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QuinStreet Reports Second Quarter Fiscal Year 2022 Results
February 8, 2022
- FYQ2 Revenue of $125MM, down 7% YoY on lower insurance client spending
- Insurance spending bounced back strongly in January, but remains volatile
- Non-Insurance revenue grew 36% YoY in FYQ2, strength expected to continue
- QRP revenue is now expected to exceed $1MM per month by June

FOSTER CITY, Calif., Feb. 8, 2022 /PRNewswire/ -- 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, 2021.

For the fiscal second quarter, the Company reported revenue of $125.3 million. Revenue declined 7% year-over-year.

GAAP net loss for the fiscal second quarter was $5.6 million, or ($0.10) per diluted share. Adjusted net income was $3.2 million, or $0.06 per diluted share.

Adjusted EBITDA for the fiscal second quarter was $5.6 million.

The Company generated $13.9 million in operating cash flow in the fiscal second quarter and closed the quarter with $115.0 million in cash and equivalents.

"Insurance client spending was further impacted in the December quarter by the widely reported effects of increased claim costs," commented Doug Valenti, QuinStreet CEO. "Insurance spending bounced back strongly in January, but has been more volatile than projected as carriers adapt to a rapidly changing environment for claims and costs. We expect current insurance market volatility to last for approximately three to six more months, and then return to more normal market conditions and increased momentum thereafter. Momentum in non-insurance verticals continues to be strong. We are also seeing good progress with growth initiatives, including QRP. QRP revenue is now expected to exceed $1 million per month by June."

"We are reducing our outlook for full fiscal year 2022 due to insurance market volatility. We now expect revenue to be between $600 million and $620 million, and adjusted EBITDA to be between $40 million and $45 million. For the March quarter, our fiscal Q3, we expect revenue to be between $155 million and $160 million, and adjusted EBITDA to be between $8 million and $10 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 +1 877-614-0009 (domestic) or +1 313-209-7315 (international callers) using passcode #4351235. A replay of the conference call will be available beginning approximately two hours after the completion of the call by dialing  +1 888-203-1112 (domestic) or +1 719-457-0820 (international callers) and using passcode #4351235. 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, gain on divestitures of businesses, net, strategic review 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, gain on divestitures of businesses, net, strategic review 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, and (vi) 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, gain or loss on divestitures of businesses, contingent consideration adjustment, strategic review costs, 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.

FY2020 results in our Education Client Vertical include revenue from US, (historically) Brazil, and India. Revenue in our Financial Services Client Vertical includes Auto Insurance (auto, home, motorcycle, and small business), Life Insurance, Health Insurance, Personal Loans, Credit Cards, Banking, and (historically) Mortgage. Revenue in our Other Client Vertical includes Home Services and (historically) B2B. In fiscal Q3 2020, we divested our B2B client vertical and Brazil operations. In fiscal Q4 2020, we divested our Mortgage business. In fiscal Q1 2021, we divested our Education business.

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 or enforcement activities of the Federal Trade Commission and other 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 December 31, 2021, 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.

Investor Contact: 
Hayden Blair
(650) 578-7824
hblair@quinstreet.com

 

QUINSTREET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
   

December 31,

   

June 30,

 
   

2021

   

2021

 

Assets

               

Current assets:

               

Cash and cash equivalents

 

$

115,035

   

$

110,318

 

Accounts receivable, net

   

64,175

     

87,928

 

Prepaid expenses and other assets

   

5,800

     

7,930

 

Total current assets

   

185,010

     

206,176

 

Property and equipment, net

   

8,469

     

6,849

 

Operating lease right-of-use assets

   

9,073

     

10,983

 

Goodwill

   

119,589

     

117,833

 

Other intangible assets, net

   

54,324

     

59,177

 

Deferred tax assets, noncurrent

   

44,997

     

43,336

 

Other assets, noncurrent

   

6,129

     

5,161

 

Total assets

 

$

427,591

   

$

449,515

 

