QuinStreet - Earnings Call - Q1 2026

Executive Summary

• Record revenue of $285.9M (+2% YoY) with adjusted EPS $0.22 and adjusted EBITDA $20.5M; both revenue and adjusted EBITDA exceeded company outlook, while GAAP diluted EPS was $0.08.
• Versus S&P Global consensus, revenue beat by ~2% and adjusted (“Primary”) EPS beat by ~159%; QNST also beat revenue and EPS in Q4 and Q3, with a small revenue miss in Q3 offset by a large EPS beat*.
• Q2 FY26 guidance: revenue $270–$280M and adjusted EBITDA $19–$20M; full-year FY26 outlook nudged to “at least” +10% revenue and “at least” +20% adjusted EBITDA growth (tone-up from prior “about” targets).
• Catalysts: Board authorized a new $40M share repurchase program; company repurchased $7M in Q1 and another $10M post-quarter, and emphasized AI-driven efficiency and margin expansion initiatives.

What Went Well and What Went Wrong

What Went Well

• Record quarterly revenue, strong adjusted profitability despite heavy investments: “We delivered record revenue and exceeded our outlook for both revenue and adjusted EBITDA”.
• Auto Insurance strength and Home Services momentum: Auto Insurance demand remained strong; Home Services grew double-digit to a record level.
• Strategic progress on AI and new products: “We expect to disproportionately benefit from AI... already adding revenue and expanding margins” and QRP/360 Finance expected to grow >100% and materially contribute to profitability.

What Went Wrong

• Mix-driven gross margin compression and seasonality: Q1 gross margin eased vs prior quarter; Q2 outlook embeds normal December seasonal softness.
• Tariff uncertainty tempering the pace of carrier spend ramp: management noted carriers are cautious pending clarity, delaying the “next leg up” in auto insurance marketing spend.
• Non-insurance Financial Services softness YoY due to prior-year promo comp: non-insurance FS declined ~10% YoY as Q1 FY25 included a large limited-time credit card offer.

Transcript

Operator (participant)

Good day and welcome to QuinStreet's fiscal first quarter 2026 financial results conference call. Today's conference is being recorded. Following prepared remarks, there will be a question-and-answer session. Should you wish to ask a question during this time, you may press star one. Should you require any operator assistance, please press star zero. At this time, I would like to turn the conference call over to Vice President of Investor Relations and Finance, Robert Amparo. Mr. Amparo, you may begin.

Robert Amparo (VP of Investor Relations and Finance)

Thank you, Operator. Thank you, everyone, for joining us as we report QuinStreet's fiscal first quarter 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-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.

Doug Valenti (CEO)

Thank you, Rob. Welcome, everyone. Fiscal Q1 was another good quarter of performance and progress for the company. We delivered record revenue and exceeded our outlook for both revenue and Adjusted EBITDA. Auto insurance demand remained strong. Home services continued to grow at double-digit rates. Adjusted EBITDA remained strong, inclusive of heavy investments in new media and product. We expect further significant growth in auto insurance revenue and margin in coming quarters and years due to strong product and market fundamentals, and to our rapidly expanding product, market, and media footprint. Auto insurance carrier results are good. Consumers are shopping. Marketing budgets continue their relentless, but still early, shift to digital and performance marketing. Carrier spending is expected to remain strong.

Uncertainty about tariffs and their eventual impact on claims costs appears to be delaying what we expect to be another significant inflection up from here in carrier marketing spend. In the meantime, we are preparing for the next leg up in auto insurance by investing in new media capacity and in dramatically expanding our product and market footprint to drive growth and expand margins now and into the future. We also expect continued strong growth in our non-insurance, non-auto insurance verticals, and we are investing aggressively there as well. Overall, our total addressable market opportunity is already enormous and growing, and we continue to deliberately, contiguously, and successfully expand our footprint. We estimate that we are less than 10% penetrated in our current footprint of addressable market. We expect to grow total company revenue at double-digit rates on average for many years to come.

We also continue to focus on margin expansion, with a near-term next milestone goal of reaching 10% quarterly Adjusted EBITDA margin in this fiscal year, which, as you know, ends in June. Our levers to grow EBITDA margin are threefold. One, growing and optimizing media to catch up to auto insurance demand. Two, growing higher margin products and businesses. Three, capturing operating leverage from top-line growth and from efficiency and productivity initiatives. Some examples. Auto insurance margins are expected to expand 5 percentage points this fiscal year and are already up over 2 percentage points just since July, with margins in new, faster-growing product market areas of auto insurance running at more than twice those of our core click marketplace. Also, margins in big new media areas in auto insurance and across the company are now past break-even and expanding further as they scale.

