QuinStreet, Inc.

Ladies and gentlemen, good day and welcome to the Quinn Street Third Quarter Fiscal 2021 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Hayden Blair, Investor Relations at Quinn Street. Please go ahead, sir.

Thank you, David, and thank you to everyone joining us as we report Quinn Street's Third Quarter of Fiscal Year 2021 Financial Results. Joining me on the call today are Chief Executive Officer Doug Valenti, and Chief Financial Officer Greg Wong. Before we begin, I would like to remind you that the following discussion will contain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8 filing made today and our 10-K filing made on August 28, 2020. Forward-looking statements are based on assumptions as of today, and the company undertakes no obligation to update these statements. Today, we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures are included in today's earnings press release, which is available on our Investor Relations website at investor.quinstreet.com. With that, I will turn the call over to Doug Valenti. Please go ahead.

Thank you, Hayden, and thank you all for joining us today. Our business momentum and execution continue to be strong. We delivered excellent numbers once again last quarter as a result. Revenue excluding divested businesses grew 39% year over year. Adjusted EBITDA grew 65%. Cash flow was strong, and we continue to maintain a strong balance sheet.

We expect the business momentum and good results to continue in the current quarter.

Last quarter's results were again driven by strength in insurance and home services, our two largest businesses. where we delivered record quarterly revenue in each. We estimate that those client verticals represent large addressable markets of tens of billions of dollars and that both are still early in their shifts to digital and performance marketing and in Quinn Street market share.

We also continue to see improving trends

in the credit-driven client verticals of financial services. We expect those businesses to return to year-over-year growth in the current June quarter. Most important, we continue to make excellent progress on a wide range of growth initiatives across the business and to strengthen our products, technologies,

and operations for future growth, competitive advantage, and efficiency. Those growth initiatives include QRP. The pipeline there continues to grow, and client integrations, testing, and initial rollouts continue to progress. Revenue is still early. but ramping, and our long-term expectations for QRP remain exciting. In the meantime, our core business tailwinds remain strong.

Marketing budgets and consumer activity continue to shift to digital at an unprecedented rate, and increasingly, to performance marketing and media. Within those megatrends, Twin Street performance marketplace solutions are ever more recognized by the biggest, most sophisticated, and most advanced clients as their most productive and consistent digital marketing channels at scale. We had a record number of financial services and home services clients spending over $1 million per month with us in the March quarter. We also continue to make precise industry consolidating acquisitions and investments to accelerate progress in our client verticals and in new product areas. We made two relatively small acquisitions

and one strategic investment in an early-stage technology company last quarter. Turning to our outlook, as I indicated earlier, we expect the strong business momentum and results to continue.

Revenue in the June quarter, our fiscal Q4, is expected to be between $140 and $145 million. seasonally consistent with last quarter's outperformance, and once again representing 39% year-over-year growth in revenue excluding divested businesses at the midpoint of the range. We expect adjusted EBITDA to be between $12 and $13 million, consistent with the top-line seasonality of the June quarter, and representing about 50% year-over-year growth at the midpoint of the range.

With that, I'll turn the call over to Greg.

