Erica Abrams – Investor Relations Doug Valenti – Chief Executive Officer Greg Wong – Chief Financial Officer.

Jason Kreyer – Craig-Hallum John Campbell – Stephens Patrick Sholl – Barrington Research Robert Breza – Northland Capital Markets Adam Klauber – William Blair Chris Sakai – Singular Research.

Good day, and welcome to QuinStreet First Quarter 2019 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Erica Abrams. Please go ahead, ma’am..

Thank you, Brad. Good afternoon, ladies and gentlemen. Thank you for joining us today to report QuinStreet’s first quarter of 2019 financial results. Joining me on the call today are Doug Valenti, CEO, and Greg Wong, CFO of QuinStreet. This call is being simultaneously webcast on the Investor Relations section of our website at www.quinstreet.com.

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

Factors that may cause the results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 10-K filings. Forward-looking statements are based on assumptions as of today and the company undertakes no obligation to update these statements.

Today, we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures are included in today’s earnings press release, which is available on our Investor Relations website. With that I’ll turn the call over to Doug Valenti, CEO of QuinStreet. Please go ahead..

Thank you, Erica, and thank you all for joining us today. Fiscal Q1 continued our recent trend of positive business momentum. We saw strong demand for our digital performance marketplace solutions. Our marketer clients are spending more in the digital channel to catch up with the growth in traffic and activity there relative to other channels.

And QuinStreet is benefiting because we are able to consistently deliver measurably attractive results and scale due to our superior technologies and strong digital networks.

We expect the trends of strong growth in digital marketing and shifting spend to performance marketing with more measurement and transparency like QuinStreet delivers to continue. And we expect those trends to provide tailwinds to our business.

QuinStreet is a clear leader in providing the best solutions and results in performance marketing at scale for big brands in our client verticals. And we continue to invest aggressively to grow that lead. Revenue in FY Q1 was up 29% year-over-year. We grew revenue in each of our reported client verticals by over 20%.

We also continued to expand margins with adjusted EBITDA up 56% and adjusted net income up 108% year-over-year. After quarter end, we closed the acquisition of AmOne Corp., an add on to our fast-growing personal loans business.

AmOne, a company that has been around for about 20 years, with particular success in personal loans over the past 10 years or so, brings highly complementary media and client coverage and the capabilities to QuinStreet. As previously announced, we paid $20 million in upfront cash and will pay $8 million over the next two years for the acquisition.

We will be releasing audited results for AmOne in coming weeks. But at a high level, they did around $22 million in revenue and $4 million in EBITDA on a trailing 12-month basis. We are raising our revenue outlook for full fiscal year 2019 from at least 10% growth to growth of between 15% and 20% over fiscal 2018.

We continue to expect – to expand margins, and that full fiscal year 2019 adjusted EBITDA will be approximately 10% of revenue. With that, I’ll turn the call over to Greg..

Thank you, Doug. Hello, and thanks to everyone for joining us today. As you know from our press release, we delivered a strong first quarter, demonstrating the overall momentum in our business and marking a nice start to fiscal 2019.

Year-over-year, we delivered double- digit revenue growth in all of our reported client verticals, and grew adjusted EBITDA and adjusted net income even faster as we expanded margins. For the first quarter, total revenue was $112.9 million, an increase of 29% year- over-year. Adjusted EBITDA increased 56% to $10.3 million or a 9% margin.

Adjusted net income increased 108% to $7.4 million or $0.14 per share on a fully diluted basis. In the first quarter, we generated $9 million of normalized free cash flow or 8% of revenue. Clients continue to shift marketing spend to online from offline media.

As this shift is occurring, QuinStreet provides measurable, sustainable and cost-effective results for clients at scale, which allows them to spend more aggressively and confidently marketing on the Internet. Looking at revenue by client vertical.

Our Financial Services client vertical represented 69% of Q1 revenue and grew 32% year-over-year to $77.4 million. We saw strong growth in the majority of our businesses in Financial Services, led by continuing momentum in insurance, which grew 34% year-over-year. We have seen a slowdown in our mortgage business driven by a softening in that market.

We believe our revised outlook to grow our total company revenue 15% to 20% in fiscal year 2019 appropriately incorporates a more cautious view of mortgage moving forward. Our Educational client vertical represented 20% of Q1 revenue and grew 24% year-over-year to $22.4 million.

