QuinStreet, Inc. (Nasdaq:QNST), a leader in performance marketing
products and technologies, today announced financial results for
the second quarter ended December 31, 2016.
For the second quarter, the Company reported
total revenue of $65.6 million and GAAP net loss of $7.9 million,
or ($0.17) per share. Adjusted EBITDA loss for the second quarter
was $(273,000) and adjusted net loss was $1.7 million, or $(0.04)
per share. The Company incurred $2.4 million in charges in the
quarter related to the restructuring announced in November.
The Company generated $0.9 million in operating
cash flow in the second quarter, net of $1.1 million of cash
outlays related to the restructuring. The Company also paid off its
$15.0 million in outstanding debt and repurchased $1.0 million of
its common stock, ending fiscal Q2 with net cash of $37.5 million
versus $38.6 million at the end of fiscal Q1.
“Fiscal Q2 results were generally consistent
with our expectations, with revenue up about 1% year-over-year,”
commented Doug Valenti, QuinStreet CEO. “We continued to see strong
growth in the Financial Services client vertical, our largest
business. Education remained challenging, but recent tone and
trends are more encouraging.
“As previously projected, we expect adjusted
EBITDA margin and cash flow to improve significantly in the March
and June quarters due to top line leverage and to cost reductions
from our recent restructuring. Top line leverage should result from
the seasonal strength of the March and June quarters and from
increases in client spending due to improving insurance industry
loss ratios,” continued Valenti.
Reconciliations of adjusted net loss to GAAP net
loss and adjusted EBITDA to GAAP net loss are included in the
accompanying tables.
Conference Call Today at 2:00 p.m.
PT
The Company will host a conference call and
corresponding live webcast at 2:00 p.m. PT today. To access the
conference call, dial +1 (888) 765.5576 or +1 (913) 312.1516 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 by
registering online at: https://jsp.premiereglobal.com/webrsvp
and using passcode 6404615 to obtain dial-in information for the
replay. Dial-in information for the replay will be available
beginning one day prior to the conference call and the conference
call replay will be available through Wednesday, February 15, 2017
at 4:30 p.m. PT.
Non-GAAP Financial Measures
This release and the accompanying tables include
a discussion of adjusted EBITDA, adjusted net loss and adjusted
diluted net loss 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) benefit from taxes, depreciation expense,
amortization expense, stock-based compensation expense, interest
and other expense, net and restructuring expense. The term
"adjusted net loss" refers to a financial measure that we define as
net loss adjusted for amortization expense, stock-based
compensation expense and restructuring expense, net of estimated
taxes. The term "adjusted diluted net loss per share" refers to a
financial measure that we define as adjusted net loss 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 and adjusted diluted net loss
per share may not be comparable to the definitions as reported by
other companies.
We believe adjusted EBITDA, adjusted net loss
and adjusted diluted net loss 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
agreement.
