QuinStreet Inc (QNST) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your QuinStreet Fourth Quarter and Fiscal 2012 Financial Results Conference Call. At this time all participants will be in a listen-only mode, but later we will conduct a question and answer session which instructions will be given at that time.

(Operator Instructions)

As a reminder, today's conference is being recorded. And now I would like to introduce your host for today, Erica Abrams of the Blueshirt Group.

Thank you, John, and good afternoon, ladies and gentlemen. Thank you for joining us today to report QuinStreet's fourth quarter and fiscal year 2012 financial results.

Joining me in the call today are Doug Valenti, CEO and Ken Hahn, CFO and COO of Quinstreet. This call is being simultaneously webcast on the Investor Relations section of our website at www.quinstreet.com.

Before we get started, I would like to remind you that the following discussion contains forward-looking statements that involve risks and uncertainties. QuinStreet's actual results may vary materially from those discussed here.

Factors that may cause the results to differ from our forward-looking statements are discussed in our most recent 10-Q filing with the SEC on May 8, 2012. Forward-looking statements are based on current expectations, and the Company does not intend to and undertakes no duty to update this information to reflect future events or circumstances.

Now I will turn the call over to Doug, CEO of QuinStreet. Please go ahead.

Thank you, Erica. Hello, everyone. Thank you for joining us today. Revenue for the year was $370.5 million, just above the upper-end of the outlook we provided last quarter. Adjusted EBITDA margin was 20%. Normalized free cash flow for the fiscal year was $54.5 million or 14.7% of revenue.

We continue to manage through changes and challenges in our business and markets in fiscal 2012. In Education, the for-profit post-secondary industry continues to adapt through regulatory changes.

In Financial Services, we, clients and competition continue to transition to new online models in a still early and dynamic market causing near-term disruptions. And while we continue to pursue a broad range of promising initiatives in newer vertical sites B2B and new geographies like Brazil, those efforts are still early.

We are not satisfied with the drop of 8% in top line results in fiscal 2012 versus 2011. We are focused on initiatives that we believe best position us for long-term growth in Education and Financial Services and more broadly. Digital marketing and media is still a very large and early market opportunity.

Let me briefly review some of the initiatives and progress we made in fiscal 2012 and that we plan to continue into 2013. In Education, we improved our engagement with clients with new staffing and programs that are allowing us to better coordinate with them and respond to rapid change. We invested in new technologies, taxonomies and approaches that significantly improved our ability to match and qualify student prospects to increase the quality and conversion rates of inquiries for our clients.

We were able to sustain inquiry or lead pricing levels despite a market environment of reduced budgets and strong downward pricing pressure. We introduced direct school placements or clicks to supplement our traditional inquiry or lead product in Education to respond to demand for direct spending, to access new budgets and to convert more visitors. And we successfully entered two early but large and promising future markets, Brazil and now India.

In Financial Services, we stabilized pricing in our SureHits or auto insurance clicks model by identifying and blocking incentivized click sources, improving our technologies and working with clients to better sort and price based on backend quality or conversion into customers. Also in auto insurance, we began to roll out of our long planned broader product offerings of quotes, policies, leads and clicks moving that business toward higher long-term volume and monetization potential.

In B2B, we completed acquisitions that will provide us with strong media, products and monetization capabilities, and made good progress integrating those businesses into a platform for growth in a promising large third leg vertical. Overall, our business model and capabilities remain strong, giving us greater ability to weather challenges and continue to invest in the future.

We are confident in the initiatives we have underway to return to growth. Visibility remains limited, due to continuing uncertainties in our applying verticals and the economy. For the fiscal quarter -- or the first fiscal quarter of 2013, the quarter ending September 30th, revenue is expected to be approximately flat versus this past June quarter with adjusted EBITDA margin in the high teens. We expect adjusted EBITDA margin for the year to be 20% as we delivered last year and as we have delivered for the past 10 years.

With that, I'll turn it over to Ken who will discuss the financials in more detail.

