QuinStreet (QNST) 8-K QuinStreet Reports Strong Fourth Quarter and Record Fiscal Year 2018 Results

Exhibit 99.1

QuinStreet Reports Strong Fourth Quarter and Record Fiscal Year 2018 Results

— Reports revenue growth of 37% for fiscal Q4 and 35% for full-year fiscal 2018

— Delivers double-digit growth in all reported client verticals in Q4

— Achieves record annual revenue of $404.4 million in fiscal 2018

— Increases adjusted EBITDA 189% in fiscal 2018

— Builds net cash to $65 million

— Expects continued double-digit revenue growth and expanding EBITDA margin in fiscal 2019

FOSTER CITY, CA – August 7, 2018— QuinStreet, Inc. (Nasdaq: QNST), a leader in performance marketing products and technologies, today announced financial results for the fourth quarter and fiscal year ended June 30, 2018.

For the fourth quarter, the Company reported revenue of $111.5 million, an increase of 37% year-over-year, and GAAP net income of $5.4 million, or $0.10 per share. Adjusted net income for the fourth quarter was $6.9 million, or $0.13 per share, and adjusted EBITDA was $10.3 million, or 9% of revenue, an increase of 70% year-over-year.

For the fiscal year, the Company reported revenue of $404.4 million, an increase of 35% year-over-year, and GAAP net income of $15.9 million, or $0.32 per share. Adjusted net income for the fiscal year was $22.3 million, or $0.45 per share, and adjusted EBITDA was $34.7 million, or 9% of revenue, an increase of 189% year-over-year.

During the fiscal year, the Company generated $27.0 million in operating cash flow and $30.5 million in normalized free cash flow and closed the year with $64.7 million in cash and no debt.

“Our business momentum and fundamentals remained strong in fiscal Q4”, commented Doug Valenti, QuinStreet CEO. “Our strategies and products are meeting increased demand for performance marketing with clients and media. Fiscal Q4 capped a year of strong growth, record revenue, and expanded margins and cash flow. Our business success continues to be driven by measurable results for our clients and media partners, and by our competitive advantages, superior products and technologies.

“Business momentum continues. We expect fiscal 2019 revenue to be up at least 10% year-over-year and full-year fiscal 2019 adjusted EBITDA margin to be approximately 10%,” 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 5:30 a.m. PT

The Company will host a conference call and corresponding live webcast at 5:30 a.m. PT. To access the conference call in the US dial +1 (877) 260.1479 (domestic) or +1 (334) 323.0522 (international). 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 by dialing +1 (888) 203.1112 (domestic) or +1 (719) 457.0820 (international) and using passcode 1533184.

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 arenon-GAAP financial measures that are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The term “adjusted EBITDA” refers to a financial measure that we define as net income (loss) less provision for (benefit from) taxes, depreciation expense, amortization expense, stock-based compensation expense, interest and other income, net, restructuring expense, external expenses related to the material weakness disclosed in our Annual Report on Form10-K, and acquisition related expense. The term “adjusted net income” refers to a financial measure that we define as net income (loss) adjusted for amortization expense, stock-based compensation expense, restructuring expense, external expenses related to the material weakness disclosed in our Annual Report on Form10-K, and acquisition related expense, net of estimated taxes calculated based on the estimated annual statutory tax rate. Due to the effects of our deferred tax asset valuation allowance and our historical net operating losses, our annual effective tax rate is not meaningful as our income tax amounts for each period are not directly correlated to the amount of income or losses before income taxes for such period. The term “adjusted diluted net income per share” refers to a financial measure that we define as adjusted net income (loss) divided by weighted average diluted shares outstanding. The term “free cash flow” refers to a financial measure that we define as net cash provided by operating activities, less capital expenditures and internal software development costs. The term “normalized free cash flow” refers to free cash flow less changes in operating assets and liabilities. Thesenon-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. In addition, our definition of adjusted EBITDA, adjusted net income, adjusted diluted net income per share, free cash flow and normalized free cash flow may not be comparable to the definitions as reported by other companies.

