Stacy Ybarra - VP, IR John Clendening - President & CEO Eric Emans - CFO

Dan Kurnos - The Benchmark Company Mitch Bartlett - Craig-Hallum

Welcome to the Second Quarter 2016 Blucora Earnings Conference Call. At this time, all participants are in a listen-only-mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. I would now like to introduce to this conference call, Ms. Stacy Ybarra. You may begin ma'am.

Good morning, and welcome to Blucora's investor conference call to discuss second quarter 2016 earnings. Before we begin, I'd like to remind you that during the course of this call, Blucora representatives will make forward-looking statements, including but not limited to statements regarding Blucora's expectations about its products and services, outlook for the future of our business and growth initiatives, and anticipated financial performance for 2016. Other statements that refer to our beliefs, plans, expectations or intentions which may be made in response to questions are also forward-looking statements for purposes of the Safe Harbor provided by the Private Securities Litigation Reform Act. Because these statements pertain to future events, they are subject to various risks and uncertainties, and actual results could differ materially from our current expectations and beliefs. Factors that could cause or contribute to such differences include, but are not limited to, the risks and other factors discussed in Blucora's most recent Quarterly Report on Form 10-Q on file with the Securities and Exchange Commission. Blucora assumes no obligation to update any forward-looking statement, which speak only as of the date the statement is made. In addition, during this call, our management will discuss GAAP and non-GAAP financial measures. In the press release, which has been posted on our website and filed with the SEC on Form 8-K, we present GAAP and non-GAAP results along with reconciliation tables, and the reasons for our presentation of non-GAAP information. We have also provided supplemental financial information to our results in the Investor Relations section of our corporate website at www.blucora.com and filed with the SEC on Form 8-K. Now, I'll turn the call over to John Clendening. Following his comments, Eric Emans will review second quarter results and full year outlook. Then we'll open up the call to your questions.

