QuinStreet Reports Fiscal Fourth Quarter and 2022 Results
- FYQ4 revenue of $146.5MM, a decrease of only 3% year-over-year
- Insurance client revenue stabilized in FYQ4
- Non-Insurance revenue was 56% of total and grew 26% YoY in FYQ4
- Repurchased 1.7M shares of common stock in FYQ4
- Solidly cash flow positive, with a strong balance sheet
FOSTER CITY, Calif., Aug. 3, 2022 /PRNewswire/ -- QuinStreet, Inc. (Nasdaq: QNST), a leader in performance marketplaces and technologies for the financial services and home services industries, today announced financial results for the fiscal fourth quarter and fiscal year ended June 30, 2022.
For the fiscal fourth quarter, the Company reported revenue of $146.5 million, a decrease of 3% year-over-year.
GAAP net loss for the fiscal fourth quarter was $4.9 million, or ($0.09) per diluted share. Adjusted net income was $2.0 million, or $0.04 per diluted share.
Adjusted EBITDA for the fiscal fourth quarter was $5.1 million.
For fiscal year 2022, the Company reported revenue of $582.1 million, an increase of 1% year-over-year.
GAAP net loss for fiscal year 2022 was $5.2 million, or ($0.10) per share. Adjusted net income was $19.5 million, or $0.35 per diluted share.
Adjusted EBITDA for fiscal year 2022 was $31.0 million.
For fiscal year 2022, the Company generated $28.7 million in operating cash flow and closed the year with $96.4 million in cash and equivalents and no bank debt.
"Fiscal Q4 played out pretty much as expected," commented Doug Valenti, CEO of QuinStreet. "Our team executed well in a complicated environment. Auto Insurance client vertical results were generally flat with February and March, while non-insurance client verticals grew at a strong double-digit rate year-over-year. We remained nicely adjusted EBITDA and cash flow positive, with a strong balance sheet.
Looking ahead, we expect Auto Insurance to essentially bounce along a bottom for the next couple of quarters - our fiscal Q1 and Q2 - as carriers continue the re-rating process. We expect a positive inflection in Auto Insurance beginning in January as 1) carrier combined ratios reset for the new calendar year and 2) consumer shopping for insurance increases in response to higher rates.
We expect our non-insurance client verticals to continue to grow at strong double-digit rates throughout the new fiscal year.
Overall, we expect revenue and adjusted EBITDA results for full fiscal 2023 to be at least flat to fiscal 2022. We will, of course, update our outlook for the full year as the year progresses.
For fiscal Q1, we expect revenue to be between $135 and $140 million and adjusted EBITDA to be between $3.0 and $3.4 million.
We expect to remain adjusted EBITDA and cash flow positive throughout fiscal 2023, and to maintain our strong balance sheet.
An update on our share re-purchase or buyback. We bought back 1.7 million shares of our stock or approximately 3% of the shares outstanding last quarter for a total of $17 million."
Conference Call Today at 2:00 p.m. PT
The Company will host a conference call and corresponding live webcast at 2:00 p.m. PT. To access the conference call dial +1 800-207-0148 (domestic) or +1 323-701-0170 (international) and use the passcode 462709. A replay of the conference call will be available beginning approximately two hours after the completion of the call by dialing +1 888-203-1112 (domestic) or +1 719-457-0820 (international) and using the passcode 9611610. The webcast of the conference call will be available live and via replay on the investor relations section of the Company's website at http://investor.quinstreet.com.
About QuinStreet
QuinStreet, Inc. (Nasdaq: QNST) is a leader in performance marketplaces and technologies for the financial services and home services industries. QuinStreet is a pioneer in delivering online marketplace solutions to match searchers with brands in digital media, and is committed to providing consumers with the information and tools they need to research, find and select the products and brands that meet their needs.
Non-GAAP Financial Measures and Definitions of Client Verticals
This release and the accompanying tables include a discussion of adjusted EBITDA, adjusted net income, adjusted diluted net income per share and free cash flow and normalized free cash flow, all of which are non-GAAP financial measures that are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The term "adjusted EBITDA" refers to a financial measure that we define as net (loss) income less provision for (benefit from) income taxes, depreciation expense, amortization expense, stock-based compensation expense, interest and other expense, net, acquisition and divestiture costs, gain on divestitures of businesses, net, contingent consideration adjustment, litigation settlement expense, tax settlement expense, and restructuring costs. The term "adjusted net income" refers to a financial measure that we define as net (loss) income adjusted for amortization expense, stock-based compensation expense, acquisition and divestiture costs, gain on divestitures of businesses, net, contingent consideration adjustment, litigation settlement expense, tax settlement expense, and restructuring costs, net of estimated taxes. The term "adjusted diluted net income per share" refers to a financial measure that we define as adjusted net income divided by weighted average diluted shares outstanding. The term "free cash flow" refers to a financial measure that we define as net cash provided by operating activities, less capital expenditures and internal software development costs. The term "normalized free cash flow" refers to free cash flow less changes in operating assets and liabilities. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. In addition, our definition of adjusted EBITDA, adjusted net income, adjusted diluted net income per share and free cash flow and normalized free cash flow may not be comparable to the definitions as reported by other companies.
