QNST - Earnings call transcript Q4 2020

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Operator

Good day and welcome to the QuinStreet Fourth Quarter and Fiscal Year 2020 Financial Results Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Erica Abrams. Please go ahead.

Erica Abrams

Thank you, Todd. gentlemen. and ladies afternoon, Good Thank you fourth we QuinStreet's today joining and fiscal us quarter results. as year report for XXXX financial

on on www.quinstreet.com. the are today Relations section Wong, This the website CEO; Investor is me at our call webcast Greg QuinStreet. CFO Doug simultaneously being of and of Joining Valenti, call

to SEC, discussion of started, These results statements and statements. also discussed our our that our under get in to Risk most materially risks recent legal forward-looking differ are we Form cause to section related business, are forward-looking filing. in uncertainties the and detail differ would Before could more remind from you including performance. notice cause may the Factors projected statements, discussed a SEC number effect those of contains like disclosure I that section restrictions and including our that about results with guarantees Factors on the by following COVID-XX X-K are and the from under involve of statements actual the in such our filed future not XX-Q today filings,

of are statements the undertakes statements. assumptions GAAP of obligation as Investor CEO based of company website. GAAP that, these be today Doug, Today, measures, I to and update discussing will With reconciliation to a non-GAAP on the Please financial no available over we measures both looking non-GAAP are Forward and included to in Relations is on will today's press go release, our which call ahead. turn QuinStreet.

Doug Valenti

on QX the bottom quarter better-than-expected and operations, QuinStreet. operating clients, was thank result COVID-XX's media delivered progress you all and strategic initiatives. successful made lines, Despite Thank on impact joining for by for today. and both excellent we and you, Fiscal on us and top Erica, challenges we posed a

now believe media and to advantage and and reinvigorated with has attractive and continue and in progress better of divested year-over-year better, Also, with cash businesses, for that any functional we at faster competitive cash. excellence We Adjusted we and time the X% flow, biggest investment was our and is most generated are delivering decade. in our and to X% growth than our ending product in long-term strong over narrow $XXX focus positioned in fiscal EBITDA Overall, We opportunities. Revenue, revenue. past reorganization clients the QX. excluding grew performance million results. quarter

in Auto loans and of economic resilience credit-driven in the the of performance in to declined grew as significantly employment the long-term by Insurance good response Home business environment. navigation two The which our including and those strong and continue businesses model. Home Services negatively and client during product, cash strength forward, in Insurance and of our shifting verticals, pandemic businesses and driven Auto by had our is, team, characteristics Services advantages highlighting generation financial client client Our offset progress the and was and Auto Results media our almost opportunity were client demand, personal clients' grew be and in we once our going The weakness results Home revenue core big to the on verticals, weakening expected. particularly the overperformance and to credit again, the strong less and long-term flow largest pandemic, Those impacted excellent areas and important XX% year-over-year strong QX. efforts strong verticals focus XX%. execution impacted by initiatives. the in and Services cards, our our almost Insurance quarter client

Services. and subsequent The X, in closed to end. to Home to add scale capabilities Modernize strategic just quarter on On the front, transaction we Modernize acquired our July

further early are new seeing objective by quarter. narrowing and -- EBITDA the and divesting narrowed are by revenue more important fiscal of And in Additionally, that stages, footprint our further in and that growth and strengthened to QRP. usage growing to expected reminder, we we still in revenue signed The footprint fiscal early QX those current product in quarters the well. and good deliver and the expectation will predictable quarter our is Mortgage implementation faster The meaningful of A clients. coming QX, first in quarter, we for years. for our our pipeline activity and progress focus continues be assets. QRP

Turning It to trends Services in said, the specifics Insurance expect look general remains verticals term. That these near of Home to too continue times. ahead the strength forecast in weakness outlook. to client or difficult we and in uncertain credit-driven our far to in and

is QX, revenue between estimate our the Our $XXX $XXX that current fiscal and million quarter, be will in million. current

expect With to to over call I'll adjusted We be margin again EBITDA Greg. the mid-single in the turn digits. that,

