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What changed in QUINSTREET, INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of QUINSTREET, INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+317 added−296 removedSource: 10-K (2023-08-21) vs 10-K (2022-08-22)

Top changes in QUINSTREET, INC's 2023 10-K

317 paragraphs added · 296 removed · 256 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFor example, marketers are attempting to better understand how their marketing spending produces measurable objectives such as meeting their target marketing cost per new customer. As marketers adopt more results-based approaches, the basis of client relationships with their marketing services providers is shifting from being more account management-based to being more results-oriented.
Biggest changeFrom account management-based client relationships to results-based client relationships Marketers are becoming increasingly focused on strategies that deliver specific, measurable results. For example, marketers are attempting to better understand how their marketing spending produces measurable objectives such as meeting their target marketing cost per new customer.
To deliver clicks, leads, calls, applications, and customers to our clients, generally we: • own or access targeted media through business arrangements (e.g., revenue sharing arrangements with online publisher partners, large and small) or by purchasing media (e.g., clicks from major search engines); • run advertisements or other forms of marketing messages and programs in that media that result in consumer or visitor responses, typically in the form of clicks (by a consumer to further qualification or matching steps, or to online client applications or offerings), leads (e.g., consumer contact information), calls (from a consumer or to a consumer by our owned and operated or contracted call centers or by that of our clients or their agents), applications (e.g., for enrollment or a financial product), or customers (e.g., funded personal loans); and 5 • continuously seek to display clients and client offerings to visitors or consumers that result in the maximum number of consumers finding solutions that can meet their needs and to which they will take action to respond, resulting in media buying efficiency (e.g., by segmenting media or traffic so that the most appropriate clients or client offerings can be displayed or “matched” to each segment based on fit, response rates or conversion rates ); • through technology and analytics, seek to optimize combination of objectives to satisfy the maximum number of shopping or researching visitors or consumers, deliver on client marketing objectives, effectively compete for online media, and generate a sound financial outcome for us.
To deliver clicks, leads, calls, applications, and customers to our clients, generally we: • own or access targeted media through business arrangements (e.g., revenue sharing arrangements with online publisher partners, large and small) or by purchasing media (e.g., clicks from major search engines); • run advertisements or other forms of marketing messages and programs in that media that result in consumer or visitor responses, typically in the form of clicks (by a consumer to further qualification or matching steps, or to online client applications or offerings), leads (e.g., consumer contact information), calls (from a consumer or to a consumer by our owned and operated or contracted call centers or by that of our clients or their agents), applications (e.g., for enrollment or a financial product), or customers (e.g., funded personal loans); • continuously seek to display clients and client offerings to visitors or consumers that result in the maximum number of consumers finding solutions that can meet their needs and to which they will take action to respond, resulting in media buying efficiency (e.g., by segmenting media or traffic so that the most appropriate clients or client offerings can be displayed or “matched” to each segment based on fit, response rates or conversion rates); and • through technology and analytics, seek to optimize combination of objectives to satisfy the maximum number of shopping or researching visitors or consumers, deliver on client marketing objectives, effectively compete for online media, and generate a sound financial outcome for us.
Our strategy for pursuing this opportunity includes the following key components: • focus on generating sustainable revenues by providing measurable value to our clients; • build QuinStreet and our industry sustainably by behaving ethically in all we do and by providing quality content and website experiences to Internet visitors; • remain vertically focused, choosing to grow through depth, expertise and coverage in our current client verticals; enter new client verticals selectively over time, organically and through acquisitions; • build a world class organization, with best-in-class capabilities for delivering measurable marketing results to clients and high yields or returns on media costs; • develop and evolve the best products, technologies and platform for managing successful performance marketing campaigns on the Internet; focus on technologies that enhance media yield, improve client results and achieve scale efficiencies; 6 • build and apply unique data advantages from running some of the largest campaigns over long periods of time in our client verticals, including the steep learning curves of what campaigns work best to optimize each media type and each client’s results; • build and partner with vertical content websites that attract high intent visitors in the client and media verticals we serve; and • be a client-driven organization and develop a broad set of media sources and capabilities to reliably meet client needs.
Our strategy for pursuing this opportunity includes the following key components: • focus on generating sustainable revenues by providing measurable value to our clients; • build QuinStreet and our industry sustainably by behaving ethically in all we do and by providing quality content and website experiences to Internet visitors; • remain vertically focused, choosing to grow through depth, expertise and coverage in our current client verticals; enter new client verticals selectively over time, organically and through acquisitions; • build a world class organization, with best-in-class capabilities for delivering measurable marketing results to clients and high yields or returns on media costs; • develop and evolve the best products, technologies and platform for managing successful performance marketing campaigns on the Internet; focus on technologies that enhance media yield, improve client results and achieve scale efficiencies; • build and apply unique data advantages from running some of the largest campaigns over long periods of time in our client verticals, including the steep learning curves of what campaigns work best to optimize each media type and each client’s results; • build and partner with vertical content websites that attract high intent visitors in the client and media verticals we serve; and • be a client-driven organization and develop a broad set of media sources and capabilities to reliably meet client needs.
This approach can allow us to convert more Internet visitors into qualified clicks, leads, calls, applications, or customers from targeted media sources, giving us an advantage when buying or monetizing that media. Our Business Model We deliver measurable and cost-effective marketing results to our clients, typically in the form of qualified inquiries such as clicks, leads, calls, applications, or customers.
This approach can allow us to convert more Internet visitors into qualified clicks, leads, calls, applications, or customers from targeted media sources, giving us an advantage when buying or monetizing that media. 5 Our Business Model We deliver measurable and cost-effective marketing results to our clients, typically in the form of qualified inquiries such as clicks, leads, calls, applications, or customers.
Our approach to proprietary performance marketing technologies allows clients to engage high intent digital media or traffic from a wide range of device types (e.g., mobile, desktop, tablet), in multiple formats or types of media (e.g., search engines, large and small media 3 properties or websites, email), and in a wide range of cost-per-action, or CPA, forms.
Our approach to proprietary performance marketing technologies allows clients to engage high-intent digital media or traffic from a wide range of device types (e.g., mobile, desktop, tablet), in multiple formats or types of media (e.g., search engines, large and small media properties or websites, email), and in a wide range of cost-per-action, or CPA, forms.
These changing approaches require a shift to fundamentally new competencies, including: From qualitative, impression-driven marketing to analytic, data-driven marketing Growth in Internet marketing enables a more data-driven approach to advertising.
These changing approaches require a shift to fundamentally new competencies, including: 4 From qualitative, impression-driven marketing to analytic, data-driven marketing Growth in Internet marketing enables a more data-driven approach to advertising.
T he majority of our operations and revenue are in North America. We generate revenue by delivering measurable online marketing results to our clients. The benefits to our clients include cost-effective and measurable customer acquisition costs, as well as management of highly targeted but also highly fragmented online media sources and access to our world-class proprietary technologies.
The majority of our operations and revenue are in North America. We generate revenue by delivering measurable online marketing results to our clients. The benefits to our clients include cost-effective and measurable customer acquisition costs, as well as management of highly targeted but also highly fragmented online media sources and access to our world-class proprietary technologies.
Our proprietary technologies have been developed over the past 23 years to allow us to best segment and match media or traffic, to deliver optimized results for our clients and to operate our high volume and highly complex channel cost-efficiently.
Our proprietary technologies have been developed over the past 24 years to allow us to best segment and match media or traffic, to deliver optimized results for our clients and to operate our high volume and highly complex channel cost-efficiently.
Our top 20 clients accounted for 51%, 58% and 55% of net revenue in fiscal years 2022, 2021 and 2020. Since our service was first offered in 2001, we have developed a broad client base with many multi-year relationships. We enter into Internet marketing contracts with our clients, most of which are cancelable with little or no prior notice.
Our top 20 clients accounted for 52%, 51% and 58% of net revenue in fiscal years 2023, 2022 and 2021. Since our service was first offered in 2001, we have developed a broad client base with many multi-year relationships. We enter into Internet marketing contracts with our clients, most of which are cancelable with little or no prior notice.
Our development teams work closely with our marketing and operating teams to develop applications and systems that can be used across our business. In fiscal years 2022, 2021 and 2020, we spent $21.9 million, $19.3 million and $14.2 million on product development. Our primary data center is at a third-party co-location center in San Francisco, California.
Our development teams work closely with our marketing and operating teams to develop applications and systems that can be used across our business. In fiscal years 2023, 2022 and 2021, we spent $28.9 million, $21.9 million and $19.3 million on product development. Our primary data center is at a third-party co-location center in San Francisco, California.
Clients In fiscal years 2022, 2021 and 2020, we had one client, The Progressive Corporation, that accounted for 17%, 23% and 21% of net revenue. No other client accounted for 10% or more of net revenue in fiscal years 2022, 2021 and 2020.
Clients In fiscal years 2023, 2022 and 2021, we had one client, The Progressive Corporation, that accounted for 20%, 17% and 23% of net revenue. No other client accounted for 10% or more of net revenue in fiscal years 2023, 2022 and 2021.
Item 1. Business Our Company We are a leader in performance marketplaces and technologies for the financial services and home services industries.
Item 1. B usiness Our Company We are a leader in performance marketplaces and technologies for the financial services and home services industries.
For example, when Internet visitors click on PPC search advertisements, they are expressing an interest in and proactively engaging with information about a product or service related to that advertisement.
The Internet enables more self-directed and targeted marketing. For example, when Internet visitors click on PPC search advertisements, they are expressing an interest in and proactively engaging with information about a product or service related to that advertisement.
When spending online, agencies spend with us and with portals, other websites and ad networks. Online marketing and media companies We compete with other Internet marketing and media companies, in many forms, for online marketing budgets. Most of these competitors compete with us in one client vertical. Examples include LendingTree and MediaAlpha in the financial services client vertical.
Online marketing and media companies We compete with other Internet marketing and media companies, in many forms, for online marketing budgets. Most of these competitors compete with us in one client vertical. Examples include LendingTree and MediaAlpha in the financial services client vertical.
Generally, our Internet visitor sources include: • websites owned and operated by us, with content and offerings that are relevant to our clients’ target customers; • visitors acquired from PPC advertisements purchased on major search engines and sent to our websites; • third-party media sources (including strategic partners) with whom we have a relationship and whose content or traffic is relevant to our clients’ target customers; • email lists owned by us or by third-parties; and • advertisements run through online advertising networks, directly with major websites or portals, social media networks, or mobile networks.
Generally, our Internet visitor sources include: • websites owned and operated by us, with content and offerings that are relevant to our clients’ target customers; • visitors acquired from PPC advertisements purchased on major search engines and sent to our websites; • third-party media sources (including strategic partners) with whom we have a relationship and whose content or traffic is relevant to our clients’ target customers; • email lists owned by us or by third-parties; and • advertisements run through online advertising networks, directly with major websites or portals, social media networks, or mobile networks. 6 Our Strategy Our goal is to continue to be one of the largest and most successful performance marketing companies on the Internet, and eventually in other digitized media forms.
None of our employees are represented by a labor union. Available Information We file reports with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other filings required by the SEC.
Available Information We file reports with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other filings required by the SEC.
The health of our workforce remains our top priority while we work to ensure a safe work environment in our offices around the world. As of June 30, 2022, we had 791 employees, which consisted of 212 employees in product development, 50 in sales and marketing, 41 in general and administration and 488 in operations.
The health of our workforce remains our top priority while we work to ensure a safe work environment in our offices around the world. 8 As of June 30, 2023, we had 937 employees, which consisted of 270 employees in product development, 51 in sales and marketing, 45 in general and administration and 571 in operations.
We compete for business on the basis of a number of factors including return on marketing expenditures, price, access to targeted media, ability to deliver large volumes or precise types of customer prospects, and reliability. 7 Advertising and direct marketing services agencies Online and offline advertising and direct marketing services agencies control the majority of the large client marketing spending for which we primarily compete.
We compete for business on the basis of a number of factors including return on marketing expenditures, price, access to targeted media, ability to deliver large volumes or precise types of customer prospects, and reliability.
We prioritize the health, safety and wellness of our employees and strive to create an environment where our employees are productive and also physically and mentally healthy, safe and well. Our offices have re-opened, and we continue to monitor the COVID-19 pandemic and related public health measures and restrictions.
We prioritize the health, safety and wellness of our employees and strive to create an environment where our employees are productive and also physically and mentally healthy, safe and well.
Intellectual Property We rely on a combination of patent, trade secret, trademark and copyright laws in the United States and other jurisdictions together with confidentiality agreements and technical measures to protect the confidentiality of our proprietary rights.
We have implemented these backup systems and redundancies to minimize the risk associated with earthquakes, fire, power loss, telecommunications failure, and other events beyond our control. 7 Intellectual Property We rely on a combination of patent, trade secret, trademark and copyright laws in the United States and other jurisdictions together with confidentiality agreements and technical measures to protect the confidentiality of our proprietary rights.
The content of our website is not intended to be incorporated by reference into this report or in any other report or document we file, and any reference to this website and others included in this report is intended to be an inactive textual reference only. 8 The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.
The content of our website is not intended to be incorporated by reference into this report or in any other report or document we file, and any reference to this website and others included in this report is intended to be an inactive textual reference only.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The measurability of online marketing allows marketers to collect a significant amount of detailed data on the performance of their marketing campaigns, including the effectiveness of ad format and placement and user responses.
The measurability of online marketing allows marketers to collect a significant amount of detailed data on the performance of their marketing campaigns, including the effectiveness of ad format and placement and user responses. This data can then be analyzed and used to improve marketing campaign performance and cost-effectiveness on substantially shorter cycle times than with traditional offline media.
So, while they are sometimes our competitors, agencies are also often our clients. We compete with agencies to attract marketing budget or spending from offline forms to the Internet or, once designated to be spent online, to be spent with us versus the agency or by the agency with others.
We compete with agencies to attract marketing budget or spending from offline forms to the Internet or, once designated to be spent online, to be spent with us versus the agency or by the agency with others. When spending online, agencies spend with us and with portals, other websites and ad networks.
From marketing messages pushed on audiences to marketing messages pulled by self-directed audiences Traditional marketing messages such as television and radio advertisements are broadcast to a broad audience. The Internet enables more self-directed and targeted marketing.
As marketers adopt more results-based approaches, the basis of client relationships with their marketing services providers is shifting from being more account management-based to being more results-oriented. From marketing messages pushed on audiences to marketing messages pulled by self-directed audiences Traditional marketing messages such as television and radio advertisements are broadcast to a broad audience.
All of the critical components of the system are redundant, and we have a backup data center in Las Vegas, Nevada. We have implemented these backup systems and redundancies to minimize the risk associated with earthquakes, fire, power loss, telecommunications failure, and other events beyond our control.
All of the critical components of the system are redundant, and we have a backup data center in Las Vegas, Nevada.
Our Strategy Our goal is to continue to be one of the largest and most successful performance marketing companies on the Internet, and eventually in other digitized media forms. We believe that we are in the early stages of a very large and long-term market opportunity.
We believe that we are in the early stages of a very large and long-term market opportunity.
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This data can then be analyzed and used to improve marketing campaign performance and cost-effectiveness on substantially shorter cycle times than with traditional offline media. 4 From account management-based client relationships to results-based client relationships Marketers are becoming increasingly focused on strategies that deliver specific, measurable results.
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Advertising and direct marketing services agencies Online and offline advertising and direct marketing services agencies control the majority of the large client marketing spending for which we primarily compete. So, while they are sometimes our competitors, agencies are also often our clients.
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None of our employees are represented by a labor union. Diversity We are committed to fostering, cultivating and preserving a culture of diversity and inclusion. We not only embrace diversity but also seek to build a culture that attracts, retains, and develops a diverse set of employees.