Trends in our Education business have been much improved in the recent quarters, primarily due to the strength of our new product platform. That said, the post-secondary market remains complex as the industry and individual clients navigate new operating requirements in a rapidly changing competitive landscape.

For those reasons, we remain cautious in our outlook for the Education client vertical. We believe our revised outlook to grow our total company revenue 15% to 20% in fiscal year 2019 appropriately incorporates that cautious view for Education moving forward.

Our Other client vertical, which includes Home Services and B2B, represented the remaining 11% of Q1 revenue and grew 22% year-over-year to $13.1 million. We again delivered strong growth in Home Services, and we also saw a return to double-digit year-over-year revenue growth from our B2B business in the first quarter. Moving on to adjusted EBITDA.

We continue to be focused on expanding profitability. For the first quarter, we reported $10.3 million in adjusted EBITDA or 9% of revenue, representing 56% growth year-over-year. Turning to the balance sheet. We grew our cash balance by $5.8 million in the quarter to $70.5 million and no debt.

Normalized free cash flow for the quarter was $9 million or 8% of revenue. Most of our adjusted EBITDA drops the normalized free cash flow due to the low capital requirements of our business model.

In summary, financially, we are delivering strong double-digit year-over-year revenue growth, expanding profit margins, a high conversion of EBITDA into cash flow and a strong balance sheet with no debt and our business has a low capital requirements. With that, I’ll turn the call over to the operator to open up the Q&A..

Thank you. [Operator Instructions] And our first question comes for Jason Kreyer with Craig-Hallum..

Hey gentlemen, good afternoon and congrats on the strong results..

Thank you, Jason..

Wondering if you can give a little bit more color on just like the size and the growth rate of your personal loans business today. And then maybe a little bit more detail on what AmOne brings into that segment that can help you go after that vertical a little bit deeper..

Personal loans is our second biggest Financial Services business, Jason. It represents somewhere between 10% and 20% now of total Financial Services revenue. Most of the others are in the 8% to 10% range other than insurance, of course, which is about 69% of Financial Services. Have been growing at very rapid rate.

As you know, I think last year grew 300% and something. This year, it’s running 100% and something. A strong market, we have great position, and it’s really well-suited to QuinStreet because it is such a hyper-segmented market both from a consumer demand and client service standpoint, and we serve a lot of clients there.

AmOne brings incremental coverage, both in clients in the segments that we weren’t covering well that they cover particularly well as well as in media, and they have sources in media that we don’t have that we want and wanted, and where they’ve done a great job of building partnerships and integrations, and where we would have had a very difficult time displacing them.

And so these synergies on this transaction are as good or better than any we’ve ever seen in any acquisition we’ve ever made. And differently with QuinStreet over the last 19 years, we know we’ve made a lot of acquisitions over time as we’ve used them to expand our footprint and to diversify our business and to get into new verticals.

So we are very enthusiastic about this transaction. I would also point out that they are an exceptionally high- quality company, a very well run, a very mission driven, very consumer and visitor service oriented. And so very good transaction and an exciting opportunity, we think, for QuinStreet..

Thanks, Doug. Just one on your media segment or – sorry, not media segment, but your various media channels.

Are there any specifics that you would call out that are really driving new customers or accelerating new business? Or any specific media partners in a vertical that are outperforming? Or is that pretty broad-based? And then further on that, just any renegotiations with media partners? Or do you think that could be a source of better margin expansion?.

Yes. We’re seeing growth pretty much across our media segments. It’s hard to – I’ll call out a couple, just because they are growing a little bit more rapidly than others. But we are seeing growth in pretty much all the high-end channels in which we participate.

Large media partnerships, in other words, partnerships with larger online media companies, have been very fast growing for us as those organizations seek to grow their performance marketing revenue streams because that’s such a great source of revenue and it is particularly a great source when you have declining, in many cases, display performance.

And so – and it’s great for us because we bring the technologies they don’t have, we bring the client coverage integrations they don’t have, we bring the matching expertise they don’t have. So we can generate so much more revenue for them than they could generate on their own.

In fact, in many cases, we’re replacing homegrown solutions that monetize – and it’s not unusual for those to have been monetizing 1/3 to 1/2 or less than we can monetize that traffic, again because of our technologies, our client coverage are matching capabilities.

