QuinStreet, Inc. Stock

Thank you. Good day, and welcome to Kin Street's Fiscal Fourth Quarter and Full Year 2026 Financial Results Conference Call. Today's conference is being recorded. Following prepared remarks, there will be Q&A session. At this time, I would like to turn the conference over to Vice President of Investor Relations and Financials,.

Robert Amparo. Mr. Amparo, you may begin. Thank you, operator, and thank you everyone for joining us as we report Quinn Street's fiscal fourth quarter and full year 2026 financial results. Joining me on the call today are Chief Executive Officer Doug Valenti and Chief Financial Officer Greg Wong. Before we begin, I would like to remind you that the following discussion will contain forward-looking statements. looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8K filing made today and our most recent 10Q filing. 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 is included in today's earnings press release, which is available on our investor relations website at investor.quinstreet.com. With that, I will turn the call over to Doug Pawlenty. Please go ahead, sir. Doug Pawlenty Thank you, Rob.

Welcome everyone. Fiscal Q4 was another record quarter. We delivered strong performance and progress across the business to close out a record fiscal year for Quinn Street. We grew quarterly revenue 43% year-over-year, with strength in both financial services and home services. Adjusted EBITDA was up 87% year-over-year in the quarter. Adjusted EBITDA margin was 11.1% in the quarter, a 270 basis point expansion over the year-ago period. Full fiscal year 2026 revenue grew 18% year over year. to $1.3 billion. Full fiscal year adjusted EBITDA grew 38% year over year $112.5 million, an 8.7% margin. and a 130 basis point expansion year over year.

Over the past two years, we have more than doubled revenue, while expanding margins, growing adjusted EBITDA by over 450%. We have also delivered strong cash flows and maintained a conservative and flexible balance sheet. Going forward, we expect to be able to continue to grow revenue at strong double-digit rates. We are early in the penetration and footprint of our addressable markets. which we estimate to be well over $100 billion per year in total opportunity. to be themselves growing at double digit rates. Carrier demand and economics in auto insurance are exceptionally strong and our footprint of clients and products is expanding rapidly. In home services, our trade growth and new trade expansion programs are going well. client demand is exceptionally strong, and the addition of HomeBuddy whose integration has gone very well, has given us much-valued new-scale capacity to meet demand. The Home Services Client Vertical is now running well over half a billion dollars per year in revenue.

We are also making good progress on growth initiatives in our other, earlier stage client verticals and products, all of which are targeting big, attractive market opportunities. Those businesses already generated over $200 million in revenue last fiscal year. Our revenue growth generally will continue to be driven by the relentless shift of marketing budgets to digital, and in digital to our performance marketplaces, whose microeconomics drive unparalleled media efficiency at scale for our clients. Our customer retention rates continue to be extraordinarily high. and the vast majority of our double-digit organic revenue growth comes from existing clients shifting and allocating more budgets. to our marketplace solutions. We see the shift to digital and performance marketing as still early and accelerating. And we are driving market growth by expanding and innovating new products and media capacity. and by uniquely and consistently delivering results at scale for clients. Strategically, we expect to continue to be a disciplined and effective acquirer and consolidator Just as we have always been, and as has been most recently demonstrated, by our exceptional results with AM1, Modernize, Aquavita Media, and HomeBuddy.

Our key operating competitive advantage continue to be our industry-leading technologies. including our core AI optimization algorithms. We are implementing dozens of new AI applications to accelerate performance and productivity across the business. And we are already seeing significant positive results from those AI applications. and we are broadening and accelerating those projects. As we grow revenue, we expect to continue to expand margins, driven by one, growth of owned and operated media, to a mixed shift to higher margin products and verticals, And three, top-line leverage from increased revenue scale combined with continuous improvement productivity and cost efficiency. Turning to our outlook. We expect revenue in fiscal Q1, which began on July 1st. to be between 370 and 380 million dollars. implying 31% growth year-over-year at the midpoint of the range. We expect adjusted EBITDA margin to be between $38 and $40 million. multiplying 90% growth, a 10.4% margin, a 320 basis point margin expansion year over year at at the midpoint of the range. Our initial outlook for full fiscal year 2027 is that we expect revenue of 1.45 to 1.55 billion dollars. implying 16% growth year-over-year at the midpoint of the range.

We expect adjusted EBITDA to be between $150 and $160 million. implying 38% growth, a 10.3% margin, and another 160 basis point margin expansion year over year at the midpoint of the range. is on top of last year's 130 basis point adjusted divotile margin expansion. Obviously, the new fiscal year is young. As the year progresses, we believe that there may be opportunities to grow revenue and expand margins even further. just as we found last fiscal year? If so, we will of course refine our outlook accordingly. With that, I'll turn the call over to Greg.

Thank you, Doug. Hello, and thanks to everyone for joining us today. Q4 was a strong finish to a record year for Quinn Street, as we delivered yet another quarter of strong double-digit revenue growth and expanded adjusted EBITDA margins. For the June quarter, total revenue grew 43% year-over-year and was $373.9 million. Adjusted net income was $29 million, or 50 cents per share. Adjusted EBITDA grew 87% year-over-year to $41.4 million and came in at an 11.1% margin, a 270 basis point expansion over the year-ago quarter. Looking at revenue by client vertical, our financial services client vertical represented 62% of Q4 revenue and grew 24% year-over-year to $232.3 million, a record revenue quarter for that business. Auto insurance remained strong in the quarter and grew 37% year-over-year.

Our home services client vertical represented 38% of Q4 revenue and grew 88% year over year to $141.6 million. also another record revenue quarter for that business. Full fiscal year, 2026 revenue. grew 18% year-over-year. EBITDA grew 38% year-over-year to $112.5 million. Turn to the balance sheet, we enter the quarter with $128 million in cash and equivalents. net debt of $22 million. We also repurchased $14.6 million worth of shares in the quarter and $31.4 million worth of shares for the year. We continue to have a measured approach to capital allocation, focused on maximizing long-term shareholder value, and we will continue to prioritize, one, investing in new products and initiatives for future growth and margin expansion. Two, accretive acquisitions. And three, share repurchases at attractive levels.

Turning to our outlook, as Doug mentioned, we expect revenue in fiscal Q1 to be between $370 and $380 million. adjusted EBITDA to be between $38 and $40 million. And we expect revenue in full fiscal year 2027 to be between 1.405 and $1.55 billion. adjusted EBITDA to be between $150 and $160 million. This is our initial view on fiscal 2027, and we will of course provide updates to our expectations as as the year progresses. In closing, fiscal 2026 was another record year for Quinn Street. Our outlook has never been more promising. Over the past two years, we've more than doubled our revenue and more than quadrupled the just adivita. We believe that our market opportunities are still in their early innings and have never been bigger, and we will continue to invest against those opportunities in fiscal 2027 and beyond.

With that, I'll turn it over to the operator for Q&A. Thank you.

At this time, we will start the Q&A session. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press the star key followed by one on your touch-tone phone. You will hear a one-tone prompt acknowledging your request. questions will be pulled in the order they are received. If you would like to decline from the polling process, please press found. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. One moment, please, for your first question.

The first question comes from Jason Creyer with Craig Hallam. Please go ahead.

Exceptional quarter guys, good work. Thank you, Jake. Wanted to start out on home services. You had a very healthy step up in revenue there. Wondering if you can just talk about the performance in terms of, you know, progress in existing verticals, new verticals, new media channels just any any additional color there is appreciated sure Jason kind of all of the above the.

Homebody integration and Synergy capture programs have gone very well. We have strong demand from existing clients and existing verticals. We made good progress in opening up and beginning to build new verticals. We have had strong growth in new media channels and broadening out our media footprint. I'd say that it's really not a cylinder in that business we're not firing on. And it's, as you know, it's an exceptionally big market opportunity and, you It requires real sophisticated execution, and I think things are going about as well as we could possibly expect there, and we are super excited about the future in that business.

Perfect. Good to hear. Doug, as you wrapped up, you kind of teased out opportunities to grow revenue faster and expand margins further. Just wanted to see if you can, you know, if there's anything you can provide to the site industry. what different levers you can pull for upside or perhaps, you know, kind of some new development areas that you're looking into. Thanks.

Sure, Jason. Well, it's the beginning of a fiscal year, so, you know, We have a lot of initiatives that we're early in or in, that add up to a lot of opportunities given that it's the beginning of the fiscal year, we usually don't count on all of those working out. But I would say that our internal plans and things that we expect ourselves to accomplish this year would add up to considerably more than we're at this point willing to commit you know, to the shareholder base, and it's our job to deliver on those. And they're everywhere. They're across the business in terms of opportunities to... better scale certain product programs, media programs, client budgets, vertical and trade expansions like we talked about for home services. So pretty much across the board, earlier in the year, we're going to be heavier in terms of our risk adjustment to those things because it's just by definition more uncertainty because we're not as far along yet. But I can't think of one of the businesses where we don't believe in our internal planning process. We have more opportunity than we're yet willing to fully commit to given it's just, again, earlier in the year.

Is QRP a part of that, or can you just give any updates on how QRP has progressed?.

Yes, QRP has done exceptionally well. QRP and 360 Finance are two big product initiatives. Both grew extraordinarily fast last fiscal year. much faster than overall company revenue, which is already pretty fast. Together this year, would expect those two businesses to do over $20 million in revenue. And they're pretty close to the same size, which is interesting. But, yes, those businesses have both scaled nicely, continue to have a lot more opportunity in front of them than behind them. But of course, we're getting good leverage, good margin leverage from them because they are getting to decent scale and we're past the heavy investment period, more into the market penetration expansion period for those products.

But we love both those products in terms of value proposition, market opportunity, competitive advantage, advantage, client demand, expected long-term importance to the channel and importance to the business model. We continue to be extraordinarily bullish on those products, and they're making good progress. That's great. Thanks, Doug. Thanks, guys. Thank you, Jason.

Thank you. The next question comes from Nib Kan with Be Righty Securities. Please go ahead.

Hi, this is Ethan Waddell calling in for another. Thanks for taking my questions. With this $100 billion a year opportunity, growing at double digits, how would you think of the relative cadence of growth for home services versus financial services?.