Our exciting QRP and 360 Finance products are expected to grow well over 100% this fiscal year and to nicely contribute to expanded profitability. Another area of current and future investment and excitement is artificial intelligence, or AI. We are confident that we are going to be an AI winner. We expect AI to accelerate our already fast-growing markets by improving consumer access, interface, and engagement in digital media. We also believe that we will disproportionately benefit from AI due to our structured proprietary data and our over 17-year history of successfully applying AI as a competitive advantage. We have dozens of new AI projects underway across the company and business, and they are already improving consumer satisfaction, client results, media efficiency, and productivity. They are already adding revenue and expanding margins.

Finally, before I share our outlook for fiscal Q2 and the full fiscal year, I am pleased to announce that the Board of Directors has authorized a new $40 million share repurchase program. The authorization reflects the strength of our underlying business model and financial position. Confidence in our long-term outlook for the business. Turning to our outlook, we expect revenue in fiscal Q2 to be between $270 million and $280 million. Adjusted EBITDA to be between $19 million and $20 million. We expect full fiscal year 2026 revenue to grow at least 10% year-over-year. Full fiscal year Adjusted EBITDA to grow at least 20% year-over-year. With that, I'll turn the call over to Greg.

Greg Wong (CFO)

Thank you, Doug. Hello, and thanks to everyone for joining us today. Fiscal Q1 was another record revenue quarter for QuinStreet. For the September quarter, total revenue was $285.9 million. Adjusted net income was $13.1 million, or $0.22 per share. Adjusted EBITDA was $20.5 million. Looking at revenue by client vertical, our financial services client vertical represented 73% of Q1 revenue and declined 2% year-over-year to $207.5 million. Auto insurance momentum accelerated in the quarter, growing 16% sequentially versus the June quarter and 4% year-over-year against a very tough comparison. Non-insurance financial services, which included personal loans, credit cards, and banking, declined 10% year-over-year as the year-ago period included a very large limited-time promotional offer that benefited our credit cards vertical. Our home services client vertical represented 27% of Q1 revenue and grew 15% year-over-year to a record $78.4 million.

Other revenue has been consolidated into our home services client vertical to more accurately depict the operational structure of that business. Turning to the balance sheet, we closed the quarter with $101 million in cash and equivalents and no bank debt. We remain in a strong financial position. In the September quarter, we repurchased $7 million worth of company shares. Subsequent to quarter-end, another $10 million worth of company shares, exhausting our previously authorized share repurchase program. In our October 30th board meeting, our Board of Directors authorized a new share repurchase program of up to another $40 million. We continue to have a rigorously disciplined approach to capital allocation and 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.

We will continue to be measured in our approach and remain focused on maximizing shareholder value. 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 declined 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. Moving to our outlook for fiscal Q2, our December quarter, we expect revenue to be between $270 million and $280 million, and Adjusted EBITDA to be between $19 million and $20 million. We expect full fiscal year 2026 revenue to grow at least 10% year-over-year and full fiscal year Adjusted EBITDA to grow at least 20% year-over-year.With that, I'll turn it over to the operator for Q&A.

Operator (participant)

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one. Should you wish to ask a question? Your first question is from Jason Kreyer from Craig-Hallum. Your line is now open.

Jason Kreyer (Senior Research Analyst)

Wonderful. Thank you, guys. Doug, just wondering if you can give some more details on the media investments that you made in the quarter, how those are performing. Specifically, you kind of teased out some of the faster growth areas where you're seeing better margin performance. Just curious more details on that. Thanks.

Doug Valenti (CEO)

Sure, Jason. We have been focused on growing our proprietary media campaigns and scaling those pretty dramatically in response to the market demand in auto insurance and in response to the competitive pressures we've seen against scarce media in auto insurance because of the spike in auto insurance demand. Those campaigns have both scaled nicely over the past few months and have now gone well beyond break-even. Our margins there are expanding and are expanding nicely. We expect there's a lot more to come. As I indicated, we've already seen about a two-point improvement in our auto insurance margins overall since July and expect at least five points by the end of the fiscal year. Those campaigns will be a big contributor to that.

Other contributors include new products and services in auto insurance beyond our historic click marketplace that are also getting to good scale. They also have significantly better margins. I do not want to talk a lot about the details of those. I do not want to give our competitors a roadmap to everything we are doing. Suffice to say, they are very contiguous. They are getting good scale. They are highly effective and proprietary as well. We expect those to continue to scale and to, again, continue to contribute. By the way, those numbers for auto insurance do not include QRP. QRP margins are treated separately from auto insurance. QRP, as I indicated, also continues to scale very nicely. We expect to be quite profitable this year, to reach profitability and be nicely profitable this fiscal year as well as it gets to quite good scale. It grew last year. Last year, it grew by 294%. This year, we expect to grow at least 70%+. QRP, while the 360 product on the home services side, is going to grow at even faster rates. We are seeing a lot of good scale and expansion from, as I said, new media, incremental products and services in auto insurance. Our new breakthrough products, the QRP and 360, and other businesses across the company, including home services, have better and higher margins than auto insurance. A lot of good things are going on on the margin expansion front.