And so that has been a particularly a well-performing, faster-growing part of our mix. We expect that to be the case looking forward. It’s a great fit for both the media partners and for us. We continue to perform exceptionally well in our own SEM campaigns, which are very, very difficult and competitive.

We perform well there, and it’s a very important source for us because we do have such strong matching capabilities and client coverage, and we can just get so much more out of that traffic than any individual client, or than other bidders can on their own basis. So that continues to be a fast growing and big part of our mix.

But again, we are seeing growth in our small partnership segment, which are, again, more niche- oriented, SEM and SEO players in the owned and operated as well as partner opt-in, e-mail list segment.

And across – and we’re also seeing, for the first time in a long time, we’ve seen very strong growth in our SEO owned and operated properties as we structure that business and focus more narrowly on a few very high-quality properties has been an outstanding performer for us.

So I would say there’s nothing that’s stands out particularly other than maybe the big media partnerships, and we have had – we have seen strength across the board, mostly driven by, again, our ability to better segment match and monetize the media. In terms of renegotiations, we are in continuous process with all of our media partnerships.

And as we’ve gained monetization, strength and capabilities, we are able to generally increase our media margins. We certainly – and the vertical refer this along with the new tech platform, which is insurance.

We had pretty dramatic increases in media margins over the past few years as we went through an investment cycle and the conversion cycle of the new platform. And then have started delivering the benefits of the new platform to our media partners.

So we could pay them more while also bringing our margins up to a rate that was more consistent with our financial objectives. So we will continue to do that as we’re not locked into a media rev share model.

We’re locked in to delivering the performance for our media partners that makes them the best – gives them the best return relative to other alternatives.

And as we continue to invest aggressively in the tech platform, the matching technologies and the other things that we talk about all the time, that gives us more strengths to do that and it should continue to result in either the ability to grow more rapidly or to expand margins in those two things, as you know, and our business can trade off..

All right. Great. Thanks for taking my questions..

Thank you, Jason..

And our next question comes from John Campbell with Stephens..

Hey guys, good afternoon. Congrats on the great quarter..

Thanks, John..

Thank you, John..

Yes. On Education, that’s been really, really strong of late. You guys mentioned a cautious outlook on the trends, I guess, going forward. But to get back to your guidance, or get down to your guidance, I think I’m having a kind of baked in year-over-year decline in Education.

Am I thinking about that correctly? Any kind of color you can provide just kind of around the outlook?.

I think flattish is probably what the guide would imply. Flattish to maybe down a little bit. And Education is just continuing – it’s an industry in transition. We’re super excited about the performance we’ve had. It’s a very good business for us.

We just don’t want anybody to get too far over the SKUs in it, given we know that it’s still an industry that can be quite volatile. For example, we have a very large client, one of our large clients is Education, that is now going through a restructuring and then may be selling off assets to various new owners.

And we don’t know exactly what that portends for that business with them, and that’s just another example of the kind of things that have been going on Education for a number of years now. So we are long-term super optimistic about Education. It’s a big market. We have great assets. We have great capabilities. We have great clients.

We are near term – we continue in the new term to be cautious because we know that there’s still a lot of change going on out there. Very importantly, we did incorporate that caution into the revised guide, and so the guide would be even stronger if we didn’t feel like we needed to be cautious about Education.

And while we’re on it, mortgage as well, which is a market that’s been very good. But it’s entering a new phase, a new cycle, and we had incorporated a lot of that caution into the plan for this year.

But I wanted to make sure everybody understood that we are seeing some slowing there, and it sloped pretty quickly, but we have incorporated that slowing as well into our revised outlook..

Okay. That make sense.

And then back to AmOne, could you guys talk a little bit about the past growth trends and maybe the growth outlook under the QuinStreet ownership? And then, I don’t know if you’re able to do this or if you guys can even kind of break this out, but any kind of rightsizing as far as revenue contribution just for FY 2019?.

We really don’t know yet for FY 2019. I think we would start by just assuming that it’s kind of consistent with the LTM. Of course, we expect that we will grow it from there. So I would say, we start there and Greg can maybe give a little more color about that when we go through more detail models, if and as that’s appropriate.

