- Continued strong execution and results in December
quarter
- The significant positive inflection in Auto Insurance has
begun
- Expect a strong sequential Company revenue ramp in fiscal Q3
and again in Q4
- Expect adjusted EBITDA margins to expand rapidly with
revenue growth
QuinStreet, Inc. (Nasdaq: QNST), a leader in performance
marketplaces and technologies for the financial services and home
services industries, today announced financial results for the
fiscal second quarter ended December 31, 2023.
For the fiscal second quarter, the Company reported revenue of
$122.7 million, down 8% year-over-year.
GAAP net loss for the fiscal second quarter was $(11.6) million,
or $(0.21) per diluted share. Adjusted net loss for the fiscal
second quarter was $(2.3) million, or $(0.04) per diluted
share.
Adjusted EBITDA for the fiscal second quarter was $0.4
million.
The Company closed the fiscal second quarter with $45.5 million
in cash and cash equivalents and no bank debt.
“The December quarter continued recent positive trends,”
commented Doug Valenti, CEO of QuinStreet. “We grew non-Insurance
businesses, made good progress on growth initiatives, and
positioned ourselves well for the re-ramp of Auto Insurance client
spending. I am particularly proud of our delivering positive
adjusted EBITDA despite the Insurance market bottom and our
toughest seasonal quarter. Our financial position and foundation
remain strong.
“The significant positive inflection in Auto Insurance client
spending has indeed begun. Auto Insurance revenue is expected to be
up well over 100% this quarter over the December quarter. Client
spending increases are broad based. Consumer shopping traffic is
also up.
“We expect a strong sequential total Company revenue ramp and
rapid EBITDA margin expansion in the March quarter and again in the
June quarter, our fiscal Q3 and Q4.
“Turning to our specific outlook for fiscal Q3, we expect
revenue to be between $160 and $170 million, representing
sequential growth of 35% at the midpoint of the range. We expect
adjusted EBITDA to be between $7 and $9 million.
“We continue to expect revenue for full fiscal year 2024, which
ends in June, to grow between 5% and 15% over fiscal year
2023.”
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. To access the conference call dial +1
888-886-7786 (domestic) or +1 416-764-8658 (international). A
replay of the conference call will be available beginning
approximately two hours after the completion of the call by dialing
+1 844-512-2921 (domestic) or +1 412-317-6671 (international) and
using passcode #44693863. The webcast of the conference call will
be available live and via replay on the investor relations section
of the Company's website at http://investor.quinstreet.com.
About QuinStreet
QuinStreet, Inc. (Nasdaq: QNST) is a leader in performance
marketplaces and technologies for the financial services and home
services industries. QuinStreet is a pioneer in delivering online
marketplace solutions to match searchers with brands in digital
media, and is committed to providing consumers with the information
and tools they need to research, find and select the products and
brands that meet their needs.
Non-GAAP Financial Measures and
Definitions of Client Verticals
This release and the accompanying tables include a discussion of
adjusted EBITDA, adjusted net (loss) income, adjusted diluted net
(loss) income per share and 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 less provision for (benefit
from) income taxes, depreciation expense, amortization expense,
stock-based compensation expense, interest and other (income)
expense, net, acquisition and divestiture costs, contingent
consideration adjustment, litigation settlement expense, tax
settlement expense, and restructuring costs. 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, acquisition and divestiture costs, contingent
consideration adjustment, litigation settlement expense, tax
settlement expense, tax valuation allowance, and 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. 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. The term “normalized free cash flow” refers to
free cash flow less changes in operating assets and liabilities.
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 and 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 (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 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, (vi) it is an element of
certain financial covenants under our historical borrowing
arrangements, and (vii) it is a factor that assists investors in
the analysis of ongoing operating trends. 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 of changes in effective tax rates or
fluctuations in permanent differences or discrete quarterly items),
non-recurring charges, certain other items that we do not believe
are indicative of core operating activities (such as litigation
settlement expense, tax settlement expense, acquisition and
divestiture costs, contingent consideration adjustment,
restructuring costs and other income and expense) and the non-cash
impact of depreciation expense, amortization expense and
stock-based compensation expense.
With respect to our adjusted EBITDA guidance, the Company is not
able to provide a quantitative reconciliation to the most directly
comparable GAAP financial measure without unreasonable efforts due
to the high variability, complexity and low visibility with respect
to certain items such as taxes, and income and expense from changes
in fair value of contingent consideration from acquisitions. We
expect the variability of these items to have a potentially
unpredictable and potentially significant impact on future GAAP
financial results, and, as such, we also believe that any
reconciliations provided would imply a degree of precision that
would be confusing or misleading to investors.
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, and contingent consideration adjustment),
non-recurring charges and certain other items that we do not
believe are indicative of core operating activities. 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.
