- Quarterly revenue of $124 million, exceeding
consensus
- Strong performance and outlook in non-insurance client
verticals
- Expect a significant positive inflection in insurance to
begin in January
- Demonstrated resilient financial model, strong balance
sheet, no bank debt
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 first quarter ended September 30, 2023.
For the fiscal first quarter, the Company reported revenue of
$123.9 million, down 14% year-over-year.
GAAP net loss for the fiscal first quarter was $(10.6) million,
or $(0.19) per diluted share. Adjusted net loss for the fiscal
first quarter was $(1.4) million, or $(0.03) per diluted share.
Adjusted EBITDA for the fiscal first quarter was $1.0
million.
The Company closed the fiscal first quarter with $56.3 million
in cash and cash equivalents and no bank debt.
“Fiscal Q1, or the September quarter, was another successful
quarter for the Company,” commented Doug Valenti, CEO of
QuinStreet. “We delivered on our strategy to continue to invest in
important long-term growth initiatives and to be positioned to take
full advantage of the return of auto insurance spending, all while
maintaining our strong financial position.”
“Non-insurance client vertical revenue grew 18% year-over-year
in the quarter and represented 79% of total Company revenue.”
“Moving to our outlook, indications from carrier clients
continue to support our expectation of a significant positive
inflection in auto insurance client spending beginning in January.
We expect that full fiscal year revenue will grow 5% to 15%
year-over-year, and that adjusted EBITDA will grow significantly
faster than revenue.”
“For fiscal Q2, we expect revenue to be between $113 and $118
million, in line with typical sequential seasonality. We expect
adjusted EBITDA in fiscal Q2 to be between $(0.5) and $0.5
million.”
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
877-423-9813 (domestic) or +1 201-689-8573 (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 #13742192. 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-K for the fiscal year
ended June 30, 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)
September 30,
June 30,
2023
2023
Assets
Current assets:
Cash and cash equivalents
$
56,305
$
73,677
Accounts receivable, net
67,684
67,748
Prepaid expenses and other assets
8,690
9,779
Total current assets
132,679
151,204
Property and equipment, net
19,504
16,749
Operating lease right-of-use assets
5,806
3,536
Goodwill
121,141
121,141
Other intangible assets, net
36,122
38,700
Other assets, noncurrent
5,713
5,825
Total assets
$
320,965
$
337,155
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
34,286
$
37,926
Accrued liabilities
41,322
44,010
Deferred revenue
—
9
Other liabilities
7,649
7,875
Total current liabilities
83,257
89,820
Operating lease liabilities,
noncurrent
4,047
1,261
Other liabilities, noncurrent
11,325
16,273
Total liabilities
98,629
107,354
Stockholders' equity:
Common stock
55
54
Additional paid-in capital
332,194
329,093
Accumulated other comprehensive loss
(268
)
(266
)
Accumulated deficit
(109,645
)
(99,080
)
Total stockholders' equity
222,336
229,801
Total liabilities and stockholders'
equity
$
320,965
$
337,155
QUINSTREET, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
September 30,
2023
2022
Net revenue
$
123,923
$
143,593
Cost of revenue (1)
116,274
131,245
Gross profit
7,649
12,348
Operating expenses: (1)
Product development
7,637
6,826
Sales and marketing
3,124
3,100
General and administrative
6,787
7,319
Operating loss
(9,899
)
(4,897
)
Interest income
166
7
Interest expense
(111
)
(226
)
Other income (expense), net
29
(23
)
Loss before income taxes
(9,815
)
(5,139
)
(Provision for) benefit from income
taxes
(750
)
622
Net loss
$
(10,565
)
$
(4,517
)
Net loss per share:
Basic
$
(0.19
)
$
(0.08
)
Diluted
$
(0.19
)
$
(0.08
)
Weighted-average shares used in computing
net loss per share:
Basic
54,470
53,350
Diluted
54,470
53,350
_________________________________
(1) Cost of revenue and operating expenses
