QUINSTREET, INC

1. The Company

QuinStreet, Inc. (the “Company”) is a leader in performance marketplaces and technologies for the financial services and home services industries. The Company was incorporated in California in April 1999 and reincorporated in Delaware in December 2009. The Company specializes in customer acquisition for clients in high value, information-intensive markets or “verticals,” including financial services and home services. The corporate headquarters are located in Foster City, California, with additional offices throughout the United States, India and Mexico. The majority of the Company’s operations and revenue are in North America.

2. Summary of Significant Accounting Policies

Basis of Presentation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying condensed consolidated financial statements and the notes to the condensed consolidated financial statements as of September 30, 2025 and for the three months ended September 30, 2025 and 2024 are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025, as filed with the SEC on August 21, 2025. The condensed consolidated balance sheet at June 30, 2025 included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the Company’s condensed consolidated balance sheet at September 30, 2025, its condensed consolidated statements of operations and comprehensive income (loss), stockholders’ equity for the three months ended September 30, 2025 and 2024 and condensed consolidated statements of cash flows for the three months ended September 30, 2025 and 2024. The results of operations for the three months ended September 30, 2025 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2026, or any other future period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of commitments and contingencies at the date of the financial statements and reported amounts of revenue and expenses during the period. On an ongoing basis, management evaluates these estimates, judgments and assumptions, including those related to revenue recognition, stock-based compensation, goodwill, long-lived assets, contingencies, credit losses of accounts receivable, and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. In addition, the Company may engage third-party valuation specialists to assist with the preparation of certain of its valuations. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates, and such differences could affect the results of operations reported in future periods.

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period’s presentation. Amounts previously presented as “Other Revenue” were reclassified into “Home Services” in the Disaggregation of Revenue table within Note 3, Revenue.

Accounting Policies

The significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025. There have been no material changes to our significant accounting policies as of and for the three months ended September 30, 2025.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures (ASU 2023-09) to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will adopt the guidance in its Form 10-K for the fiscal year ended June 30, 2026, which will result in additional disclosure in the notes to the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2023-09) to expand the disclosure requirements for income statement expenses. In January 2025, the FASB issued ASU 2025-01, to further clarify the effective date. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its financial statement disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (ASU 2025-06) to make targeted improvements to the accounting for internal-use software. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its financial statement disclosures.

ASU’s not included in the Company's disclosures were assessed and determined to be not applicable and material to the Company’s condensed consolidated financial statements or disclosures.

3. Revenue

Disaggregation of Revenue

The following table presents the Company’s net revenue disaggregated by vertical (in thousands):

Contract Balances

The contract liabilities representing client deposits from the Company’s contracts with its clients were $1.2 million and $1.3 million as of September 30, 2025 and June 30, 2025.

The Company’s contract liabilities result from payments received in advance of revenue recognition and advance consideration received from clients, which precede the Company’s satisfaction of the associated performance obligation. The changes in the liability balances during the three months ended September 30, 2025 was related to advance consideration received from clients of $0.9 million, offset by revenue recognized of $1.0 million.

Accounts Receivable and Allowances

The allowance for credit losses on accounts receivable was $1.1 million and $0.9 million as of September 30, 2025 and June 30, 2025. The revenue reserve was $1.3 million and $1.0 million as of September 30, 2025 and June 30, 2025. The total allowance for credit losses and revenue reserve was $2.4 million and $1.9 million as of September 30, 2025 and June 30, 2025.

Concentrations of Credit Risk

The Company hadone client that accounted for 21% of net revenue for the three months ended September 30, 2025, andtwo clients that accounted for 20% and 14% of net revenue for the three months ended September 30, 2024. The Company hadtwo clients that accounted for 14% and 13% of net accounts receivable as of September 30, 2025, and 16% and 13% of net accounts receivable as of June 30, 2025.

4. Net Income (Loss) per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by using the weighted-average number of shares of common stock outstanding, including potential dilutive shares of common stock assuming the dilutive effect of outstanding stock options, unvested restricted stock units, and shares issuable related to the employee stock purchase plan (“ESPP”) using the treasury stock method.

The following table presents the calculation of basic and diluted net income (loss) per share:

(1)

Diluted net loss per share for the three months ended September 30, 2024 does not reflect any potential common stock relating to stock options, restricted stock units, or shares issuable related to the ESPP due to net loss incurred. The assumed issuance of any additional shares would be anti-dilutive.

(2)

These weighted shares relate to anti-dilutive stock options, restricted stock units, and shares issuable related to the ESPP as calculated using the treasury stock method and could be dilutive in the future.

5. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. The Company estimates and categorizes the fair value of its financial instruments by applying the following hierarchy:

Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to directly access.

Level 2 — Valuations based on quoted prices for similar assets or liabilities; valuations for interest-bearing securities based on non-daily quoted prices in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3 — Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial instruments consist principally of cash equivalents, accounts receivable, accounts payable, post-closing payments and contingent consideration related to acquisitions. The recorded values of the Company’s accounts receivable and accounts payable approximate their current fair values due to the relatively short-term nature of these accounts.

