QUINSTREET : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

You ought to learn the next dialogue and evaluation of our monetary situation
and outcomes of operations at the side of the consolidated monetary
statements and the notes thereto included elsewhere on this report. The
following dialogue comprises forward-looking statements that replicate our plans,
estimates and beliefs. Our precise outcomes may differ materially from these
mentioned within the forward-looking statements. Factors that might trigger or
contribute to those variations embody these mentioned under and elsewhere in
this report, significantly within the sections titled "Cautionary Note on
Forward-Looking Statements" and "Risk Factors."

Management Overview

We are a frontrunner in efficiency marketplaces and applied sciences for the monetary
providers and residence providers industries. We concentrate on buyer acquisition for
shoppers in excessive worth, information-intensive markets or "verticals," together with
monetary providers and residence providers. Our shoppers embody some of the world's
largest corporations and manufacturers in these markets. The majority of our operations
and income are in North America.

We ship measurable and cost-effective advertising and marketing outcomes to our shoppers,
sometimes within the kind of certified inquiries reminiscent of clicks, leads, calls,
purposes, or clients. Clicks, leads, calls, and purposes can then
convert right into a buyer or sale for shoppers at a price that leads to an
acceptable advertising and marketing value to them. We are sometimes paid by shoppers after we
ship certified inquiries within the kind of clicks, leads, calls, purposes,
or clients, as outlined by our agreements with them. References to the supply
of clients means a sale or accomplished buyer transaction (e.g., funded loans,
certain insurance coverage insurance policies or buyer appointments with shoppers). Because we bear
the prices of media, our applications should lead to engaging advertising and marketing prices to
our shoppers at media prices and margins that present sound monetary outcomes for
us. To ship clicks, leads, calls, purposes, and clients to our shoppers,
usually we:

• personal or entry focused media by enterprise preparations (e.g., income

sharing preparations with on-line writer companions, giant and small) or by

buying media (e.g., clicks from main serps);

• run ads or different kinds of advertising and marketing messages and applications in

that media that lead to client or customer responses, sometimes within the

kind of clicks (by a client to additional qualification or matching steps,

or to on-line shopper purposes or choices), leads (e.g., client

contact info), calls (from a client or to a client by our owned

and operated or contracted name facilities or by that of our shoppers or their

       brokers), purposes (e.g., for enrollment or a monetary product), or
       clients (e.g., funded private loans); and

• repeatedly search to show shoppers and shopper choices to guests or

customers that consequence within the most quantity of customers discovering options

that may meet their wants and to which they may take motion to reply,

leading to media shopping for effectivity (e.g., by segmenting media or visitors

in order that probably the most acceptable shoppers or shopper choices could be displayed

or “matched” to every section based mostly on match, response charges or conversion

       charges);


   •   by know-how and analytics, search to optimize mixture of
       goals to fulfill the utmost quantity of procuring or researching

guests or customers, ship on shopper advertising and marketing goals, successfully

compete for on-line media, and generate a sound monetary final result for us.


Our major monetary goal has been and stays creating income development
from sustainable sources, at goal ranges of profitability. Our major
monetary goal is to not maximize short-term earnings, however somewhat to attain
goal ranges of profitability whereas investing in varied development initiatives, as
we proceed to consider we're within the early phases of a big, long-term market
alternative.

Our enterprise derives its web income primarily from charges earned by the
supply of certified inquiries reminiscent of clicks, leads, calls, purposes, or
clients. Through a vertical focus, focused media presence and our know-how
platform, we're capable of ship focused, measurable advertising and marketing outcomes to our
shoppers.

Our monetary providers shopper vertical represented 74%, 75% and 68% of web
income in fiscal years 2021, 2020 and 2019. Our residence providers shopper vertical
represented 23%, 10% and 9% of web income in fiscal years 2021, 2020 and 2019.
Our outcomes of operations for fiscal 12 months 2021 mirrored our acquisition of
Modernize, which was accomplished at first of the fiscal 12 months. Other
income, which primarily consists of our efficiency advertising and marketing company and
know-how providers, represented 1% of web income in fiscal 12 months 2021. In
addition, income acknowledged from our divested companies (together with our former
schooling shopper vertical, business-to-business know-how shopper vertical,
mortgage enterprise, and Brazil companies) represented 2%, 15%, and 23% of web
income for fiscal years 2021, 2020 and 2019. See Note 7, Divestitures, to our
consolidated monetary statements for extra info associated to the
divestitures. We generated the bulk of our income from gross sales to shoppers in
the United States.

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Trends Affecting our Business

COVID-19

We proceed to observe COVID-19 for impacts which will unfavorably have an effect on our
enterprise, reminiscent of reductions in shopper spending on advertising and marketing and promoting,
drops in media availability or efficiency, deteriorating client spending,
fluctuations in rates of interest, and credit score high quality of our receivables. The
COVID-19 pandemic has affected and could proceed to have an effect on our enterprise
operations, together with our staff, shoppers, publishers, enterprise companions, and
communities, and there's substantial uncertainty within the nature and diploma of
its continued results over time. For instance, inside our monetary providers
shopper vertical, sure credit-driven strains of enterprise, reminiscent of private loans
and bank cards, have seen and could proceed to see reductions in near-term
demand for our providers because of weakening financial and employment circumstances, and
the uncertainty over the size and depth of the financial downturn. The extent
to which the COVID-19 pandemic impacts our enterprise going ahead will rely upon
quite a few evolving elements we can not reliably predict, together with the length and
scope of the pandemic; enterprise and people' actions in response to the
pandemic; additional actions taken by governmental authorities to restrict the human
and financial impression of the pandemic (e.g., stimulus funds); the event,
efficacy and distribution of vaccines for COVID-19; and the impression on financial
exercise together with the size and depth of the financial downturn or monetary
market instability. These elements could adversely impression client, enterprise, and
authorities spending in addition to our shoppers' capability to pay for our providers on
an ongoing foundation. While there's optimism that the pandemic will come to an finish
with the event and prevalence of vaccines, there are nonetheless vital
uncertainties. For instance, the resurgence of circumstances because of emergence and
persistency of new variants to COVID-19 and the financial impression because of various
ranges of restrictions imposed by every state. Refer to Risk Factors (Part I,
Item 1A of this Form 10-Okay) for a dialogue of these elements and different dangers.

Client Verticals

Our monetary providers shopper vertical has been challenged by a quantity of
elements prior to now, together with the restricted availability of prime quality media at
acceptable margins attributable to the acquisition of media sources by opponents,
elevated competitors for top of the range media and adjustments in search engine
algorithms. These elements could impression our enterprise sooner or later once more. To offset
this impression, now we have enhanced our product set to offer better segmentation,
matching, transparency and proper pricing of media which have enabled higher
monetization to offer better entry to prime quality media sources. Moreover,
now we have entered into strategic partnerships and acquisitions to extend and
diversify our entry to high quality media and shopper budgets. Our monetary providers
shopper vertical additionally advantages from extra spending by shoppers in digital media and
efficiency advertising and marketing as digital advertising and marketing continues to evolve.

In the primary quarter of fiscal 12 months 2021, we accomplished the acquisition of
Modernize, a number one residence enchancment efficiency advertising and marketing firm, to broaden
our buyer and media relationships within the residence providers shopper vertical. Our
residence providers shopper vertical has been increasing over the previous a number of years,
primarily pushed by profitable execution of development initiatives and
ahead-of-schedule integration and synergies with the Modernize acquisition.

In addition, within the first quarter of fiscal 12 months 2021, consequently of the
choice to slim our focus to one of the best performing companies and market
alternatives, we entered into an settlement with a third-party and accomplished the
divestiture of our former schooling shopper vertical.

