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ValueClick announces third quarter 2006 results

ValueClick Announces Third Quarter 2006 Results<br />

ValueClick Announces Third Quarter 2006 Results

Results Exceed Previously Issued Guidance; 2006 Guidance Increased

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--Nov. 1,

2006--ValueClick, Inc. (Nasdaq:VCLK) today reported financial results

for the third quarter ended September 30, 2006. Revenue,

adjusted-EBITDA(1) and diluted net income per common share for the

quarter exceeded previously issued guidance. Based on its third

quarter performance and outlook for the fourth quarter, ValueClick

increased its guidance for fiscal year 2006.

"Our core businesses delivered another strong quarter, as our

expertise in monetizing online traffic drove 37 percent year-over-year

organic revenue growth and financial performance that exceeded all of

our guidance metrics," said James Zarley, chairman and chief executive

officer of ValueClick. "Our large-scale network solutions enable our

advertiser and publisher clients to benefit from the continued

fragmentation of online media consumption, and our increased 2006

guidance illustrates our confidence in finishing 2006 on a strong

note."


Revenue for the third quarter of 2006 was a record $137.9 million,

well above the high-end of the Company's previously issued guidance

and a 69 percent increase from the third quarter of 2005. Third

quarter 2006 results include a full quarter of operations from

Fastclick, acquired on September 29, 2005.


Income before income taxes for the third quarter of 2006 was $26.4

million, compared to $18.5 million for the third quarter of 2005.

Third quarter 2006 income before income taxes includes $3.0 million of

stock-based compensation expense, due primarily to the impact of

Statement of Financial Accounting Standards (SFAS) 123R which was

adopted by the Company on January 1, 2006, compared to $70,000 for the

third quarter of 2005. Due to the timing of services rendered, the

third quarter of 2006 also includes an incremental $1.8 million in

professional fees associated with Sarbanes-Oxley compliance, annual

audit and tax planning services that were not included in either the

third quarter of 2005 or the second quarter of 2006.


Adjusted-EBITDA for the third quarter of 2006 was $35.6 million,

above the high-end of the Company's previously issued guidance and an

increase of 57 percent from the third quarter of 2005.


Net income for the third quarter of 2006 was $16.8 million, or

$0.17 per diluted common share, compared to $11.0 million, or $0.13

per diluted common share, for the third quarter of 2005. Third quarter

2006 diluted net income per common share exceeded the Company's

previously issued guidance of $0.14. Third quarter 2006 net income

includes $1.9 million of stock-based compensation expense, net of tax,

largely due to the impact of SFAS 123R. Stock-based compensation

expense reduced third quarter 2006 diluted net income per common share

by $0.02. Based on tax return filings, net favorable discrete

adjustments to the income tax provision for the third quarter of 2006

increased diluted net income per common share by $0.01.


The consolidated balance sheet as of September 30, 2006 includes

$230 million in cash, cash equivalents and marketable securities, $595

million in total stockholders' equity and no long-term debt. During

the third quarter, ValueClick repurchased 1.1 million shares of the

Company's outstanding common stock for $15.0 million. Year-to-date

through September 30, 2006, the Company has repurchased 6.9 million

shares of its outstanding common stock for $103.4 million.


Business Outlook


The following statements are 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 expense may differ from these estimates based on the

timing and amount of options granted, the assumptions used in option

valuation and other factors.


Based on its third quarter results and outlook for 2006,

ValueClick is raising its fiscal year 2006 guidance ranges, issued

previously on August 1, 2006:


Fiscal Year 2006                     Previous           Updated
Guidance Guidance
-------------------------------- ----------------- -------------------
Revenue $519-$529 million $531-$533 million
-------------------------------- ----------------- -------------------
Adjusted-EBITDA $133-$137 million $137-$139 million
-------------------------------- ----------------- -------------------
Diluted net income per common
share $0.48-$0.54 $0.57-$0.58
-------------------------------- ----------------- -------------------

ValueClick's fiscal year 2006 guidance for diluted net income per

common share includes a deduction in the range of $0.08 to $0.09 per

share for stock-based compensation expense and an increase of $0.01

per share resulting from net favorable discrete adjustments to the

income tax provision. Fiscal year 2006 diluted net income per common

share guidance assumes an effective tax rate of 43.3 percent.

Excluding net discrete adjustments, the Company's assumed effective

tax rate would be approximately 44.5 percent.


