QuinStreet, Inc. (Nasdaq:QNST), a leader in performance marketing
online, today announced financial results for fiscal third quarter
ended March 31, 2014.
The Company reported revenue of $71.9 million and adjusted
EBITDA of $6.3 million, or 9% of revenue.
Adjusted net income was $2.0 million, or $0.04 per diluted
share, and GAAP net loss was $2.7 million, or $(0.06) per share.
Adjusted net income excludes stock-based compensation expense,
amortization of intangible assets, and tax valuation allowance, net
of estimated tax.
The Company generated $5 million of normalized free cash
flow and closed the quarter with $120 million in cash and
marketable securities and $39 million in net cash.
Reconciliations of adjusted net income to net loss, adjusted
EBITDA to net loss and normalized free cash flow to net cash
provided by operating activities are included in the accompanying
tables.
"Revenue in fiscal Q3 came in at the top of the outlook we
provided," commented Doug Valenti, QuinStreet CEO. "We continue to
spend aggressively on initiatives that we believe will result in a
return to growth, with good progress. This has been especially true
in auto insurance, our largest addressable market, where we
successfully launched our full range of complementary new policy,
lead and click products in the quarter, as committed in our last
call."
"The launch of the new auto insurance products is an important
milestone for QuinStreet. They significantly increase our revenue
opportunity and competitive advantages, and we can now more fully
shift from investment in product to investment in revenue. We
believe that investment in growing these products represents the
most direct path to returning the Company to revenue growth and
stronger margins. Based on the significant opportunities we see for
the new auto insurance products, we are increasing marketing and
media spending ahead of revenue. We expect the new products to
begin to add to auto insurance revenue in the current quarter, and
that they will do so at an accelerating rate in future quarters. We
now project that auto insurance revenue will grow next fiscal year,
which begins July 1, from the ramp of the new products. For the
current quarter, we expect revenue to be approximately
$67 million, consistent with typical sequential seasonality.
EBITDA margins will be in the single digits due primarily to
increased spending on marketing and media to ramp the new auto
insurance products," Valenti concluded.
Conference Call Today at 2:00 p.m.
PT
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 6, 2014 by
dialing +1 (855) 859-2056 in the U.S. and Canada, or 1 (404)
537-3406 for international callers, using passcode 30843970#. 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.
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 (loss) income less provision for taxes,
depreciation expense, amortization expense, stock-based
compensation expense, interest and other income (expense), net, and
impairment of goodwill. The term "adjusted net income" refers to a
financial measure that we define as net (loss) income adjusted for
amortization expense, stock-based compensation expense, impairment
of goodwill and tax valuation allowance, 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 net of estimated taxes related to impairment of
goodwill, tax valuation allowance 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 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, amortization of intangible assets,
impairment of goodwill and tax valuation allowance). 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.
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 investors
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.
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 "estimate", "will, " "believe, " "intend", "potential" 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 Company's ability
to return to growth and profitability; 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 and
to convert those visitors and those to its third-party publishers'
websites into client prospects in a cost-effective manner; the
impact of the current economic climate on the Company's business;
the Company's ability to access and monetize Internet users on
mobile devices; 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 both for client budget and access to third-party
media; the Company's ability to identify and manage acquisitions;
and the impact and costs of any alleged failure by the Company to
comply with government regulations and industry standards. 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 March 31, 2014, 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.
About QuinStreet
QuinStreet, Inc. (Nasdaq:QNST) is one of the largest Internet
performance 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. For more information,
please visit www.QuinStreet.com.