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 Form10-K, acquisition related expense, and other income and expense) and thenon-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 certainnon-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 arenon-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 cash receipts 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 thesenon-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of thesenon-GAAP financial measures will provide consistency in our financial reporting. A reconciliation of thesenon-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 Department of Education, the Federal Trade Commission and other regulatory agencies; the Company’s ability to maintain and increase client marketing spend; the Company’s ability to maintain and increase the number of visitors to its websites and to convert those visitors and those to its third-party publishers’ websites into client prospects in a cost-effective manner; the impact of the current economic climate on the Company’s business; the Company’s ability to access and monetize Internet users on mobile devices; the Company’s ability to attract and retain qualified executives and employees; the Company’s ability to compete effectively against others in the online marketing and media industry both for client budget and access to third-party media; the Company’s ability to identify and manage acquisitions; and the impact and costs of any alleged failure by the Company to comply with government regulations and industry standards. More information about potential factors that could affect the Company’s business and financial results are contained in the Company’s annual report on Form10-K and quarterly reports on Form10-Q as filed with the Securities and Exchange Commission (“SEC”). Additional information will also be set forth in the Company’s anual report on Form10-K for the year ended June 30, 2018, which will be filed with the SEC. The Company does not intend and undertakes no duty to release publicly any updates or revisions to any forward-looking statements contained herein.

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 www.QuinStreet.com.

Investor Contact:

Erica Abrams

(415)297-5864

eabrams@quinstreet.com

QUINSTREET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 30, 2018			June 30, 2017
Assets
Current assets:
Cash and cash equivalents	$	64,700		$	49,571
Accounts receivable, net		68,492			44,059
Prepaid expenses and other assets		4,432			6,225
Total current assets		137,624			99,855
Property and equipment, net		4,211			5,613
Goodwill		62,283			56,118
Other intangible assets, net		8,573			4,105
Other assets, noncurrent		7,605			8,617
Total assets	$	220,296		$	174,308
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	32,506		$	25,205
Accrued liabilities		34,811			26,223
Deferred revenue		715			1,126
Total current liabilities		68,032			52,554
Other liabilities, noncurrent		3,938			3,672
Total liabilities		71,970			56,226
Stockholders’ equity:
Common stock		48			45
Additionalpaid-in capital		277,761			263,533
Accumulated other comprehensive loss		(380	)		(463	)
Accumulated deficit		(129,103	)		(145,033	)
Total stockholders’ equity		148,326			118,082
Total liabilities and stockholders’ equity	$	220,296		$	174,308

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Year Ended June 30,
	2018			2017			2018			2017
Net revenue	$	111,521		$	81,532		$	404,358		$	299,785
Cost of revenue(1)		94,786			70,606			345,947			269,409
Gross profit		16,735			10,926			58,411			30,376
Operating expenses:(1)
Product development		3,430			3,061			13,805			13,476
Sales and marketing		2,581			2,188			10,414			9,189
General and administrative		4,696			4,086			18,556			15,934
Restructuring charges		—			—			—			2,441
Operating income (loss)		6,028			1,591			15,636			(10,664	)
Interest income		63			39			181			138
Interest expense		—			(24	)		—			(346	)
Other (expense) income, net		(182	)		(2,668	)		687			(2,416	)
Income (loss) before income taxes		5,909			(1,062	)		16,504			(13,288	)
(Provision for) benefit from income taxes		(488	)		(306	)		(574	)		1,080
Net income (loss)	$	5,421		$	(1,368	)	$	15,930		$	(12,208	)
Net income (loss) per share:
Basic	$	0.11		$	(0.03	)	$	0.34		$	(0.27	)
Diluted	$	0.10		$	(0.03	)	$	0.32		$	(0.27	)
Weighted average shares used in computing net income (loss) per share:
Basic		47,528			45,468			46,417			45,594
Diluted		51,886			45,468			49,872			45,594
(1) Cost of revenue and operating expenses include stock-based compensation expense as follows:
Cost of revenue	$	1,029		$	719		$	3,982		$	3,109
Product development		494			403			1,949			1,834
Sales and marketing		301			286			1,222			1,154
General and administrative		741			664			3,029			2,759
Restructuring charges		—			—			—			42