Acquisitions and Divestitures

Acquisitions have traditionally been, and proceed to be, an necessary aspect of
our total company technique and use of capital. We have accomplished a number of
strategic acquisitions in the course of the previous three fiscal years, together with the
acquisitions of Modernize, Mayo Labs and FCE accomplished in fiscal 12 months 2021, and
the acquisitions of AmOne, CCM, and MBT accomplished in fiscal 12 months 2019.

Furthermore, consequently of the choice to slim our focus to one of the best
performing companies and market alternatives, we accomplished a collection of
enterprise divestitures prior to now two fiscal years, together with the divestiture of
our former schooling shopper vertical accomplished in fiscal 12 months 2021, and the
divestitures of our former B2B shopper vertical, our companies in Brazil
consisting of QSB and VEMM together with its pursuits in EDB, and our mortgage
enterprise accomplished in fiscal 12 months 2020.

For detailed info concerning our acquisitions and divestitures, seek advice from
Note 6, Acquisitions, and Note 7, Divestitures, respectively, to our
consolidated monetary statements.

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Development, Acquisition and Retention of High Quality Targeted Media

One of the first challenges of our enterprise is discovering or creating media that
is top quality and focused sufficient to draw prospects for our shoppers at
prices that present a sound monetary final result for us. In order to develop our
enterprise, we should be capable of discover, develop, or purchase and retain high quality
focused media on a cheap foundation. Consolidation of media sources,
adjustments in search engine algorithms and elevated competitors for obtainable
media has, throughout some durations, restricted and could proceed to restrict our capability to
generate income at acceptable margins. To offset this impression, now we have developed
new sources of media, together with getting into into strategic partnerships with different
advertising and marketing and media corporations and acquisitions. Such partnerships embody
takeovers of efficiency advertising and marketing capabilities for big net media properties;
backend monetization of unmatched visitors for shoppers with giant media buys; and
white label merchandise for different efficiency advertising and marketing corporations. We have additionally
centered on rising our income from name middle, electronic mail, cellular and social media
visitors sources.

Seasonality

Our outcomes are topic to vital fluctuation consequently of seasonality.
In explicit, our quarters ending December 31 (our second fiscal quarter) are
sometimes characterised by seasonal weak point. In our second fiscal quarters,
there's usually decrease availability of media in the course of the vacation interval on a
value efficient foundation and some of our shoppers have decrease budgets. In our quarters
ending March 31 (our third fiscal quarter), this pattern usually reverses with
higher media availability and usually new budgets at first of the 12 months for
our shoppers with fiscal years ending December 31.

Our outcomes are additionally topic to fluctuation consequently of seasonality in our
shoppers' enterprise. For instance, income in our residence providers shopper vertical is
topic to cyclical and seasonal tendencies, as the patron demand for residence
providers sometimes rises in the course of the spring and summer time seasons and declines
in the course of the fall and winter seasons. Other elements affecting our shoppers'
companies embody macro elements reminiscent of credit score availability available in the market,
rates of interest, the energy of the financial system and employment.

Regulations

Our income has fluctuated partially consequently of federal, state and
industry-based laws and growing requirements with respect to the
enforcement of these laws. Our enterprise is affected instantly as a result of we
function web sites and conduct telemarketing and electronic mail advertising and marketing, and not directly
affected as our shoppers regulate their operations consequently of regulatory
adjustments and enforcement exercise that have an effect on their industries.

Clients in our monetary providers vertical have been affected by legal guidelines and
laws and the elevated enforcement of new and pre-existing legal guidelines and
laws. The impact of these laws, or any future laws, could
proceed to lead to fluctuations within the quantity and combine of our enterprise with
these shoppers.

An instance of a regulatory change which will have an effect on our enterprise is the modification
of the Telephone Consumer Protection Act (the "TCPA") that impacts telemarketing
calls. Our shoppers could make enterprise selections based mostly on their very own experiences
with the TCPA regardless of our merchandise and compliance practices. Those
selections could negatively have an effect on our income and profitability.



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Basis of Presentation

Net Revenue

Our enterprise generates income primarily from charges earned by the supply
of certified inquiries reminiscent of clicks, leads, calls, purposes, or clients.
We ship focused and measurable outcomes by a vertical focus, which
consists of monetary providers shopper vertical and residence providers shopper vertical.
All remaining companies that aren't vital sufficient for separate reporting
are included in different income. Our income acknowledged in fiscal years 2021, 2020
and 2019 additionally included the income generated from the divested companies
(together with our former schooling shopper vertical, business-to-business know-how
shopper vertical, mortgage enterprise, and Brazil companies). See
Note 7, Divestitures, to our consolidated monetary statements for extra
info associated to the divestitures.

Cost of Revenue

Cost of income consists primarily of media and advertising and marketing prices, personnel
prices, amortization of intangible belongings, depreciation expense and amenities
expense. Media and advertising and marketing prices consist primarily of charges paid to third-party
publishers, media homeowners or managers, or to strategic companions which can be instantly
associated to a revenue-generating occasion and of pay-per-click, or PPC, advert purchases
from Internet search corporations. We pay these third-party publishers, media
homeowners or managers, strategic companions and Internet search corporations on a
revenue-share, a cost-per-lead, or CPL, or cost-per-click, or CPC, foundation.
Personnel prices embody salaries, stock-based compensation expense, bonuses,
commissions and worker profit prices. Personnel prices are primarily associated to
people related to sustaining our servers and web sites, our name
middle operations, our editorial workers, shopper administration, inventive staff,
content material, compliance group and media buying analysts. Costs related to
software program incurred within the growth part or obtained for inside use are
capitalized and amortized to value of income over the software program's estimated
helpful life.

Operating Expenses

We classify our working bills into three classes: product growth,
gross sales and advertising and marketing, and basic and administrative. Our working bills
consist primarily of personnel prices and, to a lesser extent, skilled
providers charges, amenities charges and different prices. Personnel prices for every
class of working bills usually embody salaries, stock-based
compensation expense, bonuses, commissions and associated taxes, and worker
profit prices.

Product Development. Product growth bills consist primarily of personnel
prices, amenities charges and skilled providers charges associated to the event
and upkeep of our merchandise and media administration platform. We are
constraining bills usually to the extent practicable.

Sales and Marketing. Sales and advertising and marketing bills consist primarily of personnel
prices, amenities charges and skilled providers charges. We are constraining
bills usually to the extent practicable.

General and Administrative. General and administrative bills consist
primarily of personnel prices of our finance, authorized, worker advantages and
compliance, technical assist and different administrative personnel, accounting and
authorized skilled providers charges, amenities charges and unhealthy debt expense. We are
constraining bills usually to the extent practicable.

Interest and Other Income, Net

Interest and different revenue, web, consists primarily of curiosity expense, curiosity
revenue, and different revenue and expense. Interest expense is expounded to imputed
curiosity on post-closing funds associated to our acquisitions. We haven't any
borrowing agreements excellent as of June 30, 2021; nonetheless curiosity expense
may improve if, amongst different issues, we enter into a brand new borrowing settlement
to handle liquidity or make further acquisitions by debt financing.
Interest revenue represents curiosity earned on our money and money equivalents,
which can improve or lower relying on market rates of interest and the
quantities invested. Other revenue and expense consists of positive aspects and losses on overseas
forex change, positive aspects and losses on divestitures of subsidiaries, shopper
verticals and belongings that weren't thought of to be strategically necessary to
our enterprise, and different non-operating gadgets.

(Provision for) Benefit from Income Taxes

We are topic to tax in the United States in addition to different tax jurisdictions or
nations wherein we conduct enterprise. Earnings from our restricted non-U.S.
actions are topic to native nation revenue tax and could also be topic to U.S.
revenue tax.

