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ValueClick announces third quarter 2008 results

ValueClick Announces Third Quarter 2008 Results<br /> <p> </p>

ValueClick Announces Third Quarter 2008 Results

Repurchase Program

Board of Directors Authorizes $100 Million Increase to Stock

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--Oct. 29,

2008--ValueClick, Inc. (Nasdaq: VCLK) today reported financial results

for the third quarter ended September 30, 2008. Revenue and

adjusted-EBITDA(1) were within their respective previously-issued

guidance ranges.

"We stated in mid-July that increasing economic uncertainty would

impact the second half of the year, and our third quarter results were

in-line with this revised outlook," said Tom Vadnais, chief executive

officer of ValueClick. "While the industry's growth outlook for the

rest of the year is more cautious, we have the experience and

management team depth to continue to drive strong margins and free

cash flow in this challenging market."


Third Quarter 2008 Financial Results


Revenue for the third quarter of 2008 was $152.9 million compared

to $156.9 million for the third quarter of 2007. Weakness in the

Comparison Shopping and Search segment was offset by better than

expected performance by the display advertising business within the

Media segment. The Company's Affiliate Marketing and Technology

segments performed in-line with expectations for the third quarter of

2008.


Adjusted-EBITDA for the third quarter of 2008 was $38.4 million

compared to $40.1 million for the third quarter of 2007. Third quarter

2008 adjusted-EBITDA margin was 25.1 percent, compared to 25.5 percent

in the prior year period.


GAAP net income for the third quarter of 2008 was $2.0 million, or

$0.02 per diluted common share, compared to $16.8 million, or $0.17

per diluted common share, for the third quarter of 2007. Third quarter

2008 net income per diluted common share was impacted by two items not

included in the Company's previously-issued guidance: a stock option

tender offer; and certain discrete tax adjustments. Excluding these

two items, which are described in detail below, third quarter 2008 net

income per diluted common share would have been $0.15.


The consolidated balance sheet as of September 30, 2008 includes

$119 million in cash, cash equivalents and marketable securities, $622

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

quarter, the Company generated $32.0 million in cash from operations

and invested $2.0 million in capital expenditures. Year to date

through September 30, 2008, the Company generated $98.3 million in

cash from operations and invested $6.6 million in capital

expenditures.


Stock Option Tender Offer Completed in Third Quarter


On September 24, 2008, the Company completed a tender offer to

purchase up to 4.9 million stock options with exercise prices ranging

from $25.66 to $29.73 per share issued by the Company in 2007 to

certain employees, officers and directors. The Company repurchased 4.8

million of these stock options for an aggregate cash payment $4.8

million in the third quarter of 2008. The completed option tender

offer triggered the acceleration of stock-based compensation resulting

in an additional charge of $33.8 million in the third quarter of 2008.


Income Tax Adjustments


The Company recorded an income tax benefit in the third quarter of

2008 of $9.1 million related to discrete income tax adjustments,

primarily as a result of the expiration of certain statutes of

limitations during the third quarter of 2008.


Stock Repurchase Program Update


Today, ValueClick announced that its board of directors has

authorized a $100 million increase in the Company's Stock Repurchase

Program. As of today, up to $106.1 million of ValueClick's capital may

be used to repurchase shares of the Company's common stock under the

Stock Repurchase Program. Year-to-date through October 29, the Company

has repurchased approximately 12.0 million shares for $150.2 million,

including 8.8 million shares repurchased for $95.4 million during the

third quarter of 2008.


Divestiture of Two Non-Core Assets


On October 20, 2008, the Company announced that it had sold two

non-core assets in order to focus on its core competency of providing

online marketing products and services. The divestitures included the

AdVault advertising agency management software suite, and the ink-jet

e-commerce business. AdVault was included in the Company's Technology

business segment, while the e-commerce business was included in the

Media business segment. ValueClick retains the separate Mediaplex

online advertising technology solutions marketed under the MOJO brand,

which is unrelated to the AdVault suite and is a key part of the

Company's core online marketing services portfolio.


These divested businesses in aggregate represented less than four

percent of ValueClick's consolidated revenue and an immaterial portion

of the Company's total operating income for the first nine months of

2008. The aggregate gross proceeds from these divestitures of

approximately $18 million and the related net gain will be recorded in

the Company's fourth quarter 2008 results.