Jason Kreyer (Senior Research Analyst)

Yeah. Certainly seems promising. Wanted to follow up on your tariff comments. It seemed like last quarter that a lot of the tariff concerns had pretty well abated. Now it sounds like maybe those are back on. I'm curious if there's a new round of tariffs causing concern or if the carriers are kind of reacting more to tariffs in recent months more than they were this summer.

Doug Valenti (CEO)

No new tariffs, but no resolution of not much by way of resolution of existing tariffs. In fact, some of them went up for some countries affected. We can only go by spending behavior of our clients and by any public statements or public information. Spending behavior-wise, the clients are spending strongly, and we expect them to continue to do so, but they're not yet spending at the rate that we would expect given their very strong financial performance. One of the things that we note is mentioned in the public filings is the risk and difficulty in quantifying the exact impact of tariffs. And so we would say that, and that's one of the few things that's mentioned when it comes to why they might not be spending more than they are relative to their performance.

We would just point out that that remains a risk factor that they identify and one that they identify as one that's difficult to quantify the exact impact of, which probably implies that they're being a little bit more conservative than they would be otherwise. I think as things get more clarified, we would expect, given again the engagement we have with them, the performance that they are reporting, and the performance that we know that they have with our products, we expect a lot of room for another big leg up from here. I think those of you that follow anybody else in our space have heard the same thing, I think, from all the others in our space as well. We're getting kind of very similar reads on the market.

Jason Kreyer (Senior Research Analyst)

I appreciate the thoughts, Doug. Thank you.

Doug Valenti (CEO)

Thank you, Jason.

Operator (participant)

Thank you. Your next question is from Zach Cummins from B. Riley Securities. Your line is now open.

Zach Cummins (Senior Equity Research Analyst)

Hi. Good afternoon. Thanks for taking my questions. Doug, I was curious if you could just talk a little bit more about the spending trends you're seeing broadly among your auto insurance carriers. I know for a good part of the past 12 to 18 months, a lot of the recovery has really been driven by just a couple of major carriers. Just curious if you've seen any sort of evolution in spending trends here in recent months among your carrier partners.

Doug Valenti (CEO)

We've seen a broadening of spending, Zach. I mean, I'd say that some of the non-biggest players have grown their spend at a significantly higher rate over the past year or so than have the larger players. The larger players are still spending strongly and, as I've indicated, plan to continue to do so. I didn't mean to imply for a minute that the tariffs were a risk factor to current spending levels. I think they're just a factor in how fast we get to what we believe is going to be a pretty significant next leg up in spending for carriers. We've seen a broadening trend, a lot of very healthy spending from a lot of different clients. I think record numbers of clients spending at, if you want to pick a metric of a million dollars a month, yeah, we've got a record number of clients doing that now. That would be a data point for the broadening trend. Deepening broadening of spend, a lot of deep engagement of clients with the various products. Very healthy activity.

Zach Cummins (Senior Equity Research Analyst)

Understood. A follow-up question. Greg, I really appreciate the additional segment detail regarding Q1. Just as we look at the full-year guidance and the implied ramp in the second half of the year, is there anything we should keep in mind in terms of credit card offers or anything to that extent in the credit-driven verticals that we should be building into our model?

Greg Wong (CFO)

No. How I think about the guidance overall, Zach, is. What we expect to see is continued strong spend within auto insurance, although we expect a leg up once we get more clarity around tariffs, et cetera, et cetera, that Doug was talking about. We do expect to see a leg up. That is not baked into our outlook because we just do not know the timing of that. I'd tell you continued strong spend of the carriers and then what you would typically see is typical seasonality in the back half. Continued progress against our initiatives as well as the non-insurance businesses is how I'd characterize the outlook for the year.

Zach Cummins (Senior Equity Research Analyst)

Got it. That's helpful. Thanks for taking my questions and best of luck with the rest of the quarter.

Doug Valenti (CEO)

Thank you, Zach.

Greg Wong (CFO)

Thanks, Zach.

Operator (participant)

Thank you. Your next question is from Patrick Sholl from Barrington Research. Your line is now open.

Patrick Sholl (Research Analyst)

Hi. Thank you. Just following up on the credit-driven verticals, have there been any indications in the current macro environment of any changes in the monetization of those categories in terms of the customer profile that's coming through those media channels?

