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QuinStreet Reports Fiscal Fourth Quarter and 2021 Results

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·15 min read
In this article:
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- Record FYQ4 revenue of $151 million, growth accelerates to 29%

- FYQ4 revenue growth excluding divested businesses accelerates to 47%

- Grows net income 151%, adjusted EBITDA 71% in FYQ4

- Momentum and strong performance expected to continue in FY22

FOSTER CITY, Calif., Aug. 4, 2021 /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 full year ended June 30, 2021.

For the fourth quarter, the Company reported revenue of $151.2 million. Revenue excluding divested businesses grew 47% year-over-year.

GAAP net income for the fourth quarter was $3.8 million, or $0.07 per diluted share. Adjusted net income was $9.6 million, or $0.17 per diluted share.

Adjusted EBITDA for the fourth quarter grew 71% year-over-year to $14.3 million.

For fiscal year 2021, the Company reported revenue of $578.5 million. Revenue excluding divested businesses grew 36% year-over-year.

GAAP net income for fiscal year 2021 was $24.0 million, or $0.43 per diluted share. Adjusted net income was $36.4 million, or $0.66 per diluted share.

Adjusted EBITDA for fiscal year 2021 grew 44% year-over-year to $52.3 million.

For the fiscal year, the Company generated $50.6 million in operating cash flow and closed the year with $110.3 million in cash and equivalents.

"Revenue growth again accelerated in fiscal Q4 due to continued strong results in Insurance and Home Services, and a return to growth in credit-driven client verticals. We also continued to make excellent progress with growth initiatives," commented Doug Valenti, QuinStreet CEO.

"We expect the strong business momentum and performance to continue in fiscal Q1 and fiscal year 2022, with continued double-digit organic revenue growth. As a reminder, we lapped the Modernize acquisition on July 1. Revenue in the September quarter, our fiscal Q1, is expected to be between $150 and $155 million, seasonally consistent with last quarter's outperformance and representing 20% year-over-year growth excluding divested businesses at the midpoint of the range. We expect fiscal Q1 adjusted EBITDA to be between $13.0 and $13.5 million. Revenue for fiscal year 2022 is expected to be between $635 and $665 million, representing 15% year-over-year growth excluding divested businesses at the midpoint of the range. We expect fiscal year 2022 adjusted EBITDA to be between $63.5 and $66.5 million, representing growth of about 25% at the midpoint of the range and another year of margin expansion," concluded Valenti.

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 +1 800-367-2403 (domestic) or +1 334-777-6978 (international callers) using passcode #6068023. 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 callers) and using passcode #6068023. 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 income less provision for 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, strategic review costs, 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 income adjusted for amortization expense, stock-based compensation expense, acquisition and divestiture costs, gain on divestitures of businesses, net, strategic review costs, 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, strategic review costs, 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, 2021, 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:
Hayden Blair
(650) 578-7824
hblair@quinstreet.com

QUINSTREET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)




June 30,



June 30,




2021



2020


Assets









Current assets:









Cash and cash equivalents


$

110,318



$

107,509


Accounts receivable, net



87,928




64,472


Prepaid expenses and other assets



7,932




13,591


Total current assets



206,178




185,572


Property and equipment, net



6,849




5,657


Operating lease right-of-use assets



10,983




9,118


Goodwill



117,833




80,677


Other intangible assets, net



59,177




28,174


Deferred tax assets, noncurrent



43,737




48,673


Other assets, noncurrent



5,160




536


Total assets


$

449,917



$

358,407


Liabilities and Stockholders' Equity









Current liabilities:









Accounts payable


$

45,231



$

36,759


Accrued liabilities



57,650




42,271


Deferred revenue



33




73


Other liabilities



12,697




6,734


Total current liabilities



115,611




85,837


Operating lease liabilities, noncurrent



8,545




8,692


Other liabilities, noncurrent



30,211




7,934


Total liabilities



154,367




102,463


Stockholders' equity:









Common stock



54




52


Additional paid-in capital



320,315




304,650


Accumulated other comprehensive loss



(255)




(237)


Accumulated deficit



(24,564)




(48,521)


Total stockholders' equity



295,550




255,944


Total liabilities and stockholders' equity


$

449,917



$

358,407


QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)




Three Months Ended



Fiscal Year Ended




June 30,



June 30,




2021



2020



2021



2020


Net revenue


$

151,198



$

116,961



$

578,487



$

490,339


Cost of revenue (1)



