10-Q 1 qnst-20231231.htm 10-Q 10-Q
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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 December 31, 2023

or

 

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, 12th 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 January 31, 2024: 54,890,505

 


 

 

QUINSTREET, INC.

INDEX

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements

 

3

 

 

 

Condensed Consolidated Balance Sheets at December 31, 2023 and June 30, 2023

 

3

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2023 and 2022

 

4

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended December 31, 2023 and 2022

 

5

 

 

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended December 31, 2023 and 2022

 

6

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 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

 

19

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

28

 

 

 

Item 4. Controls and Procedures

 

28

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

29

 

 

 

Item 1A. Risk Factors

 

29

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

52

 

 

 

Item 3. Defaults Upon Senior Securities

 

52

 

 

 

Item 4. Mine Safety Disclosures

 

52

 

 

 

Item 5. Other Information

 

52

 

 

 

Item 6. Exhibits

 

53

 

 

 

SIGNATURES

 

54

 

2


 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1. FINANCIAL STATEMENTS

QUINSTREET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

December 31,

 

 

June 30,

 

 

 

2023

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

45,520

 

 

$

73,677

 

Accounts receivable, net of allowances and reserves of $3,578 and $3,722 as of December 31, 2023 and June 30, 2023, respectively

 

 

74,727

 

 

 

67,748

 

Prepaid expenses and other assets

 

 

7,832

 

 

 

9,779

 

Total current assets

 

 

128,079

 

 

 

151,204

 

Property and equipment, net

 

 

20,604

 

 

 

16,749

 

Operating lease right-of-use assets

 

 

11,909

 

 

 

3,536

 

Goodwill

 

 

121,141

 

 

 

121,141

 

Other intangible assets, net

 

 

33,544

 

 

 

38,700

 

Other assets, noncurrent

 

 

5,640

 

 

 

5,825

 

Total assets

 

$

320,917

 

 

$

337,155

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

33,783

 

 

$

37,926

 

Accrued liabilities

 

 

44,538

 

 

 

44,010

 

Deferred revenue

 

 

 

 

 

9

 

Other liabilities

 

 

6,714

 

 

 

7,875

 

Total current liabilities

 

 

85,035

 

 

 

89,820

 

Operating lease liabilities, noncurrent

 

 

9,056

 

 

 

1,261

 

Other liabilities, noncurrent

 

 

11,573

 

 

 

16,273

 

Total liabilities

 

 

105,664

 

 

 

107,354

 

Commitments and contingencies (See Note 10)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock: $0.001 par value; 100,000,000 shares authorized; 54,887,538 and 54,192,928 shares issued and outstanding as of December 31, 2023 and June 30, 2023

 

 

55

 

 

 

54

 

Additional paid-in capital

 

 

336,665

 

 

 

329,093

 

Accumulated other comprehensive loss

 

 

(268

)

 

 

(266

)

Accumulated deficit

 

 

(121,199

)

 

 

(99,080

)

Total stockholders' equity

 

 

215,253

 

 

 

229,801

 

Total liabilities and stockholders' equity

 

$

320,917

 

 

$

337,155

 

See notes to condensed consolidated financial statements

 

3


 

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenue

 

$

122,683

 

 

$

134,048

 

 

$

246,606

 

 

$

277,641

 

Cost of revenue (1)

 

 

115,830

 

 

 

125,510

 

 

 

232,104

 

 

 

256,755

 

Gross profit

 

 

6,853

 

 

 

8,538

 

 

 

14,502

 

 

 

20,886

 

Operating expenses: (1)

 

 

 

 

 

 

 

 

 

 

 

 

Product development

 

 

7,272

 

 

 

7,174

 

 

 

14,909

 

 

 

14,000

 

Sales and marketing

 

 

3,325

 

 

 

3,166

 

 

 

6,449

 

 

 

6,266

 

General and administrative

 

 

7,651

 

 

 

7,370

 

 

 

14,438

 

 

 

14,689

 

Operating loss

 

 

(11,395

)

 

 

(9,172

)

 

 

(21,294

)

 

 

(14,069

)

Interest income

 

 

166

 

 

 

12

 

 

 

332

 

 

 

19

 

Interest expense

 

 

(111

)

 

 

(213

)

 

 

(222

)

 

 

(439

)

Other income (expense), net

 

 

38

 

 

 

(9

)

 

 

67

 

 

 

(32

)

