Good day, and welcome to QuinStreet's Fiscal First Quarter 2024 Financial Results Conference Call. Today's conference is being recorded. Following prepared remarks, there will be a question- and- answer session. At this time, I would like to turn the conference over to Senior Director of Investor Relations and Finance, Robert Amparo. Mr. Amparo, you may begin. Thank you, Operator, and thank you everyone for joining us as we report QuinStreet's fiscal first quarter 2024 financial results. Joining me on the call today are Chief Executive Officer, Doug Valenti, and Chief Financial Officer, Greg Wong. Before we begin, I would like to remind you that the following discussion will contain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8-K filing made today and our most recent 10-K filing. Forward-looking statements are based on assumptions as of today, and the company undertakes no obligation to update these statements. Today, we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release, which is available on our Investor Relations website at investor.quinstreet.com. With that, I will turn the call over to Doug Valenti. Please go ahead, sir. Thank you, Rob, and thank you all for joining us. FY Q1 was another successful quarter. Non-insurance revenue grew 18% year-over-year and represented 79% of total revenue. We continued to invest in important product and growth initiatives across the business, including in staying positioned to take full advantage of the re-ramp of auto insurance client spending. We did all that while continuing to deliver on our commitment to maintain our strong financial position, once again demonstrating operational and financial excellence and the resilience of our business model. Auto insurance clients are communicating their intentions for calendar year 2024, and those indications support our expectation of a significant positive inflection in their spending beginning in January. We are spring-loaded for that inflection and would expect total company revenue to jump dramatically in the back half of the fiscal year, and adjusted EBITDA to grow faster than revenue. We expect auto insurance revenue to be even further up and to the right over the longer term, eventually returning to and exceeding prior peak levels as carriers benefit from compound rate increases, product optimizations, and cooling inflation and supply chains, thus allowing the shift to digital and performance marketing reassert itself as the dominant long-term trend. Turning to our outlook. First, for the current fiscal year, which ends next June. We expect full fiscal year 2024 revenue to grow between 5% and 15% year-over-year, implying, as I indicated earlier, a significant positive inflection in auto insurance spending in the back half. Auto insurance clients are giving us considerable detail about their footprint and budget expansion plans for January forward. While it is still difficult to predict the exact scale and slope of the auto insurance re-ramp, our bottoms-up estimates imply expected total company quarterly revenue in the second half of the fiscal year to average over $180 million per quarter. We expect quarterly adjusted EBITDA margin in the second half to be between 5%-10% of revenue. For the current quarter, our fiscal Q2, we expect total company revenue to be between $113 million and $118 million, in line with typical sequential seasonality. We expect adjusted EBITDA to be between -$500,000 and +$500,000. We will, of course, continue to maintain our strong balance sheet and strong overall financial position and discipline. Finally, our long-term outlook has never been better. We are extraordinarily well positioned to take advantage of the re-ramp of auto insurance client spending and to expand our product and market footprint in that important client vertical. We also continue to scale our non-insurance businesses, which now total about $400 million in annual revenue and grew 18% year-over-year last quarter, and at a 19% compound annual growth rate over the past three years. With that, I'll turn the call over to Greg. Thank you, Doug. Hello, and thanks to everyone for joining us today. For the September quarter, total revenue was $123.9 million. Adjusted net loss was $1.4 million or $0.03 per share, and adjusted EBITDA was $1 million. Non-insurance revenue was $98.5 million, or 79% of Q1 revenue, and grew 18% year-over-year. Looking at revenue by client vertical, our financial services client vertical represented 58% of Q1 revenue and was $72.1 million. We continue to see excellent performance from our personal loans, credit cards, and banking client verticals, which grew 33% combined. Our home services client vertical represented 40% of Q1 revenue and grew 6% year-over-year to $49.4 million. Our strategy to drive long-term growth here is simple. One, grow our business from our existing 15 or so service offerings, examples being window replacement, solar sales and installation, and bathroom remodeling, none of which we believe are anywhere close to their full potential. And two, expand into new service offerings, where we see the opportunity to at least triple