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)

QuinStreet, Inc. (NASDAQ:QNST) Q1 2022 Earnings Conference Call November 3, 2021 5:00 PM ET Company Participants Hayden Blair – Investor Relations Doug Valenti – Chief Executive Officer Greg Wong – Chief Financial Officer Conference Call Participants John Campbell – Stephens Inc. Max Michaelis – Lake Street Capital Markets Chris Sakai – Singular Research Hayden Blair Thank you, Jenny, and thank you to everyone joining us as we report QuinStreet’s First Quarter Fiscal Year 2022 Financial Results. Joining me ...

Revenue Generation and Client Dependence - The company generated significant revenue through measurable online marketing results, primarily on a "per click," "per lead," or "per action" basis, aligning with client customer acquisition cost targets [15]. - In fiscal years 2021, 2020, and 2019, The Progressive Corporation accounted for 23%, 21%, and 22% of net revenue, respectively, with the top 20 clients contributing 58%, 55%, and 54% of net revenue [32]. - A significant portion of the company's revenue is generated from a limited number of clients, with one client accounting for 23% of net revenue for fiscal year 2021 [55]. - The company relies on clients' marketing spend on its owned and operated websites and third-party publisher websites, with the majority of revenue derived from qualified inquiries such as clicks, leads, and calls [53]. - The financial services client vertical accounted for 74% of net revenue in fiscal year 2021, while home services represented 23% [174]. Product Development and Technology - The company invested $19.3 million, $14.2 million, and $12.3 million in product development in fiscal years 2021, 2020, and 2019, respectively, to enhance its technology and marketing capabilities [34]. - The company has developed proprietary technologies over 22 years to optimize media segmentation and matching, enhancing client results and operational efficiency [17]. - The company introduced the QuinStreet Rating Platform (QRP) product for insurance agents, indicating ongoing product development efforts [49]. - Product development expenses increased by $5.1 million, or 36%, in fiscal year 2021, primarily due to higher personnel costs associated with the Modernize acquisition [204]. Market Position and Strategy - The company aims to maintain a significant market share in performance marketing by leveraging its media buying power and extensive data from billions of dollars in media spend [19]. - The company is positioned to capitalize on the shift from offline to digital advertising, emphasizing data-driven marketing strategies and measurable results [21]. - The company aims to create revenue growth from sustainable sources while investing in growth initiatives rather than maximizing short-term profits [172]. - The company has made strategic acquisitions, including Modernize, Inc., Mayo Labs, LLC, and FC Ecosystem, LLC, completed in FY 2021 [88]. Operational Challenges and Risks - The company faces risks from a reduction in online marketing spend by clients, which could seriously harm its financial condition and results of operations [53]. - The company is exposed to online security risks, particularly regarding the protection of personally identifiable information, which could lead to significant expenses if breached [46]. - The company is vulnerable to interruptions in services provided by third-party vendors, which could significantly harm its business operations [96]. - The company faces risks related to integrating acquired businesses, which may lead to unforeseen operational challenges and could delay the realization of anticipated benefits [93]. Financial Performance - Net revenue for the fiscal year ended June 30, 2021, was $578,487,000, representing a 17.9% increase from $490,339,000 in 2020 [165]. - Gross profit for the fiscal year 2021 was $70,531,000, up from $52,475,000 in 2020, indicating a significant improvement in profitability [165]. - Operating income for fiscal year 2021 was $13,926,000, compared to $6,205,000 in 2020, reflecting a 124.0% increase [165]. - Net income for the fiscal year 2021 was $23,555,000, a 30.3% increase from $18,102,000 in 2020 [165]. Regulatory Environment and Compliance - The company is subject to various federal and state laws and regulations, including those related to unsolicited commercial email and telemarketing, which may increase compliance costs in the future [41]. - The company operates in a highly regulated environment, and compliance with changing laws regarding data privacy and marketing practices may increase operational costs [67]. - Changes in the Telephone Consumer Protection Act (TCPA) regulations could potentially impact revenue and profitability due to increased litigation risks [68]. - The company is subject to audits and investigations by regulatory bodies, which may allege violations of legal requirements and could result in financial liabilities [70]. Employee and Organizational Structure - The company emphasizes the importance of employee development and retention, with a commitment to pay equity and a focus on health and wellness [42]. - As of June 30, 2021, the company had 614 employees, with 165 in product development, 47 in sales and marketing, 40 in general administration, and 362 in operations [43]. - The company identified material weaknesses in internal control over financial reporting in fiscal years 2017 and 2016, although none were identified as of June 30, 2021 [127]. Market Conditions and Economic Factors - Adverse macroeconomic conditions could lead to decreases in client spending, negatively affecting revenue and operating results [65]. - Visitor traffic and client spending may be impacted by interest rate volatility, affecting the company's revenue [78]. - The business is affected by seasonality, with typically lower media availability and client budgets in the second fiscal quarter [183]. - The COVID-19 pandemic has significantly disrupted operations, leading to declines in revenue and margin, and may continue to adversely affect financial performance [133].

