QuinStreet, Inc. (Nasdaq:QNST), a leader in vertical marketing and
media online, today announced its financial results for the fiscal
first quarter ended September 30, 2010.
For the quarter, the Company reported total revenue of $103.6
million, an increase of 32% over revenue reported in the same
quarter last year.
The Company reported net income of $7.5 million, or $0.16 per
diluted share, for the quarter. Adjusted net income for the quarter
was $13.5 million, or $0.29 per diluted 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 $49.8
million, an increase of 61% as compared to the same quarter of last
year. Revenue for the Education client vertical was $42.6 million,
an increase of 5% as compared to the year-ago quarter. Revenue for
the Education client vertical grew 20% excluding changes in revenue
from a large education client undergoing a previously disclosed
change in its online marketing strategy. Revenue for Other client
verticals was $11.2 million, an increase of 57% as compared to the
year-ago quarter.
Adjusted EBITDA for the quarter was $24.6 million, or 24% of
revenue.
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 report our fourth consecutive
quarter of year-over-year revenue growth of 30% or more. We are
also excited to have exceeded quarterly revenue of $100 million for
the first time," commented Doug Valenti, QuinStreet CEO. "Revenue
grew significantly in each of our client verticals, and we have
never seen stronger client demand, visitor traffic or competitive
advantages. Our business momentum is strong. Our markets are
enormous, and despite our success to date, we are still very early
in our penetration and growth potential."
"We remain maniacally focused on execution and on delivering
shareholder value, as we have since we started the Company 11 years
ago. This is our ninth consecutive year of strong growth and
strong, consistent profitability," 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
1-866-240-0819 for the U.S. and Canada and 1-973-200-3360 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 November 3,
2010 until 11:59 p.m. PT on November 11, 2010 by dialing
1-800-642-1687 in the U.S. and Canada, or 1-706-645-9291 for
international callers, using passcode 16987722#. 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
quarterly report on Form 10-Q, which will be filed with the
Securities and Exchange Commission no later than November 15,
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
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. 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 measurement 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 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.
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 impact of
changes in government regulation and industry standards; 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 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 annual report on Form 10-K as filed with
the Securities and Exchange Commission on September 13, 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) |
|
|
|
|
September 30, |
June 30, |
|
2010 |
2010 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 127,294 |
$ 155,770 |
Accounts receivable,
net |
61,944 |
51,466 |
Deferred tax assets |
8,528 |
8,528 |
Prepaid expenses and other
assets |
4,974 |
3,123 |
Total current assets |
202,740 |
218,887 |
|
|
|
Property and equipment, net |
7,985 |
5,419 |
Goodwill |
179,006 |
158,582 |
Other intangible assets, net |
57,801 |
47,156 |
Deferred tax assets, noncurrent |
3,975 |
3,972 |
Other assets, noncurrent |
599 |
614 |
Total assets |
$ 452,106 |
$ 434,630 |
|
|
|
Liabilities and
Stockholders' Equity |
|
Current liabilities |
|
|
Accounts payable |
$ 24,861 |
$ 16,776 |
Accrued liabilities |
27,383 |
30,144 |
Deferred revenue |
1,378 |
1,241 |
Debt |
13,875 |
15,562 |
Total current liabilities |
67,497 |
63,723 |
|
|
|
Deferred revenue, noncurrent |
238 |
305 |
Debt, noncurrent |
78,348 |
78,046 |
Other liabilities, noncurrent |
2,529 |
2,534 |
Total liabilities |
148,612 |
144,608 |
|
|
|
Stockholders' equity |
|
|
Common stock |
48 |
47 |
Additional paid-in capital |
223,570 |
217,581 |
Treasury stock |
(7,779) |
(7,779) |
Accumulated other comprehensive
(loss) income |
(10) |
9 |
Retained earnings |
87,665 |
80,164 |
Total stockholders' equity |
303,494 |
290,022 |
Total liabilities and
stockholders' equity |
$ 452,106 |
$ 434,630 |
|
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands,
except per share data) |
(Unaudited) |
|
|
|
|
Three Months
Ended |
|
September
30, |
|
2010 |
2009 |
Net revenue |
$ 103,616 |
$ 78,552 |
Cost of revenue (1) |
73,629 |
55,047 |
Gross profit |
29,987 |
23,505 |
Operating expenses: (1) |
Product development |
