Conversant: Rebranded Yet Overlooked Advertising Business

Conversant: Rebranded Yet Overlooked Advertising Business

By Alex Gavrish, Etalon Investment Research; author of “Wall Street Back To Basics

Conversant Inc (CNVR): Company profile

In February 2014, ValueClick Inc, the leader in personal digital marketing, announced that it has changed its name to Conversant Inc (NASDAQ:CNVR). The new stock symbol of the company is now CNVR (formerly VCLK). Under the new brand the company will roll out the world’s first integrated marketing personalization platform that helps brands connect with people as individuals on a major scale. Conversant currently unites five digital marketing leaders launched or acquired by ValueClick since 1998. Each of the companies will contribute data, technology, and expertise to the new, unified personalization platform.

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Recent developments

In February 2014, Conversant announced it has completed the acquisition of SET Media, a digital video technology company that connects brands with people through high quality, targeted and safe video advertising. The acquisition strengthens Conversant Inc (NASDAQ:CNVR)’s portfolio of highly differentiated products for ad agencies and media professionals within digital video advertising, a global market opportunity expected to grow from $5.3 billion in 2012 to $15.6 billion in 2016, according to Global Online Video Advertising Platforms Market report by Frost & Sullivan.  In January 2014, the company announced that it had completed the sale of its owned and operated websites segment (O&O). Conversant decided to focus exclusively on its core Media and Affiliate Marketing segments, which together currently represent more than 90% of the company’s profitability.

Conversant valuation

As of February 14th, 2014 close, Conversant Inc (NASDAQ:CNVR) had a market capitalization of $1,600 million and an enterprise value of $1,626 million. For the full fiscal 2013 year, the company generated $573 mil in revenues, $168 mil in operating income, $179 mil in cash flow from operations and $165 mil in free cash flow. In terms of valuation, company is currently trading at an EV/EBITDA multiple of x7.3, P/E multiple of x15.8, and has a free cash flow yield of about 10% percent. During 2013, Conversant repurchased $224 million worth of shares which equals to a buyback yield of 14% (based on current market capitalization).


The company currently has a $100 million stock repurchase authorization program. Conversant expects to realize cash tax benefits of approximately $40 million in 2014 arising from reduced tax payment obligations in connection with O&O segment divestiture. Company provided guidance for the first quarter of 2014 and expects to have revenues of $138-144 million and adjusted EBITDA of $47-49 million for the quarter. Based on this guidance company can be expected to generate approximately $152 million in free cash flow from operations plus an additional $40 million of cash tax benefits. Traditional marketing and advertising agencies are expected to focus more on digital marketing and Conversant can become an attractive acquisition target. At the same time, conservative valuation of this internet advertising business should generate more investor interest in the future.


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