Zach Cummins

Zach Cummins inquired about the ramp-up in enforcement of the DOJ Title II requirements, the upcoming compliance date, and progress with AudioEye's federal partners. He also asked Kelly Georgevich about the expected adjusted gross margin for 2026, considering any headwinds from customer migrations.

Answer

David Moradi, CEO, confirmed the DOJ requirements are set to go into effect next month and noted continued momentum in reseller and direct channels from states, with strong progress from partners like Finalsite and CivicPlus. Kelly Georgevich, CFO, stated that both gross margin and adjusted gross margin are expected to remain relatively consistent with current levels (mid-to-high 70s% for gross margin), with opportunities for further growth, despite potential increases in AI compute costs.

Zach Cummins from B. Riley Securities requested an update on the anticipated ramp-up in enforcement of the DOJ Title II requirements, noting the upcoming initial compliance date, and asked about progress with AudioEye's major federal partners. He also asked CFO Kelly Georgevich about the outlook for adjusted gross margin in 2026, considering any headwinds from customer migration work.

Answer

CEO David Moradi confirmed that the DOJ's Title II requirements are set to go into effect next month as expected, and the company continues to see strong momentum in both reseller and direct channels from states, particularly with partners like Finalsite and CivicPlus, presenting a significant opportunity for customer penetration over the next two to three years. CFO Kelly Georgevich stated that both gross margin and adjusted gross margin are expected to remain relatively consistent in 2026, with gross margin in the mid-to-high 70s% due to increased AI compute costs, but noted opportunities for further growth in both metrics.

Inquired about AudioEye's partnership strategy in the EU, which member states are showing the most traction, and for an update on progress related to the DOJ's Title II rule.

Answer

In the EU, the company is targeting 300-500 web development agencies as ideal partners and is seeing broad traction across major countries like France, Germany, Italy, and the UK. Regarding the DOJ's Title II rule, key partners like Final Sight and Civic Plus have implemented aggressive go-to-market plans with building pipelines, and momentum is expected to increase in the second half of the year and into 2026.

Asked about the key assumptions driving confidence in ARR acceleration, the near-term gross margin impact from a customer platform migration, and early traction in the public sector following the DOJ's Title II rule.

Answer

Confidence in ARR growth stems from strong performance in the direct enterprise channel and the heating up of the EU market, plus expected acceleration from reseller partners in the second half. Gross margins will see a temporary, one-time dip in Q2 due to costs associated with the platform migration but are expected to recover to the high 70s in the second half. Public sector traction is being driven primarily through key partners like Finalsite and CivicPlus.

Inquired about the performance trends and investment plans for the Enterprise channel, and asked for early indicators of demand related to the upcoming European Accessibility Act deadline.

Answer

The Enterprise channel is experiencing strong growth with record leads and improving close rates, supported by investments made in early 2024. Regarding the European opportunity, pipelines are building dramatically, early deals are closing, and the company sees potential for revenue to significantly exceed current models.

Zach Cummins inquired about the Google TV opportunity, seeking more details on its growth potential for CTV home screen in 2026. He also asked if the proactive cleanup of inventory in 2025 is complete and if the current mix is ideal for enterprise brands.

Answer

CFO Jason Kiviat highlighted the significant opportunity in CTV home screens, noting Teads' two-year lead, extensive OEM base (including Google TV, TCL, Whale), and 55% growth in Q4, with similar or better growth expected. He emphasized direct access and premium advertiser relationships as key differentiators, which also aid omni-channel sales. Regarding inventory cleanup, Mr. Kiviat confirmed the process is largely complete, having walked away from $20 million in revenue. He stated that while the $8 million Ex-TAC headwind from Q4 will continue into H1 2026, the network is now healthier, delivering better ROAS for performance advertisers and is more suitable for premium brands.

Zach Cummins inquired about the Google TV opportunity, seeking more details on its growth potential for CTV home screen in 2026. He also asked about the status of the proactive inventory cleanup from 2025 and whether the ideal mix of inventory has now been achieved.

Answer

CEO David Kostman emphasized that CTV home screen is a significant opportunity, with Google TV being a recent addition to their OEM base. He highlighted 55% growth in Q4 for their CTV business and expects similar or better rates, attributing success to direct access, premium advertiser relationships, and omni-channel selling. He confirmed the inventory cleanup is complete in terms of execution, having foregone about $20 million in revenue, resulting in a 'much healthier network' that delivers better ROAS and is suitable for premium brands, despite the impact continuing into H1 2026.

