QuinStreet, Inc. (Nasdaq:QNST), a leader in performance marketing
products and technologies, today announced financial results for
the fourth quarter ended June 30, 2017.
For the fourth quarter, the Company reported
total revenue of $81.5 million and GAAP net loss of $1.4
million, or $(0.03) per share. Adjusted net income was $2.8
million, or $0.06 per share, and adjusted EBITDA was $6.1 million,
or 7% of revenue.
The Company generated $10.3 million in operating
cash flow in the fourth quarter.
“The fiscal fourth quarter came in as expected
and guided. We delivered year-over-year and sequential revenue
growth, increased adjusted EBITDA and generated strong
cash flow,” commented Doug Valenti, QuinStreet CEO. “Improved
results are being driven by positive momentum from the
products and media strategies developed over the past couple
of years and by our Financial Services and Home Services
client verticals, which now account for over 70% of Company
revenue. That portion of our business continues to deliver
double-digit revenue growth and expanding profitability.”
“We expect these trends and themes to continue
in the new fiscal year and that improvements in overall company
performance will accelerate as a result. For fiscal year 2018, we
expect full year revenue growth of at least 10% and adjusted
EBITDA margin of about 8%,” continued Valenti.
“The Board of Directors has approved a
reauthorization of the Company's stock repurchase program for the
upcoming year, again targeted to offset dilution from equity
compensation. Our balance sheet remains strong, with $50 million
of cash, and no debt,” concluded Valenti.
Reconciliations of adjusted net income to GAAP
net loss and adjusted EBITDA to GAAP net loss are
included in the accompanying tables.
Conference Call Today at 6:00 A.M.
PT
The Company will host a conference call and
corresponding live webcast at 6:00 A.M. PT today. To access the
conference call, dial +1 (866) 719.0110 or +1 (719) 234.0008 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://event.mymeetingroom.com and
using passcode 2038071 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 Tuesday, August 15, 2017 at
8:30 A.M. PT.
Non-GAAP Financial Measures
This release and the accompanying tables include
a discussion of adjusted EBITDA, adjusted net income and adjusted
diluted net 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) benefit from taxes, depreciation expense,
amortization expense, stock-based compensation expense, interest
and other expense, net, restructuring expense and legal settlement
expense. The term "adjusted net income" refers to a financial
measure that we define as net loss adjusted for amortization
expense, stock-based compensation expense, restructuring expense,
legal settlement expense and impairment of investment, 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. 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 and adjusted
diluted net income per share may not be comparable to the
definitions as reported by other companies.
We believe adjusted EBITDA, adjusted net income
and adjusted diluted net 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 useful to us and investors
because (i) we seek to manage our business to a level of adjusted
EBITDA as a percentage of net revenue, (ii) it is used internally
by us for planning purposes, including preparation of internal
budgets; to allocate resources; to evaluate the effectiveness of
operational strategies and capital expenditures as well as the
capacity to service debt, (iii) it is a key basis upon which we
assess our operating performance, (iv) it is one of the primary
metrics investors use in evaluating Internet marketing companies,
(v) it is a factor in determining compensation, and (vi) it is an
element of certain financial covenants under our historical
borrowing arrangements. In addition, we believe adjusted EBITDA and
similar measures are widely used by investors, securities analysts,
ratings agencies and other interested parties in our industry as a
measure of financial performance, debt-service capabilities and as
a metric for analyzing company valuations.
We use adjusted EBITDA as a key performance
measure because we believe it facilitates operating performance
comparisons from period to period by excluding potential
differences caused by variations in capital structures (affecting
interest expense), tax positions (such as the impact on periods or
companies of changes in effective tax rates or fluctuations in
permanent differences or discrete quarterly items), non-recurring
charges (such as restructuring and legal settlement expense) and
the non-cash impact of depreciation expense, amortization expense
and stock-based compensation expense.
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) and other non-recurring charges. We believe
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.