Thanks, Doug. Hello, and thanks again for joining us today. For our fourth fiscal quarter 2012, we posted $85.7 million of revenue, or a 9% decline compared to the same quarter last year. Revenue for the fiscal year was $370.5 million, slightly above the high end of the guidance of $360 million to $370 million that we provided last quarter.

In the quarter, we reached agreement with various state attorneys general with regards to our site, GIBill.com and education marketing. At the time, we disclosed in our 8-K filing that we expected to achieve our 20% annual adjusted EBITDA target for the year excluding the $2.5 million settlement. We did, in fact, reached that target even including that $2.5 million expense, delivering $72.6 million of adjusted EBITDA for fiscal 2012, a 20% margin.

Adjusted net income for fiscal Q4 was $8 million or $0.18 per share on a fully diluted basis. The settlement charge reduced net income by $0.03 per share; that is, Q4 adjusted net income per share would have been $0.21 without the settlement. As Doug discussed, our visibility remains limited as to when we return to growth. However, we are working on what we believe to be the right initiatives to enable that return to growth.

While we continue this work, we've maintained the same fundamentally strong financial model with EBITDA at our targeted 20% now for the 10th straight year and with normalized free cash flow of 15% of revenue. So with that overall context, I'll discuss details of our fiscal Q4 results.

Please see the supplemental data sheets available for download on the front page of the Investor Relations page of our corporate website. They provide essentially all the figures that I will now walk through with you.

For revenue by client vertical, our Education client vertical represents 41% of Q4 revenue, and declined 16% compared to the year-ago quarter to $35.2 million. As we have discussed, that market is challenged as clients react to the changes in regulatory environment that became effective last year. The declines that we have experienced have been volume driven with pricing mostly the same as the year ago.

The Financial Services client vertical also represented 41% of Q4 revenue and declined 11% compared to the year-ago quarter to $34.8 million. Pricing remains stable. Our revenue decline has been volume, driven primarily as a result of lost publisher media.

Revenue from our Other client verticals, which include B2B technology, home services and medical, represented 18% of total fiscal Q4 revenue and increased 20% compared to the year-ago quarter to $15.6 million. Increased revenue in our B2B technology client vertical drove the growth.

Our cost structure remains stable with operating costs at the same percentage of revenue as they have been for the entire fiscal year with the exception of G&A which increased due to the previously discussed $2.5 million attorney's general expense. All of these figures and their associate stock expense and depreciation and amortization components are included in our supplemental data sheets.

This year we made progress on the tax front structurally based on some work we've been doing with regards to our state income taxes. Hence, we're bringing down our expected rate going forward to 39% or slightly lower.

Our weighted average shares outstanding decreased to 44.7 million on a fully diluted basis reflecting shares bought under our stock repurchase plan. During the quarter, we repurchased 1 million shares for $8.5 million.

Moving to the balance sheet, our cash and marketable securities balance at quarter end was $105 million. You can see the details in the cash flow statement in our earnings release that the largest items, the generation of $5.4 million of cash from operations, the stock repurchase that I just mentioned and acquisitions also totaling $5.4 million, primarily consisting of the purchase of an online education media company in India.

Total debt decreased to $107 million from $108 million last quarter, as we made payment on our term loan and had no new borrowings. Normalized free cash flow suffered from the $2.5 million attorney's general expense. If we did not incurred that charge, normalized free cash flow would have been 14% of revenue for the quarter. As I mentioned before, normalized free cash flow for the year was 15% of revenue.

To summarize, our business model remains healthy as we work to restore growth. While navigating the return to growth, we've been mindful of our stewardship of capital buying back 4.8 million shares of our stock over the past 3 quarters. We are very focused on returning growth as quickly as possible. We look forward to updating you on our progress as we enter a new fiscal year.

With that, I'll turn the call over to the operator to open Q&A.

(Operator Instructions)

And we'll take our first question coming from Carter Malloy from Stephens. Please go ahead, Carter, and your line is now open.

Thanks. Hi, guys. Thanks for taking my questions. So looking at the 1Q guidance you've given, there's usually some seasonally (inaudible) or seasonality in that quarter. It's usually up a little bit sequentially if not sort of 7% to 10%.