Adjusted net loss and adjusted diluted net loss
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)
and other non-recurring charges. The Company believes that analysts
and investors use adjusted net loss and adjusted diluted net loss
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, 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 or enforcement
activities of the Department of Education, the Federal Trade
Commission and other regulatory agencies; 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 are contained in the Company's
annual report 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,
2016, 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) |
|
|
|
|
|
|
|
December 31, |
|
June 30, |
|
|
|
2016 |
|
|
|
2016 |
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
37,496 |
|
|
$ |
53,710 |
|
Accounts
receivable, net |
|
|
41,118 |
|
|
|
47,218 |
|
Prepaid
expenses and other assets |
|
|
6,823 |
|
|
|
7,055 |
|
Total
current assets |
|
|
85,437 |
|
|
|
107,983 |
|
Property and equipment,
net |
|
|
6,930 |
|
|
|
7,678 |
|
Goodwill |
|
|
56,118 |
|
|
|
56,118 |
|
Other intangible
assets, net |
|
|
6,674 |
|
|
|
10,081 |
|
Other assets,
noncurrent |
|
|
10,813 |
|
|
|
11,242 |
|
Total
assets |
|
$ |
165,972 |
|
|
$ |
193,102 |
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
20,422 |
|
|
$ |
19,814 |
|
Accrued
liabilities |
|
|
23,306 |
|
|
|
27,705 |
|
Deferred
revenue |
|
|
1,249 |
|
|
|
1,200 |
|
Debt |
|
|
— |
|
|
|
15,000 |
|
Total
current liabilities |
|
|
44,977 |
|
|
|
63,719 |
|
Other liabilities,
noncurrent |
|
|
4,381 |
|
|
|
4,631 |
|
Total
liabilities |
|
|
49,358 |
|
|
|
68,350 |
|
Stockholders'
equity: |
|
|
|
|
Common
stock |
|
|
46 |
|
|
|
45 |
|
Additional paid-in capital |
|
|
261,224 |
|
|
|
257,950 |
|
Accumulated other comprehensive loss |
|
|
(412 |
) |
|
|
(418 |
) |
Accumulated deficit |
|
|
(144,244 |
) |
|
|
(132,825 |
) |
Total
stockholders' equity |
|
|
116,614 |
|
|
|
124,752 |
|
Total
liabilities and stockholders' equity |
|
$ |
165,972 |
|
|
$ |
193,102 |
|
|
|
|
|
|
QUINSTREET, INC. |
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(In thousands, except
per share data) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Net
revenue |
|
|
$ |
65,610 |
|
|
$ |
64,961 |
|
|
$ |
139,048 |
|
|
$ |
137,350 |
|
|
Cost of
revenue (1) |
|
|
|
61,657 |
|
|
|
60,346 |
|
|
|
129,465 |
|
|
|
126,264 |
|
|
Gross
profit |
|
|
|
|
3,953 |
|
|
|
4,615 |
|
|
|
9,583 |
|
|
|
11,086 |
|
|
Operating
expenses: (1) |
|
|
|
|
|
|
|
|
|
|
|
Product
development |
|
|
|
3,314 |
|
|
|
3,843 |
|
|
|
7,268 |
|
|
|
8,287 |
|
|
|
Sales and
marketing |
|
|
|
2,168 |
|
|
|
2,982 |
|
|
|
4,758 |
|
|
|
6,604 |
|
|
|
General and
administrative |
|
|
|
3,794 |
|
|
|
4,138 |
|
|
|
7,825 |
|
|
|
8,358 |
|
|
|
Restructuring charges |
|
|
|
2,403 |
|
|
|
— |
|
|
|
2,403 |
|
|
|
— |
|
|
Operating
loss |
|
|
|
(7,726 |
) |
|
|
(6,348 |
) |
|
|
(12,671 |
) |
|
|
(12,163 |
) |
|
Interest
income |
|
|
|
36 |
|
|
|
10 |
|
|
|
57 |
|
|
|
16 |
|
|
Interest
expense |
|
|
|
(135 |
) |
|
|
(145 |
) |
|
|
(291 |
) |
|
|
(278 |
) |
|
Other
(expense) income, net |
|
|
|
(25 |
) |
|
