QUINSTREET, INC – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 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, 2021, 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, 2021, filed 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,
bound insurance policies 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:

• 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 a 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 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

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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 72% and 73% of net revenue
for the three and nine months ended March 31, 2022 and 76% and 74% of net
revenue for the three and nine months ended March 31, 2021. Our home services
client vertical represented 27% and 26% of net revenue for the three and nine
months ended March 31, 2022 and 23% of net revenue for both the three and nine
months ended March 31, 2021. Other revenue, which primarily includes performance
marketing agency and technology services, represented 1% of net revenue for both
the three and nine months ended March 31, 2022 and 2021. In addition, revenue
recognized from our former education client vertical represented 0% and 2% of
net revenue for the three and nine months ended March 31, 2021. 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 19% and 16%
of our net revenue for the three and nine months ended March 31, 2022 and 26%
and 25% of our net revenue for the three and nine months ended March 31, 2021.
No other client accounted for 10% or more of our net revenue for the three and
nine months ended March 31, 2022 and 2021.

Trends Affecting our Business

COVID-19

We continue to monitor the impacts from the COVID-19 pandemic that may
unfavorably affect our business, such as reductions in client spending on
marketing and advertising, drops in media availability or performance,
deteriorating consumer spending, fluctuations in interest rates, and credit
quality of our receivables. The COVID-19 pandemic has affected and may continue
to affect our business operations, including our employees, clients, publishers,
business partners, and communities, and there is substantial uncertainty in the
nature and degree of its continued effects over time. For example, within our
financial services client vertical, certain lines of business, such as credit
cards and banking, have seen and may continue to see reductions in near-term
demand for our services due to weakening economic and employment conditions, and
the uncertainty over the length and depth of the economic downturn. While we
experienced growth in our credit-driven businesses, forecasting the timeline for
full recovery still remains challenging. The extent to which the COVID-19
pandemic impacts our business going forward will depend on numerous evolving
factors we cannot reliably predict, 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 development, efficacy and
distribution of vaccines for COVID-19; and the impact on economic activity
including the length and depth of the economic downturn or financial market
instability. These factors may adversely impact consumer, business, and
government spending as well as our clients' ability to pay for our services on
an ongoing basis. While there is optimism that the pandemic will come to an end
with the development and prevalence of vaccines, there are still significant
uncertainties. For example, the resurgence of cases due to emergence and
persistency of new variants to COVID-19 and the economic impact due to varying
levels of restrictions imposed by each state in the United States. Refer to Risk
Factors (Part II, Item 1A of this Form 10-Q) for a discussion of these factors
and other risks.

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. Our financial services
client vertical also benefits from more spending by clients in digital media and
performance marketing as digital marketing continues to evolve.

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. For example,
weather-related catastrophes and other events have in the past led to short-term
increases in insurance industry client loss ratios, which decreased our clients'
advertising spending and thereby had a material adverse effect on our business.
More recently, and specifically starting in the first half of fiscal

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year 2022, the auto insurance industry has experienced similar challenges, which
has affected and may continue to affect our operations and financial results in
the auto insurance business.

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.

Acquisitions and Divestitures

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 Modernize,
Mayo Labs and 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.

Furthermore, as a result of the decision to narrow our focus to the best
performing businesses and market opportunities, we completed a series of
business divestitures in the past two fiscal years, including the divestiture of
our former education client vertical completed in fiscal year 2021, and the
divestitures of our former B2B client vertical, our businesses in Brazil
consisting of QuinStreet Brasil Online Marketing e Midia Ltda ("QSB") and VEMM,
LLC ("VEMM") along with its interests in Euro-Demand Do Brasil Serviços de
Geração de Leads Ltda ("EDB"), and our mortgage business completed in fiscal
year 2020.

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, 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.

Clients in our financial services vertical 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 (the "TCPA") that affects telemarketing
calls. 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.

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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. All remaining businesses that are not significant enough for separate
reporting are included in other revenue. Our revenue recognized during the nine
months ended March 31, 2021 also included the revenue generated from our former
education client vertical, which was divested in the first quarter of fiscal
year 2021.

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. 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. 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.

Interest and Other Income (Expense), Net

Interest and other income (expense), 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 March 31, 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 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 income and expense includes gains
and losses on foreign currency exchange, gains and losses on divestitures of
subsidiaries, client verticals and assets that were not considered to be
strategically important to our business, 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.

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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.
  • Revenue recognition;


  • Valuation of goodwill and intangible assets;


  • Stock-based compensation;


  • Business combination;


  • Income taxes; and


  • Valuation of long-lived assets.

