FOSTER CITY, Calif.,
Oct. 28, 2020 /PRNewswire/ --
QuinStreet, Inc. (Nasdaq: QNST), a leader in performance
marketplace technologies and services for the financial services
and home services industries, today announced financial results for
the first quarter ended September 30,
2020.
For the first quarter, the Company reported revenue of
$139.3 million. Revenue excluding
divested businesses increased 23% year-over-year.
GAAP net income for the first quarter increased 1197%
year-over-year to $14.7 million,
representing 11% of revenue, or $0.27
per diluted share. Adjusted net income increased 42% year-over-year
to $8.8 million, representing 6% of
revenue, or $0.16 per diluted
share.
Adjusted EBITDA for the first quarter increased 32%
year-over-year to $12.5 million,
representing 9% of revenue.
For the first quarter, the Company generated $17.6 million in operating cash flow and closed
the quarter with $102.2 million in
cash and equivalents.
"Fiscal Q1 was a good quarter for the Company as we continued to
deliver strong results, particularly in Insurance and Home
Services, our two largest businesses," commented Doug Valenti, QuinStreet CEO. "Auto Insurance
revenue growth continued to accelerate, reaching 57%
year-over-year, due to unprecedented and broadening demand from
clients and good progress with growth initiatives. Home Services
momentum was driven by the successful execution of growth
initiatives and ahead-of-schedule integration and synergies with
the Modernize acquisition."
"Trends in credit-driven businesses, specifically Personal Loans
and Credit Cards, stabilized and improved in fiscal Q1."
"As previously announced, we divested the Education client
vertical on August 31 as another step
in our strategy to narrow our footprint to our best opportunities,
and to accelerate revenue growth and margin expansion."
"Looking ahead to the current quarter or fiscal Q2, we expect
continued strong momentum and revenue growth in Insurance and Home
Services, and we expect continued strong overall Company
performance as a result. We expect revenue in fiscal Q2 to be
$118 to $122
million, in line with or beating typical seasonality, and
representing 21% year-over-year growth excluding divested
businesses at the midpoint of the range. We expect adjusted
EBITDA margin to be in the mid-single digits, reflecting only
typical seasonal fluctuation," concluded Valenti.
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 +1 800-353-6461 (domestic) or +1
334-323-0501 (international callers) using passcode #7998563. 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 callers) and using passcode #7998563. 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 leader in
performance marketplace technologies and services for the financial
services and home services industries. QuinStreet is a pioneer in
delivering online marketplace solutions to match searchers with
brands in digital media, and is committed to providing consumers
with the information and tools they need to research, find and
select the products and brands that meet their needs.
Non-GAAP Financial Measures and Definitions of Client
Verticals
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) income taxes, depreciation
expense, amortization expense, stock-based compensation expense,
interest and other expense, net, acquisition and divestiture costs,
gain on divestitures of businesses, net, strategic review costs,
contingent consideration adjustment, litigation settlement expense,
and restructuring costs. 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
and divestiture costs, gain on divestitures of businesses, net,
strategic review costs, contingent consideration adjustment,
litigation settlement expense, and restructuring costs, 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,
(vi) it is an element of certain financial covenants under our
historical borrowing arrangements, and (vii) it is a factor that
assists investors in the analysis of ongoing operating trends. 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
litigation settlement expense, acquisition and divestiture costs,
gain or loss on divestitures of businesses, contingent
consideration adjustment, strategic review costs, restructuring
costs 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, and
contingent consideration adjustment), 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.
FY2020 results in our Education Client Vertical include revenue
from US, (historically) Brazil,
and India. Revenue in our
Financial Services Client Vertical includes Auto Insurance (auto,
home, motorcycle, and small business), Life Insurance, Health
Insurance, Personal Loans, Credit Cards, Banking, and
(historically) Mortgage. Revenue in our Other Client Vertical
includes Home Services and (historically) B2B. In fiscal Q3 2020,
we divested our B2B client vertical and Brazil operations. In fiscal Q4 2020, we
divested our Mortgage business. In fiscal Q1 2021, we divested our
Education business.
