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QuinStreet (NASDAQ:QNST)
Q3 2019 Earnings Call
May. 09, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the QuinStreet third-quarter 2019 financial results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Erica Abrams.

Please go ahead, ma'am.

Erica Abrams -- Investor Relations

Thank you, Mitchell. Good afternoon, ladies and gentlemen. Thank you for joining us today as we report QuinStreet's third-quarter fiscal-year 2019 financial results. Joining me on the call today are Doug Valenti, CEO; and Greg Wong, CFO of QuinStreet.

This call is being simultaneously webcast on the Investor Relations section of our website at www.quinstreet.com. Before we get started, I would like to remind you that the following discussion contains forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause the results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 10-Q filing made on February 11, 2019.

Forward-looking statements are based on assumptions as of today, and the company undertakes no obligation to update these statements. Today, we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures are included in today's earnings press release, which is available on our Investor Relations website. With that, I'll turn the call over to Doug, CEO of QuinStreet.

Please go ahead.

Doug Valenti -- Chief Executive Officer

Thank you, Erica, and thank you all for joining us today. Fiscal Q3 results were about what we expected, except for our decision to write off the DCEH receivable, which represented a net expense impact of about $5.8 million. We said in our last call that due to tough comps and the timing of ramping initiatives, we expected second half growth to come from Q4. That remains the case.

FY Q4 results are expected to get us to full-year FY '19 revenue growth of about 15% and adjusted EBITDA margin of about 10%, consistent with the outlook we provided last call excluding the DCEH write-off. So FY '19 has been and will end being a year of very good financial results, with growth and margin expansion at record scale in our 20th year. And we have made great important progress strengthening and building the business for the future. From my perspective, our business has never been in better shape.

And looking ahead, the future has never been brighter. We have the largest number of big long-term business initiatives ramping across the broadest footprint that we have ever had in the history of the company. Progress from those initiatives contributed significantly in Q3 and offset a lot of tough comps from last year, and the initiatives continued to ramp. We expect to deliver strong year-over-year growth and margin expansion in the current quarter, our fiscal Q4, and double-digit growth and margin expansion again in fiscal 2020 and beyond.

With that, I'll turn the call over to Greg, and then I will return with some more comments and details on our growth initiatives before we open up for Q&A.

Greg Wong -- Chief Financial Officer

Thank you, Doug. Hello, and thanks to everyone for joining us today. As you'll note from our press release, we delivered $116.2 million in revenue, with the continued focus on adjusted EBITDA and cash flow generation. As Doug discussed previously, we recorded a onetime net charge of $5.8 million in the quarter related to the write-off of our receivable for DCEH given the expected change in our status from receivership to bankruptcy.

This included $8.7 million in bad debt expense, offset by $2.9 million in cost recoveries. This onetime charge reflects our full financial statement exposure associated with DCEH. For the third quarter, reported GAAP net income was $941,000, and reported adjusted net income was three point -- $3 million. Excluding the DCEH write-off, GAAP net income would have been $4.7 million and adjusted net income, $7.5 million or $0.14 per share.

Adjusted EBITDA would have been $10.3 million or 9% of revenue in the third quarter. Q3 revenue was mostly in line with our expectations and about flat with the same quarter one year ago. Solid growth and momentum in key businesses were offset by the loss of revenue from DCEH, mortgage and a large insurance client's spend test in last year's Q3. Excluding those revenue losses, year-over-year revenue growth would have been 19%.

Looking at revenue by client vertical. Our Financial Services client vertical represented 75% of Q3 revenue, that was flat with the same quarter last year at $86.9 million. We delivered triple-digit year-over-year revenue growth in personal loans and credit cards. In our insurance business, we closed the quarter with a record month of revenue in March.

For the fourth quarter, we anticipate meaningful sequential revenue growth in Financial Services driven primarily by continued momentum in insurance and credit cards and a further ramp in personal loans as we optimize the synergies from the AmOne acquisition. Our Education client vertical represented 13% of Q3 revenue and declined 25% year over year to $14.7 million. Moving forward, we expect to deliver sequential growth from Education in fiscal Q4 but foresee year-over-year declines in this business until we lap the loss of DCEH at the end of calendar 2019. Our Other client vertical, which includes Home Services and B2B, represented the remaining 12% of Q3 revenue, and grew 31% year over year to $14.6 million.

