ValueClick announced after the stock market closed today that it has seen revenues grow 13% over Q1 2012 to $165.4 million on (GAAP) earnings of $0.34 versus $0.25 from a year ago. Read the release.
Aol's Daily Finance aggregated ValueClick earnings expectations before the release, saying that "the average [Wall Street] estimate for revenue is $166.7 million. On the bottom line, the average EPS estimate is $0.39." It's unclear if this is GAAP or non-GAAP. Nevertheless, Wall Street didn't seem impressed prior to the call, as the company's stock price tumbled 13% in after-hours trading – presumably on the revenue "miss" and diminished expectations about the future (keep reading).
ValueClick is a bit of a bellwether for the world of demand-side platforms, and specifically ecommerce media retargeting, since the company bought Dotomi in 2011. Dotomi's CEO and President John Giuliani took over the reigns as CEO of ValueClick late last year.
Giuliani is quoted in today's earnings release as saying 2013 is "transformational" for his company – code for "may be bumps along the way." But later in the release he says, "Google's recent decision to exit this market is a seismic shift in the competitive landscape, and we are prioritizing resources to take full advantage. The affiliate marketing industry and its customers are at an inflection point, and ValueClick stands alone as the company with affiliate marketing at its core." Can retargeting fuel the ValueClick fires? They've got the big-brand affiliate relationships through Commission Junction.
You can listen to the rebroadcast of the webcast here. Or you can read AdExchanger's "live" blog of the earnings conference call below.
The call begins with Giuliani indicating that European business has been a drag. Also, "integration efforts" have been creating "indigestion," says ValueClick's CEO. Interesting that integration continues well after Dotomi's acquisition, but this has to do with a reorganization of ValueClick's infrastructure, influenced in part by the move toward audience buying and unlocking Commission Junction – if it's possible – for retargeting revenue.
After a rundown of the financial results from the company's financial exec, Giuliani reiterated that "affiliate marketing is at our core," and he sees ValueClick taking advantage of this CPA-driven business, which may be ready-made for retargeting.
Giuliani adds that ValueClick is moving away from media, presumably the old ad network biz. He also says the company needs to jam on recruiting as it needs more bodies and hopes to see future improvement with hiring.
ValueClick is going to buy back a bunch of shares; the idea is that the company buying its shares in the open market will improve the stock price. It will also allow ValueClick to stockpile stock for future executive compensation packages.
The Wall Street Questions Begin...
Cantor Fitzgerald's Youseff Squali says topline growth of ValueClick's revenue has "gone the other way" (i.e. Squali is surprised). Giuliani replies that Europe surprised him and he needs to keep his eye more on internal strategy (my paraphrase). He says they've decided to forego some business (media) in Q2.
Editor's note: Whatever was said at ValueClick's Analyst Day in March appears to have led to disappointment from Wall Street in regards to today's announcement.
Responding to an analyst's question, Giuliani thinks he needs to be more "prescriptive," as Q2 appears to be pivotal for launching the Dotomification of Commission Junction.
Another analyst asks about Google Affliate Network (GAN) business that ValueClick is going to take over. The analyst suggests that ValueClick will get a $25 million run rate with GAN's business. Giuliani doesn't give an answer and says he doesn't want to talk about his strategy too much for competition's sake.
Giuliani then says Europe was a problem due to mismanagement in Europe. Giuliani continues to emphasize that this has been a "learning experience" about how his team and company work together.
A Jefferies analyst cleverly asks why Google would want to get out of the affiliate marketing business. ValueClick deflects and says that affiliate marketing requires a lot of hand-holding that Google may not have wanted. Plus it wasn't Google-sized revenue.
Agency versus client-direct – an analyst asks what the breakout is by percentage. ValueClick says one-third of the revenue comes from agencies. Mobile and traditional display are associated with agencies. CRM and Mediaplex are sold "direct" more.
Wall Street wonders if M&A in Europe is possible to solve the revenue problems; Giuliani says he doubts they'll be doing any acquisitions any time soon. He adds that they'd look for "strategic" rather than "opportunistic" M&A.
Giuliani segments the data targeting capabilities of his company. The Dotomi business and its capabilities are clearly positioned as the future of the company versus the old ad network business.
Another question on hiring and how long it'll take to build a team – Giuliani says that "Interclick, Yahoo, Aol, QuadrantOne" execs have joined the company. The company was down 1% in headcount at the end of Q1, and they thought they'd be up a few percent. Editor: People have been leaving ValueClick; are the exits coming from Dotomi, ValueClick's ad network, Greystripe, Mediaplex...?
BMO's Dan Salmon wonders if Dotomi can go harder at ecommerce clients rather than affiliate network business. Giuliani falls on his sword (again) and tries to make the case that the sales strategy isn't the issue but rather internal process machinations.
Giuliani says that Commission Junction gets priority when it comes to new hires. He's all-in with making retargeting work for the affiliate business, it seems, as internal resources at ValueClick in Q1 were tilted toward sales at CJ. It didn't work as planned given the revenue miss and the lowered expectations going forward.
Mobile has the highest growth rate – likely because revenues are still small – and the CRM (Dotomi Business) continues to meet internal expectations.
It's interesting that Dotomi is now known as "CRM" when ValueClick positions the retargeter to Wall Street.
Hello paid media, you're in the CRM business now.
And the call ends.