We believe adjusted EBITDA, adjusted net income and adjusted diluted net income per share are relevant and useful information because they provide us and investors with additional measurements to analyze the Company's operating performance.
Adjusted EBITDA is useful to us and investors because (i) we seek to manage our business to a level of adjusted EBITDA as a percentage of net revenue, (ii) it is used internally by us for planning purposes, including preparation of internal budgets; to allocate resources; to evaluate the effectiveness of operational strategies and capital expenditures as well as the capacity to service debt, (iii) it is a key basis upon which we assess our operating performance, (iv) it is one of the primary metrics investors use in evaluating Internet marketing companies, (v) it is a factor in determining compensation, (vi) it is an element of certain financial covenants under our historical borrowing arrangements, and (vii) it is a factor that assists investors in the analysis of ongoing operating trends. In addition, we believe adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and other interested parties in our industry as a measure of financial performance, debt-service capabilities and as a metric for analyzing company valuations.
We use adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact of changes in effective tax rates or fluctuations in permanent differences or discrete quarterly items), non-recurring charges, certain other items that we do not believe are indicative of core operating activities (such as litigation settlement expense, tax settlement expense, acquisition and divestiture costs, gain or loss on divestitures of businesses, contingent consideration adjustment, restructuring costs and other income and expense) and the non-cash impact of depreciation expense, amortization expense and stock-based compensation expense.
With respect to our adjusted EBITDA guidance, the Company is not able to provide a quantitative reconciliation without unreasonable efforts to the most directly comparable GAAP financial measure due to the high variability, complexity and low visibility with respect to certain items such as taxes, and income and expense from changes in fair value of contingent consideration from acquisitions. We expect the variability of these items to have a potentially unpredictable and potentially significant impact on future GAAP financial results, and, as such, we also believe that any reconciliations provided would imply a degree of precision that would be confusing or misleading to investors.
Adjusted net income and adjusted diluted net income per share are useful to us and investors because they present an additional measurement of our financial performance, taking into account depreciation, which we believe is an ongoing cost of doing business, but excluding the impact of certain non-cash expenses (stock-based compensation, amortization of intangible assets, and contingent consideration adjustment), non-recurring charges and certain other items that we do not believe are indicative of core operating activities. We believe that analysts and investors use adjusted net income and adjusted diluted net income per share as supplemental measures to evaluate the overall operating performance of companies in our industry.
Free cash flow is useful to investors and us because it represents the cash that our business generates from operations, before taking into account cash movements that are non-operational, and is a metric commonly used in our industry to understand the underlying cash generating capacity of a company's financial model. Normalized free cash flow is useful as it removes the fluctuations in operating assets and liabilities that occur in any given quarter due to the timing of payments and cash receipts and therefore helps investors understand the underlying cash flow of the business as a quarterly metric and the cash flow generation potential of the business model. We believe that analysts and investors use free cash flow multiples as a metric for analyzing company valuations in our industry.
We intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. A reconciliation of these non-GAAP measures to GAAP is provided in the accompanying tables.
FY2020 results in our Education Client Vertical include revenue from US, (historically) Brazil, and India. Revenue in our Financial Services Client Vertical includes Auto Insurance (auto, home, motorcycle, and small business), Life Insurance, Health Insurance, Personal Loans, Credit Cards, Banking, and (historically) Mortgage. Revenue in our Other Client Vertical includes Home Services and (historically) B2B. In fiscal Q3 2020, we divested our B2B client vertical and Brazil operations. In fiscal Q4 2020, we divested our Mortgage business. In fiscal Q1 2021, we divested our Education business.