They have been – they grew nicely for the past few years. On the strength, there’s some very strong media partnerships’ integrations they have that are very high quality and of great interest to us and on the strength of continued strong performance in their operations. I don’t recall the percentages, so I won’t quote them.

But we expect that the assets they are so well incremental and complementary to those we already have in personal loans. That we are very focused on that synergy space, if you will. And we think that the growth, the incremental growth that they can help us deliver in personal loans over the next few years is very, very significant.

We are super enthusiastic about, again, about acquiring an asset in a company with such high caliber, but also how complementary it is and how – and that word is complementary, how much opportunity that represents for us. So we do expect it to grow nicely. In terms of FY 2019, we’re probably pretty conservative in what we have in there.

Because we have to digest it, we have to get them incorporated, we need to integrate. We started working on the joint opportunities together. But I think that if you look at two to three years, we think that it adds pretty significantly. I almost dramatically, which might not be an overstatement, to our growth opportunity and potential personal loans..

Okay. That’s helpful.

And then one small housekeeping – we might have to wait for the Q, for the filing, but what was the Progressive as a total – as a percent of total rev?.

Very similar to what it was last year, John. On the overall, I think it was around 24%, 25%..

Okay, great. Thanks guys..

Thanks, John..

Thank you. Our next question comes from James Goss with Barrington Research..

Hi, this Pat on for Jim..

Hey, Pat..

Just following up, you touched on the mortgage vertical.

I was wondering if you could provide a little bit more detail on the slowdown there, like what’s driving it and things like that?.

It’s really, what’s driving it appears to be the end of the – or the ending of the refi cycle, at least in the short term associated with rising interest rates. Here, we had a very long period of very low interest rates, and there’s been a very big refi cycle. And refinanced is the main driver of volume in that vertical for online marketing.

And because interest rates have gone up been and because there’s been such a long period of refinancings in front of that, we’ve seen a pretty dramatic turn in terms of volume. Again, I think, driven primarily by interest rates and interest rate news. We have a good practice across mortgage. We are still gaining shares.

So we feel pretty good about mortgage for the next several years and beyond. But in the short term, clearly, pretty dramatic slowdown. And we and others have seen it. We saw it a little bit later than others because, I think, we were still benefiting from some of the share gains. But I think it’s an industry thing. It’s not unexpected industry thing.

I would say that even coming into this year, we had – in our planning, we had a pretty conservative outlook for mortgage as we budget it and began the year. And we’ve softened that even more as we’ve seen the industry slow lately, but it’s an industry thing.

And I think we’ll keep focusing on other products and mortgage beyond refi, which includes purchase and home equity lines of credit and reverse mortgages and the like. And I think we’ll continue to gain share in refi.

And I think we feel good about that business, as I said, for the further term – in the near-term, pretty significant and sudden slowing in that market..

Okay. And then on Education, maybe I missed this in your – in the last question, but maybe just talk about the nonprofit side of that, international, and if they are kind of facing the same challenges as a CEO, for for-profit side..

Yes. I would say the not-for-profits are – they are part of that changing industry dynamic and changing competitive landscape. I think not-for-profits represented 70-or-so percent..

Yes, 65%. 65% of our education revenue in the quarter, which is great. That said, the not-for-profits are earlier in their marketing models, and earlier in the execution and earlier in their marketing specification online. So it’s a great thing that they’re coming along.

It’s not necessarily a great thing as far as rapid growth, but we – and they’ll continue to kind of navigate their way.

And that’s one of the reasons we’re so optimistic in the long run because they eventually get – all of them get better and better at this, and they find their way to our part of the channel, which is the largest source and potential source of new student prospects there is arguably the world, let alone on the Internet.

So I think – but they are in a competitive world, everybody is launching online programs now and online programs are the ones that create the marketing budgets. And they still have to compete on the store for-profits. And there are still store for-profits remaining, some of whom continue to be very good operators.

And many of whom are now converting themselves into a dual model where they have a not-for-profit Education institution and a for-profit services company. And that allows them to be, in many ways, much more aggressive.

And so it’s a – it’s not just new regulations, which they’re all continuing to adapt to, but it’s also the new mix of competition from not-for-profits and from the for-profit service companies serving newly not-for-profit Education institutions. And so there’s just a lot of stuff going on.

Again, I think in the long run, big market, super attractive, we’re doing well on it now. We may continue to do well in it now.

