incremental EBITDA margin of about33% versus 85% in '08. Can you -- is there anything structural about theseacquisitions that would warrant margins to kind of fundamentally to slow orstay below the mid-forty that you guys have historically done? I am not talkinghistory about '08, I am talking about later and, obviously: how fast can youramp those up?
And second if I look at theabsolute dollar increase in your guidance, there is about a $25 million to $27million increase on the revenue side, there is about a $4 million increase onthe EBITDA side. If my math is correct that means, that implies, it impliesabout a 16 forward EBITDA multiple that you paid on these acquisitions, I guessin aggregate. Which to me, I mean: that it is not accretive to your currentvaluation. Can you address those two points?
Ed DiMaria
Well I'll take the first one,just on the guidance margin. As I mentioned in my prepared remarks the businessNCS that we brought as well as InsureMe, I mean: they do operate at leastinitially at a lower margin then our online business. So we wanted to provideourselves some room to be able to move that margin up by generating a runningBankrate organic traffic, as well as SCM through those acquisition. So thatsort of implies in the margin. We think we can make progress there, we thinkthat we have enough room in there to be able to improve upon that. But that'swhere we really wanted to -- that's the bar we wanted to set, at leastinitially. I think we choose how to look at it just besides the overall growthin EBITDA dollars that we put in the guidance. We do have significant growththere and overall we are looking at it, not only margin percentage but alsojust growth in EBITDA dollars so.
Youssef Squali - Jefferies and Company
But structurally is thereanything different about this business in term of customer acquisition or not?
Tom Evans
Yeah well…
Youssef Squali - Jefferies and Company
Sure.
Tom Evans
Yeah. A large part of theircurrent customer acquisition today comes through affiliates, and they payaffiliates a rep share, so it’s significantly different than Bankrate. Now, wewant to maintain that business, they have got a great affiliate platform bothNCS and InsureMe them. But what we intend to do isbring in more direct traffic and provide them with direct traffic throughBankrate, co-brands and some other things we are doing, so they will run, andwe believe that they will run at higher margins and as I mentioned, that’swhere we will start.
But if you look at some of thetrajectory of what we've done over the past couple of years, we’ve been able topretty effectively raise margins year-to-year, and we think, we'll be able todo that this year and next year as well.
Now one of the problems we’vehad, and I think we've talked about this with all of you, is that, running at,when you look at the kind of trajectory Bankrate has had, and the kind ofmargins that we run at, it's hard to find anything else that's running at thosekinds of margins.
It's really difficult to find abusiness like that, that's affordable. And so, we thought that initially wewould take this sort of hit on margins, but then, we'll be able to grow itovertime, they are so compatible and it ought to work so well that we think,these things can be very valuable.
Ed DiMaria
And just further to the point:where you are sort of trying to back into a multiple or anything like that, wedidn’t put up specific numbers with these guys, I can assure you that, evenwith the earn-outs in fully earned, these are at a attractive multiples toultimately what Bankrate trades at. They are indeed accretive to the business.
Youssef Squali - Jefferies and Company
They are lower than what are youtrading?
Tom Evans
Absolutely.
Youssef Squali - Jefferies and Company
Okay. Then maybe my math is justoff.
Ed DiMaria
You've also got to factor in theexpense. Fee Disclosure is not as accretive. I mean Fee Disclosure is clearlygoing to be run at a loss and as an expense, and we'll be building thatbusiness as is China.So we factor that in as well. So if you would add back the money for the EBITDAthat you are showing $4 million, but it's actually more than that because thereis expense from those two assets. That is factored in as well.
Youssef Squali - Jefferies and Company
Okay. That's fair. And then, Tom,back to your 35% discount in the margin home equity CPC clicks, this isn't thefirst time since we've covered you, we've covered you for years that we've seenyou guys actually go the other way. Historically, you've taken prices up. So:do you still feel that you have enough leverage to raise rates in this categoryin '08?
Tom Evans
I did say it was out of characterand it was nine days. The answer to that is: “absolutely”. There is such athirst for the kind of volume, the kind of consumer, the kind of conversionrates that we provide that absolutely.
I mean: remember, our largestcategory currently is deposits. We put a 20% increase in January 1 and haveseen absolutely no decline in the number of people that are looking for depositcustomers in terms of advertisers. We pushed through an increase in October formortgage and home equity. It went through December.
We've got more advertisers too.We got over a thousand CPC advertisers now today. The problem was traffic wasso incredible in January that we were burning through the advertisers budgetsand we just weren't sustaining the rate tables. And from an editorialstandpoint, we want those rate tables to be full; we want them to becomprehensive. And so, we thought one of the ways that we could help theadvertiser in the short-term, while they are sort of catching their breath, wasto have that discount.
I promise you that the discountwas not done for any reason other than to help them maintain their position onthe rate tables. I mean we had double the page views in January as we had theyear prior. I mean it's been unbelievable. By the way, the first five days ofFebruary are no less busy. So we just thought it was something we do -- I knowit's a long way to answer your question -- but absolutely, we continue to feellike Bankrate is a value buy for those advertisers.
Youssef Squali - Jefferies and Company
Thank you.
