QuinStreet, Inc. (Nasdaq:QNST), a leader in vertical marketing and
media online, today announced its financial results for the quarter
ended December 31, 2011.
The Company reported total revenue of $90.5 million, a decrease
of 7% over the same quarter last year.
Adjusted EBITDA for the quarter was $19.5 million, or 22% of
revenue.
The Company reported GAAP net income of $4.4 million, or $0.09
per diluted share, for the quarter. Adjusted net income for the
quarter was $10.9 million, or $0.23 per diluted share. Adjusted net
income excludes stock-based compensation expense and amortization
of intangible assets, net of estimated tax.
The Company generated $14.9 million of normalized free cash flow
in the quarter.
Revenue for the Education client vertical was $36.6 million, a
decrease of 15% compared to the year-ago quarter. Revenue for the
Financial Services client vertical was $40.1 million, a decrease of
9% compared to the same quarter last year. Revenue for Other client
verticals was $13.8 million, an increase of 33% compared to the
year-ago quarter.
Reconciliations of adjusted net income to net income, adjusted
EBITDA to net income, and normalized free cash flow to net cash
provided by operating activities are included in the accompanying
tables.
"We are continuing to work through challenges in Education and
Financial Services and are making progress in those efforts,"
commented Doug Valenti, QuinStreet CEO. "While there is more
uncertainty during this period, we expect to return to growth in
the June quarter, and we currently expect full fiscal year revenue
to come in at approximately $400 million. We continue to post good
EBITDA and free cash flow margins while expanding our footprint and
capabilities for long-term growth. We remain enthusiastic about our
long-term growth prospects. Consistent with that optimism and as
part of the program announced in November, we repurchased 1.8
million shares of our common stock in the open market during the
quarter."
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 February 1,
2012 until 11:59 p.m. PT on February 8, 2012 by dialing
1-800-585-8367 in the U.S. and Canada, or 1-404-537-3406 for
international callers, using passcode 41440273#. 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 financial 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 February 9,
2012.
About QuinStreet
QuinStreet, Inc. (Nasdaq:QNST) is one of the largest Internet
marketing and media 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. The company is a leader in visitor friendly
marketing practices. For more information, please visit
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, 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 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. "Normalized free cash flow" refers to free cash
flow adjusted for changes in operating assets and liabilities and
the impact from excess tax benefits from stock-based compensation.
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, adjusted
diluted net income per share, free cash flow and normalized 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 measure 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 therefore helps
understand the underlying cash flow of the business as a quarterly
metric and the cash flow generation potential of the business
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 and normalized free cash flow have
certain limitations in that they do not represent the total
increase or decrease in the cash balance for the period, nor do
they represent the residual cash flow for discretionary
expenditures. Therefore, we think it is important to evaluate both
of these cash flow measures along with our consolidated statement
of cash flows and understand any changes in the operating assets
and liabilities.
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 reports 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 December 31, 2011, which will be filed with the SEC
no later than February 9, 2012. 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) |
