ValueClick Beats Estimates

Zacks

ValueClick Inc. (VCLK) reported fourth quarter 2012 non-GAAP earnings of 56 cents per share, up 21.7% from the year-ago quarter. Reported earnings also surpassed management’s guided range of 51 cents-52 cents per share.

Including stock-based compensation; earnings came in at 50 cents a share, ahead of the Zacks Consensus Estimate of 47 cents per share.

Revenues

Revenues increased 13.8% year over year to $199.6 million and beat the Zacks Consensus Estimate of $198 million. Reported revenues were at the higher end of management’s guided range of $196 million-$200 million. The year-over-year growth in revenue was primarily driven by strong performance from the Media and Affiliate Marketing segment, which fully offset the weakness in Owned & Operated segment.

Revenue from the Media segment increased 20.3% from the year-ago quarter to $122.7 million while the Affiliate Marketing segment climbed 10.3% on a year-over-year basis to $43.9 million. The upside was primarily driven by strong domestic performance.  However, Owned and Operated websites revenue declined 2.1% year over year to $33.0 million.

Operating Results

Operating expenses were up 5.5% year over year to $65.5 million, primarily attributable to higher general & administration expenses (up 19.8% year over year) and technology expenses (up 8.3% year over year). Expenses related to sales and marketing increased 3.6% year over year.

ValueClick’s income from operations surged 43.2% from the year-ago quarter to $63 million. Operating margin increased from 25.1% in the year-ago quarter to 31.6%, primarily due to higher revenue base. Including stock-based compensation, operating income came in at $67.4 million.

Net income from continuing operations on a non-GAAP basis (excluding stock-based compensation and amortization of intangible assets) was $42.8 million compared with $37.9 million in the year-ago quarter. However, including stock-based compensation and excluding amortization of intangible assets, net income was $38.4 million.

Balance Sheet

Cash and cash equivalents were $136.6 million compared with $120.2 million in the previous quarter. The company reported free cash flow of $139 million for fiscal 2012.

Guidance

For the first quarter of 2013, ValueClick expects revenue in the range of $165 million-$168 million and non-GAAP earnings in the range of 39 cents-41 cents per share.

ValueClick forecasts revenue from Affiliate Marketing to grow in the mid to high-single digit range in the first quarter. Revenue from Owned & Operated websites are expected to increase by high-single digits. For the first quarter, Media revenue is expected to grow in the high-teens range.

Recommendation

We believe that ValueClick’s strong product portfolio based on accretive acquisitions will continue to drive market share going forward. The company is realigning its operations toward high-margin business, which is expected to drive profitability going forward.

However, unfavorable foreign exchange and a sluggish European market remain headwind in the near term. ValueClick continues to face stiff competition from Google (GOOG), Yahoo (YHOO) and Digital River (DRIV), which is expected to affect its profitability going forward.

Currently, ValueClick has a Zacks Rank #2 (Buy).

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