Thank you, Stacy. Good morning everyone, and thank you for joining our call today. I would like to begin by simply expressing my appreciation to the entire Blucora team, our customers and our shareowners, for their support as I lead Blucora through our transformation to a strong and growing technology-enabled financial solutions company. After a little over 100 days as CEO, I am pleased to provide an update on the exciting and positive changes going on at our company and my views on how we will create long-term value. When I first joined Blucora in April of this year, I knew the company had significant potential. Over the last few months, I have had the opportunity to watch our business evolve and to see the hard work of our teams begin to affect positive change across our operations. I have been consistently impressed with the efforts of our people, who are fully focused on delivering great value to our customers, clients and advisors. It's exciting to be a part of a company that is so committed to doing everything possible to assist those that depend upon us in the markets we serve. As we transform Blucora our commitment to our shareholders is to deliver reliable financial performance that generates attractive returns. The full team is focused on this commitment. In these updates, you can expect me to share a balanced perspective on the company, both in terms of what's working well along with challenges we need to overcome to meet that commitment. Last quarter, I shared our near term focus on the four Ds: Divest, De-lever, Deliver and Drive. Each D represents an element of our action plan to reconfigure our capabilities and create a more streamlined, effective, and efficient business model that delivers near-term performance while positioning the firm to capture long-term growth opportunities. Today, I’ll report on the progress we have made on these elements. As I discussed during our first quarter earnings call, we reaffirmed our commitment to divest our Infospace and Monoprice businesses. Since then, we have made substantial headway on these efforts; having earlier this month announced a definitive agreement to sell Infospace to OpenMail for $45 million. This transaction, which we expect to complete in the coming weeks, marks an important step in our transition and will enable us to monetize a non-core asset to pay down debt and reduce our operating expenses. Additionally, we are focused on the sale of our Monoprice business and, although the process is taking longer than we had hoped, the process is competitive with multiple parties interested and actively conducting due diligence. We are optimistic that we will enter into a transaction in the coming months. Second, we remain focused on our efforts to de-lever our business by paying down debt, and are well on our way to achieving our goal of a 3x net leverage ratio. During the second quarter, we retired $20 million of debt, bringing our total debt reduction for the first half of the year to $88 million. Our ability to quickly and consistently de-lever demonstrates our strong cash flow generation capabilities at both businesses. Looking to the third quarter, we expect to pay down more than $40 million in debt with the net proceeds we will receive from the sale of Infospace. In addition, by de-levering we will be able to better tap into the benefits of our substantial NOLs. Third, we delivered strong growth in adjusted EBITDA, up 36% over prior year and within our expectations. This growth was fueled by very strong performance from TaxAct, counterbalanced by shortfalls versus our revenue expectations at HD Vest. I want to spend a few moments discussing our results in more detail while sharing context on the operating environment. Starting with Tax Preparation, TaxAct completed this year’s tax season in the second quarter and delivered another strong performance with revenue and segment income up 18% and 21% for the full season. This was an important year for TaxAct, as we successfully pivoted our strategy to one focused on driving profitable share growth The changes we made to our go-to-market strategy better position the business for long-term growth. One key reason for this is our price points now align to those of the volumetric leaders, enabling consumers to see our substantial price-value advantage. From a market perspective, we were pleased to see the DDIY category grow overall and view the enlarged pool of DDIY filers as a future opportunity for TaxAct. Before I move on to Wealth Management, I want to take a moment to thank JoAnn Kintzel for her valuable contributions in building TaxAct into the successful business it is today. Earlier this month, we announced that she will be stepping down as President of TaxAct once a successor is named. Thanks in large part to JoAnn's leadership over the last five years; TaxAct is in a strong position to take advantage of the significant opportunities ahead for the business. Turning now to Wealth Management. Revenue performed below our