QuinStreet, Inc.
QUINSTREET, INC (Form: 8-K, Received: 08/08/2017 08:23:29)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 8, 2017

 

 

Q UIN S TREET , I NC .

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-34628   77-0512121

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

950 Tower Lane, 6 th Floor

Foster City, CA 94404

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (650) 578-7700

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On August 8, 2017, QuinStreet, Inc. (the “Company”) issued a press release announcing its financial results for its fourth quarter ended June 30, 2017. A copy of this press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibit

 

Exhibit

Number

  

Description

99.1    Press release dated August 8, 2017 titled “QuinStreet Reports Fourth Quarter Fiscal Year 2017 Financial Results”

The information contained in Items 2.02 and 9.01 (including the exhibit furnished in this report) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

Q UIN S TREET , I NC .

Dated: August 8, 2017    

By:

 

/s/ Gregory Wong

     

Gregory Wong

     

Chief Financial Officer and Senior Vice President


INDEX TO EXHIBITS

 

Exhibit

Number

  

Description

99.1    Press release dated August 8, 2017 titled “QuinStreet Reports Fourth Quarter Fiscal Year 2017 Financial Results”

The information contained in Items 2.02 and 9.01 (including the exhibit furnished in this report) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Exhibit 99.1

QuinStreet Reports Fourth Quarter Fiscal Year 2017 Financial Results

Board of Directors Extends Stock Repurchase Program

FOSTER CITY, CA – August  8, 2017 — 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.

Investor Contact:

Erica Abrams

(415) 297-5864

eabrams@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
June 30,
    Fiscal Year Ended
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
June 30,
    Fiscal Year Ended
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
June 30,
    Fiscal Year Ended
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.