Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the Securities and Exchange Commission ("SEC").

This Quarterly Report on Form 10-Q contains "forward-looking statements" that involve risks and uncertainties, as well as assumptions that, if they do not materialize or if they prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are often identified by the use of words such as, but not limited to, "anticipate," "believe," "expect," "can," "continue," "could," "estimate," "expect," "intend," "outlook," "may," "will," "plan," "project," "seek," "should," "target," "will," "would," and similar expressions or variations intended to identify forward-looking statements. These statements reflect the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified in "Part II -Item 1A. Risk Factors" below, and those discussed in the sections titled "Special Note Regarding Forward-Looking Statements" and "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, and in other documents we file from time to time with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Management Overview

We are a leader in performance marketplaces and technologies for the financial services and home services industries. We specialize in customer acquisition for clients in high value, information-intensive markets or "verticals," including financial services and home services. Our clients include some of the world's largest companies and brands in those markets. The majority of our operations and revenue are in North America.

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. Clicks, leads, calls, and applications can then convert into a customer or sale for clients at a rate that results in an acceptable marketing cost to them. We are typically paid by clients when we deliver qualified inquiries in the form of clicks, leads, calls, applications, or customers, as defined by our agreements with them. References to the delivery of customers means a sale or completed customer transaction (e.g., funded loans or customer appointments with clients). Because we bear the costs of media, our programs must result in attractive marketing costs to our clients at media costs and margins that provide sound financial outcomes for us. To deliver clicks, leads, calls, applications, and customers to our clients, generally we:

Our primary financial objective has been and remains creating revenue growth from sustainable sources, at target levels of profitability. Our primary financial objective is not to maximize short-term profits, but rather to achieve target levels of profitability while investing in various growth initiatives, as we continue to believe we are in the early stages of a large, long-term market opportunity.

Our business derives its net revenue primarily from fees earned through the delivery of qualified inquiries such as clicks, leads, calls, applications, or customers. Through a vertical focus, targeted media presence and our technology platform, we are able to deliver targeted, measurable marketing results to our clients.

Our financial services client vertical represented 73% and 76% of net revenue for the three months ended September 30, 2025 and 2024. Our home services client vertical represented 27% and 24% of net revenue for the three months ended September 30, 2025 and 2024. We generated the majority of our revenue from sales to clients in the United States.

One client in our financial services client vertical accounted for 21% of net revenue for the three months ended September 30, 2025, and two clients accounted for 20% and 14% of net revenue for the three months ended September 30, 2024.

Trends Affecting our Business

Client Verticals

Our financial services client vertical has been challenged by a number of factors in the past, including the limited availability of high quality media at acceptable margins caused by the acquisition of media sources by competitors, increased competition for high quality media and changes in search engine algorithms. These factors may impact our business in the future again. To offset this impact, we have enhanced our product set to provide greater segmentation, matching, transparency and right pricing of media that have enabled better monetization to provide greater access to high quality media sources. 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 our financial results depend on the performance of the auto insurance industry, which may be affected by macroeconomic conditions, extreme-weather related events and supply chain events existing or occurring from time to time. For example, starting in the first half of fiscal 2022, inflation, weather-related and supply chain events led to increases in insurance industry loss ratios, which resulted in our auto insurance industry clients decreasing their advertising spending, which had an adverse effect on our business.

Beginning in calendar 2024, the auto insurance industry began to benefit from rate increases and product optimizations which allowed increased advertising spending which in turn resulted in increases in our revenues and quarterly net profits.

All of our businesses benefit 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. We have completed several strategic acquisitions in the past, including the acquisitions of BestCompany and AquaVida completed in fiscal year 2024, the acquisitions of Modernize, Mayo Labs, LLC ("Mayo Labs") and FC Ecosystem ("FCE") completed in fiscal year 2021, and the acquisitions of AmOne Corp. ("AmOne"), CloudControlMedia, LLC ("CCM"), and MyBankTracker.com, LLC ("MBT") completed in fiscal year 2019.

