QUINSTREET, INC

Previous wording

Our financial services client vertical represented 64% and 66% of net revenue in fiscal years 2024 and 2023. Our home services client vertical represented 35% and 33% of net revenue in fiscal years 2024 and 2023. Other revenue, which primarily includes our performance marketing agency and technology services, represented 1% of net revenue in fiscal years 2024 and 2023. We generated the majority of our revenue from sales to clients in the United States.

Current wording

Our financial services client vertical represented 75% and 64% of net revenue in fiscal years 2025 and 2024. Our home services client vertical represented 24% and 35% of net revenue in fiscal years 2025 and 2024. Other revenue, which primarily includes our performance marketing agency and technology services, represented 1% of net revenue in fiscal years 2025 and 2024. We generated the majority of our revenue from sales to clients in the United States.

Previous wording

In addition, within our financial services client vertical, we derive a significant amount of revenue from auto insurance carriers and the financial results depend on the performance of the auto insurance industry. For example, inflation, weather-related and supply chain events have led to increases in insurance industry loss ratios, which decreased our clients’ advertising spending and thereby had a material adverse effect on our business.

Current wording

In addition, within our financial services client vertical, we derive a significant amount of revenue from auto insurance carriers and our financial results depend on the performance of the auto insurance industry, which may be affected by macroeconomic conditions, extreme-weather related events and supply chain events existing or occurring from time to time. For example, starting in the first half of fiscal 2022, inflation, weather-related and supply chain events led to increases in insurance industry loss ratios, which resulted in our auto insurance industry clients decreasing their advertising spending, which had an adverse effect on our business.

Previous wording

Our business also benefits from more spending by clients in digital media and performance marketing as digital marketing continues to evolve.

Current wording

All of our businesses benefit from more spending by clients in digital media and performance marketing as digital marketing continues to evolve.

Previous wording

Acquisitions have historically been, and continue to be, an important element of our overall corporate strategy and use of capital. We have completed several strategic acquisitions in the past, including the acquisitions of BestCompany and AquaVida completed in fiscal year 2024, two immaterial acquisitions in fiscal year 2022, the acquisitions of Modernize, Mayo Labs and FCE completed in fiscal year 2021, and the acquisitions of AmOne, CCM, and MBT completed in fiscal year 2019. For detailed information regarding our acquisitions, refer to Note 6, Acquisitionsto our consolidated financial statements.

Current wording

Acquisitions have historically been, and continue to be, an important element of our overall corporate strategy and use of capital. We have completed several strategic acquisitions in the past, including the acquisitions of BestCompany and AquaVida completed in fiscal year 2024, the acquisitions of Modernize, Mayo Labs and FCE completed in fiscal year 2021, and the acquisitions of AmOne, CCM, and MBT completed in fiscal year 2019. For detailed information regarding our acquisitions, refer to Note 6, Acquisitionsto our consolidated financial statements.

Previous wording

One of the primary challenges of our business is finding or creating media that is high quality and targeted enough to attract prospects for our clients at costs that provide a sound financial outcome for us. In order to grow our business, we must be able to find, develop, or acquire and retain quality targeted media on a cost-effective basis. Consolidation of media sources, changes in search engine algorithms and increased competition for available media has, during some periods, limited and may continue to limit our ability to generate revenue at acceptable margins. To offset this impact, we have developed new sources of media, including entering into strategic partnerships with other marketing and media companies and acquisitions. Such partnerships include takeovers of performance marketing functions for large web media properties; backend monetization of unmatched traffic for clients with large media buys; and white label products for other performance marketing companies. We have also focused on growing our revenue from call center, email, mobile and social media traffic sources.