|
65 |
|
|
|
110 |
|
|
|
8 |
|
|
Loss before
income taxes |
|
|
|
(7,850 |
) |
|
|
(6,418 |
) |
|
|
(12,795 |
) |
|
|
(12,417 |
) |
|
(Provision
for) benefit from taxes |
|
|
|
— |
|
|
|
(40 |
) |
|
|
1,376 |
|
|
|
(405 |
) |
|
Net
loss |
|
|
|
|
$ |
(7,850 |
) |
|
$ |
(6,458 |
) |
|
$ |
(11,419 |
) |
|
$ |
(12,822 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
$ |
(0.17 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.29 |
) |
|
|
Diluted |
|
|
|
|
$ |
(0.17 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used in computing net loss per share: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
45,731 |
|
|
|
45,127 |
|
|
|
45,700 |
|
|
|
44,982 |
|
|
|
Diluted |
|
|
|
|
|
45,731 |
|
|
|
45,127 |
|
|
|
45,700 |
|
|
|
44,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Cost
of revenue and operating expenses include stock-based compensation
expense as follows: |
|
|
|
|
|
|
Cost of
revenue |
|
|
$ |
728 |
|
|
$ |
930 |
|
|
$ |
1,699 |
|
|
$ |
1,857 |
|
|
|
Product
development |
|
|
|
471 |
|
|
|
527 |
|
|
|
1,007 |
|
|
|
1,185 |
|
|
|
Sales and
marketing |
|
|
|
220 |
|
|
|
509 |
|
|
|
577 |
|
|
|
981 |
|
|
|
General and
administrative |
|
|
|
681 |
|
|
|
768 |
|
|
|
1,424 |
|
|
|
1,500 |
|
|
|
Restructuring charges |
|
|
|
42 |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET, INC. |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(In
thousands) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
Net
loss |
|
|
$ |
(7,850 |
) |
|
$ |
(6,458 |
) |
|
$ |
(11,419 |
) |
|
$ |
(12,822 |
) |
|
Adjustments
to reconcile net loss to net cash provided by |
|
|
|
|
|
|
|
|
(used in) operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
2,950 |
|
|
|
3,772 |
|
|
|
6,323 |
|
|
|
7,716 |
|
|
|
Provision
for sales returns and doubtful accounts receivable |
|
116 |
|
|
|
707 |
|
|
|
211 |
|
|
|
634 |
|
|
|
Stock-based
compensation |
|
2,142 |
|
|
|
2,734 |
|
|
|
4,749 |
|
|
|
5,523 |
|
|
|
Gain on
sales of domain names |
|
— |
|
|
|
(51 |
) |
|
|
(143 |
) |
|
|
(116 |
) |
|
|
Other
adjustments, net |
|
9 |
|
|
|
— |
|
|
|
(4 |
) |
|
|
— |
|
|
|
Changes in
assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
3,069 |
|
|
|
4,609 |
|
|
|
5,889 |
|
|
|
5,062 |
|
|
|
|
Prepaid
expenses and other assets |
|
1,134 |
|
|
|
(9,445 |
) |
|
|
560 |
|
|
|
(3,945 |
) |
|
|
|
Deferred
taxes |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
|
|
|
Accounts
payable |
|
(49 |
) |
|
|
(1,845 |
) |
|
|
627 |
|
|
|
(2,945 |
) |
|
|
|
Accrued
liabilities |
|
(719 |
) |
|
|
(2,210 |
) |
|
|
(4,502 |
) |
|
|
(3,883 |
) |
|
|
|
Deferred
revenue |
|
212 |
|
|
|
93 |
|
|
|
49 |
|
|
|
31 |
|
|
|
|
Other
liabilities, noncurrent |
|
(131 |
) |
|
|
(112 |
) |
|
|
(250 |
) |
|
|
(210 |
) |
|
|
|
|
|
Net cash
provided by (used in) operating activities |
|
883 |
|
|
|
(8,206 |
) |
|
|
2,090 |
|
|
|
(4,963 |
) |
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
(203 |
) |
|
|
(654 |
) |
|
|
(604 |
) |
|
|
(1,143 |
) |
|
Internal
software development costs |
|
(487 |
) |
|
|
(655 |
) |
|
|
(1,182 |
) |
|
|
(1,931 |
) |
|
Proceeds
from sales of domain names |
|
— |
|
|
|
51 |
|
|
|
143 |
|
|
|
91 |
