QNST QuinStreet Inc

QuinStreet, Inc. (Nasdaq:QNST), a leader in online performance marketing services and technologies, today announced financial results for the second quarter ended December 31, 2015.

For the second quarter, the Company reported total revenue of $65.0 million, adjusted EBITDA of $0.2 million, and GAAP net loss of $6.1 million, or ($0.13) per share.  Adjusted net loss for the second quarter was $1.5 million, or ($.03) per share.

The Company closed the second quarter with $50.8 million in cash and $35.8 million in net cash.

“We continued to make good progress with new products, markets and media during the quarter,” commented Doug Valenti, QuinStreet CEO. “Education revenue was down in fiscal Q2 due to an exit from the channel by a large U.S. for-profit education client. Without that change, Company revenue would have been up 3% year-over-year.”

In a separate release, the Company announced a partnership to be the exclusive provider of click product technology and management for All Web Leads (“AWL”), the largest online customer acquisition marketing company focused on the U.S. insurance industry and recent acquirer of the Bankrate Insurance customer acquisition business. QuinStreet made a one-time exclusivity payment of $10 million to AWL during the second quarter as a term of the 10-year agreement.

“Our partnership with AWL is expected to significantly increase revenue in our already fast-growing Insurance client vertical. Revenue from our Financial Services client vertical overall is expected to approach 60% of Company revenue in the second half of the fiscal year. Revenue from for-profit Education clients is expected to decline to less than 20% of Company revenue in the same period.

“We expect revenue to grow in the March and June quarters, our fiscal Q3 and Q4, at a double-digit annual rate, and to result in expansion of adjusted EBITDA margin through top-line leverage. We also expect revenue to grow by approximately 10% in fiscal 2016 over 2015,” concluded Valenti.

Reconciliations of adjusted net loss and adjusted EBITDA to GAAP net loss are included in the accompanying tables.

Conference Call Today at 1:30 p.m. PT

QuinStreet will host a conference call and corresponding live webcast at 1:30 p.m. PT today. To access the conference call, dial (888) 299.7209 for the U.S. and Canada or +1 (719) 325.2435 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 9, 2016 by dialing (888) 203.1112 in the U.S. and Canada or +1 (719) 457.0820 for international callers, using passcode 918969#. This press release and the financial tables 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 (loss) income and adjusted diluted net (loss) income per share, 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 less provision for taxes, depreciation expense, amortization expense, stock-based compensation expense, interest and other (expense) income, net, impairment of goodwill, and restructuring. The term "adjusted net (loss) income" refers to a financial measure that we define as net loss adjusted for amortization expense, stock-based compensation expense, restructuring expense, impairment of goodwill and tax valuation allowance, and debt restructuring costs, net of estimated taxes. The term "adjusted diluted net (loss) income per share" refers to a financial measure that we define as adjusted net (loss) income divided by weighted average diluted shares outstanding. 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 (loss) income and adjusted diluted net (loss) income per share may not be comparable to the definitions as reported by other companies.

We believe adjusted EBITDA, adjusted net (loss) income and adjusted diluted net (loss) income per share 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 (loss) income and adjusted diluted net (loss) 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) and other non-recurring charges. The Company believes that analysts and investors use adjusted net (loss) income and adjusted diluted net (loss) income per share as supplemental measures to evaluate the overall operating performance of companies 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 and results of analyses on impairment charges. 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 impact of changes in industry standards and government regulation including but not limited to investigation and enforcement activities of the Department of Education and the Federal Trade Commission; the Company’s ability to maintain and increase client marketing spend; 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 December 31, 2015, 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.

About All Web Leads

AWL, and its brands All Web Leads (www.allwebleads.com) and insuranceQuotes (www.insuranceQuotes.com), is the premier customer acquisition marketing company focused on the U.S. insurance industry, serving over 30,000 insurance carriers and local agents. The company delivers real-time, targeted, high-quality consumers to top insurance producers. AWL’s technology-driven approach to online marketing helps bring together agents with qualified customers who are actively searching online for insurance products. The company's award-winning insurance leads, calls and clicks programs lead the industry in conversion, qualification and volume according to recent surveys. The company is headquartered in Austin, TX.

