- Record quarterly revenue of $173 million, up 15% YoY,
exceeding outlook
- Non-insurance revenue up 34% YoY and was 58% of total
revenue
- Adjusted EBITDA of $9 million, up 30% YoY, exceeding
outlook
- Strong balance sheet with 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 third quarter ended March 31, 2023.
For the fiscal third quarter, the Company reported revenue of
$172.7 million and grew 15% year-over-year.
GAAP net loss for the fiscal third quarter was $0.5 million, or
($0.01) per diluted share. Adjusted net income was $6.1 million, or
$0.11 per diluted share.
Adjusted EBITDA for the fiscal third quarter was $9.0
million.
“Fiscal Q3 results were strong,” commented Doug Valenti, CEO of
QuinStreet. “We delivered record quarterly revenue. Adjusted EBITDA
jumped to $9 million in the quarter. The results reflect our strong
core business, the continued broadening of our footprint, and the
financial resilience and leverage of our business model. Auto
insurance revenue surged in the quarter, growing 53% sequentially,
as carrier clients began the early stages of their ramp back from
pandemic and inflation challenges. Non-insurance revenue grew 34%
year-over-year and was 58% of total revenue, reflecting continued
good progress on our long-term growth initiatives in big, new
market opportunities.”
“Turning to our outlook, we expect continued strong growth in
non-insurance client verticals in FYQ4, and beyond. We expect auto
insurance revenue to decline sequentially in FYQ4, as carriers are
unexpectedly pausing to assess the results of the recent surge, and
to continue to adjust to complex market conditions. The long arc of
auto insurance spending is still up and to the right. Carriers will
continue to adjust and adapt, and marketing budgets will continue
to shift from offline to online. Most consumers shop the digital
channel, and performance marketing, pioneered and enabled by
QuinStreet, is the most efficient spend for advanced
marketers.”
“For full fiscal year 2023, which ends in June, we expect
revenue of $575 to $580 million. We expect positive adjusted EBITDA
in FYQ4, and that adjusted EBITDA for full fiscal year 2023 will be
between $16 and $17 million. We have also begun the detailed
planning process for our fiscal year 2024, which begins in July. We
expect revenue and adjusted EBITDA to grow at double digit rates in
fiscal 2024, and that we will be strongly cash flow positive.”
“Our longer-term outlook has never been better. We expect
double-digit annual revenue growth rates, on average, in coming
years, due to continued strong performance in non-insurance
businesses alone. We expect auto insurance revenue to be up and to
the right, eventually returning to and exceeding FY2021 levels. We
expect adjusted EBITDA to grow faster than revenue, eventually
exceeding a 10% margin. Our adjusted EBITDA margin in March jumped
to 7%, just from the early stages of the return of auto insurance
revenue, demonstrating the leverage we expect in future quarters
and years,” concluded Valenti.
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 #37080900. 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 income, adjusted diluted net 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) income less (benefit from) provision
for income taxes, depreciation expense, amortization expense,
stock-based compensation expense, interest and other expense, net,
acquisition and divestiture costs, contingent consideration
adjustment, litigation settlement expense, tax settlement expense,
and restructuring costs. The term "adjusted net income" refers to a
financial measure that we define as net (loss) income adjusted for
amortization expense, stock-based compensation expense, acquisition
and divestiture costs, contingent consideration adjustment,
litigation settlement expense, tax settlement expense, and
restructuring costs, 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. 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 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, (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 without unreasonable
