QuinStreet, Inc.

Good day and welcome to Quinn Street's Fiscal Fourth Quarter and Full Year 2023 Financial Results Conference Call. Today's conference is being recorded. Following prepared remarks, there will be a question and answer session. If you have a question during the question and answer session, please press star 1 to enter the queue. 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 fiscal fourth quarter and full 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 8 filing made today and our most recent 10 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 to 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. Quinn Street had a very successful fiscal Q4. We continue to make great progress against our big non-insurance market opportunities. Those nine-figure revenue client verticals grew at strong double-digit rates year over year in the quarter and represented 75 percent of total revenue. We expect to grow those businesses at double-digit rates for years. We also continue to invest smartly and effectively in our next generation products and capabilities, including in insurance, where we are positioned to take maximum advantage of the re-inflection of carrier marketing budgets. We expect that re-inflection to begin in January. Lastly, regarding Q4, we continued to demonstrate operational and financial excellence, as well as resilience in our business model. We delivered better than expected revenue, profits, and cash flow, improving our already strong balance sheet. while navigating the auto insurance market and while maintaining high levels of investment in important new products, technologies, and growth initiatives. Moving to our outlook. First, for the new full fiscal year 2024, which began on July 1st. We continue to expect that revenue and adjusted EBITDA will grow at double-digit rates year-over-year this fiscal year, driven mainly by continued momentum and scale in non-insurance client verticals. We also expect a significant positive inflection in auto insurance client spending to begin in January or the second half of our fiscal 2024. We will also, of course, continue to maintain our strong balance sheet in fiscal 2024. Regarding our outlook for fiscal Q1, or the September quarter, we expect revenue to be between $120 and $125 million, and adjusted EBITDA to be approximately breakeven. Finally, our longer-term outlook has never been better. We expect to deliver double-digit annual revenue growth rates. We could do so just based on continued strong performance in non-insurance businesses. Revenue from non-insurance businesses is now running at almost $400 million per year. It grew 26 percent in fiscal 2023 and has grown organically at a compound annual rate of 19 percent over the past three years. We also expect insurance revenue to be up and to the right over the longer term, eventually returning to and exceeding prior peak levels, as carriers benefit from compound rate increases, product changes, cooling inflation, and improving supply chain. and allowing the shift to digital and performance marketing to reassert itself as the dominant long-term trend. We expect adjusted EBITDA to grow faster than revenue as we scale the top line faster than expenses, eventually reaching and exceeding an adjusted EBITDA margin of 10 percent. With that, I'll turn the call over to Greg.

Thank you, Doug. Hello, and thanks to everyone for joining us today. For the June quarter, total revenue was $130.3 million. Adjusted debt loss was $514,000, or one cent per share. Adjusted EBITDA was $1.8 million. Non-insurance revenue was $97.1 million, or 75 percent of Q4 revenue, and grew 18 percent year-over-year. Looking at revenue by client vertical, our financial services client vertical represented 58 percent of Q4 revenue and was $75.2 million. Our home services client vertical represented 41 percent of Q4 revenue and was $53.1 million. Other revenue was the remaining $2 billion of Q4 revenue. Turning to our full fiscal year 2023 performance, we reported revenue of $580.6 million, roughly flat year-over-year, as strong performance in non-insurance businesses offset insurance results. Revenue from non-insurance businesses were $367.4 million in fiscal year 2023 and an increase of 26% year-over-year. Our financial services client vertical represented 65% of full fiscal year revenue and was $379.7 million. Our home services client vertical represented 33% of full fiscal year revenue and was $193.1 million. Other revenue represented the remaining $7.8 million of full fiscal year revenue. Adjusted EBITDA for full fiscal year 2023 was $16.7 million. Turn to the balance sheet. We closed the year with $73.7 million of cash and equivalents and no bank debt. Gap net income this quarter included a one-time non-cash charge of $51.9 million to establish a valuation allowance against our deferred tax assets. Establishing the valuation allowance was required by GAAP, but to be clear, our deferred tax assets have expiration dates many years out, and we do expect to be able to utilize them in the future to offset tax liabilities. In summary, let me emphasize the same three main points Doug made. One, our non-insurance businesses are big market opportunities. We're growing them at strong double-digit rates and expect to continue to do so for years to come. Two, we expect a significant positive inflection in auto insurance client spending to begin in January or the second half of our fiscal 2024. And three, we continue to maintain a strong financial foundation and to demonstrate the resilience and cash generating capabilities of our business model. With that, I'll turn it over to the operator for Q&A.

And thank you, ladies and gentlemen. We will now conduct the question and answer session. If you have a question, please press star then one on your touchtone phone. If you would like to cancel your request, please press star two. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. Once again, if you have a question, it's star then one. And our first question comes from John Campbell from Stevens. Go ahead, John.

Hey, this is AJ Hayes stepping on for John. Congrats on the quarter and thanks for taking our questions. So obviously the fiscal year 24 guidance commentary is calling for growing revenue in EBITDA double digits. So if I just assume 10% growth for both revenue and EBITDA, you actually come out ahead of where consensus stood on revenue, so congrats on that. But this would imply adjusted EBITDA margin of roughly 2.9%. So with that said, my question is, does this 2.9% EBITDA margin, roughly 3%, put us in the right ballpark for how you're thinking about EBITDA margins this year? Or would you consider this maybe the floor, given that you expect EBITDA to outgrow revenue as part of your long-term outlook?

um and then maybe if this you know this kind of like the base margin assumption here could you maybe give some more color on how you're thinking about margins this year yeah thanks aj um i don't think we want to be overly specific at this point about uh the margin but i would say that we would consider 10 to be the bottom end of the the improvement year of years so i guess that's a long way of saying, yeah, we would probably expect to be better than that in terms of how it comes out. It's going to be driven. Let me give you some parameters around it. Insurance can be down this year, this fiscal year over last fiscal year, which wasn't a very good fiscal year for insurance, obviously, and will still grow at double digits on the revenue line and the EBITDA line this fiscal year. We do expect, though, that there'll be a pretty significant positive inflection insurance beginning in January and hopefully sustained and off to the races we go from there for a lot of periods to come. If and as that does happen, that's quite additive to those numbers. So hopefully that gives you, that brackets it for you as much as I think we'd like to bracket at this point. I think until we see how insurance does in the back half and how fast it does come, what rate it comes and how sustained it is, it's hard for us to be too precise about the number other than to say, again, we can deliver what we've guided, even if insurance is down this year over last fiscal year.

Great. Thanks for the color there. And then one more on guidance and kind of running with 10% rev growth assumption here again, and we're still working through the math here, but if I just assume that 10% rev growth in 2024 and then you hit your midpoint of your 1Q guide and revenue largely holds flat until we kind of flip into the new calendar year, I'm kind of getting in the ballpark of mid-teens year-over-year growth in 3Q and then a sizable year-over-year jump in 4Q in terms of revenue, somewhere in the range of maybe 50%. Is this rev ramp somewhat in the ballpark of how you're thinking about things? And maybe you kind of alluded to this in your prior commentary, but just kind of thinking, is that the right way to conceptually thinking about the rev ramp this year?

