QuinStreet, Inc. (Nasdaq:QNST), a leader in performance marketing
online, today announced financial results for the third quarter
ended March 31, 2015.
For the third quarter, the Company reported total revenue of
$75.3 million, an increase of 5% compared to the same quarter last
year. Adjusted EBITDA for the quarter was $4.3 million, or 6% of
revenue. Revenue and adjusted EBITDA were positively impacted by
$1.6 million and $1.3 million respectively, due to recognition of
revenue previously deferred in the September quarter.
Adjusted net income for the third quarter was $1.4 million, or
$0.03 per share, and GAAP net loss was $3.2 million, or ($0.07) per
share. Adjusted net income excludes stock-based compensation
expense and amortization of intangible assets, net of estimated
tax.
The Company generated $2.4 million in normalized free cash flow
in the quarter and closed the third quarter with $114 million in
cash and marketable securities and $50 million in net cash.
"We continue to see improving results from strong execution of
our strategies to roll out next-generation products and
technologies and to diversify media and markets," commented Doug
Valenti, QuinStreet CEO. "Revenue from new products and markets in
the Education client vertical grew strongly in the quarter,
offsetting declines in traditional lead generation products to U.S.
for-profit colleges. As a result, Education revenue was flat in the
quarter -- our best year-over-year performance in that client
vertical in over three years. Revenue from our auto insurance
business increased 25% year-over-year, driven by the continued
adoption and ramp of the new products launched last year. We
continue to be cash flow positive, and our balance sheet remains
strong.
"Revenue in the June quarter is expected to be up
again, with growth estimated to be approximately 5% year-over-year.
Adjusted EBITDA margin is expected to be in the low single digits,
as we continue to invest in growth initiatives. The initiatives are
providing us with a fundamentally improved business base and
roadmap that we expect to result in long-term growth and margin
re-expansion," concluded Valenti.
Reconciliations of adjusted net income to net loss, adjusted
EBITDA to net loss and normalized free cash flow to net cash
provided by operating activities are included in the accompanying
tables.
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 (888) 539.3696 for the U.S. and Canada or +1
(719) 325.2429 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 May 5, 2015 by
dialing (888) 203.1112 in the U.S. and Canada or +1 (719) 457.0820
for international callers, using passcode 1005370#. This press
release and 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, adjusted diluted net income
per share, free cash flow and normalized free cash flow, 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 less benefit from (provision for) taxes,
depreciation expense, amortization expense, stock-based
compensation expense, interest and other income (expense), net,
impairment of goodwill, and restructuring. The term "adjusted net
income" refers to a financial measure that we define as net loss
adjusted for amortization expense, stock-based compensation
expense, restructuring 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. The term "free cash flow" refers to a financial
measure that we define as net cash provided by operating
activities, less capital expenditures and internal software
development costs. "Normalized free cash flow" refers to free cash
flow less changes in operating assets and liabilities net of
estimated taxes related to impairment of goodwill, tax valuation
allowance and the impact from excess tax benefits from stock-based
compensation. 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, adjusted diluted net income per share, free cash flow and
normalized free cash flow may not be comparable to the definitions
as reported by other companies.
We believe adjusted EBITDA, adjusted net income, adjusted
diluted net income per share, free cash flow and normalized free
cash flow 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,
impairment of goodwill and tax valuation allowance). 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.
Free cash flow is useful to investors and us because it
represents the cash that our business generates from operations,
before taking into account cash movements that are non-operational,
and is a metric commonly used in our industry to understand the
underlying cash generating capacity of a company's financial model.