Greg Wong

the revenue in Doug. headwinds you, half QuinStreet, fiscal us up year due COVID-XX. to record to Thank our Hello, significant for and wrapped despite thanks year another everyone today. of second for QX joining

total million For X% per of of divested X% quarter, net income Adjusted or revenue. year-over-year. or Revenue, grew $X.X the X% fourth excluding share. year-over-year. EBITDA million decrease Adjusted was $XXX million, a revenue $X.XX businesses, was was $X.X

revenue at by vertical. Looking client

QX of Our Financial vertical $XX.X Services and client to represented decreased revenue million. year-over-year XX% X%

quarter, divested our fourth business. fiscal our During we Mortgage

grew strong excellent our client largest number Auto Insurance, growth Services of revenue delivered progress vertical a was a clients This year-over-year. long-term from and Financial of our spending in range businesses, and the broad initiatives flat quarter. record growth major year-over-year. divested carrier on XX% Excluding business, about reflects

and COVID-XX as expected credit-driven credit to significantly driven loans and Our personal declined cards businesses economic employment conditions. year-over-year due

represented included growth to July Home year-end, business, impacted subsequent times. despite to just better less acquired and well revenue add performing, million, fiscal business. $XX.X quarter, these the areas quarter record of In grew client add payment a QX expected EBITDA. at of Services. million to Our our million was million, and to we Home for five to and revenue accretive in of to $XX in efforts our to equal which fiscal upfront notes executed paid year-over-year that cash unprecedented over our On and million Modernize Modernize be will delivering XX% Xst, to which million, XX% expected years. Services $XX Home of revenue capabilities company our $XX shifting annual $XX.X installments scale are margins XXXX $XX.X vertical the exceptional payable an we Total Services to is next to consideration be

XX% $XX.X the QX our Education represented quarter. The Brazil March to and client decreased year-over-year education reflects vertical X% remaining divestiture Our of in in million. decrease revenue the business the revenue of

was or X% client year-over-year. million, of X% our Education grew the Adjusted revenue. Excluding that divestiture, vertical quarter EBITDA in $X.X

sheet. closed flow business, $XX.X with million Mortgage the acquisitions cash. by million in We for sale prior CapEx. cash of $X.X $XXX.X the from and balance cash the with We began generation operating quarter our Turning of million cash quarter $X.X Big outflows million offset the quarter the connection of $XX and $X.X million in seller and to include of with million in for issued the in notes movements equivalents.

million our to record year posted Turning grew $XXX.X fiscal full XXXX and We revenue year-over-year. X% performance. of

Mortgage and our strategic good progress We we footprint our and during fiscal BXB, businesses. Brazil our initiatives narrow to our year. fastest-growing year, operations the the made to divested best-performing on During

businesses, XX% divested revenue total year-over-year. increased Excluding the

client Financial year-over-year. businesses, services fiscal grew Services grew revenue, XX% million. represented Financial XX% vertical $XXX.X of and excluding XX% XXXX to divested revenue Our year-over-year

client verticals, represented of $XX of other which We and February X% business year-over-year and revenue XX% grew BXB BXB, Services Our Home divested million. our to included in XXXX.

Home fiscal in Services business alone XXXX. to XX% year-over-year Our grew $XX.X million

tough Insurance year-over-year. declined expected Home client revenue that softness remaining conditions. represented vertical delivered financial markets, in of the in client our than our excluding and summary, In pleased and offset revenue, for Education We more performance the revenue million. the XXXX fourth quarter, declined from are XX% Education X% with XX% businesses, particularly given both meeting expectations fiscal we to Services economic $XX.X quarter. Our outlook and year-over-year our divested record credit-driven

challenges For fiscal I'll XX%. Q&A. the are Services over the and to growth Despite made representing COVID-XX, businesses. growth go-forward related $XXX.X Financial for that in year XXXX, from operator footprint to a the of our believe Services to progress path we businesses good turn X-year our predictable fastest-growing core current Home million, revenue the and annual call expanding narrowing compound that, rate With Revenue faster, more best-performing to on our we we was margins.

Operator

Incorporated. [Operator Instructions] Stephens We'll with question take John from Campbell our first

John Campbell

good congrats Hey on quarter. afternoon guys, great a and

Doug Valenti

Thank you, John.

