IA's Special Situation Research

Institutional Analyst: Special Situation Research

Adding Vertro (VTRO) $4.75 and iClick (ICLK) $5.35 to Watch List.

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Internet Stock Review, Tuesday, 11/16/2010.

Los Angeles, CA 52..7F Sunny.
Chicago, IL, 40..51F Cloudy.
Port Jefferson, NY, 54..56F Cloudy. 199

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1. Adding Vertro (VTRO) $4.75 to Watch List.
2. Adding iClick (ICLK) $5.35 to Watch List.
3. Another Look at Vocus (VOCS) $24.60, We're up 70%.
4. Disclaimer.

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Internet Stock Review
www.internetstockreview.ning.com

Blog Version: http://internetstockreview.ning.com/profiles/blogs/adding-vertro-vt...

One of our subscribers sent us a frightening set of charts today including Google (GOOG), Apple (AAPL), IBM (IBM), Exxon Mobil (XOM) and Boeing (BA). At a quick glance, it looks like they're all rolling over (which they are) and heading significant lower (which they may or may not be). We sent it to all of our stockbrokers and the standard return reply was "yikes!'

Three month charts on Google, Apple, IBM, Exxon Mobil and Boeing:

http://finance.yahoo.com/q/bc?s=goog,aapl,ibm,xom,ba&&t=6m&...

However, it looks much less scary over two years. Two year charts:

http://finance.yahoo.com/q/bc?s=goog,aapl,ibm,xom,ba&&t=2y&...

And downright insignificant over five years. Five year charts:

http://finance.yahoo.com/q/bc?s=goog,aapl,ibm,xom,ba&&t=5y&...=

So point of the story is we've been scared recently too, but we've nonetheless decided to take advantage of the recent weakness in two relatively unheard of Internet stocks -- which are putting out dot-com boom type revenue gains -- to the Internet Stock Review Watch List. Do to time constraints, these are "mentions" really, to be followed up with rationalizations later.

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1. Adding Vertro (VTRO) $4.75 to Watch List.

The first is Vertro (VTRO) $4.75. We came across this from a company presentation (powerpoint) sent to us by a subscriber (see same guy who sent above charts). It seemed interesting, if not a bit campy. But then we ran past the numbers and OH MY. It pulled us back by the neck, like the hook they use on bad stage acts.

Two Year Chart:


http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=vtr...

(BTW: Turnaround story in the making which started with the sale of MIVA ad network in March of 2009.)

What they have is a tool bar (don't tune out yet) which is being used by nine million people ! When people do a "search" via their toolbar, they get paid through the world's leading search engines (read Google, Yahoo, Bing) when the serve up or redirect.

Presentation via an 8K: http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=7230267

Here are our 1st quarter press release excerpts:

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Third Quarter Results from Continuing Operations

Revenue was $9.8 million in Q3 2010, compared to Q2 2010 revenue from continuing operations of $8.5 million.

(Editor's note: Nine months $26 million vs $19 million,meaning annual run rate exceeding the magic $100 million.)

Gross margins were 95% in Q3 2010, compared to 96% in Q2 2010. Gross margin excludes customer acquisition costs of $6.7 million in Q3 2010 and $5.2 million in Q2 2010, which is included in consolidated operating expenses within the marketing and sales category.

Cash and cash equivalents were $7.1 million at September 30, 2010, an increase of $1.2 million from the June 30, 2010 cash of $5.9 million.

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Market cap with 7.1 million shares outstanding is rather meager sounding $33 million (subtract the $7.1 million if you'd like).

November 4th Conference call transcript: http://seekingalpha.com/article/235376-vertro-ceo-discusses-q3-2010...

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2. Adding iClick (ICLK) $5.35 to Watch List.

The second company is iClick (ICLK) $4.75. We came across this from our super-sophisticated (no kidding) reverse-merger monitoring news alert system, which uses algorithms. Okay, it doesn't use algorithms, but it is sophisticated and proprietary -- no less.

In any event our system kicked out a company by the name of 5 to1 (FTOH), which put out a press release about the reverse merger on November 11th and mentioned that Dr. Phil Frost was behind the deal.

FTOH Release: http://markets.financialcontent.com/demo/?GUID=15540444&Page=Me...

Apparently though our sophisticated 8K reverse-merger monitoring system which follows the activities of Dr. Phil Frost, was broken on November 9th (damn algorithms), when it was first revealed that in an 8K that he bought 7 million shares for $6.5 million. Whatever Dr. Frost buys, we buy -- at least if we can get involved in that small window shortly after the 8K is filed.