It's kind of hard to say. As you see, they're both growing very rapidly and they both have enormous markets and we have great footprints and a lot of vectors for scale in them. I can't really, I'm not going to bias one way or the other. I think they both can grow at very strong double digits for as far as we can see into the future. So I think they're both great businesses for us, again, great market opportunities, and we're just investing in both of them to continue to grow them as rapidly as we can reasonably and profitably do so.

Okay, and then maybe can you characterize just one of the with the HomeBuddy integration working kind of.

what the margin profile looks like going forward between those two? Between home services and financial services? Right. But yes, home services is a higher kind of media margin business. than financial services. So our biggest cost is of course media, and it's the biggest component of costs at the gross margin line, if you will. The home services business, though, has more costs below the median line. per dollar of revenue than the financial services business. So net-net, they're both very attractive contribution margins, which would be the next line, of course, to us. I would say that home services overall is probably a little bit better. than financial services, but not, you know, hugely better. But it's better at the contribution line. than financial services at this point, but both of them will exceed our targets for making sure that we can... maintain and hopefully build on, you know, our current double-digit margin profile.

All right, makes sense. I appreciate the color. Thank you. You bet.

Thank you. The next question comes from Luke Horton with Northland Securities. Please go ahead.

Yes, hey guys, thanks for taking the questions and congrats on a really nice quarter here to finish the year. Wanted to kind of shift over to the financial services side, kind of specifically in auto. You said grew 37% year over year. I guess, can you kind of cipher between how much of that growth is coming from just carrier budgets and increased paychecks? spending and kind of how do you think about the durability of that demand as we head into 2027 or fiscal 27?.

Sure. I think it's the growth in auto insurance right now is primarily being driven by growth in demand. the carriers and continued pretty high shopping levels by consumers because of their need to seek out and find ways to save money. as they fight inflation and other parts of their budget. If you look at the others that have reported that are in that industry, we kind of all grew very similar rates. So I don't think we or they took as much share as we did grew out our existing footprints. And some of those footprints don't have a lot of overlap, so that's going to be the case. There's – There's not a lot of direct competition between several of us. We have one competitor where there's more direct competition, but not nearly as much as there used to be as both of our media footprints have shifted. And, of course, the basis of competition is primarily in media supply because the client demand increases. is really in excess of what most of us can deliver anyway.

So that's where that is in terms of the durability of demand you know the the carriers are an exceptionally good financial and an exceptionally good financial position they.

their loss ratios are at great margin. They are really hungry for demand because of that. their loss ratios are inclusive of many of them already having lowered rates in a lot of places from where they had peaked kind of coming out of the post-COVID period. And so if you look on balance at the health of the, you know, patients carriers, their margins, their demand, where they are on rates relative to where they were, and fears that they would have to lower rates, which they've already done. I think one of the big carriers has said they've lowered rates in like 68% of their markets or something like that over the past couple of years. I think they're an extraordinary – that would all add up to great durability. and a lot of long-term strength. They had the big disruption coming out of COVID because of kind of hidden inflation and increased frequency. And years before that, they had a big disruption because of the, you know, higher incident rates associated with distracted driving and self-driving and sensing technologies which increase costs to repair. we don't know of anything else big like that in front of us.

And it looks like the more of a return to what was much more normal prior to those two events. And that was, you know, pretty soft market right now, which is a good thing in insurance, and the hard markets being much less disruptive than they were those two generally, generationally big adjustments, again, coming out of COVID. So durability looks good. The long-term looks good. The carriers are all getting more sophisticated now. in digital, which is great news for us. There's still a lot more budget not in digital that should be in digital. There's a lot of budget in digital that should be in performance. And again, we're seeing the general trend lines continue to be from offline to digital, once in digital, going to performance, because that's where you can get the scale. and the efficiency for those dollars spent.

Got it. That's very helpful. And then how much work is left on the HomeBuddy integration? Are there any sort of synergies you've unlocked or any learnings from the integration process here? And I guess, do you feel like you're in a good spot there where the appetite for attention is there? additional M&A is strong and what sort of criteria would you be looking for?.

Yes, the Homebody Acquisition, in terms of more synergies, we'll always find more, and we're... We're excited to be continuing to identify places we can capture more. We're not fully through the program to capture the ones that we had identified when we were we made the acquisition in the first place. So we will find more, but we have also had great progress capturing synergies on the client side, synergies on the media side, synergies on the product side, cost synergies in terms of overlapping resources. And we've captured a lot of it, and there's still considerably more to be captured in all of those areas. In terms of more M&A, We have capacity and appetite for more. We have a pretty active pipeline right now. of attractive opportunities, I would say that probably Before the end of the calendar year, we're likely to close at least one more, maybe two.

I don't think any of those will be anywhere near the size of HomeBuddy, but I think we have some very attractive homes. opportunities that we expect would be highly accretive and give us more capacity for more growth and or more margin expansion. So it's been a part of us for forever and it'll continue to be a big part of us that being.

an active, effective acquirer. Got it. Thanks for taking the questions. Congrats again on a really nice quarter.

Thank you. Thank you. The next question comes from L. Niebuhr with Lake Street Capital Markets. Please go ahead.

Hey guys, thanks for taking my question. Just one from me. So you've highlighted numerous AI initiatives across the platform. So which AI applications are already having the greatest measurable impact on your revenue growth or margins today? And where do you expect the next leg of economic benefit to come from over the next 12 months?.

Sure, Al. I would say that the places where we're probably right now having the biggest direct impact are in coding, as many, many people are. And we have a lot of coding, whether it be on the core infrastructure on our platform or creative generation for our ad campaigns where we've had enormous positive productivity impacts or in the design of our other parts of our consumer interface. So those are having a big direct impact and we're capturing synergies there. We're capturing synergies and productivity increases in contact centers where AI is allowing us to pre-qualify consumers without having to have a representative involved. and to better qualify those consumers and to have a more efficient consumer experience. So we have less costs and greater qualification of those consumers and greater productivity and conversion of those consumers. I would say that internally, as far as analytics, folks are able to use AI to do more direct analytics without having to involve analysts, which saves us time You know, labor costs also allows us to focus those analysts on harder problems. bigger problems or bigger opportunities. And we have, you know, and again, there are dozens of places.

And so those would be examples in specific places where we're having big impacts. I think in the long run, We'll have all of those continuing to help us to be more productive, and then we will likely have more traffic from the AI platforms. We are integrated with OpenAI, and most of our verticals now, and our two biggest verticals, auto insurance and home services, of course, there's a lot of activity there. The platforms themselves add. platforms aren't where they need to be yet for us to get big scale out of them, but they will be. And they have a very strong user basis, very big scale user basis. And we can see a path to, uh, those platforms, the LLMs, to being very big new channels of high-quality, high-intent, well-qualified media for our marketplaces, and we are super excited about that. So that's one that's more relatively small now, but we're in there working on it as early and as big as anybody is, and we expect those to be exciting. exceptionally big in the future if you wanted to pick out the one that's probably biggest in the future.

But we have proprietary, a big value proposition business model with a lot of proprietary relationships, data, integrations, workflows, and there's kind of not a place in our business model that you can't apply smart AI to do it better or more efficiently? And that's where the vast majority of the long-term value creation is going to be from AI. And I think we're a prime example. and a perfect business model for doing that, and we're hard at it.

Awesome. Thanks for taking my question. Congrats on the quarter.

Thank you, Elle. Thank you. The next question comes from Patrick Schwall with Barrington Research. Please go ahead.

Hi, thanks for taking the question. Congrats on the really strong quarter and the really impressive guidance. Thank you, Pat. Just following up on what you said about... Sorry, on the growth, the health of the carrier budgets and the moving from digital to performance, could you talk about where performances share within their digital budgets stands currently and how you see that evolving over time?.

They're only growing, but we're just a little bit more color around that. Yes, for the vast majority of carriers, they still don't spend the majority of their budget in digital, despite the fact that the majority of consumers... begin and end their shopping in digital. So start there. And then within digital, they we still have carriers who spend, many carriers who spend more and not in performance in digital than they do in performance in digital. And what we have seen over time, particularly with the most successful carriers, is that that's kind of the opposite of where they go eventually. Eventually they spend most of their budgets in digital and most of that digital budget in performance, or at least they max out what they can spend in performance. within the allocation to other parts of digital. And so the answer is in terms of specific numbers in share, it's too complicated because of the various carriers and the various channels and all that for us to have our arms fully around that. But as we talk to each carrier, I can tell you there's not one carrier that we don't know, serve and we serve all the big carriers that isn't trying to put more into digital and more into performance.

And there's not one of those carriers who today isn't under indexed to both digital and within digital to performance. And if you asked me to give you my best ballpark estimate of how far we are in that overall transition, I would say 20% of the way there, maybe. And that's probably being aggressive as I look ahead and look at the channel evolving and those budgets,.

following that evolution. Okay. And then just on the guidance, um, Could you maybe talk a little bit about the expectations between the two main categories, financial services and home services, and the different, like, maybe like pro forma for the acquisition of HomeBuddy and how you're expecting the growth of those two segments to contribute to the full year guidance?.

I think we expect them, and Greg correct me if I'm wrong, we expect home services to grow faster in the first half, mainly because of the home buddy effect. And I think in the second half, we expect both businesses to grow pretty strong double digits and not too dissimilar from one another. And Greg, make sure that I got that totally right. Yes, that's right. That's right. Okay,.

At this time, there are no more questions. Thank you everyone for taking the time to join Kin Street's earnings call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good day, and welcome to QuinStreet's Fiscal Third Quarter 2026 Financial Results Conference Call. Today's conference is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Vice President of Investor Relations and Finance, Robert Amparo. Mr. Amparo, you may begin.

Thank you, operator, and thank you, everyone, for joining us as we report QuinStreet's Fiscal Third Quarter 2026 Financial Results. Joining me on the call today are Chief Executive Officer, Doug Valenti; and Chief Financial Officer, Greg Wong.

Before we begin, I would like to remind you that the following discussion will contain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance.

Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8-K filing made today and our most recent 10-Q filing. 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 is included in today's earnings press release, which is available on our Investor Relations website at investor.quinstreet.com.

With that, I will turn the call over to Doug Valenti. Please go ahead, sir.

Thank you, Rob. Welcome, everyone. Fiscal Q2 was another quarter of strong performance and progress. We grew revenue 28% year-over-year to a new company record, and we grew adjusted EBITDA 53% year-over-year, also to a new company record.