The following table presents the fair value of the Company’s financial instruments (in thousands):

There wereno transfers between Level 1, Level 2, and Level 3 during the periods presented.

Cash Equivalents

All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents on the Company’s condensed consolidated balance sheets. The valuation technique used to measure the fair value of money market funds included using quoted prices in active markets for identical assets and are classified as Level 1 within the fair value hierarchy.

Post-Closing Payments Related to Acquisitions

The post-closing payments are future payments related to the acquisition of BestCompany.com, LLC (“BestCompany”) and Aqua Vida, LLC (“AquaVida”) in fiscal year 2024. The last installment payment for Modernize, Inc. (“Modernize”) of $5.5 million was completed during the first quarter of fiscal year 2026. As the fair value of the Company’s post-closing payments was determined based on installments stipulated in the terms of the acquisition agreements and discount rates observable in the market, the post-closing payments are classified as Level 2 within the fair value hierarchy.

Contingent Consideration Related to Acquisitions

The contingent consideration consists of the estimated fair value of future payments related to the Company’s acquisition of AquaVida. The AquaVida contingent consideration is based upon a percentage of margin achieved and is uncapped over a four-year period. The fair value of the contingent consideration is determined using the real options technique which incorporates various estimates, including projected net revenue, projected media margin, volatility and discount rates. As certain of these inputs are not observable in the market, the contingent consideration is classified as a Level 3 instrument. Significant changes in the projected net revenue, projected media margin, or discount rates would have a material impact on the fair value of the contingent consideration. The change in contingent consideration liability from the acquisition date to the final amount paid will be recognized in earnings at each reporting date. There wereno changes to the fair value of the contingent consideration of AquaVida for the three months ended September 30, 2025.

6. Goodwill and Intangible Assets, Net

Goodwill

As of September 30, 2025 and June 30, 2025, the Company had goodwill of $125.1 million. There wereno impairments to goodwill during thethree months ended September 30, 2025.

Intangible Assets, Net

Intangible assets, net, consisted of the following (in thousands):

Amortization of intangible assets was $2.3 million and $2.5 million for the three months ended September 30, 2025 and 2024.

Future amortization expense for the Company’s intangible assets as of September 30, 2025 was as follows (in thousands):

7. Income Taxes

The Company’s prov ision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. Each quarter the Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision. The Company recorded a provision for income taxes of $0.2 million and a benefit from income taxes of $49 thousandfor the three months ended September 30, 2025 and 2024. The tax provision for the first quarter of 2025 was primarily relatedto foreign operations, tax amortization of goodwill, and state income taxes. The tax benefit for the first quarter of 2024 was related to losses incurred by the Company in the interim period.

The Company performed an assessment on the likelihood of realizing the benefits of its deferred tax assets. As of September 30, 2025, the Company has concluded that it is not more likely than not that the Company would be able to utilize the majority of the deferred tax assets based on available evidence primarily related to historic losses and projected income. However, if there are favorable changes to actual operating results or to projections of future income, the Company may determine that it is more likely than not that such deferred tax assets may be realizable and record a material non-cash income tax benefit.

Additionally, in the event that the Company experiences an ownership change within the meaning of Section 382 of the Internal Revenue Code (“IRC”), the Company’s ability to utilize net operating losses, tax credits and other tax attributes may be limited.

8. Leases

The Company has operating leases primarily for its office facilities. The leases expire at various dates through fiscal year 2032, some of which include options to renew, with renewal terms of up to 5 years.

The components of lease expense were as follows (in thousands):

(1)

Variable lease expense is primarily composed of common area maintenance charges.

Supplemental information related to operating leases was as follows (in thousands, except lease term and discount rate):

Maturities of operating lease liabilities as of September 30, 2025 were as follows (in thousands):

9. Commitments and Contingencies

Guarantor Arrangements

The Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for the officer or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts under certain circumstances and subject to deductibles and exclusions. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is not material. Accordingly, the Company hadno liabilities recorded for these agreements as of September 30, 2025 and June 30, 2025.

In the ordinary course of its business, the Company from time to time enters into standard indemnification provisions in its agreements with its clients. Pursuant to these provisions, the Company may be obligated to indemnify its clients for certain losses suffered or incurred, including losses arising from violations of applicable law by the Company or by its third-party publishers, losses arising from actions or omissions of the Company or its third-party publishers, and for third-party claims that a Company product infringed upon any United States patent, copyright or other intellectual property rights. Where practicable, the Company limits its liabilities under such indemnities. Subject to these limitations, the term of such indemnification provisions is generally coterminous with the corresponding agreements but may extend for the duration of the applicable statute of limitations after termination of the agreement. The potential amount of future payments to defend lawsuits or settle indemnified claims under these indemnification provisions is generally limited and the Company believes the estimated fair value of these indemnity provisions is not material. Accordingly, the Company hadno liabilities recorded for these agreements as of September 30, 2025 and June 30, 2025.

Letters of Credit

The Company has a $0.3 million letter of credit agreement with a financial institution that is used as collateral for the Company’s corporate headquarters’ operating lease. The letter of credit automatically renews annually without amendment unless canceled by the financial institution within 30 days of the annual expiration date.