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, 2021, filed with the SEC.

Recently Issued Accounting Standards

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

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Results of Operations

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

                              Three Months Ended March 31,                         Nine Months Ended March 31,
                             2022                      2021                      2022                       2021
                           (In thousands, except percentages)                   (In thousands, except percentages)
Net revenue          $ 150,658       100.0 %   $ 153,052       100.0 %   $ 435,597       100.0 %    $ 427,289       100.0 %
Cost of revenue
(1)                    136,567        90.6       132,665        86.7       393,626        90.4        375,334        87.8
Gross profit            14,091         9.4        20,387        13.3        41,971         9.6         51,955        12.2
Operating
expenses: (1)
Product
development              5,509         3.8         4,905         3.2        14,995         3.4         14,776         3.5
Sales and
marketing                2,033         1.3         2,768         1.8         7,773         1.8          8,303         1.9
General and
administrative           5,489         3.6         6,460         4.2        21,758         5.0         19,931         4.7
Operating income
(loss)                   1,060         0.7         6,254         4.1        (2,555 )      (0.6 )        8,945         2.1
Interest income              7           -             5           -             7           -             40           -

Interest expense (277 ) (0.1 ) (301 ) (0.2 )

   (817 )      (0.2 )         (947 )      (0.2 )
Other income
(expense), net              45           -           (28 )         -            51           -         16,695         3.9
Income (loss)
before income
taxes                      835         0.6         5,930         3.9        (3,314 )      (0.8 )       24,733         5.8
Benefit from
(provision for)
income taxes             1,395         0.9          (893 )      (0.6 )       3,009         0.7         (4,549 )      (1.1 )
Net income (loss)    $   2,230         1.5 %   $   5,037         3.3 %   $    (305 )      (0.1 )%   $  20,184         4.7 %




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

Cost of revenue     $   491         0.3 %   $ 2,261         1.5 %   $ 4,579         1.1 %   $ 7,006         1.6 %
Product
development             203         0.1         576         0.4       1,497         0.3       1,768         0.4
Sales and
marketing                18           -         584         0.4       1,477         0.3       1,896         0.4
General and
administrative          699         0.5       1,435         0.9       4,337         1.0       4,521         1.1


Gross Profit

                    Three Months Ended           Nine Months Ended          Three          Nine
                         March 31,                   March 31,             Months         Months
                    2022          2021          2022          2021        % Change       % Change
                                    (In thousands)
Net revenue       $ 150,658     $ 153,052     $ 435,597     $ 427,289            (2 %)           2 %
Cost of revenue     136,567       132,665       393,626       375,334             3 %            5 %
Gross profit      $  14,091     $  20,387     $  41,971     $  51,955           (31 %)         (19 %)


Net Revenue

Net revenue decreased by $2.4 million, or 2%, for the three months ended March
31, 2022 compared to the three months ended March 31, 2021. Revenue from our
financial services client vertical decreased by $8.0 million, or 7%, primarily
due to a decrease in revenue in our insurance business associated with decreased
spending by insurance carriers to address profitability concerns caused by
higher incident rates, inflation, and higher costs to repair and replace
vehicles. This is offset by an increase in revenue in our credit-driven
businesses due to some economic recovery from the impact of the COVID-19
pandemic. Revenue from our home services client vertical increased by $5.7
million, or 16%, primarily as a result of increased client budgets and
successful integration of the Modernize acquisition. Other revenue, which
primarily includes performance marketing agency and technology services,
contributed $1.7 million of revenue for the three months ended March 31, 2022,
which was approximately flat as compared to $1.7 million of revenue for the
three months ended March 31, 2021.

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Net revenue increased by $8.3 million, or 2%, for the nine months ended March
31, 2022 compared to the nine months ended March 31, 2021. Revenue from our home
services client vertical increased by $16.9 million, or 17%, primarily as a
result of increased client budgets and successful integration of the Modernize
acquisition. Revenue from our financial services client vertical increased by
$1.7 million, or 1%, primarily due to an increase in revenue in our
credit-driven businesses due to some economic recovery from the impact of the
COVID-19 pandemic. This is offset by a decrease in revenue in our insurance
business associated with decreased spending by insurance carriers to address
profitability concerns caused by higher incident rates, weather-related
catastrophes, inflation, and higher costs to repair and replace vehicles. Other
revenue, which primarily includes performance marketing agency and technology
services, contributed $4.7 million of revenue for the nine months ended March
31, 2022, as compared to $3.5 million of revenue for the nine months ended March
31, 2021. The divestiture of our former education client vertical, completed in
the first quarter of fiscal year 2021, resulted in a decrease in revenue by
$11.6 million for the nine months ended March 31, 2022, as compared to the nine
months ended March 31, 2021.