Our core business is strong, and we continue to make good progress on initiatives that we expect to continue to deliver impressive revenue growth and margin expansion in fiscal Q4 and beyond. Those initiatives include dozens of active projects applying AI across our business system to our proprietary data, tech stack, integrations and workflows and to our media campaigns and interactions with consumers.

AI is strengthening our already formidable competitive advantages and is driving even better results for clients, media partners and QuinStreet. As a technology-driven company with hundreds of engineers and technical product employees, we are a fast and effective developer and adopter of leading-edge AI technologies and tools. And of course, we have a proven history with AI. We have been developing and applying AI algorithms since 2008.

Getting back to fiscal Q3, let me review some of last quarter's accomplishments in more detail. We set a company record for quarterly revenue, $346 million, up 28% year-over-year. We also set a company record for quarterly adjusted EBITDA, $29.6 million, up 53% year-over-year with expanding margins.

We continue to be in a strong financial position with a strong balance sheet and strong cash flows. We ended the quarter with over $100 million in cash and with net debt of around $50 million, including all bank debt and seller notes. Our net debt is well less than 0.5x our annualized adjusted EBITDA, even after accounting for the full cost of the $190 million acquisition of HomeBuddy. And we expect to deliver well over $100 million more free cash flow over the next 12 months.

So fiscal Q3 was an exceptionally strong quarter, and we are in an exceptionally strong market and financial position. Looking at the current June quarter or our fiscal Q4, we expect growth to accelerate even more and margins to expand even further, and we expect to set new records for quarterly revenue and adjusted EBITDA in Q4. Our early view of next fiscal year, which begins on July 1, is that we expect to again grow revenue and adjusted EBITDA at strong double-digit rates year-over-year.

Looking at our major client verticals. We delivered record auto insurance revenue in fiscal Q3 due to strong carrier demand and high levels of consumer shopping activity. Carriers continue to report good results. We are confident that our full market opportunity in auto insurance is still in its early innings, and we are successfully expanding our media, client and product footprints in that important client vertical.

We also delivered record quarterly revenue in home services in Q3, with revenue run rates now approaching $0.5 billion annually. The work to integrate HomeBuddy and to capture synergies is going well as we continue to successfully expand our media, client and product footprints for growth in the enormous home services market opportunity.

As I indicated earlier, our success continues to be driven by our industry-leading technologies and business systems, including, at their core, our AI optimization algorithms. And we are expanding the application of AI to dozens of other areas of the business, to our massive store of proprietary data generated from billions of dollars of media spend, to our millions of permutations of campaign and marketplace variables, to our proprietary integrations with clients and media, to our thousands of proprietary workflows and to our interactions with millions of in-market consumers every month.

Those efforts are already delivering big improvements in performance and productivity, and we see much, much more. Let me give you a few examples of where we are successfully applying AI to our broader business system.

First example. We are applying AI to integrate new and updated carrier rates faster and at greater scale into QRP, our insurance rating platform, increasing productivity there by an estimated 50%.

Another example. We are using AI to generate more and better ads for creative, improving productivity in that core essential function by an estimated 400% and resulting in faster campaign launches.

A third example. Our frontline employees are using AI-enabled natural language analytics to access even more of our deep trove of proprietary data and to drive deeper analytic insights and improvements in client, media and margin results with less need for analyst support or long cycle times.

And one final example here. We are, of course, applying AI to dramatically improve software coding productivity across the business and tech stack.

We are also seeing exciting growth in revenue from AI media and as AI grows in media. Some examples of that.

First, as AI overviews have expanded rapidly over the past year to now trigger on an estimated 50% plus of Google searches, revenue from our proprietary campaigns on Google has grown by over 100% over the same period.

A second example. We are an early participant in OpenAI's advertising platform, where we are already live in both insurance and home services.

And one last AI media example. We are improving consumer conversions for our media campaigns and for clients due to the use of conversational AI in our web flows, chatbots and inbound calls and in SMS and e-mail communications with end market consumers. Overall, we are and have been and expect to continue to be an AI winner.

Turning to our outlook. We expect revenue in fiscal Q4 to be between $350 million and $370 million, up sequentially to yet another new quarterly record and implying at least 34% growth year-over-year. We expect adjusted EBITDA to be between $37 million and $43 million, also up sequentially to yet another new quarterly record, reflecting continued margin expansion and implying at least 67% growth year-over-year.

With that, I'll turn the call over to Greg.

Thank you, Doug. Hello, and thanks to everyone for joining us today. Fiscal Q3 was another successful quarter, as Doug noted. It was the third consecutive quarter of record revenue for QuinStreet and also a record for adjusted EBITDA. This strong performance was driven by continued momentum and execution across our verticals.

For the March quarter, total revenue was $346.1 million, up 28% year-over-year. Adjusted EBITDA was $29.6 million, up 53% year-over-year, and adjusted net income was $17.8 million or $0.31 per share.

Looking at our revenue by client vertical. Our financial services client vertical represented 67% of Q3 revenue and grew 16% year-over-year to $231.8 million. Auto insurance momentum continued, delivering a record quarter and growing 27% year-over-year. Our home services client vertical represented 33% of Q3 revenue and grew 63% year-over-year to $114.3 million.

Turning to the balance sheet. We ended the quarter with $102 million in cash and equivalents and net debt of $54 million. Overall, QuinStreet remains in a strong financial position, and we expect to generate strong cash flows in the coming quarters and years.

We continue to have a rigorously disciplined approach to capital allocation, and we'll continue to prioritize: one, investing in new products and initiatives for future growth and margin expansion; two, accretive acquisitions; and three, share repurchases at attractive levels. We will continue to be measured in our approach and remain focused on maximizing shareholder value.

Moving to our outlook. We expect revenue in fiscal Q4 to be between $350 million and $370 million, representing at least 34% growth year-over-year. We expect adjusted EBITDA to be between $37 million and $43 million, reflecting continued margin expansion and representing at least 67% growth year-over-year.

With that, I'll turn it over to the operator for Q&A.

[Operator Instructions] Our first question comes from the line of Jason Kreyer from Craig-Hallum.

Doug, can you talk more about the AI actions that you've taken in the quarter? You'd highlighted some relationships with Google and OpenAI. And perhaps you can elaborate on your role there and what you expect over the long term with these partnerships.

I think Jason got disconnected. Our next question comes from the line...

I'm sorry, operator. This is Doug. Let me get back in. I apologize, Jason, but yes, thank you for the question. We're applying AI across the business system, as I indicated, including in media. And one of the places in media that we are active is now in OpenAI's advertising platform. They are early, but we were -- we believe we were in the first few hundred folks to actually be engaged with them and to be active on the platform.

And as I said, we're active in both insurance and in home services, running advertising campaigns there to both generate revenue, of course, and we have generated our first revenues there, but also to continue to help them pilot that platform and evolve it into a much bigger part of their business and a much bigger part of everybody -- of our business as well. So super excited.

As we've indicated before, we believe the LLMs are going to be a new entry point for consumers just like AI overviews on Google have been a new component, a new entry point for consumers. And we believe that it's a new great opportunity for us to plug in and do what we do, which is to help those consumers get matched to the best service providers and generate maximum media yield and revenue for all parties, including the platform companies, whether they be Google or OpenAI or others. So that's what that's about. But again, a lot of AI opportunities and a lot of AI activity going on.

We look forward to hearing more about how that evolves. Just as a follow-up, I want to ask about the HomeBuddy performance in the first quarter. And I'm curious how you felt the HomeBuddy and Modernize assets interacted over the course of the quarter and kind of how that integration is modified as we go forward?

Yes. It's going extremely well, going certainly as we had predicted and, in some ways, better. We integrated very quickly and, in the quarter, actually generated revenue from the integrations in terms of, for example, taking media from the Modernize side, sending it over to HomeBuddy to be converted into their auction basics, which will be product for their clients and vice versa, getting revenue back. So we're -- it's going well. It's going as expected, and we continue to be very excited about the expansion of our footprint, both in product and media with HomeBuddy.

So in terms of changes, I think we're a little bit ahead of schedule in terms of integrating the organizations. We are a little bit ahead of schedule in terms of doing what we -- in terms of having a -- kind of a one-platform approach to the media. And so I'd say that, again, every bit as well as we hoped and, in some places, better.

Our next question is from Luke Horton from Northland Securities.

Congrats on the quarter. Just wanted to touch on the auto insurance side. It looks like spending remains strong. Could you provide a little color on size of carriers and any trends you're seeing with the major carriers versus smaller guys?

Sure, Luke. We are continuing to see strength across the auto insurance client base. One of the trends that we are seeing is continued broadening. The broader base of clients grew significantly faster than the largest client, which also grew very rapidly. So there's no issues there, just a continued increased activity and broadening of demand across the client base and across the major carriers, top 10 to 15, however you want to think about them. So I'd say if there was a trend, it was just continued strength generally and continued broadening, which we've indicated previously.

Okay. Awesome. That's great to hear. And then on the kind of early fiscal year '27 color you provided with the strong double-digit revenue and EBITDA growth. I guess, could you expand on what the kind of 2 or 3 biggest drivers underpinning that outlook would be? Or what would be the biggest risk to achieving that?

Sure. Right now, we've seen preliminary numbers for next year from pretty much all of the businesses. And we've got double-digit revenue growth across the board -- strong double-digit revenue growth across the board. And in most cases, margins growing faster than revenue. And the one place where I think that's not yet indicated, it's flat margin cash revenue, but really strong growth. So some investment going on there. So no issues with that.

So again, as you would expect, home services, of course, will be particularly strong early because of the acquisition in the first couple of quarters, we expect it to be strong in the back half as well after we lap the comp on the HomeBuddy acquisition. Insurance, we see strong demand from clients and continued strong development of new media capacity, which has been a good driver of our growth and margin expansion in auto insurance over the past couple of quarters.

And then we're seeing, in the credit-driven verticals, good legs of growth there as well, whether it be in credit cards where we're getting strong indications from the issuers or banking where we're seeing strong demand from the clients there, and we have strong media capabilities there.

And in the -- in AmOne Financial, the personal loans and debt solutions company, we've been focused on quality of revenue there. So we have not been growing that business over the last year or so, but we've been pretty significantly expanding margins. We've had some decline. We've indicated before, some decline in revenue, but pretty flat margin dollars as we've improved the quality of the revenue, and we expect to be able to resume pretty aggressive growth next fiscal year at those higher margins.

