QuinStreet, Inc. (Nasdaq:QNST), a leader in performance marketing
products and technologies, today announced financial results for
the third quarter ended March 31, 2017.
For the third quarter, the Company reported
total revenue of $79.2 million and GAAP net income of $579,000, or
$0.01 per share. Adjusted net income was $2.6 million, or $0.06 per
share, and adjusted EBITDA was $5.2 million, or 7% of revenue.
The Company generated $6.2 million in operating
cash flow in the third quarter, ending the period with $42 million
in cash and equivalents, and no debt.
“Fiscal Q3 was in line with our expectations and
outlook,” commented Doug Valenti, CEO of QuinStreet. “We saw strong
double-digit sequential revenue growth in all of our client
verticals: Financial Services grew 23%, Education grew 18%, and
Other (Home Services, Business-to-Business Technology) grew 17%. We
delivered on our commitment to rapidly expand adjusted EBITDA
margin and operating cash flow in the quarter. We are pleased to
have achieved adjusted EBITDA margin of 7% and operating cash flow
of $6.2 million, resulting in a net cash position of $42
million.
“Looking at fiscal Q4, we expect revenue to grow
in the low single digit percentages both year-over- year and
sequentially. The expected sequential growth is considerably better
than our typical historic pattern of a seasonal decline in Q4,
indicating the continued positive momentum we are seeing in the
business. We expect adjusted EBITDA margin to be at least 7% for
the quarter,” concluded Valenti.
Reconciliations of adjusted net income to GAAP
net income and adjusted EBITDA to GAAP net income are included in
the accompanying tables.
Conference Call Today at 2:00 p.m.
PT
The Company will host a conference call and
corresponding live webcast at 2:00 p.m. PT today. To access the
conference call, dial +1 (800) 768.6544 or +1 (785) 830.7990 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 by
registering online at: https://jsp.premiereglobal.com/webrsvp
and using passcode 5654911 to obtain dial-in information for the
replay. Dial-in information for the replay will be available
beginning one day prior to the conference call and the conference
call replay will be available through Tuesday, May 16, 2017 at 4:30
p.m. PT.
Non-GAAP Financial Measures
This release and the accompanying tables include
a discussion of adjusted EBITDA, adjusted net income (loss) and
adjusted diluted net income (loss) 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 income (loss) less benefit from (provision for) taxes,
depreciation expense, amortization expense, stock-based
compensation expense, interest and other income (expense), net,
restructuring expense and legal settlement expense. The term
"adjusted net income (loss)" refers to a financial measure that we
define as net income (loss) adjusted for amortization expense,
stock-based compensation expense, restructuring expense and legal
settlement expense, net of estimated taxes. The term "adjusted
diluted net income (loss) per share" refers to a financial measure
that we define as adjusted net income (loss) 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 (loss) and adjusted diluted net income (loss)
per share may not be comparable to the definitions as reported by
other companies.
We believe adjusted EBITDA, adjusted net income
(loss) and adjusted diluted net income (loss) 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
agreement.
Adjusted net income (loss) and adjusted diluted
net income (loss) 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 and
amortization of intangible assets) and other non-recurring charges.
