QuinStreet, Inc.

Good day and welcome to the Queen Street first quarter fiscal 2023 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Lynn Young. Please go ahead, ma'am.

Thank you. Thanks for everyone for joining us as we report Queen Street first quarter fiscal 2023 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 upcoming 10 . 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, sir.

Thank you, Lane, and welcome, everyone. The September quarter was a good start to our fiscal 2023. We again delivered good results in a complex environment, and we expect to continue to do so. Fiscal Q1 performance included yet another quarter of strong double-digit year-over-year revenue growth in our home services and credit-driven verticals. To strengthen those two verticals, both of which are now over $100 million in annual revenue, largely offset auto insurance. The good overall financial results in the quarter reflected the strength and resilience of our business model and footprint, as well as excellent execution across the company. We also continue to invest in and to make great progress against our enormous long-term market opportunity. Our positioning and capabilities have never been better, which bodes well for the future, including the back half of our current fiscal year. Looking ahead, we expect the trends of the past couple of quarters to continue in the December quarter, our fiscal Q2. strength in home services, and credit-driven client verticals is expected to continue to offset auto insurance. We also continue to expect a significant positive inflection in auto insurance beginning in January as lawsuits reset, carriers benefit from rate increases, and consumer shopping intensifies in response to higher rates. The auto insurance inflection is expected to quickly impact our results, leading to a return to strong revenue growth rates and re-expanding the DOM margin. Revenue in fiscal Q2 is expected to be generally flat year over year and about in line with typical seasonality sequentially, with a little added conservatism for auto insurance as carriers fully absorb the effects of Hurricane Ian and otherwise finish out a challenging calendar year for that industry. We expect fiscal Q2 revenue to be between $120 and $130 million. We expect adjusted EBITDA in fiscal Q2 to be approximately breakeven, well in line with the expected seasonal decline in top line operating average and consistent with our planning and expectations, including, of course, our commitment to continue to invest in important growth and product initiatives through this transitory period in auto insurance. For the full fiscal year, we continue to expect revenue and adjusted EBITDA results to be generally flat with or better than last year. just as we indicated in last quarter's call. Our balance sheet is strong, with almost $90 million of cash and no bank debt. And we still have $20 million remaining in our authorization for share repurchases. Now, as I did last quarter, I wanted to make a few comments on the macroeconomic environment. obviously an area of some uncertainty and concern. Most importantly, we have done contingency planning for a possible recession. In the event of a recession, we would still expect current full fiscal year revenue to be flat or better versus last year, and that we would still deliver nicely positive cash flow and EBITDA. We have grown profitably through both two previous recessions. Our market penetration opportunity is likely to continue to offset much of any reasonably expected effects from a macroeconomic slowdown. Also in our favor, performance marketing is often one of the last budgets to be cut by marketers as the economy softens because, by definition, spend can be tied more directly to revenue. Further advantaging us in this environment, as in the past, our business helps consumers better shop and save for needed products and services, something they do more of when times get tougher. In particular, consumer shopping for auto insurance, our biggest client vertical, tends to increase in a software economy as consumers look to save on this non-discretionary expense. Increased shopping results in more traffic to our marketplaces. With that, I'll turn the call over to Greg.