UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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.
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of |
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(I.R.S. Employer |
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Incorporation or Organization) |
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Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered |
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(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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
Number of shares of common stock outstanding as of October 28, 2022:
QUINSTREET, INC.
INDEX
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QUINSTREET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
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September 30, |
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June 30, |
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2022 |
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2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowances and reserves of $ |
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Prepaid expenses and other assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Goodwill |
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Other intangible assets, net |
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Deferred tax assets, noncurrent |
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Other assets, noncurrent |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Deferred revenue |
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Other liabilities |
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Total current liabilities |
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Operating lease liabilities, noncurrent |
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Other liabilities, noncurrent |
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Total liabilities |
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Commitments and contingencies (See Note 10) |
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Stockholders' equity: |
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Common stock: $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See notes to condensed consolidated financial statements
3
QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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September 30, |
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2022 |
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2021 |
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Net revenue |
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$ |
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$ |
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Cost of revenue (1) |
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Gross profit |
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Operating expenses: (1) |
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Product development |
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Sales and marketing |
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General and administrative |
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Operating (loss) income |
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Interest income |
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Interest expense |
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Other (expense) income, net |
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(Loss) income before income taxes |
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Benefit from (provision for) income taxes |
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Net (loss) income |
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$ |
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$ |
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Net (loss) income per share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted-average shares used in computing net (loss) income per share: |
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Basic |
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Diluted |
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(1) |
Cost of revenue and operating expenses include stock-based compensation expense as follows: |
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Cost of revenue |
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$ |
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$ |
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Product development |
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Sales and marketing |
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General and administrative |
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See notes to condensed consolidated financial statements
4
QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
(Unaudited)
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Three Months Ended |
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September 30, |
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2022 |
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2021 |
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Net (loss) income |
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$ |
( |
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$ |
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Other comprehensive loss: |
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Foreign currency translation adjustment |
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Total other comprehensive loss |
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( |
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Comprehensive (loss) income |
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$ |
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$ |
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See notes to condensed consolidated financial statements
5
QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Treasury Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances at June 30, 2022 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Release of restricted stock, net of share settlement |
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— |
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— |
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( |
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— |
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— |
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— |
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Issuance of common stock under the employee stock purchase plan |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Withholding taxes related to release of restricted stock, net of share settlement |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Repurchase of common stock |
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— |
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— |
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( |
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( |
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— |
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— |
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— |
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( |
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Retirement of treasury stock |
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( |
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— |
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( |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Balances at September 30, 2022 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Treasury Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances at June 30, 2021 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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— |
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Release of restricted stock, net of share settlement |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Withholding taxes related to release of restricted stock, net of share settlement |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balances at September 30, 2021 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
( |
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$ |
( |
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$ |
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See notes to condensed consolidated financial statements
6
QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended |
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September 30, |
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2022 |
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2021 |
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Cash Flows from Operating Activities |
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Net (loss) income |
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$ |
( |
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$ |
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
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Depreciation and amortization |
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Provision for sales returns and doubtful accounts receivable |
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Stock-based compensation |
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Non-cash lease expense |
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( |
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( |
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Deferred income taxes |
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( |
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Other adjustments, net |
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( |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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Prepaid expenses and other assets |
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( |
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( |
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Accounts payable |
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( |
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Accrued liabilities |
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( |
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( |
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Deferred revenue |
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( |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities |
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Capital expenditures |
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( |
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( |
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Internal software development costs |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash Flows from Financing Activities |
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Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan |
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Payment of withholding taxes related to release of restricted stock, net of share settlement |
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( |
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( |
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Post-closing payments and contingent consideration related to acquisitions |
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( |
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( |
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Repurchase of common stock |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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( |
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( |
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Net decrease in cash, cash equivalents and restricted cash |
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( |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash included in other assets, noncurrent |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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Supplemental Disclosure of Cash Flow Information |
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Cash paid for income taxes |
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$ |
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$ |
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Supplemental Disclosure of Non-cash Investing and Financing Activities |
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Purchases of property and equipment included in accrued liabilities |
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Retirement of treasury stock (See Note 11) |
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( |
) |
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See notes to condensed consolidated financial statements
7
QUINSTREET, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company
QuinStreet, Inc. (the “Company”) is a leader in performance marketplaces and technologies for the financial services and home services industries. The Company was incorporated in California in April 1999 and reincorporated in Delaware in December 2009. The Company specializes in customer acquisition for clients in high value, information-intensive markets or “verticals,” including financial services and home services. The corporate headquarters are located in Foster City, California, with additional offices throughout the United States and India. The majority of the Company’s operations and revenue are in North America.
2. Summary of Significant Accounting Policies
Basis of Presentation
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The accompanying condensed consolidated financial statements and the notes to the condensed consolidated financial statements as of September 30, 2022 and for the three months ended September 30, 2022 and 2021 are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022, as filed with the SEC on August 22, 2022. The condensed consolidated balance sheet at June 30, 2022 included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the Company’s condensed consolidated balance sheet at September 30, 2022, its condensed consolidated statements of stockholders’ equity, operations and comprehensive (loss) income for the three months ended September 30, 2022 and 2021 and condensed consolidated statements of cash flows for the three months ended September 30, 2022 and 2021. The results of operations for the three months ended September 30, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2023, or any other future period.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. On an ongoing basis, management evaluates these estimates, judgments and assumptions, including those related to revenue recognition, stock-based compensation, goodwill, long-lived assets, contingencies, credit losses of accounts receivable, and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. In addition, the Company may engage third-party valuation specialists to assist with the preparation of certain of its valuations. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates, and such differences could affect the results of operations reported in future periods.
8
Accounting Policies
The significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. There have been no material changes to our significant accounting policies as of and for the three months ended September 30, 2022.
Accounts Receivable and Allowances
The Company’s accounts receivable are derived from clients located principally in the United States. The Company performs ongoing credit evaluation of its customers and generally does not require collateral. The Company makes estimates of expected credit losses for the allowance for doubtful accounts and allowance for unbilled receivables based upon its assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.
The allowance for credit losses on accounts receivable was $
Concentrations of Credit Risk
The Company had
Fair Value of Financial Instruments
The Company’s financial instruments consist principally of cash equivalents, accounts receivable, accounts payable, post-closing payments and contingent consideration related to acquisitions. The recorded values of the Company’s accounts receivable and accounts payable approximate their current fair values due to the relatively short-term nature of these accounts.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents on the Company’s condensed consolidated balance sheets.
Recent Accounting Pronouncements
In October 2021, the FASB issued Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. The new guidance is effective for the Company in the first quarter of fiscal year 2024 on a prospective basis, with early adoption permitted. The Company is currently assessing the impact the new guidance will have on the consolidated financial statements.
9
3. Revenue
Disaggregation of Revenue
The following table presents the Company’s net revenue disaggregated by vertical (in thousands):
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Three Months Ended |
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September 30, |
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2022 |
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2021 |
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Net revenue: |
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Financial Services |
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$ |
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$ |
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Home Services |
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Other Revenue |
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Total net revenue |
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$ |
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$ |
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Contract Balances
The following table provides information about contract liabilities from the Company’s contracts with its clients (in thousands):
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September 30, |
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June 30, |
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2022 |
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2022 |
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Deferred revenue |
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$ |
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$ |
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Client deposits |
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Total |
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$ |
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