Yeah, I think we're getting... Yeah, go ahead. Greg, you want to go ahead?

That's exactly what I was going to say. I think we're trying not to get over-precise with that, AJ, just because we don't know the exact... exact curve of what that inflection looks like. We expect a significant positive inflection in auto insurance spending to begin in January. But without fully knowing what the shape of that curve is, it's hard for us to get over-precise on that.

Yeah, that's exactly right. And AJ, the only thing I would add is that generally speaking, the kind of curve shape you're talking about is accurate because what you get, of course, in the back half we believe is the effects of not only continued success in growing our non-insurance businesses throughout the year, but also auto insurance, beginning its positive inflection. So generally speaking, I think the shape you talked about is accurate. But to Greg's point, and the same thing I was going to say, it's just hard to be overly precise about it at this point until we know what that auto insurance curve looks like. We feel good about it coming. It's consistent with what we're hearing from the carriers. It's consistent with what we're hearing from industry analysts. It's consistent with what we're hearing from banking analysts that cover the insurance industry. And it's obvious why. You've got now several years of, in some cases, double-digit rate increases. You have consumers renewing at those higher rates. You have the carriers adjusting their products in terms of where they're covering and what they're going to cover and how much they're going to cover to reflect the environment. You have a cooling inflation environment. You have dramatically improved supply chains on the auto and auto parts side. Everything adds up to things getting a lot better. The CEOs of the carriers themselves have talked about most of these same things. So we feel very good, particularly given that January was strong two years ago. January through March was really strong last year. and things have only gotten better from there going into calendar 2024. And, of course, the reason the beginning of the calendar year is always magical is because the combined ratio targets reset for some of the most important carriers in the channel. So, you know, everything adds up to it's probably going to be, you know, what we described. It's going to be a significant positive inflection, and it's going to begin in January. We just don't know exactly how much and how fast because nobody does.

That's very helpful. Thank you, guys.

Thank you, Adrian.

And our next question comes from Jason Cryer from Craig Hellam. Go ahead.

Hey, this is Cal Bardazan here for Jason. Just a couple from me, I guess, to start going back to Otto. Can you just talk about maybe any differences in performance you saw on agent channels versus digital channels? Agent versus digital? Yeah, just any differences in any performances you're seeing between those channels.

Yeah, I'll speak generally about it, but first by terms of overlay, you know, we're mostly leveraged to the direct channel, to the direct digital channel. We serve primarily direct carriers, and we certainly have some business on the agent side, but it is not, it's the small minority of what we do. It's unlike, you know, a couple of the other folks in particular, say, a LendingTrees insurance business or EverQuote who are much more highly accredited. exposed and or concentrated on the agent and read side. We're much more concentrated on clicks and the direct side of the market. But we do serve and we do have insights into the agent side, both because we do sell to some of them, leads and calls in particular, and because of QRP, we're quite engaged with agencies And I would say the agent side in some ways is doing better than the direct side because the big carriers that have captive or dedicated agent networks are continuing, those agents and those carriers are continuing to spend to keep the agencies healthy. If they were to completely cut off, their spending, then those agencies would dry up and their whole distribution channel would dry up. So what you usually find is that while spending drops in the agent channel when there's a hard market like there is now, it doesn't drop as precipitously or as deeply as it does in the direct channel because they need to keep that channel at least breathing until the market comes back because if they don't, then they risk losing to overstate it. their entire distribution channel, unlike with direct carriers who can just cut off advertising spend and when they want to come back, they just turn it back on. You know, quote-unquote distribution is there all the time, whether they're spending in it or not. So generally speaking, the agent channel has gone down but not as much and it doesn't have as deep a bottom for those reasons. The other thing I would say about the agent channel, I guess, is that they are also hurting depending on which part of the agent channel you're looking at because those carriers are also having hard, have had a hard time with combined or loss ratios. Particularly on the independent agent side because independent agencies, some of the largest carriers in the independent agency channel are more the direct spenders or the direct carriers who have cut back and have other ways other forms of distribution, and share that channel with other carriers so they don't have to worry as much about killing their distribution for the long term. And because, generally speaking, there's just less coverage from carriers to write to. The agents just have fewer carriers to write because of the folks being out of the market. So, you know, that would be from where we sit, that's what we're seeing, agent versus distribution. digital or direct.

Perfect. Thanks for that. And then just last one from me, just talking about personal loans and credit cards. It seems like that's still performing for you guys pretty well. Just maybe any call-ups you'd have there and kind of what you're seeing. Thanks.

Yeah. All those businesses have done great. All of our non-insurance businesses grew at strong double-digit rates this past fiscal year. We expect all to grow this fiscal year at strong double-digit rates. We are seeing great strength and good gains in credit cards where we are almost exclusively leveraged to prime consumers, and that's a good thing in the credit card market. And then in personal loans, we've seen a lot of strength, and we had a record month in June in personal loans So despite the fact that there has been some credit tightening on the lender side, we continue to expand our client base, have more options for consumers, and we have a pretty vibrant component of our business that helps consumers get connected to folks that can help them with their credit and can help them with their debt situations. And we've seen the balance shift, not surprisingly, given inflation and other factors a little bit more to that side of the business. But we're early in a very big market in personal loans and have a real balanced set of services for consumers that are really serving the market now despite some of the credit tightening. But we have personal loans, as I said, and credit cards, both strong double-digit rates. We expect it again this year. And both have a great outlook. And as I said, personal loans even had a record month just in June. So those businesses are doing very well for us.

Perfect. Thanks. That's helpful.

And our next question is from Jim Goss from Barrington. Go ahead, Jim.

All right. Thanks. You were pretty emphatic about expecting a turn in January. I know you talked about the resetting of the combined ratios, but it's been sort of a challenge to make that turn over the past year or so anyway. I was just wondering, is that really the source of your confidence because of that resetting of the combined ratios? are there things we should be watching as observers to monitor whether that turn is more likely to take place, aside from whatever you might tell us?

Jim, I can't believe you don't want to just rely on what I tell you.

But no, the... I always rely on that, Doug.

Okay. Hey, I...

As I said before, and I think it's a great question, by the way, we have had false starts. The industry, auto insurance has had false starts the last two years going into the new year. So completely understand the question and is a completely valid question. And we are asking it from every direction we know how for the exact same reasons. All I can do is let me tell you what we're seeing, what we're hearing. And on the question about what else you should watch, Let me jump to that and then I'll jump back in terms of what we're seeing and hearing and why we think it. I would encourage you to read any industry analyst reports you can get your hands on. I shared some of those with our board this past board meeting. I would look to the analysts that cover the big carriers, in particular the big direct carriers, including GEICO and Progressive, and what they're saying and hearing about the economics of those folks. I would watch Progressive's reporting, which is monthly. on their combined ratio and see if in fact their combined ratio for the remainder of this calendar year improves significantly over what it has been over the past, the first half of the calendar year, because that will imply that they're getting to, not just that they've cut costs, but they may be getting to rate adequacy and that they have the rates and the economics to be more aggressive in the January forward period, which we do believe is probably happening based on everything that we're hearing, not from Progressive, but in the market. And as we hear and read industry and stock analysts, you might note that when Progressive reported their quarter, the stock initially traded down and it popped right back up again because I think several of the analysts, the sell side analysts, came out and talked about those exact happenings those exact factors so those are some of the things I would watch and I think and I would invite you to and again I completely understand but I would remind you that two years ago January was a record for us in auto insurance last year January February March quarter was I think Greg and perhaps another record if not very close in terms of quarter for auto insurance

It wasn't a record, but it was a very strong quarter.

