QuinStreet, Inc. (Nasdaq:QNST), a leader in vertical marketing and
media on the Internet, today announced its financial results for
the fiscal third quarter and nine months ended March 31, 2010.
For the third quarter of fiscal 2010, the Company reported total
revenue of $90.8 million, an increase of 30% over the third quarter
of fiscal 2009. For the nine month period ended March 31, 2010, the
Company reported total revenue of $246.3 million, an increase of
28% over the same period of fiscal 2009.
The Company reported net income of $5.3 million, or $0.11 per
diluted common share, for the third quarter of fiscal 2010.
Adjusted net income for the quarter was $9.4 million, or $0.21 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 $41.7
million for the fiscal third quarter, an increase of 70% as
compared to the same quarter of fiscal 2009. Revenue for the
Education client vertical was $38.1 million for the fiscal third
quarter, a decrease of 1% as compared to the year-ago quarter.
Revenue growth in the Education client vertical was 23% excluding
revenue from a large education client undergoing a previously
disclosed change in their online marketing strategy. Revenue for
Other client verticals was $10.9 million for the fiscal third
quarter, an increase of 64% as compared to the year-ago
quarter.
Adjusted EBITDA for the quarter was $18.3 million, or 20% of
revenue. It was $51.5 million, or 21% of revenue, for the nine
month period ended March 31, 2010.
Free cash flow for the quarter was $12.4 million, or 14% of
revenue. It was $26.8 million, or 11% of revenue, for the nine
month period ended March 31, 2010.
Reconciliations of adjusted EBITDA to net income, adjusted net
income to net income, and free cash flow to net cash provided by
operating activities are included in the accompanying tables.
"We are pleased with our fiscal third quarter financial results,
and we are excited about the progress we made serving visitors and
clients in all of our verticals," commented Doug Valenti,
QuinStreet CEO. "Our growth momentum remained strong, driven by
increases in visitor volumes and deepening relationships with
clients. Adjusted EBITDA came in at our annual target margin of
20%, inclusive of continued aggressive investment in future
capabilities and growth."
"We welcome our new public shareholders. We are honored by their
confidence, and we will work hard to earn their ongoing support,"
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 May 5, 2010
until 11:59 p.m. PT on May 12, 2010 by dialing 1-800-406-7325 in
the U.S. and Canada, or 1-303-590-3030 for international callers,
using passcode 4281906#. This press release, the financial tables,
as well as other supplemental financial information are also
available on the relations investor relations section of the
Company's website at http://investor.quinstreet.com.
Final operating results will be included in the Company's
quarterly report on Form 10-Q, which will be filed with the
Securities and Exchange Commission no later than May 17, 2010.
About Quinstreet
QuinStreet, Inc. (Nasdaq:QNST) is a leader in vertical marketing
and media on the Internet. 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 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 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 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
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 Prospectus
filed pursuant to Rule 424(b) under the Securities Act with the
Securities and Exchange Commission on February 11,
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)
|
|
|
|
|
|
|
March 31,
|
June 30,
|
|
|
2010
|
2009
|
|
|
|
|
Assets
|
|
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
|
$ 175,318
|
$ 25,182
|
Accounts receivable, net
|
|
47,334
|
33,283
|
Deferred tax assets
|
|
5,531
|
5,543
|
Prepaid expenses and other assets
|
|
8,322
|
1,228
|
Total current assets
|
|
236,505
|
65,236
|
Property and equipment, net
|
|
5,351
|
4,741
|
Goodwill
|
|
145,803
|
106,744
|
Other intangible assets, net
|
|
45,824
|
33,990
|
