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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 March 31, 2022

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, 6th 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 May 2, 2022: 54,807,079  

 

 


 

 

QUINSTREET, INC.

INDEX

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements

 

3

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2022 and June 30, 2021

 

3

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2022 and 2021

 

4

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended March 31, 2022 and 2021

 

5

 

 

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 2022 and 2021

 

6

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2022 and 2021

 

8

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

34

 

 

 

Item 4. Controls and Procedures

 

34

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

35

 

 

 

Item 1A. Risk Factors

 

35

 

 

 

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

 

59

 

 

 

Item 3. Defaults Upon Senior Securities

 

59

 

 

 

Item 4. Mine Safety Disclosures

 

59

 

 

 

Item 5. Other Information

 

59

 

 

 

Item 6. Exhibits

 

60

 

 

 

SIGNATURES

 

61

2


 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1. FINANCIAL STATEMENTS

QUINSTREET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

March 31,

 

 

June 30,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

109,463

 

 

$

110,318

 

Accounts receivable, net of allowances and reserves of $1,358 and $1,010 as of March 31, 2022 and June 30, 2021, respectively

 

 

77,777

 

 

 

87,928

 

Prepaid expenses and other assets

 

 

6,333

 

 

 

7,930

 

Total current assets

 

 

193,573

 

 

 

206,176

 

Property and equipment, net

 

 

8,875

 

 

 

6,849

 

Operating lease right-of-use assets

 

 

7,928

 

 

 

10,983

 

Goodwill

 

 

119,589

 

 

 

117,833

 

Other intangible assets, net

 

 

51,503

 

 

 

59,177

 

Deferred tax assets, noncurrent

 

 

46,225

 

 

 

43,336

 

Other assets, noncurrent

 

 

6,070

 

 

 

5,161

 

Total assets

 

$

433,763

 

 

$

449,515

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

39,667

 

 

$

45,231

 

Accrued liabilities

 

 

49,241

 

 

 

57,650

 

Deferred revenue

 

 

84

 

 

 

33

 

Other liabilities

 

 

15,278

 

 

 

12,697

 

Total current liabilities

 

 

104,270

 

 

 

115,611

 

Operating lease liabilities, noncurrent

 

 

5,114

 

 

 

8,545

 

Other liabilities, noncurrent

 

 

22,916

 

 

 

30,211

 

Total liabilities

 

 

132,300

 

 

 

154,367

 

Commitments and contingencies (See Note 11)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock: $0.001 par value; 100,000,000 shares authorized; 54,747,302 and 53,786,363 shares issued and outstanding as of March 31, 2022 and June 30, 2021

 

 

55

 

 

 

54

 

Additional paid-in capital

 

 

326,935

 

 

 

320,315

 

Accumulated other comprehensive loss

 

 

(256

)

 

 

(255

)

Accumulated deficit

 

 

(25,271

)

 

 

(24,966

)

Total stockholders' equity

 

 

301,463

 

 

 

295,148

 

Total liabilities and stockholders' equity

 

$

433,763

 

 

$

449,515

 

 

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

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenue

 

$

150,658

 

 

$

153,052

 

 

$

435,597

 

 

$

427,289

 

Cost of revenue (1)

 

 

136,567

 

 

 

132,665

 

 

 

393,626

 

 

 

375,334

 

Gross profit

 

 

14,091

 

 

 

20,387

 

 

 

41,971

 

 

 

51,955

 

Operating expenses: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product development

 

 

5,509

 

 

 

4,905

 

 

 

14,995

 

 

 

14,776

 

Sales and marketing

 

 

2,033

 

 

 

2,768

 

 

 

7,773

 

 

 

8,303

 

General and administrative

 

 

5,489

 

 

 

6,460

 

 

 

21,758

 

 

 

19,931

 

Operating income (loss)

 

 

1,060

 

 

 

6,254

 

 

 

(2,555

)

 

 

8,945

 

Interest income

 

 

7

 

 

 

5

 

 

 

7

 

 

 

40

 

Interest expense

 

 

(277

)

 

 

(301

)

 

 

(817

)

 

 

(947

)

Other income (expense), net

 

 

45

 

 

 

(28

)

 

 

51

 

 

 

16,695

 

Income (loss) before income taxes

 

 

835

 

 

 

5,930

 

