ICLK Update: ICLK Delivers a Stellar Quarter - Raising our Target Price to $8.00

11/05/2009

MDB issued a research update today on InterCLICK Inc. (ICLK) reiterating its BUY recommendation and $8.00 Price Target.

interCLICK reported very impressive third quarter 2009 financial results with revenues of $14.4 million, well ahead of our estimates and previous company guidance. Revenues climbed an impressive 150% year-over-year and 35% sequentially as a result of increased demand from advertisers for more measurable ad results and strong penetration into new large accounts. Gross margins improved more than 1,900 basis points to 50.4% versus the 3rd quarter of 2008 and 320 basis points sequentially primarily as a result of operational improvements and efficiencies within the company’s proprietary technology platform. Operating expenses jumped to nearly $6.6 million as expected and decreased as a percentage of revenues to 46% from 54% in the 2nd quarter of 2009. The company continued to increase headcount in Q3, with the number of employees rising to 73 in October, up from 64 in the previous quarter. The result (combined with some non-cash charges) was a third quarter GAAP net income of $0.3 million or $0.01 per share. This number compares favorably to the loss of nearly $3.7 million or $0.10 per share in Q3 of 2008 and is sequentially better than the $1.0 million loss in Q2 of 2009. Other highlights from the quarter include:

• Q3 of 2009 was the company’s fourth consecutive quarter of positive EBITDA and free cash flow;
• management’s upward revision for full year 2009 revenue guidance of at least $51 million, a 125% increase above calendar 2008;
• management’s preliminary guidance for 2010 with revenue growth of at least 55% to $80 million and EBITDA of at least $9 million;
• the addition of 100 new advertiser campaigns during Q3;
• an increase in ad impressions to 9.6 billion, up nearly 21% from Q3 in 2008 and up nearly 16% sequentially; and
• interCLICK’s common stock is to begin trading under the NASDAQ symbol “ICLK” starting November 5, 2009.

After another impressive quarter we are again revising upward our revenue expectations for both calendar 2009 and 2010 and now anticipate revenues of $80.5 million in 2010. With the solid gross margins and improved operating expense margins we a confident that the company is likely to deliver significant earnings growth into 2010. Along with the company growing revenue base, we are maintaining our Buy rating and increasing the six to nine month target price to $8.00.