So could you describe what factors you've taken into account in your guidance? Is that conservatism, or is there a specific piece of business which is looked to be a little slower than normal?

Hey, Carter. You are correct. We usually have seen over the past several years more of a bump sequentially going from fiscal Q4 to fiscal Q1. We are not seeing that this time largely due to the challenges and issues that we've been wrestling with for the last year, year-plus.

And so, I don't think I would interpret that guidance as being conservative. I think we're trying to be as accurate as possible in what we're seeing in our forecast and in the markets. So that's the -- that's what's up with that.

Is that more on the Education side or the Financial Services side or both?

Yes. It's a mix of both. Again, it's similar to what we've seen lately. Both of those businesses are having issues year-over-year based on the factors that we talked about. So, I think it's a mix of both of those.

I think we expect to see some growth in Other and non unlike we had for the last few quarters year-over-year. And we have some pretty good momentum there. Of course, that is smaller of our three reporting segments. But I think we expect to be down year-over-year in Financial Services and Education.

Okay. And then, in the transcript you guys referred to some media losses on the publishers side for Financial Services. Can you describe a little more of that to us? What drove that and if that's going to keep up? Is that competitors are out pushing more aggressive splits, or why you saw that volume slip?

Sure. That's really more of continuation of what we've been talking about the last few quarters. There's nothing really new under the sun on that particular topic except that we're continuing to feel the effects that aren't fully lapped yet of the losses of some of the publishers to BankRate and their acquisitions and the loss of some publishers to Google algorithm changes, and the loss of some publishers or at least the battle for some publishers back and forth with some more aggressive competition that we -- a little bit more aggressive behavior a couple of quarters ago.

We're still seeing some effects of that as well. Those are still the primary factors. And we won't really fully lap those. And some of those aren't really necessary lappable in some case of some of the competition for a couple of quarters.

In terms of the outlook for 2012 -- sorry, '13, in relation to your guidance for margins, if that almost your rational competition on the split side for media keeps up, do you guys still feel confident in achieving those 20% margins?

We do. We feel quite confident of the 20% margins. We have a lot of levers in the business that we can pull. We -- going into this quarter, we actually went to a rift to right size on the kind of [semi-fix] side with revenue that we expected this year which gives us a little bit of wiggle room.

We have a mix of media right now that is probably not as attractive on a margin basis because of our desire to defend in certain places on a competitive basis for a while, as we roll out the broader offerings particularly in Financial Services that we think will allow us to be even more aggressive on that front with better margins.

And so, I think if you look at the mix of the fixed cost space plus the mix of media that we're choosing, where we're choosing to spend more than we might on a more normalized basis, we think we have a lot of different levers to pull. And we're quite confident in the 20% EBITDA for the year.

Okay. Very helpful color. Thank you.

Thank you, Carter.

Thanks, Carter.

And we'll take our next question, Douglas Anmuth from JPMorgan. Please go ahead, sir.

Hi, this is Bo Nam on behalf of Doug. Thank you for taking our questions. First of all, can you give us a little bit more detail about the impact that you kind of mentioned that you're seeing from the Google algorithm changes and how that might compare to the prior updates?

And also, aside from search, are you seeing more opportunities in the other channels to acquire traffic? And then, I have a follow-up after that.

Sure. There isn't a lot of new news on the Google algorithm change. And I think again what we're mostly seeing is the continued effects of things that haven't lapped yet. The bigger impacts were probably year-plus ago with Panda and there were subsequent changes over the year following that.

By the way, the initial impact was more on our owned and operated sites, some of which have recovered but not -- certainly, not fully yet. And then, there was a rolling set of changes that looked like kind of Panda -- new Panda waves in the year following that over the past one year or so that affected mostly publishers.

And we had a number of publishers to get hit pretty hard, and some which got wiped completely off of the results page. And then, of course, we had the continuing effects, as I said before, of some of the acquisitions of BankRate losses or some of those properties that we haven't -- some of which we have not fully lapped either, so --.

But lately, I would say we haven't seen a lot of impact. It's been a mix of good and bad, probably neutral over the past quarter or so since we started our last and meaningfully negative effect.

