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qnst-10q_20221231.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, 2022


☐	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 January 31, 2023: 53,805,821

QUINSTREET, INC.

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements		3

Condensed Consolidated Balance Sheets at December 31, 2022 and June 30, 2022		3

Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2022 and 2021		4

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended December 31, 2022 and 2021		5

Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended December 31, 2022 and 2021		6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021		8

Notes to Condensed Consolidated Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3. Quantitative and Qualitative Disclosures About Market Risk		30

Item 4. Controls and Procedures		30

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		31

Item 1A. Risk Factors		31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		54

Item 3. Defaults Upon Senior Securities		54

Item 4. Mine Safety Disclosures		54

Item 5. Other Information		54

Item 6. Exhibits		55

SIGNATURES		56

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,
	2022			2022
Assets
Current assets:
Cash and cash equivalents	$	79,104		$	96,439
Accounts receivable, net of allowances and reserves of $2,007 and $1,536 as of December 31, 2022 and June 30, 2022, respectively		71,412			81,429
Prepaid expenses and other assets		5,214			4,924
Total current assets		155,730			182,792
Property and equipment, net		13,069			9,311
Operating lease right-of-use assets		4,989			6,801
Goodwill		121,141			121,141
Other intangible assets, net		44,170			49,696
Deferred tax assets, noncurrent		46,543			44,220
Other assets, noncurrent		6,251			5,948
Total assets	$	391,893		$	419,909

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	37,840		$	42,410
Accrued liabilities		46,846			54,459
Deferred revenue		10			341
Other liabilities		11,478			12,369
Total current liabilities		96,174			109,579
Operating lease liabilities, noncurrent		1,741			3,858
Other liabilities, noncurrent		14,182			20,472
Total liabilities		112,097			133,909
Commitments and contingencies (See Note 10)
Stockholders' equity:
Common stock: $0.001 par value; 100,000,000 shares authorized; 53,804,545 and 53,356,875 shares issued and outstanding as of December 31, 2022 and June 30, 2022		54			53
Additional paid-in capital		322,720			316,422
Accumulated other comprehensive loss		(268	)		(261	)
Accumulated deficit		(42,710	)		(30,214	)
Total stockholders' equity		279,796			286,000
Total liabilities and stockholders' equity	$	391,893		$	419,909

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,
	2022			2021			2022			2021
Net revenue	$	134,048		$	125,331		$	277,641		$	284,939
Cost of revenue ⁽¹⁾		125,510			115,554			256,755			257,059
Gross profit		8,538			9,777			20,886			27,880
Operating expenses: ⁽¹⁾
Product development		7,174			4,861			14,000			9,486
Sales and marketing		3,166			2,834			6,266			5,740
General and administrative		7,370			9,635			14,689			16,269
Operating loss		(9,172	)		(7,553	)		(14,069	)		(3,615	)
Interest income		12			—			19			—
Interest expense		(213	)		(267	)		(439	)		(540	)
Other (expense) income, net		(9	)		2			(32	)		6
Loss before income taxes		(9,382	)		(7,818	)		(14,521	)		(4,149	)
Benefit from income taxes		1,403			2,190			2,025			1,614
Net loss	$	(7,979	)	$	(5,628	)	$	(12,496	)	$	(2,535	)
Net loss per share:
Basic	$	(0.15	)	$	(0.10	)	$	(0.23	)	$	(0.05	)
Diluted	$	(0.15	)	$	(0.10	)	$	(0.23	)	$	(0.05	)
Weighted-average shares used in computing net loss per share:
Basic		53,709			54,384			53,529			54,189
Diluted		53,709			54,384			53,529			54,189

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

Cost of revenue	$	2,113	$	2,267	$	4,232	$	4,088
Product development		765		688		1,530		1,294
Sales and marketing		658		727		1,310		1,459
General and administrative		1,941		1,891		3,675		3,638

See notes to condensed consolidated financial statements

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2022			2021			2022			2021
Net loss	$	(7,979	)	$	(5,628	)	$	(12,496	)	$	(2,535	)
Other comprehensive loss:
Foreign currency translation adjustment		(2	)		—			(7	)		—
Total other comprehensive loss		(2	)		—			(7	)		—
Comprehensive loss	$	(7,981	)	$	(5,628	)	$	(12,503	)	$	(2,535	)

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				Treasury Stock				Paid-in			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Loss			Deficit			Equity
Balances at September 30, 2022		53,549,167	$	54	—		$	—	$	318,199		$	(266	)	$	(34,731	)	$	283,256
Issuance of common stock upon exercise of stock options		45,825		—		—		—		240			—			—			240
Release of restricted stock, net of share settlement		209,553		—		—		—		—			—			—			—
Issuance of common stock under the employee stock purchase plan		—		—		—		—		—			—			—			—
Stock-based compensation expense		—		—		—		—		5,491			—			—			5,491
Withholding taxes related to release of restricted stock, net of share settlement		—		—		—		—		(1,210	)		—			—			(1,210	)
Repurchase of common stock		—		—		—		—		—			—			—			—
Retirement of treasury stock		—		—		—		—		—			—			—			—
Net loss		—		—		—		—		—			—			(7,979	)		(7,979	)
Other comprehensive loss		—		—		—		—		—			(2	)		—			(2	)
Balances at December 31, 2022		53,804,545	$	54		—	$	—	$	322,720		$	(268	)	$	(42,710	)	$	279,796

												Accumulated
									Additional			Other						Total
	Common Stock				Treasury Stock				Paid-in			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		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

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				Treasury Stock				Paid-in			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Loss			Deficit			Equity
Balances at June 30, 2022		53,356,875	$	53	—		$	—	$	316,422		$	(261	)	$	(30,214	)	$	286,000
Issuance of common stock upon exercise of stock options		83,680		—		—		—		476			—			—			476
Release of restricted stock, net of share settlement		511,720		1		—		—		(1	)		—			—			—
Issuance of common stock under the employee stock purchase plan		137,914				—		—		1,324			—			—			1,324
Stock-based compensation expense		—		—		—		—		10,775			—			—			10,775
Withholding taxes related to release of restricted stock, net of share settlement		—		—		—		—		(3,226	)		—			—			(3,226	)
Repurchase of common stock