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
annual report on Form 10-K for the fiscal year ended June 30, 2017,
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) |
|
|
|
|
|
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
49,571 |
|
|
$ |
53,710 |
|
|
Accounts
receivable, net |
|
|
44,059 |
|
|
|
47,218 |
|
|
Prepaid
expenses and other assets |
|
|
6,225 |
|
|
|
7,055 |
|
|
Total
current assets |
|
|
99,855 |
|
|
|
107,983 |
|
|
Property and equipment,
net |
|
|
5,613 |
|
|
|
7,678 |
|
|
Goodwill |
|
|
56,118 |
|
|
|
56,118 |
|
|
Other intangible
assets, net |
|
|
4,105 |
|
|
|
10,081 |
|
|
Other assets,
noncurrent |
|
|
8,617 |
|
|
|
11,242 |
|
|
Total
assets |
|
$ |
174,308 |
|
|
$ |
193,102 |
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
|
$ |
25,205 |
|
|
$ |
19,814 |
|
|
Accrued
liabilities |
|
|
26,223 |
|
|
|
27,705 |
|
|
Deferred
revenue |
|
|
1,126 |
|
|
|
1,200 |
|
|
Debt |
|
|
— |
|
|
|
15,000 |
|
|
Total
current liabilities |
|
|
52,554 |
|
|
|
63,719 |
|
|
Other liabilities,
noncurrent |
|
|
3,672 |
|
|
|
4,631 |
|
|
Total
liabilities |
|
|
56,226 |
|
|
|
68,350 |
|
|
Stockholders'
equity: |
|
|
|
|
|
Common
stock |
|
|
45 |
|
|
|
45 |
|
|
Additional paid-in capital |
|
|
263,533 |
|
|
|
257,950 |
|
|
Accumulated other comprehensive loss |
|
|
(463 |
) |
|
|
(418 |
) |
|
Accumulated deficit |
|
|
(145,033 |
) |
|
|
(132,825 |
) |
|
Total
stockholders' equity |
|
|
118,082 |
|
|
|
124,753 |
|
|
Total
liabilities and stockholders' equity |
|
$ |
174,308 |
|
|
$ |
193,102 |
|
|
|
|
|
|
|
|
QUINSTREET, INC. |
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(In thousands, except
per share data) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Fiscal Year Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net revenue |
|
$ |
81,532 |
|
|
$ |
79,113 |
|
|
$ |
299,785 |
|
|
$ |
297,706 |
|
|
Cost of revenue
(1) |
|
|
70,606 |
|
|
|
71,743 |
|
|
|
269,409 |
|
|
|
270,963 |
|
|
Gross profit |
|
|
10,926 |
|
|
|
7,370 |
|
|
|
30,376 |
|
|
|
26,743 |
|
|
Operating expenses:
(1) |
|
|
|
|
|
|
|
|
|
Product
development |
|
|
3,061 |
|
|
|
3,930 |
|
|
|
13,476 |
|
|
|
16,431 |
|
|
Sales and
marketing |
|
|
2,188 |
|
|
|
2,518 |
|
|
|
9,189 |
|
|
|
12,020 |
|
|
General
and administrative |
|
|
4,086 |
|
|
|
4,460 |
|
|
|
15,934 |
|
|
|
17,166 |
|
|
Restructuring charges |
|
|
— |
|
|
|
— |
|
|
|
2,441 |
|
|
|
— |
|
|
Operating income
(loss) |
|
|
1,591 |
|
|
|
(3,538 |
) |
|
|
(10,664 |
) |
|
|
(18,874 |
) |
|
Interest income |
|
|
39 |
|
|
|
22 |
|
|
|
138 |
|
|
|
61 |
|
|
Interest expense |
|
|
(24 |
) |
|
|
(152 |
) |
|
|
(346 |
) |
|
|
(585 |
) |
|
Other (expense) income,
net |
|
|
(2,668 |
) |
|
|
(8 |
) |
|
|
(2,416 |
) |
|
|
112 |
|
|
Loss before taxes |
|
|
(1,062 |
) |
|
|
(3,676 |
) |
|
|
(13,288 |
) |
|
|
(19,286 |
) |
|
(Provision for) benefit
from taxes |
|
|
(306 |
) |
|
|
343 |
|
|
|
1,080 |
|
|
|
(134 |
) |
|
Net loss |
|
$ |
(1,368 |
) |
|
$ |
(3,333 |
) |
|
$ |
(12,208 |
) |
|
$ |
(19,420 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.03 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.43 |
) |
|
Diluted |
|
$ |
(0.03 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.43 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
used in computing net loss per share: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
45,468 |
|
|
|
45,496 |
|
|
|
45,594 |
|
|
|
45,197 |
|
|
Diluted |
