QuinStreet, Inc. (Nasdaq: QNST), a leader in performance
marketplace products and technologies, today announced financial
results for the fiscal first quarter ended September 30, 2018.
For the first quarter, the Company reported
revenue of $112.9 million, an increase of 29% year-over-year, and
GAAP net income of $5.3 million, or $0.11 per share. Adjusted net
income for the first quarter increased 108% year-over-year to $7.4
million, or $0.14 per share. Adjusted EBITDA increased 56%
year-over-year to $10.3 million, or 9% of revenue.
During the first quarter, the Company generated
$9.2 million in normalized free cash flow and closed the quarter
with $70.5 million in cash and no debt.
“We continued to see strong demand for our
digital performance marketplace solutions in Fiscal Q1,” commented
Doug Valenti, QuinStreet CEO. “Client spend is growing as marketing
efforts align with the rapid growth of the digital channel.
QuinStreet is delivering increasingly measurable and attractive
results to clients in the digital channel due to our superior
technologies and strong networks.
“We are raising our revenue outlook for full
fiscal year 2019 to growth of between 15 and 20% over last year. We
expect to continue to expand margins and that full fiscal year 2019
adjusted EBITDA margin will be approximately 10%,” concluded
Valenti.
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.
PTThe Company will host a conference call and
corresponding live webcast at 2:00 p.m. PT. To access the
conference call in the US dial +1(855) 719-5012 or +1(334) 323-0522
for international callers. A replay of the conference call will be
available beginning approximately two hours after the completion of
the call by dialing +1(888) 203-1112 (domestic)
or +1(719) 457-0820 (international) and using passcode 6043355
and pin 5876. The webcast of the conference will be available live
and via replay on the investor relations section of the Company's
website at http://investor.quinstreet.com.
Non-GAAP Financial MeasuresThis
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 income (loss) less provision for (benefit
from) taxes, depreciation expense, amortization expense,
stock-based compensation expense, interest and other income, net,
restructuring expense, external expenses related to the material
weakness disclosed in our Annual Report on Form 10-K, and
acquisition related expense. The term "adjusted net income" refers
to a financial measure that we define as net income (loss) adjusted
for amortization expense, stock-based compensation expense,
restructuring expense, external expenses related to the material
weakness disclosed in our Annual Report on Form 10-K, and
acquisition related expense, net of estimated taxes calculated
based on the estimated annual statutory tax rate. Due to the
effects of our deferred tax asset valuation allowance and our
historical net operating losses, our annual effective tax rate is
not meaningful as our income tax amounts for each period are not
directly correlated to the amount of income or losses before income
taxes for such period. The term "adjusted diluted net income per
share" refers to a financial measure that we define as adjusted net
income (loss) 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, 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 on periods or
companies 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 restructuring expense,
external expenses related to the material weakness disclosed in our
Annual Report on Form 10-K, acquisition related expense, and other
income and expense) and the non-cash impact of depreciation
expense, amortization expense and stock-based compensation
expense.
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), 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, 2018, 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 marketplace product and technology
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.