QUINSTREET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		December 31,				June 30,
		2015				2015
Assets
Current assets:
Cash and cash equivalents		$	50,750			$	60,468
Accounts receivable, net			40,544				46,240
Deferred tax assets			173				166
Prepaid expenses and other assets			6,671				11,503
Total current assets			98,138				118,377
Property and equipment, net			8,678				8,565
Goodwill			56,118				56,118
Other intangible assets, net			14,357				19,030
Other assets, noncurrent			11,840				3,063
Total assets		$	189,131			$	205,153
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	17,460			$	20,425
Accrued liabilities			23,249				27,146
Deferred revenue			1,239				1,208
Debt			49				49
Total current liabilities			41,997				48,828
Debt, noncurrent			15,000				15,000
Other liabilities, noncurrent			5,529				5,740
Total liabilities			62,526				69,568
Stockholders' equity:
Common stock			45				45
Additional paid-in capital			252,517				249,358
Accumulated other comprehensive loss			(420	)			(413	)
Accumulated deficit			(125,537	)			(113,405	)
Total stockholders' equity			126,605				135,585
Total liabilities and stockholders' equity		$	189,131			$	205,153

 

QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
									Three Months Ended								Six Months Ended
									December 31,								December 31,
									2015				2014				2015				2014
Net revenue									$	64,961			$	66,694			$	137,350			$	135,883
Cost of revenue (1)										60,169				60,395				125,964				123,804
Gross profit										4,792				6,299				11,386				12,079
Operating expenses: (1)
	Product development									3,761				4,244				8,147				9,200
	Sales and marketing									2,917				3,357				6,492				7,024
	General and administrative									4,057				4,079				8,220				8,694
Operating loss										(5,943	)			(5,381	)			(11,473	)			(12,839	)
Interest income										10				28				16				54
Interest expense										(145	)			(786	)			(278	)			(1,966	)
Other income, net										65				636				8				2,961
Loss before income taxes										(6,013	)			(5,503	)			(11,727	)			(11,790	)
(Provision for) benefit from taxes										(40	)			26				(405	)			26
Net loss									$	(6,053	)		$	(5,477	)		$	(12,132	)		$	(11,764	)
Net loss per share:
	Basic								$	(0.13	)		$	(0.12	)		$	(0.27	)		$	(0.27	)
	Diluted								$	(0.13	)		$	(0.12	)		$	(0.27	)		$	(0.27	)
Weighted average shares used in computing net loss per share:
	Basic									45,127				44,440				44,982				44,353
	Diluted									45,127				44,440				44,982				44,353
(1) Cost of revenue and operating expenses include stock-based compensation expense as follows:
	Cost of revenue								$	753			$	785			$	1,557			$	1,429
	Product development									445				594				1,045				1,189
	Sales and marketing									444				562				869				1,026
	General and administrative									687				585				1,362				1,157

 

QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
							Three Months Ended								Six Months Ended
							December 31,								December 31,
							2015				2014				2015				2014
Cash Flows from Operating Activities
Net loss							$	(6,053	)		$	(5,477	)		$	(12,132	)		$	(11,764	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
	Depreciation and amortization							3,772				4,986				7,716				10,408
	Provision for sales returns and doubtful accounts receivable							707				288				634				470
	Write-off of bank loan upfront fees							-				-				-				328
	Stock-based compensation							2,329				2,526				4,833				4,801
	Excess tax benefits from stock-based compensation							-				-				-				(51	)
	Gain on sales of domain names							(51	)			(708	)			(116	)			(3,158	)
	Other adjustments, net							-				58				-				99
	Changes in assets and liabilities:
		Accounts receivable						4,609				13				5,062				394
		Prepaid expenses and other assets						(9,445	)			943				(3,945	)			(369	)
		Deferred taxes						-				-				(8	)			2
		Accounts payable						(1,845	)			2,331				(2,945	)			2,964
		Accrued liabilities						(2,210	)			(1,380	)			(3,883	)			(3,449	)
		Deferred revenue						93				614				31				178
		Other liabilities, noncurrent						(112	)			(92	)			(210	)			(253	)
						Net cash (used in) provided by operating activities		(8,206	)			4,102				(4,963	)			600
Cash Flows from Investing Activities
Capital expenditures								(654	)			(144	)			(1,143	)			(2,285	)
Internal software development costs								(655	)			(506	)			(1,931	)			(933	)
Purchases of marketable securities								-				(5,995	)			-				(16,600	)
Proceeds from sales and maturities of marketable securities								-				17,525				-				27,287
Proceeds from sales of domain names								51				458				91				3,158
Proceeds from sale of property and equipment								-				10				-				10
						Net cash (used in) provided by investing activities		(1,258	)			11,348				(2,983	)			10,637
Cash Flows from Financing Activities
Proceeds from exercise of common stock options								26				-				26				1,300
Principal payments on bank debt								-				(3,750	)			-				(7,500	)
Payment of bank loan upfront fees								-				-				-				(272	)
Principal payments on acquisition-related notes payable								-				-				-				(444	)
Excess tax benefits from stock-based compensation								-				-				-				51
Withholding taxes related to restricted stock net share settlement								(425	)			(182	)			(1,748	)			(626	)
						Net cash used in financing activities		(399	)			(3,932	)			(1,722	)			(7,491	)
Effect of exchange rate changes on cash and cash equivalents								(47	)			1				(50	)			17
Net (decrease) increase in cash and cash equivalents								(9,910	)			11,519				(9,718	)			3,763
Cash and cash equivalents at beginning of period								60,660				76,421				60,468				84,177
Cash and cash equivalents at end of period							$	50,750			$	87,940			$	50,750			$	87,940

 

QUINSTREET, INC.
RECONCILIATION OF NET LOSS TO
ADJUSTED NET (LOSS) INCOME
(In thousands, except per share data)
(Unaudited)
			Three Months Ended								Six Months Ended
			December 31,								December 31,
			2015				2014				2015				2014
Net loss			$	(6,053	)		$	(5,477	)		$	(12,132	)		$	(11,764	)
	Amortization of intangible assets			2,247				3,315				4,656				7,076
	Stock-based compensation			2,329				2,526				4,833				4,801
	Restructuring			-				-				218				439
	Tax impact after non-GAAP items			-				(133	)			-				(201	)
Adjusted net (loss) income			$	(1,477	)		$	231			$	(2,425	)		$	351
Adjusted diluted net (loss) income per share			$	(0.03	)		$	0.01			$	(0.05	)		$	0.01
Weighted average shares used in computing adjusted diluted net (loss) income per share				45,127				44,460				44,982				44,371
QUINSTREET, INC.
RECONCILIATION OF NET LOSS TO
ADJUSTED EBITDA
(In thousands)
(Unaudited)
			Three Months Ended								Six Months Ended
			December 31,								December 31,
			2015				2014				2015				2014
Net loss			$	(6,053	)		$	(5,477	)		$	(12,132	)		$	(11,764	)
	Interest and other expense (income), net			70				122				254				(1,049	)
	Provision for (benefit from) taxes			40				(26	)			405				(26	)
	Depreciation and amortization			3,772				4,986				7,716				10,408
	Stock-based compensation			2,329				2,526				4,833				4,801
	Restructuring			-				-				218				439
Adjusted EBITDA			$	158			$	2,131			$	1,294			$	2,809

Investor Contact:

Erica Abrams 
(415) 297-5864 
eabrams@quinstreet.com