QuinStreet, Inc. (Nasdaq:QNST), a leading Internet performance
marketing company, today announced its financial results for its
fiscal second quarter ended December 31, 2013.
The Company reported revenue of $66.1 million and adjusted
EBITDA of $6.5 million, or 10% of revenue.
For the quarter, adjusted net income was $3.0 million, or $0.07
per diluted share, and GAAP net loss was $44 million, or $1.01 per
share. Adjusted net income excludes stock-based compensation
expense, amortization of intangible assets and tax valuation
allowance, net of estimated tax.
The Company generated $6.5 million in operating cash flow and
closed the quarter with $122 million in cash and marketable
securities and $37 million in net cash.
Reconciliations of adjusted net income to net loss and adjusted
EBITDA to net loss are included in the accompanying tables.
"We continue to focus on diversifying our products, media and
markets to drive future growth. We are making good progress in
those efforts while maintaining a strong balance sheet,
profitability and cash flow," commented Doug Valenti, QuinStreet
CEO. "Revenue last quarter was slightly below the outlook we
provided, due primarily to unexpected changes in client budgets at
year end. EBITDA margin was in line with our outlook. For the March
quarter, we expect revenue in the range of $68 to $72 million, with
an adjusted EBITDA margin of approximately 10%. We remain in a
period of transition, navigating familiar challenges while
investing aggressively in initiatives that are fast-growing but
still early in their impact and scale. I am excited to report that
our full range of new products in auto insurance will launch this
quarter, which should allow us to stabilize and more quickly
re-scale that business. I have met with major clients in auto
insurance who have confirmed their strong interest. We expect to
see much more meaningful contributions from those products in our
fiscal fourth quarter."
Conference Call Today at 2:00 p.m.
PT
QuinStreet will host a conference call and corresponding live
webcast at 2:00 p.m. PT today. To access the conference call, dial
1-866-240-0819 for the U.S. and Canada and 1-973-200-3360 for
international callers. The webcast will be available live on the
investor relations section of the Company's website at
http://investor.quinstreet.com, and via replay beginning
approximately two hours after the completion of the call until the
Company's announcement of its financial results for the next
quarter. An audio replay of the call will also be available to
investors beginning at approximately 5:00 p.m. PT on February 4,
2014 by dialing 1-855-859-2056 in the U.S. and Canada, or
1-404-537-3406 for international callers, using passcode 33242918#.
This press release, the financial tables, as well as other
supplemental financial information are also available on the
investor relations section of the Company's website at
http://investor.quinstreet.com.
Non-GAAP Financial Measures
This release and the accompanying tables include a discussion of
adjusted EBITDA, adjusted net income and adjusted diluted net
income per share, all of which are non-GAAP financial measures that
are provided as a complement to results provided in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). The term "adjusted EBITDA" refers to a financial
measure that we define as net (loss) income less provision for
taxes, depreciation expense, amortization expense, stock-based
compensation expense, interest and other income (expense), net, and
impairment of goodwill. The term "adjusted net income" refers to a
financial measure that we define as net (loss) income adjusted for
amortization expense, stock-based compensation expense, impairment
of goodwill and tax valuation allowance, net of estimated taxes.
The term "adjusted diluted net income per share" refers to a
financial measure that we define as adjusted net income divided by
weighted average diluted shares outstanding. These non-GAAP
measures should be considered in addition to results prepared in
accordance with GAAP, but should not be considered a substitute
for, or superior to, GAAP results. In addition, our definition of
adjusted EBITDA, adjusted net income and adjusted diluted net
income per share may not be comparable to the definitions as
reported by other companies.
We believe adjusted EBITDA, adjusted net income and adjusted
diluted net income per share are relevant and useful information
because they provide us and investors with additional measurements
to analyze the Company's operating performance.
Adjusted EBITDA is part of our internal management reporting and
planning process and one of the primary measures used by our
management to evaluate the operating performance of our business,
as well as potential acquisitions. Adjusted EBITDA is useful to us
and investors because it provides information related to the
Company's ability to provide cash flow for acquisitions, capital
expenditures and working capital requirements. Internally, adjusted
EBITDA is used by management for planning purposes, including
preparation of internal budgets; to allocate resources; to evaluate
the effectiveness of operational strategies; and to evaluate the
Company's capacity to fund acquisitions and capital expenditures as
well as the capacity to service debt. Adjusted EBITDA is used as a
key financial metric in senior management's annual incentive
compensation program. The Company believes that analysts and
investors use adjusted EBITDA as a supplemental measurement to
evaluate the overall operating performance of companies in its
industry and use adjusted EBITDA multiples as a metric for
analyzing company valuations. It is also an element of certain
maintenance covenants under our debt agreements.