|
|
|
|
December 31, |
June 30, |
|
2011 |
2011 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 105,557 |
$ 132,290 |
Marketable securities |
38,946 |
34,927 |
Accounts receivable, net |
50,551 |
48,225 |
Deferred tax assets |
10,253 |
10,253 |
Prepaid expenses and other assets |
4,107 |
5,773 |
Total current assets |
209,414 |
231,468 |
|
|
|
Property and equipment, net |
9,453 |
8,875 |
Goodwill |
235,157 |
211,856 |
Other intangible assets, net |
68,117 |
65,847 |
Deferred tax assets, noncurrent |
5,861 |
5,866 |
Other assets, noncurrent |
1,014 |
1,012 |
Total assets |
$ 529,016 |
$ 524,924 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities |
|
|
Accounts payable |
$ 24,056 |
$ 23,300 |
Accrued liabilities |
25,944 |
33,238 |
Deferred revenue |
2,096 |
2,531 |
Debt |
16,472 |
10,038 |
Total current liabilities |
68,568 |
69,107 |
|
|
|
Debt, noncurrent |
97,600 |
96,010 |
Other liabilities, noncurrent |
5,261 |
4,418 |
Total liabilities |
171,429 |
169,535 |
|
|
|
Stockholders' equity |
|
|
Common stock |
50 |
50 |
Additional paid-in capital |
264,511 |
255,689 |
Treasury stock |
(24,362) |
(7,779) |
Accumulated other comprehensive
income |
83 |
51 |
Retained earnings |
117,305 |
107,378 |
Total stockholders' equity |
357,587 |
355,389 |
Total liabilities and stockholders'
equity |
$ 529,016 |
$ 524,924 |
|
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands,
except per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended December 31, |
Six Months Ended
December 31, |
|
2011 |
2010 |
2011 |
2010 |
Net revenue |
$ 90,523 |
$ 97,582 |
$ 191,747 |
$ 201,198 |
Cost of revenue (1) |
68,396 |
70,662 |
144,144 |
144,291 |
Gross profit |
22,127 |
26,920 |
47,603 |
56,907 |
Operating expenses: (1) |
|
|
|
|
Product development |
5,102 |
5,933 |
11,176 |
11,484 |
Sales and marketing |
3,686 |
4,665 |
7,720 |
9,410 |
General and administrative |
4,847 |
4,943 |
10,064 |
9,665 |
Operating income |
8,492 |
11,379 |
18,643 |
26,348 |
Interest income |
36 |
47 |
74 |
114 |
Interest expense |
(1,115) |
(1,028) |
(2,198) |
(2,017) |
Other income (expense), net |
(93) |
(79) |
(124) |
85 |
Income before income taxes |
7,320 |
10,319 |
16,395 |
24,530 |
Provision for taxes |
(2,887) |
(3,391) |
(6,468) |
(10,101) |
Net income |
$ 4,433 |
$ 6,928 |
$ 9,927 |
$ 14,429 |
|
|
|
|
|
|
|
|
|
|
Net income per share |
|
|
|
|
Basic |
$ 0.09 |
$ 0.15 |
$ 0.21 |
$ 0.32 |
Diluted |
$ 0.09 |
$ 0.14 |
$ 0.20 |
$ 0.30 |
|
|
|
|
|
Weighted average shares used in computing net
income per share |
|
|
|
Basic |
47,054 |
45,858 |
47,266 |
45,478 |
Diluted |
47,937 |
49,194 |
48,442 |
48,153 |
|
|
|
|
|
|
|
|
|
|
(1) Cost of revenue and operating
expenses include stock-based compensation expense as follows: |
|
|
|
|
|
Cost of revenue |
$ 1,197 |
$ 1,129 |
$ 2,376 |
$ 2,273 |
Product development |
682 |
691 |
1,342 |
1,415 |
Sales and marketing |
841 |
992 |
1,620 |
2,198 |
General and administrative |
801 |
804 |
1,557 |
1,460 |
|
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended December 31, |
Six Months Ended
December 31, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Cash Flows from Operating
Activities |
|
|
|
|
Net income |
$ 4,433 |
$ 6,928 |
$ 9,927 |
$ 14,429 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Depreciation and amortization |
7,517 |
6,723 |
14,625 |
12,620 |
Provision for sales returns and doubtful
accounts receivable |
(68) |
2 |
(32) |
(468) |
Stock-based compensation |
3,521 |
3,616 |
6,895 |
7,346 |
Excess tax benefits from stock-based
compensation |
(62) |
(5,025) |
(97) |
(5,312) |
Other non-cash adjustments, net |
632 |
70 |
875 |
85 |
Changes in assets and liabilities, net of
effects of acquisitions: |
|
|
|
|
Accounts receivable |
6,499 |
10,131 |
412 |
123 |
Prepaid expenses and other assets |
(1,487) |
(853) |
1,668 |
(2,705) |
Other assets, noncurrent |
(35) |
147 |
(6) |
167 |
Accounts payable |
(3,935) |
(1,705) |
552 |
5,255 |
Accrued liabilities |
(2,980) |
73 |
(10,287) |
(2,654) |
Deferred revenue |
(154) |
370 |