Okay. Great. And the follow-up question is --

Oh, other channels. I forgot to answer the other channels question. Do you want to jump on that?

Yes.

We are. We're working hard to develop a lot of other sources. We're working hard to continue to be successful with Google. We think that's a big part of our strength, a big part of our capabilities and a very important part of the ecosystem for sure.

But, yes, we are also working very hard on other channels. For example, mobile is growing although -- albeit on a relatively small base mobile is growing at a very high rate for us and is now not too far short of 10% of revenue, and it's coming from a lot of different sources.

We are aggressively building up our internal email list from the traffic that we already have. And those lists are performing exceptionally well for us in all of the businesses, not just B2B tech where that's a mainstay, of course, of that particular model. We are working more aggressively than we have historically with other media partners and on other media partnerships with large media players, both online folks or offline folks with online presence.

We've had -- we've gotten lots of traction -- early traction on those efforts. We believe that to be important and strategic. And we're now able to do a better job with that with our content capabilities and with our technologies, so that's an effort that we have underway.

We, like everybody else, are trying hard to see if we can make social work. And I can't say we're having a lot of success there yet and I don't know of anybody in performance other than the gamers that are. But we certainly are committed to making sure that we figure that out as soon as anybody else does, if not before. So I -- it is an important part of how we think about broadening out diversifying the business as well as just increasing our footprint.

And I'm sorry, you have a follow-on.

Actually, it was answered. Thank you very much.

Sure.

Okay. Thank you. And our next question coming from Shyam Patil from Raymond James. Please go ahead.

Hi. Thank you. Just a -- for the year, I know you talked about a 20% EBITDA margin, but for the top line, should we assume kind of normal seasonality beyond the fiscal first quarter, or should we assume that's kind of the right run rate for the year?

Hey, Shyam. Yes. Let me kind of answer that in three parts, I guess. The first part would be, you know, visibility does continue to be pretty limited for us, given the dynamics in our two biggest client verticals. And we're trying like crazy to -- as you heard -- to execute initiatives to get us to the other side. We think we're doing the right things, but there's still a lot of volatility.

So, we're uncomfortable because of limited visibility giving any particular guidance or outlook beyond the first quarter. By way of just a little bit more color -- and by the way, you've seen that the seasonality is a little bit messed up right now because of those dynamics.

To Carter's point, typically, this -- we're sequentially up this quarter -- the quarter that we're currently in and we're not expecting that. To provide a little bit more information and color, but those -- but what I just said being the primary answer, we do have a plan that calls for growth year-over-year this year -- this fiscal year. And we consider that plan to be conservative.

But, as I said, that's a plan. We had a growth plan last year. And I think we're smarter this year and I think we're more conservative this year, and we know a year is more worth of stuff. But I would say that from a guidance standpoint, from an outlook standpoint, we're not comfortable providing anything in particular by way of outlook or guidance beyond the first quarter.

Great. And there's a follow-up -- on the media side, specifically, when losses to say competitors for media that's not related to algorithm changes from Google, what are the main reasons for that? And what initiatives do you guys have in place to address that going forward?

You bet. Usually, we're just getting out and bid. We have a player in particular out there who has shown a willingness to bid very aggressively beyond margins that we think make any sense for the sustainability of the channel or really to even make money on some of those deals. And nobody knows the economics of these businesses better than we do.

And we think it's largely because they're trying to recover from the fact that they lost a bunch of cheaper traffic when it was shown to be unproductive and low quality. And as far as -- as best as we could ascertain, they think that somehow if they get big enough that somebody -- it may be able to convince somebody like us to buy them. I think it's flawed strategy. If we bought everybody that decided to try to puff up on low margins and high splits, there'd be a long line at the door to take our cash.

And so, our plan to deal with them, to the second part of your question, is to beat them. And we're going to beat them by continuing to invest in technology and continuing to broaden out our product footprint, which allows us to continue to increase our monetization capabilities, which will allow us to pay more and still make good margin. And that's a big part of what's going on with the broadened model that we keep talking about in auto insurance.

