QuinStreet Inc (QNST) 2026 Q4 法說會逐字稿

Good day and welcome to QuinStreet's fiscal fourth quarter and full-year 2026 financial results conference call. Today's conference is being recorded. Following prepared remarks, there will be Q&A session.

At this time, I would like to turn the conference over to Vice President 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 fourth quarter and full-year 2026 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-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.

Thank you, Rob. Welcome, everyone. Fiscal Q4 was another record quarter. We delivered strong performance and progress across the business to close out a record fiscal year for QuinnStreet. We grew quarterly revenue 43% year-over-year with strength in both financial services and home services.

Adjusted EBITDA was up 87% year-over-year in the quarter. Adjusted EBITDA margin was 11.1% in the quarter, a 270-basis-point expansion over the year-ago period. Full fiscal year 2026 revenue grew 18% year-over-year to $1.3 billion. Full fiscal year adjusted EBITDA grew 38% year-over-year to $112.5 million, an 8.7% margin and a 130-basis-point expansion year-over-year.

Over the past two years, we have more than doubled revenue while expanding margins, growing adjusted EBITDA by over 450%. We have also delivered strong cash flows and maintained a conservative and flexible balance sheet. Going forward, we expect to be able to continue to grow revenue at strong double-digit rates.

We are early in the penetration and footprint of our addressable markets, which we estimate to be well over $100 billion per year in total opportunity and to be themselves growing at double-digit rates. Carrier demand and economics in auto insurance are exceptionally strong, and our footprint of clients and products is expanding rapidly. In home services, our trade growth and new trade expansion programs are going well.

Client demand is exceptionally strong. And the addition of HomeBuddy, whose integration has gone very well, has given us much valued new scale capacity to meet demand. The home services client vertical is now running well over $0.5 billion per year in revenue.

We are also making good progress on growth initiatives in our other earlier stage client verticals and products, all of which are targeting big, attractive market opportunities. Those businesses already generated over $200 million in revenue last fiscal year. Our revenue growth generally will continue to be driven by the relentless shift of marketing budgets to digital and in digital to our performance marketplaces, whose microeconomics drive unparalleled media efficiency at scale for our clients. Our customer retention rates continue to be extraordinarily high, and the vast majority of our double-digit organic revenue growth comes from existing clients shifting and allocating more budgets to our marketplace solutions. We see the shift to digital and performance marketing as still early and accelerating, and we are driving market growth by expanding and innovating new products and media capacity and by uniquely and consistently delivering results at scale for clients.

Strategically, we expect to continue to be a disciplined and effective acquirer and consolidator, just as we have always been and as has been most recently demonstrated by our exceptional results with AmOne, Modernize, Aquavita Media, and HomeBuddy. Our key operating competitive advantage continue to be our industry-leading technologies, including our core AI optimization algorithms. We are implementing dozens of new AI applications to accelerate performance and productivity across the business. And we are already seeing significant positive results from those AI applications. And we are broadening and accelerating those projects.

As we grow revenue, we expect to continue to expand margins driven by, one, growth of owned and operated media; two, a mix shift to higher margin products and verticals; and three, top-line leverage from increased revenue scale combined with continuous improvement in productivity and cost efficiency.

Turning to our outlook, we expect revenue in fiscal Q1, which began on July 1, to be between $370 million and $380 million, implying 31% growth year-over-year at the midpoint of the range. We expect adjusted EBITDA margin to be between $38 million and $40 million, implying 90% growth, a 10.4% margin and a 320-basis-point margin expansion year-over-year at the midpoint of the range. Our initial outlook for full fiscal year 2027 is that we expect revenue of $1.45 billion to $1.55 billion, implying 16% growth year-over-year at the midpoint of the range.

We expect adjusted EBITDA to be between $150 million and $160 million, implying 38% growth, a 10.3% margin, and another 160-basis point margin expansion year-over-year at the midpoint of the range. That is on top of last year's 130-basis-point adjusted EBITDA margin expansion.

Obviously, the new fiscal year is young. As the year progresses, we believe that there may be opportunities to grow revenue and expand margins even further, just as we found last fiscal year. If so, we will, of course, refine our outlook accordingly.

With that, I'll turn the call over to Greg.

Thank you, Doug. Hello and thanks to everyone for joining us today. Q4 was a strong finish to a record year for QuinStreet as we delivered yet another quarter of strong double-digit revenue growth and expanded adjusted EBITDA margins.

