) reported third quarter 2012 non-GAAP earnings of 39 cents,
which managed to beat management's range of 36 cents-37 cents,
but was down 25% from the year-ago quarter. Including stock based
compensation; earnings came at 27 cents, surpassing the Zacks
Consensus Estimate of 25 cents per share.
Revenue increased 25.8% year over year to $160.9 million in
the quarter, but missed management's guided range of $164
million-$169 million and the Zacks Consensus Estimate of $166
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 &
Revenue from Media segment surged 52.3% year over year to
$96.1 million, while Affiliate Marketing revenue increased 7.4%
year over year to $34.9 million. The upside was primarily driven
by strong domestic performance. However, Owned and Operated
websites revenue declined 7.7% year over year to $29.9 million.
The company also divested Search123 business, which was a part of
Owned and Operated segment.
Gross profit increased 33% year over year to $97.7 million in
the third quarter due to higher revenue base. Gross margin
expanded 330 basis points ("bps") to 60.8%, primarily driven by
favorable revenue mix.
Operating expenses was up 31.8% year over year to $63.5
million, primarily attributable to the 27.5% yearly increase in
sales and marketing expenses. Moreover, general &
administration expenses jumped 36% and technology expenses
increased 27.1% year over year.
Operating income (including stock-based compensation but
excluding other one time items) increased 37% year over year to
$39.8 million, while operating margin increased to 24.7% from
22.7% in the prior-year quarter.
Net income from continuing operations on non-GAAP basis
(excluding stock-based compensation and amortization of
intangible assets) was $29.6 million or 39 cents per share
compared with $42.6 million or 52 cents in the year-ago quarter.
However, including stock-based compensation and excluding
amortization of intangible assets, net income was $20.9 million
or 27 cents per share.
Cash and cash equivalents were $120.2 million compared with
$88.2 million in the previous quarter. During the quarter,
ValueClick repurchased 590,000 shares for approximately $9.2
For fourth quarter, ValueClick expects revenue in the range of
$196 million-$200 million and earnings in the range of 51
cents-52 cents per share.
ValueClick forecasts revenue from Affiliate Marketing to grow
in high-single digits in the fourth quarter. Revenue from Owned
& Operated websites are expected to decrease by mid-single
digits. For the fourth quarter, Media revenue is expected to grow
in the low-twenties range.
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. Moreover, frequent share buybacks will also drive
earnings in the near term.
However, unfavorable foreign exchange and a sluggish European
market remain headwind in the near term. ValueClick continues to
face stiff competition from
), which is expected to affect its profitability going
We maintain our Neutral recommendation on the stock over the
long term (6-12 months). Currently, we have Zacks #3 Rank for
ValueClick, which translates into a short-term Hold rating.
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