Deferred tax assets, noncurrent
|
|
--
|
1,525
|
Other assets, noncurrent
|
|
684
|
642
|
Total assets
|
|
$ 434,167
|
$ 212,878
|
Liabilities, Convertible Preferred Shares and
Stockholders' Equity
|
|
Current liabilities
|
|
|
|
Accounts payable
|
|
$ 19,019
|
$ 13,408
|
Accrued liabilities
|
|
28,011
|
21,794
|
Deferred revenue
|
|
1,257
|
718
|
Debt
|
|
18,096
|
12,890
|
Total current liabilities
|
|
66,383
|
48,810
|
Deferred revenue, noncurrent
|
|
370
|
820
|
Debt, noncurrent
|
|
84,636
|
44,350
|
Other liabilities, noncurrent
|
|
2,405
|
2,309
|
Total liabilities
|
|
153,794
|
96,289
|
|
|
|
|
Convertible preferred stock
|
|
--
|
43,403
|
|
|
|
|
Stockholders' equity
|
|
|
|
Common stock
|
|
47
|
15
|
Additional paid-in capital
|
|
214,331
|
20,634
|
Treasury stock
|
|
(7,779)
|
(7,064)
|
Accumulated other comprehensive income
|
|
21
|
21
|
Retained earnings
|
|
73,753
|
59,580
|
Total stockholders' equity
|
|
280,373
|
73,186
|
Total liabilities, convertible preferred stock and stockholders'
equity
|
$ 434,167
|
$ 212,878
|
QUINSTREET, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
(In thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Nine Months Ended March 31,
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$ 90,773
|
$ 69,813
|
$ 246,288
|
$ 192,726
|
Cost of revenue (1)
|
|
66,268
|
46,780
|
177,872
|
135,030
|
Gross profit
|
|
24,505
|
23,033
|
68,416
|
57,696
|
|
|
|
|
|
|
Operating expenses: (1)
|
|
|
|
|
|
Product development
|
|
5,325
|
3,512
|
14,534
|
10,992
|
Sales and marketing
|
|
4,575
|
3,594
|
12,190
|
12,017
|
General and administrative
|
|
4,467
|
2,865
|
14,111
|
9,772
|
Operating income
|
|
10,138
|
13,062
|
27,581
|
24,915
|
Interest income
|
|
16
|
44
|
33
|
221
|
Interest expense
|
|
(1,302)
|
(879)
|
(2,931)
|
(2,749)
|
Other income (expense), net
|
|
(64)
|
(16)
|
221
|
(256)
|
Income before income taxes
|
|
8,788
|
12,211
|
24,904
|
22,131
|
Provision for taxes
|
|
(3,538)
|
(5,818)
|
(10,731)
|
(10,084)
|
Net income
|
|
$ 5,250
|
$ 6,393
|
$ 14,173
|
$ 12,047
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders
|
|
|
|
|
|
Basic
|
|
$ 3,714
|
$ 2,150
|
$ 6,371
|
$ 3,697
|
Diluted
|
|
$ 3,797
|
$ 2,301
|
$ 6,790
|
$ 3,981
|
|
|
|
|
|
|
Net income per share attributable to common stockholders
|
|
|
|
|
|
Basic
|
|
$ 0.12
|
$ 0.16
|
$ 0.33
|
$ 0.28
|
Diluted
|
|
$ 0.11
|
$ 0.15
|
$ 0.31
|
$ 0.26
|
|
|
|
|
|
|
Weighted average shares used in computing net income per share
attributable to common stockholders
|
|
|
|
|
Basic
|
|
30,795
|
13,297
|
19,156
|
13,287
|
Diluted
|
|
33,938
|
14,890
|
22,008
|
15,032
|
|
|
|
|
|
|
(1) Cost of revenue and operating expenses include
stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$ 653
|
$ 470
|
$ 2,143
|
$ 1,477
|
Product development
|
|
686
|
176
|
1,570
|
494
|
Sales and marketing
|
|
1,163
|
455
|
2,504
|
1,352
|
General and administrative
|
|
624
|
373
|
4,002
|
1,061
|
QUINSTREET, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
Nine Months Ended
March 31,
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
Net income
|
|
$ 5,250
|
$ 6,393
|
$ 14,173
|
$12,047
|
Adjustments to reconcile net income to net cash provided
by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
5,075
|
4,035
|
13,678
|
12,386
|
Net realized gain on disposal of property and equipment
|
|
(10)
|
--
|
(15)
|
--
|
Provision for doubtful accounts
|
|
116
|
--
|
26
|
(27)
|
Provision for sales returns
|
|
(226)
|
(21)
|
(260)
|
1,390
|
Stock-based compensation
|
|
3,126
|
1,474
|
10,219
|
4,384
|
Excess tax benefits from exercise of stock options
|
|
(449)
|
(111)
|
(1,821)
|
(362)
|
Other non-cash adjustments, net
|
|
268
|
284
|
582
|
560
|
Changes in assets and liabilities, net of effects of
acquisitions:
|
|
|
|
|
|
Accounts receivable
|
|
(7,185)
|
(2,414)
|
(11,261)
|
(6,463)
|
Prepaid expenses and other assets
|
|
(899)
|
(402)
|
(5,251)
|
386
|
Other assets, noncurrent
|
|
774
|
699
|
(22)
|
332
|
Deferred tax assets
|
|
(30)
|
10
|
(123)
|
18
|
Accounts payable
|
|
2,392
|
2,571
|
4,338
|
5,643
|
Accrued liabilities
|
|
4,883
|
4,266
