- Reports revenue growth of 33% year-over-year
- Continues margin progress; delivers adjusted EBITDA of 8%
- Raises full fiscal year 2018 revenue outlook to 20% growth
For the second quarter, the Company reported revenue of
The Company generated
“Results were strong again in the second quarter. Revenue was up 33% year-over-year, and adjusted EBITDA margin was 8%,” commented
“We expect these general themes to continue. We are raising our revenue growth outlook for the full fiscal year to approximately 20%, with adjusted EBITDA margin of about 8%,” concluded Valenti.
Reconciliations of adjusted net income to GAAP net income, adjusted EBITDA to GAAP net income and normalized free cash flow to net cash provided by operating activities are included in the accompanying tables.
Conference Call Today at
The Company will host a conference call and corresponding live webcast at
Non-GAAP Financial Measures
This release and the accompanying tables include a discussion of adjusted EBITDA, adjusted net income, adjusted diluted net income per share, 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
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, and (vi) it is an element of certain financial covenants under our historical borrowing arrangements. 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 on periods or companies 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 restructuring expense, external expenses related to the material weakness disclosed in our Annual Report on Form 10-K, acquisition related expense, and other income and expense) and the non-cash impact of depreciation expense, amortization expense and stock-based compensation expense.
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 and amortization of intangible assets), 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 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.
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", "intend", "potential" 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, strategic and operational plans and results of analyses on impairment charges. 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 impact of changes in industry standards and government regulation including, but not limited to investigation or enforcement activities of the
About
Investor Contact:
(415) 297-5864
eabrams@quinstreet.com
QUINSTREET, INC. | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
December 31, | June 30, | |||||||
2017 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 42,406 | $ | 49,571 | ||||
Accounts receivable, net | 48,717 | 44,059 | ||||||
Prepaid expenses and other assets | 6,798 | 6,225 | ||||||
Total current assets | 97,921 | 99,855 | ||||||
Property and equipment, net | 4,687 | 5,613 | ||||||
Goodwill | 62,283 | 56,118 | ||||||
Other intangible assets, net | 10,243 | 4,105 | ||||||
Other assets, noncurrent | 8,138 | 8,617 | ||||||
Total assets | $ | 183,272 | $ | 174,308 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 25,381 | $ | 25,205 | ||||
Accrued liabilities | 29,768 | 26,223 | ||||||
Deferred revenue | 730 | 1,126 | ||||||
Total current liabilities | 55,879 | 52,554 | ||||||
Other liabilities, noncurrent | 2,486 | 3,672 | ||||||
Total liabilities | 58,365 | 56,226 | ||||||
Stockholders' equity: | ||||||||
Common stock | 46 | 45 | ||||||
Additional paid-in capital | 266,982 | 263,533 | ||||||
Accumulated other comprehensive loss | (480 | ) | (463 | ) | ||||
Accumulated deficit | (141,641 | ) | (145,033 | ) | ||||
Total stockholders' equity | 124,907 | 118,082 | ||||||
Total liabilities and stockholders' equity | $ | 183,272 | $ | 174,308 | ||||
QUINSTREET, INC. | ||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