So right now, it's pretty much across the board strength as we go through the detailed planning for each of the client verticals.

Our next question is from Elle Niebuhr from Lake Street Capital Markets.

So on the home services front, given the heavier implied Q4 weighting, what are you seeing in contractor demand, lead pricing, media availability? Any of that, that gives you the confidence that the seasonal ramp is playing out as expected?

We're seeing pretty much all those things, Elle. I mean the client demand continues to be extraordinarily strong. The -- and that's been consistent for a while. We have significantly greater demand than we have capacity to fill it, which is always what you want in our business, given the way we serve clients.

We are making great progress on the media side with our proprietary campaigns, with the shared media between HomeBuddy and Modernize, which are the 2 brands we have in home services. And that's an area of real opportunity as both clients -- both of us take media that we don't match as well or don't have as good a coverage for, and take advantage of the new coverage, either Homebuddy for Modernize or Modernize for Homebuddy.

We're seeing good growth in new product areas, continued growth in new product areas. Consumers are -- and homeowning consumers, who are the customers there, are quite strong still. The consumers has been exceptionally resilient, given the uncertainties and inflation and gas prices. I can't really say that about the low-end consumer where we -- but AmOne has solutions to help those consumers. But as far as the homeowning consumer, which are the folks that are the customers for our contractors in home services, those folks are quite healthy and quite active.

So there's not really a dimension of weakness we're seeing in home services. If you look at the components that we worry about most, which, of course, media, capacity, client demand, pricing or consumer activity, consumer demand for projects. So continued strength and advantages of having HomeBuddy now to multiply that strength.

Our next question comes from the line of Patrick Sholl from Barrington Research.

Maybe just a follow-up on the AI side. Can you maybe talk about like carrier adoption on that? Is that sort of -- I guess, just how carriers are spending within, I guess, maybe either in agentic format or through kind of the ChatGPT or other tools like that?

Sure, Patrick. They -- if it works for them and it comes to our platform, they're buying it. In terms of buying direct there, not yet in terms of buying, say, directly off those platforms. From what we understand and have been told, OpenAI and others are focusing primarily on marketplace providers like us initially because of the consumer choice and the content. I do expect that, over time, as their platforms and their ad platforms develop further that, of course, carriers will spend direct and there will be opportunities for them to do that.

But again, as I indicated, we're early and one of the early folks working with them and one of the early folks they want to work with to help them develop their ad revenue platform and to be in a position to be able to scale that and continue to evolve it to be a big part of the channel. And I think it will be a big part of the channel. We're excited about it, as I said, as another way for consumers to come into digital. and to shop and pursue products and service providers in our verticals.

So early, not a lot of direct activity from what we've seen and what we've heard, but good active planning and activities and indications that OpenAI is going to be a big player here, and we're going to be a big part of that, just like we have been with Google since the early days of the company. We launched our first campaign with Google, gosh, as soon as they -- we had SEO with them in the early days and as soon as they went into an ad-based platform, again, we were one of the first ones in that as well. So we expect this to be a pretty similar kind of opportunity and curve.

Okay. And maybe just a quick clarification on your outlook for 2027 on the solid double-digit growth. Should we be, I guess, understanding that to be excluding acquisitions as well? Or is that on a current operations basis?

We are -- we don't have any new acquisitions in that assumption. So yes, we would expect that, that would be on the current base business.

Yes, sorry, I misspoke. I meant like would that be pro forma for acquisitions or just...

No acquisitions in that. No acquisitions in that plan.

Okay. All right. And then lastly, just on the other financial services verticals. I think you kind of touched on this a little bit, but those don't seem -- are those like being impacted at all from the rate environment or the macro, I guess? I think like some appliance manufacturers have cautioned on the consumer spending side. And I'm just kind of curious on how that might be flowing through on from consumer demand.

Sure. No, we're seeing a mixed bag, mostly good for us. The AmOne Financial business is really positioned to help consumers on the lower end of the spectrum access capital in the form of personal loan or deal with debt problems in the form of debt settlement or credit repair. And so, unfortunately, in some ways, there's still a lot of consumer demand and appears to be growing consumer demand there.

Credit cards, we only really serve prime and super prime consumers. We're not in the lower income spectrum of cards or credit development cards or anything like that. So those consumers continue to be very robust, and we have not seen issues there. On the deposit side, similarly, folks have money to put into savings accounts, high-yield savings accounts or CDs or other platforms, annuities and other. They tend to be consumers that are in the middle to upper income spectrum. So continues to be strength there.

We've seen some -- I guess if there was something to look out for, I'd say that there's probably a little bit less activity by source of funds clients than there would be if the interest rate path were clearer. I wouldn't say that's something that's fundamentally going to change our outlook or is a big risk to the business going forward. But I'd say that that's something that -- it's probably not as robust as it would be if everybody knew that rates were either going up or down. And you can imagine why, right? They don't want to commit to a CD rate until they know where rates are going and they have to decide what their interest margin is going to be when they develop those products and when they recruit consumers for those products.

But generally speaking, what you've heard from everybody, pretty stable, strong consumers, generally, particularly middle and upper income. The consumers at the lower end of the income spectrum are getting squeezed because of inflation, because of gas prices, which disproportionately hurt them and because of relatively low wage growth. But relative to -- as you position that against our business, that's a pretty good profile for the products that we serve.

[Operator Instructions] Our next question is from Naved Khan from B. Riley Securities.

This is Ethan Widell calling in for Naved Khan. To start off with, can you maybe add a little bit of color on just what you're seeing on the macro side for auto? I imagine that elevated oil prices pressing on discretionary budgets might cause less driving, more -- it's better for carriers, maybe more shopping for rates, but just wondering kind of what you're seeing along those lines.

I think both of those things. What we're seeing at our level is continued real strong demand and carriers wanting us to do more and figure out how to get more. But I think, at a macro level, I think you hit on it there. The carrier loss ratios are very healthy. They -- the indications we've gotten from them and from the industry is that they feel like they're rate adequate. And I think that the effect of higher gas prices is likely to be less driving, which means less -- the rate of incidents will be lower, which is going to be good for them because, as you said -- because there's likely to be fewer incidents and fewer claims.

And the other thing that is absolutely a factor in auto insurance is that consumers shop more when they're under financial pressure for auto insurance because they want to see if they can save money because they have to have it, but they want to make sure they're not paying more than they have to pay for it. So shopping activity tends to be at pretty high levels. And we have seen good strong shopping activity, certainly through the peak shopping season, which is always in the kind of February-March time frame. But generally speaking, we're seeing a good strong consumer activity.

Got it. And then kind of longer term, how do you view or maybe anticipate, like, your mix shift over time as you take into account kind of various growth rates in your verticals, but also layering in HomeBuddy to that? And how do you consider that in terms of maybe long-term margin possibility?

Yes, it's a great question. I think the theme that we'll probably see over the next few periods, and I'd say that's probably certainly quarters and maybe years, is that a little bit more normalization of the mix. And what I mean by that was the spike in auto insurance really caused auto insurance to be super heavy in our mix there for a period of time. And one of the reasons our margins -- and we said before, auto insurance, at its scale and with its structure, tends to come in at a little bit lower media margin percentage than our average. And so that shifted our margins down some.

But as the greater growth in auto insurance has normalized after that -- the rapid expansion of 1.5 years, 2 years ago, and the other businesses continue to grow strongly, you're seeing the mix shift back to -- gradually shift back to a more normalized level where the auto insurance won't be as dominant, which means that there will be a natural lifting of our media margin profile, which will be -- should be a natural upward tug on EBITDA margins.

And I've said before that there are kind of 3 things that are going to -- that are causing us to expand margins, have caused it over the last few quarters and are likely to continue to do it, including as we forecast next quarter. One is that mix shift. After kind of getting a heavy mix of auto insurance, that mix is going to more normalize and that will be a natural upward move in our media margin profile, which translates fairly directly to EBITDA margin since our fixed cost base is semi-fixed.

The second is going to be continued success in expanding our auto insurance margins, which have been -- are up 4 to 5 points this year over the beginning of the year, largely due to a lot of specific projects to do that as well as the development of proprietary media that we said we were going to develop, and we spent a lot of money and invested in developing and have very successfully developed. We're going to continue to do that. And that's been very, very beneficial to us and to our margins in auto insurance.

And the third is just natural operating leverage. I mean, as we grow at these rates on the revenue and therefore, margin dollar lines, but of course, don't grow at these rates on the semi-fixed cost lines below the margin -- the media margin lines, then you have a natural expansion of margin, top line leverage or operating leverage, depending on how you want to talk about it.

So those 3 factors, I think, are going to continue to play a role, certainly next quarter and probably for a considerable time going forward.

There are no questions at this time. Thank you, everyone, for taking the time to join QuinStreet's earnings call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you.

Good day, and welcome to QuinStreet's Fiscal Second Quarter 2026 Financial Results Conference Call. Today's conference is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Vice President of Investor Relations and Finance, Robert Amparo. Mr. Amparo, you may begin.

Thank you, operator, and thank you, everyone, for joining us as we report QuinStreet's Fiscal Second Quarter 2026 Financial Results. Joining me on the call today are Chief Executive Officer, Doug Valenti; and Chief Financial Officer, Greg Wong.

Before we begin, I would like to remind you that the following discussion will contain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8-K filing made today and our most recent 10-Q filing.

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 is included in today's earnings press release, which is available on our Investor Relations website at investor.quinstreet.com.

With that, I will turn the call over to Doug Valenti. Please go ahead, sir.

Thank you, Rob. Welcome, everyone. Fiscal Q2 was another productive and successful quarter. We exceeded our outlook for both revenue and adjusted EBITDA. And even more importantly, we continue to make good progress on needle-moving initiatives across the business. We see the setup for continued long-term revenue growth and margin performance as better than ever.

Auto insurance demand remained strong again in fiscal Q2, with sequential performance besting historical seasonality trends. We continue to expect further significant growth in auto insurance revenue and margin in coming quarters and years due to strong client and marketplace fundamentals and to our rapidly expanding product, market and media footprints. Home Services continues to grow at double-digit rates and is now running at close to $300 million per year in revenue, between $400 million and $500 million per year with the addition of HomeBudby.