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Results of Operations

The following desk units forth our consolidated statements of operations for the
durations indicated:



                                                  Fiscal Year Ended June 30,
                                 2021                        2020                        2019
                                              (In 1000's, besides percentages)
Net income             $ 578,487         100.0 %   $ 490,339         100.0 %   $ 455,154         100.0 %
Cost of income (1)       507,956          87.8       437,864          89.3       393,509          86.5
Gross revenue               70,531          12.2        52,475          10.7        61,645          13.5
Operating bills:
(1)
Product growth        19,344           3.3        14,206           2.9        12,329           2.6
Sales and advertising and marketing        10,991           1.9         8,876           1.8         8,755           1.9
General and
administrative             26,270           4.6        23,188           4.7        29,834           6.6
Operating revenue           13,926           2.4         6,205           1.3        10,727           2.4
Interest revenue                39             -           230             -           290             -
Interest expense           (1,296 )        (0.2 )        (696 )        (0.1 )        (367 )           -
Other revenue, web          16,660           2.9        12,947           2.6            69             -
Income earlier than revenue
taxes                      29,329           5.1        18,686           3.8        10,719           2.4
(Provision for)
profit from revenue
taxes                      (5,774 )        (1.0 )        (584 )        (0.1 )      51,761          11.3
Net revenue              $  23,555           4.1 %   $  18,102           3.7 %   $  62,480          13.7 %



(1) Cost of income and working bills embody stock-based compensation

    expense as follows:




Cost of income              $ 8,997       1.6 %   $ 8,569       1.7 %   $ 7,354       1.6 %
Product growth            2,339       0.4       1,819       0.4       1,606       0.4
Sales and advertising and marketing            2,459       0.4       1,701       0.3       1,358       0.3
General and administrative     5,838       1.0       4,628       0.9       3,810       0.8


Gross Profit



                       Fiscal Year Ended June 30,            2021 - 2020       2020- 2019
                    2021          2020          2019          % Change          % Change
                             (In 1000's)
Net income       $ 578,487     $ 490,339     $ 455,154                18 %              8 %
Cost of income     507,956       437,864       393,509                16 %             11 %
Gross revenue      $  70,531     $  52,475     $  61,645                34 %            (15 %)


Net Revenue

Net income elevated by $88.1 million, or 18%, in fiscal 12 months 2021 in comparison with
fiscal 12 months 2020. Revenue from our residence providers shopper vertical elevated by
$84.6 million, or 169%, primarily consequently of inorganic and natural (synergy)
income results from the acquisition of Modernize accomplished in fiscal 12 months 2021.
Revenue from our monetary providers shopper vertical elevated by $60.5 million,
or 17%, primarily because of our enhanced product set and knowledge analytics that
enabled entry to extra media and a rise in shopper budgets in our insurance coverage
enterprise, offset by a decline in income within the credit-driven companies because of
weakening financial and employment circumstances attributable to COVID-19. Other income,
which primarily consists of efficiency advertising and marketing company and know-how providers,
contributed $5.5 million of income for fiscal 12 months 2021. The enterprise
divestitures accomplished in fiscal years 2021 and 2020 decreased income by $62.5
million for fiscal 12 months 2021.

Net income elevated by $35.2 million, or 8%, in fiscal 12 months 2020 in comparison with
fiscal 12 months 2019. Revenue from our monetary providers shopper vertical elevated
by $57.7 million, or 19%, primarily because of our enhanced product set and knowledge
analytics that enabled entry to extra media and a rise in shopper budgets in
our insurance coverage enterprise. The change in income from our monetary providers shopper
vertical was additionally pushed by elevated income from our private loans enterprise,
primarily consequently of the acquisition of AmOne accomplished within the first quarter
of fiscal 12 months 2019, and elevated income from our bank cards and banking
companies pushed by increasing media sources, offset by a decline in income in
the credit-driven companies over the last fiscal quarter because of

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weakening financial and employment circumstances attributable to COVID-19. Revenue from
our residence providers shopper vertical elevated by $9.7 million, or 24%, primarily
attributable to elevated shopper demand. Revenue from our former schooling
shopper vertical (disposed in fiscal 12 months 2021) decreased by $7.3 million, or
11%, primarily because of the loss of a big not-for-profit schooling shopper who
entered federal receivership in January 2019. The enterprise divestitures
accomplished in fiscal 12 months 2020 decreased income by $24.9 million for fiscal 12 months
2020.

Cost of Revenue and Gross Profit Margin

Cost of income elevated by $70.1 million, or 16%, in fiscal 12 months 2021 in contrast
to fiscal 12 months 2020. This was primarily pushed by elevated media and advertising and marketing
prices of $58.0 million, elevated personnel prices together with stock-based
compensation expense of $6.0 million, and elevated amortization of intangible
belongings of $4.7 million. The improve in media and advertising and marketing prices was related
with larger income volumes. The improve in personnel prices was primarily due
to larger headcount related to the Modernize acquisition, elevated
incentive compensation related to the achievement of efficiency goals
for fiscal 12 months 2021 and elevated stock-based compensation expense. The
improve in amortization expense was primarily because of the acquisitions of
intangible belongings in fiscal 12 months 2021. Gross revenue margin, which is the
distinction between web income and value of income as a proportion of web
income, was 12% in fiscal 12 months 2021 in comparison with 11% in fiscal 12 months 2020. The
improve in gross revenue margin was primarily attributable to decreased media
and advertising and marketing prices as a proportion of income.

Cost of income elevated by $44.4 million, or 11%, in fiscal 12 months 2020 in contrast
to fiscal 12 months 2019. This was primarily pushed by elevated media and advertising and marketing
prices of $34.0 million, elevated personnel prices together with stock-based
compensation expense of $7.6 million, and elevated amortization of intangible
belongings of $2.5 million. The improve in media and advertising and marketing prices was related
with larger income volumes. The improve in personnel prices and stock-based
compensation was primarily because of larger headcount consequently of the
acquisitions accomplished in fiscal 12 months 2019. The improve in amortization expense
was primarily because of the acquisitions of intangible belongings in fiscal 12 months 2019.
Gross revenue margin was 11% in fiscal 12 months 2020 in comparison with 14% in fiscal 12 months
2019. The lower in gross revenue margin was attributable to elevated media
charges and personnel prices as a proportion of income.

Operating Expenses



                                       Fiscal Year Ended June 30,            2021 - 2020       2020- 2019
                                    2021          2020          2019          % Change          % Change
                                             (In 1000's)
Product growth              $   19,344     $  14,206     $  12,329                36 %             15 %
Sales and advertising and marketing                  10,991         8,876         8,755                24 %              1 %
General and administrative           26,270        23,188        29,834                13 %            (22 %)
Operating bills               $   56,605     $  46,270     $  50,918                22 %             (9 %)

Product Development Expenses

Product growth bills elevated by $5.1 million, or 36%, in fiscal 12 months
2021 in comparison with fiscal 12 months 2020. This was primarily because of elevated personnel
prices of $4.5 million consequently of larger headcount related to the
Modernize acquisition, elevated incentive compensation related to the
achievement of efficiency goals for fiscal 12 months 2021 and elevated
stock-based compensation expense.

Product growth bills elevated by $1.9 million, or 15%, in fiscal 12 months
2020 in comparison with fiscal 12 months 2019, primarily because of elevated personnel prices of
$1.8 million consequently of annual compensation will increase.

