QuinStreet(QNST) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements and detailed notes for QuinStreet, Inc Condensed Consolidated Balance Sheets The balance sheet shows a slight decrease in total assets and liabilities, with a modest increase in stockholders' equity | Metric | Sep 30, 2021 (in thousands) | Jun 30, 2021 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Assets | $441,933 | $449,515 | $(7,582) | | Total Liabilities | $142,238 | $154,367 | $(12,129) | | Total Stockholders' Equity | $299,695 | $295,148 | $4,547 | - Cash and cash equivalents decreased from $110.3 million at June 30, 2021, to $105.9 million at September 30, 2021[8] - Goodwill remained constant at $117.8 million for both periods[8] Condensed Consolidated Statements of Operations Net revenue increased 15% year-over-year, but net income fell significantly due to a prior-year gain on divestitures | Metric | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net revenue | $159,608 | $139,269 | 15% | | Cost of revenue | $141,505 | $122,231 | 16% | | Gross profit | $18,103 | $17,038 | 6% | | Operating income | $3,938 | $2,923 | 35% | | Income before income taxes | $3,669 | $19,295 | (81%) | | Net income | $3,093 | $14,681 | (79%) | | Basic EPS | $0.06 | $0.28 | (79%) | | Diluted EPS | $0.06 | $0.27 | (78%) | - Other income, net, was $4 thousand in Q1 FY2022 compared to $16.7 million in Q1 FY2021, which included a gain on divestitures[10] - Stock-based compensation expense included in cost of revenue and operating expenses totaled $4.9 million in Q1 FY2022, up from $4.8 million in Q1 FY2021[10] Condensed Consolidated Statements of Comprehensive Income Comprehensive income matched net income at $3.1 million, a significant decrease from $14.6 million in the prior year | Metric | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net income | $3,093 | $14,681 | | Foreign currency translation adjustment | $0 | $(38) | | Total other comprehensive loss | $0 | $(38) | | Comprehensive income | $3,093 | $14,643 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $299.7 million, driven by net income and stock-based compensation expense | Metric | Jun 30, 2021 (in thousands) | Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Balances at period beginning | $295,148 | $295,148 | | Issuance of common stock upon exercise of stock options | - | $395 | | Stock-based compensation expense | - | $4,906 | | Withholding taxes related to release of restricted stock | - | $(3,847) | | Net income | - | $3,093 | | Balances at period end | $295,148 | $299,695 | - Shares issued and outstanding increased from 53,786,363 at June 30, 2021, to 54,208,614 at September 30, 2021[13] Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased significantly, while financing activities used more cash for acquisitions | Cash Flow Activity | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,753 | $17,558 | | Net cash used in investing activities | $(1,374) | $(20,707) | | Net cash used in financing activities | $(8,764) | $(2,055) | | Net decrease in cash, cash equivalents and restricted cash | $(4,390) | $(5,265) | | Cash, cash equivalents and restricted cash at end of period | $105,943 | $102,258 | - The decrease in operating cash flow was driven by lower net income and a $7.1 million net decrease in cash from changes in working capital, primarily a $9.0 million decrease in accrued liabilities[15][130] - Investing activities in 2020 included significant cash used for the Modernize acquisition ($40.3 million) and proceeds from divestitures ($20.7 million), which were not present in 2021[15][135] - Financing activities in 2021 included $5.3 million in post-closing acquisition payments, a substantial increase from $0.3 million in 2020[15][137] Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, revenue disaggregation, acquisitions, and other key financial information Note 1. The Company QuinStreet is a leader in performance marketplaces for financial and home services, focused on customer acquisition - Incorporated in California in April 1999 and reincorporated in Delaware in December 2009[17] - Focuses on financial services and home services, having divested the education client vertical[17] - The majority of the Company's operations and revenue are in North America[17] Note 2. Summary of Significant Accounting Policies This section outlines the basis of presentation, use of estimates, and adoption of new accounting standards - Interim financial statements are unaudited and prepared in accordance with GAAP and SEC rules for interim reporting[19] - Management uses estimates and assumptions for financial reporting, including revenue recognition, stock-based compensation, goodwill, and income taxes[21] | Metric | Sep 30, 2021 (in millions) | Jun 30, 2021 (in millions) | | :--- | :--- | :--- | | Allowance