[Part I: Financial Information](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's financial statements, management's analysis, market risks, and internal controls [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the three months ended September 30, 2022, and 2021, including Balance Sheets, Statements of Operations, Statements of Comprehensive (Loss) Income, Statements of Stockholders' Equity, and Statements of Cash Flows, along with accompanying notes Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $88,382 | $96,439 | | Total current assets | $169,081 | $182,792 | | Total assets | $405,527 | $419,909 | | Total current liabilities | $104,377 | $109,579 | | Total liabilities | $122,271 | $133,909 | | Total stockholders' equity | $283,256 | $286,000 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net revenue | $143,593 | $159,608 | | Gross profit | $12,348 | $18,103 | | Operating (loss) income | $(4,897) | $3,938 | | Net (loss) income | $(4,517) | $3,093 | | Diluted net (loss) income per share | $(0.08) | $0.06 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,665 | $5,753 | | Net cash used in investing activities | $(3,037) | $(1,374) | | Net cash used in financing activities | $(10,681) | $(8,764) | | Net decrease in cash | $(8,057) | $(4,390) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies, revenue composition, acquisitions, goodwill, and segment information, including client concentration, revenue breakdown, and stock repurchase program details - A single client in the financial services vertical accounted for **25% of net revenue** for the three months ended September 30, 2022, up from 15% in the same period of 2021[25](index=25&type=chunk) Net Revenue by Vertical (in thousands) | Vertical | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Financial Services | $94,990 | $117,912 | | Home Services | $46,733 | $39,986 | | Other Revenue | $1,870 | $1,710 | | **Total net revenue** | **$143,593** | **$159,608** | - In April 2022, the Board authorized a new stock repurchase program of up to **$40.0 million**, with the company repurchasing and retiring **285,644 shares for $3.1 million** during the quarter, leaving approximately **$20.0 million available** for repurchases as of September 30, 2022[63](index=63&type=chunk) - The company operates as one reportable segment, with revenue from the United States at **$140.8 million** and international revenue at **$2.8 million** for the three months ended September 30, 2022[70](index=70&type=chunk)[72](index=72&type=chunk) [Management's Discussion and Analysis (MD&A)](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a 10% year-over-year revenue decrease to $143.6 million for the quarter, driven by a decline in Financial Services offset by Home Services growth, resulting in an operating loss due to increased expenses - The company's primary business model is delivering measurable and cost-effective marketing results to clients in the financial services and home services industries, typically in the form of qualified inquiries like clicks, leads, calls, or applications[76](index=76&type=chunk)[77](index=77&type=chunk) - Key business trends include challenges in the financial services vertical due to decreased advertising spending by auto insurance carriers, expansion in the home services vertical driven by the Modernize acquisition, and the impact of regulations like the TCPA[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[94](index=94&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Net revenue decreased 10% year-over-year to $143.6 million, primarily due to a 19% decline in Financial Services, partially offset by a 17% increase in Home Services, leading to a 32% drop in gross profit and a 22% rise in operating expenses Comparison of Operations (in thousands) | Metric | Q1 FY2023 (ended Sep 30, 2022) | Q1 FY2022 (ended Sep 30, 2021) | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $143,593 | $159,608 | (10%) | | Gross Profit | $12,348 | $18,103 | (32%) | | Operating Expenses | $17,245 | $14,165 | 22% | | Operating (Loss) Income | $(4,897) | $3,938 | N/A | - The decrease in net revenue was primarily due to a **19% decline in the Financial Services vertical**, as insurance carriers reduced spending to address profitability concerns, partially offset by a **17% increase in the Home Services vertical** from higher client budgets and growth initiatives[112](index=112&type=chunk) - Gross profit margin decreased from **11% to 9%** year-over-year, primarily due to increased personnel costs as a percentage of revenue[113](index=113&type=chunk) - Operating expenses increased by **22%**, driven by a **48% rise in Product Development costs** and a **10% rise in General and Administrative costs**, both primarily due to higher headcount and professional services fees[114](index=114&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with $88.4 million in cash, generated $5.7 million from operations, and used funds for investing activities, acquisition-related payments, and stock repurchases - As of September 30, 2022, principal sources of liquidity consisted of cash and cash equivalents of **$88.4 million**[120](index=120&type=chunk) Cash Flow Summary (in thousands) | Activity | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,665 | $5,753 | | Net cash used in investing activities | $(3,037) | $(1,374) | | Net cash used in financing activities | $(10,681) | $(8,764) | - During the quarter, the company used **$4.7 million to repurchase common stock** and **$5.5 million for post-closing payments related to acquisitions**[132](index=132&type=chunk) [Market Risk Disclosures](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is from fluctuations in interest rates on its cash and cash equivalents, which management deems immaterial due to short-term investments - The company's market risk is primarily related to interest rate fluctuations on its cash equivalents, with management believing there is no material exposure, as a hypothetical **1% decline in interest rates** would not have a material effect on the financial statements[137](index=137&type=chunk)[138](index=138&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2022, the principal executive and financial officers concluded that the company's disclosure controls and procedures were effective[139](index=139&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls, and the remote work environment due to COVID-19 has not had a material impact[140](index=140&type=chunk) [Part II: Other Information](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, key risk factors, stock repurchase activities, and other required disclosures [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings arising in the ordinary course of business, with management not expecting a material adverse effect on financial results - The company records a liability for legal proceedings when a loss is probable and the amount can be reasonably estimated, with management not believing any pending proceedings will have a material adverse effect based on current knowledge[142](index=142&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section details significant business risks, including client concentration, reliance on third-party media, online security threats, intense competition, macroeconomic impacts, and regulatory challenges - A substantial portion of revenue is generated from a limited number of clients, with **one client accounting for 25% of net revenue** for the three months ended September 30, 2022[145](index=145&type=chunk)[152](index=152&type=chunk) - The business depends on third-party media sources and Internet search companies, where changes in search engine algorithms or a decline in available media could harm revenue[145](index=145&type=chunk)[155](index=155&type=chunk)[160](index=160&type=chunk) - The company is exposed to online security risks, including data breaches and ransomware attacks, as it handles personally identifiable information, with failure to protect this data potentially leading to significant expenses and reputational damage[145](index=145&type=chunk)[156](index=156&type=chunk) - The business faces risks related to the COVID-19 pandemic and its aftermath, which could disrupt operations and have a material adverse impact on financial results through reduced client spending and supply chain disruptions[145](index=145&type=chunk)[233](index=233&type=chunk)[235](index=235&type=chunk) [Stock Repurchases](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activity, including the repurchase of 285,644 shares under a new $40.0 million program authorized in April 2022 Stock Repurchase Activity (Q1 FY2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2022 | 285,644 | $10.65 | | August 2022 | 0 | N/A | | September 2022 | 0 | N/A | | **Total** | **285,644** | **$10.65** | - The total cost for shares repurchased in the quarter was approximately **$3.1 million**, with approximately **$20.0 million remained available** for future repurchases under the authorized program as of September 30, 2022[63](index=63&type=chunk)[251](index=251&type=chunk) [Other Required Disclosures](index=52&type=section&id=Items%203-6) This concluding section confirms no defaults on senior securities, no mine safety disclosures, and lists exhibits filed with the report, along with the Chief Financial Officer's formal signature

QuinStreet Nasdaq: QNST POWERING THE PERFORMANCE MARKETING CHANNEL SEO/SEM MOBILE CALLS SOCIAl INVESTOR PRESENTATION QS Q4 FY22 UPDATE | CONFIDENTIAL Safe Harbor Statement These slides and the accompanying oral presentation contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties. All statements other than statements of historical facts in these slides and the accompanying oral presentation, including statements regardin ...