Sales and Marketing Expenses

Sales and advertising and marketing bills elevated by $2.1 million, or 24%, in fiscal 12 months
2021 in comparison with fiscal 12 months 2020. This was primarily because of elevated personnel
prices of $2.2 million consequently of elevated incentive compensation related
with the achievement of efficiency goals for fiscal 12 months 2021 and
elevated stock-based compensation expense.

Sales and advertising and marketing bills elevated by $0.1 million, or 1%, in fiscal 12 months
2020 in comparison with fiscal 12 months 2019.

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General and Administrative Expenses

General and administrative bills elevated by $3.1 million, or 13%, in fiscal
12 months 2021 in comparison with fiscal 12 months 2020. This was primarily because of elevated
personnel prices of $2.0 million consequently of elevated stock-based
compensation expense and elevated incentive compensation related to the
achievement of efficiency goals for fiscal 12 months 2021.

General and administrative bills decreased by $6.6 million, or 22%, in fiscal
12 months 2020 in comparison with fiscal 12 months 2019, primarily because of a cost of $8.7
million for unhealthy debt expense associated to a big former schooling shopper recorded
in fiscal 12 months 2019, offset by elevated personnel prices together with stock-based
compensation expense of $1.4 million, and elevated amenities expense of $0.6
million.

Interest and Other Income, Net


                                       Fiscal Year Ended June 30,             2021 - 2020        2020- 2019
                                    2021           2020          2019          % Change           % Change
                                             (In 1000's)
Interest revenue                  $       39      $     230     $     290               (83 %)            (21 %)
Interest expense                     (1,296 )         (696 )        (367 )              86 %              90 %
Other revenue, web                    16,660         12,947            69                29 %              NM

Interest and different revenue, web $ 15,403 $ 12,481 $ (8 )

            23 %              NM


NM - not significant

Interest revenue pertains to curiosity earned on our money and money equivalents in
fiscal years 2021, 2020 and 2019.

Interest expense elevated by $0.6 million, or 86%, in fiscal 12 months 2021 in contrast
to fiscal 12 months 2020 primarily because of elevated imputed curiosity on the next
common excellent steadiness of the post-closing funds associated to our enterprise
acquisitions accomplished in fiscal 12 months 2021. Interest expense elevated by $0.3
million, or 90%, in fiscal 12 months 2020 in comparison with fiscal 12 months 2019 primarily due
to elevated imputed curiosity on the next common excellent steadiness of the
post-closing funds associated to our enterprise acquisitions accomplished in fiscal
12 months 2019.

Other revenue, web, was $16.7 million in fiscal 12 months 2021 primarily because of a achieve
of $16.6 million acknowledged from the divestiture of our schooling shopper
vertical. Other revenue, web, was $12.9 million in fiscal 12 months 2020 primarily due
to a web disposition achieve of $13.6 million acknowledged from the enterprise
divestitures accomplished in the course of the fiscal 12 months. Other revenue, web, was immaterial
in fiscal 12 months 2019.

(Provision for) Benefit from Income Taxes


                                                        Fiscal Year Ended June 30,
                                                       2021          2020        2019
                                                              (In 1000's)
(Provision for) profit from revenue taxes           $   (5,774 )    $ (584 )   $ 51,761
Effective tax price                                        19.7 %       3.1 %     (482.9 %)


We recorded a provision for revenue taxes of $5.8 million in fiscal 12 months 2021,
primarily consequently of deferred federal and state revenue taxes of $5.3 million
and present state and overseas taxes of $0.4 million.

We recorded a provision for revenue taxes of $0.6 million in fiscal 12 months 2020,
primarily consequently of deferred federal and state revenue taxes of $3.5
million, offset by an anticipated tax refund of $3.1 million to be obtained from
the California Franchise Tax Board, based mostly on a settlement reached within the third
quarter of fiscal 12 months 2020.

We recorded a valuation allowance in opposition to the bulk of our deferred tax
belongings on the finish of fiscal 12 months 2014. In the second quarter of fiscal 12 months
2019, because of the preponderance of optimistic proof, together with our cumulative
revenue earlier than taxes and future forecasts of continued profitability in the
United States, we decided that ample optimistic proof existed to
conclude that considerably all of our valuation allowance was now not wanted.
Accordingly, we recorded a one-time non-cash profit from revenue taxes of $49.4
million associated to the discharge of the valuation allowance for almost all of
our federal and states deferred tax belongings.

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Our efficient tax price was 19.7%, 3.1%, and (482.9%) in fiscal years 2021, 2020
and 2019. The change within the efficient tax price in fiscal 12 months 2019 was primarily
because of the launch of the valuation allowance associated to the United States
federal and state deferred tax belongings with the exception of California analysis
and growth tax credit and the profit of extra share-based compensation
tax deductions.

Selected Quarterly Financial Data

The following desk units forth our unaudited quarterly condensed consolidated
statements of operations for the eight quarters ended June 30, 2021. We have
ready the statements of operations for every of these quarters on the identical
foundation because the audited consolidated monetary statements included elsewhere in
this report and, within the opinion of administration, every assertion of operations
consists of all changes, consisting solely of regular recurring changes,
essential for the truthful assertion of the outcomes of operations for these durations.
This info must be learn at the side of the audited consolidated
monetary statements and associated notes included elsewhere on this report. These
quarterly working outcomes usually are not essentially indicative of our working
outcomes for any future interval.



                                                                       Three Months Ended
                           June 30,       Mar 31,       Dec 31,      Sept 30,      June 30,       Mar 31,       Dec 31,      Sept 30,
                             2021          2021          2020          2020          2020          2020          2019          2019
                                                              (In

1000’s, besides per share knowledge)

(unaudited)

Net income                $ 151,198     $ 153,052     $ 134,968     $ 

139,269 $ 116,961 $ 128,663 $ 118,101 $ 126,614
Costs of income

             132,623       132,665       120,437       

122,231 105,147 114,210 105,318 113,189
Gross revenue

                  18,575        20,387        14,531        

17,038 11,814 14,453 12,783 13,425
Operating bills:
Product growth

            4,568         4,905         4,980         

4,891 4,001 3,250 3,399 3,556
Sales and advertising and marketing

            2,688         2,768         2,892         

2,643 1,805 2,116 2,592 2,363
General and
administrative

                 6,339         6,460         6,890         6,581         6,789         5,076         5,498         5,825
Operating revenue (loss)        4,980         6,254          (231 )       2,923          (781 )       4,011         1,294         1,681
Interest revenue                    -             5            12            22            61            43            54            72
Interest expense                (349 )        (301 )        (307 )        (339 )        (130 )        (177 )        (177 )        (212 )
Other (expense) revenue,
web                              (35 )         (28 )          34        16,689         2,722        10,491            (9 )        (257 )
Income (loss) earlier than
revenue taxes                   4,596         5,930          (492 )     

19,295 1,872 14,368 1,162 1,284
(Provision for) profit
from revenue taxes

             (1,225 )        (893 )         958        

(4,614 ) (370 ) (449 ) 387 (152 )
Net revenue

                 $   3,371     $   5,037     $     466     $  

14,681 $ 1,502 $ 13,919 $ 1,549 $ 1,132

Net revenue per share:
(1)
Basic                      $    0.06     $    0.09     $    0.01     $    0.28     $    0.03     $    0.27     $    0.03     $    0.02
Diluted                    $    0.06     $    0.09     $    0.01     $    0.27     $    0.03     $    0.26     $    0.03     $    0.02

Other Financial Data:
Adjusted EBITDA            $  14,242     $  15,411     $  10,032     $  12,503     $   8,398     $   9,332     $   9,063     $   9,436







(1) Net revenue per share for the 4 quarters of every fiscal 12 months could not sum to

the overall for the fiscal 12 months consequently of the totally different quantity of shares

excellent throughout every interval.