the number of these subverticals we currently serve. This multi-prong growth strategy is expected to drive double-digit average annual growth for the foreseeable future. Other revenue was the remaining $2.4 million of Q1 revenue. Turning to the balance sheet, we closed the quarter with $56.3 million of cash and equivalents and no bank debt. As we look ahead into Q2, I'd like to remind everyone of the seasonality characteristics of our business, as I do every year at this time. The December quarter, our fiscal second quarter, typically declines about 10% sequentially. This is due to reduced client staffing and budgets during the holidays and end-of-year period, a tighter media market, and changes in consumer shopping behavior. This trend generally reverses in January. For fiscal Q2, our December quarter, we expect revenue to be between $113 million and $118 million, in line with typical sequential seasonality and adjusted EBITDA to be between -$500,000 and +$500,000. In summary, let me reiterate Doug's earlier points. One, we are extraordinarily well positioned to take advantage of the re-ramp of auto insurance client spending, which we expect to begin in January. Two, we will also continue to scale our non-insurance businesses, which now total about $400 million in annual revenue and grew 18% year-over-year last quarter. And three, we expect total company revenue to jump dramatically in the back half of our fiscal year, and we expect adjusted EBITDA to increase even faster. With that, I'll turn the call over to the Operator for Q&A. Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question comes from John Campbell with Stephens Inc. Please go ahead. Hey, guys. It's Jonathan Bass on for John Campbell. Thank you for taking our questions. It looks like the Home Services segment saw a little bit of deceleration this quarter. Can you give some color on what you're seeing there, and then maybe what specific verticals are seeing slower growth? Yeah, Jonathan, yeah, Home Services grew, I think it's 6%, as Greg reported, year-over-year. We expect Home Services to grow this full calendar, or sorry, this full fiscal year at double digits, which has been the case for the past several years there. So I kind of, I guess I'd kind of say nothing to see there. Just some quarters, you know, between things converge in one way, and other quarters, they converge in others. So, I don't expect that, there's nothing to see or nothing to report in terms of any structural deceleration. Okay, got it. And then, with your commentary around the expected insurance marketing spend coming in January, do you guys have any insight on what the potential trajectory of the spend could look like throughout the year? We don't have... We have some input from, on, on that from clients. There is at least one client that's given us very specific numbers in terms of what their plans are by state and coverage for the first half of calendar 2024, which of course would be the second half of our fiscal 2024. They haven't given us much color beyond that, just general guidance in terms of their hopes and expectations for the year. So trajectory-wise, what we are assuming... is that the ramp will begin in January and be a pretty significant inflection, as we've said for the past few quarters, and that a pretty big step function increase over the December quarter's numbers, which are running along multi-year lows, as you know, and that ramp would continue, and go up in the June quarter based on what clients have told us their plans are. Very typically, the March quarter is a peak, and then we go down a little in the June quarter. But based on what the clients are telling us, we actually expect to have the step function up from the December to the March quarter, and then a continued ramp up into the right through the June quarter, and then probably typical seasonality will kick in. which would be pretty flat, June to September quarter. And then, as Greg said, you know, a downward shift in the December quarter as we work through that sequential seasonality. Okay. Thank you for the color. You bet. Thank you. Our next question comes from Jim Goss with Barrington Research. Please go ahead. Thanks. I was wondering, Doug, how many of your various insurance carrier clients are exhibiting the types of signs that would support your optimism about a sharp turn? And, how varied do you expect the timing of any recovery among those clients to be in terms of not all happening at once, perhaps, but maybe it's over a several week or several month period? You know, what do you think? I know you said you don't really know the scale and the slope, but maybe there's a little more color you can give to those expectations. Yeah, Jim, we, I'd say the majority of our carrier clients have expressed that next year, in particular, and most beginning in January, will be a higher spend year for them in the channel because of their success in getting rate increases over the past few years, and because of a cooling inflationary environment. To your point, they have varying degrees of plans for how and where they're going to ramp. Some with decent