FOSTER CITY, Calif.,
Nov. 7, 2019 /PRNewswire/ --
QuinStreet, Inc. (Nasdaq: QNST), a leader in performance
marketplace products and technologies, today announced financial
results for the first quarter ended September 30, 2019.
For the first quarter, the Company reported revenue of
$126.6 million, an increase of 12%
year-over-year, and GAAP net income of $1.1
million, or $0.02 per diluted
share.
Adjusted net income for the first quarter was $6.2 million, or $0.12 per diluted share. Adjusted EBITDA for the
first quarter was $9.4 million, or
7.5% of revenue.
During the first quarter, the Company generated $9.5 million in operating cash flow and closed
the quarter with $70.5 million in
cash and equivalents.
"As projected, we set another revenue record in the September
quarter, our fiscal Q1. More importantly, the changes we announced
last quarter to improve execution and regain momentum are already
paying off, and we expect accelerating effects as we move forward,"
commented Doug Valenti, QuinStreet
CEO.
"We are maintaining our full fiscal year outlook for both
revenue and EBITDA. Our gross margin in Q1 reflected
relatively heavy investment in new media opportunities for our
fast-growing Financial Services businesses. We have already made
good progress optimizing to a higher media margin in Q2. We expect
investments in new media opportunities to contribute to continued
strong revenue growth. We are also seeing a mix shift to higher
margin businesses more generally, and we are beginning the ramps of
new businesses with SaaS-like margins including, but not limited
to, QRP, our insurance agency management platform."
The Company also announced that it has retained Goldman Sachs
& Co. LLC to lead a process to review strategic alternatives.
The Board will undertake a broad review of the potential
alternatives to enhance shareholder value. The Board has not set a
timetable for the conclusion of its review of strategic
alternatives, and, following the earnings call, we do not intend to
provide updates until the Company has determined that
further disclosure is necessary or appropriate. There can be
no assurances that the review of strategic alternatives will result
in a transaction or other outcome.
"We remain enthusiastic and confident about our long-term market
opportunity, assets and capabilities, and we are maintaining our
outlook for both revenue and EBITDA for full fiscal year 2020.
We once again demonstrated our ability to drive results in
fiscal Q1, and our initiatives to improve execution are already
having a strong positive impact across the business. We expect
strong results in fiscal Q2. That said, a recent increase in
M&A and industry activity in our markets, combined with inbound
interest, indicate the need to assess our mix of businesses,
structure, and independence to be sure we are best positioned to
maximize current and long-term shareholder value," continued
Doug Valenti, QuinStreet CEO.
Reconciliations of adjusted net income to GAAP net income,
adjusted EBITDA to GAAP net income, 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
The Company will host a conference call and
corresponding live webcast at 2:00 p.m.
PT. To access the conference call dial +1
800-458-4121 (US callers) or +1 323-794-2597 (international
callers.) A replay of the conference call will be available
beginning approximately two hours after the completion of the call
by entering:
https://event.mymeetingroom.com/Public/WebRegistration/ZW5jPXNhQWNoekF6VkljS3J0cTZJMDh
IOFZUMCtWSVg2VjJGNFIzcUF2RFcrcSt3WU5HZTN0M3lzQ1dnd1lMOXlFSlR6azZPRkYvejFOS0d
YeFVGbktCR0ZBPT0=, registering your name and using passcode #
2521392 to join. The webcast of the conference call will be
available live and via replay on the investor relations section of
the Company's website at http://investor.quinstreet.com.
About QuinStreet
QuinStreet,
Inc. (Nasdaq: QNST) is a pioneer in delivering online
marketplace solutions to match searchers with brands in digital
media. QuinStreet is committed to providing consumers and
businesses with the information and tools they need to research,
find and select the products and brands that meet their
needs.