expectations at $76.1 million down 6% compared to the prior year. Segment income came in within guidance at $9.9 million, but was down 7%. Now, let me share more insight into the revenue shortfall. Advisor-driven revenues were down year-on-year in each primary area of fee-based, trailers, and transactional. Transactional revenue is the largest driver and was also down sequentially. Here, we are seeing two developments. One, in June we experienced an unforeseen decline in new investments in variable annuities. While the product line has historically exhibited variability, the dip in June was unusually large and centered on smaller average investment amounts. As you can imagine we are watching this extremely closely. For July, new investments have rebounded versus June, but early indications suggest we will continue to lag prior year. This challenge seems to be industry-wide as the market has been in decline from its cyclical peak in mid-2011. Our internal analysis also indicates that variable annuity demand we'd normally experience post-tax season was pulled into Q4 2015 and Q1 of this year, driven by the launch of a new sales automation tool that accelerated the closing of business, as well as a unique situation created by the buyout of a well-adopted annuity, by a large insurance company. Two, compounding the softness in new investments, we also experienced declines in commission rates. Here, the product mix has gradually moved toward product options with lower upfront fees but with higher trailing commissions paid out over time. This is reducing our short-term revenue in exchange for higher annuitized revenue. Generally, we like this trend as it moves toward more recurring revenue; however, it has been and will continue to be, a headwind. The good news is this is a gradual shift and we should begin to see some relief as trailer commissions typically kick-in one-year after the initial investment. In addition, we have seen softness in fee-based net flows which is affecting revenue performance. Given the continuance of a largely sideways market since early 2015, combined with greater market volatility, advisors are finding it more difficult to convert clients into and retain them in, a professionally managed, fee-based arrangement. Simply put, well-diversified portfolios have not delivered strong absolute returns, resulting in sluggish net new flows. Global uncertainties and macro-economic issues have not helped as these also weigh heavily on many investors, and have consumed advisor bandwidth on hand holding versus business development. Lastly, given market volatility and uncertainty, we reevaluated our assumptions for the rest of the year and are revising our outlook to assume a flat equity market and no Fed Funds rate increases. As a result of these, we are lowering our full year guidance and Eric will share more details in his prepared remarks. Now, given the financial model of the business, we expect to achieve solid annual segment margin for HD Vest around 14% for the year. Bigger picture, while we are disappointed with the revenue performance this quarter at HD Vest we believe in the attractive potential of this business. Net, the headwinds we face have become more clear, we are committed to taking the steps necessary to fight through these challenges, and we are focused on near-term execution to begin to regain momentum. One such execution focus is making it simpler to process annuities by simplifying and streamlining operations. We know that making it easier to do business with us drives greater advisor productivity and product usage, and should enable us take advantage of second half opportunities, including end of year tax planning season. A second key execution focus is helping our advisors better engage with clients. In June, we hosted our Annual National Conference in Washington DC with record attendance. A major focus of the conference was on recently developed tools that advisors can use to build their businesses regardless of the operating environment. Usage of these technology-enabled tools drives growth in assets and high quality revenue, and we are delighted to see this usage increase. We are especially pleased with the adoption of VestVision, our retirement planning tool facilitating client-personalized plans, which grew 22% versus the second quarter 2015. And, June was the strongest month of plan creation in VestVision since its launch in 2014. Importantly, it was also the broadest month of plan creation as measured by unique advisor use. We anticipate continued growth in the use of planning tools as advisors seek to better meet client needs as well as look ahead to the fiduciary duties with respect to the new DOL rules. This adoption is important as advisors who work with clients on the basis of a plan drive more assets and create monetization through increases in fee-based relationships. It's a win for clients too as they benefit over time from being in a well-diversified portfolio managed by a professional acting