specificity. Unfortunately, some of our bigger ones have that, have given us that kind of a level of detail, and others with less. But on balance, what we've done is we've taken the inputs from all the clients, and we have, you know, very good and probably the best relationships with these clients in the industry. We've taken their inputs, and we've done a bottoms-up estimate based on also media availability and expected traffic patterns, and pricing. We've put together our, you know, our best bottoms-up, and that is a big part of what results in the range we gave you for the year. We know you can do math, so we went ahead and told you what you would have figured out anyway, which is based on our guidance, even at the bottom end, we'll be doing actually an average of about $185 million a quarter in the second half of the fiscal year. As I said, probably a little bit of a ramp from Q3 to Q4, given what we're hearing from the insurers. To give you a little bit more detail on that, this might be help answer your question, to bracket it maybe a little bit for you. We expect auto insurance. We do not expect auto insurance in the March quarter, even though we expect to do $180 million in revenue in that quarter on average, but that in the other quarter, in the, in the second quarter, or the, I'm sorry, that in the fourth fiscal quarter or second calendar quarter, up to $180 million-$185 million. We don't expect auto insurance to reach the same level we did last March quarter. So this coming March quarter, despite the big jump in our revenue, we are not projecting that our auto insurance revenue will be as high as it was last March quarter, and we expect a ramp from the March quarter to the June quarter. But even in the June quarter, we don't expect yet that auto insurance revenue will reach the revenue levels of auto insurance last March quarter. So we're not going way out on a limb here. It's going to be a big step up, but it's only a big step up because we're down so low in auto insurance, at a multi-year low, as you know. And I would remind you that the peak auto insurance quarter for us, revenue-wise, was a couple of years ago in the March quarter, and that was $99.0 million. And the last March quarter's revenue, auto insurance revenue, which I said we're not going to get to in the March or the June quarters based on our current forecast, was $63 million. And so, we got a long way to go to get back to the peak, which we expect to do over the next couple of years, maybe shorter time than that. But the step function up is well in line with what you would assume to be kind of reasonable expectations of a re-ramp, particularly given relative to, again, a year ago and peak, if that's helpful. ... Okay. A couple more things, if I might. When education was your dominant business and you hit a wall, you did have a rebound develop in some of these other areas. And I'm wondering if, you know, as, as Greg was saying, with the, the potential to do more within certain areas and, and/or other areas within home services, as well as some of the financial areas, could you see some internal competition among your various sectors trying to become that next great thing, even though you're hoping to have that return in the auto area, you know, and then you're running on more cylinders? And also, are there other insurance areas within these multi-line carriers you deal with who, you know, that would benefit from the same sort of technology you employ, even though they might not be required, like auto insurance or that sort of thing, you know, but that might offer some other opportunity within those companies? I'd say that we have a number of next great things going on. We just grew, you know, our non-insurance business 18%. We've grown them 19% on a compound annual growth rate basis, and they've all grown at strong double digits. That's not being carried by any one of those client verticals. We've said, I think a number of times, that home services may well be our biggest adjustable market. And as Greg has pointed out, pretty straightforward path to continuing growth there by growing the service areas or the trades we're currently in, and then adding other trades or service areas. And we see a good, strong opportunity in the path there. So certainly, we expect continued great growth and strength in home services. Also in our other financial services verticals, non-insurance financial services verticals, I think Greg pointed out, we grew 33% year-over-year in the quarter. And those businesses are approaching $200 million in annual revenue now, if they haven't already gotten there. And those, and again, the home services is over $200 million in annual revenue. So, and we see tons of... Those are all big markets, banking, credit cards, personal loans, enormous markets. We're very early in all of them. And I think the folks that run those businesses certainly believe that they have the opportunity to create many hundreds of millions of dollars in revenue, and a couple of them certainly think they can get to $1 billion, based on just simple analysis of wallet share, market size, opportunity