Conversant, Inc.
Aug 2, 2011
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ValueClick Announces Second Quarter 2011 Results

Revenue and Profitability Exceed High-End of Guidance Ranges

Company to Acquire Dotomi, Leader in Dynamically-Optimized Display Advertising

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)-- ValueClick, Inc. (Nasdaq: VCLK) today reported financial results for the second quarter ended June 30, 2011. Revenue, adjusted-EBITDA1, and earnings per share metrics all exceeded the high-end of the guidance ranges management provided on May 3, 2011.

Highlights from the second quarter of 2011 results include:

In a separate press release, ValueClick also announced today that it has signed a definitive agreement to acquire privately-held Dotomi, the leading provider of data-driven, intelligent display media for major retailers. Through its unique set of capabilities, Dotomi has developed strategic, direct relationships with over 100 retail brands, including over forty brands from the Internet Retailer Top 100. For more information on this acquisition, please see today's press release entitled "ValueClick to Acquire Dotomi."

"Our momentum continued in the second quarter, as our investments to expand our growth profile and addressable markets continued to pay off," said Jim Zarley, chief executive officer of ValueClick. "Our unique combination of traffic, data, optimization, and services is resonating in the marketplace, and Dotomi will add direct advertiser relationships and strategic capabilities that will position us further as a powerhouse in both branding and performance-based digital marketing."

Non-GAAP net income, which excludes stock-based compensation and amortization of intangible assets was $22.4 million, or $0.28 per diluted common share for the second quarter. A table reconciling GAAP net income to non-GAAP diluted net income per common share is included in this press release.

The consolidated balance sheet as of June 30, 2011 included approximately $142.5 million in cash and cash equivalents and no debt.

Business Outlook

Today, ValueClick is announcing guidance for the third quarter of 2011:

   

Guidance

Revenue   $128-$130 million
Adjusted-EBITDA   $36-$38 million
Mid-Point Adjusted-EBITDA Margin   28.7%
GAAP diluted net income per common share   $0.21-$0.22
Non-GAAP diluted net income per common share   $0.27-$0.28

The consolidated revenue guidance range is based on the following segment-level assumptions for revenue growth rates expressed as a percentage increase from third quarter 2010 reported revenue levels:

     

    Affiliate Marketing:     up low double-digits

Media: up low forties on a reported basis, up low twenties excluding Greystripe

Owned & Operated: up low double-digits

Technology: up high single-digits

Third quarter 2011 non-GAAP and GAAP diluted net income per common share guidance assume stock-based compensation of $2.8 million, amortization of intangible assets of $5.0 million, interest and other income of $0.8 million, a 38 percent effective tax rate, and 80.5 million diluted shares outstanding.

Third quarter 2011 guidance does not include the impact of the pending Dotomi acquisition. ValueClick expects to update its business outlook after the closing of this transaction, which is anticipated to occur in late August.

Conference Call Today at 4:30 p.m. ET

Jim Zarley, chief executive officer, and John Pitstick, chief financial officer, will present an overview of the results and other factors affecting ValueClick's financial performance for the second quarter, during a conference call and webcast on August 2 at 4:30 p.m. ET. Investors and analysts may obtain the dial-in information through StreetEvents (www.streetevents.com). The live Webcast of the conference call will be available on the Investor Relations section of www.valueclick.com. A replay of the conference call will be available through August 9 at (888) 203-1112 and (719) 457-0820 (pass code: 2296590). An archive of the Webcast will also be available through August 9.

About ValueClick

ValueClick, Inc. (Nasdaq: VCLK) is one of the world's largest digital marketing companies. Through a unique combination of data, technology and services, ValueClick increases brand awareness and drives customer acquisition at scale for the world's largest advertisers, and maximizes advertising revenue for tens of thousands of online and mobile publishers. ValueClick's brands include Commission Junction, ValueClick Media, Greystripe, Mediaplex, Smarter.com, CouponMountain.com, Investopedia.com, and PriceRunner. The Company is based in Westlake Village, California, and has offices in major advertising markets worldwide. For more information, please visit www.valueclick.com.