as a fiduciary. A brief comment on DOL. As we continue to evaluate the new DOL rules, we believe we have an effective investment advisory platform which will be available to satisfy the DOL requirements. We also continue to educate our advisors and encourage them to get their advisory licenses. Thus far in 2016, we are pacing ahead of last year's record number of new advisory licenses obtained. That said, we are still assessing the impacts of the DOL and will be sharing more details in the near future. Finally, to our fourth D our teams remain focused on driving long-term growth. We have a path to creating a more streamlined business and, opportunities to create shareholder value. I'd like to share my current thoughts with the benefit now of being on the job for nearly four months. Tax Preparation. I like the hand we are playing in this business. The largest competitor in the digital do-it-yourself space is growing the category by attacking the outdated and low-value storefront model. For those that prefer or are considering DDIY, TaxAct offers incredible value. Right now, most people that are filing with larger players could come over to TaxAct, get a great experience, and pay a lot less. And, the largest player churns more filers annually than we currently serve in a given season. So we foresee substantial opportunities to drive growth through: one, sharpening our differentiation versus competitors; two, getting the credit we deserve for our superior price-value; three, tightening our marketing focus, while better utilizing data; four, improving the client experience, which will be an ongoing focus; five, additionally, we continue to be well positioned to grow in areas outside of the U.S. consumer tax business including professional, small business, and international. We have only begun to scratch the surface of these opportunities. Wealth Management. Our long-term view on HD Vest continues to be positive as well. I like businesses in this space that feature: one, revenue streams that are migrating toward more fee-based and recurring revenue; two, value to clients through a quality, trusted relationship; three, where there is upside overtime associated with the increased valuation of publicly traded securities; four, that offer greater revenue as interest rates rise, with strong flow-through to the bottom line; and five, where there is upside to key levers that drive long-term value creation. HD Vest checks the box in all five of these areas. So while it's clear the IBD sector faces a number of challenges, I believe HD Vest will be the one to beat in the IBD space. This is not just because of the aforementioned, but because in addition we offer a better mousetrap. Our "grow your own" approach to adding new advisors creates a significant net revenue advantage versus others in the sector and there is real value added for the client. It's better for investors to work with an advisor who has an eye on tax alpha because you simply can't assume away tax implications and properly advise a client on their investments. Yet it's the very thing that the majority of wealth mangers and brokers do. Regarding the fifth point around value-producing metrics, we continue to see significant opportunity in each key value lever including: increasing the number of advisors in our network. We currently have 4600 advisors out of an addressable market of approximately 250,000. Increasing the breadth of wealth management inside of tax provider practices. Today, our advisors average about 25% penetration among their tax client base. And, increasing the depth of penetration of their wealth management clients by gaining greater wallet share and increased adoption of fee-based solutions. Additionally, these two businesses make sense together. There is an opportunity to tap into TaxAct's 20,000 professional customers who are not yet HD Vest advisors and to better serve TaxAct's 5 million consumer tax filers by leveraging HD Vest capabilities to offer wealth management services. Supporting these strategic initiatives is our new operating model, which is centered on the idea of Blucora as one company. We are in the process of transitioning from a portfolio holding company operating model with separate operations to a more unified and collaborative structure. Inherent in this is a shift in the role of corporate functions from adding value through M&A to being directly accountable to help the business units grow profitably. Moving to this model will help us attract the right talent to build our team and create a more flexible, nimble Blucora. I am committed to building the best team in the business, the one everyone wants to be on. Inevitably, there will be some new folks brought in overtime in order to meet this commitment. While we are undergoing positive change at Blucora, I believe we are laying the foundation for long-term growth and value creation. With that, I would like to turn over to Eric Emans to discuss our financial performance over the past quarter.