to expand the footprint. In terms of the expansion of footprint insurance, we have opportunity to expand footprint in all of our client verticals, including insurance. It's a good question. Now, we're dominantly in insurance, a click to direct carrier model, and certainly one of the two, if not the premier company doing that, in the channel. And that's only half the market. The other half the market, which is largely served by the lead aggregator networks, is leads and calls primarily to agents instead of direct carriers, and leads and calls instead of clicks. You'll see us continue to expand our footprint. We won't do it by mimicking the current lead aggregator model because we think that's both tired and over- capacitized. We have created a number of opportunities for us to continue to expand our business there, and we've expanded quite dramatically this year, in fact, in that part of the market, and expect that we will be able to continue to do that for many years. There are also other components of insurance, sub verticals of insurance, if you will, like commercial, which represents an enormous opportunity that we're early into. But most of our big multi-line carrier clients also serve that industry, and it's mostly small business, and that's a good fit with us. So we are expanding there, and we'll continue to expand there. And of course, we've talked a lot about QRP and the rating platform and the opportunities that opens up to us to serve agencies in a whole new way with the integrations we already have, and to create opportunities with them that are broader than what we can do directly with the direct carriers or with the carriers, even with the ones that have big agent network components. So yeah, a lot of new dimensions of insurance to come. Step one will be getting the insurance market healthy again, which it looks like we're on the cusp of. There was a large client that had a call today that described their plans for their budgets next year as robust. It's a great word. We like that word, and it's consistent with what we've heard from them and what we know the plans are, going into next year. So, a lot of opportunity to continue to grow, and, we certainly don't think that we are anywhere near the point of slowing down, our scaling or penetration of any of these, markets, all of which are quite big. So we—we are, you know, we, we consider ourselves a multi-billion dollar revenue opportunity company, and just the question is how many multis we can get to. Okay. Thanks very much. Seems diversification is your friend. Thank you, Jim. I think it's... Yeah, absolutely. Okay. Thank you. Thank you. Our next question comes from Jason Kreyer with Craig-Hallum Capital Group. Please go ahead. Thank you very much. This is Cal Bartyzal for Jason. First question for me, I guess, given we continue to see new highs in mortgage rates, do you, do you think that gives you guys a longer duration growth opportunity at home services, with maybe people continuing to look at renovations over moving? We do. Yeah, no, I mean, it's you, I mean, you described it exactly right, so I really... Not much to add, but, we are, and do believe we will continue to see that. All right. And, just last one for me. Can you just maybe extrapolate out personal loans a little bit between loans and credit repair? You know, I'm just curious if personal loans side is just, you know, obviously, you guys put up strong growth rate, but, you know, just does it continue to maintain a strong trajectory despite tighter credit, higher lending rates, things like that? Thanks. Yeah, we have a broad portfolio of lenders. And we have seen tightening, just like everybody has over the past year or so, maybe a little bit more than a year. Now, I think that's being offset by the fact that we do have a broad set of lenders that cover a lot of different credit bands and a lot of different types of loans. We're constantly expanding that, and we'll continue to do so, to make sure that we can serve a greater and greater number of consumers in media. We also have, I would say, the best offerings of other solutions for consumers, from credit repair to debt settlement, high quality providers of those services, and that can really help consumers through whatever their credit challenge might be. I think that is a big part of our being able to better serve media, because we have the opportunity to have a solution for more consumers, and is a big part of why we've done better than most of the other players in this market over the past year plus. Perfect. Thank you very much. Thank you. Thank you. Our next question comes from the line of Dan Day with B. Riley Securities. Please go ahead. Yeah, afternoon, guys. Appreciate you taking the questions. Just on the insurance side, I know you don't provide like a quote request metric or anything along those lines, but just in general, like these rate hikes starting to get passed on to consumers, I'd have to imagine that shopping activity is pretty active right now, even if there's not kind of any demand to meet yet. So just anything directional you can provide on quote requests or any