Zach Cummins asked about the evolution of Thryv's go-to-market strategy, specifically how it will adapt to focus on 'quality customers,' and how the company plans to serve the lower-end market versus its direct sales approach.

Answer

Joe Walsh, Chairman and CEO, stated that Thryv is now focusing its in-person sales organization on larger businesses (typically $1 million+ in revenue) that are more likely to become 'quality customers.' He added that the company is developing a product-led growth model for smaller businesses and solopreneurs, where the economics do not support a high-touch sales approach.

Zach Cummins asked how Thryv's go-to-market strategy will evolve with a greater focus on 'quality customers,' differentiating between serving the lower end and direct sales, and potential engagement with larger partners.

Answer

Joe Walsh, Chairman and CEO, outlined a shift where the in-person sales force will concentrate on larger businesses (around $1 million in revenue or more). Smaller businesses and solopreneurs will be targeted through a product-led growth (self-service) model, minimizing high sales and service costs for this segment. Walsh emphasized that the majority of focus and resources will be directed towards prospecting and marketing to these larger, higher-value businesses.

Zach Cummins from B. Riley Securities questioned the drivers behind the strong SaaS adjusted EBITDA margin outperformance in the quarter and the outlook for the second half. He also asked for early feedback and the ideal customer profile for the newly announced Workforce Center product.

Answer

CFO Paul Rouse attributed the high SaaS margin to a strong print quarter in Marketing Services, which absorbed a larger share of allocated costs, and cautioned that this effect will reverse in the second half. Chairman & CEO Joe Walsh described Workforce Center as a product designed for businesses with under 25 employees, aiming to increase customer stickiness and reduce churn rather than being a major revenue driver.

Zach Cummins inquired about the retention rates and follow-on success with the large cohort of Marketing Services customers migrated to SaaS in 2024. He also asked if there was any contrast in resilience between the core Thryv and acquired Keep customer bases.

Answer

CEO Joe Walsh stated that migrated Marketing Services customers show no difference in churn rates compared to other new clients and exhibit strong add-on spending habits after 6-12 months. He noted that the Keep customer base, while more online-focused, has also proven resilient so far, and the acquisition integration is proceeding well with synergies on track.

Zach Cummins asked about the future progression of ARPU for the core Thryv SaaS business and for more detail on the paid SaaS add-on products that are driving multi-product adoption.

Answer

CEO Joe Walsh acknowledged that ARPU can be noisy due to marketing services conversions but expressed confidence that ARPU growth will be a key story in 2025, driven by a focus on upselling the installed base. He detailed that other paid products include "growth packages," which are add-ons to the Marketing Center designed to drive inbound leads for customers. Walsh emphasized that these tools, combined with Keap's automation, create a powerful, transparent growth platform for small businesses.

Zach Cummins inquired about the progression of gross margin in the core Thryv SaaS business and the expected pace of future expansion, particularly with the increase in multi-center adoption.

Answer

CEO Joe Walsh noted the significant SaaS gross margin improvement to over 72%, up from the low 60s previously. He attributed the expansion to increased scale and multi-center adoption. He also stated that Keap's higher gross margins will further boost the combined figure and that margins are not expected to go backward. Updated long-term guidance on this metric will be provided at the upcoming Analyst Day.

Zach Cummins of B. Riley Securities asked about the opportunity Magnite sees with agency marketplaces, specifically regarding ClearLine adoption with key agency partners.

Answer

Michael Barrett (President and CEO, Magnite) expressed enthusiasm for the adoption and volume from agency marketplaces, describing it as a "crawl, walk, run" process. He highlighted the "stickiness" of these partnerships, where Magnite becomes a strategic, long-term partner and the backbone for their programmatic businesses, which is essential for ClearLine's growth and success.

Zach Cummins of B. Riley Securities inquired about the strength Magnite is observing with agencies, particularly in agency marketplaces, and the opportunity for further ClearLine adoption with these key agency partners.

Answer

Michael Barrett, CEO, expressed enthusiasm for the adoption and volume from agency marketplaces, noting the 'crawl, walk, run' process for these initiatives. He highlighted that when agencies build their programmatic marketplaces using Magnite as the backbone, it fosters a more strategic, long-term partnership, which is essential for Magnite's growth and the success of ClearLine.