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We have demonstrated this commitment by: (1) adding Diversity as one of our core values, (2) producing our first gender and race demographic report, and (3) matching employee contributions to approved national associations and organizations ranging from legal advocacy to domestic support. We have also formed a Culture Committee to create inclusive and diverse events.
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Employee Compensation We provide comprehensive and competitive compensation packages to attract, reward and retain talented employees. Our employees’ total compensation package includes market-competitive salary, bonuses or sales incentives, and equity awards, including restricted stock units and an employee stock purchase plan. We strive to be as transparent as possible about our compensation principles.
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We hold ourselves accountable and we are committed to pay equity and parity. Our compensation philosophy is designed with both short- and long-term incentives.
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Development and Learning We invest in the professional development and growth of all our employees and are strongly committed to our responsibility of providing development and growth opportunities to our employees through greater emphasis on internal mobility and fair and equitable talent practices.
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The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks and uncertainties could pertain to other viruses, pandemics or other such unforeseen and broad-based public health crises. • Negative changes in economic conditions and the regulatory environment have had in the past, and may in the future have, a material and adverse impact on our revenue, business and growth. • If we fail to continually enhance and adapt our products and services to keep pace with rapidly changing technologies and industry standards, we may not remain competitive and could lose clients or advertising inventory. • Our results of operations have fluctuated in the past and may do so in the future, which makes our results of operations difficult to predict and could cause our results of operations to fall short of analysts’ and investors’ expectations. 9 • Limitations restricting our ability to market to users or collect and use data derived from user activities by technologies, service providers or otherwise could significantly diminish the value of our services and have an adverse effect on our ability to generate revenue. • If we do not adequately protect our intellectual property rights, our competitive position and business may suffer. • We are subject to risks with respect to counterparties, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.
Biggest changeChanges in search engine algorithms have in the past harmed, and may in the future harm, the websites’ placements in both paid and organic search result listings, which may reduce the number of visitors to our owned and operated and our third-party publishers’ websites and as a result, cause our revenue to decline. • Negative changes in economic conditions and the regulatory environment have had in the past, and may in the future have, a material and adverse impact on our revenue, business and growth. • Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition and results of operations. • If we fail to continually enhance and adapt our products asend services to keep pace with rapidly changing technologies and industry standards, we may not remain competitive and could lose clients or advertising inventory. • Our results of operations have fluctuated in the past and may do so in the future, which makes our results of operations difficult to predict and could cause our results of operations to fall short of analysts’ and investors’ expectations. • Limitations restricting our ability to market to users or collect and use data derived from user activities by technologies, service providers or otherwise could significantly diminish the value of our services and have an adverse effect on our ability to generate revenue. • If we do not adequately protect our intellectual property rights, our competitive position and business may suffer. • We are subject to risks with respect to counterparties, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows. • We face risks and uncertainties related to the COVID-19 pandemic and its aftermath, which could significantly disrupt our operations and have a material adverse impact on our business, financial condition, operating results and cash flows.
From time to time, we are subject to audits, inquiries, investigations, claims of non-compliance and lawsuits by federal and state governmental agencies, regulatory agencies, attorneys general and other governmental or regulatory bodies, any of whom may allege violations of legal requirements.
From time to time, we are subject to audits, inquiries, investigations, claims of non-compliance and lawsuits by federal and state governmental agencies, regulatory agencies, attorneys general and other governmental or regulatory bodies, any of whom may allege violations of legal and regulatory requirements.
These provisions include: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions include: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; 28 • the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
We compete with Internet and traditional media companies for high quality media and for a share of clients’ overall marketing budgets, including: • online marketing or media services providers such as LendingTree and MediaAlpha in the financial services client vertical; • offline and online advertising agencies; 16 • major Internet portals and search engine companies with advertising networks; • other online marketing service providers, including online affiliate advertising networks and industry-specific portals or performance marketing services companies; • digital advertising exchanges, real-time bidding and other programmatic buying channels; • third-party publishers with their own sales forces that sell their online marketing services directly to clients; • in-house marketing groups and activities at current or potential clients; • offline direct marketing agencies; • mobile and social media; and • television, radio and print companies.
We compete with Internet and traditional media companies for high quality media and for a share of clients’ overall marketing budgets, including: • online marketing or media services providers such as LendingTree and MediaAlpha in the financial services client vertical; • offline and online advertising agencies; • major Internet portals and search engine companies with advertising networks; • other online marketing service providers, including online affiliate advertising networks and industry-specific portals or performance marketing services companies; • digital advertising exchanges, real-time bidding and other programmatic buying channels; • third-party publishers with their own sales forces that sell their online marketing services directly to clients; • in-house marketing groups and activities at current or potential clients; • offline direct marketing agencies; • mobile and social media; and • television, radio and print companies.
We, our third-party publishers’, and our clients’ businesses operate in highly regulated industries, subject to many laws and regulatory requirements, including federal, state, and local laws and regulations regarding unsolicited commercial email, telemarketing, user privacy, search engines, Internet tracking technologies, direct marketing, data security, data privacy, pricing, sweepstakes, promotions, intellectual property ownership and infringement, trade secrets, export of encryption technology, acceptable content and quality of goods, and taxation, among others.
We, our third-party publishers’, and our clients’ businesses operate in highly regulated industries, subject to many laws and regulatory requirements, including federal, state, and local laws and regulations regarding unsolicited commercial email, telemarketing, search engines, Internet tracking technologies, direct marketing, data privacy and security, pricing, sweepstakes, promotions, intellectual property ownership and infringement, trade secrets, export of encryption technology, acceptable content and quality of goods, and taxation, among others.
Any failure by us or the third-party publishers on which we rely for telemarketing, email marketing, and other performance marketing activities to adhere to or successfully implement appropriate processes and procedures in response to existing regulations and changing regulatory requirements could result in legal and monetary liability, significant fines and penalties, or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Any failure by us or the third-party publishers on which we rely for telemarketing, email marketing, and other performance marketing activities to adhere to or successfully implement appropriate processes and procedures in response to existing laws and regulations and changing regulatory requirements could result in legal and monetary liability, significant fines and penalties, or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition, and results of operations.
There are risks and challenges inherent in conducting business in international markets, such as: • adapting our technologies and services to foreign clients’ preferences and customs; • successfully navigating foreign laws and regulations, including marketing, privacy regulations, employment and labor regulations; • changes in foreign political and economic conditions, including as a result of the Russia-Ukraine military conflict; • tariffs and other trade barriers, fluctuations in currency exchange rates and potentially adverse tax consequences; • language barriers or cultural differences; • reduced or limited protection for intellectual property rights in foreign jurisdictions; • difficulties and costs in staffing, managing or overseeing foreign operations; • education of potential clients who may not be familiar with online marketing; • challenges in collecting accounts receivables; • monitoring and complying with economic sanctions, including those resulting from the Russia-Ukraine military conflict; and • successfully interpreting and complying with the U.S.
There are risks and challenges inherent in conducting business in international markets, such as: • adapting our technologies and services to foreign clients’ preferences and customs; • successfully navigating foreign laws and regulations, including marketing, data privacy and security, employment and labor regulations; • changes in foreign political and economic conditions, including as a result of the Russia-Ukraine military conflict; • tariffs and other trade barriers, fluctuations in currency exchange rates and potentially adverse tax consequences; • language barriers or cultural differences; • reduced or limited protection for intellectual property rights in foreign jurisdictions; • difficulties and costs in staffing, managing or overseeing foreign operations; • education of potential clients who may not be familiar with online marketing; • challenges in collecting accounts receivables; • monitoring and complying with economic sanctions, including those resulting from the Russia-Ukraine military conflict; and • successfully interpreting and complying with the U.S.
Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 24 Moreover, a low or declining stock price may make us attractive to hedge funds and other short-term investors which could result in substantial stock price volatility and cause fluctuations in trading volumes for our stock.
Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Moreover, a low or declining stock price may make us attractive to hedge funds and other short-term investors which could result in substantial stock price volatility and cause fluctuations in trading volumes for our stock.
Events and conditions that could result in impairment of our goodwill and intangible assets include adverse changes in the regulatory environment, a reduced market capitalization or other factors leading to reduction in expected long-term growth or profitability. 26 Goodwill impairment analysis and measurement is a process that requires significant judgment.
Events and conditions that could result in impairment of our goodwill and intangible assets include adverse changes in the regulatory environment, a reduced market capitalization or other factors leading to reduction in expected long-term growth or profitability. Goodwill impairment analysis and measurement is a process that requires significant judgment.
In addition, a substantial portion of our revenue is generated from a limited number of clients and, if we lose a major client, our revenue will decrease and our business and prospects may be harmed. • We depend on third-party media sources, including strategic partners, for a significant portion of our visitors.
In addition, a substantial portion of our revenue is generated from a 9 limited number of clients and, if we lose a major client, our revenue will decrease and our business and prospects may be harmed. • We depend on third-party media sources, including strategic partners, for a significant portion of our visitors.
Any temporary or permanent interruption in the services provided by our call centers or third-party providers could significantly harm our business. 20 In addition, any financial or other difficulties our third-party providers face may have negative effects on our business, the nature and extent of which we cannot predict.
Any temporary or permanent interruption in the services provided by our call centers or third-party providers could significantly harm our business. In addition, any financial or other difficulties our third-party providers face may have negative effects on our business, the nature and extent of which we cannot predict.
For example, the process of integrating an acquired company, business or technology has in the past created, and may create in the future, unforeseen operating challenges, risks and expenditures, including with respect to: (i) integrating an acquired company’s accounting, financial reporting, management information and information security, human resource, and other administrative systems to permit effective management, and the lack of control if such integration is delayed or not implemented; (ii) integrating the controls, procedures and policies at companies we acquire appropriate for a public company; and (iii) transitioning the acquired company’s operations, users and customers onto our existing platforms.
For example, the process of integrating an acquired company, business or technology has in the past created, and may create in the future, unforeseen operating challenges, risks and expenditures, including with respect to: (i) integrating an acquired company’s accounting, financial reporting, management information and information security, human resource, and other administrative systems to permit effective management, and the lack of control if such integration is delayed or not implemented; (ii) integrating the controls, procedures and policies at companies we acquire that are appropriate for a public company; and (iii) transitioning the acquired company’s operations, users and customers onto our existing platforms.
If we fail to adapt successfully, we could lose clients or advertising inventory. Our results of operations have fluctuated in the past and may do so in the future, which makes our results of operations difficult to predict and could cause our results of operations to fall short of analysts’ and investors’ expectations.
If we fail to adapt successfully, we could lose clients or advertising inventory. 16 Our results of operations have fluctuated in the past and may do so in the future, which makes our results of operations difficult to predict and could cause our results of operations to fall short of analysts’ and investors’ expectations.
If we are unable to address these risks, our business, results of operations and prospects could suffer. 10 A reduction in online marketing spend by our clients, a loss of clients or lower advertising yields may seriously harm our business, financial condition and results of operations.
If we are unable to address these risks, our business, results of operations and prospects could suffer. A reduction in online marketing spend by our clients, a loss of clients or lower advertising yields may seriously harm our business, financial condition and results of operations.
Clients will stop spending marketing funds on our owned and operated websites or our third-party publisher and strategic partner websites if their investments do not generate marketing results and ultimately users or if we do not deliver advertisements in an appropriate and effective manner.
Clients will reduce or stop spending marketing funds on our owned and operated websites or our third-party publisher and strategic partner websites if their investments do not generate marketing results and ultimately users or if we do not deliver advertisements in an appropriate and effective manner.
If we experience an increase in the time to bill and collect for our services, our results of operations and cash flows could be adversely affected. We rely on certain advertising agencies for the purchase of various advertising and marketing services on behalf of their clients.
If we experience an increase in the time to bill and collect for our services, our results of operations and cash flows could be adversely affected. 19 We rely on certain advertising agencies for the purchase of various advertising and marketing services on behalf of their clients.
If our access to data is limited in the future, we may be unable to provide effective technologies and services to clients and we may lose clients and revenue. 22 Risks Related to Our Intellectual Property If we do not adequately protect our intellectual property rights, our competitive position and business may suffer.
If our access to data is limited in the future, we may be unable to provide effective technologies and services to clients and we may lose clients and revenue. Risks Related to Our Intellectual Property If we do not adequately protect our intellectual property rights, our competitive position and business may suffer.
Interruptions, failures or defects in our data collection systems, as well as privacy concerns and regulatory changes or enforcement actions affecting our or our data partners’ ability to collect user data, could also limit our ability to analyze data from, and thereby optimize, our clients’ marketing campaigns.
Interruptions, failures or defects in our data collection systems, as well as data privacy and security concerns and regulatory changes or enforcement actions affecting our or our data partners’ ability to collect user data, could also limit our ability to analyze data from, and thereby optimize, our clients’ marketing campaigns.
If we or any of our third-party publishers fail to comply with any provisions of these laws or regulations, we could be subject to regulatory investigation, enforcement actions and litigation, as well as indemnification obligations with respect to our clients.
If we or any of our third-party publishers fail to comply with any provisions of these laws or 15 regulations, we could be subject to regulatory investigation, enforcement actions and litigation, as well as indemnification obligations with respect to our clients.
Periodically, certain of our clients and publishers seek to prohibit or limit our collection or use of data derived from the use of cookies. Furthermore, actions by service providers could restrict our ability to deliver Internet-based advertising.
Periodically, certain of our clients and publishers seek to prohibit or limit our collection or use of data derived from the use of cookies. 23 Furthermore, actions by service providers could restrict our ability to deliver Internet-based advertising.
It may take longer than expected to realize the full benefits from these acquisitions or investments, such as increased revenue, enhanced efficiencies, or increased market share, or the benefit may ultimately be smaller than we expected.
It may take longer than expected to realize the full benefits from these acquisitions or investments, such as increased revenue, enhanced efficiencies, or increased market share, or the benefits may ultimately be smaller than we expected.
These factors include those discussed in this “Risk Factors” section of this report and other factors such as: • our ability to grow our revenues and adjusted EBITDA margin and to manage any such growth effectively; • changes in earnings estimates or recommendations by securities analysts; • announcements about our revenue, earnings or other financial results, including outlook, that are not in line with analyst expectations; • geopolitical and predominantly domestic as well as potentially international economic conditions in addition to public health crises such as the COVID-19 pandemic and geopolitical conflicts such as the Russia-Ukraine military conflict and resulting economic sanctions; • our ability to find, develop or retain high quality targeted media on a cost-effective basis; • relatively low trading volume in our stock, which creates inherent volatility regardless of factors related to our business performance or prospects; • the sale of, or indication of the intent to sell, substantial amounts of our common stock by our directors, officers or substantial shareholders; • stock repurchase programs; • announcements by us or our competitors of new services, significant contracts, commercial relationships, acquisitions or capital commitments; • fluctuations in the stock price and operating results of our competitors or perceived competitors that operate in our industries; • our commencement of, involvement in, or a perceived threat of litigation or regulatory enforcement action; and • negative publicity about us, our industry, our clients or our clients’ industries.
These factors include those discussed in this “Risk Factors” section of this report and other factors such as: • our ability to grow our revenues and adjusted EBITDA margin and to manage any such growth effectively; • changes in earnings estimates or recommendations by securities analysts; • announcements about our revenue, earnings or other financial results, including outlook, that are not in line with analyst expectations; • negative publicity about us, our industry, our clients or our clients’ industries; • an economic recession in the United States or other countries; • geopolitical and predominantly domestic as well as potentially international economic conditions in addition to public health crises such as the COVID-19 pandemic and geopolitical conflicts such as the Russia-Ukraine military conflict and resulting economic sanctions; 25 • our ability to find, develop or retain high quality targeted media on a cost-effective basis; • relatively low trading volume in our stock, which creates inherent volatility regardless of factors related to our business performance or prospects; • the sale of, or indication of the intent to sell, substantial amounts of our common stock by our directors, officers or substantial shareholders; • stock repurchase programs; • announcements by us or our competitors of new services, significant contracts, commercial relationships, acquisitions or capital commitments; • fluctuations in the stock price and operating results of our competitors or perceived competitors that operate in our industries; and • our commencement of, involvement in, or a perceived threat of litigation or regulatory enforcement action.