John Campbell

Sure.

results of So really impressive out the Insurance Auto business.

relative that kind know, I or, agents media space, or of of COVID. to better it's a drove out for what best looking guys peers. as across that as mean we if Just don't outperformance? pretty maybe less sense carriers maybe I Any the over outperformance? know affected outpaced Any sense I for see exposure handily coming you triggered it, your what can don't

Doug Valenti

grew And other reported XX% -- that two Insurance and X% year-over-year. that think, grew the year-over-year I folks other We one speculative, just have Auto John. the Insurance, publicly,

So XX% we what theirs. stand Insurance, our But folks other talk clearly. the say business, and our tough year-over-year relative did biggest out and we're did cause Auto away -- XX% what budget to can gaining hard faster, is say think which share by caused did I to it's in not growth it's of more to -- or far our about --

far suggested. carriers, momentum the is you lot of big ours as As as concerned, a with

right media during this abundant of because now is shift to the of because of seeing and of productive online acceleration are surprising We programming a an the of less budgets offline activity. not loss less loss and period,

the addition, And incidents, healthy which resulted of in loss carriers means because those reduced course, lower are, financially, ratios. fewer has so in driving

lot see they they're are can insurance. online, stress. things a they home, And to that have Unfortunately, are financial there's financial to money if like they stress, experience buy high. of activity consumer Consumers lot So budget. when they're they of shop experiencing save And is shopping. at the consumers on a

the hopeful is shifting shift and shopping. And to strong against particular, well. refocused permanent carriers would we're businesses. other and online. it consumer us, initiatives the best-performing for of in great the a the as do that's budgets will online pretty we're that confident because inflection core that spur or have seeing tend represents we're a It's as over the our we in add We're what clients news, permanent growth to course. -- an I acceleration shifting and on if for inflection lot the we that of so, thing we so to demand or seeing carriers. of lot good be have really a And periods budget trend We're is only The budgets of platform seeing to focused from online is, future long-term case. And that

lot did initiatives insurance. on a initiatives have in in add quarter. of And the meaningfully those We going quite

the in millions sure the dollars revenue revenue with initiatives, added they similarly online, which working millions clients working quarter, of more initiatives, also do which initiatives, client that in and to help dollars we're shift media product of make as seek can they possible. to productively those as them to and New which new quarter, to added effectively budget of as

momentum, So, business of momentum a in our and lot for lot of Insurance a sure. long-term

Greg Wong

was clear, in And he business, be the John, was to Greg. to related what this was is to Doug QRP. referring referring core to not initiatives

John Campbell

just probably of And sense. XX% factoring about strength fell this and Is assuming tune that XX%. or the then, quarter, in and and Makes like Insurance of Okay. here in right? through going Services and Loans from Cards, model Personal that kind Credit for the the Home somewhere the I'm revenue

Doug Valenti

No.

think about I be they And were down Credit may But was is I Loans I down -- think confusing. Personal XX%. XX%. Cards Greg, over

Greg Wong

right. That's

in combined quarter. the about year-over-year XX% the So down was

yes, down Credit in XX% was XX%. down Cards So than Loans less over just Personal was

John Campbell

about Home then that similar Okay. credit continuation some of bake of kind of obviously, like maybe I personal of extent, Modernize some the to mean, peers. to of it continuation that's, stiff out guess, right? loan in, a revenue. what year it. you're But And if pretty with to seeing but Got down and strength there Insurance -- XQ pretty assume of not that and kind the cards, much we're guidance, Is factoring to in on seems similar. coming out that the your you fiscal a of you a I and Services, pressure

Doug Valenti

reductions. looks challenged. seeing May, continued or Well, next the high we're have -- quite -- filters Though are our Loans some made Personal in Credit the April business guided in lot Cards like price probably extraordinarily and and/or to and we Personal good the it a back since. progress Cards weakness the And tight we only quarter of in be bottomed smaller qualification for standards or continues Loans Personal market, market they're either card but I back and mean with or we've offerings significant Credit issuers in quarter. current Loans.

So credit try it and of a be own and the with will caused balance their pre-implications the we COVID consumer while, the COVID and expect sort to are by to sheets problems challenged. And continue comfortable still economic get credit. out of cards banks for to quite as try consumers -- for the

So, look a right say and out reasons a we of situation, now to it's is dynamic very would us that that than one hard imagine. can you quarter for I -- that's much further as the

So the yes, we credit-driven continue be pretty to expect to businesses weak.

employment pretty continues, directly like bottom. are the off bouncing economy And think see We we'll do I personal for along to their they the and the -- to feel bottom, the and bounced is -- future. going and Cards loan to Credit it's how tied if progress foreseeable we be has

John Campbell

sense. makes guys. That Okay. all Thanks

Doug Valenti

John. Thanks,

Operator

take with next Thank you. Jason from We'll Craig-Hallum. question our Kreyer

Jason Kreyer

afternoon. good gentlemen, Hey

Doug Valenti

Hey, Jason

Jason Kreyer

with the business. I'll education just out start

Operator

ahead. Jason, go please

Jason Kreyer

me? Do you hear

Greg Wong

I've got you.