Current wording

One of the primary challenges of our business is finding or creating media that is high quality and targeted enough to attract prospects for our clients at costs that provide a sound financial outcome for us. In order to grow our business, we must be able to find, develop, or acquire and retain quality targeted media on a cost-effective basis. Consolidation of media sources, changes in search engine algorithms and increased competition for available media has, during some periods, limited and may continue to limit our ability to generate revenue at acceptable margins. To offset this impact, we have developed new sources of media, including entering into strategic partnerships with other marketing and media companies and acquisitions. Such partnerships include takeovers of performance marketing functions for large web media properties; backend monetization of unmatched traffic for clients with large media buys; and white label products for other performance marketing companies. We have also focused on growing our revenue from call center, native, email, mobile and social media traffic sources.

Previous wording

Clients in our financial services vertical have been affected by laws and regulations and the increased enforcement of new and pre-existing laws and regulations. The effect of these regulations, or any future regulations, may continue to result in fluctuations in the volume and mix of our business with these clients.

Current wording

Some of our clients have been affected by laws and regulations and the increased enforcement of new and pre-existing laws and regulations. The effect of these regulations, or any future regulations, may continue to result in fluctuations in the volume and mix of our business with these clients.

Previous wording

Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, facilities fees and professional services fees. We are constraining expenses generally to the extent practicable.

Current wording

Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, facilities fees and professional services fees.

Previous wording

Net revenue increased by $32.9 million, or 6%, in fiscal year 2024 compared to fiscal year 2023. Revenue from our financial services client vertical increased by $12.9 million, or 3%, due to an increase in revenue in our credit cards, personal loans and banking businesses due to increased media and client budgets. This was partially offset by a decrease in revenue in our insurance business associated with decreased spending by insurance carriers to address profitability concerns caused by inflation and higher costs to repair and replace vehicles. Revenue from our home services client vertical increased by $18.8 million, or 10%, primarily as a result of increased client budgets and successful execution of our growth initiatives. Other revenue increased by $1.2 million, or 16%, which primarily includes performance marketing agency and technology services.

Current wording

Net revenue increased by $480.2 million, or 78%, in fiscal year 2025 compared to fiscal year 2024. Revenue from our financial services client vertical increased by $424.6 million, or 108%, primarily due to an increase in revenue in our insurance business, which increased by $414.4 million, or 200%, attributable to higher demand from a broad base of carrier clients. In addition, there was an increase in net revenue in our banking businesses of $7.6 million and credit cards business of $4.1 million due to increased media and client budgets. Revenue from our home services client vertical increased by $49.9 million, or 24%, primarily as a result of increased client budgets and successful execution of our growth initiatives. Other revenue increased by $5.8 million, or 64%, which primarily includes performance marketing agency and technology services.

Previous wording

Cost of revenue increased by $35.2 million, or 7%, in fiscal year 2024 compared to fiscal year 2023. This was primarily driven by increased media and marketing costs of $20.8 million due to higher revenue volumes. Personnel costs increased by $8.3 million mainly due to higher average headcount and higher incentive compensation due to revenue growth, and increased stock-based compensation expense. Depreciation and amortization expense increased by $4.6 million mainly due to additional capitalization of internally developed software. Other costs including facilities, equipment and supplies increased by $1.3 million primarily due to increases in software license fees and maintenance contracts.

Current wording

Cost of revenue increased by $415.6 million, or 73%, in fiscal year 2025 compared to fiscal year 2024. This was primarily driven by increased media and marketing costs of $406.8 million due to higher revenue volumes. Personnel costs increased by $5.9 million mainly due to higher stock-based compensation expense due to higher average grant date share prices in the current year.

Previous wording

Gross profit margin, which is the difference between net revenue and cost of revenue as a percentage of net revenue, remained relatively flat at 8% in fiscal years 2024 and 2023. Our gross profit was $46.2 million for fiscal year 2024 compared to $48.5 million for fiscal year 2023, a decrease of $2.3 million, or 5%, primarily driven by higher personnel costs as a percentage of revenue to support our continued efforts to invest in long-term growth initiatives and capabilities.

