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.

Preliminary Income Tax and EPS Figures

As part of the discontinued operations accounting treatment for the O&O Segment, the Company is required to recast previously recorded income tax expense between continuing operations and discontinued operations. In addition, the income tax expense for the discontinued operations for the third quarter of 2013 must take into consideration the projected tax impact that will result from the historical earnings of the international components of the O&O Segment no longer considered to be permanently reinvested as a result of the planned divestiture. These tax calculations are complex and as of the filing of this release ValueClick is in the process of finalizing its procedures and calculations regarding income taxes. Accordingly, all current and prior year income tax expense figures in this release, and all earnings per share amounts, should be considered preliminary and subject to change upon the Company’s completion of its procedures.

Use of Non-GAAP Financial Measures

To provide investors with additional information regarding ValueClick’s financial results, ValueClick has disclosed in the tables below and elsewhere in this press release Adjusted EBITDA and Non-GAAP Net Income Per Diluted Common Share. Each of these Non-GAAP measures is defined within the following section of this press release and reconciled to their most comparable GAAP financial measure. Investors should not consider these Non-GAAP measures in isolation or as a substitute for GAAP financial measures. ValueClick’s definition of Adjusted EBITDA and Non-GAAP Net Income Per Diluted Common Share may not necessarily be directly comparable to similarly titled Non-GAAP measures employed by other companies.

Q3 2013 Conference Call and Webcast Today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)

ValueClick management will host a conference call at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) today to discuss its financial and operating results for the third quarter of 2013. A live webcast of the conference call, along with a financial highlights presentation containing supplemental information, will be available on ValueClick’s investor relations website at http://ir.valueclick.com. A replay of the webcast will be available through the same link beginning approximately two hours after the completion of the live call.

To access the live conference call by telephone, interested parties should dial 888-806-6208 (for domestic participants) or 913-312-0388 (for international participants) at least 10 minutes prior to the start time and use conference ID 5522937. A telephonic replay of the conference call will be available from 7:30 p.m. Eastern Time on November 5, 2013 until 7:30 p.m. Eastern Time on November 12, 2013. To access the replay, interested parties should dial 888-203-1112 (for domestic participants) and 719-457-0820 (for international participants) and the conference ID 5522937

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. The Company is based in Westlake Village, California, and has offices in major advertising markets worldwide. For more information, please visit www.valueclick.com.

Cautionary Information Regarding Forward-Looking Statements

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 27, 2013; 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.
 
VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
     
Three-month Period Nine-month Period

Ended September 30,
Ended September 30,
2013     2012 2013     2012
(Unaudited) (Unaudited)
Revenue $ 134,101 $ 130,911 $ 396,678 $ 373,252
Cost of revenue 42,928   45,234   127,141   124,980
Gross profit 91,173 85,677 269,537 248,272
Operating expenses:
Sales and marketing (Note 1) 21,700 19,881 64,143 58,754
General and administrative (Note 1) 15,097 18,462 45,585 53,891
Technology (Note 1) 14,124 13,696 41,706 40,937

Amortization of intangible assets acquired in

business combinations
3,550   5,258   10,650   16,130
Total operating expenses 54,471   57,297   162,084   169,712
Income from operations 36,702 28,380 107,453 78,560
Interest and other (expense) income, net (152 ) 209   (24,022 ) 1,507
Income before income taxes 36,550 28,589 83,431 80,067
Income tax expense 14,456   11,966   31,921   31,332
Net income from continuing operations 22,094 16,623 51,510 48,735
Net income from discontinued operations (4,103 ) 5,927 4,639 15,722
Gain on sale, net of tax   980     980
Net income $ 17,991   $ 23,530   $ 56,149   $ 65,437
 