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Washington, D.C. 20549 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Form 10-K For the Fiscal Year Ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-34628 QuinStreet, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Delaware 77-0512121 (I.R.S. Employer Ide ...

Quinstreet, Inc. (NASDAQ:QNST) Q4 2022 Earnings Conference Call August 3, 2022 5:00 PM ET Company Participants Hayden Blair - Senior Manager, Finance & IR Douglas Valenti - Chairman, President & CEO Gregory Wong - CFO Conference Call Participants John Campbell - Stephens Inc. James Goss - Barrington Research Associates Joichi Sakai - Singular Research Operator Good day, and welcome to the QuinStreet Fourth Quarter and Fiscal Year 2022 Financial Results Conference Call. Today's conference is being recorded. ...

QuinStreet Nasdaq: QNST POWERING THE PERFORMANCE MARKETING CHANNEL SEO/SEM MOBILE CALLS SOCIAl INVESTOR PRESENTATION QS Q3 FY22 UPDATE | CONFIDENTIAL Safe Harbor Statement These slides and the accompanying oral presentation contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties. All statements other than statements of historical facts in these slides and the accompanying oral presentation, including statements regardin ...

QuinStreet, Inc. (NASDAQ:QNST) Q3 2022 Earnings Conference Call May 4, 2022 5:00 PM ET Company Participants Hayden Blair - IR Douglas Valenti - CEO Gregory Wong - CFO Conference Call Participants John Campbell - Stephens Jason Kreyer - Craig-Hallum Jim Goss - Barrington Research Chris Sakai - Singular Research Operator Good day, and welcome to the QuinnStreet Third Quarter Fiscal 2022 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over ...

or UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-34628 QuinStreet, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 77-0512121 (State or Other Jurisdiction of (I.R.S. Empl ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for QuinStreet, Inc. as of December 31, 2021, and for the three and six months ended December 31, 2021 and 2020, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with accompanying notes detailing accounting policies, revenue disaggregation, acquisitions, and other financial information Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | June 30, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $185,010 | $206,176 | | **Total Assets** | $427,591 | $449,515 | | **Total Current Liabilities** | $96,656 | $115,611 | | **Total Liabilities** | $128,946 | $154,367 | | **Total Stockholders' Equity** | $298,645 | $295,148 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Revenue | $125,331 | $134,968 | | Gross Profit | $9,777 | $14,531 | | Operating (Loss) Income | $(7,553) | $(231) | | Net (Loss) Income | $(5,628) | $466 | | Diluted (Loss) Income Per Share | $(0.10) | $0.01 | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended Dec 31, in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,687 | $23,137 | | Net cash used in investing activities | $(3,979) | $(23,284) | | Net cash used in financing activities | $(10,977) | $(4,642) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial data, covering revenue disaggregation, fair value measurements, acquisitions, goodwill, intangible assets, income taxes, lease obligations, and stock-based compensation plans Disaggregation of Revenue by Vertical (in thousands) | Vertical | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Financial Services | $90,158 | $104,154 | | Home Services | $33,820 | $29,190 | | Other Revenue | $1,353 | $1,624 | | **Total net revenue** | **$125,331** | **$134,968** | - On August 31, 2020, the company divested its education client vertical for **$20.0 million**, recognizing a gain of **$16.6 million** in the first quarter of fiscal year 2021[47](index=47&type=chunk) - The company completed the acquisition of Modernize, Inc. on July 1, 2020, for total consideration of **$70.4 million** to expand its home services vertical. It also acquired FC Ecosystem, LLC in March 2021 for total consideration of **$13.7 million** to broaden its financial services customer relationships[48](index=48&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - As of December 31, 2021, the company had goodwill of **$119.6 million** and net intangible assets of **$54.3 million**. **No goodwill impairments** were recorded during the six months ended December 31, 2021[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, covering key business trends, income statement analysis, liquidity, capital resources, and cash flow activities - The company's **primary financial objective is to create sustainable revenue growth at target profitability levels**, **rather than maximizing short-term profits**, by **investing in long-term market opportunities**[87](index=87&type=chunk)[88](index=88&type=chunk) - The **COVID-19 pandemic continues to create uncertainty**, particularly affecting credit-driven businesses like personal loans and credit cards, although some recovery has been observed[91](index=91&type=chunk) - One client in the financial services vertical **accounted for 13%** of net revenue for the three months ended December 31, 2021, **down from 24%** in the prior-year period[90](index=90&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) For the quarter ended December 31, 2021, net revenue **decreased 7%** year-over-year to **$125.3 million**, primarily due to a **13% decline** in the Financial Services vertical, partially offset by a **16% increase** in the Home Services vertical, with gross profit margin **decreasing from 11% to 8%** due to higher media and marketing costs, and operating expenses **increasing by 17%** due to a **$2.7 million** adjustment to contingent consideration Revenue Change by Vertical (Three Months Ended Dec 31, 2021 vs 2020) | Vertical | Change ($M) | Change (%) | Key Driver | | :--- | :--- | :--- | :--- | | Financial Services | $(14.0) | (13%) | Decreased spending by insurance carriers. | | Home Services | $4.6 | 16% | Increased client budgets and Modernize acquisition integration. | - Gross profit margin for the quarter **decreased** to **8%** from **11%** in the prior year, primarily due to **increased media and marketing costs**, **personnel costs**, and **depreciation and amortization** as a percentage of revenue[121](index=121&type=chunk) - General and administrative expenses **increased** by **$2.7 million** (**40%**) for the quarter, primarily due to a **$2.7 million adjustment to the fair value of contingent consideration** related to an acquisition[126](index=126&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, the company's **principal sources of liquidity** were **$115.0 million** in cash and cash equivalents and expected cash from operations, which management believes are **sufficient to meet anticipated cash requirements** for at least the next 12 months, with net cash from operations at **$19.7 million**, cash used in investing at **$4.0 million**, and cash used in financing at **$11.0 million** for the six months ended December 31, 2021 - The company's **principal sources of liquidity** as of December 31, 2021, consisted of **$115.0 million** in cash and cash