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", "promises" 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. 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 from risks and
uncertainties relating to the COVID-19 pandemic; the impact of
changes in industry standards and government regulation including,
but not limited to investigation or enforcement activities of the
Federal Trade Commission and other regulatory agencies; the
Company's ability to maintain and increase client marketing spend;
the Company's ability, whether within or outside the Company's
control, 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 from risks relating to counterparties on the
Company's business; 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 impact of
changes in our business, our industry, and the current economic and
regulatory climate on the Company's quarterly and annual results of
operations; the Company's exposure to data privacy and security
risks; and the Company's ability to protect our intellectual
property rights. 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, 2020, 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:
Hayden Blair
(650) 578-7824
hblair@quinstreet.com
QUINSTREET,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
September
30,
|
|
|
June
30,
|
|
|
|
2020
|
|
|
2020
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
102,244
|
|
|
$
|
107,509
|
|
Accounts receivable,
net
|
|
|
69,131
|
|
|
|
64,472
|
|
Prepaid expenses and
other assets
|
|
|
13,467
|
|
|
|
13,591
|
|
Total current
assets
|
|
|
184,842
|
|
|
|
185,572
|
|
Property and
equipment, net
|
|
|
6,117
|
|
|
|
5,657
|
|
Operating lease
right-of-use assets
|
|
|
13,921
|
|
|
|
9,118
|
|
Goodwill
|
|
|
115,916
|
|
|
|
80,677
|
|
Other intangible
assets, net
|
|
|
58,619
|
|
|
|
28,174
|
|
Deferred tax assets,
noncurrent
|
|
|
36,273
|
|
|
|
48,673
|
|
Other assets,
noncurrent
|
|
|
1,424
|
|
|
|
536
|
|
Total
assets
|
|
$
|
417,112
|
|
|
$
|
358,407
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
47,596
|
|
|
$
|
36,759
|
|
Accrued
liabilities
|
|
|
44,325
|
|
|
|
42,271
|
|
Deferred
revenue
|
|
|
338
|
|
|
|
73
|
|
Other
liabilities
|
|
|
12,339
|
|
|
|
6,734
|
|
Total current
liabilities
|
|
|
104,598
|
|
|
|
85,837
|
|
Operating lease
liabilities, noncurrent
|
|
|
12,120
|
|
|
|
8,692
|
|
Other liabilities,
noncurrent
|
|
|
27,106
|
|
|
|
7,934
|
|
Total
liabilities
|
|
|
143,824
|
|
|
|
102,463
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
53
|
|
|
|
52
|
|
Additional paid-in
capital
|
|
|
307,350
|
|
|
|
304,650
|
|
Accumulated other
comprehensive loss
|
|
|
(275)
|
|
|
|
(237)
|
|
Accumulated
deficit
|
|
|
(33,840)
|
|
|
|
(48,521)
|
|
Total
stockholders' equity
|
|
|
273,288
|
|
|
|
255,944
|
|
Total
liabilities and stockholders' equity
|
|
$
|
417,112
|
|
|
$
|
358,407
|
|
QUINSTREET,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except per share data)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Net
revenue
|
|
$
|
139,269
|
|
|
$
|
126,614
|
|
Cost of revenue
(1)
|
|
|
122,231
|
|
|
|
113,189
|
|
Gross
profit
|
|
|
17,038
|
|
|
|
13,425
|
|
Operating expenses:
(1)
|
|
|
|
|
|
|
|
|
Product
development
|
|
|
4,891
|
|
|
|
3,556
|
|
Sales and
marketing
|
|
|
2,643
|
|
|
|
2,363
|
|
General and
administrative
|
|
|
6,581
|
|
|
|
5,825
|
|
Operating
income
|