Free cash flow is useful to investors and us 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 cash receipts 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. We believe 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," “expect,” "intend,"
“outlook,” "potential," “promises” 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 maintain
and increase client marketing spend; the Company's ability, whether
within or outside the Company’s control, 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 Company's exposure
to data privacy and security risks; the impact from risks and
uncertainties relating to the COVID-19 pandemic and its aftermath;
the impact of changes in industry standards and government
regulation including, but not limited to investigation enforcement
activities or regulatory activity by the Federal Trade Commission,
the Federal Communications Commission, the Consumer Finance
Protection Bureau and other state and federal regulatory agencies;
the impact of changes in our business, our industry, and the
current economic and regulatory climate on the Company’s quarterly
and annual results of operations; 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 protect our intellectual property rights;
and the impact from risks relating to counterparties on the
Company's business. 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-Q for the fiscal year
ended December 31, 2023, 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.
QUINSTREET, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
December 31,
June 30,
2023
2023
Assets
Current assets:
Cash and cash equivalents
$
45,520
$
73,677
Accounts receivable, net
74,727
67,748
Prepaid expenses and other assets
7,832
9,779
Total current assets
128,079
151,204
Property and equipment, net
20,604
16,749
Operating lease right-of-use assets
11,909
3,536
Goodwill
121,141
121,141
Other intangible assets, net
33,544
38,700
Other assets, noncurrent
5,640
5,825
Total assets
$
320,917
$
337,155
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
33,783
$
37,926
Accrued liabilities
44,538
44,010
Deferred revenue
—
9
Other liabilities
6,714
7,875
Total current liabilities
85,035
89,820
Operating lease liabilities,
noncurrent
9,056
1,261
Other liabilities, noncurrent
11,573
16,273
Total liabilities
105,664
107,354
Stockholders' equity:
Common stock
55
54
Additional paid-in capital
336,665
329,093
Accumulated other comprehensive loss
(268
)
(266
)
Accumulated deficit
(121,199
)
(99,080
)
Total stockholders' equity
215,253
229,801
Total liabilities and stockholders'
equity
$
320,917
$
337,155
QUINSTREET, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
Six Months Ended
December 31,
December 31,
2023
2022
2023
2022
Net revenue
$
122,683
$
134,048
$
246,606
$
277,641
Cost of revenue (1)
115,830
125,510
232,104
256,755
Gross profit
6,853
8,538
14,502
20,886
Operating expenses: (1)
Product development
7,272
7,174
14,909
14,000
Sales and marketing
3,325
3,166
6,449
6,266
General and administrative
7,651
7,370
14,438
14,689
Operating loss
(11,395
)
(9,172
)
(21,294
)
(14,069
)
Interest income
166
12
332
19
Interest expense
(111
)
(213
)
(222
)
(439
)
Other income (expense), net
38
(9
)
67
(32
)
Loss before income taxes
(11,302
)
(9,382
)
(21,117
)
(14,521
)
(Provision for) benefit from income
taxes
(252
)
1,403
(1,002
)
2,025
Net loss
$
(11,554
)
$
(7,979
)
$
(22,119
)
$
(12,496
)
Net loss per share:
Basic
$
(0.21
)
$
(0.15
)
$
(0.41
)
$
(0.23
)
Diluted
$
(0.21
)
$
(0.15
)
$
(0.41
)
$
(0.23
)
Weighted-average shares used in computing
net loss per share:
Basic
54,759
53,709
54,612
53,529
Diluted
54,759
53,709
54,612
53,529
(1) Cost of revenue and operating expenses
include stock-based compensation expense as follows:
Cost of revenue
$
2,229
$
2,113
$
4,281
$
4,232
Product development
837
765
1,610
1,530
Sales and marketing
723
658
1,363
1,310
General and administrative
2,279
1,941
4,089
3,675
QUINSTREET, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
Six Months Ended
December 31,
December 31,
2023
2022
2023
2022
Cash Flows from Operating
Activities
Net loss
$
(11,554
)
$
(7,979
)
$
(22,119
)
$
(12,496
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization
5,713
4,670
11,051
9,032
Provision for sales returns and doubtful
accounts receivable
159
608
382
729
Stock-based compensation
6,068
5,477
11,343
10,747
Change in fair value of contingent
consideration
—
(280
)
—
—
Non-cash lease expense
(357
)
—
(610
)
(542
