QuinStreet, Inc. (Nasdaq:QNST), a leader in vertical marketing and
media online, today announced its financial results for the fiscal
fourth quarter and fiscal year ended June 30, 2010.
For the fourth quarter of fiscal year 2010, the Company reported
total revenue of $88.5 million, an increase of 31% over the fourth
quarter of fiscal 2009. For the fiscal year ended June 30, 2010,
the Company reported total revenue of $334.8 million, an increase
of 29% over fiscal 2009.
The Company reported net income of $6.4 million, or $0.13 per
diluted common share, for the fourth quarter of fiscal 2010.
Adjusted net income for the quarter was $11.6 million, or $0.24 per
diluted common share. Adjusted net income excludes stock-based
compensation expense and amortization of intangible assets, net of
estimated tax.
Revenue for the Financial Services client vertical was $38.7
million for the fiscal fourth quarter, an increase of 76% as
compared to the same quarter of fiscal 2009. Revenue for the
Education client vertical was $37.3 million for the fiscal fourth
quarter, a decrease of 5% as compared to the year-ago quarter.
Revenue in the Education client vertical grew 15% excluding changes
in revenue from a large education client undergoing a previously
disclosed change in their online marketing strategy. Revenue for
Other client verticals was $12.6 million for the fiscal fourth
quarter, an increase of 96% as compared to the year-ago
quarter.
Adjusted EBITDA for the quarter was $19.9 million, or 22% of
revenue. It was $71.4 million, or 21% of revenue, for the fiscal
year ended June 30, 2010.
Reconciliations of adjusted net income to net income, adjusted
EBITDA to net income, and free cash flow to net cash provided by
operating activities are included in the accompanying tables.
"We are pleased to have delivered our third
consecutive quarter with year-over-year revenue growth of 30% or
more. Revenue grew significantly in all verticals, but for one
client," commented Doug Valenti, QuinStreet CEO. "Financial
Services continues to grow rapidly and is now our largest vertical.
Education client demand is at record levels as we are benefiting
from a 'flight to quality' driven by regulatory scrutiny and
change, and as clients anticipate and adapt to new higher
standards.
"We continued to spend aggressively on the
development of new capabilities and future growth opportunities in
the quarter, while delivering EBITDA margins above target levels.
Fiscal 2010 was our eighth straight year of strong growth and
strong, consistent profitability. We look forward to many more.
QuinStreet has never had stronger client demand, visitor traffic or
competitive advantages. We are more excited than ever about the
size and attractiveness of our markets.
"We remain confident in our long-term guidance of 15-20% annual
growth and 20% EBITDA margins, and we expect to meet or exceed
those rates of growth and profitability in the coming year,"
concluded Valenti.
Conference Call
QuinStreet will host a conference call and corresponding live
webcast at 2:00 p.m. PT today. To access the conference call, dial
1-877-941-2068 for the U.S. and Canada and 1-480-629-9712 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 August 9, 2010
until 11:59 p.m. PT on August 16, 2010 by dialing 1-800-406-7325 in
the U.S. and Canada, or 1-303-590-3030 for international callers,
using passcode 4328774#. 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.
Final operating results will be included in the Company's annual
report on Form 10-K, which will be filed with the Securities and
Exchange Commission no later than September 28, 2010.
About QuinStreet
QuinStreet, Inc. (Nasdaq:QNST) is a leader in vertical marketing
and media online. QuinStreet is headquartered in Foster City, CA.
For more information, please visit www.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 and 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 taxes, depreciation expense, amortization expense,
stock-based compensation expense, interest and other income
(expense), net. The term "adjusted net income" refers to a
financial measure that we define as net income adjusted for
amortization expense and stock-based compensation expense, net of
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. 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 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 and 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 enhance
financial performance; 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 measure 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 and amortization of intangible assets).