Tom Evans
Thanks.
Operator
Next we'll go to Brian Fitzgeraldwith Banc of America Securities.
Brian Fitzgerald - Banc of America Securities
Thank you. A quick clarificationon the new guidance: Is it safe to assume that's all from the acquisitions? Or:can you help me understand the way it's changed from the prior outlook? Is itad budgets finalized in January? January was a stronger month. Was it relatedto the front end loaded question? Or: are the integrations going better thanexpected? And then a quick one on January, you mentioned CPC was strong: anycolor on how display did in January? Thanks.
Tom Evans
Display was 47% up.
Brian Fitzgerald - Banc of America Securities
Got it.
Tom Evans
January up above the year prior.Display was strong. I mean our sell-through rate wasn't what we'd like it to benot only because we thought we'd be selling 60 million page views and it turnedout to be over 80 million page views. So we were scrambling on to try to fillit. One of the things we did is put a bunch of Bankrate Select on there andBankrate Select did extraordinarily well. So, solid demand from a displaystandpoint and solid pricing from a display standpoint. Ed, do you want tohandle the EBITDA?
Ed DiMaria
Yeah. The guidance, just aclarification, we did go up from 60 to 65 to 64 to 68, as I mentioned in myprepared remarks, and it was a couple of things. Certainly, we did take intoconsideration the acquisition of InsureMe, but alsothe core business is running a little bit better obviously than we expected. Sowe did factor in a little there as well.
On the Fee Disclosure business,as Tom just mentioned that's going to be a situation where we're going toprovide funding. We're going to develop that business. It's going to run at anegative EBITDA, obviously, until we get the revenue cranked up on thatbusiness, and business begins to get traction. So that combined with additionalinvestments in Chinawas somewhat of an offset.
So those are some of the piecesthat were factored in. I just want to remind everybody, the new guidance thatwe have in there ranges from a 54% increase in EIBTDA dollars to a 63% increasein EBITDA dollars. So it's pretty significant growth that we are expecting for2008.
Brian Fitzgerald - Banc of America Securities
Great! Thanks.
Tom Evans
Thank you.
Operator
We'll take our next question fromMark Mahaney with Citi.
Mark Mahaney - Citi
Great! Two quick questions, firstis just the way I understand I would think what's happening is you're gettinghuge ramp-up in traffic with all of the refi activity, but it must be thatconversation rates are really falling off. I think that's probably theexplanation for why advertisers are burning to budgets, but they are not ableto keep up maybe or they need the price decrease because those leads justaren't converting. Does that seem like a reasonable interpretation?
And secondly, just as a broadquestion, Tom and Ed, you've got four acquisitions in integration mode now on amajor website, overhaul that's on track for the end of Q1. It does seem like alot of things on the burners now. How should we think about the execution riskabout these five things occurring at the same time? Thank you.
Tom Evans
Two great questions, Mark. Andhonestly, the volume and the reason guys were backing off the rate tables andvolume is, if you've got 20 loan officers and they can each work five leads aday and you get 100 leads by 10 o'clock in the morning, you're not going to want to pay forincremental leads. If you can't work, I mean if they can't get to home, youdon't want to buy them, you don't want them there. We heard just the oppositethat conversion rates were up because it's refi that the consumer was ready todo business.
We've heard from so many of ouradvertisers, so many of our rate table guys that they've gotten healthier, theyare converting a lot. I mean I can tell you one advertiser told us. That guy ispretty sophisticated about the Bankrate tables. They've been adding people inanticipation of this, and they did more loans in January than in the history oftheir company. So we've been hearing the opposite. Honestly, the reason guyswere dropping off was simply because they just didn't have the back end to beable to support the amount of leads they have. But we've not heard that theyweren't converting.
On the acquisition, fair comment,you talk about getting one aborted. Maybe we're getting one aborted with a lotgoing out. I would love to have done one a quarter or one every four months forthe last year and a half. Sometimes things happen on your timing and sometimesthings happen on other peoples timing. And generally, we are acquiring someonethat happens on their timing.
The good news about theacquisitions is that we've really been able to buy in both NCS and InsureMe twovery solid, very well run companies. These are not mom-and-pop operations. Wewere really impressed. When we went in and looked at the technology platformsof these companies, the financial reporting of these companies, the operations,the management teams, we've left both teams completely intact.
Every employee at NCS has nowbeen converted to a Bankrate employee. Every employee at InsureMe -- I'm goingto be flying out tomorrow and meeting with those folks tomorrow, we want all 68of those people at Bankrate. They got a really good team. If these were poorlyrun companies that we really needed to go in and shore up the operations andstick our people in there, and fix them immediately, I completely agree withyou.
Quite frankly, we had thisdiscussion at the Board level. I don't think our Board will have approved doingthese things in the shorter period of time because it is a lot to have on ourplate. But our opportunity really is to take two great platforms and leverageour traffic across those platforms, drive up the margins, expand our portfolioof services, and integrate those into something we're already doing and that'sredesigning the site.
So the timing was actually good.I'd like to have staggered them. I know Ed would like to have staggered them.But they are great teams. And for that reason, we feel that there is anopportunity to do it. But it's a fair point. We've talked a lot about itinternally.