|
5,635
|
(3,722)
|
Deferred revenue
|
|
771
|
(303)
|
(57)
|
(627)
|
Deferred tax liabilities
|
|
29
|
--
|
134
|
--
|
Other liabilities, noncurrent
|
|
1
|
50
|
(12)
|
(43)
|
Net cash provided by operating activities
|
|
13,886
|
16,531
|
29,963
|
25,902
|
Cash flows from investing activities
|
|
|
|
|
|
Restricted cash
|
|
--
|
--
|
15
|
711
|
Proceeds from sales of property and equipment
|
|
9
|
--
|
52
|
--
|
Capital expenditures
|
|
(1,124)
|
(455)
|
(2,159)
|
(1,276)
|
Business acquisitions, net of notes payable and cash
acquired
|
|
(6,947)
|
(5,279)
|
(52,899)
|
(19,808)
|
Internal software development costs
|
|
(362)
|
(155)
|
(1,009)
|
(813)
|
Purchases of marketable securities
|
|
--
|
--
|
--
|
--
|
Proceeds from sales and maturities of marketable
securities
|
|
--
|
--
|
--
|
2,302
|
Net cash used in investing activities
|
|
(8,424)
|
(5,889)
|
(56,000)
|
(18,884)
|
Cash flows from financing activities
|
|
|
|
|
|
Net proceeds from issuance of common shares
|
|
138,776
|
60
|
139,626
|
300
|
Proceeds from bank debt
|
|
--
|
--
|
43,300
|
8,607
|
Principal payments on bank debt
|
|
(750)
|
(2,750)
|
(2,250)
|
(2,750)
|
Principal payments on acquisition-related notes payable
|
|
(2,766)
|
(711)
|
(5,609)
|
(6,764)
|
Excess tax benefits from exercise of stock options
|
|
449
|
111
|
1,821
|
362
|
Repurchases of common shares
|
|
--
|
(319)
|
(715)
|
(1,369)
|
Net cash provided by / (used in) financing activities
|
|
135,709
|
(3,609)
|
176,173
|
(1,614)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
8
|
(27)
|
--
|
(20)
|
Net increase in cash and cash equivalents
|
|
141,179
|
7,006
|
150,136
|
5,384
|
Cash and cash equivalents at beginning of period
|
|
34,139
|
23,331
|
25,182
|
24,953
|
Cash and cash equivalents at end of period
|
|
$ 175,318
|
$30,337
|
$ 175,318
|
$30,337
|
QUINSTREET, INC.
|
RECONCILIATION OF NET INCOME TO
|
ADJUSTED NET INCOME
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Nine Months Ended March 31,
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ 5,250
|
$6,393
|
$ 14,173
|
$12,047
|
Amortization of intangible assets
|
|
4,110
|
3,189
|
11,070
|
9,584
|
Stock-based compensation
|
|
3,126
|
1,474
|
10,219
|
4,384
|
Tax impact of the above items (1)
|
|
(3,039)
|
(1,958)
|
(8,941)
|
(5,867)
|
|
|
|
|
|
|
Adjusted net income
|
|
$ 9,447
|
$9,098
|
$ 26,521
|
$20,148
|
|
|
|
|
|
|
Less: non-cumulative dividends on convertible preferred stock
and undistributed earnings allocated to preferred stock
|
(2,381)
|
|
(12,833)
|
|
|
|
|
|
|
|
Adjusted net income attributable to common stockholders
|
$ 7,066
|
|
$ 13,688
|
|
|
|
|
|
|
|
Adjusted diluted net income per common share
|
|
$ 0.21
|
|
$ 0.62
|
|
|
|
|
|
|
|
Weighted-average shares used to compute adjusted diluted
net income per common share
|
33,938
|
|
22,008
|
|
|
|
|
|
|
|
(1) The non-GAAP effective tax rate used for these computations
is 42% and has been used to reduce the non-GAAP adjustments as an
estimated provision for income taxes.
|
QUINSTREET, INC.
|
RECONCILIATION OF NET INCOME
|
TO ADJUSTED EBITDA
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
Nine Months Ended
March 31,
|
|
|
2010
|
2010
|
|
|
|
|
|
|
|
|
Net income
|
|
$ 5,250
|
$ 14,173
|
Interest and other income (expenses), net
|
1,350
|
2,677
|
Provision for taxes
|
|
3,538
|
10,731
|
Depreciation and amortization
|
|
5,075
|
13,678
|
Stock-based compensation
|
|
3,126
|
10,219
|
|
|
|
|
Adjusted EBITDA
|
|
$ 18,339
|
$ 51,478
|
QUINSTREET, INC.
|
RECONCILIATION OF NET CASH PROVIDED BY OPERATING
ACTIVITIES TO
|
FREE CASH FLOW
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
Nine Months Ended
March 31,
|
|
|
2010
|
2010
|
|
|
|
|
Net cash provided by operating activities
|
|
$ 13,886
|
$ 29,963
|
Capital expenditures
|
|
(1,124)
|
(2,159)
|
Internal software development costs
|
|
(362)
|
(1,009)
|
|
|
|
|
Free cash flow
|
|
$ 12,400
|
$ 26,795
|
CONTACT: The Blueshirt Group
Erica Abrams
(415) 217-5864
erica@blueshirtgroup.com
Matthew Hunt
(415) 489-2194
matt@blueshirtgroup.com
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