If our proprietary technologies or our new or enhanced products and services fail to achieve their intended purpose or are less effective than technologies or products and services used by our competitors, our business could be harmed. Our future success will depend in part on our ability to successfully adapt to these rapidly changing online media formats and other technologies.
If our proprietary technologies or our new or enhanced products and services fail to achieve their intended purpose or are less effective than technologies or products and services used by our competitors, our business could be harmed. Our future success will also depend in part on our ability to successfully adapt to rapidly changing online media formats and other technologies.
Policing unauthorized use of our proprietary rights can be difficult and costly. Litigation, while it may be necessary to enforce or protect our intellectual property rights, could result in substantial costs and diversion of resources and management attention and could adversely affect our business, even if we are successful on the merits.
Policing unauthorized use of our proprietary rights can be difficult and costly. Litigation, while it may be necessary to enforce or protect our intellectual property rights, could result in substantial costs and diversion of resources and management attention and could adversely affect our business, even if we are successful defending such litigation on the merits.
Keeping our business in compliance with or bringing our business into compliance with new laws, therefore, may be costly, affect our revenue and harm our financial results.
Keeping our business in compliance with or bringing our business into compliance with new laws and regulations, therefore, may be costly, affect our revenue and harm our financial results.
As a result, we face risks and uncertainties such as but not limited to: • our still developing industry and relatively new business model and products such as QRP; • changes in the general economic conditions and market dynamics in the United States, or in the specific markets in which we currently do business, including as a result of the COVID-19 pandemic and Russian-Ukraine military conflict; • the impact of the COVID-19 pandemic and its aftermath on us, our third-party publishers’, and our clients’ businesses, the extent of which continues to be uncertain and will depend on future actions and outcomes that are highly uncertain and cannot be predicted, including the duration and scope of the pandemic; business and individuals' actions in response to the pandemic; further actions taken by governmental authorities to limit the human and economic impact of the pandemic (e.g., stimulus payments); the continued development, efficacy and distribution of vaccines for COVID-19; and the impact on economic activity including the length and depth of economic downturns or financial market instability that result from the pandemic; • changes in the regulatory enforcement or legislative environment; • our dependence on the availability and affordability of quality media from third-party publishers and strategic partners; • our dependence on Internet search companies to attract Internet visitors; • our ability to accurately forecast our results of operations and appropriately plan our expenses; • our ability to compete in our industry; • our ability to manage cyber security risks and costs associated with maintaining a robust security infrastructure; • our ability to continually optimize our websites to allow Internet visitors to access our websites through mobile devices; • our ability to develop new services, enhancements and features to meet new demands from our clients; • our ability to implement our enhanced products across our business and achieve client adoptions of such products; • our ability to successfully complete acquisitions, divestitures and other business development transactions including our ability to enter into, and manage the relationship and risks associated with, strategic partnerships; and, • our ability to successfully challenge regulatory audits, investigations or allegations of noncompliance with laws.
As a result, we face risks and uncertainties such as but not limited to: • our still developing industry and relatively new business model and products such as our QRP product for insurance agents; • changes in the general economic conditions and market dynamics in the United States, or in the specific markets in which we currently do business, including as a result of the COVID-19 pandemic and Russian-Ukraine military conflict; 10 • the impact of the COVID-19 pandemic and its aftermath on us, our third-party publishers’, and our clients’ businesses, the extent of which continues to be uncertain and will depend on future actions and outcomes that are highly uncertain and cannot be predicted, including the duration and scope of any resurgences of the pandemic; business and individuals’ actions in response to resurgences of the pandemic; further actions taken by governmental authorities to limit the human and economic impact of the pandemic (e.g., stimulus payments); the continued development, efficacy and distribution of vaccines for COVID-19; and the impact on economic activity including the length and depth of economic downturns or financial market instability that result from the pandemic; • changes in the regulatory enforcement or legislative environment; • our dependence on the availability and affordability of quality media from third-party publishers and strategic partners; • our dependence on Internet search companies to attract Internet visitors; • our ability to accurately forecast our results of operations and appropriately plan our expenses; • our ability to compete in our industry; • our ability to manage cybersecurity risks and costs associated with maintaining a robust security infrastructure; • our ability to continually optimize our websites to allow Internet visitors to access our websites through mobile devices; • our ability to develop new services, enhancements and features to meet new demands from our clients; • our ability to implement our enhanced products across our business and achieve client adoptions of such products; • our ability to successfully complete acquisitions, divestitures and other business development transactions including our ability to enter into, and manage the relationship and risks associated with, strategic partnerships; and • the occurrence of, and our ability to successfully challenge, regulatory audits, investigations or allegations of noncompliance with laws.
Adverse consequences resulting from increasing economic or political conflicts between the United States and China, Russia’s recent invasion of Ukraine and the subsequent economic sanctions imposed by the U.S., NATO and other countries, and various other market issues may have broader implications on economies outside the region, including increased instability in the worldwide financial markets and economy, increases in inflation, and enhanced volatility in foreign currency exchange rates.
Adverse consequences resulting from increasing economic or political conflicts between the United States and China, Russia’s invasion of Ukraine and the subsequent economic sanctions imposed by the U.S., NATO and other countries, and various other market issues may have broader implications on economies outside the region, including increased instability in the worldwide financial markets and economy, increases in inflation, recessionary economic cycles, and enhanced volatility in foreign currency exchange rates.
If any of our clients decided not to continue to place marketing spend or advertising on our owned and operated websites or on our third-party publisher or strategic partner websites, we could experience a rapid decline in our revenue over a relatively short period of time.
If any of our clients decide not to continue to place marketing spend or advertising on our owned and operated websites or on our third-party publisher or strategic partner websites, we could experience a rapid decline in our revenue over a relatively short period of time.
Any of the foregoing seasonal trends, or the combination of them, may negatively impact our quarterly revenue and results of operations.
Any of the foregoing seasonal or cyclical trends, or the combination of them, may negatively impact our quarterly revenue and results of operations.
As it is in the short seller’s best interests for the price of the stock to decline, many short sellers (sometime known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects to create negative market momentum.
As it is in the short seller’s best interests for the price of the stock to decline, many short sellers (sometimes known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects to create negative market momentum.
Item 1A. Risk Factors Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this periodic report. The risks and uncertainties described below are not the only ones we face.
Item 1A. Ri sk Factors Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this periodic report. The risks and uncertainties described below are not the only ones we face.
Click-through fraud occurs when an individual clicks on an ad displayed on a website, or an automated system is used to create such clicks, with the intent of generating the revenue-share payment to the publisher rather than viewing the underlying content.
Click-through fraud occurs when an individual clicks on an ad displayed on a website or mobile application, or an automated system is used to create such clicks, with the intent of generating the revenue-share payment to the publisher rather than viewing the underlying content.
In addition, new laws or regulations including amendments thereof or changes in enforcement of existing laws or regulations applicable to our clients could affect the activities or strategies of our clients and, therefore, lead to reductions in their level of business with us.
In addition, new laws or regulations (including amendments thereof or changes in enforcement of existing laws or regulations applicable to us or our clients) could affect the activities or strategies of us or our clients and, therefore, lead to reductions in their level of business with us or otherwise impact our business.
For example, we expended significant resources in developing new products and technologies and made strategic outlays in, among other things, partnerships, which in the short term may have the effect of reducing our adjusted EBITDA margin.
For example, we may expend significant resources in developing new products and technologies and made strategic outlays in, among other things, partnerships, which in the short term may have the effect of reducing our adjusted EBITDA margin.
In addition, we may also face liability for any failure of our third-party publishers, strategic partners, vendors or their respective affiliates to comply with regulatory requirements, as further described in the risk factor beginning, “ Negative changes in the market conditions and the regulatory environment have had in the past, and may in the future have, a material and adverse impact on our revenue, business and growth. ” The law is unsettled on the extent of liability that an advertiser in our position has for the activities of third-party publishers, strategic partners or vendors.
In addition, we may also face liability for any failure of our third-party publishers, strategic partners, vendors or their respective affiliates to comply with regulatory requirements, as further described in the risk factor beginning, “Negative changes in the economic conditions and the regulatory environment have had in the past, and may in the future have, a material and adverse impact on our revenue, business and growth.” The law is unsettled on the extent of liability that an advertiser in our position has for the activities of third-party publishers, strategic partners or vendors.
Unauthorized access to or accidental disclosure of confidential or proprietary data in our network systems, including via ransomware attacks, may cause us to incur significant expenses and may negatively affect our reputation and business. • We depend upon Internet search companies to direct a significant portion of visitors to our owned and operated and our third-party publishers’ websites.
Unauthorized or accidental access to or disclosure or use of confidential or proprietary data (including personal information) in our network systems, including via ransomware attacks, may cause us to incur significant expenses and may negatively affect our reputation and business. • We depend upon Internet search companies to direct a significant portion of visitors to our owned and operated and our third-party publishers’ websites.
Our future success depends in part on the efficient performance of our software and technology infrastructure. As the numbers of websites and Internet users increase, our technology infrastructure may not be able to meet the increased demand.
Our future success depends in part on the efficient performance of our software and technology infrastructure. As the numbers of websites, mobile applications and Internet users increase, our technology infrastructure may not be able to meet the increased demand.
Unauthorized access to or accidental disclosure of confidential or proprietary data in our network systems , including via ransomware attacks, may cause us to incur significant expenses and may negatively affect our reputation and business. Nearly all of our products and services are web-based, and online performance marketing is data-driven.
Unauthorized or accidental access to or disclosure or use of confidential or proprietary data (including personal information) in our network systems, including via ransomware attacks, may cause us to incur significant expenses and may negatively affect our reputation and business. Nearly all of our products and services are web-based, and online performance marketing is data-driven.
While no material weaknesses were identified in our internal control over financial reporting as of June 30, 2022, we cannot assure you that we will not in the future identify material weaknesses.
While no material weaknesses were identified in our internal control over financial reporting as of June 30, 2023, we cannot assure you that we will not in the future identify material weaknesses.
Further impairment charges with respect to our goodwill could have a material adverse effect on our financial condition and results of operations. Provisions in our charter documents under Delaware law and in contractual obligations could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.
Further impairment charges with respect to our goodwill or intangible assets could have a material adverse effect on our financial condition and results of operations. Provisions in our charter documents under Delaware law and in contractual obligations could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.
Foreign Corrupt Practices Act and similar foreign anti-bribery laws, particularly when operating in countries with varying degrees of governmental corruption. If we are unable to successfully expand and market our services abroad, our business and future growth may be harmed, and we may incur costs that may not lead to future revenue. Item 1B. Unresolved Staff Comments None.
Foreign Corrupt Practices Act and similar foreign anti-bribery laws, particularly when operating in countries with varying degrees of governmental corruption. If we are unable to successfully expand and market our services abroad, our business and future growth may be harmed, and we may incur costs that may not lead to future revenue. Item 1B. Unresolve d Staff Comments None. 31
Furthermore, a substantial portion of our revenue is generated from a limited number of clients, including one client that accounted for 17% of our net revenue for fiscal year 2022. Our clients can generally terminate their contracts with us at any time or pause marketing spending without contract termination, and they do not have minimum spend requirements.
Furthermore, a substantial portion of our revenue is generated from a limited number of clients, including one client that accounted for 20% of our net revenue for fiscal year 2023. Our clients can generally terminate their contracts with us at any time or pause marketing spending without contract termination, and they do not have minimum spend requirements.
Our systems and operations are vulnerable to damage or interruption from earthquakes, floods, fires, or other natural disasters, power loss, terrorist attacks, break-ins, hardware or software failures, telecommunications failures, cyber-attacks, computer viruses or other attempts to harm our systems, and similar events.
Our systems and operations are vulnerable to damage or interruption from earthquakes, floods, fires, or other natural disasters, power loss, terrorist attacks, break-ins, hardware or software failures, telecommunications failures, security breaches, cyber-attacks and other similar incidents, computer viruses or other attempts to harm our systems, and similar events.
Moreover, retaliatory acts by Russia in response to economic sanctions or other measures taken by the international community against Russia arising from the Russia-Ukraine military conflict could include an increased number or severity of cyberattacks from Russia or its allies.
Moreover, retaliatory acts by Russia in response to economic sanctions or other measures taken by the international community against Russia arising from the Russia-Ukraine military conflict could include an increased number or severity of cyber-attacks from Russia or its allies.
Factors that may increase the volatility of our results of operations include, but are not limited to, the following: • changes in client volume; • loss of or reduced demand by existing clients and agencies; • the availability and price of quality media; 15 • consolidation of media sources; • seasonality; • development and implementation of our media strategies and client initiatives; • changes in our revenue mix and shifts in margins related to changes in our media, client, or corporate development strategies; • changes in interest rates or increasing inflation; • changes in Internet search engine algorithms that affect our owned and operated and our third-party publishers’ websites ability to attract and retain Internet visitors; and • regulatory and legislative changes, including economic sanctions imposed on governments or other third parties in regions in which we, our third-party publishers or our clients operate, or their interpretation or emphasis, in our and our clients’ industries.
Factors that may increase the volatility of our results of operations include, but are not limited to, the following: • changes in client volume; • loss of or reduced demand by existing clients and agencies; • the availability and price of quality media; • consolidation of media sources; • seasonality; • development and implementation of our media strategies and client initiatives; • changes in our revenue mix and shifts in margins related to changes in our media, client, or corporate development strategies; • changes in interest rates or increasing inflation; • an economic recession in the United States or other countries; • changes in Internet search engine algorithms that affect our owned and operated and our third-party publishers’ websites’ ability to attract and retain Internet visitors; and • regulatory and legislative changes, including economic sanctions imposed on governments or other third parties in regions in which we, our third-party publishers or our clients operate, or their interpretation or emphasis, in our and our clients’ industries.
We have experienced interruptions and delays in service and availability for data centers, bandwidth and other technologies in the past. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and services could adversely affect our business and could expose us to liabilities to third-parties .
We have experienced interruptions and delays in service and availability for data centers, bandwidth and other technologies in the past, and may experience more in the future. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and services could adversely affect our business and could expose us to liabilities to third-parties.
As we grow our business, we expect to continue to invest in technology services, hardware and software. Creating the appropriate security support for our technology platforms is expensive and complex, and our execution could result in inefficiencies or operational failures and increased vulnerability to cyber-attacks.
As we grow our business, we expect to continue to invest in technology services, hardware and software. Creating the appropriate security support for our technology platforms is expensive and complex, and our execution could result in inefficiencies or operational failures and increased vulnerability to security breaches, cyber-attacks and other similar incidents.
Security concerns relating to our technological infrastructure, privacy concerns relating to our data collection practices and any perceived or public disclosure of actual unauthorized disclosure of personally identifiable information, whether through breach of our network or that of third-parties which we engage with, by an unauthorized party, employee theft, misuse, or error could harm our reputation, impair our ability to attract website visitors and to attract and retain our clients, result in a loss of confidence in the security of our products and services, or subject us to claims or litigation arising from damages suffered by consumers, and thereby harm our business and results of operations.
Security concerns relating to our technological infrastructure, data privacy concerns relating to our data collection and processing practices and any perceived or public disclosure of any actual unauthorized or accidental access to or disclosure or use of personal information, whether through breach of our network or that of third parties with which we engage, by an unauthorized party or due to employee theft, misuse, or error, could harm our reputation, impair our ability to attract website visitors and to attract and retain our clients, result in a loss of confidence in the security of our products and services, or subject us to claims or litigation arising from damages suffered by consumers, and thereby harm our business and results of operations.
If we do not implement such expansion successfully, or if we experience inefficiencies and operational failures during its implementation, the quality of our products and services and our users’ experience could decline. This could damage our reputation and cause us to lose current and potential users and clients.
