EX-99.1 2 a2013q208kexhibit991-q2res.htm EXHIBIT 99.1 2013 Q2 08K Exhibit 99.1 - Q2 Results

Exhibit 99.1
For Immediate Release
Contact:
John Pitstick, CFO
ValueClick, Inc.
1.818.575.4583
 
 
 
VALUECLICK ANNOUNCES SECOND QUARTER 2013 RESULTS

Westlake Village, CA - August 1, 2013 - ValueClick, Inc. (NASDAQ: VCLK) today reported financial results for the second quarter ended June 30, 2013. Adjusted-EBITDA1 was within its previously-issued guidance range.

“The continued strong performance by our higher value add offerings demonstrate that we are moving in the right direction, as evidenced by our strong earnings in the quarter and record free cash flow,” said John Giuliani, president and chief executive officer of ValueClick. “Despite some top line weakness in the quarter from our insertion order-driven display business, we made great progress on our integration initiatives. In addition, our significant affiliate marketing client wins during Q2 represent a great addition to our roster of direct, strategic relationships with major advertisers and provide us with an even stronger base for sustainable, profitable growth in the years to come.”

Highlights from the second quarter of 2013 include:

Revenue increased 4 percent from the second quarter of 2012 (Q2 2012) to $159.8 million;
Adjusted-EBITDA increased 12 percent from Q2 2012 to $53.1 million;
Adjusted-EBITDA margin increased to 33.2 percent from 30.9 percent in Q2 2012;
Non-GAAP net income2 per diluted common share of $0.21 was negatively impacted by an impairment charge on a note receivable. Excluding this item, non-GAAP net income per diluted common share would have been $0.39, an 11% increase from Q2 2012;
Record free cash flow (defined as cash from operations less capital expenditures) for the six and twelve-month periods ended June 30, 2013 of $73.5 million and $152.2 million, respectively;
Repurchase of 2 million shares of common stock under the share repurchase program for total cost of $52.1 million. Board of Directors increased remaining share repurchase authorization to $200 million;
Ending cash and cash equivalents balance of $127.1 million and $102.5 million of total debt as of June 30, 2013.
 
___________________________
1Adjusted-EBITDA is defined as GAAP (Generally Accepted Accounting Principles) net income from continuing operations before interest, income taxes, depreciation, amortization, and stock-based compensation. Please see the attached schedule for a reconciliation of GAAP net income from continuing operations 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.

2 Non-GAAP net income is defined as GAAP income from continuing operations before the impact of stock-based compensation and amortization of intangible assets. Please see the attached schedule for a reconciliation of GAAP income from continuing operations to non-GAAP net income per diluted common share.




Page 1 of 9



Non-Cash Note Impairment
ValueClick entered into a settlement agreement related to its note receivable from the sale of the promotional lead generation business in 2010. Under the terms of the settlement, ValueClick received an upfront payment of $5.5 million in July 2013 (included in "Other current assets" on the June 30 balance sheet) and recorded a non-cash impairment charge of $22.6 million (included in "Interest and other (expense) income, net" in the second quarter). This charge, net of related tax benefits, negatively impacted second quarter GAAP and non-GAAP net income per diluted common share by approximately $0.18.


Business Outlook
Today, ValueClick is providing guidance for the third quarter of 2013:


Q3 Guidance
Revenue
$164-$168 million
Adjusted-EBITDA
$53-$55 million
     Mid-Point Adjusted-EBITDA Margin
32.5%
Non-GAAP net income per diluted common share
$0.39-0.40
Impact of stock-based compensation and amortization of intangibles, net of tax
$(0.09)
GAAP net income per diluted common share
$0.30-$0.31

The consolidated revenue guidance mid-point is based on the following segment-level assumptions for revenue growth rates expressed as a percentage change from third quarter 2012 reported revenue levels:
 
l
Affiliate Marketing:
Up low double-digits
 
l
Media:
Up low single-digits
 
l
Owned & Operated:
Flat

Third quarter 2013 guidance assumes: stock-based compensation of $5.5 million; amortization of intangible assets of $6.5 million ($2.5 million of which will be classified in Cost of revenue); net interest and other expense of $0.5 million; a 40 percent effective tax rate; and 76 million diluted shares outstanding.