Thank you, Doug. Hello, and thanks to everyone for joining us today. Our strong business momentum and execution continued in Q3, where we delivered an all-time record revenue month in March and an all-time record revenue quarter in Q3. all while expanding adjusted EBITDA, dollars, and margin. Total revenue was $153.1 million and grew 39 percent year-over-year, excluding divested businesses. Adjusted EBITDA was $15.4 million, or 10 percent of revenue, and grew 65 percent year-over-year. Adjusted net income was $10.9 million, or 20 cents per share. and grew 57% year-over-year. Looking at revenue by client vertical, our financial services client vertical represented 76% of Q3 revenue and grew 18%, excluding divested businesses, to $116.3 million. Momentum and auto insurance, our largest business, remained strong, where we delivered an all-time record revenue month in March and an all-time record revenue quarter. This reflects strong spending and growth from a broad range of major carrier clients and good progress on a number of growth initiatives in the quarter. Also in financial services, our credit-driven client verticals continue to improve on a year-over-year basis in fiscal Q3. We expect these businesses to return to year-over-year revenue growth in the June quarter and to be good long-term growth drivers for Quinn Street. Our home services client vertical represented 23% of Q3 revenue and grew 204% year-over-year to $35 million. Home services continues to outpace our expectations due to strong organic growth and to the continued success of the integration and capturing of synergies from the modernized acquisition. Other revenue, which consists primarily of performance marketing agency and technology services, was the remaining $1.7 million of Q3 revenue. Turning to the balance sheet, we closed the quarter with $103.2 million of cash and equivalents. During the quarter, we generated $13.1 million of operating cash flow, offset by $11 million of cash outflow for two acquisitions and a strategic investment. Normalized free cash flow for the quarter was $13.1 million, or 9% of revenue. Most of our adjusted EBITDA drops to normalized free cash flow due to the low capital requirements of our business model. Our success in narrowing the footprint to our best performing and fastest growing opportunities is evident. Trailing 12-month revenue, excluding divested businesses, was $518.4 million, reflecting a three-year compound annual growth rate of 28%. With that, I'll turn the call over to the operator for Q&A.

Thank you. Ladies and gentlemen, at this time, the floor is open for your questions. If you would like to ask a question, you may do so by pressing star 1 on your touchtone phones now. If you are on a speakerphone, please make sure that your mute function is disabled to allow your signal to reach our equipment. Again, if you would like to ask a question, please press star 1 now. And we'll give it just a moment to let everyone have an opportunity to signal for questions. And it looks like our first question, hold on just a moment.

Our first question comes from John Campbell with Stevens. Mr. Campbell, your line is open, sir.

Hey, guys, this is James Holly stepping in for John Campbell.

Hey, James. Hey, James.

So I kind of wanted to touch here on the insurance side. Can you talk a little bit more first about some of the growth you're seeing there, maybe like how much it grew or some specific numbers around that?

Yeah, auto insurance grew over 40% year over year in the quarter. Very strong momentum still. Obviously, if you look at some of the numbers that have come out, some of the other companies in the space, you can tell that we are gaining share and growing significantly faster than those that have reported so far. Not surprising given the initiatives we have going on, our strength of client budgets and clients, and our expansion of the product set and the media set. in that, you know, our biggest business vertical. So, you know, lots and lots of very good stuff going on in auto insurance and insurance broadly, a lot of momentum, a lot of strong growth, as I just indicated, and very good outlook.

Yeah, it was really impressive to see what you guys did there. We, like competitor, only grown about 5%, and then you guys are up around 40%, so that's really impressive to see. It's only got 42%. Thank you. Thank you, guys.

Thank you, James. Thank you. Our next question comes from Jason Cryer with Craig Hallam.

Thanks, gentlemen. Nice quarter. Doug, you mentioned you're in the early stages of this shift to online and to performance marketing and Over the course of the last year, obviously, it seems like we've seen an acceleration of that trend, and certainly you recognize that in your business. Just wondering, as you look forward, do you see any risk that the rapid moves we've seen in the last year could kind of take a little bit of a breather this year and other media formats could maybe gain a little bit more market share relative to this online pivot? Sure.

I don't think in a fundamental way, Jason. Whether or not we can sustain 40, 50, 60% year-over-year growth rates at this scale consistently, though I think we will see other rounds of that in the future, is doubtful. But we do not see a falling off of the cliff or a reversal in trends of clients wanting to spend more on digital. It's just not the indications we're getting from clients. When I say that, I mean this is from indications that we're getting from the clients about their budgets going forward in the coming year and the programs and initiatives that we're working on with them. So we do not see a meaningful reversal or any reversal at all in terms of budget going back offline from online I think the growth rates will remain strong, and we expect good, strong double digits. Whether or not we'll keep stringing together 40% to 50% at this scale indefinitely and consistently, that's unlikely. But we don't see a slowdown from good, strong double digits, and we don't see a reversal either. Again, clients are much – the big megatrend here continues to be clients wanting and needing to spend more money in digital and being underexposed and underleveraged against digital versus the opportunity.

