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QuinStreet Reports Financial Results For Its Second Quarter Of Fiscal 2013

Conference Call

QuinStreet will host a conference call and corresponding live webcast at 2:00 p.m. PT today. To access the conference call, dial 1-866-240-0819 for the U.S. and Canada and 1-973-200-3360 for international callers. The webcast will be available live on the investor relations section of the Company's website at http://investor.quinstreet.com, and via replay beginning approximately two hours after the completion of the call until the Company's announcement of its financial results for the next quarter. An audio replay of the call will also be available to investors beginning at approximately 5:00 p.m. PT on January 29, 2013 until 11:59 p.m. PT on February 5, 2013 by dialing 1-800-585-8367 in the U.S. and Canada, or 1-404-537-3406 for international callers, using passcode 86974279#. This press release, the financial tables, as well as other supplemental financial information are also available on the investor relations section of the Company's website at http://investor.quinstreet.com.

Final financial results will be included in the Company's quarterly report on Form 10-Q, which is expected to be filed with the Securities and Exchange Commission no later than February 11, 2013.

About QuinStreet

QuinStreet, Inc. (Nasdaq:QNST) is one of the largest Internet performance marketing and media companies in the world. QuinStreet is committed to providing consumers and businesses with the information they need to research, find and select the products, services and brands that meet their needs. For more information, please visit QuinStreet.com.

     
QUINSTREET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
(In thousands)
(Unaudited)
     
  December 31, June 30,
  2012 2012
Assets    
Current assets    
Cash and cash equivalents  $ 68,323  $ 68,531
Marketable securities  39,445 36,736
Accounts receivable, net  41,196 52,830
Deferred tax assets  7,662 7,665
Prepaid expenses and other assets  12,822 7,774
Total current assets 169,448 173,536
     
Property and equipment, net 8,012 8,755
Goodwill 242,782 243,049
Other intangible assets, net 61,726 72,444
Deferred tax assets, noncurrent 8,446 8,446
Other assets, noncurrent 825 930
Total assets  $ 491,239  $ 507,160
     
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable  $ 18,506  $ 22,870
Accrued liabilities 24,864 29,462
Deferred revenue 1,955 2,553
Debt 14,624 15,429
Total current liabilities 59,949 70,314
     
Debt, noncurrent 85,037 92,167
Other liabilities, noncurrent 6,822 6,322
Total liabilities 151,808 168,803
     
Stockholders' equity    
Common stock 43 43
Additional paid-in capital 220,345 220,552
Treasury stock -- (1,178)
Accumulated other comprehensive loss (1,575) (1,439)
Retained earnings 120,618 120,379
Total stockholders' equity 339,431 338,357
Total liabilities and stockholders' equity  $ 491,239  $ 507,160
     
     
(1) Results are preliminary as of January 29, 2013, subject to change based upon the conclusion of goodwill impairment testing triggered by the Company's recent stock price decline. See "Goodwill Impairment Test" above for further detail.
         
QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(In thousands, except per share data)
(Unaudited)
         
  Three Months Ended Six Months Ended
  December 31, December 31,
  2012 2011 2012 2011
Net revenue  $ 71,751  $90,523  $ 150,377  $191,747
Cost of revenue (2)  61,713  68,396  126,903  144,144
Gross profit  10,038  22,127  23,474  47,603
Operating expenses: (2)        
Product development  4,503  5,102  9,396  11,176
Sales and marketing  3,495  3,686  7,186  7,720
General and administrative  4,019  4,847  7,945  10,064
Operating (loss) income  (1,979)  8,492  (1,053)  18,643
Interest income  28  36  56  74
Interest expense  (1,354)  (1,115)  (2,366)  (2,198)
Other (expense) income, net  (4)  (93)  42  (124)
(Loss) income before income taxes  (3,309)  7,320  (3,321)  16,395
Benefit (provision) for taxes  3,685  (2,887)  3,560  (6,468)
Net income  $ 376  $ 4,433  $ 239  $ 9,927
         
         
Net income per share        
Basic  $ 0.01  $ 0.09  $ 0.01  $ 0.21
Diluted  $ 0.01  $ 0.09  $ 0.01  $ 0.20
         
Weighted average shares used in computing net income per share        
Basic  42,777  47,054  42,795  47,266
Diluted  43,080  47,937  43,201  48,442
         
(1) Results are preliminary as of January 29, 2013, subject to change based upon the conclusion of goodwill impairment testing triggered by the Company's recent stock price decline. See "Goodwill Impairment Test" above for further detail.
         