5,551 |
4,470 |
Sales and marketing |
4,745 |
3,625 |
General and administrative |
4,722 |
3,441 |
Operating income |
14,969 |
11,969 |
Interest income |
67 |
9 |
Interest expense |
(989) |
(748) |
Other income (expense), net |
164 |
120 |
Income before income taxes |
14,211 |
11,350 |
Provision for taxes |
(6,710) |
(4,837) |
Net income |
$ 7,501 |
$ 6,513 |
|
|
|
Net income attributable to common
stockholders |
Basic |
$ 7,501 |
$ 2,207 |
Diluted |
$ 7,501 |
$ 2,395 |
|
|
|
Net income per share attributable
to common stockholders |
Basic |
$ 0.17 |
$ 0.16 |
Diluted |
$ 0.16 |
$ 0.16 |
|
|
|
Weighted average shares used in
computing net income per share attributable to common
stockholders |
Basic |
45,098 |
13,405 |
Diluted |
47,112 |
15,381 |
|
|
|
|
|
|
(1) Cost of revenue and operating
expenses include stock-based compensation expense as follows: |
|
|
|
Cost of revenue |
$ 1,144 |
$ 728 |
Product development |
724 |
253 |
Sales and marketing |
1,206 |
507 |
General and administrative |
656 |
741 |
|
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
|
(Unaudited) |
|
|
|
|
|
Three Months
Ended |
|
September
30, |
|
2010 |
2009 |
|
|
|
Cash flows from operating
activities |
Net income |
$ 7,501 |
$ 6,513 |
Adjustments to reconcile net
income to net cash provided by |
operating activities: |
Depreciation and
amortization |
5,897 |
3,952 |
Provision for sales returns and
doubtful accounts receivable |
(470) |
216 |
Stock-based compensation |
3,730 |
2,229 |
Excess tax benefits from
stock-based compensation |
(287) |
(94) |
Other non-cash adjustments,
net |
15 |
102 |
Changes in assets
and liabilities, net of effects of acquisitions: |
Accounts receivable |
(10,008) |
(5,849) |
Prepaid expenses and other
assets |
(1,852) |
(236) |
Other assets, noncurrent |
20 |
44 |
Accounts payable |
6,960 |
843 |
Accrued liabilities |
(2,727) |
4,229 |
Deferred revenue |
70 |
(116) |
Other liabilities,
noncurrent |
(5) |
(25) |
Net cash provided by operating
activities |
8,844 |
11,808 |
Cash flows from investing
activities |
Restricted cash |
(6) |
3 |
Proceeds from sales of property and
equipment |
-- |
44 |
Capital expenditures |
(902) |
(443) |
Business acquisitions, net of notes payable
and cash acquired |
(34,121) |
(11,763) |
Internal software development costs |
(384) |
(316) |
Net cash used in investing
activities |
(35,413) |
(12,475) |
Cash flows from financing
activities |
Payments for issuance of common stock |
(5) |
-- |
Proceeds from exercise of common stock
options |
2,095 |
296 |
Proceeds from bank debt |
-- |
6,500 |
Principal payments on bank debt |
(900) |
(750) |
Principal payments on acquisition-related
notes payable |
(3,365) |
(1,963) |
Excess tax benefits from stock-based
compensation |
287 |
94 |
Repurchases of common stock |
-- |
(577) |
Net cash (used
in) provided by financing activities |
(1,888) |
3,600 |
Effect of exchange rate changes on cash and
cash equivalents |
(19) |
(20) |
Net (decrease) increase in cash and cash
equivalents |
(28,476) |
2,913 |
Cash and cash equivalents at beginning of
period |
155,770 |
25,182 |
Cash and cash equivalents at end of
period |
$ 127,294 |
$ 28,095 |
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME TO |
ADJUSTED NET
INCOME |
(In
thousands) |
(Unaudited) |
|
|
|
|
Three Months
Ended |
|
September
30, |
|
2010 |
2009 |
Net Income |
$ 7,501 |
$ 6,513 |
Amortization of intangible
assets |
4,922 |
3,155 |
Stock-based compensation |
3,730 |
2,229 |
Tax impact of the above
items |
(2,673) |
(1,885) |
Adjusted net income |
$ 13,480 |
$ 10,012 |
|
|
|
Adjusted diluted net income per share |
$ 0.29 |
|
|
|
|
Weighted-average shares used to compute
adjusted diluted net income per share |
47,112 |
|
|
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME |
TO ADJUSTED
EBITDA |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months
Ended |
|
September
30, |
|
2010 |
2009 |
Net income |
$ 7,501 |
$ 6,513 |
Interest and other income
(expense), net |
758 |
619 |
Provision for taxes |
6,710 |
4,837 |
Depreciation and
amortization |
5,897 |
3,952 |
Stock-based compensation |
3,730 |
2,229 |
|
|
|
Adjusted EBITDA |
$ 24,596 |
$ 18,150 |
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
CASH PROVIDED BY |
OPERATING ACTIVITIES TO
FREE CASH FLOW |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months
Ended |
|
September
30, |
|
2010 |
2009 |
Net cash provided by operating
activities |
$ 8,844 |
$ 11,808 |
Capital expenditures |
(902) |
(443) |
Internal software development
costs |
(384) |
(316) |
Free cash flow |
$ 7,558 |
$ 11,049 |
CONTACT: The Blueshirt Group
Erica Abrams
(415) 217-5864
erica@blueshirtgroup.com
Matthew Hunt
(415) 489-2194
matt@blueshirtgroup.com
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