Net income from continuing operations

per common share - basic
$ 0.31   $ 0.22   $ 0.69   $ 0.62
Net income from continuing operations

per common share - diluted
$ 0.30   $ 0.22   $ 0.68   $ 0.61
Net income per common share - basic $ 0.25   $ 0.31   $ 0.76   $ 0.84
Net income per common share - diluted $ 0.25   $ 0.31   $ 0.74   $ 0.82
Weighted-average shares used to compute net

income per common share - basic
71,649   75,130   74,261   78,052
Weighted-average shares used to compute net

income per common share - diluted
73,322   76,513   76,085   79,640
 
 
Note 1 - Includes stock-based compensation as follows:
Three-month Period Nine-month Period
Ended September 30, Ended September 30,
2013 2012 2013 2012
(Unaudited) (Unaudited)
Sales and marketing $ 1,254 $ 1,278 $ 3,801 $ 3,854
General and administrative 2,335 2,732 6,893 8,652
Technology 1,126   1,314   3,371   4,182
Total stock-based compensation $ 4,715   $ 5,324   $ 14,065   $ 16,688
 
VALUECLICK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
       
September 30, December 31,
2013 2012
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 54,522 $ 100,403
Accounts receivable, net 110,571 130,601
Other current assets 28,894 25,364
Assets held for sale 48,686   54,893
Total current assets 242,673 311,261
 
Assets held for sale, less current portion 56,945 59,457
Note receivable, less current portion 27,615
Property and equipment, net 29,194 25,971
Goodwill 388,968 388,895
Intangible assets, net 54,735 71,342
Other assets 14,260   15,155
TOTAL ASSETS $ 786,775   $ 899,696
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings under credit facility, current $ $ 10,000
Other current liabilities 93,000 121,337
Borrowings under credit facility, less current portion 195,000 132,500
Other non-current liabilities 35,655 33,039
Liabilities related to assets held for sale 10,889   12,115
Total liabilities 334,544 308,991
Total stockholders' equity 452,231   590,705
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 786,775   $ 899,696
 
VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Nine-month PeriodEnded September 30,
2013       2012
Cash flows from operating activities:
Net income $ 56,149 $ 65,437
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on note receivable 22,556
Depreciation and amortization 29,086 34,473
Non-cash, stock-based compensation 14,950 17,390
Provision for doubtful accounts and sales credits 2,718 2,687
Gain on sale of business (980 )
Amortization of discount on note receivable (570 ) (1,779 )
Deferred income taxes 5,957 (1,074 )
Tax benefit from stock-based awards 4,056 2,330
Excess tax benefit from stock-based awards (4,216 ) (2,552 )
Changes in operating assets and liabilities, excluding business acquisitions (17,929 ) (10,424 )
Net cash provided by operating activities 112,757 105,508
 
Cash flows from investing activities:
Purchases of property and equipment (12,203 ) (13,744 )
Principal payments received on note receivable 7,460 3,099
Payments for acquisitions, net of cash acquired   (154 )
Net cash used in investing activities (4,743 ) (10,799 )
 
Cash flows from financing activities:
Proceeds from borrowings under credit agreement

157,500
82,000
Repayments under credit agreement

(105,000
) (74,500 )
Repurchases and retirement of common stock (223,823 ) (108,817 )
Proceeds from shares issued under employee stock programs 8,479 6,196
Excess tax benefit from stock-based awards 4,216   2,552  
Net cash used in financing activities (158,628 ) (92,569 )
 
Effect of exchange rate changes on cash and cash equivalents 1,031   1,420  
Net (decrease) increase in cash and cash equivalents (49,583 ) 3,560
 
Cash and cash equivalents, beginning of period 136,638   116,676  
Cash and cash equivalents, end of period 87,055 120,236
Less cash and cash equivalents of discontinued operations at end of period 32,533   33,987  
Cash and cash equivalents of continuing operations, end of period $ 54,522   $ 86,249  
 
VALUECLICK, INC.
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED EBITDA (Note 1)
(In thousands)
       
Three-month Period Nine-month Period
Ended September 30, Ended September 30,
2013     2012 2013     2012
(Unaudited) (Unaudited)
Net income from continuing operations $ 22,094 $ 16,623 $ 51,510 $ 48,735
Interest and other expense (income), net 152 (209 ) 24,022 (1,507 )
Income tax expense 14,456 11,966 31,921 31,332
Amortization of acquired intangible assets included in cost of revenue 1,986 2,018 5,957 5,990
Amortization of acquired intangible assets included in operating expenses 3,550 5,258 10,650 16,130
Depreciation and leasehold amortization 3,232 2,762 9,240 7,451
Stock-based compensation 4,715   5,324   14,065   16,688  
Adjusted EBITDA $ 50,185   $ 43,742   $ 147,365   $ 124,819  