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 us and investors because it
represents the cash that our operating business generates, 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. The
Company believes that analysts and investors use free cash flow
multiples as a metric for analyzing company valuations in our
industry. Free cash flow has certain limitations in that it does
not represent the total increase or decrease in the cash balance
for the period, nor does it represent the residual cash flow for
discretionary expenditures. Therefore, we think it is important to
evaluate free cash flow along with our consolidated statement of
cash flows.
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 "will," "believe," "intend," "potential" and similar
expressions are intended to identify forward-looking statements.
These forward-looking statements include the quotations from
management in this press release, as well as any statements
regarding the Company's anticipated financial results 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 deliver
an adequate rate of growth and manage such growth; the Company's
ability to maintain and increase the number of visitors to its
websites; the Company's ability to identify and manage
acquisitions; the impact of the current economic climate on the
Company's business; 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; the impact of changes in government regulation and
industry standards; the impact and costs of any failure by the
Company to comply with government regulations and industry
standards; and costs associated with defending intellectual
property infringement and other claims. More information about
potential factors that could affect the Company's business and
financial results is contained in the Company's quarterly report on
Form 10-Q filed on May 12, 2010. The Company does not intend and
undertakes no duty to release publicly any updates or revisions to
any forward-looking statements contained herein.
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
June 30, |
June 30, |
|
|
2010 |
2009 |
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash
equivalents |
$ 155,770 |
$ 25,182 |
Accounts receivable,
net |
51,466 |
33,283 |
Deferred tax assets |
|
8,528 |
5,543 |
Prepaid expenses and other
assets |
3,123 |
1,228 |
Total current assets |
|
218,887 |
65,236 |
Property and equipment, net |
5,419 |
4,741 |
Goodwill |
|
158,582 |
106,744 |
Other intangible assets, net |
47,156 |
33,990 |
Deferred tax assets,
noncurrent |
3,972 |
1,525 |
Other assets, noncurrent |
614 |
642 |
Total assets |
|
$ 434,630 |
$ 212,878 |
Liabilities, Convertible
Preferred Stock and Stockholders' Equity |
Current liabilities |
|
|
|
Accounts payable |
|
$ 16,776 |
$ 13,408 |
Accrued liabilities |
|
30,144 |
21,794 |
Deferred revenue |
|
1,241 |
718 |
Debt |
|
15,562 |
12,890 |
Total current
liabilities |
63,723 |
48,810 |
Deferred revenue, noncurrent |
305 |
820 |
Debt, noncurrent |
|
78,046 |
44,350 |
Other liabilities,
noncurrent |
2,534 |
2,309 |
Total liabilities |
|
144,608 |
96,289 |
Convertible preferred stock |
-- |
43,403 |
Stockholders' equity |
|
|
|
Common stock |
|
47 |
15 |
Additional paid-in
capital |
217,581 |
20,634 |
Treasury stock |
|
(7,779) |
(7,064) |
Accumulated other
comprehensive income |
9 |
21 |
Retained earnings |
|
80,164 |
59,580 |
Total stockholders'
equity |
290,022 |
73,186 |
Total liabilities,
