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qnst-10q_20211231.htm

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 December 31, 2021


☐	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 February 2, 2022: 54,553,435

QUINSTREET, INC.

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements		3

Condensed Consolidated Balance Sheets at December 31, 2021 and June 30, 2021		3

Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2021 and 2020		4

Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended December 31, 2021 and 2020		5

Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended December 31, 2021 and 2020		6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 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		22

Item 3. Quantitative and Qualitative Disclosures About Market Risk		32

Item 4. Controls and Procedures		32

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		33

Item 1A. Risk Factors		33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		56

Item 3. Defaults Upon Senior Securities		56

Item 4. Mine Safety Disclosures		56

Item 5. Other Information		56

Item 6. Exhibits		57

SIGNATURES		58

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QUINSTREET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	December 31,			June 30,
	2021			2021
Assets
Current assets:
Cash and cash equivalents	$	115,035		$	110,318
Accounts receivable, net of allowances and reserves of $1,392 and $1,010 as of December 31, 2021 and June 30, 2021, respectively		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
Commitments and contingencies (See Note 11)
Stockholders' equity:
Common stock: $0.001 par value; 100,000,000 shares authorized; 54,546,131 and 53,786,363 shares issued and outstanding as of December 31, 2021 and June 30, 2021		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

See notes to condensed consolidated financial statements

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

See notes to condensed consolidated financial statements

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(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
Other comprehensive loss:
Foreign currency translation adjustment		—			(15	)		—			(53	)
Total other comprehensive loss		—			(15	)		—			(53	)
Comprehensive (loss) income	$	(5,628	)	$	451		$	(2,535	)	$	15,094

See notes to condensed consolidated financial statements

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 September 30, 2021		54,208,614	$	54	$	321,769		$	(255	)	$	(21,873	)	$	299,695
Issuance of common stock upon exercise of stock options		153,445		—		645			—			—			645
Release of restricted stock, net of share settlement		184,072		1		(1	)		—			—			—
Stock-based compensation expense		—		—		5,587			—			—			5,587
Withholding taxes related to release of restricted stock, net of share settlement		—		—		(1,654	)		—			—			(1,654	)
Net loss		—		—		—			—			(5,628	)		(5,628	)
Other comprehensive income		—		—		—			—			—			—
Balances at December 31, 2021		54,546,131	$	55	$	326,346		$	(255	)	$	(27,501	)	$	298,645

								Accumulated
					Additional			Other						Total
	Common Stock				Paid-in			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital			Loss			Deficit			Equity
Balances at September 30, 2020		52,773,842	$	53	$	307,350		$	(275	)	$	(33,840	)	$	273,288
Issuance of common stock upon exercise of stock options		299,168		—		1,802			—			—			1,802
Release of restricted stock, net of share settlement		186,509		—		—			—			—			—
Stock-based compensation expense		—		—		5,571			—			—			5,571
Withholding taxes related to release of restricted stock, net of share settlement		—		—		(1,706	)		—			—			(1,706	)
Net income		—		—		—			—			466			466
Other comprehensive loss		—		—		—			(15	)		—			(15	)
Balances at December 31, 2020		53,259,519	$	53	$	313,017		$	(290	)	$	(33,374	)	$	279,406

See notes to condensed consolidated financial statements

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, 2021		53,786,363	$	54	$	320,315		$	(255	)	$	(24,966	)	$	295,148
Issuance of common stock upon exercise of stock options		245,649		—		1,040			—			—			1,040
Release of restricted stock, net of share settlement		514,119		1		(1	)		—			—			—
Stock-based compensation expense		—		—		10,493			—			—			10,493
Withholding taxes related to release of restricted stock, net of share settlement		—		—		(5,501	)		—			—			(5,501	)
Net loss		—		—		—			—			(2,535	)		(2,535	)
Other comprehensive income		—		—		—			—			—			—
Balances at December 31, 2021		54,546,131	$	55	$	326,346		$	(255	)	$	(27,501	)	$	298,645

							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		485,025		—		2,580		—