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 and 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 income less provision for
(benefit from) taxes, depreciation expense, amortization expense,
stock-based compensation expense, interest and other expense
(income), net, acquisition costs, contingent consideration
adjustment and shareholder litigation expense disclosed in
our Annual Report on Form 10-K. The term "adjusted net income"
refers to a financial measure that we define as net income adjusted
for amortization expense, stock-based compensation expense,
acquisition costs, contingent consideration adjustment, shareholder
litigation expense, disclosed in our Annual Report on Form 10-K,
and release of deferred 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. The term "normalized free cash
flow" refers to free cash flow less changes in operating assets and
liabilities. 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 and 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 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 useful to us and investors because
(i) we seek to manage our business to a level of adjusted
EBITDA as a percentage of net revenue, (ii) it is used
internally by us for planning purposes, including preparation of
internal budgets; to allocate resources; to evaluate the
effectiveness of operational strategies and capital expenditures as
well as the capacity to service debt, (iii) it is a key basis upon
which we assess our operating performance, (iv) it is one of
the primary metrics investors use in evaluating Internet marketing
companies, (v) it is a factor in determining compensation, and
(vi) it is an element of certain financial covenants under our
historical borrowing arrangements. In addition, we believe adjusted
EBITDA and similar measures are widely used by investors,
securities analysts, ratings agencies and other interested parties
in our industry as a measure of financial performance, debt-service
capabilities and as a metric for analyzing company valuations.
We use adjusted EBITDA as a key performance measure because we
believe it facilitates operating performance comparisons from
period to period by excluding potential differences caused by
variations in capital structures (affecting interest expense), tax
positions (such as the impact of changes in effective tax rates or
fluctuations in permanent differences or discrete quarterly items),
non-recurring charges, certain other items that we do not believe
are indicative of core operating activities (such as
shareholder litigation expense, acquisition costs, contingent
consideration adjustment and other income and expense) and the
non-cash impact of depreciation expense, amortization expense and
stock-based compensation expense.
With respect to our Adjusted EBITDA guidance, the Company is not
able to provide a quantitative reconciliation without unreasonable
efforts to the most directly comparable GAAP financial measure due
to the high variability, complexity and low visibility with respect
to certain items such as taxes, and income and expense from changes
in fair value of contingent consideration from acquisitions. We
expect the variability of these items to have a potentially
unpredictable and potentially significant impact on future GAAP
financial results, and, as such, we also believe that any
reconciliations provided would imply a degree of precision that
would be confusing or misleading to investors.
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,
contingent consideration adjustment and release of deferred tax
valuation allowance), non-recurring charges and certain other items
that we do not believe are indicative of core operating activities.
We believe 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 cash receipts 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. We believe 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", "expect", "intend",
"outlook", "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 September 30, 2019, 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.
Investor Contact:
Erica Abrams
(415) 297-5864
eabrams@quinstreet.com
QUINSTREET,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
September
30,
|
|
|
June
30,
|
|
|
|
2019
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
70,517
|
|
|
$
|
62,522
|
|
Accounts receivable,
net
|
|
|
74,615
|
|
|
|
75,628
|
|
Prepaid expenses and
other assets
|
|
|
6,168
|
|
|
|
5,228
|
|
Total
current assets
|
|
|
151,300
|
|
|
|
143,378
|
|
Property and
equipment, net
|
|
|
5,400
|
|
|
|
5,410
|
|
Operating lease
right-of-use assets
|
|
|
12,114
|
|
|
|
