Conversant, Inc. (
or erstwhile ValueClick reported first-quarter 2014 non-GAAP
earnings (including stock-based compensation) of 35 cents per
share, which was in line with the Zacks Consensus Estimate.
However, share price declined due to unimpressive outlook.
Revenues increased 8.5% year over year to $145.9 million and were
higher than management's guided range of $138.0-$144.0 million. The
year-over-year increase was primarily driven by strong performances
from the Affiliate Marketing segment and the Media business.
Revenues from the Affiliate Marketing segment increased 11.0% from
the year-ago quarter to $42.5 million. Conversant's Media segment
reported an increase of 7.0% year over year to $103.5 million.
In the first quarter, Conversant generated more than 40.0% of its
media segment revenues from client campaigns, targeting consumers
across multiple delivery channels such as the display of mobile.
Although still a smaller part of the overall business, mobile and
video products continue to lead media segment with impressive
Per comScore's ad focus rankings, Conversant's monthly unique
visitors now rank as the second largest audience only lagging
for display among all buy side entities in the U.S.
Adjusted earnings before interest, tax, depreciation and
amortization (EBITDA) decreased 4.0% year over year to $48.5
million, which was within management's guided range of $47.0 to
Operating expenses (excluding amortization) as percentage of
revenues increased 330 basis points (bps) to 41.4%, driven by
higher sales & marketing and technology related expenses, which
increased 250 and 80 bps, respectively. This was partially offset
by a lower general & administrative expense, which declined 10
bps from the year-ago quarter.
Operating margin plunged 400 bps from the year-ago quarter to
27.9%. Net income (including stock-based compensation but excluding
amortization) was $24.2 million or 35 cents per share compared with
$26.5 million or 34 cents in the year-ago quarter.
Excluding stock-based compensation and amortization, net income was
$27.0 million or 39 cents compared with $29.1 million or 38 cents
in the year-ago quarter.
Balance Sheet & Cash Flow
Cash and cash equivalents were $90.4 million compared with $81.3
million in the previous quarter. The company reported free cash
flow of $165.0 million compared with $165.0 million in the previous
Conversant repurchased 758,000 common shares at an average cost of
$24.60 per share during the first quarter ended Mar 31, 2014. As of
May 6, 2014, the remaining availability under Conversant's stock
repurchase authorization was $61.5 million.
For the second quarter of 2014, Conversant expects revenues in the
range of $135.0-$140.0 million, much higher than $128.1 million
reported in the year-ago quarter. Conversant forecasts revenues
from Affiliate Marketing to be in the range of $39.0 to $40.5
million. Media revenues are expected to be in the range of $95.5 to
Adjusted EBITDA is expected to be in the range of $42.0 to $44.0
million, slightly down from $46.8 million. Non-GAAP earnings are
expected to be in the range of 34-35 cents per share, much better
than 16 cents reported in the year-ago quarter.
We believe that Conversant's strong product portfolio, aided by
accretive acquisitions, will continue to drive market share for the
rest of 2014. The company is realigning its operations toward
high-margin businesses, which is expected to drive profitability.
Moreover, the company is re-branding its business in the domestic
market, which will boost its presence among marketers. The upcoming
customer relationship marketing (CRM) product launch and European
re-branding program are additional growth catalysts.
Additionally, we believe that the acquisition of SET Media (in
February) provides marketers with unparalleled targeting
capabilities and complete brand safety in digital video
advertising, which in turn will drive growth and profitability.
However, intensifying competition from the likes of Google,
Digital River (
remains a concern. Conversant's CRM business is also expected to
face significant headwinds due to the bankruptcy of a couple of
clients, which will hurt second-quarter top-line growth.
Currently, Conversant has a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
CONVERSANT INC (CNVR): Free Stock Analysis
DIGITAL RIVER (DRIV): Free Stock Analysis
YAHOO! INC (YHOO): Free Stock Analysis Report
To read this article on Zacks.com click here.