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In
thousands) |
(Unaudited) |
|
|
|
|
March
31, |
June
30, |
|
2014 |
2013 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 81,743 |
$ 90,117 |
Marketable securities |
38,308 |
37,847 |
Accounts receivable, net |
42,013 |
38,391 |
Deferred tax assets |
752 |
6,753 |
Prepaid expenses and other
assets |
7,978 |
4,623 |
Total current assets |
170,794 |
177,731 |
|
|
|
Property and equipment, net |
10,997 |
9,707 |
Goodwill |
151,092 |
150,456 |
Other intangible assets, net |
35,917 |
50,486 |
Deferred tax assets, noncurrent |
4,512 |
40,289 |
Other assets, noncurrent |
928 |
878 |
Total assets |
$ 374,240 |
$ 429,547 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities |
|
|
Accounts payable |
$ 19,449 |
$ 18,722 |
Accrued liabilities |
26,172 |
30,903 |
Deferred revenue |
1,231 |
1,638 |
Debt |
16,796 |
15,428 |
Total current liabilities |
63,648 |
66,691 |
|
|
|
Deferred revenue, noncurrent |
-- |
239 |
Debt, noncurrent |
64,524 |
77,249 |
Other liabilities, noncurrent |
6,109 |
6,473 |
Total liabilities |
134,281 |
150,652 |
|
|
|
Stockholders' equity |
|
|
Common stock |
43 |
43 |
Additional paid-in capital |
235,568 |
226,857 |
Accumulated other comprehensive
loss |
(1,018) |
(1,012) |
Retained earnings |
5,366 |
53,007 |
Total stockholders' equity |
239,959 |
278,895 |
Total liabilities and
stockholders' equity |
$ 374,240 |
$ 429,547 |
|
|
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
December 31, |
|
2014 |
2013 |
2014 |
2013 |
Net revenue |
$ 71,888 |
$ 79,017 |
$ 214,994 |
$ 229,394 |
Cost of revenue (1) |
61,646 |
63,863 |
181,354 |
190,765 |
Gross profit |
10,242 |
15,154 |
33,640 |
38,629 |
Operating expenses: (1) |
|
|
|
|
Product development |
4,859 |
4,891 |
14,794 |
14,288 |
Sales and marketing |
3,881 |
3,683 |
11,696 |
10,870 |
General and administrative |
4,284 |
4,394 |
12,829 |
12,339 |
Impairment of goodwill |
-- |
-- |
-- |
92,350 |
Operating (loss) income |
(2,782) |
2,186 |
(5,679) |
(91,218) |
Interest income |
30 |
28 |
84 |
84 |
Interest expense |
(911) |
(1,810) |
(2,913) |
(4,176) |
Other (expense) income, net |
(3) |
(39) |
(51) |
3 |
(Loss) income before income taxes |
(3,666) |
365 |
(8,559) |
(95,307) |
Benefit from (provision for) taxes |
993 |
(2,527) |
(39,082) |
29,517 |
Net loss |
$ (2,673) |
$ (2,162) |
$ (47,641) |
$ (65,790) |
|
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
Basic |
$ (0.06) |
$ (0.05) |
$ (1.10) |
$ (1.54) |
Diluted |
$ (0.06) |
$ (0.05) |
$ (1.10) |
$ (1.54) |
|
|
|
|
|
Weighted average shares used in computing net
loss per share |
|
|
|
|
Basic |
43,567 |
42,804 |
43,422 |
42,798 |
Diluted |
43,567 |
42,804 |
43,422 |
42,798 |
|
|
|
|
|
|
|
|
|
|
(1) Cost of revenue and operating
expenses include stock-based compensation expense as follows: |
|
|
|
|
|
Cost of revenue |
$ 595 |
$ 1,010 |
$ 2,190 |
$ 2,896 |
Product development |
551 |
665 |
1,893 |
2,056 |
Sales and marketing |
827 |
780 |
2,195 |
2,403 |
General and administrative |
477 |
558 |
1,833 |
1,457 |
|
|
|
|
|
QUINSTREET,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Cash Flows from Operating
Activities |
|
|
|
|
Net loss |
$ (2,673) |
$ (2,162) |
$ (47,641) |
$ (65,790) |
Adjustments to reconcile net loss to net cash
provided by operating activities: |
|
|
|
|
Depreciation and
amortization |
6,611 |
7,208 |
19,955 |
25,666 |
Impairment of goodwill |
-- |
-- |
-- |
92,350 |
Write-off of bank loan upfront
fees |
-- |
680 |
-- |
680 |
Provision for sales returns and
doubtful accounts receivable |
(181) |
(107) |
(424) |
(575) |
Stock-based compensation |
2,450 |
3,014 |
8,111 |
8,813 |
Excess tax benefits from
stock-based compensation |
(85) |
(10) |
(394) |
(60) |
Other adjustments, net |
23 |
128 |
150 |
(35) |
Changes in assets
and liabilities, net of effects of acquisition: |
|
|
|
Accounts receivable |
(6,760) |
(3,572) |
(3,198) |
8,619 |
Prepaid expenses and other
assets |
(2,831) |
2,481 |
(3,403) |
(2,027) |
Deferred taxes |
1,545 |
-- |
41,938 |
(28,914) |
Accounts payable |
1,064 |