|
|
2,923
|
|
|
|
1,681
|
|
Interest
income
|
|
|
22
|
|
|
|
72
|
|
Interest
expense
|
|
|
(339)
|
|
|
|
(212)
|
|
Other income
(expense), net
|
|
|
16,689
|
|
|
|
(257)
|
|
Income before income
taxes
|
|
|
19,295
|
|
|
|
1,284
|
|
Provision for income
taxes
|
|
|
(4,614)
|
|
|
|
(152)
|
|
Net income
|
|
$
|
14,681
|
|
|
$
|
1,132
|
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.28
|
|
|
$
|
0.02
|
|
Diluted
|
|
$
|
0.27
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
52,492
|
|
|
|
50,845
|
|
Diluted
|
|
|
54,269
|
|
|
|
53,326
|
|
|
|
|
|
|
|
|
|
|
(1) Cost of revenue and operating
expenses include stock-based compensation expense as
follows:
|
|
Cost of
revenue
|
|
$
|
2,201
|
|
|
$
|
2,490
|
|
Product
development
|
|
|
549
|
|
|
|
484
|
|
Sales and
marketing
|
|
|
547
|
|
|
|
421
|
|
General and
administrative
|
|
|
1,483
|
|
|
|
1,253
|
|
QUINSTREET,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash Flows from
Operating Activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14,681
|
|
|
$
|
1,132
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
4,133
|
|
|
|
2,812
|
|
Provision for sales
returns and doubtful accounts receivable
|
|
|
(95)
|
|
|
|
129
|
|
Stock-based
compensation
|
|
|
4,780
|
|
|
|
4,648
|
|
Non-cash lease
expense
|
|
|
(169)
|
|
|
|
(176)
|
|
Deferred income
taxes
|
|
|
4,525
|
|
|
|
116
|
|
Gain on divestitures
of businesses
|
|
|
(16,615)
|
|
|
|
—
|
|
Other adjustments,
net
|
|
|
339
|
|
|
|
212
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(296)
|
|
|
|
884
|
|
Prepaid expenses
and other assets
|
|
|
(19)
|
|
|
|
(637)
|
|
Accounts
payable
|
|
|
8,982
|
|
|
|
2,998
|
|
Accrued
liabilities
|
|
|
(2,713)
|
|
|
|
(2,770)
|
|
Deferred
revenue
|
|
|
25
|
|
|
|
78
|
|
Other
liabilities, noncurrent
|
|
|
—
|
|
|
|
115
|
|
Net cash provided by
operating activities
|
|
|
17,558
|
|
|
|
9,541
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(437)
|
|
|
|
(544)
|
|
Internal software
development costs
|
|
|
(696)
|
|
|
|
(507)
|
|
Business
acquisitions, net of cash acquired
|
|
|
(40,304)
|
|
|
|
—
|
|
Proceeds from
divestitures of businesses
|
|
|
20,730
|
|
|
|
—
|
|
Net cash used in
investing activities
|
|
|
(20,707)
|
|
|
|
(1,051)
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from
exercise of common stock options
|
|
|
1,167
|
|
|
|
1,827
|
|
Payment of
withholding taxes related to release of restricted stock, net of
share settlement
|
|
|
(2,874)
|
|
|
|
(2,358)
|
|
Post-closing payments
and contingent consideration related to acquisitions
|
|
|
(348)
|
|
|
|
—
|
|
Net cash used in
financing activities
|
|
|
(2,055)
|
|
|
|
(531)
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
|
|
(61)
|
|
|
|
36
|
|
Net (decrease)
increase in cash, cash equivalents and restricted cash
|
|
|
(5,265)
|
|
|
|
7,995
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
|
|
107,523
|
|
|
|
62,536
|
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
102,258
|
|
|
$
|
70,531
|
|
Reconciliation of
cash, cash equivalents, and restricted cash to the condensed
consolidated balance sheets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
102,244
|
|
|
$
|
70,517
|
|
Restricted cash
included in other assets, noncurrent
|
|
|
14
|
|
|
|
14
|
|
Total cash, cash
equivalents and restricted cash
|
|
$
|
102,258
|
|
|
$
|
70,531
|
|
QUINSTREET,
INC.
