QuinStreet, Inc. (NASDAQ:QNST) Q3 2018 Earnings Conference Call - Final Transcript

Apr 25, 2018 • 08:30 pm ET

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QuinStreet, Inc. (NASDAQ:QNST) Q3 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day and welcome to the QuinStreet Third Quarter Fiscal Year 2018 Earnings 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, Aga. Good morning, ladies and gentlemen. Thank you for joining us today to report QuinStreet's third quarter fiscal year 2018 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.

Before we get started, I would like to remind you that the following discussion contains forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause the results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 10-Q filings made on February 5th, 2018.

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 are included in today's earnings press release, which is available on our Investor Relations website.

With that I will turn the call over to Greg, CFO of QuinStreet. Please go ahead.

Executive
Gregory Wong

Thank you, Erica. Hello and thanks to everyone for joining us today. As you know from our press release, we reported an outstanding third quarter highlighted by all-time record revenues, our return to double-digit adjusted EBITDA margin and the continued generation of strong cash flows.

QuinStreet's success continues to be driven by the product and media strategies we have implemented over the past few years. Those strategies provide better matching, transparency and right pricing of media and our recent performance demonstrates that these strategies are working well for consumers, clients and QuinStreet alike.

In the third quarter, revenue grew 49% year-over-year to $117.9 million, our fastest growth rate at anywhere near the scale in QuinStreet's 19-year history. Adjusted EBITDA was $11.2 million or 10% of revenue, an increase of 116% year-over-year. Adjusted net income was $8.5 million or $0.16 per share. We generated $10.5 million of normalized free cash flow and closed the third quarter with $47.1 million in cash and equivalents and no debt.

Moving to revenue by client vertical, our Financial Services client vertical represented 74% of Q3 revenue and grew 79% year-over-year to $87.1 million. All of our largest businesses in Financial Services had strong growth in the quarter. Clients continue to shift marketing spend to online from offline media. As a shift is occurring QuinStreet is one of the only providers that delivers measurable, sustainable and cost-effective results for our clients at scale, which allows them sustain more aggressively and predictably in the world's largest shopping channel, the Internet.

Our Education client vertical represented 17% of Q3 revenue and grew