- The steep re-ramp of Auto Insurance carrier spending has
begun
- Auto Insurance revenue is expected to continue to ramp in
coming quarters
- Continued total company revenue growth, further margin
expansion expected in FYQ4
- Strong growth & margin expansion expected in fiscal year
2025 which begins July 1
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 third quarter ended March 31, 2024.
For the fiscal third quarter, the Company reported revenue of
$168.6 million.
GAAP net loss for the fiscal third quarter was $(7.0) million,
or $(0.13) per diluted share. Adjusted net income for the fiscal
third quarter was $3.4 million, or $0.06 per diluted share.
Adjusted EBITDA for the fiscal third quarter was $7.9
million.
The Company closed the fiscal third quarter with $39.6 million
in cash and cash equivalents and no bank debt.
“The steep re-ramp of Auto Insurance carrier spending has
begun,” commented Doug Valenti, CEO of QuinStreet. “Revenue in our
Auto Insurance client vertical inflected strongly in January and
scaled further during the quarter. Total Company revenue grew about
40% sequentially in fiscal Q3. Adjusted EBITDA jumped to almost $8
million dollars in the quarter. We expect the ramp of Auto
Insurance revenue to continue in coming quarters, driving growth in
total Company revenue and further margin expansion.
“Turning to our outlook for the current quarter, or fiscal Q4,
we expect revenue to be between $180 and $190 million, a quarterly
revenue record for QuinStreet, implying year-over-year growth of
over 40% at the midpoint of the range. We expect adjusted EBITDA to
be between $10 and $11 million, implying year-over-year growth of
over 400%. Our fiscal year 2025 begins this July 1. The annual run
rate of our fiscal Q4 revenue outlook already implies growth of 20%
or more over full fiscal year 2024.”
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
800-717-1738 (domestic) or +1 646-307-1865 (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 #1148246. 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, restructuring costs
and impairment of investment, 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 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 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 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 March 31,
2024, 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)
March 31,
June 30,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
39,602
$
73,677
Accounts receivable, net
99,639
67,748
Prepaid expenses and other assets
7,525
9,779
Total current assets
146,766
151,204
Property and equipment, net
20,633
16,749
Operating lease right-of-use assets
10,923
3,536
Goodwill
125,056
121,141
Other intangible assets, net
40,881
38,700
Other assets, noncurrent
4,992
5,825
Total assets
$
349,251
$
337,155
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
40,621
$
37,926
Accrued liabilities
58,425
44,010
Deferred revenue
185
9
Other liabilities
9,883
7,875
Total current liabilities
109,114
89,820
Operating lease liabilities,
noncurrent
8,260
1,261
Other liabilities, noncurrent
16,913
16,273
Total liabilities
134,287
107,354
Stockholders' equity:
Common stock
55
54
Additional paid-in capital
343,424
329,093
Accumulated other comprehensive loss
(268
)
(266
)
Accumulated deficit
(128,247
)
(99,080
)
Total stockholders' equity
214,964
229,801
Total liabilities and stockholders'
equity
$
349,251
$
337,155
QUINSTREET, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Net revenue
$
168,587
$
172,671
$
415,193
$
450,312
Cost of revenue (1)
154,276
155,633
386,380
412,388
Gross profit
14,311
17,038
28,813
37,924
Operating expenses: (1)
Product development
7,549
7,832
22,457
21,832
Sales and marketing
3,626
3,385
10,076
9,651
General and administrative
8,468
7,230
22,906
21,919
Operating loss
(5,332
)
(1,409
)
(26,626
)
(15,478
)
Interest income
49
46
381
65
Interest expense
(293
)
(187
)
(515
)
(626
)
Other expense
(2,028
)
(12
)
(1,961
)
(44
)
Loss before income taxes
(7,604
)
(1,562
)
(28,721
)
(16,083
)
Benefit from (provision for) income
taxes
556
1,083
(446
)
3,108
Net loss
$
(7,048
)
$
(479
)
$
(29,167
)
$
(12,975
)
Net loss per share:
Basic
$
(0.13
)
$
(0.01
)
$
(0.53
)
$
(0.24
)
Diluted
$
(0.13
)
$
(0.01
)
$
(0.53
)
$
(0.24
)
Weighted-average shares used in computing
net loss per share:
Basic
55,065
53,950
54,764
53,668
Diluted
55,065
53,950
54,764
53,668
(1) Cost of revenue and operating expenses
include stock-based compensation expense as follows:
Cost of revenue
$
2,203
$
2,006
$
6,483
$
6,238
Product development
789
695
2,399
2,225
Sales and marketing
794
660
2,157
1,970
General and administrative
2,948
1,947
7,038
5,622
QUINSTREET, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Cash Flows from Operating
