First Advantage Corp (FA) 2009 Q1 法說會逐字稿

Welcome to First Advantage Corporation first quarter 2009 earnings conference call. All participants will be in a listen-only mode until the question and answer session of today's call. This call is being recorded and will be available for replay from the Company's Investor Relations page on their website at www.FADV.com and threw May 11th by dialing toll free within the United States, 800-224-1285 or 402-220-3691 outside the US. A copy of today's press release is also available on the Company's website at www.FADV.com.

We will now turn the call over to Ms. Cindy Williams, Director of Investor Relations to make a brief introductory statement. Thank you ma'am and you may begin.

Thank you, and good afternoon, everyone. At this time, we would like to remind listeners that management's commentary and responses to your questions may contain forward-looking statements including certain statements made in this presentation relating to cost reduction initiatives and impact on incurred deficiencies in future quarters, including headcount reduction, facility consolidation, reduction in professional services and marketing related expenses and other statements that do not relate strictly to historical or current facts. The forward-looking statements speak only as to the date they are made and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements, factors that could cause the anticipated results to differ from those described in the forward-looking statements include -- general volatility of the capital markets and the market price of the Company's Class A common stock, the Company's ability to successfully raise capital, the Company's ability to identify incomplete acquisitions and successfully integrate businesses it acquires, changes in applicable government regulations, the degree and nature of the Company's competition, increases in the Company's expenses, any consolidation among the Company's competitors and customers, unanticipated technological changes and requirements, the Company's ability to identify suppliers of quality and cost effective data and other risks identified from time to time in the Company's SEC filings.

Investors are advised to consult the Company's filings with the SEC including its 2008 annual report on Form 10-K and and first quarter 2009 10-Q for further discussion of these and other risks. We will now begin our conference call this afternoon with our Chief Financial Officer and Executive Vice President John Lamson who will provide an overview of our financial performance for the first quarter of 2009. Following John, we will hear from Mr. Anand Nallathambi, President and Chief Executive Officer who will provide us with an overview of First Advantage strategies and operations.

At this time, it is my pleasure to turn the call over to Mr. John Lamson.

Thank you, Cindy and good afternoon everyone. We changed our reporting segments in the first quarter. We merged the previous dealer services and lender services segments and moved the direct-to-consumer credit business previously included in our data segment to a new segment called credit services. Thus, the credit services segment includes the mortgage and auto credit services businesses and the direct-to-consumer credit business. The data services segment includes the same businesses as before except for the direct-to-consumer business. All prior period information has been restated to reflect this change. Early next week, we will furnish historical information by quarter for the past two years with the new segments on a Form 8-K.

First Advantage reported income from continuing operations of $10.8 million for the first quarter of 2009 compared to $16.2 million for the first quarter of 2008. Net income attributable to First Advantage shareholders was $10.6 million or $0.18 per share in the current quarter compared to $13.3 million in the first quarter of 2008 , $0.22 per share which includes a loss on discontinued operations of $3 million or $0.05 per share. Earnings from continuing operations before interest, taxes, depreciation and amortization, EBITDA was $29.3 million in the current quarter compared to $37.1 million for the first quarter of 2008. A reconciliation of EBITDA to net income is included in our earnings release. Cash provided from continuing operations was $12.9 million in the current quarter. Our capital expenditures were $5.9 million in the current quarter resulting in free cash flow of $7 million. We reduced our capital expenditures by $5.5 million compared to the first quarter of 2008.

At March 31, 2009 we had positive working capital of $120 million. Service revenue which includes -- excludes reimbursed government fees was $190 million in the current quarter compared to $188.3 million in the comparable period of last year. Operating income was $18.8 million in the current quarter compared to $27.2 million in the first quarter of 2008. Our consolidated operating margin was 9.9% in the current quarter compared to 14.4% in the first quarter of last year. Credit Services margins were 22.9% in the current quarter compared to 21.8% in the first quarter of 2008. Volumes increased in the current quarter on a sequential basis due to reduced interest rates triggering an increase in mortgage applications.