This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, the risk that market demand for on-line advertising in general, and performance based on-line advertising in particular, will not grow as rapidly as predicted, the risk that legislation and governmental regulation could negatively impact the Company's performance, the risk that the closing of the Dotomi acquisition will not occur, the effects of the merger on ValueClick's financial results, the potential inability to successfully operate or integrate Dotomi's business, including the potential inability to retain customers, key employees or vendors. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed under "Risk Factors" and elsewhere in filings with the Securities and Exchange Commission made from time to time by ValueClick, including, but not limited to: its annual report on Form 10-K filed on February 28, 2011; recent quarterly reports on Form 10-Q; and other current reports on Form 8-K.

The Business Outlook contained in this release is based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after the date of this release. Actual stock-based compensation may differ from these estimates based on the timing and amount of stock awards granted, the assumptions used in stock award valuation and other factors. Actual income tax expense may differ from these estimates based on tax planning, changes in tax accounting rules and laws, and other factors.

ValueClick undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

1 Adjusted-EBITDA is defined as GAAP (Generally Accepted Accounting Principles) net income from continuing operations before interest, income taxes, depreciation, amortization, and stock-based compensation expenses. Please see the attached schedule for a reconciliation of GAAP net income to adjusted-EBITDA, and a discussion of why the Company believes adjusted-EBITDA is a useful financial measure to investors and how Company management uses this financial measure.

VALUECLICK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
  June 30,   December 31,
2011

2010

(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 142,534 $ 194,317
Marketable securities 3,000
Accounts receivable, net 87,106 86,738
Other current assets   24,372   18,470
Total current assets 254,012 302,525
 
Note receivable, less current portion 30,510 31,267
Property and equipment, net 14,169 12,414
Goodwill 232,174 183,218
Intangible assets, net 47,366 33,525
Other assets   46,640   50,618
TOTAL ASSETS $ 624,871 $ 613,567
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 100,157 $ 103,258
Non-current liabilities   38,482   37,668
Total liabilities 138,639 140,926
Total stockholders' equity   486,232   472,641
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 624,871 $ 613,567
 
VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 
  Three-month Period
Ended June 30,
2011   2010
(Unaudited)
Revenue $ 125,062 $ 99,601
Cost of revenue   40,098   27,346
Gross profit 84,964 72,255
Operating expenses:
Sales and marketing (Note 1) 27,868 27,117
General and administrative (Note 1) 13,562 13,363
Technology (Note 1) 10,853 8,302
Amortization of intangible assets acquired in business combinations   6,147   4,936
Total operating expenses   58,430   53,718
Income from operations 26,534 18,537
Interest and other income, net   657   2,437
Income before income taxes 27,191 20,974
Income tax expense   10,210   8,932
Net income $ 16,981 $ 12,042
 
Basic net income per common share $ 0.22 $ 0.15
Diluted net income per common share $ 0.21 $ 0.15
Weighted-average shares used to compute basic net income per common share   78,981   81,551
Weighted-average shares used to compute diluted net income per common share   80,059   82,212
 
 
Note 1 - Includes stock-based compensation as follows:
Three-month Period
Ended June 30,
2011 2010
(Unaudited)
Sales and marketing $ 533 $ 332
General and administrative 1,676 1,660
Technology   405   208
Total stock-based compensation $ 2,614 $ 2,200
 
VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 
  Six-month Period
Ended June 30,
2011     2010  
(Unaudited)
Revenue $ 241,573 $ 195,283
Cost of revenue   72,975   52,845  
Gross profit 168,598 142,438
Operating expenses:
Sales and marketing (Note 1) 57,417 51,612
General and administrative (Note 1) 26,085 27,186
Technology (Note 1) 21,019 16,226
Amortization of intangible assets acquired in business combinations   11,035   9,902  
Total operating expenses   115,556   104,926  
Income from operations 53,042 37,512
Interest and other income, net   1,065   2,996  
Income before income taxes 54,107 40,508
Income tax expense   20,264   17,143  
Income from continuing operations 33,843 23,365
Loss from discontinued operations, net of tax (134 )
Gain on sale, net of tax     10,040  
Net income $ 33,843 $ 33,271  
 