The Company believes that analysts and investors use adjusted net
income (loss) and adjusted diluted net income (loss) 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, 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 investigation or enforcement
activities of the Department of Education, the Federal Trade
Commission and other regulatory agencies; the Company’s ability to
maintain and increase client marketing spend; 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 are contained in the Company's
annual report 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, 2017,
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, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
41,744 |
|
|
$ |
53,710 |
|
|
Accounts
receivable, net |
|
|
43,107 |
|
|
|
47,218 |
|
|
Prepaid
expenses and other assets |
|
|
7,130 |
|
|
|
7,055 |
|
|
Total
current assets |
|
|
91,981 |
|
|
|
107,983 |
|
|
Property and equipment,
net |
|
|
6,277 |
|
|
|
7,678 |
|
|
Goodwill |
|
|
56,118 |
|
|
|
56,118 |
|
|
Other intangible
assets, net |
|
|
5,300 |
|
|
|
10,081 |
|
|
Other assets,
noncurrent |
|
|
10,474 |
|
|
|
11,242 |
|
|
Total
assets |
|
$ |
170,150 |
|
|
$ |
193,102 |
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
|
$ |
20,874 |
|
|
$ |
19,814 |
|
|
Accrued
liabilities |
|
|
26,185 |
|
|
|
27,705 |
|
|
Deferred
revenue |
|
|
1,040 |
|
|
|
1,200 |
|
|
Debt |
|
|
— |
|
|
|
15,000 |
|
|
Total
current liabilities |
|
|
48,099 |
|
|
|
63,719 |
|
|
Other liabilities,
noncurrent |
|
|
3,733 |
|
|
|
4,631 |
|
|
Total
liabilities |
|
|
51,832 |
|
|
|
68,350 |
|
|
Stockholders'
equity: |
|
|
|
|
|
Common
stock |
|
|
45 |
|
|
|
45 |
|
|
Additional paid-in capital |
|
|
262,391 |
|
|
|
257,950 |
|
|
Accumulated other comprehensive loss |
|
|
(453 |
) |
|
|
(418 |
) |
|
Accumulated deficit |
|
|
(143,665 |
) |
|
|
(132,825 |
) |
|
Total
stockholders' equity |
|
|
118,318 |
|
|
|
124,752 |
|
|
Total
liabilities and stockholders' equity |
|
$ |
170,150 |
|
|
$ |
193,102 |
|
|
QUINSTREET, INC. |
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(In thousands, except
per share data) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|
March 31, |
|
March 31, |
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net
revenue |
|
|
$ |
79,205 |
|
|
$ |
81,243 |
|
|
$ |
218,253 |
|
|
$ |
218,593 |
|
|
Cost of
revenue (1) |
|
|
|
69,338 |
|
|
|
72,956 |
|
|
|
198,803 |
|
|
|
199,220 |
|
|
Gross
profit |
|
|
|
|
9,867 |
|
|
|
8,287 |
|
|
|
19,450 |
|
|
|
19,373 |
|
|
Operating
expenses: (1) |
|
|
|
|
|
|
|
|
|
|
Product development |
|
|
|
3,147 |
|
|
|
4,214 |
|
|
|
10,415 |
|
|
|
12,501 |
|
|
Sales and marketing |
|
|
|
2,243 |
|
|
|
2,898 |
|
|
|
7,001 |
|
|
|
9,502 |
|
|
General and administrative |
|
|
|
4,023 |
|
|
|
4,348 |
|
|
|
11,848 |
|
|
|
12,706 |
|
|
Restructuring charges |
|
|
|
38 |
|
|
|
— |
|
|
|
2,441 |
|
|
|
— |
|
|
Operating
income (loss) |
|
|
|
416 |
|
|
|
(3,173 |
) |
|
|
(12,255 |
) |
|
|
(15,336 |
) |
|
Interest
income |
|
|
|
42 |
|
|
|
23 |
|
|
|
99 |
|
|
|
39 |
|
|
Interest
expense |
|
|
|
(31 |
) |
|
|
(155 |
) |
|
|
(322 |
) |
|
|
(433 |
) |
|
Other
income, net |
|
|
|
142 |
|
|
|
112 |
|
|
|
252 |
|
|
|
120 |
|
|
Income
(loss) before income taxes |
|
|
|
569 |
|
|
|
(3,193 |
) |
|
|
(12,226 |
) |
|
|