Organic growth declined by 14% quarter-over-quarter and increased 25% sequentially. The data service's segment margins were 9.6% in the current quarter compared to 19.9% in 2008. The margin decline is due primarily to lower margins, e-advertising revenue at our regeneration business. Organic growth was 212% quarter-over-quarter and 19.7% sequentially.

Employer Services segment service revenue was $37.5 million in the current quarter compared to $53.7 million in the first quarter of 2008 , a 30% decline. The decline in revenue reflects the increased unemployment rates in the US and overall recessionary environment both domestically and in our foreign operations. Pretax income declined from $3.5 million in 2008 to a loss of $500,000 in the current quarter. Sequentially, revenue decreased by $10.2 million from the fourth quarter of 2008 or 21.5%. Multifamily Services segment margins increased from 26% in the first quarter of 2008 to 31.7% in the current quarter primarily due to cost reductions as revenue was flat. Sequentially revenue grew by 17%.

Margins in our Investigative and Litigation support segment were 9.8% in the current quarter compared to 40.5% in the first quarter of 2008 as revenue declined by 50%. Sequentially, revenue declined by 36.4%. Our corporate expenses decreased by $2.9 million reflecting reductions in compensation and benefits, consulting fees and professional services, travel and entertainment and IT related costs. We recently announced to our employees that for 2009 we will not provide a company match for contributions to our 401K plan. We plan on resuming a contribution match in 2010 based on a yet-to-be determined profitability metrics of the Company. Expense related to this match in 2008 was approximately $3.9 million, which the Company funded in the first quarter of 2009.

While the economic climate has had an unfavorable impact on some of our businesses, we believe we have taken the appropriate cost cutting measures in 2008 and early in 2009 to enable us to be as efficient as possible and continue to provide outstanding service to our many clients. The aforementioned cost reductions in Corporate and our business segments reduced capital expenditures and proactive action taking with respect to our 401K plan are just a few examples of the necessary steps we have taken to operate in the current economic environment. As you can see by our financial results, comparing the current quarter to the first quarter of 2008 we have reduced salaries and benefits by $13.3 million or 20% and total operating expenses from $107.4 million to $89.9 million, a reduction of $17.5 million or 16%. We will continue to review operations to achieve maximum operating performance while continuing to provide outstanding customer service and expand market share which will enhance the value of First Advantage to our shareholders.

At March 31st, First Advantage had total debt outstanding of $55.2 million including fixed rate debt of $4.1 million with an average interest rate of 4.9%, and variable rate debt of $51.1 million with an average interest rate of 2%. Our available and unused line of credit was $180.6 million, and we had $59.2 million of cash on hand at March 31st. Our debt to cap ratio was 5.5%. With that, I will turn the call over to Anand

Thank you, John. Good afternoon, everyone. The key note of the first quarter was the continued strength and refinance activity in Mortgage Credit Services. The increased level of activity is holding aided by the low interest rate environment. From all industry reports, it looks like the refinance activity will continue for a while and will be further helped by the stimulus programs picking up steam in the coming months. John mentioned earlier about the consolidation of the credit related businesses in mortgage, automotive and direct to consumer verticals into one segment.

In addition to sharing the same back office infrastructure, this combination made sense with the liquidation of most of our stake and dealer track and the divestiture of CMSI. The businesses are more homogenize now and the future progression of products and services in these three verticals have more commonality among them. In the first quarter of 2009, revenues from the credit services segment declined 14% when compared to the first quarter of 2008. The year-over-year decline in service revenue is the result of 6% decline in the Mortgage Credit Reporting business and a 40% decrease in revenue in the Automotive Credit Reporting business. Operating margins increased to 22.9% from 21.8% compared to the first quarter of 2008, thanks to increased efficiencies resulting from cost take outs.

In Mortgage Credit Reporting the current transaction levels are about 11% higher than the average in the first quarter of 2009 and 32% higher than the average in the second quarter of 2008. We are seeing a heightened need amongst lenders to verify income and employment as part of the under writing due diligence. We believe this will continue along with need for comprehensive credit reporting services as the loan modification programs take full affect.