Net revenue | $ | 87,494 | $ | 65,610 | $ | 174,912 | $ | 139,048 | ||||||||||||||
Cost of revenue (1) | 75,239 | 61,657 | 151,179 | 129,465 | ||||||||||||||||||
Gross profit | 12,255 | 3,953 | 23,733 | 9,583 | ||||||||||||||||||
Operating expenses: (1) | ||||||||||||||||||||||
Product development | 3,475 | 3,314 | 6,689 | 7,268 | ||||||||||||||||||
Sales and marketing | 2,597 | 2,168 | 5,044 | 4,758 | ||||||||||||||||||
General and administrative | 4,511 | 3,794 | 8,971 | 7,825 | ||||||||||||||||||
Restructuring charges | — | 2,403 | — | 2,403 | ||||||||||||||||||
Operating income (loss) | 1,672 | (7,726 | ) | 3,029 | (12,671 | ) | ||||||||||||||||
Interest income | 36 | 36 | 73 | 57 | ||||||||||||||||||
Interest expense | — | (135 | ) | — | (291 | ) | ||||||||||||||||
Other income (expense), net | 243 | (25 | ) | 286 | 110 | |||||||||||||||||
Income (loss) before taxes | 1,951 | (7,850 | ) | 3,388 | (12,795 | ) | ||||||||||||||||
(Provision for) benefit from taxes | (4 | ) | — | 4 | 1,376 | |||||||||||||||||
Net income (loss) | $ | 1,947 | $ | (7,850 | ) | $ | 3,392 | $ | (11,419 | ) | ||||||||||||
Net income (loss) per share: | ||||||||||||||||||||||
Basic | $ | 0.04 | $ | (0.17 | ) | $ | 0.07 | $ | (0.25 | ) | ||||||||||||
Diluted | $ | 0.04 | $ | (0.17 | ) | $ | 0.07 | $ | (0.25 | ) | ||||||||||||
Weighted average shares used in computing net income (loss) per share: | ||||||||||||||||||||||
Basic | 45,974 | 45,731 | 45,776 | 45,700 | ||||||||||||||||||
Diluted | 49,614 | 45,731 | 48,172 | 45,700 | ||||||||||||||||||
(1) Cost of revenue and operating expenses include stock-based compensation expense as follows: | ||||||||||||||||||||||
Cost of revenue | $ | 1,001 | $ | 728 | $ | 1,926 | $ | 1,699 | ||||||||||||||
Product development | 484 | 471 | 960 | 1,007 | ||||||||||||||||||
Sales and marketing | 306 | 220 | 605 | 577 | ||||||||||||||||||
General and administrative | 772 | 681 | 1,509 | 1,424 | ||||||||||||||||||
Restructuring charges | — | 42 | — | 42 | ||||||||||||||||||
QUINSTREET, INC. | |||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Cash Flows from Operating Activities | |||||||||||||||||||||
Net income (loss) | $ | 1,947 | $ | (7,850 | ) | $ | 3,392 | $ | (11,419 | ) | |||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|||||||||||||||||||||
Depreciation and amortization | 1,810 | 2,950 | 4,071 | 6,323 | |||||||||||||||||
Provision for sales returns and doubtful accounts receivable | 102 | 116 | 241 | 211 | |||||||||||||||||
Stock-based compensation | 2,563 | 2,142 | 5,000 | 4,749 | |||||||||||||||||
Other adjustments, net | (272 | ) | 9 | (272 | ) | (147 | ) | ||||||||||||||
Changes in assets and liabilities: | |||||||||||||||||||||
Accounts receivable | 76 | 3,069 | (4,899 | ) | 5,889 | ||||||||||||||||
Prepaid expenses and other assets | 668 | 1,134 | (44 | ) | 560 | ||||||||||||||||
Accounts payable | (2,106 | ) | (49 | ) | 169 | 627 | |||||||||||||||
Accrued liabilities | 3,658 | (719 | ) | 3,543 | (4,502 | ) | |||||||||||||||
Deferred revenue | (104 | ) | 212 | (396 | ) | 49 | |||||||||||||||
Other liabilities, noncurrent | (1,047 | ) | (131 | ) | (1,186 | ) | (250 | ) | |||||||||||||
Net cash provided by operating activities | 7,295 | 883 | 9,619 | 2,090 | |||||||||||||||||
Cash Flows from Investing Activities | |||||||||||||||||||||
Capital expenditures | (75 | ) | (203 | ) | (199 | ) | (604 | ) | |||||||||||||
Business acquisitions | (14,154 | ) | — | (14,154 | ) | — | |||||||||||||||
Internal software development costs | (518 | ) | (487 | ) | (1,061 | ) | (1,182 | ) | |||||||||||||
Other investing activities | 224 | (44 | ) | 224 | 46 | ||||||||||||||||
Net cash used in investing activities | (14,523 | ) | (734 | ) | (15,190 | ) | (1,740 | ) | |||||||||||||