Conference Call Today at 4:30 p.m. ET
John Giuliani, chief executive officer, and John Pitstick, chief financial 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 at 4:30 p.m. ET today. The live conference call can be accessed by dialing (888) 204-4520 or (913) 981-5559. Please dial in approximately ten minutes prior to the start time and provide the operator with the pass code 6717563. A replay of the conference call will be available from Thursday, August 1 at 7:30 p.m. ET through Thursday, August 8 at 7:30 p.m. ET at (888) 203-1112 and (719) 457-0820 (pass code: 6717563). The live and archived Webcast of the conference call will be available at http://ir.valueclick.com.





Page 2 of 9


About ValueClick
ValueClick, Inc. (NASDAQ: VCLK) is one of the world's largest digital marketing companies. Through a unique combination of data, technology and services, ValueClick increases brand awareness and drives customer acquisition at scale for the world's largest advertisers, and maximizes advertising revenue for tens of thousands of online and mobile publishers. The Company is based in Westlake Village, California, and has offices in major advertising markets worldwide. For more information, please visit www.valueclick.com.

This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, the risk that market demand for on-line advertising in general, and performance based on-line advertising in particular, will not grow as rapidly as predicted, and the risk that legislation and governmental regulation could negatively impact the Company's performance. 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 February 27, 2013; recent quarterly reports on Form 10-Q; and other current reports on Form 8-K.

The Business Outlook contained in this release is 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 may differ from these estimates based on the timing and amount of stock awards granted, the assumptions used in stock award valuation and other factors. Actual income tax expense may differ from these estimates based on tax planning, changes in tax accounting rules and laws, and other factors.

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.


###



Page 3 of 9



VALUECLICK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)


 
June 30,
 
December 31,
 
2013
 
2012
 
(Unaudited)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
127,068

 
$
136,638

Accounts receivable, net
109,790

 
147,487

Other current assets
57,121

 
27,136

Total current assets
293,979

 
311,261

 
 
 
 
Note receivable, less current portion

 
27,615

Property and equipment, net
28,463

 
29,014

Goodwill
433,931

 
434,507

Intangible assets, net
68,892

 
81,822

Other assets
14,950

 
15,477

TOTAL ASSETS
$
840,215

 
$
899,696

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Borrowings under credit facility, current
$
10,000

 
$
10,000

Other current liabilities
109,080

 
132,401

Borrowings under credit facility, less current portion
92,500

 
132,500

Other non-current liabilities
35,815

 
34,090

Total liabilities
247,395

 
308,991

Total stockholders' equity
592,820

 
590,705

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
840,215

 
$
899,696





Page 4 of 9


VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)


 
Three-month Period
 
Six-month Period
 
Ended June 30,
 
Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(Unaudited)
 
(Unaudited)
Revenue
$
159,756

 
$
153,985

 
$
325,194

 
$
300,417

Cost of revenue
61,978

 
60,377

 
124,333

 
115,062

Gross profit
97,778

 
93,608

 
200,861

 
185,355

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing (Note 1)
22,828

 
20,649

 
45,293

 
41,576

General and administrative (Note 1)
15,708

 
19,519

 
33,921

 
39,091

Technology (Note 1)
17,110

 
16,887

 
33,810

 
32,967

Amortization of intangible assets acquired in
   business combinations
3,919

 
6,321

 
7,842

 
12,645

Total operating expenses
59,565

 
63,376

 
120,866

 
126,279

Income from operations
38,213

 
30,232

 
79,995

 
59,076

Interest and other (expense) income, net
(23,308
)
 
1,497

 
(23,903
)
 
1,726

Income before income taxes
14,905

 
31,729

 
56,092

 
60,802

Income tax expense
5,510

 
13,028

 
20,414

 
21,903

Net income from continuing operations
9,395

 
18,701

 
35,678

 
38,899

Net income from discontinued operations
2,480

 
1,635

 
2,480

 
3,008

Net income
$
11,875

 
$
20,336

 
$
38,158

 
$
41,907

 
 
 
 
 
 
 
 
Net income from continuing operations
   per common share - basic
$
0.12

 
$
0.24

 
$
0.47

 
$
0.49

Net income from continuing operations
   per common share - diluted
$
0.12

 
$
0.23

 
$
0.46

 
$
0.48

Net income per common share - basic
$
0.16

 
$
0.26

 
$
0.50

 
$
0.53

Net income per common share - diluted
$
0.15

 
$
0.25

 
$
0.49

 
$
0.52

Weighted-average shares used to compute net
   income per common share - basic
75,531

