QuinStreet, Inc.

expansion in fiscal Q1

and

in

full fiscal year 2025, which began on July 1. Turning to our outlook for fiscal Q1,

revenue is expected to be between $220 and $230

million, growth of

82% -over-year

at the midpoint of the range. Adjusted

EBITDA is expected to be $14 to $16 million, growth of over 1400%

at the midpoint of the range. As an initial, early, full fiscal year 2025 outlook, we

expect revenue of between $800 and $850

million, growth of 34

% -over-year at the midpoint of the range, and adjusted EBITDA of $50 to $60 million, growth of 170% year-over

-year at the midpoint of the range. We believe that there are opportunities to scale revenue and expand margins even further than that, and we will refine our outlook as the year progresses. With that, I will turn the call over to Greg. Thank you, Doug. Hello and thanks to everyone for joining us today. Q4 was a record revenue quarter for Quinn Street. All of our client verticals delivered -over-year growth in the quarter. For the June quarter, total revenue were 52% -over-year and was $198.3 million. Adjusted net income was $6.5 million or 11 cents per share, and adjusted EBITDA was $11 million. As Doug noted, the strong reramp of auto insurance continued in the June quarter. Auto insurance revenue ramped throughout the quarter, and the demand from carriers is broad-based. Additionally, our outlook for the vertical remains bullish as carriers continue to expand footprints and as the shift to digital performance marketing returns as the dominant long-term theme of the year is being triggered in driving channel and market growth. Looking at revenue by client vertical, our financial services client vertical represented 69% of Q4 revenue and grew 82% -over-year to $136.9 million, a record revenue quarter for that business. Our home services client vertical represented 30% of Q4 revenue and grew 12% -over-year to $59.3 million, also a record revenue quarter for the business. The other revenue was the remaining $2 million of Q4 revenue. Turning to our full fiscal year 2024 performance, we reported revenue of $613.5 million of 6% -over-year. Our financial services client vertical represented 64% of full fiscal year revenue and grew 3% -over-year to $392.6 million. Our home services client vertical represented 35% of full fiscal year revenue and grew 10% -over-year to $211.9 million. The other revenue represented the remaining $9 million of full fiscal year revenue. Adjusted EBITDA for full fiscal year 2024 was $20.4 million. Turning to the balance sheet, we closed the year with $50.5 million of cash and equivalents and no bank debt. In closing, our outlook on the business has never been brighter. We expect another record revenue quarter in fiscal Q1 with further margin expansion. We remain well positioned to benefit from the reramp of auto insurance client spending and are seeing continued momentum in our non-insurance client verticals. We expect strong total company revenue growth and adjusted EBITDA expansion driven by our diversified portfolio of client verticals. With that, I'll turn it over to the operator for Q&A. Ladies

and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. If you are using a speakerphone, please make sure to lift the handset before pressing any keys. Your first question comes from the line of John Campbell from Stevens. Please go ahead.

Hey guys, good afternoon.

Hey John. Hey, so obviously really solid results as far as the client demand. I mean, it's coming in, I think, way better than any of us expected. And on the FY25 revenue guidance, the high end of your range is actually above where consensus is for FY26. So, you know, it's tough to poke holes at it. But if I look, if I annualize the revenue this quarter, right, and this is not a seasonally strong quarter, which seems like it's pretty fair. It assumes that your midpoint of the revenue guidance is about 4% higher. I'm thinking you've probably got a lot of conservatism in there. But maybe if you could talk to if you expect a deceleration in home services or anything like that or anything non-auto, any kind of color that would be helpful.

Yeah, thank you, John. We do not expect a deceleration in any of our businesses. We expect all of our businesses to grow pretty strong double-digit rates this year. I would say that it's a couple of things. One is it's the first guide of the year, and it's early in the year. So we certainly don't want to get too far out ahead of ourselves. The other thing is the insurance ramp has been spectacular, largely foretold by us, as you would, I'm sure you know, given that we did get to the range on the year, as we had said we thought we might. And we just want to see how it settles out. We don't have any indications that it won't extend. But we want to see how it settles out as we and others work to regrow and optimize media to align better with the surge in demand, which is now what we're all working hard on and see if and as that has any impact at all. So I would say first guide of the year, you're going to find this pretty conservative when we go out with the first guide of the year. We do not expect any deceleration in any parts of the business, and we do expect auto insurance to continue to be very strong for the rest of the year and beyond. But we'd like to see how it settles out in terms of the precise numbers as as the the media side of the market catches up to the demand side of the market.