(1,685) |
868 |
(5,980) |
Accrued liabilities |
4,030 |
4,076 |
(1,831) |
(1,574) |
Deferred revenue |
(8) |
(67) |
(646) |
(665) |
Other liabilities,
noncurrent |
(154) |
(54) |
(524) |
290 |
Net cash provided by operating
activities |
3,031 |
9,930 |
12,961 |
30,798 |
Cash Flows from Investing
Activities |
|
|
|
|
Capital expenditures |
(500) |
(305) |
(4,679) |
(1,126) |
Business acquisition |
-- |
-- |
(875) |
-- |
Other intangibles |
(123) |
-- |
(2,815) |
(2,500) |
Internal software development costs |
(697) |
(556) |
(1,901) |
(1,813) |
Purchases of marketable securities |
(13,565) |
(12,305) |
(36,390) |
(39,965) |
Proceeds from sales and maturities of
marketable securities |
14,475 |
13,683 |
35,820 |
38,791 |
Net cash (used in) provided by
investing activities |
(410) |
517 |
(10,840) |
(6,613) |
Cash Flows from Financing
Activities |
|
|
|
|
Proceeds from exercise of common stock
options |
332 |
47 |
2,259 |
316 |
Principal payments on bank debt |
(3,750) |
(2,500) |
(8,750) |
(5,000) |
Payment of bank loan upfront fees |
-- |
(200) |
-- |
(200) |
Principal payments on acquisition-related
notes payable |
(362) |
(376) |
(2,599) |
(5,848) |
Excess tax benefits from stock-based
compensation |
85 |
10 |
394 |
60 |
Withholding taxes related to restricted stock
net share settlement |
(432) |
(43) |
(1,760) |
(191) |
Repurchases of common stock |
-- |
-- |
-- |
(6,157) |
Net cash used in financing
activities |
(4,127) |
(3,062) |
(10,456) |
(17,020) |
Effect of exchange rate changes on cash and
cash equivalents |
2 |
4 |
(39) |
16 |
Net (decrease) increase in cash and cash
equivalents |
(1,504) |
7,389 |
(8,374) |
7,181 |
Cash and cash equivalents at beginning of
period |
83,247 |
68,323 |
90,117 |
68,531 |
Cash and cash equivalents at end of
period |
$ 81,743 |
$ 75,712 |
$ 81,743 |
$ 75,712 |
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
LOSS TO |
ADJUSTED NET
INCOME |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2014 |
2013 |
2014 |
2013 |
Net loss |
$ (2,673) |
$ (2,162) |
$ (47,641) |
$ (65,790) |
Amortization of intangible
assets |
4,954 |
5,894 |
15,111 |
21,575 |
Stock-based compensation |
2,450 |
3,013 |
8,111 |
8,812 |
Impairment of goodwill |
-- |
-- |
-- |
92,350 |
Tax valuation allowance |
1,150 |
-- |
41,361 |
-- |
Tax impact to non-GAAP
items |
(3,913) |
33 |
(7,621) |
(38,452) |
Adjusted net income |
$ 1,968 |
$ 6,778 |
$ 9,321 |
$ 18,495 |
|
|
|
|
|
|
|
|
|
|
Adjusted diluted net income per share |
$ 0.04 |
$ 0.16 |
$ 0.21 |
$ 0.43 |
|
|
|
|
|
Weighted average shares used in computing
adjusted diluted net income per share |
43,911 |
43,047 |
44,095 |
43,150 |
|
|
|
|
|
|
|
|
|
|
QUINSTREET,
INC. |
RECONCILIATION OF NET
LOSS TO |
ADJUSTED
EBITDA |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2014 |
2013 |
2014 |
2013 |
Net loss |
$ (2,673) |
$ (2,162) |
$ (47,641) |
$ (65,790) |
Interest and other income
(expense), net |
884 |
1,821 |
2,880 |
4,089 |
(Benefit from) provision
for taxes |
(993) |
2,527 |
39,082 |
(29,517) |
Depreciation and
amortization |
6,611 |
7,208 |
19,955 |
25,666 |
Stock-based compensation |
2,450 |
3,013 |
8,111 |
8,812 |
Impairment of goodwill |
-- |
-- |
-- |
92,350 |
Adjusted EBITDA |
$ 6,279 |
$ 12,407 |
$ 22,387 |
$ 35,610 |
|
|
|
|
|
|
|
|
|
|
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 |
Nine Months
Ended |
|
March
31, |
March
31, |
|
2014 |
2013 |
2014 |
2013 |
Net cash provided by operating
activities |
$ 3,031 |
$ 9,930 |
$ 12,961 |
$ 30,798 |
Capital expenditures |
(500) |
(305) |
(4,679) |
(1,126) |
Internal software development
costs |
(697) |
(556) |
(1,901) |
(1,813) |
Free cash flow |
$ 1,834 |
$ 9,069 |
$ 6,381 |
$ 27,859 |
Changes in operating assets and
liabilities, less excess tax benefits from stock-based
compensation |
3,199 |
(1,169) |
6,957 |
1,826 |
Normalized free cash flow |
$ 5,033 |
$ 7,900 |
$ 13,338 |
$ 29,685 |
|
|
|
|
|
|
|
|
|
|
CONTACT: Investor Contact:
The Blueshirt Group for QuinStreet
Erica Abrams
(415) 217-5864
erica@blueshirtgroup.com
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