 
78,720

 
75,590

 
79,529

Weighted-average shares used to compute net
   income per common share - diluted
77,413

 
80,336

 
77,490

 
81,221

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 1 - Includes stock-based compensation as follows:
 
 
 
 
 
 
 
Three-month Period
 
Six-month Period
 
Ended June 30,
 
Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(Unaudited)
 
(Unaudited)
Sales and marketing
$
1,406

 
$
942

 
$
2,580

 
$
2,596

General and administrative
2,508

 
3,220

 
4,947

 
6,246

Technology
1,225

 
1,586

 
2,409

 
2,992

Total stock-based compensation
$
5,139

 
$
5,748

 
$
9,936

 
$
11,834





Page 5 of 9


VALUECLICK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 
Six-month Period
Ended June 30,
 
2013
 
2012
Cash flows from operating activities:
 

 
 

Net income
$
38,158

 
$
41,907

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Loss on note receivable
22,556

 

Depreciation and amortization
19,434

 
23,063

Non-cash, stock-based compensation
9,936

 
11,834

Provision for doubtful accounts and sales credits
2,174

 
1,761

Amortization of discount on note receivable
(570
)
 
(1,203
)
Deferred income taxes
2,745

 
(1,781
)
Tax benefit from stock-based awards
2,831

 
1,825

Excess tax benefit from stock-based awards
(2,986
)
 
(1,927
)
Changes in operating assets and liabilities, excluding business acquisitions
(14,809
)
 
(3,819
)
Net cash provided by operating activities
79,469

 
71,660

 
 
 
 
Cash flows from investing activities:
 

 
 

Purchases of property and equipment
(6,019
)
 
(11,665
)
Principal payments received on note receivable
1,960

 
2,120

Payments for acquisitions, net of cash acquired

 
(152
)
Net cash used in investing activities
(4,059
)
 
(9,697
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Proceeds from borrowings under credit agreement
25,000

 
70,000

Repayments under credit agreement
(65,000
)
 
(65,000
)
Repurchases and retirement of common stock
(52,079
)
 
(99,568
)
Proceeds from shares issued under employee stock programs
6,349

 
3,605

Excess tax benefit from stock-based awards
2,986

 
1,927

Net cash used in financing activities
(82,744
)
 
(89,036
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(2,236
)
 
(1,447
)
Net decrease in cash and cash equivalents
(9,570
)
 
(28,520
)
 
 
 
 
Cash and cash equivalents, beginning of period
136,638

 
116,676

Cash and cash equivalents, end of period
$
127,068

 
$
88,156





Page 6 of 9


VALUECLICK, INC.
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED-EBITDA (Note 1)
(In thousands)


 
Three-month Period
 
Six-month Period
 
Ended June 30,
 
Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(Unaudited)
 
(Unaudited)
Net income from continuing operations
$
9,395

 
$
18,701

 
$
35,678

 
$
38,899

     Interest and other expense (income), net
23,308

 
(1,497
)
 
23,903

 
(1,726
)
     Income tax expense
5,510

 
13,028

 
20,414

 
21,903

     Amortization of acquired intangible assets included in cost of revenue
2,491

 
2,492

 
4,985

 
4,985

     Amortization of acquired intangible assets included in operating expenses
3,919

 
6,321

 
7,842

 
12,645

     Depreciation and leasehold amortization
3,315

 
2,787

 
6,607

 
5,401

     Stock-based compensation
5,139

 
5,748

 
9,936

 
11,834

Adjusted-EBITDA
$
53,077

 
$
47,580

 
$
109,365

 
$
93,941



Note 1 - “Adjusted-EBITDA” (GAAP net income from continuing operations 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 cash equivalents, note receivable and borrowings, and the costs associated with income tax expense, capital investments, and stock-based compensation 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 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 baseline 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.




Page 7 of 9


VALUECLICK, INC.
RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP DILUTED NET INCOME PER COMMON SHARE (Note 1)
(In thousands)


 
Three-month Period
 
Six-month Period
 
Ended June 30,
 
Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(Unaudited)
 
(Unaudited)
Net income from continuing operations
$
9,395

 
$
18,701

 
$
35,678

 
$
38,899

Stock-based compensation
5,139

 
5,748

 
9,936

 
11,834

     Amortization of acquired intangible assets included in cost of revenue
2,491

 
2,492

 
4,985

 
4,985

     Amortization of acquired intangible assets included in operating expenses
3,919

 
6,321

 
7,842

 
12,645

Tax impact of above items
(4,606
)
 
(5,015
)
 
(9,390
)
 
(10,265
)
Non-GAAP net income
$
16,338

 
$
28,247

 
$
49,051

 
$
58,098

Non-GAAP net income per diluted common share
$
0.21

 
$
0.35

 
$
0.63

 
$
0.72

Weighted-average shares used to compute non-GAAP net income per diluted common share
77,413

 
80,336

 
77,490

 
81,221



Note 1 - “Non-GAAP net income per diluted common share” (GAAP net income from continuing operations per diluted common share before the impact of stock-based compensation and amortization of intangible assets) included in this press release is a non-GAAP financial measure.