Investor Contact:
Erica Abrams (415)
297-5864eabrams@quinstreet.com
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
September 30, |
|
June 30, |
|
|
|
2018 |
|
|
|
2018 |
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
70,519 |
|
|
$ |
64,700 |
|
Accounts
receivable, net |
|
|
65,668 |
|
|
|
68,492 |
|
Prepaid
expenses and other assets |
|
|
5,297 |
|
|
|
4,432 |
|
Total
current assets |
|
|
141,484 |
|
|
|
137,624 |
|
Property and equipment,
net |
|
|
4,126 |
|
|
|
4,211 |
|
Goodwill |
|
|
62,283 |
|
|
|
62,283 |
|
Other intangible
assets, net |
|
|
7,835 |
|
|
|
8,573 |
|
Other assets,
noncurrent |
|
|
7,330 |
|
|
|
7,605 |
|
Total
assets |
|
$ |
223,058 |
|
|
$ |
220,296 |
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
34,129 |
|
|
$ |
32,506 |
|
Accrued
liabilities |
|
|
31,015 |
|
|
|
34,811 |
|
Deferred
revenue |
|
|
881 |
|
|
|
715 |
|
Total
current liabilities |
|
|
66,025 |
|
|
|
68,032 |
|
Other liabilities,
noncurrent |
|
|
4,008 |
|
|
|
3,938 |
|
Total
liabilities |
|
|
70,033 |
|
|
|
71,970 |
|
Stockholders'
equity: |
|
|
|
|
Common
stock |
|
|
49 |
|
|
|
48 |
|
Additional paid-in capital |
|
|
277,084 |
|
|
|
277,761 |
|
Accumulated other comprehensive loss |
|
|
(302 |
) |
|
|
(380 |
) |
Accumulated deficit |
|
|
(123,806 |
) |
|
|
(129,103 |
) |
Total
stockholders' equity |
|
|
153,025 |
|
|
|
148,326 |
|
Total
liabilities and stockholders' equity |
|
$ |
223,058 |
|
|
$ |
220,296 |
|
|
|
QUINSTREET, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
Net
revenue |
|
|
|
|
$ |
112,869 |
|
|
$ |
87,418 |
Cost of
revenue (1) |
|
|
|
96,813 |
|
|
|
75,940 |
Gross
profit |
|
|
|
|
|
16,056 |
|
|
|
11,478 |
Operating
expenses: (1) |
|
|
|
|
|
Product
development |
|
|
3,305 |
|
|
|
3,214 |
|
Sales and
marketing |
|
|
2,044 |
|
|
|
2,447 |
|
General and
administrative |
|
|
5,394 |
|
|
|
4,460 |
Operating
income |
|
|
|
5,313 |
|
|
|
1,357 |
Interest
income |
|
|
|
|
66 |
|
|
|
37 |
Other
(expense) income, net |
|
|
(67 |
) |
|
|
43 |
Income
before taxes |
|
|
5,312 |
|
|
|
1,437 |
(Provision
for) benefit from taxes |
|
|
(15 |
) |
|
|
8 |
Net
income |
|
|
|
|
$ |
5,297 |
|
|
$ |
1,445 |
|
|
|
|
|
|
|
|
|
|
|
Net income
per share: |
|
|
|
|
|
Basic |
|
|
|
|
|
$ |
0.11 |
|
|
$ |
0.03 |
|
Diluted |
|
|
|
|
$ |
0.10 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used in computing net income per share: |
|
|
|
Basic |
|
|
|
|
|
|
48,663 |
|
|
|
45,578 |
|
Diluted |
|
|
|
|
|
52,441 |
|
|
|
46,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Cost
of revenue and operating expenses include stock-based compensation
expense as follows: |
|
Cost of
revenue |
|
|
$ |
1,539 |
|
|
$ |
925 |
|
Product
development |
|
|
401 |
|
|
|
476 |
|
Sales and
marketing |
|
|
284 |
|
|
|
299 |
|
General and
administrative |
|
|
887 |
|
|
|
737 |
|
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Cash Flows from Operating Activities |
|
|
|
Net
income |
|
$ |
5,297 |
|
|
$ |
1,445 |
|
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
|
|
Depreciation and amortization |
|
1,648 |
|
|
|
2,261 |
|
|
Provision for sales returns and doubtful
accounts receivable |
|
245 |
|
|
|
139 |
|
|
Stock-based
compensation |
|
3,111 |
|
|
|
2,437 |
|
|
Other
adjustments, net |
|
(145 |
) |
|
|
— |
|
|
Changes in
assets and liabilities: |
|
|
|
|
|
Accounts
receivable |
|
2,779 |
|
|
|
(4,975 |
) |
|
|
Prepaid
expenses and other assets |
|
(682 |
) |
|
|
(712 |
) |
|
|
Accounts
payable |
|
1,657 |
|
|
|
2,275 |
|
|
|
Accrued
liabilities |
|
(3,919 |
) |
|
|
(115 |
