QuinStreet, Inc. • SEC Filing

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10-Q

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


☐	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

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

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

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

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

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’