Zach Cummins of B. Riley Securities inquired about the specific use cases for the LLM Magnite is developing for categorizing CTV inventory and whether it's expected to drive efficiency or revenue.

Answer

CEO Michael Barrett explained the LLM will automatically crawl and categorize video content, solving the challenge of inconsistent labeling. This will allow for the real-time creation of custom segments, creating a larger targetable audience which is expected to lead to more revenue spent on the platform.

Zach Cummins inquired about any notable mix shifts within the CTV business during 2024 and its potential evolution, and also asked for clarification on Magnite's role in a recent partnership announcement with X (formerly Twitter).

Answer

CEO Michael Barrett confirmed the CTV business mix has been "quite stable." He anticipates that while Magnite's role in bringing demand will grow over time, the large premium streamers who sell their own deals will dominate the mix in 2025. Regarding X, Barrett characterized the news as a "premature" press article, stating it "wasn't a partnership announcement" and that more information would be provided later.

Zach Cummins requested an update on the Mediaocean partnership and asked about the sustainable long-term growth rate for the DV+ business.

Answer

CEO Michael Barrett stated the Mediaocean partnership is progressing as expected, with client testing underway and more substantial revenue not anticipated until H1 of the next year. CFO David Day expressed confidence in the DV+ business, stating it can continue to take share and that its growth rate could increase, driven by investments in new formats and curation.

Zach Cummins requested an update on the Mediaocean partnership and asked about the sustainable long-term growth rate for the DV+ business.

Answer

CEO Michael Barrett reiterated that the Mediaocean partnership has a long sales cycle and is currently in a testing phase, with substantial spend not expected until the first half of next year. CFO David Day expressed confidence in DV+, stating it can continue to be a share-taker and that growth rates could increase from current levels, supported by investments in new formats and curation.

Zach Cummins from B. Riley Securities noted the 1% growth contribution from non-scaled advertisers in Q4 due to early Realize adoption and asked for more data on the testing process and what works best for scaling these advertisers. He also sought context on the greater shift of adjusted EBITDA to the second half of 2026 compared to 2025, inquiring about investment timing or other factors.

Answer

Stephen Walker, CFO, found the Q4 contribution from non-scaled advertisers (testing budgets) encouraging, as Q4 is a peak budget time for testing, and expressed hope for future revenue translation. Regarding EBITDA, he explained that Q1 faces an $11 million foreign exchange headwind on operating expenses (hitting Q1/Q2 more heavily) and intentional upfront marketing expenses in Q1/Q2. He anticipates efficiency initiatives will contribute to stronger EBITDA in the second half of the year.

Zach Cummins noted the 1% growth contribution from non-scaled advertisers in Q4 due to early Realize adoption, asking for data on the testing process and strategies for scaling these advertisers to full budgets. He also inquired about the shift of Adjusted EBITDA to the second half of 2026 compared to 2025, seeking context on investment timing or other factors.

Answer

Stephen Walker, CFO, found the Q4 testing budgets from non-scaled advertisers encouraging, hoping they translate into future revenue. Regarding EBITDA, he cited an $11 million FX headwind on OpEx (primarily Israeli shekel) impacting Q1 and Q2 more heavily, along with intentional upfront marketing expenses in Q1 and Q2, expecting greater efficiency in the second half.

Zach Cummins from B. Riley Securities asked for an update on the overall tariff environment, particularly the impact from China, and inquired about the status of the share repurchase program, including any updates on approvals from Israeli authorities.

Answer

CFO Stephen Walker stated that the guidance for the second half assumes the modest headwind from China, which had a sub-1% impact on revenue, will continue. Regarding the buyback, he confirmed the new $200 million authorization was a proactive measure to get ahead of Israeli regulatory processes but provided no specific update or timeline on receiving an exemption for the 25% holder rule related to Yahoo.

Zach Cummins of B. Riley Securities questioned which business segments would be most resilient in a challenging macro environment, the drivers behind the implied second-half ex-TAC gross profit decline, and the remaining capacity of the share repurchase program.

Answer

CEO Adam Singolda asserted that Taboola's focus on performance advertising makes it resilient, as brand advertising is typically cut first in downturns. CFO Stephen Walker attributed the conservative 2H ex-TAC guidance to a prudent approach amid macro uncertainty and the slower growth of the core native market, noting Realize is expected to re-accelerate growth later. He also confirmed approximately $140 million remains on the share repurchase authorization.