Our products and services that allow lenders to assess loan portfolio toxicity are also receiving a great deal of interest. In the automotive sector, driven by the lowest car sales numbers since 1982 our credit reporting business got off to a slow start during the first quarter. However, there are signs pointing to a slow resurgence in consumer confidence as more consumers begin visiting car dealerships. Lenders are approving more auto loans, the Federal Government is guaranteeing warranties, and car makers are getting creative by guaranteeing payments or repurchasing vehicles from consumers experiencing economic hardships.

First quarter revenue declines in mortgage and automotive credit were almost off set by an increase in revenue in the consumer credit business at 65,000 new members were added to our Private Label Identity Protection program. The direct-to-consumer business had a 20% increase in revenue in the first quarter compared to a year ago. Significant client roll outs and scheduled product launches should help their performance throughout 2009. Service revenue in the data services segment more than doubled over the first quarter of 2008. Operating margins in this segment declined from 19.9% in the first quarter of 2008 to 9.6 in the current quarter as a result of increased revenue mix of lead generation products. Non traditional lead generation remains the revenue driver in this segment as e-advertising once again displayed accelerated momentum.

Compared to the first quarter of 2008 revenue grew more than five times and operating margins grew almost four times. Given the impressive growth sustainability of trends and avoiding undue concentration of revenues, is a priority for us. We are currently in the process of diversifying this business into a more predictable and higher margin business model.

In addition to the always popular health and wellness vertical, we are making end roads into new markets, debt settlements and home warranties both of which more closely align to our traditional lead generation business and also result in higher operating margins. Transportation Services and Specialty Credit continue to perform well during this turbulent times. We have taken steps to optimize revenue, streamline expenses and develop new products, all of which help us to be less vulnerable to new competition, irrational pricing and an expensive regulatory compliance environment. The payday lending industry has always been under tough legislative pressures especially in the current political environment. In our employer services segment revenues declined 30% from the first quarter of 2008 , this segment is feeling the affects of the current recession not only in the US but globally as well.

In March, the unemployment rate rose to 8.5% this compares to 5.1% the same time last year. Every percentage point in unemployment translates to about a $15 million impact to our top line. Current economic reports indicate a worsening trend over the short-term and recovering by year end. In response, we are furthering our efforts by increasing operational efficiencies, expanding our customer base and adding to our product mix. Our focus on efficiencies continues in all of our operation centers worldwide.

In addition to the cost containment initiatives under taken in 2008, we have instituted reduced workweek, flatter management structures and are in the process of implementing a two-week furlough over the next couple of quarters. At this point, we feel we have taken aggressive efforts to streamline our infrastructure. Going forward, we have to take a longer term view with this business, since the strategic opportunities warrant our commitment to retain a valuable staff and invest in product innovations for the future. Intense focus on increasing our customer base continues with recent client wins in the US and abroad. Stateside, based on some recent wins we see an opportunity to consolidate market share. Our success rate in Europe is about 80% from RFB's, which, again, create a great opportunity to increase market share.

Service revenue in the Multifamily segment declined 2% in the first quarter compared to a year ago, but operating margins were 32%, a 19% increase over the first quarter of 2008. This segment has been our most consistent performer with steady operating margins. With the economic downturn and lackluster new home sales or re-sell activity, the transactional turn over in this industry has been adversely impacted. In addition, there is increased supply of rental units due to the mortgage market dislocation. More single family residences are turning to rentals now than normal cycles. Our performance is the result of the focus in converting more transactions towards analytics and implementing self service components wherever possible.

Renters insurance continues at a healthy 30% annual growth rate. In our Investigative and Litigation support segment demand weakened during the first quarter. Service revenue declined 50% compared to the first quarter of 2008 and 36% compared to the fourth quarter of 2008 representing the low point for this dynamic segment. Indices-wide we are seeing a lull in the enforcement of legal actions. We experienced a significant drop in data processing and progress with lots of delays and deferments in litigation projects by the middle of the first quarter. As we have mentioned in previous quarters, this business is project based and although the pipeline is still full and active the flow of work is at a lower level than we have seen in the past. It is important to note that it is more of a slow down rather than project cancellations. In response to these slow downs we have instituted a number of cost savings measures including head count reductions which will save approximately 2 million in 2009.

