QuinStreet, Inc. (Nasdaq:QNST), a leader in vertical marketing and
media online, today announced its financial results for the fiscal
third quarter ended March 31, 2011.
The Company reported total revenue of $107.7 million, an
increase of 19% over the same quarter last year.
Adjusted EBITDA for the quarter was $23.2 million, or 22% of
revenue.
The Company reported GAAP net income of $6.3 million, or $0.13
per diluted share, for the quarter. Adjusted net income for the
quarter was $12.6 million, or $0.25 per diluted share. Adjusted net
income excludes stock-based compensation expense and amortization
of intangible assets, net of estimated tax.
The Company generated $28.9 million in cash flow from operations
and closed the quarter with $150.1 million in cash and marketable
securities.
Revenue for the Education client vertical was $48.0 million, an
increase of 26% compared to the year-ago quarter. Revenue for the
Financial Services client vertical was $48.7 million, an increase
of 17% compared to the same quarter last year. Revenue for Other
client verticals was $11.0 million, an increase of 1% compared to
the year-ago quarter.
For the nine-month period ended March 31, the Company reported
total revenue of $309 million, an increase of 25% over the same
period last year, and adjusted EBITDA of $70 million, or 23% 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 delivered another quarter of good financial
results in fiscal Q3, and we continued to make great progress
building our capabilities and business for the long-term,"
commented Doug Valenti, QuinStreet CEO. "We are particularly
pleased with the performance of our Education client vertical,
reflecting client demand for more compliant and effective marketing
solutions as well as the effects of new client signings and further
penetration of more segments. Growth in our Financial Services
client vertical was solid at this scale and consistent with our
expectations for a period of more muted growth discussed in our
last quarterly call. We remain confident and enthusiastic about our
opportunity in Financial Services and in all of our client
verticals. We are still incredibly early in the pursuit of these
enormous markets. We continue to expect that we will be able to
meet our objective to grow revenue an average of 15-20% per year,
even at this scale, for as far as the eye can see, reflective of
our large footprint and uniquely powerful competitive
advantages."
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 May 4, 2011
until 11:59 p.m. PT on May 13, 2011 by dialing 1-800-642-1687 in
the U.S. and Canada, or 1-706-645-9291 for international callers,
using passcode 60128082#. 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 May 16, 2011.
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.
Additional information will also be set forth in the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 2011,
which will be filed with the SEC during the Company's fiscal fourth
quarter in 2011. 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, |
|
2011 |
2010 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 124,684 |
$ 155,770 |
Marketable securities |
25,420 |
-- |
Accounts receivable, net |
52,704 |
51,466 |
Deferred tax assets |
8,526 |
8,528 |
Prepaid expenses and other assets |
7,775 |
3,123 |
Total current assets |
219,109 |
218,887 |
|
|
|
Property and equipment, net |
9,195 |
5,419 |
Goodwill |
211,710 |
158,582 |
Other intangible assets, net |
71,366 |
47,156 |
Deferred tax assets, noncurrent |
3,972 |
3,972 |
Other assets, noncurrent |
487 |
614 |
Total assets |
$ 515,839 |
$ 434,630 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities |
|
|
Accounts payable |
$ 23,535 |
$ 16,776 |
Accrued liabilities |
34,397 |
30,144 |
Deferred revenue |
2,371 |
1,241 |
Debt |
11,080 |
15,562 |
Total current liabilities |
71,383 |
63,723 |
|
|
|
Deferred revenue, noncurrent |
122 |
305 |
Debt, noncurrent |
100,010 |
78,046 |
Other liabilities, noncurrent |
3,457 |
2,534 |
Total liabilities |
174,972 |
144,608 |
|
|
|
Stockholders' equity |
|
|
Common stock |
49 |
47 |
Additional paid-in capital |
247,692 |
217,581 |
Treasury stock |
(7,779) |
(7,779) |
Accumulated other comprehensive (loss)
income |
(27) |
9 |
Retained earnings |
100,932 |
80,164 |
Total stockholders' equity |
340,867 |
290,022 |
Total liabilities and stockholders'
equity |
$ 515,839 |
$ 434,630 |
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands,
except per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended March 31, |
Nine Months Ended
March 31, |
|
2011 |
2010 |
2011 |
2010 |
Net revenue |
$ 107,705 |
$ 90,773 |
$ 308,903 |
$ 246,288 |
Cost of revenue (1) |
78,578 |
66,268 |
222,869 |
177,872 |
Gross profit |
29,127 |
24,505 |
86,034 |
68,416 |
Operating expenses: (1) |
|
|
|
|
Product development |
6,836 |
5,325 |
18,320 |
14,534 |
Sales and marketing |
4,687 |
4,575 |
14,097 |
12,190 |
General and administrative |
5,525 |
4,467 |
15,190 |
14,111 |
Operating income |
12,079 |
10,138 |
38,427 |
27,581 |
Interest income |
25 |
16 |
139 |
33 |
Interest expense |
(1,091) |
(1,302) |
(3,108) |
(2,931) |
Other income (expense), net |
66 |
(64) |
151 |
221 |
Income before income taxes |
11,079 |
8,788 |
35,609 |
24,904 |
Provision for taxes |
(4,740) |
(3,538) |
(14,841) |
(10,731) |
Net income |
$ 6,339 |
$ 5,250 |
$ 20,768 |
$ 14,173 |
|
|
|
|
|
Net income attributable to common
stockholders |
|
|
|
|
Basic |
$ 6,339 |
$ 3,714 |
$ 20,768 |
$ 6,371 |
Diluted |
$ 6,339 |
$ 3,797 |
$ 20,768 |
$ 6,790 |
|
|
|
|
|
Net income per share attributable to common
stockholders |
|
|
|
|
Basic |
$ 0.14 |
$ 0.12 |
$ 0.45 |
$ 0.33 |
Diluted |
$ 0.13 |
$ 0.11 |
$ 0.42 |
$ 0.31 |
|
|
|
|
|
Weighted average shares used in computing net
income per share attributable to common stockholders |
|
|
|
|
Basic |
46,792 |
30,795 |
45,910 |
19,156 |
Diluted |
50,593 |
33,938 |
48,960 |
22,008 |
|
|
|
|
|
|
|
|
|
|
(1) Cost of revenue and operating
expenses include stock-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
Cost of revenue |
$ 1,138 |
$ 653 |
$ 3,411 |
$ 2,143 |
Product development |
669 |
686 |
2,084 |
1,570 |
Sales and marketing |
918 |
1,163 |
3,116 |
2,504 |
General and administrative |
782 |
624 |
2,242 |
4,002 |
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months
Ended March 31, |
Nine Months Ended
March 31, |
|
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
|
|
Cash Flows from Operating
Activities |
|
|
|
|
|
Net income |
$ 6,339 |
$ 5,250 |
$ 20,768 |
$ 14,173 |
|
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
7,632 |
5,075 |
20,252 |
13,678 |
|
Provision for sales returns and doubtful
accounts receivable |
325 |
(110) |
(143) |
(234) |
|
Stock-based compensation |
3,507 |
3,126 |
10,853 |
10,219 |
|
Excess tax benefits from stock-based
compensation |
(1,432) |
(449) |
(6,744) |
(1,821) |
|
Other non-cash adjustments, net |
123 |
258 |
208 |
567 |
|
Changes in assets and liabilities, net of
effects of acquisitions: |
|
|
|
|
|
Accounts receivable |
(609) |
(7,185) |
(486) |
(11,261) |
|
Prepaid expenses and other assets |
4,601 |
(899) |
1,896 |
(5,251) |
|
Other assets, noncurrent |
(34) |
651 |
133 |
(145) |
|
Accounts payable |
1,312 |
2,392 |
6,567 |
4,338 |
|
Accrued liabilities |
6,057 |
4,883 |
3,403 |
5,635 |
|
Deferred revenue |