Loss before income taxes

 

 

(11,302

)

 

 

(9,382

)

 

 

(21,117

)

 

 

(14,521

)

(Provision for) benefit from income taxes

 

 

(252

)

 

 

1,403

 

 

 

(1,002

)

 

 

2,025

 

Net loss

 

$

(11,554

)

 

$

(7,979

)

 

$

(22,119

)

 

$

(12,496

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.21

)

 

$

(0.15

)

 

$

(0.41

)

 

$

(0.23

)

Diluted

 

$

(0.21

)

 

$

(0.15

)

 

$

(0.41

)

 

$

(0.23

)

Weighted-average shares used in computing net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

54,759

 

 

 

53,709

 

 

 

54,612

 

 

 

53,529

 

Diluted

 

 

54,759

 

 

 

53,709

 

 

 

54,612

 

 

 

53,529

 

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

 

Cost of revenue

 

$

2,229

 

 

$

2,113

 

 

$

4,281

 

 

$

4,232

 

Product development

 

 

837

 

 

 

765

 

 

 

1,610

 

 

 

1,530

 

Sales and marketing

 

 

723

 

 

 

658

 

 

 

1,363

 

 

 

1,310

 

General and administrative

 

 

2,279

 

 

 

1,941

 

 

 

4,089

 

 

 

3,675

 

 

See notes to condensed consolidated financial statements

4


 

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net loss

$

(11,554

)

 

$

(7,979

)

 

$

(22,119

)

 

$

(12,496

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

 

 

 

(2

)

 

 

(2

)

 

 

(7

)

Total other comprehensive loss

 

 

 

 

 

(2

)

 

 

(2

)

 

 

(7

)

Comprehensive loss

 

$

(11,554

)

 

$

(7,981

)

 

$

(22,121

)

 

$

(12,503

)

See notes to condensed consolidated financial statements

5


 

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 September 30, 2023

 

 

54,648,886

 

 

$

55

 

 

 

 

 

$

 

 

$

332,194

 

 

$

(268

)

 

$

(109,645

)

 

$

222,336

 

Issuance of common stock upon exercise of stock options

 

 

50,650

 

 

 

 

 

 

 

 

 

 

 

 

173

 

 

 

 

 

 

 

 

 

173

 

Release of restricted stock, net of share settlement

 

 

258,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under the employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,081

 

 

 

 

 

 

 

 

 

6,081

 

Withholding taxes related to release of restricted stock, net of share settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,161

)

 

 

 

 

 

 

 

 

(1,161

)

Repurchase of common stock

 

 

 

 

 

 

 

 

(70,107

)

 

 

(622

)

 

 

 

 

 

 

 

 

 

 

 

(622

)

Retirement of treasury stock

 

 

(70,107

)

 

 

 

 

 

70,107

 

 

 

622

 

 

 

(622

)

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,554

)

 

 

(11,554

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2023

 

 

54,887,538

 

 

$

55

 

 

 

 

 

$

 

 

$

336,665

 

 

$

(268

)

 

$

(121,199

)

 

$

215,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at September 30, 2022

 

 

53,549,167

 

 

$

54

 

 

 

 

$

 

 

$

318,199

 

 

$

(266

)

 

$

(34,731

)

 

$

283,256

 

Issuance of common stock upon exercise of stock options

 

 

45,825

 

 

 

 

 

 

 

 

 

 

 

 

240

 

 

 

 

 

 

 

 

 

240

 

Release of restricted stock, net of share settlement

 

 

209,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under the employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,491

 

 

 

 

 

 

 

 

 

5,491

 

Withholding taxes related to release of restricted stock, net of share settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,210

)

 

 

 

 

 

 

 

 

(1,210

)

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,979

)

 

 

(7,979

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Balances at December 31, 2022

 

 

53,804,545

 

 

$

54

 

 

 

 

 

$

 

 

$

322,720

 

 

$

(268

)

 

$

(42,710

)

 

$

279,796

 

See notes to condensed consolidated financial statements

6


 

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 June 30, 2023

 

 

54,192,928

 

 

$

54

 

 

 

 

$

 

 

$

329,093

 

 

$

(266

)

 

$

(99,080

)

 

$

229,801

 

Issuance of common stock upon exercise of stock options

 

 

165,136

 

 

 

 

 

 

 

 

 

 

 

 

589

 

 

 

 

 

 

 

 

 

589

 