On a more positive note, in addition to the projects in queue we have noticed a lesser slow down on the international front as compared to that in the US. We intend to capitalize on this trend by further expanding our operations in both Europe and Asia Pacific. The hedge fund investigative reporting business is also seeing an increase in business after a prolonged period of low transactional activity. Enterprise-wide we have been aggressive in taking actions to fit our infrastructure to the economic environment. Our global head count is 23% lower than a year ago which translates to [1169] fewer employees. Cost containment initiatives implemented to date represent a total of 41.3 million on an annualized basis. We are continuing to look at creative ways to stay lean yet maintain the necessary base to deliver on the value expectations of our clients.

Financially, our balance sheet is strong with a low level of debt. The debt to capital ratio is 5.5%. We have reduced capital expenditures by 48% compared to a year ago. In general, we believe we are well positioned to capitalize on the market opportunities as we come out of this recessionary cycle.

I would now like to open the call up to

Thank you. (Operator Instructions). First question is from Brian Ruttenbur with Morgan Keegan.

First question I have is about the cash flow in the quarter. It appears by you giving us the cash and debt that you had a negative of 15.7 million of cash generation ; is that correct or am I missing something.

Brian, this is John. I think you may have missed something.

Then help me out --

I will help you here

From the last quarter your debt and cash at least what I had written down -- I may have been mistaken -- tell us about cash generation in the quarter and what happened there.

For the quarter, the cash provided from operations was $12.9 million and our CapEx was -- capital expenditures was 5.9 million. So that gives us free cash flow of about 7 million. Now, our debt went up because we paid out $23 million for acquisitions during the quarter -- not new acquisitions -- we bought the remaining minority shareholder interest in read quick and we had an earn out payment in the electronic discovery business.

That's the piece I was missing.

Free cash flow from operations was 7 million. Okay. Next question just real quick gross margins going forward, should they be at these low levels -- it looks like kind of year-over-year comparison -- your gross margins are down is this a level we should be looking for for the next couple of quarters, low to mid-50s? Yes, I think what happened this quarter because we had the large surge in revenue in our data services business on the e-advertising business that -- that's a -- as we have discussed -- a lower both operating and gross margin business. So I think historically our gross margins have been running in the fourth quarter of ' 08 we were 62% almost. In the first quarter we were about 71.5% and this quarter we were about 57% gross margins. I think what you will see is getting back to the low 60s range.

You mean in the next couple quarters?

Yes, throughout the remainder of the year.

And kind of last question and I will open it up to someone else and shut up. Revenue and earnings are they sustainable at these levels? First quarter was tough economically but can you maintain these levels or better of both revenue and earnings with the cost cuts you have implemented?

Brian this is Anand -- by and large we see some upside opportunities in some areas. Like we talked about in Employer Services even though we feel like there is economic reports indicate a worsening trend in the short-term before things get better. We have seen a couple of major wins which means the market share is shifting among traditional competitors. We feel good about our chances. Obviously, mortgage we feel like the refinance activity is holding and we feel like the stimulus programs and loan modification programs haven't kicked in yet and we think that litigation support as things pick up litigation projects that have been delayed -- we haven't been told anything will be cancelled. Those have to come back in the later part of the year. The hot area for the first quarter was e-advertising. As we said in the last call we like the increase in revenue but we don't like the revenue mix nor did we like the margins and the sustainable of those trends. We are diversifying that business into more verticals that are closer to our traditional lines. So you would see those numbers come down. I'm hoping it will be a wash but that's the best answer.

I think the only thing I would add to that is the Multifamily Services business as you know from following us through a number of years is seasonal and we historically the second and third quarter are -- the earnings are better than the first and fourth quarter. That normal seasonality -- we kind of expect that to kick in also. If you are extrapolating out first quarter.

