QuinStreet, Inc. (NASDAQ:QNST) Q2 2024 Earnings Call Transcript
QuinStreet, Inc. (NASDAQ:QNST) Q2 2024 Earnings Call Transcript February 7, 2024
QuinStreet, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and welcome to QuinStreet's Fiscal Second 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.
Robert Amparo: Thank you, operator. And thank you, everyone, for joining us as we report QuinStreet's fiscal second quarter 2024 financial results. Joining me on the call today are Chief Executive Officer, Douglas 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-Q 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.
Doug Valenti: Thank you, Rob and thank you all for joining us. December was a successful quarter. We met or exceeded our objectives in the quarter and continued recent positive themes, including growing non-insurance businesses at strong rates year-over-year, investing in and making good progress on growth initiatives across the business, and positioning ourselves well for the re-ramp of auto insurance client spending. All that while delivering solidly positive adjusted EBITDA and maintaining our strong balance sheet. I am particularly proud of those accomplishments, given that we were facing the bottom of the insurance cycle, and our toughest seasonal quarter. The significant positive inflection in auto insurance client spending that we expected to begin in January has indeed begun.
Auto insurance revenue is expected to be up well over 100% sequentially this quarter versus the December quarter. Auto insurance client spending increases are broad-based and consumer shopping traffic online for auto insurance is also up as consumers react to the compound rate increases of the past few years. Auto insurance clients have indicated that the steep ramp of spending is likely to continue. Accordingly, we expect strong sequential total company revenue growth and rapid EBITDA expansion in the current March quarter and further strong sequential total company revenue growth and rapid EBITDA expansion again in the June quarter. The exact slope of the auto insurance ramp is impossible to predict, but the ramp is, of course, highly impactful to our results.
Turning to our outlook for the current or March quarter, our fiscal Q3. We expect revenue to be between $160 million and $170 million, representing sequential growth of 35% at the midpoint of the range. We expect adjusted EBITDA to jump to between $7 million and $9 million as we captured the initial immediate impact of operating leverage from the revenue ramp. For fiscal year 2024, which ends in June, we continue to expect company revenue to grow between 5% and 15% over fiscal 2023. Looking ahead to fiscal year 2025, which begins soon in July, while detailed planning is not yet completed, I am already confident that we will expect strong double-digit full year revenue growth over fiscal 2024. Now, before I turn the call over to Greg for more details on our financial results, let me give you my overall view of where we are.
We have limited a fierce macroeconomic storm in auto insurance, our biggest vertical. We have maintained positive adjusted EBITDA and a strong balance sheet throughout, thanks to strong capabilities, disciplined execution, and a resilient business model. Our business model and strong financial foundation allowed us to continue to invest in the future during this period despite the conditions in auto insurance. We rapidly scaled two nine-figure non-insurance client verticals and invested aggressively in our capabilities, products, and footprint for future growth. We are now incredibly well-positioned for the near and long-term. Our footprint for growth is large and diversified, representing tens of billions of dollars of addressable markets.
We have big growth opportunities in the expansion of our existing client verticals and in exciting new contiguous markets and product areas. Our capabilities and competitive advantages are clear and strong, and we are improving them and expanding our market opportunities at a rate unprecedented in company history or I would argue, in the history of our industry. I have never been more confident or bullish about our prospects from here, especially, of course, as auto insurance continues to adapt, normalize, and re-ramp. With that, I'll turn the call over to Greg.
Greg Wong: Thank you, Doug. Hello and thanks to everyone for joining us today. Fiscal Q2 was another solid quarter for QuinStreet. Total revenue was $122.7 million. Adjusted net loss was $2.3 million or $0.04 per share, and adjusted EBITDA was $417,000. Within the quarter, we saw the auto insurance cycle bottom out in November. That being said, we are excited about the significant inflection of auto insurance client spending, which indeed began in January. Looking at revenue by client vertical. Our Financial Services client vertical represented 58% of Q2 revenue and was $71.3 million. Our Home Services client vertical represented 40% of Q2 revenue and grew 15% year-over-year to $49.3 million. Other revenue was the remaining $2 million of Q2 revenue.
Turning to the balance sheet, we closed the quarter with $45.5 million of cash and equivalents and no bank debt. Moving to our outlook, for fiscal Q3, our March quarter, we expect revenue to be between $160 million and $170 million and adjusted EBITDA to be between $7 million and $9 million. For full fiscal year 2024, which ends in June, we continue to expect revenue to grow between 5% and 15% over fiscal 2023. In summary, let me reiterate Doug's earlier points. One, over the past few years, we have navigated a generational downturn in our largest vertical and continue to invest in long-term growth initiatives, all while generating positive adjusted EBITDA and maintaining our strong balance sheet throughout that period. Two, we are well-positioned to benefit from the significant positive inflection in auto insurance client spending, which has indeed begun in January.
And three, we expect strong sequential revenue growth and rapid adjusted EBITDA expansion in the March quarter and again in the June quarter. With that, I'll turn it over to the operator for Q&A.
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