For the June quarter, total revenue grew 43% year-over-year and was $373.9 million. Adjusted net income was $29 million, or $0.50 per share. Adjusted EBITDA grew 87% year-over-year to $41.4 million and came in at an 11.1% margin, a 270-basis-point expansion over the year-ago quarter. Looking at revenue by client vertical, our financial services client vertical represented 62% of Q4 revenue and grew 24% year-over-year to $232.3 million, a record revenue quarter for that business.

Auto insurance remained strong in the quarter and grew 37% year-over-year. Our home services client vertical represented 38% of Q4 revenue and grew 88% year-over-year to $141.6 million, also another record revenue quarter for that business. Full fiscal year 2026 revenue grew 18% year-over-year. EBITDA grew 38% year-over-year to $112.5 million.

Turning to the balance sheet, we ended the quarter with $128 million in cash and equivalents and net debt of $22 million. We also repurchased $14.6 million worth of shares in the quarter and $31.4 million worth of shares for the year. We continue to have a measured approach to capital allocation focused on maximizing long-term shareholder value, and we will continue to prioritize: one, investing in new products and initiatives for future growth and margin expansion; two, accretive acquisitions; and three, share repurchases at attractive levels.

Turning to our outlook, as Doug mentioned, we expect revenue in fiscal Q1 to be between $370 million and $380 million and adjusted EBITDA to be between $38 million and $40 million. And we expect revenue in full fiscal year 2027 to be between $1.45 billion and $1.55 billion and adjusted EBITDA to be between $150 million and $160 million. This is our initial view on fiscal 2027, and we will, of course, provide updates to our expectations as the year progresses.

In closing, fiscal 2026 was another record year for QuinStreet, and our outlook has never been more promising. Over the past two years, we have more than doubled our revenue and more than quadrupled adjusted EBITDA. We believe that our market opportunities are still in their early innings and have never been bigger, and we will continue to invest against those opportunities in fiscal 2027 and beyond.

With that, I'll turn it over to the operator for Q&A.

(Operator Instructions) Jason Kreyer, Craig-Hallum.

Exceptional quarter, guys. Good work.

Thank you, Jason.

I wanted to start out on home services. You had a very healthy step up in revenue there. Wondering if you can just talk about the performance. In terms of progress in existing verticals, new verticals, new media channels, just any additional color there is appreciated.

Sure, Jason. Kind of all of the above, the HomeBuddy integration and synergy capture programs have gone very well. We have strong demand from existing clients and existing verticals. We made good progress in opening up and beginning to build new verticals. We have had strong growth in new media channels and broadening out our media footprint.

I'd say that there's really not a cylinder in that business we're not firing on. And it's, as you know, it's an exceptionally big market opportunity, and that requires real sophisticated execution. And I think things are going about as well as we could possibly expect there, and we are super excited about the future in that business.

Good to hear. Doug, as you wrapped up, you kind of teased out opportunities to grow revenue faster and expand margins further. Just want to see if you can -- if there's anything, what different levers you can pull for upside or perhaps, kind of some new development areas that you're looking into?

Sure, Jason. Well, it is the beginning of the fiscal year, so we have a lot of initiatives that we're early in or that add up to a lot of opportunities. Given that it's the beginning of the fiscal year, we usually don't count on all of those working out. But I would say that our internal plans and things that we expect ourselves to accomplish this year would add up to considerably more than we're at this point willing to commit to the shareholder base, and it's our job to go deliver on those and they're everywhere. They're across the business in terms of opportunities to better scale certain product programs and media programs, client budgets, vertical and trade expansions like we talked about for home services.

So pretty much across the board, earlier in the year, we're going to be heavier in terms of our risk adjustment to those things because it's just by definition more uncertainty because we're not as far along yet. But I can't think of one of the businesses where we don't believe in our internal planning process. We have more opportunity than we're yet willing to fully commit to given it's just, again, earlier in the year.

Is QRP a part of that or can you just give any updates on how QRP has progressed?

Yeah, QRP has done exceptionally well. QRP and 360 Finance are two big product initiatives. Both grew extraordinarily fast last fiscal year, much faster than overall company revenue, which is already pretty fast. And together this year, we would expect those two businesses to do over $20 million in revenue.

And they're pretty close to the same size, which is interesting, but yeah, those businesses have both scaled nicely, continue to have a lot more opportunity in front of them than behind them. But of course, we're getting good leverage, good margin leverage from them because they are getting to decent scale, and we're past the heavy investment period more into the market penetration expansion period for those products. But we love both those products in terms of value proposition, market opportunity, competitive advantage, high demand, expected long-term importance to the channel and importance to the business model.

We continue to be extraordinarily bullish on those products, and they're making good progress.

That's great.

Naved Khan, B. Riley Securities.