Mark Mahaney - Citi
Thank you Tom. Thank you, Ed.
Tom Evans
Thank you.
Ed DiMaria
Thank you, Mark.
Operator
We'll take our next question fromHeath Terry with Credit Suisse.
John Pitzer - Credit Suisse
Thanks. It's actually [JohnPitzer] for Heath Terry. Just a quick question. With the Fed cutting rates,presumably you guys are seeing better growth in the overall mortgage category.Can you guys please talk about the impact on your margins given the higherpricing from improved mix from mortgage relative to your deposits?
Tom Evans
Yeah. The margin impact is prettymuch the same. If you go from, as I said, charging $6 to $750 on deposits,every dime that falls to the bottomline, so the margin expansion on Bankrateitself of the core business in January was significant. Again, without getting addover our schemes, I dare say January was by far the most profitable month we'veever had, no doubt about it, and increased margins. And all of that sort offalls in the bottomline, And it doesn't really matter whether its deposit ormortgage.
Because of the size of thedeposits that we're generating is pretty valuable stuff, we've tried toincrease more aggressively the deposit rates than mortgage rates over the past,actually, couple of years to try to bring them sort of in lockstep with oneanother. So, we want to be in a position where we're completely ambivalentabout whether it's a mortgage click or a deposit click. If it works either way,interest rates are going up, interest rates are going down, you get it fromone; you get it from the other.
I can tell you that January, itwas both. I mean: deposit clicks were up, mortgage clicks were up. As you say,it was kind of all good.
John Pitzer - Credit Suisse
Great! Thank you.
Tom Evans
Thank you.
Ed DiMaria
Thank you.
Operator
At this time, we'll take our lastquestion from Kyle Evans with Stephens.
Kyle Evans - Stephens
Hi, guys. Thanks for taking myquestion.
Tom Evans
Surely.
Kyle Evans - Stephens
It seems like to me that theinability to quickly sync up your demand with unexpected supply, whether that'ssome cancelled advertisers or this tide wave that you're are seeing in Januaryof traffic, that may be one of the only flaws in that core business. What canyou guys do operationally from here given all the volatility of rates and allthat other stuff in terms of operations and/or in terms of pricing, maybesomething more dynamic along an auction model-type thing to better sync thoseup?
Tom Evans
Yeah, besides clone our ChiefRevenue Officer is Don Ross. I really think it's a couple of things. You hitthe prom on there. We talk a lot internally and discuss ways to sort ofmitigate the traffic slider and advertiser cancels, traffic is strong, andagain it's why I talk about the difficulty of these 90-day chunks. We've reallytried to coordinate, and I think we've done for the most parts in over the lastseveral years a decent job, not a fabulous job, but a decent job of matchingtraffic and SEM spend when we do that with sold inventory.
One of the reasons why Select,NCS, InsureMe are so attractive, Fee Disclosures is more of an integratedopportunity and saving for college is more of an integrated opportunity. But tobe able to pop up a consumer offer, when we have incremental traffic or when wehave holes in the inventory for whatever reason, is really -- and two or threeor four, as Ed talked about, sort of five different lead gen opportunities thatall monetize pretty well is exactly for that reason.
We cannot predict well enoughwhat the traffic is because I got to tell you we were prepared for January. Wemade a conscious decision in December not to chase the nickels and dimes at theend of the year. I don't know whether they would have been there or not, but wereally focused on setting up embracing for January. So we got off to a betterstart. We sort of got blown over by the tsunami. I mean it was just so muchtraffic, but we've plugged in Bankrate Select, we've plugged in NCS and theydid really, really well. We added InsureMe to be able to plug into all thatincremental traffic.
So that's one of the reasons whywe want this broader portfolio of products that we're able to monetize. Besidesort of the natural things that we could do on the site, integrating on myplace is where it makes sense, providing the offers. It provides a portfoliofor the consumers where there were lots of products.
Kyle, we haven't figured out thetiming of where we can perfectly match. We try to do was [remin] advertising.That sometimes works. I got to tell you in environment like January, we evenblew threw our remin advertisers capacity on the top end of their demand. Nowit doesn't happen that often. And sometimes the remin stuff doesn't monetizethe way core stuff certainly does. But we're trying to run as many place to dothat as possible. We don't have it down perfect but we're doing better.
Kyle Evans - Stephens
Great! Thanks.
Tom Evans
Yeah. Thank you. Well, thankseverybody. Really, I appreciate everybody's joining us. We believe this companyhas never been in a better position to continue and accelerate the momentumthat we have. We've had three really good years in a row and feel that with thebroad width of product and service that we now have to offer to the consumerthat this will be our best year yet.
So, I appreciate your support andhope you monitor our progress as we continue to build the company. So, thankseveryone. I'm sorry to go on so long. We had a lot to talk about. But thank youvery much and we'll report back to you soon.
Operator
And that concludes today'sconference call. We do appreciate everybody's participation. If you have anyfurther questions, you may contact Bruce Zanca directly at 917-368-8648. Andagain, that was area code 917-368-8648. Thank you and have a good day.
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