Current wording

Gross profit margin, which is the difference between net revenue and cost of revenue as a percentage of net revenue, was 10% and 8% in fiscal years 2025 and 2024. Our gross profit was $110.9 million for fiscal year 2025 compared to $46.2 million for fiscal year 2024, an increase of $64.6 million, or 140%. The increase in gross profit margin was attributable to a decrease in personnel cost and depreciation as percentage of net revenue, offset by a higher mix of revenue from our financial services client vertical which had a higher media cost as a percentage of revenue.

Previous wording

Product development expenses increased by $1.2 million, or 4%, in fiscal year 2024 compared to fiscal year 2023. This was primarily due to increased personnel costs of $1.7 million as a result of higher headcount and increased stock-based compensation, partially offset by decreased professional services costs of $0.6 million.

Current wording

Product development expenses increased by $3.8 million, or 13%, in fiscal year 2025 compared to fiscal year 2024. This was primarily due to increased personnel costs of $4.0 million due to higher employee compensation expense and increased stock-based compensation expense.

Previous wording

Interest income relates to interest earned on our cash and cash equivalents. Interest expense relates to imputed interest on post-closing payments related to our acquisitions. Interest expense decreased by $0.1 million, or 14%, in fiscal year 2024 compared to fiscal year 2023 primarily due to decreased imputed interest on a lower average outstanding balance of the post-closing payments. Other (expense) income, net, increased by $2.0 million, or 3,860% in fiscal year 2024 compared to fiscal year 2023 primarily due impairment charge for investment in equity securities of $2.0 million recorded in third quarter of fiscal year 2024.

Current wording

Interest income relates to interest earned on our cash and cash equivalents. Interest expense relates to imputed interest on post-closing payments related to our acquisitions. Interest expense decreased by $0.3 million, or 41%, in fiscal year 2025 compared to fiscal year 2024 primarily due to decreased imputed interest on a lower average outstanding balance of the post-closing payments. Other (expense) income, net, decreased by $1.9 million, or 91% in fiscal year 2025 compared to fiscal year 2024 primarily due impairment charge for investment in equity securities of $2.0 million recorded in third quarter of fiscal year 2024.

Previous wording

We recorded a provision for income taxes of $0.9 million in fiscal year 2024, primarily as a result of a net expense for deferred federal, state and foreign income taxes of $0.5 million and current state and foreign income taxes of $0.4 million. The net deferred tax expense is related to indefinite lived deferred tax liabilities unable to be offset with deferred tax assets. As a result of continued operating losses, the Company maintained a valuation allowance against its net deferred tax assets.

Current wording

We recorded a provision for income taxes of $0.9 million in fiscal year 2024, primarily as a result of a net expense for deferred federal, state and foreign income taxes of $0.5 million and current state and foreign income taxes of $0.4 million. The net deferred tax expense is related to indefinite lived deferred tax liabilities unable to be offset with deferred tax assets. As a result of continued operating losses through fiscal 2024, the Company maintained a valuation allowance against its net deferred tax assets.

Previous wording

Our effective tax rate was (3.1%), (222.4%) and 8.9% in fiscal years 2024, 2023 and 2022. The increase in our effective tax rate for fiscal year 2024 compared to fiscal year 2023 was primarily due to the one-time charge related to the recognition of valuation allowance in fiscal year 2023.

Current wording

Our effective tax rate was 16.5%, (3.1%) and (222.4%) in fiscal years 2025, 2024 and 2023. The increase in our effective tax rate for fiscal year 2025 compared to fiscal year 2024 was primarily due to the Company generating pre-tax income in the current year compared to a pre-tax loss in the prior year.

Previous wording

The following table presents a reconciliation of adjusted EBITDA to net loss calculated in accordance with GAAP, the most comparable GAAP measure, for each of the periods indicated:

Current wording

The following table presents a reconciliation of adjusted EBITDA to net income (loss) calculated in accordance with GAAP, the most comparable GAAP measure, for each of the periods indicated:

Previous wording

As of June 30, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $50.5 million and cash we expect to generate from future operations. Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. We believe our cash equivalents are liquid and accessible.