But we want to make sure everybody is aware that it can be, as evidenced by the example I gave when I’m talking to John about a big client having going to a big restructuring kind of out of the blue, it can be a place with a lot of sudden change as there are so many dynamics in it.

So we just want to make sure nobody – and you’ve heard me say it quarter-after-quarter lately, I’ve been very cautious and have been trying to keep people from getting too excited about Education coming back, because while it could just keep going up into the right from here, we could have changes and disruptions, and that is very consistent with the fact that it is still a rapidly evolving market.

So that’s – I’m just trying to provide that context, so that two quarters from now if we have a big hiccup, folks understand that we anticipated that and again, importantly, we believe we’ve incorporated that into our guide..

Okay. Thank you..

You bet..

Thank you. And our next question comes from Robert Breza with Northland Capital Markets..

Hi. Good morning. Congratulations..

Hey, Rob. Thank you..

Two-part kind of question, maybe half for Doug and half for Greg. So as you look at the acquisition, how do you think about the bit from an overall integration technology perspective? What was appealing more from – what were they missing, I guess, that you bring to the table to make one plus one equals three instead of two.

And then Greg, maybe – and/or for Doug, as you think about the investment you need to make to kind of really get it fully integrated, how should we be thinking about that just from an overall impact perspective? Thanks..

Sure, sure.

I don’t want to get into too many details that I would consider competitive, in a sense, there are some of talk generically in some ways, but we are exceptional at a very large segment of personal loans, because we have a lot of integrations with – deep integrations with clients, and we have an extraordinary matching technology that allows us, as we do in other verticals, to link a consumer with the provider that we know is going to best serve them.

And that technology is integrated with over 75 lending clients or it has about 75 lending clients on the platform when a lot of those are very deep integrations with those clients, and we can do that exceptionally well. Nobody else has that to the degree we have it. And AmOne certainly did not have that.

We will be able to apply that technology and their media partnerships almost immediately and get, we think, at least two times, may be as many as three times as many of the visitors to convert and match than they can do today on that side of the traffic flows.

They have, on the other hand, a very much deeper in another segment of personal loans where we had weaker coverage and where they have extraordinary capabilities for matching and serving consumers there, and actually quite a bit better than we have had, and so they will be able to take that part – we’ll be able to take that part of their monetization system and apply it to our media and get a lot more of the visitors served and matched and, of course, therefore, monetized than we do today.

That’s one of the reasons that is such as an exciting opportunity because it is so complementary and they bring unique capabilities that immediately add to us, and we bring unique capabilities that immediately add to them.

And so those are the – that’s the main story of the acquisition in terms of what – and so what they had was great, it just wasn’t what we had, and what we have is great, it just wasn’t what they had. And so when you put them together, we think one and one is four or five. One plus one is four or five, not three.

In terms of the investment, look, to integrate them almost none. I mean, this is like integrating with another media partner, which is insignificant for us. It’s what we do for a living. So we do not expect there to be any meaningful increase in, say, expenses or other efforts or costs I would say with the integration..

Yes. There should be no more capital investment for other than we’ve talked about in the deal structure. What we did bring on is we brought on AmOne’s entire team into the mix. So that goes – our operating expenses will go up from that – by that standpoint..

But their media margins and their revenue more than offset that as you can see from the numbers I gave you. They did almost 20% EBITDA margins on an LTM basis or trailing 12-month basis..

Got you. Congratulations..

Thank you, Rob..

Thanks, Rob..

Thank you. Our next question comes from Adam Klauber with William Blair..

Thanks. Good afternoon. A couple of….

Hey, Adam..

Hi. A couple of questions on the insurance segment.

How does the nonprogressive insurance segment, did that grow as fast on average as the overall segment or faster?.

It was actually pretty much right on par. Progressive grew at a very similar rate as our overall Financial Services business and actually our overall insurance business. So, we probably had seven, eight other clients, they grew it a faster year-over-year rate than Progressive did – Progressive grew on average with the rest of the business..

Okay, okay.

And over the last six, nine months, have you seen other large insurance companies in addition to Progressive begin stepping up? Is that a trend?.

Absolutely. Yes, in fact, we have a number of large clients that have grown a lot faster than Progressive. They just don’t – nobody has the scale with us that Progressive has. But we’ve had several of the large kind of top five or six carriers that have grown their spin with us at a pretty significantly higher rate than Progressive has..