other relevant metrics you think are important, that the supply is there, we just need the demand to come back, as you think it will in January? Yeah, Dan, I think you're right on it. With all the rate increases, we've seen pretty significant increase in shopping consumers in auto and home insurance, as you would expect. People get their rate increases, they immediately think, "Gosh, maybe I can go get it cheaper somewhere else." And that's particularly exacerbated by the fact that you've got, for some folks, big inflationary effects on other parts of their income statement, and a little bit of a slowing economy, theoretically, although we had, I know we had a pretty robust growth rate last quarter. So I think it depends on the segment, but generally speaking, we are seeing increased shopping. I think one of the other companies in this space said they're seeing record consumer shopping for insurance. I don't know if we're seeing record, but if we're not, we certainly are seeing a significant increase over a year ago, which was an increase over two years ago, all driven by the rate increases, which have been, you know, averaging double digit for a couple of years now. I think three years, actually. So we are seeing a lot of shoppers. The problem is, there are so many insurers that aren't in market right now, that those shoppers aren't finding what they're looking for. And so it's the quote. We're getting a lot of requests or a lot of traffic, but you wouldn't necessarily translate that into quote, unquote, quote requests, because there aren't enough insurers in the market to match them and give them a quote request. So it's difficult to say how that metric would play out, given the dynamics in the market. But the main metric that matters right now is shopping, and shopping is up. And it looks like, based on what we're hearing from carriers, the next year, there'll be a lot more alternatives for those shoppers and a lot more options for those shoppers, which will result in a heck of a lot more quotes and quote requests and then quotes. Thanks for that, Doug. Appreciate it. Just second one on the M&A environment. You've been pretty quiet on this front for a while now. Just anything interesting out there, and just any areas you'd, you'd be looking to tack on if there is something out there that presents itself? Yeah, we will, we'll continue to be opportunistic and active. We've made a few small acquisitions over the past year or so, smaller. We are always looking, we're always open, for things that add meaningfully and to our verticals. And we've got a couple in the hopper right now that we like a lot. Neither of them are real big, but they could be really impactful. We like those best, of course. It's great to find a company that has done well in their-- at their scale, that we can kind of plug into our network and ramp and scale much more rapidly. And that's kind of our favorite opportunity. We've got a couple of those in the hopper right now that we're pretty excited about, and I'm sure there will be more. We're also being conservative because of the insurance environment and the fact that our, you know, our adjusted EBITDA is, you know, kind of at the breakeven level, so we're not replacing the cash we're using. We're mindful of that, but it hasn't caused us to pass on anything that we'd really like, really like to do yet. As I indicated, we expect to return to pretty robust cash flow levels in the second half of the fiscal year. All right. Thanks, guys. Appreciate it. Thank you, Dan. Thank you. Our next question comes from Bruce Goldfarb with Lake Street Capital. Please go ahead. Doug, Greg, thank you for taking my call, and congrats on the results. Thank you, Bruce. So are you, are you guys planning any changes to the cost structure to drive margins higher, kind of take advantage of the ramp? We already have. We've positioned ourselves to take great advantage of the ramp, including being very mindful of cost over the past few years. I would point out that if you did the math on the top-line leverage that we lost over the past few quarters, we should not have done as much EBITDA as we did. We did that because we have been very focused on margin costs, in order to make sure that we were able to sustain positive adjusted EBITDA margins through the period where we lost so much top line. But also to be prepared to really bounce up very rapidly as auto insurance comes back. So, short answer is we have, and we will continue to, but we're trading that off against making sure that we're continuing to invest in great growth opportunities, too. But I think we've done well balancing those two competing objectives. In fact, I'd say we feel like we've done about as well as we can. Feel very good about where we are. Great. And I don't know if you break out customers, but could what percent was progressive in terms of percent of revenue for the quarter? If you're willing to do that. This is Greg. Well, we- Progressive was 3% of revenue. 