Earnings Preview: ValueClick (VCLK)

ValueClick Inc. (VCLK) is slated to release its fourth quarter 2010 results on February 15.

Third Quarter Highlights

ValueClick’s third quarter earnings surpassed the Zacks Consensus Estimate of 14 cents per share. Earnings (including stock-based compensation but excluding amortization of intangibles) were 16 cents per share, down 46.7% year over year from 30 cents reported in the prior-year quarter.

Better-than-expected earnings in the quarter were primarily attributable to a reduction in operating expenses and increase in margins. Results included a $24 million tax benefit and other items. Revenues, adjusted EBITDA and earnings per share exceeded the high end of management’s guided range.

Revenues inched up 1.5% year over year to $106.8 million, but achieved a 7.2% sequential growth. Revenues were ahead of management’s guidance range of $100.0 to $104.0 million and the Zacks Consensus Estimate of $103.0 million.

Revenues were primarily driven by strong growth in the Affiliated Marketing segment (27.8% of total revenue), which posted a revenue growth of 13.0% on a year-over-year basis to reach $29.8 million. The growth was driven by transactional volume expansion in the commission junction marketplace, in which ValueClick holds the top notch.


Guidance for the fourth quarter of 2010 exceeded analyst’s expectation.The company expectsa double-digit growth in the fourth quarter 2010 and full year 2011. The Street was expecting $120.2 million in revenues and 19 cents per share in earnings at the time the company provided its guidance. For the fourth quarter of 2010, ValueClick expects revenues in the $122 million–$126 million range.

Year-over-year, the company expects revenue from Media to grow in the mid-to-high single-digit percentage range. Affiliate Marketing is expected to increase in the low double-digit percentage range. Owned & Operated websites are expected to increase in the low twenties percentage range. Technology is expected to be in the low double-digit range for the fourth quarter.

Adjusted EBITDA is expected in the range of $39.0–$40.0 million, which represents an adjusted EBITDA margin of 32% at the midpoint. Earnings on a GAAP basis are projected in the range of 22 cents to 23 cents per share, while earnings on a non-GAAP basis are expected in the range of 27 cents to 28 cents per share.

Management expects to sustain its double-digit growth in the Affiliated Marketing and Media segments for fiscal 2011 through market share gains over the long term.

None of the 17 analysts covering VCLK have changed their estimates for the fourth quarter of 2010 in the last 30 days. The current Zacks Consensus Estimate for the quarter is 23 cents per share. This is in line with the reported fourth quarter of 2009 results.

Our Take

Strength in the Internet advertising industry, increasing ecommerce spending, growing display ad trends in the U.S, synergies from the Investopedia acquisition, share repurchases, impressive cash flow and debt free balance sheet are positives. We also remain upbeat on VCLK’s growing Affiliate Marketing segment and a rebound in its Owned and Operating segment.

However, intense competition from Google Inc. (GOOG), Microsoft Corp. (MSFT) and Yahoo (YHOO) are areas of concern. Although we expect the company to deliver improved results in 2011on an accelerating top line, we maintain our “Neutral” rating on the stock awaiting sustained growth.

The stock is currently aZacks # 2 Rank, which translates to a short-term ‘Buy’ rating.

VALUECLICK INC (VCLK): Free Stock Analysis Report

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