Note 1 - “Adjusted EBITDA” (GAAP net income from continuing operations 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 cash equivalents, 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 NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP DILUTED NET INCOME PER COMMON SHARE (Note 1)
(In thousands)
       
Three-month Period Nine-month Period
Ended September 30, Ended September 30,
2013   2012 2013   2012
(Unaudited) (Unaudited)
Net income from continuing operations $ 22,094 $ 16,623 $ 51,510 $ 48,735
Stock-based compensation 4,715 5,324 14,065 16,688
Amortization of acquired intangible assets included in cost of revenue 1,986 2,018 5,957 5,990
Amortization of acquired intangible assets included in operating expenses 3,550 5,258 10,650 16,130
Tax impact of above items (4,155 ) (4,708 ) (12,591 ) (13,732 )
Non-GAAP net income $ 28,190   $ 24,515   $ 69,591   $ 73,811  
Non-GAAP net income per diluted common share $ 0.38   $ 0.32   $ 0.91   $ 0.93  
Weighted-average shares used to compute non-GAAP net income per diluted common share 73,322   76,513   76,085   79,640  

Note 1 - “Non-GAAP net income per diluted common share” (GAAP net income from continuing operations per diluted common share before the impact of stock-based compensation and amortization of intangible assets) included in this press release is a non-GAAP financial measure.

Non-GAAP net income per diluted common share, as defined above, may not be similar to non-GAAP net income per diluted common share measures used by other companies and is not a measurement under GAAP. Management believes that non-GAAP net income per diluted 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 net income per diluted common share in evaluating the overall performance of the Company's business operations.

Though management finds non-GAAP 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 uses non-GAAP net income per diluted common share in conjunction with GAAP earnings and earnings per common share measures. The Company believes that non-GAAP 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 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,
2013   2012 2013   2012
(Unaudited) (Unaudited)
Affiliate Marketing:
Revenue $ 38,872 $ 34,871 $ 113,805 $ 105,583
Cost of revenue 4,491   4,514   13,579   12,890  
Gross profit 34,381 30,357 100,226 92,693
Operating expenses 10,775   10,014   31,111   29,718  
Segment income from operations $ 23,606   $ 20,343   $ 69,115   $ 62,975  
 
Media:
Revenue $ 95,254 $ 96,104 $ 283,000 $ 267,941
Cost of revenue 36,458   38,735   107,674   106,226  
Gross profit 58,796 57,369 175,326 161,715
Operating expenses 28,554   29,722   85,789   86,543  
Segment income from operations $ 30,242   $ 27,647   $ 89,537   $ 75,172  
 
Reconciliation of segment income from operations

to consolidated income from operations:
Total segment income from operations $ 53,848 $ 47,990 $ 158,652 $ 138,147
Corporate expenses (6,895 ) (7,010 ) (20,527 ) (20,779 )
Stock-based compensation (4,715 ) (5,324 ) (14,065 ) (16,688 )
Amortization of acquired intangible assets included in cost of revenue (1,986 ) (2,018 ) (5,957 ) (5,990 )
Amortization of acquired intangible assets included in operating expenses (3,550 ) (5,258 ) (10,650 ) (16,130 )
Consolidated income from operations $ 36,702   $ 28,380   $ 107,453   $ 78,560  
 
Reconciliation of segment revenue to consolidated revenue:
Affiliate Marketing $ 38,872 $ 34,871 $ 113,805 $ 105,583
Media 95,254 96,104 283,000 267,941
Inter-segment eliminations (25 ) (64 ) (127 ) (272 )
Consolidated revenue $ 134,101   $ 130,911   $ 396,678   $ 373,252  
 

Copyright Business Wire 2010

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