Cost of Revenue and Gross Profit Margin

Cost of revenue increased by $3.9 million, or 3%, for the three months ended
March 31, 2022 compared to the three months ended March 31, 2021, primarily
driven by increased media and marketing costs of $3.0 million, increased
amortization of intangible assets of $0.3 million, and increased personnel costs
of $0.1 million. Gross profit margin, which is the difference between net
revenue and cost of revenue as a percentage of net revenue, was 9% and 13% for
the three months ended March 31, 2022 and 2021. The decrease in gross profit
margin was primarily attributable to increased media and marketing costs as a
percentage of revenue.

Cost of revenue increased by $18.3 million, or 5%, for the nine months ended
March 31, 2022 compared to the nine months ended March 31, 2021, primarily
driven by increased media and marketing costs of $17.3 million associated with
higher revenue volumes and increased amortization of intangible assets of $0.5
million, offset by decreased personnel costs including stock-based compensation
expense of $0.2 million. Gross profit margin was 10% and 12% for the nine months
ended March 31, 2022 and 2021. The decrease in gross profit margin was primarily
attributable to increased media and marketing costs as a percentage of revenue.

Operating Expenses

                               Three Months Ended          Nine Months Ended           Three            Nine
                                    March 31,                  March 31,              Months           Months
                                2022          2021         2022          2021        % Change         % Change
                                               (In thousands)

Product development $ 5,509 $ 4,905 $ 14,995 $ 14,776

              12 %              1 %
Sales and marketing               2,033        2,768         7,773        8,303             (27 %)            (6 %)

General and administrative 5,489 6,460 21,758 19,931

             (15 %)             9 %
Operating expenses           $   13,031     $ 14,133     $  44,526     $ 43,010              (8 %)             4 %

Product Development Expenses

Product development expenses increased by $0.6 million, or 12%, for the three
months ended March 31, 2022 compared to the three months ended March 31, 2021,
primarily due to increased personnel costs of $0.3 million and increased
professional services costs of $0.2 million.

Product development expenses were approximately flat for the nine months ended
March 31, 2022 compared to the nine months ended March 31, 2021.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $0.7 million, or 27%, for the three
months ended March 31, 2022 compared to the three months ended March 31, 2021,
primarily due to decreased personnel costs including stock-based compensation
expense of $0.7 million.

Sales and marketing expenses decreased by $0.5 million, or 6%, for the nine
months ended March 31, 2022 compared to the nine months ended March 31, 2021,
primarily due to decreased personnel costs including stock-based compensation
expense of $0.7 million.

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General and Administrative Expenses

General and administrative expenses decreased by $1.0 million, or 15%, for the
three months ended March 31, 2022 compared to the three months ended March 31,
2021, primarily due to decreased personnel costs including stock-based
compensation expense of $0.9 million.

General and administrative expenses increased by $1.8 million, or 9%, for the
nine months ended March 31, 2022 compared to the nine months ended March 31,
2021, primarily due to an adjustment to contingent consideration of $2.7 million
recorded in the second quarter of fiscal year 2022 and increased facilities
expense of $0.3 million, offset by decreased professional services costs of $1.5
million.

Benefit from (Provision for) Income Taxes

                                        Three Months Ended                Nine Months Ended
                                            March 31,                         March 31,
                                      2022              2021             2022            2021
                                                          (In thousands)
Benefit from (provision for)
income taxes                      $      1,395       $      (893 )   $      

3,009 $ (4,549 )

As of March 31, 2022, we have not recorded any significant valuation allowance
adjustments based on the information and evidence available at the time.
However, if there are unfavorable changes to actual operating results or to
projections of future income, we may determine that it is more likely than not
that such deferred tax assets may not be realizable.

We recorded a benefit from income taxes of $1.4 million and $3.0 million for the
three and nine months ended March 31, 2022 and a provision for income taxes of
$0.9 million and $4.5 million for the three and nine months ended March 31,
2021. The change from an income tax provision to an income tax benefit was
primarily due to the changes in the amount of pre-tax income or loss and the
Company's estimated annual effective tax rate.

Liquidity and Capital Resources

As of March 31, 2022, our principal sources of liquidity consisted of cash and
cash equivalents of $109.5 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 including the impact of COVID-19, 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.

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.