Hi there, this is Ethan Widell calling for Naved. To start, with this $100 billion a year opportunity growing at double-digits, how do you think is the relative cadence of growth for home services versus financial services?

It's kind of hard to say. As you see, they're both growing very rapidly, and they both have -- they're both enormous markets, and we have great footprints and a lot of vectors for scale in them. So I can't really -- I'm not biased one way or the other. I think they both can grow very strong double-digits for as far as we can see into the future.

So I think they're both great businesses for us, great -- again, great market opportunities, and we're investing in both of them to continue to grow them as rapidly as we can reasonably and profitably do so.

Okay. And then maybe can you characterize just with the HomeBuddy integration working kind of what the margin profile looks like going forward between those two?

Between HomeBuddy, I mean, sorry, between home services and financial services?

Right.

Yeah, home services is a higher kind of media margin business than financial services. So our biggest cost is, of course, media, and it's the biggest component of cost at the gross margin line, if you will. The home services business has business, though has more costs below the median line per dollar revenue than the financial services business. So net-net, they're both very attractive contribution margins, which would be the next line, of course, to us.

I would say that home services overall is probably a little bit better than financial services but not hugely better, but it's better at the contribution line than financial services at this point. But both of them will exceed our targets for making sure that we can maintain and hopefully build on our current double-digit margin profile.

All right, next time. I appreciate the color.

You bet.

Luke Horton, Northland Securities.

Congrats on a really nice quarter here to finish the year. Wanted to kind of shift over to the financial services side, kind of specifically in auto. You said grew 37% year-over-year. I guess, can you kind of cipher between how much of that growth is coming from just carrier budgets and increased spending versus any market share gains and kind of how do you think about the durability of that demand as we head into 2027 or fiscal '27?

Sure, I think it's the growth in auto insurance right now is primarily being driven by growth in demand. From the carriers and continued pretty high shopping levels by consumers because of their need to seek out and find ways to save money as they fight inflation in other parts of their budget. If you look at the others that have reported that are in that industry, we kind of all grew very similar rates, so I don't think we or they took as much share as we did, grew out our existing footprints and some of those footprints don't have a lot of overlap, so that's going to be the case.

There's not a lot of direct competition between several of us. We have one competitor where there's more direct competition, but not nearly as much as there used to be as both of our media footprints have shifted. And of course, the basis of competition is primarily in media supply because the client demand. Is really in excess of what most of us can deliver anyway. So that's where that is.

In terms of the durability of demand, the carriers are in an exceptionally good financial position. Their loss ratios are at great margin. They are really hungry for demand because of that. Their loss ratios are inclusive of many of them already having lowered rates in a lot of places from where they had peaked kind of coming out of the post-COVID period.

And so, if you look on balance at the health of the carriers, their margins, their demand, where they are on rates relative to where they were and fears that they would have to lower rates, which they've already done. I think one of the big carriers has said they've lowered rates in like 68% of their markets or something like that over the past couple of years. I think they're in extraordinary -- That would all add up to great durability and a lot of long-term strength.

They had the big disruption coming out of COVID because of kind of hidden inflation and increased frequency. And years before that, they had a big disruption because of the higher incident rates associated with distracted driving and self-driving and sensing technologies which can increase costs to repair. We don't know of anything else big like that in front of us. And it looks like the more of a return to what was much more normal prior to those two events.

And that was a pretty soft market right now, which is a good thing in insurance and the hard markets being much less disruptive than they were those two generationally big adjustments again coming out of COVID. So durability looks good. The long-term looks good. The carriers are all getting more sophisticated in digital, which is great news for us.

There's still a lot more budget not in digital that should be in digital, and there's a lot of budget in digital that should be in performance. And again, we're seeing the general trend lines continue to be from offline to digital, once in digital going to performance because that's where you can get the scale. And the efficiency for those dollars spent.

Got it. That's very helpful. And then how much work is left on the HomeBuddy integration? Are there any sort of synergies you've unlocked or any learnings from the integration process here?

And I guess, do you feel like you're in a good spot there where the appetite for additional M&A is strong and what sort of criteria. Criteria would you be looking for?

Yeah, the HomeBuddy in terms of more synergies, we'll always find more. And we're excited to be continuing to identify places we can capture more. And we're not fully through the programs to capture the ones that we had identified when we made the acquisition in the first place. So we will find more, but we have also had great progress capturing synergies on the client side, synergies on the media side, synergies on the product side, cost synergies in terms of overlapping resources, and we've captured a lot of it, and there's still considerably more to be captured in all of those areas.