(15,610 |
) |
|
Benefit
from (provision for) taxes |
|
|
|
10 |
|
|
|
(72 |
) |
|
|
1,386 |
|
|
|
(477 |
) |
|
Net income
(loss) |
|
|
$ |
579 |
|
|
$ |
(3,265 |
) |
|
$ |
(10,840 |
) |
|
$ |
(16,087 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) per share: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
$ |
0.01 |
|
|
$ |
(0.07 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.36 |
) |
|
Diluted |
|
|
|
|
$ |
0.01 |
|
|
$ |
(0.07 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used in computing net income (loss) per share:
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
45,507 |
|
|
|
45,333 |
|
|
|
45,636 |
|
|
|
45,098 |
|
|
Diluted |
|
|
|
|
|
45,722 |
|
|
|
45,333 |
|
|
|
45,636 |
|
|
|
45,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Cost
of revenue and operating expenses include stock-based compensation
expense as follows: |
|
|
|
|
|
Cost of revenue |
|
|
$ |
691 |
|
|
$ |
969 |
|
|
$ |
2,390 |
|
|
$ |
2,826 |
|
|
Product development |
|
|
|
424 |
|
|
|
576 |
|
|
|
1,431 |
|
|
|
1,761 |
|
|
Sales and marketing |
|
|
|
291 |
|
|
|
501 |
|
|
|
868 |
|
|
|
1,482 |
|
|
General and administrative |
|
|
|
671 |
|
|
|
770 |
|
|
|
2,095 |
|
|
|
2,270 |
|
|
Restructuring charges |
|
|
|
— |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
|
QUINSTREET, INC. |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(In
thousands) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
March 31, |
|
March 31, |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
Net income
(loss) |
$ |
579 |
|
|
$ |
(3,265 |
) |
|
$ |
(10,840 |
) |
|
$ |
(16,087 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
2,660 |
|
|
|
3,721 |
|
|
|
8,983 |
|
|
|
11,437 |
|
|
(Provision for) recovery from sales returns and doubtful
accounts receivable |
|
(102 |
) |
|
|
209 |
|
|
|
109 |
|
|
|
843 |
|
|
Stock-based compensation |
|
2,077 |
|
|
|
2,816 |
|
|
|
6,826 |
|
|
|
8,339 |
|
|
Gain on sales of domain names |
|
(11 |
) |
|
|
(44 |
) |
|
|
(154 |
) |
|
|
(160 |
) |
|
Other adjustments, net |
|
(3 |
) |
|
|
— |
|
|
|
(7 |
) |
|
|
— |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(1,887 |
) |
|
|
(9,165 |
) |
|
|
4,002 |
|
|
|
(4,103 |
) |
|
Prepaid expenses and other assets |
|
23 |
|
|
|
(23 |
) |
|
|
583 |
|
|
|
(3,968 |
) |
|
Deferred taxes |
|
(510 |
) |
|
|
— |
|
|
|
(510 |
) |
|
|
(8 |
) |
|
Accounts payable |
|
482 |
|
|
|
5,066 |
|
|
|
1,109 |
|
|
|
2,121 |
|
|
Accrued liabilities |
|
3,225 |
|
|
|
6,890 |
|
|
|
(1,277 |
) |
|
|
3,007 |
|
|
Deferred revenue |
|
(209 |
) |
|
|
(336 |
) |
|
|
(160 |
) |
|
|
(305 |
) |
|
Other liabilities, noncurrent |
|
(138 |
) |
|
|
(117 |
) |
|
|
(388 |
) |
|
|
(327 |
) |
|
Net cash provided by operating activities |
|
6,186 |
|
|
|
5,752 |
|
|
|
8,276 |
|
|
|
789 |
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
(374 |
) |
|
|
(546 |
) |
|
|
(978 |
) |
|
|
(1,689 |
) |
|
Internal
software development costs |
|
(552 |
) |
|
|
(758 |
) |
|
|
(1,734 |
) |
|
|
(2,689 |
) |
|
Proceeds
from sales of domain names |
|
11 |
|
|
|
44 |
|
|
|
154 |
|
|
|
135 |
|
|
Other
investing activities |
|
(36 |
) |
|
|
(2 |
) |
|
|
(133 |
) |
|
|
(2 |
) |
|
Net cash used in investing activities |
|
(951 |
) |
|
|
(1,262 |
) |
|
|
(2,691 |
) |
|
|
(4,245 |
) |