Our outlook for that business, what we believe to be our largest addressable market remains strongly positive, short and long term. I just mentioned HomeBuddy. Subsequent to quarter end and as previously announced, we completed the acquisition of HomeBuddy, adding unique new product, media and clients to Home Services. HomeBuddy has mastered the technology and execution of auction-driven exclusive leads, a product in high demand by large segments of the Home Services client market and one that we did not yet have.

Also, their focus and success building big-scale campaigns in social and native channels brings vast new sources of media, helping us meet fast-growing client demand. We expect HomeBuddy to extend our long history of successful M&A. Most recently, that history includes Modernize Home Services and Aqua Vida Media. Modernize is now the core business of our home services client vertical, where our revenue has grown about 150% since the acquisition in 2020. Aqua Vida Media is now our core social, native and display media platform. Those channels have grown about 300% in revenue just since the acquisition in 2024. We are even more excited about the potential for HomeBuddy than we were about these highly successful transactions.

Our total addressable market opportunity is enormous and growing, and we continue to deliberately, contiguously and successfully expand our footprint. We still estimate that we are less than 10% penetrated in our current addressable market footprint. We are also focused on continuing to adapt aggressively and successfully to changes in our markets and ecosystem. Most prominently, our progress applying AI across the business and thriving in a more AI-driven ecosystem has already been strong, and we are continuing to increase those efforts. We expect AI to lead to increased opportunities in our already big and fast-growing markets, and we expect to disproportionately benefit from AI due to our structured proprietary integrations and data and to our long history of successfully applying AI as a competitive advantage.

Overall, we expect total company revenue growth and margin expansion in coming quarters and years. We continue to expect full fiscal year revenue, excluding HomeBuddy, to grow at least 10% and full fiscal year adjusted EBITDA, excluding HomeBuddy, to grow at least 20%, both consistent with our previous outlook. We also expect to achieve our next milestone margin goal to reach 10% quarterly adjusted EBITDA margin in this fiscal year, even excluding HomeBuddy. Said another way, our core business remains strong and HomeBuddy is purely additive and accretive to our previous outlook.

Turning now to our new outlook, which, of course, includes HomeBuddy. We expect total revenue in fiscal Q3 to be between $330 million and $340 million and total adjusted EBITDA to be between $26.5 million and $30.5 million. We expect total revenue in full fiscal year 2026, which, as a reminder, ends in June to be between $1.25 billion and $1.3 billion and total full fiscal year adjusted EBITDA to be between $110 million and $115 million.

With that, I'll turn the call over to Greg.

Thank you, Doug. Hello, and thanks to everyone for joining us today. Fiscal Q2 was another productive and successful quarter, as Doug noted. It was the second consecutive quarter of record revenue for QuinStreet in what is typically our seasonally lowest revenue quarter. The strong performance was driven by impressive execution across our verticals. For the December quarter, total revenue was $287.8 million. Adjusted net income was $14 million or $0.24 per share, and adjusted EBITDA was $21 million.

Looking at revenue by client vertical. Our financial services client vertical represented 75% of Q2 revenue and declined 1% year-over-year to $216.8 million. Auto insurance momentum continued in the quarter, growing 6% sequentially versus the September quarter, significantly outpacing typical seasonality. From a year-over-year standpoint, we were down 2% as we were comping against an unprecedented surge of insurance carrier spending in the year ago period.

Noninsurance financial services, which includes personal loans, credit cards and banking, grew 10% year-over-year. Our Home Services client vertical represented 25% of Q2 revenue and grew 13% year-over-year to $71 million.

Turning to the balance sheet. We closed the quarter with $107 million of cash and equivalents and no bank debt. Moving to the tax front. Our provision this quarter includes a onetime benefit of $48 million related to the reversal of our valuation allowance against our deferred tax assets that we established in fiscal year 2023. We expect to return to a 3-year cumulative profit position by the end of this fiscal year, so this entry was required by GAAP. To be clear, this onetime benefit is a noncash item and is excluded from non-GAAP results.

Moving on from our Q2 results, I'd like to spend some time discussing our recent acquisition of HomeBuddy and our capital allocation priorities. Starting with HomeBuddy. HomeBuddy expands our product, media and client footprints for growth at scale in what we believe is our largest addressable market, Home Services. While our Home Services vertical has been growing at a compound annual growth rate of over 15%, even combined with HomeBuddy, we serve less than 1% of a massive market that we estimate spends more than $70 billion on marketing. We closed the acquisition of HomeBuddy about a month ago in early January.

As a reminder, the terms of the acquisition include $115 million at closing. We funded this amount with $45 million of cash from our balance sheet and $70 million drawn from our new $150 million revolving credit facility. The terms of the acquisition also include $75 million in post-closing payments payable equally over 4 years. As previously communicated, when we announced the acquisition, we expect HomeBuddy to generate $30 million or more of adjusted EBITDA in the first 12 months after closing. And although early in our integration of HomeBuddy, we are working on capturing synergies to drive that number even higher.

Overall, QuinStreet remains in a strong financial position, and we expect to generate strong cash flows in the coming quarters. We continue to have a rigorously disciplined approach to capital allocation and we'll continue to prioritize: one, investing in new products and initiatives for future growth and margin expansion; two, accretive acquisitions; and three, share repurchases at attractive levels. We will continue to be measured in our approach and remain focused on maximizing shareholder value.

Overall, our long-term outlook has never been better. We expect strong revenue growth and margin expansion to continue in coming quarters and years with our near-term next milestone goal still to reach 10% quarterly adjusted EBITDA margin in this fiscal year, even excluding the expected accretive impact of HomeBuddy. As a reminder, we have 3 key levers to expand the EBITDA margin. One, growing and optimizing new higher-margin media capacity to meet auto insurance market demand; two, growing higher-margin products and businesses in insurance and in noninsurance client verticals to represent a higher percentage of our overall business mix; and three, capturing operating leverage from top line growth through scale and from efficiency and productivity initiatives. In other words, growing revenue and media margin dollars significantly faster than operating expenses.

Turning to our outlook, which includes HomeBuddy. We expect total revenue in fiscal Q3 to be between $330 million and $340 million and total adjusted EBITDA to be between $26.5 million and $30.5 million. We expect total full fiscal year 2026 revenue to be between $1.25 billion and $1.3 billion, and total full fiscal year adjusted EBITDA to be between $110 million and $115 million.

With that, I'll turn it over to the operator for Q&A.

[Operator Instructions] Your first question comes from Zach Cummins of B. Riley.

Congrats on a strong quarter, Doug and Greg. Doug, I just wanted to start off asking about just AI in particular. I know that's been a big worry in the market here in recent weeks. But first, can you talk about the traffic trends you've been seeing with your platform in recent months? Have you seen any meaningful changes in terms of channel or overall traffic volumes? And then second, I know you touched on this a little bit in your script, but can you just speak to how QuinStreet can position itself to navigate the changes in the landscape as AI becomes more prevalent?

Yes, Zach. Thank you for the question. In terms of traffic trends, only positive. We haven't seen any negative trends -- or let me say this, we have seen only net positive trends in the traffic, and we expect that, that will continue to be the case. I think we have a record amount of volume with, say, Google on that platform. And most of the searches now, as you know, involve AI-based answers and searches. It's only created more opportunity for us to get deeper and have more places to run our campaigns. So short answer, net positive and strongly net positive. You can see it in our performance trends. You can see it in our forecast, and we're seeing it in the data. So fears there would be unfounded.

In terms of the overall AI landscape, which is obviously apparently on everybody's mind right now. There seem to be -- if we step back, there are kind of 2 big concerns. One is the AI bubble and the other is the AI disruption or disintermediation. I think we can all agree that the bubble concerns don't really apply to us given where we're now trading relative to our strong performance and scale as we've traded down with the sector broadly defined. With respect to fears of disruption and disintermediation of existing business models, that's pretty clearly overblown across and it has been pretty indiscriminate, of course, as it's kind of pulled in software, SaaS, information services, performance marketing and all of those things. And it's not surprising it's been overblown, indiscriminate.

That's kind of what happens early in these big risk cycles, interpreted as risk cycles, but pretty clearly overblown. And don't take my word for it, obviously. I mean, Jensen Huang, who knows more about AI than any of us will ever know, is quoted, as you know, in the past couple of days talking about it and saying it's just logical. It doesn't make sense. AI is much more likely to enhance or utilize the value add business models and tools, software and otherwise out there than it is to replace them. And the CEO of Google just said basically the same thing yesterday. And certainly, that would be our view from the trenches as we actually do this stuff day-to-day.

And I would add, historically, most of the value of these big technology disruptions eventually accrues to the incumbents after the big platform and infrastructure companies are built, which is a phase, of course, we're going through now. So that's exactly what we're also seeing on the ground in the trenches applying and competing and working these businesses day-to-day. And as I think I've indicated before, we have a lot. We've always had a lot of AI going on in our core marketplace algorithms function since 2008, that's been our core technology. And we've only added to that, of course, and we have activities across the business and applications of AI. So we certainly see ourselves as an example of that.

Now the fears of people being disintermediated or disruptive aren't completely unfounded. I mean there -- to the extent there are businesses that rely on commodity data or commerce and commodity products or that are doing simple aggregation, simple manipulation or simple intermediation of those areas, commodity data, commodity products, then they are certainly at risk from AI. But that is not what most successful software companies broadly define or certainly not what QuinStreet is or does.

We at QuinStreet have literally billions of dollars of proprietary data. We have spent billions of dollars generating that data through media campaigns that are extraordinarily complex with permutations into the billions when you combine all the variables. We have proprietary integrations and access to data and -- to that data that allows us to continuously generate more of it, refresh it and build on it. And we have proprietary technologies, including AI since 2008, as I mentioned, that we utilize to optimize that data for the benefits of our consumers and of our marketing clients. And we also do that in a regulatory compliant and brand-compliant way, which are very highly, highly complex.

So clearly, what we do is uniquely complex. It's not commodity. It is value add. It's proprietary. And clearly, we've been successful. We're good at it because if you look at our age and our size and our profitability, by definition, we're quite successful at it. So we see as AI comes, we see rather than the negatives and the disruption, what we see is a field of more, better, higher capabilities that is net additive in a very, very meaningful way to our business and to our company. We do not view it as a big threat.