Adjusted EBITDA

We embody adjusted EBITDA on this report as a result of (i) we search to handle our
enterprise to a stage of adjusted EBITDA as a proportion of web income, (ii) is
used internally by administration for planning functions, together with preparation of
inside budgets; to allocate assets; to guage the effectiveness of
operational methods and capital expenditures in addition to the capability to
service debt, (iii) it's a key foundation upon which administration assesses our
working efficiency, (iv) it's one of the first metrics buyers use in
evaluating Internet advertising and marketing corporations, (v) it's a think about figuring out
compensation, (vi) it is a component of sure monetary covenants beneath our
historic borrowing preparations, and (vii) it's a issue that assists
buyers within the evaluation of ongoing working tendencies. We outline adjusted EBITDA
as web revenue much less curiosity and different expense, web, provision for (profit from)
revenue

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taxes, depreciation expense, amortization expense, stock-based compensation
expense, acquisition and divestiture prices, achieve on divestitures of companies,
web, strategic overview prices, litigation settlement expense, tax settlement
expense, and restructuring prices.

We use adjusted EBITDA as a key efficiency measure as a result of we consider it
facilitates working efficiency comparisons from interval to interval by excluding
potential variations attributable to variations in capital constructions (affecting
curiosity expense), tax positions (such because the impression of adjustments in efficient tax
charges or fluctuations in everlasting variations or discrete quarterly gadgets),
non-recurring costs and sure different gadgets that we don't consider are
indicative of our core working actions (reminiscent of acquisition and divestiture
associated expense, achieve or loss on divestitures of companies, strategic overview
prices, litigation settlement expense, tax settlement expense, restructuring
prices, and different expense, web) and the non-cash impression of depreciation expense,
amortization expense and stock-based compensation expense.

In addition, we consider adjusted EBITDA and comparable measures are extensively utilized by
buyers, securities analysts, scores businesses and different  events in
our {industry} as a measure of monetary efficiency, debt-service capabilities
and as a metric for analyzing firm valuations. Our use of adjusted EBITDA has
limitations as an analytical instrument, and it shouldn't be thought of in isolation
or as an alternative to evaluation of our outcomes as reported beneath GAAP. Some of
these limitations are:

• adjusted EBITDA doesn’t replicate our money expenditures for capital

tools or different contractual commitments;

• though depreciation and amortization are non-cash costs, the belongings

being depreciated and amortized could have to get replaced sooner or later, and

adjusted EBITDA doesn’t replicate money capital expenditure necessities for

such replacements;

• adjusted EBITDA doesn’t replicate adjustments in, or money necessities for, our

        working capital wants;


    •   adjusted EBITDA doesn't think about the possibly dilutive impression of

issuing stock-based compensation to our administration staff and staff;

• ought to we enter into borrowing preparations sooner or later, adjusted EBITDA

doesn’t replicate the curiosity expense or the money necessities that could be

essential to service curiosity or principal funds on such indebtedness;

• adjusted EBITDA doesn’t replicate sure tax funds which will symbolize a

discount in money obtainable to us; and

• different corporations, together with corporations in our {industry}, could calculate

adjusted EBITDA measures in a different way, which reduces their usefulness as a

comparative measure.


Due to those limitations, adjusted EBITDA shouldn't be thought of as a measure
of discretionary money obtainable to us to spend money on the expansion of our enterprise.
When evaluating our efficiency, adjusted EBITDA must be thought of alongside
different monetary efficiency measures, together with varied money stream metrics, web
revenue (loss) and our different GAAP outcomes.

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The following desk presents a reconciliation of adjusted EBITDA to web revenue,
probably the most comparable GAAP measure, for every of the durations indicated:


                                                                       Three Months Ended
                           June 30,       Mar 31,       Dec 31,      Sept 30,      June 30,       Mar 31,       Dec 31,      Sept 30,
                             2021          2021          2020          2020          2020          2020          2019          2019
                                                                         (In 1000's)
                                                                           (unaudited)
Net revenue                 $   3,371     $   5,037     $     466     $  14,681     $   1,502     $  13,919     $   1,549     $   1,132
Interest and different
expense, web                     384           324           261           243           106           462           132           397
Provision for (profit
from) revenue taxes             1,225           893          (958 )       4,614           370           449          (387 )         152
Depreciation and
amortization                   4,191         3,874         4,003         4,133         2,959         2,851         2,854         2,812
Stock-based compensation
expense                        4,442         4,856         5,555         4,780         5,500         1,869         4,700         4,648
Acquisition and
divestiture prices                 45           160           330           276           634            40            16           295
Gain on divestitures of
companies, web                    -             -             -       (16,615 )      (2,759 )     (10,819 )           -             -
Strategic overview prices             -             -             -             -            68            63           199             -
Litigation settlement
expense                          231             -             -             -            15            80             -             -
Tax settlement expense           310             -             -             -             -             -             -             -
Restructuring prices               43           267           375           391             3           418             -             -
Adjusted EBITDA            $  14,242     $  15,411     $  10,032     $  

12,503 $ 8,398 $ 9,332 $ 9,063 $ 9,436

Net income                $ 151,198     $ 153,052     $ 134,968     $ 139,269     $ 116,961     $ 128,663     $ 118,101     $ 126,614
Net revenue as a
proportion of web
income                            2 %           3 %           - %          11 %           1 %          11 %           1 %           1 %
Adjusted EBITDA as a
proportion of web
income                            9 %          10 %           7 %           9 %           7 %           7 %           8 %           7 %


We search to handle our enterprise to a stage of adjusted EBITDA as a proportion of
web income. We achieve this on a fiscal 12 months foundation by various our operations to
steadiness income development and prices all through the fiscal 12 months. We don't search to
handle our enterprise to a stage of adjusted EBITDA on a quarterly foundation and we
count on our adjusted EBITDA margins to range from quarter to quarter.

Liquidity and Capital Resources

As of June 30, 2021, our principal sources of liquidity consisted of money and
money equivalents of $110.3 million and money we count on to generate from future
operations. Our money and money equivalents are maintained in extremely liquid
investments with remaining maturities of 90 days or much less on the time of
buy. We consider our money equivalents are liquid and accessible.

Our short-term and long-term liquidity necessities primarily come up from our
working capital necessities, capital expenditures, inside software program
growth prices and acquisitions once in a while. Our acquisitions in fiscal
years 2021 and 2019 even have deferred buy value elements and contingent
consideration which requires us to make a collection of funds following the
acquisition cut-off date. Our major working money necessities embody the
fee of media prices, personnel prices, prices of info know-how programs
and workplace amenities. Our capability to fund these necessities will rely upon our
future money flows, that are decided, partially, by future working
efficiency and are, due to this fact, topic to prevailing international macroeconomic
circumstances together with the impression of COVID-19, and monetary, enterprise and different
elements, some of that are past our management. Even although we could not want
further funds to fund anticipated liquidity necessities, we should elect
to acquire debt financing or concern further fairness securities for different
causes.

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We consider that our principal sources of liquidity will likely be ample to fulfill
our presently anticipated money necessities by no less than the subsequent 12 months.

The following desk summarizes our money flows for the durations indicated:


                                                            Fiscal Year Ended June 30,
                                                         2021          2020          2019
                                                                  (In 1000's)
Net money supplied by working
actions                                             $  50,615     $  47,608     $  37,965
Net money (utilized in) supplied by
investing actions                                     (36,457 )       8,868       (36,989 )
Net money utilized in financing
actions                                               (11,312 )     (11,632 )      (4,054 )

Net Cash Provided by Operating Activities

Cash flows from working actions are primarily the consequence of our web revenue
adjusted for depreciation and amortization, profit from or provision for gross sales
returns and uncertain accounts receivable, stock-based compensation expense,
non-cash lease expense, positive aspects and losses on divestitures of companies, deferred
revenue taxes and adjustments in working capital elements.

