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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                 to               

Commission File No. 001-34628

 

QuinStreet, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

77-0512121

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

950 Tower Lane, 6th Floor

 

Foster City, California

94404

(Address of principal executive offices)

(Zip Code)

650-578-7700

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share

 

QNST

 

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

 

 

Accelerated filer

 

 

 

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

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.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of shares of common stock outstanding as of May 5, 2021: 53,619,471  

 

 


 

 

QUINSTREET, INC.

INDEX

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements

 

3

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2021 and June 30, 2020

 

3

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2021 and 2020

 

4

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 31, 2021 and 2020

 

5

 

 

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 2021 and 2020

 

6

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2021 and 2020

 

8

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

36

 

 

 

Item 4. Controls and Procedures

 

36

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

37

 

 

 

Item 1A. Risk Factors

 

37

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

60

 

 

 

Item 3. Defaults Upon Senior Securities

 

60

 

 

 

Item 4. Mine Safety Disclosures

 

60

 

 

 

Item 5. Other Information

 

60

 

 

 

Item 6. Exhibits

 

61

 

 

 

SIGNATURES

 

62

2


 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1. FINANCIAL STATEMENTS

QUINSTREET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

March 31,

 

 

June 30,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

103,202

 

 

$

107,509

 

Accounts receivable, net of allowances and reserves of $1,292 and $10,177 as of March 31, 2021 and June 30, 2020, respectively

 

 

82,331

 

 

 

64,472

 

Prepaid expenses and other assets

 

 

8,538

 

 

 

13,591

 

Total current assets

 

 

194,071

 

 

 

185,572

 

Property and equipment, net

 

 

6,810

 

 

 

5,657

 

Operating lease right-of-use assets

 

 

11,448

 

 

 

9,118

 

Goodwill

 

 

118,209

 

 

 

80,677

 

Other intangible assets, net

 

 

62,201

 

 

 

28,174

 

Deferred tax assets, noncurrent

 

 

44,503

 

 

 

48,673

 

Other assets, noncurrent

 

 

5,253

 

 

 

536

 

Total assets

 

$

442,495

 

 

$

358,407

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

39,848

 

 

$

36,759

 

Accrued liabilities

 

 

56,634

 

 

 

42,271

 

Deferred revenue

 

 

87

 

 

 

73

 

Other liabilities

 

 

15,143

 

 

 

6,734

 

Total current liabilities

 

 

111,712

 

 

 

85,837

 

Operating lease liabilities, noncurrent

 

 

9,442

 

 

 

8,692

 

Other liabilities, noncurrent

 

 

32,774

 

 

 

7,934

 

Total liabilities

 

 

153,928

 

 

 

102,463

 

Commitments and contingencies (See Note 12)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock: $0.001 par value; 100,000,000 shares authorized; 53,612,299 and 52,209,813 shares issued and outstanding at March 31, 2021 and June 30, 2020

 

 

54

 

 

 

52

 

Additional paid-in capital

 

 

317,132

 

 

 

304,650

 

Accumulated other comprehensive loss

 

 

(282

)

 

 

(237

)

Accumulated deficit

 

 

(28,337

)

 

 

(48,521

)

Total stockholders' equity

 

 

288,567

 

 

 

255,944

 

Total liabilities and stockholders' equity

 

$

442,495

 

 

$

358,407

 

 

See notes to condensed consolidated financial statements

 

 

 

3


 

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net revenue

 

$

153,052

 

 

$

128,663

 

 

$

427,289

 

 

$

373,378

 

Cost of revenue (1)

 

 

132,665

 

 

 

114,210

 

 

 

375,334

 

 

 

332,717

 

Gross profit

 

 

20,387

 

 

 

14,453

 

 

 

51,955

 

 

 

40,661

 

Operating expenses: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product development

 

 

4,905

 

 

 

3,250

 

 

 

14,776

 

 

 

10,205

 

Sales and marketing

 

 

2,768

 

 

 

2,116

 

 

 

8,303

 

 

 

7,071

 

General and administrative

 

 

6,460

 

 

 

5,076

 

 

 

19,931

 

 

 

16,399

 

Operating income

 

 

6,254

 

 

 

4,011

 

 

 

8,945

 

 

 

6,986

 

Interest income

 

 

5

 

 

 

43

 

 

 

40

 

 

 

169

 

Interest expense

 

 

(301

)

 

 

(177

)

 

 

(947

)

 

 

(566

)

Other (expense) income, net

 

 

(28

)

 

 

10,491

 

 

 

16,695

 

 

 

10,225

 

Income before income taxes

 

 

5,930

 

 

 

14,368

 

 

 

24,733

 

 

 

16,814

 

