10-Q
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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, 2023

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 April 28, 2023: 54,117,722

 


 

QUINSTREET, INC.

INDEX

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements

 

3

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2023 and June 30, 2022

 

3

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2023 and 2022

 

4

 

 

 

Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended March 31, 2023 and 2022

 

5

 

 

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 2023 and 2022

 

6

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022

 

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

 

29

 

 

 

Item 4. Controls and Procedures

 

29

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

30

 

 

 

Item 1A. Risk Factors

 

30

 

 

 

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

 

53

 

 

 

Item 3. Defaults Upon Senior Securities

 

54

 

 

 

Item 4. Mine Safety Disclosures

 

54

 

 

 

Item 5. Other Information

 

54

 

 

 

Item 6. Exhibits

 

55

 

 

 

SIGNATURES

 

56

 

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,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,962

 

 

$

96,439

 

Accounts receivable, net of allowances and reserves of $2,146 and $1,536 as of March 31, 2023 and June 30, 2022, respectively

 

 

105,606

 

 

 

81,429

 

Prepaid expenses and other assets

 

 

8,729

 

 

 

4,924

 

Total current assets

 

 

177,297

 

 

 

182,792

 

Property and equipment, net

 

 

15,143

 

 

 

9,311

 

Operating lease right-of-use assets

 

 

4,020

 

 

 

6,801

 

Goodwill

 

 

121,141

 

 

 

121,141

 

Other intangible assets, net

 

 

41,362

 

 

 

49,696

 

Deferred tax assets, noncurrent

 

 

47,547

 

 

 

44,220

 

Other assets, noncurrent

 

 

5,969

 

 

 

5,948

 

Total assets

 

$

412,479

 

 

$

419,909

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

41,279

 

 

$

42,410

 

Accrued liabilities

 

 

62,892

 

 

 

54,459

 

Deferred revenue

 

 

 

 

 

341

 

Other liabilities

 

 

8,622

 

 

 

12,369

 

Total current liabilities

 

 

112,793

 

 

 

109,579

 

Operating lease liabilities, noncurrent

 

 

1,291

 

 

 

3,858

 

Other liabilities, noncurrent

 

 

13,868

 

 

 

20,472

 

Total liabilities

 

 

127,952

 

 

 

133,909

 

Commitments and contingencies (See Note 10)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock: $0.001 par value; 100,000,000 shares authorized; 54,113,977 and 53,356,875 shares issued and outstanding as of March 31, 2023 and June 30, 2022

 

 

54

 

 

 

53

 

Additional paid-in capital

 

 

327,929

 

 

 

316,422

 

Accumulated other comprehensive loss

 

 

(267

)

 

 

(261

)

Accumulated deficit

 

 

(43,189

)

 

 

(30,214

)

Total stockholders' equity

 

 

284,527

 

 

 

286,000

 

Total liabilities and stockholders' equity

 

$

412,479

 

 

$

419,909

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenue

 

$

172,671

 

 

$

150,658

 

 

$

450,312

 

 

$

435,597

 

Cost of revenue (1)

 

 

155,633

 

 

 

136,567

 

 

 

412,388

 

 

 

393,626

 

Gross profit

 

 

17,038

 

 

 

14,091

 

 

 

37,924

 

 

 

41,971

 

Operating expenses: (1)

 

 

 

 

 

 

 

 

 

 

 

 

Product development

 

 

7,832

 

 

 

5,509

 

 

 

21,832

 

 

 

14,995

 

Sales and marketing

 

 

3,385

 

 

 

2,033

 

 

 

9,651

 

 

 

7,773

 

General and administrative

 

 

7,230

 

 

 

5,489

 

 

 

21,919

 

 

 

21,758

 

Operating (loss) income

 

 

(1,409

)

 

 

1,060

 

 

 

(15,478

)

 

 

(2,555

)

Interest income

 

 

46

 

 

 

7

 

 

 

65

 

 

 

7

 

Interest expense

 

 

(187

)

 

 

(277

)

 

 

(626

)

 

 

(817

)

Other (expense) income, net

 

 

(12

)

 

 

45

 

 

 

(44

)

 

 

51

 

(Loss) income before income taxes

 

 

(1,562

)

 

 

835

 

 

 

(16,083

)

 

 

(3,314

)

Benefit from income taxes

 

 

1,083

 

 

 

1,395

 

 

 

3,108

 

 

 

3,009

 

Net (loss) income

 

$

(479

)

 

$

2,230

 

 

$

(12,975

)

 

$

(305

)

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.01

)

 

$

0.04

 

 

$

(0.24

)

 

$

(0.01

)

Diluted

 

$

(0.01

)

 

$

0.04

 

 

$

(0.24

)

 

$

(0.01

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

53,950

 

 

 

54,645

 

 

 

53,668

 

 

 

54,339

 

Diluted

 

 

53,950

 

 

 

55,536

 

 

 

53,668

 

 

 

54,339

 

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

 

Cost of revenue

 

$

2,006

 

 

$

491

 

 

$

6,238

 

 

$

4,579

 

Product development

 

 

695

 

 

 

203

 

 

 

2,225

 

 

 

1,497

 

Sales and marketing

 

 

660

 

 

 

18

 

 

 

1,970

 

 

 

1,477

 

General and administrative

 

 

1,947

 

 

 

699

 

 

 

5,622

 

 

 

4,337

 

 

See notes to condensed consolidated financial statements

4


QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net (loss) income

$

(479

)

 

$

2,230

 

 

$

(12,975

)

 

$

(305

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

1

 

 

 

(1

)

 

 

(6

)

 

 

(1

)

Total other comprehensive income (loss)

 

 

1

 

 

 

(1

)

 

 

(6

)

 

 

(1

)

Comprehensive (loss) income

 

$

(478

)

 

$

2,229

 

 

$

(12,981

)

 

$

(306

)

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

 

 

Treasury Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2022

 

 

53,804,545

 

 

$

54

 

 

 

 

 

$

 

 

$

322,720

 

 

$

(268

)

 

$

(42,710

)

 

$

279,796

 

Issuance of common stock upon exercise of stock options

 

 

7,366

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

 

 

 

 

 

 

 

43

 

Release of restricted stock, net of share settlement

 

 

161,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under the employee stock purchase plan

 

 

140,732

 

 

 

 

 

 

 

 

 

 

 

 

1,363

 

 

 

 

 

 

 

 

 

1,363

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,321

 

 

 

 

 

 

 

 

 

5,321

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,518

)

 

 

 

 

 

 

 

 

(1,518

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(479

)

 

 

(479

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Balances at March 31, 2023

 

 

54,113,977

 

 

$

54

 

 

 

 

 

$

 

 

$

327,929

 

 

$

(267

)

 

$

(43,189

)

 

$

284,527

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2021

 

 

54,546,131

 

 

$

55

 

 

 

 

 

$

 

 

$

326,346

 

 

$

(255

)

 

$

(27,501

)

 

$

298,645

 

Issuance of common stock upon exercise of stock options

 

 

52,597

 

 

 

 

 

 

 

 

 

 

 

 

230

 

 

 

 

 

 

 

 

 

230

 

Release of restricted stock, net of share settlement

 

 

148,574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,424

 

 

 

 

 

 

 

 

 

1,424

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,065

)

 

 

 

 

 

 

 

 

(1,065

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,230

 

 

 

2,230

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balances at March 31, 2022

 

 

54,747,302

 

 

$

55

 

 

 

 

 

$

 

 

$

326,935

 

 

$

(256

)

 

$

(25,271

)

 

$

301,463

 

 

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

 

 

Treasury Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’