Cash supplied by working actions was $50.6 million in fiscal 12 months 2021
in comparison with $47.6 million in fiscal 12 months 2020 and $38.0 million in fiscal 12 months
2019.

Cash supplied by working actions in fiscal 12 months 2021 consisted of web
revenue of $23.6 million, adjusted for non-cash changes of $24.2 million and
adjustments in working capital accounts of $2.8 million. The non-cash changes
primarily consisted of stock-based compensation expense of $19.6 million,
depreciation and amortization of $16.2 million, and a lower in deferred tax
belongings of $5.4 million primarily because of provision for revenue taxes recorded in
fiscal 12 months 2021, offset by a achieve of $16.6 million acknowledged from the
divestiture of our schooling shopper vertical. The adjustments in working capital
accounts had been primarily attributable to a rise in accrued liabilities of
$10.6 million, a rise in accounts payable of $6.6 million, and a lower
in pay as you go bills and different belongings of $6.0 million, offset by a rise in
accounts receivable of $20.1 million. The will increase in accounts payable and
accrued liabilities had been because of the timing of funds. The lower in pay as you go
bills and different belongings was primarily because of the refund of an unamortized
pay as you go expense of $5.3 million. The improve in accounts receivable was because of
the timing of receipts.

Cash supplied by working actions in fiscal 12 months 2020 consisted of web
revenue of $18.1 million, adjusted for non-cash changes of $19.4 million and
adjustments in working capital accounts of $10.1 million. The non-cash changes
primarily consisted of stock-based compensation expense of $16.7 million and
depreciation and amortization of $11.5 million, offset by a web disposition achieve
of $13.6 million acknowledged from the enterprise divestitures accomplished in fiscal
12 months 2020. The adjustments in working capital accounts had been primarily attributable
to a lower in accounts receivable of $11.4 million and a lower in different
belongings, noncurrent of $5.5 million, offset by a rise in pay as you go bills
and different belongings of $8.1 million. The lower in accounts receivable was because of
the timing of receipts. The lower in different belongings, noncurrent, was primarily
because of a reclassification of unamortized pay as you go expense of $4.3 million from
long-term to short-term as we anticipated to obtain fee inside the subsequent 12
months. The improve in pay as you go bills and different belongings was primarily because of
the reclassification of $4.3 million as mentioned above, in addition to an anticipated
tax refund of $3.1 million to be obtained from the California Franchise Tax
Board, based mostly on a settlement reached within the third quarter of fiscal 12 months 2020.

Cash supplied by working actions in fiscal 12 months 2019 consisted of web
revenue of $62.5 million, adjusted for non-cash changes of $19.0 million and
adjustments in working capital accounts of $5.6 million. The non-cash changes
primarily consisted of a one-time non-cash profit of $49.4 million associated to
our launch of the valuation allowance for almost all of our federal and
states deferred tax belongings, offset by stock-based compensation expense of $14.1
million, depreciation and amortization of $9.0 million, and unhealthy debt expense of
$8.7 million associated to a big former schooling shopper. The adjustments in working
capital accounts had been primarily attributable to a rise in accounts
receivable of $8.3 million and a lower in accrued liabilities of $3.4
million, offset by a rise in accounts payable of $4.5 million. The improve
in accounts receivable is primarily because of the improve in income, the lower
in accrued liabilities is primarily because of a lower in accrued efficiency
incentive compensation related to the decrease achievement of efficiency
goals and the rise in accounts payable is primarily because of the timing
of funds.

Net Cash (Used in) Provided by Investing Activities

Cash flows from investing actions usually embody capital expenditures,
capitalized inside software program growth prices, acquisitions once in a while,
enterprise divestitures, and funding in fairness securities.

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Cash utilized in investing actions was $36.5 million in fiscal 12 months 2021,
in comparison with money supplied by investing actions of $8.9 million in fiscal 12 months
2020 and money utilized in investing actions of $37.0 million in fiscal 12 months 2019.

Cash utilized in investing actions in fiscal 12 months 2021 was primarily because of
funds for the acquisitions of Modernize, Mayo Labs and FCE, web of money
acquired, of $49.3 million, capital expenditures and inside software program
growth prices of $5.1 million, and funding in fairness securities of $4.0
million, offset by $21.9 million of money obtained from the divestitures of our
schooling shopper vertical and B2B shopper vertical.

Cash supplied by investing actions in fiscal 12 months 2020 was primarily because of
$15.4 million money obtained from the enterprise divestitures accomplished in fiscal
12 months 2020, web of money divested of $0.3 million, offset by capital expenditures
and inside software program growth prices of $4.3 million, and a money fee of
$2.0 million related to an insignificant enterprise acquisition accomplished in
fiscal 12 months 2020.

Cash utilized in investing actions in fiscal 12 months 2019 was primarily because of our
acquisitions of AmOne, CCM and MBT in fiscal 12 months 2019 for $32.7 million, web of
money acquired of $3.1 million and capital expenditures and inside software program
growth prices of $4.3 million.

Net Cash Used in Financing Activities

Cash flows from financing actions usually embody fee of withholding
taxes associated to the discharge of restricted inventory, web of share settlement,
proceeds from the train of inventory choices, and post-closing funds associated
to enterprise acquisitions.

Cash utilized in financing actions was $11.3 million in fiscal 12 months 2021,
in comparison with money utilized in financing actions of $11.6 million in fiscal 12 months
2020 and $4.1 million in fiscal 12 months 2019.

Cash utilized in financing actions in fiscal 12 months 2021 was because of the fee of
withholding taxes associated to the discharge of restricted inventory, web of share
settlement of $8.0 million, and fee of post-closing funds and contingent
consideration associated to acquisitions of $7.7 million, offset by proceeds from
the train of inventory choices of $4.4 million.

Cash utilized in financing actions in fiscal 12 months 2020 was because of the
post-closing funds and contingent consideration associated to acquisitions of
$9.3 million, and funds of withholding taxes associated to the discharge of
restricted inventory, web of share settlement of $6.4 million, offset by proceeds
from the train of inventory choices of $4.1 million.

Cash utilized in financing actions in fiscal 12 months 2019 was because of the funds of
withholding taxes associated to the discharge of restricted inventory, web of share
settlement of $9.9 million and post-closing funds associated to acquisitions of
$2.0 million, offset by proceeds from the train of inventory choices of $7.8
million.

Off-Balance Sheet Arrangements

During the durations offered, we didn't have any materials relationships with
unconsolidated entities or monetary partnerships, reminiscent of entities usually
known as structured finance or particular function entities, which might have
been established for the aim of facilitating off-balance sheet preparations
or different contractually slim or restricted functions.

Contractual Obligations

The following desk units forth funds due beneath our contractual obligations as
of June 30, 2021:



                                       Total         Less than 1 Year       1-3 Years       3-5 Years
                                                              (In 1000's)
Operating leases (1)                 $   16,621     $            6,432     $     9,432     $       757
Post-closing fee associated to
acquisitions (2)                         34,954                 10,262          14,966           9,726
Contingent consideration associated
to acquisitions (2)                       5,432                  2,584           2,848               -
Total                                $   57,007     $           19,278     $    27,246     $    10,483



(1) We lease varied workplace amenities, together with our company headquarters in

Foster City, California. The phrases of sure lease agreements embody hire

    escalation provisions and tenant enchancment allowances.