Perfect. Appreciate that. Wanted to walk through puts and takes on the home services side. You've now lapped the beginning of pandemic headwinds. Thinking through the different services you offer, you know, I would assume things like indoor remodeling starts to see easy comps while like gutters and solar probably starts to see difficult comps. So can you maybe frame what your expectations are as we go forward? Can home services continue to grow the way it has the last couple of quarters or do you expect any acceleration or deceleration in that category?

We expect, again, continued strong double-digit growth in home services. The triple digits is largely coming from the effects of the acquisition, which we will lap here in the next couple of months. But in terms of the organic momentum and strong double-digit growth at scale, we expect that to continue really for as far as the eye can see. I mean, we are maybe the most underpenetrated versus the TAM in home services and have a very clear view and runway for continuing to expand and grow in that really big market. So I think we will have the lapping of the modernized acquisition, but I think we expect to plow right through that with good, strong double-digit growth for literally as far as the eye can see. We are already talking about numbers in the next couple of years that are pretty significantly higher than where we are today. And we have our eyes on, you know, a half a billion dollar revenue business there in the next three to five years on an annual basis. So we think that's a big market. We think we can make it, we can build a really big business there. And even then, we will be relatively small and relatively under-penetrated when you look at the number of service providers that we will be representing and the percentage of their budgets that we'll be representing for them online. So that is a massive market and a very, very big long-term opportunity. We have a lot of momentum there.

Okay, last one for me. I'm going to take the bait from earlier in your prepared remarks, but you mentioned some tuck-in acquisitions and a strategic investment. Can you give any additional color on those?

Yeah, the tuck-in acquisitions were both in insurance, a couple of small opportunities that we think added meaningfully to our footprint as we continue to look to expand different lines of insurance. They were both not in auto insurance, and so those we're excited about because, as you know, often we can pick up bits and pieces that help us get our cycle moving faster and ramp that. So those were small acquisitions that helped seed and accelerate the development of a couple of insurance verticals that were continuing to work hard and growing pretty rapidly. The strategic investment was in a technology company. There's a technology that's very important to a future product we have that we're working on that is part of our continued progress in deepening our integration into our client verticals. And this is a very big long-term program we're working on that's similar in attractiveness, in our opinion, to QRP, but in a different vertical. And this locks down that technology partnership, which is a key piece of that product It gives us exclusive rights to that technology in that business area and is just part of that roadmap. So we're super excited about that business opportunity. We'll talk more about it as it gets a little bit further along, a little bit more ready for prime time. But think of it as a piece of the product roadmap for R&D for another deep integration technology and another one of our verticals. another one of our very big verticals, and a product profile that from a size and profitability standpoint looks a lot like QRP.

Perfect. Thank you. Appreciate the time. Thank you, Jason.

Thank you. Our next question comes from Adam Klauber with William Blair.

Hi. Thanks. A couple of questions. I'm not sure if you said it. Generally, what has been the organic growth of the home service in the last quarter and two, the last two quarters?

Twenty-something percent, Adam. I don't have the number right in front of me. Greg, I think you have that.

Hey, Adam, last quarter it was 21% organic growth.

Okay. Okay, great. Has that picked up or has that run what it's been running the last quarter or two?

That increase from last quarter, last quarter we were in the teens. Okay. In the December quarter. So December quarter was in the teens organically. This quarter it was 21%. Great.

And then for the credit card and personal loan business, how much of a drag would you say that was this quarter on growth, just again roughly?

Yeah, the overall credit-driven businesses – We're down about 35% this quarter, and that's down from 42% in the December quarter, 60% in the September quarter, and 70% in the June quarter of last year.

Okay. So, as I think you said, are you looking for those to more flatten out next quarter off of, I guess, pretty low numbers? Is that right?