QUINSTREET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Year Ended June 30,
	2018			2017			2018			2017
Cash Flows from Operating Activities
Net income (loss)	$	5,421		$	(1,368	)	$	15,930		$	(12,208	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,790			2,394			7,767			11,377
Impairment of investment		—			2,500			—			2,500
Provision for sales returns and doubtful accounts receivable		144			182			525			291
Stock-based compensation		2,565			2,072			10,182			8,898
Other adjustments, net		(192	)		45			(1,108	)		(116	)
Changes in assets and liabilities:
Accounts receivable		430			(1,134	)		(24,958	)		2,868
Prepaid expenses and other assets		2,733			905			1,910			830
Deferred tax assets		(51	)		80			(51	)		(430	)
Other assets, noncurrent		302			233			1,096			891
Accounts payable		2,109			4,285			7,350			5,394
Accrued liabilities		(4,157	)		122			8,489			(1,155	)
Deferred revenue		160			86			(411	)		(74	)
Other liabilities, noncurrent		412			(142	)		258			(530	)
Net cash provided by operating activities		11,666			10,260			26,979			18,536
Cash Flows from Investing Activities
Capital expenditures		(214	)		(182	)		(610	)		(1,160	)
Business acquisitions		—			—			(14,154	)		—
Internal software development costs		(613	)		(451	)		(2,146	)		(2,185	)
Restricted cash		—			(866	)		—			(766	)
Other investing activities		193			53			1,061			(26	)
Net cash used in investing activities		(634	)		(1,446	)		(15,849	)		(4,137	)
Cash Flows from Financing Activities
Proceeds from exercise of common stock options		7,863			—			11,028			—
Payment of withholding taxes related to release of restricted stock, net of share settlement		(1,372	)		(253	)		(6,487	)		(1,018	)
Repurchases of common stock		—			(721	)		(647	)		(2,487	)
Repayment of revolving loan facility		—			—			—			(15,000	)
Net cash provided by (used in) financing activities		6,491			(974	)		3,894			(18,505	)
Effect of exchange rate changes on cash and cash equivalents		88			(13	)		105			(33	)
Net increase (decrease) in cash and cash equivalents		17,611			7,827			15,129			(4,139	)
Cash and cash equivalents at beginning of period		47,089			41,744			49,571			53,710
Cash and cash equivalents at end of period	$	64,700		$	49,571		$	64,700		$	49,571

QUINSTREET, INC.

RECONCILIATION OF NET INCOME (LOSS) TO

ADJUSTED NET INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Year Ended June 30,
	2018			2017			2018			2017
Net income (loss)	$	5,421		$	(1,368	)	$	15,930		$	(12,208	)
Amortization of intangible assets		803			1,196			3,515			6,215
Stock-based compensation		2,565			2,072			10,182			8,856
Restructuring		—			—			—			2,441
Acquisition costs		31			—			667			—
Material weakness related expense		35			—			563			—
Shareholder litigation expense		16			—			16			—
Contingent consideration adjustment		(152	)		—			(152	)		—
Impairment of investment		—			2,500			—			2,500
Tax impact afternon-GAAP items		(1,831	)		(1,584	)		(8,464	)		(2,809	)
Adjusted net income	$	6,888		$	2,816		$	22,257		$	4,995
Adjusted diluted net income per share	$	0.13		$	0.06		$	0.45		$	0.11
Weighted average shares used in computing adjusted diluted net income per share		51,886			45,946			49,872			45,594

QUINSTREET, INC.

RECONCILIATION OF NET INCOME (LOSS) TO

ADJUSTED EBITDA

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Year Ended June 30,
	2018			2017			2018			2017
Net income (loss)	$	5,421		$	(1,368	)	$	15,930		$	(12,208	)
Interest and other (income) expense, net		119			2,653			(868	)		2,624
Provision for (benefit from) taxes		488			306			574			(1,080	)
Depreciation and amortization		1,790			2,394			7,767			11,377
Stock-based compensation		2,565			2,072			10,182			8,856
Restructuring		—			—			—			2,441
Acquisition costs		31			—			667			—
Material weakness related expense		35			—			563			—
Shareholder litigation expense		16			—			16			—
Contingent consideration adjustment		(152	)		—			(152	)		—
Adjusted EBITDA	$	10,313		$	6,057		$	34,679		$	12,010

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 June 30,						Year Ended June 30,
	2018			2017			2018			2017
Net cash provided by operating activities	$	11,666		$	10,260		$	26,979		$	18,536
Capital expenditures		(214	)		(182	)		(610	)		(1,160	)
Internal software development costs		(613	)		(451	)		(2,146	)		(2,185	)
Free cash flow	$	10,839		$	9,627		$	24,223		$	15,191
Changes in operating assets and liabilities		(1,938	)		(4,435	)		6,317			(7,794	)
Normalized free cash flow	$	8,901		$	5,192		$	30,540		$	7,397