Turning to the balance sheet. We closed the third quarter with $67 million in cash and equivalents. Excluding the DCEH write-off, normalized free cash flow for the quarter was $9.2 million or 8% of revenue. In summary, Q3 revenue results were about what we expected.

We made good progress on initiatives for future growth of our business. We are well positioned for strong year-over-year revenue growth in Q4 and double-digit growth in margin expansion in fiscal year 2020. With that, I'll turn the call back over to Doug.

Doug Valenti -- Chief Executive Officer

Thank you, Greg. I wanted to circle back to describe some of the big initiatives contributing to our strong Q4 and FY 2020 outlook and the forward-looking optimism generally that I expressed earlier. First, we continue to increase our share of wallet with clients. This is a long-term trend as clients shift more of their marketing budget to digital and as we earn more budget allocations through performance.

Our client churn remains extraordinarily low and most of our growth quarter-to-quarter comes from existing clients allocating more budget to digital media from other channels and to QuinStreet based on our measurably superior performance. There is still a large penetration gap between the proportion of budget spent with us by the most advanced digital marketing clients and that spent with us by those earlier in their digital marketing journey, implying a big reserve of new revenue opportunities ahead. This accelerating secular trend to digital media and to true performance marketing with QuinStreet will likely remain the most powerful driver of our ongoing base business growth for many years to come. The second major initiative driving our business is big media partnerships.

We continue to expand our media footprint through partnerships with media brands that have large in-market audiences and traffic. This relatively new channel will double in FY '19 over FY '18, and we expect it to double again in FY '20 to well over $100 million in revenue. This is an area where QuinStreet is a clear market leader, hugely advantaged by the fact that we do not compete as a brand with our media partners or our clients. Examples include integrating comparison tables and search widgets from the QuinStreet platform onto sites that show up high on Google SEO rankings score, say, auto insurance, then matching visitors to carriers.

Other examples include turn-down or decline solutions for lenders and carriers, whereby we match visitors to their websites that they cannot serve to other clients, generating newfound revenue from otherwise wasted media or advertising spend. Further examples include providing entirely new or replacement white label performance marketplace and content solutions for online media companies. QuinStreet simply generates significantly more, highly strategic performance marketing revenue in our verticals for the media companies than they can generate on their own due to our proprietary matching optimization technologies, bigger budgets, expertise and network of clients and client integrations. QuinStreet technologies and products are also easily integrated, transparently reported and turnkey for our media partners.

Powering these strategic performance market revenue streams for big online media brands in turn gives QuinStreet clients access through the large new pools of end market consumers. These partnerships broaden our media footprint, deepen our integration into the overall ecosystem and diversify our media supply chain. We are still early in this opportunity. We have a deep pipeline of new partnerships, and most that are already in place are still ramping.

A third major initiative is the reinvestment and resurgence of QuinStreet-owned and operated media websites. We have refocused and rebuilt our core media properties over the past couple of years, with a focus on the consumer and on sustainable traffic growth. These investments are paying off. Traffic to our core Financial Services sites is up significantly this year after climbing strongly last year.

These sites are high authority in their verticals and provide us with many degrees of leverage in the business. QuinStreet's main sites include CardRatings.com, CarInsurance.com, Insurance.com, Insure.com, SavingsAccounts.com, MoneyRates.com, HSH.com and newly added AmOne.com. You may have also seen increased media coverage of these sites in recent months. There have been hundreds, including in The Wall Street Journal just yesterday, as more of our data-driven content and expertise have been picked up by the broader media ecosystem.

We're still in the early stages of this important long-term initiative. A fourth initiative is the continued expansion of our client industry footprint. Over $200 million of QuinStreet current annualized revenue is from verticals other than Education or insurance. We still expect good growth in insurance for a long time to come and also in Education in the medium to long term as that business and industry continue to evolve.