|
|
45,468 |
|
|
|
45,496 |
|
|
|
45,594 |
|
|
|
45,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Cost of
revenue and operating expenses include stock-based compensation
expense as follows: |
|
|
|
|
|
Cost of
revenue |
|
$ |
719 |
|
|
$ |
954 |
|
|
$ |
3,109 |
|
|
$ |
3,780 |
|
|
Product
development |
|
|
403 |
|
|
|
579 |
|
|
|
1,834 |
|
|
|
2,340 |
|
|
Sales and
marketing |
|
|
286 |
|
|
|
343 |
|
|
|
1,154 |
|
|
|
1,825 |
|
|
General
and administrative |
|
|
664 |
|
|
|
753 |
|
|
|
2,759 |
|
|
|
3,023 |
|
|
Restructuring charges |
|
|
— |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET, INC. |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(In
thousands) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Fiscal Year Ended |
|
|
June 30, |
|
June 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Cash Flows from
Operating Activities |
|
|
|
|
|
|
|
|
Net loss |
$ |
(1,368 |
) |
|
$ |
(3,333 |
) |
|
$ |
(12,208 |
) |
|
$ |
(19,420 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
2,394 |
|
|
|
3,650 |
|
|
|
11,377 |
|
|
|
15,087 |
|
|
Impairment of investment |
|
2,500 |
|
|
|
— |
|
|
|
2,500 |
|
|
|
— |
|
|
Recovery
from (provision for) sales returns and doubtful accounts
receivable |
|
182 |
|
|
|
(54 |
) |
|
|
291 |
|
|
|
789 |
|
|
Stock-based compensation |
|
2,072 |
|
|
|
2,629 |
|
|
|
8,898 |
|
|
|
10,968 |
|
|
Gains on
sale of domain names |
|
(15 |
) |
|
|
(21 |
) |
|
|
(169 |
) |
|
|
(181 |
) |
|
Other
adjustments, net |
|
60 |
|
|
|
116 |
|
|
|
53 |
|
|
|
116 |
|
|
Changes
in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
(1,134 |
) |
|
|
2,336 |
|
|
|
2,868 |
|
|
|
(1,767 |
) |
|
Prepaid
expenses and other assets |
|
905 |
|
|
|
(76 |
) |
|
|
830 |
|
|
|
4,448 |
|
|
Deferred
taxes |
|
80 |
|
|
|
(488 |
) |
|
|
(430 |
) |
|
|
(496 |
) |
|
Other
assets, noncurrent |
|
233 |
|
|
|
313 |
|
|
|
891 |
|
|
|
(8,179 |
) |
|
Accounts
payable |
|
4,285 |
|
|
|
(2,626 |
) |
|
|
5,394 |
|
|
|
(505 |
) |
|
Accrued
liabilities |
|
122 |
|
|
|
(2,399 |
) |
|
|
(1,155 |
) |
|
|
608 |
|
|
Deferred
revenue |
|
86 |
|
|
|
297 |
|
|
|
(74 |
) |
|
|
(8 |
) |
|
Other
liabilities, noncurrent |
|
(142 |
) |
|
|
(118 |
) |
|
|
(530 |
) |
|
|
(445 |
) |
|
Net cash
provided by operating activities |
|
10,260 |
|
|
|
226 |
|
|
|
18,536 |
|
|
|
1,015 |
|
|
Cash Flows from
Investing Activities |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
(182 |
) |
|
|
(170 |
) |
|
|
(1,160 |
) |
|
|
(1,859 |
) |
|
Internal software
development costs |
|
(451 |
) |
|
|
(793 |
) |
|
|
(2,185 |
) |
|
|
(3,482 |
) |
|
Proceeds from sale of
domain names |
|
15 |
|
|
|
21 |
|
|
|
169 |
|
|
|
156 |
|
|
Restricted cash |
|
(866 |
) |
|
|
— |
|
|
|
(766 |
) |
|
|
— |
|
|
Other investing
activities |
|
38 |
|
|
|
(15 |
) |
|
|
(195 |
) |
|
|
(17 |
) |
|
Net cash
used in investing activities |
|
(1,446 |
) |
|
|
(957 |
) |
|
|
(4,137 |
) |
|
|
(5,202 |
) |
|
Cash Flows from
Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from exercise
of common stock options |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26 |
|
|
Principal payments on
acquisition-related notes payable |
|
— |
|
|
|
(41 |
) |
|
|
— |
|
|
|
(41 |
) |
|
Withholding taxes related to release of restricted stock, net of
share settlement |
|
(253 |
) |
|
|
(343 |
) |
|
|
(1,018 |
) |
|
|
(2,482 |
) |
|
Repurchases of common
stock |
|
(721 |
) |
|
|
— |
|
|
|
(2,487 |
) |
|
|