equivalents[130](index=130&type=chunk) Cash Flow Summary (Six Months Ended Dec 31, in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,687 | $23,137 | | Net cash used in investing activities | $(3,979) | $(23,284) | | Net cash used in financing activities | $(10,977) | $(4,642) | - Cash used in financing activities for the six months ended Dec 31, 2021, included **$6.5 million** for **post-closing and contingent payments for acquisitions** and **$5.5 million** for **withholding taxes on restricted stock releases**[141](index=141&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's **primary market risk exposure is from interest rate fluctuations** on its cash and cash equivalents, which are invested in **money market funds**, and management believes this exposure is **not material** due to the **short-term nature of its investments** - The company's **main market risk is interest rate risk** related to its cash and cash equivalents held in **money market funds**[146](index=146&type=chunk)[147](index=147&type=chunk) - Due to the **short-term nature of its investments**, the company believes it does not have **material exposure** to changes in fair value from interest rate fluctuations. A **hypothetical 1% decline in interest rates** would **not have a material effect**[147](index=147&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the participation of the CEO and CFO, evaluated the company's **disclosure controls and procedures** and concluded they were **effective at a reasonable assurance level** as of December 31, 2021, with **no material changes to internal control over financial reporting** identified during the quarter - Based on an evaluation as of December 31, 2021, the **principal executive and financial officers** concluded that the company's **disclosure controls and procedures were effective at the reasonable assurance level**[148](index=148&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that **materially affected, or are reasonably likely to materially affect, such controls**[149](index=149&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is **subject to various legal proceedings and claims** arising in the **ordinary course of business**, but management does not believe the final outcome of any pending matters will have a **material adverse effect** on its future financial results - The company is **subject to various legal proceedings and claims** in the **ordinary course of business** but does not believe they will have a **material adverse effect** on its financial results[150](index=150&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks associated with investing in the company's common stock, including the **evolving nature of its industry**, **dependence on client spending and a limited number of major clients**, **reliance on third-party media sources and search engines**, **online security threats and data privacy regulations**, the **ongoing impact of the COVID-19 pandemic**, and **intense competition** - A substantial portion of revenue comes from a limited number of clients; one client **accounted for 14% of net revenue** for the six months ended December 31, 2021. The **loss of a major client could significantly harm the business**[160](index=160&type=chunk) - The company is exposed to **online data privacy and security risks**, including **unauthorized access to personally identifiable information**. **Failure to maintain adequate safeguards** could result in **significant expenses and reputational damage**[164](index=164&type=chunk)[165](index=165&type=chunk) - **Dependence on Internet search companies for visitor traffic** is a key risk. **Changes in search engine algorithms** have **harmed and could in the future harm website placements** and **reduce revenue**[168](index=168&type=chunk)[169](index=169&type=chunk) - The business is **subject to numerous complex and changing regulations**, such as the **TCPA (Telephone Consumer Protection Act)** and **CCPA (California Consumer Privacy Act)**, which could be **costly to comply with and expose the company to liability**[173](index=173&type=chunk)[175](index=175&type=chunk) - The **COVID-19 pandemic and its aftermath pose significant risks**, potentially **disrupting operations**, **reducing client marketing spend**, and **adversely impacting financial results and cash flows**[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported **no unregistered sales of its equity securities** and **no repurchases of its equity securities** during the period covered by the report - There were **no unregistered sales of equity securities** during the period[254](index=254&type=chunk) - The company **did not purchase any of its own equity securities** during the period[255](index=255&type=chunk) [Defaults Upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported **no defaults upon its senior securities** during the period - **None**[256](index=256&type=chunk) [Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is **not applicable to the company's business** - **Not Applicable**[257](index=257&type=chunk) [Other Information](index=56&type=section&id=Item%205.%20Other%20Information) The company reported **no other information for this period** - **None**[258](index=258&type=chunk) [Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the **2021 Employee Stock Purchase Plan**, **CEO and CFO certifications** pursuant to the Sarbanes-Oxley Act, and **Inline XBRL data files** - **Exhibits filed include** the **2021 Employee Stock Purchase Plan**, **CEO/CFO certifications** (Sections 302 and 906), and **various Inline XBRL documents**[260](index=260&type=chunk)

Financial Data and Key Metrics Changes - Revenue in Q2 2022 declined 7% year-over-year to $125.3 million [25] - GAAP net loss was $5.6 million or $0.10 per share, while adjusted net income was $3.2 million or $0.06 per share [25] - Adjusted EBITDA was $5.6 million [25] - Cash balance increased by $6 million, closing the quarter with $115 million in cash and equivalents [29] Business Line Data and Key Metrics Changes - Financial Services client vertical represented 72% of Q2 revenue, declining 13% year-over-year to $90.2 million [26] - Non-insurance client verticals saw revenue growth of 36% year-over-year in the December quarter [21] - Home Services client vertical represented 27% of Q2 revenue, growing 16% year-over-year to $33.8 million [28] Market Data and Key Metrics Changes - Insurance client spending rebounded strongly in January, up almost 80% over December, but faced significant cuts again in February [8][10] - The auto and home insurance market is experiencing increased claim frequencies and higher repair costs due to supply chain issues and inflation [12][14] Company Strategy and Development Direction - The company aims to grow revenue and generate between $40 million and $45 million of adjusted EBITDA for the fiscal year [11] - Focus on expanding core trades in Home Services and scaling growth rates in early development stages [28] - Continued investment in QRP, expecting revenue to exceed $1 million per month by June [22] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over the reduced spending from insurance clients but remains