QuinStreet Reports Financial Results for Its Second Quarter of Fiscal 2013

QuinStreet Reports Financial Results for Its Second Quarter of Fiscal 2013

FOSTER CITY, Calif., Jan. 29, 2013 (GLOBE NEWSWIRE) -- QuinStreet, Inc.
(Nasdaq:QNST), a leader in vertical marketing and media online, today
announced its financial results for its second quarter of fiscal 2013.

The Company reported total revenue of $71.8 million. Adjusted EBITDA was $11.2
million, or 16% of revenue.

The Company reported GAAP net income of $0.4 million, or $0.01 per diluted
share. GAAP net income and GAAP EPS results are preliminary and subject to
change based upon the conclusion of goodwill impairment testing triggered by
the Company's recent stock price decline.

Adjusted net income for the quarter was $5.6 million, or $0.13 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 $32.7 million. Revenue for the
Financial Services client vertical was $26.5 million. Revenue for Other client
verticals was $12.6 million.

The Company generated $11.3 million of operating cash flow and $12.8 million
of normalized free cash flow. The Company paid down its debt by $3 million and
closed the quarter with $108 million in cash and marketable securities.

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

"We are making good progress on key initiatives that we believe position us
for a return to growth," commented Doug Valenti, QuinStreet CEO. "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 due to continued product and market transitions in
our core Financial Services and Education verticals. Our current expectation
for revenue in the March quarter is in the $75 to $80 million range. Adjusted
EBITDA margin will likely be in the mid-teens for the quarter, as we will
continue to invest in key initiatives for the long term," concluded Valenti.

Goodwill Impairment Test

QuinStreet's public market capitalization sustained a decline after December
31, 2012, to a value below the net book carrying value of the Company's
equity. As a result, the Company determined that this triggered the necessity
to conduct step one of a goodwill impairment test as described under GAAP.
This test is currently in progress and the Company has not concluded as to
whether goodwill, which had a carrying value of $243 million as of December
31, 2012, was impaired for the second quarter of fiscal 2013. Prior to filing
its Form 10-Q for the second quarter of fiscal 2013, the Company expects to
complete the step one impairment test. If the result of the step one analysis
indicates an impairment, the Company will conduct a step two evaluation to
determine the amount of the non-cash impairment charge, if any. If step two
cannot be completed prior to filing of the Form 10-Q for the second quarter of
fiscal 2013, the Company may estimate a range of potential impairment charges
and may record an estimated non-cash charge in the second quarter of fiscal
2013 in accordance with GAAP. Any material difference between such estimate
and the final step two evaluation, either positive or negative, would be
recorded in the third quarter of fiscal 2013. The Company's evaluation could
result in a non-cash impairment charge for a substantial portion of the book
value of goodwill, which would negatively affect GAAP net income, although
revenue and cash flow from operations would not be affected.

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 are non-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 less provision for taxes, depreciation expense,
amortization expense, stock-based compensation expense, interest and other
income (expense), net. The term "adjusted net income" refers to a financial
measure that we define as net income adjusted for amortization expense and
stock-based compensation expense, net of estimated taxes. The term "adjusted
diluted net income per share" refers to a financial measure that we define as
adjusted net income 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. "Normalized free cash flow" refers to free cash
flow adjusted for changes in operating assets and liabilities and the impact
from excess tax benefits from stock-based compensation. These non-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, adjusted diluted net income
per share, free cash flow and normalized free cash flow are relevant and
useful information because they provide us and investors with additional
measurements to analyze the Company's operating performance.

Adjusted EBITDA is part of our internal management reporting and planning
process and one of the primary measures used by our management to evaluate the
operating performance of our business, as well as potential acquisitions.
Adjusted EBITDA is useful to us and investors because it provides information
related to the Company's ability to provide cash flow for acquisitions,
capital expenditures and working capital requirements. Internally, adjusted
EBITDA is used by management for planning purposes, including preparation of
internal budgets; to allocate resources to enhance financial performance; to
evaluate the effectiveness of operational strategies; and to evaluate the
Company's capacity to fund acquisitions and capital expenditures as well as
the capacity to service debt. Adjusted EBITDA is used as a key financial
metric in senior management's annual incentive compensation program. The
Company believes that analysts and investors use adjusted EBITDA as a
supplemental measurement to evaluate the overall operating performance of
companies in its industry and use adjusted EBITDA multiples as a metric for
analyzing company valuations. It is also an element of certain maintenance
covenants under our debt agreements.

