QuinStreet, Inc. 2026 Q4 Earnings Call

Thank you, operator. 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 QuinStreet. 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 the 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 half a billion dollars 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. 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. As has been most recently demonstrated by our exceptional results with Amway, Modernize, Aqua Vida, and HomeBuddy. Our key operating competitive advantage continued 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. 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 1st, to be between $370 million-$380 million, implying 31% growth year-over-year at the midpoint of the range.

We expect adjusted EBITDA margin to be between $38 million-$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-$1.55 billion, implying 16% growth year-over-year at the midpoint of the range. We expect adjusted EBITDA to be between $150 million-$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, 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. Three, share repurchases at attractive levels.

Turning to our outlook, as Doug mentioned, we expect revenue in fiscal Q1 to be between $370 and $380 million, and adjusted EBITDA to be between $38 and $40 million. We expect revenue in full fiscal year 2027 to be between $1.45 and $1.55 billion, and adjusted EBITDA to be between $150 and $160 million. This is our initial view on fiscal 2027. We will, of course, provide updates to our expectations as the year progresses. In closing, fiscal 2026 was another record year for QuinStreet. Our outlook has never been more promising. Over the past two years, we've 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. 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.