Normalized free cash flow is useful as it removes the fluctuations
in operating assets and liabilities that occur in any given quarter
due to the timing of payments and therefore helps investors
understand the underlying cash flow of the business as a quarterly
metric and the cash flow generation potential of the business
model. The Company believes that analysts and investors use free
cash flow multiples as a metric for analyzing company valuations 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 and results of analyses
on impairment charges. 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 impact of changes in industry
standards and government regulation including but not limited to
enforcement activities of the Department of Education; 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 March 31, 2015, 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) |
|
|
|
|
March 31, |
June 30, |
|
2015 |
2014 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 114,100 |
$ 84,177 |
Marketable securities |
-- |
38,630 |
Accounts receivable, net |
44,961 |
41,979 |
Deferred tax assets |
223 |
223 |
Prepaid expenses and other
assets |
11,989 |
11,647 |
Total current assets |
171,273 |
176,656 |
|
|
|
Property and equipment, net |
8,811 |
11,126 |
Goodwill |
55,451 |
55,451 |
Other intangible assets, net |
21,444 |
31,441 |
Deferred tax assets, noncurrent |
1,710 |
1,712 |
Other assets, noncurrent |
523 |
457 |
Total assets |
$ 259,212 |
$ 276,843 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities |
|
|
Accounts payable |
$ 20,823 |
$ 19,517 |
Accrued liabilities |
28,948 |
27,854 |
Deferred revenue |
1,356 |
1,175 |
Debt |
19,713 |
17,698 |
Total current liabilities |
70,840 |
66,244 |
|
|
|
Debt, noncurrent |
44,848 |
59,565 |
Other liabilities, noncurrent |
5,567 |
5,883 |
Total liabilities |
121,255 |
131,692 |
|
|
|
Stockholders' equity |
|
|
Common stock |
44 |
44 |
Additional paid-in capital |
247,105 |
239,558 |
Accumulated other comprehensive
loss |
(815) |
(1,054) |
Accumulated deficit |
(108,377) |
(93,397) |
Total stockholders' equity |
137,957 |
145,151 |
Total liabilities and
stockholders' equity |
$ 259,212 |
$ 276,843 |
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2015 |
2014 |
2015 |
2014 |
Net revenue |
$ 75,345 |
$ 71,888 |
$ 211,228 |
$ 214,994 |
Cost of revenue (1) |
65,192 |
61,646 |
188,996 |
181,354 |
Gross profit |
10,153 |
10,242 |
22,232 |
33,640 |
Operating expenses: (1) |
|
|
|
|
Product development |
4,653 |
4,859 |
13,853 |
14,794 |
Sales and marketing |
3,881 |
3,881 |
10,905 |
11,696 |
General and administrative |
4,300 |
4,284 |
12,994 |
12,829 |
Operating loss |
(2,681) |
(2,782) |
(15,520) |
(5,679) |
Interest income |
7 |
30 |
61 |
84 |
Interest expense |
(760) |
(911) |
(2,726) |
(2,913) |
Other income (expense), net |
40 |
(3) |
3,001 |
(51) |
Loss before income taxes |
(3,394) |
(3,666) |
(15,184) |
(8,559) |
Benefit from (provision for) taxes |
178 |
993 |
204 |
(39,082) |
Net loss |
$ (3,216) |
$ (2,673) |
$ (14,980) |
$ (47,641) |
|
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
Basic |
$ (0.07) |
$ (0.06) |
$ (0.34) |
$ (1.10) |
Diluted |
$ (0.07) |
$ (0.06) |
$ (0.34) |
$ (1.10) |
|
|
|
|
|
Weighted average shares used in
computing net loss per share |
|
|
|
Basic |
44,522 |
43,567 |
44,409 |
43,422 |
Diluted |
44,522 |
43,567 |
44,409 |
43,422 |
|
|
|
|
|
|
|
|
|
|
(1) Cost of revenue
and operating expenses include stock-based compensation expense as
follows: |
|
|
|
|
|
Cost of revenue |
$ 863 |
$ 595 |
$ 2,292 |
$ 2,190 |
Product development |
542 |
551 |
1,731 |
1,893 |
Sales and marketing |
600 |
827 |
1,626 |
2,195 |
General and administrative |
576 |
477 |
1,733 |
1,833 |
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Cash Flows from Operating
Activities |
|
|
|
|
Net loss |
$ (3,216) |
$ (2,673) |
$ (14,980) |
$ (47,641) |
Adjustments to reconcile net loss to net cash
provided by operating activities: |
|
|
|
|
Depreciation and
amortization |
4,370 |
6,611 |
14,778 |
19,955 |
Net realized loss from sale of
marketable securities |
32 |
-- |
32 |
-- |
Provision for sales returns and
doubtful accounts receivable |
(412) |
(181) |
58 |
(424) |
Write-off of bank loan upfront
fees |
-- |
-- |
328 |
-- |
Stock-based compensation |
2,581 |
2,450 |
7,382 |
8,111 |
Excess tax benefits from
stock-based compensation |
51 |
(85) |
-- |
(394) |
Gain on sale of domain
names |
(173) |
-- |
(3,331) |
-- |