Greg Wong (CFO)

I would say not significant changes, but the trends. The trends are that the lower-end consumer is under more and more pressure. We are seeing very healthy demand for credit and debt-related relief products. Also, in some cases, personal loan products, which serve more that demographic than the upper end of the income spectrum. The middle and upper end of the income spectrum continue to be very healthy. The banks reported it yet again. We are seeing it yet again. The demand for credit cards, credit card debt is at record levels, but the liquidities are not. They are at quite low levels. There continues to be, trend-wise, a bifurcation. Our credit card business is primarily aimed at upper-income consumers, so that works for us. Our AM1 Financial Products business tends to be aimed at helping lower-end consumers, so that works for us there.

The only other business that we have in that area is the banking business, which is a source of funds business. That market is still growing very rapidly. It was kind of dormant during the zero-interest period. Once interest rates came back up, that market really has taken off. We have very, very strong demand from a very broad range of clients. We continue to do very well there. The only trend there is that interest rates are more normalized now. Even if they come down a little bit, they are still there. Source-of-funds accounts are open again, and banks are utilizing that to raise capital. Those would be the general trends, but nothing significant, no significant changes or inflections that we have seen.

Patrick Sholl (Research Analyst)

Okay. And then within the home services segment, I guess, have you seen any sort of change in activity there driven by lowering interest rates, or is that more going to flow through the financial services sector?

Greg Wong (CFO)

We have not. We continue to see robust demand for home services. We have all the business opportunity and market opportunity we can stand and will have, I think, for decades to come there. It is a massive market. It is healthy. Performance marketing works very well if done well. We do it better than anybody. Our clients tell us that, by the way. It is just a matter of continuing to execute and implement and execute and implement. We are doing that every day. As you have seen, we are growing at very consistent, very good rates. We are probably limited only by our capacity to execute, not by market demand. We are very early in our penetration there. The market is quite healthy. Consumers have a lot of equity. They have a lot of capacity to fund products or projects. They have not been relocating as much, which means that there are not as many new projects associated with moving in, but there are a lot of new projects associated with nesting and fixing up where they are. On balance, just a super healthy market. Homeowners are in very good financial shape in general, and we are very early in our penetration of that very large market.

Patrick Sholl (Research Analyst)

Okay. Thank you.

Greg Wong (CFO)

Thank you.

Operator (participant)

Thank you once again. Please press star one if you wish to ask a question. Your next question is from Elle Niebuhr from Lake Street Capital Markets. Your line is now open.

Elle Niebuhr (Equity Research Associate)

Hey, guys. Thanks for taking my questions. So first, wondering how we should think about makeshift impacts on gross margin into 2026. Especially as the carrier budgets remain healthy.

Greg Wong (CFO)

That's a great question. The carrier budgets are healthy, but we haven't really modeled the next leg up in growth for this fiscal year. If, in fact, we stay at a steady state and then just grow with seasonality as we enter this insurance shopping season in the March quarter, we're likely to see that mix where the mix has shifted pretty dramatically to auto insurance over the past year and a half or so. They're starting to normalize more, and that mix shift trend will soften. In fact, we may actually see a growth of other products and services and businesses go faster than auto insurance. If that's the case, that's, generally speaking, until and as we get these new media campaigns built for auto insurance, generally speaking, that will expand gross margin. As I indicated in my prepared remarks, we are targeting getting to a 10% Adjusted EBITDA in the back half of the fiscal year, which would be, of course, the March or June quarters. That would be a component of that, a factor in that.

Elle Niebuhr (Equity Research Associate)

Gotcha. Thanks. With that margin expansion, do you see that coming from auto, mix, or operating efficiency, or where do you see that expansion coming from?

Greg Wong (CFO)

Yeah. Three main areas. One is the mix. Initiatives, particularly the new media initiatives in auto insurance. Continuing to scale and continuing to expand and continuing to help grow our margins there. The growth of our higher-margin businesses, as I indicated just now when we talked about that, either the new products with 360 and QRP or home services, some of our other businesses that are structurally higher-margin, growing faster or at least not falling back in the mix. Certainly efficiency and productivity initiatives, which we have a ton of going on. Just to give you a data point on that, just to make sure that's real. It's real to you. In the past two years, we've gone from like $600 million year in revenue to $1.2 billion year in revenue. In that period, we have gone from 902 employees to 928 employees. We've doubled revenue by adding 26 employees. When I talk about efficiency and productivity initiatives, we really have efficiency and productivity initiatives. They're working very well.

Elle Niebuhr (Equity Research Associate)

Gotcha. Thanks for taking my questions. I'll hop back in queue.

Greg Wong (CFO)

You bet.

Operator (participant)

Thank you. There are no further questions at this time. That concludes our question-and-answer session for today. 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. You may all disconnect your lines.