 

 

(3,314

)

 

 

24,733

 

Benefit from (provision for) income taxes

 

 

1,395

 

 

 

(893

)

 

 

3,009

 

 

 

(4,549

)

Net income (loss)

 

$

2,230

 

 

$

5,037

 

 

$

(305

)

 

$

20,184

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

0.09

 

 

$

(0.01

)

 

$

0.38

 

Diluted

 

$

0.04

 

 

$

0.09

 

 

$

(0.01

)

 

$

0.37

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

54,645

 

 

 

53,427

 

 

 

54,339

 

 

 

52,988

 

Diluted

 

 

55,536

 

 

 

55,623

 

 

 

54,339

 

 

 

55,015

 

 

(1)

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

 

Cost of revenue

 

$

491

 

 

$

2,261

 

 

$

4,579

 

 

$

7,006

 

Product development

 

 

203

 

 

 

576

 

 

 

1,497

 

 

 

1,768

 

Sales and marketing

 

 

18

 

 

 

584

 

 

 

1,477

 

 

 

1,896

 

General and administrative

 

 

699

 

 

 

1,435

 

 

 

4,337

 

 

 

4,521

 

 

See notes to condensed consolidated financial statements

 

4


 

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

2,230

 

 

$

5,037

 

 

$

(305

)

 

$

20,184

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(1

)

 

 

8

 

 

 

(1

)

 

 

(45

)

Total other comprehensive (loss) income

 

 

(1

)

 

 

8

 

 

 

(1

)

 

 

(45

)

Comprehensive income (loss)

 

$

2,229

 

 

$

5,045

 

 

$

(306

)

 

$

20,139

 

 

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

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2021

 

 

54,546,131

 

 

$

55

 

 

$

326,346

 

 

$

(255

)

 

$

(27,501

)

 

$

298,645

 

Issuance of common stock upon exercise of stock options

 

 

52,597

 

 

 

 

 

 

230

 

 

 

 

 

 

 

 

 

230

 

Release of restricted stock, net of share settlement

 

 

148,574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,424

 

 

 

 

 

 

 

 

 

1,424

 

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

 

 

 

 

 

 

 

 

(1,065

)

 

 

 

 

 

 

 

 

(1,065

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,230

 

 

 

2,230

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balances at March 31, 2022

 

 

54,747,302

 

 

$

55

 

 

$

326,935

 

 

$

(256

)

 

$

(25,271

)

 

$

301,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2020

 

 

53,259,519

 

 

$

53

 

 

$

313,017

 

 

$

(290

)

 

$

(33,374

)

 

$

279,406

 

Issuance of common stock upon exercise of stock options

 

 

214,075

 

 

 

1

 

 

 

1,183

 

 

 

 

 

 

 

 

 

1,184

 

Release of restricted stock, net of share settlement

 

 

138,705

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,870

 

 

 

 

 

 

 

 

 

4,870

 

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

 

 

 

 

 

 

 

 

(1,938

)

 

 

 

 

 

 

 

 

(1,938

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,037

 

 

 

5,037

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Balances at March 31, 2021

 

 

53,612,299

 

 

$

54

 

 

$

317,132

 

 

$

(282

)

 

$

(28,337

)

 

$

288,567

 

 

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

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2021

 

 

53,786,363

 

 

$

54

 

 

$

320,315

 

 

$

(255

)

 

$

(24,966

)

 

$

295,148

 

Issuance of common stock upon exercise of stock options

 

 

298,246

 

 

 

 

 

 

1,270

 

 

 

 

 

 

 

 

 

1,270

 

Release of restricted stock, net of share settlement

 

 

662,693

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

11,917

 

 

 

 

 

 

 

 

 

11,917

 

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

 

 

 

 

 

 

 

 

(6,566

)

 

 

 

 

 

 

 

 

(6,566

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(305

)

 

 

(305

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balances at March 31, 2022

 

 

54,747,302

 

 

$

55

 

 

$

326,935

 

 

$

(256

)

 

$

(25,271

)

 

$

301,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2020

 

 

52,209,813

 

 

$

52

 

 

$

304,650

 

 

$

(237

)

 

$

(48,521

)

 

$

255,944

 

Issuance of common stock upon exercise of stock options

 

 

699,100

 

 

 

1

 

 

 

3,763