Current wording

As of June 30, 2025, our principal sources of liquidity consisted of cash and cash equivalents of $101.1 million and cash we expect to generate from future operations. Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. We believe our cash equivalents are liquid and accessible.

Previous wording

In April 2022, our Board of Directors canceled our prior stock repurchase program that commenced in July 2017 and authorized a new stock repurchase program allowing the repurchase of up to $40.0 million worth of common stock. In fiscal year 2024, we repurchased and retired 247,618 shares of our common stock at an average price of $8.85 per share at a total cost of $2.2 million (including a broker commission of $0.03 per share). Repurchases under this program took place in the open market and were made under a Rule 10b5-1 plan. The repurchased shares of common stock were recorded as treasury stock and were accounted for under the cost method. As of June 30, 2024, approximately $16.8 million remained available for stock repurchases pursuant to the board authorization.

Current wording

In April 2022, our Board of Directors authorized a new stock repurchase program allowing the repurchase of up to $40.0 million worth of common stock. In fiscal year 2024, we repurchased and retired 247,618 shares of our common stock at an average price of $8.85 per share at a total cost of $2.2 million (including a broker commission of $0.03 per share). Repurchases under this program took place in the open market and were made under a Rule 10b5-1 plan. The repurchased shares of common stock were recorded as treasury stock and were accounted for under the cost method. There were no repurchases made during the fiscal year 2025. As of June 30, 2025, approximately $16.8 million remained available for stock repurchases pursuant to the board authorization.

Previous wording

Cash flows from operating activities are primarily the result of our net (loss) income adjusted for depreciation and amortization, provision for or benefit from sales returns and doubtful accounts receivable, stock-based compensation expense, change in the fair value of contingent consideration, non-cash lease expense, deferred income taxes, impairment of investment in equity securities and changes in working capital components. Cash provided by operating activities was $12.0 million in fiscal year 2024, compared to $11.8 million in fiscal year 2023 and $28.7 million in fiscal year 2022.

Current wording

Cash flows from operating activities are primarily the result of our net (loss) income adjusted for depreciation and amortization, change in the fair value of contingent consideration, provision for sales returns and doubtful accounts receivable, stock-based compensation expense, non-cash lease expense, deferred income taxes, impairment of investment in equity securities and changes in working capital components. Cash provided by operating activities was $85.0 million in fiscal year 2025, compared to $12.0 million in fiscal year 2024 and $11.8 million in fiscal year 2023.

Previous wording

Cash provided by operating activities in fiscal year 2023 consisted of net loss of $68.9 million, adjusted for non-cash adjustments of $86.7 million and changes in working capital accounts of $6.0 million. The non-cash adjustments primarily consisted of a one-time non-cash charge of $47.2 million to establish a valuation allowance for our deferred tax assets, depreciation and amortization of $19.2 million, and stock-based compensation expense of $18.8 million. The changes in working capital accounts were primarily attributable to a decrease in accrued liabilities of $7.1 million, an increase in prepaid expenses and other assets of $4.8 million, and a decrease in accounts payable of $4.8 million, offset by a decrease in accounts receivable of $10.9 million.

Current wording

Cash provided by operating activities in fiscal year 2025 consisted of a net income of $4.7 million, adjusted for non-cash adjustments of $76.0 million, and a net increase in cash from changes in working capital of $4.2 million. The non-cash adjustments primarily consisted of stock-based compensation expense of $31.8 million, depreciation and amortization expense of $24.5 million, change in the fair value of contingent consideration of $17.1 million, and provision for sales return and doubtful accounts receivable of $2.2 million. The changes in working capital accounts were primarily attributable to an increase in accrued liabilities and accounts payable of $32.3 million, offset by an increase in accounts receivable and prepaid expenses and other assets of $28.0 million. The increases in working capital accounts were primarily due to higher revenue levels in fiscal year 2025 as compared to the same period in prior year, and the timing of receipts and payments.

