Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• QuinStreet Inc (NASDAQ:QNST) delivered record revenue in fiscal Q2, driven by a surge in auto insurance client demand.
• Revenue grew 130% year over year, reaching $282.6 million.
• The company raised its full fiscal year 2025 revenue outlook to approximately $1.085 billion.
• Adjusted EBITDA remained strong, benefiting from operating leverage and media efficiencies.
• QuinStreet Inc (NASDAQ:QNST) has broadened its client base, with a record number of carriers spending seven figures monthly.

Negative Points

• The company faced challenges in optimizing media due to the rapid surge in auto insurance demand.
• Margins were slightly lower than expected due to a heavy mix of auto insurance that wasn't fully optimized.
• The implementation of T CPA compliance caused some disruption and distraction from other activities.
• There was a tough comparison in the credit card segment, resulting in closer to flat growth.
• The company is still in the early stages of building media for business insurance, impacting current margins.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Sign with QNST.

Q: Can you provide some color on the capacity and momentum in the auto insurance sector, especially as carriers start to open more states? A: (Doug Valenti, CEO) We see a lot of capacity ahead. We've broadened our client base significantly, with a record number of carriers spending seven figures monthly. Many carriers still lack the exposure they want in digital channels, so there's substantial upside. We expect to consolidate around this new higher base and grow strong double digits. We're also expanding into new insurance markets, including agent-driven carriers and business insurance, which offer significant opportunities.

Q: Regarding the adjusted EBITDA margin, how much of the expected improvement is due to channel dynamics versus self-help initiatives? A: (Doug Valenti, CEO) Last quarter's margins were lower due to a heavy mix of auto insurance, which wasn't fully optimized. We're working on optimizing media and client results, which will improve margins. Additionally, we're growing higher-margin opportunities and improving structural margins through new media sources. We expect margin expansion this quarter and a significant jump in Q4.

Q: Can you discuss the impact of the TCPA regulations and any learnings from preparing for them? A: (Doug Valenti, CEO) We prepared for TCPA for over a year, testing various approaches to consumer contact. Although the regulations were stayed, we learned a lot and will apply these insights to improve our operations. The preparation was disruptive, but it positioned us well for long-term trends that will benefit the channel and QuinStreet.

Q: Are there any signs of media supply constraints easing in the auto insurance sector? A: (Doug Valenti, CEO) We've seen media companies shift focus back to auto insurance, increasing supply. Our own activities have also shifted back to auto insurance, yielding strong growth. We expect supply to catch up with demand, reducing constraints in the coming quarters.

Q: How do you see the potential impact of tariffs on auto insurance rates, given the new administration's stance? A: (Doug Valenti, CEO) We haven't heard concerns from clients about tariffs affecting auto insurance rates. While tariffs could lead to re-rating processes, carriers are currently in good shape with strong loss ratios and profitability. States are also more open to allowing rate adjustments based on real economics.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.