—
|
|
Goodwill
|
|
|
82,544
|
|
|
|
82,544
|
|
Other intangible
assets, net
|
|
|
33,178
|
|
|
|
35,118
|
|
Deferred tax assets,
noncurrent
|
|
|
52,048
|
|
|
|
52,149
|
|
Other assets,
noncurrent
|
|
|
5,674
|
|
|
|
6,012
|
|
Total
assets
|
|
$
|
342,258
|
|
|
$
|
324,611
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
40,020
|
|
|
$
|
37,093
|
|
Accrued
liabilities
|
|
|
37,699
|
|
|
|
36,878
|
|
Deferred
revenue
|
|
|
839
|
|
|
|
761
|
|
Other
liabilities
|
|
|
9,015
|
|
|
|
8,967
|
|
Total
current liabilities
|
|
|
87,573
|
|
|
|
83,699
|
|
Operating lease
liabilities, noncurrent
|
|
|
11,850
|
|
|
|
—
|
|
Other liabilities,
noncurrent
|
|
|
14,744
|
|
|
|
18,083
|
|
Total
liabilities
|
|
|
114,167
|
|
|
|
101,782
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
51
|
|
|
|
50
|
|
Additional paid-in
capital
|
|
|
293,866
|
|
|
|
289,768
|
|
Accumulated other
comprehensive loss
|
|
|
(335)
|
|
|
|
(366)
|
|
Accumulated
deficit
|
|
|
(65,491)
|
|
|
|
(66,623)
|
|
Total
stockholders' equity
|
|
|
228,091
|
|
|
|
222,829
|
|
Total
liabilities and stockholders' equity
|
|
$
|
342,258
|
|
|
$
|
324,611
|
|
QUINSTREET,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except per share data)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2019
|
|
|
2018
|
|
Net
revenue
|
|
$
|
126,614
|
|
|
$
|
112,869
|
|
Cost of revenue
(1)
|
|
|
113,189
|
|
|
|
96,813
|
|
Gross
profit
|
|
|
13,425
|
|
|
|
16,056
|
|
Operating expenses:
(1)
|
|
|
|
|
|
|
|
|
Product
development
|
|
|
3,556
|
|
|
|
3,305
|
|
Sales and
marketing
|
|
|
2,363
|
|
|
|
2,044
|
|
General and
administrative
|
|
|
5,825
|
|
|
|
5,394
|
|
Operating
income
|
|
|
1,681
|
|
|
|
5,313
|
|
Interest
income
|
|
|
72
|
|
|
|
66
|
|
Interest
expense
|
|
|
(212)
|
|
|
|
—
|
|
Other expense,
net
|
|
|
(257)
|
|
|
|
(67)
|
|
Income before income
taxes
|
|
|
1,284
|
|
|
|
5,312
|
|
Provision for income
taxes
|
|
|
(152)
|
|
|
|
(15)
|
|
Net income
|
|
$
|
1,132
|
|
|
$
|
5,297
|
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
50,845
|
|
|
|
48,663
|
|
Diluted
|
|
|
53,326
|
|
|
|
52,441
|
|
|
|
|
|
|
|
|
|
|
(1) Cost of revenue and operating
expenses include stock-based compensation expense as
follows:
|
|
Cost of
revenue
|
|
$
|
2,490
|
|
|
$
|
1,539
|
|
Product
development
|
|
|
484
|
|
|
|
401
|
|
Sales and
marketing
|
|
|
421
|
|
|
|
284
|
|
General and
administrative
|
|
|
1,253
|
|
|
|
887
|
|
QUINSTREET,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2019
|
|
|
2018
|
|
Cash Flows from
Operating Activities
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
1,132
|
|
|
$
|
5,297
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
2,812
|
|
|
|
1,648
|
|
Provision for sales
returns and doubtful accounts receivable
|
|
|
129
|
|
|
|
245
|
|
Stock-based
compensation
|
|
|
4,648
|
|
|
|
3,111
|
|
Non-cash lease
expense
|
|
|
(176)
|
|
|
|
—
|
|
Deferred income
taxes
|
|
|
116
|
|
|
|
—
|
|
Other adjustments,
net
|
|
|
212
|
|
|
|
(145)
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
884
|
|
|
|
2,779
|
|
Prepaid expenses and other assets
|
|
|
(637)
|
|
|
|
(682)
|
|
Accounts payable
|
|
|
2,998
|
|
|
|
1,657
|
|
Accrued liabilities
|
|
|
(2,770)
|
|
|
|
(3,919)
|
|
Deferred revenue
|
|
|
78
|
|
|
|
166
|
|
Other liabilities, noncurrent
|
|
|
115
|
|
|
|
70
|
|
Net
cash provided by operating activities
|
|
|
9,541
|
|
|
|
10,227
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(544)
|
|
|
|
(334)
|
|
Internal software
development costs
|
|
|
(507)
|
|
|
|
(596)
|
|
Other investing
activities
|
|
|
—
|
|
|
|
145
|
|
Net cash used in
investing activities
|
|
|
(1,051)
|
|
|
|
(785)
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from
exercise of common stock options
|
|
|
1,827
|
|
|
|
2,144
|
|
Payment of
withholding taxes related to release of restricted stock, net of
share settlement
|
|
|
(2,358)
|
|
|
|
(5,857)
|
|
Net cash used in
financing activities
|
|
|
(531)
|
|
|
|
(3,713)
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
|
|
36
|
|
|
|
90
|
|
Net increase in cash,
cash equivalents and restricted cash
|
|
|
7,995
|
|
|
|
5,819
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
|
|
62,536
|
|
|
|
65,588
|
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
70,531
|
|
|
$
|
71,407
|
|
Reconciliation of
cash, cash equivalents, and restricted cash to the condensed
consolidated balance sheets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
70,517
|
|
|
$
|
70,519
|
|
Restricted cash
included in other assets, noncurrent
|
|
|
14
|
|
|
|
888
|
|
Total cash, cash
equivalents and restricted cash
|
|
$
|
70,531
|
|
|
$
|
71,407
|
|
QUINSTREET,
INC.