Yes. I would say over the last four quarters, you’ve had at least five or six carriers every quarter. They grow at a faster rate than Progressive..

Okay. And then, I know you’ve been signing up a couple of other carriers for a turndown, "services".

Has that increased from the last quarter or two?.

Our share in some of those has increased in the last quarter or two. And I think we have had some more incremental – and I think we’ve had that incremental commitments over the last two quarters, but I’d have to look and see the timing of the actual contracts. But that continues to be a good trend for us..

Okay.

And I know we talked to homeowners business is still pretty small, but did that have a pretty good growth during the quarter also?.

I don’t have those numbers in front of me..

Yes. I don’t have those numbers from….

There has been a good – it’s been well growing for us and it’s high seven – high mid – high single-digit seven figures a year. So, between $5 million and $10 million a year. I think that it might lately have been running about $1 million a month. So, it’s been a nice grower for us, rapidly growing in the overall insurance context.

A lot of carriers, of course, want to bundle home and auto. And so our strength in auto means that we – as they want to increase the bundling and the matching of consumers to home, we get a lot of that incremental revenue because they incorporate it into the campaigns. So it has been a very good grower for us.

It’s not nearly as big as auto on a pure basis, but it’s a good strong business for us. And again, I don’t have the numbers in front of me. But my best estimate is in the $10 million-plus per year range..

Okay, okay. And it sounds like, overall, you’re just seeing really good momentum in the insurance verticals.

Is that – is that a good characterization?.

Yes. A very strong momentum in insurance across the board, including all the various lines that we serve..

Okay, okay. Great.

And then as far as mortgage, how big is that business that you can say and then what does that actually do during the quarter?.

No. Actually, it’s about – it has been about 10% of Financial Services revenue. And so it’s – in the pack of about three other verticals outside of insurance that are about that same range, 8% to 10% of Financial Services revenue.

So, it’s meaningful, but not, as you see from the guide, even with the pretty significant assumption softening there, we still think that our latest outlook is 15% to 20% growth in the year. So it matters, but it’s part of a mix and we’re well diversified. And across the board, but certainly in Financial Services, too..

Okay.

And then did it soften during this quarter actually?.

It began softening as an industry has been softening, I think for a couple of quarters. We powered through that last quarter. We just had so much momentum in our various campaigns and wins in media. We just started seeing the results of it softening this quarter. And by the way, we weren’t down this quarter, year-over-year.

We’re flat year-over-year – we’re about flat year-over-year this quarter. But that’s from a pretty significant growth rate last quarter. So we’re looking at it now and saying, as we feel that softening coming, we need to be planning for it to continue to be.

And as we look out over the budgets over this quarter, next quarter, we feel like it’s going to continue to be softening quickly.

So we think we’ll go from a pretty strong growth last quarter year-over-year, flat growth – I’m sorry, two quarters year-over-year, flat growth in FY Q1 year-over-year to probably down year-over-year for the next couple of quarters, and we want to make sure that we knew – we let folks know that make sure that we knew – we let folks know that was happening, but also let you know that we had incorporated that into our outlook..

Okay, great.

And then as far as cash flow, it’s very strong quarter, anything unusual and any reason, again, based on your guide, you’re expecting revenues to grow at a nice clip, that cash flow should not continue to grow and nice clip also?.

There is none, except for the fact that we wrote a $20 million check on October 1st. But the cash flow characteristics should not change..

Okay, okay. great. Thank you very much..

Thank you..

Thank you. [Operator Instructions]. And our next question comes from Chris Sakai with Singular Research..

Hi, Greg and Doug, a good quarter..

Hi, Chris. Thank you..

Hi, Chris. Thank you..

Just – yes, no problem, I just was asking about the AmOne acquisition.

Has that been incorporated in the 15% to 20% year guidance from a revenue growth?.

It has..

Okay. All right. That’s good to know. I just wanted to see if you could comment on any sort of future acquisitions and what sort of industry they would be in..

Yes. I mean, it’s obviously a great question. We made a couple over the past year or two between Katch, which was primarily insurance, but also included mortgage assets, as well as now AmOne and personal loans. We’re both opportunistic and targeted in what we do on the acquisition front. I would say that Katch was opportunistic.