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 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.


Based on its third quarter results and outlook for the remainder

of the year, ValueClick is updating its fiscal year 2008 guidance

ranges, issued previously on July 31, 2008. The Company is also

issuing guidance for the fourth quarter of 2008.


The updated guidance also reflects the Company's divestiture of

two non-core assets, which previously were expected to contribute $5

million in aggregate revenue in the fourth quarter of 2008. Fourth

quarter 2008 revenue expectations have also been negatively impacted

by approximately $6 million relative to previous guidance due to

foreign currency exchange movements. Guidance is as follows:


                                    Fiscal Year 2008  Fourth Qtr. 2008
----------------------------------------------------------------------
Revenue $633-$638 $140-$145
million million
----------------------------------------------------------------------
Adjusted-EBITDA $161-$164 $33-$36 million
million
----------------------------------------------------------------------
Adjusted-EBITDA Margin at Mid-
Point of Guidance Ranges 25.6% 24.2%
----------------------------------------------------------------------
GAAP diluted net income per common
share $0.55-$0.56 $0.15-$0.16
----------------------------------------------------------------------

Fiscal year 2008 GAAP diluted net income per common share guidance

includes the impact of approximately $0.36 per diluted common share

for stock-based compensation. Fourth quarter 2008 guidance for GAAP

diluted net income per common share includes a reduction of $0.02 per

diluted common share for stock-based compensation and assumes a 43

percent net effective income tax rate.


Fiscal year and fourth quarter 2008 guidance for GAAP diluted net

income per common share does not include the net gain on sale from the

divested businesses, which the Company expects to record as

discontinued operations in its fourth quarter 2008 financial

statements.


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


Tom Vadnais, 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 October 29, 2008 at

4:30PM 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 November 5 at (888) 203-1112 and (719) 457-0820 (pass code:

7487512). An archive of the Webcast will also be available through

November 5.


About ValueClick


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

integrated online marketing services 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, Smarter.com, CouponMountain.com, 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, 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, and the risk that legislation and governmental regulation

could negatively impact the Company's performance. 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 29, 2008; recent quarterly reports on Form

10-Q; and other current reports on Form 8-K. 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 BALANCE SHEETS
(In thousands)

September 30, December 31,
2008 2007
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 86,718 $ 82,767
Marketable securities 2,151 170,691
Accounts receivable, net 102,927 126,605
Other current assets 26,990 18,785
------------- ------------
Total current assets 218,786 398,848
Marketable securities, less current
portion 30,350 34,059
Property and equipment, net 18,123 19,357
Goodwill 438,057 439,532
Intangible assets, net 89,387 112,979
Other assets 5,711 6,247
------------- ------------
TOTAL ASSETS $800,414 $1,011,022
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $105,085 $ 219,199
Non-current liabilities 73,070 81,890
------------- ------------
Total liabilities 178,155 301,089
Total stockholders' equity 622,259 709,933
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $800,414 $1,011,022
============= ============

                           VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three-month Period
Ended September 30,
--------------------
2008 2007
--------------------
(Unaudited)
(Note 1)
Revenue $152,900 $ 156,892
Cost of revenue 53,718 50,450
--------- ----------
Gross profit 99,182 106,442
Operating expenses:
Sales and marketing (Note 2) 51,160 46,390
General and administrative (Note 2) 39,435 18,275
Technology (Note 2) 12,375 8,724
Amortization of intangible assets acquired in
business combinations 7,139 6,726
--------- ----------
Total operating expenses 110,109 80,115
--------- ----------
Income (loss) from operations (10,927) 26,327
Interest income and other, net (366) 2,943
--------- ----------
Income (loss) before income taxes (11,293) 29,270
Income tax expense (benefit) (13,292) 12,439
--------- ----------
Net income $ 1,999 $ 16,831
========= ==========
Basic net income per common share $ 0.02 $ 0.17
========= ==========
Weighted-average shares used to compute basic net
income per common share 89,571 99,138
========= ==========
Diluted net income per common share $ 0.02 $ 0.17
========= ==========
Weighted-average shares used to compute diluted
net income per common share 89,957 100,174
========= ==========
Note 1 - The condensed consolidated statements of operations include
the results of MeziMedia from the acquisition consummation date (July
30, 2007). Had this transaction been completed as of January 1, 2007,
on an unaudited pro forma basis, revenue would have been $165.1
million, and net income would have been $17.7 million, or $0.18 per
diluted common share, for the three-month period ended September 30,
2007. 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, 2007, and are
not necessarily indicative of future results.
Note 2 - Includes stock-based compensation as
follows:
Three-month Period
Ended September 30,
--------------------
2008 2007
--------- ----------
(Unaudited)
Sales and marketing $ 12,957 $ 1,200
General and administrative 23,192 2,791
Technology 3,497 603
--------- ----------
Total stock-based compensation $ 39,646 $ 4,594
========= ==========