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds
from exercise of common stock options |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26 |
|
|
Withholding
taxes related to restricted stock, net of share settlement
|
|
(229 |
) |
|
|
(391 |
) |
|
|
(765 |
) |
|
|
(2,139 |
) |
|
Repurchases
of common stock |
|
(723 |
) |
|
|
— |
|
|
|
(1,766 |
) |
|
|
— |
|
|
Repayment
of revolving loan facility |
|
— |
|
|
|
— |
|
|
|
(15,000 |
) |
|
|
— |
|
|
Net cash used in financing activities |
|
(952 |
) |
|
|
(391 |
) |
|
|
(17,531 |
) |
|
|
(2,113 |
) |
|
Effect of
exchange rate changes on cash and cash equivalents |
|
(35 |
) |
|
|
(47 |
) |
|
|
(20 |
) |
|
|
(97 |
) |
|
Net
increase (decrease) in cash and cash equivalents |
|
4,248 |
|
|
|
4,052 |
|
|
|
(11,966 |
) |
|
|
(5,666 |
) |
|
Cash and
cash equivalents at beginning of period |
|
37,496 |
|
|
|
50,750 |
|
|
|
53,710 |
|
|
|
60,468 |
|
|
Cash and
cash equivalents at end of period |
$ |
41,744 |
|
|
$ |
54,802 |
|
|
$ |
41,744 |
|
|
$ |
54,802 |
|
|
QUINSTREET, INC. |
|
RECONCILIATION OF NET INCOME (LOSS)
TO |
|
ADJUSTED NET INCOME (LOSS) |
|
(In thousands, except
per share data) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
|
|
|
|
March 31, |
|
March 31, |
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net income
(loss) |
|
|
|
$ |
579 |
|
|
$ |
(3,265 |
) |
|
$ |
(10,840 |
) |
|
$ |
(16,087 |
) |
|
Amortization of intangible assets |
|
|
1,380 |
|
|
|
2,183 |
|
|
|
5,019 |
|
|
|
6,839 |
|
|
Stock-based compensation |
|
|
|
2,077 |
|
|
|
2,816 |
|
|
|
6,784 |
|
|
|
8,339 |
|
|
Restructuring |
|
|
|
|
38 |
|
|
|
79 |
|
|
|
2,441 |
|
|
|
297 |
|
|
Legal settlement |
|
|
|
|
— |
|
|
|
100 |
|
|
|
— |
|
|
|
100 |
|
|
Tax impact after non-GAAP items |
|
|
(1,466 |
) |
|
|
(689 |
) |
|
|
(1,225 |
) |
|
|
— |
|
|
Adjusted
net income (loss) |
|
|
$ |
2,608 |
|
|
$ |
1,224 |
|
|
$ |
2,179 |
|
|
$ |
(512 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
diluted net income (loss) per share |
|
$ |
0.06 |
|
|
$ |
0.03 |
|
|
$ |
0.05 |
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing adjusted
diluted net income (loss) per share
|
|
|
45,722 |
|
|
|
45,343 |
|
|
|
45,729 |
|
|
|
45,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET, INC. |
|
RECONCILIATION OF NET INCOME (LOSS)
TO |
|
ADJUSTED EBITDA |
|
(In
thousands) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
|
|
|
|
March 31, |
|
March 31, |
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net income
(loss) |
|
|
|
$ |
579 |
|
|
$ |
(3,265 |
) |
|
$ |
(10,840 |
) |
|
$ |
(16,087 |
) |
|
Interest and other (income) expense, net |
|
|
(153 |
) |
|
|
20 |
|
|
|
(29 |
) |
|
|
274 |
|
|
(Benefit from) provision for taxes |
|
|
|
(10 |
) |
|
|
72 |
|
|
|
(1,386 |
) |
|
|
477 |
|
|
Depreciation and amortization |
|
|
|
2,660 |
|
|
|
3,721 |
|
|
|
8,983 |
|
|
|
11,437 |
|
|
Stock-based compensation |
|
|
|
2,077 |
|
|
|
2,816 |
|
|
|
6,784 |
|
|
|
8,339 |
|
|
Restructuring |
|
|
|
|
38 |
|
|
|
79 |
|
|
|
2,441 |
|
|
|
297 |
|
|
Legal settlement |
|
|
|
|
— |
|
|
|
100 |
|
|
|
— |
|
|
|
100 |
|
|
Adjusted
EBITDA |
|
|
|
$ |
5,191 |
|
|
$ |
3,543 |
|
|
$ |
5,953 |
|
|
$ |
4,837 |
|
|
Investor Contact:
Erica Abrams
(415) 297-5864
eabrams@quinstreet.com
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