Attached files
file | filename |
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EX-99.2 - EX-99.2 - QUINSTREET, INC | qnst-ex992_10.htm |
EX-99.1 - EX-99.1 - QUINSTREET, INC | qnst-ex991_7.htm |
EX-23.1 - EX-23.1 - QUINSTREET, INC | qnst-ex231_85.htm |
8-K/A - 8-K/A - QUINSTREET, INC | qnst-8ka_20181001.htm |
Exhibit 99.3
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On October 1, 2018, pursuant to a Share Purchase Agreement (the “Share Purchase Agreement”) by and among QuinStreet, Inc. (the “Company”), AmOne Corp. (“AmOne”) and Rod Romero (the “Seller”) entered into on October 1, 2018, the Company acquired all of the issued and outstanding capital stock of AmOne from the Seller (the “Closing”).
The Share Purchase Agreement required the Company to pay (i) at Closing, approximately $20.3 million in cash, subject to certain closing adjustments as provided in the Share Purchase Agreement, including adjustments for cash, debt and net asset balance and (ii) up to $8.0 million in additional post-Closing payments, payable in equal semi-annual installments over a two year period, with the first installment payable six-months following the date of Closing.
The Company has presented the pro forma combined balance sheet as if the acquisition had occurred on September 30, 2018 using the acquisition method of accounting. The Company has presented the pro forma combined statements of operations for the three months ended September 30, 2018 and the fiscal year ended June 30, 2018 as if the acquisition occurred on July 1, 2017.
These unaudited pro forma combined financial statements and the notes thereto should be read together with the Company’s audited consolidated financial statements and the notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2018, filed with the Securities and Exchange Commission on September 12, 2018.
The pro forma combined financial statements are presented for illustrative purposes only and do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated, nor is it necessarily indicative of the future financial condition and results of operations of the combined company.
PRO FORMA COMBINED BALANCE SHEET
As of September 30, 2018
(In thousands)
(Unaudited)
|
|
QuinStreet, Inc. |
|
|
AmOne Corp. |
|
|
Pro Forma Adjustments |
|
|
Notes |
|
Pro Forma |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
70,519 |
|
|
$ |
889 |
|
|
$ |
(23,039 |
) |
|
(a) |
|
$ |
48,369 |
|
Accounts receivable, net |
|
|
65,668 |
|
|
|
2,510 |
|
|
|
— |
|
|
|
|
|
68,178 |
|
Marketable securities |
|
|
— |
|
|
|
404 |
|
|
|
— |
|
|
|
|
|
404 |
|
Prepaid expenses and other assets |
|
|
5,297 |
|
|
|
267 |
|
|
|
— |
|
|
|
|
|
5,564 |
|
Total current assets |
|
|
141,484 |
|
|
|
4,070 |
|
|
|
(23,039 |
) |
|
|
|
|
122,515 |
|
Property and equipment, net |
|
|
4,126 |
|
|
|
122 |
|
|
|
— |
|
|
|
|
|
4,248 |
|
Goodwill |
|
|
62,283 |
|
|
|
— |
|
|
|
4,065 |
|
|
(c) |
|
|
66,348 |
|
Other intangible assets, net |
|
|
7,835 |
|
|
|
— |
|
|
|
23,900 |
|
|
(b) |
|
|
31,735 |
|
Other assets, noncurrent |
|
|
7,330 |
|
|
|
20 |
|
|
|
— |
|
|
|
|
|
7,350 |
|
Total assets |
|
$ |
223,058 |
|
|
$ |
4,212 |
|
|
$ |
4,926 |
|
|
|
|
$ |
232,196 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Current liabilities: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
34,129 |
|
|
$ |
762 |
|
|
$ |
— |
|
|
|
|
$ |
34,891 |
|
Accrued liabilities |
|
|
31,015 |
|
|
|
355 |
|
|
|
— |
|
|
|
|
|
31,370 |
|
Deferred revenue |
|
|
881 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
881 |
|
Other liabilities |
|
|
— |
|
|
|
— |
|
|
|
2,066 |
|
|
(a) |
|
|
2,066 |
|
Total current liabilities |
|
|
66,025 |
|
|
|
1,117 |
|
|
|
2,066 |
|
|
|
|
|
69,208 |
|
Other liabilities, noncurrent |
|
|
4,008 |
|
|
|
257 |
|
|
|
5,698 |
|
|
(a) |
|
|
9,963 |
|
Total liabilities |
|
|
70,033 |
|
|
|
1,374 |
|
|
|
7,764 |
|
|
|
|
|
79,171 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