And as you guys know, we are pleased with the progress in terms of the metrics of that model. A little frustrated that we're not getting it rolled out as fast we'd like, but some of that's on us; most of that's on just the interface with clients with a lot of other things that are more important to work on, and we're not as important to them as they are to us.

But it's coming, and it's coming as certain as the sunrise tomorrow, but it's not just coming as fast as we'd like. But as that comes, it gives us much greater advantage from a monetization standpoint and much more defensible advantage because it's extraordinary difficult to pool the assets and capabilities together that we pooled together for that model.

So that's the -- that's what's going to turn that most assuredly in the next quarters, two-year-plus. And that's the core of our strategy.

Got it. Thank you.

And there, I'm talking about Financial Services. We're not having an issue in media and Education. Education -- the issue is much more about client demand and volatility thereof associated with the new regs. The publisher issues, and media issues are really Financial Services related.

Got it. Thank you.

Sure.

Thank you. And we'll take our next question coming from Robert Coolbrith from ThinkEquity. Robert, please go ahead with your question.

Thank you. Good afternoon. I have three separate questions. Wondering if you could expand a little bit more on the contribution from some of the new product offerings both in Education and Financial Services. And, are any of those starting to become material?

Or is it -- over what period of time do you -- and again, this goes back to your last response. But over what period of time do you think that those can become sort of immaterial in the range of, say, 10% of revenue in each of the segments?

I think that of the two main new product offerings would be the broadened offering model in auto insurance which includes the leads, quotes, policies as well as the clicks that we've had. And then the other one would be the addition of clicks in Education.

As far as the auto insurance broader offering, we think we're months, not quarters, away from that reaching the point where it begins to be material, both in terms of its revenue for that sub-vertical -- let me say months which might end up being quarters but not years is a better way to depict for that.

And, as well as getting us enough more media leverage to materially or meaningfully impact that landscape and our wins on the media side, and as we hope we just wear out the guys that are -- again, the guys are just overspending.

By the way, if you're overspending in media -- you guys have heard this from me before. Folks that overspend in media never get it back. They're not building anything; they're just wasting money. And so, I think we'll eventually wear those guys out and they're not that well capitalized.

So we're -- it will be a combination of them burning out and us continuing to grow that. But I think it's months or a few quarters until we get the materiality there not -- certainly not longer than that in our expectation. We're pretty well along in that curve. Some of that's, as I said, is a little less predictable because it's not all in our control.

But we have a nice portfolio of clients that are signed and seeking -- with whom we're seeking to launch that can get us there, there being high enough monetization rates that we begin to turn the quarter on media and turn the corner on growth in Financial Services.

Education, we've seen a lot of good demand for the click product. That hasn't yet turned into a lot of orders, partly because the clients remain a little bit less willing to do a lot of aggressive things or new things in this environment and partly because our inventory is somewhat constrained. But if the clients were writing checks, we'd make the inventory thing work.

But we expect that -- my expectation is that clicks will be a very meaningful part of our Education business. And in terms of my best estimate of when it can be -- get to your materiality threshold, I would say, I would hope that in about a year. In between now and then, there's a lot of opportunity for us to continue to pick up share on the inquiry or lead side, so I'm not -- we see a lot of opportunity as clients return to the market.

We finally have Education clients talking about growth again. One of our largest and one of the best companies in the space recently said they expect to be growing in '13; another one said '14. That's the first time either of them really talked about growth in a long time. So that's -- I think they're finding the bottom, and with them we will find the bottom as well.

So I think -- and as they do that and, in turn, more budget to marketing and to the channel, we continue to gain share through consolidation of many, many clients' budgets as they seek to focus on a fewer number of higher quality partners that can both deliver good quality results at good volumes, but also can manage the complexities of compliance. And we count our straight A's on that particular report card.

So we -- I don't think the clicks thing in Education is going to reach the -- I don't expect it will be 10% within the next few months or even a couple of quarters. We do -- I do expect it. We have that mandate to get it there in hopefully about a year. But in between, we have a lot of other opportunities to take advantage of on our core inquiry, lead business.

Okay. Second question is on the state attorney's general settlement. To what extent do you expect -- I know you said in the 8-K that you don't expect any material impact there. Does that comment still stand? I'm sorry if I missed any commentary on that earlier.