FTOH 8K: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=7546236

5 to 1 (FTOH) stock was $0.35 on the 9th, $4.10 on the 10th and $4.20 on the day the press release went out. This is why we follow Dr. Frost.

Our last successful opportunity with Dr. Frost was in 2007, when we pounced on Exegenics (EXEG) after such an 8K and added it to the Biotech Stock Review Watch List at $0.85 -- which we later bailed out at $3.00 -- after he arranged a three way merger with the surviving company called OPKO Health.

The source of the idea was ShellStockReview.com, which is a must subscribe service (they found it at $0.40).

So we were reading the press release and we read (our apologies for making this such a long "mention" but it's interesting how we find -- even to us-- undiscovered stocks sometimes) about the jaw dropping team they put together:

"5to1 has formed an alliance of major media publishers, managing and selling unsold inventory on a publisher-only controlled advertising platform. The company was founded by former Fox Interactive Media executives, James Heckman (CEO) and Ross Levinsohn (Chairman) who were able to gather many of the top digital pioneers in the industry to join as co-founding advisors and investors, including Levinsohn's former partner at Fuse Capital, Jonathan Miller (News Corp. CEO Digital Media), who helped incubate the model with former Fox and AOL Sales head, Michael Barrett; Michael Kassan and Wenda Harris Millard of Media Link; former CBS digital head Quincy Smith; digital music pioneer Fred Davis; former MTV CDO Jason Hirschhorn; former Tribune President of Broadcasting Ed Wilson; founding CEO of ESPN.com, Mike Slade; and Casey Wasserman, CEO of WMG."

"5to1 also includes a management team with over 200 years of senior officer Internet leadership experience, the core of which came from Fox Interactive Media's executive staff. Heckman, Levinsohn and outgoing interclick CEO Mike Matthew will comprise the Board of Directors."

Some of the names were familiar, some weren't. So we decided to dig on the ones we didn't know (it's a good way meet the real players). One name was " Mike Matthew, the outgoing interclick CEO."

Over at interClick we read:

NEW YORK, Nov. 2, 2010 (GLOBE NEWSWIRE) -- interclick, inc. (Nasdaq:ICLK) today announced President and Founder Michael Katz will become Chief Executive Officer of the company effective February 1, 2011, following a three month transition period with CEO Michael Mathews. Mr. Mathews' departure was announced in connection with his intention to join a "new venture."

And that's how we found interClick (ICLK).

Here's the numbers (most recent 10Q):

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Revenue was $26.4 million in Q3 2010, a quarterly record and 84% year-over-year increase. Growth was attributed to higher campaign revenue from both existing and new clients seeking interclick's data-driven solution.

Gross profit was $12.2 million in Q3 2010, an all-time high and up 68% year-over-year. Gross profit margin was 46.0%, up 160 basis points sequentially from the second quarter period.

The Company ended the quarter with $12.3 million in cash and cash equivalents, of which $1.3 million is restricted. As of September 30, 2010, interclick had 23.8 million shares outstanding and 30.4 million fully-diluted shares outstanding.

Business Outlook

The Company expects 2010 revenue to exceed $98 million, growing year-over-year by at least 77%, and reflecting an increase from previous guidance of $90 million. interclick estimates 2010 EBITDA will be approximately $12.8 million, growing year-over-year by approximately 177%, and reflecting an increase from previous guidance of $9 million. The Company projects Q4 revenue and EBITDA to exceed $36 million and $5.6 million, respectively.

(Nine month numbers $62 million vs. $33 million)

23 million shares outstanding or a $109 million market cap.

Chart:


http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=icl...

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3. Another Look at Vocus (VOCS) $24.60, We're up 70%.

This is almost funny, the stock is up 70% from where we added it ($14.50) to the Watch List in February and there is no active analyst coverage as far as we can tell.

Nice Chart:


http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=voc...

We know of many investors (individual and professional) who simply can't conceive how a stock could go up without analyst coverage. Guess this is an example of how it can. Guess this also falls under the "if you make money (our your story pans out), the share price will take care of itself."

Also note, there are no press releases available at the general investing public websites:

Knobias: http://www.knobias.com/individual/public/quote.htm?aff=SAMPLE&t...
Yahoo: http://finance.yahoo.com/q?s=vocs&ql=1
MarketWatch: http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=voc...