efforts to the most directly comparable GAAP financial measure 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 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, 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 quarterly report on Form 10-Q for the quarter
ended March 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)
March 31,
June 30,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
62,962
$
96,439
Accounts receivable, net
105,606
81,429
Prepaid expenses and other assets
8,729
4,924
Total current assets
177,297
182,792
Property and equipment, net
15,143
9,311
Operating lease right-of-use assets
4,020
6,801
Goodwill
121,141
121,141
Other intangible assets, net
41,362
49,696
Deferred tax assets, noncurrent
47,547
44,220
Other assets, noncurrent
5,969
5,948
Total assets
$
412,479
$
419,909
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
41,279
$
42,410
Accrued liabilities
62,892
54,459
Deferred revenue
—
341
Other liabilities
8,622
12,369
Total current liabilities
112,793
109,579
Operating lease liabilities,
noncurrent
1,291
3,858
Other liabilities, noncurrent
13,868
20,472
Total liabilities
127,952
133,909
Stockholders' equity:
Common stock
54
53
Additional paid-in capital
327,929
316,422
Accumulated other comprehensive loss
(267
)
(261
)
Accumulated deficit
(43,189
)
(30,214
)
Total stockholders' equity
284,527
286,000
Total liabilities and stockholders'
equity
$
412,479
$
419,909
QUINSTREET, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per
share data) (Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2023
2022
2023
2022
Net revenue
$
172,671
$
150,658
$
450,312
$
435,597
Cost of revenue (1)
155,633
136,567
412,388
393,626
Gross profit
17,038
14,091
37,924
41,971
Operating expenses: (1)
Product development
7,832
5,509
21,832
14,995
Sales and marketing
3,385
2,033
9,651
7,773
General and administrative
7,230
5,489
21,919
21,758
Operating (loss) income
(1,409
)
1,060
(15,478
)
(2,555
)
Interest income
46
7
65
7
Interest expense
(187
)
(277
)
(626
)
(817
)
Other (expense) income, net
(12
)
45
(44
)
51
(Loss) income before income taxes
(1,562
)
835
(16,083
)
(3,314
)
Benefit from income taxes
1,083
1,395
3,108
3,009
Net (loss) income
$
(479
)
$
2,230
$
(12,975
)
$
(305
)
Net (loss) income per share:
Basic
$
(0.01
)
$
0.04
$
(0.24
)
$
(0.01
)
Diluted
$
(0.01
)
$
0.04
$
(0.24
)
$
(0.01
)
Weighted-average shares used in computing
net (loss) income per share:
Basic
53,950
54,645
53,668
54,339
Diluted
53,950
55,536
53,668
54,339
(1) Cost of revenue and operating expenses
include stock-based compensation expense as follows:
Cost of revenue
$
2,006
$
491
$
6,238
$
4,579
Product development
695
203
2,225
1,497
Sales and marketing
660
18
1,970
1,477
General and administrative
1,947
699
5,622
4,337
QUINSTREET, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2023
2022
2023
2022
Cash Flows from Operating
Activities
Net (loss) income
$
(479
)
$
2,230
$
(12,975
)
$
(305
)
Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating activities:
Depreciation and amortization
4,972
4,247
14,004
12,660
Provision for sales returns and doubtful
accounts receivable
169
(31
)
898
379
Stock-based compensation
5,308
1,411
16,055
11,890
Change in the fair value of contingent
consideration
—
—
—
2,698
Non-cash lease expense
(280
)
(272
)
(822
)
(752
)
Deferred income taxes
(981
)
(1,204
)
(3,260
)
(2,819
)
Other adjustments, net
(6
)
123
(147
)
356
Changes in assets and liabilities:
Accounts receivable
(34,363
)
(13,574
)
(25,075
)
9,770
Prepaid expenses and other assets
(3,238
)
(473
)
(3,826
)
685
Accounts payable
3,113
1,463
(1,562
)
(5,448
)
Accrued liabilities
16,465
7,326
10,920
(8,184
)
Deferred revenue
(10
)
48
(341
)
51
Net cash (used in) provided by operating
activities
(9,330
)
1,294
(6,131
)
20,981
Cash Flows from Investing
Activities
Capital expenditures
(485
)
(1,656
)
(2,038
)
(2,376
)