                           VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Nine-month Period
Ended September 30,
-------------------
2008 2007
-------------------
(Unaudited)
(Note 1)
Revenue $ 492,765 $ 462,492
Cost of revenue 160,533 146,554
--------- ---------
Gross profit 332,232 315,938
Operating expenses:
Sales and marketing (Note 2) 148,958 137,036
General and administrative (Note 2) 81,311 53,016
Technology (Note 2) 32,502 26,386
Amortization of intangible assets acquired in
business combinations 22,678 17,967
--------- ---------
Total operating expenses 285,449 234,405
--------- ---------
Income from operations 46,783 81,533
Interest income and other, net 4,098 9,257
--------- ---------
Income before income taxes 50,881 90,790
Income tax expense 13,226 37,697
--------- ---------
Net income $ 37,655 $ 53,093
========= =========
Basic net income per common share $ 0.40 $ 0.53
========= =========
Weighted-average shares used to compute basic net
income per common share 94,202 99,577
========= =========
Diluted net income per common share $ 0.40 $ 0.53
========= =========
Weighted-average shares used to compute diluted
net income per common share 94,864 100,941
========= =========
Note 1 - The condensed consolidated statements of operations include
the results of MeziMedia from the acquisition consummation date (July
30, 2007). Had this transaction been completed as of January 1, 2007,
on an unaudited pro forma basis, revenue would have been $507.3
million, and net income would have been $56.5 million, or $0.56 per
diluted common share, for the nine-month period ended September 30,
2007. 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, 2007, and are
not necessarily indicative of future results.
Note 2 - Includes stock-based compensation as
follows:
Nine-month Period
Ended September 30,
-------------------
2008 2007
--------- ---------
(Unaudited)
Sales and marketing $ 16,355 $ 3,524
General and administrative 29,595 7,856
Technology 4,813 1,772
--------- ---------
Total stock-based compensation $ 50,763 $ 13,152
========= =========

                           VALUECLICK, INC.
RECONCILIATION OF NET INCOME TO ADJUSTED-EBITDA (Note 1)
(In thousands)

Three-month Period
Ended September 30,
--------------------
2008 2007
---------- ---------
(Unaudited)
Net income $ 1,999 $ 16,831
Interest income and other, net 366 (2,943)
Provision (benefit) for income taxes (13,292) 12,439
Amortization of intangible assets acquired
in business combinations 7,139 6,726
Depreciation and leasehold amortization 2,559 2,425
Stock-based compensation 39,646 4,594
---------- --------
Adjusted-EBITDA $ 38,417 $ 40,072
========== ========

Nine-month Period
Ended September 30,
--------------------
2008 2007
---------- ---------
(Unaudited)
Net income $ 37,655 $ 53,093
Interest income and other, net (4,098) (9,257)
Provision for income taxes 13,226 37,697
Amortization of intangible assets acquired
in business combinations 22,678 17,967
Depreciation and leasehold amortization 7,685 7,202
Stock-based compensation 50,763 13,152
---------- --------
Adjusted-EBITDA $127,909 $119,854
========== ========

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 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 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.


