ValueClick, Inc. (Nasdaq: VCLK) today reported financial results for the
third quarter ended September 30, 2011. Highlights from the third
quarter of 2011 results include:
Revenue of $136.0 million, up 27 percent from the third quarter of
2010 (Q3 2010);
Adjusted-EBITDA1 of $40.0 million, up 29 percent from Q3
2010;
Adjusted-EBITDA margin of 29.4 percent versus 29.1 percent in Q3 2010;
and
GAAP net income of $0.47 per diluted share versus $0.44 in Q3 2010.
"We delivered strong organic growth and profitability in the quarter,
while strengthening our display capabilities and direct advertiser
relationships with the Dotomi acquisition," said
Jim Zarley, chief
executive officer of ValueClick. "The organic initiatives and
acquisitions we completed over the last twelve months provide us with a
unique set of capabilities at scale, and I am optimistic that we can
leverage these competitive strengths to drive strong, sustainable growth
and meaningful profitability going forward."
Non-GAAP net income, which excludes stock-based compensation and
amortization of intangible assets was $44.4 million, or $0.55 per
diluted common share for the third quarter of 2011. A table reconciling
GAAP net income to non-GAAP diluted net income per common share is
included in this press release.
The Company recorded favorable tax adjustments of approximately $19
million in the third quarter of 2011. Assuming the normalized 38 percent
effective tax rate included in the Company's previously-issued guidance,
net income would have been $18.4 million, or $0.23 per diluted common
share.
The consolidated balance sheet as of September 30, 2011 included
approximately $98.7 million in cash and cash equivalents, and $145.0
million in total debt associated with the August 31 acquisition of
Dotomi.
Dotomi Acquisition Closed
On August 31, ValueClick acquired all of the outstanding equity interest
in Dotomi for upfront consideration consisting of: (a) 7.1 million
shares of ValueClick common stock; (b) the assumption of 0.5 million
fully vested stock options; and (c) $148 million in cash (net of cash
acquired). In addition, ValueClick assumed 0.4 million shares of
unvested restricted stock which will vest over a one-year period and 0.5
million unvested stock options which will vest over a period ranging
from one to three years.
A portion of the acquisition was funded by the Company's Amended and
Restated Credit Agreement, as described in the Company's Form 8-K filed
with the Securities and Exchange Commission on August 24. This credit
agreement provides the Company with $200 million of total available
credit with a five-year term, including a senior secured revolving
credit facility of $150 million and a $50 million term loan.
Dotomi's results of operations were included in ValueClick's
consolidated and Media segment results beginning on August 31, 2011.
Share Repurchase Program Update
During the quarter, the Company repurchased 4.3 million shares of its
common stock for a total cost of $63.1 million. Year to date, ValueClick
has repurchased 7.0 million shares of its common stock for a total cost
of $102.2 million. As of today, ValueClick's share repurchase program
authorization is $83.4 million.
Business Outlook
Today, ValueClick is announcing guidance for the fourth quarter of 2011:
Guidance
Revenue
$173-$179 million
Adjusted-EBITDA
$55-$59 million
Mid-Point Adjusted-EBITDA Margin
32.4
%
Non-GAAP diluted net income per common share
$0.39-$0.41
The consolidated revenue guidance range is based on the following
segment-level assumptions for revenue growth rates expressed as a
percentage increase from fourth quarter 2010 reported revenue levels:
•
Affiliate Marketing:
up high single-digits
•
Media:
up over 100 percent on a reported basis, up high teens to low
twenties excluding the impact of acquisitions
•
Owned & Operated:
down low double-digits
•
Technology:
up mid teens
"Given the tremendous growth opportunities and higher margin profiles of
our other three segments, we believe the time is right to proactively
scale down some of the lower-margin businesses within the Owned &
Operated segment that rely on paid traffic and search monetization, and
this is reflected in our fourth quarter expectations," said
John
Pitstick, chief financial officer of ValueClick. "We will continue to
focus on our higher-margin, organic traffic-based owned and operated
properties, which complement our core marketing services offerings."
Fourth quarter 2011 guidance assumes stock-based compensation of $6.0
million, amortization of intangible assets of $9.0 million, net interest
and other income of $0.0 million, a 38 percent effective tax rate, and
84 million diluted shares outstanding.