In terms of more M&A, yes, we have capacity and appetite for more. We have a pretty active pipeline right now of attractive opportunities. I would say that probably before the end of the calendar year, we're likely to close at least one more, maybe two. I don't think any of those will be anywhere near the size of HomeBuddy, but I think we have some very attractive opportunities that we expect would be highly accretive and give us more capacity for more growth and/or more margin expansion.

So it's been a part of us for forever, and it'll continue to be a big part of us that being an active, effective acquirer.

Got it. Congrats again on a really nice quarter.

Elle Niebuhr, Lake Street Capital Markets.

Just one from me. So you've highlighted numerous AI initiatives across the platform. So which AI applications are already having the greatest measurable impact on your revenue growth or margins today? And then where do you expect the next leg of economic benefit to come from over the next 12 months?

Sure, Elle. I would say that the places where we're probably right now having the biggest direct impact are in coding as many people are and we have a lot of coding, whether it be on the core infrastructure on our platform or creative generation for our ad campaigns where we've had enormously positive productivity impacts or in the design of our other parts of our consumer interface. So those are having a big direct impact, and we're capturing synergies there.

We're capturing synergies and productivity increases in contact centers where AI is allowing us to pre-qualify consumers without having to have a representative involved. And to better qualify those consumers and to have a more efficient consumer experience, we have less costs and greater qualification of those consumers and greater productivity and conversion of those consumers. I would say that internally, as far as analytics, folks are able to use AI to do more direct analytics without having to involve analysts, which saves us, labor costs. It also allows us to focus those analysts on harder problems, bigger problems or bigger opportunities.

And we have, and again, there are dozens of places, and so those are the examples and specific places where we're having big impacts. I think in the long run, we'll have all of those continuing to help us to be more productive, and then we will likely have more traffic from the AI platforms. We are integrated with OpenAI. Most of our verticals now, and our two biggest verticals, auto insurance and home services, of course, there's a lot of activity there.

The platforms themselves, ad platforms, aren't where they need to be yet for us to get big scale out of them, but they will be. And they have a very strong user bases, very big scale user bases, and we can see a path to those platforms, the LLMs to being very big, new channels of high-quality, high intent, well-qualified media for our marketplaces, and we are super excited about that. So that's one that's more relatively small now, but we're in there working on it as early and as big as anybody is, and we expect those to be exceptionally big in the future if you wanted to pick out the one that's probably biggest in the future.

But we have proprietary -- a big value proposition business model with a lot of proprietary relationships, data integrations, workflows. And there's kind of not a place in our business model that you can't apply smart AI to do it better or more efficiently. And that's where the vast majority of the long-term value creation is going to be from AI. And I think we're a prime example and a perfect business model for doing that. And we're hard at it.

Awesome. Congrats on the quarter.

Patrick Sholl, Barrington Research.

Congrats on the really strong quarter and the really impressive guidance.

Just following up on what you said about -- sorry, on the growth. The health of the carrier budgets and the moving from digital to performance. Could you talk about where performances share within their digital budgets bands currently and how you see that evolving over time? Certainly growing, but we're just a little bit more color around that.

Yeah, for the vast majority of carriers, they still don't spend the majority of their budget in digital, despite the fact that the majority of consumers begin and end their shopping in digital. So we start there. And then within digital, we still have many carriers who spend more and not in performance in digital than they do in performance in digital. And what we have seen over time particularly with the most successful carriers, is that that's kind of the opposite of where they go eventually.

Eventually, they spend most of their budgets in digital and most of that digital budget in performance, or at least they max out what they can spend in performance within the allocation to other parts of digital. The answer is, in terms of specific numbers and share, it's too complicated because of the various carriers and the various channels and all that for us to have our arms fully around that. But as we talk to each carrier, I can tell you there's not one carrier that doesn't that we don't know that we serve, and we serve all the big carriers. That isn't trying to put more into digital and more into performance.

And there's not one of those carriers who today isn't under-indexed to both digital and within digital to performance. And if you asked me to give you my best ballpark estimate of how far we are in that overall transition, I would say 20% of the way there, maybe. And that's probably being aggressive as I look ahead and look at the channel evolving in those budgets, following that evolution.

Okay, and then just on the guidance, could you maybe talk a little bit about the expectations between the two main categories, financial services and home services on the different, like maybe like pro forma for the acquisition of homebody on how you're expecting the growth of those two segments to contribute to the full-year guidance?

I think we expect them, and Greg, correct me if I'm wrong, we expect home services to grow faster in the first half, mainly because of the HomeBuddy effect. And I think in the second half, we expect both businesses to grow pretty strong double-digits and not too dissimilar from one another.

Greg, make sure that I got that exactly right.

Yeah, that's right.

At this time, there are no more questions. 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.