QuinStreet, Inc. (QNST) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reflects strong financial performance, with record revenue and profitability improvements. There is optimism in the auto insurance segment and strategic investments in media and products. The Q&A highlights healthy spending trends and margin expansion, though tariff uncertainties persist. Share repurchase completion and a strong cash position further support a positive outlook. Overall, the company's guidance and strategic initiatives suggest a positive market reaction.

Key Financial Performance

Total Revenue $285.9 million, a record high, with a 10% year-over-year growth driven by strong performance in auto insurance and home services.

Adjusted Net Income $13.1 million or $0.22 per share, reflecting profitability improvements.

Adjusted EBITDA $20.5 million, showing strong operational performance and investments in new media and product areas.

Financial Services Client Vertical Revenue $207.5 million, representing 73% of Q1 revenue, declined 2% year-over-year due to a tough comparison and a large promotional offer in the prior year.

Auto Insurance Revenue Grew 4% year-over-year and 16% sequentially, driven by strong demand and market fundamentals.

Noninsurance Financial Services Revenue Declined 10% year-over-year due to the absence of a large promotional offer from the prior year.

Home Services Client Vertical Revenue $78.4 million, representing 27% of Q1 revenue, grew 15% year-over-year due to strong demand and operational improvements.

Cash and Equivalents $101 million, with no bank debt, indicating a strong financial position.

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Operating Highlights

AI-driven products: Dozens of new AI projects are underway, improving consumer satisfaction, client results, media efficiency, and productivity. These projects are already adding revenue and expanding margins.

QRP and 360 finance products: Expected to grow well over 100% this fiscal year and contribute to expanded profitability.

Auto insurance market: Strong demand with expected significant growth in revenue and margin due to expanding product, market, and media footprint. Margins in new product market areas are more than twice those of the core click marketplace.

Home services market: Continued double-digit growth, with Q1 revenue growing 15% year-over-year to $78.4 million.

Revenue growth: Record revenue of $285.9 million in Q1, with full fiscal year revenue expected to grow at least 10% year-over-year.

Adjusted EBITDA: Achieved $20.5 million in Q1, with full fiscal year adjusted EBITDA expected to grow at least 20% year-over-year.

Margin expansion: Auto insurance margins expected to expand 5 points this fiscal year, with new media areas now past breakeven and expanding further as they scale.

AI investment: Significant focus on AI projects to leverage structured proprietary data and improve market competitiveness.

Share repurchase program: Board authorized a new $40 million share repurchase program, reflecting confidence in the business model and long-term outlook.

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Risk or Challenges

Carrier marketing spend uncertainty: Uncertainty about tariffs and their eventual impact on claims costs is delaying a significant increase in carrier marketing spend, which could impact revenue growth in the auto insurance sector.

Seasonality in business operations: The December quarter typically experiences a sequential decline in revenue due to reduced client staffing, budgets during the holidays, tighter media markets, and changes in consumer shopping behavior.

Decline in non-insurance financial services revenue: Non-insurance financial services revenue, including personal loans, credit cards, and banking, declined 10% year-over-year due to the absence of a large promotional offer from the prior year.

Heavy investments impacting margins: Significant investments in new media capacity, product expansion, and AI projects may pressure margins in the short term, despite their long-term growth potential.

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Guidance & Outlook

Auto Insurance Revenue and Margin: Significant growth in auto insurance revenue and margin is expected in the coming quarters and years due to strong product and market fundamentals, as well as an expanding product, market, and media footprint. Auto insurance margins are projected to expand by 5 points this fiscal year.

Non-Auto Insurance Verticals: Continued strong growth is expected in non-insurance verticals, with aggressive investments being made to support this growth.

Total Addressable Market: The company estimates it is less than 10% penetrated in its current addressable market footprint and expects to grow total company revenue at double-digit rates on average for many years.

