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ValueClick Announces Third Quarter 2013 Results

ValueClick, Inc. (NASDAQ: VCLK) today reported financial results for the third quarter ended September 30, 2013.

“We delivered strong profitability and cash flow in the third quarter, driven by a continued mix shift into our higher value added offerings,” said John Giuliani, president and CEO of ValueClick. “Solid year-over-year growth in our CRM, affiliate marketing, mobile, video and cross-device solutions was offset by weakness in our insertion order display business within the Media segment.”

“We are making great progress advancing our ‘One ValueClick’ integration, an important companywide effort that will further strengthen our ability to serve as a strategic partner for advertisers across all business lines. Our repurchase of 8 million shares of common stock during the quarter underscores our confidence in ValueClick’s future,” Giuliani added.

Announced Intent to Pursue Divestiture of Owned & Operated Websites (“O&O”) Segment: O&O Results Are Now Reflected as Discontinued Operations in Current and Historical Financials

As announced separately today, and as part of the Company’s focus on aligning its businesses with the ‘One ValueClick’ strategy, ValueClick intends to pursue the divestiture of its O&O segment, which operates a broad range of popular content and ecommerce websites including Investopedia, PriceRunner, Smarter.com, SymptomFind and CouponMountain.com. As a result, ValueClick has reclassified the O&O segment’s current and historical operating results as discontinued operations. The revised presentation of the Company’s historical financial results is available in downloadable Excel format on ValueClick’s Investor Relations website located at http://ir.valueclick.com/.
 

Q3 Results Summary

(Does Not Include O&O Segment, Which is Now Classified as Discontinued Operations)
 
In millions, except percentages and per share amounts   Q3 2013   Q3 2012   % Change  
Revenue   $ 134.1   $ 130.9   2 %
Adjusted EBITDA(1) 50.2 43.7 15 %
GAAP Net Income from Continuing Operations 22.1 16.6 33 %
Non-GAAP Net Income(1) $ 28.2 $ 24.5 15 %
GAAP Net Income from Continuing Operations Per Diluted Common Share $ 0.30 $ 0.22 36 %
Non-GAAP Net Income Per Diluted Common Share(1) $ 0.38 $ 0.32 19 %
 

(1) Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP Net Income Per Diluted Share are Non-GAAP measures are described below and reconciled to their most comparable GAAP measures.
 

Q3 2013 Financial Summary
  • Revenue was $134.1 million, an increase of 2% year-over-year.
  • Adjusted EBITDA was $50.2 million, an increase of 15% year-over-year.
  • Adjusted EBITDA margin increased to 37.4% from 33.4% in the third quarter of 2012.
  • Non-GAAP net income per diluted share was $0.38, an increase of 19% year-over-year.
  • GAAP net income from continuing operations per diluted share was $0.30, an increase of 36% year-over-year.
Comparison of Q3 2013 Results vs. Company's Pro Forma Guidance for Q3 2013
 
Q3 2013 Financial Metrics   Previously Issued Guidance(1)   O&O Segment Guidance Assumptions   "Pro Forma" Guidance (Excluding O&O)   Reported / Continuing Operations
 
Revenue (in millions) $164 to $168 $30 $134 to $138 $134.1
 
Adjusted EBITDA (in millions) $53 to $55 $6 $47 to $49 $50.2
Non-GAAP Net Income Per Diluted Common Share $0.39 to $0.40 $0.04 $0.35 to $0.36 $0.38
 
(1) ValueClick's Q3 2013 guidance was provided on August 1, 2013.
 

Cash Flows
  • Free cash flow for the nine months ended September 30, 2013 was $100.6 million, an increase of 10% year-over-year from the comparable nine-month period in 2012.
  • Free cash flow for the trailing 12 month period ended September 30, 2013 was $147.4 million.
  • The Company defines free cash flow as net cash provided by operating activities less capital expenditures.

Stock Repurchases
  • ValueClick repurchased 8 million common shares at an average cost of $21.45 per share during the third quarter ended September 30, 2013.
  • Year-to-date in 2013, ValueClick has repurchased 10 million common shares, representing approximately 13% of total common shares issued and outstanding as of December 31, 2012.
  • In October 2013, ValueClick’s Board of Directors increased the remaining availability under the Company’s stock repurchase authorization to $100 million.

Balance Sheet
  • As of September 30, 2013, cash and cash equivalents were $54.5 million and total debt was $195 million.
  • ValueClick amended its credit agreement in the third quarter, resulting in an increase of the senior secured revolving credit facility to $400 million and an extension of the maturity date to August 19, 2018.
ValueClick Segment Financial Summary
In millions, except percentages   Q3 2013   Q3 2012   % Change
 
Affiliate Marketing Revenue $ 38.9 $ 34.9 11 %
Media Revenue 95.3 96.1 (1 )%
Intersegment Eliminations       (0.1 )   NM  
Consolidated Revenue $ 134.1 $ 130.9 2 %
 
Affiliate Marketing Income from Operations $ 23.6 $ 20.3 16 %
Media Income from Operations   30.2     27.6     9 %
Total Segment Income from Operations $ 53.8 $ 48.0 12 %
 

Q3 2013 Segment Results Summary
  • Affiliate marketing segment revenue was $38.9 million, an increase of 11% year-over-year, representing the segment’s highest growth rate in more than two years. The increase in Affiliate Marketing segment revenue and operating profitability reflects continuing growth in transaction volumes and clients, including advertiser clients migrated from the former Google Affiliate Network that ceased operations in July 2013.
  • Media segment revenue was $95.3 million, a decrease of 1% year-over-year. Continuing solid growth in CRM, mobile, video and cross device solutions was offset by a decline in ValueClick’s traditional insertion order-driven display business.

Q3 2013 O&O Results(Included within Discontinued Operations)
  • O&O revenue was $28.9 million and O&O segment income from operations was $4.5 million and are included in discontinued operations.
  • Discrete tax adjustments associated with the planned divestiture led to an unusually high tax provision attributable to the O&O business for the third quarter of 2013, resulting in an after-tax loss of $4.1 million in discontinued operations in the quarter.

Q4 2013 Business Outlook

ValueClick’s financial guidance for the fourth quarter of 2013 is presented in the following tables, along with the Company’s results for the fourth quarter of 2012 to provide a basis for comparison. The guidance and fourth quarter 2012 results do not include the O&O segment since O&O results have been reclassified to discontinued operations as described above.
Consolidated Financial Outlook   Q4 2013 Guidance     Q4 2012 Actual Results

Revenue
 

$166 - $171 million
   

$166.6 million
Adjusted EBITDA $69 - $72 million $68.1 million
Mid-Point Adjusted EBITDA Margin 41.8% 40.9%
Non-GAAP net income per diluted common share $0.57 - $0.58 $0.50
Impact of stock-based compensation and amortization of intangibles, net of tax $(0.09) $(0.08)
GAAP net income from continuing operations per diluted common share   $0.48 - $0.49     $0.42
 
Segment Revenue Assumptions   Q4 2013 Guidance     Q4 2012 Actual Results
Affiliate Marketing Segment Revenue $49 - $51 million $43.9 million
Media Segment Revenue   $117 - $120 million     $122.7 million

Additional Guidance Assumptions

ValueClick’s fourth quarter 2013 guidance assumes: stock-based compensation of $5.1 million; amortization of intangible assets of $5.6 million ($2.0 million of which will be included in cost of revenue); net interest and other expense of $0.5 million; a 40% effective tax rate; and 68.5 million diluted shares outstanding.

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