convertible preferred stock and stockholders' equity |
$ 434,630 |
$ 212,878 |
QUINSTREET,
INC. |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(In thousands,
except per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended June 30, |
Fiscal Year Ended
June 30, |
|
2010 |
2009 |
2010 |
2009 |
Net revenue |
$88,547 |
$67,801 |
$334,835 |
$260,527 |
Cost of revenue (1) |
62,858 |
46,563 |
240,730 |
181,593 |
Gross profit |
25,689 |
21,238 |
94,105 |
78,934 |
Operating expenses: (1) |
|
|
|
|
Product development |
5,192 |
3,895 |
19,726 |
14,887 |
Sales and marketing |
4,508 |
4,137 |
16,698 |
16,154 |
General and administrative |
4,353 |
3,400 |
18,464 |
13,172 |
Operating income |
11,636 |
9,806 |
39,217 |
34,721 |
Interest income |
64 |
24 |
97 |
245 |
Interest expense |
(1,046) |
(795) |
(3,977) |
(3,544) |
Other income (expense), net |
1,302 |
17 |
1,523 |
(239) |
Income before income taxes |
11,956 |
9,052 |
36,860 |
31,183 |
Provision for taxes |
(5,545) |
(3,825) |
(16,276) |
(13,909) |
Net income |
$ 6,411 |
$ 5,227 |
$ 20,584 |
$ 17,274 |
|
|
|
|
|
Net income attributable to common
stockholders |
|
|
|
|
Basic |
$ 6,411 |
$ 1,702 |
$ 12,782 |
$ 5,399 |
Diluted |
$ 6,411 |
$ 1,812 |
$ 13,201 |
$ 5,798 |
|
|
|
|
|
Net income per share attributable to common
stockholders |
|
|
|
|
Basic |
$ 0.14 |
$ 0.13 |
$ 0.50 |
$ 0.41 |
Diluted |
$ 0.13 |
$ 0.12 |
$ 0.46 |
$ 0.39 |
|
|
|
|
|
Weighted average shares used in
computing net income per share attributable to common
stockholders |
|
Basic |
45,067 |
13,315 |
25,616 |
13,294 |
Diluted |
47,762 |
14,787 |
28,429 |
14,971 |
|
|
|
|
|
|
|
|
|
|
(1) Cost of revenue and operating
expenses include stock-based compensation expense as follows: |
|
|
|
|
|
|
|
Cost of revenue |
$ 968 |
$ 439 |
$ 3,111 |
$ 1,916 |
Product development |
606 |
175 |
2,176 |
669 |
Sales and marketing |
959 |
409 |
3,463 |
1,761 |
General and administrative |
619 |
766 |
4,621 |
1,827 |
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended June 30, |
Fiscal Year Ended
June 30, |
|
2010 |
2009 |
2010 |
2009 |
Cash flows from operating
activities |
|
|
|
|
Net income |
$ 6,411 |
$ 5,227 |
$ 20,584 |
$ 17,274 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
|
|
Depreciation and amortization |
5,113 |
3,592 |
18,791 |
15,978 |
Provision for sales returns and doubtful
accounts receivable |
(517) |
110 |
(751) |
1,473 |
Stock-based compensation |
3,152 |
1,789 |
13,371 |
6,173 |
Excess tax benefits from exercise of
stock options |
(38) |
(112) |
(1,859) |
(474) |
Loss (gain), net on early extinguishment
of debt |
(1,270) |
-- |
(1,179) |
-- |
Other non-cash adjustments, net |
(919) |
3 |
(443) |
563 |
Changes in assets and liabilities, net of
effects of acquisitions: |
|
|
|
|
Accounts receivable |
(3,142) |
(2,579) |
(14,403) |
(9,042) |
Prepaid expenses and other assets |
5,280 |
99 |
29 |
485 |
Other assets, noncurrent |
33 |
(1,042) |
11 |
(710) |
Deferred tax assets |
(5,309) |
(4,099) |
(5,432) |
(4,081) |
Accounts payable |
(975) |
(2,284) |
3,363 |
3,359 |
Accrued liabilities |
2,265 |
6,213 |
7,900 |
2,491 |
Deferred revenue |
(55) |
(93) |
(112) |
(720) |
Deferred tax liabilities |
(1,473) |
-- |
(1,339) |
-- |
Other liabilities, noncurrent |
(10) |
(156) |
(22) |
(199) |
Net cash provided by operating
activities |
8,546 |
6,668 |
38,509 |
32,570 |
Cash flows from investing
activities |
|
|
|
|
Restricted cash |
(1) |
-- |
14 |
711 |
Proceeds from sales of property and