) |
|
|
Deferred
revenue |
|
166 |
|
|
|
(292 |
) |
|
|
Other
liabilities, noncurrent |
|
70 |
|
|
|
(139 |
) |
|
|
|
|
Net cash
provided by operating activities |
|
10,227 |
|
|
|
2,324 |
|
Cash Flows from Investing Activities |
|
|
|
Capital
expenditures |
|
(334 |
) |
|
|
(124 |
) |
Internal
software development costs |
|
(596 |
) |
|
|
(543 |
) |
Other
investing activities |
|
145 |
|
|
|
— |
|
|
|
|
|
Net cash
used in investing activities |
|
(785 |
) |
|
|
(667 |
) |
Cash Flows from Financing Activities |
|
|
|
Withholding taxes related to release of
restricted stock, net of share settlement |
|
(5,857 |
) |
|
|
(726 |
) |
Proceeds
from exercise of common stock options |
|
2,144 |
|
|
|
— |
|
Repurchases
of common stock |
|
— |
|
|
|
(125 |
) |
|
|
|
|
Net cash
used in financing activities |
|
(3,713 |
) |
|
|
(851 |
) |
Effect of
exchange rate changes on cash and cash equivalents |
|
90 |
|
|
|
(10 |
) |
Net
increase (decrease) in cash and cash equivalents |
|
5,819 |
|
|
|
796 |
|
Cash and
cash equivalents at beginning of period |
|
65,588 |
|
|
|
50,459 |
|
Cash and
cash equivalents at end of period |
$ |
71,407 |
|
|
$ |
51,255 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of cash, cash
equivalents, and restricted cash to the consolidated balance
sheet |
Cash and
cash equivalents |
$ |
70,519 |
|
|
$ |
50,367 |
|
Restricted
cash included in other assets, non current |
|
888 |
|
|
|
888 |
|
Total cash,
cash equivalents and restricted cash |
$ |
71,407 |
|
|
$ |
51,255 |
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME TO |
ADJUSTED NET INCOME |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Net
income |
|
|
|
|
|
$ |
5,297 |
|
|
$ |
1,445 |
|
Amortization of intangible assets |
|
|
734 |
|
|
|
1,134 |
|
Stock-based compensation |
|
|
3,111 |
|
|
|
2,437 |
|
Acquisition costs |
|
|
|
172 |
|
|
|
— |
|
Shareholder litigation expense |
|
|
13 |
|
|
|
— |
|
Material weakness related expense |
|
|
— |
|
|
|
528 |
|
Tax impact after non-GAAP items |
|
|
(1,959 |
) |
|
|
(1,996 |
) |
Adjusted
net income |
|
|
|
$ |
7,368 |
|
|
$ |
3,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
diluted net income per share |
|
$ |
0.14 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing
adjusted diluted net income per share |
|
|
52,441 |
|
|
|
46,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET INCOME TO |
ADJUSTED EBITDA |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Net
income |
|
|
|
|
|
$ |
5,297 |
|
$ |
1,445 |
|
Interest and other income, net |
|
|
1 |
|
|
(80 |
) |
Provision for (Benefit) from taxes |
|
|
15 |
|
|
(8 |
) |
Depreciation and amortization |
|
|
1,648 |
|
|
2,261 |
|
Stock-based compensation |
|
|
3,111 |
|
|
2,437 |
|
Acquisition costs |
|
|
|
172 |
|
|
— |
|
Shareholder litigation expense |
|
|
13 |
|
|
— |
|
Material weakness related expense |
|
|
— |
|
|
528 |
|
Adjusted
EBITDA |
|
|
|
$ |
10,257 |
|
$ |
6,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Net cash
provided by operating activities |
|
$ |
10,227 |
|
|
$ |
2,324 |
|
Capital expenditures |
|
|
|
(334 |
) |
|
|
(124 |
) |
Internal software development costs |
|
|
(596 |
) |
|
|
(543 |
) |
Free cash
flow |
|
|
|
|
$ |
9,297 |
|
|
$ |
1,657 |
|
Changes in operating assets and liabilities |
|
|
(71 |
) |
|
|
3,958 |
|
Normalized
free cash flow |
|
|
$ |
9,226 |
|
|
$ |
5,615 |
|
|
|
|
|
|
|
|
|
|
|
|
QuinStreet (NASDAQ:QNST)
Historical Stock Chart
From Jun 2024 to Jul 2024
QuinStreet (NASDAQ:QNST)
Historical Stock Chart
From Jul 2023 to Jul 2024