Development, Acquisition and Retention of High Quality Targeted Media

One of the primary challenges of our business is finding or creating media that is high quality and targeted enough to attract prospects for our clients at costs that provide a sound financial outcome for us. In order to grow our business, we must be able to find, develop, or acquire and retain quality targeted media on a cost-effective basis. Consolidation of media sources, changes in search engine algorithms and increased competition for available media has, during some periods, limited and may continue to limit our ability to generate revenue at acceptable margins. To offset this impact, we have developed new sources of media, including entering into strategic partnerships with other marketing and media companies and acquisitions. Such partnerships include takeovers of performance marketing functions for large web media properties; backend monetization of unmatched traffic for clients with large media buys; and white label products for other performance marketing companies. We have also focused on growing our revenue from call center, native, email, mobile and social media traffic sources.

Seasonality

Our results are subject to significant fluctuation as a result of seasonality. In particular, our quarters ending December 31 (our second fiscal quarter) are typically characterized by seasonal weakness. In our second fiscal quarters, there is generally lower availability of media during the holiday period on a cost-effective basis and some of our clients have lower budgets. 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. 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. 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. Our business is affected directly because we operate websites and conduct telemarketing and email marketing, and indirectly affected as our clients adjust their operations as a result of regulatory changes and enforcement activity that affect their industries.

Some of our clients have been affected by laws and regulations and the increased enforcement of new and pre-existing laws and regulations. The effect of these regulations, or any future regulations, may continue to result in fluctuations in the volume and mix of our business with these clients.

An example of a regulatory change that may affect our business is the amendment of the Telephone Consumer Protection Act ("TCPA") that affects telemarketing and the consent requirements for certain types of telemarketing calls and automated messaging. The scope and interpretation of the laws that are or may be applicable to the automated delivery of voice and text messages are continuously evolving and developing. Our clients may make business decisions based on their own experiences with the TCPA regardless of our products and compliance practices. Those decisions may negatively affect our revenue and profitability.

Basis of Presentation

Net Revenue

Our business generates revenue primarily from fees earned through the delivery of qualified inquiries such as clicks, leads, calls, applications, or customers. We deliver targeted and measurable results through a vertical focus, which includes our financial services client vertical and our home services client vertical.

Cost of Revenue

Cost of revenue consists primarily of media and marketing costs, personnel costs, amortization of intangible assets, depreciation expense and facilities expense. Media and marketing costs consist primarily of fees paid to third-party publishers, media owners or managers, or to strategic partners that are directly related to a revenue-generating event and of pay-per-click, or PPC, ad purchases from Internet search companies. We pay these third-party publishers, media owners or managers, strategic partners and Internet search companies on a revenue-share, a cost-per-lead, or CPL, or cost-per-click, or CPC, basis. Personnel costs include salaries, stock-based compensation expense, bonuses, commissions and related taxes, and employee benefit costs. Personnel costs are primarily related to individuals associated with maintaining our servers and websites, our call center operations, our editorial staff, client management, creative team, content, compliance group and media purchasing analysts. Costs associated with software incurred in the development phase or obtained for internal use are capitalized and amortized to cost of revenue over the software's estimated useful life.

Operating Expenses

We classify our operating expenses into three categories: product development, sales and marketing, and general and administrative. Our operating expenses consist primarily of personnel costs and, to a lesser extent, professional services fees, facilities fees and other costs. 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. Sales and marketing expenses consist primarily of personnel costs, facilities fees and professional services fees.

General and Administrative. 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 expense is related to imputed interest on post-closing payments related to our acquisitions. We have no borrowing agreements outstanding as of September 30, 2025; 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 income represents interest earned on our cash and cash equivalents, which may increase or decrease depending on market interest rates and the amounts invested. Other (expense) income, net includes gains and losses on foreign currency exchange, and other non-operating items.

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. Earnings from our limited non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax.

Critical Accounting Policies, Estimates and Judgments

In presenting our consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and reported amounts of revenue and expenses during the reporting period.

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. On an ongoing basis, we reconsider and evaluate our estimates and assumptions. Actual results may differ significantly from these estimates.

We believe that the critical accounting policies listed below involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our consolidated financial statements.