optimistic about medium to long-term growth [10][12] - The transition period in the auto and home insurance market is expected to last around six months, with a return to normalized spending anticipated between late spring and early fall [16][19] - Management highlighted strong momentum in non-insurance verticals and the potential for increased consumer shopping activity in auto insurance [20][19] Other Important Information - The company is open to considering buybacks if there is a significant dislocation between business performance and investor sentiment [59] - A one-time charge of approximately $2.7 million was taken to adjust the fair value of an earn-out associated with a recent acquisition [90] Q&A Session Summary Question: Can you clarify the cadence of spending from insurance clients? - Management confirmed that spending was strong in January but faced cuts again in February due to changing loss ratios and economic conditions [36][38] Question: How do you see the concentration of spending changes across carriers? - Management indicated that the spending cuts are widespread across various carriers, not isolated to a few [42][44] Question: What strategies will the company employ to gain market share during this period? - Management plans to deepen relationships with carriers and continue investing in QRP to assist agencies during this transition [48][50] Question: What are the expectations for non-insurance revenue growth? - Management expects credit-driven verticals to return to pre-pandemic levels soon, with strong growth rates anticipated [62][64] Question: How does the company view future investments and acquisitions? - The company prioritizes finding opportunities outside the insurance vertical to boost growth in other areas [84]

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and detailed notes for QuinStreet, Inc [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight decrease in total assets and liabilities, with a modest increase in stockholders' equity | Metric | Sep 30, 2021 (in thousands) | Jun 30, 2021 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Assets | $441,933 | $449,515 | $(7,582) | | Total Liabilities | $142,238 | $154,367 | $(12,129) | | Total Stockholders' Equity | $299,695 | $295,148 | $4,547 | - Cash and cash equivalents decreased from **$110.3 million** at June 30, 2021, to **$105.9 million** at September 30, 2021[8](index=8&type=chunk) - **Goodwill remained constant** at $117.8 million for both periods[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net revenue increased 15% year-over-year, but net income fell significantly due to a prior-year gain on divestitures | Metric | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net revenue | $159,608 | $139,269 | 15% | | Cost of revenue | $141,505 | $122,231 | 16% | | Gross profit | $18,103 | $17,038 | 6% | | Operating income | $3,938 | $2,923 | 35% | | Income before income taxes | $3,669 | $19,295 | (81%) | | Net income | $3,093 | $14,681 | (79%) | | Basic EPS | $0.06 | $0.28 | (79%) | | Diluted EPS | $0.06 | $0.27 | (78%) | - Other income, net, was $4 thousand in Q1 FY2022 compared to **$16.7 million in Q1 FY2021**, which included a gain on divestitures[10](index=10&type=chunk) - Stock-based compensation expense included in cost of revenue and operating expenses totaled **$4.9 million** in Q1 FY2022, up from $4.8 million in Q1 FY2021[10](index=10&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income matched net income at $3.1 million, a significant decrease from $14.6 million in the prior year | Metric | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net income | $3,093 | $14,681 | | Foreign currency translation adjustment | $0 | $(38) | | Total other comprehensive loss | $0 | $(38) | | Comprehensive income | $3,093 | $14,643 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased to $299.7 million, driven by net income and stock-based compensation expense | Metric | Jun 30, 2021 (in thousands) | Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Balances at period beginning | $295,148 | $295,148 | | Issuance of common stock upon exercise of stock options | - | $395 | | Stock-based compensation expense | - | $4,906 | | Withholding taxes related to release of restricted stock | - | $(3,847) | | Net income | - | $3,093 | | Balances at period end | $295,148 | $299,695 | - Shares issued and outstanding increased from 53,786,363 at June 30, 2021, to **54,208,614** at September 30, 2021[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased significantly, while financing activities used more cash for acquisitions | Cash Flow Activity | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,753 | $17,558 | | Net cash used in investing activities | $(1,374) | $(20,707) | | Net cash used in financing activities | $(8,764) | $(2,055) | | Net decrease in cash, cash equivalents and restricted cash | $(4,390) | $(5,265) | | Cash, cash equivalents and restricted cash at end of period | $105,943 | $102,258 | - The decrease in operating cash flow was driven by **lower net income** and a **$7.1 million** net decrease in cash from changes in working capital, primarily a $9.0 million decrease in accrued liabilities[15](index=15&type=chunk)[130](index=130&type=chunk) - Investing activities in 2020 included significant cash used for the **Modernize acquisition ($40.3 million)** and proceeds from divestitures ($20.7 million), which were not present in 2021[15](index=15&type=chunk)[135](index=135&type=chunk) - Financing activities in 2021 included **$5.3 million in post-closing acquisition payments**, a substantial increase from $0.3 million in 2020[15](index=15&type=chunk)[137](index=137&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, revenue disaggregation, acquisitions, and other key financial information [Note 1. The Company](index=8&type=section&id=Note%201.%20The%20Company) QuinStreet is a leader in performance marketplaces for financial and home services, focused on customer acquisition - Incorporated in California in April 1999 and reincorporated in Delaware in December 2009[17](index=17&type=chunk) - Focuses on **financial services and home services**, having divested the education client vertical[17](index=17&type=chunk) - The majority of the Company's operations and revenue are in **North America**[17](index=17&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=8&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the basis of presentation, use of estimates, and adoption of new accounting standards - Interim financial statements are unaudited and prepared in accordance with **GAAP and SEC rules** for interim reporting[19](index=19&type=chunk) - Management uses estimates and assumptions for financial reporting, including **revenue recognition, stock-based compensation, goodwill, and income taxes**[21](index=21&type=chunk) | Metric | Sep 30, 2021 (in millions) | Jun 30, 2021 (in millions) | | :--- | :--- | :--- | | Allowance for credit losses | $0.1 | $0.1 | | Revenue reserve | $1.1 | $0.9 | | Total allowance for credit losses and revenue reserve | $1.2 | $1.0 | - One client accounted for **15% of net revenue** for the three months ended September 30, 2021 (down from 26% in 2020), and one additional client accounted for 15% of net accounts receivable[26](index=26&type=chunk) - Adoption of ASU 2019-12 (Income Taxes) as of July 1, 2021, had **no material impact** on the condensed consolidated financial statements[29](index=29&type=chunk) [Note 3. Revenue](index=10&type=section&id=Note%203.