Adjusted net income and adjusted diluted net income per share
are useful to us and investors because they present an additional
measurement of our financial performance, taking into account
depreciation, which we believe is an ongoing cost of doing
business, but excluding the impact of certain non-cash expenses
(stock-based compensation, amortization of intangible assets and
impairment of goodwill). The Company believes that analysts and
investors use adjusted net income and adjusted diluted net income
per share as supplemental measures to evaluate the overall
operating performance of companies in our industry.
We intend to provide these non-GAAP financial measures as part
of our future earnings discussions and, therefore, the inclusion of
these non-GAAP financial measures will provide consistency in our
financial reporting. A reconciliation of these non-GAAP measures to
GAAP is provided in the accompanying tables.
Legal Notice Regarding Forward Looking
Statements
This press release and its attachments contain forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 that involve risks and uncertainties. Words
such as "estimate", "will, " "believe, " "intend", "potential" and
similar expressions are intended to identify forward-looking
statements. These forward-looking statements include the statements
in quotations from management in this press release, as well as any
statements regarding the Company's anticipated financial results,
growth and strategic and operational plans. The Company's actual
results may differ materially from those anticipated in these
forward-looking statements. Factors that may contribute to such
differences include, but are not limited to: the Company's ability
to return to growth and profitability; the impact of changes in
government regulation and industry standards; the Company's ability
to maintain and increase the number of visitors to its websites and
to convert those visitors and those to its third-party publishers'
websites into client prospects in a cost-effective manner; the
impact of the current economic climate on the Company's business;
the Company's ability to access and monetize Internet users on
mobile devices; the Company's ability to attract and retain
qualified executives and employees; the Company's ability to
compete effectively against others in the online marketing and
media industry both for client budget and access to third-party
media; the Company's ability to identify and manage acquisitions;
and the impact and costs of any alleged failure by the Company to
comply with government regulations and industry standards. More
information about potential factors that could affect the Company's
business and financial results is contained in the Company's annual
reports on Form 10-K and quarterly reports on Form 10-Q as filed
with the Securities and Exchange Commission ("SEC"). Additional
information will also be set forth in the Company's quarterly
report on Form 10-Q for the quarter ended December 31, 2013, which
will be filed with the SEC. The Company does not intend and
undertakes no duty to release publicly any updates or revisions to
any forward-looking statements contained herein.
About QuinStreet
QuinStreet, Inc. (Nasdaq:QNST) is one of the largest Internet
performance marketing and media companies in the world. QuinStreet
is committed to providing consumers and businesses with the
information they need to research, find and select the products,
services and brands that meet their needs. For more information,
please visit www.QuinStreet.com.
