ValueClick Announces Second Quarter 2007 Results

ValueClick, Inc. (Nasdaq:VCLK) today reported financial results for the second quarter ended June 30, 2007. Diluted net income per common share of $0.17 met the low end of the Company’s previously-issued guidance. However, revenue and adjusted-EBITDA1 were below the Company’s previously-issued guidance. The quarter’s results were negatively impacted by the Company’s promotion-based business. The Company also announced that today it will close its acquisition of MeziMedia, Inc., a leading operator of U.S. comparison shopping websites, and that its board of directors has increased the authorization of the Company’s stock repurchase program to $100 million. "The promotion-based sector suffered a downturn that began in late May and became more pronounced in June, which negatively impacted our quarter,” said Tom Vadnais, chief executive officer of ValueClick. "We have reassessed our outlook on the promotion-based business and have taken aggressive steps to bring its costs in line with the changes occurring in this part of the industry. We expect to see the full impact of this cost-cutting initiative in the fourth quarter.” Mr. Vadnais continued, "While promotion-based lead generation results were disappointing, I am pleased by the strong performance in our non-promotional Media, Affiliate Marketing and Technology businesses. Additionally, MeziMedia gives our Comparison Shopping segment scale in the U.S. that complements PriceRunner’s scale in Europe. ValueClick’s scale and breadth in online performance marketing services and technologies differentiate us from our peers, and we remain optimistic about the Company’s prospects for growth and profitability.” Second Quarter 2007 Results Revenue for the second quarter of 2007 was $148.7 million, an increase of $18.6 million, or 14 percent, from $130.0 million for the second quarter of 2006. Second quarter 2007 results include three months of operations from Shopping.net, acquired in December 2006. Income before income taxes for the second quarter of 2007 was $29.4 million compared to $27.2 million for the second quarter of 2006. Adjusted-EBITDA for the second quarter of 2007 was $38.8 million compared to $36.0 million for the second quarter of 2006. Second quarter 2006 income before income taxes and adjusted-EBITDA include net proceeds of $1.9 million related to a favorable legal settlement. Net income for the second quarter of 2007 was $17.6 million, or $0.17 per diluted common share, compared to $14.4 million, or $0.14 per diluted common share, for the second quarter of 2006. The consolidated balance sheet as of June 30, 2007 includes $373 million in cash, cash equivalents and marketable securities, $703 million in total stockholders’ equity and no long-term debt. MeziMedia Acquisition Closed ValueClick also announced that today it will close its acquisition of MeziMedia, Inc. for approximately $95.5 million in cash, net of cash acquired, at the time of closing and additional cash consideration based on revenue and adjusted-EBITDA performance from the closing date through December 31, 2009. Total cash consideration, which includes the $95.5 million net cash payment at time of closing, will range between $95.5 million and $347.4 million, depending on whether performance thresholds are met. Stock Repurchase Program Authorization Increased to $100 Million ValueClick also announced that its board of directors has increased the authorization of its stock repurchase program. In September 2001, the Company’s board of directors authorized a stock repurchase program ("the program”) to allow for the repurchase of shares of the Company’s common stock at prevailing market prices in the open market or through unsolicited negotiated transactions. Since the inception of the program and through June 30, 2007, the Company’s board of directors had authorized a total of $245 million for repurchases under the Program and the Company had repurchased a total of 32.6 million shares of its common stock for $179 million, leaving approximately $66 million available under the program. That amount has been increased to $100 million as a result of the board’s new authorization. Repurchases have been funded from available working capital and all shares have been retired subsequent to their repurchase. There is no guarantee as to the exact number of shares that will be repurchased by the Company and the Company may discontinue repurchases at any time that management or the Company’s board of directors determines additional repurchases are not warranted. Business Outlook The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after the date of this release. Actual stock-based compensation expense may differ from these estimates based on the timing and amount of options granted, the assumptions used in option valuation and other factors. Actual net income tax expense and the net effective income tax rate may differ from these estimates based on tax planning, changes in tax accounting rules and laws, and other factors. Based on its second quarter results, the close of the MeziMedia acquisition and revised outlook for 2007, ValueClick is updating its fiscal year 2007 guidance ranges, issued previously on May 2, 2007: Fiscal Year 2007   Previous Guidance   Updated Guidance Revenue   $655-$665 million   $645-$660 million Adjusted-EBITDA   $177-$182 million   $168-$172 million Diluted net income per common share   $0.79-$0.81   $0.74-$0.76 Fiscal year 2007 guidance for diluted net income per common share includes a reduction of $0.11 per diluted common share for stock-based compensation expense, and assumes a 41 percent net effective income tax rate. Additionally, ValueClick