10. Stockholders’ Equity and Stock Benefit Plans

Stock Repurchases

In April 2022, the Board of Directors authorized a stock repurchase program allowing the repurchase of up to $40.0 million of the Company's common stock. During the three months ended September 30, 2025, the Company repurchased and retired 462,440 shares of its common stock at an average price of $15.41 per share, at a total cost of $7.1 million (including a broker commission of $0.03 per share). There wasno stock repurchase activity during thethree months ended September 30, 2024. As of September 30, 2025, approximately $9.7 million remained available for stock repurchases pursuant to the board authorization.

Repurchase of shares of common stock are recorded as treasury stock and are accounted for under the cost method. The Company’s accounting policy upon the retirement of treasury stock is to deduct its par value from common stock and reduce additional paid-in capital by the amount recorded in additional paid-in capital when the stock was originally issued.

Stock Incentive Plans

The Company may grant nonstatutory stock options (“NQSOs”), restricted stock, service-based restricted stock units (“Service-based RSUs”), stock appreciation rights, performance-based stock awards (“Performance-based RSUs”), and other forms of equity compensation, as well as performance cash awards, under its 2010 Equity Incentive Plan (the “2010 Incentive Plan”). The Company may grant NQSOs and RSUs to non-employee directors under the 2010 Non-Employee Directors’ Stock Award Plan (the “Directors’ Plan”).

As of September 30, 2025,23,125,612 shares were reserved and 11,217,890 shares were available for issuance under the 2010 Incentive Plan;4,598,838 shares were reserved and 1,871,841 shares were available for issuance under the Directors’ Plan.

Stock-based Compensation Expense

The following table summarizes the compon ents of stock-based compensation by grant type:

Stock Award Activities

Stock Options

The Company estimates the fair value of stock options at the date of grant using the Black-Scholes option-pricing model. Options are granted with an exercise price equal to the closing price of the Company’s common stock on the date of grant. The outstanding stock options as of September 30, 2025 totaled 116,075 shares.

Service-Based RSU

The Company estimates the fair value of service-based RSUs based on the closing price of the Company’s common stock on the grant date. The following table summarizes the service-based RSU activity under the plans:

Performance-Based RSU

Performance-based RSUs vest variably subject to the achievement of performance targets, consisting of both revenue growth and adjusted EBITDA targets. The Company evaluates the portion of the awards that are probable to vest quarterly until the performance criteria are met. The Company estimates the fair value of performance-based RSUs based on the closing price of the Company’s common stock on the grant date. As some of the components that comprise the performance targets have not been fully established, a grant date as defined by ASC 718 has not been determined. The Company will re-measure the compensation expense associated with the performance-based RSUs at each reporting date based on the closing price of the Company’s common stock at each reporting date until the grant date has been established.

The following table summarizes the performance-based RSU activity under the plans:

Employee Stock Purchase Plan

In October 2021, the Company adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), with 2,164,999 shares of common stock reserved for future issuance under the plan. During the three months ended September 30, 2025,142,331 shares of common stock were purchased under the 2021 ESPP at a weighted-average price of $9.35. As of September 30, 2025,1,083,612 shares were available for issuance under the 2021 ESPP. The fair value of the purchase rights for the ESPP are estimated on the date of grant using the Black-Scholes model.

ESPP employee payroll contributions accrued as of September 30, 2025 included within accrued liabilities on the Company’s condensed consolidated balance sheet was $0.5 million, and will be used to purchase shares for the ESPP purchase period ending on February 24, 2026.

11. Segment Information

The Company manages its operations as asingle operating segment for the purpose of assessing performance and making operating decisions. The Company’s Chief Operating Decision Maker ("CODM") is thechief executive officer, who manages operations based on financial information provided on a consolidated basis to assess performance and decide how to allocate resources.

As asingle reportable operating segment entity, the Company's segment performance measure is net income (loss), which is used to monitor budget versus actual results. Segment income from operations includes all geographic revenues, related cost of net revenues and operating expenses directly attributable to the reportable segment.

The significant components of segment costs and expenses, along with a reconciliation to net income (loss) are presented below (in thousands):

(1)Digital marketing services (“DMS”)expense primarily includes media and marketing expense, personnel-related costs, general facilities, and professional fees.

(2)General and administrative expense and Corporate systems expense are primarily comprised of personnel-related costs, professional fees, general facilities, office-related costs and technology service costs.

(3)Other segment cost and expense primarily includes non-cash depreciation, amortization, stock-based compensation and other non-recurring expenses, as well as interest income and income taxes, which are included in net income (loss).

The following tables set forth net revenue and long-lived assets by geographic area (in thousands):

12. Subsequent Events

On October 30, 2025, the Board of Directors authorized a new stock repurchase program allowing the Company to repurchase up to $40.0 million of its outstanding shares of common stock. Repurchases under this program may take place in the open market or in privately negotiated transactions and may be made under a Rule 10b5-1 plan. There is no guarantee as to the exact number of shares that will be repurchased by the Company, and the Company may discontinue repurchases at any time.