Thank you. And since then, again, what we've had in the market is carriers successfully getting rate increases and getting compounded rate increases over several years now. And having now consumers who renew about every six months renew under those increased rates. We've had carriers adjust their products and their coverage to better reflect where they think they can make money in the market. and to reflect the current economics in the market. We obviously have dramatically cooling inflation from where it was two years ago and a year ago. And supply chains, as you can tell just by watching your television, seeing all the car ads, the automobile ads are back. Well, they're back because we have cars to sell again. And so you've seen a supply chain improvement for automobiles, you've seen a softening of used car pricing, and you've seen an improvement in supply chains for automobile parts, all of which matter to a carrier who has to pay for all that. So everything adds up to when combined ratios reset in January, the environment being a lot more conducive to carriers getting back into growth mode. And the CEOs of these companies have come out and said, we want to grow. And by the way, they're rewarded for growing. So, you know, they will have had three years to adjust and adapt, and they've had price increases, as I said, and the environment getting better. So it's just hard for us to imagine, and we haven't found an industry analyst anywhere that disagrees with the notion that calendar 24 is going to be better than 23. The big question is at exactly what rate. So how we would characterize it is what I think is pretty safe ground. Pretty significant. positive inflection in January from where we are right now because the carriers are down so much as they look to finish out this calendar year against a pretty bad first half. But exactly how big and exactly how fast, here's the good news. Our insurance business could be down year over year this fiscal year and we will still deliver double-digit growth.

Okay. Well, one more in this area and then I have one other thought. But there's a clear difference between homeowners and automotive insurance that some of the carriers are getting out of Florida and California in the homeowners area. So it can be very unpredictable. And I'm wondering if you get squeezed between the cautious carriers and the sort of the concerned consumers who don't really have other good options as their pricing goes up, even if they look through the options is they don't, they don't really find anything better, which can, can seem to extend the process of that transition.

Well, the more they shop, uh, the more business we get.

Um, so, and, and the places where carriers are pulled out of markets are really kind of immaterial to our auto insurance business getting a heck of a lot bigger. In fact, getting back to the size it was before. as the market normalizes. So those are certainly factors, but I don't think they're factors that in any way changes the answer for us if the market, in fact, comes back and begins its comeback as we think it will beginning in January. So the only other two things I throw in there, and I don't want to pile on because, hey, God knows we've all had way too much of a frustrating time trying to figure out what's going on in the auto and home insurance markets, including the carriers, by the way. It's not like these guys aren't trying. These are great companies giving it their best shot in an incredibly complicated and difficult environment. So I don't think there's blame to be laid anywhere, but it has been awfully difficult. But I would say that with inflation, with a softening economy, God forbid a recession, what we have always seen is that shopping for auto insurance increases. On top of that, Consumers are getting, as they renew, their rates are getting increased. In some cases, their rates are getting increased at strong double-digit rates, 10%, 15%, 20%, 30%. That causes shopping. When consumers shop more for insurance, we get more traffic and our business goes up. Our business is driven by two things, traffic and budgets. Right now, traffic is up because rates have gone up and budgets are down. but it's really hard to produce revenue. We expect from January forward that we'll still have very strong traffic for all the reasons I just talked about, and that budgets will begin to come back. And that adds up to, and that should mean significant positive inflection in spending, should mean significant positive inflection in our auto home insurance revenue.

Well, my last thought was it seems that this is your big opportunity to put the pedal to the metal on the huge non-financial verticals, the home services area, as you did back when education hit a wall and you sort of transitioned the theme of your business, basically. I'm wondering if there are challenges that are stopping you from going even faster there, whether, you know, financial issues in the homeowners or anything else, or, you know, is it just a matter of defining which areas you want to get into, service and additives in the middle area.

That's a great observation and a great point and question. I would say that we're investing as aggressively as we think we can to good effect. I don't think that we're missing anything big in terms of what we're investing in. We're investing, of course, for the long term. So what we're doing, we think we're building We want to build in a big, sustainable way, which I think we're doing that. If we wanted to push further out on the kind of probability or risk curve in terms of our investments, I think we could if we were not more constrained by wanting to make sure we maintain a pretty safe profile while we wait for insurance to come back. So you think about it, what are we balancing? We want to maintain our infrastructure and insurance and, in fact, continue to invest in that infrastructure so that when insurance comes back, we get maximum advantage. But we're doing that without much insurance revenue. So that's pretty hard on profits and cash flow. We're investing very aggressively on non-insurance businesses, to your point. And we're doing that with great effect. We measure our performance on that. We measure our margins on it. This year we expect about a 30% margin on those incremental investments and to deliver strong double-digit growth rates, again, in those businesses. So we think we're doing it very effectively. We think we're doing it in the right places, and we think we're doing it in a way that's going to give us sustainability. And so you take those two things and you balance them against the business, and you say, but we – Because we want to continue to control our own destiny and maintain a very safe profile, we want to be cash flow positive. So those are kind of the things we're balancing. And I think I would argue, and nobody's more biased than I am, that we're doing it awfully well if you look at the results.

Well, I appreciate your thoughts, and thanks for taking my questions. Thank you, Jim.

And up next, we have Chris Sakai from Singular. Go ahead, Chris.

Yes. Hi, Greg and Doug. I had a question on Q1's guidance of what, 120 to 125 million? Can you provide a breakdown as far as what percentage of that would be financial and what percentage of those services?

Greg, I don't know if you have that in front of you or if we want to provide the guide at that level of detail. We provide the guide by vertical like that, Chris. But I would say that the general way to think about it is auto insurance is running along the bottom of where it's been for the last several years. And so what you should expect and what our other non-insurance businesses are doing extraordinarily well So the bulk, just like this quarter, 75% of our revenue was non-insurance. I would expect that it would be that or more this quarter because auto insurance is actually as low as it's been in a very long time, and it dropped down to that level in the May and June timeframes. So it'll be lower this quarter than it was last quarter as, again, the carriers try to offset a very bad first half and get ready, we hope, to be able to inflect in January. Greg, I'm sorry. Make sure I cover that right for you.

Yeah, no, that's exactly it. I think we'll see a full quarter effect from auto insurance of depressed spending in the September quarter offset by double-digit growth in non-insurance businesses. So very similar dynamic to what we saw in the June quarter.

Okay, sounds good. And then, let's see. Yeah, I think, can you talk about actually providing guidance for the year? When would you provide that?