Thanks, John. Today I will cover second quarter results and then provide third quarter outlook and update our full year outlook. Our consolidated results and year-on-year pro forma growth for the second quarter are as follows: revenue of $120.1 million up 7%, adjusted EBITDA of $35.3 million, up 36%, reflecting year-on-year segment income growth of 30%, and, non-GAAP net income of $23.4 million, up 61% and EPS of $0.55 per diluted share. GAAP net loss for the second quarter was $14.4 million or a $0.34 cent loss per share and reflects impairment charges associated with our discontinued operations. Turning to the balance sheet, we have cash, cash equivalents, and short-term investments of $82.1 million. As John mentioned, we paid down $20 million of term loan B, bringing our net debt down to $437.2 million. Net leverage exiting the quarter was 4.5 times, down from 5.2 times as of March 31, 2016. In the third quarter we expect to utilize 100% of the net proceeds from the Infospace divesture to further pay down debt as we remain focused on reaching our net leverage goal of 3 times in 2017. Shifting to segment performance, starting with Tax Preparation. Second quarter revenue was $44.0 million and segment income was $29.8 million. For the first half of 2016, which encompasses the entire tax season, revenue was $132.5 million, up 18% versus the first half of 2015, and segment income was $77.4 million, up approximately 21%. Segment margin for the first half of 2016 was 58.4%. As we discussed during our first quarter call, we pivoted our offering this year to better position us for future growth and we are pleased with the performance and future potential of the business. In the back half of the year we are making investments in technology and marketing to set up the business for a successful 2016 tax year and beyond. We are gearing up this off season, focusing on revitalizing our value leadership position in consumer DIY. We look forward to sharing more on our 2017 outlook in the coming months. Closing out on 2016 we expect full year revenue of $137.5 million to $138.5 million and segment margin in the 47% to mid-47-percent range which reflects increased investment as we spend back a portion of 2015 tax season over-performance. Second half 2016 revenue will be slightly weighted toward fourth quarter as will segment loss as we begin to ramp up our investment leading into tax season. Transitioning to Wealth Management, second quarter revenue was $76.1 million, down 6% versus prior year and below our expectations for the quarter. As John mentioned, the revenue miss was largely driven by an unforeseen decline in the back half of the quarter in our variable annuity transaction revenue. To provide some context, June variable annuity investment volumes were down over 35% versus June 2015. This coupled with declines in commission rates as advisors have gradually shifted toward product options with lesser upfront fees, has pressured transaction revenue in the quarter. John noted, that thus far in July volumes have bounced back on a sequential basis and we are also seeing commission rates holding steady sequentially and are up year-on-year. Touching quickly on assets, advisory AUM grew 2% sequentially versus the first quarter 2016 but was down 1% versus the second quarter 2015. Advisory net flows were up $11 million as advisors continue to battle client sentiment driven by volatile market swings. Total AUA was also up 2% sequentially driven entirely by market. Segment income for the second quarter was $9.9 million, down 7% year-on-year and consistent with our outlook as the team managed costs to offset revenue shortfalls. Turning to the third quarter and full year 2016, we have reset our advisor driven revenue outlook acknowledging the headwinds the business is facing. Our revised expectations take into account the following factors: second quarter performance versus the second quarter outlook, transaction revenue rate and volume variability, and market volatility. As it relates to market volatility, we have removed all market related upside from our 2016 outlook. We are holding the S&P 500 flat through the end of the year and have also assumed no fed fund rate increases for the remainder of the year. Our previous outlook range had included S&P 500 appreciation in the back half of the year and one fed rate increase. As a reminder, a 25 bps increase is approximately $500,000 to $600,000 of revenue and segment income per quarter. Lastly, given environmental considerations, we have adjusted down our net flow expectations for AUA and AUM for the remainder of the year. Our third quarter outlook for wealth management is revenue of $74.6 million to $78 million at a segment margin range of mid-12-percent to mid-13-percent. For the full year we expect wealth management revenue of $303 million to $313 million at a segment margin range of mid-13-percent to low-14-percent. Finishing up second quarter performance with unallocated corporate operating expense. Second quarter expense was $4.5 million, down 4% from the prior year. This included approximately $900,000 in non-recurring costs including a severance charge of approximately $400,000. As we think about the rest of the year we are increasing our full year corporate cost expectations to a range of $19.5 million to $19.8 million. This increase is primarily the result of increased second quarter severance costs, legal fees associated with ongoing and potential litigation matters and recruiting related expenses. The key takeaway is our run rate expenses are in line with our expectations and we have a path to our $12 million annual run rate goal in the first half of 2017. However, there are likely to be some one-time cost to achieve the reduction in run rate, and we will share these once they become more clear. For the third quarter we expect unallocated operating expenses of $5.2 million to $5.4 million. With that let's turn to consolidated outlook for the third quarter and an update to our full year outlook. For the third quarter we can expect revenue between $77 million and $81 million, adjusted EBITDA between a negative of $2.3 million and negative $200,000, non-GAAP net loss from continuing operations of $15 million to $12.6 million or $0.36 to $0.30 loss per share and GAAP loss from continuing operations of $16.2 million to $14.8 million or $0.39 to $0.36 loss per share. For the full year, we are lowering our outlook as follows: we expect revenue between $440.5 million and $451.5 million, adjusted EBITDA between $85.8 million to $90.5 million, non-GAAP net income from continuing operations of $35.8 million to $40.9 million or $0.84 to $0.96 per diluted share and GAAP loss from continuing operations of $5.5 million to $2.0 million or a $0.13 to $0.05 loss per share. To reiterate, our lowering of our full year revenue outlook is driven by headwinds in our wealth management segment which captures both increased variability in our transaction revenue trends, evidenced by the second quarter revenue softness, and environmental factors associated with increased market volatility. Full year outlook for adjusted EBITDA and non-GAAP net income have been lowered to reflect gross profit decline associated with the lowering of wealth management revenue as well as an increase in non-recurring unallocated corporate expenses. With that, let me turn the call back over to John for his closing remarks.