%20Revenue) Net revenue grew to $159.6 million, driven by strong performance in financial and home services verticals | Vertical | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Financial Services | $117,912 | $94,213 | | Home Services | $39,986 | $33,469 | | Other Revenue | $1,710 | $0 | | Divested Business | $0 | $11,587 | | Total net revenue | $159,608 | $139,269 | - Financial Services revenue **increased by 25%** year-over-year, and Home Services revenue **increased by 19%** year-over-year[31](index=31&type=chunk) - The former education client vertical, divested in Q1 FY2021, contributed **$11.6 million in revenue** in Q1 FY2020[31](index=31&type=chunk) [Note 4. Net Income per Share](index=10&type=section&id=Note%204.%20Net%20Income%20per%20Share) Basic and diluted net income per share decreased significantly to $0.06, reflecting lower net income | Metric | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Net income (in thousands) | $3,093 | $14,681 | | Basic EPS | $0.06 | $0.28 | | Diluted EPS | $0.06 | $0.27 | | Weighted-average shares (Basic, in thousands) | 53,993 | 52,492 | | Weighted-average shares (Diluted, in thousands) | 55,789 | 54,269 | - Dilutive securities included stock options (575 thousand shares) and restricted stock units (1,221 thousand shares) for Q1 FY2022[35](index=35&type=chunk) [Note 5. Fair Value Measurements](index=11&type=section&id=Note%205.%20Fair%20Value%20Measurements) The Company categorizes fair value measurements into three levels, with contingent consideration as Level 3 | Instrument | Level 1 (Sep 30, 2021) | Level 2 (Sep 30, 2021) | Level 3 (Sep 30, 2021) | Total (Sep 30, 2021) | Total (Jun 30, 2021) | | :--- | :--- | :--- | :--- | :--- | :--- | | Money market funds | $1,670 | $0 | $0 | $1,670 | $1,670 | | Post-closing payments related to acquisitions | $0 | $29,728 | $0 | $29,728 | $34,954 | | Contingent consideration related to acquisitions | $0 | $0 | $5,432 | $5,432 | $5,432 | | Total Liabilities | $0 | $29,728 | $5,432 | $35,160 | $40,386 | - Post-closing payments decreased from **$34.9 million to $29.7 million**, while contingent consideration remained stable at $5.4 million[40](index=40&type=chunk) - Contingent consideration is valued using the **real options technique**, incorporating projected net revenue, gross margin, volatility, and discount rates[43](index=43&type=chunk) [Note 6. Divestitures](index=13&type=section&id=Note%206.%20Divestitures) The Company divested its education client vertical for $20.0 million, recognizing a gain of $16.6 million - Divestiture of education client vertical completed on **August 31, 2020**[46](index=46&type=chunk) - Total cash consideration for divestiture was **$20.0 million**[46](index=46&type=chunk) - Recognized a **gain of $16.6 million** from the divestiture within other income, net[46](index=46&type=chunk) [Note 7. Acquisitions](index=13&type=section&id=Note%207.%20Acquisitions) The Company completed several acquisitions in fiscal 2021 to expand its financial and home services verticals - **Modernize, Inc.** was acquired on July 1, 2020, for $43.9 million cash upfront and $27.5 million in post-closing payments, broadening the home services client vertical[47](index=47&type=chunk) | Asset Type | Estimated Fair Value (in thousands) | Estimated Useful Life | | :--- | :--- | :--- | | Customer/publisher/advertiser relationships | $21,300 | 9 years | | Content | $800 | 1.5 years | | Website/trade/domain names | $5,300 | 15 years | | Acquired technology and others | $6,300 | 4 years | | Total | $33,700 | | - **FC Ecosystem, LLC (FCE)** was acquired on March 1, 2021, for $7.0 million cash upfront, $4.0 million in post-closing payments, and up to $9.0 million in contingent consideration, broadening financial services relationships[51](index=51&type=chunk) - **Mayo Labs, LLC** was acquired on February 17, 2021, for $2.0 million cash upfront and $2.0 million in post-closing payments, serving the financial services client vertical[54](index=54&type=chunk) | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | | :--- | :--- | :--- | | Net revenue | $142,303 | $145,333 | | Net income | $15,778 | $2,606 | [Note 8. Goodwill and Intangible Assets, Net](index=16&type=section&id=Note%208.%20Goodwill%20and%20Intangible%20Assets%2C%20Net) Goodwill remained stable at $117.8 million with no impairments, while intangible assets decreased due to amortization - Goodwill was **$117.8 million** as of September 30, 2021, and June 30, 2021, with **no impairments recorded** during the three months ended September 30, 2021[58](index=58&type=chunk) | Asset Type | Sep 30, 2021 (Net Carrying Amount, in thousands) | Jun 30, 2021 (Net Carrying Amount, in thousands) | | :--- | :--- | :--- | | Customer/publisher/advertiser relationships | $45,035 | $47,345 | | Content | $132 | $266 | | Website/trade/domain names | $6,662 | $6,799 | | Acquired technology and others | $4,332 | $4,767 | | Total | $56,161 | $59,177 | - Amortization of intangible assets was **$3.0 million** for the three months ended September 30, 2021[59](index=59&type=chunk) | Fiscal Year Ending June 30, | Amortization (in thousands) | | :--- | :--- | | 2022 (remaining nine months) | $8,350 | | 2023 | $10,500 | | 2024 | $9,604 | | 2025 | $7,622 | | 2026 | $5,197 | | Thereafter | $14,888 | | Total | $56,161 | [Note 9. Income Taxes](index=17&type=section&id=Note%209.%20Income%20Taxes) The provision for income taxes was $0.6 million, significantly lower than the $4.6 million in the prior year | Metric | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Provision for income taxes | $(576) | $(4,614) | - **No significant valuation allowance adjustments** were recorded as of September 30, 2021[61](index=61&type=chunk) - An ownership change under **IRC Section 382** could limit the Company's ability to utilize net operating losses and other tax attributes[62](index=62&type=chunk) [Note 10. Leases](index=17&type=section&id=Note%2010.%20Leases) The Company has operating leases for office facilities with a total lease expense of $1.6 million for the quarter | Expense Type | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Operating lease expense | $1,301 | $1,308 | | Short-term lease expense | $169 | $253 | | Variable lease expense | $120 | $148 | | Total lease expense | $1,590 | $1,709 | - Weighted average remaining lease term for operating leases is **2.5 years** (down from 3.4 years in 2020)[66](index=66&type=chunk) - Weighted average discount rate for operating leases is **5.0%**[66](index=66&type=chunk) | Fiscal Year Ending June 30, | Amount (in thousands) | | :--- | :--- | | 2022 (remaining nine months) | $4,658 | | 2023 | $5,763 | | 2024 | $3,663 | | 2025 | $721 | | 2026 | $32 | | Total minimum lease payments | $14,837 | | Present value of net minimum lease payments | $12,738 | [Note 11. Commitments and Contingencies](index=18&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) The Company has indemnification agreements and a letter of credit, but believes related liabilities are not material - Indemnification agreements for officers and directors have unlimited maximum potential payments, but **insurance limits exposure**, making the estimated fair value not material[68](index=68&type=chunk) - Indemnification provisions with clients are generally limited, and the **estimated fair value is not material**[69](index=69&type=chunk) - A **$0.5 million letter of credit** serves as collateral for the Company's corporate headquarters' operating lease[70](index=70&type=chunk) [Note 12. Stockholders' Equity](index=19&type=section&id=Note%2012.