But we are also excited about the broadening of our addressable market footprint and the scale and growth in other client verticals, particularly Home Services, personal loans and other areas of Financial Services. A fifth initiative driving growth is the expansion of our product and service footprint, adding new revenue streams from existing clients and allowing QuinStreet to serve large groups of new ones. These adjacent offerings include taking on entire areas of marketing budget management as media agency of record, and providing our QMP technology product as the client or agency's media-buying platform. They also include new mission-critical channel management and marketing funnel technologies and services, an example there being the coming rollout of the QuinStreet quoting and agency management platform in the independent insurance agent channel, a product in development and in pilot for the past two years-or-so and a game changer, we believe, for carriers and independent agencies.

All of these new product and service offerings deepen our integration and value add to clients and media partners, create new-scale revenue streams and significantly expand our addressable markets. Several are also expected to add positive margin leverage beyond just top line leverage, the main driver of our increased profitability over the past few years. Finally, while I would not characterize it as an initiative, our highly selective M&A activity and investments in partnerships have picked up over the past few years. This activity has increased gradually as we stabilized and diversified the business and as we have strengthened our balance sheet and returned to strong cash flows.

The transactions have been highly effective and accretive, accelerating penetration of client budgets for media and fueling product and service expansions. Ours is a very fragmented industry. It is difficult and expensive generally to get to scale. QuinStreet has a great advantage in having built a big-scale business and a platform into which acquisitions can be added to great effect.

We're a natural consolidator. Most of our new client vertical entries and diversification over the years have been ceded or spurred by M&A. I expect M&A to continue to be part of our strategy and advantage as it has been for other large players in our industry and as our industry continues to mature, most likely through bite-sized tuck-in acquisitions or investments in partnerships, like the ones we have done lately. We will continue to be conservative, surgical and highly selective and I believe effective in M&A execution.

We have always been good at it. That said, I expect that most of our growth will continue to be organic either through internal efforts like the ones I outlined today or from synergies created by acquisitions that has also always been our model and we see no shortage of future opportunity there. Now turning to our outlook. There is a lot of momentum at scale in our core business and in our growth initiatives.

Our business outlook is excellent as a result. We expect fiscal Q4 revenue to grow significantly over Q3 to the range of $128 million to $132 million, a breakout quarterly revenue record for QuinStreet, and an annualized run rate that already implies at least $520 million in revenue in fiscal 2020, a breakout annual revenue record. Our first year over $500 million, and already strong double-digit growth over FY '19. Adjusted EBITDA margin in Q4 is expected to be greater than 10%, and we expect adjusted EBITDA margin and cash flow expansion again in fiscal 2020.

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

Questions & Answers:


Operator

Thank you. [Operator instructions] And we'll take our first question from John Campbell with Stephens. Please go ahead. 

Carter Trent -- Stephens Inc. -- Analyst

Hey, guys. This is Carter on for John. I've got a quick question on gross margin. I saw that it compressed in the quarter a little bit.

Can you expand on what specifically drove that? Was it with Google increasing their price for AdSense? And will the focus on these new media partnerships help that going forward, this gross margin?

Greg Wong -- Chief Financial Officer

No, really, part of the compression was primarily related to increased personnel costs associated with the AmOne acquisition. As you remember, the real synergies in that acquisition for us were top line revenue synergies. We took on essentially the entire cost base and the entire headcount of that business, which is primarily in cost of sales, and we are still early in that synergy. So we see a lot of opportunity to lever up gross margin as we continued to realize more of those synergies.

But that's the real component of the gross margin.

Carter Trent -- Stephens Inc. -- Analyst

OK. Got it. That makes sense. One more on the turn-down service.

Can you talk a little bit more on the opportunity you see there? And can you provide kind of a use case scenario on the dynamics of that service, how it works? And do most of your clients currently take advantage of that service?

Doug Valenti -- Chief Executive Officer

The way it works is when someone comes to typically, and it's -- we're the market leaders in doing this in insurance and personal loans in particular, if someone comes to one of our client's websites and they fill out information and they don't really match our client in terms of that client's target customer base or ability to serve, the simplest example being an insurance carrier that isn't in that state, because, as you know, it's a state-by-state coverage in insurance, then we present listings to that visitor in various forms, depending on the client's website and what they want to do. And when a consumer -- and those listings are driven by our collection of attributes and information, our matching algorithms to know who can serve that consumer. And then when that consumer clicks over to the other client and generates revenue for us on that basis, we pay the initial client -- the initial carrier a portion of what we get paid. So it allows them to take a consumer that came to their website that they ended up not being able to serve but they have been responding to ad spend, and monetize them, and also, very importantly, to serve them, to satisfy them, to provide them with a solution to their problem.