Basic income from continuing operations per common share $ 0.42 $ 0.28  
Diluted income from continuing operations per common share $ 0.42 $ 0.28  
Basic net income per common share $ 0.42 $ 0.40  
Diluted net income per common share $ 0.42 $ 0.40  
Weighted-average shares used to compute basic net income per common share   79,829   82,218  
Weighted-average shares used to compute diluted net income per common share   80,847   82,850  
 
 
Note 1 - Includes stock-based compensation as follows:
Six-month Period
Ended June 30,
2011   2010  
(Unaudited)
Sales and marketing $ 819 $ 660
General and administrative 3,089 3,097
Technology   623   400  
Total stock-based compensation $ 4,531 $ 4,157  
 
VALUECLICK, INC.
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED-EBITDA (Note 1)
(In thousands)
 
  Three-month Period
Ended June 30,
  2011       2010  
(Unaudited)
Net income $ 16,981 $ 12,042
Interest and other income, net (657 ) (2,437 )
Provision for income tax 10,210 8,932
Amortization of intangible assets acquired in business combinations 6,147 4,936
Depreciation and leasehold amortization 1,762 1,608
Stock-based compensation   2,614     2,200  
Adjusted-EBITDA $ 37,057   $ 27,281  
 
Six-month Period
Ended June 30,
  2011     2010  
(Unaudited)
Income from continuing operations $ 33,843 $ 23,365
Interest and other income, net (1,065 ) (2,996 )
Provision for income tax 20,264 17,143
Amortization of intangible assets acquired in business combinations 11,035 9,902
Depreciation and leasehold amortization 3,516 3,214
Stock-based compensation   4,531     4,157  
Adjusted-EBITDA $ 72,124   $ 54,785  
 

Note 1 - "Adjusted-EBITDA" (GAAP income from continuing operations before interest, income taxes, depreciation, amortization, and stock-based compensation expenses) included in this press release is a non-GAAP financial measure.

 

Adjusted-EBITDA, as defined above, may not be similar to adjusted-EBITDA measures used by other companies and is not a measurement under GAAP. Management believes that adjusted-EBITDA provides useful information to investors about the Company's performance because it eliminates the effects of period-to-period changes in income from interest on the Company's cash and marketable securities and the costs associated with income tax expense, capital investments, and stock-based compensation which are not directly attributable to the underlying performance of the Company's business operations. Management uses adjusted-EBITDA in evaluating the overall performance of the Company's business operations.

 

Though management finds adjusted-EBITDA useful for evaluating aspects of the Company's business, its reliance on this measure is limited because excluded items often have a material effect on the Company's earnings and earnings per common share calculated in accordance with GAAP. Therefore, management uses adjusted-EBITDA in conjunction with GAAP earnings and earnings per common share measures. The Company believes that adjusted-EBITDA provides investors with an additional tool for evaluating the Company's core performance, which management uses in its own evaluation of overall performance, and a baseline for assessing the future earnings potential of the Company. While the GAAP results are more complete, the Company prefers to allow investors to have this supplemental metric since, with a reconciliation to GAAP, it may provide greater insight into the Company's financial results.

 
VALUECLICK, INC.
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP DILUTED NET INCOME PER COMMON SHARE (Note 1)
(In thousands)
 
  Three-month Period
Ended June 30,
  2011       2010  
(Unaudited)
Net income $ 16,981 $ 12,042
Stock-based compensation 2,614 2,200
Amortization of intangible assets acquired in business combinations 6,147 4,936
Tax impact of above items   (3,349 )   (2,746 )
Non-GAAP net income $ 22,393   $ 16,432  
Non-GAAP diluted net income per common share $ 0.28   $ 0.20  
Weighted-average shares used to compute non-GAAP diluted net income per common share   80,059     82,212  
 
Six-month Period
Ended June 30,
  2011     2010  
(Unaudited)
GAAP income from continuing operations $ 33,843 $ 23,365
Stock-based compensation 4,531 4,157
Amortization of intangible assets acquired in business combinations 11,035 9,902
Tax impact of above items   (6,075 )   (5,446 )
Non-GAAP net income $ 43,334   $ 31,978  
Non-GAAP diluted net income per common share $ 0.54   $ 0.39  
Weighted-average shares used to compute non-GAAP diluted net income per common share   80,847     82,850  
 

Note 1 - "Non-GAAP diluted net income per common share" (GAAP diluted income from continuing operations per common share before the impact of stock-based compensation, amortization of intangibles, and other non-recurring events) included in this press release is a non-GAAP financial measure.