%20Stockholders'%20Equity) A stock repurchase program is authorized, with 903,636 shares remaining available, but no shares were repurchased - Stock repurchase program authorized for up to **966,000 outstanding shares** of common stock[72](index=72&type=chunk) - **903,636 shares remain available** for repurchase as of September 30, 2021[72](index=72&type=chunk) - **No repurchases were made** under this program during the three months ended September 30, 2021[72](index=72&type=chunk) [Note 13. Stock Benefit Plans](index=19&type=section&id=Note%2013.%20Stock%20Benefit%20Plans) The Company grants various equity awards under its incentive plans, valued using the Black-Scholes model - 23,125,612 shares were reserved and **13,385,818 shares were available** for issuance under the 2010 Incentive Plan as of September 30, 2021[75](index=75&type=chunk) - Stock options are granted with an exercise price equal to the closing price of the Company's common stock on the grant date and valued using the **Black-Scholes option-pricing model**[76](index=76&type=chunk) | Metric | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Expected term (in years) | 4.5 | 4.5 | | Expected volatility | 58% | 62% | | Expected dividend yield | — | — | | Risk-free interest rate | 0.8% | 0.3% | | Grant date fair value | $8.66 | $5.81 | [Note 14. Segment Information](index=20&type=section&id=Note%2014.%20Segment%20Information) The Company operates as one reportable segment, with the majority of revenue and assets in the United States - The Company operates as **one reportable segment**, as the chief operating decision maker reviews financial information on a consolidated basis[77](index=77&type=chunk) | Geographic Area | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | United States | $154,483 | $136,413 | | International | $5,125 | $2,856 | | Total net revenue | $159,608 | $139,269 | | Geographic Area | Sep 30, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :--- | :--- | :--- | | United States | $7,129 | $6,672 | | International | $204 | $177 | | Total property and equipment, net | $7,333 | $6,849 | - All other intangible assets, net, are attributed to the **United States**[78](index=78&type=chunk)[80](index=80&type=chunk) [Note 15. Subsequent Events](index=20&type=section&id=Note%2015.%20Subsequent%20Events) Stockholders approved the 2021 Employee Stock Purchase Plan, with the first offering period in Q3 FY2022 - The Company's **2021 Employee Stock Purchase Plan** was approved by stockholders on October 25, 2021[79](index=79&type=chunk) - The first offering period of the plan is expected to commence in the **third quarter of fiscal year 2022**[79](index=79&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and outlook [Management Overview](index=21&type=section&id=Management%20Overview) QuinStreet is a leader in performance marketplaces for financial and home services, focused on customer acquisition - QuinStreet is a leader in performance marketplaces and technologies for the **financial services and home services industries**, specializing in customer acquisition[83](index=83&type=chunk) - Revenue is primarily derived from fees earned through the delivery of qualified inquiries such as **clicks, leads, calls, applications, or customers**[86](index=86&type=chunk) - The financial services client vertical represented **74% of net revenue** for the three months ended September 30, 2021 (up from 68% in 2020)[87](index=87&type=chunk) - One client in the financial services client vertical accounted for **15% of net revenue** for the three months ended September 30, 2021 (down from 26% in 2020)[88](index=88&type=chunk) [Trends Affecting our Business](index=22&type=section&id=Trends%20Affecting%20our%20Business) Key trends include COVID-19 impacts, client vertical dynamics, acquisitions, media sourcing, and regulations - The Company continues to monitor the impacts from the **COVID-19 pandemic**, including potential reductions in client spending, media availability, and consumer spending[89](index=89&type=chunk) - The financial services client vertical benefited from enhanced product sets, while the home services vertical expanded due to the **Modernize acquisition**[90](index=90&type=chunk)[91](index=91&type=chunk) - **Acquisitions are an important element of corporate strategy**, while divestitures narrow focus to best-performing businesses[92](index=92&type=chunk)[93](index=93&type=chunk) - Challenges include finding or creating **high-quality targeted media cost-effectively** due to consolidation, search engine algorithm changes, and increased competition[94](index=94&type=chunk) - Results are subject to **significant seasonal fluctuation**, with Q2 typically weaker and Q3 generally stronger[95](index=95&type=chunk) - The business is affected by **federal, state, and industry-based regulations**, particularly in financial services, which can cause fluctuations in business volume and mix[97](index=97&type=chunk)[98](index=98&type=chunk) [Basis of Presentation](index=24&type=section&id=Basis%20of%20Presentation) This section details the recognition and classification of key items in the financial statements - Net revenue is generated primarily from fees earned through the delivery of **qualified inquiries** in financial services and home services client verticals[101](index=101&type=chunk) - Cost of revenue consists primarily of **media and marketing costs**, personnel costs, and amortization of intangible assets[102](index=102&type=chunk) - Operating expenses are classified into **product development, sales and marketing, and general and administrative**, primarily comprising personnel costs[103](index=103&type=chunk) - Interest and other income, net, includes interest expense, interest income, and non-operating items like **gains/losses on divestitures**[106](index=106&type=chunk) [Critical Accounting Policies, Estimates and Judgments](index=25&type=section&id=Critical%20Accounting%20Policies%2C%20Estimates%20and%20Judgments) Financial statement preparation requires significant management estimates, particularly for revenue and goodwill - Critical accounting policies involve significant judgments, assumptions, and estimates related to **revenue recognition, valuation of goodwill, and stock-based compensation**[114](index=114&type=chunk) - Management evaluates these estimates based on historical and anticipated results, but **actual results could differ significantly**[21](index=21&type=chunk)[110](index=110&type=chunk) - There have been **no material