Cash Flows from Financing Activities | |||||||||||||||||||||
Proceeds from exercise of common stock options | 898 | — | 898 | — | |||||||||||||||||
Withholding taxes related to release of restricted stock, net of share settlement |
(1,109 | ) | (189 | ) | (1,835 | ) | (536 | ) | |||||||||||||
Repurchases of common stock | (522 | ) | (1,043 | ) | (647 | ) | (1,043 | ) | |||||||||||||
Repayment of revolving loan facility | — | (15,000 | ) | — | (15,000 | ) | |||||||||||||||
Net cash used in financing activities | (733 | ) | (16,232 | ) | (1,584 | ) | (16,579 | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | 13 | (10 | ) | 15 | ||||||||||||||||
Net decrease in cash and cash equivalents | (7,961 | ) | (16,070 | ) | (7,165 | ) | (16,214 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | 50,367 | 53,566 | 49,571 | 53,710 | |||||||||||||||||
Cash and cash equivalents at end of period | $ | 42,406 | $ | 37,496 | $ | 42,406 | $ | 37,496 | |||||||||||||
QUINSTREET, INC. | |||||||||||||||||
RECONCILIATION OF NET INCOME (LOSS) TO | |||||||||||||||||
ADJUSTED NET INCOME (LOSS) | |||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net income (loss) | $ | 1,947 | $ | (7,850 | ) | $ | 3,392 | $ | (11,419 | ) | |||||||
Amortization of intangible assets | 717 | 1,691 | 1,851 | 3,639 | |||||||||||||
Stock-based compensation | 2,563 | 2,100 | 5,000 | 4,707 | |||||||||||||
Material weakness related expense | — | — | 528 | — | |||||||||||||
Acquisition costs | 524 | — | 524 | — | |||||||||||||
Restructuring | — | 2,403 | — | 2,403 | |||||||||||||
Tax impact after non-GAAP items | (2,070 | ) | — | (4,066 | ) | — | |||||||||||
Adjusted net income (loss) | $ | 3,681 | $ | (1,656 | ) | $ | 7,229 | $ | (670 | ) | |||||||
Adjusted diluted net income (loss) per share | $ | 0.07 | $ | (0.04 | ) | $ | 0.15 | $ | (0.01 | ) | |||||||
Weighted average shares used in computing adjusted diluted net income (loss) per share |
49,614 | 45,731 | 48,172 | 45,700 | |||||||||||||
QUINSTREET, INC. | |||||||||||||||||
RECONCILIATION OF NET INCOME (LOSS) TO | |||||||||||||||||
ADJUSTED EBITDA | |||||||||||||||||
(In thousands) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net income (loss) | $ | 1,947 | $ | (7,850 | ) | $ | 3,392 | $ | (11,419 | ) | |||||||
Interest and other (income) expense, net | (279 | ) | 124 | (359 | ) | 124 | |||||||||||
Provision for (benefit from) taxes | 4 | — | (4 | ) | (1,376 | ) | |||||||||||
Depreciation and amortization | 1,810 | 2,950 | 4,071 | 6,323 | |||||||||||||
Stock-based compensation | 2,563 | 2,100 | 5,000 | 4,707 | |||||||||||||
Material weakness related expense | — | — | 528 | — | |||||||||||||
Acquisition costs | 524 | — | 524 | — | |||||||||||||
Restructuring | — | 2,403 | — | 2,403 | |||||||||||||
Adjusted EBITDA | $ | 6,569 | $ | (273 | ) | $ | 13,152 | $ | 762 | ||||||||
QUINSTREET, INC. | |||||||||||||||||
RECONCILIATION OF NET CASH PROVIDED BY | |||||||||||||||||
OPERATING ACTIVITIES TO FREE CASH FLOW | |||||||||||||||||
AND NORMALIZED FREE CASH FLOW | |||||||||||||||||
(In thousands) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net cash provided by operating activities | $ | 7,295 | $ | 883 | $ | 9,619 | $ | 2,090 | |||||||||
Capital expenditures | (75 | ) | (203 | ) | (199 | ) | (604 | ) | |||||||||
Internal software development costs | (518 | ) | (487 | ) | (1,061 | ) | (1,182 | ) | |||||||||
Free cash flow | $ | 6,702 | $ | 193 | $ | 8,359 | $ | 304 | |||||||||
Changes in operating assets and liabilities | (1,145 | ) | (3,516 | ) | 2,813 | (2,373 | ) | ||||||||||
Normalized free cash flow | $ | 5,557 | $ | (3,323 | ) | $ | 11,172 | $ | (2,069 | ) | |||||||
Source: QuinStreet, Inc.