QUINSTREET, INC Q3 FY2025 earnings call

Key Points - Doug Valenti: - Delivered strong results in fiscal Q3 with revenue up 60% YOY and adjusted EBITDA up 145%. - Financial services client vertical revenue grew 78% YOY, auto insurance up 165%; Home Services revenue grew 21% YOY to a new quarterly record. - Continued strong results due to big market opportunities, value proposition, competitive advantages, and execution-focused culture. - Expect to continue double-digit revenue and profit growth short and long term. - Strengthened financial position in Q3 with over $80 million in cash and no bank debt. - ### Greg Wong: - Fiscal Q3 was another strong quarter with double-digit revenue growth and progress on profitability initiatives. - Total revenue for March quarter was $269.8 million, adjusted net income was $12.4 million or $0.21 per share. - Focus on optimizing media efficiencies, growing higher margin opportunities, and ongoing productivity improvements.

Fiscal Q3 was a strong quarter for QuinStreet. Total revenue grew 60% year-over-year to $269.8 million. Adjusted EBITDA was $19.4 million. By client vertical, the financial services client vertical represented 74% of Q3 revenue, growing 78% year-over-year to $199.7 million, with auto insurance up 165%. The Home Services client vertical represented 24% of Q3 revenue, growing 21% year-over-year to $65.4 million, a record quarter. Other revenue was $4.7 million.

- Maintains full fiscal year 2025 outlook: - Full fiscal year revenue expected to be between $1.065 billion and $1.105 billion, implying at least 18% YOY revenue growth in fiscal Q4. - Full fiscal year adjusted EBITDA expected to be between $80 million and $85 million, implying at least 89% YOY adjusted EBITDA growth in fiscal Q4. - The implied outlook range for fiscal Q4 is wider due to tariffs and tariff-related uncertainties introducing risk and potential volatility to client spending. - Prioritize expense and cash flow management, margin expansion, and maintaining a strong balance sheet.

• Tariffs and tariff-related uncertainties introduce risk and potential volatility to client spending, which is reflected in the wider outlook range for fiscal Q4.

Q: Can you provide insight into conversations with auto carriers regarding tariffs and their impact on profitability and rate taking?

A: Our conversations with auto carrier executives are different. Tariffs if fully implemented likely negatively affect loss ratios by increasing claim costs. Carriers have strong combined ratios and could absorb wide range of tariff implementations. No material reductions from clients based on tariffs yet, it's wait and see as folks are in wait and see mode regarding tariffs.

Q: How are you approaching margin expansion versus investments in the business?

A: Continuing to invest aggressively in new growth initiatives. Margin expansion comes from top-line leverage (revenue growth outpacing cost base), growth of proprietary media in auto insurance, converting media partnerships to fee-based models, product initiatives like new products for agencies with higher margins, scaling new product areas like QRP and 360 finance, and expanding in personal loans with more clients to better service traffic flow.

Q: How are tariffs impacting home services and shape of revenue trends for next fiscal year?

A: Heard from clients in certain pockets that tariffs could increase costs and they'd need to figure out passing along, but not across the board. Without tariffs, expect strong double-digit top-end adjusted EBIT growth and return to relatively normal seasonality, but modification to buying patterns due to waiting on tariffs has affected ramp of growth.

Q: Can you talk about auto insurance business sequentially and trends across carriers?

A: Auto insurance was down sequentially over 10% due to December quarter being exceptionally strong. Approach is to be prudent in media mix, grow proprietary media, use private exchange model. Broad footprint of engagement with clients, broader market with more carriers spending more online. Short-term patterns shifting due to new calendar year and tariff concerns, but broader trend is more clients spending more with better engagement.

Q: Any early signs of success in new verticals or client segments?

A: Extraordinary growth in new products aimed at agency side of insurance market with triple-digit growth. Good success in other insurance segments, continued strong growth in home services adding new trades, success in credit cards and banking businesses, and progress in personal loans business with broadening offerings to better serve consumers.