507 |
771 |
947 |
(57) |
|
Other liabilities, noncurrent |
531 |
123 |
923 |
122 |
|
Net cash provided by operating
activities |
28,859 |
13,886 |
58,577 |
29,963 |
|
Cash Flows from Investing
Activities |
|
|
|
|
|
Capital expenditures and other investing
activities |
(1,477) |
(1,115) |
(4,430) |
(2,092) |
|
Business acquisitions, net of notes payable
and cash acquired |
(5,095) |
(6,947) |
(91,723) |
(52,899) |
|
Internal software development costs |
(442) |
(362) |
(1,322) |
(1,009) |
|
Purchases of marketable securities |
(15,007) |
-- |
(33,923) |
-- |
|
Proceeds from sales and maturities of
marketable securities |
8,484 |
-- |
8,484 |
-- |
|
Net cash used in investing
activities |
(13,537) |
(8,424) |
(122,914) |
(56,000) |
|
Cash Flows from Financing
Activities |
|
|
|
|
|
Payments for issuance of common stock |
-- |
138,478 |
(106) |
138,076 |
|
Proceeds from exercise of common stock
options |
2,966 |
298 |
12,580 |
1,550 |
|
Proceeds from bank debt, net of issuance
costs |
(375) |
-- |
24,425 |
43,300 |
|
Principal payments on bank debt |
(875) |
(750) |
(2,650) |
(2,250) |
|
Principal payments on acquisition-related
notes payable |
(614) |
(2,766) |
(7,725) |
(5,609) |
|
Excess tax benefits from stock-based
compensation |
1,432 |
449 |
6,744 |
1,821 |
|
Repurchases of common stock |
-- |
-- |
-- |
(715) |
|
Net cash provided by financing
activities |
2,534 |
135,709 |
33,268 |
176,173 |
|
Effect of exchange rate changes on cash and
cash equivalents |
7 |
8 |
(17) |
-- |
|
Net increase (decrease) in cash and cash
equivalents |
17,863 |
141,179 |
(31,086) |
150,136 |
|
Cash and cash equivalents at beginning of
period |
106,821 |
34,139 |
155,770 |
25,182 |
|
Cash and cash equivalents at end of
period |
$ 124,684 |
$ 175,318 |
$ 124,684 |
$ 175,318 |
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME TO |
ADJUSTED NET
INCOME |
(In thousands,
except per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended March 31, |
Nine Months Ended
March 31, |
|
2011 |
2010 |
2011 |
2010 |
Net income |
$ 6,339 |
$ 5,250 |
$ 20,768 |
$ 14,173 |
Amortization of intangible assets |
6,124 |
4,110 |
16,575 |
11,070 |
Stock-based compensation |
3,507 |
3,126 |
10,853 |
10,219 |
Tax impact of the above items |
(3,395) |
(3,039) |
(9,818) |
(8,941) |
Adjusted net income |
$ 12,575 |
$ 9,447 |
$ 38,378 |
$ 26,521 |
|
|
|
|
|
Adjusted diluted net income per share |
$ 0.25 |
|
$ 0.78 |
|
|
|
|
|
|
Weighted average shares used in computing
adjusted diluted net income per share |
50,593 |
|
48,960 |
|
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME TO |
ADJUSTED
EBITDA |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended March 31, |
Nine Months Ended
March 31, |
|
2011 |
2010 |
2011 |
2010 |
Net income |
$ 6,339 |
$ 5,250 |
$ 20,768 |
$ 14,173 |
Interest and other income (expense),
net |
1,000 |
1,350 |
2,818 |
2,677 |
Provision for taxes |
4,740 |
3,538 |
14,841 |
10,731 |
Depreciation and amortization |
7,632 |
5,075 |
20,252 |
13,678 |
Stock-based compensation |
3,507 |
3,126 |
10,853 |
10,219 |
Adjusted EBITDA |
$ 23,218 |
$ 18,339 |
$ 69,532 |
$ 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, |
|
2011 |
2010 |
2011 |
2010 |
Net cash provided by operating
activities |
$ 28,859 |
$ 13,886 |
$ 58,577 |
$ 29,963 |
Capital expenditures |
(1,477) |
(1,124) |
(4,424) |
(2,159) |
Internal software development costs |
(442) |
(362) |
(1,322) |
(1,009) |
Free cash flow |
$ 26,940 |
$ 12,400 |
$ 52,831 |
$ 26,795 |
CONTACT: Erica Abrams or Matthew Hunt
(415) 217-5864 or (415) 489-2194
erica@blueshirtgroup.com
matt@blueshirtgroup.com
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