If we do not implement such expansions successfully, or if we experience inefficiencies and operational failures during their implementation, the quality of our products and services and our users’ experience could decline. This could damage our reputation and cause us to lose current and potential users and clients.
Because our subsidiary CloudControlMedia, LLC (“CCM”) provides performance marketing agency and technology services to clients in financial services, education and other markets , we may still be subject to investigations, audits, inquiries, claims or litigation related to education.
Because our subsidiary CCM provides performance marketing agency and technology services to clients in financial services, education and other markets, we may still be subject to investigations, audits, inquiries, claims or litigation related to education.
The businesses of our clients and third-party media publishers (including strategic partners) have also been negatively affected and may continue to be disrupted by reduced demand, consumer creditworthiness, delinquencies, absenteeism, quarantines, economic responses our government is taking to limit the human and economic impact of the COVID-19 pandemic (e.g., stimulus payments) and restrictions on employees’ ability to work, office closures and travel or health-related restrictions.
The businesses of our clients and third-party media publishers (including strategic partners) have also been negatively affected and may continue to be disrupted by reduced demand, deteriorated consumer creditworthiness, delinquencies, absenteeism, quarantines, economic responses by the U.S. and other governments to limit the human and economic impact of the COVID-19 pandemic (e.g., stimulus payments) and restrictions on employees’ ability to work, office closures and travel or health-related restrictions.
If we fail to maintain adequate reasonable safeguards to protect the security, confidentiality and integrity of personally identifiable information including failure to develop, implement and support our technology infrastructure and assessment processes, we may be in breach of our commitments to our clients and consumers.
If we fail to maintain adequate safeguards to protect the security, confidentiality and integrity of personal information, including any failure to develop, implement and support our technology infrastructure and assessment processes, we may be in breach of our commitments to our clients and consumers.
If we fail to maintain adequate reasonable safeguards to protect the security, confidentiality and integrity of personally identifiable information including failure to develop, implement and support our technology infrastructure and assessment processes, we may be in breach of our commitments to our clients and consumers.
If we fail to maintain adequate safeguards to protect the security, confidentiality and integrity of personal information, including any failure to develop, implement and support our technology infrastructure and assessment processes, we may be in breach of our commitments to our clients and consumers.
For example, macroeconomic conditions such as an economic downturn or public health crises such as the COVID-19 pandemic and the Russia-Ukraine military conflict have impacted and may continue to impact our clients’ marketing spend in the short-term and potentially in the long-term.
For example, macroeconomic conditions such as an economic downturn or a recession in the United States or other countries or public health crises such as the COVID-19 pandemic and the Russia-Ukraine military conflict have impacted and may continue to impact our clients’ marketing spend in the short-term and potentially in the long-term.
We may need to increase our security-related expenditures to maintain or increase our systems’ security or to address problems caused and liabilities incurred by security breaches. 12 We depend upon Internet search companies to direct a significant portion of visitors to our owned and operated and our third-party publishers’ websites.
We may need to increase our security-related expenditures to maintain or increase our systems’ security or to address problems caused and liabilities incurred by security breaches, cyber-attacks and other similar incidents. We depend upon Internet search companies to direct a significant portion of visitors to our owned and operated and our third-party publishers’ websites.
Under our acquisition agreement with Mayo Labs, we are required to pay $2.0 million in post-closing payments. Under our acquisition agreement with FCE, we are required to pay $4.0 million in post-closing payments and contingent consideration of up to an additional $9.0 million. Also, the anticipated benefit of many of our strategic transactions, including anticipated synergies, may not materialize.
Under our acquisition agreement with Mayo Labs, the purchase consideration included $2.0 million in post-closing payments. Under our acquisition agreement with FCE, the purchase consideration included $4.0 million in post-closing payments and contingent consideration of up to an additional $9.0 million. Also, the anticipated benefit of many of our strategic transactions, including anticipated synergies, may not materialize.
We cannot assure you that we will be able to acquire media inventory that meets our clients’ performance, price and quality requirements, in which case our revenue could decline or our operating costs could increase. 11 We are exposed to online data privacy and security risks particularly given that we gather, transmit and store personally identifiable information.
We cannot assure you that we will be able to acquire media inventory that meets our clients’ performance, price and quality requirements, in which case our revenue could decline or our operating costs could increase. We are exposed to data privacy and security risks, particularly given that we gather, transmit, store and otherwise process personal information.
Moreover, to the extent the COVID-19 pandemic or any worsening of the global business and economic environment as a result thereof adversely affects our business, financial condition, operating results and cash flows, it may also have the effect of heightening or exacerbating many of the other risks described in these risk factors, such as those relating to a reduction in online marketing spend by our clients, a loss of clients or lower advertising yields, our dependence on third-party publishers including strategic partners, risks with respect to counterparties, annual and quarterly fluctuations in our results of operations, the impact of interest rate volatility on our visitor traffic, internal control over financial reporting, seasonal fluctuations, our ability to collect our receivables from our clients and risks relating to our ability to raise additional capital when and as needed.
Furthermore, we may experience disruptions to our business operations resulting from supply chain disruptions affecting auto insurance carrier budgets which could have a material adverse impact on our business, financial condition, operating results and cash flows. 29 Moreover, to the extent the COVID-19 pandemic or any worsening of the global business and economic environment as a result thereof adversely affects our business, financial condition, operating results and cash flows, it may also have the effect of heightening or exacerbating many of the other risks described in these risk factors, such as those relating to a reduction in online marketing spend by our clients, a loss of clients or lower advertising yields, our dependence on third-party publishers including strategic partners, risks with respect to counterparties, annual and quarterly fluctuations in our results of operations, the impact of interest rate volatility on our visitor traffic, internal control over financial reporting, seasonal fluctuations, our ability to collect our receivables from our clients and risks relating to our ability to raise additional capital when and as needed.
A security breach at any such third-party could be perceived by consumers as a security breach of our systems and in any event could result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions.
A security breach, cyber-attack or other similar incident experienced by any such third party could be perceived by consumers as a security breach of our systems and in any event could result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions.
For example, under our acquisition agreement with MBT, we are required to pay $4.0 million in post-closing payments and an estimated fair value of contingent consideration of $1.5 million of which the contingent consideration was paid off in the third quarter of fiscal year 2020.
For example, under our acquisition agreement with MBT, the purchase consideration included $4.0 million in post-closing payments and an estimated fair value of contingent consideration of $1.5 million of which the contingent consideration was paid off in the third quarter of fiscal year 2020.
If we are not able to comply with the requirements of the SOX Act in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would diminish investor confidence in our financial reporting and require additional financial and management resources, each of which may adversely affect our business and operating results.
If we are not able to comply with the requirements of the SOX Act in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would diminish investor confidence in our financial reporting and require additional financial and management resources, each of which may adversely affect our business and operating results. 27 In fiscal years 2017 and 2016, we identified material weaknesses in our internal control over financial reporting.
We may be unable to anticipate all our vulnerabilities and implement adequate preventative measures and, in some cases, we may not be able to immediately detect a security incident. In the past, we have experienced security incidents involving access to our databases.
We may be unable to anticipate all our vulnerabilities and 12 implement adequate preventative measures and, in some cases, we may not be able to immediately detect a security breach, cyber-attack or other similar incident. In the past, we have experienced security incidents involving access to our databases.
O ur board of directors canceled the prior stock repurchase program that commenced in July 2017 and authorized a new stock repurchase program allowing the repurchase of up to $40.0 million worth of common stock. As of June 30, 2022, approximately $23.1 million remained available for stock repurchases pursuant to the board authorization.
Our board of directors canceled the prior stock repurchase program that commenced in July 2017 and authorized a new stock repurchase program allowing the repurchase of up to $40.0 million worth of common stock. As of June 30, 2023, approximately $19.0 million remained available for stock repurchases pursuant to the board authorization.
Furthermore, our clients may make business decisions based on their own experiences with the TCPA regardless of our products and the changes we implemented to comply with the new regulations.
Furthermore, our clients may make business decisions based on their own experiences with the TCPA regardless of our products and the changes we implemented to comply with the new regulations. These decisions may negatively affect our revenue or profitability.
Some of our business is conducted through third-parties, which may gather, transmit and store information about our users and marketing and media partners, through our infrastructure or through other systems.
Some of our business is conducted through third parties, which may gather, transmit, store and otherwise process information (including confidential, proprietary and personal information) about our users and marketing and media partners, through our infrastructure or through other systems.
Internet search companies with brand recognition, such as Google, Yahoo! and Bing, have significant numbers of direct sales personnel and substantial proprietary advertising inventory and web traffic that provide a significant competitive advantage and have a significant impact on pricing for Internet advertising and web traffic.
Internet search and social media companies with brand recognition have significant numbers of direct sales personnel and substantial proprietary advertising inventory and web traffic that provide a significant competitive advantage and have a significant impact on pricing for Internet advertising and web traffic.
The shift from desktop or laptop computers to mobile devices could potentially deteriorate the user experience for visitors to our websites and may make it more difficult for visitors to respond to our offerings.
Our online marketing services and content were originally designed for desktop or laptop computers. The shift from desktop or laptop computers to mobile devices could potentially deteriorate the user experience for mobile visitors to our websites and may make it more difficult for mobile visitors to respond to our offerings.
In addition, in the aftermath of the pandemic, it may be the case that consumers spend less time researching and comparing online, which could represent decreased demand for the online products and services that we market for our clients.
In addition, our clients’ businesses may continue to be disrupted in the aftermath of the pandemic if consumers spend less time researching and comparing online, which could represent decreased demand for the online products and services that we market for our clients.
In addition, COVID-19 or other disease outbreaks have in the short-run, and may over the longer term, adversely affect the economies and financial markets within many countries, including in the United States, resulting in economic or financial market instability and could continue to negatively affect marketing and advertising spend in products offered by our clients or on media availability or performance.
In addition, COVID-19 and other disease outbreaks have adversely affected, and may continue to adversely affect, the economic and financial market stability within many countries, including in the United States, and could continue to negatively affect marketing and advertising spend in products offered by our clients or on media availability or performance.
In addition, reductions in business by one or more significant clients has in the past triggered, and may in the future trigger, price reductions for other clients whose prices for certain products are determined in whole or in part by client bidding or competition which may reduce our ability to monetize media, further decreasing revenue.
Clients may also fail to renew their contracts or reduce their level of business with us, leading to lower revenue. 11 In addition, reductions in business by one or more significant clients has in the past triggered, and may in the future trigger, price reductions for other clients whose prices for certain products are determined in whole or in part by client bidding or competition which may reduce our ability to monetize media, further decreasing revenue.
Under our acquisition agreement with CCM, we are required to pay $7.5 million in post-closing payments and an estimated fair value of contingent consideration of $3.6 million. Under our acquisition agreement with AmOne, we are required to pay $8.0 million in post-closing payments. Under our acquisition agreement with Modernize, we are required to pay $27.5 million in post-closing payments.
Under our acquisition agreement with CCM, the purchase consideration included $7.5 million in post-closing payments and an estimated fair value of contingent consideration of $3.6 million. Under our acquisition agreement with AmOne, the purchase consideration included $8.0 million in post-closing payments. Under our acquisition agreement with Modernize, the purchase consideration included $27.5 million in post-closing payments.
In addition, we could incur significant costs for which our insurance policies may not adequately cover us and expend significant resources in protecting against security breaches and complying with the multitude of state, federal and foreign laws regarding data privacy and data breach notification obligations.
In addition, we could incur significant costs for which our insurance policies may not adequately cover us and may be required to expend significant resources in protecting against cyber-attacks, security breaches and other similar incidents and to comply with the multitude of state, federal and foreign laws and regulations regarding data privacy, security and data breach notification obligations.
These decisions may negatively affect our revenue or profitability. 14 In connection with our owned and our third-party publishers’ email campaigns to generate traffic for our clients, we are subject to various state and federal laws regulating commercial email communications, including the federal CAN-SPAM Act.
In connection with our owned and our third-party publishers’ email campaigns to generate traffic for our clients, we are subject to various state and federal laws regulating commercial email communications, including the federal CAN-SPAM Act.
We believe increased regulation may continue to occur in the area of data privacy, and laws and regulations applying to the solicitation, collection, retention, deletion and processing, sharing or use of personally identifiable information.
For example, we believe increased regulation may continue to occur in the area of data privacy and security, and laws and regulations applying to the solicitation, collection, retention, deletion, sharing, use and other processing of personal information.
In addition, we license content, software and other intellectual property rights from third-parties and may be subject to claims of infringement if such parties do not possess the necessary intellectual property rights to the products they license to us.
In addition, we license content, software and other intellectual property rights from third-parties and may be subject to claims of infringement if such parties do not possess the necessary intellectual property rights to the products they license to us. 24 In addition, we have in the past, and may in the future, be subject to legal proceedings and claims that we have infringed the patents or other intellectual property rights of third-parties.
Despite our implementation of security measures and controls, our information technology and infrastructure are susceptible to circumvention by an internal party or third-party, such that electronic or physical computer break-ins, cyber-attacks, malware, ransomware, viruses, social engineering (including phishing attacks), fraud, employee error and other disruptions and security breaches that could result in third-parties gaining unauthorized access to our systems and data.
Despite our implementation of security measures and controls, our information technology and infrastructure are susceptible to circumvention by an internal party or third-party, such as electronic or physical computer break-ins, security breaches, attacks, malware, ransomware, viruses, social engineering (including phishing attacks), denial of service or information, fraud, employee error and other disruptions or similar incidents, including those perpetrated by criminals or nation state actors, that could result in, among other things, third parties gaining unauthorized access to our systems and data (including confidential, proprietary and personal information).
A significant portion of our revenue is attributable to visitor traffic originating from third-party publishers (including strategic partners). In many instances, third-party publishers can change the media inventory they make available to us at any time in ways that could impact our results of operations. In addition, third-party publishers may place significant restrictions on our offerings.
A significant portion of our revenue is attributable to visitor traffic originating from third-party publishers (including strategic partners). In many instances, third-party publishers can change the media inventory they make available to us whether due to regulatory action affecting specific publishers or to third-party media generally at any time in ways that could impact our results of operations.
Violations or alleged violations of laws by us, our third-party publishers or our clients could result in damages, fines, criminal prosecution, unfavorable publicity, and restrictions on our ability to operate, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Violations or alleged violations of laws and regulations, or any such obligations, by us, our third-party publishers, our clients or our third-party service providers on which we rely to process personal information on our behalf, could result in enforcement actions, litigation, damages, fines, criminal prosecution, unfavorable publicity, and restrictions on our ability to operate, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Changes in the macroeconomic or market conditions and changes in the regulatory environment have in the past affected, and may continue to negatively affect, our clients’ businesses, marketing practices and budgets and, therefore, impact our business, financial condition, operating results and cash flows. 13 Worldwide economic conditions remain uncertain due to various global disruptions, including geopolitical events, such as war, the threat of war (including collateral damage from cyberwarfare), or terrorist activity; natural disasters; power shortages or outages; major public health issues, including pandemics; and significant local, national, or global events capturing the attention of a large part of the population, which could prevent or hinder our, or third-party publishers’ or our clients’ ability to do business, increase our costs, and negatively affect our stock price.
Worldwide economic conditions remain uncertain due to various global disruptions, including geopolitical events, such as war, the threat of war (including collateral damage from cyberwarfare), or terrorist activity; natural disasters; power shortages or outages; major public health issues, including pandemics; and significant local, national, or global events capturing the attention of a large part of the population, which could prevent or hinder our, or third-party publishers’ or our clients’ ability to do business, increase our costs, and negatively affect our stock price.
While no impairment was recorded as a result of the interim impairment test, it is possible that another material change could occur in the future.