132,622




105,147




507,956




437,864


Gross profit



18,576




11,814




70,531




52,475


Operating expenses: (1)

















Product development



4,568




4,001




19,344




14,206


Sales and marketing



2,688




1,805




10,991




8,876


General and administrative



6,239




6,789




26,170




23,188


Operating income (loss)



5,081




(781)




14,026




6,205


Interest income






61




39




230


Interest expense



(349)




(130)




(1,296)




(696)


Other (expense) income , net



(37)




2,722




16,659




12,947


Income before income taxes



4,695




1,872




29,428




18,686


Provision for income taxes



(922)




(370)




(5,471)




(584)


Net income


$

3,773



$

1,502



$

23,957



$

18,102



















Net income per share:

















Basic


$

0.07



$

0.03



$

0.45



$

0.35


Diluted


$

0.07



$

0.03



$

0.43



$

0.34



















Weighted average shares used in computing net income per share:


Basic



53,702




52,059




53,166




51,529


Diluted



55,473




53,301




55,129




53,387




































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


Cost of revenue


$

1,991



$

2,754



$

8,997



$

8,569


Product development



571




632




2,339




1,819


Sales and marketing



563




570




2,459




1,701


General and administrative



1,317




1,544




5,838




4,628


QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Three Months Ended



Fiscal Year Ended



June 30,



June 30,



2021



2020



2021



2020


Cash Flows from Operating Activities
















Net income

$

3,773



$

1,502



$

23,957



$

18,102


Adjustments to reconcile net income to net cash provided by

operating activities:
















Depreciation and amortization


4,191




2,959




16,201




11,476


Provision for (benefit from) sales returns and doubtful
accounts receivable


12




446




(341)




625


Stock-based compensation


4,442




5,500




19,633




16,717


Non-cash lease expense


(238)




(204)




(816)




259


Deferred income taxes


744




288




5,007




3,546


Gain on divestitures of businesses, net





(2,759)




(16,615)




(13,578)


Other adjustments, net


61




(130)




742




315


Changes in assets and liabilities:
















Accounts receivable


(5,608)




7,720




(20,063)




11,354


Prepaid expenses and other current assets


607




(4,425)




5,954




(8,136)


Other assets, noncurrent


91




4,547




(173)




5,508


Accounts payable


5,544




(3,189)




6,558




103


Accrued liabilities


847




743




10,611




1,173


Deferred revenue


(54)




(27)




(40)




178


Other liabilities, noncurrent





1







(34)


Net cash provided by operating activities


14,412




12,972




50,615




47,608


Cash Flows from Investing Activities
















Capital expenditures


(602)




...

(641)




(1,969)




(1,962)


Business acquisitions, net of cash acquired








(49,304)




(2,000)


Internal software development costs


(793)




(616)




(3,131)




(2,291)


Proceeds from divestitures of businesses, net of cash

divested





3,991




21,947




15,096


Purchases of equity investment








(4,000)





Other investing activities











25


Net cash (used in) provided by investing activities


(1,395)




2,734




(36,457)




8,868


Cash Flows from Financing Activities
















Proceeds from exercise of common stock options


204




262




4,357




4,092


Payment of withholding taxes related to release of restricted
stock, net of share settlement


(1,462)




(963)




(7,980)




(6,376)


Post-closing payments and contingent consideration related

to acquisitions


(4,669)




(4,644)




(7,689)




(9,348)


Net cash used in financing activities


(5,927)




(5,345)

...


(11,312)




(11,632)


Effect of exchange rate changes on cash, cash equivalents
and restricted cash


26




9




(36)




143


Net increase in cash, cash equivalents and restricted cash


7,116




10,370




2,810




44,987


Cash, cash equivalents and restricted cash at beginning of
period


103,217




97,153




107,523




62,536


Cash, cash equivalents and restricted cash at end of period

$

110,333



$

107,523



$

110,333



$

107,523


Reconciliation of cash, cash equivalents, and restricted
cash to the condensed consolidated balance sheets
















Cash and cash equivalents

$

110,318



$

107,509



$

110,318



$

107,509


Restricted cash included in other assets, noncurrent


15




14




15




14


Total cash, cash equivalents and restricted cash

$

110,333



$

107,523



$

110,333



$

107,523


QUINSTREET, INC.