No, that's a great question, Chris.

I think as soon as we have any kind of reasonable clarity on auto insurance, We'll be able to get more precise. I know it's kind of frustrating when we get something as generic as, you know, double digits. But, you know, what we can do with that is we can make a broad range of assumptions. And we know what our forecasts are for non-insurance businesses. We've been quite accurate. In fact, I think beat that budget last year quite handily. But what we don't have a handle on, as I said before, is the exact shape of the auto insurance curve from January forwards. We believe, of course, for all the reasons I've talked about, that there's going to be a significant positive inflection. We don't know exactly how big or what rate. We've run a lot of different models. And again, I think the best news to give you is that we can be down year over year in auto insurance this fiscal year and still deliver double-digit growth over fiscal 23. That's about as precise as we can be. And hopefully that's a good bracket to at least give you until we begin to get budgets probably in the December. We'll get indications maybe in November. We'll get hopefully budget numbers in December, and then we'll know where we'll have a much better feel for where we are. So I would hope that the answer to that is when we report our fiscal Q2 or or the December quarter, we'll be able to tighten that range quite a bit for you.

Okay, sounds good. And then last one for me. So you expect adjusted odds to be exceeding the 10% margin range. Can you give any timeframe on that?

I can't because it depends on auto insurance. I can tell you that if we do an auto insurance, what we think we could do in auto insurance, which is not to the levels that it was anywhere near to the levels of the peak, then we could be pretty close to that as soon as the fiscal fourth quarter. Now, we don't expect that, and we're not guiding to that. but that gives you a sense of how rapidly EBITDA margin will come back as we get a return of any kind of top-line leverage from auto insurance. Greg, do you want to make sure I'm giving that accurately? No, that's accurate.

That's correct. That is correct.

Okay. Sounds good. Thanks for the answers. Thank you, Chris.

And up next we have Max Michaelis. Go ahead, Max, from Lake Street Capital.

Hey, guys. Congrats on the quarter. I won't keep beating the dead horse on the guidance. I'll shift gears here. Just going back to some of your commentary on investments in the quarter and going forward, can you just get into a little bit more specifics on what kind of investments you're going to be directing some of this cash towards? Thank you.

You bet, Max.

When I say investments, I don't just mean capital investments.

Oftentimes when I talk about investment, I mean people and or working on a new media opportunity that might result in some losses for a while until we optimize it up and to the right. Again, I use the term investments pretty generically. I know that can be confusing. I apologize for that. Mostly, it's going to be several buckets. One is We have a lot of opportunities to continue to press our growth and non-insurance client verticals because those are big markets. They don't have the structural headwinds of auto insurance. Um, and we have, uh, we have more clients to add. We have more media properties to partner with. We have more immediate campaigns to develop. We have the, the development and application of our core optimization technologies to those verticals, um, as they get to the scale that justifies that and where a scale that requires that in order for us to really be as efficient as we need to be. So it's investment in all of those areas, whether it be people or trial and error or other forms of ramping, all those kinds of things. So that's probably the bulk of the investment. In fact, it has been the bulk of the investment this past year, will likely be the bulk of the investment this coming year. We're also investing in, as you know, new products. We continue to invest aggressively in QRP. We continue to see great opportunity in QRP. We have made great, great progress in QRP, but for the bad market. And that product is just continuing to get better as we get feedback from carriers and from agencies and as we work with some of the big agencies to get that implemented. So that and another product that we talked about, for lending and home services. We'll continue to invest in that product. Neither of those products have big revenue yet through RP because of the insurance market. The other lending product, because it's earlier stage, but we're putting a lot of money into those products. We think they both represent, you know, tens to hundreds of millions of dollars of very high margin opportunity for the company that are very contiguous to and very complementary to our core business. So we're continuing those investments and have continued those investments. including in insurance, as I said, not just QRP, but also in media and all the other things we need to do in insurance to be ready for the business to come back on the other side. So those are the big buckets, and we have been doing that. We will continue to do that. And the reason you see the reduction even now this past year is because we've done that while losing from the peak $200 million a year in insurance revenue. So that's kind of the things we think are important to keep investing in while maintaining a great balance sheet and while staying cash flow and adjusted EBITDA positive.

No, that's great color. And then actually I do want to ask something about the quarter here with the insurance vertical. I know the rug was kind of pulled out from underneath you back in April unexpectedly. Did it get materially worse throughout the quarter in May and June?

It did. Yeah. It did.

And we've been told by the carriers that we're kind of at the bottom.

Hopefully they're right.

But, yeah, you know, they are going to, I think what we're seeing is carriers cutting costs dramatically in order to offset a bad first half and get to their combined ratio targets and hopefully, fingers crossed, to be ready to spring out and inflect very positively come January.

Okay, and then last one for me. What was progressive in the quarter as a percentage of revenue? Six. Hey, Max, this is Greg.

Progressive was six. Yeah, 6%.

Yeah. Thank you. That's it for me, guys. Thank you, Max.

And our final question is a follow-up from John Campbell from Stevens. Go ahead, John.

Hey, guys. This is AJ Hazon again for John. Just wanted to follow up on the home services issue. segment. You've been putting up impressive year-over-year growth numbers there, despite last being tough comps. So you've had a handful of really strong quarters and maybe even a handful of really strong years going on here in this segment. So the question is, what is driving this growth of late? Is it new product-driven? Is it new customers? Is it getting a deeper share of wallet? Or is there maybe anything else worth calling out there?

Yeah, we have had several great years in home services, AJ. We just had another great quarter. We expect yet another great year. There's a lot of momentum in that business, a lot of dimensions to the growth. We are getting deeper in the trades, we call them. A trade is kind of a subvertical in home services. A trade might be roofing, for example, or windows or HVACs. So we are getting deeper into the trades we're in, getting more clients, more budgets from existing clients, and more media access because of those stronger budgets. That's one dimension. Another dimension is we're adding new trades. We're getting into more trades, and we expect to continue to get into more trades as we go forward. And then we're just executing extraordinarily well. You know, we... When we merged our home services business with the modernized home services business, they were very complementary. And we thought one-on-one would be two and a half. One-on-one has been about four as those teams have executed. So just good basic execution on all the dimensions that matter to our business, whether it be more media, better results from media, more budgets, better results for our clients so we get even more budgets, or the application of the Quinn Street core optimization technologies, which are really our secret sauce, that's our magic, into home services as we've gotten further along the integration curve. All of those things have been additive and have contributed to strong growth, which we just had, again, another strong year, another strong quarter, and we expect another strong year going forward. And it's a massive market. You've heard us say, and Greg has said, maybe our biggest addressable market, and quite possibly so. It's a great fit for Quinn Street, and we've got a great team, and they're executing extraordinarily well, and we know what we need to do, and we get up and do it every day. So those are kind of the dimensions.

That's great. Thanks for the call there, Doug.

Thank you, AJ.