for credit losses | $0.1 | $0.1 | | Revenue reserve | $1.1 | $0.9 | | Total allowance for credit losses and revenue reserve | $1.2 | $1.0 | - One client accounted for 15% of net revenue for the three months ended September 30, 2021 (down from 26% in 2020), and one additional client accounted for 15% of net accounts receivable[26] - Adoption of ASU 2019-12 (Income Taxes) as of July 1, 2021, had no material impact on the condensed consolidated financial statements[29] Note 3. Revenue Net revenue grew to $159.6 million, driven by strong performance in financial and home services verticals | Vertical | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Financial Services | $117,912 | $94,213 | | Home Services | $39,986 | $33,469 | | Other Revenue | $1,710 | $0 | | Divested Business | $0 | $11,587 | | Total net revenue | $159,608 | $139,269 | - Financial Services revenue increased by 25% year-over-year, and Home Services revenue increased by 19% year-over-year[31] - The former education client vertical, divested in Q1 FY2021, contributed $11.6 million in revenue in Q1 FY2020[31] Note 4. Net Income per Share Basic and diluted net income per share decreased significantly to $0.06, reflecting lower net income | Metric | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Net income (in thousands) | $3,093 | $14,681 | | Basic EPS | $0.06 | $0.28 | | Diluted EPS | $0.06 | $0.27 | | Weighted-average shares (Basic, in thousands) | 53,993 | 52,492 | | Weighted-average shares (Diluted, in thousands) | 55,789 | 54,269 | - Dilutive securities included stock options (575 thousand shares) and restricted stock units (1,221 thousand shares) for Q1 FY2022[35] Note 5. Fair Value Measurements The Company categorizes fair value measurements into three levels, with contingent consideration as Level 3 | Instrument | Level 1 (Sep 30, 2021) | Level 2 (Sep 30, 2021) | Level 3 (Sep 30, 2021) | Total (Sep 30, 2021) | Total (Jun 30, 2021) | | :--- | :--- | :--- | :--- | :--- | :--- | | Money market funds | $1,670 | $0 | $0 | $1,670 | $1,670 | | Post-closing payments related to acquisitions | $0 | $29,728 | $0 | $29,728 | $34,954 | | Contingent consideration related to acquisitions | $0 | $0 | $5,432 | $5,432 | $5,432 | | Total Liabilities | $0 | $29,728 | $5,432 | $35,160 | $40,386 | - Post-closing payments decreased from $34.9 million to $29.7 million, while contingent consideration remained stable at $5.4 million[40] - Contingent consideration is valued using the real options technique, incorporating projected net revenue, gross margin, volatility, and discount rates[43] Note 6. Divestitures The Company divested its education client vertical for $20.0 million, recognizing a gain of $16.6 million - Divestiture of education client vertical completed on August 31, 2020[46] - Total cash consideration for divestiture was $20.0 million[46] - Recognized a gain of $16.6 million from the divestiture within other income, net[46] Note 7. Acquisitions The Company completed several acquisitions in fiscal 2021 to expand its financial and home services verticals - Modernize, Inc. was acquired on July 1, 2020, for $43.9 million cash upfront and $27.5 million in post-closing payments, broadening the home services client vertical[47] | Asset Type | Estimated Fair Value (in thousands) | Estimated Useful Life | | :--- | :--- | :--- | | Customer/publisher/advertiser relationships | $21,300 | 9 years | | Content | $800 | 1.5 years | | Website/trade/domain names | $5,300 | 15 years | | Acquired technology and others | $6,300 | 4 years | | Total | $33,700 | | - FC Ecosystem, LLC (FCE) was acquired on March 1, 2021, for $7.0 million cash upfront, $4.0 million in post-closing payments, and up to $9.0 million in contingent consideration, broadening financial services relationships[51] - Mayo Labs, LLC was acquired on February 17, 2021, for $2.0 million cash upfront and $2.0 million in post-closing payments, serving the financial services client vertical[54] | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | | :--- | :--- | :--- | | Net revenue | $142,303 | $145,333 | | Net income | $15,778 | $2,606 | Note 8. Goodwill and Intangible Assets, Net Goodwill remained stable at $117.8 million with no impairments, while intangible assets decreased due to amortization - Goodwill was $117.8 million as of September 30, 2021, and June 30, 2021, with no impairments recorded during the three months ended September 30, 2021[58] | Asset Type | Sep 30, 2021 (Net Carrying Amount, in thousands) | Jun 30, 2021 (Net Carrying Amount, in thousands) | | :--- | :--- | :--- | | Customer/publisher/advertiser relationships | $45,035 | $47,345 | | Content | $132 | $266 | | Website/trade/domain names | $6,662 | $6,799 | | Acquired technology and others | $4,332 | $4,767 | | Total | $56,161 | $59,177 | - Amortization of intangible assets was $3.0 million for the three months ended September 30, 2021[59] | Fiscal Year Ending June 30, | Amortization (in thousands) | | :--- | :--- | | 2022 (remaining nine months) | $8,350 | | 2023 | $10,500 | | 2024 | $9,604 | | 2025 | $7,622 | | 2026 | $5,197 | | Thereafter | $14,888 | | Total | $56,161 | Note 9. Income Taxes The provision for income taxes was $0.6 million, significantly lower than the $4.6 million in the prior year | Metric | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Provision for income taxes | $(576) | $(4,614) | - No significant valuation allowance adjustments were recorded as of September 30, 2021[61] - An ownership change under IRC Section 382 could limit the Company's ability to utilize net operating losses and other tax attributes[62] Note 10. Leases The Company has operating leases for office facilities with a total lease expense of $1.6 million for the quarter | Expense Type | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Operating lease expense | $1,301 | $1,308 | | Short-term lease expense | $169 | $253 | | Variable lease expense | $120 | $148 | | Total lease expense | $1,590 | $1,709 | - Weighted average remaining lease term for operating leases is 2.5 years (down from 3.4 years in 2020)[66] - Weighted average discount rate for operating leases is 5.0%[66] | Fiscal Year Ending June 30, | Amount (in thousands) | | :--- | :--- | | 2022 (remaining nine months) | $4,658 | | 2023 | $5,763 | | 2024 | $3,663 | | 2025 | $721 | | 2026 | $32 | | Total minimum lease payments | $14,837 | | Present value of net minimum lease payments | $12,738 | Note 11. Commitments and Contingencies The Company has indemnification agreements and a letter of credit, but believes related liabilities are not material - Indemnification agreements for officers and directors have unlimited maximum potential payments, but insurance limits exposure, making the estimated fair value not material[68] - Indemnification provisions with clients are generally limited, and the estimated fair value is not material[69] - A $0.5 million letter of credit serves as collateral for the Company's corporate headquarters' operating lease[70] Note 12. Stockholders' Equity A stock repurchase program is authorized, with 903,636 shares remaining available, but no shares were repurchased - Stock repurchase program authorized for up to 966,000 outstanding shares of common stock[72] - 903,636 shares remain available for repurchase as of September 30, 2021[72] - No repurchases were made under this program during the three months ended September 30, 2021[72] Note 13. Stock Benefit Plans The Company grants various equity awards under its incentive plans, valued using the Black-Scholes model - 23,125,612 shares were reserved and 13,385,818 shares were available for issuance under the 2010 Incentive Plan as of September 30, 2021[75] - Stock options are granted with an exercise price equal to the closing price of the Company's common stock on the grant date and valued using the Black-Scholes option-pricing model[76] | Metric | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Expected term (in years) | 4.5 | 4.5 | | Expected volatility | 58% | 62% | | Expected dividend yield | — | — | | Risk-free interest rate | 0.8% | 0.3% | | Grant date fair value | $8.66 | $5.81 | Note 14. Segment Information The Company operates as one reportable segment, with the majority of revenue and assets in the United States - The Company operates as one reportable segment, as the chief operating decision maker reviews financial information on a consolidated basis[77] | Geographic Area | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | United States | $154,483 | $136,413 | | International | $5,125 | $2,856 | | Total net revenue | $159,608 | $139,269 | | Geographic Area | Sep 30, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :--- | :--- | :--- | | United States | $7,129 | $6,672 | | International | $204 | $177 | | Total property and equipment, net | $7,333 | $6,849 | - All other intangible assets, net, are attributed to the United States[78][80] Note 15. Subsequent Events Stockholders approved the 2021 Employee Stock Purchase Plan, with the first offering period in Q3 FY2022 - The Company's 2021 Employee Stock Purchase Plan was approved by stockholders on October 25, 2021[79] - The first offering period of the plan is expected to commence in the third quarter of fiscal year 2022[79] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial performance, condition, and outlook Management Overview QuinStreet is a leader in performance marketplaces for financial and home services, focused on customer acquisition - QuinStreet is a leader in performance marketplaces and technologies for the financial services and home services industries, specializing