Provision for income taxes

 

 

(893

)

 

 

(449

)

 

 

(4,549

)

 

 

(214

)

Net income

 

$

5,037

 

 

$

13,919

 

 

$

20,184

 

 

$

16,600

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.09

 

 

$

0.27

 

 

$

0.38

 

 

$

0.32

 

Diluted

 

$

0.09

 

 

$

0.26

 

 

$

0.37

 

 

$

0.31

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

53,427

 

 

 

51,807

 

 

 

52,988

 

 

 

51,353

 

Diluted

 

 

55,623

 

 

 

53,439

 

 

 

55,015

 

 

 

53,416

 

 

(1)

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

 

Cost of revenue

 

$

2,261

 

 

$

978

 

 

$

7,006

 

 

$

5,815

 

Product development

 

 

576

 

 

 

185

 

 

 

1,768

 

 

 

1,187

 

Sales and marketing

 

 

584

 

 

 

152

 

 

 

1,896

 

 

 

1,131

 

General and administrative

 

 

1,435

 

 

 

554

 

 

 

4,521

 

 

 

3,084

 

 

See notes to condensed consolidated financial statements

 

4


 

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income

 

$

5,037

 

 

$

13,919

 

 

$

20,184

 

 

$

16,600

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

8

 

 

 

70

 

 

 

(45

)

 

 

117

 

Total other comprehensive income (loss)

 

 

8

 

 

 

70

 

 

 

(45

)

 

 

117

 

Comprehensive income

 

$

5,045

 

 

$

13,989

 

 

$

20,139

 

 

$

16,717

 

 

See notes to condensed consolidated financial statements

5


QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2020

 

 

53,259,519

 

 

$

53

 

 

$

313,017

 

 

$

(290

)

 

$

(33,374

)

 

$

279,406

 

Issuance of common stock upon exercise of stock options

 

 

214,075

 

 

 

1

 

 

 

1,183

 

 

 

 

 

 

 

 

 

1,184

 

Release of restricted stock, net of share settlement

 

 

138,705

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,870

 

 

 

 

 

 

 

 

 

4,870

 

Withholding taxes related to release of restricted stock, net of share settlement

 

 

 

 

 

 

 

 

(1,938

)

 

 

 

 

 

 

 

 

(1,938

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,037

 

 

 

5,037

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Balances at March 31, 2021

 

 

53,612,299

 

 

$

54

 

 

$

317,132

 

 

$

(282

)

 

$

(28,337

)

 

$

288,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2019

 

 

51,636,757

 

 

$

52

 

 

$

298,080

 

 

$

(319

)

 

$

(63,942

)

 

$

233,871

 

Issuance of common stock upon exercise of stock options

 

 

151,625

 

 

 

 

 

 

689

 

 

 

 

 

 

 

 

 

689

 

Release of restricted stock, net of share settlement

 

 

149,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,884

 

 

 

 

 

 

 

 

 

1,884

 

Withholding taxes related to release of restricted stock, net of share settlement

 

 

 

 

 

 

 

 

(1,226

)

 

 

 

 

 

 

 

 

(1,226

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,919

 

 

 

13,919

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

 

 

 

70

 

Balances at March 31, 2020

 

 

51,938,074

 

 

$

52

 

 

$

299,427

 

 

$

(249

)

 

$

(50,023

)

 

$

249,207

 

 

See notes to condensed consolidated financial statements

6


QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2020

 

 

52,209,813

 

 

$

52

 

 

$

304,650

 

 

$

(237

)

 

$

(48,521

)

 

$

255,944

 

Issuance of common stock upon exercise of stock options

 

 

699,100

 

 

 

1

 

 

 

3,763

 

 

 

 

 

 

 

 

 

3,764

 

Release of restricted stock, net of share settlement

 

 

703,386

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

15,238

 

 

 

 

 

 

 

 

 

15,238

 

Withholding taxes related to release of restricted stock, net of share settlement

 

 

 

 

 

 

 

 

(6,518

)

 

 

 

 

 

 

 

 

(6,518

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,184

 

 

 

20,184

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

(45

)

Balances at March 31, 2021

 

 

53,612,299

 

 

$

54

 

 

$

317,132

 

 

$

(282

)

 

$

(28,337

)

 

$

288,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2019

 

 

50,518,460

 

 

$

50

 

 

$

289,768

 

 

$

(366

)

 

$

(66,623

)

 

$

222,829

 

Issuance of common stock upon exercise of stock options

 

 

667,651

 

 

 

1

 

 

 

3,804

 

 

 

 

 

 

 

 

 

3,805

 

Release of restricted stock, net of share settlement

 

 

751,963

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Stock-based compensation expense