Zach Cummins inquired about the expected timeline for the Realize platform to re-accelerate growth to double-digit rates and asked about the company's capital allocation priorities between buybacks and debt reduction.

Answer

CFO Steve Walker explained that it's too early to provide a specific timeline for Realize's growth impact, noting the 2025 guidance was set conservatively to allow time for traction. He reiterated that share buybacks are the #1 priority for capital use, viewing it as the best ROI, and mentioned they are exploring other ways to address debt, such as refinancing.

Zach Cummins inquired about the trends observed in the nearly $40 million in business closed following ZetaLive, asking if particular verticals or solution sets were driving this early momentum and how management views its progression.

Answer

David Steinberg, Co-founder, Chairman, and CEO, stated that the deals were across multiple verticals, including a significant win in telecom, and emphasized that the $39 million is just the beginning, amplified by CES. Chris Greiner, CFO, highlighted that there are over 200 distinct opportunities from ZetaLive, valued at more than $130 million, making the $100 million goal very achievable.

Zach Cummins asked about the nearly $40 million in business closed following Zeta Live, seeking insights into specific trends, verticals, or solution sets driving this early momentum. He also inquired about any one-time impacts on the Q4 gross margin and the expected gross margin profile for 2026 with Marigold's integration.

Answer

David Steinberg, Co-founder, Chairman, and CEO, noted that the $39 million in closed business was across multiple verticals, including a significant win in telecom, and was amplified by the Consumer Electronics Show. He emphasized the company's growing market recognition as an AI disruptor. Chris Greiner, CFO, explained that the Q4 gross margin reflected strong channel quarters in social and connected TV, both below the corporate average, and indicated that Marigold is expected to be a tailwind for annual gross margin improvement of 100-300 basis points towards the 2028 target.

Zach Cummins asked about the strong momentum in the telecom vertical, the reasons for its success, and whether it involves displacing other solutions. He also inquired about free cash flow conversion and whether working capital headwinds from agency collections are expected to ease.

Answer

David Steinberg (Co-Founder, Chairman, and CEO, Zeta Global) attributed telecom success to the platform's ability to drive accelerated growth at lower costs, primarily displacing major marketing clouds. Chris Greiner (CFO, Zeta Global) added that telecom's growth has been strong for two quarters, and consumer discretionary verticals also showed robust growth. Chris Greiner stated that adjusting for agency payment timing, FCF conversion would have been 80%+, and the 2030 target of 70%+ accounts for potential continued headwinds.

Zach Cummins highlighted the strong momentum in the telecom vertical, asking about the drivers of this success and whether it primarily involves displacing existing solutions. He also followed up on free cash flow conversion, inquiring if working capital headwinds from agency collections are expected to ease in future years.

Answer

CEO David Steinberg attributed telecom success to Zeta's platform enabling accelerated growth at lower costs, primarily displacing major marketing clouds. CFO Chris Greiner added that telecom's growth has been strong for two quarters, now exceeding 20% year-over-year on a trailing 12-month basis. Chris Greiner stated that even with continued working capital headwinds from agencies, Zeta is on track for its 2030 free cash flow conversion target of at least 70%, implying the model accounts for this.

Zach Cummins inquired about the typical direct versus indirect spend mix when landing new independent agencies and asked about the company's strategy for expanding into the public sector.

Answer

CFO Chris Greiner stated that new independent agencies typically onboard like enterprises, moving quickly to platform deals with a primary focus on direct channels. CEO David Steinberg noted that for the public sector, Zeta has built a specialized team and is leveraging relationships from its political business, expecting it to become a meaningful vertical over time.

Zach Cummins of B. Riley Securities asked if the new scaled customers in Q1 were primarily organic or from LiveIntent. He also inquired if the macro uncertainty was accelerating opportunities with major holding companies as they lean into more durable, data-driven marketing.

Answer

CFO Chris Greiner explained that the customer base is now fully blended, with some contribution from LiveIntent, but noted the organic business is the primary driver. CEO David Steinberg confirmed that the trend toward data-driven marketing is meaningfully accelerating their business with holding companies. He noted that Zeta is often their most profitable partner, and the ability to prove ROI is driving deeper engagement and scaling with a third major holding company.

Zach Cummins of B. Riley Securities asked about the growth opportunity with the top five global agency holding companies versus mid-market agencies, and inquired about plans for quota-carrying headcount growth through the Zeta 2028 plan.