Thanks, Eric. In my short time with the Company, we have made substantial progress towards our transformation objectives. Our focus on the four D's is already beginning to yield results and we are excited about the future of the new Blucora. We will now move to Q&A.

Great. Thanks. Good morning, very early morning to you guys. Look, I'm just obviously going to focus around HD Vest here. Just a few questions. First, John, look, I -- you've kind of -- you've inherited this; you've obviously made some changes already. So I know the long-term outlook very promising. To me, the first question is, you talked a lot about the headwinds, I know when we had a chance to meet up, you were talking about implementing your game plan. And I'm just really trying to get a sense of how much of this sort of downtick near-term is a result of macro versus possibly you taking a chance to get more aggressive on shifting towards more of a recurring revenue stream model, given that recurring did actually tick up in the quarter sequentially, and was a greater portion of the overall revenue base?

Hey, Dan, good morning. Thanks for the question, appreciate that. So in terms of the order of your question I'll sort of answer going in the same order. There definitely is some cyclical issues in this business that are not unique to when we have an HD Vest, as we've shared, we feel good about the future potential that business over time. In fact, we had done as we had sized this business up as the year unfolded; we had felt that we had largely avoided some of the sector issues they caught up with us a bit. Last quarter, we see some of these elements stabilizing, and that we still believe very confidently that the impacts around the sector will be less overtime on this business. Now, to your point on the shift, we're definitely experiencing some short-term headwind around that shift. We love and we discussed this, we love businesses that can be moving into a more recurring sort of revenue stream. A stickier revenue; it's higher quality revenue and the sort of offers that clients end up in tend to be better for them over time. So there is an element of that and we are encouraged and delighted really when we make that shift. On the short-term, though, there is some pain. We've done the math and had done the math earlier around. Do we like to trade from an economic point of view on top of liking the trade from a consumer point of view? And the answer is definitely yes. So we're going to continue to push on that. In fact, we'd like to see acceleration in the move to fee-based offers. We feel good about our offers. There's lot of room to grow there and that's the linkage in the conversation that I just led earlier around focusing on advisor engagement. And though the markets have not been generous and kind to anybody, we got to focus on the things that we can control and that's getting advisors more and more engaged with their clients using the tools that we've built, because we know that they turn into future revenue.

Do you think that because you guys have this unique organic advisor growth development strategy that that puts you more at risk or less at risk? How would you characterize it when the market becomes more uncertain and you've got guys that are primarily tax guys having to deal with a more challenging equity market?

So decidedly less at risk. If I've the option, door one, business like HD Vest, tax professionals, deep relationships with clients used to being a fiduciary. Door two, typical IBD stuck in the trade-day broker business or rent-day broker business where you're paying for practices and looking to grow through that fashion. Sometimes you're in that mode; you're tempted to try to speak to generate so you sort of drive your business by getting more and more tempted around buying and overpaying for practices. So we're not in that model. Now, what it does clearly is put more pressure on us to be more creative on who we can find out of the 250,000 group of tax repairs that we can convince to become wealth advisor. And there's a long -- there's a longer sales cycle on that and then we've got the added need to be really good never better at convincing people to move through that funnel to pass the test and become effective. Now, the good news there is, first of all, you're not going to get tempted and do a bunch of things around sort of manufacturing advisor growth. Second thing about that is though we are looking through that entire process, Roger and the team are very focused on adding ever more science to that process so that we can generate net growth in advisors over time. We see no structural reason why we can't do that. But I think it's actually -- for me it's very clearly an advantage and you get some issues short-term, when it becomes more difficult to recruit, it looks like it's hard to wealth management and that sort of thing, but it's a far better model than the alternative. And over time it's a good model.

And just to press on one of the points that you made in terms of accelerating the shift. I mean, is it fair to think that the back half of this year now that you've been, you passed your 100-day period; you've got the lay of the land that you're going to now start to get more aggressive with some of the changes that you like to implement with sort of an eye towards having a much solid much more solid base in 2017 to go forward?