While no impairment was recorded as a result of the interim impairment test, it is possible that in the future another event occurs that does require a material impairment charge.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our principal executive office is located in a leased facility in Foster City, California, consisting of approximately 44,556 square feet of office space under a lease with an expiration date in October 2023. This facility accommodates our principal engineering, sales, marketing, operations, finance and administrative activities.
Biggest changeItem 2. P roperties Our corporate headquarters are located at 950 Tower Lane, Suite Nos. 500 and 600, Foster City, California 94404 and consist of approximately 44,556 square feet of office space under a lease with an expiration date in October 2023. This facility accommodates our engineering, sales, marketing, operations, finance and administrative activities.
Outside of the United States, we also lease facilities to accommodate engineering and operations in India. 30 We may add new facilities and expand our existing facilities as we add employees and expand our markets, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.
We may add new facilities and expand our existing facilities as we add employees and expand our markets, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.
We also lease additional facilities to accommodate sales, marketing, and operations throughout the United States.
We also lease additional facilities to accommodate our engineering, sales, marketing, and operations throughout the United States. Outside of the United States, we lease facilities to accommodate engineering and operations in India.
Added
In March 2023, we amended our lease agreement. Under the amended agreement, upon the expiration of the current lease, our corporate headquarters will be relocated to Suite No. 1200 within the same building and consist of approximately 22,915 square feet of office space with a lease term of five years.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, the outcome of such legal matters is subject to significant uncertainties. Item 4. Mine Safety Disclosures Not Applicable . 31 PART II
Biggest changeHowever, the outcome of such legal matters is subject to significant uncertainties. Item 4. Mine Saf ety Disclosures Not Applicable. 32 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 31 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 Item 6. Selected Consolidated Financial Data 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 32 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6. Selected Consolidated Financial Data 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table shows the high and low sale prices per share of our common stock as reported on the Nasdaq Global Select Market for the periods indicated : Fiscal Year Ended June 30, 2022 High Low First quarter ended September 30, 2021 $ 19.06 $ 16.13 Second quarter ended December 31, 2021 $ 18.60 $ 13.28 Third quarter ended March 31, 2022 $ 18.49 $ 10.45 Fourth quarter ended June 30, 2022 $ 12.25 $ 8.55 Fiscal Year Ended June 30, 2021 High Low First quarter ended September 30, 2020 $ 15.84 $ 10.10 Second quarter ended December 31, 2020 $ 22.34 $ 15.59 Third quarter ended March 31, 2021 $ 24.76 $ 19.70 Fourth quarter ended June 30, 2021 $ 21.18 $ 17.59 On August 15, 2022, the closing price as reported on the Nasdaq Global Select Market of our common stock was $12.63 per share and we had approximately 42 stockholders of record of our common stock.
Biggest changeThe following table shows the high and low sale prices per share of our common stock as reported on the Nasdaq Global Select Market for the periods indicated: Fiscal Year Ended June 30, 2023 High Low First quarter ended September 30, 2022 $ 13.51 $ 10.19 Second quarter ended December 31, 2022 $ 14.38 $ 10.56 Third quarter ended March 31, 2023 $ 18.03 $ 14.37 Fourth quarter ended June 30, 2023 $ 15.64 $ 6.92 Fiscal Year Ended June 30, 2022 High Low First quarter ended September 30, 2021 $ 19.06 $ 16.13 Second quarter ended December 31, 2021 $ 18.60 $ 13.28 Third quarter ended March 31, 2022 $ 18.49 $ 10.45 Fourth quarter ended June 30, 2022 $ 12.25 $ 8.55 On August 14, 2023, the closing price as reported on the Nasdaq Global Select Market of our common stock was $9.70 per share and we had approximately 42 stockholders of record of our common stock.
The following performance graph shows a comparison from June 30, 2017 through June 30, 2022 of cumulative total return for our common stock, the Nasdaq Composite Index and the RDG Internet Composite Index. Such returns are based on historical results and are not intended to suggest future performance.
The following performance graph shows a comparison from June 30, 2018 through June 30, 2023 of cumulative total return for our common stock, the Nasdaq Composite Index and the RDG Internet Composite Index. Such returns are based on historical results and are not intended to suggest future performance.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Select Market under the symbol QNST.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Select Market under the symbol QNST.
Data for the Nasdaq Composite Index and the RDG Internet Composite Index assume reinvestment of dividends. Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities in fiscal year 2022.
Data for the Nasdaq Composite Index and the RDG Internet Composite Index assume reinvestment of dividends. Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities in fiscal year 2023. 34
The following table summarizes the stock repurchase activity that took place in the open market during the fourth quarter of fiscal year 2022: Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares May Yet Be Purchased Under the Share Repurchase Program April 1, 2022 - April 30, 2022 — $ — — $ 40,000,000 May 1, 2022 - May 31, 2022 964,222 10.20 964,222 30,140,245 June 1, 2022 - June 30, 2022 687,821 10.28 687,821 23,050,108 Total 1,652,043 $ 10.23 1,652,043 (1) Excludes $0.03 per share broker commission. 33 Performance Graph The following performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section , and shall not be deemed to be incorporated by reference into any filing of QuinStreet, Inc. under the Securities Act of 1933, as amended, or the Exchange Act.
The following table summarizes the stock repurchase activity that took place in the open market during the fourth quarter of fiscal year 2023: Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares May Yet Be Purchased Under the Share Repurchase Program April 1, 2023 - April 30, 2023 — $ — — $ 20,000,107 May 1, 2023 - May 31, 2023 22,976 8.08 22,976 19,813,722 June 1, 2023 - June 30, 2023 94,573 8.61 94,573 18,996,891 Total 117,549 $ 8.50 117,549 (1) Excludes $0.03 per share broker commission. 33 Performance Graph The following performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of QuinStreet, Inc. under the Securities Act of 1933, as amended, or the Exchange Act.
For equity compensation plan information refer to Item 12 in Part III of this Annual Report on Form 10-K. 32 Stock Repurchase Program In April 2022, the Board of Directors canceled the prior stock repurchase program that commenced in July 2017 and authorized a new stock repurchase program allowing us to repurchase up to $40.0 million of our outstanding shares of common stock.
Stock Repurchase Program In April 2022, the Board of Directors canceled the prior stock repurchase program that commenced in July 2017 and authorized a new stock repurchase program allowing us to repurchase up to $40.0 million of our outstanding shares of common stock.
Added
The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Added
For equity compensation plan information refer to Item 12 in Part III of this Annual Report on Form 10-K.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFiscal Year Ended June 30, 2022 2021 2020 2019 2018 (In thousands, except per share data) Consolidated Statements of Operations Data: Net revenue $ 582,099 $ 578,487 $ 490,339 $ 455,154 $ 404,358 Cost of revenue (1) 528,368 507,956 437,864 393,509 345,947 Gross profit 53,731 70,531 52,475 61,645 58,411 Operating expenses: (1) Product development 21,906 19,344 14,206 12,329 13,805 Sales and marketing 11,042 10,991 8,876 8,755 10,414 General and administrative 25,501 26,270 23,188 29,834 18,556 Total operating expenses 58,449 56,605 46,270 50,918 42,775 Operating (loss) income (4,718 ) 13,926 6,205 10,727 15,636 Interest income 10 39 230 290 181 Interest expense (1,075 ) (1,296 ) (696 ) (367 ) — Other income, net 21 16,660 12,947 69 687 Interest and other (expense) income, net (1,044 ) 15,403 12,481 (8 ) 868 (Loss) income before income taxes (5,762 ) 29,329 18,686 10,719 16,504 Benefit from (provision for) income taxes 514 (5,774 ) (584 ) 51,761 (574 ) Net (loss) income $ (5,248 ) $ 23,555 $ 18,102 $ 62,480 $ 15,930 Net (loss) income per share: (2) Basic $ (0.10 ) $ 0.44 $ 0.35 $ 1.26 $ 0.34 Diluted $ (0.10 ) $ 0.43 $ 0.34 $ 1.18 $ 0.32 Weighted-average shares used in computing net (loss) income per share: Basic 54,339 53,166 51,529 49,581 46,417 Diluted 54,339 55,129 53,387 52,754 49,872 (1) Cost of revenue and operating expenses include stock-based compensation expense as follows: Cost of revenue $ 7,475 $ 8,997 $ 8,569 $ 7,354 $ 3,982 Product development 2,575 2,339 1,819 1,606 1,949 Sales and marketing 2,378 2,459 1,701 1,358 1,222 General and administrative 6,078 5,838 4,628 3,810 3,029 (2) See Note 4, Net (Loss) Income per Share , to our consolidated financial statements for an explanation of the method used to calculate basic and diluted net (loss) income per share of common stock.
Biggest changeFiscal Year Ended June 30, 2023 2022 2021 2020 2019 (In thousands, except per share data) Consolidated Statements of Operations Data: Net revenue $ 580,624 $ 582,099 $ 578,487 $ 490,339 $ 455,154 Cost of revenue (1) 532,101 528,368 507,956 437,864 393,509 Gross profit 48,523 53,731 70,531 52,475 61,645 Operating expenses: (1) Product development 28,893 21,906 19,344 14,206 12,329 Sales and marketing 12,542 11,042 10,991 8,876 8,755 General and administrative 27,904 25,501 26,270 23,188 29,834 Total operating expenses 69,339 58,449 56,605 46,270 50,918 Operating (loss) income (20,816 ) (4,718 ) 13,926 6,205 10,727 Interest income 296 10 39 230 290 Interest expense (790 ) (1,075 ) (1,296 ) (696 ) (367 ) Other (expense) income, net (52 ) 21 16,660 12,947 69 Interest and other (expense) income, net (546 ) (1,044 ) 15,403 12,481 (8 ) (Loss) income before income taxes (21,362 ) (5,762 ) 29,329 18,686 10,719 (Provision for) benefit from income taxes (47,504 ) 514 (5,774 ) (584 ) 51,761 Net (loss) income $ (68,866 ) $ (5,248 ) $ 23,555 $ 18,102 $ 62,480 Net (loss) income per share: (2) Basic $ (1.28 ) $ (0.10 ) $ 0.44 $ 0.35 $ 1.26 Diluted $ (1.28 ) $ (0.10 ) $ 0.43 $ 0.34 $ 1.18 Weighted-average shares used in computing net (loss) income per share: Basic 53,799 54,339 53,166 51,529 49,581 Diluted 53,799 54,339 55,129 53,387 52,754 (1) Cost of revenue and operating expenses include stock-based compensation expense as follows: Cost of revenue $ 7,923 $ 7,475 $ 8,997 $ 8,569 $ 7,354 Product development 2,880 2,575 2,339 1,819 1,606 Sales and marketing 2,298 2,378 2,459 1,701 1,358 General and administrative 5,685 6,078 5,838 4,628 3,810 (2) See Note 4, Net (Loss) Income per Share , to our consolidated financial statements for an explanation of the method used to calculate basic and diluted net (loss) income per share of common stock. 35 June 30, 2023 2022 2021 2020 2019 (In thousands) Consolidated Balance Sheets Data: Cash and cash equivalents $ 73,677 $ 96,439 $ 110,318 $ 107,509 $ 62,522 Working capital 61,384 73,213 90,565 99,735 59,679 Total assets 337,155 419,909 449,515 358,407 324,611 Long-term liabilities 17,534 24,330 38,756 16,626 18,083 Total stockholders' equity 229,801 286,000 295,148 255,944 222,829 Fiscal Year Ended June 30, 2023 2022 2021 2020 2019 (In thousands) Consolidated Statements of Cash Flows Data: Net cash provided by operating activities $ 11,838 $ 28,672 $ 50,615 $ 47,608 $ 37,965 Depreciation and amortization 19,155 16,961 16,201 11,476 8,975 Capital expenditures 3,062 2,842 1,969 1,962 1,972 Fiscal Year Ended June 30, 2023 2022 2021 2020 2019 (In thousands) Other Financial Data: Adjusted EBITDA (1) $ 16,690 $ 31,030 $ 52,188 $ 36,229 $ 34,489 (1) We define adjusted EBITDA as net (loss) income less interest and other expense, net, provision for (benefit from) income taxes, depreciation expense, amortization expense, stock-based compensation expense, acquisition and divestiture costs, gain on divestitures of businesses, net, strategic review costs, contingent consideration adjustment, litigation settlement expense, tax settlement expense, and restructuring costs.
Item 6. Selected Consolidated Financial Data The following selected consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements and accompanying notes appearing elsewhere in this report.
Item 6. Selected Consol idated Financial Data The following selected consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements and accompanying notes appearing elsewhere in this report.
Some of these limitations are: • adjusted EBITDA does not reflect our cash expenditures for capital equipment or other contractual commitments; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements; • adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • adjusted EBITDA does not consider the potentially dilutive impact of issuing stock-based compensation to our management team and employees; • should we enter into borrowing arrangements in the future, adjusted EBITDA does not reflect the interest expense or the cash requirements that may be necessary to service interest or principal payments on such indebtedness; • adjusted EBITDA does not reflect certain tax payments that may represent a reduction in cash available to us; and • other companies, including companies in our industry, may calculate adjusted EBITDA measures differently, which reduces their usefulness as a comparative measure. 36 Due to these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business.
Some of these limitations are: • adjusted EBITDA does not reflect our cash expenditures for internal software development projects, capital equipment or other contractual commitments; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements; • adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • adjusted EBITDA does not consider the potentially dilutive impact of issuing stock-based compensation to our management team and employees; 36 • should we enter into borrowing arrangements in the future, adjusted EBITDA does not reflect the interest expense or the cash requirements that may be necessary to service interest or principal payments on such indebtedness; • adjusted EBITDA does not reflect certain tax payments that may represent a reduction in cash available to us; and • other companies, including companies in our industry, may calculate adjusted EBITDA measures differently, which reduces their usefulness as a comparative measure.
The following table presents a reconciliation of adjusted EBITDA to net (loss) income calculated in accordance with U.S. generally accepted accounting principles (GAAP), the most comparable GAAP measure, for each of the periods indicated: Fiscal Year Ended June 30, 2022 2021 2020 2019 2018 (In thousands) Net (loss) income $ (5,248 ) $ 23,555 $ 18,102 $ 62,480 $ 15,930 Interest and other expense (income), net 1,044 1,212 1,097 8 (868 ) (Benefit from) provision for income taxes (514 ) 5,774 584 (51,761 ) 574 Depreciation and amortization 16,961 16,201 11,476 8,975 7,767 Stock-based compensation expense 18,506 19,633 16,717 14,128 10,182 Acquisition and divestiture costs 519 811 985 736 667 Gain on divestitures of businesses, net — (16,615 ) (13,578 ) — — Strategic review costs — — 330 — — Contingent consideration adjustment (926 ) — — (100 ) (152 ) Litigation settlement expense 34 231 95 23 16 Tax settlement expense 516 310 — — — Material weakness related expense — — — — 563 Restructuring costs 138 1,076 421 — — Adjusted EBITDA $ 31,030 $ 52,188 $ 36,229 $ 34,489 $ 34,679 37
The following table presents a reconciliation of adjusted EBITDA to net (loss) income calculated in accordance with U.S. generally accepted accounting principles (GAAP), the most comparable GAAP measure, for each of the periods indicated: Fiscal Year Ended June 30, 2023 2022 2021 2020 2019 (In thousands) Net (loss) income $ (68,866 ) $ (5,248 ) $ 23,555 $ 18,102 $ 62,480 Interest and other expense, net 546 1,044 1,212 1,097 8 Provision for (benefit from) income taxes 47,504 (514 ) 5,774 584 (51,761 ) Depreciation and amortization 19,155 16,961 16,201 11,476 8,975 Stock-based compensation expense 18,786 18,506 19,633 16,717 14,128 Acquisition and divestiture costs 102 519 811 985 736 Gain on divestitures of businesses, net — — (16,615 ) (13,578 ) — Strategic review costs — — — 330 — Contingent consideration adjustment — (926 ) — — (100 ) Litigation settlement expense 6 34 231 95 23 Tax settlement expense (755 ) 516 310 — — Restructuring costs 212 138 1,076 421 — Adjusted EBITDA $ 16,690 $ 31,030 $ 52,188 $ 36,229 $ 34,489 37
The consolidated statements of operations data for fiscal years ended June 30, 201 9 and 201 8 and the consolidated balance sheets data as of June 30, 20 20 , 201 9 and 20 1 8 are derived from our audited consolidated financial statements, which are not included in this report.