Answer

CEO David Steinberg described the opportunity with the large agency holdcos as 'very, very large' while also noting that Zeta is adding mid-market agencies faster than expected. CFO Chris Greiner stated that the 2028 plan assumes 10-15% annual growth in quota carriers, which reflects efficiency gains compared to the 22% CAGR from 2021-2024, emphasizing a continued focus on quality over quantity in hiring.

Zach Cummins of B. Riley Securities asked about client interest and adoption trends for the new generative AI agents. He also requested an update on the system integrator (SI) channel as a future growth lever.

Answer

CEO David Steinberg described the AI agent adoption rate as the fastest he's seen for any company product, contributing to strong net revenue retention. Regarding SIs, he noted that two are now active and the channel is working, but it remains a long-cycle sale and is not yet factored into 2025 growth plans.

Zach Cummins from B. Riley Securities asked about customer interest and adoption trends for Zeta's expanded lineup of generative AI agents, and also requested an update on the progress of building out the system integrator (SI) channel.

Answer

CEO David Steinberg described the adoption of AI agents as unprecedentedly strong, contributing to high net retention as clients actively build their own agents. On the SI channel, he noted that two partnerships are already up and running and the model is working, but it remains a long-cycle effort not yet factored into 2025 forecasts.

Zach Cummins asked about any meaningful changes or shifts in traffic coming onto the platform due to the emergence of large LLM platforms, and the anticipated broadening of carrier contribution and composition across key carrier partners for 2026.

Answer

CEO Jayme Mendal stated no material direct impact or mix shift from LLM growth, as overall and search volumes remain high and SEO was not a primary traffic source. He views AI search as a 2026 growth opportunity through content, technical integrations, and paid advertising, while also expanding into higher-funnel channels. CFO Joseph Sanborn noted that 75% of top 25 carriers were below peak Q4 spend, indicating growth potential. He expects more competition and movement among carriers (especially 5-10) in 2026 due to a focus on profitable policy growth and the return of a national carrier.

Zach Cummins asked if EverQuote has observed any significant changes in traffic or channel mix on its platform since the emergence of large LLM platforms. He also inquired about the anticipated broadening of carrier contribution in 2026 and how to interpret the contribution across key carrier partners.

Answer

Jayme Mendal, EverQuote's Chief Executive Officer, stated no material direct impact or mix shift from LLM platforms, as overall and search volumes remain historically high, and EverQuote was not heavily reliant on SEO. He views LLMs as a growth opportunity, expecting meaningful traffic in 2026 through content, technical integrations, and paid advertising, while also expanding into higher-funnel channels like social and video. Joseph Sanborn, EverQuote's Chief Financial Officer and Chief Administrative Officer, noted that 75% of top 25 carriers in Q4 were below peak quarterly spend, indicating ample growth potential. He anticipates more competition and movement among carriers in Q1 and throughout 2026, driven by a focus on profitable policy growth and the re-entry of another national carrier, which is seen as healthy for the marketplace.

Zach Cummins asked for insight into the incremental investments in new traffic channels in Q4, their anticipated impact on Variable Marketing Margin (VMM), and the outlook for VMM over the next couple of quarters.

Answer

Jayme Mendal (CEO, EverQuote) explained that investments are in higher-funnel channels like social, video, display, connected TV, and AI search, which may initially run at lower margins. Joseph Sanborn (CFO, EverQuote) added that the Q4 VMM impact is estimated at a couple hundred basis points, with VMM generally expected to remain in the high 20s, influenced by the advertising environment and bidding technology efficiency.

Zach Cummins of B. Riley Securities asked for more context on Q2 carrier spending dynamics and inquired about the company's M&A strategy in light of its strong balance sheet and new share repurchase program.

Answer

CEO Jayme Mendal clarified that most carriers are in growth mode and he expects a full panel of carriers by year-end. CFO Joseph Sanborn added that while the new $50 million buyback reflects confidence in the business, the company will also selectively consider M&A that accelerates its core strategy in the P&C market.

Zach Cummins asked about the performance of the agent channel following the new platform rollout and what baseline assumptions for the second half of the year include regarding challenged states like California or New York.

Answer

Executive Jayme Mendal reported that the agent business is healthy with 20-30% growth, driven by a strategy to build a 'one-stop growth shop' with value-add products that are gaining traction. Executive Joseph Sanborn confirmed that baseline assumptions have not changed and do not include a recovery in California or New York. He identified potential tariffs as a wildcard but noted carriers appear healthy enough to absorb the impact, and there was no news on other lagging carriers coming online.