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 third quarter,
during a conference call and webcast on November 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 November 9 at
(888) 203-1112 and (719) 457-0820 (pass code: 6490250). An archive of
the webcast will also be available through November 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, Dotomi, 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 effects of recent acquisitions 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, stock-based
compensation expenses, and acquisition-related costs. 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,
2011
2010
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents
$
98,687
$
194,317
Marketable securities
—
3,000
Accounts receivable, net
106,154
86,738
Other current assets
24,044
18,470
Total current assets
228,885
302,525
Note receivable, less current portion
30,112
31,267
Property and equipment, net
19,896
12,414
Goodwill
438,661
183,218
Intangible assets, net
123,008
33,525
Other assets
14,069
50,618
TOTAL ASSETS
$
854,631
$
613,567
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings under credit facility, current
$
10,000
$
—
Other current liabilities
110,148
103,258
Borrowings under credit facility, less current
135,000
—
Other non-current liabilities
23,220
37,668
Total liabilities
278,368
140,926
Total stockholders' equity
576,263
472,641
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
854,631
$
613,567
VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three-month Period
Ended September 30,
2011
2010
(Unaudited)
Revenue
$
135,988
$
106,768
Cost of revenue
45,736
28,502
Gross profit
90,252
78,266
Operating expenses:
Sales and marketing (Note 1)
28,578
29,351
General and administrative (Note 1)
15,144
12,331
Technology (Note 1)
12,649
8,897
Amortization of intangible assets acquired in business combinations
6,419
5,376
Total operating expenses
62,790
55,955
Income from operations
27,462
22,311
Interest and other income (expense), net
2,167
(2,683
)
Income before income taxes
29,629
19,628
Income tax benefit
(8,281
)
(16,549
)
Net income
$
37,910
$
36,177
Basic net income per common share
$
0.47
$
0.45
Diluted net income per common share
$
0.47
$
0.44
Weighted-average shares used to compute basic net income per common
share
80,112
81,228
Weighted-average shares used to compute diluted net income per
common share
81,277
81,814
Note 1 - Includes stock-based compensation as follows:
Three-month Period
Ended September 30,
2011
2010
(Unaudited)
Sales and marketing
$
826
$
257
General and administrative
2,077
1,261
Technology
812
163
Total stock-based compensation
$
3,715
$
1,681
VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Nine-month Period
Ended September 30,
2011
2010
(Unaudited)
Revenue
$
377,561
$
302,051
Cost of revenue
118,711
81,347
Gross profit
258,850
220,704
Operating expenses:
Sales and marketing (Note 1)
85,995
80,963
General and administrative (Note 1)
41,229
39,517
Technology (Note 1)
33,668
25,123
Amortization of intangible assets acquired in business combinations
17,454
15,278
Total operating expenses
178,346
160,881
Income from operations
80,504
59,823
Interest and other income, net
3,232
313
Income before income taxes
83,736
60,136
Income tax expense
11,983
594
Income from continuing operations
71,753
59,542
Loss from discontinued operations, net of tax
—
(134
)
Gain on sale, net of tax
—
10,040
Net income
$
71,753
$
69,448
Basic income from continuing operations per common share
$
0.90
$
0.73
Diluted income from continuing operations per common share
$
0.89
$
0.72
Basic net income per common share
$
0.90
$
0.85
Diluted net income per common share
$
0.89
$
0.84
Weighted-average shares used to compute basic net income per common
share
79,924
81,884
Weighted-average shares used to compute diluted net income per
common share
80,992
82,501
Note 1 - Includes stock-based compensation as follows:
Nine-month Period
Ended September 30,
2011
2010
(Unaudited)
Sales and marketing
$
1,645
$
917
General and administrative
5,166
4,358
Technology
1,435
563
Total stock-based compensation
$
8,246
$
5,838
VALUECLICK, INC.