And we have no further questions at this time. Thank you everyone for taking the time to join Quinn Street Earnings Call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you. You may all disconnect. you music you Thank you. Good day and welcome to Quinn Street's Fiscal Fourth Quarter and Full Year 2023 Financial Results Conference Call. Today's conference is being recorded. Following prepared remarks, there will be a question and answer session. If you have a question during the question and answer session, please press star 1 to enter the queue. 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 fiscal fourth quarter and full 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 8 filing made today and our most recent 10 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 to 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. Quinn Street had a very successful fiscal Q4. We continued to make great progress against our big non-insurance market opportunities. Those nine-figure revenue client verticals grew at strong double-digit rates year over year in the quarter and represented 75% of total revenue. We expect to grow those businesses at double-digit rates for years. We also continue to invest smartly and effectively in our next generation products and capabilities, including in insurance, where we are positioned to take maximum advantage of the re-inflection of carrier marketing budgets. We expect that re-inflection to begin in January. Lastly, regarding Q4, we continued to demonstrate operational and financial excellence, as well as resilience in our business model. We delivered better than expected revenue, profits, and cash flow, improving our already strong balance sheet. while navigating the auto insurance market and while maintaining high levels of investment in important new products, technologies, and growth initiatives. Moving to our outlook. First, for the new full fiscal year 2024, which began on July 1st. We continue to expect that revenue and adjusted EBITDA will grow at double-digit rates year-over-year this fiscal year, driven mainly by continued momentum and scale in non-insurance client verticals. We also expect a significant positive inflection in auto insurance client spending to begin in January or the second half of our fiscal 2024. We will also, of course, continue to maintain our strong balance sheet in fiscal 2024. Regarding our outlook for fiscal Q1, or the September quarter, we expect revenue to be between $120 and $125 million, and adjusted EBITDA to be approximately breakeven. Finally, our longer-term outlook has never been better. We expect to deliver double-digit annual revenue growth rates. We could do so just based on continued strong performance in non-insurance businesses. Revenue from non-insurance businesses is now running at almost $400 million per year. It grew 26 percent in fiscal 2023 and has grown organically at a compound annual rate of 19 percent over the past three years. We also expect insurance revenue to be up and to the right over the longer term, eventually returning to and exceeding prior peak levels, as carriers benefit from compound rate increases, product changes, cooling inflation, and improving supply chain. and allowing the shift to digital and performance marketing to reassert itself as the dominant long-term trend. We expect adjusted EBITDA to grow faster than revenue as we scale the top line faster than expenses, eventually reaching and exceeding an adjusted EBITDA margin of 10%. With that, I'll turn the call over to Greg.

Thank you, Doug. Hello, and thanks to everyone for joining us today. For the June quarter, total revenue was $130.3 million. Adjusted debt loss was $514,000, or one cent per share. Adjusted EBITDA was $1.8 million. Non-insurance revenue was $97.1 million, or 75% of Q4 revenue, and grew 18% year-over-year. Looking at revenue by client vertical, our financial services client vertical represented 58% of Q4 revenue and was $75.2 million. Our home services client vertical represented 41% of Q4 revenue and was $53.1 million. Other revenue was the remaining $2 billion of Q4 revenue. Turning to our full fiscal year 2023 performance, we reported revenue of $580.6 million, roughly flat year-over-year, as strong performance in non-insurance businesses offset insurance results. Revenue from non-insurance businesses were $367.4 million in fiscal year 2023 and an increase of 26% year-over-year. Our financial services client vertical represented 65% of full fiscal year revenue and was $379.7 million. Our home services client vertical represented 33% of full fiscal year revenue and was $193.1 million. Other revenue represented the remaining $7.8 million of the full fiscal year revenue. Adjusted EBITDA for full fiscal year 2023 was $16.7 million. Turn to the balance sheet. We closed the year with $73.7 million of cash and equivalents and no bank debt. Gap net income this quarter included a one-time non-cash charge of $51.9 million to establish a valuation allowance against our deferred tax assets. Establishing the valuation allowance was required by GAAP, but to be clear, our deferred tax assets have expiration dates many years out, and we do expect to be able to utilize them in the future to offset tax liabilities. In summary, let me emphasize the same three main points Doug made. One, our non-insurance businesses are big market opportunities. We're growing them at strong double-digit rates and expect to continue to do so for years to come. Two, we expect a significant positive inflection in auto insurance client spending to begin in January or the second half of our fiscal 2024. And three, we continue to maintain a strong financial foundation and to demonstrate the resilience and cash generating capabilities of our business model. With that, I'll turn it over to the operator for Q&A.

And thank you, ladies and gentlemen. We will now conduct the question and answer session. If you have a question, please press star then one on your touchtone phone. If you would like to cancel your request, please press star two. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. Once again, if you have a question, it's star then one. And our first question comes from John Campbell from Stevens. Go ahead, John.

Hey, this is AJ Hayes stepping on for John. Congrats on the quarter and thanks for taking our questions. So obviously the fiscal year 24 guidance commentary is calling for growing revenue in EBITDA double digits. So if I just assume 10% growth for both revenue and EBITDA, you actually come out ahead of where consensus stood on revenue, so congrats on that. But this would imply adjusted EBITDA margin of roughly 2.9%. So with that said, my question is, does this 2.9% EBITDA margin, roughly 3%, put us in the right ballpark for how you're thinking about EBITDA margins this year? Or would you consider this maybe the floor, given that you expect EBITDA to outgrow revenue as part of your long-term outlook?

um and then maybe if this you know this kind of like the base margin assumption here could you maybe give some more color on how you're thinking about margins this year yeah thanks aj um i don't think we want to be overly specific at this point about uh the margin but i would say that we would consider 10 to be the bottom end of the the improvement year of years so i guess that's a long way of saying, yeah, we would probably expect to be better than that in terms of how it comes out. It's going to be driven. Let me give you some parameters around it. Insurance can be down this year, this fiscal year over last fiscal year, which wasn't a very good fiscal year for insurance, obviously, and will still grow at double digits on the revenue line and the EBITDA line this fiscal year. We do expect, though, that there'll be a pretty significant positive inflection insurance beginning in January and hopefully sustained and off to the races we go from there for a lot of periods to come. If and as that does happen, that's quite additive to those numbers. So hopefully that gives you, that brackets it for you as much as I think we'd like to bracket at this point. I think until we see how insurance does in the back half and how fast it does come, what rate it comes and how sustained it is, it's hard for us to be too precise about the number other than to say, again, we can deliver what we've guided, even if insurance is down this year over last fiscal year.

Great. Thanks for the color there. And then one more on guidance and kind of running with 10 rev growth assumption here again and we're still working through the you know the math here but if i just assume that 10 rev growth in in 2024 and then you hit your midpoint of your your one q guide and revenue largely holds flat until we kind of flip into the new calendar year i'm kind of getting in the ballpark of mid-teens year-over-year growth in 3q and then a sizable year-over-year jump in in 4q in terms of revenue um somewhere in the range of maybe 50 percent um Is this rev ramp somewhat in the ballpark of how you're thinking about things? And maybe you kind of alluded to this in your prior commentary, but just kind of thinking is that the right way to conceptually thinking about the rev ramp this year?