Zachary Cummins asked for feedback from carriers on maintaining 1:1 consent standards and their broader growth sentiment for 2025, comparing enterprise versus agent-led channels.

Answer

CEO Jayme Mendal clarified that while carriers are not imposing 1:1 standards, they are interested in the resulting higher-quality leads. He noted that both enterprise and agent-led channels are now converging on a growth mindset, as most carriers have achieved underwriting profitability and are focused on expansion.

Zach Cummins asked about the spending intentions of the broader auto carrier set for the upcoming year. He also inquired about the drivers behind the strong growth in the home and renters insurance vertical.

Answer

CEO Jayme Mendal stated that underwriting profitability is healthy across the industry, and virtually every carrier is focused on growth for next year, setting the stage for increased competition. Regarding the home vertical, he attributed its 30% growth to a balanced increase in both traffic and monetization, stemming from a renewed focus and resourcing that began last year. He noted that improving underlying market dynamics in home insurance should also support future growth.

Zachary Cummins asked about the bookings trajectory for ClearanceJobs in 2026, considering defense spending tailwinds, the impact of growing AI-related job postings on Dice's value, and whether Dice's margin compression is due to lower revenue or new investments.

Answer

CEO Art Zeile explained that ClearanceJobs' Q4 improvement was due to improved sales execution and leadership changes, with the new defense budget acting as a significant tailwind. He noted that while there's high demand for AI professionals on Dice, the broader commercial tech hiring market remains subdued. CFO Greg Schippers clarified that Dice's margin compression is primarily due to the lower revenue base resulting from 2025 bookings challenges, despite ongoing efficient investments in the platform.

Zachary Cummins inquired whether the compression in Dice's margins was solely due to a lower revenue base or if incremental investments were planned for 2026.

Answer

Greg Schippers, CFO of DHI Group, Inc., confirmed that the margin compression was primarily due to bookings challenges in 2025 flowing through to lower 2026 revenue. He noted lower OpEx is targeted for 2026, but it won't fully offset the revenue decline, though investments in Dice's platform efficiency continue.

Zach Cummins of B. Riley Securities inquired about the Q2 booking performance for ClearanceJobs and the company's confidence in a second-half recovery. He also asked about the strategic value of the Agile ATS acquisition and the expected timeline for stabilizing the Dice business following recent restructuring.

Answer

CEO Art Zeile explained that ClearanceJobs bookings were impacted by federal budget uncertainty, but the newly approved, larger budget has restored client confidence. He positioned the Agile ATS acquisition as a key adjacent tool for the half of CJ's customers who lack a specialized applicant tracking system. Regarding Dice, Zeile noted that while the environment is challenging, the tech job market appears to be stabilizing, with encouraging signs of sequential growth from major staffing firms, a key customer segment for Dice.

Asked about the Q2 booking performance and second-half outlook for ClearanceJobs, the strategic rationale and potential impact of the Agile ATS acquisition, and the timeline for stabilizing the Dice business post-restructuring.

Answer

Management acknowledged a choppy Q2 for ClearanceJobs due to federal budget uncertainty but expressed confidence for the second half now that a large budget is approved. The Agile ATS acquisition is seen as a strategic, adjacent product that can be bundled with ClearanceJobs to serve about half of its existing customer base and also be sold to Dice customers. For Dice, the market appears to be stabilizing, with positive signs from key staffing firm customers, though a full rebound depends on the broader economy.

Zach Cummins of B. Riley Securities inquired about the renewal dynamics with major staffing clients, the recent downtick in renewal rates, and the potential risk this poses for the key Q4 and Q1 renewal season. He also asked about the source of management's confidence in a return to bookings growth next year.

Answer

Executive Art Zeile acknowledged the risk in renewals, noting that while most churn is from smaller firms, reduced usage by a few large staffing clients can materially impact the renewal rate. He expressed optimism for 2025, citing positive tech labor market data, historical workforce growth trends, and a sense of pent-up demand for both new projects and voluntary employee attrition. CFO Raime Muhle also briefly commented.

Zach Cummins of B. Riley Securities inquired about the potential impact of recent DHS security line changes on TSA PreCheck demand, visibility into the DMDC program's revenue mix, and the company's capital allocation priorities, particularly M&A.