in customer acquisition[83] - Revenue is primarily derived from fees earned through the delivery of qualified inquiries such as clicks, leads, calls, applications, or customers[86] - The financial services client vertical represented 74% of net revenue for the three months ended September 30, 2021 (up from 68% in 2020)[87] - One client in the financial services client vertical accounted for 15% of net revenue for the three months ended September 30, 2021 (down from 26% in 2020)[88] Trends Affecting our Business Key trends include COVID-19 impacts, client vertical dynamics, acquisitions, media sourcing, and regulations - The Company continues to monitor the impacts from the COVID-19 pandemic, including potential reductions in client spending, media availability, and consumer spending[89] - The financial services client vertical benefited from enhanced product sets, while the home services vertical expanded due to the Modernize acquisition[90][91] - Acquisitions are an important element of corporate strategy, while divestitures narrow focus to best-performing businesses[92][93] - Challenges include finding or creating high-quality targeted media cost-effectively due to consolidation, search engine algorithm changes, and increased competition[94] - Results are subject to significant seasonal fluctuation, with Q2 typically weaker and Q3 generally stronger[95] - The business is affected by federal, state, and industry-based regulations, particularly in financial services, which can cause fluctuations in business volume and mix[97][98] Basis of Presentation This section details the recognition and classification of key items in the financial statements - Net revenue is generated primarily from fees earned through the delivery of qualified inquiries in financial services and home services client verticals[101] - Cost of revenue consists primarily of media and marketing costs, personnel costs, and amortization of intangible assets[102] - Operating expenses are classified into product development, sales and marketing, and general and administrative, primarily comprising personnel costs[103] - Interest and other income, net, includes interest expense, interest income, and non-operating items like gains/losses on divestitures[106] Critical Accounting Policies, Estimates and Judgments Financial statement preparation requires significant management estimates, particularly for revenue and goodwill - Critical accounting policies involve significant judgments, assumptions, and estimates related to revenue recognition, valuation of goodwill, and stock-based compensation[114] - Management evaluates these estimates based on historical and anticipated results, but actual results could differ significantly[21][110] - There have been no material changes to the Company's significant accounting policies as of and for the three months ended September 30, 2021[23][113] Results of Operations Net revenue grew 15%, but net income fell 79% due to a prior-year gain and higher media costs | Metric | Sep 30, 2021 (in thousands) | % of Revenue (2021) | Sep 30, 2020 (in thousands) | % of Revenue (2020) | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $159,608 | 100.0% | $139,269 | 100.0% | | Cost of revenue | $141,505 | 88.7% | $122,231 | 87.8% | | Gross profit | $18,103 | 11.3% | $17,038 | 12.2% | | Operating income | $3,938 | 2.5% | $2,923 | 2.1% | | Income before income taxes | $3,669 | 2.3% | $19,295 | 13.9% | | Net income | $3,093 | 1.9% | $14,681 | 10.5% | - Net revenue increased by $20.3 million, or 15%, primarily due to a 25% increase in financial services revenue and a 19% increase in home services revenue[117] - Cost of revenue increased by $19.3 million, or 16%, primarily driven by increased media and marketing costs associated with higher revenue volumes[119] - Gross profit margin decreased from 12% to 11% due to increased media and marketing costs as a percentage of revenue[119] | Expense Type | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Product development | $4,625 | $4,891 | (5%) | | Sales and marketing | $2,906 | $2,643 | 10% | | General and administrative | $6,634 | $6,581 | 1% | | Total Operating expenses | $14,165 | $14,115 | 0% | - Provision for income taxes decreased from $4.6 million in 2020 to $0.6 million in 2021[125] Liquidity and Capital Resources Liquidity is sufficient, with $105.9 million in cash, despite a significant year-over-year decrease in operating cash flow - As of September 30, 2021, principal sources of liquidity consisted of cash and cash equivalents of $105.9 million and cash expected to be generated from future operations[126] - The Company believes its principal sources of liquidity will be sufficient to satisfy anticipated cash requirements through at least the next 12 months[128] | Cash Flow Activity | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,753 | $17,558 | | Net cash used in investing activities | $(1,374) | $(20,707) | | Net cash used in financing activities | $(8,764) | $(2,055) | - Cash provided by operating activities decreased from $17.6 million in 2020 to $5.8 million in 2021, primarily due to lower net income and changes in working capital[129][130] - Cash used in investing activities decreased from $20.7 million in 2020 (due to the Modernize acquisition) to $1.4 million in 2021[133][134][135] - Cash used in financing activities increased from $2.1 million in 2020 to $8.8 million in 2021, mainly due to $5.3 million in post-closing acquisition payments[136][137] - The Company did not have any material off-balance sheet arrangements during the periods presented[139] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk is interest rate fluctuations, but this exposure is not considered material - The Company's market risk exposure is primarily the result of fluctuations in interest rates[142] - Investments in cash equivalents are short-term, limiting material exposure to changes in interest rates[143] - A hypothetical decline of 1% in the interest rate on investments would not have a material effect on the condensed consolidated financial statements[143] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective, with no material changes identified - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2021[144] - No material changes in internal control over financial reporting were identified during the period covered by the report[145] - The Company has not experienced any material impact to its internal controls over financial reporting despite employees working remotely due to the COVID-19 pandemic[145] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company does not believe any pending legal proceedings will have a material adverse effect on its financial results - The Company may become involved in legal proceedings and claims arising in the ordinary course of its business[146] - The Company records a liability when it believes that it is probable that a loss has been incurred and the amount can be reasonably estimated[146] - Based on current knowledge, the Company does not believe that any pending or threatened legal proceedings will have a material adverse effect on its future financial results[146] ITEM 1A. RISK FACTORS Investing in the Company's stock involves high risk related to its industry, client dependence, and regulations Summary of Risks Associated with Our Business Key risks include operating in a developing industry, client concentration, and reliance on third-party media - The Company operates in an industry that is still developing and has a relatively new business model that is continually evolving[149] - A reduction in online marketing spend by clients or a loss of clients may seriously harm the business, as a substantial portion of revenue is generated from a limited number of clients[149] - The Company depends on third-party media sources, including strategic partners, for a significant portion of its visitors[149] - The Company is exposed to online security risks, particularly given that it gathers, transmits, and stores personally identifiable information[149] - The Company depends upon Internet search companies to direct a significant portion of visitors to its websites, and changes in search engine algorithms could harm placements[149] - The Company faces risks and uncertainties related to the COVID-19 pandemic and its aftermath, which could significantly disrupt operations[149] Risks Related to Our Business and Industry Risks include adapting to a rapidly evolving industry, economic changes, intense competition, and managing growth - The Company's still developing industry and relatively new business model and products create risks and uncertainties[150][152] - A reduction in online marketing spend by clients could seriously harm the business, especially given reliance on a limited number of clients[154][156] - Dependence on third-party media sources means any decline in supply or increase in price could cause revenue to decline or costs to increase[159] - Exposure to online data privacy and security risks could lead to significant expenses and reputational damage[160][161] - Reliance on Internet search companies means changes in search engine algorithms could harm website placements and reduce visitor traffic[164][165] - Negative changes in economic conditions and the regulatory environment (e.g., CCPA, GDPR, TCPA) may have a material adverse impact on revenue and growth[168][169][171] - The Company's results of operations have fluctuated and may do so in the future due to factors including seasonality and changes in client volume[176] - Failure to effectively manage future growth or scale