Liabilities and Stockholders' Equity

               

Current liabilities:

               

Accounts payable

 

$

39,139

   

$

45,231

 

Accrued liabilities

   

42,174

     

57,650

 

Deferred revenue

   

36

     

33

 

Other liabilities

   

15,307

     

12,697

 

Total current liabilities

   

96,656

     

115,611

 

Operating lease liabilities, noncurrent

   

6,375

     

8,545

 

Other liabilities, noncurrent

   

25,915

     

30,211

 

Total liabilities

   

128,946

     

154,367

 

Stockholders' equity:

               

Common stock

   

55

     

54

 

Additional paid-in capital

   

326,346

     

320,315

 

Accumulated other comprehensive loss

   

(255)

     

(255)

 

Accumulated deficit

   

(27,501)

     

(24,966)

 

Total stockholders' equity

   

298,645

     

295,148

 

Total liabilities and stockholders' equity

 

$

427,591

   

$

449,515

 

 

QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

 
   

Three Months Ended

   

Six Months Ended

 
   

December 31,

   

December 31,

 
   

2021

   

2020

   

2021

   

2020

 

Net revenue

 

$

125,331

   

$

134,968

   

$

284,939

   

$

274,237

 

Cost of revenue (1)

   

115,554

     

120,437

     

257,059

     

242,668

 

Gross profit

   

9,777

     

14,531

     

27,880

     

31,569

 

Operating expenses: (1)

                               

Product development

   

4,861

     

4,980

     

9,486

     

9,871

 

Sales and marketing

   

2,834

     

2,892

     

5,740

     

5,535

 

General and administrative

   

9,635

     

6,890

     

16,269

     

13,471

 

Operating (loss) income

   

(7,553)

     

(231)

     

(3,615)

     

2,692

 

Interest income

   

     

12

     

     

34

 

Interest expense

   

(267)

     

(307)

     

(540)

     

(646)

 

Other income, net

   

2

     

34

     

6

     

16,723

 

(Loss) income before income taxes

   

(7,818)

     

(492)

     

(4,149)

     

18,803

 

Benefit from (provision for) income taxes

   

2,190

     

958

     

1,614

     

(3,656)

 

Net (loss) income

 

$

(5,628)

   

$

466

   

$

(2,535)

   

$

15,147

 
                                 

Net (loss) income per share:

                               

Basic

 

$

(0.10)

   

$

0.01

   

$

(0.05)

   

$

0.29

 

Diluted

 

$

(0.10)

   

$

0.01

   

$

(0.05)

   

$

0.28

 
                                 

Weighted-average shares used in computing net
(loss) income per share:

                               

Basic

   

54,384

     

53,055

     

54,189

     

52,774

 

Diluted

   

54,384

     

55,163

     

54,189

     

54,716

 
                                 

(1) Cost of revenue and operating expenses include stock-based compensation expense as follows:

 

Cost of revenue

 

$

2,267

   

$

2,544

   

$

4,088

   

$

4,745

 

Product development

   

688

     

643

     

1,294

     

1,192

 

Sales and marketing

   

727

     

765

     

1,459

     

1,312

 

General and administrative

   

1,891

     

1,603

     

3,638

     

3,086

 

 

QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
   

Three Months Ended

   

Six Months Ended

 
   

December 31,

   

December 31,

 
   

2021

   

2020

   

2021

   

2020

 

Cash Flows from Operating Activities

                               

Net (loss) income

 

$

(5,628)

   

$

466

   

$

(2,535)

   

$

15,147

 

Adjustments to reconcile net income to net cash provided by operating activities:

                               

Depreciation and amortization

   

4,213

     

4,003

     

8,413

     

8,136

 

Provision for (benefit from) sales returns and doubtful accounts receivable

   

210

     

(12)

     

410

     

(107)

 

Stock-based compensation

   

5,573

     

5,555

     

10,479

     

10,335

 

Change in the fair value of contingent consideration

   

2,698

     