include stock-based compensation expense as follows:
Cost of revenue
$
2,052
$
2,119
Product development
773
765
Sales and marketing
640
652
General and administrative
1,810
1,734
QUINSTREET, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
September 30,
2023
2022
Cash Flows from Operating
Activities
Net loss
$
(10,565
)
$
(4,517
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization
5,338
4,362
Provision for sales returns and doubtful
accounts receivable
223
120
Stock-based compensation
5,275
5,270
Non-cash lease expense
(253
)
(262
)
Deferred income taxes
544
(802
)
Other adjustments, net
(438
)
(147
)
Changes in assets and liabilities:
Accounts receivable
(159
)
5,822
Prepaid expenses and other assets
1,089
(426
)
Accounts payable
(3,603
)
(1,868
)
Accrued liabilities
(2,525
)
(1,594
)
Deferred revenue
(9
)
(293
)
Other liabilities, non-current
110
—
Net cash (used in) provided by operating
activities
(4,973
)
5,665
Cash Flows from Investing
Activities
Capital expenditures
(1,624
)
(476
)
Internal software development costs
(3,470
)
(2,561
)
Net cash used in investing activities
(5,094
)
(3,037
)
Cash Flows from Financing
Activities
Proceeds from exercise of stock options
and issuance of common stock under employee stock purchase plan
1,579
1,560
Payment of withholding taxes related to
release of restricted stock, net of share settlement
(2,187
)
(2,016
)
Post-closing payments and contingent
consideration related to acquisitions
(5,277
)
(5,494
)
Repurchase of common stock
(1,426
)
(4,731
)
Net cash used in financing activities
(7,311
)
(10,681
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
6
(4
)
Net decrease in cash, cash equivalents and
restricted cash
(17,372
)
(8,057
)
Cash, cash equivalents and restricted cash
at beginning of period
73,692
96,453
Cash, cash equivalents and restricted cash
at end of period
$
56,320
$
88,396
Reconciliation of cash, cash
equivalents, and restricted cash to the condensed consolidated
balance sheets
Cash and cash equivalents
$
56,305
$
88,382
Restricted cash included in other assets,
noncurrent
15
14
Total cash, cash equivalents and
restricted cash
$
56,320
$
88,396
QUINSTREET, INC.
RECONCILIATION OF NET LOSS
TO
ADJUSTED NET (LOSS)
INCOME
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
September 30,
2023
2022
Net loss
$
(10,565
)
$
(4,517
)
Amortization of intangible assets
2,578
2,822
Stock-based compensation
5,275
5,270
Acquisition and divestiture costs
—
32
Restructuring costs
270
50
Tax impact of non-GAAP items
1,023
(1,168
)
Adjusted net (loss) income
$
(1,418
)
$
2,489
Adjusted diluted net (loss) income per
share
$
(0.03
)
$
0.05
Weighted average shares used in computing
adjusted diluted net (loss) income per share
54,470
54,273
QUINSTREET, INC.
RECONCILIATION OF NET LOSS
TO
ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
September 30,
2023
2022
Net loss
$
(10,565
)
$
(4,517
)
Interest and other expense, net
(84
)
242
Provision for (benefit from) income
taxes
750
(622
)
Depreciation and amortization
5,338
4,362
Stock-based compensation
5,275
5,270
Tax settlement expense
—
32
Restructuring costs
270
50
Adjusted EBITDA
$
984
$
4,817
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
September 30,
2023
2022
Net cash (used in) provided by operating
activities
$
(4,973
)
$
5,665
Capital expenditures
(1,624
)
(476
)
Internal software development costs
(3,470
)
(2,561
)
Free cash flow
(10,067
)
2,628
Changes in operating assets and
liabilities
5,096
(1,641
)
Normalized free cash flow
$
(4,971
)
$
987
QUINSTREET, INC.
DISAGGREGATION OF
REVENUE
(In thousands)
(Unaudited)
Three Months Ended
September 30,
2023
2022
Net revenue:
Financial Services
$
72,125
$
94,990
Home Services
49,394
46,733
Other Revenue
2,404
1,870
Total net revenue
$
123,923
$
143,593
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101357603/en/
Investor Contact: Robert Amparo (347) 223-1682
ramparo@quinstreet.com
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