(493) |
440 |
Other liabilities, noncurrent |
387 |
397 |
906 |
392 |
Net cash provided by operating
activities |
14,268 |
20,874 |
24,945 |
29,718 |
Cash Flows from Investing
Activities |
|
|
|
|
Capital expenditures |
(631) |
(2,045) |
(1,384) |
(2,947) |
Business acquisitions, net of notes payable
and cash acquired |
(999) |
(52,507) |
(31,203) |
(86,628) |
Internal software development costs |
(523) |
(496) |
(1,082) |
(880) |
Purchases of marketable securities |
(13,076) |
(18,916) |
(22,686) |
(18,916) |
Proceeds from sales and maturities of
marketable securities |
12,602 |
-- |
18,035 |
-- |
Other investing activities |
2 |
-- |
30 |
(6) |
Net cash used in investing
activities |
(2,625) |
(73,964) |
(38,290) |
(109,377) |
Cash Flows from Financing
Activities |
|
|
|
|
Payments for issuance of common stock |
-- |
(101) |
-- |
(106) |
Proceeds from exercise of common stock
options |
370 |
7,519 |
2,187 |
9,614 |
Proceeds from bank debt |
5,884 |
24,800 |
5,884 |
24,800 |
Principal payments on bank debt |
(1,312) |
(875) |
(2,625) |
(1,775) |
Payment of bank loan upfront fees |
(1,370) |
-- |
(1,370) |
-- |
Principal payments on acquisition-related
notes payable |
(558) |
(3,746) |
(1,771) |
(7,111) |
Excess tax benefits from stock-based
compensation |
62 |
5,025 |
97 |
5,312 |
Withholding taxes related to restricted stock
net share settlement |
(78) |
-- |
(262) |
-- |
Repurchases of common stock |
(15,556) |
-- |
(15,556) |
-- |
Net cash (used in) provided by financing
activities |
(12,558) |
32,622 |
(13,416) |
30,734 |
Effect of exchange rate changes on cash and
cash equivalents |
3 |
(5) |
28 |
(24) |
Net decrease in cash and cash
equivalents |
(912) |
(20,473) |
(26,733) |
(48,949) |
Cash and cash equivalents at beginning of
period |
106,469 |
127,294 |
132,290 |
155,770 |
Cash and cash equivalents at end of
period |
$ 105,557 |
$ 106,821 |
$ 105,557 |
$ 106,821 |
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME TO |
ADJUSTED NET
INCOME |
(In thousands,
except per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended December 31, |
Six Months Ended
December 31, |
|
2011 |
2010 |
2011 |
2010 |
Net income |
$ 4,433 |
$ 6,928 |
$ 9,927 |
$ 14,429 |
Amortization of intangible assets |
6,162 |
5,529 |
11,948 |
10,451 |
Stock-based compensation |
3,521 |
3,616 |
6,895 |
7,346 |
Tax impact of the above items |
(3,264) |
(3,750) |
(6,288) |
(6,423) |
Adjusted net income |
$ 10,852 |
$ 12,323 |
$ 22,482 |
$ 25,803 |
|
|
|
|
|
|
|
|
|
|
Adjusted diluted net income per share |
$ 0.23 |
$ 0.25 |
$ 0.46 |
$ 0.54 |
|
|
|
|
|
Weighted average shares used in computing
adjusted diluted net income per share |
47,937 |
49,194 |
48,442 |
48,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
INCOME TO |
ADJUSTED
EBITDA |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended December 31, |
Six Months Ended
December 31, |
|
2011 |
2010 |
2011 |
2010 |
Net income |
$ 4,433 |
$ 6,928 |
$ 9,927 |
$ 14,429 |
Interest and other income (expense),
net |
1,172 |
1,060 |
2,248 |
1,818 |
Provision for taxes |
2,887 |
3,391 |
6,468 |
10,101 |
Depreciation and amortization |
7,517 |
6,723 |
14,625 |
12,620 |
Stock-based compensation |
3,521 |
3,616 |
6,895 |
7,346 |
Adjusted EBITDA |
$ 19,530 |
$ 21,718 |
$ 40,163 |
$ 46,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, |
Six Months Ended
December 31, |
|
2011 |
2010 |
2011 |
2010 |
Net cash provided by operating
activities |
$ 14,268 |
$ 20,874 |
$ 24,945 |
$ 29,718 |
Capital expenditures |
(631) |
(2,045) |
(1,384) |
(2,947) |
Internal software development costs |
(523) |
(496) |
(1,082) |
(880) |
Free cash flow |
$ 13,114 |
$ 18,333 |
$ 22,479 |
$ 25,891 |
Changes in operating assets and
liabilities, less excess tax benefits from stock-based
compensation |
1,767 |
(3,535) |
7,345 |
4,294 |
Normalized free cash flow |
$ 14,881 |
$ 14,798 |
$ 29,824 |
$ 30,185 |
CONTACT: Erica Abrams or Matthew Hunt
(415) 217-5864 or (415) 489-2194
erica@blueshirtgroup.com
matt@blueshirtgroup.com
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