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED-EBITDA (Note 1)
(In thousands)
Three-month Period
Ended September 30,
2011
2010
(Unaudited)
Net income
$
37,910
$
36,177
Interest and other (income) expense, net
(2,167
)
2,683
Provision for income tax
(8,281
)
(16,549
)
Amortization of intangible assets acquired in business combinations
6,419
5,376
Depreciation and leasehold amortization
2,036
1,664
Stock-based compensation
3,715
1,681
Acquisition-related costs
412
—
Adjusted-EBITDA
$
40,044
$
31,032
Nine-month Period
Ended September 30,
2011
2010
(Unaudited)
Income from continuing operations
$
71,753
$
59,542
Interest and other income, net
(3,232
)
(313
)
Provision for income tax
11,983
594
Amortization of intangible assets acquired in business combinations
17,454
15,278
Depreciation and leasehold amortization
5,552
4,878
Stock-based compensation
8,246
5,838
Acquisition-related costs
412
—
Adjusted-EBITDA
$
112,168
$
85,817
Note 1 - "Adjusted-EBITDA" (GAAP income from continuing
operations before interest, income taxes, depreciation, amortization,
stock-based compensation expenses, and acquisition-related costs)
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, note receivable and
borrowings, 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 September 30,
2011
2010
(Unaudited)
Net income
$
37,910
$
36,177
Stock-based compensation
3,715
1,681
Amortization of intangible assets acquired in business combinations
6,419
5,376
Tax impact of above items
(3,609
)
(2,818
)
Non-GAAP net income
$
44,435
$
40,416
Non-GAAP diluted net income per common share
$
0.55
$
0.49
Weighted-average shares used to compute non-GAAP diluted net income
per common share
81,277
81,814
Nine-month Period
Ended September 30,
2011
2010
(Unaudited)
GAAP income from continuing operations
$
71,753
$
59,542
Stock-based compensation
8,246
5,838
Amortization of intangible assets acquired in business combinations
17,454
15,278
Tax impact of above items
(9,684
)
(8,264
)
Non-GAAP net income
$
87,769
$
72,394
Non-GAAP diluted net income per common share
$
1.08
$
0.88
Weighted-average shares used to compute non-GAAP diluted net income
per common share
80,992
82,501
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 and amortization of intangibles) 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
Nine-month Period
Ended September 30,
Ended September 30,
2011
2010
2011
2010
(Unaudited)
(Unaudited)
Affiliate Marketing:
Revenue
$
32,525
$
29,841
$
99,615
$
87,938
Cost of revenue
4,260
4,111
12,898
12,548
Gross profit
28,265
25,730
86,717
75,390
Operating expenses
9,457
9,190
28,304
27,527
Segment income from operations
$
18,808
$
16,540
$
58,413
$
47,863
Media:
Revenue
$
52,714
$
33,321
$
131,902
$
95,761
Cost of revenue
26,104
18,239
68,899
51,000
Gross profit
26,610
15,082
63,003
44,761
Operating expenses
15,752
7,257
35,289
21,704
Segment income from operations
$
10,858
$
7,825
$
27,714
$
23,057
Owned & Operated Websites:
Revenue
$
40,460
$
35,913
$
118,961
$
95,796
Cost of revenue
14,452
5,473
34,482
15,990
Gross profit
26,008
30,440
84,479
79,806
Operating expenses
17,830
23,307
60,359
62,279
Segment income from operations
$
8,178
$
7,133
$
24,120
$
17,527
Technology:
Revenue
$
10,399
$
7,901
$
27,572
$
23,405
Cost of revenue
999
826
2,805
2,451
Gross profit
9,400
7,075
24,767
20,954
Operating expenses
3,357
2,887
9,865
8,903
Segment income from operations
$
6,043
$
4,188
$
14,902
$
12,051
Reconciliation of segment income from operations to consolidated
income from operations:
Total segment income from operations
$
43,887
$
35,686
$
125,149
$
100,498
Corporate expenses
(6,291
)
(6,318
)
(18,945
)
(19,559
)
Stock-based compensation
(3,715
)
(1,681
)
(8,246
)
(5,838
)
Amortization of intangible assets
(6,419
)
(5,376
)
(17,454
)
(15,278
)
Consolidated income from operations
$
27,462
$
22,311
$
80,504
$
59,823
Reconciliation of segment revenue to consolidated revenue:
Affiliate Marketing
$
32,525
$
29,841
$
99,615
$
87,938
Media
52,714
33,321
131,902
95,761
Owned & Operated Websites
40,460
35,913
118,961
95,796
Technology
10,399
7,901
27,572
23,405
Inter-segment eliminations
(110
)
(208
)
(489
)
(849
)
Consolidated revenue
$
135,988
$
106,768
$
377,561
$
302,051
ValueClick, Inc.
Gary J. Fuges, CFA
1.818.575.4677
Source: ValueClick, Inc.
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