technology infrastructure could impair operating performance and lead to client loss[188][189][191] - Acquisitions, investments, and divestitures could complicate operations, result in dilution, and other harmful consequences[195][197][199] - Limitations restricting the ability to market to users or collect data (e.g., cookies, email) could significantly diminish the value of services and adversely affect revenue[209][211] Risks Related to Our Intellectual Property The Company's competitive position relies on protecting its intellectual property from infringement and lawsuits - If the Company does not adequately protect its intellectual property rights, its competitive position and business may suffer[213] - Third-parties may sue the Company for intellectual property infringement, which could require significant costs to defend or settle[215][216] - As a creator and distributor of Internet content, the Company faces potential liability and expenses for legal claims based on the nature and content of materials it distributes[219] Risks Related to the Ownership of Our Common Stock The stock price has been volatile and may fluctuate due to financial results, analyst opinions, and market factors - The trading price of the Company's common stock has been volatile and may continue to fluctuate significantly[220][222] - If securities or industry analysts do not publish research or issue adverse opinions, the stock price and trading volume could decline[224] - Directors and executive officers, with substantial influence over the Company, could delay or prevent a change in corporate control[225][227] - The stock repurchase program may not enhance long-term stockholder value and could increase stock price volatility or diminish cash reserves[228] - The Company may be subject to short selling strategies that could drive down the market price of its common stock[229] - Failure to maintain proper and effective internal controls could impair the ability to produce accurate financial statements or prevent fraud[230][231][232] - The Company may be required to record a significant charge to earnings if its goodwill or intangible assets become impaired[233][234] - Provisions in the Company's charter documents and Delaware law could discourage a takeover that stockholders may consider favorable[235][237] - The Company does not currently intend to pay dividends, meaning return on investment will depend on stock price appreciation[236] General Risk Factors General risks include the COVID-19 pandemic, counterparty risks, and reliance on key management personnel - The COVID-19 pandemic poses significant risks, potentially disrupting operations, decreasing consumer demand, and reducing client budgets[239][240][243] - The Company is subject to risks with respect to counterparties, whose failure to meet obligations could cause losses or costly litigation[245] - Success depends on the continued services of the management team and other key employees; the loss of one or more could harm the business[246] - Damage to the Company's reputation could harm its business, financial condition, and results of operations[247][249][250] - The Company may need additional capital in the future to meet financial obligations or pursue business objectives[252] - Conducting business in international markets presents additional risks and challenges, including adapting to foreign preferences and navigating laws[253][254] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No unregistered sales of equity securities were made, and no stock repurchases occurred during the quarter - No unregistered sales of equity securities were reported[255] - As of September 30, 2021, 903,636 shares remain available for repurchase under the stock repurchase program[257] - No repurchases were made under the stock repurchase program during the first quarter of fiscal year 2022[257] ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities were reported - No defaults upon senior securities were reported[258] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the Company - This item is not applicable[259] ITEM 5. OTHER INFORMATION No other information was reported - No other information was reported[260] ITEM 6. EXHIBITS This section lists the exhibits filed with the report, including CEO/CFO certifications and XBRL documents - Includes certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[262] - Contains Inline XBRL Instance Document and Taxonomy Extension Schema, Calculation, Definition, and Label Linkbase Documents[262] SIGNATURES Signatures The report was duly signed by the Chief Financial Officer on behalf of the company on November 4, 2021 - The report was signed by Gregory Wong, Chief Financial Officer (Principal Financial and Accounting Officer)[266] - The date of signature was November 4, 2021[266]