Answer

Executive Vice President of Security Solutions Mark Griffin stated they do not expect the DHS rule change to negatively affect TSA PreCheck enrollments, as speed remains the key benefit. Executive VP & CFO Mark Bendza noted that visibility into the DMDC mix is improving, with a weighting towards software, and that the primary capital allocation priority is using free cash flow for share buybacks, though they remain open to disciplined tuck-in or transformational M&A.

Zach Cummins of B. Riley Securities inquired about any changes to the new business outlook, the margin profile of the DMDC program during its ramp-up, and the performance and rollout pace of the TSA PreCheck enrollment centers.

Answer

EVP and CFO Mark Bendza explained that the DMDC program will be dilutive to overall margins, with lower-margin revenue streams ramping up first, causing sequential margin contraction. EVP of Security Solutions Mark Griffin noted the new business pipeline remains over $4 billion, but new 2025 wins would likely have a minimal single-digit revenue impact this year. Mark Bendza also highlighted that TSA PreCheck is a significant driver of the company's improved cash flow.

Zach Cummins asked about the impact of the new U.S. administration on single-award government contracts and requested more detail on the 2025 revenue framework, particularly the accounting for the DMDC and DHS program awards.

Answer

Chairman and CEO John Wood explained that while the new administration is generally positive for Telos, it has caused near-term delays in single-award contracts, shifting the company's focus to task orders on existing vehicles. EVP and CFO Mark Bendza clarified that the 2025 revenue estimate for the DMDC and DHS programs was adjusted due to a higher mix of software versus hardware. Software revenue is often recognized over a performance period rather than all at once, affecting the first-year revenue recognition but not the total contract value or cash flow timing.

Zach Cummins asked for more details on the recent restructuring, including which business lines were discontinued, and inquired about the size of the new business pipeline for the Secure Networks segment heading into the key government buying season.

Answer

Chairman & CEO John Wood stated that the company discontinued its advanced cyber-analytics and Ghost solutions due to low sales traction. EVP & CFO Mark Bendza added that revenue from these lines was de minimis, so there will be no revenue headwind. Regarding the pipeline, Bendza described roughly 20 opportunities with a nine-figure total contract value. EVP of Security Solutions Mark Griffin further clarified the total pipeline is approximately $4.1 billion across 245 opportunities.

Zach Cummins from B. Riley Securities asked for details on the breadth of the auto insurance recovery beyond the top carriers and questioned the drivers behind the expected margin expansion in fiscal 2026.

Answer

CEO Douglas Valenti and CFO Gregory Wong confirmed the recovery is broad-based. Valenti highlighted a record number of carriers spending over $1 million per month, while Wong noted that auto insurance grew over 60% year-over-year even excluding the largest carrier. Regarding margins, Valenti detailed several initiatives, including media optimization, developing new proprietary media capacity, growing new higher-margin products like QRP, and maintaining flat non-variable operating expenses.

Zach Cummins asked for details on the Auto Insurance business's sequential performance, the evolution of QuinStreet's margin strategy in that segment, and recent spending trends across different insurance carriers.

Answer

CFO Greg Wong stated that Auto Insurance revenue was down just over 10% sequentially from an exceptionally strong December quarter. CEO Doug Valenti added that the company is adapting its strategy to protect margins by emphasizing proprietary media and a private exchange model. He also noted that spending has broadened, with Greg Wong highlighting that the auto business excluding the largest client grew over 150% year-over-year.

Zach Cummins asked about the margin impact from TCPA preparations and if the Home Services outlook has improved, and also requested color on the spending contribution from top auto insurance carriers versus the broader group.

Answer

CEO Doug Valenti confirmed that the Home Services outlook for the second half is now better with the TCPA changes stayed, and this is reflected in the updated guidance. He noted that while a couple of carriers are significantly larger, a dramatically broader base of large carriers is now more engaged and sophisticated in the digital channel than ever before.

Zach Cummins asked about the primary drivers of the strong Q1 growth in the Home Services vertical and the company's expectations for this segment, especially with the upcoming TCPA changes. He also requested clarification on the quarter's free cash flow, noting the timing of cash collections mentioned by management.

Answer

CEO Doug Valenti attributed Home Services growth to strong execution on key initiatives in a large market. He acknowledged TCPA will have its most direct impact on this vertical but stated the company is well-prepared, with expectations that higher lead value and pricing will offset other effects long-term. CFO Greg Wong clarified that the cash balance was impacted by the timing of approximately $22 million in payments received one day after the quarter ended and expects to return to positive cash generation going forward.