Are we expected to return to growth? Pretty strong growth. As you heard, the second derivative has been getting better, and we are, I think I said this last quarter, up pretty significantly from the bottom in those businesses. We're still a long way from the top, but we do expect those businesses to actually, all of those businesses, all of the financial services client verticals, we expect to grow significantly. at pretty significant double-digit rates this quarter, year over year, the current quarter, year over year.

Okay. So those credit businesses from February to March and to the extent, you know, just April, you know, have you seen sequential improvement in those businesses? We have, yes.

Continuously, sequential improvement of businesses. Again, I think, and Greg, you would have the numbers, but I think we're up, at least 80% to 100% off the bottom. And that has been a consistent up into the right trend, Adam. And we expect that trend and are seeing that trend continue. We're seeing the clients are back. Budgets are back. Underwriting filters are opened up. And really, the missing ingredient at this point, although it's already begun, because as you can hear, the business has already started coming back, is really a rewrap of consumer activity. and in credit cards that will be just general consumer spending activity including for travel which is a big part of credit cards which is just beginning to come back and in personal loans it's kind of getting beyond the stimulus and also getting people spending on their credit cards so then they want to consolidate that credit card debt to a lower rate in a personal loan so A lot of good trends. We're up a lot from the bottom. Those trends have been continuously improving from the bottom, which was a little over a year ago, and good outlook going forward in those businesses.

Okay, thanks. And then as far as QRP, how many agents have or agencies have signed up today versus maybe six, nine months ago are beginning to use it?

I think we have 25 launched and signed now. The answer is it's up pretty significantly. I don't have the exact numbers in front of me, but it continues to be up and to the right, and the progress of everybody that has signed has also been good, and everybody that has launched has also been good. So if you look at every piece of the pipeline, we are very pleased as our carrier partners with the progress and where this thing is going. We are as excited today about QRP given that progress and the feedback as we have ever been, actually more than we've ever been, and we think it is a bigger opportunity than we ever have.

Great. Yeah, that's good growth, if I remember correctly. Roughly a year ago, I mean, you were more in the single digits. So going from that to 25 is definitely a good sign. And then as far as home service, you know, not saying you're going to do it, but, you know, is there, you know, are there other acquisitions that could not just tuck-ins but could move the pile like the last one?

There are other opportunities to look at and, you know, we will continue to do that. We, as we proved with modernizing, as we've proven in so many places, by the way, 25 signed agencies is the number I just went back. I just went to the pipeline report and, uh, I think we have 31 50 something, um, in the, in the later stages of the pipeline. And so, uh, big, big continued progress and opportunity in QRP. Um, the, um, Where were we? I'm sorry. I pulled myself back.

What was your last question? The last question is that I know in the last year or so you've signed up some big marketing partners helping the insurance vertical. Is there a point where some of those annualize and will that have an impact as they begin to annualize or is this just more of a continual flow? I'm looking at are there one or two big, big partners that signed up that are you know, really been pushing growth in the last two quarters that are probably still growing, but maybe two quarters down the road won't have as big of an impact?

I don't think so. I don't think we've had any big, chunky new publishers or partners come online that we're going to be lamping. It's a fairly smooth continuum. Greg, am I forgetting anything?

No, you're not. We're not overly concentrated in any single publishers. It's just a continuation and a continual thing.

I think it's still the fact that no single publisher represents even 10% of our insurance volume. I think that's still correct.

I don't have the number from you, but it's been the case. Thanks for the answers, guys. Thank you, Adam. You bet.

Thank you. Our next question comes from Jim Goss with Barrington Research.

Thanks. Within the home services category, I'm wondering if you could talk about which specific verticals were most prominent in this quarter and how that might have compared a year ago when you were in the midst of the pandemic. Has there been a shift from outside to more inside type activity? or has one complemented the other and that helped you achieve greater growth?