RECONCILIATION OF NET INCOME TO

ADJUSTED NET INCOME

(In thousands, except per share data)

(Unaudited)




Three Months Ended



Fiscal Year Ended




June 30,



June 30,




2021



2020



2021



2020


Net income


$

3,773



$

1,502



$

23,957



$

18,102


Amortization of intangible assets



3,024




2,011




11,870




7,810


Stock-based compensation



4,442




5,500




19,633




16,717


Acquisition and divestiture costs



45




634




811




985


Gain on divestitures of businesses, net






(2,759)




(16,615)




(13,578)


Strategic review costs






68







330


Litigation settlement expense



231




15




231




95


Tax settlement expense



310







310





Restructuring costs



43




3




1,076




421


Tax impact after non-GAAP items



(2,251)




387




(4,828)




(3,985)


Adjusted net income


$

9,617



$

7,361



$

36,445



$

26,897



















Adjusted diluted net income per share


$

0.17



$

0.14



$

0.66



$

0.50



















Weighted average shares used in computing

adjusted diluted net income per share



55,473




53,301




55,129




53,387


QUINSTREET, INC.

RECONCILIATION OF NET INCOME TO

ADJUSTED EBITDA

(In thousands)

(Unaudited)




Three Months Ended



Fiscal Year Ended




June 30,



June 30,




2021



2020



2021



2020


Net income


$

3,773



$

1,502



$

23,957



$

18,102


Interest and other expense, net



386




106




1,213




1,097


Provision for income taxes



922




370




5,471




584


Depreciation and amortization



4,191




2,959




16,201




11,476


Stock-based compensation



4,442




5,500




19,633




16,717


Acquisition and divestiture costs



45




634




811




985


Gain on divestitures of businesses, net






(2,759)




(16,615)




(13,578)


Strategic review costs






68







330


Litigation settlement expense



231




15




231




95


Tax settlement expense



310







310





Restructuring costs



43




3




1,076




421


Adjusted EBITDA


$

14,343



$

8,398



$

52,288



$

36,229


QUINSTREET, INC.

RECONCILIATION OF CASH PROVIDED BY

OPERATING ACTIVITIES TO FREE CASH FLOW

AND NORMALIZED FREE CASH FLOW

(In thousands)

(Unaudited)




Three Months Ended



Fiscal Year Ended




June 30,



June 30,




2021



2020



2021



2020


Net cash provided by operating activities


$

14,412



$

12,972



$

50,615



$

47,608


Capital expenditures



(602)




(641)




(1,969)




(1,962)


Internal software development costs



(793)




(616)




(3,131)




(2,291)


Free cash flow


$

13,017



$

11,715



$

45,515



$

43,355


Changes in operating assets and liabilities



(1,427)




(5,370)




(2,847)




(10,146)


Normalized free cash flow


$

11,590



$

6,345



$

42,668



$

33,209


QUINSTREET, INC.
DISAGGREGATION OF REVENUE
(In thousands)
(Unaudited)

In the first quarter of fiscal year 2021, the Company completed the acquisition of Modernize, Inc. to increase the scale and capabilities in the home services client vertical. In addition, in fiscal year 2020 and in the first quarter of fiscal year 2021, the Company completed the divestitures of its education client vertical, business-to-business technology client vertical, its mortgage business, as well as its wholly owned subsidiaries, QuinStreet Brasil Online Marketing e Midia Ltda, and VEMM, LLC along with its interests in Euro-Demand Do Brasil Serviços de Geração de Leads Ltda to narrow its focus to the best performing businesses and market opportunities.

As a result of these activities, in the second quarter of fiscal year 2021, the Company updated its reporting structure which resulted in two client verticals: financial services and home services, which was applied on a retrospective basis. All remaining businesses that are not significant enough for separate reporting are included in other revenue. The following table presents the Company's net revenue disaggregated by vertical:



Three Months Ended



Fiscal Year Ended




June 30,



June 30,




2021



2020



2021



2020


Net revenue:

















Financial Services


$

112,168



$

88,486



$

426,819



$

366,289


Home Services



36,937




14,361




134,538




49,931


Other Revenue



2,093







5,543





Divested Businesses:

















Education






13,887




11,587




61,214


Business-to-Business Technology






64







9,060


Mortgage Business






163







3,234


Brazil Businesses












611


Total net revenue


$

151,198



$

116,961



$

578,487



$

490,339


Cision
Cision

View original content:https://www.prnewswire.com/news-releases/quinstreet-reports-fiscal-fourth-quarter-and-2021-results-301348629.html

SOURCE QuinStreet, Inc.