Yeah, I think we're not again getting – yeah, go ahead. Greg, you want to go ahead?

That's exactly what I was going to say. I think we're trying not to get over-precise with that, AJ, just because we don't know the exact – exact curve of what that inflection looks like. We expect a significant positive inflection in auto insurance spending to begin in January. But without fully knowing what the shape of that curve is, it's hard for us to get over precise on that.

Yeah, that's exactly right. And AJ, the only thing I would add is that generally speaking, the kind of curve shape you're talking about is accurate because what you get, of course, in the back half we believe is the effects of not only continued success in growing our non-insurance businesses throughout the year, but also auto insurance, beginning its positive inflection. So generally speaking, I think the shape you talked about is accurate. But to Greg's point, and the same thing I was going to say, it's just hard to be overly precise about it at this point until we know what that auto insurance curve looks like. We feel good about it coming. It's consistent with what we're hearing from the carriers. It's consistent with what we're hearing from industry analysts. It's consistent with what we're hearing from banking analysts that cover the insurance industry. And it's obvious why. You've got now several years of, in some cases, double-digit rate increases. You have consumers renewing at those higher rates. You have the carriers adjusting their products in terms of where they're covering and what they're going to cover and how much they're going to cover to reflect the environment. You have a cooling inflation environment. You have dramatically improved supply chains on the auto and auto parts side. Everything adds up to things getting a lot better. The CEOs of the carriers themselves have talked about most of these same things. So we feel very good, particularly given that January was strong two years ago. January through March was really strong last year. and things have only gotten better from there going into calendar 2024. And, of course, the reason the beginning of the calendar year is always magical is because the combined ratio targets reset for some of the most important carriers in the channel. So, you know, everything adds up. It's probably going to be, you know, what we described. It's going to be a significant positive inflection, and it's going to begin in January. We just don't know exactly how much and how fast because nobody does.

That's very helpful.

Thank you, guys.

Thank you, Adrian.

And our next question comes from Jason Cryer from Craig Hellam. Go ahead.

Hey, this is Cal Bartizone here for Jason. Just a couple from me, I guess, to start going back to Otto. Can you just talk about maybe any differences in performance you saw on agent channels versus digital channels? Agent versus digital? Yeah, just any differences in any performances you're seeing between those channels.

Yeah, I'll speak generally about it, but first by terms of overlay, you know, we're mostly leveraged to the direct channel, to the direct digital channel. We serve primarily direct carriers, and we certainly have some business on the agent side, but it is not, it's the small minority of what we do. It's unlike, you know, a couple of the other folks in particular, say, a lending trees insurance business or EverQuote who are much more highly experienced. exposed and or concentrated on the agent and lead side. We're much more concentrated on clicks and the direct side of the market. But we do serve and we do have insights into the agent side, both because we do sell to some of them, leads and calls in particular, and because of QRP, we're quite engaged with agencies And I would say that the agent side in some ways is doing better than the direct side because the big carriers that have captive or dedicated agent networks are continuing, those agents and those carriers are continuing to spend to keep the agencies healthy. If they were to completely cut off, their spending, then those agencies would dry up and their whole distribution channel would dry up. So what you usually find is that while spending drops in the agent channel when there's a hard market like there is now, it doesn't drop as precipitously or as deeply as it does in the direct channel because they need to keep that channel at least breathing until the market comes back because if they don't, then they risk losing to overstate it. their entire distribution channel, unlike with direct carriers who can just cut off advertising spend and when they want to come back, they just turn it back on. You know, quote-unquote distribution is there all the time, whether they're spending in it or not. So generally speaking, the agent channel has gone down but not as much and it doesn't have as deep a bottom for those reasons. The other thing I would say about the agent channel, I guess, is that they are also hurting depending on which part of the agent channel you're looking at because those carriers are also having hard, have had a hard time with combined or loss ratios. Particularly on the independent agent side because independent agencies, some of the largest carriers in the independent agency channel are more the direct spenders or the direct carriers who have cut back and have other ways other forms of distribution, and share that channel with other carriers so they don't have to worry as much about killing their distribution for the long term. And because, generally speaking, there's just less coverage from carriers to write to. The agents just have fewer carriers to write because of the folks being out of the market. So, you know, that would be from where we sit, that's what we're seeing, agent versus distribution. digital or direct.

Perfect. Thanks for that. And then just last one from me, just talking about personal loans and credit cards. It seems like that's still performing for you guys pretty well. Just maybe any call-ups you'd have there and kind of what you're seeing. Thanks.

Yeah. All those businesses have done great. All of our non-insurance businesses grew at strong double-digit rates this past fiscal year. We expect all to grow this fiscal year at strong double-digit rates. We are seeing great strength and good gains in credit cards where we are almost exclusively leveraged to prime consumers, and that's a good thing in the credit card market. And then in personal loans, we've seen a lot of strength, and we had a record month in June in personal loans So despite the fact that there has been some credit tightening on the lender side, we continue to expand our client base, have more options for consumers, and we have a pretty vibrant component of our business that helps consumers get connected to folks that can help them with their credit and can help them with their debt situations. And we've seen the balance shift, not surprisingly, given inflation and other factors a little bit more to that side of the business. But we're early in a very big market in personal loans and have a real balanced set of services for consumers that are really serving the market now despite some of the credit tightening. But we have personal loans, as I said, and credit cards, both strong double-digit rates. We expect it again this year. And both have a great outlook. And as I said, personal loans even had a record month just in June. So those businesses are doing very well for us.

Perfect. Thanks. That's helpful.

And our next question is from Jim Goss from Barrington. Go ahead, Jim.

All right. Thanks. You were pretty emphatic about expecting a turn in January. I know you talked about the resetting of the combined ratios, but it's been sort of a challenge to make that turn over the past year or so anyway. I was just wondering, is that really the source of your confidence because of that resetting of the combined ratios? are there things we should be watching as observers to monitor whether that turn is more likely to take place, aside from whatever you might tell us?

Jim, I can't believe you don't want to just rely on what I tell you.

But, no, the... I always rely on that, Rick.

Okay. Hey, I...

As I said before, and I think it's a great question, by the way, we have had false starts. The industry, auto insurance has had false starts the last two years going into the new year. So completely understand the question and is a completely valid question. And we are asking it from every direction we know how for the exact same reasons. All I can do is let me tell you what we're seeing, what we're hearing. And on the question about what else you should watch, Let me jump to that and then I'll jump back in terms of what we're seeing and hearing and why we think it. I would encourage you to read any industry analyst reports you can get your hands on. I shared some of those with our board this past board meeting. I would look to the analysts that cover the big carriers, in particular the big direct carriers, including GEICO and Progressive, and what they're saying and hearing about the economics of those folks. I would watch Progressive's reporting, which is monthly. on their combined ratio and see if, in fact, their combined ratio for the remainder of this calendar year improves significantly over what it has been over the past, the first half of the calendar year because that will imply that they're getting to, not just that they've cut costs, but they may be getting to rate adequacy and that they have the rates and the economics to be more aggressive in the January forward period, which we do believe is probably happening, based on everything that we're hearing, not from Progressive, but in the market, and as we hear and read industry and stock analysts, you might note that when Progressive reported their quarter, the stock initially traded down, and it popped right back up again, because I think several of the analysts, the sell-side analysts, came out and talked about those exact happenings those exact factors so that's that those are some of the things I would watch and I think and I would invite you to and again I completely understand but I would remind you that two years ago January was a record for us in auto insurance last year January February March quarter was I think Greg and perhaps another record if not very close in terms of quarter for auto insurance

It wasn't a record, but it was a very strong quarter.