Thank you very much.

Mark Marcon with R W Baird.

Good afternoon. I was wondering if you can give us a little bit of a feel in terms of what is going on underneath the surface in terms of Credit Services with the merging of the various entities in there and what I'm referring to specifically is if we were to look at -- if we were using the old divisions under Lender Services, would that -- would the margins be up there or what is going on from that perspective and can you describe pricing in that division?

I will address those questions one at a time. The first one, Mark, was more of what is happening from a revenue standpoint from the top line standpoint. Obviously like I mentioned earlier, on the mortgage side, we feel like the revenue -- the refinance activities is holding and we don't see interest rates really getting any higher from the current levels give or take a point here or there. On the automotive side, that has been depressed for a while but --

Sure.

But we are hearing from our clients there is a lot more foot traffic than they have seen in the beginning of the year. We are hoping with the (inaudible) programs to rekindle consumer confidence would help us a little bit there. That's a question mark. On the consumer side we are very -- there is some confidence there because we have signed up some major accounts and there is some project launches that are coming up that we feel will be a positive there. On a margin level I think that the margins will stay and improve where you see mainly because if the revenue activity holds, we think that we have done a lot of things to take that cost that is going to benefit us as we go on.

I guess what I was getting towards if I heard you correctly, didn't you say that the mortgage business was probably up about 11% year-over-year earlier on in your comments?

Let me see. That's correct.

Isn't mortgage refinance activity -- if we were to look at the mortgage banker's association or Freddie or, Fannie, and look at the activity there, isn't it up more than 11%, if looking quarter versus quarter?

When you compare from last year's first quarter compared to this year's first quarter, it is 11% higher. If you remember last year the drop actually happened after the first quarter.

Right.

So last year's first quarter was still a pretty active -- if you remember it, there was a pretty --

I do.

-- good refinance component there. I think our market share is improving.

And pricing is holding. It isn't changing?

There is always pricing pressure in that area. It is holding to some extent mainly because there is a slight quality. Everybody is worrying about what has happened over the last two or three years and they are trying to be careful and also the lower tier competitors are being driven out because there is a heavy security and compliance standpoint investment that they have to make. I feel pretty good about it. There is always irrational pricing by competitors as a last ditch effort to stay in business. By and large, we don't see this environment as anything more price competitive in the past. It has been a pretty competitive price market anyway.

Sequentially we should see some improvement there with regard to the margins?

I would think so.

That's right, Mark.

On the ILS, you have always been up front in terms of it is hard to predict. The level of variability despite that is still somewhat surprising. Was it surprising to you that it dropped off this much? What gives you confidence that it will come back any time soon?

It was -- I will be honest. We were surprised by the drop because it was -- all of the sudden it was a sudden drop in the middle of a bad February where most of our projects were put on hold or projects in progress were delayed but we take confidence in the fact that our pipeline is still forward. We are active in a lot of regulatory enforcement type actions. Obviously we can't comment on some of these things. Litigation hasn't stopped or gone down. It has just been delayed.

Why would something get delayed in terms of something that you were working on --

Let me walk you through why that may be the case. We understand is it but let me explain it. Most of our engagements come from law firms. If you look at it, law firms -- the economic crunch and pressures have really impacted the legal community. I think the legal community unemployment in the first quarter was 10%. So you can kind of see that them being the primary drivers for our business, that has been -- that is one of the reasons for us being on hold because there is a lot of turmoil amongst them. Knowing that our waiting -- our mix of business is more on the compliance and regulatory related matters, even internationally in foreign (inaudible) practice enforcement, we feel like that hasn't been necessarily curtailed or cancelled. It has been put on the back burners.

Would you imagine that -- can you imagine having a lower revenue quarter than this on ILS or would you think that it would drift back up more towards what you saw during Q4 and kind of that sort of average?

It is tough to predict. I would venture to guess -- I would hate to think it would be lower where we saw it in the first quarter but --

Hard to say if it will pick up any time soon?