|
|
Other
investing activities |
|
(44 |
) |
|
|
— |
|
|
|
(97 |
) |
|
|
— |
|
|
|
|
|
|
Net cash
used in investing activities |
|
(734 |
) |
|
|
(1,258 |
) |
|
|
(1,740 |
) |
|
|
(2,983 |
) |
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds
from exercise of common stock options |
|
— |
|
|
|
26 |
|
|
|
— |
|
|
|
26 |
|
|
Withholding
taxes related to restricted stock, net of share settlement |
|
(189 |
) |
|
|
(425 |
) |
|
|
(536 |
) |
|
|
(1,748 |
) |
|
Repurchases
of common stock |
|
(1,043 |
) |
|
|
— |
|
|
|
(1,043 |
) |
|
|
— |
|
|
Repayment
of revolving loan facility |
|
(15,000 |
) |
|
|
— |
|
|
|
(15,000 |
) |
|
|
— |
|
|
|
|
|
|
Net cash
used in financing activities |
|
(16,232 |
) |
|
|
(399 |
) |
|
|
(16,579 |
) |
|
|
(1,722 |
) |
|
Effect of
exchange rate changes on cash and cash equivalents |
|
13 |
|
|
|
(47 |
) |
|
|
15 |
|
|
|
(50 |
) |
|
Net
decrease in cash and cash equivalents |
|
(16,070 |
) |
|
|
(9,910 |
) |
|
|
(16,214 |
) |
|
|
(9,718 |
) |
|
Cash and
cash equivalents at beginning of period |
|
53,566 |
|
|
|
60,660 |
|
|
|
53,710 |
|
|
|
60,468 |
|
|
Cash and
cash equivalents at end of period |
$ |
37,496 |
|
|
$ |
50,750 |
|
|
$ |
37,496 |
|
|
$ |
50,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET, INC. |
|
RECONCILIATION OF NET LOSS TO |
|
ADJUSTED NET LOSS |
|
(In thousands, except
per share data) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Net
loss |
|
|
|
|
|
$ |
(7,850 |
) |
|
$ |
(6,458 |
) |
|
$ |
(11,419 |
) |
|
$ |
(12,822 |
) |
|
|
Amortization of intangible assets |
|
|
1,691 |
|
|
|
2,247 |
|
|
|
3,639 |
|
|
|
4,656 |
|
|
|
Stock-based
compensation |
|
|
|
2,100 |
|
|
|
2,734 |
|
|
|
4,707 |
|
|
|
5,523 |
|
|
|
Restructuring |
|
|
|
|
2,403 |
|
|
|
— |
|
|
|
2,403 |
|
|
|
218 |
|
|
|
Tax impact
after non-GAAP items |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Adjusted
net loss |
|
|
|
$ |
(1,656 |
) |
|
$ |
(1,477 |
) |
|
$ |
(670 |
) |
|
$ |
(2,425 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
diluted net loss per share |
|
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing adjusted
diluted net loss per share |
|
|
45,731 |
|
|
|
45,127 |
|
|
|
45,700 |
|
|
|
44,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET, INC. |
|
RECONCILIATION OF NET LOSS TO |
|
ADJUSTED EBITDA |
|
(In
thousands) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Net
loss |
|
|
|
|
|
$ |
(7,850 |
) |
|
$ |
(6,458 |
) |
|
$ |
(11,419 |
) |
|
$ |
(12,822 |
) |
|
|
Interest
and other expense, net |
|
|
|
124 |
|
|
|
70 |
|
|
|
124 |
|
|
|
254 |
|
|
|
Provision
for (benefit from) taxes |
|
|
|
— |
|
|
|
40 |
|
|
|
(1,376 |
) |
|
|
405 |
|
|
|
Depreciation and amortization |
|
|
|
2,950 |
|
|
|
3,772 |
|
|
|
6,323 |
|
|
|
7,716 |
|
|
|
Stock-based
compensation |
|
|
|
2,100 |
|
|
|
2,734 |
|
|
|
4,707 |
|
|
|
5,523 |
|
|
|
Restructuring |
|
|
|
|
2,403 |
|
|
|
— |
|
|
|
2,403 |
|
|
|
218 |
|
|
Adjusted
EBITDA |
|
|
|
$ |
(273 |
) |
|
$ |
158 |
|
|
$ |
762 |
|
|
$ |
1,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Contact:
Erica Abrams
(415) 297-5864
eabrams@quinstreet.com
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