And also, do you have any indication so far that the AGs are going to go after some competitors to sort of level the playing field over any sort of time span?

Yes. You didn't miss any other commentary, but thanks for asking. The testing continues to show that we are not going to see a material negative impact from the changes required by the AGs. That's not really surprising to us because, as you know, we don't believe we were doing anything wrong to begin with.

But we were happy to cooperate and making sure that we raise the bar to the standards that everybody felt were well, well beyond any normal standards or reasonable expectations for disclaimers and the like reflected in the agreement that we filed.

In terms of the leveling of the playing field, that's a great question and we have been working closely with a number of large clients as well as with the industry organization, to ensure that they understand the rules that we agreed to and the changes that we agreed to and to put -- to allow them to most easily roll those recommended changes out across all of their partners.

And for the most part, and I'd say in fact unanimously to this point, there has been a great desire to do that. In that way, while it wasn't a lot of fun to go through the process we went through, it is helpful to the industry in that there is at least a set of recommendations that add up to this stuff could be considered to be deceptive if you don't fix it.

And we're making sure the industry understands what that is. And what we have seen not surprisingly with the folks that we work with, is a great desire to understand that themselves and to roll that out across all of their partners.

And so, we would expect that that's probably the most effective way to get the playing field leveled. And we expect that progress and that folks are going to be doing that; they told us they are. And these are -- they don't tell us things when they don't do them historically. These are for the most part, despite sensationalistic comments from certain areas to the contrary, high quality -- folks trying to do the right thing.

As far as the AGs themselves, we can't speak to that or to what their plans are. We do have a good working dialogue with them. We continue to be in good working dialogue with them to make sure that we smoothly transition to changes and that we stay coordinated and that the dialogue remains productive. But again, they are unwilling and unable and we are -- to commit to doing any of those things, but you can bet we encourage them.

Okay. And then, finally, I just want make sure I understand this. And, again, I apologize if I missed the commentary here earlier. But the Other segment, pretty material deceleration in the year-over-year revenue - year-over-year growth, if I have the numbers right, from around 40% to 20%.

I just want to make sure I understand that in terms of comps -- acquisition comps and also the demand environment and get a little more detail there. That's a lot of questions. Thank you very much.

I'm not sure I understood the question, but I think Ken did. So let me let Ken --

On the Other -- reduction in growth rate essentially, in Other on an overall basis. And what we saw in Other was growth in B2B technology. What we had been seeing during the prior 3 quarters was growth in B2B technology and home services. We did not grow in home services as well this last quarter, and so that put a drag on the overall growth rate in Other.

As you can imagine, home services which is kitchen remodels, roofing, flooring, windows, is a fairly difficult market right now. And despite that, we've grown the first 3 quarters of the year; we didn't in Q4 in that particular sub-vertical, and as a result it slowed down the overall growth in Other.

And is there any reason why you might have seen a slowdown in that particular sub-vertical, or is it just sort of an outlier?

It's general economy and behavior of specific clients. If you look at that, a couple of the big players in the industry have been struggling a little bit. And so, it's just -- it's a hard time in that space as you know.

The second part -- just to address it specifically -- of your question, is there is no inorganic lapping or anything like that , B2B technology still performed strongly on a roll basis.

Okay. Great.

Yes. I would say -- just to add color to the question about home services too -- Robert, we think that's a very good business for us in the long-term. But it continues to be pretty challenged and volatile in the short-term. I think our team there did a great job growing that despite the headwinds.

And I think it will be one where we'd hope to continue to see some growth. But given the economic climate and the challenges in that vertical, we wouldn't be surprised not to see growth. We're working to grow it, but we wouldn't be surprised not to see a lot of growth in coming quarters. But we do expect again that that will continue to be a great business for us, and it's a good contribution business for us for a long, long time to come.

Okay. Thank you, again.

Thank you, Robert.

Thank you. And we'll take our next question from Jordan Rohan from Stifel Nicolaus. Please go ahead, sir.