That's a great question. I don't think there's anything that's particularly illuminating there, Jim. The bias right now amongst consumers is still the exterior work, and so that still has represented the strongest growth areas for us. But we have good growth areas and more interior-oriented areas as well, particularly as we've been coming out of the pandemic and as clients have been coming back and as some supply chains have gotten fixed. There were some supply chain effects for a while in some of the indoor products, including some of the, say, kitchen and bathroom-related remodel products. So I'd say still a bias generally toward the exterior, as you would expect, but good activity across the board, and we're seeing good growth exterior and interior, and I would expect the interior stuff to just continue to come back at a pretty good clip as we get further and farther down the path of opening up people's homes and people getting vaccinated.

Okay, and just to make sure I'm reading this correctly, when you talked about the 21% organic growth, are you basically suggesting that Modernize was bigger than your own home services last year in the third quarter, with which you've been comparing, and that will be a similar situation in the fourth quarter before you lap it and move on as more of a single comparable year-over-year company.

Make sure I understand the question, but yeah, Modernize, we will lap, Greg, July 1st? July 1st. Yes, please. July 1st, and of course the July, so in that 200 and something percent year-over-year growth, you've got the modernized volumes. If you were to take the, if you were to normalize out the modernized volumes, the overall business, the combined business, including modernized, Greg, keep me honest, on the calculation, it was up 21% year-over-year. That's right.

Okay, that's what I wanted to make sure, because 11.5% A year ago, a quarter modernized would have been more than that number to give you the basis.

That's right, Jim. All we do from an organic growth calculation is we take the two standalone businesses from last year. We take our standalone home services number, adding to modernize the standalone, and calculating the growth off of that to get to the organic growth. So, yes, that's correct.

So that's a reasonable template for the fourth fiscal quarter, and then we get into normalcy. except for whatever. We'll laugh in here. Okay.

And our outlook is for growth rates to be in that 20% plus range going forward on that business.

And our last question, are you thinking in terms of your future growth in home services to focus to a greater extent on filling in the several verticals that might be key to you right now I think there are five or six, I think the last time we talked about this, or is it to try to move into other verticals as a complementary basis for those five or six that are big right now?

It'll be both. We have a lot of growth opportunities in the verticals that we're already in, four or five of which are the most mature and biggest right now. We have another six plus that are you know, earlier stage but decent size. And then we have, you know, call it another dozen or so that we're beginning our footprint in and we're very early. So the growth will be coming from a combination, and we're organized this way, of both continuing to develop the productivity and the effectiveness of the marketplaces and the service area, the trades we call them, the trade or services we're in, while also continuing to add new trades and develop those new trades just from an earlier stage. So it's one of the reasons the growth and the scale of home services is so attractive to us going forward is that we have both of those vectors of growth, and each of these service areas is quite large. So we've got a lot more we can do in the verticals we're in, even the most mature ones, some of which are, by the way, the ones that are growing fastest for us. And then we have a lot of new verticals with a lot more growth to come. We have more verticals we're going to add over time. We think we can be in anywhere from 50 to 100, depending on who you believe and how they develop. Trades, that is. A trade might be roofing, siding, kitchen remodels, home security, something like that. So that's what we would call a trade or a sub-vertical. So we expect both. and we're working on both. And that's why, as far as the eye can see, we see growth in home services.

Okay, and one last one. To the extent that you're still very small relative to the TAMs you outlined, are you attracting a lot of attention and therefore competition that you might not have had before?

In home services or generally?

In home services generally, in home services specifically.

Yeah, home services, there's reasonable competition there already, but it is more consolidated already than, say, insurance. We believe we're pretty strong number two at this point in the performance marketing or marketplace model to Angie. And there's pretty, there's quite a bit of white space between us and number three. And would be a pretty tough challenge for them to try to figure out how to catch us. These are companies that have been around a long time. So right now, it's as complicated and difficult a space to execute in as there is in performance marketing, partly because it is multi-service, multi-vertical. The good news for Quinn Street is we were built to be multi-service, multi-vertical. We've always been multi-service, multi-vertical. And so there's a lot of fragmentation of folks that are in specific verticals and are folks that have begun to go multivertical but have kind of stalled because of the complexity of trying to do that. And so there certainly is competition, but I'd say that we are further along the consolidation curve in that market in most ways than we are in insurance where there's still you know, relatively good amount of fragmentation and competition for the scale of that industry. All right. Thanks, Doug.