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In
thousands) |
(Unaudited) |
|
|
|
|
December 31, |
June 30, |
|
2013 |
2013 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 83,247 |
$ 90,117 |
Marketable securities |
39,243 |
37,847 |
Accounts receivable, net |
35,072 |
38,391 |
Deferred tax assets |
981 |
6,753 |
Prepaid expenses and other assets |
5,136 |
4,623 |
Total current assets |
163,679 |
177,731 |
|
|
|
Property and equipment, net |
10,866 |
9,707 |
Goodwill |
151,092 |
150,456 |
Other intangible assets, net |
40,819 |
50,486 |
Deferred tax assets, noncurrent |
5,828 |
40,289 |
Other assets, noncurrent |
937 |
878 |
Total assets |
$ 373,221 |
$ 429,547 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities |
|
|
Accounts payable |
$ 17,890 |
$ 18,722 |
Accrued liabilities |
22,233 |
30,903 |
Deferred revenue |
1,222 |
1,638 |
Debt |
16,008 |
15,428 |
Total current liabilities |
57,353 |
66,691 |
|
|
|
Deferred revenue, noncurrent |
17 |
239 |
Debt, noncurrent |
69,445 |
77,249 |
Other liabilities, noncurrent |
6,263 |
6,473 |
Total liabilities |
133,078 |
150,652 |
|
|
|
Stockholders' equity |
|
|
Common stock |
43 |
43 |
Additional paid-in capital |
233,188 |
226,857 |
Accumulated other comprehensive
loss |
(1,127) |
(1,012) |
Retained earnings |
8,039 |
53,007 |
Total stockholders' equity |
240,143 |
278,895 |
Total liabilities and stockholders'
equity |
$ 373,221 |
$ 429,547 |
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Six Months
Ended |
|
December
31, |
December
31, |
|
2013 |
2012 |
2013 |
2012 |
Net revenue |
$ 66,145 |
$ 71,751 |
$ 143,106 |
$ 150,377 |
Cost of revenue (1) |
56,116 |
61,712 |
119,708 |
126,902 |
Gross profit |
10,029 |
10,039 |
23,398 |
23,475 |
Operating expenses: (1) |
|
|
|
|
Product development |
4,776 |
4,504 |
9,935 |
9,397 |
Sales and marketing |
3,659 |
3,496 |
7,815 |
7,187 |
General and administrative |
4,411 |
4,019 |
8,545 |
7,945 |
Impairment of goodwill |
-- |
92,350 |
-- |
92,350 |
Operating loss |
(2,817) |
(94,330) |
(2,897) |
(93,404) |
Interest income |
27 |
28 |
54 |
56 |
Interest expense |
(976) |
(1,354) |
(2,002) |
(2,366) |
Other (expense) income, net |
(29) |
(4) |
(48) |
42 |
Loss before income taxes |
(3,795) |
(95,660) |
(4,893) |
(95,672) |
(Provision for) benefit from taxes |
(40,234) |
32,169 |
(40,075) |
32,044 |
Net loss |
$ (44,029) |
$ (63,491) |
$ (44,968) |
$ (63,628) |
|
|
|
|
|
Net loss per share |
|
|
|
|
Basic |
$ (1.01) |
$ (1.48) |
$ (1.04) |
$ (1.49) |
Diluted |
$ (1.01) |
$ (1.48) |
$ (1.04) |
$ (1.49) |
|
|
|
|
|
Weighted average shares used in computing net
loss per share |
|
|
|
|
Basic |
43,420 |
42,777 |
43,268 |
42,795 |
Diluted |
43,420 |
42,777 |
43,268 |
42,795 |
|
|
|
|
|
(1) Cost of revenue and operating
expenses include stock-based compensation expense as follows: |
|
|
|
|
|
Cost of revenue |
$ 721 |
$ 963 |
$ 1,595 |
$ 1,886 |
Product development |
610 |
698 |
1,342 |
1,391 |
Sales and marketing |
598 |
858 |
1,368 |
1,623 |
General and administrative |
697 |
510 |
1,356 |
899 |
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Six Months
Ended |
|
December
31, |
December
31, |
|
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
Cash Flows from Operating
Activities |
|
|
|
|
Net loss |
$ (44,029) |
$ (63,491) |
$ (44,968) |
$ (63,628) |
Adjustments to reconcile net loss to net cash
provided by operating activities: |
|
|
|
|
Depreciation and amortization |
6,668 |
10,179 |
13,344 |
18,458 |
Impairment of goodwill |
-- |
92,350 |
-- |
92,350 |
Provision for sales returns and doubtful
accounts receivable |
32 |
(152) |
(243) |
(468) |
Stock-based compensation |
2,626 |
3,029 |
5,661 |
5,799 |
Excess tax benefits from stock-based
compensation |
(213) |
(26) |
(309) |
(50) |
Other non-cash adjustments, net |