Non-GAAP net income per diluted common share, as defined above, may not be similar to non-GAAP net income per diluted common share measures used by other companies and is not a measurement under GAAP. Management believes that non-GAAP net income per diluted common share provides useful information to investors about the Company's performance because it eliminates the effects of items which are not directly attributable to the underlying performance of the Company's business operations. Management uses non-GAAP net income per diluted common share in evaluating the overall performance of the Company's business operations.

Though management finds non-GAAP net income per diluted common share 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 uses non-GAAP net income per diluted common share in conjunction with GAAP earnings and earnings per common share measures. The Company believes that non-GAAP net income per diluted common share 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 baseline 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.




Page 8 of 9


VALUECLICK, INC.
SEGMENT OPERATING RESULTS
(In thousands)

 
Three-month Period
 
Six-month Period
 
Ended June 30,
 
Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(Unaudited)
 
(Unaudited)
Affiliate Marketing:
 
 
 
 
 
 
 
Revenue
$
36,622

 
$
33,605

 
$
74,933

 
$
70,712

Cost of revenue
4,526

 
4,200

 
9,088

 
8,376

Gross profit
32,096

 
29,405

 
65,845

 
62,336

Operating expenses
9,512

 
9,711

 
20,336

 
19,704

Segment income from operations
$
22,584

 
$
19,694

 
$
45,509

 
$
42,632

 
 
 
 
 
 
 
 
Media:
 
 
 
 
 
 
 
Revenue
$
91,490

 
$
91,088

 
$
187,746

 
$
171,837

Cost of revenue
35,377

 
36,888

 
71,216

 
67,491

Gross profit
56,113

 
54,200

 
116,530

 
104,346

Operating expenses
28,141

 
29,079

 
57,235

 
56,821

Segment income from operations
$
27,972

 
$
25,121

 
$
59,295

 
$
47,525

 
 
 
 
 
 
 
 
Owned & Operated Websites:
 
 
 
 
 
 
 
Revenue
$
31,662

 
$
29,401

 
$
62,617

 
$
58,076

Cost of revenue
19,590

 
16,846

 
39,106

 
34,303

Gross profit
12,072

 
12,555

 
23,511

 
23,773

Operating expenses
6,106

 
5,736

 
11,925

 
11,621

Segment income from operations
$
5,966

 
$
6,819

 
$
11,586

 
$
12,152

 
 
 
 
 
 
 
 
Reconciliation of segment income from operations
to consolidated income from operations:
 
 
 
 
 
 
Total segment income from operations
$
56,522

 
$
51,634

 
$
116,390

 
$
102,309

Corporate expenses
(6,760
)
 
(6,841
)
 
(13,632
)
 
(13,769
)
Stock-based compensation
(5,139
)
 
(5,748
)
 
(9,936
)
 
(11,834
)
Amortization of acquired intangible assets included in cost of revenue
(2,491
)
 
(2,492
)
 
(4,985
)
 
(4,985
)
Amortization of acquired intangible assets included in operating expenses
(3,919
)
 
(6,321
)
 
(7,842
)
 
(12,645
)
Consolidated income from operations
$
38,213

 
$
30,232

 
$
79,995

 
$
59,076

 
 
 
 
 
 
 
 
Reconciliation of segment revenue to consolidated revenue:
 
 
 
 
 
 
 
Affiliate Marketing
$
36,622

 
$
33,605

 
$
74,933

 
$
70,712

Media
91,490

 
91,088

 
187,746

 
171,837

Owned & Operated Websites
31,662

 
29,401

 
62,617

 
58,076

Inter-segment eliminations
(18
)
 
(109
)
 
(102
)
 
(208
)
Consolidated revenue
$
159,756

 
$
153,985

 
$
325,194

 
$
300,417




Page 9 of 9