49 |
|
|
|
8 |
|
|
|
(8 |
) |
|
(d) |
|
|
49 |
|
Treasury stock |
|
|
— |
|
|
|
(416 |
) |
|
|
416 |
|
|
(d) |
|
|
— |
|
Additional paid-in capital |
|
|
277,084 |
|
|
|
190 |
|
|
|
(190 |
) |
|
(d) |
|
|
277,084 |
|
Accumulated other comprehensive loss |
|
|
(302 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(302 |
) |
Accumulated deficit |
|
|
(123,806 |
) |
|
|
3,056 |
|
|
|
(3,056 |
) |
|
(d) |
|
|
(123,806 |
) |
Total stockholders' equity |
|
|
153,025 |
|
|
|
2,838 |
|
|
|
(2,838 |
) |
|
|
|
|
153,025 |
|
Total liabilities and stockholders' equity |
|
$ |
223,058 |
|
|
$ |
4,212 |
|
|
$ |
4,926 |
|
|
|
|
$ |
232,196 |
|
2
PRO FORMA COMBINED STATEMENT OF OPERATIONS
Fiscal Year Ended June 30, 2018
(In thousands, except per share data)
(Unaudited)
|
|
QuinStreet, Inc. |
|
|
AmOne Corp. |
|
|
Pro Forma Adjustments |
|
|
Notes |
|
Pro Forma |
|
||||
Net revenue |
|
$ |
404,358 |
|
|
$ |
21,779 |
|
|
$ |
— |
|
|
|
|
$ |
426,137 |
|
Cost of revenue |
|
|
345,947 |
|
|
|
15,826 |
|
|
|
3 |
|
|
(f) |
|
|
361,776 |
|
Gross profit |
|
|
58,411 |
|
|
|
5,953 |
|
|
|
(3 |
) |
|
|
|
|
64,361 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development |
|
|
13,805 |
|
|
|
463 |
|
|
|
— |
|
|
|
|
|
14,268 |
|
Sales and marketing |
|
|
10,414 |
|
|
|
732 |
|
|
|
— |
|
|
|
|
|
11,146 |
|
General and administrative |
|
|
18,556 |
|
|
|
1,112 |
|
|
|
— |
|
|
|
|
|
19,668 |
|
Operating income |
|
|
15,636 |
|
|
|
3,646 |
|
|
|
(3 |
) |
|
|
|
|
19,279 |
|
Interest income |
|
|
181 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
181 |
|
Other income, net |
|
|
687 |
|
|
|
45 |
|
|
|
— |
|
|
|
|
|
732 |
|
Income before taxes |
|
|
16,504 |
|
|
|
3,691 |
|
|
|
(3 |
) |
|
|
|
|
20,192 |
|
Provision for taxes |
|
|
(574 |
) |
|
|
— |
|
|
|
— |
|
|
(g) |
|
|
(574 |
) |
Net income |
|
$ |
15,930 |
|
|
$ |
3,691 |
|
|
$ |
(3 |
) |
|
|
|
$ |
19,618 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.42 |
|
Diluted |
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.39 |
|
Weighted-average shares used in computing net income per share: |
|
|||||||||||||||||
Basic |
|
|
46,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
46,417 |
|
Diluted |
|
|
49,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
49,872 |
|
3
PRO FORMA COMBINED STATEMENT OF OPERATIONS
Three Months Ended September 30, 2018
(In thousands, except per share data)
(Unaudited)
|
|
QuinStreet, Inc. |
|
|
AmOne Corp. |
|
|
Pro Forma Adjustments |
|
|
Notes |
|
Pro Forma |
|
||||
Net revenue |
|
$ |
112,869 |
|
|
$ |
6,490 |
|
|
$ |
— |
|
|
|
|
$ |
119,359 |
|
Cost of revenue |
|
|
96,813 |
|
|
|
4,731 |
|
|
|
1 |
|
|
(f) |
|
|
101,545 |
|
Gross profit |
|
|
16,056 |
|
|
|
1,759 |
|
|
|
(1 |
) |
|
|
|
|
17,814 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development |
|
|
3,305 |
|
|
|
151 |
|
|
|
— |
|
|
|
|
|
3,456 |
|
Sales and marketing |
|
|
2,044 |
|
|
|
235 |
|
|
|
— |
|
|
|
|
|
2,279 |
|
General and administrative |
|
|
5,394 |
|
|
|
338 |
|
|
|
(172 |
) |
|
(e) |
|
|
5,560 |
|
Operating income |
|
|
5,313 |
|
|
|
1,035 |
|
|
|
171 |
|
|
|
|
|
6,519 |
|
Interest income |
|
|
66 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
66 |
|
Other (expense) income, net |
|
|
(67 |
) |
|
|
30 |
|
|
|
— |
|
|
|
|
|
(37 |
) |
Income before taxes |
|
|
5,312 |
|
|
|
1,065 |
|
|
|
171 |
|
|
|
|
|
6,548 |
|
Provision for taxes |
|
|
(15 |
) |
|
|
— |
|
|
|
— |
|
|
(g) |
|
|
(15 |
) |
Net income |
|
$ |
5,297 |
|
|
$ |
1,065 |
|
|
$ |
171 |
|
|
|
|
$ |
6,533 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.13 |
|
Diluted |
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.12 |
|
Weighted-average shares used in computing net income per share: |
|
|||||||||||||||||
Basic |
|
|
48,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
48,663 |
|
Diluted |
|
|
52,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
52,441 |
|
4