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

                                               Nine Months Ended
                                                   March 31,
                                              2022          2021
                                                (In thousands)

Net cash provided by operating activities $ 20,981 $ 36,203
Net cash used in investing activities (6,775 ) (35,062 )
Net cash used in financing activities (15,052 ) (5,385 )

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Operating Activities

Cash flows from operating activities are primarily the result of our net (loss)
income adjusted for depreciation and amortization, stock-based compensation
expense, gains and losses on divestitures of businesses, and changes in working
capital components.

Cash provided by operating activities was $21.0 million for the nine months
ended March 31, 2022, compared to cash provided by operating activities of $36.2
million for the nine months ended March 31, 2021.

Cash provided by operating activities for the nine months ended March 31, 2022
consisted of a net loss of $0.3 million, offset by non-cash adjustments of $24.4
million, and a net decrease in cash from changes in working capital of $3.1
million. The non-cash adjustments primarily consisted of depreciation and
amortization expense of $12.7 million, stock-based compensation expense of $11.9
million, an adjustment to contingent consideration of $2.7 million, and an
increase in deferred tax assets of $2.8 million due to benefit from income taxes
recorded for the first three quarters of fiscal year 2022. The changes in
working capital accounts were primarily attributable to a decrease in accrued
liabilities of $8.2 million and a decrease in accounts payable of $5.4 million,
offset by a decrease in accounts receivable of $9.8 million. The decreases in
accounts receivable, accrued liabilities and accounts payable were primarily due
to lower revenue levels in the month ended March 31, 2022 as compared to the
month ended March 31, 2021, and the timing of receipts and payments.

Cash provided by operating activities for the nine months ended March 31,
2021 consisted of a net income of $20.2 million, non-cash adjustments of $14.6
million and a net increase in cash from changes in working capital of
$1.4 million. The non-cash adjustments primarily consisted of stock-based
compensation expense of $15.2 million, depreciation and amortization expense of
$12.0 million, and a decrease in deferred tax assets of $4.3 million due to
provision for income taxes recorded for the first three quarters of fiscal year
2021, offset by a net disposition gain of $16.6 million recognized from the
divestiture of our former education client vertical completed in the first
quarter of fiscal year 2021. The changes in working capital accounts were
primarily attributable to an increase in accrued liabilities of $9.8 million, a
decrease in prepaid expenses and other assets of $5.1 million, and an increase
in accounts payable of $1.0 million, offset by an increase in accounts
receivable of $14.5 million. The increases in accounts payable and accrued
liabilities were due to the timing of payments. The decrease in prepaid expenses
and other assets was due to the refund of an unamortized prepaid expense of $5.3
million. The increase in accounts receivable was due to the timing of receipts.

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 $6.8 million for the nine months ended
March 31, 2022, compared to cash used in investing activities of $35.1 million
for the nine months ended March 31, 2021.

Cash used in investing activities in the nine months ended March 31, 2022 was
primarily due to capital expenditures and internal software development costs of
$5.9 million, and $1.0 million cash paid at the closing of an immaterial
acquisition completed in the second quarter of fiscal year 2022.

Cash used in investing activities in the nine months ended March 31, 2021 was
primarily due to payments for the acquisitions of Modernize, Mayo and FCE, net
of cash acquired, of $49.3 million, investment in equity securities of $4.0
million, and capital expenditures and internal software development costs of
$3.7 million, offset by $20.0 million of cash received from the divestiture of
our former education client vertical completed in the first quarter of fiscal
year 2021, and $1.9 million of cash received from the divestiture of our former
B2B client vertical completed in the third quarter of fiscal year 2020.

Financing Activities

Cash flows from financing activities generally include post-closing payments
related to our acquisitions, withholding taxes related to the release of
restricted stock, net of share settlement, and proceeds from the exercise of
stock options.

Cash used in financing activities was $15.1 million for the nine months ended
March 31, 2022, compared to cash used in financing activities of $5.4 million
for the nine months ended March 31, 2021.

Cash used in financing activities in the nine months ended March 31, 2022 was
due to payment of post-closing payments and contingent consideration related to
acquisitions of $9.8 million, payment of withholding taxes related to the
release of restricted stock, net of share settlement of $6.6 million, offset by
proceeds from the exercise of stock options of $1.3 million.


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Cash used in financing activities in the nine months ended March 31, 2021 was
due to the payment of withholding taxes related to the release of restricted
stock, net of share settlement of $6.5 million, and payment of post-closing
payments and contingent consideration related to acquisitions of $3.0 million,
offset by proceeds from the exercise of stock options of $4.2 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, 2021.



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