     

2,698

     

 

Non-cash lease expense

   

(250)

     

(195)

     

(480)

     

(364)

 

Deferred income taxes

   

(2,170)

     

(1,019)

     

(1,615)

     

3,506

 

Gain on divestitures of businesses, net

   

     

     

     

(16,615)

 

Other adjustments, net

   

148

     

41

     

233

     

380

 

Changes in assets and liabilities:

                               

Accounts receivable

   

24,037

     

(2,863)

     

23,344

     

(3,159)

 

Prepaid expenses and other assets

   

1,718

     

6,101

     

1,158

     

6,082

 

Accounts payable

   

(10,072)

     

(9,979)

     

(6,911)

     

(997)

 

Accrued liabilities

   

(6,545)

     

3,425

     

(15,510)

     

712

 

Deferred revenue

   

2

     

56

     

3

     

81

 

Net cash provided by operating activities

   

13,934

     

5,579

     

19,687

     

23,137

 

Cash Flows from Investing Activities

                               

Capital expenditures

   

(311)

     

(604)

     

(720)

     

(1,041)

 

Internal software development costs

   

(1,294)

     

(703)

     

(2,259)

     

(1,399)

 

Business acquisitions, net of cash acquired

   

(1,000)

     

     

(1,000)

     

(40,304)

 

Proceeds from divestitures of businesses, net of cash divested

   

     

730

     

     

21,460

 

Purchases of equity investment

   

     

(2,000)

     

     

(2,000)

 

Net cash used in investing activities

   

(2,605)

     

(2,577)

     

(3,979)

     

(23,284)

 

Cash Flows from Financing Activities

                               

Proceeds from exercise of common stock options

   

651

     

1,791

     

1,044

     

2,958

 

Payment of withholding taxes related to release of restricted stock, net of share settlement

   

(1,653)

     

(1,706)

     

(5,501)

     

(4,580)

 

Post-closing payments and contingent consideration related to acquisitions

   

(1,211)

     

(2,672)

     

(6,520)

     

(3,020)

 

Net cash used in financing activities

   

(2,213)

     

(2,587)

     

(10,977)

     

(4,642)

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

   

(9)

     

(12)

     

(14)

     

(73)

 

Net increase (decrease) in cash, cash equivalents and restricted cash

   

9,107

     

403

     

4,717

     

(4,862)

 

Cash, cash equivalents and restricted cash at beginning of period

   

105,943

     

102,258

     

110,333

     

107,523

 

Cash, cash equivalents and restricted cash at end of period

 

$

115,050

   

$

102,661

   

$

115,050

   

$

102,661

 

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets

                               

Cash and cash equivalents

 

$

115,035

   

$

102,647

   

$

115,035

   

$

102,647

 

Restricted cash included in other assets, noncurrent

   

15

     

14

     

15

     

14

 

Total cash, cash equivalents and restricted cash

 

$

115,050

   

$

102,661

   

$

115,050

   

$

102,661

 

 

QUINSTREET, INC.
RECONCILIATION OF NET (LOSS) INCOME TO
ADJUSTED NET INCOME
(In thousands, except per share data)
(Unaudited)

 
   

Three Months Ended

   

Six Months Ended

 
   

December 31,

   

December 31,

 
   

2021

   

2020

   

2021

   

2020

 

Net (loss) income

 

$

(5,628)

   

$

466

   

$

(2,535)

   

$

15,147

 

Amortization of intangible assets

   

2,937

     

2,929

     

5,953

     

6,057

 

Stock-based compensation

   

5,573

     

5,555

     

10,479

     

10,335

 

Acquisition and divestiture costs

   

104

     

330

     

465

     

606

 

Gain on divestitures of businesses, net

   

     

     

     

(16,615)

 

Contingent consideration adjustment

   

2,698

     

     

2,698

     

 

Tax settlement expense

   

516

     

     

516

     

 

Restructuring costs

   

67

     

375

     

100

     

766

 