|
RECONCILIATION OF
NET INCOME TO
|
ADJUSTED NET
INCOME
|
(In thousands,
except per share data)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Net income
|
|
$
|
14,681
|
|
|
$
|
1,132
|
|
Amortization of
intangible assets
|
|
|
3,128
|
|
|
|
1,935
|
|
Stock-based
compensation
|
|
|
4,780
|
|
|
|
4,648
|
|
Acquisition and
divestiture costs
|
|
|
276
|
|
|
|
295
|
|
Gain on divestitures
of businesses
|
|
|
(16,615)
|
|
|
|
—
|
|
Restructuring
costs
|
|
|
391
|
|
|
|
—
|
|
Tax impact of non-GAAP
items
|
|
|
2,204
|
|
|
|
(1,766)
|
|
Adjusted net
income
|
|
$
|
8,845
|
|
|
$
|
6,244
|
|
Adjusted
diluted net income per share
|
|
$
|
0.16
|
|
|
$
|
0.12
|
|
Weighted
average shares used in computing adjusted diluted net income per
share
|
|
|
54,269
|
|
|
|
53,326
|
|
QUINSTREET,
INC.
|
RECONCILIATION OF
NET INCOME TO
|
ADJUSTED
EBITDA
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Net income
|
|
$
|
14,681
|
|
|
$
|
1,132
|
|
Interest and other
expense, net
|
|
|
243
|
|
|
|
397
|
|
Provision for income
taxes
|
|
|
4,614
|
|
|
|
152
|
|
Depreciation and
amortization
|
|
|
4,133
|
|
|
|
2,812
|
|
Stock-based
compensation
|
|
|
4,780
|
|
|
|
4,648
|
|
Acquisition and
divestiture costs
|
|
|
276
|
|
|
|
295
|
|
Gain on divestitures
of businesses
|
|
|
(16,615)
|
|
|
|
—
|
|
Restructuring
costs
|
|
|
391
|
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
12,503
|
|
|
$
|
9,436
|
|
QUINSTREET,
INC.
|
RECONCILIATION OF
CASH PROVIDED BY
|
OPERATING
ACTIVITIES TO FREE CASH FLOW
|
AND NORMALIZED
FREE CASH FLOW
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Net cash provided by
operating activities
|
|
$
|
17,558
|
|
|
$
|
9,541
|
|
Capital
expenditures
|
|
|
(437)
|
|
|
|
(544)
|
|
Internal software
development costs
|
|
|
(696)
|
|
|
|
(507)
|
|
Free cash
flow
|
|
$
|
16,425
|
|
|
$
|
8,490
|
|
Changes in operating
assets and liabilities
|
|
|
(5,979)
|
|
|
|
(668)
|
|
Normalized free cash
flow
|
|
$
|
10,446
|
|
|
$
|
7,822
|
|
QUINSTREET, INC.
REVENUE OF DIVESTED BUSINESSES
As a result of the Company's decision to narrow the focus to its
best performing businesses and market opportunities, the Company
completed a series of business divestitures in fiscal year 2020 and
in the first quarter of fiscal year 2021.
In fiscal year 2020, the Company completed the divestitures of
its business-to-business technology client vertical, its mortgage
business, as well as its wholly owned subsidiaries, QuinStreet
Brasil Online Marketing e Midia Ltda, and VEMM, LLC along with its
interests in Euro-Demand Do Brasil Serviços de Geração de Leads
Ltda. These businesses contributed $6.8
million to the Company's net revenue for the three months
ended September 30, 2019.
In the first quarter of fiscal year 2021, the Company completed
the divestiture of its Education client vertical, which contributed
$7.6 million and $12.8 million to the Company's net revenue for
the three months ended September 30,
2020 and 2019, respectively.
View original
content:http://www.prnewswire.com/news-releases/quinstreet-reports-first-quarter-fiscal-year-2021-financial-results-301162150.html
SOURCE QuinStreet, Inc.