QuinStreet Hits A New All Time Low After Reporting Earnings

QuinStreet, Inc. (QNST), hit an all time low this morning after issuing its earnings report for the quarter ending September 30, 2012

The stock traded as low as $5.66 today and is current trading as of time of publication at $6 a share.

At $6 a share the company has a market cap of just $255 million dollars, which is not great for a company with $103 million in cash.

Shares of QuinStreet hit an all time high of $23.86 back in Feburary of 2011

QuinStreet bought Insurance.com and CarInsurance.com for around $50 million dollars each and has spent a lot of money in the domain sector over the years in the insurance and educational verticals.

As far as the earnings report the Company reported total revenue of $78.6 million. Adjusted EBITDA was $12.0 million, or 15% of revenue.

The Company reported GAAP net loss of $137 thousand, or $(0.00) per share, for the quarter. Adjusted net income for the quarter was $6.2 million, or $0.14 per diluted share. Adjusted net income excludes stock-based compensation expense and amortization of intangible assets, net of estimated tax.

Revenue for the Education client vertical was $34.6 million.

Revenue for the Financial Services client vertical was $30.3 million.

Revenue for Other client verticals was $13.7 million.

The Company generated $9.7 million of normalized free cash flow and closed the quarter with $103.6 million in cash and marketable securities.

Reconciliations of adjusted net income to net (loss) income, adjusted EBITDA to net (loss) income, and normalized free cash flow to net cash provided by operating activities are included in the accompanying tables.

“We continue to work through challenges and transitions in our core Financial Services and Education verticals,” commented Doug Valenti, QuinStreet CEO. “We are encouraged by our progress on key initiatives that we believe better position us for a return to growth. We also continue to manage the Company with characteristic financial discipline, generating attractive EBITDA and free cash flow margins, with minimal demands for capital.”

“Visibility remains limited. We expect revenue for the current or second fiscal quarter to be in the range of $75 to $80 million.

Adjusted EBITDA margin will likely be in the mid-to-high teens. We continue to target 20% adjusted EBITDA margin for the full fiscal year,” concluded Valenti.

 

QUINSTREET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
	September 30,	June 30,
	2012	2012
Assets
Current assets
Cash and cash equivalents	$ 64,448	$ 68,531
Marketable securities	39,145	36,736
Accounts receivable, net	44,912	52,830
Deferred tax assets	7,662	7,665
Prepaid expenses and other assets	7,783	7,774
Total current assets	163,950	173,536
Property and equipment, net	8,430	8,755
Goodwill	242,955	243,049
Other intangible assets, net	65,645	72,444
Deferred tax assets, noncurrent	8,446	8,446
Other assets, noncurrent	878	930
Total assets	$ 490,304	$ 507,160
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$ 20,074	$ 22,870
Accrued liabilities	22,324	29,462
Deferred revenue	2,243	2,553
Debt	13,623	15,429
Total current liabilities	58,264	70,314
Debt, noncurrent	89,180	92,167
Other liabilities, noncurrent	7,001	6,322
Total liabilities	154,445	168,803
Stockholders’ equity
Common stock	43	43
Additional paid-in capital	217,299	220,552
Treasury stock	—	(1,178)
Accumulated other comprehensive loss	(1,726)	(1,439)
Retained earnings	120,243	120,379
Total stockholders’ equity	335,859	338,357
Total liabilities and stockholders’ equity	$ 490,304	$ 507,160

QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
	Three Months Ended
	September 30,
	2012	2011
Net revenue	$ 78,626	$ 101,224
Cost of revenue (1)	65,190	75,748
Gross profit	13,436	25,476
Operating expenses: (1)
Product development	4,893	6,074
Sales and marketing	3,691	4,034
General and administrative	3,926	5,217
Operating income	926	10,151
Interest income	28	38
Interest expense	(1,012)	(1,083)
Other income (expense), net	46	(31)
Income before income taxes	(12)	9,075
Provision for taxes	(125)	(3,581)
Net (loss) income	$ (137)	$ 5,494
Net (loss) income per share
Basic	$ (0.00)	$ 0.12
Diluted	$ (0.00)	$ 0.11
Weighted average shares used in computing net income per share
Basic	42,812	47,505
Diluted	43,320	48,975
(1) Cost of revenue and operating expenses include stock-based compensation expense as follows:
Cost of revenue	$ 923	$ 1,179
Product development	693	660
Sales and marketing	765	779
General and administrative	389	756

QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	Three Months Ended
	September 30,
	2012	2011
Cash Flows from Operating Activities
Net (loss) income	$ (137)	$ 5,494
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,279	7,108
Provision for sales returns and doubtful accounts receivable	(316)	36
Stock-based compensation	2,770	3,374
Excess tax benefits from stock-based compensation	(24)	(35)
Other non-cash adjustments, net	75	243
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	8,323	(6,087)
Prepaid expenses and other assets	(9)	3,155
Other assets, noncurrent	57	29
Accounts payable	(2,754)	4,487
Accrued liabilities	(5,926)	(7,307)
Deferred revenue	(309)	(339)
Other liabilities, noncurrent	342	519
Net cash provided by operating activities	10,371	10,677
Cash Flows from Investing Activities
Capital expenditures	(291)	(753)
Business acquisitions, net of notes payable and cash acquired	—	(30,204)
Internal software development costs	(651)	(559)
Purchases of marketable securities	(14,862)	(9,610)
Proceeds from sales and maturities of marketable securities	12,145	5,433
Other investing activities	4	28
Net cash used in investing activities	(3,655)	(35,665)
Cash Flows from Financing Activities
Proceeds from exercise of common stock options	236	1,817
Proceeds from bank debt		—
Principal payments on bank debt	(1,250)	(1,313)
Payment of bank loan upfront fees		—
Principal payments on acquisition-related notes payable	(3,568)	(1,213)
Excess tax benefits from stock-based compensation	24	35
Withholding taxes related to restricted stock net share settlement	(101)	(184)
Repurchases of common stock	(6,157)	—
Net cash used in financing activities	(10,816)	(858)
Effect of exchange rate changes on cash and cash equivalents	17	25
Net decrease in cash and cash equivalents	(4,083)	(25,821)
Cash and cash equivalents at beginning of period	68,531	132,290
Cash and cash equivalents at end of period	$ 64,448	$ 106,469