For further information on our critical and other significant accounting policies and estimates, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended June 30, 2025, filed with the SEC.

Recently Issued Accounting Standards

See Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements.

Results of Operations

The following table sets forth our condensed consolidated statements of operations for the periods indicated:

(1) Cost of revenue and operating expenses include stock-based compensation expense as follows:

Gross Profit

Net Revenue

Net revenue increased by $6.6 million, or 2%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Revenue from our home services client vertical increased by $10.1 million, or 15%, primarily as a result of increased client budgets and successful execution of growth initiatives. Revenue from our financial services client vertical decreased by $3.4 million, or 2%, primarily due to a decrease in revenue in credit cards business of $7.2 million, attributable to the timing of limited time offers with our credit card customers, offset by an increase in revenue in our banking business of $3.5 million, attributable to higher demand from a broad base of clients.

Cost of Revenue and Gross Profit Margin

Cost of revenue increased by $8.1 million, or 3%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily driven by increased media and marketing costs of $8.6 million due to higher revenue volumes. Gross profit margin, which is the difference between net revenue and cost of revenue as a percentage of net revenue, was 9% and 10% for the three months ended September 30, 2025 and 2024. The decrease in gross profit margin was attributable to an increase in media and marketing fees as a percentage of net revenue.

Operating Expenses

Product Development Expenses

Product development expenses decreased by $0.5 million, or 5%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to decreased personnel cost.

Sales and Marketing Expenses

Sales and marketing expenses increased by $0.6 million, or 14%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to increased personnel cost due to higher average headcount and increased stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses decreased by $7.6 million, or 45%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to an adjustment to the fair value of contingent consideration of $6.3 million in the first quarter of fiscal year 2025 and decreased bad debt expense of $1.0 million.

(Provision for) Benefit from Income Taxes

The Company recorded a provision for income taxes of $0.2 million and a benefit from income taxes of $49 thousand for the three months ended September 30, 2025 and 2024.

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

On July 4, 2025, U.S. legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" ("The Act") was signed into law. The Act, among other things, extended key provisions of the 2017 Tax Cuts and Jobs Act and introduced targeted changes to the U.S. federal income tax regime. Key provisions include permanently restoring bonus depreciation allowances, permanent changes in the limitations for deducting business interest expense and permanent reintroduction of expensing of US research and development costs. The impact on current and deferred taxes for tax law changes is reported in continuing operations in the interim

period which includes the enactment date. The Company continues to evaluate the impact of The Act on its financial statements, including the related tax implications to the current and future fiscal years.

Liquidity and Capital Resources

As of September 30, 2025, our principal sources of liquidity consisted of cash and cash equivalents of $101.3 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. We believe our cash equivalents are liquid and accessible.

Our short-term and long-term liquidity requirements primarily arise from our working capital requirements, capital expenditures, internal software development costs, repurchases of our common stock, and acquisitions from time to time. Our acquisitions also may have deferred purchase price components and contingent consideration which requires us to make a series of payments following the acquisition closing date. Our primary operating cash requirements include the payment of media costs, personnel costs, costs of information technology systems and office facilities. 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. Even though we may not need additional funds to fund anticipated liquidity requirements, we may still elect to obtain debt financing or issue additional equity securities for other reasons.

In April 2022, our Board of Directors authorized a new stock repurchase program allowing the repurchase of up to $40.0 million worth of common stock. During the three months ended September 30, 2025, the Company repurchased and retired 462,440 shares of its common stock at an average price of $15.41 per share, at a total cost of $7.1 million (including a broker commission of $0.03 per share). Repurchases under this program took place in the open market and were made under a Rule 10b5-1 plan. The repurchased shares of common stock were recorded as treasury stock and were accounted for under the cost method. There were no repurchases made during the fiscal year 2025. As of September 30, 2025, approximately $9.7 million remained available for stock repurchases pursuant to the board authorization.

On October 30, 2025, the Board of Directors authorized a new stock repurchase program allowing the Company to repurchase up to $40.0 million of its outstanding shares of common stock. Repurchases under this program may take place in the open market or in privately negotiated transactions and may be made under a Rule 10b5-1 plan.