(2) Cost of revenue and operating expenses include stock-based compensation expense as follows:
         
Cost of revenue  $ 963  $ 1,197  $ 1,886  $ 2,376
Product development  698  682  1,391  1,342
Sales and marketing  858  841  1,623  1,620
General and administrative  510  801  899  1,557
         
QUINSTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
         
  Three Months Ended Six Months Ended
  December 31, December 31,
  2012 2011 2012 2011
         
Cash Flows from Operating Activities        
Net (loss) income  $ 376  $ 4,433  $ 239  $ 9,927
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization  10,179  7,517 18,458 14,625
Provision for sales returns and doubtful accounts receivable  (152)  (68) (468) (32)
Stock-based compensation  3,029  3,521 5,799 6,895
Excess tax benefits from stock-based compensation  (26)  (62) (50) (97)
Other non-cash adjustments, net  531  632 606 875
Changes in assets and liabilities, net of effects of acquisitions:        
Accounts receivable  3,868  6,499 12,191 412
Prepaid expenses and other assets  (5,039)  (1,487) (5,048) 1,668
Other assets, noncurrent  53  (35) 110 (6)
Accounts payable  (1,541)  (3,935) (4,295) 552
Accrued liabilities  277  (2,980) (5,649) (10,287)
Deferred revenue  (289)  (154) (598) (493)
Other liabilities, noncurrent  2  387 344 906
Net cash provided by operating activities 11,268 14,268 21,639 24,945
Cash Flows from Investing Activities        
Capital expenditures   (530)  (631) (821) (1,384)
Business acquisitions, net of notes payable and cash acquired  --   (999) -- (31,203)
Other intangibles  (2,500)  --  (2,500) --
Internal software development costs  (606)  (523) (1,257) (1,082)
Purchases of marketable securities  (13,569)  (13,076) (28,431) (22,686)
Proceeds from sales and maturities of marketable securities  12,948  12,602 25,093 18,035
Other investing activities  11  2 15 30
Net cash used in investing activities (4,246) (2,625) (7,901) (38,290)
Cash Flows from Financing Activities        
Proceeds from exercise of common stock options  33  370 269 2,187
Proceeds from bank debt  --   5,884 -- 5,884
Principal payments on bank debt  (1,250)  (1,312) (2,500) (2,625)
Payment of bank loan upfront fees  --   (1,370) -- (1,370)
Principal payments on acquisition-related notes payable  (1,904)  (558) (5,472) (1,771)
Excess tax benefits from stock-based compensation  26  62 50 97
Withholding taxes related to restricted stock net share settlement  (47)  (78) (148) (262)
Repurchases of common stock  (0)  (15,556) (6,157) (15,556)
Net cash used in financing activities (3,142) (12,558) (13,958) (13,416)
Effect of exchange rate changes on cash and cash equivalents  (5)  3 12 28
Net decrease in cash and cash equivalents 3,875 (912) (208) (26,733)
Cash and cash equivalents at beginning of period 64,448 106,469 68,531 132,290
Cash and cash equivalents at end of period  $ 68,323  $ 105,557  $ 68,323  $ 105,557
         
QUINSTREET, INC.
RECONCILIATION OF NET INCOME TO
ADJUSTED NET INCOME
 (In thousands, except per share data)
 (Unaudited)
         
  Three Months Ended Six Months Ended
  December 31, December 31,
  2012 2011 2012 2011
Net income  $ 376  $ 4,433  $ 239  $ 9,927
Amortization of intangible assets  8,805  6,162  15,681  11,948
Stock-based compensation  3,029  3,521  5,799  6,895
Tax impact of the above items  (6,598)  (3,264)  (9,882)  (6,288)
Adjusted net income  $ 5,612  $ 10,852  $ 11,837  $ 22,482
         
         
Adjusted diluted net income per share  $ 0.13  $ 0.23  $ 0.27  $ 0.46
         
Weighted average shares used in computing adjusted diluted net income per share  43,080  47,937  43,201  48,442
         
         
         
QUINSTREET, INC.
RECONCILIATION OF NET INCOME TO
ADJUSTED EBITDA
 (In thousands)
 (Unaudited)
         
  Three Months Ended Six Months Ended
  December 31, December 31,
  2012 2011 2012 2011
Net income  $ 376  $ 4,433  $ 239  $ 9,927
Interest and other income (expense), net  1,330  1,172  2,268  2,248
(Benefit) provision for taxes  (3,685)  2,887  (3,560)  6,468
Depreciation and amortization   10,179  7,517  18,458  14,625
Stock-based compensation  3,029  3,521  5,799  6,895
Adjusted EBITDA  $ 11,229  $ 19,530  $ 23,204  $ 40,163
         
         
         
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,
  2012 2011 2012 2011
Net cash provided by operating activities   $ 11,268  $ 14,268  $ 21,639  $ 24,945
Capital expenditures  (530)  (631)  (821)  (1,384)
Internal software development costs  (606)  (523)  (1,257)  (1,082)
Free cash flow  $ 10,132  $ 13,114  $ 19,561  $ 22,479
Changes in operating assets and liabilities, less excess tax benefits from stock-based compensation  2,695  1,767  2,995  7,345
Normalized free cash flow  $ 12,827  $ 14,881  $ 22,556  $ 29,824
         
CONTACT: Erica Abrams or Matthew Hunt
         (415) 217-5864 or (415) 489-2194
         erica@blueshirtgroup.com
         matt@blueshirtgroup.com

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