changes** to the Company's significant accounting policies as of and for the three months ended September 30, 2021[23](index=23&type=chunk)[113](index=113&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Net revenue grew 15%, but net income fell 79% due to a prior-year gain and higher media costs | Metric | Sep 30, 2021 (in thousands) | % of Revenue (2021) | Sep 30, 2020 (in thousands) | % of Revenue (2020) | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $159,608 | 100.0% | $139,269 | 100.0% | | Cost of revenue | $141,505 | 88.7% | $122,231 | 87.8% | | Gross profit | $18,103 | 11.3% | $17,038 | 12.2% | | Operating income | $3,938 | 2.5% | $2,923 | 2.1% | | Income before income taxes | $3,669 | 2.3% | $19,295 | 13.9% | | Net income | $3,093 | 1.9% | $14,681 | 10.5% | - Net revenue increased by **$20.3 million, or 15%**, primarily due to a 25% increase in financial services revenue and a 19% increase in home services revenue[117](index=117&type=chunk) - Cost of revenue increased by **$19.3 million, or 16%**, primarily driven by increased media and marketing costs associated with higher revenue volumes[119](index=119&type=chunk) - **Gross profit margin decreased from 12% to 11%** due to increased media and marketing costs as a percentage of revenue[119](index=119&type=chunk) | Expense Type | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Product development | $4,625 | $4,891 | (5%) | | Sales and marketing | $2,906 | $2,643 | 10% | | General and administrative | $6,634 | $6,581 | 1% | | Total Operating expenses | $14,165 | $14,115 | 0% | - Provision for income taxes decreased from **$4.6 million** in 2020 to **$0.6 million** in 2021[125](index=125&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is sufficient, with $105.9 million in cash, despite a significant year-over-year decrease in operating cash flow - As of September 30, 2021, principal sources of liquidity consisted of **cash and cash equivalents of $105.9 million** and cash expected to be generated from future operations[126](index=126&type=chunk) - The Company believes its principal sources of liquidity will be **sufficient to satisfy anticipated cash requirements** through at least the next 12 months[128](index=128&type=chunk) | Cash Flow Activity | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,753 | $17,558 | | Net cash used in investing activities | $(1,374) | $(20,707) | | Net cash used in financing activities | $(8,764) | $(2,055) | - Cash provided by operating activities **decreased from $17.6 million in 2020 to $5.8 million in 2021**, primarily due to lower net income and changes in working capital[129](index=129&type=chunk)[130](index=130&type=chunk) - Cash used in investing activities decreased from $20.7 million in 2020 (due to the Modernize acquisition) to **$1.4 million in 2021**[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - Cash used in financing activities increased from $2.1 million in 2020 to **$8.8 million in 2021**, mainly due to $5.3 million in post-closing acquisition payments[136](index=136&type=chunk)[137](index=137&type=chunk) - The Company did not have any **material off-balance sheet arrangements** during the periods presented[139](index=139&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company's primary market risk is interest rate fluctuations, but this exposure is not considered material - The Company's market risk exposure is primarily the result of **fluctuations in interest rates**[142](index=142&type=chunk) - Investments in cash equivalents are short-term, limiting **material exposure to changes in interest rates**[143](index=143&type=chunk) - A hypothetical decline of 1% in the interest rate on investments would **not have a material effect** on the condensed consolidated financial statements[143](index=143&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes identified - Management concluded that disclosure controls and procedures were **effective at the reasonable assurance level** as of September 30, 2021[144](index=144&type=chunk) - **No material changes** in internal control over financial reporting were identified during the period covered by the report[145](index=145&type=chunk) - The Company has not experienced any material impact to its internal controls over financial reporting despite employees working remotely due to the **COVID-19 pandemic**[145](index=145&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The Company does not believe any pending legal proceedings will have a material adverse effect on its financial results - The Company may become involved in legal proceedings and claims arising in the **ordinary course of its business**[146](index=146&type=chunk) - The Company records a liability when it believes that it is **probable that a loss has been incurred** and the amount can be reasonably estimated[146](index=146&type=chunk) - Based on current knowledge, the Company does not believe that any pending or threatened legal proceedings will have a **material adverse effect** on its future financial results[146](index=146&type=chunk) [ITEM 1A. RISK FACTORS](index=31&type=section&id=Item%201A.%20Risk%20Factors) Investing in the Company's stock involves high risk related to its industry, client dependence, and regulations [Summary of Risks Associated with Our Business](index=31&type=section&id=Summary%20of%20Risks%20Associated%20with%20Our%20Business) Key risks include operating in a developing industry, client concentration, and reliance on third-party media - The Company operates in an industry that is **still developing** and has a relatively new business model that is continually evolving[149](index=149&type=chunk) - A reduction in online marketing spend by clients or a loss of clients may seriously harm the business, as a **substantial portion of revenue is generated from a limited number of clients**[149](index=149&type=chunk) - The Company depends on **third-party media sources**, including strategic partners, for a significant portion of its visitors[149](index=149&type=chunk) - The Company is exposed to **online security risks**, particularly given that it gathers, transmits, and stores personally identifiable information[149](index=149&type=chunk) - The Company depends upon **Internet search companies** to direct a significant portion of visitors to its websites, and changes in search engine algorithms could harm placements[149](index=149&type=chunk) - The Company faces risks and uncertainties related to the **COVID-19 pandemic** and its aftermath, which could significantly disrupt operations[149](index=149&type=chunk) [Risks Related to Our Business and Industry](index=32&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Risks include adapting to a rapidly evolving industry, economic changes, intense competition, and managing growth - The Company's still developing industry and relatively new business model and products create **risks and uncertainties**[150](index=150&type=chunk)[152](index=152&type=chunk) - A reduction in online marketing spend by clients could seriously harm the business, especially given **reliance on a limited number of clients**[154](index=154&type=chunk)[156](index=156&type=chunk) - Dependence on third-party