is announcing guidance for the third quarter of 2007: Third Quarter 2007   Guidance Revenue   $155-$165 million Adjusted-EBITDA   $38-$40 million Diluted net income per common share   $0.16-$0.17 Third quarter 2007 guidance for diluted net income per common share includes a reduction of $0.03 per diluted common share for stock-based compensation expense and assumes a 42 percent net effective income tax rate. Conference Call Today at 8:30 a.m. ET James Zarley, executive chairman, Tom Vadnais, chief executive officer, and Sam Paisley, chief administrative officer, will present an overview of the results and other factors affecting ValueClick’s financial performance for the second quarter during a conference call and webcast on July 30, 2007 at 8:30 a.m. ET. Investors can access the call by dialing (877) 704-5385 or (913) 312-1303. The passcode is 8823884. The live webcast and other information of potential interest to investors will be available to the public in the Investor Relations section of the Company’s website (www.valueclick.com). Replay information will be available for seven days after the call and may be accessed at (888) 203-1112 for domestic callers and (719) 457-0820 for international callers. The passcode is 8823884. About ValueClick ValueClick, Inc. (Nasdaq:VCLK) is one of the world’s largest integrated online marketing services companies, offering comprehensive and scalable solutions to deliver cost-effective customer acquisition for advertisers and transparent revenue streams for publishers. ValueClick’s performance-based solutions allow its customers to reach their potential through multiple online marketing channels, including affiliate and search marketing, display advertising, lead generation, ad serving and related technologies, and comparison shopping. ValueClick brands include Commission Junction, ValueClick Media, Mediaplex, and PriceRunner. For more information, please visit www.valueclick.com. This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, trends in online advertising spending and estimates of future online performance-based advertising. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed under "Risk Factors” and elsewhere in filings with the Securities and Exchange Commission made from time to time by ValueClick, including, but not limited to: its annual report on Form 10-K filed on March 1, 2007; recent quarterly reports on Form 10-Q; and other current reports on Form 8-K. ValueClick undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 1 Adjusted-EBITDA is defined as GAAP (Generally Accepted Accounting Principles) net income before interest, income taxes, depreciation, amortization, and stock-based compensation. Please see the attached schedule for a reconciliation of GAAP net income to adjusted-EBITDA, and a discussion of why the Company believes adjusted-EBITDA is a useful financial measure to investors and how Company management uses this financial measure. VALUECLICK, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)   Three-month PeriodEnded June 30, 2007 2006 (Unaudited) (Note 1)   Revenue $ 148,676 $ 130,028 Cost of revenue   49,057   42,126 Gross profit 99,619 87,902 Operating expenses: Sales and marketing (Note 2) 42,194 37,641 General and administrative (Note 2) 17,200 11,377 Technology (Note 2) 8,735 8,267 Amortization of intangible assets   5,470   5,450 Total operating expenses   73,599   62,735 Income from operations 26,020 25,167 Interest income, net   3,375   2,005 Income before income taxes 29,395 27,172 Income tax expense   11,767   12,728 Net income $ 17,628 $ 14,444   Basic net income per common share $ 0.18 $ 0.14   Weighted-average shares used to compute basic net income per common share     100,038   101,265   Diluted net income per common share $ 0.17 $ 0.14   Weighted-average shares used to compute diluted net income per common share     101,623   103,459   Note 1 – The condensed consolidated statements of operations include the results of Shopping.net from the acquisition consummation date (December 1, 2006). Had this transaction been completed as of January 1, 2006, on an unaudited pro-forma basis, revenue would have been $131.2 million, and net income would have been $14.4 million, or $0.14 per diluted common share, for the three-month period ended June 30, 2006. These unaudited pro-forma results are for information purposes only, are not necessarily indicative of what the actual results would have been had this transaction occurred on January 1, 2006, and are not necessarily indicative of future results.   Note 2 – Includes stock-based compensation expense as follows:     Three-month PeriodEnded June 30, 2007 2006   (Unaudited) Sales and marketing $ 1,296 $ 1,173 General and administrative 2,981 1,397 Technology   643   626 Total stock-based compensation expense $ 4,920 $ 3,196 VALUECLICK, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)   Six-month PeriodEnded June 30, 2007 2006 (Unaudited) (Note 1)   Revenue $ 305,600 $ 247,315 Cost of revenue   96,104   81,363 Gross profit 209,496 165,952 Operating expenses: Sales and marketing (Note 2) 90,646 69,015 General and administrative (Note 2) 34,741 28,208 Technology (Note 2) 17,662 16,313 Amortization of intangible assets   11,241   11,105 Total operating expenses   154,290   124,641 Income from operations 55,206 41,311 Interest income, net   6,314   3,923 Income before income taxes 61,520 45,234 Income tax expense   25,258   21,001 Net income $ 36,262 $ 24,233   Basic net income per common share $ 0.36 $ 0.24   Weighted-average shares used to compute basic net income per common share     99,801   101,643   Diluted net income per common share $ 0.36 $ 0.23   Weighted-average shares used to compute diluted net income per common share     101,331   104,120   Note 1 – The condensed consolidated statements of operations include the results of Shopping.net from the acquisition consummation date (December 1, 2006). Had this transaction been completed as of January 1, 2006, on an unaudited pro-forma basis, revenue would have been $249.2 million, and net income would have been $24.0 million, or $0.23 per diluted common share, for the six-month period ended June 30, 2006. These unaudited pro-forma results are for information purposes only, are not necessarily indicative of what the actual results would have been had this transaction occurred on January 1, 2006, and are not necessarily indicative of future results.   