equipment |
1 |
-- |
53 |
-- |
Capital expenditures |
(551) |
(71) |
(2,710) |
(1,347) |
Business acquisitions, net of notes payable
and cash acquired |
(15,277) |
(8,124) |
(68,176) |
(27,932) |
Internal software development costs |
(405) |
(247) |
(1,414) |
(1,060) |
Proceeds from sales and maturities of
marketable securities |
-- |
-- |
-- |
2,302 |
Net cash used in investing
activities |
(16,233) |
(8,442) |
(72,233) |
(27,326) |
Cash flows from financing
activities |
|
|
|
|
Net proceeds from issuance of common
shares |
(1,286) |
-- |
136,790 |
-- |
Proceeds from exercise of common stock
options |
90 |
36 |
1,640 |
304 |
Proceeds from bank debt |
-- |
-- |
43,300 |
8,607 |
Principal payments on bank debt |
(850) |
(750) |
(3,100) |
(3,500) |
Principal payments on acquisition-related
notes payable |
(9,841) |
(2,796) |
(15,450) |
(9,560) |
Excess tax benefits from exercise of stock
options |
38 |
112 |
1,859 |
474 |
Repurchases of common stock |
-- |
-- |
(715) |
(1,337) |
Net cash provided by / (used in)
financing activities |
(11,849) |
(3,398) |
164,324 |
(5,012) |
Effect of exchange rate changes on cash and
cash equivalents |
(12) |
17 |
(12) |
(3) |
Net increase in cash and cash
equivalents |
(19,548) |
(5,155) |
130,588 |
229 |
Cash and cash equivalents at beginning of
period |
175,318 |
30,337 |
25,182 |
24,953 |
Cash and cash equivalents at end of
period |
$ 155,770 |
$ 25,182 |
$ 155,770 |
$ 25,182 |
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME TO |
ADJUSTED NET
INCOME |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended June 30, |
Fiscal Year Ended
June 30, |
|
2010 |
2009 |
2010 |
2009 |
Net income |
$ 6,411 |
$ 5,227 |
$ 20,584 |
$ 17,274 |
Amortization of intangible assets |
4,219 |
2,152 |
15,289 |
11,736 |
Stock-based compensation |
3,152 |
1,789 |
13,371 |
6,173 |
Tax impact of the above items |
(2,200) |
(1,246) |
(9,549) |
(6,012) |
Adjusted net income |
$ 11,582 |
$ 7,922 |
$ 39,695 |
$ 29,171 |
Less: non-cumulative dividends on convertible
preferred stock and undistributed earnings allocated to preferred
stock |
-- |
|
(12,833) |
|
Adjusted net income attributable to common
stockholders |
$ 11,582 |
|
$ 26,862 |
|
Adjusted diluted net income per common
share |
$ 0.24 |
|
$ 0.94 |
|
Weighted-average shares used to compute
adjusted diluted net income per common share |
47,762 |
|
28,429 |
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME |
TO ADJUSTED
EBITDA |
(In
thousands) |
(Unaudited) |
|
|
|
|
Three Months Ended June
30, |
Fiscal Year Ended June
30, |
|
2010 |
2010 |
Net income |
$ 6,411 |
$ 20,584 |
Interest and other income (expense),
net |
320 |
(2,357) |
Provision for taxes |
5,545 |
16,276 |
Depreciation and amortization |
5,113 |
18,791 |
Stock-based compensation |
3,152 |
13,371 |
Adjusted EBITDA |
$ 19,901 |
$ 71,379 |
QUINSTREET,
INC. |
RECONCILIATION OF NET
CASH PROVIDED BY |
OPERATING ACTIVITIES TO
FREE CASH FLOW |
(In
thousands) |
(Unaudited) |
|
|
|
|
Three Months Ended June
30, |
Fiscal Year Ended June
30, |
|
2010 |
2010 |
Net cash provided by operating
activities |
$ 8,546 |
$ 38,509 |
Capital expenditures |
(551) |
(2,710) |
Internal software development costs |
(405) |
(1,414) |
Free cash flow |
$ 7,590 |
$ 34,385 |
CONTACT: The Blueshirt Group
Erica Abrams
(415) 217-5864
erica@blueshirtgroup.com
Matthew Hunt
(415) 489-2194
matt@blueshirtgroup.com
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