Additionally, ValueClick is announcing guidance for the fourth

quarter of 2006:


Fourth Quarter 2006                               Guidance
------------------------------------- --------------------------------
Revenue $146-$148 million
------------------------------------- --------------------------------
Adjusted-EBITDA $38-$40 million
------------------------------------- --------------------------------
Diluted net income per common share $0.17-$0.18
------------------------------------- --------------------------------

Fourth quarter 2006 diluted net income per common share guidance

includes a reduction of $0.02 per share for stock-based compensation

expense. Fourth quarter 2006 diluted net income per common share

guidance assumes an effective tax rate of 44.5 percent.


Conference Call Today


James Zarley, chairman and chief executive officer, and Sam

Paisley, chief administrative officer, will present an overview of the

results and other factors affecting ValueClick's financial performance

for the third quarter during a conference call and webcast on November

1, 2006 at 1:30PM PT. Investors and analysts may obtain the dial-in

information through StreetEvents (www.streetevents.com).


The live webcast and other information of potential interest to

investors will be available to the public in the Investor Relations

section of the Company's website (www.valueclick.com). Replay

information will be available for seven days after the call and may be

accessed at (888) 203-1112 for domestic callers and (719) 457-0820 for

international callers. The passcode is 4871755.


About ValueClick


ValueClick, Inc. (Nasdaq:VCLK) is one of the world's largest

integrated online marketing companies, offering comprehensive and

scalable solutions to deliver cost-effective customer acquisition for

advertisers and transparent revenue streams for publishers.

ValueClick's performance-based solutions allow its customers to reach

their potential through multiple online marketing channels, including

affiliate and search marketing, display advertising, lead generation,

ad serving and related technologies, and comparison shopping.

ValueClick brands include Commission Junction, ValueClick Media,

Mediaplex, and PriceRunner. For more information, please visit
www.valueclick.com.


This release contains forward-looking statements that involve

risks and uncertainties, including, but not limited to, ValueClick's

ability to successfully integrate its Fastclick and Webclients

acquisitions, trends in online advertising spending and estimates of

future online performance-based advertising. 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 March 31,

2006 and an amendment to its Annual Report on Form 10-K/A filed on

April 21, 2006; its current report on Form 8-K filed on February 27,

2006; recent quarterly reports on Form 10-Q and Form 10-Q/A; other

current reports on Form 8-K. Other factors that could cause actual

results to differ materially from those expressed or implied in the

forward-looking statements include, but are not limited to, the risk

that market demand for online advertising, and performance-based

online advertising in particular, will not grow as rapidly as

predicted. 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 before interest, income taxes,