Now you might ask yourself, how (or why) in the world would a company with $90 million in the bank and growing business not issue press releases. Well actually they do. But since they own a press release service (PRWEB), which does not get tagged by the "retail" press release aggregators, they are shy to use a competitor and thus it seems like they don't.

You can finds their releases here: http://markets.financialcontent.com/demo/?Page=News&Ticker=VOCS...

GUIDANCE:

For the full year of 2010, GAAP revenue is expected to be in the range of approximately $96.4 million to $96.6 million. Non-GAAP EPS is expected to be in the range of $0.69 to $0.70 assuming an estimated non-GAAP weighted average 19.8 million diluted shares outstanding and an estimated non-GAAP effective tax rate of 5%. Stock-based compensation, amortization of intangible assets, acquisition related expenses, the effect of adjustments to deferred revenue related to purchase accounting and adjustments to the fair value of contingent consideration for earn-outs are expected to be $0.90 per share

Here is the original write-up

1. Adding Vocus (VOCS) $14.50 to Watch List.

Hello, we've stumbled across another good one ! We're adding it to both the Internet and IA's Special Situation Research Watch Lists.

This one we found purely by accident -- and no one has heard of it, which is funny (well sad) -- because they are in the PR business !

We'd call this an excellent 5 year play. The story is relatively simple (though boring) with no real near term catalyst like a new product launch, or a pending FDA approval on the horizon. What it does have which is appealing, is a boatload of cash ($104 million -- or $5.75 per share) and more potential clients ahead of it, than behind it.

We would additionally view this as an attractive acquisition candidate for one of the many multi-billion dollar media companies out there, who are intent on ruling the world -- or someone like Reuters.

The whole story is pretty much in today's 10Q which was just released and as will further be told on today's conference call at 4:30 ET (let's hope they don't just "read" us the 10Q).

10Q: http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=6729557

One weird thing is that they own a press release distribution service like Business Wire or PRNewswire -- but it doesn't "tag" stock symbols. So when they issue a press release (even on themselves), the news isn't picked up at Yahoo Finance or any one of the other 1000 financial websites, which pick up news by stock symbol. They could solve this problem by using Business Wire, but maybe they think it's embarrassing to be using a competitor, which is ridiculous.

Bottom line, is you have to go to their website to see their news. Which is probably another reason why the stock is so cheap and so little known. Even their own shareholders won't know that there is news unless they go to their website. Not smart. If we were a shareholder and we saw today's news, we would have jumped for joy and been a buyer and the stock probably would have gone up, rather than down.

So here's the big picture skinny. They have a press release service called PRWeb which is like Business Wire and they have a database of reporters (which we'll call Vocus), which they rent out for up to $13,000 a year.

#1. PRWeb:

http://www.prweb.com/pr/press-release-price.html

Self explanatory. They charge $80 to $360 per release. Pretty nice and pretty fancy, but problematic for publicly traded companies to use, because they don't "tag" stock symbols. From what we've studied so far, we'd say they are better than Business Wire or PR Newswire or Marketwire or Globe Newswire etc..

#2. Vocus.

http://www.vocus.com/content/productsservices.asp

This is the big money. Again they charge up to $13,500 "per" year. They have 4,438 customers.

They just reported their best quarter on record at $22 million. For the year they reported $84 million in sales. Non GAAP they earned $15 million or $0.65 for the year.

Total cash and etc., was $104 million up from $87 million. Free cash flow was $19.5 million for the year -- so yes this is cash generation machine.

Importantly the new number of clients rose from 3,379 to 4,438. That's a 31% increase ! They have 165 salespeople.

Names of customers are pretty impressive like British Midland Airways, Country Music Television, Coleman Company, Duesseldorf Marketing & Tourism, Firehouse Subs, Florida Fruit & Vegetable Association, Harlem Globetrotters International, Honest Abe Log Homes, Loving Arms Childcare, My Wedding Workbook, New York Institute of Technology, Providence College and Royal Caribbean Cruises.

You can listen to conference call right now: http://www.vocus.com/content/index.asp

News Link (remember don't go to yahoo to get the news): http://tinyurl.com/yfhdca5

#3. Valuation.

There are 18 million shares outstanding. So the whole company is valued at $261,000,000.