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In February 2010, we entered right into a lease settlement for our company
headquarters situated at 950 Tower Lane, Foster City, California with an
expiration date in October 2018 and an choice to increase the time period of the lease
twice by one further 12 months. In April 2018, the lease settlement was amended to
lengthen the lease time period by October 31, 2023. Under the amended lease
settlement, in the course of the first 12 months of the prolonged lease time period, the month-to-month base
hire was abated for the primary eight months and elevated to $0.2 million for the
remaining 4 months. During the second 12 months of the prolonged lease time period, the
month-to-month base hire was abated for the primary 5 months and elevated to $0.3
million for the remaining seven months. Subsequently, after every 12-month
anniversary, the month-to-month base hire will increase by roughly 3%. We have an
choice to increase the time period of the lease for a further 5 years following
October 31, 2023.

(2) In accordance with the phrases of the acquisitions accomplished in fiscal years

2021 and 2019, we’re required to make post-closing funds and contingent

consideration funds. See Note 6, Acquisitions, to our consolidated

monetary statements for extra info on the post-closing funds and

contingent consideration funds associated to our enterprise acquisitions.

The above desk doesn’t embody roughly $2.4 million of long-term revenue
tax liabilities for uncertainty in revenue taxes because of the truth that we’re
unable to fairly estimate the timing of these potential future funds.

Critical Accounting Policies and Estimates

We have ready our consolidated monetary statements in conformity with
accounting ideas usually accepted in the United States of America
("GAAP"). In doing so, we're required to make estimates and assumptions that
have an effect on the reported quantities of belongings and liabilities, disclosure of contingent
belongings and liabilities on the date of the monetary statements and reported
quantities of income and bills in the course of the reporting interval. Actual outcomes could
differ considerably from these estimates. Some of the estimates and assumptions
we're required to make relate to issues which can be inherently unsure as they
pertain to future occasions. We base these estimates and assumptions on historic
expertise or on varied different elements that we consider to be affordable and
acceptable beneath the circumstances. On an ongoing foundation, we rethink and
consider our estimates and assumptions.

Additionally, COVID-19 is an element which can trigger precise outcomes to vary from
estimates. COVID-19 is contributing to a basic slowdown within the international financial system
and could have an effect on our enterprise, outcomes of operations, monetary situation, and
future strategic plans. At this time, the extent to which the COVID-19 could
impression our monetary situation or outcomes of operations is unsure.

We refer to those estimates and assumptions as crucial accounting insurance policies and
estimates. We consider that the crucial accounting insurance policies listed under contain
our extra vital judgments, estimates and assumptions and, due to this fact, may
have the best potential impression on our consolidated monetary statements. In
addition, we consider {that a} dialogue of these insurance policies is critical to
perceive and consider the consolidated monetary statements contained on this
report.

See Note 2, Summary of Significant Accounting Principles, to our consolidated
monetary statements for additional info on our crucial and different
vital accounting insurance policies.

Revenue Recognition

We generate our income primarily from charges earned by the supply of
certified inquiries reminiscent of clicks, leads, calls, purposes, or clients. We
acknowledge income after we switch management of promised items or providers to our
shoppers in an quantity that displays the consideration to which we count on to be
entitled in change for these items or providers. We acknowledge income pursuant
to the five-step framework contained in ASC 606, Revenue from Contracts with
Customers: (i) determine the contract with a shopper; (ii) determine the
efficiency obligations within the contract, together with whether or not they're distinct in
the context of the contract; (iii) decide the transaction value, together with
the constraint on variable consideration; (iv) allocate the transaction value to
the efficiency obligations within the contract; and (v) acknowledge income when (or
as) the Company satisfies the efficiency obligations.

As half of figuring out whether or not a contract exists, likelihood of assortment is
assessed on a client-by-client foundation on the outset of the contract. Clients are
subjected to a credit score overview course of that evaluates the shoppers' monetary
place and the flexibility and intention to pay. If it's decided from the
outset of an association that the shopper doesn't have the flexibility or intention
to pay, we are going to conclude {that a} contract doesn't exist and will repeatedly
reassess our analysis till we're capable of conclude {that a} contract does
exist.

Generally, our contracts specify the interval of time as one month, however in some
cases the time period could also be longer. However, for many of our contracts with
shoppers, both social gathering can terminate the contract at any time with out penalty.
Consequently, enforceable rights and obligations solely exist on a day-to-day
foundation, leading to particular person each day contracts in the course of the specified time period of the
contract or till one social gathering terminates the contract previous to the top of the
specified time period.

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We have assessed the providers promised in our contracts with shoppers and have
recognized one efficiency obligation, which is a collection of distinct providers.
Depending on the shopper's wants, these providers consist of a specified or an
limitless quantity of clicks, leads, calls, purposes, clients, and so on.
(hereafter collectively known as "advertising and marketing outcomes") to be delivered over
a interval of time. We fulfill these efficiency obligations over time because the
providers are supplied. We don't promise to offer some other vital items
or providers to our shoppers.

Transaction value is measured based mostly on the consideration that we count on to
obtain from a contract with a shopper. Our contracts with shoppers comprise
variable consideration as the worth for a person advertising and marketing consequence varies on
a day-to-day foundation relying on the market-driven quantity a shopper has dedicated
to pay. However, as a result of we make sure the acknowledged interval of our contracts doesn't
usually span a number of reporting durations, the contractual quantity inside a
interval is predicated on the quantity of advertising and marketing outcomes delivered inside the interval.
Therefore, the transaction value for any given interval is mounted and no estimation
of variable consideration is required.

If a advertising and marketing consequence delivered to a shopper doesn't meet the contractual
necessities related to that advertising and marketing consequence, our contracts permit for
shoppers to return a advertising and marketing consequence usually inside 5-10 days of having
obtained the advertising and marketing consequence. Such returns are factored into the quantity billed
to the shopper on a month-to-month foundation and consequently lead to a discount to
income in the identical month the advertising and marketing result's delivered. No warranties are
provided to our shoppers.

We don't allocate transaction value as now we have just one efficiency obligation
and our contracts don't usually span a number of durations. Taxes collected from
shoppers and remitted to governmental authorities usually are not included in income. We
elected to make use of the sensible expedient which permits us to file gross sales
commissions as expense as incurred when the amortization interval would have been
one 12 months or much less.

We invoice shoppers month-to-month in arrears for the advertising and marketing outcomes delivered throughout
the previous month. Our customary fee phrases are 30-60 days. Consequently, we
wouldn't have vital financing elements in our preparations.

Separately from the agreements that now we have with shoppers, now we have agreements
with Internet search corporations, third-party publishers and strategic companions
that we have interaction with to generate focused advertising and marketing outcomes for our shoppers. We
obtain a payment from our shoppers and individually pay a payment to the Internet search
corporations, third-party publishers and strategic companions. We consider whether or not we
are the principal (i.e., report income on a gross foundation) or agent (i.e., report
income on a web foundation). In doing so, we first consider whether or not we management the
items or providers earlier than they're transferred to the shoppers. If we management the
items or providers earlier than they're transferred to the shoppers, we're the
principal within the transaction. As a consequence, the charges paid by our shoppers are
acknowledged as income and the charges paid to our Internet search corporations,
third-party publishers and strategic companions are included in value of income.
If we don't management the products or providers earlier than they're transferred to the
shoppers, we're the agent within the transaction and acknowledge income on a web
foundation. We have one subsidiary, CCM, which supplies efficiency advertising and marketing company
and know-how providers to shoppers in monetary providers, schooling and different
markets, recognizing income on a web foundation. Determining whether or not we management the
items or providers earlier than they're transferred to the shoppers could require
judgment.