Thank you. And since then, again, what we've had in the market is carriers successfully getting rate increases and getting compounded rate increases over several years now. And having now consumers who renew about every six months renew under those increased rates. We've had carriers adjust their products and their coverage to better reflect where they think they can make money in the market. and to reflect the current economics in the market. We obviously have dramatically cooling inflation from where it was two years ago and a year ago. And supply chains, as you can tell just by watching your television, seeing all the car ads, the automobile ads are back. Well, they're back because we have cars to sell again. And so you've seen a supply chain improvement for automobiles, you've seen a softening of used car pricing, and you've seen an improvement in supply chains for automobile parts, all of which matter to a carrier who has to pay for all that. So everything adds up to when combined ratios reset in January, the environment being a lot more conducive to carriers getting back into growth mode. And the CEOs of these companies have come out and said, we want to grow. And by the way, they're rewarded for growth. So, you know, they will have had three years to adjust and adapt, and they've had price increases, as I said, and the environment getting better. So it's just hard for us to imagine, and we haven't found an industry analyst anywhere that disagrees with the notion that calendar 24 is going to be better than 23. The big question is at exactly what rate. So how we would characterize it is what I think is pretty safe ground. Pretty significant. positive inflection in January from where we are right now because the carriers are down so much as they look to finish out this calendar year against a pretty bad first half. But exactly how big and exactly how fast, here's the good news. Our insurance business could be down year over year this fiscal year and we will still deliver double-digit growth.

Okay. Well, one more in this area and then I have one other thought. But there's a clear difference between homeowners and automotive insurance that some of the carriers are getting out of Florida and California in the homeowners area. So it can be very unpredictable. And I'm wondering if you get squeezed between the cautious carriers and the sort of the concerned consumers who don't really have other good options as their pricing goes up, even if they look through the options is they don't, they don't really find anything better, which can, can seem to extend the process of that transition.

Well, the more they shop, uh, the more business we get.

Um, so, and, and the places where carriers are pulled out of markets are really kind of immaterial to our auto insurance business getting a heck of a lot bigger. In fact, getting back to the size it was before. as the market normalizes. So those are certainly factors, but I don't think they're factors that in any way changes the answer for us if the market, in fact, comes back and begins its comeback as we think it will beginning in January. So the only other two things I throw in there, and I don't want to pile on because, hey, God knows we've all had way too much of a frustrating time trying to figure out what's going on in the auto and home insurance markets, including the carriers, by the way. It's not like these guys aren't trying. These are great companies giving it their best shot in an incredibly complicated and difficult environment. So I don't think there's blame to be laid anywhere, but it has been awfully difficult. But I would say that with inflation, with a softening economy, God forbid a recession, what we have always seen is that shopping for auto insurance increases. On top of that, Consumers are getting, as they renew, their rates are getting increased. In some cases, their rates are getting increased at strong double-digit rates, 10%, 15%, 20%, 30%. That causes shopping. When consumers shop more for insurance, we get more traffic and our business goes up. Our business is driven by two things, traffic and budgets. Right now, traffic is up because rates have gone up and budgets are down. so it's really hard to produce revenue. We expect from January forward that we'll still have very strong traffic for all the reasons I just talked about, and that budgets will begin to come back. And that adds up to, and that should mean significant positive inflection in spending, should mean significant positive inflection in our auto home insurance revenue.

Well, my last thought was it seems that this is your big opportunity to put the pedal to the metal on the huge non-financial verticals, the home services area, as you did back when education hit a wall and you sort of transitioned the theme of your business, basically. I'm wondering if there are challenges that are stopping you from going even faster there, whether they're financial issues in the homeowners or anything else, or is it just a matter of defining which areas you want to get into, sort of as an antidote to the middle area.

That's a great observation and a great point and question. I would say that we're investing as aggressively as we think we can to good effect. I don't think that we're missing anything big in terms of what we're investing in. We're investing, of course, for the long term. So what we're doing, we think we're building... We want to build in a big, sustainable way, which I think we're doing that. If we wanted to push further out on the kind of probability or risk curve in terms of our investments, I think we could if we were not more constrained by wanting to make sure we maintain a pretty safe profile while we wait for insurance to come back. So you think about it, what are we balancing? We want to maintain our infrastructure and insurance and, in fact, continue to invest in that infrastructure so that when insurance comes back, we get maximum advantage. But we're doing that without much insurance revenue. So that's pretty hard on profits and cash flow. We're investing very aggressively on non-insurance businesses, to your point. And we're doing that with great effect. We measure our performance on that. We measure our margins on it. This year we expect about a 30% margin on those incremental investments and to deliver strong double-digit growth rates, again, in those businesses. So we think we're doing it very effectively. We think we're doing it in the right places. And we think we're doing it in a way that's going to give us sustainability. And so you take those two things and you balance them against the business and you say, but we've Because we want to continue to control our own destiny and maintain a very safe profile, we want to be cash flow positive. So those are kind of the things we're balancing. And I think I would argue, and nobody's more biased than I am, that we're doing it awfully well if you look at the results.

Well, I appreciate your thoughts, and thanks for taking my questions. Thank you, Jim.

And up next, we have Chris Sakai from Singular. Go ahead, Chris.

Yes. Hi, Greg and Doug. I had a question on Q1's guidance of what, 120 to 125 million? Can you provide a breakdown as far as what percentage of that would be financial and what percentage of those services?

Greg, I don't know if you have that in front of you or if we want to provide the guide at that level of detail. We don't typically provide the guide by vertical like that, Chris. But I would say that the general way to think about it is auto insurance is running along the bottom of where it's been for the last several years. And so what you should expect and what our other non-insurance businesses are doing extraordinarily well So the bulk, just like this quarter, 75% of our revenue was non-insurance. I would expect that it would be that or more this quarter because auto insurance is actually as low as it's been in a very long time, and it dropped down to that level in the May and June timeframes. So it'll be lower this quarter than it was last quarter as, again, the carriers try to offset a very bad first half and get ready, we hope, to be able to inflect in January. Greg, I'm sorry. Make sure I cover that right for you.

Yeah, no, that's exactly it. I think we'll see a full quarter effect from auto insurance of depressed spending in the September quarter offset by double-digit growth in non-insurance businesses. So very similar dynamic to what we saw in the June quarter.

Okay, sounds good. And then, let's see. Yeah, I think, can you talk about actually providing guidance for the year? When would you provide that?

