QUINSTREET, INC Q2 FY2025 earnings call

Key Points

• Delivered record revenue in fiscal Q2, driven by unprecedented auto insurance client demand and strong performance in other verticals.
• Adjusted EBITDA remains strong with operating leverage, and margin expansion is expected through media efficiencies and other initiatives.
• Fiscal Q3 revenue expected between $265 million and $275 million, adjusted EBITDA between $19.5 million and $20 million.
• Full fiscal year 2025 outlook raised: revenue ~$1.085 billion, adjusted EBITDA ~$82.5 million.
• FCC TCPA regulations were stayed, with replacement regulations likely less disruptive than originally feared.

In fiscal Q2, QuinStreet's total revenue was $282.6 million. The Financial Services client vertical represented 78% of Q2 revenue, growing 208% year-over-year to $219.9 million, with auto insurance driving this growth at 615% YOY. The Home Services client vertical accounted for 21% of Q2 revenue, growing 21% year-over-year to $59.6 million. Other revenue made up the remaining 1% of Q2 revenue at $3.1 million.

Forward-Looking Statements

• Fiscal Q3 revenue projected to be between $265 million and $275 million, adjusted EBITDA between $19.5 million and $20 million.
• Full fiscal year 2025 revenue outlook revised to $1.065 billion to $1.105 billion, adjusted EBITDA to $80 million to $85 million.
• Expect sequential margin expansion in fiscal Q4 as initiatives progress.

Risks Discussed

• FCC TCPA regulations caused disruption during preparation, but lessons learned from testing will be applied, and replacement regulations are expected to be less disruptive than originally feared.
• Potential market changes or regulations could pose future disruptions, but current outlook accounts for manageable risks.

Q: John Campbell asked about maintaining momentum and EBITDA margin, specifically regarding channel dynamics and initiatives.

A: Doug Valenti responded discussing capacity in auto insurance clients, expansion into agent-driven carriers and business insurance, and margin improvement through media optimization and new initiatives.

Q: Jason Kreyer inquired about TCPA learnings and margin, including industry compliance and efficiencies.

A: Doug Valenti mentioned significant preparation for TCPA, learned from testing, and that regulations being stayed reduced disruption, with lessons applied to improve operations.

Q: Zach Cummins asked about auto insurance carrier contribution and margins, including future evolution of carrier spend.

A: Doug Valenti discussed broad-based strength in auto insurance carriers, dramatic progress in carrier capabilities, and expected margin improvement as supply catches up to demand.

Q: Patrick Sholl asked about other financial services verticals growth and insurance agent-driven margins.

A: Doug Valenti and Greg Wong explained 15% growth in noninsurance verticals and that insurance agent-driven business is expected to be additive to margins with incremental yield on existing media.

Q: Chris Sakai asked about business insurance margins and insurance volatility.

A: Doug Valenti stated business insurance margins are early-stage but expected to align with averages, and insurance volatility was unique to the pandemic, with future swings expected to be manageable.

Q: Eric Martinuzzi asked about tariffs and auto carrier rates.

A: Doug Valenti responded that no clients have raised concerns about tariffs affecting auto carrier rates, and any future rerating would likely occur based on economic factors.