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The historical combined financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma combined statements of operations, expected to have a continuing impact on the combined results following the business combination.
As AmOne’s fiscal year end is December 31, the Company has compiled the AmOne statement of operations for the twelve months ended June 30, 2018 by obtaining the statement of operations for the fiscal year ended December 31, 2017, adding the statement of operations activity from January 1, 2018 through June 30, 2018 and subtracting the statement of operations activity from January 1, 2017 through June 30, 2017.
Note 2. Preliminary Purchase Price Allocation
The Company acquired AmOne for approximately $20.3 million in cash, subject to certain closing adjustments as provided in the Share Purchase Agreement, including adjustments for cash, debt and net asset balance and (ii) up to $8.0 million in additional post-Closing payments, payable in equal semi-annual installments over a two year period, with the first installment payable six-months following the date of Closing. Total consideration at closing was calculated as follows (in thousands):
|
Estimated Fair Value |
|
|
|
Cash |
$ |
23,039 |
|
|
Deferred payments |
|
7,764 |
|
|
Total |
$ |
30,803 |
|
|
The Company has performed a preliminary valuation analysis of the fair market value of AmOne's assets acquired. The following table summarizes the preliminary allocation of the purchase price and the estimated useful lives of the identifiable intangible assets acquired as of the date of the acquisition (in thousands):
|
Estimated Fair Value |
|
|
Estimated Useful Life |
|
|
Customer/publisher/advertiser relationships |
$ |
22,400 |
|
|
8 years |
|
Website/trade/domain names |
|
1,100 |
|
|
15 years |
|
Acquired technology and others |
|
400 |
|
|
3 years |
|
Goodwill |
|
4,065 |
|
|
Indefinite |
|
Net assets |
|
2,838 |
|
|
n/a |
|
Total |
$ |
30,803 |
|
|
|
|
This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma combined financial statements. Due to the timing of the close of the acquisition, the Company is still finalizing the allocation of the purchase price to the individual assets acquired. Accordingly, these preliminary estimates are subject to change during the measurement period, which is the period subsequent to the acquisition date during which the acquiror may adjust the provisional amounts recognized for a business combination, not to exceed one year form the acquisition date. The final purchase price allocation, which may include changes in the allocations within intangible assets and between intangible assets and goodwill, will be determined when the Company has completed the detailed review of underlying inputs and assumptions used in its preliminary purchase price allocation.
Note 3. Pro Forma Adjustments
The following adjustments have been reflected in the unaudited pro forma combined financial statements. The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change.
(a) |
To record the total consideration paid related to the acquisition. |
(b) |
To record the fair value of the acquired assets as of the acquisition date. |
5
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
(c) |
To record the goodwill associated with the acquisition. |
(d) |
Represents the elimination of the historical AmOne shareholder’s equity. |
(e) |
Represents the elimination of nonrecurring acquisition costs incurred by the Company during the three months ended September 30, 2018 that are directly related to the acquisition. |
(f) |
To recognize the amortization associated with the intangible assets acquired by the Company on a straight-line basis over its estimated useful life. |
(g) |
No provision for income taxes was recorded related to the acquisition as the Company maintains a full valuation allowance against its deferred tax assets. |
6