So our clients typically consider it both a good branding experience as well as of course, an offset to media spend, which allows them to go spend and get more -- typically more media yet. In terms of number of clients we serve, I'd say that most -- I would not say most large carriers do it. I would say several large carriers do it. We're the exclusive turn-down partner for a number of large carriers and for more large carriers than anybody else by far.

So at the top, say, five to 10 carriers, probably a little less than half take advantage of the service today. We would expect, given the attractiveness of it that over time, more and more will, and several are ramping at. In personal loans, I would say that we are the dominant player there now. I would say that again, most of the large lenders do have turn-down service, but we are the dominant share leader there.

And some that don't yet are planning to. And we're still very early in the ramping of the combined improved monetization from both us and AmOne in that program. So -- and again, there, it's the same thing. So if a consumer comes in, they fill out information.

In lending, we're more deeply integrated into the back ends of most of our clients, so that when it's clear that, that consumer will not qualify for a loan at that particular lender, we feed up -- either we allow that consumer to then click on an offer to find other lenders or -- and in the most advanced cases, we're able to feed up actual preapproved loan offer listings to that consumer from our integrations and allow that consumer to click over directly to that new lender and get a loan. And when we get paid for that, we pay some portion of that back to the original lender.

Carter Trent -- Stephens Inc. -- Analyst

OK. Got it.

Operator

Thank you. We'll take our next question from Jason Kreyer with Craig-Hallum. Please go ahead.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

Hey, guys. Good afternoon. Doug, just wanted to say thanks for the incremental color on all these new growth initiatives. Really appreciate that.

I wanted to start out on the quoting platform. We'll start kind of pick on that one a little bit. But just wondering if you can give a little bit of color on how broad -- as you've been in beta testing there, you know, how broad the adoption has been from carrier. And then if you have any insights into timing, when you would expect that to kind of roll out in a bigger way.

Doug Valenti -- Chief Executive Officer

Sure. We've been in a pilot with two agencies, one, a large internal agency for carrier; the other is one of, if not the largest national agency for all the independent carriers, for somewhere around six months to a year, and scaled up from a small number of agents up a significant number of agents to, I think, now, we're with most of the agents in both of those cases. So I'd have to look at the actual numbers and check with our folks there. It's gone extraordinarily well.

The product, we believe, will be 100% ready for full rollout nationally against the specs we've gotten from both the carriers and the agencies as of June. We have -- the rollout plan is really dependent on the carriers, but I would expect that this coming fiscal year, we would see meaningful incremental revenue contribution from the agency platform. Whether or not we get to 100% penetration next fiscal year or not is I doubt just because of the volume of agencies that we need to ramp on it. But I would expect it to be a meaningful contributor as to the folks that run that business for us in fiscal 2020.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

OK. Great color. I appreciate that. We've heard from some of the carriers that in the first few months of the year -- of the calendar year, we saw a little bit softer pricing environment in auto insurance and that led to fewer consumers price shopping.

Just wondering if there was any trickle-down to you, if you saw some of that or if you were kind of immune to those trends.

Doug Valenti -- Chief Executive Officer

We saw some of that as well. I would say it was -- well, we -- and Greg alluded to, we had a record March. We had a solid quarter in insurance. Of course, we were facing a bit of a tough comp because of the big test last year in terms of the year-over-year audit, but it was -- we still did see and we know from the carriers, as you do, that they did see broadly a softer environment than they all -- we all expected.

That said, it's -- everybody believes and it's proceeding to be a relatively short-term phenomenon driven by some timings of things like -- well, like tax return dates as well as holidays as well as the changes to the tax laws, which have more of an effect on insurance shopping than I ever knew before we had to get into details this season to figure it out. So I would say -- the short answer, yes, long answer, don't expect that it's something that changes our outlook for the future of our insurance business.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

OK. And you mentioned a couple times the strength that you saw in March. Is there any uniqueness within that? Like did you see any carriers that maybe accelerated or carriers that have not been online come online?