                           VALUECLICK, INC.
RECONCILIATION OF GAAP NET INCOME PER DILUTED COMMON SHARE TO PRO
FORMA NET INCOME PER DILUTED COMMON SHARE (Note 1)
(In thousands)

Three-month Period
Ended September 30,
2008
-------------------
GAAP net income $ 1,999
Stock-based compensation related to tender
offer:
Gross impact 33,796
Tax impact (13,518)
Tax benefit from discrete tax adjustments (9,118)
-----------------
Pro forma net income 13,159
=================
Pro forma diluted net income per common share $ 0.15
=================
Weighted-average shares used to compute diluted net
income per common share 89,957
=================

Note 1 - "Pro forma net income per diluted common share" (GAAP net

income per diluted common share before the impact of accelerated

stock-based compensation associated with the Company's

recently-completed stock option tender offer and before the impact of

significant discrete tax adjustments) included in this press release

is a non-GAAP financial measure.


Pro forma net income per diluted common share, as defined above,

may not be similar to pro forma net income per diluted common share

measures used by other companies and is not a measurement under GAAP.

Management believes that pro forma net income per diluted common share

provides useful information to investors about the Company's

performance because it eliminates the effects of non-recurring items

which are not directly attributable to the underlying performance of

the Company's business operations. Management uses pro forma net

income per diluted common share in evaluating the overall performance

of the Company's business operations.


Though management finds pro forma net income per diluted 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 always

uses pro forma net income per diluted common share in conjunction with

GAAP earnings and earnings per common share measures. The Company

believes that pro forma net income per diluted 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 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.


                           VALUECLICK, INC.
SEGMENT OPERATING RESULTS
(In thousands)
Three-month Period Nine-month Period
Ended September Ended
30, September 30,
------------------ -------------------
2008 2007 2008 2007
-------- -------- -------- ---------
(Unaudited) (Unaudited)
Media:
Revenue $ 78,735 $ 85,602 $237,407 $294,961
Cost of revenue 37,065 35,130 108,075 113,547
-------- -------- -------- --------
Gross profit 41,670 50,472 129,332 181,414
Operating expenses 22,785 33,269 76,081 114,437
-------- -------- -------- --------
Segment income from operations $ 18,885 $ 17,203 $ 53,251 $ 66,977
======== ======== ======== ========
Comparison Shopping and
Search:
Revenue $ 36,580 $ 35,703 $139,091 $ 62,305
Cost of revenue 10,484 11,363 36,071 20,993
-------- -------- -------- --------
Gross profit 26,096 24,340 103,020 41,312
Operating expenses 18,760 16,129 69,989 29,763
-------- -------- -------- --------
Segment income from operations $ 7,336 $ 8,211 $ 33,031 $ 11,549
======== ======== ======== ========
Affiliate Marketing:
Revenue $ 29,315 $ 27,836 $ 90,342 $ 83,064
Cost of revenue 5,081 3,115 13,807 9,301
-------- -------- -------- --------
Gross profit 24,234 24,721 76,535 73,763
Operating expenses 11,031 10,208 33,151 29,151
-------- -------- -------- --------
Segment income from operations $ 13,203 $ 14,513 $ 43,384 $ 44,612
======== ======== ======== ========
Technology:
Revenue $ 8,998 $ 8,215 $ 28,346 $ 23,453
Cost of revenue 1,682 1,393 4,604 4,279
-------- -------- -------- --------
Gross profit 7,316 6,822 23,742 19,174
Operating expenses 4,032 3,388 12,194 10,237
-------- -------- -------- --------
Segment income from operations $ 3,284 $ 3,434 $ 11,548 $ 8,937
======== ======== ======== ========
Total segment income from
operations $ 42,708 $ 43,361 $141,214 $132,075
Corporate expenses (6,850) (5,714) (20,990) (19,423)
Stock-based compensation (39,646) (4,594) (50,763) (13,152)
Amortization of intangible
assets (7,139) (6,726) (22,678) (17,967)
-------- -------- -------- --------
Consolidated income (loss)
from operations $(10,927) $ 26,327 $ 46,783 $ 81,533
======== ======== ======== ========
Reconciliation of segment
revenue to consolidated
revenue:
Media $ 78,735 $ 85,602 $237,407 $294,961
Comparison Shopping and Search 36,580 35,703 139,091 62,305
Affiliate Marketing 29,315 27,836 90,342 83,064
Technology 8,998 8,215 28,346 23,453
Inter-segment eliminations (728) (464) (2,421) (1,291)
-------- -------- -------- --------
Consolidated revenue $152,900 $156,892 $492,765 $462,492
======== ======== ======== ========

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