Other adjustments, net |
29 |
23 |
128 |
150 |
Changes in assets and
liabilities, net of effects of acquisition: |
|
|
|
|
Accounts receivable |
(3,434) |
(6,760) |
(3,040) |
(3,198) |
Prepaid expenses and other
assets |
(365) |
(2,831) |
(734) |
(3,403) |
Deferred taxes |
-- |
1,545 |
2 |
41,938 |
Accounts payable |
(836) |
1,064 |
2,128 |
868 |
Accrued liabilities |
5,595 |
4,030 |
2,146 |
(1,831) |
Deferred revenue |
3 |
(8) |
181 |
(646) |
Other liabilities,
noncurrent |
(63) |
(154) |
(316) |
(524) |
Net cash provided by operating
activities |
4,162 |
3,031 |
4,762 |
12,961 |
Cash Flows from Investing
Activities |
|
|
|
|
Capital expenditures |
(344) |
(500) |
(2,629) |
(4,679) |
Business acquisition |
-- |
-- |
-- |
(875) |
Other intangibles |
-- |
(123) |
-- |
(2,815) |
Internal software development costs |
(495) |
(697) |
(1,428) |
(1,901) |
Purchases of marketable securities |
-- |
(13,565) |
(16,600) |
(36,390) |
Proceeds from sales and maturities of
marketable securities |
27,990 |
14,475 |
55,277 |
35,820 |
Proceeds from sale of domain names |
188 |
-- |
3,346 |
-- |
Proceeds from sale of property and
equipment |
-- |
-- |
10 |
-- |
Net cash provided by (used in)
investing activities |
27,339 |
(410) |
37,976 |
(10,840) |
Cash Flows from Financing
Activities |
|
|
|
|
Proceeds from exercise of common stock
options |
-- |
332 |
1,300 |
2,259 |
Principal payments on bank debt |
(5,000) |
(3,750) |
(12,500) |
(8,750) |
Payment of bank loan upfront fees |
-- |
-- |
(272) |
-- |
Principal payments on acquisition-related
notes payable |
-- |
(362) |
(444) |
(2,599) |
Excess tax benefits from stock-based
compensation |
(51) |
85 |
-- |
394 |
Withholding taxes related to restricted stock
net share settlement |
(284) |
(432) |
(910) |
(1,760) |
Net cash used in financing
activities |
(5,335) |
(4,127) |
(12,826) |
(10,456) |
Effect of exchange rate changes on cash and
cash equivalents |
(6) |
2 |
11 |
(39) |
Net increase (decrease) in cash and cash
equivalents |
26,160 |
(1,504) |
29,923 |
(8,374) |
Cash and cash equivalents at beginning of
period |
87,940 |
83,247 |
84,177 |
90,117 |
Cash and cash equivalents at end of
period |
$ 114,100 |
$ 81,743 |
$ 114,100 |
$ 81,743 |
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
LOSS TO |
ADJUSTED NET
INCOME |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2015 |
2014 |
2015 |
2014 |
Net loss |
$ (3,216) |
$ (2,673) |
$ (14,980) |
$ (47,641) |
Amortization of intangible
assets |
2,879 |
4,954 |
9,955 |
15,111 |
Stock-based compensation |
2,581 |
2,450 |
7,382 |
8,111 |
Restructuring |
-- |
-- |
439 |
-- |
Tax valuation allowance |
-- |
1,150 |
-- |
41,361 |
Tax impact after non-GAAP
items |
(808) |
(3,913) |
(1,009) |
(7,621) |
Adjusted net income |
$ 1,436 |
$ 1,968 |
$ 1,787 |
$ 9,321 |
|
|
|
|
|
|
|
|
|
|
Adjusted diluted net income per share |
$ 0.03 |
$ 0.04 |
$ 0.04 |
$ 0.21 |
|
|
|
|
|
Weighted average shares used in computing
adjusted diluted net income per share |
45,137 |
43,911 |
44,626 |
44,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
LOSS TO |
ADJUSTED
EBITDA |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2015 |
2014 |
2015 |
2014 |
Net loss |
$ (3,216) |
$ (2,673) |
$ (14,980) |
$ (47,641) |
Interest and other expense
(income), net |
713 |
884 |
(336) |
2,880 |
(Benefit from) provision for
taxes |
(178) |
(993) |
(204) |
39,082 |
Depreciation and
amortization |
4,370 |
6,611 |
14,778 |
19,955 |
Stock-based compensation |
2,581 |
2,450 |
7,382 |
8,111 |
Restructuring |
-- |
-- |
439 |
-- |
Adjusted EBITDA |
$ 4,270 |
$ 6,279 |
$ 7,079 |
$ 22,387 |
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
CASH PROVIDED BY |
OPERATING ACTIVITIES TO
FREE CASH FLOW |
AND NORMALIZED FREE
CASH FLOW |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2015 |
2014 |
2015 |
2014 |
Net cash provided by operating
activities |
$ 4,162 |
$ 3,031 |
$ 4,762 |
$ 12,961 |
Capital expenditures |
(344) |
(500) |
(2,629) |
(4,679) |
Internal software development
costs |
(495) |
(697) |
(1,428) |
(1,901) |
Free cash flow |
$ 3,323 |
$ 1,834 |
$ 705 |
$ 6,381 |
Changes in operating assets and
liabilities, less excess tax benefits from stock-based
compensation |
(951) |
3,199 |
(367) |
6,957 |
Normalized free cash flow |
$ 2,372 |
$ 5,033 |
$ 338 |
$ 13,338 |
CONTACT: Investor Contact:
The Blueshirt Group for QuinStreet
Erica Abrams
(415) 297-5864
erica@blueshirtgroup.com
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