Release of restricted stock, net of share settlement

 

 

636,331

 

 

 

1

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Issuance of common stock under the employee stock purchase plan

 

 

140,761

 

 

 

 

 

 

 

 

 

 

 

 

1,164

 

 

 

 

 

 

 

 

 

1,164

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,368

 

 

 

 

 

 

 

 

 

11,368

 

Withholding taxes related to release of restricted stock, net of share settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,348

)

 

 

 

 

 

 

 

 

(3,348

)

Repurchase of common stock

 

 

 

 

 

 

 

 

(247,618

)

 

 

(2,200

)

 

 

 

 

 

 

 

 

 

 

 

(2,200

)

Retirement of treasury stock

 

 

(247,618

)

 

 

 

 

 

247,618

 

 

 

2,200

 

 

 

(2,200

)

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,119

)

 

 

(22,119

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Balances at December 31, 2023

 

 

54,887,538

 

 

$

55

 

 

 

 

 

$

 

 

$

336,665

 

 

$

(268

)

 

$

(121,199

)

 

$

215,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2022

 

 

53,356,875

 

 

$

53

 

 

 

 

$

 

 

$

316,422

 

 

$

(261

)

 

$

(30,214

)

 

$

286,000

 

Issuance of common stock upon exercise of stock options

 

 

83,680

 

 

 

 

 

 

 

 

 

 

 

 

476

 

 

 

 

 

 

 

 

 

476

 

Release of restricted stock, net of share settlement

 

 

511,720

 

 

 

1

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Issuance of common stock under the employee stock purchase plan

 

 

137,914

 

 

 

 

 

 

 

 

 

 

 

 

1,324

 

 

 

 

 

 

 

 

 

1,324

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,775

 

 

 

 

 

 

 

 

 

10,775

 

Withholding taxes related to release of restricted stock, net of share settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,226

)

 

 

 

 

 

 

 

 

(3,226

)

Repurchase of common stock

 

 

 

 

 

 

 

 

(285,644

)

 

 

(3,050

)

 

 

-

 

 

 

 

 

 

 

 

 

(3,050

)

Retirement of treasury stock

 

 

(285,644

)

 

 

 

 

 

285,644

 

 

 

3,050

 

 

 

(3,050

)

 

 

 

 

 

 

 

 

-

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,496

)

 

 

(12,496

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Balances at December 31, 2022

 

 

53,804,545

 

 

$

54

 

 

 

 

 

$

 

 

$

322,720

 

 

$

(268

)

 

$

(42,710

)

 

$

279,796

 

See notes to condensed consolidated financial statements

7


 

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net loss

 

$

(22,119

)

 

$

(12,496

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

11,051

 

 

 

9,032

 

Provision for sales returns and doubtful accounts receivable

 

 

382

 

 

 

729

 

Stock-based compensation

 

 

11,343

 

 

 

10,747

 

Non-cash lease expense

 

 

(610

)

 

 

(542

)

Deferred income taxes

 

 

745

 

 

 

(2,279

)

Other adjustments, net

 

 

(415

)

 

 

(138

)

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(7,361

)

 

 

9,288

 

Prepaid expenses and other assets

 

 

2,000

 

 

 

(588

)

Other assets, non-current

 

 

185

 

 

 

 

Accounts payable

 

 

(4,725

)

 

 

(4,675

)

Accrued liabilities

 

 

906

 

 

 

(5,547

)

Deferred revenue

 

 

(9

)

 

 

(331

)

Net cash (used in) provided by operating activities

 

 

(8,627

)

 

 

3,200

 

Cash Flows from Investing Activities

 

 

 

 

 

 

Capital expenditures

 

 

(2,962

)

 

 

(1,553

)

Internal software development costs

 

 

(6,415

)

 

 

(5,465

)

Other investing activities

 

 

 

 

 

(120

)

Net cash used in investing activities

 

 

(9,377

)

 

 

(7,138

)

Cash Flows from Financing Activities

 

 

 

 

 

 

Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan

 

 

1,700

 

 

 

1,797

 

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

 

 

(3,348

)

 

 

(3,226

)

Post-closing payments and contingent consideration related to acquisitions

 

 

(6,229

)

 

 

(7,224

)

Repurchase of common stock

 

 

(2,288

)

 

 

(4,731

)

Net cash used in financing activities

 

 

(10,165

)

 

 

(13,384

)

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

 

 

12

 

 

 

(13

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(