If we subtract $104 million from that number, the market is really valuing the company at $157,000,000

On a per share basis, take $14.50 and subtract $5.75 (their cash) and we have a company being valued at $9.00. Divide that number by $0.65 (earnings) and we have a PE ratio of only 13 and that my friends is insane. The stock should have went up $1.50 on that news, versus down $1.50.

Hello ! And goodbye.

#4.

Chart looks great.

They went public in the later part of 2005 and traded near $40 in late 2008 before the bear market ripped its wings off. It essentially back to where it was 5 years ago. It traded as low as $12 in the bottom of the market last March.

5 Year Chart:

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=voc...

Oh wait one caution. They predicted a flatish to downish 2010, along with the industry and investing in their business which may reduce profitability (a worthy goal).

One final, final thing. We just listened to the conference and "they did" decide to read the 10Q which we just read. It's like the Department of Redundancy Department. If you want to skip the reading and go right top he Q&A section it starts at the 24:15 mark.

Guidance:

For the full year of 2010, revenue is expected to be in the range of $90.0 million to $92.0 million. Non-GAAP EPS is expected to be in the range of $0.56 to $0.58 assuming an estimated non-GAAP weighted average 21.3 million diluted shares outstanding and an estimated non-GAAP effective tax rate of 8%. Amortization of intangible assets and stock-based compensation is expected to be $0.77 per share. GAAP EPS is expected to be in the range of $(0.21) to $(0.19) assuming an estimated weighted average 18.6 million basic and diluted shares outstanding. Free cash flow is expected to range from $12.0 million to $13.0 million. Our non-GAAP cash tax rate for 2010 is expected to be 20%.

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Disclaimer: VOCS This release contains "forward-looking" statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These are statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "may," "will," "expects," "projects," "anticipates," "estimates," "believes," "intends," "plans," "should," "seeks," and similar expressions. This press release contains forward-looking statements relating to, among other things, Vocus� expectations and assumptions concerning future financial performance. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual future results to differ materially from those projected or contemplated in the forward-looking statements. Forward-looking statements may be significantly impacted by certain risks and uncertainties described in Vocus' filings with the Securities and Exchange Commission. The risks and uncertainties referred to above include, but are not limited to, risks associated with possible fluctuations in our operating results and rate of growth, our history of operating losses, interruptions or delays in our service or our Web hosting, our business model, breach of our security measures, the emerging market in which we operate, our relatively limited operating history, our ability to hire, retain and motivate our employees and manage our growth, competition, our ability to continue to release and gain customer acceptance of new and improved versions of our service, successful customer deployment and utilization of our services, fluctuations in the number of shares outstanding, foreign currency exchange rates and interest rates. Not a client.
VTRO: This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or expressions such as "anticipate," "plan," "will," "intend," "believe" or "expect" or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including (1) our agreement with Google, which accounts for a significant portion of our revenue, has a two year term that expires on December 31, 2010; if we are unable to renew our agreement with Google, or we renew our agreement on less favorable terms, we will likely experience a decline in revenue and our business operations may be significantly harmed, (2) our ability to successfully execute upon our corporate strategies, (3) our ability to distribute and monetize our international products at rates sufficient to meet our expectations, (4) our ability to develop and successfully market new products and services, and (5) the potential acceptance of new products in the market. Additional key risks are described in Vertro's reports filed with the U.S. Securities and Exchange Commission, including the Form 10-Q for Q3 2010. Not a client.
ICLK: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including fourth quarter and full year 2010 revenue and EBITDA outlook and growth. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "projects," "seeks," "believes," "estimates," "expects" and similar references to future periods. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the impact of intense competition, the continuation or worsening of current economic conditions, a potential decrease in corporate advertising spending, a potential decrease in consumer spending and the condition of the domestic and global credit and capital markets. Further information on our risk factors is contained in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2009. Any forward-looking statement speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time-to-time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
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Going Concern Statements.
We would like to point out that the majority of companies listed on the
OTC Bulletin Board have factors which create an
uncertainty about the their ability to continue as a going concern. These
concerns are typically related to financing (or lack of), competitive
environments, lack of operating history and operating at loss levels which
is typical of most start-ups.
These statement can usually be found in their most recent 10Q filings and
typically you don't have to dig to far down past the financial tables. We
like to use http://www.pinksheets.com for quick and easy access to SEC
filings. We think it would be wise for most investors to assume that all
companies listed on the OTC Bulletin Board (and many on NASDAQ) have going
concern issues.
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statements therein not misleading. roland@internetstockreview.com





















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