It is stabilizing. We are seeing early signs. I'm not sure if it will be exactly where we were. That is tough to tell.

Thank you.

Carter Malloy with Stephens, Inc.

On the last question about the transaction levels, you had said 32% higher for 3 in 1 transactions. Was that over Q2 2008 ?

Yes, second quarter 2008.

And how do those look versus 4Q '08?

It was higher. I don't know exactly what the number is. We can get back to you, Carter

When you said the 11% higher transactions year-over-year, that was in light of the segment being down. So I can assume the Delta there is the pricing?

Yes.

In your affiliate marketing business which I assume is you are calling e-advertising business is that still a $22 million a month run rate?

No, it is not. We did not like the health and wellness product mix and it was one product that was driving a lot of it. On the last call we talked about it ACAI Berry. We are pretty conservative when we take a look at those things. We have been very strong in kind of trying to follow the strictest interpretation of the FDC laws on direct marketing and marketing and stuff. We are not anticipating it to be in the $20 million. We would like it to be lower. It is more controllable.

Correct but -- it is safe to assume that you guys have seen that slow significantly where you talked about the $20 million a month range?

We have slowed it down. In other words, we can control that pipe. We have chosen to take a lot more conservative approach towards it.

Okay. And then your employer segment, can you talk about margins there and maybe if you expect that to be break to break even this quarter or how long you expect it to take?

That is tough. We explained to you the dynamics of what 8.5% unemployment means. The early report coming out on the economic side is it could go up. We don't know if it is a percentage or not. Every percentage point means about $50 million to our top line. It is tough to say how it will stabilize. We like the fact we won some major client wins over the last four or five weeks and Europe especially we were told 8 out of 10 wins that we were in the RFP's that we competed. It shows there is a lot of market mix changing in the traditional competitors and we feel we are the benefactor on that.

Okay. Do you feel like you have already taken all the preemptive moves to on fixed costs?

Yes, we feel like we have been very aggressive, which is why you are seeing us now go more towards the kind of -- trying to go towards not any more head count reductions but focus more on reduced workweek or furlough or things like that.

And then John, real quick, can you tell us bad debt in the quarter?

I'm sorry, for what?

Bad debt for the quarter.

For the quarter, the bad debt was about 3.2 million, that's comparable to fourth quarter of last year.

I think it is up a little bit from --

It was about 1.4 in Q1'08.

Do you expect that to stay at these levels from here?

We beefed it up a little in the data segment because of the large revenue increase. I would suspect -- once again barring any significant negative movements in the overall economy -- I would expect that to be at the high end of what the run rate might be.

Lastly, real quickly the piece that you moved into credit from data, I can assume that all of that is more profitable 20% type growing direct to consumer business?

Correct. We will have an 8-K on there that will break all that out for you guys historically.

You said that will be out next week?

Yes, I expect to file that early next week.

Thank you.

Nat Otis with KBW.

Good afternoon. Most of my questions have been asked. John, I have a couple quick follow-up number questions. Anyway I can get those organic growth numbers by the segments?

Not a problem at all. These are comparing Q1 '09 to Q1 '08, okay?

Okay.

The credit services segment declined 14%. Data was basically doubled in growth, 211%. And employer was down 30%. Multifamily, I said it was flat it was down 2%, investigative was down 50%.

Very helpful. Last quick question, do you have a current -- I know you talked about how much head count you have cut since the end of 1Q '08, what is your current head count and how much was taken out just in this past quarter?

Yes, I think I can tell you that. Our current head count in the US is 2,345 and as of March our total was 3,826. At the end of the year -- you asked about the quarter -- we had 4,097 total. So whatever that difference is.

Okay.

So, what, a couple hundred or so. 4,097 to 3,826.

Perfect. That's helpful.

All right, Nat, thank you.

The next question is from Mark Marcon from R W Baird.

It's related to the prior question. Were there any charges in the quarter that would be non-recurring in nature?

No, Mark, nothing that would move the needle much.

