ValueClick Inc.
(
VCLK
) 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.
Quarter Details
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 &
Operated segment.
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
million.
Guidance
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.
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. 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
Google Inc.
(
GOOG
) and
Yahoo! Inc.
(
YHOO
), which is expected to affect its profitability going
forward.
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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