media sources means any **decline in supply or increase in price** could cause revenue to decline or costs to increase[159](index=159&type=chunk) - Exposure to **online data privacy and security risks** could lead to significant expenses and reputational damage[160](index=160&type=chunk)[161](index=161&type=chunk) - Reliance on Internet search companies means **changes in search engine algorithms** could harm website placements and reduce visitor traffic[164](index=164&type=chunk)[165](index=165&type=chunk) - Negative changes in economic conditions and the regulatory environment (e.g., **CCPA, GDPR, TCPA**) may have a material adverse impact on revenue and growth[168](index=168&type=chunk)[169](index=169&type=chunk)[171](index=171&type=chunk) - The Company's results of operations have fluctuated and may do so in the future due to factors including **seasonality and changes in client volume**[176](index=176&type=chunk) - **Failure to effectively manage future growth** or scale technology infrastructure could impair operating performance and lead to client loss[188](index=188&type=chunk)[189](index=189&type=chunk)[191](index=191&type=chunk) - **Acquisitions, investments, and divestitures** could complicate operations, result in dilution, and other harmful consequences[195](index=195&type=chunk)[197](index=197&type=chunk)[199](index=199&type=chunk) - Limitations restricting the ability to market to users or collect data (e.g., **cookies, email**) could significantly diminish the value of services and adversely affect revenue[209](index=209&type=chunk)[211](index=211&type=chunk) [Risks Related to Our Intellectual Property](index=46&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The Company's competitive position relies on protecting its intellectual property from infringement and lawsuits - If the Company does not adequately protect its **intellectual property rights**, its competitive position and business may suffer[213](index=213&type=chunk) - Third-parties may sue the Company for **intellectual property infringement**, which could require significant costs to defend or settle[215](index=215&type=chunk)[216](index=216&type=chunk) - As a creator and distributor of Internet content, the Company faces **potential liability and expenses** for legal claims based on the nature and content of materials it distributes[219](index=219&type=chunk) [Risks Related to the Ownership of Our Common Stock](index=47&type=section&id=Risks%20Related%20to%20the%20Ownership%20of%20Our%20Common%20Stock) The stock price has been volatile and may fluctuate due to financial results, analyst opinions, and market factors - The trading price of the Company's common stock has been **volatile** and may continue to fluctuate significantly[220](index=220&type=chunk)[222](index=222&type=chunk) - If securities or industry analysts do not publish research or issue adverse opinions, the **stock price and trading volume could decline**[224](index=224&type=chunk) - Directors and executive officers, with **substantial influence over the Company**, could delay or prevent a change in corporate control[225](index=225&type=chunk)[227](index=227&type=chunk) - The stock repurchase program may not enhance long-term stockholder value and could **increase stock price volatility** or diminish cash reserves[228](index=228&type=chunk) - The Company may be subject to **short selling strategies** that could drive down the market price of its common stock[229](index=229&type=chunk) - **Failure to maintain proper and effective internal controls** could impair the ability to produce accurate financial statements or prevent fraud[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) - The Company may be required to record a significant charge to earnings if its **goodwill or intangible assets become impaired**[233](index=233&type=chunk)[234](index=234&type=chunk) - Provisions in the Company's charter documents and Delaware law could **discourage a takeover** that stockholders may consider favorable[235](index=235&type=chunk)[237](index=237&type=chunk) - The Company does not currently intend to pay dividends, meaning return on investment will depend on **stock price appreciation**[236](index=236&type=chunk) [General Risk Factors](index=52&type=section&id=General%20Risk%20Factors) General risks include the COVID-19 pandemic, counterparty risks, and reliance on key management personnel - The **COVID-19 pandemic** poses significant risks, potentially disrupting operations, decreasing consumer demand, and reducing client budgets[239](index=239&type=chunk)[240](index=240&type=chunk)[243](index=243&type=chunk) - The Company is subject to risks with respect to **counterparties**, whose failure to meet obligations could cause losses or costly litigation[245](index=245&type=chunk) - Success depends on the continued services of the **management team and other key employees**; the loss of one or more could harm the business[246](index=246&type=chunk) - **Damage to the Company's reputation** could harm its business, financial condition, and results of operations[247](index=247&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) - The Company may need **additional capital** in the future to meet financial obligations or pursue business objectives[252](index=252&type=chunk) - Conducting business in **international markets** presents additional risks and challenges, including adapting to foreign preferences and navigating laws[253](index=253&type=chunk)[254](index=254&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were made, and no stock repurchases occurred during the quarter - **No unregistered sales** of equity securities were reported[255](index=255&type=chunk) - As of September 30, 2021, **903,636 shares remain available** for repurchase under the stock repurchase program[257](index=257&type=chunk) - **No repurchases were made** under the stock repurchase program during the first quarter of fiscal year 2022[257](index=257&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - **No defaults** upon senior securities were reported[258](index=258&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is **not applicable**[259](index=259&type=chunk) [ITEM 5. OTHER INFORMATION](index=55&type=section&id=Item%205.%20Other%20Information) No other information was reported - **No other information** was reported[260](index=260&type=chunk) [ITEM 6. EXHIBITS](index=56&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including CEO/CFO certifications and XBRL documents - Includes **certifications of the Chief Executive Officer and Chief Financial Officer** pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[262](index=262&type=chunk) - Contains **Inline XBRL Instance Document** and Taxonomy Extension Schema, Calculation, Definition, and Label Linkbase Documents[262](index=262&type=chunk) SIGNATURES [Signatures](index=57&type=section&id=Signatures) The report was duly signed by the Chief Financial Officer on behalf of the company on November 4, 2021 - The report was signed by **Gregory Wong, Chief Financial Officer** (Principal Financial and Accounting Officer)[266](index=266&type=chunk) - The date of signature was **November 4, 2021**[266](index=266&type=chunk)