Okay. And just the amount of revenue that transitioned over to Credit Services from Data, would it be roughly equivalent in the year ago period as it was during this period? In other words, if we take a look at the Delta in terms of Data Services in terms of what you ended up showing from Q1 of '08 relative to what you ended up reporting is that roughly the amount that ended up transitioning?

It is up about almost $2 million.

Okay. When you said for the e-marketing piece, that you will end up improving the margins? Exactly how will you do that, is it from a scale?

In the advertising, improving the margins?

Right.

A lot of it has to do with scale. A lot of it has to do with the particular products.

You can actually charge more for the segments that you are more active in and that are more consistent with the rest of your business than what you were doing for the healthcare?

This particular product, yes, the different verticals have different margins, pricing and we are gravitating more towards the traditional lead generation and also some new verticals which has a higher margin and I would say those margins that we are gravitating towards are more in the neighborhood of like double-digits, the teens rather than it being closer to 10.

It sounds like -- to summarize relative to what you reported in the first quarter, Credit Services margins should improve a little bit, Data Services -- sequentially because you are getting a little stronger. Employer Services probably goes down because labor market is getting tougher, Multifamily stays where it is, and ILS is a kind of a bit of a wild card depending on what happens to the Service revenue. Is that roughly correct?

I think that is a fair general assessment, yes.

Great. Thank you.

Thank you.

Carter Malloy with Stephens.

On Multifamily can you give us a size on how big insurance is, you said it is 30% growth but Multifamily is down 2%, understood that to be a counter cyclical piece of the business. Can you help us understand one, how big insurance is and than two, what is going on in the rest of that business?

Yes, I don't know that we have --

While they are looking for it, Carter, my thought is there isn't a lot of seasonality to it because it is a consumer product. It is renters ' insurance that is more of a consumer product that we sell direct to the consumer and the product has actually provided and underwritten by First American.

Correct but you said that insurance was up year-over-year 30%?

Yes and it is more of growth because we believe that we -- 35 to maybe 45% to the renters ' population out there with our market share. If that's the case it is more of activating that customer base and signing on more renters insurance.

I guess what I'm curious to know if it is just a small piece it is not so much of a concern. If that was a bigger piece than that would imply that the rest of the Multifamily business is doing fairly poorly. I was under the impression --

It is not a big number. Mainly like I said the product is underwritten by First American and we would get more of commissions on it. It is not a big percentage of our business.

I don't have that exact number. I can get it for you, though.

Then just on the loss -- lack of growth inside of the rest of multi family, one would assume with churn rates picking up and more families moving into duplex type living arrangements, you would see growth in that business. Is the lack of growth because of competition or loss of market share or pricing?

No, it is not because of competition at all. It is because of more of a glut on the supply side of it. There are more properties available for rent because there is a lot of single family homes moving into being rentals than before and we are also noticing that a lot of people are doing consumer to consumer type rental rather than organized rental housing.

Okay.

You are welcome.

Mark Marcon with R W Baird.

How are you thinking about acquisitions versus -- I imagine there is a number of entities that you probably looked at that probably came down in terms of price relative to continuing to keep a strong balance sheet given the uncertainty in the environment.

Mark, we do look at a lot of deals in the course of business. We are being careful in looking at it mainly because there is the uncertainty of the markets and such. There are some areas we are confidence and we know that through experience we can do well. It is a question of hitting upon the right things. Obviously, I can't comment on things in progress that we look at and we talked about. In the data and analytics and we like those kind of things. The pricing works out, the evaluation metrics work out, we wouldn't be -- we wouldn't hesitate looking at them.

And this is John. We have got -- because our balance sheet is pretty conservative, I guess to say the least, and we would like it that way, certainly if there is an opportunity with the metrics on it discussed, we have the ability to pull the trigger on some deals if they make sense to us.

It is not due to any lack of looking at it. As a matter of fact, we are getting ready to go to Asia to visit some operational places and there is also a couple of appointments that we have set up to look at a few companies that could mean well for our products and services.

Great. Thank you for the color.

At this time, there are no further questions.

Thanks, everybody.

Thank you all for participating. You may disconnect.