Performance marketing company QuinStreet (NASDAQ:QNST) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 60.1% year on year to $269.8 million. Its non-GAAP profit of $0.21 per share was in line with analysts’ consensus estimates.
Revenue: $269.8 million vs analyst estimates of $270.8 million (60.1% year-on-year growth, in line)
Adjusted EPS: $0.21 vs analyst estimates of $0.20 (in line)
Adjusted EBITDA: $19.41 million vs analyst estimates of $19.72 million (7.2% margin, 1.6% miss)
“Turning to our outlook, we are maintaining our full fiscal year 2025 outlook as we move into the June quarter, our fiscal Q4. Full fiscal year revenue is expected to be between $1.065 and $1.105 billion, implying revenue growth of at least 18% year-over-year in fiscal Q4. Full fiscal year adjusted EBITDA is expected to be between $80 and $85 million, implying adjusted EBITDA growth of at least 89% year-over-year in fiscal Q4. The implied outlook range for fiscal Q4 is wider than our usual outlook range, reflecting our view that tariffs and tariff-related uncertainties introduce risk and potential volatility to client spending.”
Operating Margin: 1.8%, up from -3.2% in the same quarter last year
Free Cash Flow Margin: 10%, up from 0.2% in the same quarter last year
Market Capitalization: $1.03 billion
“We delivered strong results again in the March quarter, our fiscal Q3, growing revenue 60% year-over-year, and adjusted EBITDA 145%,” commented Doug Valenti, CEO of QuinStreet.
Company Overview
Founded during the dot-com era in 1999 and specializing in high-intent consumer traffic, QuinStreet (NASDAQ:QNST) operates digital performance marketplaces that connect clients in financial and home services with consumers actively searching for their products.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $1.03 billion in revenue over the past 12 months, QuinStreet is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.
As you can see below, QuinStreet’s sales grew at an incredible 15.8% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows QuinStreet’s demand was higher than many business services companies.
QuinStreet Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. QuinStreet’s annualized revenue growth of 31.4% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.
QuinStreet Year-On-Year Revenue Growth
This quarter, QuinStreet’s year-on-year revenue growth of 60.1% was magnificent, and its $269.8 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 11.8% over the next 12 months, a deceleration versus the last two years. Still, this projection is commendable and suggests the market sees success for its products and services.
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Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.
Although QuinStreet was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 1.2% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out.
Looking at the trend in its profitability, QuinStreet’s operating margin decreased by 1.4 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. QuinStreet’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.
In Q1, QuinStreet generated an operating profit margin of 1.8%, up 5 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
QuinStreet’s EPS grew at a decent 8% compounded annual growth rate over the last five years. However, this performance was lower than its 15.8% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.
QuinStreet Trailing 12-Month EPS (Non-GAAP)
Diving into QuinStreet’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, QuinStreet’s operating margin improved this quarter but declined by 1.4 percentage points over the last five years. Its share count also grew by 9.8%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.
QuinStreet Diluted Shares Outstanding
In Q1, QuinStreet reported EPS at $0.21, up from $0.06 in the same quarter last year. This print beat analysts’ estimates by 3.3%. Over the next 12 months, Wall Street expects QuinStreet’s full-year EPS of $0.76 to grow 43.9%.
Key Takeaways from QuinStreet’s Q1 Results
The quarterly results were fine, but the company's comments about increasing uncertainty around the macro and tariffs seems to be spooking the markets. The stock traded down 9.6% to $16.55 immediately following the results.