Doug Valenti

We you can now. hear

Jason Kreyer

Okay.

I Sorry Brick-and-mortar asking education, you takes walk performing I was probably through puts not well, about and education that. in the Education. mean, just about quarter? online probably the well, performing can

Doug Valenti

Well, pretty not the or as away. be they strong, our education represented to The Campus budgets, online which year pretty had decently two, budgets strong. over have almost revenue than but continue stronger much went of been, completely you hit as XX% about past it. dramatically

yes, did of a main the for in And pretty dynamic, portion so clients, significant education in the strong that the a business team online and to represent phenomenal drop a from demand actually replace totally campus though almost But of and that is education. decent demand in overly based did pretty education. revenue job which demand not gone our performance is significant campus working

Jason Kreyer

update joined I curious happy this. Doug, through updates for of you I And you progressing any so time line if the QRP on Or way pipeline? Kind But so the if just pipeline apologies have any the Okay. call addressed are missed with late, the contribution? your do things you're there? comments,

Doug Valenti

Sure.

The We are yet pipeline. pipeline got way things are with happy the the through stronger this quarter. progressing again

which great clients promote that excited momentum We're us or are agency that feel of into The we the with going about revenue like carriers, meaningful the big than be and channel. first every product up our have will We it partners. opportunity of helping over we've the or quarter. more agencies, is will This the carriers with it's of and news great, be The to as with been last to have X,XXX% be the the ever opportunity. bigger the than thousands quarter is is previously. We communicated for dollars. QRP, bad only still hundreds

and go So it's how very clients engagement and proposition it's we're and value the well. But well. The to with continues outlook early. progressing extraordinarily the catching the

great product. carriers getting We matters the the in are from support that promote the channel, us they everybody including help as

activity. we're that's the to can begin to see do, isn't have have like. heck before. sense good, But looks and ramp that what what So, X this watch we for the It's just the one works it's -- more the it the expand that or revenue. actually don't far getting we of just we're me that doesn't we'll the out the that hearing implemented. implement now don't a be know, that what wide. when you've have product we in how And say the look we could our But curve think good. better the than as to to most lives, a see committed important you're had move. it pipeline, test and not progress We've a folks see strictly great today." delivering." floor to very things by it no pipeline. to it known this their they We no which words, done be but make we see drop the pipeline "hey, going we they getting agents, of And we've active, no the we're We've -- the hey, which progress through doing And usage is through work this "hey, tested, over exactly we're for. because to is and to to you just continues aspect value is very In the the never say, the to They of like the and gotten have just agency your one and going want. pipeline continues some not had initial reaction seeing to going as and see want see using clients that what I X quarter -- going last not ramp to you one of going dates they agents for exactly heard they metrics, to starting know had and as haven't what to does that clients to now get -- agents. keep I it gotten continue I but movement say, proposition is, is they're other share we they're pricing all expand to said, because be lot So it's of have quarter signed, use we're the change have paid the progress pipeline,

Jason Kreyer

helpful that think play market? a we little for on that. bounce more one little Or to weakness? doing offering. Or more of the a repair service bit, Loans We've help past this last Just -- looking start the that offset for that in credit can a does Personal a your role be when you the kind product? talked color And that Perfect. Is in a me. do within about to back anything

Doug Valenti

demand There's and And we Personal services. now huge our seeing that Loans are credit for right Absolutely. absolutely. credit repair business. in Yes, management

you things things of providers. of was to better the to that repair several know, of As one acquisition -- and high-quality credit one service coverage the MX, acquisition to match and -- better us settlement consumers the debt brought abilities

service, absolutely, for in able April and So May demand we settlement significantly debt reason we increase unfortunately, part the or in up demand, that -- of was really bounced to repair Personal were Loans the credit after in bottoming services. increasing

grow early us allow will be that and So business, yes, I we've we there. -- that, loans, with saw future. personal in strong spring expect the a the that lot I to expect focus will offsetting in put of the will the continue to foreseeable bottom that, that lenders in continue off weakness a that nice,

Jason Kreyer

Thank you.