Note 2 – Includes stock-based compensation expense as follows:     Six-month PeriodEnded June 30, 2007 2006   (Unaudited) Sales and marketing $ 2,324 $ 2,449 General and administrative 5,065 2,763 Technology   1,169   1,304 Total stock-based compensation expense $ 8,558 $ 6,516 VALUECLICK, INC. RECONCILIATION OF NET INCOME TO ADJUSTED-EBITDA (Note 1) (In thousands)   Three-month Period Ended June 30, 2007   2006 (Unaudited) Net income $ 17,628 $ 14,444 Less interest income, net (3,375 ) (2,005 ) Plus provision for income taxes 11,767 12,728 Plus amortization of intangible assets 5,470 5,450 Plus depreciation and leasehold amortization 2,343 2,220 Plus stock-based compensation   4,920     3,196   Adjusted-EBITDA $ 38,753   $ 36,033     Six-month Period Ended June 30, 2007   2006 (Unaudited) Net income $ 36,262 $ 24,233 Less interest income, net (6,314 ) (3,923 ) Plus provision for income taxes 25,258 21,001 Plus amortization of intangible assets 11,241 11,105 Plus depreciation and leasehold amortization 4,777 4,469 Plus stock-based compensation   8,558     6,516   Adjusted-EBITDA $ 79,782   $ 63,401     Note 1 - "Adjusted-EBITDA" (earnings before interest, income taxes, depreciation, amortization, and stock-based compensation) included in this press release is a non-GAAP financial measure.   Adjusted-EBITDA, as defined above, may not be similar to adjusted- EBITDA measures used by other companies and is not a measurement under GAAP. Management believes that adjusted-EBITDA provides useful information to investors about the Company's performance because it eliminates the effects of period-to-period changes in income from interest on the Company's cash and marketable securities and the costs associated with income tax expense, capital investments, and stock-based compensation expense which are not directly attributable to the underlying performance of the Company's business operations. Management uses adjusted-EBITDA in evaluating the overall performance of the Company's business operations.   Though management finds adjusted-EBITDA useful for evaluating aspects of the Company's business, its reliance on this measure is limited because excluded items often have a material effect on the Company's earnings and earnings per common share calculated in accordance with GAAP. Therefore, management always uses adjusted-EBITDA in conjunction with GAAP earnings and earnings per common share measures. The Company believes that adjusted-EBITDA provides investors with an additional tool for evaluating the Company's core performance, which management uses in its own evaluation of overall performance, and a base-line for assessing the future earnings potential of the Company. While the GAAP results are more complete, the Company prefers to allow investors to have this supplemental metric since, with a reconciliation to GAAP, it may provide greater insight into the Company's financial results. VALUECLICK, INC. SEGMENT OPERATING RESULTS (In thousands)   Three-month PeriodEnded June 30, Six-month PeriodEnded June 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Media: Revenue $ 100,937 $ 93,542 $ 209,359 $ 172,927 Cost of revenue   39,885     36,240     78,417     69,976   Gross profit 61,052 57,302 130,942 102,951 Operating expenses   37,072     34,416     81,168     61,470   Segment income from operations $ 23,980   $ 22,886   $ 49,774   $ 41,481     Comparison Shopping: Revenue $ 8,174 $ 5,948 $ 16,791 $ 11,494 Cost of revenue   1,815     460     3,164     753   Gross profit 6,359 5,488 13,627 10,741 Operating expenses   5,780     4,972     12,505     10,345   Segment income from operations $ 579   $ 516   $ 1,122   $ 396     Affiliate Marketing: Revenue $ 32,252 $ 25,160 $ 65,050 $ 52,022 Cost of revenue   6,705     4,328     12,663     8,439   Gross profit 25,547 20,832 52,387 43,583 Operating expenses   10,183     8,218     20,072     17,081   Segment income from operations $ 15,364   $ 12,614   $ 32,315   $ 26,502     Technology: Revenue $ 7,768 $ 5,728 $ 15,238 $ 11,503 Cost of revenue   1,434     1,325     2,886     2,650   Gross profit 6,334 4,403 12,352 8,853 Operating expenses   3,410     3,130     6,849     6,212   Segment income from operations $ 2,924   $ 1,273   $ 5,503   $ 2,641     Total segment income from operations $ 42,847 $ 37,289 $ 88,714 $ 71,020 Corporate expenses (6,437 )   (3,476 )   (13,709 )   (12,088 ) Stock-based compensation (4,920 )   (3,196 )   (8,558 )   (6,516 ) Amortization of intangible assets   (5,470 )     (5,450 )     (11,241 )     (11,105 ) Consolidated income from operations $ 26,020   $ 25,167   $ 55,206   $ 41,311     Reconciliation of segment revenue to consolidated revenue: Media $ 100,937 $ 93,542 $ 209,359 $ 172,927 Comparison Shopping 8,174 5,948 16,791 11,494 Affiliate Marketing 32,252 25,160 65,050 52,022 Technology 7,768 5,728 15,238 11,503 Inter-segment eliminations   (455 ) )   (350 )     (838 )     (631 ) Consolidated revenue $ 148,676   $ 130,028   $ 305,600   $ 247,315