Tax impact of non-GAAP items

   

(3,038)

     

(2,608)

     

(5,039)

     

(404)

 

Adjusted net income

 

$

3,229

   

$

7,047

   

$

12,637

   

$

15,892

 

Adjusted diluted net income per share

 

$

0.06

   

$

0.13

   

$

0.23

   

$

0.29

 

Weighted average shares used in computing adjusted diluted net income per share

   

55,675

     

55,163

     

55,732

     

54,716

 

 

QUINSTREET, INC.
RECONCILIATION OF NET (LOSS) INCOME TO
ADJUSTED EBITDA
(In thousands)
(Unaudited)

 
   

Three Months Ended

   

Six Months Ended

 
   

December 31,

   

December 31,

 
   

2021

   

2020

   

2021

   

2020

 

Net (loss) income

 

$

(5,628)

   

$

466

   

$

(2,535)

   

$

15,147

 

Interest and other expense, net

   

265

     

261

     

534

     

504

 

(Benefit from) provision for income taxes

   

(2,190)

     

(958)

     

(1,614)

     

3,656

 

Depreciation and amortization

   

4,213

     

4,003

     

8,413

     

8,136

 

Stock-based compensation

   

5,573

     

5,555

     

10,479

     

10,335

 

Acquisition and divestiture costs

   

104

     

330

     

465

     

606

 

Contingent consideration adjustment

   

2,698

     

     

2,698

     

 

Gain on divestitures of businesses, net

   

     

     

     

(16,615)

 

Tax settlement expense

   

516

     

     

516

     

 

Restructuring costs

   

67

     

375

     

100

     

766

 

Adjusted EBITDA

 

$

5,618

   

$

10,032

   

$

19,056

   

$

22,535

 

 

QUINSTREET, INC.
RECONCILIATION OF CASH 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,

 
   

2021

   

2020

   

2021

   

2020

 

Net cash provided by operating activities

 

$

13,934

   

$

5,579

   

$

19,687

   

$

23,137

 

Capital expenditures

   

(311)

     

(604)

     

(720)

     

(1,041)

 

Internal software development costs

   

(1,294)

     

(703)

     

(2,259)

     

(1,399)

 

Free cash flow

   

12,329

     

4,272

     

16,708

     

20,697

 

Changes in operating assets and liabilities

   

(9,139)

     

3,260

     

(2,084)

     

(2,719)

 

Normalized free cash flow

 

$

3,190

   

$

7,532

   

$

14,624

   

$

17,978

 

 

QUINSTREET, INC.
DISAGGREGATION OF REVENUE
(In thousands)
(Unaudited)

 

In the first quarter of fiscal year 2021, the Company completed the acquisition of Modernize, Inc. to increase the scale and capabilities in the home services client vertical. In addition, the Company divested its former education client vertical to narrow its focus to the best performing businesses and market opportunities. As a result of these activities, in the second quarter of fiscal year 2021, the Company updated its reporting structure which resulted in two client verticals: financial services and home services, which was applied on a retrospective basis. All remaining businesses that are not significant enough for separate reporting are included in other revenue. The following table presents the Company's net revenue disaggregated by vertical:

 
   

Three Months Ended

   

Six Months Ended

 
   

December 31,

   

December 31,

 
   

2021

   

2020

   

2021

   

2020

 

Net revenue:

                               

Financial Services

 

$

90,158

   

$

104,154

   

$

208,070

   

$

198,367

 

Home Services

   

33,820

     

29,190

     

73,806

     

62,563

 

Other Revenue

   

1,353

     

1,624

     

3,063

     

1,720

 

Divested Business

   

     

     

     

11,587

 

Total net revenue

 

$

125,331

   

$

134,968

   

$

284,939

   

$

274,237

 

 

 

Cision View original content:https://www.prnewswire.com/news-releases/quinstreet-reports-second-quarter-fiscal-year-2022-results-301477964.html

SOURCE QuinStreet, Inc.

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