Activities
Net loss
$
(7,048
)
$
(479
)
$
(29,167
)
$
(12,975
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization
6,225
4,972
17,276
14,004
Impairment of investment
2,000
—
2,000
—
Provision for sales returns and doubtful
accounts receivable
326
169
708
898
Stock-based compensation
6,721
5,308
18,063
16,055
Non-cash lease expense
51
(280
)
(559
)
(822
)
Deferred income taxes
(559
)
(981
)
187
(3,260
)
Other adjustments, net
150
(6
)
(266
)
(147
)
Changes in assets and liabilities:
Accounts receivable
(25,237
)
(34,363
)
(32,599
)
(25,075
)
Prepaid expenses and other assets
296
(3,238
)
2,481
(3,826
)
Accounts payable
7,023
3,113
2,297
(1,562
)
Accrued liabilities
13,980
16,465
14,886
10,920
Deferred revenue
185
(10
)
176
(341
)
Net cash (used in) provided by operating
activities
4,113
(9,330
)
(4,517
)
(6,131
)
Cash Flows from Investing
Activities
Capital expenditures
(1,211
)
(485
)
(4,173
)
(2,038
)
Internal software development costs
(2,488
)
(3,031
)
(8,903
)
(8,496
)
Acquisitions, net of cash acquired
(4,510
)
—
(4,510
)
—
Other investing activities
(1,500
)
—
(1,500
)
(120
)
Net cash used in investing activities
(9,709
)
(3,516
)
(19,086
)
(10,654
)
Cash Flows from Financing
Activities
Proceeds from exercise of stock options
and issuance of common stock under employee stock purchase plan
1,595
1,409
3,296
3,206
Payment of withholding taxes related to
release of restricted stock, net of share settlement
(1,571
)
(1,518
)
(4,920
)
(4,744
)
Post-closing payments and contingent
consideration related to acquisitions
(344
)
(3,184
)
(6,573
)
(10,408
)
Repurchase of common stock
—
—
(2,288
)
(4,731
)
Net cash used in financing activities
(320
)
(3,293
)
(10,485
)
(16,677
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(2
)
(2
)
13
(14
)
Net decrease in cash, cash equivalents and
restricted cash
(5,918
)
(16,141
)
(34,075
)
(33,476
)
Cash, cash equivalents and restricted cash
at beginning of period
45,535
79,118
73,692
96,453
Cash, cash equivalents and restricted cash
at end of period
$
39,617
$
62,977
$
39,617
$
62,977
Reconciliation of cash, cash
equivalents, and restricted cash to the condensed consolidated
balance sheets
Cash and cash equivalents
$
39,602
$
62,962
$
39,602
$
62,962
Restricted cash included in other assets,
noncurrent
15
15
15
15
Total cash, cash equivalents and
restricted cash
$
39,617
$
62,977
$
39,617
$
62,977
QUINSTREET, INC.
RECONCILIATION OF NET LOSS
TO
ADJUSTED NET INCOME
(LOSS)
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Net loss
$
(7,048
)
$
(479
)
$
(29,167
)
$
(12,975
)
Amortization of intangible assets
2,678
2,808
7,834
8,454
Stock-based compensation
6,734
5,308
18,077
16,055
Acquisition and divestiture costs
30
—
30
32
Litigation settlement expense
—
6
—
6
Tax settlement expense
—
—
—
39
Restructuring costs
277
102
578
183
Impairment of investment
2,000
—
2,000
—
Tax impact of non-GAAP items
(1,235
)
(1,597
)
410
(4,012
)
Adjusted net income (loss)
$
3,436
$
6,148
$
(238
)
$
7,782
Adjusted diluted net income (loss) per
share
$
0.06
$
0.11
$
(0.00
)
$
0.14
Weighted average shares used in computing
adjusted diluted net income (loss) per share
56,733
55,680
54,764
54,952
QUINSTREET, INC.
RECONCILIATION OF NET LOSS
TO
ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Net loss
$
(7,048
)
$
(479
)
$
(29,167
)
$
(12,975
)
Interest and other expense, net
2,272
153
2,095
605
Benefit from (provision for) income
taxes
(556
)
(1,083
)
446
(3,108
)
Depreciation and amortization
6,225
4,972
17,276
14,004
Stock-based compensation
6,734
5,308
18,077
16,055
Acquisition and divestiture costs
30
—
30
32
Litigation settlement expense
—
6
—
6
Tax settlement expense
—
—
—
39
Restructuring costs
277
102
578
183
Adjusted EBITDA
$
7,934
$
8,979
$
9,335
$
14,841
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
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Net cash (used in) provided by operating
activities
$
4,113
$
(9,330
)
$
(4,517
)
$
(6,131
)
Capital expenditures
(1,211
)
(485
)
(4,173
)
(2,038
)
Internal software development costs
(2,488
)
(3,031
)
(8,903
)
(8,496
)
Free cash flow
414
(12,846
)
(17,593
)
(16,665
)
Changes in operating assets and
liabilities
3,754
18,032
12,758
19,884
Normalized free cash flow
$
4,168
$
5,186
$
(4,835
)
$
3,219
QUINSTREET, INC.
DISAGGREGATION OF
REVENUE
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Net revenue:
Financial Services
$
112,250
$
120,219
$
255,708
$
304,520
Home Services
53,908
50,289
152,636
139,997
Other Revenue
2,429
2,163
6,849
5,795
Total net revenue
$
168,587
$
172,671
$
415,193
$
450,312
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508534355/en/
Investor Contact: Robert
Amparo (347) 223-1682 ramparo@quinstreet.com
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