In case you missed it, here’s the Press Release. I’m going to share a basic overview and my thoughts on this deal, as well as provide some insight into QuinStreet’s1 acquisitions this decade.
What is Get The Referral?
As its name indicates, it’s a platform that helps generate customer referrals for its clients. They focus on Home Improvement and have a branded Referrals app. They also offer an app to help sales reps follow up on referrals. They integrate with a number of CRMs to automate referral workflows.
Why did they make this acquisition?
From their website, GTR’s pricing is between $400-$2K/month (when paying monthly). I can’t find an active advertiser count in any of the announcements, so I won’t speculate on what their average client revenue is. But looking at those numbers, one has to presume that the recurring revenue is lower than Modernize’s average lead revenue per client.
A smaller acquisition like this is likely driven more by collecting sticky products to offer core clients, rather than client acquisition or revenue. You could also argue that GTR could make Modernize’s leads slightly more valuable if it helps sold customers generate additional revenue.
From the announcement
“For Modernize clients, the addition of GTR means one platform covering both sides of growth: high-intent homeowner demand, plus the financing, marketing services, and now referral tools that turn customers they have already served into the next great job.”
I think it’s interesting they’re listing the three angles of leads, finance, and marketing services. Reading the tea leaves, I believe “homeowner demand” is leads and “marketing services” is the media buying service they announced back in August.
Home Services Focus
What’s interesting is that 6 of QuinStreet’s last 9 acquisitions were in Home Services (66.67%). It’s even more staggering from a dollar standpoint: Of known prices, the total spent on acquisitions since 2020, 92.53% of the money went to Home Services. If you include AquaVida, which is partially home services, the percentage goes to 95.20%.
QuinStreet operates in Home Services, Insurance, Personal Loans, and Credit Cards (with the last 3 being lumped into the “Financial Services” category for reporting. With four categories, they seem to be hyper-focused on growing Home Services through acquisition, with a few smaller ones in Insurance. That said, they did acquire AmOne for $28.3MM in 2018, and MyBankTracker in 2019 for an undisclosed amount.
Here’s a list of all of the acquisitions this decade I found in my research. Definitely a chance I missed one, but these are what I could gather. I should also mention that I asked a friend and current QuinStreet employee this week how many acquisitions he thought they made since 2020, and his answer was four.
QuinStreet didn’t disclose the price in the announcement, but if they provide details in future filings, I’ll report back.
I won’t speculate on which acquisitions might be related to the undisclosed prices, but we get a bit of insight on scale from the 2022 10K:
“Cash used in investing activities in fiscal year 2022 was primarily due to capital expenditures and internal software development costs of $7.5 million, and $1.8 million cash paid at the closing of two immaterial acquisitions completed in fiscal year 2022”
Why Are Some Prices Not Disclosed?
Public companies only need to disclose the purchase price for “Material Acquisitions”. Generally speaking, the income, assets, or investment in the new company must be over 20% of the purchaser’s same item. For example, if a company doing $100MM in revenue buys a firm doing $21MM, then they would need to disclose.
Summary
I mentioned the heavy Home Services focus in my last email about QuinStreet’s earnings reports since they had just announced the HomeBuddy acquisition. Buying Get The Referral only further proves that they believe Home Services is their golden goose, and I wouldn’t be surprised to see more acquisitions down the line.
Disclosures
Texting and Referrals aren’t inherently Home Services, but both ContractorTexter and Get The Referral specialized in home improvement and serviced that type of client.
I managed ConXPros for about two years. I also sat on the M&A committee for a few years during my time at QuinStreet.
QuinStreet acquired Modernize in 2020 and uses the name/branding for their home services division. I will use QuinStreet and Modernize interchangeably here.