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To: Bill Harmond who wrote (30728)	11/2/2006 12:21:20 AM
From: Elroy	Read Replies (1) \| Respond to of 57684

3Q06 results were ahead of our expectations including $137.9M in revenue, $35.6M in adjusted EBITDA, and $0.19 in adjusted EPS. EPS benefited by $0.02 from a lower effective tax rate. Our estimates were $133.6M, $34.9M, and $0.16. The Media segment was the largest source of upside, driven by strength in lead generation services. Media revenue grew 45% Y/Y pro-forma. We expect the strength to continue into FY07 due to international expansion and the launch the of new products such as video advertising, search engine marketing, and Web development. Affiliate Marketing and Technology segments returned to growth after a setback in 2Q06, and the growth should be sustained into FY07. Guidance for the remainder of FY06 was raised from adjusted EPS in the range of $0.57-0.64 to $0.65-0.67, ahead of our $0.61 estimate. We are raising our estimates due primarily to higher revenue growth. See page 3 for details. Valuation remains attractive. Relative to peers and considering the projected free cash flow growth of 31% in FY07 to $150M, or $1.50 per share, we believe VCLK remains undervalued. Summary ValueClick’s 3Q06 results showed sequential growth across all segments and no signs of inventory shortage or competitive pressure. Revenue grew 37% Y/Y on a pro-forma basis. The company’s scale 2nd largest ad network in U.S. and a leading affiliate marketing business) and broad base of online marketing services focused on direct marketers with an ROI emphasis continue to differentiate the company. International expansion and new product launches, along with continued migration of ad budgets online, should generate 20%- plus revenue growth in FY07. We believe VCLK remains undervalued. Investment Conclusion