Okay. Thank you, Jim. Thank you. Our next question comes from Jacob Stefan with Lake Street Capital Markets.

Yeah, hi. Thanks for taking my question. I'm here on behalf of Eric Martinuzzi. Just a quick question about... possible margin compression so that as some of these governments want to kind of take advantage of other retailers or other large advertising digital advertising companies making a considerable amount of revenue are you guys worried about any margin compression where you might be charged more per per lead

Not really, Jacob. We're not seeing that. We generally are price makers, not price takers. So we're the ones that are driving the price up because as our marketplaces get more and more efficient and productive and yield more, then we're able to pay that much more for media, whether it be in a partnership or in buy and click, say, from a Google. And as you know, well, we control to a large extent our gross margin because of where we choose to be on the media curve. And so, no, not really. We're not seeing that. The main effect that you should, two main effects you should continue to see on margin with us. One is operating leverage. As we grow revenue at that, you know, on average 30% incremental margin, which is the contribution after media costs, and we grow that at double digits, which we expect to be able to do for as far as we can see, and we drop that onto a semi-fixed cost base underneath that, but then that has a natural upward tug on EBITDA, and that's what you've been seeing lately. You saw again last quarter. You see a little bit of a diminishment of that this quarter only because it's this is always a seasonally down quarter for us over last quarter, down a little bit. So you lose a little bit of that operating leverage and then it starts coming back up again as we flow through the rest of the year into again, the next time we hit Q3, which is always our peak quarter of the year, fiscal Q3, or your normal human calendar, Q1. So that's one effect, is that operating leverage, which will be driving our margins and we expect to be able to continue to drive our margins up through operating leverage as we continue to grow that top line at about that incremental contribution into a semi-fixed cost base below that line. The second is we are blending in at a higher rate now, much higher margin businesses than our traditional and historic core. And so that is going to, depending on how we decide to manage that, either do we spend it to grow faster, or do we find that we can't do that in a way that we feel is, is maximally productive or, or, or efficient. And therefore do we begin to grow that 30% number, um, which is good, which obviously, you know, drives everything else up into the right at a higher, higher rate. Uh, those are things that we're working on and with their trade-offs that we'll have to make, because of course you want us to continue to, to invest in growth. But, um, you know, again, the, it, it, Let's take QRP, for example. If QRP is anywhere near as big as we think it is and it seems to be, as that blends into the business model, there's going to be a pretty dramatic impact up and to the right on margin. We probably will be, at that point, we'll probably have to expand margin beyond just the operating leverage effects. But those are the things that I expect to have the biggest impact on margin and in the foreseeable future. I do not see any effects from the other things you mentioned. Not material.

No, that's great, Culler. Thank you. Just an overall macro question, kind of piggybacking off of Jason's, I believe. Are you guys concerned that your consumer spending might kind of shift away from Being online is, you know, everything kind of starts to open back up and there's live concerts. How do you think about that?

Yeah, it's a great question. We don't. The clients don't either. What we've said for a while and what the clients have indicated to us is that this has been an acceleration of a long-term curve to spend more in digital and on digital marketing. and it's helping them to catch up faster. They were forced to focus on it by COVID because other channels diminished so rapidly. But none of them are talking about pulling budget back out of digital to put into other channels or offline channels. We're not hearing that from anybody, no clients. So we don't expect that. What we do expect is that we're further up the curve and that we're going to keep running up that curve. The slope of that curve, I think, will, you know, it's unlikely to stay 40%, 50% or 200%, but we think it's going to be strong double digits up and to the right for the foreseeable future. A couple of things that are working in our favor going forward that kind of would, credit card use is only going to drive more credit card spending. Credit card use is going to drive more personal loans, lending, Those are businesses that have been completely dead in COVID. And we also expect on the home services side that a lot of the verticals that have been stalled by COVID, a lot of the inside services that Jim talked about or Jim referred to us talking about, are coming back. And we're seeing a lot of homeowner activity. And what people do when homes get really expensive, if they don't sell their home and move, which most are not doing, is they invest in their home. And so we are seeing extraordinary demand and strength in home services, and we see no reason why that would do anything other than increase post-COVID. Again, driven largely by the fact that people are now willing to have work and workers done in-house.