Legal Notice Regarding Forward Looking Statements
This press release and its attachments contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties. Words such as "estimate", "will", "believe", "expect", "intend", "outlook", "potential", "promises" and similar expressions are intended to identify forward-looking statements. These forward-looking statements include the statements in quotations from management in this press release, as well as any statements regarding the Company's anticipated financial results, growth and strategic and operational plans. The Company's actual results may differ materially from those anticipated in these forward-looking statements. Factors that may contribute to such differences include, but are not limited to: the Company's ability to maintain and increase client marketing spend; the Company's ability, whether within or outside the Company's control, to maintain and increase the number of visitors to its websites and to convert those visitors and those to its third-party publishers' websites into client prospects in a cost-effective manner; the Company's exposure to data privacy and security risks; the impact from risks and uncertainties relating to the COVID-19 pandemic and its aftermath; the impact of changes in industry standards and government regulation including, but not limited to investigation or enforcement activities of the Federal Trade Commission and other regulatory agencies; the impact of changes in our business, our industry, and the current economic and regulatory climate on the Company's quarterly and annual results of operations; the Company's ability to compete effectively against others in the online marketing and media industry both for client budget and access to third-party media; the Company's ability to protect our intellectual property rights; and the impact from risks relating to counterparties on the Company's business. More information about potential factors that could affect the Company's business and financial results are contained in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission ("SEC"). Additional information will also be set forth in the Company's annual report on Form 10-K for the fiscal year ended June 30, 2022, which will be filed with the SEC. The Company does not intend and undertakes no duty to release publicly any updates or revisions to any forward-looking statements contained herein.
Investor Contact:
Erica Abrams
(415) 297-5864
ir@quinstreet.com
QUINSTREET, INC. | |||||||
June 30, | June 30, | ||||||
2022 | 2021 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 96,439 | $ | 110,318 | |||
Accounts receivable, net | 81,429 | 87,928 | |||||
Prepaid expenses and other assets | 4,924 | 7,930 | |||||
Total current assets | 182,792 | 206,176 | |||||
Property and equipment, net | 9,311 | 6,849 | |||||
Operating lease right-of-use assets | 6,801 | 10,983 | |||||
Goodwill | 121,141 | 117,833 | |||||
Other intangible assets, net | 49,696 | 59,177 | |||||
Deferred tax assets, noncurrent | 44,220 | 43,336 | |||||
Other assets, noncurrent | 5,948 | 5,161 | |||||
Total assets | $ | 419,909 | $ | 449,515 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 42,410 | $ | 45,231 | |||
Accrued liabilities | 54,459 | 57,650 | |||||
Deferred revenue | 341 | 33 | |||||
Other liabilities | 12,369 | 12,697 | |||||
Total current liabilities | 109,579 | 115,611 | |||||
Operating lease liabilities, noncurrent | 3,858 | 8,545 | |||||
Other liabilities, noncurrent | 20,472 | 30,211 | |||||
Total liabilities | 133,909 | 154,367 | |||||
Stockholders' equity: | |||||||
Common stock | 53 | 54 | |||||
Additional paid-in capital | 316,422 | 320,315 | |||||
Accumulated other comprehensive loss | (261) | (255) | |||||
Accumulated deficit | (30,214) | (24,966) | |||||
Total stockholders' equity | 286,000 | 295,148 | |||||
Total liabilities and stockholders' equity | $ | 419,909 | $ | 449,515 | |||
QUINSTREET, INC. | ||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net revenue | $ | 146,502 | $ | 151,198 | $ | 582,099 | $ | 578,487 | ||||||||
Cost of revenue (1) | 134,742 | 132,623 | 528,368 | 507,956 | ||||||||||||