The consolidated statements of operations data for fiscal years ended June 30, 2020 and 2019 and the consolidated balance sheets data as of June 30, 2021, 2020 and 2019 are derived from our audited consolidated financial statements, which are not included in this report.
Our historical results are not necessarily indicative of our future results and any interim results are not necessarily indicative of the results for a full fiscal year. 34 We derived the consolidated statements of operations data for fiscal years ended June 30, 20 2 2 , 20 2 1 and 20 20 and the consolidated balance sheets data as of June 30, 20 2 2 and 20 2 1 from our audited consolidated financial statements appearing elsewhere in this report.
We derived the consolidated statements of operations data for fiscal years ended June 30, 2023, 2022 and 2021 and the consolidated balance sheets data as of June 30, 2023 and 2022 from our audited consolidated financial statements appearing elsewhere in this report.
When evaluating our performance, adjusted EBITDA should be considered alongside other financial performance measures, including various cash flow metrics , net (loss) income and our o ther GAAP results.
Due to these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. When evaluating our performance, adjusted EBITDA should be considered alongside other financial performance measures, including various cash flow metrics, net (loss) income and our other GAAP results.
Removed
June 30, 2022 2021 2020 2019 2018 (In thousands) Consolidated Balance Sheets Data: Cash and cash equivalents $ 96,439 $ 110,318 $ 107,509 $ 62,522 $ 64,700 Working capital 73,213 90,565 99,735 59,679 69,592 Total assets 419,909 449,515 358,407 324,611 220,296 Long-term liabilities 24,330 38,756 16,626 18,083 3,938 Total stockholders' equity 286,000 295,148 255,944 222,829 148,326 35 Fiscal Year Ended June 30, 2022 2021 2020 2019 2018 (In thousands) Consolidated Statements of Cash Flows Data: Net cash provided by operating activities $ 28,672 $ 50,615 $ 47,608 $ 37,965 $ 26,979 Depreciation and amortization 16,961 16,201 11,476 8,975 7,767 Capital expenditures 2,842 1,969 1,962 1,972 610 Fiscal Year Ended June 30, 2022 2021 2020 2019 2018 (In thousands) Other Financial Data: Adjusted EBITDA (1) $ 31,030 $ 52,188 $ 36,229 $ 34,489 $ 34,679 (1) We define adjusted EBITDA as net (loss) income less interest and other expense (income), net, (benefit from) provision for income taxes, depreciation expense, amortization expense, stock-based compensation expense, acquisition and divestiture costs, gain on divestitures of businesses, net, strategic review costs, contingent consideration adjustment, litigation settlement expense, tax settlement expense, external expenses related to the material weakness disclosed in our FY 2017 Annual Report on Form 10-K, and restructuring costs.
Added
Our historical results are not necessarily indicative of our future results and any interim results are not necessarily indicative of the results for a full fiscal year.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeEarnings from our limited non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax. 41 Results of Operations The following table sets forth our consolidated statements of operations for the periods indicated: Fiscal Year Ended June 30, 2022 2021 2020 (In thousands, except percentages) Net revenue $ 582,099 100.0 % $ 578,487 100.0 % $ 490,339 100.0 % Cost of revenue (1) 528,368 90.8 507,956 87.8 437,864 89.3 Gross profit 53,731 9.2 70,531 12.2 52,475 10.7 Operating expenses: (1) Product development 21,906 3.7 19,344 3.3 14,206 2.9 Sales and marketing 11,042 1.9 10,991 1.9 8,876 1.8 General and administrative 25,501 4.4 26,270 4.6 23,188 4.7 Operating (loss) income (4,718 ) (0.8 ) 13,926 2.4 6,205 1.3 Interest income 10 — 39 — 230 — Interest expense (1,075 ) (0.2 ) (1,296 ) (0.2 ) (696 ) (0.1 ) Other income, net 21 — 16,660 2.9 12,947 2.6 (Loss) income before income taxes (5,762 ) (1.0 ) 29,329 5.1 18,686 3.8 Benefit from (provision for) income taxes 514 0.1 (5,774 ) (1.0 ) (584 ) (0.1 ) Net (loss) income $ (5,248 ) (0.9 )% $ 23,555 4.1 % $ 18,102 3.7 % (1) Cost of revenue and operating expenses include stock-based compensation expense as follows: Cost of revenue $ 7,475 1.3 % $ 8,997 1.6 % $ 8,569 1.7 % Product development 2,575 0.4 2,339 0.4 1,819 0.4 Sales and marketing 2,378 0.4 2,459 0.4 1,701 0.3 General and administrative 6,078 1.0 5,838 1.0 4,628 0.9 Gross Profit Fiscal Year Ended June 30, 2022 - 2021 2021 - 2020 2022 2021 2020 % Change % Change (In thousands) Net revenue $ 582,099 $ 578,487 $ 490,339 1 % 18 % Cost of revenue 528,368 507,956 437,864 4 % 16 % Gross profit $ 53,731 $ 70,531 $ 52,475 (24 %) 34 % Net Revenue Net revenue increased by $3.6 million, or 1%, in fiscal year 2022 compared to fiscal year 2021.
Biggest changeEarnings from our limited non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax. 41 Results of Operations The following table sets forth our consolidated statements of operations for the periods indicated: Fiscal Year Ended June 30, 2023 2022 2021 (In thousands, except percentages) Net revenue $ 580,624 100.0 % $ 582,099 100.0 % $ 578,487 100.0 % Cost of revenue (1) 532,101 91.6 528,368 90.8 507,956 87.8 Gross profit 48,523 8.4 53,731 9.2 70,531 12.2 Operating expenses: (1) Product development 28,893 5.0 21,906 3.7 19,344 3.3 Sales and marketing 12,542 2.2 11,042 1.9 10,991 1.9 General and administrative 27,904 4.8 25,501 4.4 26,270 4.6 Operating (loss) income (20,816 ) (3.6 ) (4,718 ) (0.8 ) 13,926 2.4 Interest income 296 0.1 10 — 39 — Interest expense (790 ) (0.2 ) (1,075 ) (0.2 ) (1,296 ) (0.2 ) Other (expense) income, net (52 ) — 21 — 16,660 2.9 (Loss) income before income taxes (21,362 ) (3.7 ) (5,762 ) (1.0 ) 29,329 5.1 (Provision for) benefit from income taxes (47,504 ) (8.2 ) 514 0.1 (5,774 ) (1.0 ) Net (loss) income $ (68,866 ) (11.9 )% $ (5,248 ) (0.9 )% $ 23,555 4.1 % (1) Cost of revenue and operating expenses include stock-based compensation expense as follows: Cost of revenue $ 7,923 1.4 % $ 7,475 1.3 % $ 8,997 1.6 % Product development 2,880 0.5 2,575 0.4 2,339 0.4 Sales and marketing 2,298 0.4 2,378 0.4 2,459 0.4 General and administrative 5,685 1.0 6,078 1.0 5,838 1.0 Gross Profit Fiscal Year Ended June 30, 2023 - 2022 2022 - 2021 2023 2022 2021 % Change % Change (In thousands) Net revenue $ 580,624 $ 582,099 $ 578,487 — % 1 % Cost of revenue 532,101 528,368 507,956 1 % 4 % Gross profit $ 48,523 $ 53,731 $ 70,531 (10 %) (24 %) 42 Net Revenue Net revenue was approximately flat in fiscal year 2023 compared to fiscal year 2022.
To deliver clicks, leads, calls, applications, and customers to our clients, generally we: • own or access targeted media through business arrangements (e.g., revenue sharing arrangements with online publisher partners, large and small) or by purchasing media (e.g., clicks from major search engines); • run advertisements or other forms of marketing messages and programs in that media that result in consumer or visitor responses, typically in the form of clicks (by a consumer to further qualification or matching steps, or to online client applications or offerings), leads (e.g., consumer contact information), calls (from a consumer or to a consumer by our owned and operated or contracted call centers or by that of our clients or their agents), applications (e.g., for enrollment or a financial product), or customers (e.g., funded personal loans); and • continuously seek to display clients and client offerings to visitors or consumers that result in the maximum number of consumers finding solutions that can meet their needs and to which they will take action to respond, resulting in media buying efficiency (e.g., by segmenting media or traffic so that the most appropriate clients or client offerings can be displayed or “matched” to each segment based on fit, response rates or conversion rates); • through technology and analytics, seek to optimize combination of objectives to satisfy the maximum number of shopping or researching visitors or consumers, deliver on client marketing objectives, effectively compete for online media, and generate a sound financial outcome for us.
To deliver clicks, leads, calls, applications, and customers to our clients, generally we: • own or access targeted media through business arrangements (e.g., revenue sharing arrangements with online publisher partners, large and small) or by purchasing media (e.g., clicks from major search engines); • run advertisements or other forms of marketing messages and programs in that media that result in consumer or visitor responses, typically in the form of clicks (by a consumer to further qualification or matching steps, or to online client applications or offerings), leads (e.g., consumer contact information), calls (from a consumer or to a consumer by our owned and operated or contracted call centers or by that of our clients or their agents), applications (e.g., for enrollment or a financial product), or customers (e.g., funded personal loans); • continuously seek to display clients and client offerings to visitors or consumers that result in the maximum number of consumers finding solutions that can meet their needs and to which they will take action to respond, resulting in media buying efficiency (e.g., by segmenting media or traffic so that the most appropriate clients or client offerings can be displayed or “matched” to each segment based on fit, response rates or conversion rates); and • through technology and analytics, seek to optimize combination of objectives to satisfy the maximum number of shopping or researching visitors or consumers, deliver on client marketing objectives, effectively compete for online media, and generate a sound financial outcome for us.
We are constraining expenses generally to the extent practicable. Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, facilities fees and professional services fees. We are constraining expenses generally to the extent practicable. General and Administrative.
Sales and marketing expenses consist primarily of personnel costs, facilities fees and professional services fees. We are constraining expenses generally to the extent practicable. General and Administrative.
Benefit from (Provision for) Income Taxes We are subject to tax in the United States as well as other tax jurisdictions or countries in which we conduct business.
(Provision for) Benefit from Income Taxes We are subject to tax in the United States as well as other tax jurisdictions or countries in which we conduct business.
The non-cash adjustments primarily consisted 45 of stock-based compensation expense of $19. 6 million, depreciation and amortization of $16.2 million, and a decrease in deferred tax assets of $ 5. 4 million primarily due to provision for income taxes recorded in fiscal year 2021, offset by a gain of $16.6 million recognized from the divestiture of our education client vertical .
The non-cash adjustments primarily consisted of stock-based compensation expense of $19.6 million, depreciation and amortization of $16.2 million, and a decrease in deferred tax assets of $5.4 million primarily due to provision for income taxes recorded in fiscal year 2021, offset by a gain of $16.6 million recognized from the divestiture of our education client vertical.
In our quarters ending March 31 (our third fiscal quarter), this trend generally reverses with better media availability and often new budgets at the beginning of the year for our clients with fiscal years ending December 31. 39 Our results are also subject to fluctuation as a result of seasonality in our clients’ business.
In our quarters ending March 31 (our third fiscal quarter), this trend generally reverses with better media availability and often new budgets at the beginning of the year for our clients with fiscal years ending December 31. Our results are also subject to fluctuation as a result of seasonality in our clients’ business.
Significant judgments required to estimate the fair value of reporting units include estimating future cash flows and determining appropriate discount rates, growth rates, an appropriate control premium and other assumptions. Changes in these 49 estimates and assumptions could materially affect the determination of fair value for each reporting unit which could trigger impairment.
Significant judgments required to estimate the fair value of reporting units include estimating future cash flows and determining appropriate discount rates, growth rates, an appropriate control premium and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit which could trigger impairment.
Other factors affecting our clients’ businesses include macro factors such as credit availability in the market, interest rates, the strength of the economy and employment. Regulations Our revenue has fluctuated in part as a result of federal, state and industry-based regulations and developing standards with respect to the enforcement of those regulations.
Other factors affecting our clients’ businesses include macro factors such as credit availability in the market, interest rates, the strength of the economy and employment. 39 Regulations Our revenue has fluctuated in part as a result of federal, state and industry-based regulations and developing standards with respect to the enforcement of those regulations.
Some of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We base these estimates and assumptions on historical experience or on various other factors that we believe to be reasonable and appropriate under the circumstances.
Some of the estimates and assumptions 47 we are required to make relate to matters that are inherently uncertain as they pertain to future events. We base these estimates and assumptions on historical experience or on various other factors that we believe to be reasonable and appropriate under the circumstances.
Determining whether we control the goods or services before they are transferred to the clients may require judgment. 48 Stock-Based Compensation We measure and record the expense related to stock-based transactions based on the fair values of stock-based payment awards, as determined on the date of grant.
Determining whether we control the goods or services before they are transferred to the clients may require judgment. Stock-Based Compensation We measure and record the expense related to stock-based transactions based on the fair values of stock-based payment awards, as determined on the date of grant.
Consequently, we do not have significant financing components in our arrangements. Separately from the agreements that we have with clients, we have agreements with Internet search companies, third-party publishers and strategic partners that we engage with to generate targeted marketing results for our clients.
Consequently, we do not have significant financing components in our arrangements. 48 Separately from the agreements that we have with clients, we have agreements with Internet search companies, third-party publishers and strategic partners that we engage with to generate targeted marketing results for our clients.
Personnel costs for each category of operating expenses generally include salaries, stock-based compensation expense, bonuses, commissions and related taxes, and employee benefit costs. Product Development. Product development expenses consist primarily of personnel costs, facilities fees and professional services fees related to the development and maintenance of our products and media management platform.
Personnel costs for each category of operating expenses generally include salaries, stock-based compensation expense, bonuses, commissions and related taxes, and employee benefit costs. Product Development. Product development expenses consist primarily of personnel costs, facilities fees and professional services fees related to the development and maintenance of our products and media management platform. Sales and Marketing.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.
Item 7. Management’s Discussion and Analys is of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.
The above table does not include approximately $2.5 million of long-term income tax liabilities for uncertainty in income taxes due to the fact that we are unable to reasonably estimate the timing of these potential future payments.
The above table does not include approximately $2.6 million of long-term income tax liabilities for uncertainty in income taxes due to the fact that we are unable to reasonably estimate the timing of these potential future payments.
We regularly assess the realizability of our deferred tax assets. Judgment is required to determine whether a valuation allowance is necessary and the amount of such valuation allowance, if appropriate.
The Company regularly assess the realizability of our deferred tax assets. Judgment is required to determine whether a valuation allowance is necessary and the amount of such valuation allowance, if appropriate.
We have no history or expectation of paying dividends on our common stock. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of the award.
We estimate the expected volatility of our common stock based on our historical volatility over the expected term of the award. We have no history or expectation of paying dividends on our common stock. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of the award.
We consider all available evidence, both positive and negative, to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company considers all available evidence, both positive and negative, to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized.
In evaluating the need, or continued need, for a valuation allowance we consider, among other things, the nature, frequency and severity of current and cumulative taxable income or losses, forecasts of future profitability, and the duration of statutory carryforward periods.
In evaluating the need, or continued need, for a valuation allowance The Company considers, among other things, the nature, frequency and severity of current and cumulative taxable income or losses, forecasts of future profitability, and the duration of statutory carryforward periods.