Adjusted EBITDA Margin: The company aims to achieve a 10% quarterly adjusted EBITDA margin within this fiscal year ending in June. Adjusted EBITDA for fiscal Q2 is projected to be between $19 million and $20 million, with full fiscal year adjusted EBITDA expected to grow at least 20% year-over-year.

Revenue Growth: Fiscal Q2 revenue is expected to be between $270 million and $280 million. Full fiscal year 2026 revenue is projected to grow at least 10% year-over-year.

AI Initiatives: The company is investing in numerous AI projects expected to improve consumer satisfaction, client results, media efficiency, and productivity. These initiatives are already contributing to revenue growth and margin expansion.

Share Repurchase Program: A new $40 million share repurchase program has been authorized, reflecting confidence in the company's long-term outlook.

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Shareholder Return Plan

Share Repurchase Program: The Board of Directors has authorized a new $40 million share repurchase program. This reflects the strength of the underlying business model, financial position, and confidence in the long-term outlook for the business. Additionally, in the September quarter, $7 million worth of company shares were repurchased, and subsequent to the quarter end, another $10 million worth of shares were repurchased, exhausting the previously authorized share repurchase program.

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Key Q&A

Q:Can you provide more details on the media investments made in the quarter and their performance?

A:The company has been scaling proprietary media campaigns in response to market demand in auto insurance and competitive pressures. These campaigns have scaled well, are beyond breakeven, and margins are expanding. Auto insurance margins improved by 2 points since July and are expected to improve by at least 5 points by the fiscal year-end. New products and services in auto insurance are also contributing to better margins. QRP grew 294% last year and is expected to grow at least 70% this year, while the 360 product in home services is growing even faster.

Q:Are there new tariff concerns or changes in carrier reactions to tariffs?

A:There are no new tariffs, but existing tariffs remain unresolved, with some increases for certain countries. Clients are spending strongly but not at expected levels given their financial performance. Tariffs are identified as a risk factor, making clients more conservative in spending. Management expects spending to increase as clarity around tariffs improves.

Q:What are the spending trends among auto insurance carriers?

A:Spending has broadened, with non-major players growing their spend at higher rates than larger players. Larger players continue to spend strongly. A record number of clients are spending $1 million a month, indicating healthy and broadening spending trends.

Q:What should be considered in the full-year guidance and implied ramp in the second half of the year?

A:Continued strong spending in auto insurance is expected, with a potential leg up once tariff clarity improves. Typical seasonality in the second half and progress in other initiatives and non-insurance businesses are anticipated. The potential leg up in spending is not included in the outlook due to timing uncertainty.

Q:Are there any changes in monetization trends in credit-driven verticals due to the macro environment?

A:There are no significant changes, but trends show lower-end consumers under more pressure, leading to strong demand for credit and debt relief products. Middle and upper-income consumers remain healthy, with record credit card debt but low delinquencies. The banking business is growing rapidly due to normalized interest rates.

Q:Have there been changes in activity within the Home Services segment due to lowering interest rates?

A:No significant changes have been observed. The home services market remains robust, with strong demand and opportunities. Consumers have equity and capacity to fund projects, and the market is healthy with consistent growth.

Q:How should mix shift impacts on gross margin into 2026 be considered, especially with healthy carrier budgets?

A:If growth remains steady, the mix shift to auto insurance may normalize, and other products and services may grow faster, potentially expanding gross margins. The company targets a 10% adjusted EBITDA in the back half of the fiscal year.

Q:What are the main drivers of margin expansion?

A:Margin expansion is driven by scaling new media initiatives in auto insurance, growth of higher-margin businesses like 360 and QRP, and efficiency and productivity initiatives. The company doubled revenue in two years while adding only 26 employees, demonstrating significant efficiency improvements.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details about new products and services in auto insurance, citing competitive reasons. They also did not include the potential leg up in spending due to tariff clarity in their outlook, citing timing uncertainty.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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QNST Report

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