OK, that's helpful. And then maybe like a bigger picture industry, maybe strategic question. But, you know, I think a lot of a lot of your competitors are, you know, I think this is a broad based recovery. Everybody is feeling the strength right now. As far as the margin flow through, I think, you know, you talked a little bit about maybe last quarter talking about 10 percent margins for this year. But, you know, everybody is kind of chasing the same opportunity. It seems like at this point. So maybe a little bit lower margin, you have to obviously be there for your carrier partners. You can't go sit on the sidelines. So I totally understand it. But like, as I think about industry consolidation and Doug, you've been in this industry, I think you're maybe one of the godfathers or forefathers of this industry. Talk to me about what you feel like the market could where you feel like the market could head over time. It just feels like if you take some four or five of these competitors and make one or two, the whole customer acquisition cost, the margin opportunity is really there for you.

Yeah, John, it's a good question. Let me touch on the margin. First of all, we think that 10 percent is still where we're heading in terms of this particular quarter in the near term. The heavier mix of auto insurance doesn't help that because, as you know, auto insurance, given its scale, maturity, competitiveness comes in a little bit lower than average media margin percent. We expect that mix to fix itself over time as we continue to expand all the other businesses. And we expect the media, the margins and auto insurance actually get better from here. As we work to, as I indicated before, optimize the media against that surge in demand. Nobody had time to do that with the demand came so fast. What media was still available got bit up by everybody. And it's taken a little while for the other media channels to reinvest and regrow themselves to catch up. That's all good stuff for going forward. That's all tailwind stuff for going forward. In terms of the strategic context, I'm not there. There are arguments for and against consolidation. And a number of the larger clients want more than one player in the role that we play. And so it could be and that consolidating could be you could not get the main synergy you're hoping for, which is the hope for increase in media margin or gross margin through that combined market power. And that's something that I think is a big concern for anybody thinking about consolidating. There are a lot of other potential barriers to consolidation in terms of how different companies operate, what they're good at, whether or not those are synergistic or not, if they could be combined in a way that didn't destroy more value than it created. So I think it's a complicated question. It's not something I would count on in the foreseeable future. It's not something I would count out in the long term, depending on how these markets continue to evolve. But I think in any and all cases, we're going to be in really good shape. We are we could not feel better about the setup for Quinn Street.

All really

great points. I appreciate the color. Thank you, John.

Your

next question is from

the line of Zach Cummings from B. Riley Securities. Please go ahead.

Hi, good afternoon. Thanks for taking my questions and congrats on the strong into your fiscal 24. Just curious if you could give some more insight into where you're seeing strength among the carriers. I imagine there are some that are further along in terms of their recovery, but just curious of the trends that you're seeing and how you expect that to continue to play out in the coming quarters.

Yes, more broad based than ever in

terms of scale demand. We have several clients doing multiple millions of dollars per month with us. We have twice that number. So, you know, I'd say between five and ten clients, depending on how you count some of it, we're doing over in total doing over one at least a million dollars a month with us. And we're seeing it across the spectrum in terms of both direct carriers as well as more agent driven carriers. We're seeing it across the product mix, clicks, calls and leads, although we're dominantly clicks on the direct side. We have a lot more market to penetrate on the agency and lead side and call side of the industry. So, you know, a mix of carriers and a mix of products and a very healthy diverse mix and probably the healthiest, most diverse mix we've ever had, honestly, in terms of the breadth of the footprint is how I would mainly characterize it. I would say I don't see any. But the one other common theme, though, is that nobody's really back to their pre-COVID peak in terms of their footprint coverage, in terms of geo coverage and product coverage. So, for example, not many folks back in California yet. And a lot of the folks not covering big parts of Florida and or not covering Florida in a certain type of coverage range. And I can go there's lists, there's lists after lists after lists after lists. And then there are still carriers, significant carriers, who have not really moved dramatically from their lows of the past few years. So there's it's a good broad based mix. Still nobody back to their pre-COVID peak and still others not really up in the market. And one areas, one of the areas that's still lagging quite a bit is the independent agency channel because they've just now started to get product back, carriers coming back into the market. And so it will still take them a while to get staff back up, get set back up and have enough that product that they're in the right states to make their business work. So it's been it's broad based, but it's still not complete by any stretch.