Our ability to fund these requirements will depend on our future cash flows, which are determined, in part, by future operating performance and are, therefore, subject to prevailing global macroeconomic conditions including the impact of COVID-19, and financial, business and other factors, some of which are beyond our control.
Our ability to fund these requirements will depend on our future cash flows, which are determined, in part, by future operating performance and are, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.
Cash used in financing activities in fiscal year 2021 was due to the payment of withholding taxes related to the release of restricted stock, net of share settlement of $8.0 million, and payment of post-closing payments and contingent consideration related to acquisitions of $7.7 million, offset by proceeds from the exercise of stock options of $4.4 million. 46 Cash used in financing activities in fiscal year 2020 was due to the post-closing payments and contingent consideration related to acquisitions of $9.3 million, and payments of withholding taxes related to the release of restricted stock, net of share settlement of $6.4 million, offset by proceeds from the exercise of stock options of $4.1 million.
Cash used in financing activities in fiscal year 2021 was due to the payment of withholding taxes related to the release of restricted stock, net of share settlement of $8.0 million, and payment of post-closing payments and contingent consideration related to acquisitions of $7.7 million, offset by proceeds from the exercise of stock options of $4.4 million.
We recognize tax benefits from an uncertain tax position only if it is more likely than not, based on the technical merits of the position, that the tax position will be sustained on examination by the tax authorities.
The Company recognizes tax benefits from an uncertain tax position only if it is more likely than not, based on the technical merits of the position, that the tax position will be sustained on examination by the tax authorities.
Historically, businesses have had the option o f deducting Sec. 174 expenses in the year incurred or capitalizing and amortizing the costs over five years. The new TCJA provision, however, eliminates this option and require s Sec. 174 expenses associated with research conducted in the U.S. to be capitalized and amortized over a 5 -year period.
Historically, businesses have had the option of deducting research and development expenses in the year incurred or capitalizing and amortizing the costs over five years. The new TCJA provision, however, eliminates this option and requires Sec. 174 expenses associated with research conducted in the U.S. to be capitalized and amortized over a 5-year period.
The following table summarizes our cash flows for the periods indicated: Fiscal Year Ended June 30, 2022 2021 2020 (In thousands) Net cash provided by operating activities $ 28,672 $ 50,615 $ 47,608 Net cash (used in) provided by investing activities (9,225 ) (36,457 ) 8,868 Net cash used in financing activities (33,315 ) (11,312 ) (11,632 ) Net Cash Provided by Operating Activities Cash flows from operating activities are primarily the result of our net (loss) income adjusted for depreciation and amortization, provision for or benefit from sales returns and doubtful accounts receivable, stock-based compensation expense, change in the fair value of contingent consideration, non-cash lease expense, gains and losses on divestitures of businesses, deferred income taxes and changes in working capital components.
The following table summarizes our cash flows for the periods indicated: Fiscal Year Ended June 30, 2023 2022 2021 (In thousands) Net cash provided by operating activities $ 11,838 $ 28,672 $ 50,615 Net cash used in investing activities (15,125 ) (9,225 ) (36,457 ) Net cash used in financing activities (19,459 ) (33,315 ) (11,312 ) Net Cash provided by Operating Activities Cash flows from operating activities are primarily the result of our net (loss) income adjusted for depreciation and amortization, provision for or benefit from sales returns and doubtful accounts receivable, stock-based compensation expense, change in the fair value of contingent consideration, non-cash lease expense, gains and losses on divestitures of businesses, deferred income taxes and changes in working capital components.
Net Cash Used in Financing Activities Cash flows from financing activities generally include repurchases of common stock, payment of withholding taxes related to the release of restricted stock, net of share settlement, proceeds from the exercise of stock options, and post-closing payments related to business acquisitions.
Net Cash Used in Financing Activities Cash flows from financing activities generally include repurchases of common stock, payment of withholding taxes related to the release of restricted stock, net of share settlement, proceeds from the exercise of stock options and issuance of common stock under employee stock purchase plan, and post-closing payments related to business acquisitions.
Liquidity and Capital Resources As of June 30, 2022, our principal sources of liquidity consisted of cash and cash equivalents of $96.4 million and cash we expect to generate from future operations. Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase.
Liquidity and Capital Resources As of June 30, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $73.7 million and cash we expect to generate from future operations. Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase.
Interest expense decreased by $0.2 million, or 17%, in fiscal year 2022 compared to fiscal year 2021 primarily due to decreased imputed interest on a lower average outstanding balance of the post-closing payments related to our business acquisitions.
Interest expense decreased by $0.3 million, or 27%, in fiscal year 2023 compared to fiscal year 2022 primarily due to decreased imputed interest on a lower average outstanding balance of the post-closing payments related to our business acquisitions.
We have an option to extend the term of the lease for an additional five years following October 31, 2023. (2) In accordance with the terms of the acquisitions completed in fiscal years 2022, 2021 and 2019, we are required to make post-closing payments and contingent consideration payments.
We have one option to extend the term of the lease for an additional three years. (2) In accordance with the terms of the acquisitions completed in fiscal years 2022, 2021 and 2019 we are required to make post-closing payments and contingent consideration payments.
This was primarily due to an adjustment to contingent consideration of $0.9 million recorded in fiscal year 2022. General and administrative expenses increased by $3.1 million, or 13%, in fiscal year 2021 compared to fiscal year 2020.
General and administrative expenses decreased by $0.8 million, or 3%, in fiscal year 2022 compared to fiscal year 2021. This was primarily due to an adjustment to contingent consideration of $0.9 million recorded in fiscal year 2022.
The increase in amortization expense was primarily due to the acquisitions of intangible assets in fiscal year 2021. Gross profit margin was 12% in fiscal year 2021 compared to 11% in fiscal year 2020. The increase in gross profit margin was primarily attributable to decreased media and marketing costs as a percentage of revenue.
The increase in amortization expense was primarily due to the acquisitions of intangible assets in fiscal year 2022. Gross profit margin was 9% in fiscal year 2022 compared to 12% in fiscal year 2021. The decrease in gross profit margin was primarily attributable to increased media and marketing costs as a percentage of revenue.
We recognize stock-based compensation expense for options and service-based RSUs using the straight-line method, and for performance-based RSUs and market-based RSUs using the graded vesting method, based on awards ultimately expected to vest. We recognize stock-based compensation expense for the purchase rights granted under the ESPP using the straight-line method over the offering period.
We recognize stock-based compensation expense for options and service-based RSUs using the straight-line method, and for performance-based RSUs using the graded vesting method, based on awards ultimately expected to vest. We recognize stock-based compensation expense for the purchase rights granted under the ESPP using the straight-line method over the offering period. We estimate future forfeitures at the date of grant.
Our judgment regarding future profitability may change due to future market conditions including the impact of COVID-19, changes in U.S. or international tax laws and other factors.
Our judgment regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors.
We have no borrowing agreements outstanding as of June 30, 2022; however interest expense could increase if, among other things, we enter into a new borrowing agreement to manage liquidity or make additional acquisitions through debt financing.
Interest expense is related to imputed interest on post-closing payments related to our acquisitions. We have no borrowing agreements outstanding as of June 30, 2023; however interest expense could increase if, among other things, we enter into a new borrowing agreement to manage liquidity or make additional acquisitions through debt financing.
Our financial services client vertical represented 72%, 74% and 75% of net revenue in fiscal years 2022, 2021 and 2020. Our home services client vertical represented 27%, 23% and 10% of net revenue in fiscal years 2022, 2021 and 2020.
Our financial services client vertical represented 66%, 72% and 74% of net revenue in fiscal years 2023, 2022 and 2021. Our home services client vertical represented 33%, 27% and 23% of net revenue in fiscal years 2023, 2022 and 2021.
For example, r evenue in our home services client vertical is subject to cyclical and seasonal trends, as the consumer demand for home services typically rise s during the spring and summer seasons and decline s during the fall and winter seasons .
For example, revenue in our home services client vertical is subject to cyclical and seasonal trends, as the consumer demand for home services typically rises during the spring and summer seasons and declines during the fall and winter seasons.
We deliver targeted and measurable results through a vertical focus, which includes our financial services client vertical and our home services client vertical. All remaining businesses that are not significant enough for separate reporting are included in other revenue .
We deliver targeted and measurable results through a vertical focus, which includes our financial services client vertical and our home services client vertical. All remaining businesses that are not significant enough for separate reporting are included in other revenue. Our revenue recognized in fiscal year 2021 also included the revenue generated from our divested former education client vertical.
This was primarily due to increased personnel costs of $1.5 million as a result of higher headcount, and increased professional services costs of $0.7 million. Product development expenses increased by $5.1 million, or 36%, in fiscal year 2021 compared to fiscal year 2020.
This was primarily due to increased personnel costs of $1.5 million as a result of higher headcount, and increased professional services costs of $0.7 million. Sales and Marketing Expenses Sales and marketing expenses increased by $1.5 million, or 14%, in fiscal year 2023 compared to fiscal year 2022.
Cash provided by operating activities was $28.7 million in fiscal year 2022 compared to $50.6 million in fiscal year 2021 and $47.6 million in fiscal year 2020. Cash provided by operating activities in fiscal year 2022 consisted of net loss of $5.2 million, adjusted for non-cash adjustments of $33.8 million and changes in working capital accounts of $0.1 million.
Cash provided by operating activities was $11.8 million in fiscal year 2023, compared to cash provided by operating activities of $28.7 million in fiscal year 2022 and cash provided by operating activities of $50.6 million in fiscal year 2021. 45 Cash provided by operating activities in fiscal year 2023 consisted of net loss of $68.9 million, adjusted for non-cash adjustments of $86.7 million and changes in working capital accounts of $6.0 million.
Business Combinations We account for business combinations using the acquisition method, which requires that the total consideration for each of the acquired business be allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.
Interest and penalties related to unrecognized tax benefits are recognized within income tax expense. 49 Business Combinations We account for business combinations using the acquisition method, which requires that the total consideration for each of the acquired business be allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.
Other income, net, was $16.7 million in fiscal year 2021 primarily due to a gain of $16.6 million recognized from the divestiture of our education client vertical . Other income, net, was $12.9 million in fiscal year 2020 primarily due to a net disposition gain of $13.6 million recognized from the business divestitures completed during the fiscal year .
Other (expense) income, net, was $16.7 million in fiscal year 2021 primarily due to a gain of $16.6 million recognized from the divestiture of our education client vertical .
Benefit from (Provision for) Income Taxes Fiscal Year Ended June 30, 2022 2021 2020 (In thousands) Benefit from (provision for) income taxes $ 514 $ (5,774 ) $ (584 ) Effective tax rate 8.9 % 19.7 % 3.1 % We recorded a benefit from income taxes of $0.5 million in fiscal year 2022, primarily as a result of a net benefit for deferred federal and state income taxes of $0.9 million offset by current state and foreign taxes of $0.4 million.
(Provision for) Benefit from Income Taxes Fiscal Year Ended June 30, 2023 2022 2021 (In thousands) (Provision for) benefit from income taxes $ (47,504 ) $ 514 $ (5,774 ) Effective tax rate (222.4 %) 8.9 % 19.7 % We recorded a provision for income taxes of $47.5 million in fiscal year 2023, primarily as a result of establishing a valuation allowance against the net deferred tax assets, which resulted in deferred federal and state income taxes of $47.1 million and current state and foreign income taxes of $0.4 million.
Interest expense increased by $0.6 million, or 86%, in fiscal year 2021 compared to fiscal year 2020 primarily due to increased imputed interest on a higher average outstanding balance of the post-closing payments related to our business acquisitions completed in fiscal year 2021. Other income, net, was immaterial in fiscal year 2022.
Interest expense decreased by $0.2 million, or 17%, in fiscal year 2022 compared to fiscal year 2021 primarily due to decreased imputed interest on a lower average outstanding balance of the post-closing payments related to our business acquisitions. Other (expense) income, net, was immaterial in both fiscal years 2023 and 2022.
Income Taxes We account for income taxes using an asset and liability approach to record deferred taxes. Our deferred income tax assets represent temporary differences between the financial statement carrying amount and the tax basis of existing assets and liabilities that will result in deductible amounts in future years, including net operating loss carry forwards.
The Company’s deferred income tax assets represent temporary differences between the financial statement carrying amount and the tax basis of existing assets and liabilities that will result in deductible amounts in future years, including net operating loss carry forwards.
The divestiture of our former education client vertical, completed in fiscal year 2021, resulted in a decrease in revenue by $11.6 million for fiscal year 2022, as compared to fiscal year 2021. Net revenue increased by $88.1 million, or 18%, in fiscal year 2021 compared to fiscal year 2020.
The divestiture of our former education client vertical, completed in fiscal year 2021, resulted in a decrease in revenue by $11.6 million for fiscal year 2022, as compared to fiscal year 2021. Cost of Revenue and Gross Profit Margin Cost of revenue increased by $3.7 million, or 1%, in fiscal year 2023 compared to fiscal year 2022.
We recorded a provision for income taxes of $5.8 million in fiscal year 2021, primarily as a result of deferred federal and state income taxes of $5.3 million and current state and foreign taxes of $0.4 million.
We recorded a provision for income taxes of $5.8 million in fiscal year 2021, primarily as a result of deferred federal and state income taxes of $5.3 million and current state and foreign taxes of $0.4 million. Our effective tax rate was (222.4%), 8.9%, and 19.7% in fiscal years 2023, 2022 and 2021.
In assessing the qualitative factors, we consider the impact of key factors such as changes in the general economic conditions including the impact of COVID-19, changes in industry and competitive environment, stock price, actual revenue performance compared to previous years, forecasts and cash flow generation.
In assessing the qualitative factors, we consider the impact of key factors such as changes in the general economic conditions, changes in industry and competitive environment, stock price, actual revenue performance compared to previous years, forecasts and cash flow generation. We had one reporting unit for purposes of allocating and testing goodwill for fiscal years 2023 and 2022.
General and administrative expenses consist primarily of personnel costs of our finance, legal, employee benefits and compliance, technical support and other administrative personnel, accounting and legal professional services fees, facilities fees and bad debt expense. We are constraining expenses generally to the extent practicable.
General and administrative expenses consist primarily of personnel costs of our finance, legal, employee benefits and compliance, technical support and other administrative personnel, accounting and legal professional services fees, facilities fees and bad debt expense. Interest and Other (Expense) Income, Net Interest and other (expense) income, net, consists primarily of interest expense, interest income, and other income and expense.
Interest and Other Income, Net Fiscal Year Ended June 30, 2022 - 2021 2021 - 2020 2022 2021 2020 % Change % Change (In thousands) Interest income $ 10 $ 39 $ 230 (74 %) (83 %) Interest expense (1,075 ) (1,296 ) (696 ) (17 %) 86 % Other income, net 21 16,660 12,947 (100 %) 29 % Interest and other income, net $ (1,044 ) $ 15,403 $ 12,481 (107 %) 23 % Interest income relates to interest earned on our cash and cash equivalents in fiscal years 2022, 2021 and 2020.
Interest and Other (Expense) Income, Net Fiscal Year Ended June 30, 2023 - 2022 2022 - 2021 2023 2022 2021 % Change % Change (In thousands) Interest income $ 296 $ 10 $ 39 2860 % (74 %) Interest expense (790 ) (1,075 ) (1,296 ) (27 %) (17 %) Other (expense) income, net (52 ) 21 16,660 (348 %) (100 %) Interest and other (expense) income, net $ (546 ) $ (1,044 ) $ 15,403 (48 %) (107 %) Interest income relates to interest earned on our cash and cash equivalents in fiscal years 2023, 2022 and 2021.
The changes in working capital accounts were primarily attributable to a decrease in accounts receivable of $11.4 million and a decrease in other assets, noncurrent of $5.5 million, offset by an increase in prepaid expenses and other assets of $8.1 million. The decrease in accounts receivable was due to the timing of receipts.