)
Deferred income taxes
201
(1,478
)
745
(2,279
)
Other adjustments, net
23
9
(415
)
(138
)
Changes in assets and liabilities:
Accounts receivable
(7,202
)
3,467
(7,361
)
9,288
Prepaid expenses and other assets
911
(162
)
2,000
(588
)
Other assets, non-current
75
—
185
—
Accounts payable
(1,123
)
(2,808
)
(4,725
)
(4,675
)
Accrued liabilities
3,431
(3,951
)
906
(5,547
)
Deferred revenue
—
(38
)
(9
)
(331
)
Net cash (used in) provided by operating
activities
(3,655
)
(2,465
)
(8,627
)
3,200
Cash Flows from Investing
Activities
Capital expenditures
(1,339
)
(1,078
)
(2,962
)
(1,553
)
Internal software development costs
(2,945
)
(2,904
)
(6,415
)
(5,465
)
Other investing activities
—
(120
)
—
(120
)
Net cash used in investing activities
(4,284
)
(4,102
)
(9,377
)
(7,138
)
Cash Flows from Financing
Activities
Proceeds from exercise of stock options
and issuance of common stock under employee stock purchase plan
122
238
1,700
1,797
Payment of withholding taxes related to
release of restricted stock, net of share settlement
(1,161
)
(1,210
)
(3,348
)
(3,226
)
Post-closing payments and contingent
consideration related to acquisitions
(952
)
(1,730
)
(6,229
)
(7,224
)
Repurchase of common stock
(862
)
—
(2,288
)
(4,731
)
Net cash used in financing activities
(2,853
)
(2,702
)
(10,165
)
(13,384
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
7
(9
)
12
(13
)
Net decrease in cash, cash equivalents and
restricted cash
(10,785
)
(9,278
)
(28,157
)
(17,335
)
Cash, cash equivalents and restricted cash
at beginning of period
56,320
88,396
73,692
96,453
Cash, cash equivalents and restricted cash
at end of period
$
45,535
$
79,118
$
45,535
$
79,118
Reconciliation of cash, cash
equivalents, and restricted cash to the condensed consolidated
balance sheets
Cash and cash equivalents
$
45,520
$
79,104
$
45,520
$
79,104
Restricted cash included in other assets,
noncurrent
15
14
15
14
Total cash, cash equivalents and
restricted cash
$
45,535
$
79,118
$
45,535
$
79,118
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,
2023
2022
2023
2022
Net loss
$
(11,554
)
$
(7,979
)
$
(22,119
)
$
(12,496
)
Amortization of intangible assets
2,578
2,824
5,156
5,646
Stock-based compensation
6,068
5,477
11,343
10,747
Acquisition and divestiture costs
—
—
—
32
Restructuring costs
31
32
301
81
Tax settlement expense
—
39
—
39
Tax impact of non-GAAP items
622
(1,248
)
1,645
(2,415
)
Adjusted net (loss) income
$
(2,255
)
$
(855
)
$
(3,674
)
$
1,634
Adjusted diluted net (loss) income per
share
$
(0.04
)
$
(0.02
)
$
(0.07
)
$
0.03
Weighted average shares used in computing
adjusted diluted net (loss) income per share
54,759
53,709
54,612
54,591
QUINSTREET, INC.
RECONCILIATION OF NET LOSS
TO
ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
Six Months Ended
December 31,
December 31,
2023
2022
2023
2022
Net loss
$
(11,554
)
$
(7,979
)
$
(22,119
)
$
(12,496
)
Interest and other expense, net
(93
)
210
(177
)
452
Provision for (benefit from) income
taxes
252
(1,403
)
1,002
(2,025
)
Depreciation and amortization
5,713
4,670
11,051
9,032
Stock-based compensation
6,068
5,477
11,343
10,747
Acquisition and divestiture costs
—
—
—
32
Tax settlement expense
—
39
—
39
Restructuring costs
31
32
301
81
Adjusted EBITDA
$
417
$
1,046
$
1,401
$
5,862
QUINSTREET, INC.
RECONCILIATION OF CASH (USED
IN) PROVIDED BY
OPERATING ACTIVITIES TO FREE
CASH FLOW
AND NORMALIZED FREE CASH
FLOW
(In thousands)
(Unaudited)
Three Months Ended
Six Months Ended
December 31,
December 31,
2023
2022
2023
2022
Net cash (used in) provided by operating
activities
$
(3,655
)
$
(2,465
)
$
(8,627
)
$
3,200
Capital expenditures
(1,339
)
(1,078
)
(2,962
)
(1,553
)
Internal software development costs
(2,945
)
(2,904
)
(6,415
)
(5,465
)
Free cash flow
(7,939
)
(6,447
)
(18,004
)
(3,818
)
Changes in operating assets and
liabilities
3,908
3,492
9,004
1,852
Normalized free cash flow
$
(4,031
)
$
(2,955
)
$
(9,000
)
$
(1,966
)
QUINSTREET, INC.
DISAGGREGATION OF
REVENUE
(In thousands)
(Unaudited)
Three Months Ended
Six Months Ended
December 31,
December 31,
2023
2022
2023
2022
Net revenue:
Financial Services
$
71,334
$
89,310
$
143,458
$
184,300
Home Services
49,333
42,975
98,728
89,708
Other Revenue
2,016
1,763
4,420
3,633
Total net revenue
$
122,683
$
134,048
$
246,606
$
277,641
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240207874298/en/
Investor Contact: Robert
Amparo (347) 223-1682 ramparo@quinstreet.com
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