In terms of disintermediation, by the way, if our business model could have been disintermediated, there are some big players that already exist with massive capabilities that have done that a long time ago. The question we always ask, we have always asked because we take our moats quite seriously is if someone were to try to disintermediate with AI or otherwise, how would they do it? Who would be able to do it? And how would they make money? And we just don't see -- we can't -- and again, we do this to our -- we as an executive team and with our product engineering team asked this question all the time. And the answers are not impossible, but extraordinarily difficult.

First of all, who would have the incentive because they got to be able to make money? How would they get access to or replicate the data, which, again, would take enormous amounts of time and money? It's not something you could just turn AI on and expect that the data is going to come. How would they access the data? Again, they can't get access to the proprietary integrations because the clients, among others, don't -- won't give it to them. And how do they make money? The money comes from the marketers. So disintermediation would include not just a disintermediating, say, a QuinStreet, but would really mean disintermediating the client brands, which represent hundreds of billions of dollars of value and tens of billions of dollars of annual spend. So the money is in the marketing, which means the money is not in the disintermediation.

So we see -- again, we don't see the risk that others see. We take it seriously. We look for it. We test against it. We ask ourselves. We question others in the industry. Nobody, by the way, has been able to counter any of what I just said. So we see more opportunity, not less going forward. And clearly, and hopefully, that's reflected in our performance recently and in the past and in our -- in the forecast that we've given. So probably a longer than you signed up for, but I think in this environment, something that is worthy of that.

Absolutely. I'll keep it to just one more follow-up question. In terms of auto insurance trends, nice to see the sequential increase here in what is seasonally a slower quarter on the auto insurance side. As we lap into calendar year '26, I mean, can you give us a sense of just the appetite and spending trends you've been hearing from your clients? I know premiums are likely to moderate, but it seems like profitability is in a great spot for many of these carriers. So just curious to hear conversations and trends you've been seeing across your auto insurance carrier base.

Sure. Very strong engagement, very strong interest, a lot of focus on the channel, a lot of focus on how to do better and eventually bigger in the channel. On the other side, there's been an unprecedented surge in their spend overall and certainly in the channel over the past year or so. And they're still digesting that, and they're kind of reaching kind of on this new plateau that's growing incrementally, but not growing at high rates from here, while they sort out how that worked for them and what they want to do to optimize further and what risks lie ahead, including having enough -- and by the way, you're right, their economics are in great shape. The financials are in great shape. So they have great capacity.

But based on what we observed, it appears that they're weighing that against are there places where they should now be reducing rates, what are going to be the eventual full effects of tariffs and many other factors. So I would say that strong engagement, very stable incremental growth. I'd say that returning to a more normalized growth rate, which we would consider to be between 10% and 20% year-over-year is probably on the not-too-distant horizon as long as there's not some big externality impact from something that nobody expects. But these guys -- these -- the carriers are extraordinarily sophisticated. They're balancing a lot of different things. They're adapting as they go. I know there's been some concern out there about rates and what happened in New York, people fearing that there'd be impact on rates. That's just normal course for the auto insurance industry.

This is the stuff that goes on all the time, different states having different points of view about the rates and where they are. And these companies, our clients, these sophisticated auto insurance carriers are extraordinarily adept at adapting and adjusting and navigating and moving forward. So we don't see any of that as being a material risk to what we're likely to see from them going forward.

Your next question comes from Jason Kreyer of Craig-Hallum.

So I just wanted to touch on HomeBuddy and kind of the cross-sell opportunity there. Specifically on the media side of things, I think HomeBuddy opens up a lot more reach in terms of media. So maybe if you can just talk a little bit about what that cross-sell can look like?

You bet, Jason. It's a great question. And that's probably the most exciting part of the HomeBuddy combination. We are really -- despite the great success of Aqua Vida, which was kind of our toe in the water in what is the place where there's the most consumer traffic on the Internet, which is the combination of social display and native. We are kind of nowhere in that overall ecosystem because the traffic is quite different in terms of its intent than the search ecosystem that we have grown up in and that we are so good at.

And so what HomeBuddy does is it brings demonstrated ability to build these campaigns at scale in that biggest media footprint on the Internet. They already do $140-ish million in revenue. They're all in that media, and they do it very successfully in terms of client results and very successfully in terms of economics. And so they figured that out. And so we could have continued to spend a lot of money figuring it out and climbing that learning curve ourselves, but we were able to acquire HomeBuddy on very attractive terms and in a way that gives us that access and that capability immediately, so we can now scale it rather than continue to work our way up that scale learning curve. And the cross-sell there is enormously important because if you look at our Home Services business today, our GM there just recently said that every client wants more, every client. And so that's the demand side of the marketplace, if you will. The supply side is media.

And so having now the ability to be -- to scale dramatically in a very predictable expert way that HomeBuddy brings to us in that media ecosystem to continue to feed the growing demand for digital performance marketing from our growing footprint of Home Services clients is enormous. I can't say enough about how exciting and what a big deal that is for us. So -- and then the other side of it, as I indicated in my prepared remarks, that they also have a unique product that works great in their ecosystem, but also works in our ecosystem, which is this auction-based exclusive leads product that's fairly complex in its technology and implementation and execution. It's their core -- it is their only product basically. And so taking that product and selling that into our client footprint is also a big opportunity. So both are big, but if you made me pick one, I'd pick the media side like you appropriately pointed out. That's a big deal.

Wonderful. I'm going to pivot on the follow-up here. So the last couple of quarters, Doug, you've highlighted some R&D initiatives that you think can drive accelerated growth, drive improved profitability. I think embedded in there are things like QRP, things like Finance 360. I know you have others in there. Curious, how are these tracking? And when do you think these initiatives can get to the point of scale where they become more noticeable to fundamentals?

That's a great question. You named a couple of them. Others include new media and auto insurance to meet demand at a higher margin and expanding our insurance footprint into places other than just auto insurance clicks, which would include leads, calls and selling more into the agent-driven models. We historically were dominated in our insurance business for clicks to direct carriers, great carriers like Progressive and Allstate and GEICO and pretty much all the major carriers. But that's only half the market in terms of marketing spend.

The other half is in the agent-driven carriers. And that's a place that we're spending a lot of time and money that comes to us because of our abilities at very attractive margins in a place that where we see hundreds and hundreds of millions of dollars of new revenue opportunity, and we're up to about $100 million revenue run rate there now. So we're getting that one to a pretty good scale, but there's a heck of a lot more to come. And then there's the whole commercial small business side, which has enormous demand from our clients and represents -- if you look at overall demand from auto insurance to consumers and insurance to -- or P&C, if you will, for consumers and insurance and small businesses, that's kind of half and half of the overall market.

So we're currently concentrating in about 1/4 of the overall addressable market, still a lot of opportunity in that quarter, but we're expanding our footprint into another one of the quarters, which is the agent-driven side of P&C and then the other half, which is the SMB and consumer-driven side, we're further along in the agent-driven P&C, but we are making good progress on the SMB and commercial side, and we have a lot of runway in front of us. So those are also components of that. So I would say that some already at good scale, leads and calls into P&C consumer agent-driven is, like I said, running $100 million a year or so and very strong performance there.

Others are getting to better scale, 360 and QRP are both growing very rapidly and together will represent north of $10 million, well north of $10 million in revenue, high margin, high variable margin revenue this fiscal year. We're getting near the tail end of our heavy lift in R&D spending for those products and are really much more into the scale and profitability era for those products. And so -- and I could probably name 5 or 6 or 7 other initiatives in the various businesses across the company, including owned and operated media, for auto insurance, owned and operated media for credit cards, which are 2 areas that we've spent a lot of money developing, and we're much further up those learning curves, both in terms of scale, but also in terms of profitability than we were a couple of months ago, let alone 6, 12 months ago.

Yes. So big initiatives across the business. I think in terms of the answer in terms of when you're going to see their effects, you're seeing the effects now. We have forecast a pretty significant increase in our adjusted EBITDA margin this quarter and next quarter. And Greg alluded to the various components of what's driving that, one being new capacity, better margin media and auto insurance, O&O media, auto insurance and other media, higher-margin media and auto insurance. Another one being growing these new higher-margin initiatives and businesses, some of which I just talked about. And the third leg being just leverage from greater scale on a slower growing semi-fixed cost base.

So you are going -- you have seen it lately as we've ramped adjusted EBITDA margin back up after the effects of the initial surge in auto insurance. And you're going to see it this quarter and the current quarter, and you're going to see it grow significantly and incrementally yet again in fiscal Q4 because, again, we've said, listen, we fully expect that we're going to hit that 10% adjusted EBITDA margin number from the 7.3% we just did last quarter in this fiscal year on a quarterly basis, even without HomeBuddy and HomeBuddy is accretive to that. So those are kind of some of the moving parts. And hopefully, that gives you a good view of it.

Your next question comes from Eric Martinuzzi of Lake Street.

Yes. The growth rate on the Home Services business, kind of the legacy side here in the last couple of quarters has been about mid-teens. What -- is HomeBuddy growing at a similar rate?

HomeBuddy has been growing at a little bit faster rate lately. So net-net, Eric, we still -- as we've said before, we expect the average compound growth rate of our Home Services business going forward to be between 15% and 20%.

Okay. And then the -- as I looked at the kind of implied math for Q4 based on the Q3 guide, at least in my model, I've got a little bit more of a hockey stick in Q4 than I had as I'm revising the model. Just wondering if there is any abnormal seasonality either in the legacy business or in the HomeBuddy acquired business as you look out to Q3 and Q4?

It's a good catch. And in fact, there is a seasonality in the Home Services business, both our legacy business as well as in HomeBuddy and a pretty significant seasonality. The March quarter is one of the weakest quarter, not surprising, right? There's snow and ice everywhere. So people aren't doing a lot of gutter replacements or things like that. And then the activity grows pretty dramatically into the 2 strongest quarters of the June and the September quarter. And so you're -- dominantly, what you're seeing there, Eric, is that effect from a now combined, as I indicated earlier, home services business that represents between $400 million and $500 million of our total revenue.

So pretty significant seasonality, weak quarter -- weakest quarter, one of the 2 weakest quarters, December and March quarters. And then you're seeing the June quarter, which is our fiscal Q4 being -- which is historically the strongest quarter in the home services industry. So that's the impact or effect you're seeing.

[Operator Instructions] Your next question comes from Patrick Sholl of Barrington.

On the other financial service verticals, I think you mentioned that those were up year-over-year. I think you had talked about kind of like just a difficult comp in credit cards in the last quarter. So can you maybe just sort of like just talk about the environment for those services right now just in the current macro environment?