We believe that our principal sources of liquidity will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months and thereafter for the foreseeable future.

The following table summarizes our cash flows for the periods indicated:

Net Cash Provided by (Used in) Operating Activities

Cash flows from operating activities are primarily the result of our net income (loss) adjusted for depreciation and amortization, change in the fair value of contingent consideration, provision for sales returns and doubtful accounts receivable, stock-based compensation expense, non-cash lease expense, deferred income taxes, and changes in working capital components. Cash provided by operating activities was $19.6 million for the three months ended September 30, 2025, compared to cash used in operating activities of $13.7 million for the three months ended September 30, 2024.

Cash provided by operating activities for the three months ended September 30, 2025 primarily consisted of a net income of $4.5 million and non-cash adjustments of $15.1 million. The non-cash adjustments primarily consisted of stock-based compensation expense of $9.2 million and depreciation and amortization expense of $5.8 million. The changes in working capital accounts were primarily attributable to an increase in accounts receivable of $14.8 million, offset by an increase in accrued liabilities and accounts payable of $14.5 million. The increases in accounts receivable, and accrued liabilities and accounts payable were primarily due to higher revenue for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, and timing of receipts and payments.

Cash used in operating activities for the three months ended September 30, 2024 consisted of a net loss of $1.4 million and a net decrease in cash from changes in working capital of $34.3 million, offset by non-cash adjustments of $22.0 million. The non-cash adjustments primarily consisted of stock-based compensation expense of $8.4 million, depreciation and amortization expense of $6.4 million, and provision for sales return and doubtful accounts receivable of $1.5 million. The changes in working capital accounts were primarily attributable to an increase in accounts receivable of $63.6 million and an increase in prepaid expenses and other assets of $0.8 million, offset by an increase in accrued liabilities of $17.6 million and an increase in accounts payable of $12.3 million. The increases in accounts receivable, and accrued liabilities and accounts payable were primarily due to higher revenue for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, and timing of receipts and payments.

Net Cash Used in Investing Activities

Cash flows from investing activities generally include capital expenditures, capitalized internal software development costs, and acquisitions from time to time. Cash used in investing activities was $4.1 million for the three months ended September 30, 2025, compared to $2.6 million for the three months ended September 30, 2024.

Cash used in investing activities in the three months ended September 30, 2025 was primarily due to internal software development costs of $2.9 million and capital expenditures of $1.2 million.

Cash used in investing activities in the three months ended September 30, 2024 was primarily due to internal software development costs of $2.2 million and capital expenditures of $0.4 million.

Net Cash Used in Financing Activities

Cash flows from financing activities generally include post-closing payments related to business acquisitions, payment of withholding taxes related to the release of restricted stock, net of share settlement, repurchases of common stock, proceeds from issuance of common stock under employee stock purchase plan and exercise of stock options. Cash used in financing activities was $15.3 million for the three months ended September 30, 2025, compared to $9.2 million for the three months ended September 30, 2024.

Cash used in financing activities in the three months ended September 30, 2025 was due to repurchase of common stock of $6.7 million, payment of withholding taxes related to the release of restricted stock, net of share settlement of $5.3 million and payment of post-closing payments and contingent consideration related to acquisitions of $4.6 million, offset by proceeds from the issuance of common stock under the employee stock purchase plan of $1.3 million.

Cash used in financing activities in the three months ended September 30, 2024 was due to payment of withholding taxes related to the release of restricted stock, net of share settlement of $5.4 million and payment of post-closing payments and contingent consideration related to acquisitions of $5.1 million, offset by proceeds from the exercise of stock options and issuance of common stock under the employee stock purchase plan of $1.4 million.

Off-Balance Sheet Arrangements

During the periods presented, we did not have any material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual Obligations

Our contractual obligations primarily consist of operating leases, post-closing payments and contingent consideration payments recognized from our acquisitions. These contractual obligations impact our short-term and long-term liquidity and capital resource needs.

There have been no material changes in our contractual obligations as presented in Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for our fiscal year ended June 30, 2025.