|
RECONCILIATION OF
NET INCOME TO
|
ADJUSTED NET
INCOME
|
(In thousands,
except per share data)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2019
|
|
|
2018
|
|
Net income
|
|
$
|
1,132
|
|
|
$
|
5,297
|
|
Amortization of
intangible assets
|
|
|
1,935
|
|
|
|
734
|
|
Stock-based
compensation
|
|
|
4,648
|
|
|
|
3,111
|
|
Acquisition
costs
|
|
|
295
|
|
|
|
172
|
|
Shareholder litigation
expense
|
|
|
—
|
|
|
|
13
|
|
Tax impact of non-GAAP
items
|
|
|
(1,766)
|
|
|
|
(1,959)
|
|
Adjusted net
income
|
|
$
|
6,244
|
|
|
$
|
7,368
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted net
income per share
|
|
$
|
0.12
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computing adjusted diluted net income per
share
|
|
|
53,326
|
|
|
|
52,441
|
|
QUINSTREET,
INC.
|
RECONCILIATION OF
NET INCOME TO
|
ADJUSTED
EBITDA
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2019
|
|
|
2018
|
|
Net income
|
|
$
|
1,132
|
|
|
$
|
5,297
|
|
Interest and other
expense, net
|
|
|
397
|
|
|
|
1
|
|
Provision for income
taxes
|
|
|
152
|
|
|
|
15
|
|
Depreciation and
amortization
|
|
|
2,812
|
|
|
|
1,648
|
|
Stock-based
compensation
|
|
|
4,648
|
|
|
|
3,111
|
|
Acquisition
costs
|
|
|
295
|
|
|
|
172
|
|
Shareholder litigation
expense
|
|
|
—
|
|
|
|
13
|
|
Adjusted
EBITDA
|
|
$
|
9,436
|
|
|
$
|
10,257
|
|
QUINSTREET,
INC.
|
RECONCILIATION OF
CASH PROVIDED BY
|
OPERATING
ACTIVITIES TO FREE CASH FLOW
|
AND NOMALIZED FREE
CASH FLOW
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2019
|
|
|
2018
|
|
Net cash provided by
operating activities
|
|
$
|
9,541
|
|
|
$
|
10,227
|
|
Capital
expenditures
|
|
|
(544)
|
|
|
|
(334)
|
|
Internal software
development costs
|
|
|
(507)
|
|
|
|
(596)
|
|
Free cash
flow
|
|
$
|
8,490
|
|
|
$
|
9,297
|
|
Changes in operating
assets and liabilities
|
|
|
(668)
|
|
|
|
(71)
|
|
Normalized free cash
flow
|
|
$
|
7,822
|
|
|
$
|
9,226
|
|
View original
content:http://www.prnewswire.com/news-releases/quinstreet-reports-first-quarter-fiscal-year-2020-financial-results-300954250.html
SOURCE QuinStreet, Inc.