Stock-Based Compensation

We measure and file the expense associated to stock-based transactions based mostly on
the truthful worth of the stock-based fee awards as decided on the date of
grant. The truthful worth of restricted inventory models with a service situation
("service-based RSU") is set based mostly on the closing value of our frequent
inventory on the date of grant. For inventory choices, now we have chosen and used the
Black-Scholes choice pricing mannequin to estimate the truthful worth. The truthful worth of
restricted inventory models with a service and efficiency situation
("performance-based RSU") is set based mostly on the closing value of our frequent
inventory on the date of grant. Grant date as outlined by ASC 718 is set when
the elements that comprise the efficiency targets have been absolutely
established. If a grant date has not been established, the compensation expense
related to the performance-based RSU is re-measured at every reporting date
based mostly on the closing value of our frequent inventory at every reporting date till the
grant date has been established. For restricted inventory models with a service and
market situation ("market-based RSU"), now we have chosen and used the Monte Carlo
simulation mannequin to estimate the truthful worth on the date of grant.

In making use of these fashions, our willpower of truthful worth is affected by
assumptions concerning a quantity of subjective variables. These variables embody,
however usually are not restricted to, the anticipated inventory value volatility over the time period of the
award and the workers' precise and projected inventory choice train and
pre-vesting employment termination behaviors. We estimate the anticipated
volatility of our frequent inventory based mostly on our historic volatility over the
anticipated time period of the award. We haven't any historical past or expectation of paying
dividends on our frequent inventory. The risk-free rate of interest is predicated on the U.S.
Treasury yield for a time period in step with the anticipated time period of the award.

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We acknowledge stock-based compensation expense for choices and service-based RSUs
utilizing the straight-line methodology, and for performance-based RSUs and market-based
RSUs utilizing the graded vesting methodology, based mostly on awards in the end anticipated to
vest. We estimate future forfeitures on the date of grant. On an annual foundation,
we assess adjustments in our estimate of anticipated forfeitures based mostly on current
forfeiture exercise. The impact of changes made to forfeiture charges, if any,
is acknowledged within the interval that the change is made.

Business Combinations

We account for enterprise combos utilizing the acquisition methodology, which
requires that the overall consideration for every of the acquired enterprise be
allotted to the belongings acquired and liabilities assumed based mostly on their
estimated truthful values on the acquisition date. The extra of the acquisition value
over the truthful values of these identifiable belongings and liabilities is recorded as
goodwill. During the measurement interval, which can be as much as one 12 months from the
acquisition date, we could file changes to the belongings acquired and
liabilities assumed with the corresponding offset to goodwill.

In figuring out the truthful worth of belongings acquired and liabilities assumed in a
enterprise mixture, we used the revenue method to worth our most vital
acquired belongings. Significant assumptions regarding our estimates within the revenue
method embody base income, income development price web of shopper attrition,
projected gross margin, low cost charges, projected working bills and the
future efficient revenue tax charges. The valuations of our acquired companies
have been carried out by a third-party valuation specialist beneath our administration's
supervision. We consider that the estimated truthful worth assigned to the belongings
acquired and liabilities assumed are based mostly on affordable assumptions and
estimates that market contributors would use. However, such assumptions are
inherently unsure and precise outcomes may differ from these estimates.
Future adjustments in our assumptions or the interrelationship of these assumptions
could negatively impression future valuations. In future measurements of truthful worth,
antagonistic adjustments in discounted money stream assumptions may lead to an
impairment of goodwill or intangible belongings that might require a non-cash cost
to the consolidated statements of operations and could have a cloth impact on
our monetary situation and working outcomes.

Acquisition associated prices usually are not thought of half of the consideration, and are
expensed as working bills as incurred. Contingent consideration, if any, is
measured at truthful worth initially on the acquisition date in addition to subsequently
on the finish of every reporting interval till settlement on the finish of the
evaluation interval. We embody the outcomes of operations of the companies
acquired as of the start of the acquisition dates.

Goodwill

We conduct a take a look at for the impairment of goodwill on the reporting unit stage on
no less than an annual foundation and at any time when there are occasions or adjustments in
circumstances that might extra seemingly than not scale back the estimated truthful worth of
a reporting unit under its carrying worth. Application of the goodwill
impairment take a look at requires judgment, together with the identification of reporting
models, assigning belongings and liabilities to reporting models, assigning goodwill
to reporting models, and figuring out the truthful worth of every reporting unit.
Significant judgments required to estimate the truthful worth of reporting models
embody estimating future money flows and figuring out acceptable low cost charges,
development charges, an acceptable management premium and different assumptions. Changes in
these estimates and assumptions may materially have an effect on the willpower of
truthful worth for every reporting unit which may set off impairment.

We carry out our annual goodwill impairment take a look at on April 30 and conduct a
qualitative evaluation to find out whether or not it's essential to carry out a
quantitative goodwill impairment take a look at. In assessing the qualitative elements, we
think about the impression of key elements reminiscent of adjustments within the basic financial
circumstances together with the impression of COVID-19, adjustments in {industry} and aggressive
surroundings, inventory value, precise income efficiency in comparison with earlier years,
forecasts and money stream technology. We had one reporting unit for functions of
allocating and testing goodwill for fiscal years 2021 and 2020. Based on the
outcomes of the qualitative evaluation accomplished as of April 30, 2021 and 2020,
there have been no indicators of impairment.

Long-Lived Assets

We consider long-lived belongings, reminiscent of property and tools and bought
intangible belongings with finite lives, for impairment at any time when occasions or adjustments
in circumstances point out that the carrying worth of an asset is probably not
recoverable. If essential, a quantitative take a look at is carried out that requires the
software of judgment when assessing the truthful worth of an asset. When we
determine an impairment, we scale back the carrying quantity of the asset to its
estimated truthful worth based mostly on a reduced money stream method or, when obtainable
and acceptable, to comparable market values. As of April 30, 2021 and 2020, we
evaluated our long-lived belongings and concluded there have been no indicators of
impairment.

                                       49

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Income Taxes

We account for revenue taxes utilizing an asset and legal responsibility method to file
deferred taxes. Our deferred revenue tax belongings symbolize non permanent variations
between the monetary assertion carrying quantity and the tax foundation of current
belongings and liabilities that can lead to deductible quantities in future years,
together with web working loss carry forwards. Deferred tax belongings and liabilities
are measured utilizing the presently enacted tax charges that apply to taxable revenue
in impact for the years wherein these tax belongings and liabilities are anticipated
to be realized or settled. Valuation allowances are supplied when essential to
scale back deferred tax belongings to the quantity anticipated to be realized. We frequently
assess the realizability of our deferred tax belongings. Judgment is required to
decide whether or not a valuation allowance is critical and the quantity of such
valuation allowance, if acceptable. We think about all obtainable proof, each
optimistic and destructive, to find out, based mostly on the burden of obtainable proof,
whether or not it's extra seemingly than not that some or all of the deferred tax belongings
is not going to be realized. In evaluating the necessity, or continued want, for a valuation
allowance we think about, amongst different issues, the character, frequency and severity of
present and cumulative taxable revenue or losses, forecasts of future
profitability, and the length of statutory carryforward durations. Our judgment
concerning future profitability could change because of future market circumstances
together with the impression of COVID-19, adjustments in U.S. or worldwide tax legal guidelines and
different elements.

We acknowledge tax advantages from an unsure tax place solely whether it is extra
seemingly than not, based mostly on the technical deserves of the place, that the tax
place will likely be sustained on examination by the tax authorities. The tax
advantages acknowledged within the monetary statements from such positions are then
measured based mostly on the biggest profit that has a better than 50% probability of
being realized upon final settlement.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our consolidated
monetary statements for info with respect to current accounting
pronouncements and the impression of these pronouncements on our consolidated
monetary statements.

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