QuinStreet, Inc. (NASDAQ:QNST) Q2 2017 Earnings Conference Call - Final Transcript

Feb 08, 2017 • 05:00 pm ET

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QuinStreet, Inc. (NASDAQ:QNST) Q2 2017 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good day and welcome to the QuinStreet Second Quarter 2017 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Erica Abrams. Please go ahead.

Executive
Erica Abrams

Thank you, Melissa. Good afternoon, ladies and gentlemen. Thank you for joining us today as we report QuinStreet's second quarter 2017 financial results. Joining me on the call today are Doug Valenti, CEO; and Greg Wong, CFO of QuinStreet. This call is being simultaneously webcast on the Investor Relations section of our website at www.quinstreet.com. (Forward-Looking Cautionary Statements) Today we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures are included in today's earnings press release, which is available on our Investor Relations website. Now, I will turn the call over to Doug, CEO of QuinStreet. Please go ahead.

Executive
Doug Valenti

Thank you, Erica. Hello everyone. Thank you for joining us today. Fiscal Q2 results were generally consistent with our expectations with revenue up 1% year-over-year despite deep cuts in marketing spending in the quarter by insurance clients due to industry loss ratio challenges. Insurance client spending has bounced back strongly in January as industry loss ratios have improved. Key themes in fiscal Q2 included strong growth in the financial services client vertical, our largest business, driven by the success of our new products and technologies offset by challenges in education and the education client vertical.

We continue to navigate these business shifts while maintaining a strong balance sheet and positive cash flow. We now expect to be able to rapidly expand EBITDA margins and cash flow due to the cost reductions from our recent restructuring and due to the return of topline leverage as we enter our seasonally strongest quarter and as insurance clients increase spending. We expect continued positive momentum in financial services. Also the trends and tone in education are improving at a rate not seen in several years driven by expectations of a more balanced regulatory environment and enthusiasm for our new products.

The new products now account for 80% of our education client vertical revenue. In summary, the business initiatives and trends shared with you last quarter are on track including our expectations for strong expansion of EBITDA margin and cash flow in the second half of the fiscal year. We look forward to reporting our progress again to you next quarter. With that, I'll turn the call over to Greg for more details of the financials for the quarter.

Executive
Greg Wong

Thanks, Doug. Hello and thanks to everyone for joining us today. For the second quarter total revenue was $65.6 million, adjusted net loss was $1.7 million or $0.04 per share, and adjusted EBITDA was approximately breakeven. We generated $900,000 of operating cash flow in the quarter. Revenue was in line with our expectation for the quarter increasing 1% year-over-year and reflecting the typical seasonality that we see in the December quarters. Seasonality is related to reduced budgets that coincide with the client fiscal year-ends and lower