Sure, Pat. I would say the environment is good, not great. We still have tons of growth opportunity even in a good or less than good environment because we're still pretty early and relatively small in our footprint in all of those businesses. Those businesses are what we generically call personal loans should probably be more specific -- internally, we refer to it as financial solutions because it includes not just personal loans, but HELOC, debt settlement, credit repair and a lot of other services to consumers. So still early in our overall growth planning and strategy there. Those markets are in pretty good shape.

Fortunately or unfortunately, debt settlement and credit repair have been in pretty strong demand over the past number of quarters, and they're likely to -- and look like they're just getting stronger as the -- that consumer cohort faces more and more pressure. The personal loans business is solid and doing better. Most of the lenders have been opening up their demand in their filters. And then we have other newer components there, like I said, HELOC and others that we are super early in but are showing very good signs. So I would say it's a good environment. It's not a great environment because there is some concern among clients that the consumer or at least the working consumer is under a lot of stress.

Again, that's not bad for some of what we offer like debt settlement. In terms of -- just to get to a couple of the other pieces of it. In credit cards, we are -- we serve premium consumers pretty much only. We're dominantly the high-end credit cards, the travel points credit cards. So that business is in great shape. There's a ton of competition among the banks, as you probably know, if you expose to any media. We're trying to sign up customers for their premium travel credit cards. That's -- there's a lot of money in that, a lot of interest in that. There's been a little bit of concern lately about the notion of somebody trying to impose a 10% limit on credit card interest. What we've heard from the industry and from the clients is that, that is extraordinarily unlikely. And the clients are not behaving as if that is going to happen so that they're not changing their appetite of their spending habits.

We have the unique position of being one of only a couple of companies that can run third-party media networks for all the major credit card issuers. We're very good at that. It's a great competitive advantage and a great opportunity. We are aggressively building on top of that, a lot of owned and operated media, which has been something we've been investing in and that we're super excited about continuing to scale in that market, and our clients only want more from us. It's another one of those verticals where the only complaint we typically get from a client is we need more from you, we want more. So we're aggressively working to build that out into a good appetite.

And then the banking side, which is kind of the smallest of the 3 of those pieces, which is where we really deal with source of funds accounts, CDs, savings, high-yield savings, more and more brokerage accounts. We're just super early. The demand is strong. We're not seeing -- macro effect-wise, we're not seeing anything that I think is notable given how early we are in our penetration. It's a massive market opportunity. We're super early. It's a very, very good business for us. And I think we feel like we're going to continue to do well though.

We've seen a little bit of -- there's been some clients that have kind of been in and out of the CD market. Every time there's a big threat of interest rates coming down faster than anybody expected, you'll see them pull back a little bit because they don't want to commit to CD consumers if the rates are going to come down immediately. And so there's been a little bit of choppiness, but I would say -- I wouldn't say enough that I would call it a kind of big macro effect. I would say that's just kind of part of the volatility we're seeing generally in the current economy, some associated with what I might say is -- what I might call unpredictable government intervention.

Okay. And then maybe just like a couple of questions related to AI. Just maybe with all the capital being committed to AI investments, are you seeing like any difficulty in attracting or retaining talent? And then you kind of talked about like just the sources of traffic. Are you seeing -- specifically, you highlighted the Google search results and the incorporation of AI there. Can you maybe sort of talk about like if you're seeing like any change in -- what you're seeing -- a little bit more detail on what you're seeing on the traffic patterns of whether it's coming from SEO versus your partners and other sources there?

Yes, sure. We are not seeing a loss of or difficulty recruiting. I would point out, and this is an interesting fact that the Chief Strategy Officer at OpenAI is a former QuinStreet executive -- if anybody wants to understand how QuinStreet is integrated into the overall market. But no, we're not seeing problems attracting or retaining talent anywhere in the company, let alone in our tech group and our AI group, where we are -- there's a lot of good talent out there, and we have a lot of projects and we're able to keep those folks and attract those folks.

In terms of Google traffic, more and more traffic does come from SEM, which is paid traffic around GEO searches, generative engine optimization searches. And we're very, very successful in the SEM component. We always have been, and we're only getting more opportunities to do that at greater scale in the current Google format. And we are seeing pretty good progress in GEO. We don't have much by way of SEO. It's never -- we deemphasized that years ago. And so the SEO -- our SEO has actually been fairly stable, not declining in any kind of significant rates, but it's not material anyway.

So it's -- again, it's not something that we made the decision a number of years ago not to focus on it because we knew that Google did not want people to focus on it. They want to build partnerships with folks like us where we pay for media. They don't really -- they're not that interested in sending us free traffic. So again, we made that strategic decision a long time ago. It's not a significant component of either our traffic nor really of our third-party media, and that transition has happened over a number of years. So the mix is -- yes, the mix has shifted to more SEM around AI-based searches, and that's good. We -- again, we see that as providing us with even more opportunity to be even more targeted and segmented in our spend, and we're very, very good at that.

There are no further questions at this time. Thank you, everyone, for taking the time to join QuinStreet's earnings call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you.

Good day, and welcome to QuinStreet's Fiscal First Quarter 2026 Financial Results Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference call over to Vice President of Investor Relations and Finance, Robert Amparo. Mr. Amparo, you may begin.

Thank you, operator, and thank you, everyone, for joining us as we report QuinStreet's Fiscal First Quarter 2026 Financial Results. Joining me on the call today are Chief Executive Officer, Doug Valenti; and Chief Financial Officer, Greg Wong. Before we begin, I would like to remind you that the following discussion will contain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8-K filing made today and our most recent 10-K filing.

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 is included in today's earnings press release, which is available on our Investor Relations website at investor.quinstreet.com. With that, I will turn the call over to Doug Valenti. Please go ahead, sir.

Thank you, Rob. Welcome, everyone. Fiscal Q1 was another good quarter of performance and progress for the company. We delivered record revenue and exceeded our outlook for both revenue and adjusted EBITDA. Auto insurance demand remained strong. Home services continued to grow at double-digit rates, and adjusted EBITDA remained strong, inclusive of heavy investments in new media and product [Technical Issue]. We expect further significant growth in auto insurance revenue and margin in coming quarters and years due to strong product and market fundamentals and to our rapidly expanding product, market and media footprint. Auto insurance carrier results are good. Consumers are shopping and marketing budgets continue their relentless [Technical Issue] but still early shift to digital and performance marketing. While carrier spending is expected to remain strong, uncertainty about tariffs and their eventual impact on claims costs appears to be delaying what we expect to be another significant inflection up from here in carrier marketing spend.

In the meantime, we are preparing for the next leg up in auto insurance by investing in new media capacity and in dramatically expanding our product and market footprint to drive growth and expand margins now and into the future. We also expect continued strong growth in our noninsurance non-auto insurance verticals, and we are investing aggressively there as well. Overall, our total addressable market opportunity is already enormous and growing, and we continue to deliberately, contiguously and successfully expand our footprint. We estimate that we are less than 10% penetrated in our current footprint of addressable market. We expect to grow total company revenue at double-digit rates on average for many years to come. We also continue to focus on margin expansion with a near-term next milestone goal of reaching 10% quarterly adjusted EBITDA margin in this fiscal year, which, as you know, ends in June.

Our levers to grow EBITDA margin are threefold: one, growing and optimizing media to catch up to auto insurance demand; two, growing higher-margin products and businesses; and three, capturing operating leverage from top line growth and from efficiency and productivity initiatives. Some examples. Auto insurance margins are expected to expand 5 points this fiscal year and are already up over 2 points just since July, with margins in new faster-growing product market areas of auto insurance running at more than twice those of our core click marketplace. Also, margins in big new media areas in auto insurance and across the company are now past breakeven and expanding further as they scale. And our exciting QRP and 360 finance products are expected to grow well over 100% this fiscal year and to nicely contribute to expanded profitability.

Another area of current and future investment and excitement is artificial intelligence or AI. We are confident that we are going to be an AI winner. We expect AI to accelerate our already fast-growing markets by improving consumer access, interface and engagement in digital media. We also believe that we will disproportionately benefit from AI due to our structured proprietary data and our over 17-year history of successfully applying AI as a competitive advantage. We have dozens of new AI projects underway across the company and business, and they are already improving consumer satisfaction, client results, media efficiency and productivity. And they are already adding revenue and expanding margins.

Finally, before I share our outlook for fiscal Q2 and the full fiscal year, I am pleased to announce that the Board of Directors has authorized a new $40 million share repurchase program. The authorization reflects the strength of our underlying business model and financial position and confidence in our long-term outlook for the business. Turning to our outlook. We expect revenue in fiscal Q2 to be between $270 million and $280 million and adjusted EBITDA to be between $19 million and $20 million. We expect full fiscal year 2026 revenue to grow at least 10% year-over-year and full fiscal year adjusted EBITDA to grow at least 20% year-over-year. With that, I'll turn the call over to Greg.

Thank you, Doug. Hello, and thanks to everyone for joining us today. Fiscal Q1 was another record revenue quarter for QuinStreet. For the September quarter, total revenue was $285.9 million. Adjusted net income was $13.1 million or $0.22 per share, and adjusted EBITDA was $20.5 million. Looking at revenue by client vertical. Our financial services client vertical represented 73% of Q1 revenue and declined 2% year-over-year to $207.5 million. Auto insurance momentum accelerated in the quarter, growing 16% sequentially versus the June quarter and 4% year-over-year against a very tough comparison. Noninsurance financial services, which included personal loans, credit cards and banking, declined 10% year-over-year as the year ago period included a very large limited time promotional offer that benefited our credit cards vertical.

Our home services client vertical represented 27% of Q1 revenue and grew 15% year-over-year to a record $78.4 million. Other revenue has been consolidated into our home services client vertical to more accurately depict the operational structure of that business. Turning to the balance sheet. We closed the quarter with $101 million in cash and equivalents and no bank debt, and we remain in a strong financial position. In the September quarter, we repurchased $7 million worth of company shares and subsequent to quarter end, another $10 million worth of company shares, exhausting our previously authorized share repurchase program. In our October 30 Board meeting, our Board of Directors authorized a new share repurchase program of up to another $40 million. We continue to have a rigorously disciplined approach to capital allocation and continue to prioritize: one, investing in new products and initiatives for future growth and margin expansion; two, accretive acquisitions; and three, share repurchases at attractive levels.