Those folks were selling assets in a, what I would describe is a – and they may not agree with this, so let me just characterize it as in a relatively distressed way, seem to me, that’s how I characterize it. May or may not be fair. And so we are opportunistic there in picking up those assets, and I think it was very helpful to us.

On the AmOne side, we targeted that company. We admired what they were doing. We admired that they had in terms of company capabilities to us. And so we really targeted, developed that deal on our own.

I would say we still have a mix of those two things that we’re looking at, some targeted places that we’re looking because we think that they’re highly complementary to our current capabilities and business. I won’t disclose those because of the nature of that, the sensitivities there.

And then opportunistically, we see – we get a lot of incoming every month and almost never, of course, percentage-wise, pursue any of those transactions, but we will continue to be opportunistic as well. None currently planned, I would say, in the pipeline. No signed contracts.

But discussions going on, and we’ll continue to maintain a very high bar for any of that we do. And as you hopefully can tell, cash was a very, very highly accretive transaction for us.

AmOne is, I believe, clearly shows it’s going to be a very highly accretive transaction for us and very strategic and very additive to the long-term footprint and growth of the company. We’ll keep those kind of standards as we sort things through..

Okay, great.

So, the valuation of companies, do you see that any – are they pretty good right now? I mean, is that a fair assumption to make?.

Well, the ones we’ve made have been really strongly fair valuations. I’d say that if you look at the market broadly, some folks have paid a lot for some assets. In our world generally, a lot more than we may be would have and maybe could justify. But – so I wouldn’t say there’s necessarily a trend there.

I do think that when it comes to add-ons to QuinStreet, very often, we can create a lot of value out of another company’s assets, and so that allows us to pay a price that is great for them, and it’s still great for us because we can create so much more value, and certainly that was the case in Katch, and I believe that will be the case in AmOne, from the assets than the previous owners.

So I – we like those that are best because it certainly represents, as you can imagine, very high ROI for us. And I think that will continue – those will to be continue – that will continue to be the main profile we look at. That’s kind of our operating model.

We don’t have to acquire anything to keep growing, we believe, a good, strong double-digit rates for a long time.

But we also will be aggressive about buying where we see assets that do represent strong, new opportunities where we can create more value, where the returns are high for our capital and where it adds to our long-term footprint and/or accelerate the development of our business in a vertical that we feel like we want to be in, that we think we can win in.

So that’s kind of how we think about it. And as you see, we don’t make that many.

But I hope that as you’ve seen over the period that we’ve made over the past few years, whether it’s a partnership like AWL or the actual acquisitions like Katch and AmOne, we tend to have very high standard in terms of what we do, and we’re pretty excited about – we don’t want to do them unless we can tell you we’re excited about them..

Okay, great.

And lastly, I just was wondering you guys got $70 million in cash on hand, just was wondering did you have any plans for that? Or is it just needs for opportunistic acquisitions, if you had any commentary there?.

Sure. I would point out that it was $50 million the day after the quarter ended because we did the AmOne acquisition, the $20 million for that. And then beyond that, our first – and we kind of have a hierarchy of thinking in terms of cash, as you would expect.

First of all, we just want to make sure we have a strong balance sheet, too, that’s fully able to support all of our growth initiatives and our aspirations to continue to aggressively operate and grow the company for the long-term, obviously. Second, are opportunistic in partnerships and acquisitions.

Some of the three meaningful ones we made over the past few years, which I would include AWL, Katch and AmOne, all of which, the returns on capital on all of those, in my view, have been and/or will be extraordinary and are very strategic in terms of expanding our footprint and capabilities.

Beyond that, we have shown our willingness historically when we thought that our stock was meaningfully undervalued to acquire and do buybacks. We’ve had several buybacks over the last number of years, adding up to many millions of dollars and spends.

It’s something that we’ll continue to have a willingness to look at and to do particularly when we think there’s a dramatic difference between where the stock is or where we think the stock might get and where we think it should be, and we – again, we’ve shown a willingness to do that, but those would be the – those are the ways we do that.

I prefer one and two. But we’ve shown a willingness to do three when it made sense..

Okay, great. Thanks..

Thank you. And we have no further questions in the queue at this time. Ladies and gentlemen, please be aware that the replay for today’s conference will be available in approximately two hours. This concludes today’s conference call. You may now disconnect..