Doug Valenti -- Chief Executive Officer

No, not any more than this. It's kind of a standard trend. Not really, no.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

Fair enough. And then just the last one for me. Any commentary on the mortgage business? Because I know there's a couple more challenging quarters. Kind of heard a couple things in the channel that may be lightening up a little bit?

Doug Valenti -- Chief Executive Officer

Yes. I mean I would say that I'd characterize it as it's still a difficult environment on a kind of year-over-year comp basis in mortgage because the market -- the refi market is very long and [Inaudible] The cycle has been long. The interest rates went up a little bit for a while, and when they did that, it kind of shut the market down and a lot of the actual lenders even downsized. And as the rates have gone back down and the markets recovered a little bit, we are definitely seeing some recovery there in our business.

I would say, I would characterize it as it's been a tough environment, but we feel pretty strongly that it's bottomed. And that this quarter will be meaningfully better than last quarter for us in terms of the environment and our business progress there. And so I think we made progress from here for sure. I don't think we'll get back to one to two year-ago levels again for some time.

And that certainly has -- it was a drag on a comp basis on the quarter, and I expect it will continue to be a drag, obviously being overcome by a lot of strength in other businesses for us going forward.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

All right. Appreciate all the color. Thanks.

Operator

We'll take our next question from Robert Breza with Northland Capital Market. Please go ahead.

Robert Breza -- Northland Capital Markets -- Analyst

Hi. Good afternoon, everybody. Yes. Hey, it seems like you guys got a really pretty good handle on your growth initiatives here in terms of where you're going.

I guess, my question would be, as you think about those new growth initiatives, where do you think you could potentially hit a road bump? So for example, when you talk about the media partnership doubling in revenue, would media be an area where you think we could potentially see some issues? I mean, I think the initiatives are great and everything. I'm just trying to figure out what's the opposite side of that.

Doug Valenti -- Chief Executive Officer

Yes. Most of the -- I mean all of the initiatives I described today are actually things that are in full ramp mode. None of these are new. And our outlook is pretty clear.

And I would say our confidence level about the initiatives themselves, I'm looking at next year, is really, really high because most of these things are under way, now planned, if you will. And the pipelines are good, and most of what would take for us to do, say, over $500 million next year is supplied by the growth rate or things that are kind of already locked in. So things can always go wrong. We didn't anticipate DCEH dropping out of the sky.

Another great news is that the next biggest Education client is hundreds of thousands of dollars a month. So while that industry continues to be troubled, that was the worst thing that could have happened to us in Education, which is the most challenged industry client vertical for us, as it has been for a long time for all the reasons we've all talked about ad nauseam. I don't think mortgages got more downside to it. We feel pretty strongly that it would bounce off the bottom there.

I think insurance is still a very big market with a lot of budgets to penetrate. It won't always be straight up into the right, but over -- if you step back far enough, it will always be straight up into the right because we have quarterly bumps and bruises there, I'm sure like we do anything else, probably driven by changes to the media landscape and/or changes to client budgets and/or loss ratios, which have not been an issue since the clients repriced a couple years ago. And in fact, just the opposite, most of the carriers are in phenomenal shape from a loss ratio standpoint, including, of course, our largest client, who continues to just perform extraordinarily well through their own great execution. So I would say on the initiatives I listed, I think there's a lot more upside than downside versus where we are today and those are under way.

I don't see a lot of -- I'd say, if I said what are the big risks? The big risks are always big disruptions in media and big disruptions with clients. So our job day to day is making sure that we have a lot of things going on, and that we have a bigger and broader and more diversified footprint in both sides of the market. And part of what I described to you today is how we're getting that done.

Robert Breza -- Northland Capital Markets -- Analyst

Thank you very much. 

Operator

And we'll take our next question from Adam Klauber with William Blair. Please go ahead.

Adam Klauber -- William Blair -- Analyst

Hi. Good afternoon, guys. A couple of questions. Could you, I guess, maybe give us more details or just clarity on the difference in growth rate between this quarter, third quarter and fourth quarter? At least -- sorry, the organic revenue growth rate.

So if we strip out some of the headwinds but also AmOne, that growth rate looks to be around 15%. Whereas to meet your guidance for the next quarter, it looks like the organic growth rate should be more 25% or 25%-plus. So I guess, what's doing better next quarter than you saw this quarter?

