QuinStreet, Inc.

Good day and welcome to Queen Street's third quarter and fiscal year 2023 financial results conference call. Today's conference is being recorded. Following prepared remarks, there will be a question and answer session, at which time callers will need to press star and 1 on your telephone keypad. If at any time during this call you require immediate assistance, please press star 0 for the operator. At this time, I would like to turn the conference over to Senior Director, of Investor Relations and Finance, Robert Amparo. Mr. Amparo, you may begin.

Thank you, operator. And thank you, everyone, for joining us as we report Quinn Street's third quarter fiscal year 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 8K filing made today and our most recent 10Q filing. 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 and non-GAAP financial measures is 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, Rob. Welcome, everyone. Fiscal Q3 results were strong. exceeding our outlook for revenue and adjusted EBITDA. Quarterly revenue was $173 million, growing 15% year over year and setting an all-time company record. Adjusted EBITDA jumped to $9 million in the quarter, once again demonstrating the strong operating leverage of our business model. Q3's good results were driven by continued strength in non-insurance verticals, where revenue grew 34% year-over-year and represented 58% of total company revenue. The good results were also driven by the strong early stages of the re-ramp of auto insurance. Auto insurance revenue surged 53% in Q3 over Q2. Q3 demonstrated our strong core business our continued success scaling and broadening our footprint, and the financial resilience and leverage of our business model, all on the foundation of sound business and financial fundamentals, cost discipline, and a great balance sheet with no bank debt. As we look ahead, you can continue to expect more of the same. As demonstrated once again, we are definitely built to last. And our long-term business opportunities and capabilities have never been better. While auto insurance client spending came back strongly last quarter, as they and we had forecast, clients once again reduced marketing spend in late March and early April due to recurring mixed results with their combined ratios. or profitability. The reductions were significant and unexpected for them, and therefore, of course, for us. Clearly, the road back to normal for insurance carriers from the challenges of the pandemic, inflation, and severe weather events is complicated and difficult to navigate, even for the best companies. The unexpected break in the re-ramp of auto insurance client spending will affect our outlook for the current quarter or fiscal Q4. But the near-term insurance carrier spending reductions do not diminish our longer-term opportunity, expectations, or enthusiasm for that big and important market. The auto insurance re-ramp is pausing, not stopping. the long arc of auto insurance spending is still up and to the right. Carriers will continue to adjust and adapt, and marketing budgets will continue to shift from offline to online. Most consumers will continue to shop online for everything, including ever more so for insurance. And digital performance marketing like that pioneered and enabled by Quinn Street will still be the most efficient marketing spend at scale for advanced marketers. In the meantime, Quinn Street will keep doing what we have been doing. We will continue to make great progress on initiatives to broaden and diversify our revenue footprint and to grow our market opportunity in insurance and in non-insurance client verticals. We will focus investments on new technology, product and business expansion areas that offer the best returns and the biggest opportunities for future growth. And we will maintain a strong fundamental financial foundation, including of course, cost discipline and a strong balance sheet. Of particular note, we will continue to stay spring loaded for strong leverage and rapid margin expansion as revenue grows or returns, as demonstrated last quarter. Turning now to our near-term outlook. We expect auto insurance revenue to decline in FYQ4 versus FYQ3 due to the unexpected near-term carrier spending reductions. For full fiscal year 2023, which ends in June, We expect revenue of $575 to $580 million. We expect positive adjusted EBITDA in FYQ4, despite the auto insurance challenges, and that adjusted EBITDA for full fiscal year 2023 will be between $16 and $17 million. We have also begun the detailed planning process for our fiscal year 2024. which begins in July. We expect revenue and adjusted EBITDA to grow at double digits in fiscal year 2024, and that we will be strongly cash flow positive. We will update our outlook and be more precise as the re-ramp of auto insurance continues to unfold. Our longer-term outlook has never been better. We expect double-digit annual revenue growth rates on average in coming years due to continued strong performance in non-insurance businesses alone. We expect auto insurance revenue to be up and to the right, eventually returning to and exceeding FY 2021 peak levels. We expect adjusted EBITDA to grow faster than revenue, eventually exceeding a 10% margin. Our adjusted EBITDA margin in March jumped to 7% just from the early stages of the return of auto insurance revenues, demonstrating the leverage we expect in future quarters and years. With that, I'll turn the call over to Greg.