Zach Cummins asked about the current stage of the go-to-market transformation and sought clarification on the updated adjusted EBITDA guidance, specifically regarding any incremental investments planned for the second half of the year.

Answer

CFO Marc Suidan described the transformation as being in the 'walk' phase, moving towards 'run,' with the team largely in place but processes still being refined. CEO Gleb Budman added that pipeline and deal size metrics show significant progress. Suidan noted that the guidance reflects a slight acceleration of CapEx into Q3 to support B2 OverDrive demand but affirmed the company is on track for Q4 adjusted free cash flow positivity.

On behalf of Zach Cummins, Ethan Widell asked for more details on the Opti9 partnership's role in market expansion and whether the company plans to continue expanding its sales team amidst cost-cutting initiatives.

Answer

CEO Gleb Budman described the Opti9 partnership as a key regional and channel expansion in Canada, providing backend storage for the country's largest Veeam MSP. CFO Marc Suidan confirmed that the company will reinvest a portion of its over $8 million in cost savings to expand sales capacity, specifically by hiring more sales reps to capitalize on improved productivity.

Zachary Cummins of B. Riley Securities questioned management's confidence in converting the new pipeline into closed deals to drive a return to ARR growth. He also asked if the noted increase in multi-year contracts is part of a new, deliberate go-to-market strategy.

Answer

CEO and President Joshua Resnik expressed high confidence in pipeline conversion, citing strong product engagement metrics, improved go-to-market execution, and robust underlying demand. He confirmed that seeking multi-year deals was a deliberate strategy introduced with PolicyNote, stating that the success, with new corporate logos signing on at double the rate of a year ago, reflects customer confidence in the product's long-term roadmap rather than aggressive discounting.

Zach Cummins from B. Riley Securities asked for details on the pro forma balance sheet following the planned divestitures of Oxford Analytica and Dragonfly, and sought clarification on what is excluded from the 2025 guidance.

Answer

CFO and CIO Jon Slabaugh explained that the divestiture will cause a roughly $29 million reduction to the senior term loan, lowering quarterly cash interest expense to approximately $2 million. He clarified that Q1 2025 guidance is GAAP but includes about $3 million in revenue from the divested assets that will not be present in subsequent quarters.

Asked for more detail on the second-half guidance for growth and EBITDA, and about the company's differentiated offering and opportunities in the CTV market.

Answer

The company reaffirmed its expectation for a return to pro forma growth in H2, driven by business improvements and synergies. Adjusted EBITDA is expected to ramp significantly in H2 due to cost synergy realization. The CTV differentiation lies in exclusive home screen placements, with a future focus on performance CTV.

Inquired about the reasons for Teads' Q4 underperformance and the company's confidence in stabilizing the business, particularly in the U.S. He also asked a follow-up question about the deleveraging timeline and target leverage ratio given the revised deal terms.

Answer

Executives attributed Teads' Q4 softness to temporary, one-off issues: political instability in France and merger-related distraction and employee turnover in the U.S. They expressed high confidence in returning to growth, noting positive trends in January. On leverage, the company started at under 2.5x and is targeting a 1-1.25x ratio, which is considered prudent given the combined entity's strong cash flow generation.

Zach Cummins inquired about volume trends with the key DSP partner during the first quarter, including any outsized impact on display formats, and asked about the evolution and future potential of relationships with mid-market DSPs.

Answer

CFO Steven Pantelick reported that volumes with the key DSP partner have been stable and were slightly better than expected in Q1, with the financial impact set to be lapped by mid-year. CEO Rajeev Goel added that areas like CTV have seen dramatic growth with this partner. Goel also noted a significant shift in the market, with a growing mid-market of advertisers and agencies making independent decisions, creating a strong growth opportunity for PubMatic's platform globally.

Zach Cummins focused on Connected TV (CTV), asking where the company is seeing the most success, what types of media streamers are particularly attractive, and about the long-term growth runway for the segment.

Answer

CEO Rajeev Goel stated that success comes from PubMatic's platform being built to handle all programmatic transaction types as CTV shifts away from insertion order-based buying. He noted that PubMatic now works with 80% of the top 30 global streamers, up from 70% in the prior quarter, including major players like Roku and Disney+ Hotstar. Goel sees a long growth runway driven by live sports, data curation, and the 'Activate' platform.