Gross profit | 11,760 | 18,575 | 53,731 | 70,531 | ||||||||||||
Operating expenses: (1) | ||||||||||||||||
Product development | 6,911 | 4,568 | 21,906 | 19,344 | ||||||||||||
Sales and marketing | 3,269 | 2,688 | 11,042 | 10,991 | ||||||||||||
General and administrative | 3,742 | 6,339 | 25,501 | 26,270 | ||||||||||||
Operating (loss) income | (2,162) | 4,980 | (4,718) | 13,926 | ||||||||||||
Interest income | 3 | — | 10 | 39 | ||||||||||||
Interest expense | (258) | (349) | (1,075) | (1,296) | ||||||||||||
Other (expense) income, net | (30) | (35) | 21 | 16,660 | ||||||||||||
(Loss) income before income taxes | (2,447) | 4,596 | (5,762) | 29,329 | ||||||||||||
(Provision for) benefit from income taxes | (2,495) | (1,225) | 514 | (5,774) | ||||||||||||
Net (loss) income | $ | (4,942) | $ | 3,371 | $ | (5,248) | $ | 23,555 | ||||||||
Net (loss) income per share: | ||||||||||||||||
Basic | $ | (0.09) | $ | 0.06 | $ | (0.10) | $ | 0.44 | ||||||||
Diluted | $ | (0.09) | $ | 0.06 | $ | (0.10) | $ | 0.43 | ||||||||
Weighted average shares used in computing net (loss) income per share: | ||||||||||||||||
Basic | 54,342 | 53,702 | 54,339 | 53,166 | ||||||||||||
Diluted | 54,342 | 55,473 | 54,339 | 55,129 | ||||||||||||
(1) Cost of revenue and operating expenses include stock-based compensation expense as follows: | ||||||||||||||||
Cost of revenue | $ | 2,896 | $ | 1,991 | $ | 7,475 | $ | 8,997 | ||||||||
Product development | 1,078 | 571 | 2,575 | 2,339 | ||||||||||||
Sales and marketing | 901 | 563 | 2,378 | 2,459 | ||||||||||||
General and administrative | 1,741 | 1,317 | 6,078 | 5,838 | ||||||||||||
QUINSTREET, INC. (Unaudited) | ||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
Cash Flows from Operating Activities | ||||||||||||||
Net (loss) income | $ | (4,942) | $ | 3,371 | $ | (5,248) | $ | 23,555 | ||||||
Adjustments to reconcile net (loss) income to net | ||||||||||||||
Depreciation and amortization | 4,302 | 4,191 | 16,961 | 16,201 | ||||||||||
Provision for (benefit from) sales returns and | 202 | 12 | 581 | (341) | ||||||||||
Stock-based compensation | 6,616 | 4,442 | 18,506 | 19,633 | ||||||||||
Revaluation adjustment of contingent liability | (3,624) | — | (926) | — | ||||||||||
Non-cash lease expense | (291) | (238) | (1,043) | (816) | ||||||||||
Deferred income taxes | 2,028 | 1,145 | (791) | 5,408 | ||||||||||
Gain on divestitures of businesses, net | — | — | — | (16,615) | ||||||||||
Other adjustments, net | 125 | 60 | 482 | 741 | ||||||||||
Changes in assets and liabilities: | ||||||||||||||
Accounts receivable | (4,229) | (5,608) | 5,543 | (20,063) | ||||||||||
Prepaid expenses and other current assets | 1,409 | 608 | 3,003 | 5,955 | ||||||||||
Other assets, noncurrent | 121 | 91 | (788) | (173) | ||||||||||
Accounts payable | 2,564 | 5,544 | (2,885) | 6,558 | ||||||||||
Accrued liabilities | 3,153 | 848 | (5,031) | 10,612 | ||||||||||
Deferred revenue | 257 | (54) | 308 | (40) | ||||||||||
Net cash provided by operating activities | 7,691 | 14,412 | 28,672 | 50,615 | ||||||||||
Cash Flows from Investing Activities | ||||||||||||||
Capital expenditures | (466) | (602) | (2,842) | (1,969) | ||||||||||
Business acquisitions, net of cash acquired | (797) | — | (1,797) | (49,304) | ||||||||||
Internal software development costs | (1,188) | (793) | (4,672) | (3,131) | ||||||||||
Proceeds from divestitures of businesses, net of cash | — | — | — | 21,947 | ||||||||||
Purchases of equity investment | — | — | — | (4,000) | ||||||||||
Other investing activities | — | — | 86 | — | ||||||||||
Net cash used in investing activities | (2,451) | (1,395) | (9,225) | (36,457) | ||||||||||
Cash Flows from Financing Activities | ||||||||||||||
Proceeds from exercise of common stock options | 582 | 204 | 1,854 | 4,357 | ||||||||||
Payment of withholding taxes related to release of | (776) | (1,462) | (7,342) | (7,980) | ||||||||||
Post-closing payments and contingent consideration | (2,800) | (4,669) | (12,559) | (7,689) | ||||||||||
Stock repurchases | (15,268) | — | (15,268) | — | ||||||||||
Net cash used in financing activities | (18,262) | (5,927) | (33,315) | (11,312) | ||||||||||