No, that's a great question, Chris.

I think as soon as we have any kind of reasonable clarity on auto insurance, We'll be able to get more precise. I know it's kind of frustrating when we give something as generic as double digits. But what we can do with that is we can make a broad range of assumptions. And we know what our forecasts are for non-insurance businesses. We've been quite accurate. In fact, I think beat that budget last year quite handily. But what we don't have a handle on, as I said before, is the exact shape of the auto insurance curve from January forward. We believe, of course, for all the reasons I've talked about, that there's going to be a significant positive inflection. We don't know exactly how big or what rate. We've run a lot of different models. And again, I think the best news to give you is that we can be down year over year in auto insurance this fiscal year and still deliver double-digit growth over fiscal 23. That's about as precise as we can be. And hopefully that's a good bracket to at least give you until we begin to get budgets probably in the December. We'll get indications maybe in late November. We'll get hopefully budget numbers in December. And then we'll know, you know, we'll have a much better feel for where we are. So I would hope that the answer to that is when we report our fiscal Q2 or or the December quarter, we'll be able to tighten that range quite a bit for you.

Okay, sounds good. And then last one for me. So you expected just to be exceeding the 10% margin range. Can you give any timeframe on that?

I can't because it depends on auto insurance. I can tell you that if we do an auto insurance, what we think we could do in auto insurance, which is not to the levels that it was anywhere near to the levels of the peak, then we could be pretty close to that as soon as the fiscal fourth quarter. Now, we don't expect that, and we're not guiding to that. but that gives you a sense of how rapidly EBITDA margin will come back as we get a return of any kind of top-line leverage from auto insurance. Greg, do you want to make sure I'm giving that accurately? No, that's accurate.

That's correct. That is correct.

Okay. Sounds good. Thanks for the answers. Thank you, Chris.

And up next we have Max Michaelis. Go ahead, Max, from Lake Street Capital.

Hey, guys. Congrats on the quarter. I won't keep beating the dead horse on the guidance. I'll shift gears here. Just going back to some of your commentary on investments in the quarter and going forward, can you just get into a little bit more specifics on what kind of investments you're going to be directing some of this cash towards? Thank you.

You bet, Max.

When I say investments, I don't just mean capital investments.

Oftentimes, when I talk about investment, I mean people and or working on a new media opportunity that might result in some losses for a while until we optimize it up and to the right. Again, I use the term investments pretty generically. I know that can be confusing. I apologize for that. Mostly, it's going to be several buckets. One is we have a lot of opportunities to continue to press our growth and non-insurance client verticals because those are big markets. They don't have the structural headwinds of auto insurance. Um, and we have, uh, we have more clients to add. We have more media properties to partner with. We have more immediate campaigns to develop. We have the, the development and application of our core optimization technologies to those verticals, um, as they get to the scale that justifies that and where, a scale that requires that in order for us to really be as efficient as we need to be. So it's investment in all of those areas, whether it be people or trial and error or other forms of ramping, all those kinds of things. So that's probably the bulk of the investment. In fact, it has been the bulk of the investment this past year, will likely be the bulk of the investment this coming year. We're also investing in, as you know, new products. We continue to invest aggressively in QRP. We continue to see great opportunity in QRP. We have made great, great progress in QRP, but for the bad market. And that product is just continuing to get better as we get feedback from carriers and from agencies and as we work with some of the big agencies to get that implemented. So that and another product that we talked about, for lending and home services. We'll continue to invest in that product. Neither of those products have big revenue yet through RP because of the insurance market. The other lending product, because it's earlier stage, but we're putting a lot of money into those products. We think they both represent, you know, tens to hundreds of millions of dollars of very high margin opportunity for the company that are very contiguous to and very complementary to our core business. So we're continuing those investments and have continued those investments. including in insurance, as I said, not just QRP, but also in media and all the other things we need to do in insurance to be ready for the business to come back on the other side. So those are the big buckets, and we have been doing that. We will continue to do that. And the reason you see the reduction in EBITDA this past year is because we've done that while losing, from the peak, $200 million a year in insurance revenue. So that's kind of the things we think are important to keep investing in while maintaining a great balance sheet and while staying cash flow and adjusted EBITDA positive.

No, that's great color. And then actually I do want to ask something about the quarter here with the insurance vertical. I know the rug was kind of pulled out from underneath you back in April unexpectedly. Did it get materially worse throughout the quarter in May and June?

It did. Yeah, it did.

And we've been told by the carriers that we're kind of at the bottom.

Hopefully they're right.

But, yeah, you know, they are going to, I think what we're seeing is carriers cutting costs dramatically in order to offset a bad first half and get to their combined ratio targets and hopefully, fingers crossed, to be ready to spring out and inflect very positively come January.

Okay, and then last one for me. What was progressive in the quarter as a percentage of revenue? Six.

Hey, Max, this is Greg. Progressive was six. Yeah, 6%. Yeah.

Thank you. That's it for me, guys. Thank you, Max.

And our final question is a follow-up from John Campbell from Stevens. Go ahead, John.

Hey, guys. This is AJ Hazon again for John. Just wanted to follow up on the home services issue. segment. You've been putting up impressive year-over-year growth numbers there, despite last being tough comps. So you've had a handful of really strong quarters and maybe even a handful of really strong years going on here in this segment. So the question is, what is driving this growth of late? Is it new product driven? Is it new customers? Is it getting deeper share of wallet? Or is there maybe anything else worth calling out there?

Yeah, we have had several great years in home services, AJ. We just had another great quarter. We expect yet another great year. There's a lot of momentum in that business, a lot of dimensions to the growth. We are getting deeper in the trades, we call them. A trade is kind of a subvertical in home services. A trade might be roofing, for example, or windows or HVACs. So we are getting deeper into the trades we're in, getting more clients, more budgets from existing clients, and more media access because of those stronger budgets. That's one dimension. Another dimension is we're adding new trades. We're getting into more trades, and we expect to continue to get into more trades as we go forward. And then we're just executing extraordinarily well. You know, we... When we merged our home services business with the modernized home services business, they were very complementary. And we thought one-on-one would be two and a half. One-on-one has been about four as those teams have executed. So just good basic execution on all the dimensions that matter to our business, whether it be more media, better results from media, more budgets, better results for our clients so we get even more budgets, or the application of the Quinn Street core optimization technologies, which are really our secret sauce, that's our magic, into home services as we've gotten further along the integration curve. All of those things have been additive and have contributed to strong growth, which we just had, again, another strong year, another strong quarter, and we expect another strong year going forward. And it's a massive market. You've heard us say, and Greg has said, maybe our biggest addressable market, and quite possibly so. It's a great fit for Quinn Street, and we've got a great team, and they're executing extraordinarily well, and we know what we need to do, and we get up and do it every day. So those are kind of the dimensions.

That's great. Thanks for the call there, Doug.

Thank you, AJ.

And we have no further questions at this time. Thank you everyone for taking the time to join Quinn Street Earnings Call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you. You may all disconnect.