Hey, guys. This is Nat Brogadir in for Jordan. Two quick questions. One is sales and marketing -- now you guys are under $3 million a quarter. I mean, how low can that line item fall from an OpEx standpoint?

And, secondly, just a follow-up on the last question, the Other segment is still growing, you know, call it high teens, 20% in 1Q, I mean that would really imply for your guidance at Financial Services and in Edu both decelerate further in 1Q. So just help me understand, you know, is Edu worse than Financial Services, or would you expect both to kind of take another step down from that year-over-year decline standpoint? Thanks.

Sure. Not a problem. On sales and marketing, we saw a decrease in total expense for the quarter. Part of that is reconciling and final yearend bonuses for performance overall for the year. You can imagine it was not as good a year this year from a bonus perspective given a lack of performance. So part of what you see is that.

We have no plans to change fundamentally the expense structure today. As you heard, we're very focused on the 20%. We've kept the various line items, sales and marketing, G&A, product development at a similar model level all year -- same percentage of revenue in expense for each of those essentially the whole year.

So I wouldn't, you know, we don't aim to do anything different there. We aim to maintain our 20% EBITDA margin which we think is a good profitability level, especially as we seek to start growth again.

Regarding your comment on Other and the relationship of that revenue growth to Financial Services and Education, we're not providing specific guidance for Financial Services and Education specifically. What I'd say is the overall trend you're discussing I think it applies to both.

You know, this past quarter, while we had a decline year-over-year, it was an acceleration from the prior quarter. And I think we're pointing out as we're going back to a larger decrease next quarter. It's a near-term forecast based on the challenges we're dealing with, and we wanted to provide that color. But, there's nothing in particular as it relates to the different client verticals. One is not hitting us harder than the other.

Got it. Appreciate the color. Thanks, guys.

Sure.

(Operator Instructions)

And we'll take our next question from Nat Schindler from Bank of America. Please go ahead, sir.

Hi. This is Paul Bieber for Nat. Thanks for taking my questions. I was hoping if you could repeat your comments about volume and pricing trends in Q4. And then, what are your expectations for your initiatives in Brazil and India, and how would you characterize the regulatory risks in those geographies?

Sure. Paul, let me take the first one and Doug will grab the second. It was -- for both Education and Financial Services which we broke out in the prepared remarks, it was all volume. Pricing was flat essentially on a year-over-year basis for both Financial Services and Education. So, it was entirely volume driven.

In terms of Brazil and India, we think we've bought good early entry points and we're beginning to work on developing strong markets into a very attractive -- both from a size as well as structure basis -- future markets. And so, I think I would think of those as early options on very attractive long-term markets initially in Education, but eventually, we will roll into other verticals including Financial Services.

They are -- in our estimation, if you combine structures that are helpful or attractive for Education marketing and in private for-profit Education, with scale these are the next two markets in the world after the United States. And so, we're very excited to be there.

In terms of regulatory risks, I don't think their regulatory risk is particularly stronger or bigger or lower than in the United States -- greater or lesser than the United States. I don't think -- I do think that we will be able to anticipate any potential regulatory risks better than we were in the United States.

So my expectation is that we and the clients will likely avoid much of this -- the big disruption that we felt here because we won't get way ahead of ourselves or way behind ourselves, depending on how you think about it there, as has happened in the United States. Now in the US, after this period I think, too, we're going to be a much -- the industry is going to be healthier. We're ready to go off and grow again. This industry's not going away.

But I don't -- we don't see any particular worrisome regulatory risks in Brazil and India or anything that we don't think we can well adapt to and manage through. And that certainly was part of our assessment.

Okay. Thanks for taking my questions.

You're welcome.

Okay. Ladies and gentlemen, that's all the time we have for questions today. Before wrapping up the call, I wanted to remind all attendees that an audio replay of the call will be available approximately 2 hours after the call until 11:59 p.m. Pacific time on August 7, 2012. You can access the replay system by dialing 1-800-585-8367 in the US and Canada, or 1-404-537-3406 for international callers using the pass code 98832594 followed with the pound sign.

Ladies and gentlemen, this does conclude your conference. You may now disconnect and have a great day.