Doug Valenti -- Chief Executive Officer

Yes. Sure. And again, next quarter, recall, is this quarter. We're almost halfway through it.

We exited last quarter with insurance on the strong upward trajectory and posted a record month in March after, as Jason pointed out, seasonably relatively soft January and February for the whole industry. And so insurance, we expect to be considerably stronger and is running considerably stronger this quarter than it did last -- at the beginning of this quarter than at the beginning of last quarter, of course. Personal loans continues to ramp very nicely for us as we ramp these synergies from the AmOne acquisition. We didn't see much by way of these synergies last quarter.

We will see significant penetration and capture of those synergies this quarter, and that will be a meaningful contributor to increased growth. And that business is scaling very, very nicely, and I would expect to be $100 million revenue business worth for us in months on a run-rate basis, of course, not quarters and not years. So that is on a very strong ramp. We continue to see very strong growth in our credit cards business.

We had a record month in April in credit cards, which was on top of, I think, a record month in March. So that business is on a tear. We're having a record quarter in Home Services, a business that we believe has a lot more scale opportunity in it. That business will probably grow this quarter year over year at least about 30%, Greg?

Greg Wong -- Chief Financial Officer

Yes.

Doug Valenti -- Chief Executive Officer

To again significant record levels, and we don't really see any end in sight in that trajectory. We -- again, as I think you know, we think -- that's a monster opportunity for us, and what we've been doing is setting it ourselves up just to scale it much more aggressively and quickly. And I feel good about our progress on that path. So again, our personal loans, synergies from AmOne, insurance on a better pace than it was last quarter.

Credit cards, setting new records each month. Home Services setting new records each month and for the quarter. Those are the main drivers of the difference in growth rate. And then you have -- and then you pointed out.

You still have the mortgage comp and the DCEH comp, but you don't -- but you'd lose the insurance test comp from last year. So that would explain part of the deuce to the growth rate as well. But most importantly -- or just look at the absolute number. Whatever the comps are, we're going to do about $130 million this quarter in revenue, and that is a breakout record quarter for us and breakout new scale, but it's driven by those -- primarily those four businesses.

Greg Wong -- Chief Financial Officer

That's right. And I would add, that's pretty big momentum going into a fourth quarter or a June quarter, where we're typically seasonally down about 5% sequentially so...

Adam Klauber -- William Blair -- Analyst

OK. And then my next question. Thanks for the highlights on the growth drivers for next year. And I think you said the media brands would turn down some white label solution.

And you've mentioned a couple of items that are -- you're helping your partners and getting paid to help them. When we think about next year, how would you rank the biggest incremental drivers within that bucket of revenue growth?

Doug Valenti -- Chief Executive Officer

From all the initiatives or from that -- just from the big media partnerships one?

Adam Klauber -- William Blair -- Analyst

From just the big media partnerships.

Doug Valenti -- Chief Executive Officer

Sure. I would say we have a couple of very large online media brands that are aggressively adopting and ramping, particularly in insurance and personal loans for us. Let me name a couple of names for you just to make it more real. Bankrate continues to be a great partner for us in insurance and personal loans.

NerdWallet has become a great partner for us across-the-board and particularly in insurance, and I think it will expand -- and it's expanding into other verticals with us. The Simple Dollar is a site. It continues to grow with us. TransUnion is a big partner of ours and continues to broaden that partnership and expand that partnership with us.

IAC is a big and growing partner with us in a number of divisions of their business and media ownership. So -- and that's just a handful of what is a pretty big portfolio, but those are all big partners already doing some meaningful amount with us but on a pretty steep ramp to do a lot more. That will show up this quarter and next -- and going -- and into next year. And then we have, gosh, a bunch of them.

Adam Klauber -- William Blair -- Analyst

And then just following up...

Doug Valenti -- Chief Executive Officer

By the way, let me add one thing to that because it would be neglectful for me not to say because I included turndowns in the big media partnerships example. Turndowns and personal loans are big and a very fast-growing at scale part of our mix as well this quarter going into next year, as we both improved and increased the monetization by adding our loan APIs to that -- to those systems. But also as we move into fully implementing the dual monetization of us and AmOne with the existing partners, and we expect to add several very big partners over the next month or tw0 that we'll be ramping into next year. So that will be a very large contributor to that part of the -- that initiative as well.