3%. Okay. Great. Thank you. And then, just my last question. Some of these larger insurance programs that you're talking about, do they give you visibility, you know, for almost the whole year? I mean, do you get, like, some of your bigger customers? They give us general objectives for the year and general plans for the year- Okay. - subject to stuff happening, like, you know, how bad is the hurricane season? So they, I would say they give us general views of what their objectives will be and how they're thinking about the coming year, and then varying degrees of detail couple quarters out, and then pretty good detail coming, you know, before a coming quarter. And then, and, and typically, those are decently accurate, subject only to, you know, again, stuff coming up that they didn't expect. Great. Well, congrats again, and thanks for taking my question. Thank you, Bruce. Thank you. Our next question comes from Chris Sakai with Singular Research. Please go ahead. Hi, Doug and Greg. Hey, Chris. I just had a question on the revenue guidance that you gave of 5%-15%. I just wanted to know, is that somewhat of a downgrade from the previous quarter when you said that you would expect revenue and adjusted EBITDA to grow at double-digit rate? I'd say it's about being more specific for you. I mean, double digits covers an awful lot of ground, right? And so we just decided that now that we know more going into the back half, as we go looking at the back half and this quarter, that we would bracket it. I would point out that the middle of that range is double digits, 10%, and that we still maintain that even if auto insurance were flat year-over-year, we'd still grow double digits because of the strength of non-insurance. So there is no downgrade here. There's no lowering of expectations. We're just giving you more specificities to the range, and all the things we said previously are still true. Okay. Sounds good. And then, first, to go back to personal loans, so in June, it had a very good month. How did the months this quarter compare? I'm sorry, I didn't quite understand the question. Chris, ask again, please. I guess, as far as revenue goes from personal loans is concerned, Yeah. I recall June was a very good month. How does- Yeah, we- - compare? Yeah, It's been personal loans continues to perform exceptionally well for us. I think Greg pointed out that personal loans, credit cards, and banking together grew 33% year-over-year. And personal loans is more than half of that total. More than half of the total revenue of credit cards, banking, and personal loans is personal loans. And so you can extrapolate from that, that it, it, it had a really good quarter last quarter. Greg, did I get that right? ... Yeah, you did. And just to add on to that, it was a very good quarter. You're right, Chris. The June quarter is very strong for personal loans, and I would add that the March quarter or the, I'm sorry, the September quarter that we just finished, was also a record quarter for personal loans. So very strong performance. Okay, great. So by the third and fourth quarter, are you guys expecting that all your segments will be growing sequentially? I'd have to look at the, yeah, I'd say that third fiscal quarter, yes, over second fiscal quarter. I'd have to look at going from third fiscal quarter to fourth fiscal quarter. Typically, that is more, it comes down from the peak in March. That's our typical seasonal pattern. But as I said, auto insurance is expected to actually ramp from the March to the June quarter. The other businesses are probably expected to be flat to down a little, if typical seasonality holds. Greg, do you have that in front of you? I don't know if that's- Yeah, no, that makes sense. That, that exactly makes sense. Yes. Okay, sounds good. And, and last for me, I guess, what you were seeing last quarter as far as expecting to, for improvements as far as in auto insurance, are you still seeing that? And are you seeing what, what you expected last quarter play out into, into this quarter? I think we said last quarter that we expected a significant positive inflection in auto insurance to begin in January. I think we did, we exactly continue to expect that. This quarter, the current, the December quarter, we expect it to continue to be a quarter where auto insurance is challenged, until they get to January and reset their combined ratio targets, and get new budgets. That continues to be the case. This quarter is about like last quarter in auto insurance, and that's exactly what we expected, and we expect—we said we expect the January quarter to begin a significant positive inflection, or the March quarter, depending on how you want to think about it. And we still expect that, as we said, and we've gotten a little bit more granular because we've gotten more, more, specific indications in terms of, as best we can, doing a bottoms up on what that means for the range for the, for the entire business in the, in the back half and for the year. So yeah, I, I guess the short answer is yes. Okay, great. Thanks. Thank you. Thank you. There are no further questions at this time. Thank you, everyone, for taking the time to join QuinStreet's earnings call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you for joining us.