Understood. And my one

other question really centers around home services. Can you talk about your preparations in terms of one to one consent regulations under the TCPA with those going into effect early next year?

Any

sort of indications of what kind of impact that could present to home services and how you're prepping to work through that?

That was a great question. And it is mainly for us, as you know, it's mainly a home services thing, somewhere between 20 and 30 percent of our total business would be impacted or applicable under the regulation. And just to make to kind of level set everybody, the FCC came out with a modification to the TCPA consent consumer consent rules that is slated to go into effect next January, which requires consumers to consent one to one for any for any service provider that intends to contact them either by phone or by text. And that is not current industry practices currently in leads. And this applies to mainly leads based on what I just said, as I'm sure you figured out. And so that means that any lead that's generated, the consumer has to opt in specifically opt in for that service provider contact. And that's new for the industry and the industry has got to adapt to it. A few things. First and foremost, we believe that is well accounted for in terms of any impact or any effects it will have in the plan and outlook we just gave you, including the fact that we think there's probably assuming we continue to execute well more than we can we can add to that over time. So that's probably the most important point. But the other points would be we've been involved and known about this likely regulation for quite some time. We have a good dialogue with the FCC. We understand and of course respect what their objectives are here. We may or may not have gone about it the same way. We think that the and the main reason is that it is probably going to have a pretty negative effect on smaller service providers because they won't have the name recognition with consumers. And so they'll be less likely to get an opt in. As you know, the street traffic's primarily and mainly in large providers, big branded players were dominated in our client base by the big brands. But we noticed coming. We've been looking at and testing and preparing for it for quite some time. And so I think that while there may be some disruption, which again is fully accounted for in our outlook, might likely to be a lot because we've had so much notice and we've been preparing for it. And it only affects applies to 20 to 30 percent of our business to the extent it has any impact. And I think in the longer run, and I don't mean 10 years, I think the next two to three to four years, it's a really good thing for the channel. And it's a really good thing for Queen Street. It's going to take out, clean up, get rid of a lot of the junk in the channel. There are a lot of folks who do nothing but buy and resell leads and contacts and column leads and overmatch consumers to to to to providers to the tune of, you know, more than five, 10 times. And that is not helpful to our consumer response. It's not helpful to the long term health of the channel. It's not helpful to the clients. We don't do any of that. And so that means that there's going to be a lot more market share and a lot more market demand for what we do. The other thing is it will it will likely make leads under that program much more highly effective and much more highly converting, which will make them more valuable. And nobody's better positioned in Queen Street to benefit from that. We are all about being close to our clients and right pricing to quality and to value. So, you know, it's going to be something we'll get to. It's kind of foreign or guide. And I think probably more than a counter for our guide. And we feel really good about the other side.

Understood. Well, thanks for taking my questions and pass the luck with the rest of the quarter. Thank you. Your next question comes from the line of Jason

from Craig. Please go ahead.

Great. Thank you guys. Good night. Results here. You included a comment about just the opportunity to scale revenue margins after curious that that's just a nod to conservatism in the numbers or are you kind of alluding to some strategic opportunities that you see over the course of the year?

Yes, we don't have a great connection. I think Rob got the gist of that. What was

that conservatism in the guide and any any upside based on our initiatives?

We do think there's a lot of potential upside based on our initiatives, Jason, both because of the current run rate, assuming that doesn't settle out differently and because of a lot of initiatives we've got working in all of the businesses. So while I think this is a fair outlook, given how early it is in the year and making sure that we we we think about, you know, guess what I might might facetiously call duration risk, I think in terms of in terms of where we would put it on the scale relative to what we have in our internal plans based on the execution against the initiatives, we'd say it's pretty conservative. Yeah.

Okay, apologies if I have a bad connection, I'm going to try to squeeze one more, but you just mentioned the focus on optimizing media supply. You just elaborate on the things you can do there.

You bet.

