QuinStreet(QNST) - 2021 Q2 - Earnings Call Transcript

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]