That's great. Thank you. Congrats on the quarter, by the way. Thank you, Jason.

Thank you. Our last question comes from Chris Sakai with Singular Research.

Hi. Good afternoon. Hey, Chris. Just had a question on... Hi, Doug. I know you talked about it in the Q&A a little, but entrance into new client verticals, I know you said you've got a lot on your docket already. I wanted to see, get your idea about, you know, what, what it takes or how do you test it as far as what, what you think will be a next great successful client vertical.

Sure. And, and I was referring when, when I talked about that, I was referring to adding more service trade or trade verticals and home services. where home services is broadly made up of a lot of independent trades. Again, roofing would be one, siding would be one, home security would be one, kitchen remodels, bathroom remodels. Those would each be trades or verticals within that. The way we look at that is we look at a combination of client budget and where the biggest budgets are for marketing generally and that we think are teed up to move into digital, along with the media availability. How much are consumers, how active are consumers researching, looking for that trade or service online? And then we begin working on a range, and we score those verticals. against a number of dimensions that we believe help indicate how attractive they are for our business model and for the clients and for the media. And then we begin working on a range of them, largely starting with clients. And then where we get progress, we focus. So, you know, ideally we'll get what we call an anchor tenant, a big national client or at least a big super regional client. that engages and that we get far enough along with that we, we begin to, that we can begin to focus on that vertical. We get them signed up. We surround them with more clients. And then we, that gives us some, the media buying power to go and get the kind of media, media supply curve, the media whip going. And then as we get more media, we can go get more clients and then we get more clients. We get more and more media. So it's really a, it's, it's, First of all, identifying, you know, five characteristics, the areas that we think are best opportunities and most attractive. We then work on those opportunities, have folks calling, doing research. And then as we start to make progress, you'll see us kind of focus in on the ones where we've made progress to get them developed and growing. And then as capacity opens up and or, We get those working, then we start, we go right back and start all over again. So it's a pretty tried and true approach that we've used historically to get into any vertical area that, again, wouldn't surprise you to know that we're looking at the combination of characteristics of clients and client budgets with media, digital media availability and structure. Okay. And then we just go with that. So that's how we do it.

Okay. Any chance you re-enter into education?

In a performance marketplace format, very, very, very low chance. That market has a lot of challenges. You know, the demise of the big high-quality for-profits, and I call them high-quality because they largely were the University of Phoenix's and others, or the conversion of some of those high-quality ones into not-for-profits, has really resulted in there being a lot less marketing budget. And then there's, from a Megatrend standpoint, there's an overcapacity in higher education generally. And then there's an overcapacity in the marketing services or performance marketplace components of that industry because of all the loss of the for-profit budgets. So I think that industry is going to be unattractive structurally for a very, very long time. And we have plenty to work on in our core financial services and home services verticals going forward. I don't expect that we would be looking at going back into education and certainly not in my career lifetime. Again, not as a performance marketplace solution. I say it that way because there are some clients we serve on the agency or the technology services side that we're not going, and those are very attractive businesses for us, but our core marketplace business, which is what, 99% of our business, we do not anticipate going back into education.

Okay. All right. Thanks. Thank you, Chris.

Ladies and gentlemen, that concludes the time we have for Q&A. Please note that a replay of this webinar can be found on the company's website at investor.quinstreet.com. This concludes today's presentation. You may disconnect your phone lines and thank you for joining us this afternoon.