A few things. First of all, as I said, the demand came in so quickly that any discretionary media and in the words media that isn't proprietary to any one of us that are in this business was bid up very quickly because it was scarce, right? So that's the scarcity, simple, simple supply and demand happening that will soften as more media comes online. Folks that had had stopped investing in stopped in in either content or campaigns or other ways of driving media for auto insurance are very rapidly trying to rebuild that to catch up, including us, but also a lot of our partners. So as that catches up, that will cause media to be more right price to its true value rather than overpriced because it's scarce. So that's that's a big part of it. Another big part of it is that it has come in so quickly and in a narrower footprint than you would ever than you would expect. And across so many different clients, so suddenly that the normal process and procedure we go through to make sure that we adequately segment match and right price that media to the right carrier in the right way. We just haven't caught up. And that's a huge part of what we do to add value and create an extract surplus from the media. And so we have not had. We just haven't had time to do all of that yet. So those two dimensions are things that we will be doing and that we're hard at work doing right now.

Great. Thank you very much. Thank you, Jason. Your next question comes from the line of

James Goss from Barrington Research. Your line is now open.

All right. Thank you. I was wondering if any M&A opportunities seem to be on the horizon, either tuck in or otherwise. I know you made a couple that have material on both the financial and home services side of your business.

Yes,

we're always looking. I would say nothing imminent, but we are a natural consolidator of the small to mid-sized players on the media, client or technology side of our industry. And we will continue to be so. We've had very, very good results from our acquisitions, both small and large, including some of the smaller ones lately. But I would say we'll stay in market. We'll continue to be opportunistic. That's the number one thing we expect to use capital for over time. And it's just, but there's nothing imminent.

Okay. And if we move as we move toward the time when interest rate cuts seem likely to begin to materialize, are there certain verticals you expect or businesses even you expect will benefit more than others, either in financial or in services? And are there any new verticals to potentially target?

I think all the businesses are in pretty good position relative to interest rate cuts and, by the way, relative to a recession. We're very well positioned. If, in fact, there is a recession, I think latest estimates are 25 to 35% of that. I'd love to go business by business. I think we're in phenomenal shape relative to that. And by the way, we've grown through every past recession. So I think we're very well positioned for that in terms of interest rates. I don't expect that there's going to be a huge impact on any of our businesses from interest rates coming down. Here are some of the dynamics, though. In our personal loans business, we will likely see a resurgence of lending relative to debt and credit management. As you know, that had shifted the other way when interest rates went up. We'll see that go back. We're ready for that. We have great client coverage. We'll show just as I think we've seen in the past. I think we'll see a big, flexible and faster response as we did the one way when we go the other way. But that will be a dynamic. I think in home services, you'll go from you'll still have people that won't refi because I think 70% of mortgage holders are still have a still under 5% mortgage. So there won't be a lot of refi action going on. We're not in that business, but it may loosen up moving so more people may move. If they do, that usually does generate some home services activity. If they don't move or if they don't want to move because they're in too low mortgage, that usually generates some home services activity because they want to nest and they want to get their home ready for lots of things, including aging. And we are highly leveraged to aging in place as in several of our trades in home services. I don't think it will have much of an effect in credit cards and probably keep the industry healthy or because today the rates on balances are are prohibited. Even though that the credit card industry is very, very healthy right now, as you heard from the banks and and you would hear from us, I think in our banking business, which is our smallest independent client vertical, if you will, there'll be a shift around the different kinds of products. But I don't think that business will go away because it's you know, we're not going back to zero. And if it goes back to three, four percent, there's still going to be a place for CDs and savings accounts and money market funds and those kinds of things in the consumer mix. So, you know, as I and insurance, I just can't expect part of the any effect. I don't know that I can't think of any way that it would meaningfully impact in the range of likely happens. Anything I remind you, though, going back to the recession, auto insurance shopping typically increases during the recession. So I think I think we're you know, we've done a lot of scenario planning. We really like the setup for us and in whatever scenario you're looking at.

OK, maybe one last one. I wonder if you've talked sometimes of states that are avoiding adding new policies. Is there any exposure of note in your area, especially among larger states that could be important to you that are, you know, very negative and some of the new auto insurance that would be more appropriate to you?