We will continue to be measured in our approach and remain focused on maximizing shareholder value. As we look ahead into Q2, I'd like to remind everyone of the seasonality characteristics of our business as I do every year at this time. The December quarter, our fiscal second quarter, typically declined sequentially. This is due to reduced client staffing and budgets during the holidays and end of year period, a tighter media market and changes in consumer shopping behavior. This trend generally reverses in January. Moving to our outlook. For fiscal Q2, our December quarter, we expect revenue to be between $270 million and $280 million and adjusted EBITDA to be between $19 million and $20 million. We expect full fiscal year 2026 revenue to grow at least 10% year-over-year and full fiscal year adjusted EBITDA to grow at least 20% year-over-year. With that, I'll turn it over to the operator for Q&A.

[Operator Instructions] Your first question is from Jason Kreyer from Craig-Hallum.

Wonderful. Doug, just wondering if you can give some more details on the media investments that you made in the quarter, how those are performing. Specifically, you kind of teased out some of the faster growth areas where you're seeing better margin performance. Just curious more details on that.

Sure, Jason. We have been focused on growing our proprietary media campaigns and scaling those pretty dramatically in response to the market demand in auto insurance and in response to the competitive pressures we've seen against scarce media and auto insurance because of the spike in auto insurance demand. And those campaigns have done -- have both scaled nicely over the past few months and have now gotten beyond -- well beyond breakeven and our margins there are expanding and are expanding nicely, but we expect there's a lot more to come. And as I indicated, we've already seen about a 2-point improvement in our auto insurance margins overall since July and expect at least 5 points by the end of the fiscal year. And those campaigns are -- will be a big contributor to that.

Other contributors include new products and services in auto insurance beyond our historic click marketplace that are also getting to good scale and also have significantly better margins. I don't want to talk a lot about the details of those, so I don't want to give our competitors a road map to everything we're doing. But suffice to say, they're very contiguous. They're good scale. They're highly effective and proprietary as well, and we expect those to continue to scale and to again, continue to contribute. By the way, those numbers for auto insurance do not include QRP. QRP margins are treated separately from auto insurance. And QRP, as I indicated, also continues to scale very nicely, and we expect to be quite profitable this year to reach profitability and be nicely profitable this fiscal year as well as it gets to quite good scale.

It grew last year. Last year, it grew by 294%. This year, we expect to grow at least 70% plus in QRP, while the 360 product on the home services side is going to grow at even faster rates. So -- we're seeing a lot of good scale and expansion from us in new media, incremental products and services in auto insurance, our new breakthrough products, the QRP and 360 and other businesses across the company, including home services that have better and higher margins in auto insurance. So a lot of good things going on, on the margin expansion front.

Yes. Certainly seems promising. I wanted to follow up on your tariff comments. It seemed like last quarter that a lot of the tariff concerns had pretty well abated. Now it sounds like maybe those are back on. I'm curious if there's a new round of tariffs causing concern or if the carriers are kind of reacting more to tariffs in recent months more than they were this summer.

No new tariffs, but no resolution of -- not much by way of resolution of existing tariffs. In fact, some of them went up for some countries affected. We can only go by spending behavior of our clients and by public -- any public statements or public information. Spending behavior-wise, the clients are spending strongly, and we expect them to continue to do so, but they're not yet spending at the rate that we would expect given their very strong financial performance. One of the things that we note is mentioned in the public filings is the risk and difficulty in quantifying the exact impact of tariffs. And so it -- we would say that -- and that's one of the few things that's mentioned when it comes to why they might not be spending more than they are relative to their performance. So we would just point out that, that remains a risk factor that they identify and one that they identify as one that's difficult to quantify the exact impact of, which probably implies that they're being a little bit more conservative than they would be otherwise.

And I think as things get more clarified, there'll be -- we would expect, given, again, the engagement we have with them, the performance that they are reporting and the performance that we know that they have with our products, we expect a lot of room for another big leg up from here. And I think those of you that follow anybody else in our space has heard the same thing, I think, from all the others in our space as well. We're getting kind of very similar reads on the market.

Your next question is from Zach Cummins from B. Riley Securities.

Doug, I was curious if you could just talk a little bit more about the spending trends you're seeing broadly among your auto insurance carriers. I know for a good part of the past 12 to 18 months, a lot of the recovery has really been driven by just a couple of major carriers. But just curious if you've seen any sort of evolution in spending trends here in recent months among your carrier partners?

We've seen a broadening of spending, Zach. I mean I'd say that some of the non-biggest players have grown their spend at a significantly higher rate this -- over the past year or so then have the larger players -- larger players are still spending strongly and plan -- as they've indicated to us, plan to continue to do so. So I didn't mean to imply for a minute that the tariffs were a risk factor to current spending levels. I think they're just a factor in how fast we get to what we believe is going to be a pretty significant next leg up in spending for carriers. But we're seeing a broadening trend, a lot of very healthy spending from a lot of different clients. And I think record numbers of clients spending -- if you want to pick a metric of $1 million a month, yes, we've got a record number of clients doing that now. And so that would be a data point for the broadening trend. But deepening, broadening of spend, a lot of deep engagement of clients with the various products and very, very healthy activity.

Understood. And a follow-up question, Greg, I really appreciate the additional segment detail regarding Q1. Just as we look at the full year guidance and the implied ramp in the second half of the year, anything we should keep in mind in terms of like credit card offers or anything to that extent in the credit-driven verticals that we should be building into our model?

No. I think about the guidance overall, Zach, is what we expect to see is continued strong spend within auto insurance, although we expect a leg up once we -- you get more clarity around tariffs, et cetera, that Doug was talking about, we do expect to see a leg up. That is not baked into our outlook because we just don't know the timing of that. So I'd tell you, continued strong spend of the carriers and then what you would typically see is typical seasonality in the back half and then continued progress against our other initiatives as well as the noninsurance business is how I'd characterize the outlook for the year.

Your next question is from Patrick Sholl from Barrington Research.

I was just on the -- following up on the credit-driven verticals, have there been any indications in like the current macro environment of any changes in like the monetization of that -- of those categories in terms of like the customer profile that's coming through those media channels?

I would say not -- they are not significant changes, but the trends. And the trends are that the lower-end consumer is under more and more pressure. And so we're seeing very healthy demand for credit and debt-related relief products and also in some cases, personal loan products, which are -- which serve more of that demographic than the upper end of the income spectrum. The middle and upper end of the income spectrum continue to be very healthy. The banks reported it yet again. We're seeing it yet again. The demand for credit cards, credit card debt is at record levels, but delinquencies are not. They're at quite low levels. And so there continues to be trend-wise a bifurcation. Our credit card business is primarily aimed at upper income consumers. So that works for us. And our [ M1 ] financial products business tends to be aimed at helping lower-end consumers. So that works for us there.

The only other business that we have in that area is the banking business, which is a source of funds business. And that market is still growing very rapidly. It was kind of dormant during the 0 interest period. And once interest rates came back up, that market really has taken off, and we have very, very strong demand from a very broad range of clients, and we continue to do very well there. And again, the only trend there is that interest rates are more normalized now. Even if they come down a little bit, they're still -- the source of funds accounts are open again. And so -- and banks are utilizing that to raise capital. So those would be the general trends, but nothing significant, no significant changes or inflections that we've seen.

Okay. And then within the Home Services segment, I guess, have you seen any sort of like change in like activity there driven by lowering interest rates? Or is that more going to flow through the financial services sector?

We have not. We see -- we continue to see robust demand for home services. And we have all the business opportunity and market opportunity we can stand and we will have, I think, for decades to come there. It's a massive market. It's healthy. Performance marketing works very well. They're done well, and we do it better than anybody. And our clients tell us that, by the way. And there -- it's a matter of continuing to execute and implement and execute and implement. We're doing that every day. And as you've seen, we're growing at very consistent, very good rates and probably limited only by our capacity to execute, not by market demand. So we're very early in our penetration there. The market is quite healthy. Consumers have a lot of equity. They have a lot of capacity to fund products or projects. And they haven't been relocating as much, which means that there aren't as many new projects associated with moving in, but there are a lot of new projects associated with nesting and fixing up where they are. So on balance, just a super healthy market. Homeowners are in very good financial shape in general, and we're very early in our penetration of that very large market.

[Operator Instructions] And your next question is from Elle Niebuhr from Lake Street Capital Markets.

So first, wondering how we should think about mix shift impacts on gross margin into 2026, especially as the carrier budgets remain healthy.

That's a great question. The carrier budgets are healthy, but we haven't really modeled the next leg up in growth for this fiscal year. So if, in fact, we stay at steady state and then just grow with seasonality as we enter this insurance shopping season in the March quarter, we're likely to see that mix -- where the mix has shifted pretty dramatically to auto insurance over the past 1.5 years or so. They're starting normalizing more and that mix shift trend will soften. And in fact, we may actually see growth of other products and services and businesses faster, [ grow ] faster than auto insurance. If that's the case, that's generally speaking, until and as we get these new media campaigns both for auto insurance, generally speaking, that will expand gross margin. And we indicated, as I indicated in my prepared remarks, we are targeting getting to a 10% adjusted EBITDA in the back half of the fiscal year, which would be, of course, the March or June quarters and that would be a component of that -- a factor in that.

Got you. And then with that margin expansion, do you see that coming from auto mix or operating efficiency? Or where do you see that expansion coming from?

Yes, 3 main areas. One is the mix and initiatives, particularly the new media initiatives in auto insurance continuing to scale and continuing to expand and continuing to help grow our margins there. The growth of our higher-margin businesses, as I indicated just now when we talked about that, either the new products for 360 and QRP or home services, some of our other businesses that are structurally higher margin, growing faster or at least not falling back in the mix. And then certainly efficiency and productivity initiatives, which we have a ton of going on. And just to give you a data point on that, just to make sure that's real, it's real to you. In the past 2 years, we've gone from like $600 million a year in revenue to $1.2 billion a year in revenue. In that period, we have gone from 902 employees to 928 employees. So we've doubled revenue by adding 26 employees. So when I talk about efficiency and productivity initiatives, we really have efficiency and product initiatives and they're working very well.

Thank you. There are no further questions at this time. And that concludes our question-and-answer session for today. Thank you, everyone, for taking the time to join QuinStreet's earnings call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you for joining. You may all disconnect your lines.