QuinStreet, Inc. (NASDAQ:QNST) Q4 2021 Earnings Conference Call August 4, 2021 5:00 PM ET Company Participants Hayden Blair - IR Douglas Valenti - CEO Gregory Wong - CFO Conference Call Participants John Campbell - Stephens Incorporated Jason Kreyer - Craig-Hallum Adam Klauber - William Blair Jim Goss - Barrington Research Sam Flynn - Lake Street Capital Markets Chris Sakai - Singular Research Operator Good day, and welcome to the QuinStreet Fourth Quarter and Fiscal Year 2021 Financial Results Conference C ...

Quinstreet, Inc. (NASDAQ:QNST) Q3 2021 Earnings Conference Call May 5, 2021 5:00 PM ET Company Participants Hayden Blair - Senior Manager, Finance & IR Douglas Valenti - Chairman, President & CEO Gregory Wong - CFO Conference Call Participants Jason Kreyer - Craig-Hallum Adam Klauber - William Blair & Company James Goss - Barrington Research Associates Jacob Stephan - Lake Street Capital Markets Joichi Sakai - Singular Research Operator Ladies and gentlemen, good day and welcome to the QuinStreet Third Quar ...

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, 2021 or ☐ 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) Registrant's telephone number, including area code Securities re ...

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 December 31, 2020 or ☐ 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. E ...

Financial Data and Key Metrics Changes - Revenue for Q2 2021 was $135 million, representing a 36% year-over-year growth, excluding divested businesses [17] - Adjusted EBITDA was $10 million, with adjusted net income of $7 million or $0.13 per share [17] - Revenue growth excluding divested businesses was 6% sequentially in the quarter, significantly better than typical seasonal declines [7] Business Line Data and Key Metrics Changes - Financial Services client vertical accounted for 77% of Q2 revenue, growing 18% year-over-year to $104.2 million [17] - Auto Insurance revenue grew 57% year-over-year, while Home Services revenue surged 165% year-over-year to $29.2 million [18] - Credit-driven personal loans and credit card businesses grew 25% sequentially and were up 80% from the June quarter [18] Market Data and Key Metrics Changes - The company noted strong momentum in the Insurance and Home Services sectors, with expectations for continued growth in personal loans and credit cards as the economy improves [13][21] - The trailing 12-month revenue, excluding divested businesses, was $475.7 million, reflecting a three-year compound annual growth rate of 30% [21] Company Strategy and Development Direction - The company is focused on integrating and capturing synergies from the Modernize acquisition, which is ahead of schedule [10][32] - QuinStreet aims to strengthen its products, technologies, and operations for future growth and competitive advantage [9] - The company is optimistic about its position in credit-driven markets, which are seen as future growth engines [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing shift to digital marketing, which is expected to remain a permanent change rather than a temporary trend [58] - The company anticipates continued strong momentum and revenue growth in the Insurance and Home Services verticals for Q3 2021, with revenue expected between $145 million and $150 million [14][22] - Management highlighted that economic activity and employment are key indicators for the performance of personal loans and credit cards [54] Other Important Information - The company closed the quarter with $102.6 million in cash and equivalents, generating $5.6 million in operating cash flow [20] - Normalized free cash flow for the quarter was $7.5 million, or 6% of revenue [20] Q&A Session Summary Question: Growth in personal loans and credit cards - Management noted that both personal loans and credit cards are showing improvement, with personal loans progressing slightly faster [26][28] Question: Home Services organic growth - Management indicated strong double-digit organic growth in Home Services, but could not confirm if it was around 30% [30][32] Question: Specific categories in Home Services - Management confirmed strong growth across core trades in Home Services, with better performance in exterior projects compared to interior ones due to COVID-19 [36][38] Question: Margins and operating structure - Management explained that the quarter's gross margin was affected by seasonality and a similar fixed cost structure [42] Question: Competitive situation in Home Services - Management stated that Home Services has less competitive intensity compared to Insurance, with a fragmented client base [50][51] Question: Impact of interest rates on Home Services - Management does not expect interest rates to significantly impact demand for Home Services, as the market is still in early penetration stages [65]

QuinStreet, Inc. (NASDAQ:QNST) Q1 2021 Results Conference Call October 28, 2020 5:00 PM ET Company Participants Erica Abrams - Investor Relations Doug Valenti - Chief Executive Officer Greg Wong - Chief Financial Officer Conference Call Participants John Campbell - Stephens Inc Jason Kreyer - Craig-Hallum Jim Goss - Barrington Research Ryan Meyers - Lake Street Capital Markets Chris Sakai - Singular Research Operator Good day, and welcome to the QuinStreet First Quarter Fiscal 2021 Financial Results Confere ...