— |
|
|
Repayment of revolving
loan facility |
|
— |
|
|
|
— |
|
|
|
(15,000 |
) |
|
|
— |
|
|
Net cash
used in financing activities |
|
(974 |
) |
|
|
(384 |
) |
|
|
(18,505 |
) |
|
|
(2,497 |
) |
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(13 |
) |
|
|
23 |
|
|
|
(33 |
) |
|
|
(74 |
) |
|
Net increase (decrease)
in cash and cash equivalents |
|
7,827 |
|
|
|
(1,092 |
) |
|
|
(4,139 |
) |
|
|
(6,758 |
) |
|
Cash and cash
equivalents at beginning of period |
|
41,744 |
|
|
|
54,802 |
|
|
|
53,710 |
|
|
|
60,468 |
|
|
Cash and cash
equivalents at end of period |
$ |
49,571 |
|
|
$ |
53,710 |
|
|
$ |
49,571 |
|
|
$ |
53,710 |
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET, INC. |
|
RECONCILIATION OF NET LOSS TO |
|
ADJUSTED NET INCOME |
|
(In thousands, except per share
data) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Fiscal Year Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net loss |
|
$ |
(1,368 |
) |
|
$ |
(3,333 |
) |
|
$ |
(12,208 |
) |
|
$ |
(19,420 |
) |
|
Amortization of intangible assets |
|
|
1,196 |
|
|
|
2,103 |
|
|
|
6,215 |
|
|
|
8,942 |
|
|
Stock-based compensation |
|
|
2,072 |
|
|
|
2,629 |
|
|
|
8,856 |
|
|
|
10,968 |
|
|
Restructuring |
|
|
— |
|
|
|
— |
|
|
|
2,441 |
|
|
|
297 |
|
|
Legal
settlement expense |
|
|
— |
|
|
|
275 |
|
|
|
— |
|
|
|
375 |
|
|
Impairment of investment |
|
|
2,500 |
|
|
|
— |
|
|
|
2,500 |
|
|
|
— |
|
|
Tax
impact after non-GAAP items |
|
|
(1,584 |
) |
|
|
(603 |
) |
|
|
(2,809 |
) |
|
|
(419 |
) |
|
Adjusted net
income(1) |
|
$ |
2,816 |
|
|
$ |
1,071 |
|
|
$ |
4,995 |
|
|
$ |
743 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted net
income per share |
|
$ |
0.06 |
|
|
$ |
0.02 |
|
|
$ |
0.11 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used in computing adjusted diluted net income per
share |
|
|
45,946 |
|
|
|
45,533 |
|
|
|
45,784 |
|
|
|
45,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUINSTREET, INC. |
|
RECONCILIATION OF NET LOSS TO |
|
ADJUSTED EBITDA |
|
(In thousands) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Fiscal Year Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net loss |
|
$ |
(1,368 |
) |
|
$ |
(3,333 |
) |
|
$ |
(12,208 |
) |
|
$ |
(19,420 |
) |
|
Interest
and other expense, net |
|
|
2,653 |
|
|
|
138 |
|
|
|
2,624 |
|
|
|
412 |
|
|
Provision
for (benefit from) taxes |
|
|
306 |
|
|
|
(343 |
) |
|
|
(1,080 |
) |
|
|
134 |
|
|
Depreciation and amortization |
|
|
2,394 |
|
|
|
3,650 |
|
|
|
11,377 |
|
|
|
15,087 |
|
|
Stock-based compensation |
|
|
2,072 |
|
|
|
2,629 |
|
|
|
8,856 |
|
|
|
10,968 |
|
|
Restructuring |
|
|
— |
|
|
|
— |
|
|
|
2,441 |
|
|
|
297 |
|
|
Legal
settlement expense |
|
|
— |
|
|
|
275 |
|
|
|
— |
|
|
|
375 |
|
|
Adjusted EBITDA(1) |
|
$ |
6,057 |
|
|
$ |
3,016 |
|
|
$ |
12,010 |
|
|
$ |
7,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) GAAP
net loss included a one-time, non-cash charge of $2.5 million
recognized in other (expense) income, net in the Company's
condensed consolidated statements of operations, to write down the
Company's interest in a non-profit education online program
management company that the Company made an investment in April
2015. This charge is excluded from non-GAAP results and has no
impact on adjusted EBITDA or adjusted net income. |
|
Investor Contact:
Erica Abrams
(415) 297-5864
eabrams@quinstreet.com
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