I don't think so. We don't see anything like that. That would be material at all. And by the way, I forgot to answer part of your last question, Jim. And I apologize. You asked about new verticals and not explicitly new verticals. But what we will do when we have plans to do is continue to add new trades and home services. And some of those trades are, you know, many millions of dollars a year. So it's the effect is almost a new vertical. We expect that new segments in banking, including trading platforms and and other ways that people put their money to work and credit cards. We expect to add new segments of cards. We're really, really leveraged promotional miles based cards now. And there are a lot of other areas of cards where we can get a lot bigger in insurance where we're growing and will continue to grow a new new areas of insurance, including B2B and commercial insurance. Which is a big initiative for us. And so we won't and not none that we would at the at the big name level necessarily get into, though, you know, we didn't expect you then to personal loans when we did. So certainly will remain opportunistic, but we will continue to add big chunky legs to the business that create more footprint for growth in the future.

All right. Thanks for all your elaboration. Thank you, Jim. Your last question comes from the line of Chris Sakai

from Singular Research. Please go ahead.

Yes, hi, Doug and Greg. Hey, Chris. So on on your experience with these with prior auto insurance sort of turnarounds like we're seeing, how high and how much can it keep growing before it tails off?

Hey, Chris, it's a massive market and most of the spend is still offline. As far as I know, we still only have one significant one of the majors progressive just a couple of years ago. Five, he started spending more than half their marketing media budget online. If you look at the consumer shopping patterns and you allocate budget based on that, most carriers, most clients of any type should be spending 70 or more percent other budgets online. So the most advanced, most penetrated carrier still isn't there. And most of the others, none of the others that we know of expect set for some of the upstarts, which aren't that significant, are way, way, way below where they should be. So that's going to be this, you know, billions of dollars still to come in terms of just the natural shift over to to digital. And they find their way to digital performance marketplaces like ours when they do that, because that's where you want to be. And obviously, I don't think that's arguable anymore when you look at the patterns and you look at people like progressive. And so that could last us for many, many years to come. And then you've got you've got commercial insurance, which is super early and it's half the industry and you got other areas of insurance that you can tuck in. And so we ourselves participate in just really mainly clicks to direct carriers, which is one half of the pretty much one half of the overall P and C market. We have and we're and we have clicks and we have more clicks to more carriers because because the budget moving online, we have calls and leads, which are very early stages for us that apply to the market that we're ramping up very aggressively, growing very aggressively. We have the more agency driven clients which have not represented much for us historically and the will as we add the other products. And then we get to go into the agency side, as I indicated, which is half P and C market and the other half of the overall market is commercial. So, you know, we will be growing at good rates and insurance long past my leaving Quinn Street and I don't have any near term plans to leave Quinn

Street. OK, thanks for that answer. And then one question as well with I know there's a lot of fires in the West Coast and and storms and in the East Coast. Are you seeing an increase in revenue and online searching for different insurances because of that?

Not necessarily because we're seeing a lot of searching and shopping in California, but not a lot of carriers willing to cover California, both because of the risk and because California won't allow insurance to raise the rates big enough, fast enough. So there's a lot of wasted shopping, if you will, going on in California because consumers just aren't finding results. But more broadly, the main thing we're seeing relative to shopping and activity is record shopping levels because of inflation and consumers trying to find ways to save money. And because of the the increase in rates that they've seen over the past few years, you know, insurance rates, you probably know yourself, have gone up 30 to 50 percent after multiple years of compound rate increases. So there's a big surge in shopping nationwide because the rate increases and because of inflation. And that's only going to that's going to get bigger, we think, with as if and as the economy softens, more so consumers are more consumers are going to want to save money. So, you know, we expect consumer shopping to be high for a long time to come and and should be a tailwind to the industry for quite a while. And, you know, the rate down cycle, if it starts happening, then you're going to get more shopping again because then people are going to want to go see who lower the rates first where. So changes are good for us in insurance. And there's a lot of change right now.

OK, great. Thanks

for the answer. Thank you, Chris. There are no

further questions at this time. Thank you, everyone, for taking the time to join Queen Street's earnings call. Replay information is available on the earnings press release issued this afternoon. This concludes today's conference call. Thank you.

Thank you.