Previous wording

Cash flows from investing activities generally include capital expenditures, capitalized internal software development costs, acquisitions from time to time and investment in equity securities. Cash used in investing activities was $22.7 million in fiscal year 2024, compared to $15.1 million in fiscal year 2023 and $9.2 million in fiscal year 2022.

Current wording

Cash flows from investing activities generally include capital expenditures, capitalized internal software development costs, and acquisitions from time to time. Cash used in investing activities was $11.4 million in fiscal year 2025, compared to $22.7 million in fiscal year 2024 and $15.1 million in fiscal year 2023.

Previous wording

Cash used in investing activities in fiscal year 2024 was primarily composed of $16.7 million capital expenditures and capitalized internal software development costs, $4.5 million cash payment at the closing of business acquisitions in the third quarter of fiscal year 2024, and $1.5 million of other investing activities. Cash used in investing activities in fiscal year 2023 was primarily composed of $15.0 million capital expenditures and capitalized internal software development costs.

Current wording

Cash used in investing activities in fiscal year 2024 was primarily composed of $16.7 million capital expenditures and capitalized internal software development costs, $4.5 million cash payment at the closing of business acquisitions in the third quarter of fiscal year 2024, and $1.5 million of other investing activities.

Previous wording

Cash flows from financing activities generally include repurchases of common stock, payment of withholding taxes related to the release of restricted stock, net of share settlement, proceeds from the exercise of stock options and issuance of common stock under employee stock purchase plan, and post-closing payments and contingent consideration related to business acquisitions. Cash used in financing activities was $12.5 million in fiscal year 2024, compared to $19.5 million in fiscal year 2023 and $33.3 million in fiscal year 2022.

Current wording

Cash flows from financing activities generally include post-closing payments related to business acquisitions, payment of withholding taxes related to the release of restricted stock, net of share settlement, repurchases of common stock, proceeds from issuance of common stock under employee stock purchase plan and exercise of stock options. Cash used in financing activities was $23.0 million in fiscal year 2025, compared to $12.5 million in fiscal year 2024 and $19.5 million in fiscal year 2023.

Previous wording

Cash used in financing activities in fiscal year 2023 was due to payment of post-closing payments and contingent consideration related to acquisitions of $11.6 million, repurchases of common stock of $5.6 million, and the payment of withholding taxes related to the release of restricted stock, net of share settlement of $5.4 million, offset by proceeds from the issuance of common stock under the employee stock purchase plan and exercise of stock options of $3.2 million.

Current wording

Cash used in financing activities in fiscal year 2025 was due to payment of post-closing payments and contingent consideration related to acquisitions of $13.7 million, and payment of withholding taxes related to the release of restricted stock, net of share settlement of $13.2 million, offset by proceeds from the exercise of stock options and issuance of common stock under the employee stock purchase plan of $4.0 million.

Previous wording

In accordance with the terms of the acquisitions completed in fiscal years 2024, 2022, 2021 and 2019, we are required to make post-closing payments and contingent consideration payments. See Note 6, Acquisitions, to our consolidated financial statements for more information on the post-closing payments and contingent consideration payments related to our business acquisitions.

Current wording

In accordance with the terms of our acquisitions completed in fiscal years 2024 and 2021, we are required to make post-closing payments and contingent consideration payments. See Note 6, Acquisitions, to our consolidated financial statements for more information on the post-closing payments and contingent consideration payments related to our business acquisitions.

Previous wording

The above table does not include approximately $2.7 million of long-term income tax liabilities as of June 30, 2024 for uncertainty in income taxes due to the fact that we are unable to reasonably estimate the timing of these potential future payments.

Current wording

The above table does not include approximately $2.8 million of long-term income tax liabilities as of June 30, 2025 for uncertainty in income taxes due to the fact that we are unable to reasonably estimate the timing and amount of these potential future payments.