depreciation, amortization, and stock-based compensation. 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 STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three-month Period
Ended September
30,
------------------
2006 2005
--------- --------
(Unaudited)
(Note 1)
Revenue $137,865 $81,414
Cost of revenue 38,709 22,496
--------- --------
Gross profit 99,156 58,918
Operating expenses:
Sales and marketing (Note 2) 46,270 22,021
General and administrative (Note 2) 14,326 10,314
Technology (Note 2) 8,301 5,680
Amortization of intangible assets 5,462 3,107
--------- --------
Total operating expenses 74,359 41,122
--------- --------
Income from operations 24,797 17,796
Interest income, net 1,642 687
--------- --------
Income before income taxes 26,439 18,483
Income tax expense 9,648 7,481
--------- --------
Net income $16,791 $11,002
========= ========
Basic net income per common share $0.17 $0.13
========= ========
Weighted-average shares used to compute basic net
income per common share 96,612 84,596
========= ========
Diluted net income per common share $0.17 $0.13
========= ========
Weighted-average shares used to compute diluted net
income per common share 98,546 87,666
========= ========
Note 1 - The condensed consolidated statements of operations include
the results of Fastclick from the beginning of the accounting period
nearest to the acquisition consummation date (September 29, 2005).
Had this transaction been completed as of January 1, 2005, on an
unaudited pro-forma basis, revenue would have been $100.8 million and
net income would have been $11.0 million, or $0.11 per diluted common
share, for the three-month period ended September 30, 2005. These
unaudited pro-forma results are for information purposes only, are
not necessarily indicative of what the actual results would have been
had this transaction occurred on January 1, 2005, and are not
necessarily indicative of future results.
Note 2 - Includes stock-based compensation expense as follows (the
increase in 2006 compared to 2005 is primarily due to the adoption of
SFAS 123R)
                                                Three-month Period
Ended September 30,
--------------------------
2006 2005
--------------------------
(Unaudited)
Sales and marketing $1,145 $28
General and administrative 1,264 27
Technology 583 15
------------- ------------
Total stock-based compensation expense $2,992 $70
============= ============
                           VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Nine-month Period
Ended September 30,
-------------------
2006 2005
--------- ---------
(Unaudited)
(Note 1)
Revenue $385,180 $187,400
Cost of revenue 120,072 49,569
--------- ---------
Gross profit 265,108 137,831
Operating expenses:
Sales and marketing (Note 2) 115,285 48,433
General and administrative (Note 2) 42,534 27,566
Technology (Note 2) 24,614 14,782
Amortization of intangible assets 16,567 5,792
Restructuring expense, net -- 4
--------- ---------
Total operating expenses 199,000 96,577
--------- ---------
Income from operations 66,108 41,254
Interest income, net 5,565 3,467
--------- ---------
Income before income taxes 71,673 44,721
Income tax expense 30,649 18,269
--------- ---------
Net income $41,024 $26,452
========= =========
Basic net income per common share $0.41 $0.32
========= =========
Weighted-average shares used to compute basic net
income per common share 99,948 83,182
========= =========
Diluted net income per common share $0.40 $0.31
========= =========
Weighted-average shares used to compute diluted
net income per common share 102,242 85,954
========= =========
Note 1 - The condensed consolidated statements of operations include
the results of E-Babylon, Webclients and Fastclick from the beginning
of the accounting period nearest to their acquisition consummation
dates (June 13, 2005, June 24, 2005 and September 29, 2005,
respectively). Had these transactions been completed as of January 1,
2005, on an unaudited pro-forma basis, revenue would have been $290.8
million and net income would have been $29.1 million, or $0.28 per
diluted common share, for the nine-month period ended September 30,
2005. These unaudited pro-forma results are for information purposes
only, are not necessarily indicative of what the actual results would
have been had these transactions occurred on January 1, 2005, and are
not necessarily indicative of future results.
Note 2 - Includes stock-based compensation expense as follows (the
increase in 2006 compared to 2005 is primarily due to the adoption of
SFAS 123R):
                                                 Nine-month Period
Ended September 30,
-------------------------
2006 2005
-------------------------
(Unaudited)
Sales and marketing $3,594 $73
General and administrative 4,027 60
Technology 1,887 36
------------- -----------
Total stock-based compensation expense $9,508 $169
============= ===========
                           VALUECLICK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September December
30, 31,
2006 2005
----------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $55,019 $46,875
Marketable securities, at fair value 175,065 193,908
Accounts receivable, net 88,535 74,636
Other current assets 16,548 11,324
----------- ---------
Total current assets 335,167 326,743
Property and equipment, net 18,072 17,509
Goodwill 271,182 273,215
Intangible assets, net 85,857 102,245
Other assets 1,679 1,149
----------- ---------
TOTAL ASSETS $711,957 $720,861
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 65,860 66,946
Non-current liabilities 51,112 35,372
----------- ---------
Total liabilities 116,972 102,318
Total stockholders' equity 594,985 618,543
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $711,957 $720,861
=========== =========
                           VALUECLICK, INC.
RECONCILIATION OF NET INCOME TO ADJUSTED-EBITDA (Note 1)
(In thousands)
Three-month Period
Ended September 30,
-------------------
2006 2005
-------------------
(Unaudited)
Net Income $16,791 $11,002
Less interest income, net (1,642) (687)
Plus provision for income taxes 9,648 7,481
Plus amortization of intangible assets 5,462 3,107
Plus depreciation and leasehold amortization 2,382 1,679
Plus stock-based compensation 2,992 70
---------- --------
Adjusted-EBITDA $35,633 $22,652
========== ========
Nine-month Period
Ended September 30,
-------------------
2006 2005
-------------------
(Unaudited)
Net Income $41,024 $26,452
Less interest income, net (5,565) (3,467)
Plus provision for income taxes 30,649 18,269
Plus amortization of intangible assets 16,567 5,792
Plus depreciation and leasehold amortization 6,851 4,742
Plus stock-based compensation 9,508 169
---------- --------
Adjusted-EBITDA $99,034 $51,957
========== ========
Note 1 - "Adjusted-EBITDA" (earnings before interest, income taxes,
depreciation, amortization, and stock-based compensation) 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 costs
associated with capital investments, income from interest on the
Company's cash and marketable securities, and stock-based
compensation expense 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 always 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 base-line 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.

CONTACT: ValueClick, Inc.


Gary J. Fuges, CFA, 818-575-4677


SOURCE: ValueClick, Inc.