Effect of exchange rate changes on cash, cash | (3) | 26 | (12) | (36) | ||||||||||
Net (decrease) increase in cash, cash equivalents | (13,025) | 7,116 | (13,880) | 2,810 | ||||||||||
Cash, cash equivalents and restricted cash at | 109,478 | 103,217 | 110,333 | 107,523 | ||||||||||
Cash, cash equivalents and restricted cash at end of | $ | 96,453 | $ | 110,333 | $ | 96,453 | $ | 110,333 | ||||||
Reconciliation of cash, cash equivalents, and | ||||||||||||||
Cash and cash equivalents | $ | 96,439 | $ | 110,318 | $ | 96,439 | $ | 110,318 | ||||||
Restricted cash included in other assets, noncurrent | 14 | 15 | 14 | 15 | ||||||||||
Total cash, cash equivalents and restricted cash | $ | 96,453 | $ | 110,333 | $ | 96,453 | $ | 110,333 | ||||||
QUINSTREET, INC. | ||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net (loss) income | $ | (4,942) | $ | 3,371 | $ | (5,248) | $ | 23,555 | ||||||||
Amortization of intangible assets | 2,808 | 3,024 | 11,581 | 11,870 | ||||||||||||
Stock-based compensation | 6,616 | 4,442 | 18,506 | 19,633 | ||||||||||||
Acquisition and divestiture costs | 2 | 45 | 519 | 811 | ||||||||||||
Gain on divestitures of businesses, | — | — | — | (16,615) | ||||||||||||
Contingent consideration adjustment | (3,624) | — | (926) | — | ||||||||||||
Litigation settlement expense | (62) | 231 | 34 | 231 | ||||||||||||
Tax settlement expense | — | 310 | 516 | 310 | ||||||||||||
Restructuring costs | 12 | 43 | 138 | 1,076 | ||||||||||||
Tax impact after non-GAAP items | 1,149 | (2,185) | (5,627) | (4,762) | ||||||||||||
Adjusted net income | $ | 1,959 | $ | 9,281 | $ | 19,493 | $ | 36,109 | ||||||||
Adjusted diluted net income per | $ | 0.04 | $ | 0.17 | $ | 0.35 | $ | 0.65 | ||||||||
Weighted average shares used in adjusted diluted net income per | 54,934 | 55,473 | 55,481 | 55,129 | ||||||||||||
QUINSTREET, INC. | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Net (loss) income | $ | (4,942) | $ | 3,371 | $ | (5,248) | $ | 23,555 | |||||||
Interest and other expense, net | 285 | 384 | 1,044 | 1,212 | |||||||||||
Provision for (benefit from) income | 2,495 | 1,225 | (514) | 5,774 | |||||||||||
Depreciation and amortization | 4,302 | 4,191 | 16,961 | 16,201 | |||||||||||
Stock-based compensation | 6,616 | 4,442 | 18,506 | 19,633 | |||||||||||
Acquisition and divestiture costs | 2 | 45 | 519 | 811 | |||||||||||
Gain on divestitures of businesses, | — | — | — | (16,615) | |||||||||||
Contingent consideration adjustment | (3,624) | — | (926) | — | |||||||||||
Litigation settlement expense | (62) | 231 | 34 | 231 | |||||||||||
Tax settlement expense | — | 310 | 516 | 310 | |||||||||||
Restructuring costs | 12 | 43 | 138 | 1,076 | |||||||||||
Adjusted EBITDA | $ | 5,084 | $ | 14,242 | $ | 31,030 | $ | 52,188 | |||||||
QUINSTREET, INC. | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Net cash provided by operating | $ | 7,691 | $ | 14,412 | $ | 28,672 | $ | 50,615 | |||||||
Capital expenditures | (466) | (602) | (2,842) | (1,969) | |||||||||||
Internal software development costs | (1,188) | (793) | (4,672) | (3,131) | |||||||||||
Free cash flow | $ | 6,037 | $ | 13,017 | $ | 21,158 | $ | 45,515 | |||||||
Changes in operating assets and | (3,275) | (1,428) | (150) | (2,848) | |||||||||||
Normalized free cash flow | $ | 2,762 | $ | 11,589 | $ | 21,008 | $ | 42,667 | |||||||
QUINSTREET, INC. | ||||||||||||||||
In the first quarter of fiscal year 2021, the Company completed the acquisition of Modernize, Inc. to increase the | ||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net revenue: | ||||||||||||||||
Financial Services | $ | 100,762 | $ | 112,168 | $ | 417,110 | $ | 426,819 | ||||||||
Home Services | 44,295 | 36,937 | 158,805 | 134,538 | ||||||||||||
Other Revenue | 1,445 | 2,093 | 6,184 | 5,543 | ||||||||||||
Divested Business | — | — | — | 11,587 | ||||||||||||
Total net revenue | $ | 146,502 | $ | 151,198 | $ | 582,099 | $ | 578,487 | ||||||||
View original content:https://www.prnewswire.com/news-releases/quinstreet-reports-fiscal-fourth-quarter-and-2022-results-301599327.html
SOURCE QuinStreet, Inc.