The changes in working capital accounts were primarily attributable to a decrease in accrued liabilities of $7.1 million, an increase in prepaid expenses and other assets of $4.8 million, and a decrease in accounts payable of $4.8 million, offset by a decrease in accounts receivable of $10.9 million.
We have completed several strategic acquisitions in the past, including the acquisitions of Modernize, Mayo Labs and FCE completed in fiscal year 2021, and the acquisitions of AmOne, CCM, and MBT completed in fiscal year 2019.
We have completed several strategic acquisitions in the past, including the acquisitions of Modernize, Mayo Labs and FCE completed in fiscal year 2021, and the acquisitions of AmOne, CCM, and MBT completed in fiscal year 2019. For detailed information regarding our acquisitions, refer to Note 6, Acquisitions to our consolidated financial statements.
We estimate future forfeitures at the date of grant. On an annual basis, we assess changes to our estimate of expected forfeitures based on recent forfeiture activity. The effect of adjustments made to the forfeiture rates, if any, is recognized in the period that change is made.
On an annual basis, we assess changes to our estimate of expected forfeitures based on recent forfeiture activity. The effect of adjustments made to the forfeiture rates, if any, is recognized in the period that change is made. Income Taxes The Company accounts for income taxes using an asset and liability approach to record deferred taxes.
In addition, within our financial services client vertical, we derive a significant amount of revenue from auto insurance carriers and the financial results depend on the performance of the auto insurance industry.
Moreover, we have entered into strategic partnerships and acquisitions to increase and diversify our access to quality media and client budgets. In addition, within our financial services client vertical, we derive a significant amount of revenue from auto insurance carriers and the financial results depend on the performance of the auto insurance industry.
Operating Expenses Fiscal Year Ended June 30, 2022 - 2021 2021 - 2020 2022 2021 2020 % Change % Change (In thousands) Product development $ 21,906 $ 19,344 $ 14,206 13 % 36 % Sales and marketing 11,042 10,991 8,876 — % 24 % General and administrative 25,501 26,270 23,188 (3 %) 13 % Operating expenses $ 58,449 $ 56,605 $ 46,270 3 % 22 % Product Development Expenses Product development expenses increased by $2.6 million, or 13%, in fiscal year 2022 compared to fiscal year 2021.
Operating Expenses Fiscal Year Ended June 30, 2023 - 2022 2022 - 2021 2023 2022 2021 % Change % Change (In thousands) Product development $ 28,893 $ 21,906 $ 19,344 32 % 13 % Sales and marketing 12,542 11,042 10,991 14 % — % General and administrative 27,904 25,501 26,270 9 % (3 %) Operating expenses $ 69,339 $ 58,449 $ 56,605 19 % 3 % Product Development Expenses Product development expenses increased by $7.0 million, or 32%, in fiscal year 2023 compared to fiscal year 2022.
Gross profit margin, which is the difference between net revenue and cost of revenue as a percentage of net revenue, was 9% in fiscal year 2022 compared to 12% in fiscal year 2021. The decrease in gross profit margin was primarily attributable to increased media and marketing costs as a percentage of revenue.
The decrease in media and marketing costs was associated with higher mix of revenue derived from businesses with better media efficiency. Gross profit margin, which is the difference between net revenue and cost of revenue as a percentage of net revenue, was 8% in fiscal year 2023 compared to 9% in fiscal year 2022.
Our effective tax rate was 8.9%, 19.7%, and 3.1% in fiscal years 2022, 2021 and 2020. 44 A provision of the Tax Cuts and Jobs Act (TCJA) is effect ive for us for the fiscal year end ing June 30, 2023, creating a significant change to the treatment of research and experimental (R&E) expenditures under Section 174 of the IRC (Sec. 174 expenses).
A provision of the Tax Cuts and Jobs Act (TCJA) is effective for us for the fiscal year ending June 30, 2023, creating a significant change to the treatment of research and experimental (R&E) expenditures under Section 174 of the IRC (Sec. 174 expenses).
We recognize revenue when we transfer control of promised goods or services to our clients in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.
Revenue Recognition We generate our revenue primarily from fees earned through the delivery of qualified inquiries such as clicks, leads, calls, applications, or customers. We recognize revenue when we transfer control of promised goods or services to our clients in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.
In addition, we believe that a discussion of these policies is necessary to understand and evaluate the consolidated financial statements contained in this report.
In addition, we believe that a discussion of these policies is necessary to understand and evaluate the consolidated financial statements contained in this report. See Note 2, Summary of Significant Accounting Principles , to our consolidated financial statements for further information on our critical and other significant accounting policies.
Net Cash (Used in) Provided by Investing Activities Cash flows from investing activities generally include capital expenditures, capitalized internal software development costs, acquisitions from time to time, business divestitures , and investment in equity securities .
Net Cash Used in Investing Activities Cash flows from investing activities generally include capital expenditures, capitalized internal software development costs, acquisitions from time to time, business divestitures, and investment in equity securities. Cash used in investing activities was $15.1 million in fiscal year 2023 compared to $9.2 million in fiscal year 2022 and $36.5 million in fiscal year 2021.
The increase in media and marketing costs was associated with higher revenue volumes. The increase in personnel costs was mainly attributable to a higher headcount. The increase in amortization expense was primarily due to the acquisitions of intangible assets in fiscal year 2022.
This was primarily driven by increased media and marketing costs of $15.4 million, increased personnel costs of $3.3 million and increased amortization of intangible assets of $0.5 million. The increase in media and marketing costs was associated with higher revenue volumes. The increase in personnel costs was mainly attributable to a higher headcount.
Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements for information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements.
As of April 30, 2023 and 2022, we evaluated our long-lived assets and concluded there were no indicators of impairment. Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements for information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements.
These variables include, but are not limited to, the expected stock price volatility over the term of the award and the employees’ actual and projected stock option exercise and pre-vesting employment termination behaviors. We estimate the expected volatility of our common stock based on our historical volatility over the expected term of the award.
In applying these models, our determination of the fair value of the award is affected by assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the award and the employees’ actual and projected stock option exercise and pre-vesting employment termination behaviors.
Contractual Obligations The following table sets forth payments due under our contractual obligations as of June 30, 2022: Total Less than 1 Year 1-3 Years 3-5 Years (In thousands) Operating leases (1) $ 10,865 $ 6,084 $ 4,708 $ 73 Post-closing payment related to acquisitions (2) 28,437 11,673 11,816 4,948 Contingent consideration related to acquisitions (2) 1,787 1,102 685 — Total $ 41,089 $ 18,859 $ 17,209 $ 5,021 (1) We lease various office facilities, including our corporate headquarters in Foster City, California.
Contractual Obligations The following table sets forth payments due under our contractual obligations as of June 30, 2023: Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years (In thousands) Operating leases (1) $ 18,593 $ 5,521 $ 6,121 $ 5,285 $ 1,666 Post-closing payment related to acquisitions (2) 17,498 12,373 5,125 — — Contingent consideration related to acquisitions (2) 1,039 1,039 — — — Total $ 37,130 $ 18,933 $ 11,246 $ 5,285 $ 1,666 (1) We lease various office facilities, including our corporate headquarters in Foster City, California.
O ther revenue, which primarily includes our performance marketing agency and technology services, represented 1% of net revenue in fiscal years 2022 and 2021.
Other revenue, which primarily includes our performance marketing agency and technology services, represented 1% of net revenue in fiscal years 2023, 2022 and 2021. In addition, revenue recognized from our divested former education client vertical represented 0%, 0% and 2% of net revenue for fiscal years 2023, 2022 and 2021.
Long-Lived Assets We evaluate long-lived assets, such as property and equipment and purchased intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If necessary, a quantitative test is performed that requires the application of judgment when assessing the fair value of an asset.
Based on the results of the qualitative assessment completed as of April 30, 2023 and 2022, there were no indicators of impairment. Long-Lived Assets We evaluate long-lived assets, such as property and equipment and purchased intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
When we identify an impairment, we reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. As of April 30, 2022 and 2021, we evaluated our long-lived assets and concluded there were no indicators of impairment.
If necessary, a quantitative test is performed that requires the application of judgment when assessing the fair value of an asset. When we identify an impairment, we reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values.
For expenses associated with research outside of the United States, Sec. 174 expenses are required to be capitalized and amortized over a 15-year period. We are currently assessing the impact of the provision , however a material impact to cash taxes is not expected due to available net operating losses and tax credits.
For expenses associated with research outside of the United States, Sec. 174 expenses are required to be capitalized and amortized over a 15-year period. This change in tax law did not have a material impact to cash taxes and the Company has accounted for a deferred tax asset related to these costs.
Cost of Revenue Cost of revenue consists primarily of media and marketing costs, personnel costs, amortization of intangible assets, depreciation expense and facilities expense.
See Note 7, Divestitures, to our consolidated financial statements for more information related to the divestiture. Cost of Revenue Cost of revenue consists primarily of media and marketing costs, personnel costs, amortization of intangible assets, depreciation expense and facilities expense.
Cost of Revenue and Gross Profit Margin Cost of revenue increased by $20.4 million, or 4%, in fiscal year 2022 compared to fiscal year 2021. This was primarily driven by increased media and marketing costs of $15.4 million, increased personnel costs of $3.3 million and increased amortization of intangible assets of $0.5 million.
The decrease in gross profit margin was primarily attributable to increased personnel costs as a percentage of revenue as we continue to invest in long-term growth initiatives and capabilities. Cost of revenue increased by $20.4 million, or 4%, in fiscal year 2022 compared to fiscal year 2021.
Cash provided by investing activities in fiscal year 2020 was primarily due to $15.4 million cash received from the business divestitures completed in fiscal year 2020, net of cash divested of $0.3 million, offset by capital expenditures and internal software development costs of $4.3 million, and a cash payment of $2.0 million associated with an insignificant business acquisition completed in fiscal year 2020 .
Cash used in investing activities in fiscal year 2023 was primarily due to capital expenditures and internal software development costs of $15.0 million.
Our home services client vertical has been expanding over the past several years, primarily driven by successful execution of growth initiatives and synergies with the Modernize acquisition. Acquisitions and Divestitures Acquisitions have historically been, and continue to be, an important element of our overall corporate strategy and use of capital.
On July 1, 2020, we completed the acquisition of Modernize, a leading home improvement performance marketing company, to broaden our customer and media relationships in the home services client vertical. Our home services client vertical has been expanding over the past several years, primarily driven by successful execution of growth initiatives and synergies with the Modernize acquisition.
Other revenue, which primarily includes performance marketing agency and technology services, contributed $ 5.5 million of revenue for fiscal year 2021. The business divestitures completed in fiscal year s 2021 and 2020 decreased revenue by $ 62.5 million for fiscal year 2021.
Other revenue, which primarily includes performance marketing agency and technology services, contributed $7.8 million of revenue for fiscal year 2023, as compared to $6.2 million of revenue for fiscal year 2022. Net revenue increased by $3.6 million, or 1%, in fiscal year 2022 compared to fiscal year 2021.
For detailed information regarding our acquisitions and divestitures, refer to Note 6, Acquisitions , and Note 7, Divestitures , respectively, to our consolidated financial statements.
See Note 7, Divestitures, to our consolidated financial statements for more information related to the divestiture.
Cost of revenue increased by $70.1 million, or 16%, in fiscal year 2021 compared to fiscal year 2020. This was primarily driven by increased media and marketing costs of $58.0 million, increased personnel costs including stock-based compensation expense of $6.0 million, and increased amortization of intangible assets of $4.7 million.
This was primarily driven by increased personnel costs of $16.4 million and increased amortization of intangible assets of $2.0 million, offset by decreased media and marketing costs of $15.9 million. The increase in personnel costs was mainly due to higher headcount, the impact of our annual salary increases, increased incentive compensation and increased stock-based compensation expense.
This was primarily due to increased personnel costs of $2.2 million as a result of increased incentive compensation associated with the achievement of performance objectives for fiscal year 2021 and increased stock-based compensation expense. 43 General and Administrative Expenses General and administrative expenses decreased by $0.8 million, or 3%, in fiscal year 2022 compared to fiscal year 2021.
General and Administrative Expenses General and administrative expenses increased by $2.4 million, or 9%, in fiscal year 2023 compared to fiscal year 2022. This was primarily due to an allowance for bad debt expense of $2.0 million recorded in fiscal year 2023, and increased professional services costs of $0.7 million.
This was primarily due to increased personnel costs of $4.5 million as a result of higher headcount associated with the Modernize acquisition, increased incentive compensation associated with the achievement of performance objectives for fiscal year 2021 and increased stock-based compensation expense.
This was primarily due to increased personnel costs of $1.6 million as a result of higher headcount, the impact of our annual salary increases, and increased incentive compensation. Sales and marketing expenses were approximately flat in fiscal year 2022 compared to fiscal year 2021.
Cash provided by operating activities in fiscal year 2020 consisted of net income of $18.1 million, adjusted for non-cash adjustments of $19.4 million and changes in working capital accounts of $10.1 million.
The increase in prepaid expenses and other assets was primarily due to increased prepayments made to third-party publishers . Cash provided by operating activities in fiscal year 2022 consisted of net loss of $5.2 million, adjusted for non-cash adjustments of $33.8 million and changes in working capital accounts of $0.1 million.
We recorded a provision for income taxes of $0.6 million in fiscal year 2020, primarily as a result of deferred federal and state income taxes of $3.5 million, offset by an expected tax refund of $3.1 million to be received from the California Franchise Tax Board, based on a settlement reached in the third quarter of fiscal year 2020 .
The Company recorded a one-time non-cash charge to income tax expense in the current period. 44 We recorded a benefit from income taxes of $0.5 million in fiscal year 2022, primarily as a result of a net benefit for deferred federal and state income taxes of $0.9 million offset by current state and foreign income taxes of $0.4 million.
Moreover, we have entered into strategic partnerships and acquisitions to increase and diversify our access to quality media and client budgets. Our financial services client vertical also benefits from more spending by clients in digital media and performance marketing as digital marketing continues to evolve.
Our business also benefits from more spending by clients in digital media and performance marketing as digital marketing continues to evolve. Acquisitions Acquisitions have historically been, and continue to be, an important element of our overall corporate strategy and use of capital.
In April 2018, the lease agreement was amended to extend the lease term through October 31, 2023. Under the amended lease agreement, during the first year of the extended lease term, the monthly base rent was abated for the first eight months and increased to $0.2 million for the remaining four months.
In April 2018, the lease agreement was amended to extend the lease term through October 31, 2023, with an option to extend the term of the lease for an additional five years following the expiration date.
Removed
In addition, revenue recognized from our divested businesses (including our former education client vertical, business-to-business technology client vertical, mortgage business, and Brazil businesses) represented 0%, 2% and 15% of net revenue for fiscal years 2022, 2021 and 2020. See Note 7, Divestitures, to our consolidated financial statements for more information related to the divestitures.
Added
Even after the initial COVID-19 outbreak subsided, we have experienced and may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
Biggest changeItem 7A. Quanti tative and Qualitative Disclosures about Market Risk 50 We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
We believe that we do not have material exposure to changes in the fair value of these investments as a result of changes in interest rates due to the short-term nature of our 50 investments. Declines in interest rates may reduce future investment income.
We believe that we do not have material exposure to changes in the fair value of these investments as a result of changes in interest rates due to the short-term nature of our investments. Declines in interest rates may reduce future investment income.
Our market risk exposure is primarily the result of fluctuations in inflation or interest rate s. Interest Rate Risk We invest our cash equivalents in money market funds. Cash and cash equivalents are held for working capital purposes and acquisition financing. We do not enter into investments for trading or speculative purposes.
Our market risk exposure is primarily the result of fluctuations in inflation or interest rates. Interest Rate Risk We invest our cash equivalents in money market funds. Cash and cash equivalents are held for working capital purposes and acquisition financing. We do not enter into investments for trading or speculative purposes.

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