Doug Valenti

you, Jason. Thank

Operator

our Thank question you. Research. take Goss next from Barrington with [Operator Instructions] Jim We'll

Unidentified Analyst

Good evening. bit for just for maybe your This just about of could -- Jim. if on helping wondering of that customers generally how could is terms more they've just more in with you and a reacted Pat talk just your rollout? just was [ph] you was how if they little to the view wondering I support carriers QRP, rollout I funnel

Doug Valenti

are there thought of that really them that a agency it the beginning. They define would from with an was the integrations carriers product. in to that the us and to -- by product told The they us their add a And working most way us more build for been They be reference and partners to support we as this ones continue with supportive to work QRP were have effective. acting the it by product and in the carriers opportunity for channel. to their

quoting of and more add sure We and as for we accurate the that, already have to full also have in team them committing cost centers that the many cost -- in we carriers country organizations the pipeline far some end-to-end match of other integrations, that And use someone more a know full on in carrier's to we we have with and all centers, and very do. integrations have India criteria, own have their of with carriers carriers or a we consumers states have pretty working know, long we many the policy more those unserved. I'm those of most those even to go deepest end-to-end doesn't as now in -- And time. if often, carriers almost pre-work because

have that center business using call are cost big the And in floor. of the terms pipeline, so QRP consumers their to satisfy center volume-wise, part to get today that agency the on in or centers carriers dropped committed what business used their cost own the a in

product. integrations. So we're of in from the promotion product support support getting -- support for and the We're a the of getting for reference terms

So the And end-to-end we live carriers to across committing support the Board the product, support. rates. by so actually more have integrations, even adopt accurate integrating

Unidentified Analyst

there's -- translate then, of would And moving guess, to line. businesses? lot the midpoint I -- the that year-over-year top acquired QX growth between Okay. sort I what guidance, rate at But and divested a of a on just the guess, of on parts your what

Doug Valenti

have Greg, of of that? do I have I me front front have don't me. don't you in that that in

Greg Wong

don't I that now. front have right of me in

Unidentified Analyst

Okay. was had. all I Great That was great. That guys. quarter. Exceptional

Doug Valenti

Thank you, Pat.

Operator

Sakai with [Operator Instructions] next from Chris We'll you. our Thank Research. question Singular take

Chris Sakai

Hi, and Greg. Doug

Doug Valenti

Chris. Hey,

Chris Sakai

Hi, a -- wanted the I revenue sort from What's Modernize. will ramp-up in I next time be question on of acquisition? for recognized sort of the see Modernize? the quarter, to had

Doug Valenti

is Services last immediately about combined know, our year. We business like existing Home pretty of running it our that million a Chris, was Yes. report business, we because with separately, $XX as acquisitions, you won't most this at which,

as it be our So -- quarter, numbers fact. on quite will closed be And clearly within in results. reported since this incorporated financial Home will our we Xst, into Services July

be think into So that revenue revenue between numbers of and as between to component revenue, $XX million I and of and the million to company to we indicated, comes revenue and -- a we $XX the announced to will Services course, expect when the directly the year for -- fiscal Home Greg We acquisition, Modernize we be in business. full XXXX Services that. total add in as indicated, pretty Home

we add an quarter, just The represent, because what of the it Modernize that in come Services. this hopefully, terms as might they see increasing, exact don't be throughout Home first quarter number can you'll will quarter synergies. I the so, plus of The what with you'll revenue. this -- know It's had, And year. for at to combined due synergies what pace again, accelerating the

revenue subject That quarter for improvements. we and in only we the seasonality. impact least businesses grow will business existing lowest the against client this Modernize terms would with for likely between but So business will to Modernize, be quite and synergies we media execute efficiencies get of as that the fully expect integrated our and incremental significant two the budgets product and

Chris Sakai

Okay, are be of great. in then, -- was sort as costs? far quarter, coming And going as there extra last there quarter? this acquisition in the goes, are any that this to acquisition Or

Doug Valenti

I think there -- are to But anything? you Greg, I'm can all that us. pretty are mean, I I you those anything Greg, acquisition any. missing add behind that? am sure don't costs do

Greg Wong

acquisition The up, of material, because could in the that the the be. bulk be to will there behind they're related June all no, us expect I yes, small costs But pieces quarter. coming there

Chris Sakai

it that for it me. great. think Okay, Well, I takes all

thanks. So

Doug Valenti

Great. Thank you, Chris.

Operator

Thank replay XXX-XXX-XXXX. of code XXXXXXX. for participation. you. will This be A concludes available dialing the conference is XXX-XXX-XXXX your The or access Thank today's you by call.

now may You disconnect.

QuinStreet (QNST) 9 Aug 202020 Q4 Earnings call transcript