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 certain non-cash expenses
(stock-based compensation and amortization of intangible assets). The Company
believes 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 us and investors because it represents the cash
that our business generates from operations, before taking into account cash
movements that are non-operational, and is a metric commonly used in our
industry to understand the underlying cash generating capacity of a company's
financial model. The measure 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 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. The Company believes that
analysts and investors use free cash flow multiples as a metric for analyzing
company valuations in our industry. Free cash flow and normalized free cash
flow have certain limitations in that they do not represent the total increase
or decrease in the cash balance for the period, nor do they represent the
residual cash flow for discretionary expenditures. Therefore, we think it is
important to evaluate both of these cash flow measures along with our
consolidated statement of cash flows and understand any changes in the
operating assets and liabilities.

We intend to provide these non-GAAP financial measures as part of our future
earnings discussions and, therefore, the inclusion of these non-GAAP financial
measures will provide consistency in our financial reporting. A reconciliation
of these non-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 "will, " "believe, " "intend, "
"potential" and similar expressions are intended to identify forward-looking
statements. These forward-looking statements include the quotations from
management in this press release, as well as any statements regarding the
Company's anticipated financial results, 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 Company's ability to return to growth and remain profitable; the
impact of changes in government regulation and industry standards; the
Company's ability to maintain and increase the number of visitors to its
websites; the Company's ability to identify and manage acquisitions; the
impact of the current economic climate on the Company's business; 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; the impact and costs of any failure by the
Company to comply with government regulations and industry standards; and
costs associated with defending intellectual property infringement and other
claims. More information about potential factors that could affect the
Company's business and financial results is contained in the Company's annual
reports on Form 10-K and quarterly reports on Form 10-Q as filed with the
Securities and Exchange Commission ("SEC"). Additional information will also
be set forth in the Company's quarterly report on Form 10-Q for the quarter
ended December 31, 2012, 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.

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'    $491,239           $507,160
equity
                                                          
                                                          
^(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               4,019        4,847      7,945        10,064
administrative
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,   (4)          (93)       42           (124)
net
(Loss) income before      (3,309)      7,320      (3,321)      16,395
income taxes
Benefit (provision) for   3,685        (2,887)    3,560        (6,468)
taxes
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               510          801        899          1,557
administrative

                                                                
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 byoperating activities:
Depreciation and amortization        10,179   7,517     18,458    14,625
Provision for sales returns and      (152)    (68)      (468)     (32)
doubtful accounts receivable
Stock-based compensation             3,029    3,521     5,799     6,895
Excess tax benefits from stock-based (26)     (62)      (50)      (97)
compensation
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       11,268    14,268     21,639    24,945
activities
Cash Flows from Investing Activities                             
Capital expenditures                (530)    (631)     (821)     (1,384)
Business acquisitions, net of notes  --      (999)     --        (31,203)
payable and cash acquired
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   12,948   12,602    25,093    18,035
of marketable securities
Other investing activities           11       2         15        30
Net cash used in investing           (4,246)   (2,625)    (7,901)   (38,290)
activities
Cash Flows from Financing Activities                             
Proceeds from exercise of common     33       370       269       2,187
stock options
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                (1,904)  (558)     (5,472)   (1,771)
acquisition-related notes payable
Excess tax benefits from stock-based 26       62        50        97
compensation
Withholding taxes related to
restricted stock net share           (47)     (78)      (148)     (262)
settlement
Repurchases of common stock          (0)      (15,556)  (6,157)   (15,556)
Net cash used in financing           (3,142)   (12,558)   (13,958)  (13,416)
activities
Effect of exchange rate changes on   (5)      3         12        28
cash and cash equivalents
Net decrease in cash and cash        3,875     (912)      (208)     (26,733)
equivalents
Cash and cash equivalents at         64,448    106,469    68,531    132,290
beginning of period
Cash and cash equivalents at end of  $68,323 $105,557 $68,323 $105,557
period

                                                                 
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  43,080   47,937   43,201   48,442
per share
                                                                 
                                                                 
                                                                 
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),   1,330    1,172    2,268    2,248
net
(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         $11,268 $14,268 $21,639 $24,945
activities
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  2,695    1,767    2,995    7,345
from stock-based compensation
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