249 |
533 |
538 |
608 |
Changes in assets and
liabilities, net of effects of acquisition: |
|
|
|
Accounts receivable |
5,216 |
3,868 |
3,562 |
12,191 |
Prepaid expenses and other assets |
(1,172) |
(4,606) |
(513) |
(4,615) |
Other assets, noncurrent |
27 |
50 |
(59) |
107 |
Deferred taxes |
40,371 |
(28,914) |
40,393 |
(28,914) |
Accounts payable |
(2,352) |
(1,541) |
(196) |
(4,295) |
Accrued liabilities |
(557) |
276 |
(5,861) |
(5,650) |
Deferred revenue |
(199) |
(289) |
(638) |
(598) |
Other liabilities, noncurrent |
(208) |
2 |
(370) |
344 |
Net cash provided by operating
activities |
6,459 |
11,268 |
10,341 |
21,639 |
Cash Flows from Investing
Activities |
|
|
|
|
Capital expenditures |
(2,989) |
(530) |
(4,179) |
(821) |
Business acquisition |
(875) |
-- |
(875) |
-- |
Other intangibles |
(2,597) |
(2,500) |
(2,692) |
(2,500) |
Internal software development costs |
(547) |
(606) |
(1,204) |
(1,257) |
Purchases of marketable securities |
(10,258) |
(13,569) |
(23,236) |
(28,431) |
Proceeds from sales and maturities of
marketable securities |
9,127 |
12,959 |
21,345 |
25,108 |
Net cash used in investing
activities |
(8,139) |
(4,246) |
(10,841) |
(7,901) |
Cash Flows from Financing
Activities |
|
|
|
|
Proceeds from exercise of common stock
options |
934 |
33 |
1,927 |
269 |
Principal payments on bank debt |
(2,500) |
(1,250) |
(5,000) |
(2,500) |
Principal payments on acquisition-related
notes payable |
(1,714) |
(1,904) |
(2,237) |
(5,472) |
Excess tax benefits from stock-based
compensation |
213 |
26 |
309 |
50 |
Withholding taxes related to restricted stock
net share settlement |
(289) |
(47) |
(1,328) |
(148) |
Repurchases of common stock |
-- |
-- |
-- |
(6,157) |
Net cash used in financing
activities |
(3,356) |
(3,142) |
(6,329) |
(13,958) |
Effect of exchange rate changes on cash and
cash equivalents |
(12) |
(5) |
(41) |
12 |
Net (decrease) increase in cash and cash
equivalents |
(5,048) |
3,875 |
(6,870) |
(208) |
Cash and cash equivalents at beginning of
period |
88,295 |
64,448 |
90,117 |
68,531 |
Cash and cash equivalents at end of
period |
$ 83,247 |
$ 68,323 |
$ 83,247 |
$ 68,323 |
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
LOSS TO |
ADJUSTED NET
INCOME |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Six Months
Ended |
|
December
31, |
December
31, |
|
2013 |
2012 |
2013 |
2012 |
Net loss |
$ (44,029) |
$ (63,491) |
$ (44,968) |
$ (63,628) |
Amortization of intangible assets |
5,021 |
8,805 |
10,157 |
15,681 |
Stock-based compensation |
2,626 |
3,029 |
5,661 |
5,799 |
Impairment of goodwill |
-- |
92,350 |
-- |
92,350 |
Tax valuation allowance |
40,211 |
-- |
40,211 |
-- |
Tax impact of the above items |
(828) |
(35,201) |
(3,708) |
(38,485) |
Adjusted net income |
$ 3,001 |
$ 5,492 |
$ 7,353 |
$ 11,717 |
|
|
|
|
|
Adjusted diluted net income per share |
$ 0.07 |
$ 0.13 |
$ 0.17 |
$ 0.27 |
|
|
|
|
|
Weighted average shares used in
computing adjusted diluted net income per share |
43,980 |
43,080 |
44,106 |
43,201 |
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
LOSS TO |
ADJUSTED
EBITDA |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Six Months
Ended |
|
December
31, |
December
31, |
|
2013 |
2012 |
2013 |
2012 |
Net loss |
$ (44,029) |
$ (63,491) |
$ (44,968) |
$ (63,628) |
Interest and other income (expense),
net |
978 |
1,331 |
1,996 |
2,269 |
Provision for (benefit from) taxes |
40,234 |
(32,169) |
40,075 |
(32,044) |
Depreciation and amortization |
6,668 |
10,179 |
13,344 |
18,458 |
Stock-based compensation |
2,626 |
3,029 |
5,661 |
5,799 |
Impairment of goodwill |
-- |
92,350 |
-- |
92,350 |
Adjusted EBITDA |
$ 6,477 |
$ 11,229 |
$ 16,108 |
$ 23,204 |
CONTACT: Erica Abrams
(415) 217-5864
erica@blueshirtgroup.com
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