Adam Klauber -- William Blair -- Analyst

OK. Thank you. And one last on the insurance carrier that you're helping to build out their agency quoting system. You mentioned -- you said you've been doing beta test with two big agencies, but then you're rolling out more throughout the year.

Does that mean you're already rolling out to different agencies this year? And then that will just continue or that you're going to start rolling out more next year?

Doug Valenti -- Chief Executive Officer

We -- I expect we will add at least one new agency this fiscal year, and then I expect that there will be a much -- that we'll add a whole bunch of agencies next year, is my expectation.

Adam Klauber -- William Blair -- Analyst

OK, OK. So I guess, implied in that, the beta test have gone relative well. Is that -- have those been coming out pretty well?

Doug Valenti -- Chief Executive Officer

They've gone extraordinarily well. I think the carrier feedback has been -- they have been ecstatic about the performance and about our progress and how fast we've been able to do it. And we've got the same thing from the agencies, exact same feedback, including agencies saying that they're just going to sell a heck of a lot more policies. This -- and recall, we're building this out initially for one very large client, but we have, I think, five other clients committed now to the platform.

And this allows the agencies to very quickly, with a great slick workflow, get more quotes faster than they can write. And the feedback from the agency clients has been, we're going to write a lot more business. So this is a project that's going to be great for the carriers, going to be great for the agencies. And of course, we QuinStreet love it because it's a great way to add value to the ecosystem and apply our technology into a part of the channel where we're going to earn SaaS-like margins.

So we're very excited about the project.

Adam Klauber -- William Blair -- Analyst

And as you think about talking about being over $500 million next year, is that part of the thought that this will help you go over $500 million? Or is that more just on top of everything you've been thinking about?

Doug Valenti -- Chief Executive Officer

Surely on top. I include none of the -- nothing from the agency platform in over $500 million for next year just because this quarter, we'll have virtually nothing from the agency platform. We're running the pilots for free. And so the agency platforms is on top of that number.

Adam Klauber -- William Blair -- Analyst

OK. Great. Thank you very much. 

Operator

We'll take our next question from Jim Goss with Barrington Research. Please go ahead.

Jim Goss -- Barrington Research -- Analyst

First, I'd like to take a little more granular look at the slightly lower Financial Services revenue base. I know you gave a couple reasons for that between the mortgage issue and the insurance client revenue or tests that wasn't repeated. I assume that was -- there were puts and takes and some things were growing plus and offset by these two issues. And I wonder if you might give any more clarity to how that developed?

Doug Valenti -- Chief Executive Officer

Sure, Jim. I think you hit it. We had -- the Financial Services, I think, was about flat year over year in the quarter? But between the loss of market in the mortgage and a large insurance carrier test we're holding that we benefited from it, but they didn't go back to that -- the high level of spending, I think we lost in the neighborhood of, I don't know...

Greg Wong -- Chief Financial Officer

$17 million or so.

Doug Valenti -- Chief Executive Officer

$16 million, $17 million year over year. So that means that everything else in the business, and they're only -- the rest of the Financial Services, of course, grew enough to offset that. So that's really the math on the outcome of it. So it was -- we had very strong growth in personal loans year over year.

We had very strong growth in credit cards year over year, we had a record month in insurance in March year over year and good momentum there. So it was -- it's kind of mortgage was the main -- mortgage and the comp were the main drivers of our being flat year over year in Financial Services. And obviously, from our guide, you can see that we expect that to largely fix itself this quarter for the reasons that I alluded to before.

Jim Goss -- Barrington Research -- Analyst

So mid-teens million type advantage over a year ago would be consistent with that in the fourth quarter from the acquired businesses that continue to grow?

Doug Valenti -- Chief Executive Officer

Sorry, I didn't quite understand the question, but the mortgage comp will still be an issue this quarter but the insurance test will not.

Jim Goss -- Barrington Research -- Analyst

And with insurance test -- OK. So one is continuing, and one is not?

Doug Valenti -- Chief Executive Officer

Yes.

Jim Goss -- Barrington Research -- Analyst

With the insurance -- do you have -- is there anything more you can say about the insurance test? Was there some disappointment, I'm presuming that, that did not step up that level of commitment from that particular insurer? Or are you finding others who are interested in considering the same sort of increased penetration?