Internal software development costs
(3,031
)
(1,225
)
(8,496
)
(3,484
)
Business acquisitions, net of cash
acquired
—
—
—
(1,000
)
Other investing activities
—
85
(120
)
85
Net cash used in investing activities
(3,516
)
(2,796
)
(10,654
)
(6,775
)
Cash Flows from Financing
Activities
Proceeds from exercise of stock options
and issuance of common stock under employee stock purchase plan
1,409
229
3,206
1,273
Payment of withholding taxes related to
release of restricted stock, net of share settlement
(1,518
)
(1,065
)
(4,744
)
(6,566
)
Post-closing payments and contingent
consideration related to acquisitions
(3,184
)
(3,239
)
(10,408
)
(9,759
)
Repurchase of common stock
—
—
(4,731
)
—
Net cash used in financing activities
(3,293
)
(4,075
)
(16,677
)
(15,052
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(2
)
5
(14
)
(9
)
Net decrease in cash, cash equivalents and
restricted cash
(16,141
)
(5,572
)
(33,476
)
(855
)
Cash, cash equivalents and restricted cash
at beginning of period
79,118
115,050
96,453
110,333
Cash, cash equivalents and restricted cash
at end of period
$
62,977
$
109,478
$
62,977
$
109,478
Reconciliation of cash, cash
equivalents, and restricted cash to the condensed consolidated
balance sheets
Cash and cash equivalents
$
62,962
$
109,463
$
62,962
$
109,463
Restricted cash included in other assets,
noncurrent
15
15
15
15
Total cash, cash equivalents and
restricted cash
$
62,977
$
109,478
$
62,977
$
109,478
QUINSTREET, INC.
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED NET INCOME (In
thousands, except per share data) (Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2023
2022
2023
2022
Net (loss) income
$
(479
)
$
2,230
$
(12,975
)
$
(305
)
Amortization of intangible assets
2,808
2,820
8,454
8,773
Stock-based compensation
5,308
1,411
16,055
11,890
Acquisition and divestiture costs
—
51
32
516
Contingent consideration adjustment
—
—
—
2,698
Litigation settlement expense
6
—
6
—
Tax settlement expense
—
—
39
516
Restructuring costs
102
122
183
222
Tax impact of non-GAAP items
(1,597
)
(1,738
)
(4,012
)
(6,776
)
Adjusted net income
$
6,148
$
4,896
$
7,782
$
17,534
Adjusted diluted net income per share
$
0.11
$
0.09
$
0.14
$
0.31
Weighted average shares used in computing
adjusted diluted net income per share
55,680
55,536
54,952
55,665
QUINSTREET, INC.
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA (In
thousands) (Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2023
2022
2023
2022
Net (loss) income
$
(479
)
$
2,230
$
(12,975
)
$
(305
)
Interest and other expense, net
153
225
605
759
Benefit from income taxes
(1,083
)
(1,395
)
(3,108
)
(3,009
)
Depreciation and amortization
4,972
4,247
14,004
12,660
Stock-based compensation
5,308
1,411
16,055
11,890
Acquisition and divestiture costs
—
51
32
516
Contingent consideration adjustment
—
—
—
2,698
Litigation settlement expense
6
—
6
—
Tax settlement expense
—
—
39
516
Restructuring costs
102
122
183
222
Adjusted EBITDA
$
8,979
$
6,891
$
14,841
$
25,947
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,
2023
2022
2023
2022
Net cash (used in) provided by operating
activities
$
(9,330
)
$
1,294
$
(6,131
)
$
20,981
Capital expenditures
(485
)
(1,656
)
(2,038
)
(2,376
)
Internal software development costs
(3,031
)
(1,225
)
(8,496
)
(3,484
)
Free cash flow
(12,846
)
(1,587
)
(16,665
)
15,121
Changes in operating assets and
liabilities
18,032
5,210
19,884
3,126
Normalized free cash flow
$
5,186
$
3,623
$
3,219
$
18,247
QUINSTREET, INC.
DISAGGREGATION OF REVENUE (In thousands) (Unaudited)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2023
2022
2023
2022
Net revenue:
Financial Services
$
120,219
$
108,277
$
304,520
$
316,347
Home Services
50,289
40,704
139,997
114,510
Other Revenue
2,163
1,677
5,795
4,740
Total net revenue
$
172,671
$
150,658
$
450,312
$
435,597
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005749/en/
Investor Contact: Robert Amparo (347) 223-1682
ramparo@quinstreet.com
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