 

Non-GAAP diluted net income per common share, as defined above, may not be similar to non-GAAP diluted net income per common share measures used by other companies and is not a measurement under GAAP. Management believes that non-GAAP diluted net income per common share provides useful information to investors about the Company's performance because it eliminates the effects of items which are not directly attributable to the underlying performance of the Company's business operations. Management uses non-GAAP diluted net income per common share in evaluating the overall performance of the Company's business operations.

 

Though management finds non-GAAP diluted net income per common share useful for evaluating aspects of the Company's business, its reliance on this measure is limited because excluded items often have a material effect on the Company's earnings and earnings per common share calculated in accordance with GAAP. Therefore, management uses non-GAAP diluted net income per common share in conjunction with GAAP earnings and earnings per common share measures. The Company believes that non-GAAP diluted net income per common share provides investors with an additional tool for evaluating the Company's core performance, which management uses in its own evaluation of overall performance, and a baseline for assessing the future earnings potential of the Company. While the GAAP results are more complete, the Company prefers to allow investors to have this supplemental metric since, with a reconciliation to GAAP, it may provide greater insight into the Company's financial results.

 
VALUECLICK, INC.
SEGMENT OPERATING RESULTS
(In thousands)
 
  Three-month Period   Six-month Period
Ended June 30, Ended June 30,
  2011       2010     2011       2010  

(Unaudited)

(Unaudited)

Affiliate Marketing:
Revenue $ 32,616 $ 28,738 $ 67,090 $ 58,097
Cost of revenue   4,314     4,418     8,638     8,437  
Gross profit 28,302 24,320 58,452 49,660
Operating expenses   9,186     9,046     18,847     18,337  
Segment income from operations $ 19,116   $ 15,274   $ 39,605   $ 31,323  
 
Media:
Revenue $ 42,986 $ 31,637 $ 79,188 $ 62,440
Cost of revenue   23,082     16,908     42,795     32,761  
Gross profit 19,904 14,729 36,393 29,679
Operating expenses   10,896     7,163     19,537     14,447  
Segment income from operations $ 9,008   $ 7,566   $ 16,856   $ 15,232  
 
Owned & Operated Websites:
Revenue $ 40,554 $ 31,986 $ 78,501 $ 59,883
Cost of revenue   11,954     5,434     20,030     10,517  
Gross profit 28,600 26,552 58,471 49,366
Operating expenses   19,705     21,042     42,529     38,972  
Segment income from operations $ 8,895   $ 5,510   $ 15,942   $ 10,394  
 
Technology:
Revenue $ 9,092 $ 7,610 $ 17,173 $ 15,504
Cost of revenue   888     860     1,806     1,625  
Gross profit 8,204 6,750 15,367 13,879
Operating expenses   3,474     2,975     6,508     6,016  
Segment income from operations $ 4,730   $ 3,775   $ 8,859   $ 7,863  
 
Reconciliation of segment income from operations to consolidated income from operations:
Total segment income from operations $ 41,749 $ 32,125 $ 81,262 $ 64,812
Corporate expenses (6,454 ) (6,452 ) (12,654 ) (13,241 )
Stock-based compensation (2,614 ) (2,200 ) (4,531 ) (4,157 )
Amortization of intangible assets   (6,147 )   (4,936 )   (11,035 )   (9,902 )
Consolidated income from operations $ 26,534   $ 18,537   $ 53,042   $ 37,512  
 
Reconciliation of segment revenue to consolidated revenue:
Affiliate Marketing $ 32,616 $ 28,738 $ 67,090 $ 58,097
Media 42,986 31,637 79,188 62,440
Owned & Operated Websites 40,554 31,986 78,501 59,883
Technology 9,092 7,610 17,173 15,504
Inter-segment eliminations   (186 )   (370 )   (379 )   (641 )
Consolidated revenue $ 125,062   $ 99,601   $ 241,573   $ 195,283  

ValueClick, Inc.
Gary J. Fuges, CFA, 1-818-575-4677

Source: ValueClick, Inc.

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