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ValueClick Tops Estimates

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ValueClick Inc. (NasdaqGS:VCLK - News) reported fourth quarter 2011 earnings (including stock-based compensation but excluding amortization of intangibles) of 43 cents per share that stormed past the Zacks Consensus Estimate of 29 cents per share. Moreover, reported earnings rose 43.3 % from 30 cents in the prior-year quarter.


Revenues increased 41.9% year over year to $182.6 million in the quarter. Reported revenue was not only ahead of the Zacks Consensus Estimate of $175.0 million, but it also surpassed management’s guided range of $173.0-$179.0 million.

The better-than-expected result was primarily driven by strong growth in the Media segment, buoyed by the Dotomi acquisition, and other business segments, which fully offset the decline in the Owned and Operated websites segment.

The Media (51.0% of the total revenue) was up by a staggering 122.0% year over year to $92.7 million. The Affiliated Marketing segment (22.0% of the total revenue) was up 10.0% year over year to $39.8 million, while revenue from Technology (5.0% of revenues) increased 11.8% year over year to $9.5 million in the quarter.  However, Owned and operated websites revenue (22.0% of the total revenue) was down 4.2% year over year to $40.9 million in the quarter.

Operating Performance

Gross profit increased 52.3% year over year to $106.0 million in the fourth quarter. Gross margin increased from 54.1% in the previous-year quarter to 58.1% in the fourth quarter, primarily boosted by higher revenues.

Operating expenses were $62.8 million, up 60.9% year over year, primarily attributable to higher sales and marketing expenses which increased 85.8% from the comparable previous year. Moreover, expenses related to general & administration and technology increased 33.6% and 57.6%, respectively, on a year over year basis.

Operating income increased 39.4% year over year to $45.6 million, while Operating margin remained flat on a year-over-year basis at 25.0%.

Adjusted EBITDA surged 43.0% year over year to $56.9 million and accounted for 31.2% of the quarter’s revenues.

Balance Sheet

ValueClick had no long-term debt on its balance sheet at the end of the reported quarter. Cash and cash equivalents were $116.7 million compared with $98.7 million in the previous quarter.

During the quarter, ValueClick repurchased 2.8 million shares for a total cost of $44.2 million.


For fiscal first quarter 2012, management expects revenues in the range of $155.0 million–$160.0 million. Management expects earnings on a non-GAAP basis to be in the range of 34 cents-35 cents per share. Adjusted EBITDA is expected in the range of $46.0 million–$48.0 million.

The company expects revenues from Affiliate Marketing to grow in low-double digit range. Owned & Operated websites are expected to decrease in the high-single digits range. Technology is expected to grow in the high single-digit range. Media is anticipated to grow over 100.0% on reported basis, up in high teens to low twenties (excluding the impact of acquisitions).


ValueClick posted an impressive fourth quarter. This was primarily driven by the robust growth recorded in the business segments along with strength in the internet advertising industry, increasing e-commerce spending, and improving display ad growth trends coupled with direct advertiser relationships with the Dotomi acquisition. Moreover, share repurchases, impressive cash flow and a debt-free balance sheet are the positives for the company. The company’s concentration in the high-margin businesses is expected to drive future growth prospects.

We also remain upbeat on ValuClick’s growing Media, Affiliate Marketing segment and expect a turnaround in its Owned and Operated business.

However, a sluggish macro-economic environment and intense competition from Google Inc. (NasdaqGS:GOOG - News), Microsoft Corp. (MSFT) and Yahoo! Inc. (NasdaqGS:YHOO - News) remain near-term headwinds.

We maintain our Neutral rating on the stock over the long term (6-12 months). Currently, we have Zacks #2 Rank for ValueClick, which translates to a short-term Buy rating.

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