Yes, there's no doubt about that. The answer is 100% yes. It's up to the team and myself over the next little while here to determine which spots we pick first, what are the highest leverage spots. That'll range from aligning the organization to what are the priorities around deploying some new tactics in each of the business, not just HD Vest, but each of the business, so that can in the case of HD Vest rebuild momentum that you can point and say that's the business that's on a move and moving ahead despite whatever may be happening in the market at that time. And on the TaxAct's business, that's not begun to grow itself in terms of paid filers, without paying it's heavily dependent on ARPU sorts of gains. So it's at all those levels that we're operating right now. And we're focused on executing those it in a way that begin to show up in the results.

And then just lastly for me. Obviously, I know you guys had planned or were thinking about having Monoprice at least announced. I know it's on going, I'm not obviously asking for an update here. But anything that you can sort of -- give us any, shed any light on in terms of is it possible that because InfoSpace took so long to divest that markets read -- only read the Monoprice's gotten pushed back?

Dan, its Eric. You know look, I think it's just the dynamics of the sales process. And as John touched on in his comment, we're pleased that the process remains competitive and with multiple parties continuing to do work and best intentions to get those done by today. But obviously we also want the best execution for shareholders, so that's what we're focused on. And pretty much what John has said in his comments is really the update we can give at this time.

[Operator Instructions]. Our next question comes from Mitch Bartlett with Craig-Hallum.

Good morning. Just following up on the last discussion there. Is it -- was it your strategies that you were putting in place that caused the change in the new investment in variable annuities or what again was the -- I mean, a 35% decline seems fairly precipitous. Is it just a reaction to something that you were doing or is there something larger in the marketplace? And then the second question. I know you don't want to talk any more about Monoprice. But is Monoprice with the core business continues to perform kind of within expectation?

Okay. Why don't you grab the later one and I'll come back to the first question?

Sure. Well, Mitch, we haven't given a lot of color on either InfoSpace or Monoprice and we're going to continue not to. What I would say is, it's not really a end-year performance issue as it relates to the process. It's just the dynamics of a deal process, we're trying to get folks to the finish line and get the right deal for shareholders. So I wouldn't read too much into the timing versus the performance. Obviously, you know, if you know, this performed since we've owned it, so that creates its own challenges in a process. But as it relates to end-year that is not our primary issue now, it's just getting folks to the finish line. John, you want to take the first question?

Yes. Thank you. And thanks for the question. So no -- I mean, big pictures, absolutely no new strategy that that would have generated that sort of delta in that month. It is a highly variable part of P&L, more variable than that we'd anticipate actually. But at the same time that was a sort of dip we've not seen previously. It's fair to say, I shared upfront though that there have been some operational things that we we've deployed. One of which we believe actually brought forward some volume relatively significantly. There is another factor that brought forward some volume as well. And it seems to us that that had been a factor not necessarily just in June, but in the last couple of months, as advisors have absorbed new ways of working with us around annuities which are going to be pluses over time. But also, given the fact that they were able to close business much more quickly drying in Q1; and in summary, Q4 drying up a bit the pipeline for us in Q2.

But overall, looking forward, your guidance is affected by a number of things, where we are at right now on total volumes in trailer commissions and the things that you'd describe. But you feel the variability is not swinging widely at this point, it's stabilized?

So Mitch, I think what I would say is, you think about the revenue line, fee-based and trailers are much more stable than transaction. Transactional revenue is based upon sales that are happening. And quite frankly, we had something in June that we -- as went back and looked over multiple years that we hadn't seen around variable annuities in that time period. So it did catch us a little off guard. What I would say is, what -- it has given us an appreciation around the variability of that particular line item. And so what I would say is the forward outlook built-in that variability, as well as takes into account the performance through second quarter. And therefore, I wouldn't say stability per se, but I think as we look forward we feel fee-based and trailers are pretty stable, transaction has got a lot of variability and we captured that in our go-forward projection.

[Operator Instructions]. And I'm not showing any further questions at this time. This also concludes today's presentation. You may now disconnect and have a wonderful day.