Doug Valenti -- Chief Executive Officer

The test was run by a large carrier that hasn't had as much exposure or activity in digital as some of the other large carriers, and they did kind of a -- let's just see what would happen if we spent this big surge amount over this period of time a year ago. They spent that surge amount. They believed it actually worked pretty well for them was the feedback. They thought like our performance was really good.

But they said, "We're not ready given our systems and the way we process marketing spend and advertising spend to actually spend at that surge level on an ongoing basis. But we now know what we have to do." And they went back and they're working on that. So -- and they did increase their spend with us quite significantly over what they have spent prior to the test, but they didn't return to the surge level spending for us or anybody else in the channel. We are -- but as I said, I think the amount they spent with us subsequent to the test is about double what they spent with us before the test, and we are working with them on a couple of projects to help them prepare to and be able to accommodate spending at the levels that they spent in the surge.

So I think in the long run, just a phenomenal thing and it's a very predictable thing, in my opinion. On the short run, it was what they decided to do, and we're happy to be supportive of it, but I would not read it as -- it was a failure. Quite the contrary, I think it was a huge success for them and us. It's just the way they're processing afterwards.

Jim Goss -- Barrington Research -- Analyst

OK. And lastly, with Education, last year, there was a bump up in the fourth quarter. But I'm assuming, the sort of run rate you had in the third quarter just reported is probably more likely to occur in the fourth quarter, that level of business?

Greg Wong -- Chief Financial Officer

Correct. Yes. No, I would look at the third quarter. Again, I would expect to see some sequential growth in the fourth quarter out of Education.

That said, it's going to be -- from a year-over-year standpoint, it's going to be a tough comp until we lap it at the end of the calendar year.

Jim Goss -- Barrington Research -- Analyst

OK. Thanks much. 

Operator

[Operator instructions] We'll take our next question from Chris Sakai with Singular Research. Please go ahead.

Chris Sakai -- Singular Research -- Analyst

Hi, Doug and Greg. Just a quick question, I guess, on the general and administrative expense this year was near 14 -- or this quarter was near $14 million. Can you comment on why it was higher it seems than a year ago?

Greg Wong -- Chief Financial Officer

Yes, Chris. That's primarily all related to the $8.7 million bad debt charge we took for the DCEH write-off.

Chris Sakai -- Singular Research -- Analyst

Oh, OK. I guess is that -- that relates to my next question I guess. So this $5.8 million charge related to the write-offs, is that in that general and administrative expense then?

Greg Wong -- Chief Financial Officer

So there's $8.7 million related to bad debt write-off in G&A, and it's offset by $2.9 million in cost of sales associated with cost that we were not contractually obligated to pay out off.

Chris Sakai -- Singular Research -- Analyst

Just a quick question, I guess, on the general and administrative expense this year was near 14 -- or this quarter was near $14 million. Can you comment on why it was higher it seems than a year ago?

Greg Wong -- Chief Financial Officer

Yes, Chris. That's primarily all related to the $8.7 million bad debt charge we took for the DCEH write-off.

Chris Sakai -- Singular Research -- Analyst

Oh, OK. I guess is that -- that relates to my next question I guess. So this $5.8 million charge related to the write-offs, is that in that general and administrative expense then?

Greg Wong -- Chief Financial Officer

So there's $8.7 million related to bad debt write-off in G&A, and it's offset by $2.9 million in cost of sales associated with cost that we were not contractually obligated to pay out off.

Chris Sakai -- Singular Research -- Analyst

All right guys. All right. That makes sense. Okay.

All right. Thanks that's all have.

Greg Wong -- Chief Financial Officer

Thanks, Chris.

Operator

[Operator signoff]

Duration: 52 minutes

Call participants:

Erica Abrams -- Investor Relations

Doug Valenti -- Chief Executive Officer

Greg Wong -- Chief Financial Officer

Carter Trent -- Stephens Inc. -- Analyst

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

Robert Breza -- Northland Capital Markets -- Analyst

Adam Klauber -- William Blair -- Analyst

Jim Goss -- Barrington Research -- Analyst

Chris Sakai -- Singular Research -- Analyst

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